Centre of excellence

29 January 2009



With a stable economic and legal system, the Czech Republic is becoming the new manufacturing hub of Europe. Sonali Advani finds out why


Of all the former Communist nations in Central and Eastern Europe (CEE), the Czech Republic has one of the most developed economies. It always had an industrial culture – the Czech regions of Bohemia and Moravia were the industrial centre of the Austro-Hungarian Empire since the 19th century.

Fast-forward to the 21st century and signs of development are evident across the nation. Its central location in Europe, along with a skilled and technically educated workforce has attracted millions in the way of foreign direct investment. The Czech Republic is the first post-Communist country to receive an investment-grade credit rating by international credit institutions.

No wonder then, that the packaging industry is investing heavily in the country. Last year, the global packaging group Alcan Packaging invested €17mn in a new flexible packaging facility – Novobal – in Nový Bydžov with the objective to expand its footprint in Central Europe. Focused primarily on production and printing of high-quality rotogravure flexible packaging, the site is expected to be operational in the fourth quarter of 2009.

Highlighting the benefits of the Czech Republic, Frederic Goig, vice-president of business development for CEE says: “To respond to the growing business in Europe, we wanted to expand our Central and Eastern European footprint. The Czech Republic’s strategic location provides easy access to all of Europe, including the western markets.”

The new facility will have three rotogravure presses printing in seven colours, combined with inline lamination, and cold sealing equipment. “While our current facility in Skrivany has 50 employees, the new factory in Nový Bydžov will have 150 working in three shifts,” Michal Uher, business unit director for the Czech Republic, says.

“This new plant will help Alcan Packaging to increase productivity and drastically increase market share in CEE,” explains Frederic Goig, “this is therefore not a defensive investment for reasons of saving costs, but an investment that will help us better serve the needs of our customers.”

The Czech Republic is not only attracting investment from converters, but also from the suppliers to the packaging industry.

When EskoArtwork saw the sales of its Kongsberg tables rise by 150 per cent during the last four years, it decided, as part of a long-term strategic plan, to double its production capacity by building an additional manufacturing site. It was essential for EskoArtwork to build a plant that would ensure that

the quality of the cutting tables is not compromised and also take advantage of low cost production. This development is historic for EskoArtwork as it is Kongsberg’s first manufacturing plant to be built outside of Kongsberg, Norway. The move exemplifies the company’s faith in Czech technical expertise and craftsmanship.

“Also important to us were the economic stability of the country at macro level, its developed infrastructure and transportation,” says Nicolai Gradman, senior vice-president CAM and supply chain at EskoArtwork.

“The ease of conducting business in a country with low crime, corruption and bureaucracy, as well as a country that shared a similar culture and time zone, were other important factors. But the most important criterion was the availability and quality of labour with technical expertise and craftsmanship.”

Brno, in the Czech Republic, satisfied all of Kongsberg’s needs. It is the country’s second largest city and a junction for the pan-European highways linking major cities in Austria, Poland, Slovakia, Hungary, Italy, and the Baltic region. Brno boasts six universities with 20,000 students enrolled in technical fields. It also has an excellent supplier base for materials and components.

Yet another advantage for EskoArtwork investing in the Czech Republic was its proximity to the Kongsberg headquarters. “The staff at Brno had to be trained in Norway for a period of three to six months to understand the manufacturing process. We also have staff from Kongsberg visit us from time to time to supervise the employees and handle transfers. The transition and training would have been much longer and more resources would have been required if the investment was made in a country further away from Europe,” explains Karel Novacek, the plant manager in Brno.

Spread across 1,000 m2 of production and warehouse area as well as 100 m2 of office space, the Brno facility currently has 17 employees working in a single shift. Whilst its primary focus of Brno will be to produce single, mature machines and meet increasing market demands, Kongsberg will remain the CAM technology and R&D centre, focusing on manufacturing new products and critical subassemblies.

EskoArtwork plans to increase the yearly production in Brno from approximately 50 to about 200 tables within a year, and to move to a bigger facility close to the city’s airport in December 2009. It might also be used as a customer showroom in the future.

“The only challenge in the Czech Republic could be retention of staff. In such a developing economy, multi-national investment is resulting in many job opportunities,” Karel Novacek points out.

“We are pleased with the choice we have made in investing in the Czech Republic and are impressed with the technical knowledge of the employees,” adds Nicolai Gradman.

Although the investors benefit from simpler customs regulations and EU norms, as well as tax incentives, Czech industrialisation is not complete yet. The Government still faces many challenges and is making a conscious effort to further develop its cities and attract more investment. Vladimír Gašpar, director of the Regional Development Agency South Moravia, points out:

“We are now focusing on developing an integrated transport system, more industrial zones, and easing the integration of foreigners. For example, we have started an international school where the teaching staff are predominantly native English speakers.”

But the region also needs to develop beyond its manufacturing capabilities and look to become a hub for innovation. “Although innovation currently continues to be driven by the West, this gap will close shortly as R&D is now getting active in the CEE,” concludes Frederic Goig.


Cutting tables to be made in Brno Kongsberg

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Alcan Packaging
EskoArtwork

Kongsberg Kongsberg


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