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Feature story : The Garment industry in Vietnam - Hanoi(2)
Expand the business based on "sewing" and aim to become a Japanese "SOGO-SHOSHA (general trading house)" style company.
The company was originally a national enterprise with a long history. Now it's a nucleus company of the Vinatex group. It exports to a balanced mix of countries, including Japan, USA, and various countries in Europe. Last year it took in capital from the private sector by offering half of its stock to the public. When Nguyen Xuan Duong, president of the company, met with us for an interview, he spoke enthusiastically on the scale of the Vietnam market and high growth expectations.
A factory with JUKI machines. Jackets (blousons) are being manufactured here.
The latest sewing machines are introduced.
The LK-1908A-SS Computer-controlled, high-speed bartacking machine.
The MEB-3200S Computer-controlled, eyelet buttonholing machine (with multi-cutting device).
The DP-2100 Dry head, computer-controlled, lockstitch sleeve attaching machine.
The DCS-246 Cylinder-bed, 1-needle, unison-feed, lockstitch machine.
The LH-3128 2-needle, needle-feed lockstitch machine.
The LH-3568S 2-needle, needle-feed, lockstitch machine with organized split needle bar
A well balanced base of export customers helps to strengthen the company constitution.
The products of exporting companies are generally higher in quality than the products manufactured for the domestic market only. A manufacturer can only survive by producing products that customers use. Repeat orders can never be assured unless the products are high in quality.
Every country has different requirements, based on the characteristics of its market. The buyers of each country demand suppliers to satisfy those requirements. A company exporting to various countries must have the technical competence to satisfy various requirements from different markets.
"One-hundred percent of the products we produce are exported," says Nguyen Xuan Duong, president of the company. "Our main export customer countries are America 40%, EU 30%, and Japan 25% (Australia and others buy 5% of our exports). Requirements vary from country to country, and it's tough to satisfy them all. But that's not a bad thing: it has helped us to acquire our high capabilities."
"When buyers from US companies come, they check many things about our company. Are we violating any legal requirements? Do we give employees their Sundays off? Do we keep their daily overtime to 4 hours at maximum? Do we provide adequate social insurance to the employees? Are the labour hours for pregnant women too long? Is the company paying overtime? Is the working environment clean enough? Are working areas adequately lit? Do we have the right number of toilets for the number of employees?
"Japanese buyers, on the other hand, are extremely demanding on quality. What's the quality of the finished product? What kind of sewing machines do we use? Do the seams have good appearance? Are the threads tight?
"We decided to introduce JUKI machines when a buyer told us one day: "Please use good sewing machines!"
Customer requirements can be categorized into three areas.
- Improve the working environment at the factory
- Improve the system for compensating operators
- Improve the quality of the completed products
These three requirements are closely related to the basics of managing a manufacturing company. The company's high export volumes to countries all over the world attest to its success in meeting all three of these requirements. The company can expect to stay running in good order and even to further improve the quality of its products. Herein lies Nguyen's secret.
Even so, it has been very tough for the company to reach the stage where it is today. The rapid growth of the company was triggered by the introduction of JUKI sewing machines in 1989.
"Our company was an old national sewing factory established in 1966. We used old German and Dutch machines to manufacture working wear and uniforms for the Soviet Union and European countries. In 1989 we happened to meet a Dutch buyer who asked us if we could manufacture jackets (blousons and jackets).
"Having already garnered some experience in making those products, we were able to take in orders. But our customer urged us to ‘to use good sewing machines'. In the interests of quality, we purchased a JUKI lockstitch machine from a sewing machine dealer in the south. The machine was excellent in quality and operability. We've been using JUKI sewing machines ever since.
"A good machine is the key for improving quality and productivity. A good thing about JUKI is that it doesn't only sell the machines, but also provides factory diagnosis service and technical seminars from an early stage. That is extremely helpful to improve the technical level of the operators."
The target is start-to-finish manufacturing of suits and casual wear.
The company now operates seven factories on a 60,000 square-meter site, together with the headquarters. Five-thousand skilled operators work at the site, and another 3,000 work on the production lines of subsidiaries (8,000 skilled operators). The facilities are equipped with 5,000 high-tech sewing machines, mainly JUKI, plus others imported from the USA and Germany.
The facilities are now manufacturing high-grade suits, jackets, shirts, pants, T shirts, polo shirts, slacks, dresses, and swimming wear. Monthly production volume is as follows.
- Suits: 90,000 pieces
- Jackets: 225,000 pieces
- Pants: 225,000 pieces
- Shirts, T shirts, polo shirts: 300,000 pieces
- Swimming wear: 150,000 pieces
"We sell our USA exports to retailers such as J.C. Penny, Walmart, Zara, and the Gap. The lot size for those customers normally ranges from 50,000 to 100,000 pieces. For our Japanese customers the lot size is 1,000 at the most, and quality requirements are severe. If we accidentally cut a thread for a product destined for the Japan market, we have to remove the entire thread and sew again from the beginning. This has a great influence on the efficiency. But by satisfying severe quality requirements we can enhance our technical level."
The target for the future is to become a Japanese "Sogo-Shosha" style company.
This factory has the unique ability to manufacture several items in one line. The blouson factory, for example, has seven lines, each manned by about 50 operators. This line can manufacture overcoats and other items if it needs to. The flexibility of the line attests to the high technical level of the company overall. High capabilities give the company high flexibility.
"The Vietnamese garment business is booming, with many orders," comments Duong. "I think this trend will continue for the next twenty years. We are also trying to get orders from overseas customers by obtaining ISO9000 and ISO14000 certifications. We recently acquired a 5 ha site and are now preparing to start up a new factory."
In spite of this trend, the company only plans to continue expanding the sewing business for the next 10 years or so. Thereafter they plan to strengthen their capabilities in planning, engineering, and trade. They are thinking about expanded import and export businesses, including housing. Their eventual target is to become a Japanese "Sogo-Shosha" style company.
This path of growth isn't unusual: many major Japanese trading companies began as textile businesses. Good luck!