Interview with Mr. Gerald Hofer, CEO, KNAPP AG, Austria

Mar 2020 Interview with Mr. Gerald Hofer, CEO, KNAPP AG, Austria

Prisma Reports (PR): KNAPP is a success story made in Austria, started 65 years ago in 1952. The company has become a global technology leader in the warehouse logistics business, working with a variety of customers all over the world. To start with, can you give us a rapid tour of the group, how has it developed over the years, and how does it stand out?

Gerald Hofer (GH): KNAPP is a typical Austrian company, founded in the 1950’s by Günther Knapp. He was an engineer and an inventor who produced a lot of things that were too early for his time. At some point Günther Kapp was contacted by a pharmaceutical company in Austria and he helped them to put in place a highly sophisticated warehouse solution to deal with their increased medicine distribution needs. KNAPP continued to grow into the pharmaceutical business field until the 90s, and is still very much present today in the pharmaceuticals supply chain. We are actually the number one technology supplier in the pharmaceuticals supply chain, servicing also the industry from the pre-wholesale stage – ensuring the distribution from production sites, as well as the B2C distribution, the automation of shop floor, pharmacies, hospitals, all the way down to a long-term medication of patients. KNAPP has become very much dedicated to software and data. We are the biggest integrated supplier of solutions, dealing also with all the data and the software processes that come with it. That’s the difference to other producers that produce conveyors or shuttles. We do offer equipments, but we actually always deliver fully integrated systems. We offer all kinds of solutions around smart production, from smart data, to quality control by picture recognition, and more smart features. KNAPP has been an early adopter of smart solutions. KNAPP today counts 4,500 employees. After the last few years when we had a significant growth, our aim now is to focus more on a sustainable development and reach a level of €1 billion turnover. We are a technology company, which means that we need a lot of trained engineers, software technicians, and specialized workers in all the areas of the business. KNAPP is also a family business, priviliging quality over quantity, and quality over turnover and fast growth

(PR): How has KNAPP expanded over the years, and how does it contribute to industries’ growth and challenges at present?

(GH): Over the years KNAPP has expanded its support from the pharmaceutical industry to other business sectors and created different business units to support B2C activities in these sectors. That is a big growth driver for us. KNAPP today is very present in the food industry, which is a big sector, demanding quality, sustainability, safety and variety for the customer. We have been very successful as well in the fashion industry over the last 10 years. Almost all the big brands in the fashion industry are our customers. KNAPP is here to guarantee the success of our customers: we are like the guys in the background, enabling others to have a perfect supply chain. Logistics, which is the when and how a product is handed over to the customer, has become an integral part of the product. In fact the production, the logistics, the sales process, the actual point of sale – whether it’s the internet or the shop floor – are all integrated into the value chain and become one. KNAPP is part of that process and supports these value chains. From getting the right material, getting the right people, getting the right data to a certain place, communicating between the production steps all the way up to staff planning, skill planning, quality assurance – all those elements are integrated into KNAPP’s systems. We have long-term business relations with our customers, and today 70% of our business is coming from existing customers. Many of our existing customers are indeed facing tremendous change in their businesses, because they have new demands, new issues, or because they start up new businesses. We are here to support their growth and support these changes. We are using automation and are building systems to enable our customers to cope with their growth and to give them more flexibility. We priviledge existing customers and long-term business relations, which has given us a very steady development also on the international side.

(PR): 2017-2018 KNAPP Group has been the most successful business year of its 65-Yearhistory with a 12% growth in net revenues from €631.9 to €709.6 million. Order volume increased by 32% to €926 million, while profit grew by 29.8% generating €45.2 million. What drove this growth and what’s your outlook for 2019?

(GH): KNAPP’s rapid growth is fueled by our customers’ increasing needs. This explains our great results. Yet much of our profits have been used to finance new infrastructure investment to serve our customers, so eventually we also had an investment-rich year where we invested more than we actually made profits. That is not very usual for family companies, but we saw this as an absolute necessity for us to continue to fulfil our customers’ evolving needs. Our job is to integrate value-added services within the supply chain to enable our customers to provide better services to their customers.

(PR): Innovation is something that is very much ingrained in KNAPP’s DNA. Your founder Günther Knapp was a strong inventor himself. KNAPP recently won the Material Handling Innovation Award for Best IT innovation with its RedPILOT solution. Can you tell me a little bit more about KNAPP’s R&D efforts?

(GH): We have very stable profits representing about 5-7% of our turnover. Yet we heavily invest into research and development every year, and we’re working together with severaluniversities – not only universities here in the region, but also with US universities, and other institutes in other countries. Together, we try to always be on the lead regarding technologies. We call innovation our tradition. So for KNAPP it’s a tradition to be the most innovative company in our business field. That’s what we stand for. We do everything from machinery and self-building, to robotic solutions, solutions with shuttles, all the transportation systems around, all the handling machines, and more importantly also all the processes, all the software, all the optimization processes, the quality insurance processes. We do all this from one hand.

(PR): What is your strategy to keep innovating, what kind of new green tech fields are you exploring at the moment?

(GH):We have an established process driving our innovation. First we get feedback from our customers, we discuss new ideas, new platforms, we discuss their challenges and dreams, and from there we start to be creative. KNAPP has a lot of technologies that we engineer in-house on our own and that is our strength. We are producing electronics, we have skills in mechanics and mechatronics, and so the next big challenge is to foresee the main upcoming trends and what’s the next edge of success for our customers. From there we form a development roadmap, together leveraging all kinds of partners and resources, including universities and customers who are often directly involved into our development process. Universities do the basic development and the basic research, and we then take the latest edge of technology and put it together into solutions for our customers. That’s for us an ongoing process: we try to understand where the markets go and what the demands are and come up with new ideas. Sometimes we try also to take the market by surprise.

(PR): Your COO Mr. Mathi recapped it very well saying ‘Innovation and KNAPP are inseparably linked. With our technologies, we are changing the world of logistics over the long term.” How is KNAPP embracing the latest digitalisation trends, and making the digital turn?

(GH): KNAPP has been digital since the 70s! The big difference and the critical part of the digital process today is how to get more from data: how to get the right information, at the right moment, in the right quality, which comes down to our very own definition of logistics. Logistics today is not only having the right product, in the right place, at the right time, with the right cost; but it’s also having the right information, the right people with the right skills, and the right working space. We have the technology to help our customers to have the right information at the right place. We listen very intensively to what is going on in our market segments and try to be ahead of what is the next step to those industries. We brought new developments to the market, we have new software products. For example we have new picture recognition technology that is very important for the pharmaceutical market in the US, because in the US the laws are different from Europe, demanding serialisation throughout the whole supply chain. We are supplying our customers there with the latest technology to make them in a step-by-step operation, ready for the 1st of January 2023, when they will have to fulfil all these applications. We are helping them with our technology to do so. The main message here is that we are highly involved, trying to do more in the industries than we have ever been doing.

(PR): KNAPP operates through 42 international sites, in the US, Europe, China, South Africa, Australia and Latin America. How are you working to further internationalize the group?

(GH): We started our expansion in Germany, then in Europe, and today we are very happy to say that a big portion of our business comes from the Americas, from the US and Canada.We are heavily involved in the Latin American countries. We are in China, in Asia, in Korea, we’re in South Africa, Australia. Today around about 50% of our business comes from oversees, and 50% from Europe. We adapt our business models to follow our specific customers, and this takes us from one country to another. For example, when we build something for a big brand in Germany and that they expand to the USA, they take us over to work for them and accompany their development on their next expansion market.

(PR): How important is the US market for the group?

(GH): The US is the strongest economy in the world, hosting some of the most sophisticated industries, and a lot of trends are coming from there, so naturally it’s a key market for KNAPP. The US accounts for around about 1/3 of our business. Our biggest subsidiary is established in Atlanta, Georgia, and employs almost 200 employees at present. Business there is expanding fast. As a result we are planning to enlarge our facilities there. Our new premises in Atlanta will be much larger than what we had before.

(PR): What’s your strategy in terms of marketing and branding to grow your reputation?

(GH): We are trying to establish a brand as a technology leader, although this is not comparable to end-customer marketing strategies. Our main strategy is to become a strong partner to the leaders in the business sectors we are acting in, and get known as an element of their success. And then, those references lead to next references. That’s our main strategy. Of course, we are also doing trade fairs, we are in Chicago, we are in Atlanta, and all the big trade fairs.

(PR): How would you rate Austria’s potential and talent in regard to high-tech and IT, specifically? Perhaps in the region as well?

(GH): Austria is producing high quality people out of its education system, and that is the base of our success. A lot of international people come to study in Austria, which is bringing an interesting international touch that benefits us. As a country we don’t have natural resources, but we have human resources, that’s our resource, and that’s very important to our success.

(PR): You’ve been with Knapp for almost 25 years, and in the CEO seat for the past 7 years. What are some of your ambitions? What would you like to achieve most?

(GH): We want to establish an independent high-tech company with a strong international footprint. We love to make profits and high turnovers of course – but what matters most for us is to put in place a sustainable success, and sustainable partnerships with our customers. Customers who are faced with a rapidly growing business that they can’t handle on their own should get support from our side and count on us as long-term partner. We want to become big enough to withstand the big international conglomerates that have established in our industry over the last years. We want to reassure our bigger partners that they can rely on our economic strength and for that, we need to achieve a critical mass. Our customers establish a relation with us not for a moment, but for years and decades, and so the most important thing we can give them is to be a very stable partner, on whom they can rely. They can invest with us today; we will be here in 15 years, doing a great job for them. Growth is not the most important figure in our company that measures our success. We want to grow, yes, but in a very stable and sustainable way..

(PR): What’s your final message?

(GH): What we like most in KNAPP is this multinational and multilingual working space we have created, involving all kinds of nationalities and all kinds of different professions. We have some US colleagues working in our Austrian headquarters, and we have Austrians and other nationalities working in the US. As an organisation we have a responsibility for sustainability and for social cohesion; and for us success happens when you get rid of any borders and restrictions.