Redarc Electronics Pty Ltd is South Australia’s pin-up automotive component manufacturing company. And rightly so.
Redarc is a manufacturing-turnaround success story from whom every other business in South Australia can learn.
It was bought, in 1997, with one product, produced out of a tin shed, employing eight people (behind the present internally-glass-walled factory in Lonsdale). It had annual sales of less than $1 million. Redarc now employs 135 people and generates annual sales of more than $30 million.
Its rate of expansion has been rapid and steady. Its plan for 2017 is to employ 150 people and generate annual sales of $50 million.
At the age of 32, the (now) managing director of Redarc, Anthony Kittel, decided to go into business on his own. He had a degree in Mechanical Engineering from the South Australian Institute of Technology (now UniSA), an MBA from the University of Adelaide, had worked for nine years with BHP in Whyalla, and was working for ROH Wheels. Redarc came up for sale, and he and his father-in-law, Denis Brion, bought it. Five years later Anthony and his wife, Michele, bought the whole company.
They gave Redarc a new strategic direction: a focus on innovation. Since then, Redarc has endeavoured to invest a minimum of 15 per cent of its sales revenue in R&D and innovation, and to have about a quarter of its employees working in R&D and innovation. In May this year, Redarc bought another innovative, automobile electronics company, Hummingbird Electronics, located in Port Stephens, in the Hunter Region of New South Wales.
Hummingbird makes electronic GPS intelligent devices (including driver behaviour monitors and inclinometers) that complement Redarc’s range of battery management systems and internal electronics (battery isolators, gauges and electric braking systems) for SUVs, caravans, buses, trucks and motor homes. The company has a goal to release five new products every year.
So why does Redarc stay at Lonsdale? The reason is typical of resident South Australian-owned businesses: Anthony, Michele and their four children like living here.
Anthony Kittel defines Redarc’s market in the following way: “If it has a battery and it moves, it is a customer.”
It is Redarc’s intense focus on innovation, product quality and hard work that has given Redarc it’s spectacular growth rate. There is no mystery to this. Any South Australian business willing to be very good at what it does, to be highly innovative and to work very hard can reasonably expect to succeed.
Of particular importance have been Redarc’s management practices and work culture. Employees want to contribute and make Redarc a success. The work culture provides a win/win environment. Employees regard Redarc as “our company”. There are shared goals and a high level of teamwork. This is why Redarc’s people work hard.
Every two months there is a full sit-down lunch for all employees. Every section of the business makes a presentation about what is happening, so everyone knows what is going on – from their mates, not just the management. There is a company bonus system that provides the same flat rate bonus to all employees, including managers. Redarc’s employees appreciate that the company’s rapid growth produces opportunities for themselves for promotion, work variety and training opportunities.
Many of Redarc’s employees have joined as unskilled workers and have been trained (at the company’s expense) to Certificate 3 and 4 levels with Regency TAFE. Redarc also trains apprentices, and takes on a number of new university engineering graduates each year. It runs a summer program for a dozen engineering students where the students work on significant projects in the company’s “to do” list. Anthony Kittel says that the graduates being produced by all three universities are getting better all the time. A number of Redarc’s employees have MBAs and PhDs.
Redarc now has a portfolio of products that is world class – innovative and of very high quality. These products find markets in both the automotive Original Equipment Manufacturer (OEM) market and the automotive aftermarket. The company’s products are highly suitable for special vehicle manufacture (for example, ambulances, police vehicles, fire engines, mining trucks, caravans, motor homes, and other specific use applications). Redarc sells its products to a company in the Netherlands which uses them to modify SUV’s for Africa, for example.
The company sells only five per cent of its production in South Australia: 92 per cent of its sales are in the rest of Australia, and three per cent are in exports. It has a target to export 20 per cent of its production.
So why does Redarc stay at Lonsdale? The reason is typical of resident South Australian-owned businesses: Anthony, Michele and their four children like living here.
Anthony has deep roots in South Australia. He was brought up in Hawker and went to school in Port Augusta. His grandfather and uncle were the RAA roadside assistance contractors for the Southern Flinders. Anthony learned a lot about dealing with crises and interacting with people from them. These lessons have served him in good stead in running his own business.
The reasons for liking South Australia do not extend to lavish South Australian Government subsidies. Since 2006, Redarc has received about $300,000 from the South Australian government (and about $3.6 million from the Commonwealth government) in R&D grants and in help towards building its new factory.
Like other businesses, the cost of doing business is a constant challenge. Redarc is always trying to design products that have lower labour costs and that are produced with smarter automation. To achieve this, a few highly skilled people do the manufacturing and production, rather than an army of unskilled people.
Redarc is always looking for a better way to do things. It is constantly upgrading its products as well as creating new ones.
Redarc was named 2014 Telstra Australian Business of the Year and won the Award for Excellence in Innovation at the 2015 Technology Industry Association Achievement Awards for its Tow-Pro Electric Trailer Brake Controller.
Richard Blandy is an Adjunct Professor of Economics in the Business School at the University of South Australia.
