Strategy to Reduce Wastage in a Garment Export House

June 16, 2018 | Author: goel_anshipu87 | Category: Demand, Profit (Accounting), Exports, Prices, Clothing



Strategy To Reduce Wastage In A Garment Export House ³To minimise the loss incurred in a Garment export house dueto the wastage and surplus production pieces. Executive Summary: Ready made garments, made of cotton and other natural fibers ,constitutes a major portion of the total Indian Exports. In fact , garments manufactured in India are in good demand in Europe and other developed nations of the world. This is an Organization based project where I have tried to identify the major problem areas in a readymade garments Export house and suggest the organization appropriate methods and means to find a suitable solution to these problems in order to minimize their loss and gain maximum Cost benefit. The aim of this project is to reduce the Fabric and Material wastages along with the loss incurred by the Company due to the surplus production made to complete the total number of pieces in the µExport ± order¶, in case there is some major defect in the final lot of the finished garment, which has to be replaced with the extra pieces produced to meet such contingencies. The Company , Ms. Front Page Exports is engaged in exporting readymade garments to Europe. It has an annual turnover of around Rs.30 million .The Company has its in-house facilities for fabric Cutting, Dyeing, Washing & Pressing and other finishing activities. Fabrication or stitching of the Garments is done outside the Company at various fabrication units , where the garments are stitched at Piece-meal basis. However, minor alterations are made at the export house either by the fabricator¶s men or by the tailors hired by the company for Sampling and other in-house stitching jobs. Declaration : This project is wholly my own work except where other sources have been given specific credit. The Proposal for the Project : The main aim is : To minimize the loss in a garment export house by implementing the ³optimal utilization of the Wastage and profitable disposal of the surplus production policy´, whereby - Identify the best practice in the same industry. Other areas of wastage and overheads are the rejections due to the dyeing and printing defects. 2.If there are not many rejections in the final product . Evaluate the cost of alternatives. 8. Optimize resources to achieve efficient and profitable results. 4. after the shipment has been sent. 3. 5. The identification of the problem : The major problem in this Export house is the overhead incurred during the manufacturing process. Extract revenue from appropriate disposal of surplus production to gain maximum cost benefit. is enormous. . Reduce wastage. 3. Finding other profitable channels to sell and clear the surplus production to minimize the loss. these excess pieces lie as waste and idle stock in the store room to either rot or be used by the workers for their personal use and other odd purposes .This surplus production is generally 5% of the total number of pieces in each style . 4. Wastage in the form of small usable fabric cuttings can be identified and optimally utilized. Utilize the waste material and surplus production to generate additional revenue for the organization by using it in other profitable businesses. of which the wastage in the form of small fabric strips cut during the cutting phase . 6. 2. Reduce overheads. Extract maximum profits.1. Investigate various alternatives to extract maximum revenue from selling the surplus pieces. Design a cost benefit plan. Action Plan : 1. Investigate the vital industry standards and procedures. The main objectives are to: 1. Formulate the best processes to utilize the wastes. 4. 5. 7. Another big problem faced by this organization is of optimally selling the surplus pieces produced to cover the rejections which are incurred after checking the finished product . Analyze the prevailing thinking procedures. Visit the factory premises to determine the existing procedures and amount of wastage. 2. Formulating and suggesting alternate ways to utilize the material wastes and reduce the overheads. 3. These surplus pieces have either been used by the company workers or are used by the company¶s owner for giving gifts or other personal uses. per Kg.and also some large pieces of two to five meters are also disposed off on the similar basis .e. The surplus pieces are also dumped and lie idle to be eaten by the insects and rot. which is produced during the cutting of the fabric and is generally unavoidable. the company has taken no action to avert these problems and have continued to lose on its profits. Current Scenario in the Company : As mentioned earlier the company is incurring a heavy loss due to the wastage and dumping of the surplus pieces. To summarize . Identification of the best practice in a similar industry : The best practice in the similar industry has been identified to be followed by another big Export house namely.The small pieces of cloth approximately less than a meter are wastes for the company . Selling of the small strips to the Scrap dealers results in almost a complete loss for the company on the fabric which costs much more than what is received for it(less than one tenth of actual cost per meter). And although the company is aware of this unnecessary overhead but so far nothing has been done in this regard. ³Ace Fashions´. Thus they not only occupy the valuable space but are also a net loss for the company. either the small pieces mostly up to one meter are dumped in a corner to rot and unnecessarily occupy space or are sold to the Scrap vendors (Kabadis) on weighing (i. which can be controlled and reduced when subjected to other beneficial and profitable alternatives.) basis. These small pieces are nothing but a dump and a visible overhead for the company. it is observed that in spite of being aware of this unnecessary overheads and loss . due to their small meter defects. What the company has been doing till today is that. All these wastages sum up to be a large amount of loss for the company . Rs. This company has formulated other well designed plans to convert this loss due to the wastage . These pieces are absolutely fine or have some very ± very minor defects. as they are not visible and therefore can be of any material or design. The company is dispatching packed shipments of these surplus production pieces to the countries in the Middle East. 8. Research Methodology : This Organisation based project has been prepared by a progressive stepwise information collection according to the methods mentioned below: Identification of the problem and research objectives: . what Ace Fashion has been doing to minimize their overheads and achieve maximum cost benefit. They have undertaken the following activities to reduce these overheads and convert them into additional profits for the company : 1. The company makes beautiful Ruffles or hair bands from these cloth cuttings and sells them in the market to earn revenue from the wastage. The company is selling its surplus production in the domestic market to several retail vendors. 5. 6. button plackets. These small strips of cloth are used for piping.. 2. The company hereby under study should also pursue similar activities . large variety products for their retail outlets. These cutting wastes from the printed fabrics are creatively used as appliqué work on plain dresses to make them look more attractive and make optimum utilization of the wastage. 3. Africa and other small nations like Sri Lanka . Bangladesh etc. They also manufacture colorful children garments by creatively using these pieces for patch work. Nepal . Indonesia . This not only saves the cost of fresh material but also optimally utilizes the cutting waste. facing of necklines and armholes. 4. large variety and cost effective products .and surplus production into saleable commodities to yield good profits for the company. who are interested in such less quantity . who are willing to buy in small quantity. 7. The company manufactures matching scarves from the fabric cuttings of 2 ± 5 meters. These small fabric cuttings are sold to Bed sheets and Pillow cover manufacturers who design and make beautiful Bed sheets from their patchwork. IV. with respect to the company. Research Methods: This refers to the ways in which the information has been collected. I.The Observation .to determine the loss incurred due to the surplus production and then find suitable ways to convert this loss into profits by selling them with good margins.The first step was to identify and define the problem in clear terms . the fabric suppliers . fabricators to whom the stitching job is outsourced . . Surveys and Interviews . Reference books and the reports printed by Apparel Export Promotion Council (AEPC). The technique used here was of Observation . Data Sources : Most of the data has been collected from the primary sources like the proprietor of the company. Surveys and Interviews revealed the areas and processes where the waste is generated and then what is being done with this waste and surplus production .Market survey was conducted to find the market potential of the Export surplus production determine the amount of wastage in the company and find appropriate methods to optimally utilize this wastage. various operational managers . Formulating the Research plan : There is a need to design a suitable plan to proceed with the information collection phase as it is considered to be one of the most important factor for an efficient and effective progression of the entire project. Therefore the problem as also mentioned earlier is : . this could also be referred to as an unstructured questionnaire but most of the information was collected on the basis of self ±monitoring and a personal one to one basis of interview. III.e. While some of the secondary sources for the information have been the Internet . Development of a Sampling Plan : The µSampling Unit¶ was basically within the company premises. II. neither too broad nor too wide .. retail vendors of the export surplus in the domestic market and managers in other Export houses. Research instrument : Most of the information has been extracted by Informal Interviews or questions asked from the employees and the owner of the company. employees working in the company . i. The Sampling size consisted of 25-30 employees including the managers and the owner of the company who were informally interviewed with respect to the problem in focus. the merchandiser of the company ± who deals with the company buyers . . it is very easy to sell the surplus production pieces to the retail vendors of export surplus in the domestic market at good profit margins . thus reducing the fixed cost incurred by the company during the period of less export orders. Proposed Solution and recommendations for the company : As per the objectives of the project. (c) selling the waste to Bed sheet and pillow cover manufacturers at appropriate prices . high fashion children clothes for the domestic market . button plackets etc. when there are not many export orders the company can manufacture Colorful . The company can follow the practices undertaken by the company considered as the one implementing the best practices in the industry.V. to save on the cost of fresh material . a number of alternative solutions are hereby being proposed to tackle the problem and optimally utilize the waste material and dispose the surplus pieces to increase the revenues. Whose methods have already been mentioned earlier in the report (like (a) utilizing the waste fabric for necklines . using large waste pieces to earn additional revenues by utilizing the waste material and the idle workforce and machinery . more variety and low cost packed shipments of surplus production pieces to small buyers and other developing countries . (b) dispatching less quantity . Analyses of the information : The information has been analyzed considering the best practice in the industry as the benchmark and the methods followed by them to avert these problems which are not undertaken by the company in focus.) Since the fashion trends in India are highly influenced by the trends prevailing in the developed western countries of Europe . (d) utilizing the waste to manufacture children and other garments with appliqué work etc. These waste materials can also be utilized to create new designs by using these patches in the plain dresses. The company can utilize this waste to make matching scarves and ruffles to tie hair. And the other parts are analyzed and presented along with the recommendations to achieve maximum cost benefit. which adds value to the garment it manufactures and yield additional profits for the company. armholes . Present the findings along with the solution to the problem: The findings have been presented in the form of a Flow chart depicting the origin and the disposal of the waste. During off season . . then these can be sold to the photo frame manufacturers at good prices to make the border of the photo frame . Cost benefit Analysis : With reference to Annexure ii . machinery and materials by using them to manufacture Ruffles . the company can also advertise and flash its offers on the internet or in the newspapers to invite the buyers for selling these pieces with good margins.These waste fabric cuttings can be sold at good prices to µDurri manufacturers¶ (Rugs makers) who use these small colorful pieces (µChindi¶s¶) to manufacture beautiful rugs and wall hangings which are then either exported as handicraft items or sold in the domestic market at very good profit margins.e.. to sell the surplus production pieces . The waste material can also be sold to the toy manufacturers who can either use these for filling in stuffed toys or to cover them with beautiful & colorful patchwork. The company hired tailors can be allotted the work of making alterations to rectify small defects due to which the pieces got rejected and were not sent. Scarves and other such accessories which utilizes the waste . Debit note (i. The overheads would be effectively and efficiently covered. This would result in the following benefits for the company : 1. These tailors need not be paid overtime for the alterations they make to eliminate the defects of the garments but instead utilize them when the Sampling is not being done and they are free to do this work. children clothes . Similar practice should be followed . Besides the alternatives followed by the Export house identified as to be following the best practices in the industry. If the fabric cuttings are of some glossy material like Velvet . . deduction from their amount of remuneration) should be issued to the fabricators who did not manufacture the garments properly and thus due to their mistakes and negligence these rejected pieces could not be sent and the company had to bear their cost . during the times when the company has less Export orders. This loss can be avoided if the proposed solution is adopted by the company. 2 lakhs . we can observe that the total waste sum up to a big amount of above Rs. as mentioned in the point above to achieve optimum utilization of the manpower . they will get everything at one place. This would provide more satisfaction to the buyers as they need not go to others for matching accessories . Place and Promotion. 2. 6. it has a few disadvantages also which are mentioned below : 1. in order to achieve maximum cost benefit. This would not only result in an optimum utilization of the manpower and machinery but would also improve the moral and motivation level of the employees by assuring them of their job security. 60. 8. This will result in a higher consumption of power and materials. 4. by optimally using and retaining them during idle period of less orders . It would also enable the workers to get clothes for their children at very cheap rates .000 will be earned by the company. its Price. Instead of a loss an extra profit of Rs. Sometimes the buyers are more interested in buying more variety and less quantity of garments . However . 3. Selling of the products in the domestic market requires a thorough analysis relevant to the Product. This would involve more wear and tear of the machinery.000 ± 70. which is another advantage for them. This would enable the company to improve its Goodwill . these surplus production pieces would enable the company to fulfill this requirement of them and would be beneficial for both the parties. 3. It will occupy some of the valuable space within factory premises to store the waste material and surplus production pieces. . 5. The above mentioned advantages results in satisfied workers and Buyers which means efficient and better performance along with more business yielding higher profits for the company.2. Recommendation to Implement the proposed solution : A supervisor should be appointed to monitor the process of production to achieve maximum benefit and avoid any pilferage or loss of material . 7. a correct planning of resources allow limiting service shortage and achieving higher profitability. For Example: A hospital does its resource planning (i.Additional material required to convert waste into profitably saleable items . A project or a process is said to be cost effective if it achieves the stated objectives at minimum cost. beds. This procedure is also said to be of a µdependent demand¶. Review Literature: Optimization of Resources to maximize Revenue : An efficient implementation of MRP(Material Requirement Planning) should be followed . The allocation of the resources is adapted until the consumption date in order to match the prevailing demand. The organizations try to determine the value of the stock . These are changing continuously. periodically and take appropriate measures to reduce the level of stock and increase the stock turnover. For example an ISP that has limited capacity due to its dependence on other ISP¶s (Internet .e. That is possible if the following activities are undertaken : Planning Resources : When resources are flexible and the demand is highly variable . surgeons and other facilities) according to the anticipated demand for each different type of clinical intervention. An effort should be made to reduce the stock level by eliminating the valueless material to reduce the holding cost and administrative and clerical effort . Pricing can then be more accurately adapted according to the clients actual preferences. require proper handling and stock control so that they are optimally utilized and do not result in generating more waste and idle stock. In case of a shortage in supply there is a need to estimate the unconstrained demand that would have been registered incase of unlimited capacity. operating theatre equipments. where a proper control is exercised over the purchasing of the materials according to the orders received for the finished goods. and increase the availability of space. Dynamic Forecasting: Predictions of demand are made a year in advance for each product based on the seasonal demand. day of the week and market trends. Cost Effectiveness refers to the cost of achieving stated objectives. 10 -15 per Kg. of pieces in a particular style.That is. The cost of making a Ruffle can be Rs.50.days and time to compensate for imbalances between demand and supply. price sensitivity and buying patterns. rejected pieces .160 ± 170. 5 ± 6 in the market. labor and energy costs etc. The waste pieces used instead of fresh cloth Piping and necklines will save another Rs. which will amount to Rs. The surplus production pieces sold in the domestic market to the retail vendors would again yield a margin of Rs. 5-8 per piece. If the proposals are evaluated in terms of cost then : The cost of patch work will not cost more than Rs.000 in the form of cutting wastage . The order sheets are attached as Annexure II which shows the consumption per piece and the cost for each style. 10 ± 30 . The total wastage per order amounts to be around Rs.00. wasted meterage . but if sold to a Toy maker or a handicraft manufacturer would easily yield Rs. defines a differentiated pricing by seasons . Designing offers to generate new demand: It has become important to design a large and coherent set of offers since the mass market has been replaced by the micro markets where the customers have different specific product requirements. The waste cloth strips if sold to the scarp dealer would just earn Rs. Surplus production pieces . a dress that costs Rs.7000 ± 9000 per order. 10 but will increase the value of a plain dress or a scarf by Rs. two Buyer order sheets have been taken and the actual amount of wastage and the cost have been determined on their basis.7 Kg to the maximum .5 per piece which can be sold easily for Rs. 2. Expected implications of the proposed solution : For the cost benefit analysis . Large pieces used for manufacturing children clothes can also yield a good margin of Rs. Thus a single offer at the same price does not allow to optimize the revenues.140 could be sold for Rs.Service Provider) gateway.20 ± . New offers are designed by determining demand patterns and efficient utilization of resources . The wastage is taken to be 10% of the average and the surplus production is done @ 5% of the total no. Production and Operations management by Muhlemann et al.) 502 Double Top Ptd. in mts. 1500 0. Annexure I Bibliography : The information was extracted from the following sources : 1. www.Wastage pc.50 ± 60. GGT. Avg. Printed reports of AEPC (Apparel Export Promotion Council) Annexure II Order Sheet of Buyer 1 Style Pcs. Dyed GGT. The Scarves if made out of bigger pieces of fabric cuttings can be sold for www. Total Consumption Rate of 2. Total (Rs.30. Internet : www. All these processes would not only cover the overheads and loss but also earn a profit of Rs. Fabric Qty.60000 ± 70000 for the company.inzuzo.85 . 3.aepc. Desc. ) 701 Double Dress Ptd.Rs.100 5% of total pcs. Pcs. Fabric Qty. 1950 mts.60 1275 mts.20 Rs. Desc. .150 Order Sheet of Buyer 2 Style no. Avg. . . Total Consumption Rate of fabricmt. 500mts.37 Rs.Wastage pc. Total (Rs.85 (cost per piece) 6375 507 Surplus Prod.75 5% of total pcs.25 1500 mts.1.Rs. 900 mts Rs.150pc. (cost per piece) 15000 Total 2.30 45000 502 Surplus Prod. Rs.32 Rs. .30 0. Poplin 2000 0. Dyed GGT.01. GGT.28 134775 507 Dress Cotton 60x40 Ptd.75 0. in mts. . No.425 Annexure III: Project¶s Time Schedule S.28 1.45 1.90.L 15 O Typing the report 5 N 16 P Printing the report 1 O 17 Q Binding the report 2 P .200 (cost per piece) 15.37 Rs.75. .15 1. Rs.000 Total 1. of pcs.G 9 I Analysis of the data 7 H 10 J Designing the proposed solution 12 I 11 K Cost benefit analysis 3 J 12 L Proposing Recommendations for the company J K 13 M Identifying the implications of the proposed solution 15 K 14 N Drafting the report 7 M.Surplus Prod. 1500mts.32 Rs.00 1725mts. 2175mts.75 5% of total No.T.V 1500 1. . Activity Type of Activity Duration Dependency 1 A Visit the company 1 2 B Identify the problem 5 A 3 C Review the current scenario in the organization 2 B 4 D Determine aimsObjectives 1 C 5 E Interviewing the sampling Unit members 1 D 6 F Review Literature 5 E 7 G Consult other relevant authorities and conduct informal interviews of the employees 10 F 8 H Identify the best practice in the industry 5 E.Rs.425 .
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