South Island Garment Sdn Bhd (SIP), a 100% wholly-owned subsidiary of MAGNI.
SIP与NIKE已经合作了33年！（1985-2018）
【Dependence on major customer】
SIG’s current business is largely dependent on the sale of woven sportswear to Nike, Inc. (“Nike”). Sales to Nike accounted for approximately 75% of SIG’s revenue for the financial year ended 30 April 2005.
SIG has enjoyed a cordial relationship with Nike for the past 20 years since 1985. Being a supplier of Nike apparels, SIG is required to adhere to a strict set of compliance rules known as the “Nike Code of Conduct”. Due to SIG’s emphasis on quality control and successful business ties with Nike, Nike has appointed SIG as one of the tier-1 woven manufacturers of Nike apparels worldwide. To be a Nike tier-1 manufacturer, SIG must maintain a high and consistent performance in its on-time delivery and quality of its apparels. The privilege of being a Nike’s tier-1 manufacturer is that Nike is committed to prioritising the production capacity offered by its tier-1 manufacturers. Although SIG continuously strives to improve its quality assurance, delivery and customer service, there can be no assurance that SIG will continue to have a cordial business relationship with Nike, and that Nike would not remove SIG as a tier-1 woven manufacturer of Nike products. Nike, being a global company, has the flexibility in sourcing for other manufacturers worldwide and is not dependent on any single manufacturer.
The Board of SIG also seeks to mitigate these risks by looking out for other strategic customers which have a relatively wide range of products that would be able to provide SIG with a constant flow of orders. Although the Board of SIG seeks to mitigate its risks by looking out for other strategic customers, it also strives to strike a balance between the need to minimise its business risks via a larger customer base and the risks arising from its focus on certain major customers to ensure better profitability.
【Brand loyalty 】
The success of a particular brand is mainly dependent on the consumers’ loyalty, and updated fashion and quality associated with the brand name. With Nike’s products being the main product produced by SIG, SIG does not have any control over Nike’s brand loyalty. Nike is the largest seller of athletic footwear and apparel company worldwide. In the past years, Nike has achieved remarkable growth which reflects its consistent effort and ability to capture and sustain market share. Hence, the risk of brand switching by Nike’s customers is well monitored. If Nike’s reputation and business performance is affected, there can be no assurance that the financial performance of SIG would not be affected. In view of SIG’s capability to develop and produce a wide range of product types ranging from basic to highly technical seam sealed garments, the Board of SIG is confident that it would be able to switch its operations to serve other customers such as Adidas, Fila, Puma and Reebok whom they had working relationships with.
【Future prospects and plans of SIG】
SIG has been involved in the apparel industry since 1975. With 30 years of experience in this industry, SIG has built a good reputation in the apparel industry and is known among its customers as a reliable and consistent manufacturer of high-quality and sophisticated woven sportswear. With its established presence in the apparel industry and good reputation, SIG has been able to expand its customer base to include the most strategic players such as Nike in the sportswear sector.
SIG has identified Nike as its main strategic customer as SIG has enjoyed a good working relationship with Nike for more than 20 years and Nike is the largest seller of athletic apparel in the world and a provider of a wide range of product mix. SIG is also one of Nike’s tier-1 woven manufacturers of Nike products worldwide. Being a tier-1 contract manufacturer of Nike, Nike is committed to prioritising the production capacity offered by its tier-1 manufacturers.
SIG received the “Outstanding Performance Award” from Nike in 2005 at the Nike Supplier Summit Year 2005. The award marked Nike’s recognition of SIG’s performance and is based on consistent achievement of at least 95% on-time delivery, less than 1% quality defect rate and compliance score of grade A for the past 1 year.
Nike has revenue and cost of sales of USD13.740 billion and USD7.624 billion respectively for the financial year ended 31 May 2005. Nike has targeted to increase its business volume with SIG by approximately 1.5 times by the year 2007. As such, SIG’s future business development with Nike is promising given that SIG places utmost importance on the quality of its products, and SIG’s revenue from Nike is very minimal as compared to the overall business revenue of Nike. The Board of SIG believes that this will bring rapid growth to SIG in terms of business volume and profitability.
To retain Nike’s confidence in its products and to remain as Nike’s tier-1 woven manufacturer, SIG is committed to increase its production efficiencies and capacities, and maintain its quality assurance.
To cater for the increase in production capacity, SIG plans to increase its manufacturing plants or production lines in Vietnam by entering into new business collaborations with its existing joint venture partner in Vietnam, and to expand its manufacturing facilities to other countries which have a lower cost of production. SIG is also on a constant look-out for other strategic customers which have a relatively wide range of products to provide SIG with a constant flow of orders to mitigate its risk of cyclical sales.
SIG’s persistence and aggressive efforts in cost management, production efficiency and effectiveness, shorter lead time and “lean” management concept have also enhanced SIG’s profitability.
