Key Performance Indicators (KPIs) are measured to assess where the factory currently stands and to find key focus areas where management needs to look into. Top 9 KPIs have been listed and explained below that are measured by garment manufacturers (export houses) in the apparel industry. Analysis of these KPIs is carried out monthly.
1. Factory Efficiency%
Factory efficiency indicates how efficiently sewing lines is run in a factory. This indicator is important because capacity planning of the factory and projected garment making cost is done based on factory efficiency. Factory efficiency includes all lines minutes produced and total hours attended by direct labor in sewing floor. Target factory efficiency varies based on the order quantity. For the detailed calculation of efficiency refer to ‘how to calculate efficiency of a production line or batch?” For factory efficiency – calculate total minutes produced by all lines and total minutes attended by all lines. Factory efficiency% = (Total minutes produced X 100)/Total minutes attended.
2. Man to Machine Ratio:
When it is factory’s Man to Machine ratio (MMR), every employees of the factory is considered under manpower. So, Man : Machine= Total manpower: Total sewing machines available in the factory (machines those are in use). For example, if a factory has 500 sewing machines and total manpower of the factory is 1100 then man to machine ratio =1100:500 OR 2.2. This ratio varies product to product and on organization structure.
3. Cut to ship ratio:
This is a ratio of total cut quantity and total shipped quantity of an order. This indicator is measured order wise and monthly shipped orders. To keep buffer (for damaged, defective garments) factory cuts extra pieces than order quantity. For example: factory received an order of 20000 pieces, cut quantity 20200 pieces (1% extra cutting) and total shipped quantity 20000 pieces. Cut : Ship = 20200:20000 = 1.01. This indicator is measured to control surplus quantity after shipment, reduction in extra cutting and damaged garment. Target Cut to ship ratio is 1.
4. Order to ship ratio:
Buyer expect to receive full quantity from supplier that has been ordered. This is most important factor that buyer uses for vendor evaluation. This indicator is calculated as = Total order quality/ Total shipped quantity. Target of Order to Ship ratio is always 1. It is good if factory can ship higher than order quantity (only if buyer accepts extra quantity).
5. On time Delivery:
How much shipment did not meet target shipment date is analyzed at the end of each month? Target on time delivery of each style is to meet shipment delivery date. If not meet reasons of not meeting delivery date are analyzed. It is calculate as = Total orders shipped on time/Total orders shipped on the month. For example, if factory shipped 18 styles on time out of total 20 styles shipped in month then On time delivery of that month is =18/20*100% = 90%
6. Average style changeover time:
Time gap between previous style over (last piece out from the line) and first piece output of the current style is known as style change over time. Shorter changeover time is considered as better performance level. It varies style to style and production systems. Time of Change over time of each style is recorded and average changeover time of the factory is measured.
7. Right First time quality:
This indicator is represented in percentages. Total audits passed in first time out of total audit conducted by auditors. First time right quality is measured in various stages of garment processing and analysis is done audit wise. Higher values (percentage) of right first time quality is considered as better performance of the factory.
8. Quality to Production:
Quality level of each department is measured in DHU and Percentage defective unit. Higher the value of DHU higher alteration time and higher cost incurred in quality.
9. Down time percentage:
Down time is one of the top most reasons for less factory efficiency. Factory analyses major down times to control and improve machine and operator utilization. Top 5 reasons for down time (also known as non-productive time, Off-standard time) are line setting, operation sitting idle, no feeding, machine breakdown and no planning for line.
Garment manufacturing business more specifically garment export business is a profitable business if factory performance is measured and management work to improve performance level step by step. Each of the above KPI plays role on production cost, factory’s reputation and profit margin.