Product Innovation Fuels Sanitation Manufacturing Enterprise in Cambodia

The piece below originally appeared on WASHfunders‘ blog.

By John Sauer, Senior Technical Advisor for WASH, PSI

Geoff Revel knows the value of sustainable, market-driven local solutions, having led an organization called WaterSHED Cambodia that supported local businesses and governments to generate sales of over 200,000 toilets to rural consumers. Inspired by business solutions, Geoff has now transformed the NGO into WaterSHED Ventures, a social business that sells water, sanitation and hygiene products in Cambodia, Laos, Vietnam and Bangladesh. One of these products is the Paradise toilet shelter, winner of the Reed Elsevier Environmental Challenge. The Paradise Shelter was designed in 2015 and launched as the first prefabricated toilet shelter for the base of the pyramid market.

While about half of rural Cambodians now have a basic toilet in their home, over five million people are still practicing open defecation. These are last mile consumers, who are both poorer consumers and have been reluctant to purchase a toilet due to remoteness and time-consuming installation. WaterSHED Ventures’ solution was to introduce a product innovation and a sales approach to satisfy these more hard-to-reach consumers. Enter the flat-pack Paradise Shelter complete toilet option paid for with online installment payments—think Ikea in rural Cambodia.

The value proposition of the Paradise Shelter toilet is that the consumer can get their toilet right away and only have to pay an installment payment of about $30 per month for about 1 ½ years, using an easy online payment system that all Cambodians already use. This is an advantage over the current toilets, which require upfront payment and don’t include a shelter, which customers have to build by brick over time, as they can afford to buy more bricks.

At the basic level, the Paradise Shelter business model is developed quite similarly to solar and other last-mile distribution enterprises. All costs of goods sold (COGS) and the indirect expenses, like marketing and sales activities and transportation, need to be covered for the social enterprise to break even or turn a profit. Production and installation, therefore, need to be as efficient as possible to minimize costs. For example, a last-mile solar installation can take just one hour to be completed. The sanitation sector is notorious for cumbersome and time-consuming installations plagued with quality control issues, and the pre-fabricated shelter eliminates some of those issues. However, significant challenges for the rapid installation of sanitation systems at a competitive cost remain. One bottleneck is a gap in the skilled workforce required for the installation of the plumbing and septic system (which the Paradise Shelter sits over). The root cause is social problems prevalent in Cambodia as well as rural skilled labor migration; skilled workers are moving to take higher-paying jobs in Phnom Penh or Thailand. Another challenge is the high cost of local transport for the delivery of the product. The Paradise Shelter team is trying to overcome these challenges through process engineering focused on efficiency and cost optimization for production, delivery and installation.

Local manufacturing of new products that have been introduced by WaterSHED Ventures is disruptive and unique in the sanitation sector and something more actors and donors should be supporting. The product was designed with the ability to affordably manufacture a lightweight, durable, attractive and high-quality product with locally available or easily importable materials, equipment, and labor. The Paradise Shelter factory was sited in Kampong Cham both because of the affordable rent as well as the strategic location to access several surrounding provinces. The set up for the factory includes some basic hand tools, racks for storing the raw materials and ready-to-deliver materials, and the workstations. The primary material for the Paradise Shelter, cement particle board, is ordered from Thailand, and the hollow steel bars and roofing materials are purchased from Phnom Penh. The factory currently has production capacity of 15-20 units per week, but that has potential for scaling up.

The Paradise Shelter team has deployed some marketing techniques through social media, for example, a cartoon developed by the marketing team and a local artist discussing openly the issue of women and girls’ safety. The child quickly returns home from a trip to open defecate after finding a snake. In 2020 the team is expanding its sales and marketing channels to include sanitation hardware depots.

WaterSHED Ventures has a strong local team who are confident that they can overcome these challenges and barriers and have continued to grow sales every month. 2020 is shaping up to be a year of further growth, reaching revenue of near half a million dollars. The team’s vision is locally adapted problem solving and solution generation.

When it comes to sanitation, many international investors have come with preconceived ideas and haven’t given the space required to incubate local creative ideas in the start-up environment. Also, very few initiatives have supported the kind of product research and development (R&D) WaterSHED Ventures has done. Globally it’s a very important reminder that there are no social enterprises in sanitation serving base of the pyramid consumers in a sustainability growing way that are covering all costs.

WaterSHED Ventures and the larger sanitation sector need access to patient support and finance (both grants and social investment), supported by individuals who are willing to work with local teams as they test and iterate on locally viable solutions. Finding solutions will require creative partnership development with new supplier networks, context-appropriate sales and marketing, and improved operational efficiency and cost optimization.

Locally supported manufacturing, led by social business, is a unique approach that doesn’t receive enough attention in the sanitation sector. WaterSHED Ventures is proving that a local manufacturing model for a full toilet shelter solution is possible and potentially profitable as well.

Furthermore, the idea of businesses using tools, equipment, and inputs they can affordably import or purchase locally to make high-quality finished products is an important concept that needs more attention and review. For example, why couldn’t cheaper septic tanks be produced locally made from high-density polyethylene (HDPE)—which can be bought in bulk rolls—and basic plastic welding equipment as opposed to construction with concrete or high cost rotational molding? Local manufacturing deserves more attention and more testing of ideas and innovations and support to R&D should take place.

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