Chapter 6 begins with a discussion of the impact a customer-centric culture can have on the outcomes of an organization. It also discusses the vital role played by marketing leaders. Perhaps no case in this book exemplifies customer-centricity and the culture needed to back this goal than Pakistan’s Beacon Impex. In 2017, a prime customer of bodywear showed the company a ‘Yellow Card’ (in other words, gave it a warning). Immediately, the company focused on its prime customer’s needs and agreed that its top-end strategic customers wanted on-time deliveries, reduced lead times at competitive prices, quality, innovation, flexibility, and adherence to world-class ethical and environmental standards. To achieve these goals, Beacon Impex not only in-housed the elastic part of bodywear, improved its pre-production service quality but also instituted and institutionalized trainings to change the very mindset of its key employees, such as the sewing operators. The results vindicated this customer-centric approach (Dr. Aamir Khan, Case Advisor).
Despite Pakistan facing ever-growing current account deficits, Beacon Impex, is on track to become a role model for exporting quality goods in bodywear, meeting customers’ needs and earning much-needed foreign exchange for the country. All of this has been achieved by playing intelligently within both international and national environments. This case unpacks Beacon Impex’s remarkable story of transformation, starting from a simple dyeing business to the industry leader in the bodywear category it is today, and serves as an exemplar that other Pakistani manufacturers can follow. At the same time, it outlines challenges that Beacon Impex faces in the near future.
The Burning Platform Syndrome
Masood Textiles, the parent company of Beacon Impex, was incorporated in 1991 as a knitted garment manufacturer. Despite experiencing ups and downs, the company saw good growth and expanded into multiple categories in the knitting business. However, when international quotas were removed, global players gained an advantage, and countries like Bangladesh, India, Vietnam, Cambodia, and China became Pakistan's main competitors in the bodywear field. This increased competition played out at the product, company, and industry level.
According to Harvard management professors, "the Burning Platform Syndrome" is essential to any successful change management effort. This means that an organization must clearly demonstrate to employees that it is facing a difficult situation and needs to implement a drastic change management program. Masood Textiles, the parent company of Beacon Impex, had been involved in multiple categories within the knitted apparel industry, including sportswear, underwear, and loungewear. However, this lack of focus may have led to problems such as delays in response, delivery, and development. In 2017, a prime customer of bodywear showed it a ‘Yellow Card’, the proverbial first warning given by the referee in a soccer/football match.
For Masood Textiles, the threat of business cutback represented by the "Yellow Card" from its major bodywear customer was a wake-up call. The customer complained about issues such as on-time deliveries (OTDs), long lead times, and high rates of rejection, and hinted at the potential for seeking competitive options in the global manufacturing community. The customer warned that it could exit if substantial improvements were not made. At a time when countries in Asia had established themselves as major players in the market and Pakistan was facing negative brand associations internationally, Masood was under increasing pressure to revamp its entire business operations.
Understanding Customer Needs
After numerous brainstorming sessions, the top management at Masood Textiles decided to completely separate the key categories of sportswear and bodywear within the organization. They also decided to establish a separate company focused solely on underwear production. The name Beacon Impex, which was already registered under the umbrella company, was chosen for this purpose. The group had 8 factories available and decided to initially dedicate one factory to Beacon Impex bodywear production. This restructuring allowed the company to approach each category with a laser-like focus and improve its performance.
In 2017, the challenge of leading Beacon Impex was entrusted to a managing director-level individual to ensure prompt, multidimensional decision-making without losing momentum. Starting from scratch with a turnover of USD 18 million, the company saw spectacular growth, reaching a turnover of USD 99 million by June 2022, just five years later. Despite the challenges of the Covid-19 pandemic, the company has set a target of USD 150 million for 2025. The customer that had issued a "yellow card" at USD 18 million grew to USD 54 million, on-time deliveries increased from 60% to 98%, and the average lead time decreased from 110 days to around 50 days. But how were these impressive figures achieved?
The first reason has been outlined above: allocation of responsibility and focus. But there’s more to the story. Beacon Impex also took a back-to-basics approach, asking itself what customers want and how it can meet those needs while creating value for both the customer and itself. Beacon Impex determined that customers want on-time deliveries, reduced lead times at competitive prices, quality, innovation, flexibility, and adherence to world-class ethical and environmental standards. As the MD knew, while good marketing can help attract new customers, it is performance, beyond their expectations, that sustains relationships and delights them.
However, it can be difficult to prioritize these seven needs. For example, even if a company offers quality at a reduced price, an unacceptably late on-time delivery can undermine the entire effort. To meet these challenges, accentuated by a global production space, Beacon Impex carefully crafted its strategy and focused on every aspect of management, including planning, supply chain and operations, costing, and marketing. In addition, the company revamped its human resources practices and launched a broad-based, tightly managed program of motivation and training for its workforce, with a special focus on sewing operators, who are the cornerstone of the company.
Bottlenecks and Insourcing
To improve its performance and meet customer needs, Beacon Impex began by conducting a thorough analysis of the costs of its products, components, and processes. This analysis revealed that more than 25% of the costs were associated with the elastic used in underwear and packaging. That was not all. The elastic was being imported from China or India, which was both expensive and caused supply chain issues that contributed to long lead times. At the time, no Pakistani supplier was producing the type of elastic Beacon Impex needed. Therefore, the company decided to set up its own jacquard elastic plant, which became operational in 2.5 years. By 2022, 95% of Beacon's elastic needs were being fulfilled by this in-house facility. This not only led to drastic cost savings and reduced lead times, but also allowed Beacon to tap into prestigious customer bases such as Hugo Boss and Dillard's. As a result, Beacon is now emerging as a regional player with plans to unlock the global elastic market in the near future.
In-housing elastic production was not the only success for Beacon Impex. The company also worked to ensure that local partners who could supply packaging materials were trained, developed, and obtained global approvals. The quality of the packaging has now improved to the point where brands such as Hugo Boss and Dillard's are being packaged inside Pakistan using in-house made fabric and elastic. In-sourcing was just one of the many ways Beacon Impex reduced costs. The company also managed to reduce its rejection rate from 5% to 1.5% and increase sewing output with higher efficiency by changing the mindset of its workforce, as described in a later section. This allowed Beacon Impex to improve its quality while keeping costs low.
Managing Strategic Partners
To better serve its customers, Beacon Impex's management coined the terms "strategic partner" and "transactional customer" for major and minor segments, respectively. The company believed that minor customers had the potential to become major ones and would also consider non-financial factors in value creation. Approximately 70% of Beacon's customers are strategic partners who are engaged in long-term relationships. As one marketing team head explained, to facilitate this engagement, Beacon Impex assigned specific managers to work with counterparts within its strategic partners, allowing for process and field specialization rather than having one or two individuals responsible for multiple departments. This helped to improve communication and facilitate product development and quality management.
Beacon Impex also began focusing on improving pre-production service quality and prompt delivery, even though this phase does not generate immediate revenue. The head of process improvement gave an example: if a customer requested a prototype sketch within 24 hours, Beacon Impex would develop and send it on time. This attention to service at the design and prototype levels, where buying has not yet occurred, helped to win the trust of customers and secure orders. Beacon Impex also revised its sample costing to make it more competitive. By serving customers well at this stage, the company was able to win the support of back-end operators and build trust with its customers.
Changing Mindsets
While the operational and supply chain revamp was a significant challenge, it was not the most difficult part of Beacon Impex's change management program. The company found it more difficult to change the mindset of its workforce, particularly the sewing operators who are the cornerstone of the company. In fact, as the managing director noted, even with these massive changes, Beacon Impex had achieved only 55% of its goal but needed to reach 75% to be at the level of the best brands in the world.
The issue that Beacon Impex faced was that, compared to their counterparts in other countries, the sewing operators in Pakistan had a more resistant mindset when it came to adopting a more scientific attitude towards work. When trained, sewing operators in other countries tend to consistently apply their learning and stick to new methods. In Pakistan, it takes more effort and a wider range of motivational techniques to convince operators to consistently apply their learning and avoid reverting to old methods. This highlights the importance of soft skills in addition to hard skills. Beacon Impex made significant efforts to address this issue and bring about changes in the workforce's mindset.
To change the mindset of its workforce, Beacon Impex used a variety of tools including motivational videos and campaigns, and training and development interventions, which involved all the managers, supervising staff, and labor, the General Manager Operations explained. These interventions were based on learning from Toyota's training workshops but were adapted to meet Beacon's specific needs and key performance indicators. Above all, the company communicated the urgent need for change to its employees, without which survival was at stake. Processes were then implemented and monitored.
To keep the labor force motivated, Beacon Impex held both marathon and short sessions, including Gemba walks, and used management tools to monitor the progress of the program. It was continuously emphasized to the labor that Beacon wanted a win-win outcome and aimed to create value for the customer, its employees, and itself. As the program started to bear fruit and the labor saw their monetary returns improving, they became more supportive of the change management initiatives. The managing director noted that keeping the labor motivated was one of the most difficult parts of the change management process.
In addition to the challenges of changing the mindset of the workforce, Beacon Impex also faced a global turnover crunch, although the impact was not as severe as that experienced by its competitors. To ensure a continuous supply of trained employees, the company set up training schools and an MTO (Management Trainee Officer) program in partnership with the National Textile University, which included an intake of 36 MTOs. To support out-of-town workers, Beacon Impex provided hostel accommodation and arranged transportation for those living nearby. The company also implemented policies to ensure that all employees were respected, and no worker would be humiliated.
One factor that has contributed to low turnover rates at Beacon Impex is the increase in the participation of female labor, from 10% to 35%. Interestingly, female workers, whether they are machine operators, final inspectors, or packers, have the lowest turnover rates, unless they are forced to leave due to domestic constraints. The success of Beacon Impex's efforts to include more female workers has been impressive and has attracted the attention of highly regarded organizations, who have visited the company for advice and even for collaborative projects.
What the Future Holds
Beacon Impex has focused on the production and export of high-quality bodywear, and the company is considering the possibility of creating its own brand in the future. However, owning its own brand may bring both higher mark-ups and the risk of carrying large inventories in the event of a recession.
One challenge that Beacon Impex continues to face is finding a sufficient supply of trained operators and inspectors, especially as the company grows. Beacon Impex is working on establishing a skill development institute to address this issue. The company is considering whether to invest in robotics to improve quality, consistency (such as stitches per inch), and reduce costs.
Another challenge for Beacon Impex is meeting global standards for sustainability and circularity. The company has already made significant progress in this area. While most garment manufacturers in Pakistan use 130 liters of water to dye one kilogram of cloth, Beacon Impex now only uses 33 liters, saving 1 million liters of water per day on the production of 10,000 kilograms of cloth. Beacon has also installed servo-pedals on its sewing machines to reduce energy consumption, replaced diesel generators with gas generators, and connected the exhaust of its gas generators to boilers to save energy. However, Beacon Impex must continue to improve its sustainability and circularity efforts in order to stay competitive.
To ensure a steady supply of raw materials, Beacon Impex has taken steps to hedge its costs by moving backwards in the supply chain and reaching out to farmers and growers to secure a consistent supply of cotton. This process requires significant investments of resources and time.
Despite the challenges, Beacon Impex has implemented a successful 360-degree change management program across operations, supply chain, organizational behavior, and marketing. This has earned the company a reputation as a reliable partner for some of the biggest names in the industry and has brought in much-needed foreign exchange for Pakistan. Beacon Impex serves as an example for other textile and non-textile companies seeking to turn challenges into opportunities.
Questions to stimulate conversation on the case
- Were the solutions derived and implemented by Beacon management appropriate? How so?
- What are the current challenges faced by the manufacturing industries in Pakistan these days?
- Can the Beacon Impex case be referred to and utilized in service industries?