Cost reduction measures taken by a garment manufacturer

1. Background of the survey

The selected organisation is a medium graduated table garment fabricating mill located at suburb country of the state. Factory has capacity to supply employment chances for over 80 skilled labors. Since twelvemonth 1995 mill is being fabricating garments – Shirts, Trousers, Jackets, Blouses, Night wear, Babies garments etc for local and foreign market. In order to gain net incomes, the mill organizes the factors of production to bring forth garments that meet the demand of local and foreign market. To keep the profitableness of the organisation it has become necessary to cut down the cost of the merchandise and increase the quality of the garments.

For most intent of this survey is to practically preview cost decrease pattern of organisations and consequence of the patterns in the organisation. Cost decrease steps became most important and prioritize subject in current concern scheme due to the prevailing planetary economical crises. Cost decrease steps address inquiries about the efficient and effectual direction.

A comprehensive survey of pattern of cost decrease steps of garment mill and consequence of the steps in mill was hard because of informations restrictions and directors reluctance to supply informations. Insufficiency of available informations makes it hard to province exactly pattern of cost decrease steps and consequence of that. This is farther complicated by the fact that directors conceal some information intentionally by believing this information will travel to their rivals.

2. Cost Decrease Techniques

Cost decrease schemes helped the organisation to fit its capablenesss with chances in the market topographic point to carry through its aims. To keep the profitableness of the organisation and to acquire the competitory advantage, the direction has introduced some cost decrease methods during last two old ages. Although indirect costs are comparatively little per centum of entire cost, direction every bit introduced cost decrease steps for both direct and indirect cost beginnings. Revealed informations proven that organisation was able to salvage over seven 1000000s of rupees during last twelvemonth. The enforced cost decreases steps as follows,

List of cost decrease attacks implemented by the selected organisation

Production procedure redesigning

Waste direction

Overtime work cut down

Staff cut down

Cut off of medical insurance installation

Cut off of nutrient installation

Suspension loan and salary progress installation

Reduce transit installation

Electricity salvaging steps

Cost cut down through restricting Telephone installation

Reduce office care cost

Stationary and certification cost decrease

Introduction of new production

Merchandise development

Suspension of organisation ‘s one-year trip

Time salvaging steps

Cost reduces through stock list controlling.

3. Classification of cost decrease steps

1. Product procedure related cost decrease attacks

Cost decrease by production procedure redesigning

Cost decrease through waste direction

Cost reduces through stock list controlling.

2. Employee related cost decrease attacks

Cost decrease by overtime work

Cost cut down by Staff cut down

Staff public assistance cost decrease

Cut off of medical insurance installation

Suspension of involvement free loan installation and salary progresss

Cut off of nutrient

Suspension of organisation ‘s one-year trip

Cut off of conveyance installation

Time salvaging steps

3. Administration and office care related cost decrease attacks

Electricity salvaging steps

Telephone

Reduce office care cost

Stationary and certification cost decrease

4. Customer related cost decrease attacks

Introduction of new production

Merchandise development

4. Evaluation and Analysis of Cost Reduction Techniques

1 Product procedure related cost decrease attacks

1.1 Cost decrease by merchandise procedure redesigning

To cut down cost, the organisation had redesigned production procedure. Consecutive to optimise the all fabrication procedure, Manufacturing, sample testing, procumbent handling, bringing service and mender had been redesigned with the concern of best cost, quality, safety, client satisfaction etc. Interior designers had been encouraged to vigilantly stipulate portion quality by taking into consideration the cumulative consequence of portion on merchandise quality. Production clip was saved by rapidly piecing few parts with better quality. Partss are easiness of production and commonalty with other designs. This method support standardisation of parts, lower limit usage of purchased parts, modular design and standard design characteristics. It has reorganized the edifice to order and assemblage customization. All parts maintain available at all point of usage, makes it easier for parts to be pulled into assembly which eliminate the unneeded motions. By telling less type of parts in big qualities it reduced material operating expense cost. Organization was able to cut down cost and improves flexibleness by redesigning.

Harmonizing to the direction, overtime payment sum at the same clip as about 20 % of salary during past few old ages. It shouldered about 5 % of entire direct cost. Organization was able to run into client deadline without making overtime plants as a consequences of procedure redesigning. In order to redesign fabrication procedure, organisation had used adept procedure development squad and paid them sum at the same as 9.5 % of one-year overtime sum. By parts maintain available at all point of usage, and extinguishing unneeded motions, one shop assistant ‘s responsibility had wipe out without any effecting. Organization was able to salvage sum at same clip as 10.5 % of salary and one shop assistant ‘s salary valued Rs.5, 900/- by procedure redesigning. This redesigning of the procedure guarantee that how good the characteristics work and had significantly influence on quality, dependability and how rapidly new merchandise can be introduced into the market. Consequently cost benefit of the redesigning is much higher than the overtime economy and one labor wage.

1.2 Cost decrease through waste managing.

Increase productiveness by extinguishing many types of waste. Such as extra stock list and unneeded handling, clip cachexia, defects, make overing, material wastage. Waste stuffs had been sold to domestic manufacturers at really low monetary values. Organization had started to bring forth new frocks by utilizing west stuff particularly for the local market alternatively of selling to the domestic. Thesiss merchandise are supplying at really inexpensive monetary value and it is good chance for the clients. Organization was able to to boot gain at least 50 thousand per month. Because of this determination the domestic people loss their unrecorded goon.

In order to salvage clip, introduced item system for workers to minimise away from work station ( if any worker wants to travel out of work station even to travel to toilet or any other exigency they should acquire permission item from supervisor and when employee back to workstation he should instantly return to the supervisor ) , and acquire rid of unneeded procedure ( Ex: reduced dual stretch to one stitch in some merchandises ) .

To forestall unneeded break organisation had introduced proactive equipment / machine care method. On that organisation had enter in to serve understanding with 3rd party organisation which cost was about Rs. Hundred and 50 1000 per annum. With this understanding, serving organisation indiscriminately come and does necessary service to all machines without break to normal procedure. As a consequence of no any machine take away from procedure during last twelvemonth where which often experiences early. This determination accelerates production and optimized labour ingestion. To guarantee the optimal usage of machine tool and workstation, one piece flow lines balanced to make the needed undertakings at each station. This may besides assist to run into deadlines without making overtime and end the supervisory staff.

1.3 Cost reduces through stock list controlling.

Inventory controlling is another of import cost decrease beginning. Materials comprise of the 60 to 70 % of the entire production cost. The assorted techniques have been introduced to commanding stock list managing cost. Organization had removed not traveling stock because non traveling stock goes on adding operating expenses for a period of old ages and it becomes a out of use stock list. Organization uses categorization system. This helps to cut down stock handling cost and organisation was able to cut down one shop assistant service. Cost benefits of these techniques are peculiarly high.

2. Employee related cost decrease attacks

2.1 Cost cut down by halting overtime work

As it is explained by the Sri Lankan jurisprudence overtime work is one and one-half times or doubles size payment. Though overtime is high cost beginning organisation had used overtime works for provide high quality merchandises to clients and run into their mark. Harmonizing to the direction, overtime payment sum at the same clip as about 20 % of salary during past few old ages. It shouldered about 5 % of entire direct cost. The direction has stopped over clip work and payments. This determination is effected to mill and office employees. This mill had used to pay overtime payment for managerial staffs every bit good. Top Management has consecutively introduced flexible working hours for the direction staffs to success in overtime payment suspension process.

The organisation was able to salvage money as at least 20 % of salary due to the overtime suspension determination. As per directors, no any order or occupation has been delayed due to this step and they are acquiring same end product as they got early by working overtime. Employees ware adherent to work overtime and receive extra payment. Consequently staffs wretchedness and labour turnover is increased in the mill. Overtime work is more dearly-won and it significantly consequence to the organisation ‘s cost construction. In other manus, Worlds can non continually work long hr and their end product bit by bit reduces as they are tired of working long hours. Therefore cost benefit of overtime work instead low. However, organisation was able to salvage at least money same as 20 % of monthly wage. As direction there is no such a large respect of end product relatively overtime work period and non overtime period. Organization was able to acquire maximal usage of human resources during working hr. One ground for that may be by limited employees working hours to 8, employees may give their part without exhausted. Though engaging cost increased this is a good cost decrease method.

2.2 Cost cut down by Staff cut down

It is observed that salary denoted about half of organisation ‘s cost. By redesigning production procedure and presenting production squad construct, it was able to extinguish unneeded occupation. Organization has terminated 5 labors, one office drudge, two supervisors, one helper director and two clerk ‘s service. Organization was able to salvage about hundred and 50 1000 per month by cut downing employees. This determination was a considerable harm to the high occupation security which was experienced by the employees during last 10 15 old ages. This determination adversely consequence to the employees moral and face uncertainness.

Sri Lankan labor jurisprudence is non a flexible jurisprudence and it ever facilitate the employee and it gives hapless assistance to employers. This organisation falls to cut down staffs to protect many other employees and the organisation. Terminated staffs have been paid one month salary to boot and tip. Some of complete staffs have taken legal action against to the organisation on their expiration. Organization occurs to pay extra payments for legal officer. Though organisation is able to salvage considerable salvaging on this step, add-on cost beginning was initiated as a consequence of. This state of affairs was raised as a consequence of unorganised execution. If anterior blessing was taken from legal authorization this cost beginnings may non be occurred. Therefore organisation was unable to success in cost as expected due to incorrect execution. High occupation security enhanced staff trueness and builds a healthy and happy working environment and promoted good relationship among the staff but with this determination employees experienced uncertainness. This may besides a motivation to increase labour turnover.

2.3 Staff public assistance cost decrease

Performances of the organisation depend on employees ‘ enthusiasm and satisfaction with their occupations ; all affect the productiveness, repute and endurance of the house. Employees are the chief drive force of the organisation. Organization believes that employees are their most valuable plus. To heighten staff trueness and guarantee they have an first-class working environment organisation had provided truth of installations for them. Few of them are medical insurance coverage, conveyance installation, pleasant working environment, Interest free staff loan installation, payment for residuary leave, 15 minis spiritual memorial period for every twenty-four hours, salary progress if necessary, one-year trip and etc. All these installations help to construct a healthy and happy working environment and promoted good relationship among the staff. But organisation was urged to cut off these installations to be success in increasing market competition and planetary economical crises.

2. 3.1 Cut off of medical insurance installation

All degree employees experienced medical insurance installation. They were paid all their medical disbursal including hospitalization charges. Medical insurance coverage helps to increase employees ‘ satisfaction and advance healthy relationship among employees and employer. Medical insurance coverage was deriving in popularity with staff class employers and non that much popular within labors. As Sri Lanka is a state which provides free medical service to its states cut off of medical insurance coverage is non such a large issue for the labor. But that determination was severely affected to the managerial staff ‘s enthusiasm. Organization was able to salvage over five 100 1000 rupees annually on this determination. Organization was able to salvage considerable sum of money which less affected to labors and important consequence to staff grade motive. However this is a relatively good cost decrease method of a mill.

2.3.2 Suspension of involvement free loan installation and salary progresss

Organization had provided involvement free loan for lasting employees which non more than employee ‘s one twelvemonth wage. Inference period is three twelvemonth. Other than to the staff loan wage progress besides suspended. Management has planned to put company money in to concern publicity. This determination helps to screen the concern and it helps to increase stableness of the organisation. Suspension of staff loan installation is non considerable affect to the managerial staff as bulk of the staffs had already taken loan and managerial staffs are more secure in economically than labors. But the suspension of salary progress is severely consequence to labor enthusiasm and it may besides move to increase labour turnover. Cost benefit of this technique is relatively low. It is observed that organisation was unable to salvage considerable salvaging on history of.

2. 3.3 Cut off of nutrient

Organization provided breakfast, tiffin and tea to all degree of employees. Majority of employees ‘ are hapless female. This meal installation helps to keep their organic structure nutrition degree and helped to increase enthusiasm. Some hapless misss may come to work without repasts and others may hold to weak up early forenoon to fix their repasts as a consequence of cut off of nutrient installation. Any employees can work on their maximal capacity if they ‘re mentally and physically fit. Therefore cut off of nutrient disbursals can be adversely affected to the end product. Organization was able to salvage at least one hundred and 50 1000 and other manus it may severely impact to the employees attempt and moral. Organization experiences relatively high degree of absenteeism after implementing the determination. It can be identified as non good cost tax write-off method to mill which employed bulk female low income employees.

2.3.4 Suspension of organisation ‘s one-year trip.

Employees are the most of import resources of the mill. The one-year trip is corporate squad edifice exercisings which helps persons work better on separately and together. Geting to cognize each other is a great manner for staff to organize stronger working relationships. Staffs who are non normally working together have chance to bond and is good chance for new and diffident members to acquire involved focussed undertaking. Further honoring staff with a merriment twenty-four hours out employees feel valued by the employer and more likely to be happy at working and loyal. Geting off from the mundane undertakings can gives employees a fresh feeling. It helps to place staff strength and failings and it helps to supply right chances for staff back at the office for them to develop. Build relationship among colleagues. Additionally, staff themselves will larn more about theirs and others ‘ strengths and failings. Organization saved about hundred thousand annually but the economy benefit is relatively low sing the benefit of this squad edifice event.

2. 3.5 Cut off of conveyance installation

The organisation is a medium graduated table garment fabricating mill located at suburb country. Public transit installation of the country is in really hapless degree relatively to the urban country of the state. Organization had provided office maintains vehicle for managerial staffs and separate vehicles to transport workers and office staff. There was a non implemented cost decrease step for managerial staffs transport installation. Organization has employed two coachs to transport all employees including staff and workers alternatively of two coachs and new wave which employed early. Organization was able to cut down transit cost by Rs. 40,000/- per month by this determination.

2.3.5 Time salvaging steps

It was introduced nominal system for workers to minimise away from work station ( if any worker wants to travel out of work station even to travel to toilet or any other exigency they should acquire permission item from supervisor and when employee back to workstation he should instantly return to the supervisor ) . This method more scientific and in long tally this will consequence to staff defeat. It was unable to salvage considerable salvaging. Cost benefit of the method is really low. It was advised staffs to warship or prays before working hr which was used to done by the staff after working hr early. By leting memorize employees ‘ to their faith before start the responsibility direction expected to make peaceable and harmonious working environment. This may besides directs to run into costumiers aim without overtime work. This is good clip salvaging method. By seting conveyance vehicle clip consequently, direction was able to ease employees to go on this exercising. Organization was able to salvage 350 adult male hours monthly valid about twenty thousand without act uponing to employees and devoid of harm their aim.

3. Administration and office care related cost decrease attacks

3.1 Electricity economy steps

The usage of air conditioners within office premises has been stopped and round had issued to all staffs by reding electricity salvaging steps, on that staff have been advised how they can help to salvage electricity while working. ( Staff switches off computing machines and visible radiations when they go outside of the work station ) . As this mill located at moistness whether country this issue is non effected to the staffs productiveness. Organization was able cut down electricity measure by at least five 1000s per month without consequence to the end product.

3.2 Telephone

All telephones unites have been locked and introduced upper bound of monthly telephone charges and if it exceeded peculiar employee is responsible for the extra. There was no considerable respect between before and after introduced of the policy. As telephone installations has provided to direction staff and they all use that installation for the official mater. Whether bounds are exceeded it all uses for the concern demands.

3.3 Reduce office care cost

Office and mill cleansing service supplier ‘s service had stopped and assigned to office drudges and assistants. Part clip worker has recruited for healthful service by paying Rs.2,000 per month. Organization was able to salvage twenty thousand of rupees which they paid to cleaning service organisation. Due to this determination labour turnover has increased. Organization was unable to the attained that they maintained early on cleansing and healthful installation. This is non a good cost decrease step to the organisation.

3.4 Stationary and certification cost decrease

Organization started to utilize Low monetary value letter papers and strong stationary commanding methods have been introduced. Organization was able to cut down around five 100 rupees per month from this step.

4. Customer related cost decrease attacks

4.1 Introduction of new production

Factory fabrication garments – Shirts/Trousers/Jackets/Blouses /Night wear/Babies garments etc for local and foreign market. It is introduced low stuff and labour ingestion garment to the local market. Organization has been involved in the development of garments for low-price. As revealed it is marketed low cost merchandise with low monetary value. This is a good chance for the clients. This is a good achievement for organisation to win the clients.

4.2 Product development

Organization had introduced new frocks by utilizing west stuff particularly for the local market alternatively of selling to the domestic. Thesiss merchandise are supplying at really inexpensive monetary value and it is good chance for the clients. Organization was able to to boot gain at least 50 thousand per month. The organisation ever targeted to win the upper income degree clients and they had ignored lower income group by bring forthing high quality high monetary value garments. With this development organisation was able to catch the low income group by bring forthing high quality garments at inexpensive monetary value. Organization was able to spread out the market instead than limited in to the high income client group.

5. Decision

The long-run practicableness of an organisation ‘s concern program depends on back uping its competitory advantage. Competitive advantage is normally attained through developing new merchandises to better quality and cut down costs. For most intent of this survey is to practically preview cost decrease pattern of organisations and consequence of the patterns in the organisation. The selected organisation is a medium graduated table garment fabricating mill located at out of metropolitan metropolis. Cost decrease schemes helped the organisation to fit its capablenesss with chances in the market topographic point to carry through its aims. To keep the profitableness of the organisation and to acquire the competitory advantage, the direction has introduced some cost decrease methods during last two old ages. Although indirect costs are comparatively little per centum of entire cost, direction every bit introduced cost decrease steps for both direct and indirect cost beginnings. Revealed informations proven that organisation was able to salvage around one million of rupees during last twelvemonth. The exercised cost decreases steps were, employee related, production procedure related, client related and disposal and office care related cost decrease. It is observed that organisation had implemented cost decrease techniques without making proper cost benefit analysis. However revealed informations proven that organisation was able to salvage over seven 1000000s of rupees during last twelvemonth. Reducing overtime work, Staff public assistance cut off, Production betterment, Introduction of new production, Production procedure related, Productivity increasing steps, Wastage decrease steps, Electricity salvaging steps have been in turn accomplished the organisation end while employee reduction, office care steps uneffective.

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