New model to enhance SME capabilities

In more than a year since Toyota Motor Thailand kicked off the Toyota Social Innovation (SI) scheme to strengthen small and medium-sized enterprises, a small garment factory in Kanchanaburi’s Phanom Thuan district, one of the three pilot projects, is showing a significant change in business management.

Corporate social responsibility (CSR) has become an integral part of operations for almost all companies, but Toyota says it is now taking its social contribution to a new level in a move that marks a pioneering approach to sustainable development. 

Surasak Suthongwan, vice president of Toyota Thailand, said that although small enterprises, mostly community businesses, are considered engines of economic growth, representing 25 per cent of gross domestic product, the fact is that only 5 per cent of them survive. 

A survey of their operations revealed that the two key problems of community businesses were management and sales.

 Management covers cash flow, operating costs and raw-material costs, while sales responsibilities include pricing, sales channels and product-distribution systems.

More than 20 years ago, Rossawan Jongmaitreeporn was a dressmaker at her home in Phanom Thuan. Later, she formed Hart Otop to produce sportswear for sale in the district and opened a shop in Bobae market. 

She ran into management problems when she unexpectedly landed large orders for mainly polo shirts. 

After Hart was approached by a Toyota dealer in Phanom Thuan, she decided to participate in the SI pilot project more than a year ago in the hope of tackling the problems and learning management.

“Before joining the Toyota scheme, I didn’t know how to solve problems through the entire production process, including inventory and deliveries,” she said.

Now Hart is showing significant improvement with higher sales, lower operating costs and a better quality of life for workers.  

Hart produces a minimum of 25,000 polo shirts per month for public and private organisations. 

Delivery delays have dropped from 25 per cent to 3.8 per cent, lead time has shortened from more than a month to just 0.38 month, the stock area has been reduced by half, and the proportion of defective products has been slashed.

Hart has almost 100 employees, more than half working at home. They earn at least Bt7,000 and some more than Bt10,000 a month. 

“I’m thinking about registering as a company with the plan to expand my market to Asean including Vietnam and Myanmar. Thanks to much lower production costs resulting from greater management efficiency, Hart Otop can offer quality products at competitive prices,” she said.

As agreed, Hart will eventually become a learning centre, transferring knowledge and experience to other interested small businesses.

Under the SI model, Toyota applies the Toyota Way philosophy to improve community business management. It comprises the Kaizen principle of continuous improvement, Toyota Production System, just-in-time management and a customer-first policy. 

The five key performance indicators for the small-business owners are production efficiency, quality control, deliveries, inventory and work-in-process. These are aimed at increasing sales and profit and making management more professional.

It is critical for SMEs to understand their own fundamental problems clearly, which vary from business to business and size and type. That’s why Toyota has to change the mindset of the communities and make them aware than an understanding of the problems and weaknesses is essential to select the right mechanisms to resolve the overall problems.

Toyota is in the process of finding three community enterprises for its project expansion next year and anticipates that SI will be applied to community businesses in every province by 2022.

Toyota dealers nationwide will recommend community enterprises they feel should be considered for the project and will also play a role in supporting those chosen for participation. 

However, acceptance by the communities is regarded as essential as only then will they be ready for change through the SI process. 

The scheme is being implemented not just by company staff with considerable experience in the fields of production and service, but by retirees, who are also invited to participate with a view to transferring their knowledge to the community enterprises. 

Next year, Toyota will establish a social enterprise as a vehicle to carry on the SI scheme effectively. The company is confident that after the completion of its mission, the small businesses will be able to run their operations and sustain themselves.