TPK/AppOps/CS 101/

CASE STUDY

A Jeans factory of 500 machines produces basic 5 pocket jeans and employs 1300 people. The factory works for
an average of 26 days/month in an 8hr/day shift and has workers working in assembly line system on non-
programmable sewing machines having frequent breakdowns. The level of automation in the factory can be
called as “low to mid”. The average production per day stands at 5,800 pieces. The jeans being manufactured
are basic and the styles are similar in construction, with an average SAM of 15 minutes. The sewing room has
100 direct helpers. The average order quantity is in the range of 40,000 – 50,000 pieces. The operations of the
factory are managed by a production team headed by a GM.

The factory has had a rather long relationship with the buyer, who has been more than willing to give in more
orders to the factory, but the factory, although catering to the same product profile over the years, has not
been able increase its production. As such it has been unable to accept more orders from the buyers. The
factory had been following a policy of not accepting more than it is capable of doing in order to avoid any air
shipments. This policy was adopted when the costs were not as high as they are now, the buyer offered better
prices and the company was happy making profits in excess of Rs.5 Mn.

This equation has of course changed over the years and the profit margins have gone down drastically. The
company realizes that while the costs have been constantly going up, the buyer prices have been declining
constantly. While the average factory cost currently stood at Rs. 11 Mn per month, the average CM they get
from the buyer now stands at USD 1.5 (1USD=45INR). With cost pressures increasing constantly, the company
now wants to make a shift in its approach and review the business strategy to increase the profits of the
company. The company knows that the only way to increase profits is to bring the Cost per SAM down, which
means that either the production should be increased by having better efficiency or costs’ reduced, or a
combination of both. An IE team of 4 persons (1 manager + 3 executives) is hired immediately to start the
process of monitoring efficiencies and help reduce costs.

A meeting in this regard is called by the GM and one of the suggestions made is that the factory should change
its product profile and start making shirts. The new products being mentioned here will have small order
quantities in the range of 5,000 – 7,000 with SAMs averaging 23 minutes, and CMs offered at 2.5 USD. The IE
manager having reviewed the current scenario, points out that while the CMs of the small orders will be better,
they can touch an average efficiency of 50% with these orders. The current orders (Jeans), by virtue of being
long can touch average efficiencies to the tune of 60% and above. The GM, although knowing that the new
product would bring challenges, seems excited with the prospects of getting higher CMs and asks one of the
Managers to answers some queries before making the final decision. Supposing you are the Manager, answer
the following:-

1. What is the efficiency at which the company is currently performing?

2. What is the current Cost/SAM?
3. Is the company making profits or is incurring losses in the current scenario.
4. Does the policy of not accepting orders fearing over booking make sense?
5. At current Efficiency, how much would the cost translate to, if the Cost/SAM comes down to Rs 3?
6. How can the costs be reduced?
7. Was the decision of hiring the IE team right, considering that this would increase the costs further? If
yes why.
8. Should the company change the product profile or continue with the current one. Calculate and
compare.
9. What can the IE team do to increase the Efficiencies?
10. What production challenges could the new product profile bring in?
 TPK/AppOps/CS 101/
1. factory efficiency in the current scenario stands at 15%.

2. Considering each worker daily wage at Rs.333

Then, 1200 operators * Rs 333 = 399600
Units produced 5800* 15 SAM = 87000
Then cost/sam will be Rs.4.59

3. Company is in loss at the current scenario.

4. No, company should definitely go ahead with procuring more orders.

5. The cost would translate to Rs2,61,000 if cost/sam comes down to Rs3.

6. Conducting motion study and correcting faulty motions

Hourly operator capacity checks
Conduct R&D for the garment
Use best possible line layout

7. IE team would be able to present clear facts and data about the capacity of the line, downtime of the
line and would also help to improve the productivity. They will also work on automation of the factory
and process improvisation on the floor.

8. Factory should change the plan to shift to shirt production as they can achieve higher efficiency and
less cost/sam.

9. IE team can help to improve productivity with the help of method study, motion study and time study
With the help of GSD data the IE team can help to reduce the operation wise sam.
They will introduce new folders and attachments that can help to simplify operations.
They will follow line plan closely and reduce change over times and reduce loss of time on floor.

10. New product line would need new set skills for production.
Garment construction will be different than jeans
New folders and jig sets will be required for automation that we can use for collar and cuff operations.