STEP UP THE QUALITY OR FACE THE BOOT

       Nike's decision to relocate to Vietnam is a dire warning for Thai industries to pull their socks up. The recent announcement that Nike, the international sports goods and sports shoe maker, is planning to relocate its production facility from Thailand to Vietnam is a warning to Thai industry it needs to upgrade quality and production levels. Nike plans to relocate this facility in late February 2010, according to Sakon Sikamamat, president of the Thai Footwear Association. The international brand says it plans to move to Thailand's competitors Vietnam and Indonesia because of the lower production costs in those two countries; this according to a plan to cut production costs from the company's headquarters in America. The relocation to a cheaper source of production is predictable. Amidst the current global economic slump, the company, like so many others, is looking to cut its production costs in order to remain competitive.
       While the Thai agencies concerned should be prepared to assist those who are laid off, Nike's intention should serve as a dire warning to all industries in Thailand. If they fail to improve their quality, they will be quickly caught and overtaken by the emerging economies in Asean and beyond.
       Sakon said that apart from the Nike relocation plan, other foreign-brand shoe companies have reduced their purchase orders due to the economic situation. Low-end footwear products from Thailand are still popular in neighbouring countries such as Cambodia and Laos. But the producers of these budget products are unlikely to maintain their share in those markets for long. This is due to cheaper imports from China taking over the markets in Indochina. Chinese producers can offer far cheaper products than Thai manufacturers.
       But there is still light at the end of the tunnel. The Thai shoe industry is perceived as having potential because the quality of Thai products is seen as medium- to high-end by consumers in the US, Europe and Japan. This perception of consumers overseas shows that the Thai shoe industry will have room to grow if it manages to constantly improve quality so that it does not have to compete directly with the newly-emerging economies and their lower production costs.
       Ironically, in spite of the news of the relocation of plants, skilled labour is still in high demand in Thailand. Sakon said the leather-shoe sector faces a shortage of designers and some 4,000 skilled workers. Indeed, Thai leather products have increasingly gained an international reputation for high quality and good design. If the industry manages to increase the number of designers to shore up production value, it will shine in the future. Educational institutions and companies should also work to produce qualified personnel to serve the industry. Practical training in factories, where design students can experience the work environment and real market demand, will help prepare them for the industry.
       To secure market share in the long term, Thailand should not only serve as a production base for global brands. International brand names are ready to move their production facilities to anywhere that offers cheaper costs aligned with quality workmanship. Nike is an example. Thai industries must also think about the possibility of establishing and building up their own brand names. This can be done by highlighting the strengths of products made in Thailand through attention to detail and quality.
       The current economic slump will be a big test for the survivors. Non-competitive industries that depend on cheap labour will not be able to maintain their market share for long because of the fierce competition from other labour-intensive production bases. Only those industries with the potential to find a niche in the crowded market place will emerge as winners amid the current doldrums.
       If shoe producers fail to upgrade quality, and those involved fail in their initiatives to create awareness of the quality of Thai-made products, then they will bite the dust. And we will see more plant relocations to other countries with no return to Thailand.