Abu Dhabi Pallet Industry (ADPI), founded in 2000 by Salem Abdullah Majia Al Muhairi, is the largest pallet manufacturer and recycler in UAE. ADPI defines its customer base as business which moves goods on platforms.
How did you get into business?
My father traded foodstuffs. I realised that trading was a low margin business when I studied business in the US. As a part of my education programme I was visiting manufacturing plants. I told my father that “we” needed to get into manufacturing. My father advised me to follow my calling. He didn’t want to change. I had seen products coming on pallets to our warehouse and getting dispatched to customers. I asked my father if making pallets was a good business to start. My father asked me to study the business.
An uncle of mine gave me catalogues to study and leads to companies. We got invitations to visit factories in different countries. I wanted to see the machinery working before deciding on what to purchase. I visited Spain, saw the machinery, and collected all the details to start a factory. The initial investment was too high. I declined the proposal.
And then the supplier came to UAE.
So what happened?
I told him that whatever he wished to supply must be commercially viable. I didn’t need a quote that is about technical features and price, and for a big factory. He gave me a price; I bought 2 machines, got 5 employees and started business with Dh500,000.
Your suppliers helped establish the business?
I was advised to start operations in phases. Instead of buying blocks of wood, I started with pre-cut sections. The extra cost was offset by reduced transportation cost, reduced processing wastage, and quicker handling.
We needed guidance in raw materials. A pallet looks simple but the nail has a special design. It goes in straight and then flares. Nails had to be specially made.
How did you recruit people when you started?
No one knew how to use the machines.
I asked for advice from the suppliers. I thought we needed engineers. I was told to recruit carpenters who could read and write English.
Then?
Startup was not easy. The supplier found it challenging to train people to use the machines. I was like my employees. I knew nothing about the business. The supplier was worried. He told me that if he knew this, he would not have sold me the machines. He was scared that a poor factory would reflect badly on his business.
The machine capacity was around 1,000 pallets in 8 hours. The first day we barely had made 120 pallets. Second day score was 360 pallets. I was ready to give up. We had not produced enough pallets to load a full truck. One employee motivated me. He made me focus on delivery. We decided to work continuously until we achieved our delivery volume.
The supplier visited us recently. He told me, “You are a completely different man today. On the day of the installation, I was uncertain how you will run the business. You were much stressed”.
How did you get your first order?
When we entered the market a company in Jubail, Saudi Arabia, was a big supplier. We analysed their costs. Their location had cost disadvantages for servicing UAE. Their prices were high for direct shipments to Abu Dhabi. To offset which they were shipping goods to Jebel Ali and then trucking pallets to Abu Dhabi. The logistics arrangement was complicated with multiple handling and extra freight time.
The first contract taught us to look at costs and prices very carefully. We estimated our cost at Dh60 and I gave the first offer at Dh60. This was better than the Saudi supplier. The customer was purchasing pallets at Dh45. My competitor was bidding at Dh42 to keep a new supplier out. We were called for a meeting, informed that our prices were high and that we could collect the order at around Dh40. We double-checked our costs. We were making a contribution of Dh2 per pallet. Quantity was 10,000. We took the order at a low price as a promise of growth. For 2 years the prices remained low. No one was making money. It took time for everyone in the industry to realise the uselessness of low prices.
Did buyers give you a preference as a National supplier?
All Government companies prefer manufacturers in the UAE. When we started UAE already had four factories. They were strong and large companies owned by local business groups. So no, we got no preference. Competition was strong and pricing was sharp.
How did you use the first contract? Learning how to price. Learning how to manage.
Bourouge is a good buyer. They don’t put all their eggs into one basket. Every supplier got a part of the contract.
Everyone expected me to close my factory. I was uncertain but confident. I was a small player. Having started the factory, paid the rent, and recruited staff, I was determined to work quietly, focusing, understanding, and managing my business, and each tender. I learnt to track and manage costs. I needed to manage all my costs — raw material, transportation, maintenance, and people — if I had to make only Dh2 per pallet.
How do you decide bid prices?
I keep track of competitors by analysing costs in detail. To quote for Saudi Arabia I did a detailed analysis of the landed cost of the pallet and then made an estimated cost-sheet of my competitors — their raw materials, manufacturing, and logistics cost. This comparative analysis gives me the understanding to “know” the range of bid price for various contracts.
Growth plans?
We started with a factory of 900 square metres. It is now 11,000 square metres. This year we are entering Saudi Arabia to serve Aramco. They have been evaluating us as a supplier. We are now recognised as a pallet manufacturer. We are not the biggest. I have learnt to compete with bigger and better competitors. Over time our performance has improved. Our prices have remained firm. We have decided to remain small. And not reduce price to win contracts. I believe that size should not be an issue for a startup if the entrepreneur focuses on his business instead of focusing on competitors. Many digressions come. My advice is to concentrate on your work and you will win.
Did you ever think why did I do this?
Many times. Pressure from friends is always there. My father gifted me a Mercedes when I finished college and got a job. The following year I started the factory and sold the Mercedes. A cousin of mine commented, “Before you had money. Now where is your money?” I showed him the factory and said, “That is my Mercedes.” The business was initially not making money. Dubai was booming. Many of my friends were in real estate. They used to tease me, “We are making money. What are you making?” I used to reply, “I am making a loss and building the business.” They used to retort, “Stop making a loss. Sell the business.” I was determined to carry on. There are always stories of people having made 3 times or 100 times their investment. One has to be careful and remain focused.
Innovations in business?
To cut costs at every point of the supply chain we have designed transportation trailer trucks to increase (doubled) their carrying capacity.
Is it important to do everything with your own hands when you start a business?
I believe one has to see things with one’s own eyes to learn and develop the business. If you are not on top of the business it will not develop. I still manage and focus on everything in the business. I meet customers. I identify and inspect wood suppliers. I manage the production. I work very closely with all my employees. Your goals?
I want to be a leading pallet maker in UAE. I define leading as profitability and profile. Not size. In twelve years we have established the foundation. We now have to grow.
How have you changed as a person?
I am far more mature today. I do things carefully. I also take my chances. I will decline business if it is beyond my capacity.
