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Crisis management of a leading Indonesian denim maker
Issue date:01/06/2009
ATA Journal for Asia on Textile & Apparel - Jun 2009 Issue
Source:Journal for Asia on Textile & Apparel
Featured company: APAC

Asep Setiaharja has recently met the head of Indonesia's biggest denim manufacturer, Benny Soetrisno, and discussed with him how to withstand the current straining economic situation

PT APAC Inti Corpora (APAC) claims to be the biggest denim manufacturer in Indonesia with an annual denim production of 60 millions yards, which is also the company's most important business. It has also other business divisions to support denim manufacturing, including the manufacture of yarns and greige fabrics.

Through its sister company, APAC has expanded its business in garment sector.

APAC was formed through an acquisition of a large spinning and weaving factory. Since then, under the helm of President-Director Benny Soetrisno, the new company - APAC - ventured into the denim manufacturing that has become the company's core business. Meanwhile, APAC maintains a large production capacity of spinning and weaving in the same manufacturing location.

Strategically lied in Central Java, APAC is committed to serving the global textile demand and markets its product to more than 70 countries across five major continents.

The current global crisis has influenced almost all business sectors, including textiles. It is thus interesting to know how a giant company, like APAC, withstands the straining situation. In what way it manages to meet challenges and capture opportunities. To answer these questions, ATA Journal conducted an exclusive interview with President-Director of PT APAC Inti Corpora, Benny Soetrisno, at his office in Jakarta, Indonesia.


Benny Soetrisno
ATA: What is your key success factor in the textile business?

Mr Soetrisno: Employee is the most valuable asset for us. There is a corporate belief in APAC: "People are the company.

We can buy technology, and we can buy machinery, but loyal employees have to be developed through a good plan in management. To manage employee well we have to pay attention in two aspects, namely skill and aptitude.

Developing a skillful person is not as hard as developing a good aptitude employee who the company needs. For that reason, APAC founded GRIPAC (Griya Pelatihan APAC) as its training center with a comprehensive and holistic human resources management program.

APAC understands the importance of nurturing human resources, and competent people are given full chance to develop their skills and capacity at APAC.

ATA: What is APAC's strategy in facing the current economic toughness?

Mr Soetrisno: It was evident that the current global crisis has been reining up the global demand on textiles. This condition caused unbalanced demand and supply. Consequently, there is excessive supply everywhere, which has pulled down the price level and intensified the competition among suppliers. To survive the current condition, APAC has to be more cost-efficient along all lines — in the production process and the supporting process as well.

There are two points of interest to enhance cost-efficiency in the production process, which are (1) control on purchasing costs of raw materials and (2) control on manufacturing costs.

To control purchasing costs of raw materials, APAC adopts the following policies.

APAC mainly uses three fiber materials: cotton, polyester and rayon.

Cotton is partially imported from the international market and the rest are obtained from domestic vendors. As the Rupiah rate dropped against the US dollar during the crisis, the (domestic) cotton has got more expensive while international cotton price got lower.


PT APAC Inti Corpora (APAC)
On the other hand, the domestic price of polyester and rayon have been relatively stable. APAC, therefore, changes its production strategy. The production of polyester and rayon yarns and fabrics, including their blends, has been increased while that of cotton/ blend products has been decreased.

Subsequently, to control the manufacturing cost, APAC has paid increased attention in two particular sections: electric power and manpower.

Energy audit of all machinery and motor devices was conducted to determine the best way of energy management. The audit report outlined a number of recommendations and we have acted accordingly to achieve improvements, resulting in less consumption of electricity of machinery and motor devices without compromising the productivity. Restructuring of job allocation and management structure was undergone to better control manpower costs. For instance, under-load employees were given more job tasks. Similar to other companies, APAC was not able to avoid labor lay-off, which amounted to about 10%-15% of labors, including retired employees.

Cost control was enforced not only in the production process, but also in the supporting areas. Currently, APAC is working to find most valuable logistic routes at the best reasonable price. The operation of accounting and purchasing activities were relocated from the headquarters in Jakarta to the factory plant in Bawen, Central Java to save costs.

ATA: Any reduction of production during crisis?

Mr Soetrisno: The product portfolio of APAC can be divided into two categories, best selling items and less-selling products. APAC has to be realistic when facing the current condition. Hence, APAC was forced to reduce its manufacturing of less-selling products, leading to a 30% reduction of APAC's production.

ATA: How about the market?

Mr Soetrisno: Before answering the question, let me recall that APAC Group is an integrated company from spinning, weaving all the way to garment-making. In the case of producing garment, APAC Group has not experienced any negative impact. The market is still stable so far (by the first quarter of 2009).

Unfortunately, it was a different case in the market of yarns and fabrics. About 70% of yarns and fabrics by APAC are made for the international market, and the remaining are sold domestically.

United States and European countries are major exporting markets of APAC. As the demand in these two major areas showed declines, APAC started to engage in market diversification.

At the same time, we found that markets in Latin of America, Asia and Africa were still in a good condition. Therefore, APAC transferred some of its market destinations from the two major markets to the three (emerging) regions. APAC has also decided to increase its share in the neighbouring region since there are bulk demands from the domestic market, which is the ASEAN in the viewpoint of APAC. In the ASEAN Free Trade Area (AFTA), selling products to Malaysia or Vietnam is as easy as to Papua.

ATA: Any particular expansion plan in the future?

Mr Soetrisno: I do strongly believe that the crisis will be over soon. If we could be in a-bit-hard situation in 2009, I am projecting that we'll be back to normal in 2010.

During the crisis, APAC was applying a wait-and-see strategy.

For 2010 forward, APAC will return penetrating the market at full speed. I am planning to purchase new facilities of dyeing and finishing. The new facilities will not expand the production capacity but serve for quality improvement. At present, APAC produces products for medium markets. Empowered by the new facilities, APAC will start producing high-end textiles to reach the premium market.

ATA: Last question, do you have any advice for textile entrepreneurs on facing the future condition?

Mr Soetrisno: Stayed focus. We commit to whatever competency we possess, which forms our own core competence. For example, APAC used to focus on denim production, and it was and still is one of APAC's core competence. Other additional production units were built to support the denim production, with the spinning and garment units being erected for providing support and sustaining further development of our denim production. Yarns sold in the market are those in excess from our spinning unit. In recent years, the company has diversified its product portfolio to woven garment products as well.
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