Quality Investment

My Dear Colleagues,

Yesterday, few of my colleagues were asked to prepare a report on quality investment in manufacturing sector in Malaysia. Well, the topic sounds very familiar right? But it isn’t so actually.

Disagreements started to creeps when one of us starts questioning what are “quality investments”? How do you define “quality investments”? All the time we keep saying that Malaysia need high value manufacturing investments, but what is it? Is it projects with big investments? Is it those capital intensive projects? Or is it a knowledge-based ones?

All of us started to throw-ins their own theories. Some said the quality project is referring to capital intensive projects, projects with investments with more than RM 1 billion. Others said it should be based on their technology used. Projects with advanced technological manufacturing process IS a quality project, regardless of how much its investments figure is. Another quarters argued that a quality investment projects are projects in new growth areas such as renewable energy and others.

As for me, the definition of “quality investment projects” in manufacturing should be based on the bottom line – PROFIT. Profit is the final destination of any organizational-being. There are two things that determine of profit, that is – PRODUCTIVITY and MARKET SHARE. And, as the cycle goes, there are two things that determined your productivity – EFFICIENCIES OF EQUIPMENT AND OPERATION MANAGEMENT, AND EFFICIENCIES OF MANAGEMENT PRATICES.  Efficiencies of equipment includes the using of modern and high technology manufacturing facilities, and machines.

 

Friends,

Why we should based the definition of “quality investment” on profit? Because with profit, you earn more wealth and with wealth you can contribute to the overall society through taxes, job opportunities, and others. These will then improve the standard of living of everybody throughout the society. To better understand this, I’ll give you three examples:

First is Dyson (M) Sdn. Bhd. a Brirish company based in Johor producing knowledge-based activities, bladeless fan. Second is First Solar Sdn. Bhd., Kulim-based company producing solar panels. Third is Hup Seng Beehoon Sdn. Bhd., a local company in Kelantan producing bihun. From these three companies, which one is a “quality investment project” in manufacturing sector?

Dyson is a company that depends highly on their research capabilities to produch a high-tech product. What are the relevancy of this “high-end” product? The relevancy lies on Dyson’s capabilities to enforce a premium price because of their peculiar product.  When they can charge a higher price and control more market share, they can earn better revenue and boost their profits.

First Solar is a company involved in a new growth area, renewable energy – solar panels. Why? Because the industry’s market share is still very much intact and everything is open for competition. First Solar jump into that market because of opportunities to gain more market share (as the market first mover) and thus capture more profits.

Hup Seng Beehoon is an ordinary local company, run by an Apek from Kelantan. By his beehoon is a good quality beehoon and his company control more that 30% of the world’s beehoon market. The company in the market leader in the world’s beehon market because of it’s plant productivity is very high. They hire world class engineers and researchers and use state-of-the-art machines and facilities. Thus, there are one of the elite Fortune 500 companies.

It’s no matter which industry are you in, whether it is a new growth areas, traditional industries, or highly-knowledge-based industries, the most important thing is your Profit and productivity. Hence, the term “quality investment” should be based on this premises.

Everything should be based on markets. The markets are the only things that matters in the business world. Quality projects is defined by those companies that capture the most of market share and plug in the most profits. How do they capture the market share? Through high-technological manufacturing facilities or efficient management practices. Using these two tools, they can be very productive offering the markets with abundant quality supplies charging a reasonable price.

Products should not be used as a pre-requisite in determining a quality investment. It can be any products, whether knowledge-based bladeless fan of Dyson or First Solar’s products in new growth areas or an ordinary bihun, a commodity.