Garment Piece Rate setting using Standard Time. This methods helps factories to determine more accurate direct labor cost. One can sets piece rate on the first day of production starting. Where in traditional piece rate system, managers need to 2-3 days to observe operators production speed and then decide a fair piece rate.
He wants to determine piece rate based on operation SAM. But he knows little about measuring garment SAM. He was wondering if I know about such things.
Benefits of SAM Based Piece Rate:
Piece Rate negotiation with sewing operators:
The solution for this problem is determining garment piece rate based on standard time.
- Measure standard time of operations, categorize operations based on difficulty level and machine type
- Set per minute rate for each category considering line efficiency factor.
- If operators disagree with piece rate, explain, and show them how much time to be taken to complete their operations. And how many pieces they can produce in a day if they work in full effort.
- While finalizing piece rate, consider order quantity, style run and product difficulty level.
By this method you can set Piece Rate on the first day of production start. And can avoid initial production loss. (Note: Factory needs to gain experience on IE things to implement this method effectively) .
Accuracy in product costing for direct labor cost part
Direct labor cost is very important part of product costing as lot of labors are involved in making a piece of garment. When you calculate piece rate based on your past experience, you are not always sure if your calculation is accurate. Sometimes you might give your operators excess rate, which subsequently increases product costing. (Indirect labor costs and overhead costs are calculated based on direct labor cost). Your estimation might also be lower than actual cost.
Cost negotiation with buyers
Now buyers ask for open costing for orders. Buyers are aware about the minimum labor wages in your region. And they can derive direct labor cost for a product. You might not have technical team but they have to analyze product construction and estimating standard time. In such environment, you will find difficulty adding much margin in various cost categories.
Other Benefits of SAM Based Costing
There are many other benefits of introducing SAM based piece rate. When you plan to implement SAM based costing, you are actually setting up Industrial Engineering Cell in your factory. An IE will also perform other tasks of IE department rather than just said objective. As a result you can take advantages of IE department in many ways. Some of those are
- You can set standard time for products and operations
- It would help you in planning manpower and machines in advance
- You can measure factory performance and individual operator performance accurately, benchmark your performance level
- IE tools and methods can be used for productivity and quality improvement
- Having product SAM, you can estimate production capacity, do better line planning, and production planning
Read this post to learn more about IE’s activities.
The next important thing one need to take action on following areas while planning to implement SAM based piece rate setting.
- Understanding Industrial Engineering concepts, and use of Standard Minute in apparel production
- Hire experienced Industrial Engineer and set Industrial Engineering department and IE team.
- Set Key Responsibility Areas for the IEs
- Develop SOP for IE activities
- Establish database for operation SAM by measuring time study method or you can consider purchasing MTS based SAM calculating software.
- Set labor cost per standard minute