Wee Tiong has prospered by redesigning its business model to supply value-added information to customers and suppliers.
As one enters the offices of Wee Tiong Pte Ltd to interview Tan Wee Beng, director of the Singapore-based rice and sugar trading firm, one see a sign on the front door that reads: “Please Remove Footwear”. Inside is a conference room filled with towering stacks of filled invoices and papers. Mr Tan sheepishly apologizes for the mess, explaining that the auditors have just completed their work. The word “easygoing” springs to mind.
The policy to remove footwear is part of an effort by Wee Tiong to make customers feel at home. After all, as Mr Tan says, Wee Tiong’s corporate culture, revolves around trust and familiarity.
These are two traits highly regarded in the commodities trading industry. His words are underpinned by the fact that most of his employees have been with the company for a long time as full-timers and his major customers and suppliers have been doing business with Wee Tiong for many years.
While cultivating long-term full-time employees is fairly straightforward, managing customer and supplier relationships is comparatively more contentious. Asked to share his secrets for handling tricky relationship, Mr Tan says that there’s no “home-grown secret formula” but a continuous effort to understand the needs of customers and suppliers. “To do so,” explained Mr Tan, “redesigning our traditional business model was a must.”
One major change that Wee Tiong has made to its business model was incorporating up-to-date financial tools and nibbling the company to make accurate business decisions.
The need for this redesign stemmed from the shortcomings of its old business model. In the past the lack of information made it difficult for retailers and manufacturers of rice and sugar products to establish connections with suppliers. Wee Tiong was able to leverage on this established reputation as a trustworthy intermediary, and its business prospered.
However, with the onset of the Internet, this form of guan xi became less important because data, prices and contact information could easily be obtained. This threatened Wee Tiong’s position as a middleman. Furthermore, the large influx of cash coming from the financial markets into the commodities market made the prices of commodities more volatile, giving rise to a new problem of customers and suppliers backing out of the contracts when the agreed-upon prices were no longer favourable.
In order to bring fresh ideas into the company, Mr Tan, an electrical engineering graduate from Nanyang Technological University, was roped into the family business by his father and brother in 2002.
After the first few months, Mr Tan soon realized that for Wee Tiong to remain competitive, there was a need for it take positions in both the futures and physical commodities market. He took several night classes to improve his knowledge about the communities market and financial systems.
Six months later, armed with up-to-date financial tools, Mr Tan formed a team of traders to conduct extensive research into the global supply and demand conditions for commodities – specifically rice, sugar and flour.
The trading team allowed Wee Tiong to supply value-added information to customers and suppliers and helped the company to remain relevant.
Mr Tan said that the information generated by the trading team was often conveyed to major suppliers and customers for free. The information helps customers and suppliers make informed decisions to buy or sell. He also added that the information is valuable because the “financial markets in developing countries where trade is conducted are not as robust as Singapore’s” and most of their major customers and suppliers do not have the access to such value-added analysis.
This service has allowed Wee Tiong to help strengthen its relationship with customers and suppliers.
The purpose of the training team is not just to provide value-added services to customers and suppliers. It has also been key in helping Wee Tiong maintain its reputation in the industry as a trustworthy and reliable company. This is especially pertinent in the face of wide fluctuations in commodity prices.
Price fluctuations often lead to suppliers and customers reneging on contracts because the contractually agreed price point is no longer in their favor. As a trustworthy middleman, Wee Tiong has always, at all costs, upheld its contractual agreement to both suppliers and customers. This is a huge financial commitment for the company because if a supplier backs out of a contract, Wee Tiong would have to source in the open market to honour its agreement with the customer. Sometimes this can result in losses running into millions of dollars but Mr Tan still insists that maintaining Wee Tiong’s repetition is paramount.
The trading team helps to hedge Wee Tiong against potential losses due to contractual defaults by taking up active positions in the commodity options and futures market. Mr Tan said that this hedging has allowed Wee Tiong to significantly cut down on losses and hence increase its profits.