Table 4-1: Aldila Vietnam SWOT analysis
Aldila in Vietnam
STRENGHT
• Head office is located in US. We are recognized as the most advanced production facility in US.
• Strong brands and experienced BOM over 30 years in graphite golf shafts.
• Company has world-wide distribution network.
• Diversified product portfolio and has been a good design:
Golf:
Year 2007 2013
Product type 50 367
Arrow: owned arrow product in 2011.
• Aldila products have high quality levels such as innovative, a perfected blend of weight, torque, flex.
• Human resources are young, dynamic and cheap.
WEAKNESS • Yield of product is low and rework cost is high.
• Most of raw materials need to be imported from US, price is high and long lead time.
• Base on balance sheet 2012 vs 2013:
Cash flow was declined because inventory was increased. We invested a new arrow production line which affected to short term debt.
OPPORTUNITY
• VN governments have many “open door policy” to welcome foreign investment company.
• Growth Prospects in Global Golf Market and Emerging Markets.
• Company can make our own raw materials.
• Product life cycle is shortening: in the past, it was 05 years. Now, only 02~03years. Our company’s policy to control and reduce the lead-time.
• Aldila headquarter has budget by USD but pay for employee by VND while Exchange rate of USD vs VND currency is always going up. This will help to control budget in VND better.
• Victory Archery Acquisition
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THREAT
• Rapid Technological Change
• Environmental Regulation: Global economic crisis.
• Increasing Competitive Pressure: More competitors from China/Taiwan and they are moving/expanding factory in VN.
• Price of almost raw materials have trend to increase.
• The cost (labor…) of Aldila factory in China branch was increased rapidly.
Besides, China government policies are tighter. It creates more pressure on Aldila factory in China then it might affect to cash flow of the whole group.
Below are our Vietnam economic environment analyses that will be contributed advantage but also create some disadvantage on Aldila Company.
Table 4-02: Aldila Vietnam PESTEL analysis
Aldila in Vietnam Environment
POLITICAL
Advantage:
• Political stability and convenience for FDI companies. VN government continues to improve and attract foreign investments which defined as an important part of VN economy.
• Lands for rent are cheap and duration to rent is long (49years).
• Good tax incentives and trade policies have been given by government.
Disadvantage:
• Infrastructure is still rudimental
ECONOMIC
Advantage:
• Vietnam joined WTO, many multilateral and bilateral agreements.
• VN has Development-Economic Strategy from 2010~2020: become an industrialized, modern economy and stabilize the economy, build world-class infrastructure to create a good business environment.
• Capital income growth slows.
All these factors will create advantage for FDI company as open market, can do business following world regulations.
Disadvantage:
• Inflation makes wage increase (12~15% per year)
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SOCIAL
Advantage:
• Abundant young labor force.
• Opportunity to develop because of VN economic development and FDI company increment.
• Human resources are young and dynamic, cheap.
Disadvantage:
• Human resources haven’t been well-qualified yet.
• High turnover because many jobs opportunity.
TECHNOLOGIC AL
Advantage:
• Apply high technologies in decorating shaft like laser/spray instead of only painting.
• Develop new type of material to produce premium shafts.
Disadvantage:
• Qualify process takes a long time: about 03 months from launching until qualified.
It affects to our production seriously because time to launch program is short.
ENVIRONMENT AL
Advantage:
• Our company is located in VSIP 1 with very good transportation facilities, electric energy supplies.
• Vietnam began member WTO, ASEAN, APEC.
Disadvantage:
• In general, Vietnam has low labor costs.
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LEGAL
Advantage:
• Government creates new laws to protect labor (Child labor, limited of working overtime,…)
• Government creates conditions to attract foreign investments. Income tax for FDI company invest before 2007 will be applied as below:
+ Exempt in the first 04 years + Next 07 years is only 5%.
+ Next 04 years will be applied 10%.
+ Meanwhile other kind of company must pay 25%.
• Not have to pay for imported/exported tax but company must control and report the consumption of each material with government in each contract.
Disadvantage:
• Law system is more tighten and change fast, less predictable and not consistent on legal regulations.
• Taxation is obvious changes in law through legislation. There is plenty of time for the business to prepare with little warning. Other law changes that commonly affect business include Workplace Health and Safety, Industrial Relations, Consumer Protection and Environmental Law.
In general, Aldila has some advantages of leading technology and strong brand in graphite golf industry. Technology and is a factor in the external environment that constantly exerts pressure on the business or organization. Technological change affects the design of products. It helps company to provide nice and fashionable products. Management team has good education and experiences. Labor force is young and cheap. Investment environment is convenience and attractive: tax incentive, VN is a member of WTO, Asian…
On the other hand, Aldila is also facing with some internal problems such as low direct labor skills, low yield and high material cost…company must order from oversea: long lead time, transportation cost and custom clearance fees are high. Some external disadvantages: competitors, new technological developments are occurring, the rapid changes in the world, globalization and the fierce competition. Law systems are changed fast.
Base on above status, the most important thing for company to survive is internal performance to assure company profit by producing high-quality products and at less cost.
Company needs to review current processes to improve it by doing the right things, right at the first time. Prepare to change by exploring new, innovative, and better ways of doing things to increase productivity and profitability.
Page 39 In long term, company needs to focus on customer and learning growth to create and sustain a global competitive advantage. Company needs a systematic approach to exploiting, renewing and enhancing their core capabilities.
4.2. Analyze case study base on current KPIs:
Currently, company has 13 KPIs listed as below:
Table 4-03: Current KPIs system in ALDILA
Pers pecti ve
KPI
Meas ureme nt
Year 2013
Target
2013 Status PIC Initiative
Finance
Return on Investment (ROI)
F1 % 22 30
Supply chain manager/
BOMs
Reduce development cost. Increase total unit sales and Profit/unit.
Re-organize Supply chain to save cost.
Sale volume F2 PCS 2.9M 2.8M Sales/ BOMs
Increase the number of customers.
Increase the frequency of repurchase.
Develop Marketing depts.
Train our Sales staffs.
Days of
Inventory stock
F3 Day 42 35 Material Manager/
BOMs
Re-organize Supply chain function.
Reduce replenishment lead times Reduce variability of demand and supply Stock
Provision F4 % 14 15 Material Manager/
BOMs
Re-organize Supply chain function
Eliminate obsolete stocks. Pareto our inventory.
Customer
On time
Delivery (OTD)
C1 % 81 85 Planning/
Production
Set “on-time delivery” as a top goal of our organization.
Make on-time shipments to review performance. Identify and redesign “key”
processes to prevent on-time deliveries.
Return Rate C2 Ppm 134 120 Eng/ QA/
Production Analyze customer complaints.
Order confirmation Lead Time
C3 Day 18 21 Planning/
Production
Re-organize manufacturing. Improve Labor flexibility. JIT to improve manufacturing concepts.
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Internal process
Yield I1 % 62 68 Eng/ QA/
Production
Reduce rejection and improve quality of product. Save labor and material cost and improve OTD.
Scrap Rate I2 % 6.5 4.0 Eng/ QA/
Production
Set clear accountability for defects/scrap.
Review the defect Pareto and focus on top 3.
Identify the “real” root causes of the defects.
Track and actively review results.
Production
lead time I3 Day 11 8 Production
/Eng/QA Improve delivery lead time Machine
down-time rate
I4 % 74 80 Engineering/
Maintenance Analysis stoppage reason.
Learning & Growth
Employee Turn-over Rate
LG1 % 6.7 6 BOMs/ HR
Employee turn-over analysis by job classification: direct worker between official worker vs temporary worker and indirect employee with high skill and management level
Implemented
training rate LG2 % 82.5 80 Training/ HR Training plan and evaluation
Comment: There are total 13 KPIs but only 4 KPIs (30.7%) achieved target in 2013.
With 9 KPIs don’t hit target (69.3%). That was affected to company performance.
In order to understand why company didnｔt achieve these targets, BOMs must analyze to see how targets were set? How did company select, measure and analyze data? Then, have action plan to improve it. Company needs go through KPI by KPI to review.