MANAGING RISKS IN SMEs: THE CASE OF MUDIM

NOOR AFZA AMRAN

HALIMAH @ NASIBAH AHMAD

DARWINA AHMAD ARSHAD

Despite Mr. Shaarani’s efforts in positioning MUDIM as one of the successful Small and

Medium Enterprises (SMEs) in Malaysia, his mind was not at peace. He visualized the

many business risks involved in managing MUDIM, such as the sluggish economic

environment in Malaysia. In addition, competition from other firms, such as Habhal, Jalel

and Adabi, and the increase in prices of raw materials used as the main ingredients for

MUDIM’s products, such as dried soy bean and chilli, could also badly affect the

company’s profit margin.

Notwithstanding the risks that he foresaw, the overriding concern of Mr. Sharaani was

identifying an appropriate person who could take over the helm of MUDIM. As the

owner and Managing Director of MUDIM, Mr. Sharaani believed that business

sustainability was very much dependent on who would succeed him.

BACKGROUND OF THE COMPANY

MUDIM was located at No. 26, Kampung Jelutong, Mukim Tobiar, 06700 Pendang,

Kedah Darul Aman. The company was founded by Mr. Shaarani bin Zakaria. ‘MUDIM’

was the nickname of Mr. Shaarani’s late father, Mr. Zakaria Arshad. MUDIM

commenced its food business in 1987 as a SME. The start-up capital was RM 10,000 and

it rapidly increased to RM300,000 after just 20 years of operations, which did not fail to

attract the attention of Mr. Shaarani. Due to the fine and exquisite taste of the soy sauce,

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the demand from the customers consistently kept increasing, and if MUDIM kept

improving and enhancing its products and flavour, the enterprise could do well without a

doubt. Mr. Shaarani then decided that it was an opportune time to expand the business.

In the early years of the business, MUDIM was not the brand name for the products. The

name, ‘MUDIM’ came about three months after the company commenced operations.

Initially, a simple logo, basically comprising a green circle was used. Later, the logo was

changed, where ‘MUDIM’ was written using Arabic calligraphy. A few months later,

MUDIM once again changed the logo to MZ. The current business logo, ‘MUDIM’, was

decided upon in 2000 (refer to Appendix 1).

MUDIM was a Bumiputera business producing three main products, i.e., soy sauce, chilli

sauce and vinegar. In the initial stages, MUDIM’s products were sold to local people

around Kedah, and slowly began penetrating markets in the states of Perlis and Pulau

Pinang.

MUDIM’s enhanced marketing strategies, quality control, technological advances,

experience, expertise and efficient product distribution management, enabled MUDIM’s

products to successfully penetrate the food industry, both domestically and globally. Mr.

Shaarani had received the support from various government agencies, such as the

Malaysian Agricultural Research and Development Institute (MARDI), Majlis Amanah

Rakyat (MARA), Lembaga Kemajuan Pertanian Muda (MADA), Federal Agricultural

and Marketing Authority (FAMA) and Standards and Industrial Research Institute

of Malaysia (SIRIM). MARDI was instrumental in providing advice and training on food

processing; MARA conducted workshops on the intricacies involved in food preparation

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besides tips on how to become a successful and motivated entrepreneur; FAMA helped in

the promotion of MUDIM’s products through Expos held in various places, including in

Brunei and Thailand; MADA gave a grant amounting to RM200,000.00 to boost

MUDIM’s business development; and SIRIM helped Mr. Shaarani hone his

entrepreneurial skills to provide him the competencies and the much needed competitive

edge to take MUDIM’s brand name to greater heights.

Mr. Shaarani also had participated in several food product Expos organised by several

relevant parties, such as the Global Halal Market Place (MIHAS) in Melaka, IAT Expo at

the Putra World Trade Centre in Kuala Lumpur and ALL-Expo in Serdang, Selangor; it

was Mr. Shaarani’s fervent desire to make MUDIM’s products a brand to be reckoned

with in the local market. It made him beam with pride to see MUDIM’s products proudly

displayed on the shelves in hypermarkets, like Tesco, C-Mart, Giant and Mydin in

Kedah, Perlis, Penang and North Perak. The average production of soy sauce, chilli sauce

and vinegar was around fourteen (14) tonnes per day. Abroad, MUDIM products had

successfully penetrated Brunei, Singaporean and Thai markets, clearly evidencing that

Mr. Shaarani had successfully placed the MUDIM brand alongside other competitors, not

only domestically but globally as well.

MUDIM practiced the Islamic concept in its production. The company strongly

emphasized on cleanliness and purity of its products. This was proven when MUDIM

was conferred the Good Manufacturing Practice (GMP) Award. MUDIM sent its staff to

attend courses organised by SIRIM in order to enhance their management skills and keep

abreast with the latest trends and developments in the market. MUDIM’s products were

guaranteed HALAL and had been certified by Jabatan Agama Islam Malaysia (JAKIM).
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Of its three products, MUDIM was well known for its soy sauce, boasting of a unique

taste and catering to the palate of children, teenagers, adults and the older group, alike. In

addition, MUDIM used plastic bottles with a distinctive and easily identifiable shape,

which gave MUDIM and edge over its competitors who used glass bottles.

The main raw materials needed by MUDIM for production were soy beans, dried chilli,

sugar and salt, and of course, the plastic bottles. Usually, the soy sauce that was produced

could cater to a one-week demand. However, the demand for soy sauce and chilli sauce

was often unpredictable, depending on prevailing conditions.

Mr. Hakim was the General Manager of MUDIM indicated that seven (7) suppliers,

Teong Chun, HM Trading, Syarikat AAA, Soon Seng Food Industry, Hat Leong Sticker

Master, Rebond and Bintang Niaga, supplied raw materials to MUDIM. For MUDIM, it

was not difficult to get new suppliers if the current suppliers over-charged. However,

MUDIM preferred to create and sustain a long-term relationship with its current suppliers

in order to build trust and ensure reliable and steady supplies. Mr. Hakim believed that a

good relationship with suppliers was vital as this would help in ensuring quality input,

reduce delay of raw material delivery and speed up the production process.

One of the problems that MUDIM faced was maximising production due to shortage of

machines. Currently, there was only one machine operating to cater for the production of

both soy sauce and chilli sauce. Taking cognizance of this limitation, Mr. Shaarani

applied for a FAMA grant to increase the number of machines and expand the existing

factory. A new building was badly needed to place the new machines. By constructing a
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new plant, MUDIM could produce more to meet the market demand and ensure a greater

competitive edge. In addition to endeavouring to increase production, MUDIM was

always concerned with safety. Staff always made sure that the warehouse and office

doors were properly locked and closed-circuit cameras were strategically installed around

the factory and warehouse to ensure the safety of the building and products. MUDIM did

not hire security guards, whether for day or night-time duty. The management believed

that there was no guarantee that hiring security guards could prevent break-ins; besides,

there had been no cases of theft or break-ins at MUDIM.

VISION AND MISSION OF MUDIM

MUDIM had a two-fold Vision as follows:

To become one of the leading food industries in Malaysia with high quality products at

reasonable price, which satisfies customers and meets their expectations.

Two broad mission statements embodied MUDIM’s goals as follows:

 To produce high quality and HALAL products for the local and global markets.

After stringent tests on the quality of its products, MUDIM had been awarded the

HALAL certification from JAKIM and certificate of authenticity of the taste and

quality from Majlis Agama Islam Negeri Kedah (MAINK). MUDIM’s hallmark

was indeed the quality of all its products, from raw materials quality and

processes to packaging. If a customer had bought damaged or spoilt products, be

it to the contents, colouring or packaging, the products would be replaced free of

charge.

 To contribute to the economic growth of Malaysia.

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 With the support from the Ministry of Domestic Trade & Consumer Affairs

(MDTCA), MARA, FAMA, MADA and MARDI, MUDIM had been able to

capitalise on the opportunities availed by the Government agencies, and

indirectly give back to the Malaysian economy.

THE LEADER IN YOU

Mr. Sharaani

MUDIM began as a family business involving Mr. Sharaani and his parents. In 1980,

Mr. Sharaani began venturing into the business after he completed his secondary level

education. As a young man, Mr. Shaarani had started showing a keen interest in business

and his entrepreneurial characteristics had made his father, Mr. Zakaria, extremely proud

of him. Soon, Mr. Shaarani joined his father in the business of selling traditional

medicine in early 1987. In April of that year, they ventured into a new business of selling

soy sauce. Through his enterprising spirit, Mr. Shaarani managed to come up with his

own soy sauce recipe, a secret he shares with his mother to this day. With firm

determination and confidence to start a soy sauce business, Mr. Sharaani approached a

manager, Mr. Ibni Hajar, from MARDI to discuss the potential of starting the business

with his new soy sauce recipe. Mr. Ibni Hajar assigned someone from MARDI to teach

Mr. Sharaani and his parents the correct and modern techniques of producing soy sauce.

Mr. Sharaani also attended a training workshop conducted by MARDI before starting his

business. In mid-1987, Mr. Shaarani and his father officially started their involvement in

the food industry and started selling soy sauce and chilli sauce on a small scale.

However, MUDIM’s signature product was its soy sauce, a family recipe, which through

his ingenuity, Mr. Shaarani had enhanced and perfected. The soy sauce was richly thick

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and dark and boasted of a variety of flavours (salty, sweet and creamy and special)

Initially, the sauce was produced in their home and Mr. Sharaani was involved in

processes of making it, including in the cooking process.

In the early days, Mr. Sharaani himself was responsible for promoting, marketing and

selling the soy and chilli sauces. Being very enterprising, Mr. Shaarani distributed the

sauces to grocery shops around the village. For two years, he was a familiar figure on a

motorbike in his village, diligently distributing his homemade soy and chilli sauces to

nearby areas. The income from the two-year sales was good enough for him to buy a

second-hand car at a cost of RM3,000. Being able to carry more products in his car and

travel, even in bad weather, Mr. Shaarani found his sales increasing with more revenue

coming in, due to his perseverance and relentless efforts.

MUDIM started growing by leaps and bounds since that first step Mr. Shaarani took way

back in 1987. A fair-skinned with soft-spoken man, Mr. Shaarani had ambitious dreams

for MUDIM. Even though he was looked upon as a wealthy and successful businessman

with commendable business skills and experience, Mr. Sharaani never forgot his roots

and humble beginnings; he was an honest and a pious person, and operated his business

on one solid life principle, i.e., “in order to be successful, one needs to be hardworking,

diligent and willing to sacrifice”. Mr. Shaarani eventually became a very successful

entrepreneur, with two factories under his management.

Mr. Hakim

Mr. Mohd Ibnul Hakim bin Othman was the General Manager of MUDIM. He joined the

business in 2011 and was a familiar figure in MUDIM. A fresh graduate from the PTPTL
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College in Sungai Petani, Kedah, holding a Diploma in Business Administration, Hakim

was young, pleasant, jovial, easy-going and energetic. He joined MUDIM as a fresh

graduate and was assigned the responsibilities of handling sales, production and

administrative matters of the company. When he joined MUDIM on 1 July 2011, he was

appointed as an Assistant Manager. As a dedicated and determined worker, he quickly

rose the ranks and just after two years of holding the assistant manager’s post, Mr.

Shaarani began to recognize Mr. Hakim’s potential, particularly his positive and

charismatic attitude. Mr. Shaarani intuitively knew this young man could be a successful

manager, someone who could be trusted to lead and take the company to new heights.

Mr. Hakim was an independent worker which did not fail to draw the attention of his

boss. He endeavoured to get funds for the business from Tabung Ekonomi Kumpulan

Usaha Niaga (TEKUN NASIONAL), MADA, and FAMA. He also went to great lengths

to make sure that MUDIM was duly recognised by important agencies, vis-a-vis the

HALAL certification from JAKIM and MeSTI certification from the Ministry of Health.

Sales improved tremendously from year to year, and Mr Hakim was given the credit for

this impressive sales growth (refer to Appendix 2). As the business and demand from

customers grew, issues which arose always needed prompt decision. Mr. Hakim soon

became inevitable when decisions had to be made quickly. With a firm head on his

shoulders and considerable knowledge and experience that he had acquired over the

years, Mr. Hakim made strategic improvements for the good of MUDIM. Any decision

or action that resulted in improvement, especially in sales or profits, were quickly

executed, even if it had not been initially planned or budgeted for.

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HUMAN RESOURCE MANAGEMENT

In 2016, MUDIM, which was categorised as a SME, had a total of 46 workers and most

of them were from the nearby villages. In terms of recruiting staff, Mr. Sharaani normally

preferred to appoint staff from among his family members and friends. This was clearly

evidenced when Mr. Shaarani said, “I told my son that all staff in MUDIM should be

appointed from among family members and friends. That is my priority when I want to

make them my staff. I do not look so much at academic qualifications. In fact,

qualification is my second priority”.

For example, Mr. Hakim, who was his assistant general manager, was also appointed

based on the recommendation of his second son, who was a good friend of Mr Hakim.

Mr. Sharaani felt staff members comprising family members and friends could prevent a

stressful working environment; he wanted all the staff to enjoy working in MUDIM. Mr.

Sharaani, who knew each and every staff member usually monitored them through

CCTV that was directly linked to his office. Mr Sharaani also practiced empowerment

and let Mr. Hakim to make decisions, although important decisions, especially those

relating to financial matters, were made by Mr. Sharaani.

MUDIM had a well-planned organisational chart. Even though the company was located

in Pendang, Kedah, a rural area, MUDIM did not face problems in getting manpower.

The organisational chart (as shown in Figure 1) explains the flow of work, line of

reporting and authority in the company.

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 Figure 1: Organizational Chart of MUDIM

Haji Shaarani
Managing Director
Najimuddeen
Technician
Zamri Ibnul Hakim Nazim Tajudin
HR Executive General Manager Maintenance Manager General
Ibrahim
Worker
Housekeeping/
Supervisor
Shahrul Nizam Murni Razlin Asmah Shauqi
Production Purchasing Assistant Accounts General
Manager Admin Officer Manager Worker
Admin

20 Production Staff Husna Aziz Shafiza Azwan Atiekah

A/c Payable Storekeeper A/c receivable Assistant A/c inventory
storekeeper

Shahidan
General
Worker 10 drivers

The 46 staff in MUDIM reported to Mr. Hakim, the frequency of reporting depending on

the urgency of the case. In certain instances, issues would be forwarded to be discussed

in the management meeting. There were two types of meetings in MUDIM, i.e.,

management meeting and staff meeting. Management meetings were held based on need.

If the issues were related to production, the production managers would be involved to

discuss the details with Mr. Hakim. Then, a report would be prepared and given to Mr.

Shaarani.

Staff meetings with Mr. Shaarani were usually held five (5) or six (6) times per year,

depending on his time and availability. The management team and staff were involved in

this meeting. Mr. Shaarani chaired the meeting, with Mr. Hakim taking over if Mr.

Shaarani was unavailable. Usually, the issues discussed in the meeting were related to

production, human resource matters and other problems that arose from time to time.

However, the final decision would come from Mr. Shaarani, assisted by Mr. Hakim. In

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addition, other types of meetings were also held in MUDIM, such as informal meetings,

discussion via what’s app groups and emails. These media were used by staff and

management teams to communicate and organize virtual and informal meetings. It often

resulted in fast, easy and prompt feedback.

Besides the emphasis on efficient business operations, Mr. Shaarani cared about his

employees and did not neglect their welfare. In fact, employees were treated as

MUDIM’s most prized asset. He was a magnanimous man, and staff members, mostly

from the Pendang area, were happy working for MUDIM. Since its establishment, staff

turnover in MUDIM was negligible. The longest staff tenure was 27 years and that

employee retired at the age of 77 years. MUDIM did not face shortage of staff since it

was easy to find local people to work with MUDIM.

CULTURE ACCELERATES BOSS-STAFF RELATIONS

Both Mr. Shaarani and Mr. Hakim exuded a warm personality, making all staff feel

comfortable. Mr. Shaarani always reminded his right-hand man, Mr. Hakim, that it was

important to treat all staff well and equally, just like he treated his own family members.

In this way, a good relationship could be forged and staff would feel happy and

motivated to work with MUDIM. If the staff encountered any problems, Mr. Shaarani or

his management team were always readily available to lend them a helping hand. No

problem was too trivial to be ignored and no staff member was denied help or

counselling. A cordial and harmonious atmosphere certainly prevailed in MUDIM.

Besides MUDIM’s warm and nurturing culture, staff were also provided many facilities,

such as prayer room, gymnasium and pantry for them to use during or after their working
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hours. With such a conducive environment, the staff could get together and enjoy the

facilities provided for them. Mr. Shaarani even went out of his way to ensure the staff

practised a healthy lifestyle. The gymnasium was fully equipped for the staff to exercise

and stay fit, in tandem with the motto, “Healthy staff are motivated staff and motivated

staff perform better in their job”. Mr. Hakim added that, “To have good workers, they

must stay fit and be happy to do their work; the gymnasium is not only for physical

exercise but it also allows staff to release pent-up energy and work stress so as to

improve both emotionally and physically”.

At MUDIM, staff also enjoyed several other perks, including annual leave, maternity

leave, medical leave, Employees’ Provident Fund (EPF) and Social Security

Organisation (SOCSO) contributions. In addition, special events, like yearly family

vacations, were organised for the staff. MUDIM also sponsored staff to perform umrah

yearly. The management had decided that all staff must have an equal chance to perform

umrah; hence staff were sent based on seniority. Through all these perks and incentives,

Mr. Shaarani hoped to inculcate a work-family spirit among the staff, in the hope that

MUDIM could be a successful ‘family’-owned business.

THE PRODUCTION PROCESS

MUDIM was aware that it needed to continually improve its products to be more viable

in the market. Therefore, MUDIM felt it was essential that the efficiency of its machinery

and the technology used in the factory be upgraded in order to maximise production. To

continue producing high quality soy sauce and chilli sauce, it was imperative for

MUDIM to ensure the machines and equipment could function optimally. Presently,

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there were 20 operators in the production line with two main activities (for soy sauce and

chilli sauce) being carried out using the same machines in a week.

Figure 2: Production Process

Mix Jacketed Pack in box Store in Arrange

Cook cooling
ingredients with barcodes warehouse based on
(2 tonnes) machine
date and
pot) quantity

For example, MUDIM produced soy sauce for two consecutive days. Then, the company

had to stop the machines and clean them in order to produce the chilli sauce. This usually

resulted in a glitch when the production had to shut down for two to three days. The

machines needed to be cleaned and dried completely before being used for the chilli

sauce production. The process started with mixing the ingredients in a two-tonne heated

pot. Once it was cooked, it was transferred into a jacketed cooling machine through a

pipe. This was to avoid bacterial infection and to reduce the possibility of spoiling the

sauce. The sauce was then filled into the bottles at a temperature of 32 0C to 350C, sealed

and put into boxes with barcodes. In the event of any loss of products or spoilage,

management could easily trace the products by referring to the barcodes. Before sending

the goods to the market, the products were placed in a warehouse. MUDIM had a large

and clean warehouse to stock the products and MUDIM ensured that the temperature of

the warehouse was suitable for storing the products. This was because soy sauce and

chilli sauce were considered as perishable products and needed to be stored under the

right temperature. The products were systematically arranged based on the date

manufactured and the quantities were keyed into a system.

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MUDIM was aware that it needed to continually improve its products to be not only

more viable in the market, but to also sustain its competitive edge. It was important to

accommodate the customers’ demand and compete in the dynamic market. For MUDIM,

their suppliers were the backbone, since the demand for MUDIM’s products had

increased tremendously over the years. To meet the high demand, new and sophisticated

technology was vital for production. To be competitive, MUDIM had improved greatly

on its business operations, from manual to automated production. Currently, the plant

was 95% automated. With the automated and sophisticated facilities, the work system

changed from a shift system to daily weekday operations from 8.30 am to 5.30 pm. Mr.

Shaarani believed that with the new and modern machinery, the business could operate

effectively without the need to operate 24 hours a day.

As the owner of the company, Mr. Shaarani needed to be frequently updated by Mr.

Hakim on all matters regarding the business. The frequency of reporting depended on the

situation. Generally, Mr. Hakim would report daily to Mr. Shaarani by meeting him face-

to-face or by telephone call. “Mostly I have meetings with Hakim, the production

supervisor and the technician. Normally, they will update me on the daily production

progress. They will also inform me on any problems encountered”, said Mr. Shaarani.

MUDIM’S MARKETING STRATEGY AND COMPETITORS

To be competitive in the food industry, strategic planning was crucial. Mr. Hakim

initiated many marketing efforts to promote MUDIM’s products both locally and abroad.

One of the ways he did this was by hiring sales agents who could promote the products to

hypermarkets in Malaysia, such as Tesco, Giant, AEON and Mydin. Top management

realized that once the products could penetrate the hypermarkets, the demand would
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increase. However, most hypermarkets were more inclined to place well-known brands in

front shelves and products of MUDIM were as an alternative choice for customers.

Fulfilling customers’ demands was not easy. Mr. Hakim was aware that their products

were still new in certain geographical areas, and ‘guerrilla’ style promotion was not

exactly a brilliant option to market MUDIM’s products due to inadequate resources and

limited production.

During festive seasons, MUDIM promoted its products via the state radio, especially

during the fasting month of Ramadhan. Mr. Hakim also noticed that MUDIM’s products

were not only marketed in Malaysia but also overseas, such as in Egypt, Brunei,

Indonesia and Singapore. The overseas market was initially started by students who went

to study overseas. They brought along MUDIM’s products in huge quantities for their

own consumption and sometimes, sold the products to their friends. Mr. Hakim also

allowed students from higher learning institutions to do research on MUDIM’s products

in order to boost its business image. ‘Word-of-mouth’ from these students indirectly

helped in business expansion to other new geographical areas, such as the Klang Valley

and the Western and Southern Peninsular of Malaysia.

MUDIM also faced stiff competition from other businesses that offered the same

products (chilli sauce, soy sauce and vinegar). Therefore, MUDIM needed to be

constantly prepared to face the threat of new entrants into the same markets. Mr. Hakim

realized that some of MUDIM’s competitors had previously received several awards,

especially for quality standardization. For instance, Habhal’s soy sauce, a well-known

product in this country, especially in West Malaysia, had received the ISO 9000:2008

certification, which was an obvious indication that Habhal’s products had fulfilled
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international quality standards; customers had since begun to make a beeline for Habhal‘s

soy sauce which were marketed all over Malaysia, including Sabah and Sarawak and to

some countries, such as the United Kingdom, the United States of America and China.

The competitors’ products could easily enter the new markets due to their popularity and

aggressive advertising. As for MUDIM’s products, Mr. Hakim was realistic. He

acknowledged that it was difficult for their products to penetrate new markets due to

limited resources and volume of production. For MUDIM, their priority was the survival

of the business and offering affordable products for their customers. Mr. Hakim remained

confident. He was aware of MUDIM’s strengths, including the competitive price of

MUDIM’s products compared to its rivals, like Habhal and Jalel. This was one of the

main reasons why people preferred MUDIM’s products as the prices were reasonable for

all customers from low to high income earners. The last price revision for soy sauce was

RM2.80 and it was done in 2012. Mr. Hakim mentioned that although the Goods and

Services Tax (GST) had been implemented, there was no price increment for MUDIM’s

products. In terms of fluctuation of raw material costs, MUDIM did not face problems as

they had a number of suppliers that could fulfil their demand on time. The price of the

raw materials had not increased because MUDIM normally bought in bulk from

suppliers.

Although MUDIM’s products were doing reasonably well, Mr. Hakim realised that the

company could not afford to be complacent and rest on its laurels. Marketing efforts had

to be undertaken and every year, Mr. Hakim advertised MUDIM’s products via the radio,

especially during the fasting month. MUDIM also appointed their lorry drivers as sales

agents. The sales agents were responsible not only for delivering the products to their

respective wholesalers and retailers; they also had the role of introducing and marketing
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MUDIM’s products to prospective wholesalers and retailers. Indirectly also, the attractive

plastic bottle was another marketing effort which made customers want to buy MUDIM’s

products. The carefully ergo-designed plastic bottles were attractive and stood out from

other similar products in the market. Compared to glass bottles, consumers found the

plastic lightweight bottles of MUDIM a nice addition in their kitchen and useful for

storing other things when the sauces had been used up.

INVENTORY SYSTEM

The Accounts Department in MUDIM was divided into two units, namely the Accounts

Receivable (AR) Unit and Accounts Payable (AP) Unit. The Accounts Department had

two workers and a supervisor. The supervisor was responsible for inspecting all the

accounts, ensuring accurate record keeping of transactions and maintaining proper

internal control.

Goods were sold on both on cash and credit terms. If the deal was done on credit terms, it

would be monitored by the Accounts Department. The credit term offered to the

wholesalers was usually two (2) weeks. On the other hand, credit period granted to the

hypermarkets, such as MYDIN and TESCO, was one (1) month. Normally, all payments

were received in a given period. However, there had been cases where the debtors failed

to pay their debts within the time period given, but this problem had not significantly

affected the business. According to Mr. Hakim, MUDIM had never really encountered

bad debt problems. The approach used by MUDIM in alleviating bad debt problem was

by delaying the delivery of goods. In other words, the goods would not be delivered to

the debtors until they had fully repaid their debt, after which only the delivery would be

made.
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As a manufacturing business, inventory of MUDIM was classified into two, namely: raw

materials inventory and finished goods inventory. Inventory was managed by the

Administrative Department. The Inventory Unit was divided into two sections, the

Purchase Unit and Storage Unit, and managed by three (3) staff members. The inventory

was monitored by a storekeeper, who was responsible for overseeing the movement of

the inventory. All finished goods inventory were equipped with barcode on the boxes.

The barcode system was used by MUDIM and it had become an effective tool for

security purposes. In addition, it was very useful for tracing the inventory, especially in

the case of losses. However, the barcode system was not without its disadvantages, as it

could only track the loss when it involved boxes, but it could not track individual items.

Hence, MUDIM planned to have a system that could track individual products to ensure

improvement in the control and monitoring of the inventory.

MUDIM used a computerized system, known as the C4 system to oversee the inventory

and it was monitored by the other two (2) staff. This system assisted MUDIM to monitor

the updated inventory balance from time to time. Besides using the C4 system, MUDIM

still maintained the store card to monitor the inventory manually. In recording

transactions relating to inventory, MUDIM adopted the First-In, First-Out (FIFO) system,

which was in line with the accounting standards. MUDIM stored adequate amount of

finished goods to fulfil the demand of their customers. For example, if the machine was

being used for the production of soy sauce, an adequate amount of soy sauce would be

produced and kept in order to fulfill the expected sales for a certain period, such as

weekly sales. Similarly, when the machine was used for production of chilli sauce, an

adequate inventory of chilli sauce would be produced and kept for the expected sale of a
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certain period. Normally, the production of soy sauce was greater compared to chilli

sauce as the demand for soy sauce was generally higher than the chilli sauce; this had led

to a larger amount of soy sauce inventory being stored.

In terms of raw materials inventory, MUDIM had never faced acute shortage because

MUDIM had its own plans, financial targets and budget. The targeted amounts of sales,

for example, took into consideration the production constraints. The targeted sales had to

be aligned with the production capacity. This carefully planning and budgeting system

prevented the occurrence of shortage of raw materials. MUDIM normally kept a

sufficient amount of raw material that could cover its production capacity, usually for a

month. The C4 and Just-in-Time (JIT) systems were also used to prevent shortage of raw

materials. If the stock of raw materials was insufficient to cover the anticipated

production, MUDIM would ensure that early notice was given to suppliers. The C4

system helped to link the information between the store and the production department.

Thus, the storekeeper could constantly check the raw materials inventory in order to

ensure an adequate supply of raw materials was available for production.

CASH MANAGEMENT AND ACCOUNTING SYSTEM

Besides inventory management, it was also imperative for MUDIM to manage and

monitor its cash flow. Cash management and control was done by the Accounts

Department and all purchases were monitored directly by Mr. Hakim. Large payments

required verification and approval from as well as signature of Mr. Sharaani, who

monitored the cash on a daily basis. The amount of cash involved on a daily basis was

between RM30,000 to RM40,000. All cash was banked in by Mr. Sharaani himself daily

and accounts and documentation were recorded by the accounts staff, while the manager
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was responsible for evaluating and monitoring the cash transactions. At the end of each

month, the bank reconciliation statements were prepared so that adjustment could be

done on the balances of the bank and cash book accounts. MUDIM used internet banking

services so as to be up-to-date with all its banking transactions. Besides, internet banking

facilitated the monitoring of the accounts balance and checking could be carried out

easily and quickly.

Similar to other businesses, it was necessary for MUDIM to prepare its financial

statement. Financial statement preparation is one of the final steps in the accounting

cycle. Mr. Sharaani and Mr. Hakim understood very well that a financial statement is a

measure of the success of their business operations. It was also important for evaluating

the financial condition of the business in order to facilitate economic decisions in future.

Due to several constraints, preparation of financial statement of MUDIM was outsourced

to an external accounting firm, and it was prepared based on the accounting information

system. Previously, the accounting system used was the User Business System (UBS);

subsequently, MUDIM switched to the Auto-Count system.

FAMILY SUCCESSION

As Mr. Shaarani sat down to enjoy his coffee in his office, his mind suddenly thought

about his children. He paced restlessly in his office and wondered who among his five

children, could replace him. His first son was not a suitable candidate as he already had

his own business, starting off with the transportation business and successfully expanding

his empire to encompass the hardware industry. His second son also had his own

business. He was involved in the production of bottles and became the main supplier to

MUDIM. This ruled out the possibility of his second child succeeding him. Mr.
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Shaarani’s thoughts shifted to his third child. His only daughter was still pursuing her

studies at the Universiti Teknologi Mara (UiTM), and was undergoing practical training.

Mr. Shaarani wanted his daughter to work and gain as much experience as possible. He

intended to help his daughter to start-up her own business. As he continued to ponder, he

thought of his fourth child, who was continuing his studies at the Institut Kemahiran

Belia Negara (IKBN) in Jitra, Kedah. Unfortunately, this son was not interested in

MUDIM; as a very hands-on person, he was more interested in repairing vehicles and

intended to pursue his dreams to set up his own workshop someday. For Mr. Shaarani,

his successor needed to have a keen interest in his business. Hence, his fourth child was

also struck off his list of possible successors. Finally, Mr. Shaarani’s mind drifted to his

youngest son, a 16-year old, who was still studying in a secondary school. Although very

young, his youngest son had already started displaying a keen interest in business. He

idolized successful business luminaries, such as Dato' Aliff and Dato' Vida. Mr. Shaarani

felt the future of MUDIM lay in his youngest child’s hands; nonetheless, he wanted his

son to further his studies as he realized that a solid education would provide the much

needed foundation to manage and sustain a business. Mr. Shaarani smiled as he felt he

had finally identified a successor and hoped that his plan to appoint his youngest son to

replace him would ultimately materialize.

FUTURE DIRECTION

The immediate future plan of MUDIM was to complete the construction of a new factory

plant in order to enhance its production capacity. The wide and spacious compound

surrounding the existing plant would be used to build the new factory. It was expected

that the new factory could contribute towards an increase in production, sales and

profitability of the business in the future. The completion of the new factory would
21
enable the production and processing of soy sauce and chilli sauce to be done separately,

hence negating the need to stop production and clean the same machine as done

previously

MUDIM had come up with a few strategic plans for the company. The company started

their operations manually and shifted to semi-automation, and then was 95% automated.

Plans were underway for full automation. The company was in the process of building a

new factory located behind the existing factory. Once the new factory had been

completed, MUDIM planned to split the production of chilli sauce and soy sauce.

MUDIM also planned to expand its trading and distribution of products, not only in

Malaysia, but in global markets as well. In line with Vision 2020, MUDIM would move

on and expand its business creatively, innovatively and competitively, to become viable

as well as to achieve excellence, glory and distinction in the industry. MUDIM also

wished to increase the use of computerised systems in its manufacturing and business

operations.

MUDIM was practically a family business, but there was really no son or daughter of the

owner who worked at MUDIM. Before this, Mr. Shaarani’s son, Mr. Muhaimin, worked

together with Mr. Hakim in MUDIM. Then, Mr. Sharaani decided to create a new

business for his son so that he could independently manage his own business. Mr.

Sharaani set up a new vertically integrated business for his son, which was a bottles

factory. The factory supplied bottles to MUDIM to bottle the soy sauce, chilli sauce and

vinegar. To ensure the distinctiveness of MUDIM’s plastic bottles packaging, Mr.

Sharaani had announced that their bottles would be patented in the near future. In this

regard, the business intended to expand backwards on the production path by building a
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new plant for plastic bottle production to be managed by Mr. Muhaimin. With this larger

scale of plastic bottles production, it could meet the demand from MUDIM.

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APPENDIX 1

Logo Used By MUDIM in 2000

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APPENDIX 2

Table 1: Total Sales for MUDIM (2011 to 2014)

Year Total Sales (in RM)

2011 5,000,000

2012 7,000,000

2013 8,000,000

2014 10,000,000

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