CHAPTER 3: SELECTED STRATEGIES FOR GATEXCO 20 AND
3.3.1. Activities functional strategy 1 - Product quality management
Total Quality Management system focuses on improving the quality of the product of GATEXCO20 in line with the customer satisfaction. There are several activities that GATEXCO20 should carry out to improve its TQM system:
Identify all the factors involved in the garment and textile manufacturing in order to provide a specific process
Develop the seminar and meetings to make sure all the designers and manufacturing employees understand what the requirement of products to meet the customer needs
Establish the tracking system in order to capture all fault activities or sewing deflects, colour deflects, sizing deflects, garment deflects
Take into account the seam problems and prevention
A handle sample must be produced as well as working sample
The manufacturing flows should be clearly defined with suitable time factors and all the employees inform their duty and time consuming of their participation in this process
Making the newcomer aware of specifications and tolerances, faults themselves, their effect and the appropriate action to take.
3.3.1.2. Adopt the Six Sigma system
During the research, the author identifies that there is a significant use of a model namely Six Sigma. Like TQM it can be used in various business environments, ranging from manufacturing industries to servicing industries.
The question is what the differences between two models.
The research of (Jacowski, 2007) reveals that the Six Sigma is just process quality improvement program which is based on the assumption of which the perfection of quality can be achieved through reducing the defects ratio to 3.4 defects per million. Hence, Six Sigma helps the adopted companies to achieve higher efficiency and saving cost. Unlike Six Sigma, TQM focuses on the quality improvement through conformance to internal requirements.
Other difference between TQM and Six Sigma is that “TQM initiatives focus on improving individual operations within unrelated business processes
whereas Six Sigma programs focus on improving all the operations within a single business process” (Jacowski, 2007). In the table below, the author provides two types of systems with characteristics that GATEXCO20 can choose when developing Six Sigma system.
Table 10: Six Sigma system
Problems Old methods New methods
Design Product performance Customer base
Analysis Experience base Data based
Manufacturing Trial and error process Robust design process
Inventory level High quantity Low production
quantity as needed
People Cost to company Asset to company
Employee goal Company Customer
Product engineering Small input information and feedbacks from customers
High input information and feedbacks from customers
Quality focus Product Process
Quality horizon Short term Long term
Manufacturing cost Continuously rising Stable and decreasing One of the most key success factor for the implementation of the Six-Sigma is to establish the way to motivate the employees of GATEXCO20 towards the concepts of Six-Sigma. To motivate our team members to achieve the company‟s objectives, the author proposes to use some motivate measures, including: reward/incentive, job enrichment/enlargement, creating good relationship within the team.
Reward/Incentives
The reward and incentive are different. While the reward refers to something of value or recognition of success, the incentive refers to promise of a reward or motivate team members toward success. An incentive is the promise of a reward that an employee will earn if they achieve a specific level of performance.
In GATEXCO20, the author proposes to use reward for team member who has the creative idea to improve the product‟s functions such as increasing the quality of the products or finding the issues that may be potential harmful to the company‟s product in the future. The incentive can be applies for those who are working hard and contribute many ideas during the meeting. They may get the incentives or the promotion to higher position in the company if they continue to maintain and to improve their positive performance. In addition, the company must to establish the non-cash incentives such as trophies, plaques, travel.
Job enrichment/enlargement
The job enrichment and enlargement are different. While the job enrichment focuses on adding responsibility vertically (i.e. removing control, more accountability, new tasks, special assignments), the job enlargement focuses on doing more horizontally for new duties that may or not be related to the team members‟ main jobs. Both of them are used to increasing the team member empowerment and triggering their curiosity.
In GATEXCO20, the author suggests that the company can adopt both of job enrichment and job enlargement for motivating team members. People, who are assessed to be a master in one area, can be assigned to other areas for job enlargement. The company can also adopt the job enrichment when the
company finds itself in rush competition with other rivals such as VINATEX, Viet Tien. In case of rush competition, the company may has to downsize, so the team member may put more additional workload rather than recruiting more employees.
Creating good relationship within the team
Creating good relationship within the team is useful way to motive team members. There are several ways to keep a good relationship within the team.
First, team leader should evaluate his/herself to understand, encourage and control his/her behavior as a leader. Second, team leader must to be familiar with team members. The more and the better he knows his staff, the simpler it is to get them involved in the job as well as in achieving the team and organizational goals.
3.3.1.3. Invest capital on higher technology and high skilled labor
GATEXCO20 should enhance the product quality through improving its technology and high skilled labor. The company can acquires the new machines with updated technology to reduce the deflection rate and to improve the productivity to meet the customers‟ needs.
The company also recruits high skilled labors as the major trend of Vietnamese garment and textile enterprises is to shift from Cut-Make-Trim (CMT) style to Free-On-Board (FOB) style that requires the domestic enterprises have to enhance their skills to compete with foreign enterprises.
3.3.1.4. Establish the quality management unit in each factory
The last action for the functional strategy 1 is to establish the quality management unit in each factory of GATEXCO20. The main duty of this unit is to monitor the manufacturing process in its factory and to report the fault case to the quality management department in the GATEXCO20‟s
headquarter. To make sure the communication between quality management unit in the factories and the quality management department in the headquarter, GATEXCO20 should buy the software that allows the real-time communication.
3.3.2. Activities functional strategy 2 – Build-up the raw material system 3.3.2.1. Build-up the purchasing centers
The purchasing center has the responsibility of buying raw material from local supplier in the competitive prices and of estimating the fluctuation of the local raw material prices in order to have the inventorying plans. Furthermore, the purchasing centers should be placed in Nghe An, Da Nang and Nha Trang due to these area‟s weathers are good for cultivation.
(http://vietnamnews.vnagency.com.vn).
3.3.2.2. Build-up the areas for self-cultivation
However, the raw materials from local suppliers are not significant for the demand of the company. Furthermore, imported raw material is often affected by the global market. Hence, GATEXCO20 should build-up the areas for self- cultivation. This is the right way due to there are more and more competitors of GATEXCO20 have built up their own cultivation area. For example, Nam Dan garment and textile cluster project developed by the Ha Noi Textile and Garment Joint Stock Company (Hanosimex) in central Nghe An Province's Nam Dan District has invested US$63 million to build up the fiber and yarn cultivation. Nha Trang Garment and Textile Joint Stock Co, an affiliate of the Phong Phu Corporation has the project valued at US$16.98 million to grow up 40,000 ha of spun yarn.
3.3.3. Activities functional strategy 3 – Product diversification 3.3.3.1. Create partnership with foreign garment and textile enterprises
The first activity for functional strategy 3 is to create the long term partnership with foreign garment and textile enterprises. The reason of this action can be found in the case of VINATEX. This company now has the relationship with more than 400 corporations and companies from 65 countries and territorial regions. Its export value has accounted for over 20%
of the total export turnover of the company (http://en.www.info.vn). Thus, long term relationship with foreign garment and textiles enterprises will bring the higher turnover for GATEXCO20.
However, finding the suitable foreign enterprise to make partnership is not the easy task. Generally, this partnership can be achieved through the supportive programmes from the Vietnamese Government. Other way is GATEXCO20 should participate in international trade shows to meet all authenticated foreign garment and textile enterprises in the world. The author lists out some internal trade shows that GATEXCO20 can be participate in:
Table 11: International trade shows
No Venue Organizer Products
1 Bangkok
International Trade
& Exhibition Centre (BITEC)
Reed Tradex
Company
Fashion dress materials, Embroidered, A wide range in denims,
Trimmings &
embellishments, All types of buttons
2 Miami Beach
Convention Centre
Global sources Ready-to-wear garments, Outerwear, Sweaters &
knitwear, Sportswear &
active wear, Bridal wear, Fabrics & textiles, Fibers
& yarns, Trimming materials & accessories, Underwear, Swimwear, beachwear & accessories, Sleepwear & loungewear 3 Bangabandhu
International Conference Centre
Bangabandhu International Conference Centre
Textile apparel
technology, Machinery &
related service 4 Imigrantes
Exhibition Center, Sao Paulo
Global sources Ready-to-wear garments, Underwear & Swimwear, Sweaters & knitwear, Fabrics, lace & trimmings, Causal & Fashion Handbags, Fashion Jewelry, Scarves, Headwear
5 Expo Centre
Lahore
FAKT
EXHIBITIONS PVT LTD
Accessories for textile machinery looms &
knitwear, Embroidery, cutting & laying machines, Garment accessories, Yarn dyeing,
Sewing, Spinning
machinery, All kinds of Textile & Garment machinery
(Source: http://tradeshowcalendar.globalsources.com)
3.3.3.2. Invest capital in research and development
Other way to improve the diversification or GATEXCO‟s products is to invest capital in research and development (R&D). In addition to establish the R&D department, the company should allocate the employees to join in external R&D enhancement programmes. For example, GATEXCO20‟s employees can participate in the “Textile Research Institute‟s capacity of conducting research, training and experimental development of textile techniques” which is known as the funding project between Belgium and Vietnam with the value of € 1,200,000. The objective of this course is to provide improved services to the textile and garment enterprises through research and development, transfer of technology, testing, and training and information dissemination. This should strengthen the textile and garment industry to be a spearhead economic sector with a key role in export.
GATEXCO20 should also cooperate with the domestic university in R&D.
The author suggest GATEXCO20 should work with Ho Chi Minh City University of Technology, the faculty of mechanical engineering, in order to make the in-depth research on computerization, automation and consolidation of production management systems to improve quality, productivity.
3.3.3.3. Conduct the annual market research
To ensure the products of GATEXCO20 is diversified in the right way, GATEXCO20 should self-conduct the annual market research, in order to update the demand of the customers and to identify the new opportunities for the future development.
Alternatively, if the company cannot self-conduct the annual market research, the company should buy the market research from third parties such as Business Monitor Intelligent (BMI), European Intelligent Unit (EIU) or the report from Vietnam Garment and Textile Association.
3.3.4. Action plans for five years strategies
Table 12: Action plans for five years strategies Functional Strategy 1- Product quality management Activities Resources Responsibil
ity
Expected Objectives
Time
Schedule Evaluation Improve
the TQM system
Existing TQM system
Top
managemen t,
Quality managemen t
department, Customer service center, Sale team, Manufacturi ng unit
Enhance the product quality through customer satisfaction and
employee participatio n
Jan 2013 to July 2013, Monthly monitori ng and revision
The market report on customer satisfaction and
employee satisfaction
Adopt the Six Sigma system
IT
infrastructu re
Top
managemen t,
Quality managemen t
department, Customer
Reduce the deflect rate
Aug 2013 to Mar 2014, Monthly monitori ng and revision
The report on the number of deflect rate in the manufacturi ng units
service center, Sale team, Manufacturi ng unit
Invest capital on higher technolog y and high skilled labor
Technology department
Top manageme nt, IT, Finance
Increase the productivity and product quality
Jan 2013 to
Decemb er 2013, parallel running or pilot test for at least 3 months, Monthly monitori ng and revision
The report of the number of product made by new
technology system and compare to the current system
Establish the quality managem ent unit in each factory
Existing employees in the manufacturi ng units
Top
managemen t,
Quality managemen t
department,
Monitoring the problem timely
Jan 2013 to Mar 2013
The daily, weekly, or monthly report from quality managemen t unit in
each
factory: the report frequency, detail of the report, the trustfulness of the reports Functional strategy 2 – Build-up the raw material system Activities Resources Responsibil
ity
Expected Objectives
Time
Schedule Evaluation Build-up
the purchasin g centers
Local supplier
Top manageme nt, sale team, finance
Ensure the raw
material need for the manufacturi ng
Jan 2013 to Dec 2013
The number of raw material from each purchasing center, Operating cost of each purchasing unit
compare with the profit return Build-up
the areas
Local supplier
Top manageme
Ensure the raw
Jan 2013 to Dec
The number of square of
for self- cultivation
nt, sale team, finance
material need for the manufacturi ng
2015 cultivation, the
productivit y per square in cultivation area
Functional strategy 3 – Product diversification Activities Resources Responsibil
ity
Expected Objectives
Time
Schedule Evaluation Create
partnershi p with foreign garment and textile enterprise s
Top manageme nt
Increase the annual turnover, increase the expertise
On- going process
Number of partnership, the quality assessment for the partnership per year
Invest capital in research and developm ent
Top manageme nt, Finance, Human resource manageme nt
Finding the new way to improve the efficiency and cost saving in manufacturi ng process
On- going process
Number of new
innovation ideas
Conduct Secondary Marketing Understandi On- Number of
the annual market research
data from the market (TV, internet, third parties reports)
department ng the market trend and the
competitive level
against other rivals
going process
market research was
conducted
3.4. Recommendations to GATEXCO20 for strategies implementation In term of business strategy implementation, GATEXCO20 should follow up the pre-determined process. The author suggests using the process which is provided by R. Grunig (2011). To make the process is simple, R. Grunig (2011) considers the business strategy implementation as a project which has 07 steps, as described in the figure below.
Figure 17: The business strategy process
(Source: R. Grunig, 2011) The first step is to make the plans for the business strategy project at high level or kick-off meeting. The second step is to conduct the strategic analyses such as M. Porter‟s Five Forces Model, SWOT analyses, in-bound and out- bound logistics. The third and the fourth step is to develop the corporate strategy and business strategies. The fifth step is to make the detailed plan of implementation which is clearly defined the objectives, scope of work, responsibility of each stakeholder and key deliverables with time line. The sixth step is to assess frequently the implementation, to highlight the key issues and to propose solutions. The last step is to document all relevant documents and these documents have to be approved by the chairman or the director of GATEXCO20.
3.5. Recommendations to the Government
The Vietnamese Government should play the important role in establishing the general policies for the development of raw material cultivation. Recently, the Prime Minister has approved a program to develop Vietnam‟s cotton cultivation by 2015, increasing the cotton cultivation areas to 30,000 ha in 2015 and 76,000 ha in 2020. In the long run, the Vietnamese Government should establish more programmes to increase the cultivation for other raw materials to make sure the local garment and textile manufacturers have the adequate materials for exporting and local requirements. In more detail, the Government has approved, textile proposed strategy to build more cultivations, waste water treatment system standards in cultivation areas such as Thai Binh, Nghe An, Tra Vinh, etc. Additionally, the construction industry also conducted an ecological laboratory at the Institute of Textiles is responsible for assessing and approving the safety certificates for export and commodity inspection, to ensure the safety of the users in Vietnam, as well as in the import market. The laboratory is responsible for building and managing product safety standards and technical barriers needed to protect consumers in the domestic market.
In addition to the supportive programmes for raw material cultivation, the author suggests that the Vietnamese Government should establish the supportive financial programmes that help the local manufacturers having the necessary capitals for financing their activities.
The last recommendation to the Government is to establish the business laws in order to create the healthy competitive environments between local manufacturers and the foreign enterprises.
CONCLUSIONS
In this research, the author has examined the theory of formulating business strategies through the case study of GATEXCO20 in the garment and textile industry. During three chapters, the author has gone through the analyses on the Vietnam macro economy (Chapter I) in order to identify the new trend of politics, economic, social and technology into the business activities of GATEXCO20. These analyses will help the author to formulate the opportunities and threats to GATEXCO20. The main opportunities are (i) the Vietnamese Government has implemented the policies of which supporting the local suppliers to grow up the raw materials; (ii) the Vietnamese Government has the favorable policies in order to encourage the Vietnamese people to use the local-made products, (iii) the customers are more focusing on the local-made products, (iv) the opportunitiy of adopting new technology, (v) people are more taking care to their clothes. However, the author has seen that there are alot of threats of which GATEXCO20 has to face such as (i) inadequate raw material, (ii) alot of competitor in the market, (iii) WTO accession with trade liberalization brings more powerful competiors to the market, (iv) economic downturn affecting to Europe and reduce the exporting volume to this market, (v) unpredictive the future need of the customers.
The author also examines the internal activities of GATEXCO20 (Chapter II) that brings the information of strenghts and weakness of the company to the author. The major strengths of the company are (i) TQM system, (ii) high production capacity, (iii) quite fast exchange service. The major weaknesses are (i) high lag time or idle time in procurment process, (ii) insufficient distribution system, etc.