Growth picked up significantly in the latter half of 2010, allowing the security industry to take a few gulps of fresh air amidst the suffocating effects of the recession. While the transition to IP-based security and the demand for sharper images have enabled companies catering to the video surveillance market to enjoy healthy growth, things have been rough for other segments of the security industry, such as access control and intrusion detection. Nevertheless, the Security 50 ranking was not dominated completely by video surveillance manufacturers. Several access control companies weathered the hardship through strategic acquisitions and cost-cutting measures. Several companies also made first-time appearances on the Security 50 ranking due to newly available data, while some disappeared because of acquisitions
Average revenue growth for access control manufacturers on the Security 50 ranking was 8 percent, compared to 2009. The Global Technologies division of Assa Abloy remains the top player at US$776.8 million in revenue, up 5.2 percent from 2009. Second was RCG, which saw revenue grow by 23.5 percent to $388.4 million, due to the company's aggressive expansion in China and Southeast Asia.
Growth for video surveillance companies was especially strong, at an average of 20.2 percent. The growth was largely fueled by the markets' demand for better image quality. Avigilon, one of the top profit growers, saw revenue grow to $32.6 million, up 91.2 percent from 2009. Chinese manufacturers Hikvision Digital Technology and Dahua Technology have also scaled the ranking ladder. In fact, 13 of the top 15 revenue growers cater to the video surveillance market. Vivotek is another company riding the megapixel waves, growing 71.5 and 57.5 percent in revenue and profit, respectively.
Security giants such as Honeywell Security and Bosch Security Systems were hit harder than most by the economic crisis. Although they remain the top performers of the year, growth in 2010 was modest, albeit much better than the previous year.
Fit = Happy
The financial crisis shrunk the market for security, and manufacturers were faced with intense competition. Many of the top 15 performers, with regards to revenue and profit growth, jumped up from much lower positions. Under the circumstance, established companies were forced to examine their processes to trim fat and increase efficiency.
In the first half of 2010, Bosch Security Systems gradually toned down aggressive cost-saving measures, playing it safe due to doubts regarding the strength of the global economic recovery. In the second half of the year, demand for security technology increased significantly, with Asian markets showing the strongest growth. This was especially beneficial for the product business of Bosch. However, cost-efficiency measures taken during the financial crisis were not in vain, as they prepared Bosch to take advantage of the economic recovery in 2010.
Assa Abloy also benefited from successful restructuring, closing down 38 of its production units and switching 42 to focus mainly on final assembly. A total of 5,387 employees were let go as a result. An increasing volume of standard production has been transferred to internal and external units in low-cost countries. The remaining local assembly units were improved through the introduction of lean methods throughout the company, combined with efficient final assembly of customized products.
Trimming Fat to Increase Efficiency
Measures made to cut costs were consolidating production units, shifting production to low-cost countries, increasing production efficiency, optimizing inventory management, and streamlining administrative processes and workforces.
Flir Systems also successfully reduced production costs. By designing and manufacturing products that take advantage of economies of scale, Flir reduces the cost of delivering a product to customers. The increased unit volume output reduces production costs, which allows lower selling prices and increases demand for its products.
Flir designed a vertically integrated manufacturing process that allows full control over key component technologies. Through acquisitions and internal development, they created an internal supply network that optimizes manufacturing throughput, increases product design flexibility, enhances product reliability and provides independence in designing key components. The integrated approach enables Flir to lower costs, yet continue to improve the functionality and efficiency of critical components. Furthermore, Flir can deliver products in a more timely and cost-effective manner by relying less on third-party suppliers, .
On the other end of the rope, Axis Communication does not have its own facilities. This enables it to be more flexible in the manufacturing process. The supplier strategy Axis employs is to account for more than 5 percent but less than 25 percent of each supplier's sales to ensure suppliers remain focused on Axis, while also allowing the flexibility to rapidly scale up or down volumes.
Regardless of manufacturing strategy, providers striving to offer a comprehensive product line streamlined their production processes to increase productivity and reduce costs. An effective method was to develop common product platforms wi th f ewe r c omponent s and common product development. In production, flexible final assembly close to the customer is combined with the transfer of high-volume standard production to external and internal production units in low-cost countries.
Mobotix transitioned to a new processor technology for all singlelens cameras. It will be gradually deployed in dual-lens cameras as well. One advantage of the new platform is that all Mobotix products now utilize an identical electronic board. This simplifies purchasing logistics, reduces production costs and increases product quality.
AVTech also develops products based on a common platform, allowing it to reduce development and production costs, while catering to different market segments with a comprehensive product line.
In addition, companies that have invested in lean manufacturing techniques, such as Assa Abloy and Visonic, were able to control production costs more effectively. Pioneered by Toyota, lean manufacturing allows more efficient production flows, better control of material costs, improved decisionmaking procedures and shorter development times.
Beyond Streamlining Production
Inventories are difficult to manage. There are considerable costs based on anticipated sales, and risks arise when an event impacts product demand. Coming up short in sales results in higher inventory levels of finished goods, components and raw materials. Reducing inventories helps reduce capital employed and improve cash flow. However, it is equally important to maintain stable and swift product delivery.
Administrative flows gradually grow cumbersome over time. Automated and standardized solutions help reduce and eliminate manual work to create a seamless flow from internal processes to external communication to final delivery, increasing efficiency and customer satisfaction.
One interesting cost-saving measure Bosch took was to focus on prevention. Extended field-analysis testing was used to determine what products would encounter in real-world situations, and additional findings were fed back into the development loop. With products that are designed to withstand stresses and strains in the actual environments they are targeted for, Bosch was able to reduce support costs.
Flir employed several strategies to lower operational costs through vertically integrating operations, expanding use of shared services, rationalizing strategic sourcing processes, and diversifying manufacturing operations.
Dahua also optimized management and production to control costs and increase productivity, resulting in 125.4 percent profit growth, which is higher than its revenue growth of 81.4 percent.