Case Analysis for Ls Garments, Philippines

Problems:

LS Garments has come a long way since they incorporated in 1991. From a 35-person workforce to a 1,140 personnel, the company has grown remarkably having two factories as well as two subcontractors located in Bacolod and Batangas. With a huge company such as this, one would not think that it could still encounter problems regarding deadlines and difficulties in collecting payments. However, in their transaction with Dubai Fashions, here are some of the problems the company encountered:

a. Inability to ship orders on the specified date—October 20, 2003

b. Quantity shipped was short four pieces of what was ordered

c. Difficulty in collecting payment

Causes of the Problem:

As stated in the case, the reason for LS Garments inability to ship orders on time was due to the tight production schedule it had for its major buyers. However, for a big company as LS Garments, to be unable to produce additional 2,700 pieces of garments ordered 4 months prior to shipment date would be unlikely. The company had obviously neglected the order made by Dubai Fashions.

To add to that, the shipment made by LS Garments to Dubai was missing 4 pieces. Because everything was already rushed due to the request of Dubai Fashions to push the shipment date earlier and considering the already tight production schedule LS Garments was facing to be able to meet the orders of its major buyers in the USA and UK, the company might have neglected to do a quality control check before shipment.

Another problem encountered was that they had difficulty collecting payment from Dubai Fashions. Although stories of unpaid letters of credit from the Middle East were rampant in the Philippine export community, this transaction between Dubai Fashions and LS Garments was really not smoothly handled.