In order to explore the problem and the cause of problem, the depth interview has been conducted with related people in AVN.
- The first group of 5 people from sales department including Mr. Chuong Vu – Sales Director, Mr. Duc Le – Deputy Sales Manager, Mr. Duy Vo – Deputy Sales Manager, Mr. Luan Dao – GKA Manager and Ms. Hang Nguyen – Sales Support cum Marketing Executive.
- The second group of 2 people from Customer Service Department including Ms.
Diep Huynh – Customer Service Manager and Ms. Hien Nguyen – Customer Service Executive.
- The third group of 2 people from HR & Admin Department including Ms. Vy Nguyen – General Manager (left the company from 30 March 2019) and Mr.
Shafiq Zaman – Managing Director.
Response from Group 1
Mr. Chuong Vu – Sales Director said that the sales turnover in 2018 reached US$1.5 million, an increase of 25% compared with sales target 2018 of US$1.2 million. However, profit is small compared with other production site like Bangladesh, and with the largest competitor Coats Phong Phu at 40% - 42% profit margin. This is a challenge for Amann Vietnam in the next 4 years (2019 – 2022). According to him, there are some probable reasons of the decrease in gross profit margin and negative profit in 2018.
1/ Cost increase including
- Transportation cost: especially air shipment for urgent orders and urgent samples.
The cost of shipment increased much in the last months of 2018 which impacts gross profit margin significantly.
- Sales expenditure: cost of visiting customers has increased in recent months. He thinks that this is because sales team members do visit plan ineffectively and inefficiently. Therefore, they do not utilize in using car to visit customers.
- Overtime: he had to sign many overtime proposals for customer service and admin department. He is wondering about the time management skills of staff or system management of the company, which do not support employees to complete their job in working hours and stated that this problem needs to be investigated. He expects employees can complete their job in working hours and no longer sign for OT. He wants them to be able to balance among work, family and individual.
2/ Work efficiency
- Taking about work efficiency, he shared that the sales forecast is not accurate due to sales people’s lack of forecast experience.
- Sales plan is not good as his expectation due to lack of selling skills and time management skills. Sales plan phasing by month has a big variation with actual sales recorded, especially for the North area. However, he did not see any action plan taken by sales people in the North. Sales target should be achieved by the sales effort not by accident.
- Customer service department usually works overtime. He had a question mark on employee competencies, job description unclear so they do not understand their job requirements or system/SOP of the company.
- Finally, he is wondering about recruitment process of AVN. Is it really the reason for underperformance results.
3/ Local production
- Regarding expanding business in Vietnam in apparel sector, it is a must to have local production to compete with local suppliers. Moreover, customers require speed to market due to the change in customer behaviors so leadtime is very important and manufacturers request quick delivery service.
- AVN does not have any factory in Vietnam so at the moment; the company has to import threads from Yancheng, China and from Germany to serve Vietnam market, which is not competitive in term of price and leadtime to customers.
Ms. Hang Nguyen – Sales Support & Marketing Executive who is in charge of care arrangement for sales team replied that:
1/ The cost of renting car is different depending on the time and the location of customers that sales people visit.
2/ Regarding cost increase in using car, she said that only one case happened in the North. Salesmen requested car urgently without plan in advance so the company has to accept high cost for that visit. Later on, there are always car visit booking in advance.
Interviewing Deputy Sales Managers, both Mr Duy Vo and Mr Duc Le have similar comments on product range, thread sizes, price approval process as well as segmentation positioning.
1/ Product range: Amann does not have enough product ranges to compete with competitors in Vietnam market, especially closed competitors such as Coats Phong Phu, A&E, Gunzetal and other local competitors such as Phong Viet, Toung Loong, Gitai, Khoi Chi Hung, Hung Long, Chin Shin, etc.
2/ Thread sizes: There is no the middle sizes from the thinner to the coarser ones.
Major product types as below table are lack of thread sizes needed.
- SabaC: no middle size between Tex 105 and Tex 200 such as Tex 120, Tex 150, Tex 180 for jeans/denim.
- Rasant: no coarser sizes from Tex 105 to Tex 240 for jeans/denim.
- Universal: no middle size between Tex 150 and Tex 170 such as Tex 180 for jeans/denim or heavy garments.
- SabaTEX and SabaSOFT: no sizes Tex 21 or Tex 24 which is very popular in Vietnam market for overlock and cover seams.
Table 6: Amann available thread sizes 3/ Price proposal
- Every single case to approach a new customer, sales team VN has to double check with Global Key Account Management (GKAM) to know that if there is any global offer to mentioned customer. If yes, they must follow global offer. If not, GKAM will suggest selling price based on local sales’ proposal or based on their calculation by themselves. It takes a few days to get the final one. In some cases, local sales and GKAM expectation on price offer does not reach to the agreement so local sales cannot gain that business. Price must be align with other countries so GKAM from Head Quarter decides price offer for Vietnam, which is a disadvantage for Vietnam sales team because the price is not competitive to gain the new business or profit margin is small for existing customers due to global agreement and transportation cost from China or Germany to Vietnam.
- Regarding new business development, Amann Group focuses on high segmentation with its flagship product Serafil and other special products such as SabaSOFT, SabaFLEX and IsaMET. However, the demand of these products in Vietnam is small. If the company wants to expand more business to gain more market share, approach to middle segmentation is more workable with popular products like SabaC, Universal, SabaTEX.
- The price of popular threads in Vietnam is very competitive because there are many suppliers in this market who can supply these kinds of product. This reduces the average selling price of AVN. Moreover, Amann is importing threads from China and Germany, the price of popular threads is low to compete with local
suppliers, AVN therefore has to suffer very low profit or even negative profit to gain the new business.
Response from Group 2
Ms. Diep Huynh – Customer Service Manager said that:
1/ Transportation: there are 3 methods of transportation: ship by sea from Germany or China, ship by truck from China to the Northern of Vietnam, ship by air for urgent cases. Ship by air has increased recently because sales requested urgent delivery to maintain key customers and to develop new business.
2/ Regarding overtime, she said that there is no system and her team members have to work manually. It takes a lot of time for CS to monitor and follow up the order. The late feedback from Amann China and Amann Germany is also a reason causing so many pending things in the process of handling order.
Response from Group 3
Ms. Vy Nguyen – General Manager replied that overtime cost is small and irregular. Therefore OT does not impact operation cost remarkably. OT only happens in the peak season in quarter 2 and quarter 4.
Collected the information on OT cost from Ms. Hang Nguyen – Sales Support, this is a small amount in quarter 4 only so it does not much influence on the overall cost as Ms. Vy’s opinion.
Mr. Shafiq Zaman – Managing Director replied that the most difficulty in the first beginning stage of setting up a manufacturing company in the central of Vietnam is human resources. He also shared the product types will be produced in Vietnam.
According to the information collected from the depth interview and financial report, the whole problem mess can be showed and generated in the following preliminary cause-effect map:
Diagram 2: The initial cause - effect map of Amann Vietnam
Negative profit
Increase in cost of goods
sold Increase in air
shipment
Decrease in profit margin
Decrease in average selling
price Increase in overtime cost
Increase in transportation cost Expanding local
business by import goods
Unqualified sales people Recruitment
process is not good.
In effective system management
Inefficient sales plan
Increase in selling expenses
Work ineffectively
D Trade-offs (high-
end products vs low-end products)
Symptoms
4. Updated cause-effect map