Jinjian Business Strategy Jinjian Garment

Jinjian Business Strategy

Jinjian Garment Factory Business Strategy

The Jinjian Garment Factory's many challenges are made even more challenging due to the lack of clarity in human resources policies and practices, myopic and short-sighted approach to managing inbound production demand including a lack of production scheduling which includes a lack of forecasting, a lack of business process management (BPM) workflow best practices, and lastly, a lack of consistent quality management processes and practices. In short, the entire factory needs to be re-vamped both from a process standpoint across each of its functions; there is no synchronization across accounting and finance for example to production to accurately forecast and control the cost per garment produced. There isn't a standard costing model defined to measure cost variances against; there is no centralized enterprise resource planning (ERP) series of processes or automation included in factory. In short, this is factory of 250 employees working with processes that individual craftsmen would use to accomplish the same result. As a result of all these problems and lack of coordination between each of the factories' functional areas, confusion reigns and morale is very poor as a result. Clearly the owner and managing director, Mr. Lou Baijin, is in for many more sleepless nights and $15,000 air shipment bills (and the potential of lost customers) if the fundamental aspects of the factories do not change soon.

Strengths, Weaknesses, Opportunities & Threats (SWOT) Analysis

In assessing the Jinjian Garment Factory and defining its strengths, weaknesses, opportunities, and threats, the following key insights are defined:

Strengths:

Production efficiencies evident in the ability to meet large, complex orders from U.S.-based customers. Despite the relatively high cost of labor the Jinjian Garment Factory is capable of accepting and fulfilling large orders.

Strong customer relationships with American retailers as evidenced by the large order being completed as the case study begins and the factory working overtime to complete an order.

Ability to attract and retain skilled workers during one of the busiest months of the year is a strength that Jinjian Garment Factory has been able to grow over time by cooperating with and bargaining successful with workers on wages.

Expert-level knowledge of the processes including in CMT including the 15 procedures necessary for creating a dress.

Strong expertise in production workflow, despite needing to have this more automated as a series of processes.

Ability to meet many small orders illustrates that the CMT process and 15 procedures to produce a dress are well-understood throughout the company.

Weaknesses:

There is a complete lack of demand planning in the factory, even to the worksheet level, much less to a computerized Enterprise Resource Planning (ERP) system.

There is no forecasting system in place to understand customers' requirements well ahead of time; from the case study it appears the orders are fought for in bidding wars between factories with price and availability being the two factors the majority of factory general managers rely on to win business.

The factory's short-term focus of just completing one order after another forces employees to also be very short-term in their work ethic as well; each order is a battle between employees and the managers of the factories. This dynamic appears to play out across the entire industry.

Basing compensation purely on piecework as a measure of productivity will nearly always lead to work slowdowns by workers to force up the rate per piecework, especially when the order is large and has a short deadline. Workers see these orders as an opportunity to earn more money.

The workers are actually running the factory right now to their benefit, despite any illusions Mr. Lou Baijin has of being in control. They are dictating when the order gets done to extract higher wages from Mr. Lou Baijin.

Cost structures are out of alignment to a significant degree when 60% of the cost of an item is labor; this introduces a very high level of variable cost to each item making gross margins and profitability nearly impossible to predict reliably.

Opportunities:

Develop a consortium of manufacturing companies to spread the risks of unpredictable demands and often unpredictable costs. In constructing this consortium, Mr. Lou Baijin could recommend that the group of companies begin to define supply chain participation standards including cost of the materials and develop standards for supplier performance. The consortium to also assist each other in developing more evenly distributed production levels.