On the different day, I met one Head Operations in a garment factory. On that day he used to be solely one week ancient to that company. We had been discussing problems confronted by using small garment factories like a trouble in placing Piece Rate for new styles. He used to be asking me about placing piece price for stitching operators based totally on operation SAM. And our dialogue went on.
It was once a knits factory. Garments are made through a team of operators. Progressive Bundle System (PBS) does not exist there. Operators are paid in the piece-rate system. Piece prices are determined by using previous work ride of the manager, market rate, and mutual negotiation of manufacturing unit and operators. The manufacturing facility is searching for a answer to this trouble brought about due to the piece-rate system. As a new operations head, he likes to convey suitable structures in the factory.
He desires to decide the piece price primarily based on operation SAM. But he is aware of little about measuring garment SAM. He was thinking if I comprehend about such things.
Here SAM capability Standard Minute. As per US Department of Labor "A piece fee fixes a wage charge on every executed unit of work". SAM primarily based piece price is a technique of deriving piece fee of operations based totally on operation SAM and hourly operator rate. In layman language, putting piece fee (making price of every operation) based totally on popular time of stitching operation. In different phrases operators would be paid primarily based on wellknown minutes produced by means of them. SAM based totally costing can be used in each environments – for salaried as nicely as piece charge employees.
By the way I received an fascinating subject matter for discussion. I am making ready a draft for similarly discussion. This explains how to introduce SAM Based costing, its benefits, and prolonged advantages if manufacturing facility introduces SAM based totally costing for stitching operators. I am sharing an introduction here.
SAM Based Piece Rate:
Piece Rate negotiation with stitching operators:
In piece fee environment, piece-rate negotiation of operations goes on for two to three days after loading of a style. Until the fee is constant for every operation, operators work at a slower pace than their real capability. The motive is to exhibit they cannot earn tons cash if the piece price is now not set higher. As a result, most of the time the manufacturing facility spends extra cash on operators payroll. This is the problem.
The answer for this trouble is deciding the garment piece price based totally on wellknown time.
Measure the popular time of operations, categorize operations based totally on situation stage and laptop kind
Set per minute charge for every class thinking about line effectivity factor.
If operators disagree with piece rate, explain, and exhibit them how lots time to be taken to whole their operations. And how many portions they can produce in a day if they work in full effort.
While finalizing piece rate, reflect on consideration on order quantity, fashion run and product concern level.
By this method, you can set Piece Rate on the first day of manufacturing start. And can keep away from preliminary manufacturing loss. (Note: Factory wishes to obtain trip on IE matters to enforce this approach effectively) .
Accuracy in product costing for direct labour fee part
Direct labour price is a very necessary phase of product costing as a lot of labours are concerned in making a piece of garment. When you calculate piece fee based totally on your previous experience, you are now not usually certain if your calculation is accurate. Sometimes you may supply your operators extra rate, which consequently will increase product costing. (Indirect labour charges and overhead charges are calculated primarily based on direct labour cost). Your estimation may additionally be decrease than the true cost.
This will motive excessive product costing or low product costing. If you fee too excessive you may lose the order. On the different hand if your fee is too low, you will earn much less through processing the order. Secondly, you may want to pay extra to your people than your estimation.
Solution: You want to work smartly. While making product value sheet use correct direct labor fee determine derived from product SAM. Thus you will make greater correct product costing.
Cost negotiation with buyers
Now shoppers ask for open costing for orders. Buyers are conscious about the minimal labor wages in your region. And they can derive direct labor value for a product. You may no longer have technical crew however they have to analyze product building and estimating popular time. In such environment, you will discover challenge including tons margin in a number of fee categories.
If you be aware of preferred time of a product, manufacturing facility performance (efficiency) and minimal labor wages you can without problems derive direct labor fee of a product (without having Industrial Engineer or work learn about crew you would now not get figures for first two). In case customer pushes you too a whole lot for lowering labor cost, you can inform them confidently what is viable and what is not. This is no longer solely used in making ready product charge for customers however it helps you to apprehend if you are making earnings from the order in advance.
Benefits of SAM Based Costing
There are many different advantages of introducing SAM based totally piece rate. When you graph to put in force SAM based totally costing, you are definitely putting up Industrial Engineering Cell in your factory. An IE will additionally operate different duties of IE branch alternatively than simply stated objective. As a end result you can take blessings of IE branch in many ways. Some of these are
You can set fashionable time for merchandise and operations
It would assist you in planning manpower and machines in boost
You can measure manufacturing facility overall performance and man or woman operator overall performance accurately, benchmark your overall performance level
IE equipment and techniques can be used for productiveness and first-class enchancment
Having product SAM, you can estimate manufacturing capacity, do higher line planning, and manufacturing planning .
Action Plan
The subsequent vital aspect one want to take motion on following areas whilst planning to put in force SAM primarily based piece fee setting.
Understanding Industrial Engineering concepts, and use of Standard Minute in garb production
Hire skilled Industrial Engineer and set Industrial Engineering branch and IE team.
Set Key Responsibility Areas for the IEs
Develop SOP for IE things to do
Establish database for operation SAM through measuring time learn about approach or you can reflect onconsideration on buying MTS primarily based SAM calculating software.
Set labour price per fashionable minute
The thinking is now not new however even factories that have installed the Industrial Engineering branch do no longer exercise SAM primarily based piece rate. If like this concept you can introduce this method in your factory.
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