UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business ------------------------------ Luong Thi My Lan POOR INNOVATION ACTIVITIES AT SMT (VN) CO., LTD MASTER OF BUSINESS ADMINISTRATION Ho Chi Minh City – Year 2018 1 TIEU LUAN MOI download : skknchat@gmail.com UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business ------------------------------ Lương Thị Mỹ Lan POOR INNOVATION ACTIVITIES AT SMT (VN) CO., LTD MASTER OF BUSINESS ADMINISTRATION SUPERVISOR: Ph. Đoàn Anh Tuấn Ho Chi Minh City – Year 2018 2 TIEU LUAN MOI download : skknchat@gmail.com TABLE OF CONTENT Executive information Introduction CHAPTER 1: COMPANY INTRODUCTION 3 1. Organization chart 4 CHAPTER 2: PROBLEM IDENTIFICATION 5 2. Potential Problem and Validation 6 2.
Central Problem 12 CHAPTER 3: CAUSES AND UPDATED CAUSE-EFFECT MAP 15 3. Causes and validation 16 3. Central Cause 19 CHAPTER 4: ALTERNATIVE SOLUTIONS 21 4. Solution 1: Finance leasing 21 4.
Solution 2: Built up the training process and policy 24 CHAPTER 5: ACTION PLAN 26 Conclusion SUPPORTING INFORMATION REFERENCE 1 TIEU LUAN MOI download : skknchat@gmail.com Executive information The SMT Company is leading in textile industry about label manufacturing high quality base on the combination of high technology, customer‘s reliable and satisfaction, good management and high demand of market. However, nowadays, in the completive market, SMT seem lost the top position because objective and subjective factors. Base on the symptoms is profit margin drop down, the main problem of this company was revealed is the strategy company does not invest machine and technology. The reasons are point out three majors: the power of financial equity and the well-trained workload, in this situation, finance and human resources are the challenge for company.
Finally, the conception of director also related to run the business for company’s strategy. These problems must solve quickly as it is indeed threatening the survival. Company suggests two positive solutions for cause problem are finance leasing and built up the training process and policy. These solutions are not only support about capital resources through choose the bank with interesting attractive, professional process and more benefits but also give company the plan in human resource training by heightening labor awareness of training skill and knowledge, making training plan and plus more policy to encourage the labor with reasonable cost.
Based on these solutions, company conduct the action plan with people in charge such as CEO, CFO, Factory Manager … in time to improve the situation. This thesis also collects the data from financial and internal reports, refers the literature by author and in-depth interview all persons with high position in charged for more details also interview other related employees to be executed fully understand the problem. Additions, this thesis used formula is Gross profit margin = (Sale revenue – Cost of Goods Sold) / Sale revenue to clarify the symptom also used some kind of charts to analysis and compare the information in detail. Meaning, this thesis presented the important problem and positive solutions also the action plan for main problem in positive.
2 TIEU LUAN MOI download : skknchat@gmail.com Introduction Textile industry in general label industry in particular is the most important industry in Vietnam which not only solve about unemployment but also impulse the development of industry in Vietnam. This makes textile industry essential for the Vietnamese people. However, nowadays, when Vietnam joined the WTO, textile industry in Vietnam is facing more challenges such as the policies, culture and more strong competitors as Chine industry. SMT Vietnam Company is a Foreign Direct Investment company that specialized in providing cloth and shoes labels for textile industry.
Due to the fashion grow rapidly in Vietnam; at the begin 2003 SMT Company established which focuses on label producing by chain complex machinery. CHAPTER 1: COMPANY INTRODUCTION 1. Industry overview Vietnam plays an increasingly large role in the World’s Textile & Garment Value Chain - its garment products exported to over 180 countries and territories. The country poised a bright future ahead of becoming the world’s textile production center, and major garment makers are continuing to explore expansion and production opportunities in Vietnam.
There are around 6000 textile and garment manufacturing firms operating in Vietnam, 84% of which privately owned, 15% FDI, and remaining 1% are state-owned. This industry employs around 2.5 million people in the country on an average wage of $239 per month. Garment manufacturing accounts for 70% of the total businesses in this sector in Vietnam with CMT (Cut, Make, Trim) being the main method (85%) of export. The apparel exports account for 11.61) of the country’s total exports (2016).
Company overview SMT (VN) Co., Ltd is the Foreign Directly Investment in manufacture high quality labels. In 2003, SMT was established by the main director is Thailand woman and have two working location include one head office in TanBinh district and one factory in Cu Chi 3 TIEU LUAN MOI download : skknchat@gmail. That location is useful for transport and production. The main products are woven and printing labels to provide for the business of Footwear / Garment / Bags/ Accessories items, etc., SMT Vietnam has good environment working also well-trained technicians with much talented and skillful teamwork.
We are now major supplying our woven labels to main customers i. Nike/ Reebok/ Timberland/Adidas/ Pierre Cardin/ Puma in Vietnam market and many brand name customers in Asia countries also enhance our customer’s brand name in worldwide market. Moreover, over 15 year, SMT already has exported woven labels to USA, EU, Hong Kong, Singapore, China, and Australia annually. Organizational chart The human resource in 2017: 200 people for office and factory CEO SALE DIRECTOR FINANCE HR MANAGER FACTORY MANAGER DIRECTOR Sale Customer Accountants Staffs Manager Service Depart Worker 4 TIEU LUAN MOI download : skknchat@gmail.com CHAPTER 2: PROBLEM IDENTIFICATION 2.
Problem finding process In order to identify the company’s problems, these following steps executed: Reference the data of report’s company to understand the symptoms and positive problems. Review the literature related to the symptoms and accounting data of industry. Interview all persons who in charged for more detail: Mr. Tran Quoc Bao - Director of factory Mr.
Nguyen Luong Bang – Director of sale and customer service department Ms. Ho Loc Ly – Finance manager Mr. Ky Ngoc Minh – HR manager Ms. And others employee to get the full information for clear understand the problem.
Moreovers, information from customers and competitors also be collected to futher reference. Company’s symptoms Following the date of financial report from 2016 to 2017, the symptoms of this division had revealed as following: The formula of this ratio is Gross = (Sale Revenue – Cost of Goods Sold) Profit Margin Sale Revenue The trend’s gross profit margin had fall down 5% from 59% to 56% in 2016-2017. Specially, the end of 2017, gross profit margin rapidly decreased between 60% and 26% 5 TIEU LUAN MOI download : skknchat@gmail.com from August to December and was high distance with 2016 in same period. More important, this was in the seasonal textile.
The main reasons of decreasing gross profit margin are the revenue and cost of good sold: For the operating revenue had reasonable decreased around 21% between 2016 and 2017, specially, the revenue in 2017 had trend rapidly went down from January (8,236 million) to December (6,866 million). Moreover, total SMT revenue 2017 was around 20% lower than QN Competitor Company; most important, SMT’s revenue had high distance over 35% with competitor in the fashion season (in supporting information) 6 TIEU LUAN MOI download : skknchat@gmail.com The reasons make revenue decreased by the fluctuated PO (Production Order). The PO had same trend as revenue (in supporting information). In particular, the negative effecting to PO and revenue is the loss of customer’s offers includes loyal and potential customers and in 2017 had lowest customer’s offers.
The total customer’s offers around were 2. More detail, in 2016, there were 1.950 PO (Production Order) from loyal customers, 764 PO from potential customers and 30 PO form others. However, in 2017, there were 1.700 PO from loyal customers (down 13%), 401 PO from potentials customers (down 48%), and 20 PO from others only. Bang, Manager of sale and customer service department, also point that the product’s season and lack of reputation were a part of reason effect to customers offers decreasing.
On the other hand, the cost goods of sold was calculated by three factors is material cost, labor cost and manufacturing cost, but the labor cost was stable. The cost of goods sold went down around 10% between 32. This was due to the raising material cost and manufactory cost. Follow the data accounting there were dramatically increased in 56% for material cost and 4% for manufactory cost such as repair and replaced equipment for machine.
Moreover, finance manager stated that company could not reuse waste material woven so policy control cost ineffective for material cost. This lead to the result of gross profit margin went down in 2 years. 7 TIEU LUAN MOI download : skknchat@gmail.com Material Cost Manufacturing Cost 2016 8,437,533,736 11,680,566,811 2017 13,200,332,658 12,129,623,444 Increase rate 56% 4% Table: The material and manufacturing cost SMT Conclusion, the symptoms showed such as decrease gross profit margin, revenue and the customer’s order. Moreover, we can see the revenue decreased around 20% but COGS just fall down 10%, lower than revenue, so we can see the factor affect COGS as material and manufacturing cost was flexible changed.
Follow that symptoms above, this was the serious signal to urge me discover and clarify what was the main problem. Potential problem and validation Although, SMT is one of the strong competitors, follow these company’s symptoms as gross profit margin also base on the literature and in-depth interview people in charge in business to claim that company had trend went down. The potential problem clarified by review the theory and in-depth interview to confirm what is the central problem. Follow the theory by two studies that claimed the low quality service and product effect to customer satisfaction such as: Kandampully (1) stated that quality of service, rather than price, has become the key to a manufacturing’s ability to differentiate itself from its competitors and to gain customer loyalty and Nielsen (2) claim that companies increasingly look to quality, satisfaction, and loyalty as keys to achieving market leadership.
Understanding what drives these critical elements, how they linked and how they contribute to your company’s overall equity is fundamental to success. By the way, as Customer service and sale admin shared that the brand value and reputation of company affected by the appreciated customers also Bontis 8 TIEU LUAN MOI download : skknchat@gmail.com (3) found that customer satisfaction enhances reputation in the service environment. The link between satisfaction and reputation has received minimal attention. In order to confirm, the Customer service and sale admin agree to in 2017 company get more complain from customers about not only the standard label lower the sample but also the way customer service staff solve the situation too late or usually miss the client’s email.
Therefore, the customer’s satisfaction had trend went down and influent the amounts of loyal and potential customers decreased in 2 years. More detail, in 2016, there were 1.950 PO from loyal customers, 764 PO from potential customers and 30 PO form others. However, in 2017, there were 1.700 PO from loyal customers (down 13%), 401 PO from potentials customers (down 48%), and 20 PO from others only. Conclusion, the result showed that the low quality product and service influence customers’ satisfy so company lack of reputation and lost loyal and potential customer in loss that make customer’s offer was decreasing.
It is definitely not a good business at all. The other side, each label must follow standard that were signed by 2 parties base on the sample about the size, color, and the amount of thread.