By SUCHEERA PINIJPARAKARN
Running an original-equipment-manufacturing operation for more than 10 years, the company has witnessed a lack of cash flow in the past two years due to the sharp drop in orders from modern traders, and from wholesalers in Platinum Fashion Mall, said the company’s founder, Suprang Kaewcham.
Modern trade outlets and wholesalers together contribute 70 per cent of the company’s sales, with the remainder accounted for by exports via agents.
The economic slowdown has negatively affected consumer purchasing power, especially in the fashion segment, resulting in clients requesting the extension of credit terms, and leading to a cash-flow shortage, she explained.
In general, Sadhida Garment sets credit terms of 60 to 90 days for modern trade outlets, but when customers seek an extended repayment period, it leaves the company with insufficient cash to pay its accounts payable.
Moreover, sales by wholesalers in Platinum Fashion Mall have dropped by 20 per cent, and some wholesale customers have had to close down their businesses, Suprang said.
“We were obliged to pay off debt with SME Bank to the tune of Bt100,000 a month, but the cash-flow shortage meant we weren’t able to keep up our payments. We have had to go into rehabilitation, with the bank now allowing us to pay Bt30,000 a month,” she said.
However, the rehabilitation with the Small and Medium Enterprise Development Bank of Thailand has in fact been a turning point for Sadhida Garment, because the bank suggested that the company enter the “turnaround” project of the Office of Small and Medium Enterprise Promotion.
Under the project, the company was advised to produce uniforms for private companies, and to embrace the online channel.
The credit term for uniform business is 30 days, much less than for modern traders, and the company now knows its costs and margin with much greater certainty than when dealing with modern trade outlets.
As a result, its cash flow has improved, she said.
The company currently produces uniforms for three automobile companies, and hopes to build sales further as it cannot rely on Platinum Fashion Mall clients returning to previous order levels any time soon.
The company’s founder plans to open a Facebook page as the online channel to promote Sadhida Garment among wholesalers and retailers that are seeking a quality garment supplier.
Although garment-making is a sunset industry, she insists that there will always be a future for businesses that make the right sort of quality clothing and know who their customers are.
With the mass market for clothing facing intense competition from China, it is crucial to make quality products in order to survive, she added.
“When the modern traders want quality apparel on their shelves, we are the choice [they turn to]. Each piece of clothing has a different grade and different pricing. If you see a shirt with a price tag of Bt599 or more at a modern trade store … [it’s most likely] one that we made,” she said.