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Case Study: Our Knit Factory Management Techniques & Their Consequences

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Engr. Kawsar Alam Sikder, COO -Textile Division, Asrotex Group

Engr. Abrar A Apu, Asst. Professor, Department of Textile Engineering, Daffodil International University

Knit sector is more value adding comparing to our woven sector. Knit sector used to contribute in currency retaining for the country. As time passed by, the competition among knit items producers has become challenging with additional pressures from buyers’ side on FOB price reduction. Apart from this, increased direct labor cost, utility cost, compulsory investment compliance issues such as social standards and health and safety. Present scenario of knit business is volatile, uncertain, complex and ambiguous. In addition to these, management style of investor/owner/businessman of knit factories make the knit business situation worse. Management style is like a two-edge sword, if properly apply brings better than expectation/ target and if miss used the outcome is closing of business. 

There are obvious many reasons why a knit factory is facing profitability crisis or struggling to keep survive dreamed project, and one of the main reasons where I want to narrate is Management Style. In many cases, some factories fall in the sinking point from where return back to the race become tough.

The very first element of management style is taking decision right, and if any leader/CEO’s fail to take right decision the consequence is crucial- huge loses, closing down the project.  I want to share few case study which will be eye opener for others.

Avoiding management tools- feasibility study & ROI: I have observed that top management/owners of many factories in most cases, not invest their time and resources on feasibility study and ROI (return on investment) before going to increase production capacity. One of a renowned factory KFMA (not really name), invested in fabric manufacturing plant to make the capacity double by sanctioning loan from bank. CEO did not take any advice willing from any technical expert, because he is confident that he is well informed than technical persons/subordinates. He loves to take vital decision.  He is confident that he will be able to repay bank loan installment by selling extract capacity fabric from expansion site. After initial completion of multi storied building and installation of machinery, he found instant following challenges:

  • Present gas supply is not sufficient to run newly installed machinery. Government officially stopped any gas line approval. Gas consumption of boiler crossed the approved limit if run all dyeing machines. There is chance of disconnection from state autonomous body TITAS, if repeatedly exceed the approved limit consecutive months. So decided to run 50% dyeing machines. Captive electricity is not sufficient to run finishing range as well as, 50% finishing line remain idle. Stenter run by CNG gas even through it was not economical.
  • Managing the payment of monthly bank installment became tougher than ever. Dream broken just after install all the machines.

The consequences of the above-mentioned management style are difficulties in disbursement of wages & salary of the work force in on time, high employee turn-over, loss of workers’ productivity. In addition, huge credit on supplier’s receivable, facing liquidity problems, unable to open L/C for yarn, dyes, chemical etc. and on time shipment became dream. As a result, this factory is in overall crisis.

This is not for the so called KFMA factory, but also for many other factories. So before any investment, we have to calculate the ROI. Should not invest be based on facts.

screenshot-10Management without PERT: There is very few technical terms and their uses. One among few technical term is PERT that’s stand for Project Evaluation and Review Technique. The must tool for implementation of new project, especially technical and complex project like textile industry. I physically come to know few factories’ project implementation taking 3 to 4 times more than time estimated. Consequently, increased the project cost much higher. In most cases, the investor/businessman himself follow up the project implementation activities without having any knowledge on inter-related activities and their time duration. The outcomes of his project implementation are:

  • Machines arrive in factory before completion of new building
  • Factory is ready for production but can’t obtain environmental clearance
  • Factory is ready but gas connection was not obtained
  • Lift or chiller arrived in factory before complete the building.

Product Diversification without Competent Resources: tightening price is common one way trends in apparel business by global brands and retailers. One of the top brands has reduced its FOB price of legging items 10% within last 4-years. But, at the same time direct labour price increased 51% within the same tenure and labour productivity stands in the same range. One of the obvious reasons for price pressure due to saturated market competition among manufacturers.screenshot-32

Organization should invest to increase the capability of doing value added products and transform workforce as competent resources. Skills and competency development is training, workshop and seminar participations. We shall covert our workforce into strength by giving proper training. Product diversification by Research and Development (R&D) and skills and competent manpower by industrial-are two important management tools missing.

Top Level Management without Modern Management: Many entrepreneur does not have enough knowledge on modern management. Successors are in the board immediately after completion the education. Successors believe that their present successes indicate their previous strategy was right, they are knowledge is better performer than professional employees. A renown textile industry KFMB, introduced the below strategy to increase accountability of their management staffs & workers.

screenshot-10Everybody should submit their written targets or to do lists to concern team in the morning. Before leaving the work station in evening, everybody must submit his/her job completion list to the concern team. Salary & wages will be equivalent % of achieved average productivity. Every employee started to spend noticeable amount of time & papers to comply above rules. 100 % Verification of the performance cannot possible. Staff’s become demotivated after getting repeated thread of salary deduction. Skill & talented staff’s leave the organization. Within few months, the organization found production and profitability in the minimum margin. Successors of the entrepreneur shall not be placed directly on the board of management without having proper organizational knowledge and skill, as textile-apparel sector is one of the complex production sector in the global business as well as very sensitive in terms of using competitive manpower.

Rule of Thumb Management:  To become a top executive, he/she invests most of the time with acquired knowledge, skills and competence with care and proper chemistry of earned knowledge, skills and experience bring result for the whole organization, but it need time for new top executive in new environment. Entrepreneurs want very quick results with newly recruited top executives. If results are taking some time to flourish, impatient entrepreneurs decided to change executives. Entrepreneurs fails to realize that taking over of new management, new environment, new team members and new decision by top executive is time dependent. If the organization is organized (let’s example of our cantonment area), it is easy to instruct and control employees whereas if not, it might take multiple times and different strategies to bring environment under control.

Now, textile-apparel business is more competitive in terms of price, profit, quality and commitment. Business patterns are change than ever before. The old principles failing to give expected results, thus new principles and policy are time control. That is why, it is right and crucial time to rethink business, restructure business, redesign business and more to keep pace with every changing trends and requirements from global buyers.

 

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