While most of the free world is moving manufacturing to China, Japanese company Hitachi Global Storage Systems (Hitachi GST) became an outlier when it decided to transfer a chunk of its single slider manufacturing business from Mexico to the Philippines.

It was a strategic decision, reveals Hitachi GST Philippines President Chandra Anamirtham in the recent Asia CEO forum held at the Dusit Thani Manila. All too aware of the fact that the manufacturing industry in the country was barely surviving, Anamirtham acknowledges that it spelled a lot of risk for the company to suddenly change its course.

“It definitely took a lot of guts to close the whole factory within six months and transfer everything to the Philippines,” he shares, adding that, “In 2007, we made the Philippines the hub for single slider manufacturing. In the whole world for Hitachi, the only site to do slider components is in the Philippines, and it delivered excellent results.”

Indeed, it was a move that worked, as Hitachi GST continuously triples its yearly mass production capacity since 2007. “This year, we’re forecasting 120 million units produced per quarter; that means almost 1.3 million per day for mass production,” informs Anamirtham.

He goes on to add that the Philippine hub has also increased its new technology capacity by more than 83 times since 2008; employee growth has increased from 5,000 in 2007 to 8,600 today—“we’re forecasting to close 2011 with almost 9,000 employees,” he injects—and, on top of that, unit cost has improved by almost 50 percent, “which, as we all know,” he addresses the crowd of VIPs, “is very important to CEOs and GMs.”

And as unit cost is improving, it doesn’t necessarily imply that quality is being sacrificed. “We’re still the no. 1 manufacturing company in the region,” Anamirtham shares.

 

Why not China?
Whereas most manufacturing companies rank products as their top priority, Anamirtham asserts that, “products are just the end result. We need to prioritize the quality of the people and the process first. In Hitachi, we put 90 percent effort to improve the quality of our people and process so that our products, by default, will be excellent.”

He then cites the extraordinary characteristics of loyalty and adaptability in Filipinos as key reasons behind his company’s significant transfers of complex work from other countries. “People are always talking about China being the ultimate manufacturing destination,” he begins. “But the low attrition rate is the one thing that encourages us to stay here in the Philippines. It’s less than five percent per year; for direct employees, it’s less than three percent.”

According to Anamirtham, this figures highly in every manufacturer’s decision-making. “In ShenZhen, China,” he shares, “attrition rate is 30 percent per year, and it can even go up to 60 percent during the Chinese New Year season. That’s a very big problem because it means in three years all employees are new. But here, Filipinos are so loyal and they really stay with the company.”

Every day, the Philippine hub receives almost 20 to 30 conference calls worldwide. “Our people can just pick up their assignments and deliver,” shares Anamirtham. “In non English-speaking countries, it’s very hard to explain over the phone. So the most important advantage here is really the labor supply and maintenance, and we are fully utilizing that.”

 

Elevating Quality
Hitachi isn’t the only one benefiting from their decision to make the Philippines a major manufacturing hub. The fact that the company has been consistently recognized as “Best Employer” by the Philippine Economic Zone Authority (PEZA) bespeaks a symbiotic relationship with its employees. “The reason that enabled us to run our operations smoothly here is quality,” shares Anamirtham. “And when we talk of quality, we start with our employees.”

Team development programs are implemented in all levels of the organization. “We set up the Harvard Business Planning Leadership Transformation Program for 67 managers, and this tackles business essentials, strategy, communication, performance management, leadership and innovation,” informs Anamirtham.

Ground level employees also benefit from the company’s In-House Bachelor’s Degree Program. “A number of our technicians who have been with the company for the last10 years are college dropouts because they were unable to finish due to financial concerns,” Anamirtham shares, “so we worked with CHED to have an in-house bachelor degree program. It’s called the ETEEAP (Expanded Tertiary Education Equivalency and Accreditation Program) and we set it up in a way that we held classes in our factory on Fridays and Saturdays.”

Over a hundred employees registered for the ETEEAP, and by November, 80 will be graduating. “Career development for employees is at the heart of our CSR program,” Anamirtham pronounces. “Why should I spend money when my people are in need of it, too? CSR needs to start at home,” he says.

Structure is the key to Hitachi GST’s successful team development programs, and it is with structure that Anamirtham hopes to address one of the key areas of concern in the manufacturing process.

“Initiative,” he says, “is the one area Filipinos need to improve upon. I have worked in other countries like China, Indonesia and Thailand, and I feel Filipino workers are very talented and more than comparable. But what they need to inject is initiative. And how do you do that? You give them responsibility.”

Before 2007, expatriates covered the gamut of managerial roles in Hitachi GST. Within a short period of time, these jobs were assigned for locals to take over. Business took a beating for three months because of the adjustment period, but Anamirtham shares that Filipino employees are very trainable and easy to mold. “It just needs a little time to create leaders and make things happen. And I’m very proud to say that today the managerial level is 90 percent local,” he says.

Initiative needs to be honed, concludes Anamirtham, which “doesn’t mean putting employees on the spot. It means giving them responsibility and pushing them to shine.”

Published in the Business Agenda section of Manila Bulletin, September 5, 2011

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