The baggage handling system at Taoyuan International Airport sends travelers' luggage from airline check-in counters directly to the aircraft 365 days a year.

Some 200 kilometers south of the airport, automated equipment at a new Chi Mei Optoelectronics TFT-LCD panel plant moves panel after panel exactly to where it is needed on the production line.

All these automatic systems were designed by Kenmec. The Taipei-based company supplies about 80 percent of the automation needs of Taiwan's listed companies. Its customers range from bean sprout farms to automated parking garages to the high-tech TFT-LCD panel industry.

Since its founding 34 ago, Kenmec has never posted a loss. Last year it racked up revenue worth NT$3.2 billion. More than 100 companies in Taiwan offer conveyer equipment, but only a handful are able to compete with Kenmec when it comes to system integration. More than 200 of Kenmec's 1,800 employees – roughly one out of nine – are engaged in R&D.

Kenmec Mechanical Engineering chairman Hsieh Ching-fu is not happy that Kenmec has long been categorized as a mechanical equipment maker. "We aren't some low-grade factory. We sell integrated services," he asserts. Kenmec belongs to both the electromechanical industry and the service industry.

Kenmec is a classic example of a "2.5 generation" company – part manufacturing, part service. "If customers want production automation, process rationalization or higher process efficiency, they all come to us," says Hsieh, dissecting the entire history of factory automation in Taiwan with great familiarity.

Early on, Taiwan's small and medium-sized enterprises would do things roughshod, purchasing their own machines and equipment, and assembling their own production lines with the help of a few skilled workers. As a result output tended to be low and reject rates high, causing serious bottlenecks that held back business development.

Seizing Automation Needs

Hsieh, who started out as a maker of conveyer equipment, had a good nose for the prospects of automation. Twenty-five years ago Kenmec began to get involved in the full automation of electronic contract manufacturing plants, investing around NT$10 million. At a machinery exhibition at the World Trade Center in Taipei, the company presented a more than 10-meter-high material handling facility, which immediately attracted the interest of many electronics factories.

Back then General Instrument Taiwan, based in the Taipei suburb of Sindian, wanted to double its output and sought a cooperative relationship with Kenmec. "Within half a year Kenmec designed a dozen different projects, introducing a real-time material supply system and unmanned transport vehicles," Hsieh proudly recalls. The new automated system allowed General Instrument Taiwan to cut more than 2,000 jobs, while more than doubling its capacity.

Hsieh, who only received a middle school education and originally worked as a mechanic, was fully aware that he would not make a fortune just from selling equipment. "You need to provide customized planning services, and experience is decisive for success," notes Hsieh. The threshold for getting into automation is high. It takes integrated machinery, process control and computerized systems.

Twelve years ago, Kenmec introduced an enterprise resource planning (ERP) system and established a knowledge-sharing platform for the automated  design of production lines. The company's 200-plus R&D team can mine tens of thousands of past design projects for information and inspiration, thus shortening the R&D process.

One Step ahead of Customers

Kenmec has mastered the development and manufacturing of automated equipment. Its strengths are finding production line flaws that cause low efficiency and helping customers boost productivity.

One day a lipstick maker with a reject rate of more than 10 percent sought Kenmec's advice. The R&D team discovered that many of the lipstick tubes were defective because they were jostled as they moved down the production line. Therefore, Kenmec designed a method to automatically place the lipstick into individual paper boxes as soon as they were made, preventing collision during transport. As a result productivity immediately jumped threefold.

"Chairman Hsieh is very smart. He's looking for new business opportunities all the time, always one step ahead of his customers," observes Simon Tsai, president of Taiwanese notebook maker Clevo and its Chinese IT retail chain subsidiary Buynow. When Clevo built a new factory in Sanchong outside of Taipei, it asked Kenmec to plan the production lines.

Clevo did not want a traditional single-story factory that takes up a lot of land. Instead, it wanted its laptops assembled in an eight-story vertical production line. "We designed a fully automated notebook computer assembly and transportation system. The notebooks can be put together on a single transportation system from parts assembly on the eighth floor to the shipping warehouse on the first floor," Hsieh says, beaming with pride.

During the past decade Kenmec has begun to enter the international market. Even Japanese companies, which usually pride themselves on their production efficiency, have enlisted Kenmec's help. The company helped a thermal power plant on the outskirts of Tokyo install a coal ash delivery system several kilometers long. It also implemented automated delivery systems for a warehouse run by the Japanese Self-Defense Forces in Hokkaido, a Sharp TFT-LCD plant, and a manufacturer of prefabricated housing.

Kenmec also designed the distribution center for major U.S. online computer retailer Newegg. "Even their automated warehouse management software, their hardware equipment and their office forms were all designed by Kenmec," Hsieh says with a satisfied smile.

Kenmec quickly gained experience in the automation of TFT-LCD processes and equipment and has begun to delve into the field of system integration. Recently, the company released optical bonding equipment for the production of TFT-LCD displays, which markedly shortens the complicated hydrogel bonding process. "Many touch screen panel makers want to reserve our whole line to make their products," Hsieh reveals.

Kenmec has also felt the effects of last year's global financial crisis as customers put the brakes on plant expansion plans. But Hsieh is still quite confident about the future, because China is currently experiencing a labor shortage. That's exactly where Kenmec's expertise in automation might come in handy. "A number of China-based Taiwanese businesses and Chinese customers are now looking to us. After all, Kenmec's core value is helping the customer raise productivity."

Translated from the Chinese by Susanne Ganz