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2004, the factory moved to KEDA Industrial Park in Napoh near Jitra with a wider acreage and has operated from there until today to meet the increased demand and production. The Company KUSATEX operates as a textile company since its establishment. As explained by KUSATEX's financial executive during an interview session, the company's background, business and establishment are as follows: KUSATEX was established by Mr. Shafiq... who previously worked as an executive at RADICARE. Are you familiar or have you heard about RADICARE? RADICARE normally supplies hospital products..... When he had gained sufficient experience, he decided to start his own business. So, he set up his first company, ISBEC Sdn. Bhd. It was a trading company. Initially, we are not manufacturers. We just buy and sell fabric-related products. Initially, Shafiq intended to establish the consortium by inviting several entrepreneurs to join him, but he was unsuccessful due to lack of interest from the entrepreneurs. Shafiq attributed KUSATEX's achievement to the four (4) mission statements as stated: to produce international standard quality products; [ii] to establish a competitive and dynamic 'Bumiputera' organization in the textile industry; [iii] to advance the involvement and income among disabled and rural people; and [iv] to improve the local products as well as to successfully access the international market. KUSATEX organisational structure is shown in Table 1 below.
Chief Financial and Administration Officer Human Resource and Administration Executive Financial Executive Table 1: Organizational structure of KUSATEX Chief Executive Officer Shafiqurrahman Shamsuddin Weaving machine General Manager Wahid Engineering [MT-11-2000 & MT-11-1000] Nazir Engineering [Loom 76] Chief Business Development Officer Operation Executive Marketing Executive The head office of KUSATEX administer manages and monitors the supply of products to its customers from Kota Damansara, Petaling Jaya, Selangor. Both its factories are located in KEDA Industrial Park in Jeniang and Napoh, Kedah. The factory in Jeniang concentrates on fabric weaving whilst the Napoh factory concentrates on sewing based on the license provided to KUSATEX. The company has advanced and sophisticated plant and machinery as listed in Table 2: Table 2: Type of Machines Sewing Machine Chief Production Officer Single Needle Singer-591D300AF Brother - DB2-8735-3 Mitsubishi-LS2-130 Juki - DDL-5530 Bar tracking Brother-LT2-8845-3 Juki-LK1850 J Technical Manager Production Manager Fashion Development Manager Operation Executive Operator Cutter Table Cutting table 0% Vibration free 6' x 32' Ironing board/table 4' x 5
Table 3 below shows the list of KUSATEX's products: Table 3: List of Apparels and Other Products Apparels Doctor's Apparel Hospital Staff Clothing Army Uniform Armed Forces Tainted Uniform Others Linen Protector Hospital Towel Army Towel Managing The Company and People Mr. Shafiq is very strict when it comes to work. He wants his staff to follow job procedures. In doing so, he guides the staff to do the right ways provided that the staff must be proactive in learning the process. For example, full paper work needs to be prepared before the company wants to go for a tender. He does not like any work being done with less preparation. If there are five steps, so you need to do all the five. If you do all then I will appreciate your work. It means that you have to do all without any exception... He also guides us how to make networking with business people.... How important is it to see the people face to face and communicate with them rather than just talking through the phone. We may get good advice on how to make loan, etc. Mr. Shafiq is very concerned and critical about job documentation. All works must be documented and kept in a proper place. For example if you make purchase order, make sure go very details such as fill in the date of delivery, quantity of materials, and the document must be signed. If anything happen in the future you have the evidence... Another example is in signing a cheque. We need to follow the required steps... it needs to be verified by three different staffs before he can sign the cheque... In addition, any changes from the normal amounts in the bills also need to be justified... Mr. Shafiq likes to give motivational talks to the management staff. The staffs feel motivated to do their work. Some staffs say that they cannot find this kind of practices in other companies. The staff turnover in this company is very small.
He put the trust on us to do the work. He always says that you can do it!". He gives ways to solve problems. He keeps mentioning that it is a matter of whether you want to do it or not... where there is a will there is a way... When we thought that there is no way to solve a problem, but to him there is always a solution to the problem. And he is very good at dealing and negotiating with people. That is his strength... Mr. Shafiq interacts with his staffs from all levels of works, not only at the management staff's level but also at the factory workers' level. The workers feel they are being appreciated by their boss and motivated to work for the company. The company also rewards excellent workers every month and make monthly birthday celebration. On these occasions, workers are given some token of appreciation for their excellence in work. The company also makes annual event at the end of the year to provide school materials to staffs with school kids. For example, they are given school uniforms, bags, shoes, fees or coupon, based on the staff's need. We are trying as much as possible to make them happy and in return they will be happy to work with us. Some may be given school uniforms, bags, fees. coupon... which is complete from head to toe... Expansion in the Making Initially, KUSATEX, through ISBEC, operated as a towel weaving factory but the government advised the management to apply for sewing license and set up a new factory as the existing license cannot cater for sewing. When asked about the reasons for the two big sections of the company, the interviewee justified as below: Why there are two companies, ISBEC and KUSATEX, both under the same manager, Mr. Shafiq? Why the two companies were not merged into one company? Well, first ISBEC was licensed under the Ministry of Finance but not for sewing. We only weaved. So, at that time, we only weaved towels and supplied towels. But when we want to enter a tender related to sewing, we cannot because we do not have the code for that purpose. So, we were advised to establish another company and apply new certificate. If there are tenders that require sewing, we use this consortium.
KUSATEX then applied license from the Ministry of Finance to enable participation in government tender to sew uniforms through KUSATEX in Napoh. Napoh is chosen for several reasons such as low rental cost as well as its support for the "1 village 1 industry' program. It also provides labour opportunities for the locals such as single mothers and women. Further explanation was given about business operations in Kuala Lumpur (KL) by the interviewee: We have a HQ for managing all our customers in KL. Actually we do the sewing in KL, easier for us but the cost is very high there. Better here... one is the cost aspect and another is, actually we took up the challenge by Tun Mahathir when he proposed a challenging idea 1 village 1 industry. So, Mr. Shafiq took up this challenge. Then KEDA let this premise at a reasonable rate. Mr. Shafiq said ok, then we set up a factory here. We set up this factory to provide employment opportunities. If you notice when you enter the factory earlier, there are many local women. They are able to retain employees due to good human resources management practices. With good textile industry knowledge, strong accounting, and management leadership background, KUSATEX has developed a good management system. KUSATEX, however, faces product quality challenges when local materials fail to meet SIRIM requirements such as bedding for bedded patients who require material that is custom-made in USA and special thread for weaving from Vietnam. The interviewee clarified about imported raw materials and machinery used by KUSATEX: Yes, like this thread, we bought from Vietnam. We manage the cost to ensure getting high profit. How? We have to consider not only prices but also the quality of materials. So, instead of going to China, now we go to Indonesia and Vietnam...the costs there are cheaper and the quality are better than in China.... She further mentioned about the process of ordering raw materials for company production: Ordering is based on tender... for example, like government tender, the factory will inform us total tender in three years, and how many materials are required. To my knowledge, they do not fix but we have to forecast how much to order...
Continuing successful in getting tenders are presumably crucial to KUSATEX, hence highly monitored specification is observed for each product. Keeping in mind that all KUSATEX's products must go through quality control (QC) process, management must ensure that production forecasting each year complies with the specification in the tenders. Proper planning is essential to avoid delivery problems to customers. KUSATEX thus manages product quality management and prompt delivery system. KUSATEX does not wish to rely on government tenders forever but has planned to promote its services to the private sector. KUSATEX wants to be successful based on its merit of producing good products. Thus, the management plans to be involved in import and export business overseas in search of opportunities for business expansion and stability. Shafiq's prior link with RADICARE has helped the company to promote its products to the Ministry of Health. To sustain on-going quality products of KUSATEX, Shafiq saw the potential in Starlight Apparel Sdn. Bhd. He found that Starlight has skilled workers. KUSATEX's existing workers are not as skilful as Starlight's. The company is developing but somehow the lack of skilled workers might hinder future expansion. Shafiq also found that Starlight has problems with managing the accounting system of the company which he is good at. Technologically. Starlight is also superior to KUSATEX. In 2010, KUSATEX took over Starlight, a company with trained skilled workers in Penang. Shafiq had been eyeing this take-over to boost KUSATEX's expansion. He straightaway sent KUSATEX operators in Napoh to be trained in Starlight. This has called for complementing strategy to serve the expansion demand. The interviewee explicated about the acquisition of the company by KUSATEX: As I said before, the tender has been extended. We have been supplying to hospitals until now. And recently, we acquired one Chinese company. Starlight Apparel, which is in Penang. Because Mr. Shafiq saw the potential there! It is in the same business. Starlight workers are skilled in sewing. Mr. Shafiq saw the potential in this company. This company has skill potential. We do not have that kind of great sewing skill because our workers are untrained. We keep growing. But from the sewing aspect, Starlight has neater and faster workers. We have to make up with the Chinese. Thus, we call it KUSATEX GROUP because now we have KUSATEX Sdn. Bhd., we have ISBEC Sdn. Bhd., and we have Starlight Apparel Sdn. Bhd.
Regardless of this upcoming expansion, the company, however, still maintains its SME status. Its long-established link with customers has enabled it to get financial assistance and support from banking institutions and private sectors. KUSATEX has facilities such as letters of credit, overdraft, and/or letter of trust' from local commercial banks. These facilities have really helped the management when suppliers demand for payment guarantee. When asked about the strategies after the 3-year tender expired, the interviewee explained about the financial strategy: You probably want to know about our financial standing, where we get refinancing? Up to now, the bank is willing to help us. We receive bank facilities. They give us letter of credits, overdraft, and letter of trust which is really helping us because suppliers sometimes are strict. Sometimes, they do not accept credit, so we have to pay by cash. Sometime, we need cash fast but the customers have not paid us yet. There are times when we have no advance at all. The advance from the Ministry is always late. So, how do we want to strategize? What we have to deliver? In fact, the raw materials must be ordered early. So, bank provides the support and allows us to pay a bit late. Their Worries At the initial stage, KUSATEX's Apparel worked under financial constraints. Fortunately, the management managed to obtain loan from bank so as not to depend on financial support from the government. We borrowed from the bank (not from the government)... not that we do not apply from the government but their requirement is very demanding. We were a newly established company at that time. When the requirement is demanding, we have to go to some other bodies where the requirement is minimal and can give us better offer. We don't have option. But now we are very fortunate because we have SME Bank. The bank offers supports but in choosing the banks we are still comparing with other banks. At the initial stage of business establishment, financial support from the government agencies was really hard to get due to high requirement and red tape faced by other Bumiputera SMEs. This situation has limited choices but somehow the management managed to obtain financial support. Later, business expansion with good financial track record has enabled the management to win SME bank assistance.
The company has plans to reach out to the private sector like private hospitals but it seems difficult to enter the private market without being a renowned company. The private hospitals, for example, have their own suppliers' company network. Shafiq's Apparel has to be a strong company to penetrate the private market. So, it resorted to Government Link Companies (GLCs) and managed to win the tender to supply corporate uniforms to a GLC company. The Company then tried to reach out to more GLCs by strategizing through developing good rapport with other companies. The main focus of the company now is on marketing. Regarding this, the interviewee said: Private hospitals are difficult to penetrate. They have their own team. Must be really, really strong and we are trying where possible. So we talk to GLCs. The first GLC we got is company F. We have supplied uniforms to F. If you go to any F shop, you will see they are wearing white shirt that is stitched by our company... When asked about marketing strategies, she explained: We have marketing team, first target now are the GLCs. The only constraint is how to strategize... We need to build rapport. We manage to have good sample. So, now we are doing marketing all out... get to know people. Mr. Shafiq emphasized more on quality workers rather than quantity. Due to this, all staff must be able to do various tasks. The finance department is also required to complete the accounts, while the department of operations and development is in charge of marketing. Therefore, staff resources can be minimized as they are able to do multi-task. As KUSATEX is managed to supply its products to some government agencies, Shafiq's Apparel needs to maintain high quality products. For example, not only the quality of weaving but also the colour of the dye for towels must strictly follow the required specification, or else it will be rejected. This challenge was stressed by the interviewee: Yes, customer has certain specifications to meet. If you wrongly produce, for example, this towel, the dying process, if you wrongly mix the colour, you will get the wrong colour, and when customer comes to check, they will reject all. Customers are very strict when it comes to quality... 10
Another challenge is to maintain competitive advantage in terms of quality and distribution. The company must have proper production planning to deliver the goods as scheduled. For example, the goods must be delivered within two months, thus raw materials must be purchased from suppliers abroad which takes at least 15 days for delivery. Production must be on time, or customers might resort to competitors. Most of their competitors are non- Bumiputera entrepreneurs. Shafiq's company is the only Malay company that owns weaving machines where most of the raw materials are imported. Definitely, technology and supplier challenges must be faced to survive in this industry as made clear by the interviewee: We do have competitors in terms of hospital products. But our strength is how we manage in terms of quality and delivery. Our delivery is very prompt. If the order is required in two months, two months later, it is ready to be delivered. We need to be very good in planning... because we have to buy materials from outside. The materials are not bought in Malaysia. It takes 15 days to arrive... so, how do you plan that? If you plan very well, we can deliver on time. If delivery is late, customers will grumble and make noise. We have competitors, if delivery is late, maybe they will go to other places. So, we have to do it... if we want to survive! Conclusion Moving forward, Shafiq's anxiety grew as to whether he will be able to endeavour into the bigger market as KUSATEX's growth is vastly dependable upon government tender. How long is he going to depend on government tender? The expansion plans must continue to be competitive so as to be able to get a bigger share in the textile producing market. Shafiq's Apparel must compete based on the same merit with others in the market. He has considered several factors such as resorting to high technology machines, getting skilled workers, strengthening existing networking, developing new networking, meeting stringent product specifications, ensuring product compliance, maintaining product quality and on-time product delivery. However, will the company survive in the long run with the heat of the ever- changing business competition environment? The company's future growth and expansion depend largely on Shafiq's mindset and capability to strategize and capture new markets.