Journal of Scientific Research and Reviews Vol. 1(1), pp. 15 - 19, March 2012 Available online at http://www.wudpeckerresearchjournals.

org/JSRR 2012 Wudpecker Research Journals

Full Length Research Paper

Measurement of garment companies performance through key performance indicators

E. Shehi, G. Guxho, S. Spahija
Textile and Fashion Department, Tirana, Albania.
Accepted 10 March 2012

Key Performance Indicators are used by an organization to evaluate its success of the activity in which it is engaged. Key Performance Indicators are quantifiable measurements, agreed to beforehand, that reflect the critical success factors of an organization. They will differ depending on the organization. Whatever Key Performance Indicators are selected, they must reflect the organization's goals, they must be key to its success, and they must be quantifiable (measurable). Key Performance Indicators usually are long-term considerations. The definition of what they are and how they are measured do not change often. The goals for a particular Key Performance Indicator may change as the organization's goals change, or as it gets closer to achieving a goal. The garment industry remains one of the most important sectors in Albania referring to the share in the exports and the largest number of workforce. In this paper we present and discuss the way of establishing the Key Performance Indicators for measuring the company performance. The KPIs are being tested in several companies operating in this sector and actually implemented in 25 companies. Key words: Key Performance Indicators, performance measurement, productivity.

INTRODUCTION This paper is part of a broader project whose final goal is advancing sustained, broad-based economic growth in Albania. It helps apparel/garment and footwear companies become more competitive, increase sales and create additional jobs by expanding trade and investment, increasing enterprise productivity and improving countrys workforce. This paper will introduce the methodology used for the companies for measuring productivity using sixteen key performance indicators (KPIs). Actually more than 25 companies have implemented this methodology. Performance measurement is the process that the company sets the parameters for reaching the required goals with. This process often requires the collection and use of statistical data to estimate the progress towards the goals of one organization.
METHODOLOGY For the purpose of this paper, data on Key Performance Indicators (KPIs) for one company is collected, evaluated and suggestions for improvement are presented. A Performance Indicator or Key Performance Indicator (KPI) is an industry jargon term for a type of Measure of Performance. KPIs are commonly used by an organization to evaluate its success or the success of a particular activity in which it is engaged. Sometimes success is defined in terms of making progress toward strategic goals, but often, success is simply the repeated achievement of some level of operational goal (zero defects, 10/10 customer satisfaction etc.). Accordingly, choosing the right KPIs is reliant upon having a good understanding of what is important to the organization. The KPIs are an element of Information Management Systems of one organization that need to be calculated and measured on a weekly basis. The KPIs give the results of the company performance and ensure indicators where the performance should be improved in the future. Some organizations prefer that this information register on a monthly basis instead of weekly basis but this is a long period because for the KPIs the action needs to be taken very quickly so that the impact is high. Every company/organization that collects data applies three rules: The registered data only are to be collected. No need to register the data if no action is to be undertaken later. No need to analyze the data if no action will be undertaken.

Performance measurement

*Corresponding tekstilmoda.org.

author.

E-mail:

ermira.shehi@upt-

Proces through which company sets the parameters within which

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all the programs, investments and profits should achieve the desired result. Use of statistical data to define the progress path through the specified goals. Sometimes success is defined in terms of making progress toward strategic goals [2], but often, success is simply the repeated achievement of some level of operational goal (zero defects, 10/10 customer satisfaction etc.). Because of the need to develop a good understanding of what is important, performance indicator selection is often closely associated with the use of various techniques to assess the present state of the business, and its key activities. These assessments often lead to the identification of potential improvements; and as a consequence, performance indicators are routinely associated with 'performance improvement' initiatives. The KPIs reports are considered an important action to get the required and desired improvements on: Productivity; Operators efficiency Company structure; Links and relations between administration and operators. Human resources; Absenteeism level and working shifts. Efficient usage of resources; Usage of the fabric and accessories Costs; Comparison of the standard cost per hour and standard cost per hours obtained by the client. Quality; Level of defects per 100 units. The reasons why the company should measure its performance includes: To estimate how well the company performs. To show how the managers should control the operators work. To plan the budget . To motivate. To promote. To learn. To improve The main principles of performance measurement includes; The whole work should be measured. The non measured work can not be managed because there is no information to evaluate its value. Non measured work should be kept in minimal level or avoided. Performance evaluation in terms of results is related to the work transformation from managers into operational one. Performance reporting and variations analyses should be regularly registered. Regular reporting ensures that correcting actions are undertaken in proper time. Correcting action is important for an efficient managerial control The most important required data is; The time for completing the work operation, time for picking up the material, sewing, etc. Units on which the operation is dependent: type of the raw material, type of stitches, length of stitch etc. Type and number of parts to be assembled in a garment, average number of pieces in the bundle. Information on working condition: general data, type of machine, velocity of machine.

lines depending on orders and number of styles. The product is knitted sportswear for some well known brand names in Europe. The KPIs are collected, measured and analyzed for the period November 2010 to August 2011 and this is the very first attempt to measure the company performance through Key Performance Indicators. Terminology explanation Total effective minutes from direct operators/60 = effective hour The correct effective minutes are needed for ensuring real figures. If the values of the correct effective minutes are too high, then the total number of Effective hours worked by the operators would be too high and the efficiency will not reflect the real performance level. If the values of effective minutes are too low the reported figures are not accurate. The value of correct effective minutes is measured according the international Standards. This indicator is used for the efficiency of the direct operators as shown in Table 1 Total number of working hours including the extra work hours from direct operators This indicator is used for measuring the efficiency of direct operators. Table 2 This is used for calculating the total produced effective hours in addition of the sewing operators It includes operators of the cutting sector, cleaning operators etc. Table 3 Efficiency of direct operators Its accuracy depends on the value of effective minutes. Number of total produced effective hours / Number of total hours including extra time x 100 (%) Effective use of direct operators (Total working hours including extra time Effective time without work)/Total hours including extra time (%) The effective time without work includes minutes/hours when the direct operators are not yielding effective minutes. This indicator is important for calculation of the amount of time that one direct operator spends with operations while is in production line. In the case of the sewing operator this includes: time when the operator is

RESULTS The main part of this paper has been focused in collecting, measuring and analyzing the key performance indicators in one company producing sportswear. The company is located in Durres, with 17 years of experience in facon sector, thus are exporting the finished products with the main destination: the Italian clients. The work is organized in several technological

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Figure 1. Standard hours produced

Figure 3. Time loss

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Figure 2. Working hours including extra work Figure 4. Absenteeism level

waiting to start work, machine defects etc. check the absenteeism level. Number of indirect operators Work leave Operators not yielding effective minutes are called indirect operators. Total number of the operators direct operators The above formula is used for calculation of the direct and indirect operators ratio. From the international standards this ratio should not exceed 1:0.5. Absenteeism Total number of the absent hours from direct operators during the week /Total direct operators x total working hours in a week. According the standards this figure should not exceed 5%. Its management responsibility to Total number of operators who left work during the week/total number of operators at the beginning of the week (%). According to the standards, this value should not exceed 2%. Number of styles produced in a week This indicator affects Total produced effective hours and the efficiency of direct operators Average amount of order Total number of produced units in a week /number of

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18% 16% 14% 12% 10% Series1 8% 6% 4% 2% 0% 1 5 9 13 17 21 25 29 33 37

Figure 5. Defects at the end of the line

produced styles.

From the data analysis in 39 weeks there is an increase of about 16% of efficiency of directs (KPI 4) KPI 3 and 6 showed that the ratio between direct and indirect operators was high. In fact, it shows a company policy to hire many assisting staff in order to maximize producing time of the sewing operators. KPI 11 and 12 present a high number of styles and small orders reflecting the tendency of the garment sector and bringing the need for skilled and flexible workforce to maintain good levels of productivity. KPI 13 showed that company produces garments with many operations KPI 16 and 17 originally there was no defect control in-line. The percentage of defects at the end of the line was very high. The time required for defects repair, thus the extra cost for the company was high. This was calculated and presented to the management. After presenting the pro active system for quality control the tendency was towards improvement of the production quality, reduction of the defects at the end of the line and savings.

Standard hours per style Total effective hours produced in a week/Number of styles produced. Cost per effective hours Company cost for one week including administrative costs/total number of produced hours. Price Price from the client for one piece of garment/value of effective minutes for one piece of garment X 60 Average defects per 100 units in line Number of defects requiring repair/number of checked garments (%) Average defects per 100 units at the end of the line Number of defects requiring repair/number of checked garments (%) The analysis of the weekly KPIs reports showed that there is a need for qualification in more than one operation. This would be responsive to the tendency of the sector in working with small orders and many changing styles.

Conclusion A set of performance indicators are explained, collected and calculated to analyze and improve the general productivity of the company. The effective minutes are required to get the real figures. If the effective minutes are too high, the total effective hours produced will be too high as well and the efficiency will not reflect the performance level. If the effective minutes value is too low the reported figures will not be correct. The value of effective minutes should be measured always according the international standards. Other performance indicators adopted and used for the productivity and performance measurement in the garment companies are total number of working hours including extra hours of work; number of indirect and direct operators, the efficiency of direct operators, absenteeism, number of models, average quantity of order, level of defects in line and at the end of the line, average effective hours per model, cost per effective hours, price. In garment production the time needed for completing different processes is measured in Standard Minutes and should be calculated according the International Standards in order to have accurate data for company performance. Not every company can be able to collect and evaluate all the KPIs, but efforts should be done to calculate as many as possible to have a maximal benefit. One of the most important indicators is number of total work hours that should be under continuous observation and control to understand how it contributed in the reported percentage. Companies need to learn on the problems they have on a weekly basis in order to have the possibility to improve management and productivity aiming the desired production cost and profit. The effect

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that the often changes of styles in the company performance can be reduced through a better planning process and the skilled operators capable to do more than one operations. About 80% of the low efficiency is management responsibility The whole standard time of the break except for the time spent by machine operator to correct the defects is responsibility of the managementand requires a registration mechanism to collect the proper and accurate data. The now days tendency is an increase of the order styles and reduction of the quantity per style and it can contribute to the total produced effective hours and to the efficiency of direct operators. Actual cost of the company should be taken into consideration when negotiating the price with clients. Practically the effective costs should exceed the company cost per effective hour. The in line defects should be monitored carefully It was observed an increase in the company output from the week 25 due to focus on individual performances and continuity of work up to the last observed week. Efficiency had risen due to some short training courses undertaken for the skilled operators (more than one operation) and due to the

introduction of the policy of defects control in-line. End of line defects still remain high. Operators qualification through training and courses is important for the company.
REFERENCES Bose R (2006). Understanding management data systems for enterprise performance management . Effendi M, Razali MM, Rohana A, Adi S, (2008). A study on the development of the key performance indicators for an aerospace manufacturing company, ISSN 1985 3157. Fairhurst Katerine (2007). Advances in apparel production. Gamble J, Strickland A, Thompson A (2007). Crafting & Executing Strategy. Haycock John, (2011). Productivity Toolkit for garment companies, Publication of USAID Albania-Rritje Albania. Lichiello Patricia, Turnock J, Bernard Guidebook for performance measurement. Pradip V Mehta, Satish K Bhardwaj (1998). Managing quality in the apparel industry Taylor Carol, Fitz-Gibonn, (1990). Performance Indicators ISBN 9781853590924. www.Wikipedia.org , Key Performance Indicators