The Domestic Textile And Apparel Market

Published Date: 02 Nov 2017

Introduction

India's total textile and apparel industry size both domestic and exports is projected to grow at a CAGR (Compound Annual Growth Rate) of 9.5 per cent to reach $223 billion by 2021 from the $89 billion in 2011, according to a white paper by industry body FICCI (Federation of Indian Chambers of Commerce and Industry) and research firm Technopak. India's total textile and apparel industry size is estimated at $89 billion in 2011 and is projected to grow at a CAGR of 9.5 per cent to reach $223 billion by 2021.

The domestic textile and apparel market in India is worth $58 billion and has the potential to grow at a CAG of 9 per cent, to reach $141 billion by 2021, the white paper on 'Challenges in Textile and Apparel Industry’. India's textile and apparel exports were at $31 billion in 2011 and are growing at an annual rate of 10 per cent since 2005. India's share of the world's textile and apparel exports stands at 4.5 per cent. It is estimated that due to the increasing shift of textile and apparel production to Asian nations and the deteriorating export-competitiveness of China, this figure will grow to 8 per cent by 2020, with a total exports value of $82 billion. This growth, from 4.5 per cent to 8 per cent of world trade, will open up huge potential for Indian players. (India Times, 2012)

The Indian textile and apparel industry is diversified and has the capacity to provide a wide variety of textiles to meet different market needs. It has access to a large group of skilled labor as well as trained and skilled technical and managerial personnel.

Apparel Manufacturing involves the assembly of garments under various production systems. An apparel production system is an integration of materials handling, production processes, personnel, and equipment that directs work flow and generates finished products. Rumer .G (2002)

The purpose of this research was to explore and study the potential benefits of maintaining the right WIP inventory. The study evaluated and compared the effects of the WIP inventory on the cost transactions. For the purpose of this study, there were no market constraints. Everything produced was sold. This ensured that the system constraint remained within the assembly process itself

To carry out the research primary as well as secondary data was studied. Primary data was collected in the form of in-depth interview and questionnaire from industry experts of garment manufacturing unit in Delhi. A mass of secondary data was collected with the help of books, journals. To carry out this research, field surveys were conducted. The WIP inventory was studied in a usual assembly line process. Daily production reports were collected and were analyzed for the calculation of average inventory and actual holding period of the Co. Time and motion study was performed on an assembly line. The independent variables of buffer size, number, and location for each workstation along with the production plan, The WIP inventory was studied at different work stations.

In this study, it is important to point out just how the level of WIP inventory affects the outcome on cost. A reduction in WIP inventory reduces total asset value of inventory within the system. Average WIP inventory units are 37730, in a holding period of 8 days. Thus reduction in WIP inventory units within a desired holding period leads to lower carrying costs and variable operating expense, thus reducing total operating expense. A reduction in total operating expense will increase cash flow.

Other factors which disturb the WIP level were identified, such as Operator skill level Machine Breakdown, Rate in change of style, Rate in change of fabric, Rejects/ Alterations, Weak lines, and waiting time, their affect on WIP are explored

Physical inventory has traditionally been considered and is currently shown as an asset from an accounting point of view. It is obvious from this case study that excess WIP inventory, over and above the minimal requirements for production, will have a negative effect on cost and productivity.

Garment exporters are adopting long-term strategies that make use of information to achieve greater sophistication in planning and flexibility in operations to respond quickly to market shifts. The objective is to shorten lead times, reduce inventory levels, increase inventory turns and avoid stock outs and markdowns.

Garment exporters are now establishing their production schedules closer to the selling season based on quick response strategy that links apparel exporters and manufacturing operations to make available the right product at the right time

Therefore, for quick response exporters should try and reduce the buffer level, as it is added to the pending work level of the day and hence increase the cost.

Implementation of WIP control software will be helpful as the tracking of the units will be very simple. The software attempts to integrate all departments and functions across a company onto a single computer system that can serve all those departments’ particular requirements.

Also an inventory control model is suggested, which will have a reduced number of buffers at every work station and hence will decrease the WIP units carried forward.

Chapter – 2

Purpose of Research, Research Objectives & Limitations

PURPOSE OF THIS RESEARCH

To recognize a significant problem area in the industry. To address the problem and identify the key factors.

To understand the problem and carry out the research. Keeping in the mind the key factors of the issue.

To collect data, to find in dept details of the issue, and analyze and interpret

To find the solution to the existing issue.

RESEARCH OBJECTIVES (RO)

LIMITATIONS

The study was limited to Delhi and NCR, export houses covered in Delhi and NCR are not the true image of apparel industry.

Because of time constrain the only five export houses could be studied.

Those were chosen on basis of convince sampling.

Most people contacted did not have enough of time.

Actual document is not given by the company. The required information is noted while visiting the company.

Difficulties in doing cost analysis, as export houses were not very keen to share information and for their privacy policy the company name is not mentioned in this project and annexure as well.

Chapter – 3

Literature Review

LITERATURE REVIEW

Inventory Costs

Inventory procurement, storage and management is associated with huge costs associated with each these functions.

Inventory costs are basically categorized into three headings:

Ordering Cost

Carrying Cost

Shortage or stock out Cost & Cost of Replenishment

Cost of Loss, pilferage, shrinkage and obsolescence etc.

Cost of Logistics

Sales Discounts, Volume discounts and other related costs.

Ordering Cost

Cost of procurement and inbound logistics costs form a part of Ordering Cost. Ordering Cost is dependant and varies based on two factors - The cost of ordering excess and the Cost of ordering too less.

Both these factors move in opposite directions to each other. Ordering excess quantity will result in carrying cost of inventory. Where as ordering less will result in increase of replenishment cost and ordering costs.

These two above costs together are called Total Stocking Cost. If you plot the order quantity vs the TSC, you will see the graph declining gradually until a certain point after which with every increase in quantity the TSC will proportionately show an increase.

This functional analysis and cost implications form the basis of determining the Inventory Procurement decision by answering the two basic fundamental questions - How Much to Order and When to Order.

How much to order is determined by arriving at the Economic Order Quantity or EOQ.

Carrying Cost

Inventory storage and maintenance involves various types of costs namely:

Inventory Storage Cost

Cost of Capital

Inventory carrying involves Inventory storage and management either using in house facilities or external warehouses owned and managed by third party vendors. In both cases, inventory management and process involves extensive use of Building, Material Handling Equipments, IT Software applications and Hardware Equipments coupled managed by Operations and Management Staff resources.

Inventory Storage Cost

Inventory storage costs typically include Cost of Building Rental and facility maintenance and related costs. Cost of Material Handling Equipments, IT Hardware and applications, including cost of purchase, depreciation or rental or lease as the case may be. Further costs include operational costs, consumables, communication costs and utilities, besides the cost of human resources employed in operations as well as management.

Cost of Capital

Includes the costs of investments, interest on working capital, taxes on inventory paid, insurance costs and other costs associate with legal liabilities.

The inventory storage costs as well as cost of capital is dependant upon and varies with the decision of the management to manage inventory in house or through outsourced vendors and third party service providers.

Current times, the trend is increasingly in favor of outsourcing the inventory management to third party service provides. For one thing the organizations find that managing inventory operations requires certain core competencies, which may not be inline with their business competencies. They would rather outsource to a supplier who has the required competency than build them in house.

Secondly in case of large-scale warehouse operations, the scale of investments may be too huge in terms of cost of building and material handling equipments etc. Besides the project may span over a longer period of several years, thus blocking capital of the company, which can be utilized into more important areas such as R & D, Expansion etc. than by staying invested into the project.

Factors affecting inventory cost

Inventory management operations are increasingly being outsourced to third party service providers, thereby ensuring that the investments and costs in managing the inventories are reduced. This is a welcome trend provided the companies focus on overseeing and reviewing both inventory management as well as inventory operations periodically to ensure proper controls are maintained and processes followed.

Inventory management entails study of data on movement of inventory, its demand pattern, supply cycles, sales cycles etc. Active management calls for continuous analysis and management of inventory items to target at lean m inventory Management.

Inventory management operations are increasingly being outsourced to third party service providers, thereby ensuring that the investments and costs in managing the inventories are reduced. This is a welcome trend provided the companies focus on overseeing and reviewing both inventory management as well as inventory operations periodically to ensure proper controls are maintained and processes followed.

Inventory management entails study of data on movement of inventory, its demand pattern, supply cycles, sales cycles etc. Active management calls for continuous analysis and management of inventory items to target at lean m inventory Management.

Inventory Management function is carried out by the inventory planners in the company in close co ordination with procurement, supply chain logistics and finance, besides marketing departments.

The efficiencies of inventory management are largely dependent upon the skills and knowledge of the inventory planners, the focus and involvement of management and the management policies coupled with the inventory management system.

However inventory operations management is not under the control of the inventory management team but rests with the third party service providers. In this section of the article we aim to uncover few of the critical areas and action points on the part of operations that can impact the inventory of the company.

Unskilled Labor and Staff: Inventory operations management is a process-oriented operation. Every task and action required to be carried out by the operatives will impact the inventory as well as the delivery lead times and other parameters. Therefore knowledge of what one is required to do and the effect of the action should be known to the operatives who are on the shop floor. For Example: If an operative is given a put away task, he should know how and where he should put away the pallet, how to scan the pallet ID and confirm it back to the system. Besides he should also know the impact of not completing any of these actions or doing some thing wrong. The impact his action will have on the system as well as physical inventory should be clear to the operative.

Secondly different inventory items would have to be handled differently. Operatives who are carrying out the task should know why and what is required to be done. They should also know the consequences of not following the process. A pallet might have to be scanned for the pallet id and put away on a floor location, while a carton might have to be opened and scanned for individual boxes inside and put away into a bin. The operatives should be trained on the entire process and understand why and what he is doing.

The WMS systems are quite operational and task intensive. Where the warehouses are being managed on RF based systems, the operatives should be able to manage the RF readers, understand how to access and complete transactions through the RF Guns.

Often it is noticed that when the warehouse operations are being managed by a third party service provider and the principle customer is not present at the location, the quality of staff and operatives is compromised and people are not given adequate training before being allocated their responsibility. Such situations can lead to inventory discrepancies.

In adequate SOP, Training and emphasis on processes compliance: When a inventory management project kicks off at a third party warehouse location, both the principle customer as well as the third party service provider work on the project and setup basic processes, document them in Standard Operating Procedures and conduct training as a part of the project management methodology.

However over a period of time, the nature of business requirements changes, resulting in change in the operating processes. These do not get documented in terms of amendments and the SOPs become outdated. Thereafter one finds that the new comers who are introduced on the shop floor are required to learn the processes by working along with others where as no training or SOP document is provided to him for reference. With the result they often have half-baked knowledge of the processes and carry on tasks not knowing why they are doing and what they are required to do.

This situation is very dangerous for the health of the inventory and it shows slackness in the attitude of the third party service provider. Continuation of such a situation will lead to bad housekeeping, inventory mismatches, discrepancies and also affect the service delivery. If left unchecked can lead to theft, pilferage and misuse of inventory.

In any third party owned inventory operations warehouse, the principle client should ensure that periodic review and training is conducted for all staff. Inventory operations should be periodically reviewed and inventory counts and audits carried out regularly.

Production Systems

Three types of production systems commonly used to mass produce apparel are: bundle system, assembly line production, and whole garment production. Each system requires an appropriate management philosophy, materials handling methods, floor layout, and employee training. Samuelson P (2002). Firms may combine or adapt these systems to meet their specific production needs. Firms may use only one system, a combination of systems for one product line, or different systems for different product lines in the same plant.

An assembly line production system is a type of line layout that moves garment components from work station to work station for assembly. All the parts for a single garment are attached through the production line together.

For the Productions system to function properly planning is very important. Manufacturing planning and control deal with decisions on the acquisition, utilization and allocation of production resources to satisfy requirements in the most efficient and effective way. Typical decisions include work force level, production lot sizes, assignment of overtime and sequencing of production runs.

Material Requirement Planning (MRP)

MRP- is a time-phased inventory system that links production of finished goods to the timely availability of inputs (raw materials /sub-assemblies) its is a dependent demand technique that uses bill-of-materials, lead times for delivery, inventory, expected receipts, and a master production schedule to precisely determine material requirements even to the point of scheduling machine usage.

But for a balanced growth & efficient running of the enterprise, it is necessary that material cost, material supply & material utilization are so controlled that they led to the reduction in the cost of production & distribution, maximization of production as well as margin of profit. Huddle K (2003)

"A revolution is occurring in operations management. During the last few years, material requirements planning (MRP), have invaded operations planning and control in quick sequence. Each new system has challenged old ways of doing things. These innovative methods are completely changing not only manufacturing processes but also operations management. Factory managers must decide which approach to adopt to meet current and future needs. Darn A (2005)

The three management functions; Production Control, Inventory Control, and Personnel Control, are also present in every apparel factory, regardless of how small the factory. The function of Production Control is to synchronize all the production processes, in order to produce every garment with minimal inventory-in-process Management should accomplish all planned activities as there is huge amount of investment involved in especially in holding inventory. Eilon. H (1995)

Inventory

It is defined as store of goods. Inventory is often discussed in terms of goods for sale; organizations - manufacturers, service-providers - also have inventories. Inventories are not only intended for sale to customers it may also be held in any premises an organization for use. Stock ties up cash and if uncontrolled it will be impossible to know the actual level of stocks and therefore impossible to control them.

Most Manufacturing organizations usually divide their inventory into:

RAW MATERIAL (fabric + trims)

INVENTORY WIP

FINISHED GOODS

Raw materials - materials and components scheduled for use in making a product.

Work in process, (WIP) is made up of all the materials, parts (components), assemblies, and those is being processed or are waiting to be processed. This generally includes all material and components that have begun their transformation to finished goods.

Finished goods - goods ready for sale.

A manufacturer must maintain some inventory of raw materials and work-in-process in order to keep the factory running. Work in progress inventory builds up because of the production cycle. Production cycle is the time span between introduction of raw materials into production and emergence of finished product at the completion of production cycle. Till production cycle completes stock of WIP has to be maintained. However, the exact determination of total inventory quantities and the determination of the location and size of work-in-process (WIP) inventories are difficult. Lundy, J.L (2001)

Inventory control problems often result in record and physical count inconsistency which may ultimately lead to higher than preferred inventory levels. Conversely, accurate inventory records result in lower inventory investment and are the foundation for forecasting, ordering, tracking, vendor evaluation, and dead stock administration programmers. Brown L.K- Atlope International

Orient craft, manufacturing company has employed consultants (both foreign and Indian) to study the various units and suggest changes. Waste control measures in all departments are emphasized and internal training for greater efficiency is an ongoing process. Inventory is one area where one should have strategic control over resources, as the investment made is huge. Dhingra Sudhir, CMD, Orient Craft

Inventory and Cost

Managing cost is a concern for every department; each activity performed involves cost and if managed properly becomes the competitive advantage for a firm. Raw material accounts for almost 60% of cost of production, if work in progress and finished goods are accumulated for longer time it will result in increase of overheads, higher operating cost, and high production costs

The function of Cost Control is to prevent the cost of any processing operation or other type of manufacturing activity from increasing above the standard cost calculated for the prescribed method of any process.

Inventory control is concerned with minimizing the total cost of inventory

Inventory turnover reflects the utilization of inventory from its system within a given financial period. This can be computed for any type of inventory—materials and supplies used in manufacturing or service delivery, work in progress (WIP), finished products, or all inventory combined.

A firm should avoid a situation of over investment or under investment in inventories. The major dangers of over investment are:

(1) Unnecessary tie up from the fund and loss of profit.

(2) Excessive holding cost, Carrying cost

This excessive level of inventories consumes funds from the firm which cannot be used for any other purpose, and thus it involves opportunity cost. The carrying cost such as the cost of storage, handling, insurance, also increase in proportion to the volume of inventory.

Inventory is a major capital investment affecting cash flow and profitability. Inventory comprises one-third to one-half of companies’ total assets. Inventory reductions can do more to improve ROA (Return on Assets). Gupta R.L, Alpine Overseas

The cost of shortage, i.e., the lost occurred if the WIP inventory is insufficient to meet all demand. Is the most difficult to measure and is not often handled properly. Jain Vikas, Purchase Dept, R&R Impex

The ultimate goal of an organization is to increase productivity by optimum utilization of the available resources, keeping in mind the cost factor. Manufactures are constantly facing problem in controlling the WIP inventory and also the increasing cost, more problems have been identified

:

Losing buyers because of poor inventory management

Return on assets is low

Work in progress cycles are long

Low inventory turnover

Inadequate material flow capabilities

Operator skill

Machine work delay

Improper line balancing

Inventory control practices are very important for any organization; it further solves the question of how little and how much, some researchers confirm that. Inventory if is not sufficient then a Co. can lose sales and cost of back orders is also time consuming (Lambert Douglas M, Harrington C, Vance M, 1990). It was also concluded that if, In the middle of production factory runs short of raw materials it can be crucial and will increase operating costs. Labor cost will be higher since workers would not be working till the stock materials arrive and when they arrive they would have to be paid for their overtime jobs.

Further explorations on how production planning and inventory control decisions affect operational performance, ( Khairy A.H. , Yansong Liang,2007).Findings on the production line shows, how using appropriate and a well planned production strategy will carry less raw material and work-in-process inventory. The performance drivers for these plants, through which the operations function excels, are effective utilization of equipment, reduced finished goods inventory, and reduced setup down time, it was therefore analyzed that effective control of WIP, will make the flow more smooth.

Solmon Hug (1995) has concluded that variations in the inventory drive systems and the introduction of raw material will have an effect on the level of WIP inventory in the system.

Three valid reasons to have WIP inventory in a manufacturing process. The first use is to cover process variability, the second is to compensate for a mismatch in process time and customer delivery demands, and the third reason is to allow for local re-sequencing without impact to the other workstations. Layden (1997) these tradeoffs lead to an enormously difficult task of choosing and optimizing a WIP inventory drive system.

Issues With Relation To Inventory

The cost of capital to the company or return that could be earned on the money invested has ranged anywhere from 6% to 18% in the last 25 years. Obviously, inventory has a very significant impact on cost of money.

The larger the Inventory is, and the longer it is held, the more likely engineering changes, customer preferences and technological changes will render that inventory unusable. In the clothing industry, it is not unusual to see inventories depreciate as much as 90% when styles change. (Thomson JJ, Hoat Miner, Deeds Jessica, 1999)

Inventory needs people to order, receive inspect, record, move, count, store, retrieve, post it to the ledger, etc. People are the largest or second largest expense (after material) for most manufacturers.

Although previous research shows that inventory decisions are of strategic importance to the Co. and maintaining the right level of inventory for smooth operations is the ultimate goal of the Co. However to solve the remaining in previous research the gaps identified are:

WIP Inventory has a direct relation with cost; the factors which affect the cost are not analyzed. Relation between cost and inventory is not explained

WIP Inventory handling time is nearly 50% of the production cycle time in many industries and no, analysis has been made on Inventory handling time.

Significance Of The Research

The results from this project will allow a review of the WIP inventory in an apparel manufacturing unit. It will be seen how daily WIP level affects the cost and the daily investment made in inventory. Also the reasons for the rise in the level of WIP are pointed out in the research, and its affects on productivity and efficiency are also highlighted.

This research has been made with an attempt to emphasize the problems in the apparel manufacturing unit, so can be of help to the manufactures. And also would educate students in the industry about inventories

Chapter – 1

Research Methodology

RESEARCH METHODOLOGY OF OBJECTIVE-1

To find out the factors which cause rise in the level of work in progress

Research Design

The research was carried out to identify the factors that cause rise in level of WIP inventory. The research was, helpful in clarifying the independent and dependent factors the affect WIP inventory Philip (1993). Keeping excess raw material and WIP inventories allows workers to keep working if problems arise in the plant. On the other hand high inventories subject the manufacturer to additional liabilities and result in long manufacturing cycle time, Stylianides (1995). For this project exploratory research was done. Also the research was helpful in understanding that how a Good, reliable processes will help reduce INVENTORY, and also provide a more reliable flow of supply, which will help reduce buffer stocks, safety stocks, safety lead time inventory and eliminate much accumulation of WIP inventory on the production floor. Savings will be from the lower WIP inventory combined with an increase in inventory. Joner (1992), WIP inventory handling time should be controlled for a well planned production set-up. Short cycle times are achieved by having viable scheduling systems that require minimal inventories.

Data Collection Method

A mass of secondary data was collected with the help of books, journals. To carry out this research, field surveys were conducted. To conduct this research, a time and motion study was performed on an assembly line. The independent variables of buffer size, number, and location for each workstation along with the production plan, The WIP inventory was studied at different work stations, throughput time and holding period was also studied. The reasons for the rise in level of WIP inventory were observed.

The data to be collected for primary research is based on Questionnaire and the interviews.

Sample Design

The matter has been selected based on the cluster sampling. Judgmental sampling is done because only concerned person to the field was interviewed. Sample unit selected were one factories for field survey (N=5) Questionnaires will be filled by ten industry expert (N=10). Interviews of two industry expert (N=2).

Data Analysis Method

The research was exploratory in character, so, the data was evaluated was through field experiments. Data was analyzed using statistical techniques, showing cause and effect diagram.

RESEARCH METHODOLOGY OF OBJECTIVE-2

To find out how mismanagement of WIP inventory increases cost.

Research Design

The research was carried out to discover how level of WIP inventory affects the cost. The purpose of this research was to explore and compare the potential benefits of controlling WIP inventory and buffer management . Deitz (1997) has reported that by applying effective inventory models, one can help speed up results at lower costs.

The study evaluated and compared the effects of the WIP inventory on the financial measures of performance. For the purpose of this study, there were no market constraints. Everything produced was sold. This ensured that the system constraint remained within the assembly process itself. Inventory is such a critical cost driver that it needs to be eliminated throughout the whole production system

For this project causal research was carried out, helped in investigating, the effect of one variable on another. The research was used to measure what impact a specific change in WIP inventory will have on existing cost, as the largest component of inventory cost is work-in-process inventory" – Boucher (1984)

In this study, it was important to study how the level of WIP inventory affects the outcome of the financial measures of performance. A reduction in WIP inventory reduces total asset value of inventory within the system. If management can learn to implement a WIP inventory management effectively, it can reduce WIP inventory levels, increase cash flow, earn a greater return on investment, and return higher net profits. The research was quantitative and qualitative in character. Quantitative was useful in identifying the level WIP inventory in what quantities and those were further used for calculations.

Qualitative was helpful in locating the possible factors which cause inventory mismanagement and variables within the assemble line that can be controlled.

Data Collection Method

The WIP inventory was studied in a usual assembly line process. Daily production reports were collected and were analyzed for the calculation of average inventory and actual holding period of the Co. An average of four styles were observed and accounted for cost calculation. These variables were further considered and a relation was developed between cost and average inventory. .

Sample Design

The matter has been selected based on the probability sampling Judgmental sampling is done because only concerned person on the field was interviewed. Sample unit selected was one factory (N=1).

Data Analysis Method

Data analysis was carried in the following. First, the data was evaluated through field experiments, and then the independent variables were analyzed with the help of, cost analysis and finally were interpreted using graphs.

Chapter – 5

Findings & Analysis

FINDINGS & ANALYSIS OF RO-1

Graph 5.4

OS- Operator Skill Level

MB- Machine Breakdown

RS- Rate in Change of Style

RF- Rate in change of fabric

RA- Rejects/ Alterations

WL- Weak Lines

WT- Waiting Time.

As per industry experts the following: are the reasons for the rise in the level of WIP.

The most affecting factor is weak line and improper line balancing.

Operator skill level is seen to be one affecting cause for the rise in level of WIP. Different operator’s performance is dissimilar which effects the daily out put.

Machine Break down, causes a rise in level. Machinery when breaks down it doesn’t work properly, takes time to set the machinery over again.

Rejects/ Alterations also increase the WIP, and also add to the rework cost.

Change in style is a neutral factor as operators is quite used to doing different styles and fabrics, but affects WIP up to some extent.

Industry experts feel waiting time is the least affected factor.

Following are the findings from the production line

Line Balancing

The problem of assembly line balancing is to assign different tasks to individual workstations for ensuring the sum of task times at any station not exceeding the desired time. Standard minute time is generally used as the target time for sewing speed and production efficiency.

Line balancing is a cause of weak, line if not balanced properly will not give the target results,

Graph 5.5

Above graph depicts the per day line output, in 22 machines. The output is not close to desired and the reasons for the same are.

WEAK LINE

LINE BALANCING

MACHINE PROBLEMOPEARTOR EFFICIENCY

UNNECESARRY MOVEMENT

COMPLICATESTYLE

ALTERATIONS

Figure 5.1

Further four lines for 3 styles were measured in terms of output and following graph depicts the difference in the level of output

Graph 5.6

Operator Skill Level

Desired time taken-60% efficiency

OPERATOR 1

OPERATOR 2

OPERATOR 3

OPERATOR 4

29

34

35

36

37

48

50

55

53

56

34

40

42.4

39

43

Table 5.3- Time taken by different operators

Graph 5.7

The above graph depicts the time taken by different operators to complete a task, which shows that the each operator performs the task in different amount of time.

Variance in Daily Output

Target at

60% efficiency

Total/daily

variance

34

28

6

24

17

7

29

20

9

24

15

9

Table 5.4- variance in daily output per machine

Graph 5.8

The graph above represents the daily planned output/per machine and the actual output.

The reasons for the same were identified:

OPERATOR IMPROPER PLANNING

DECREASE in OUTPUT/hr

IMPROPER SAM

SEWING TECHNIQUE UNWANTED MOVEMENT

Fig 5.2

MACHINERY BREAKDOWN:

Few causes for the same were observed:

1) Failure to maintain the fundamental needs of the machine: cleanliness, lubrication, keeping bolts tight, belt tension, folder adjustment; this represents 80% of all sewing machine failures.

2) Failure to maintain the normal operating measures: speed, thick fabrics

3) Lack of skill of the operator r the maintenance crew

4) Normal deterioration of the machine

5) Design errors of machines (rare in sewing) and attachments like folders and guides

IMPROPER ATTCAHMENT

MACHINERY BREAKDOWN

LUBRICATION

OPERATOR SKILL

Fig 5.4

Waiting Time

Is the time for which an operator has to wait for the raw material, to continue with the operation, it increases the level of work, as also the idle time which further cause an increase in cost.

Graph 5.9

The above graph depicts the time an operator had to wait for the cut component.

Rejects and Alterations

ORDER QUANTITY

Rejection

% rate

Style 1

5000

1050

21

Style 2

6500

1900

29

Style 3

7800

2700

35

Style 4

5500

1475

27

Table 5.5 – Rejects and alterations rate

Graph 5.10

Above graph represents the order quantities and the rejected units, rejection rate of four different styles calculated. Average rejection rate of Co. X is 28%.

Unnecessary Material Movement

Unnecessary movement was observed in assembly line, due to other orders the machine planning was not proper. The garment was moving back in the line for the completion of component. The machine layout was improper as the garment had to go to other machine which had binder attachment.

Findings

Improper line working

Individual efficiency of the operator is a vital reason, (because it is what ultimately contributes to the line efficiency.

Poor balancing is one major reason for line inefficiency. The line is rebalanced, by checking again the distribution of the work and its estimated time.

Output / machine slow down with the line utilization.

Inadequacy of WIP in the assembly line.

Absenteeism is another major reason of line inefficiency.

Complicacy of the design matters in this case.

The operator ‘waiting time is more than .5%of the total time’.

Reasons for production variances

Poor concentration due to personal fatigue

Complication in style

Insufficient work in progress

Improper Planning

Production; planning and control involve the planning of routing, scheduling, dispatching inspection, and coordination, control of materials, methods machines, tools and operating times. The ultimate objective of the organization is to supply and regulate movement of materials and labor, machines utilization and related activities, in order to bring about the desired manufacturing results in terms of quality, quantity. Planning if not done and executed in the right manner causes variance between desired and planned.

Following are the results of improper planning

Imperfect SAM.

Line balancing not proper.

Unnecessary movement of the garment in the production line.

Incorrect line feeding.

Improper machine planning

Other findings:

Delay in attachment of machine part.

More time taken to perform an operation than the desired time.

Analysis

Indian garment exporters another area of concern is productivity, despite of so much of planning work not at all takes place as scheduled. After considering all observations and findings following has been analyzed:

Work progress on the production floor is disturbed because of lot of reasons. WIP level increases, targets do not match the actual levels, which affects cost and the productivity. It has been seen in graph 5.8 that the daily output varies value to this in one day. This causes variance in the planned and the actual. The reasons for the same are determined.

Operator skill level is another reason which causes tremendous rise in the WIP level. Conducting time study for four different operators it was observed all five have taken dissimilar time to complete one task. The time varies which further increases the throughput time of the garment. The pending work is carried forward the next day, and is added to the buffer. Graph 5.7 depicts the variance in the operator skill level,

Weak line is seen to be the most affecting cause in the increase of WIP level graph 5. depicts the line efficiency of four styles on five lines its seen that the daily output of each line varies from the other and nine of the lines was able to achieve the daily target. The reason for the same is determined. A lot of factors cause variations on operational time of the same task such as the fabrics and sub-materials, performance of the machinery, working environment

First approach to evaluate the inventory-productivity relation was to examine the correlation between labor productivity and the level of WIP inventory

To determine the correlation between the WIP inventory level and labor productivity, average WIP units is estimated and the dependent variable is labor productivity, units are taken fixed for a particular period. There is a positive co-relation which means that the labor efficiency if low then the average WIP turned in the desired holding time will increase.

Increase in WIP level will decrease the level of productivity, operator efficiency.

The rise in the throughput time of the garment leads to reduction in the operator efficiency also increases the WIP conversion period.

With less WIP inventory, better assessment of delivery dates can be done.

Overtime, outsourcing, shift of style as per the urgency is the consequences of increase in level of WIP.

The consequences of excess in-process inventory

• Damaged goods, high cost of cleaning

• Lost parts

• Handling costs: increases

• Cost of keeping track of the inventory: paper work, input in computerized system

• Space

The consequences of excess WIP inventory

• Mark-downs

• Space and rent costs

There is lot of wastes of resources, in the manufacturing unit few of them have been identified from the above findings.

Transportation

From one workstation to another

Causes

Bad layout

The traditional lot production system

Handling

At the workstation: bad methods

Bundle handling

Handling stock

Rework

Cost of repairing defective products

Production lost

Delays incurred

Space

Space used for inventory

Poor working methods

Unnecessary steps that add cost and not value

Unnecessary movements

Causes

• Not made under the principles of time and motion study

• Inadequate design due to the absence of participation of the production department in the development process

FINDINGS & ANALYSIS OF RO-2

Indian garment exporter’s main area of concern is to reduce cost. Every Co. would want to reduce its cost of production. For controlling that it’s very important to control various variables involved in manufacturing process, which are

Labor

Material

Operating expenses

Material should be taken care of as the investment made on raw material alone account for 60% of the cost of production.

FINDINGS:

Accumulation of more units of WIP inventory increases the cost.

Average investment in inventory will increase with the increase in holding period.

Average Cost per unit

202

Average WIP units

37728

Investment in WIP

7606658

Opportunity Cost**- 16%

16%

Holding Cost

1217065

Table 5.1 - Investment in WIP for Co. X (Refer to Annexure Pg 5)

Average WIP units calculated for a given holding period, if there is a rise in the WIP units their will be a rise in WIP investment.

HOLDING PERIOD

AVG WIP UNITS

Factory X

8 days

37730

Table 5.2 - Holding period for Co. X (Refer to Annexure Pg 5)

For Co. X, Average holding period (conversion period) is seen to be 8 days.

Average WIP units calculated for a given holding period, if there is a rise in the WIP units their will be a rise in WIP investment.

Graph 5.1

Co. X Average units of WIP increased which is seen to increase the holding period by 3 days more then average holding period and therefore increase in cost is shown.

According to Industry experts, other costs affected by the level of WIP inventory are:

Graph 5.2

Overtime cost is the most affected due to rise in level of WIP units. Followed by storage cost and rework cost respectively.

Level of WIP of factory X

Graph 5.3

Average WIP inventory level for Co. X is 37730.

Graph above

Depicts the level of daily WIP in factory Y. the graph is showing us WIP value at the end of each day.

Shows the unit value of work in process. WIP value is usually unstable.

Analysis

First approach to assessing the potential inventory- and cost relationship was to examine the correlation between cost and the average level of WIP inventory. There is a positive correlation seen between the cost and average WIP inventory, which clearly proves when the units will increase cost, will increase. Also there is a positive co-relation seen in the between average WIP units and holding period, holding period will increase with the increase of average WIP units.

WIP inventory should be maintained properly, and then profit margins are higher:

Their will be less investment in inventory (raw material and labor).

Less overtime due to late or urgent orders.

WIP have direct relation to cost, they are many costs involved with the daily carrying out of WIP

Maintaining standard WIP inventory will lower investment per unit sold:

Controlled WIP decreases the chances of producing the wrong prevents the need more space and equipment to hold.

In order to reduce the WIP inventory a Co. should set up the target value first and then should compare the results with the target. Much of the attention to improvements in the factory goes to the most obvious source of cost, the actual production process, which includes manufacturing labor and purchased materials and parts

Cost has a direct relation with inventory, it is analyzed that a Co. investment in daily WIP will increase with the rise in the WIP units in the desired conversion cycle. Cost is seen to increase with per unit value in increase, which affects the profit straight. This excessive level of inventories consumes funds from the firm which cannot be used for any other purpose, and thus it involves opportunity cost. The carrying cost such as the cost of storage, handling, insurance, also increase in proportion to the volume of inventory.

Another table 5.3 shows how the investment made in WIP inventory increase with the increase in the WIP units, which further increases the conversion cycle.

Likewise its seen in graph 5.2 show that overtime cost is the most affected cost as work level when increases, results in overtime, storage cost increases as space is required to store the goods. Rework cost also is affected due to rejections, the work level increases.

[CHAPTER-]

SUGGESTIONS

For proper management of WIP, it is very important to move as per the planned targets, and integrate all the activities in an appropriate way.

A bottleneck operation determines hourly production of a sewing line. In a bottleneck operation garments are piled up compared to other operations in the line and produces lowest number of garments. Efficiency of the line as well as labor productivity is affected by work in process (WIP) level at bottleneck operations. By reducing WIP level at bottleneck operations labor productivity can be improved. As per industry expert there are 7 practical ways have been discussed that will help a company to reduce WIP.

1. Method improvement: For the method improvement, first need to conduct method study for the bottleneck operations. Method study is the in depth monitoring and analysis of the way an operator performs its task. Once the method study is done, look for better ways to save time and less effort by the operator. This could be done by improving work motions or providing work aids like gauges, folders, attachments, trolleys, movers, tracks or machine automation. As much time as save through method improvisation from bottleneck operation you get better production that will in turn reduce WIP level. 

2. Share capacity: In the sewing line there will be some operation with higher capacity than required for line’s target production. Few pieces have to move from the bottleneck operation to nearby operation which has potentially higher capacity. Must maintain this capacity sharing in a certain interval and introduce incentive scheme in that case normally operators don’t like to do others work. Operators who had potential capacity to share his/her capacity for bottleneck operation intentionally reduce his/her speed to balance the bundle completion time with the line speed. Spare capacity of adjacent line’s extra capacity operations can be utilized.

3. Add additional manpower or machine: This is the easiest way to increase production at bottleneck operations. Initially it is not suggested for this option and better try to improve work method. In case the potential capacity of the operator is too less than the target output of the line then consider for adding extra machine. Calculate each machine capacity and demand from the bottleneck operation. According to it add additional sewing machine. Following this a company can drastically reduce WIP level. It must be kept in mind that machine productivity may reduce in some cases. 

4. Improve workstation layout: The first and last movement (i.e. pick up and dispose) performed by an operator in an operation cycle depends on the workstation layout. A closer look to workstation layout of the bottleneck operators will help to find out whether the layout is following principles of best workstation design mentioned by Hiba in his book Improving Working Conditions and Productivity in the Garment Industry: An Action Manualhttp://www.assoc-amazon.com/e/ir?t=wwwonlineclot-20&l=as2&o=1&a=922110849X

Position material, tool and controls within easy reach.

Use jigs and other devices to save time and efforts.

This could be relating to ergonomic issues like light, fan, seat adjustment, etc. Redesign workstation to reduce material handling time and get increased production. 

5. Better operator allocation: Each operator has different set of skill level (operations they generally perform) and efficiency at work. So at time of operator selection the right operator should be select correctly. Allocate high content jobs to highly skilled (matching to the job) operators. And for low skilled operators select jobs that required low skill to perform and that has comparatively low work content. In this step the managerial person have to check whether operator selection was done correctly or not.

6. Work for extra hours: If additional machine set up is not possible due unavailability of machine or space and above steps don’t making much difference in WIP reduction then this step meaning overtime (provided that you factory policy permits for working extra hours) to make enough pieces and create WIP for the following operations. 

7. Use time saving tricks: Lot of time is spent by operators in material handling and associated jobs. Here few time saving tricks has been listed. These may be helpful to company.

If the bottleneck operation is having sub-parts of operations, they can be bifurcated and given to helpers or other nearby operators. In this way operator can produce extra pieces and keep smooth flow to the line. b. Use UBT machines for thread trimming instead of hand clippers or trimmers.

Check previous operation if there is any quality issue due to which the operator is not receiving proper input to work on. This may reduce production and create bottleneck operation. 

The operator could be provided with extra bobbins and needles (depends on company needle policy) to save the winding time and requesting for new needle and receiving it.

Following soft ware is recommended for control of WIP.

SAP ERP

Features & Functions

SAP ERP redefines enterprise resource planning – delivering role-based access to crucial data, applications, and analytical tools. With SAP ERP, you can efficiently deal with business challenges in the following areas:

Financials – Ensure compliance and predictability of business performance – so your organization can gain a deeper financial insight across the enterprise and tighten control of finances. SAP ERP Financials automates financial and management accounting and financial supply chain management. The solution also provides rigorous support for corporate-governance mandates such as Basel II and Sarbanes-Oxley.

Human Capital Management – Optimize your HR processes with a complete, integrated, and global human capital management (HCM) solution. SAP ERP provides this HCM solution for organizations of all sizes and in all industries. You can maximize the potential of your workforce, while supporting innovation, growth, and flexibility. The SAP ERP HCM solution automates talent management, core HR processes, and workforce deployment – enabling increased efficiency and better compliance with changing global and local regulations.

Operations – Manage end-to-end procurement and logistics business processes for complete business cycles – from self-service requisitioning to flexible invoicing and payment – optimizing the flow of materials. SAP ERP Operations also helps discrete and process manufacturers manage the entire life cycle of product development and manufacturing. The solution automates the entire manufacturing process and reduces costs by controlling and adapting the manufacturing process in real time – and increases customer satisfaction by delivering higher-quality products.

[CHAPTER-]

CONCLUSION

From the above finding and analysis it has been found out that WIP inventory is one of the cause the increases the cost of production, as it involves material and labor. High WIP inventory level results in long manufacturing cycle. It is very important for a manufacturing unit to maintain adequate stock of inventory for uninterrupted production. To reduce WIP at each work station one needs to optimize the inventory requirements across the process.

Factors have been found which disturb the WIP on the production line. Factors like operator skill level, weak line and machinery break down are the most affecting factors that cause a rise in the level of WIP. This causes waste in the resources like storage, labor, time and money.

Hence, it is important to control the WIP units as they are never stable, and if not controlled can affect the cost adversely. So WIP software, which control and tracks the WIP units is recommended as if we have to achieve the desired results in production we have to support it through a better operational system. Also an inventory model is developed which can reduce the % of work carried forward. As the buffer is kept low.

Further area of study can be carried out on deciding and comparing different inventory systems with respect to financial performance of each system.