How to Reduce CPM in a Factory?

Here, CPM stands for Cost per Minute. I am posting this article to answer this question asked by an OCS reader on Ask OCS.

To be more accurate, we can say CPM is the cost incurred per standard minute produced by a production line. The question is how you can reduce cost per minute in a garment factory. To understand the CPM reduction method, first, you need to know how CPM is calculated.

The formula for calculating CPM is

CPM = (Total amount paid to the operators /Total standard minutes produced by the employees)

For a day total salary of the direct workers will remain the same but produced SAM may vary depending on the number of garments produced and the product SAM. Considering the daily salary amount is fixed for a production line. To reduce the cost per minute, the factory needs to increase the produce minutes.

Related: How to calculate cost per minute of a sewing line?

You can increase produced minutes by increasing the line efficiency. The line efficiency increased when you produced more garments).

Your main goal would be increasing line efficiency which means increasing the produced SAM.

I have written writing a few articles on how to increase line efficiency.
You can refer to those articles for guides and implement those steps. In a recent post, I've written an answer to another question - how to rebuild production methods in an old garment factory and improve line efficiency? You can follow the methods to produce more SAM and you can reduce cost per minute. 

Here is an example that shows how the cost per minute reduced when line efficiency is increased.

Let's say, A garment factory XYZ, 50 workers produced 800 garments in a day. The standard minute of the garment is 20 minutes. The total salary paid to the direct labors 17,500 INR (assuming daily wages Rs 350 per day). In this case, cost per minute is

= (17,500/(800x20))
= 1.094

The calculated line efficiency is 66.67%.

Now let’s say, line efficiency is increased to 75%. Now, total production and produced minutes will be increased.  As the production quantity increases the cost per garment and cost per minute will be reduced. 
= (17,500/(900x20))

In the above example, you can see the cost per minute reduced from 1.09 to 0.972 by increasing line efficiency from 66.67% to 75%.

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