THE ability to tackle three important factors — people, products and productivity, and profitability — is crucial to run a successful business today.
The principal issue is profitability, without which a business would not thrive. In the present climate, there are many uncertainties globally. It is undeniable that uncertainty adds to the cost of doing business. The actions of some global leaders have stirred anxiety, and resources that could be better utilised for the greater social good are being used for arms and policing instead.
Oil has caused much stress in recent years as its price rose sharply a couple of years ago, impacting the economies of many countries. Today, the oil price seems to be going up rather sharply, once again raising concerns.
In Malaysia, the government must perform a delicate balancing act with calls to limit foreign worker recruitment to give locals more employment opportunities amid a shortage of workers. Some industries still lack workers, local or foreign. In addition, many locals are no longer interested in dangerous, dirty and difficult jobs.
The government should come up with a policy that benefits the nation as well as industry. As far as the glove industry is concerned, the amount of value-add and revenue a foreign worker generates is among the highest, if not the highest, in the country. Moreover, foreign workers are filling positions that are shunned by Malaysians.
In tackling the rising cost of doing business, the glove industry has long transformed itself to meet any challenges. Faced with an uncertain supply of natural rubber latex and greater price volatility, the industry opted for synthetic rubber (nitrile latex) as an alternative material to produce medical and surgical gloves. Today, the ratio of global demand for natural and synthetic medical gloves is 50:50, with Malaysia supplying about 65% of total global consumption of about 236 billion pieces.
In the area of products and productivity, the industry has made great strides in R&D to come up with innovative products. Key to the industry’s success is meeting world-class standards and quality. The association plays a pivotal role in the Asean Consultative Committee on Standards and Quality as well as in the global ISO TC 45, and helped set the global standards for rubber gloves. The ability to produce a thinner version of the gloves with equal strength and durability, while saving on raw materials, has transformed the industry.
New advances in the development of speciality and niche gloves have been primarily championed by Malaysian manufacturers. To stay in front, we must embrace proficiency in administration and management, efficiency in production and utilisation of material, constant R&D as well as understand the requirements of the marketplace and, most importantly, the affordability of consumers as volume runs into billions of pieces. Rising cost is an inevitable element of doing business and, thus, cutting costs with an innovative cost-savings product is vital to stay profitable.
The most daunting cost factor in any industry is wages. The industry has taken the necessary steps to automate wherever possible so as to be less dependent on foreign workers, and the results have been quite evident. In 2009, we would have required 12 people to produce a million pieces of gloves, but today, with automation in stripping and stacking, we only need 2.4 people. It is the aim of the industry to further reduce the workforce needed to produce one million pieces of gloves to 1.7 people. A reduction of workers also means less supervisory and management staff.
The industry has engaged with international buyers to explain to them the rising cost of materials, utilities and wages so that they can better inform the users. This is another important element as the impact of higher production cost will not come as a surprise but rather be seen as part and parcel of doing business.
In its quest for greater efficiency, the industry has been able to design and engineer a production line capable of producing up to 45,000 pieces of gloves per hour versus a mere 3,000 pieces in the 1980s.
The industry would also like to say that we are where we are today because of the support of the government and various institutions like the Malaysian Rubber Board and the Malaysian Rubber Export Promotion Council. We are fortunate to have the Ministry of Plantation Industries and Commodities and the Ministry of International Trade and Industry assisting us in surmounting rising costs.
In tackling the rising cost of doing business, we hope the deputy prime minister will assist the industry by helping improve the flow of foreign workers.
We thank the government for granting moratoriums on difficult issues in the past and we believe any additional cost or increase in any category can be put aside to meet the challenges of the rising cost of doing business.
Cess collection should be reviewed and where nurturing, promoting and enhancing the image of any industry is necessary, it is our duty to support it. But if the collection is in excess of needs, the surplus should be channelled back into the industry. Entrepreneurial industry leaders can churn out double-digit returns on this excess quantum and create more export revenue and profits. It will mean more jobs and input into the economy. Creating more cess quantum to be collected when the industry produces more gloves is the best way to do this.
Inflationary and incremental costs are inevitable across the world. What is key is the ability to manage these well. Dialogue and strategic deliberations by the government, industries and stakeholders are necessary to check runaway costs with a view to the sustainability of the entire economy. The rising cost of doing business is a worldwide phenomenon and Malaysia and its industries are poised to tackle the challenges in the days ahead.
Denis Low Jau Foo is president of Malaysian Rubber Glove Manufacturers Association