I have recently visited a factory that has implemented preperformance-based incentive scheme for their sewing operators (salaried operators), line supervisors, quality checkers and floor in-charges. Within a time span of six months company just doubled their monthly production with same manpower and other resources.
In this case study I have discussed points -
- how the factory did it?
- what all benefits factory is experiencing by implementing incentive system?
Company profile:The Company is situated in National Capital Region (NCR) of India. Under product profile company makes ladies top with a lot of machine embroidery as well as hand embroidery work. Most of their sewing operators are migrants from other parts of the country. And most of them live far away from the factory location. The company provides a shuttle bus for the commuting to work. The company implemented incentive in a floor of 350 sewing machines.
Benefits Factory Gained after Implementation of Performance Based Incentive Scheme
- Operator efficiency level increased
- Number of operators reached the target efficiency and earned lump sum amount weekly.
- Line efficiency improved more than 50%
- Monthly Production improved by two fold in first six months of implementation
- Operators become more disciplined regarding spending quality time on producing pieces
- Operators agreed to do multiple jobs/ operations (which was a difficult task to convince an operator work on more than one operation throughout the day)
- Monthly capacity of the factory increased proportionate to the efficiency increase
- Considerable reduction in absenteeism percentage
- Above all factory saves lot of money after the successful implementation of incentive scheme.
How They did it?Factory designed a simple incentive system to motivate their sewing operators. Under the incentive scheme, each operator can earn incentive irrespective of line’s output once they meet following criteria
- An operator hits target efficiency and
- An operator produces more than the target.
Operator incentive scheme is also linked with attendance of the operator. Like, if an operator works less than 5 days in a week will get no efficiency bonus.
The incentive payment is made weekly basis.
To provide the correct amount of incentive, operator’s individual production is captured and daily operator wise efficiency is calculated by engineers. It was a very difficult task to measure the correct efficiency of each individual (operators) by manual data capturing.
This factory installed a new technology, RFID based shop floor production monitoring and control system that helped engineer to measure real time performance of operators. This real time production tracking system also provides a display device to each workstation on which operators can checks their day's production and total efficiency. Operator can even see their bonus amount earned on the display device. Even this software itself calculates operator’s weekly incentive earnings based on the above criteria.