Manufacturers cut lead times, inventories

Many domestic companies are choosing lean manufacturing or just-in-time (JIT) production as one of several methods to survive in more difficult economic times.

Lean manufacturing is a production practice that considers the expenditure of resources for any goal other than the creation of value for the customer to be wasteful and thus, a target for elimination.

Just-in-time production is a “pull” system of production, whereby actual orders signal when a product should be manufactured.

To realise lean production, many enterprises are seeking ways to reduce the volume of products in stock and the reserve of production materials which, they believe, will help them quickly achieve capital turnover and effectively use capital resources.

Minh Tien Bag Sewing Company (Miti) in HCM City’s Binh Chanh District is one of the pioneers using lean production methods and achieving initial success.

Miti director Nguyen Tri Kien predicted that the market’s purchasing power would drop because prices of all kinds of goods including production materials would rise.

To effectively use capital sources, the company had reduced the stock of both completed products and raw materials by at least 50 per cent by buying raw materials on time, producing in line with the design process, and delivering on schedule, Kien said.

In addition, the company had also expanded its distribution network via a system of supermarkets and bookshops to increase its sales points from 25 to 75 points.

To reduce investment costs, Miti was seeking partners involved in production of accessories needed for production of bags and suitcases, he said.

The director of a company specialising in processing of animal feed revealed that his company each month used 1,000 tons of cassava for processing activities.

In the past, it often stocked raw materials for at least six months, but the stock now has fallen significantly, which allows for only one or two months of production.

High interest rates, unpredicted forex rates and sky-high prices of raw materials needed for production of animal feed were the main reasons that many producers were keeping small volumes of raw materials, he said.

Thanks to limited stocks, storage fees had also decreased significantly, he added.

With the JIT method, the Southern Rubber Industry Joint Stock Company (Casumina) also reduces its stocks of completed products and raw materials, thereby minimising its production costs and quickly achieving capital turnover, according to deputy general director Le Van Tri.

“We stock enough raw materials to implement orders that prove to have a high payment ability. Thanks to this, we can receive the money right after delivering,” Tri said.

Tri, however, said that when keeping a limited volume of raw materials in stock, companies might meet high risks from fluctuating raw material prices on the market.

To avoid this possibility, companies should negotiate with their partners to sign short-term orders at current prices, he said.

Trinh Tri Cuong, general director of Dai Dong Tien Plastic Corporation, also said that his company’s production plan now was based on the market’s monthly demand. – Vietnamnews

Tags: Vietnam Manufacturing sector