The Mech Touch Chapter 987
985 Perplexing Business Strategy
In the following days, Ves went on a series of tours through the Kadar-Neyvis Group's manufacturing complexes. They owned four in total, spread across different parts of Bentheim.
Jeff brought Ves to the Haston Complex first. Situated in the poorest city of Bentheim, the surroundings looked awfully rough, but those who worked here seemed happy and grateful to be working for the KNG.
"It must be very hard to base production in Haston." Ves idly commented as he casually inspected the entire plant under the guidance of one of the presiding mech designers.
"This is the old production plant of Neyvis Mechs back before the merger." The mech designer said. "We are a familiar institution in Haston. The Neyvis Family has a good relationship with the local Haston communities. By working together with the locals, we've managed to avoid the travails that other mech companies suffer when they think they can just drop down a factory here to take advantage of the cheap labor."
"What does the Neyvis Family do?" Ves asked, even though he already knew the question due to his prior studies.
Jeff answered this question quickly and confidently. "The Neyvis Family is a familiar mainstay in the Bentheim business community. They have long been in the banking and finance sector. Their Industrial and Commercial Bank of Bentheim has invested in many mech companies as well as many grassroots businesses. Eventually, Antoine Neyvis entered the mech industry and achieved great success, propelling him all the way to become the new head of the family!"
"Does that mean that Mr. Neyvis is also in charge of the family's ICBB?"
"Not directly. The bank's shares belong to the family's estate, and every major decision requires the approval of the family. Nonetheless, the ICBB has increased their cooperation with the Kadar-Neyvis Group lately."
As a capital-intensive industry, the vast majority of mech company startups went heavily into debt to get their foot off the ground. The harsh competition and relatively high barrier for entry did not deter many hopeful young mech designers in trying to make it as a mech entrepreneur.
Most failed outright.
Many more barely managed to keep their heads above water.
However, the few wild successes paid off extremely well, especially if the bank held equity in the newly-founded mech companies.
These huge successes made it viable for banks to earn a profit despite investing in many failed ventures.
Even if too many mech companies they invested in failed for some reason or another, the banks usually claimed the collateral which would be put to good use in another company.
Ves figured one of the reasons why Neyvis Mechs managed to achieve success early on was because the Neyvis Family accumulated a substantial amount of insider know-how on how to operate a mech company.
Having invested in so many mech companies through the years and having witnesses so many successes and failures, the Neyvis Family already knew most of the pitfalls of the mech industry!
As Ves continued his tour throughout the Haston Complex, he became struck by the numerous production lines, large amounts of motivated personnel and the extremely complex supply chains intertwined in this central location.
The mech designer brought them to the rear section of the plants where warehouses and landing pads stored hundreds of freshly-fabricated frontline mechs packed in compact containers. Transports occasionally flew down to offload raw materials and pick up the mechs.
"The logistics of running a manufacturing complex that can pump out an arsenal of mechs is extremely intricate. We are involved with hundreds of suppliers, logistics firms and distributors who ship our mechs to where they are sold. Keeping our supply chains running with all of the uncertainties of war and business has been difficult, but we are more than up to the challenge!"
The Haston Complex shipped in a huge amount of raw resources and subsequently shipped out a large amount of cheap but very sizable mechs. This in turn meant that the KNG's logistical efforts at this particular complex was the most large-scale and intensive operation of the entire company!
From the areas where the mech designer took him, Ves did not see anything amiss, at least on the surface. The large amount of people, the tight spaces and the overall level of monitoring and inspection left very little room for individuals to smuggle anything in or out of the complex.
However, as long as a substantial amount of key personnel were involved, something shady could still happen under the noses of everyone else. If Ves wanted to dig any impropriety out, then he needed to look into some of the personnel susceptible to these schemes.
Unfortunately, he wouldn't be able to do so on this short visit.
"Thank you for the tour. Visiting this complex has opened up my eyes." Ves said.
"It is our pleasure to show off the KNG's splendor, Mr. Larkinson." The bland mech designer responded.
Ves visited the three other manufacturing complexes of the KNG in turn.
The Ansel Complex was just as large as the Haston Complex. It used to be the center of production of the old Kadar Group and still pumped out spaceborn mechs to this day.
While the frontline mechs produced by the Haston Complex mostly sold for about 4 to 8 million credits, the mechs at the Ansel Complex could be bought for around 15 to 30 million credits.
This was still an extremely competitive price point, and Ves figured the profit margins were already rather skinny even during the good times.
The workers at the Ansel Complex generally appear to be more competent and diligent in their work. Subsequently, they were also much better paid.
"Ansel is known as the mech capital of this planet." The local mech designer explained. "While Ansel is famous for hosting its premier mech university, it is also known for educating some of the most best mech technicians in the Republic. Most of our mech technicians working here at our Ansel Complex come from those institutions."
"They must be rather expensive to employ." Ves remarked.
"We are always known for our generous remuneration. We are always working hard to achieve the best possible quality in our output. The raving reviews and the excellent customer feedback of our spaceborn mech models proves that all of our efforts here has propelled the KNG to greater prominence!"
Ves nodded. The mech market did indeed appreciate the KNG's many offerings. They enjoyed good reputation for delivering good quality products.
However, Ves privately questioned whether all of these extra efforts were really worth it. Even though the good reputation helped them sell more mechs, would the additional revenue offset all of the extravagant costs incurred by employing so many highly qualified mech technicians?
The KNG already paid its employees above average industry rates and offered extremely generous benefits on top of that. Certainly, employee satisfaction and subsequently their productivity all rose to the top, but Ves couldn't help but suspect the KNG wasted far more money without getting enough in return.
To Ves, the mech company's overly generous treatment of their personnel had reached beyond the bounds of common sense!
It was as wasteful as employing one of the Lyrical Kitchen's top chefs for the sole purpose of warming up nutrient packs!
Frontline mechs never sold for very much. Subsequently, there wasn't much profit to be made out a single sale. The Haston Complex fabricated so many frontline mechs because the KNG needed to leverage their economy of scale to the utmost in order to make a decent living out of selling these low-value mechs.
As for their operations in Ansel, while Ves genuinely found the Ansel-educated mech technicians to be a pleasure to work with, they were paid much more than their regular counterparts.
Was it worth it to pay twice as much for an Ansel mech technician when they only performed twenty to forty percent better than some basic mech technician that barely graduated out of a local trade school?
Ves looked to his own business as an example. The LMC's first mech technicians consisted of a fair number of local mech technicians from Cloudy Curtain. Even though they weren't nearly as good as the mech technicians from Ansel or those working from the military, the LMC still managed to fabricate premium mechs just fine!
Therefore, Ves felt profoundly uncomfortable about all of the pampering the blue collar workers received.
He continued to feel that way when he quickly toured the KNG's two smaller complexes. Erected after the merger of the Kadar Group and Neyvis Mechs, the two newer sites attempted to accommodate the expanded needs of the rising mech company.
The Mosville Complex was a hybrid production and repair site, and served as the center of the KNG's after-sales support services. Not only did it produce a significant quantity of spare parts and various supplies, it also ran a substantial repair operation which constantly fixed up heavily-damaged mechs sent back by their customers.
The Dorum Complex on the other hand was the smallest but also the most extravagant. Even though the KNG excelled in selling cheap bulk mechs, they didn't entirely ignore the premium mech segments. Kadar or Neyvis regularly spent time here to design, develop and fabricate custom mechs, and even without them the plant still produced various specialty premium mechs for various purposes.
Overall, Ves found these two newer complexes to be more inefficient than the older ones. The Dorum Complex especially featured such low production volumes that he doubted it had ever turned a profit.
As for the Mosville Complex, Ves had much to say about the viability of their repair operations. Having supervised the extensive and continuous repair efforts of the Flagrant Vandal space and ground mechs, Ves was highly adept in the amount of manpower, expertise, supplies and time needed to repair the various kinds of damage that mechs tended to incur.
What Ves found most inefficient about the repairs being performed at Mosville was that the KNG allocated a substantial amount of manpower, resources and time to fix up cheap frontline mechs which incurred heavy battle damage. Many of them were even outright wrecked!
It was safe to say it cost a lot of time and resources to reconstruct these mechs, yet their inherently low value meant that the KNG couldn't charge full price to effect these repairs.
"The KNG also sells a huge amount of frontline mechs every year. The more mechs they sell, the more their customers will send them back for repairs and restoration."
Ostenably, the KNG sold its frontline mechs at bottom rock prices in order to earn a profit on their after-sales services. However, how much could they mark up their prices to service their cheapest products?
The mercenary corps and other customers that purchased these bargain bin mechs tended to be penny-pinching cheapskates. They would always compare prices on everything and never paid for anything that wasn't worth the cost.
Subsequently, the KNG couldn't charge too much for their repair services or otherwise those cheapskate mech owners would simply bring their damaged mechs to a cheaper repair business!
Although the quality between the two services differed quite substantially, most budget-minded mech owners probably found it wasteful to put their cheap mechs in the care of the KNG's well-trained but overpaid mech repairers!
As Ves finished his brief tours of all four manufacturing complexes, the questions in his mind continued to grow without abating.
The profligate way the KNG spent its money paired with its business strategy of focusing on selling large amounts of economy and budget mechs seemed incredibly contradictory.
"How can the KNG even expect to make a profit? Even if they are in the green, their wasteful spending ways means that their return on investment should be a lot more morose than comparable mech companies!"
Ves felt as if he was missing a crucial piece of the puzzle in the KNG's business strategy. What he really wanted to do right now was to storm into the KNG's headquarters, barge into their Financial Department and read through their financial records!
However, as a liaison mech designers sent to the KNG for the sole purpose of babysitting their military production activities, checking the company's finances fell outside of his purview.
As a private company, the KNG also didn't need to report their statements in public. Therefore, obtaining any accurate information on the true state of their finances would be very difficult.
Still, Ves had a feeling that understanding how the KNG's actually earned their money would help out his investigations.