White Paper

Key Performance
Indicators In Apparel
Manufacturing
Authors :
Amit Gugnani
Senior Vice President
Abhishek Yugal
Associate Vice President
Contents
I. Abstract 4

II. Performance Indicators 5

III. Key Performance Indicators for Apparel Manufacturing 6

IV. KPIs 7

1. Quality 7

1.1 Defects per Hundred Units – DHU 7

1.2 Buyer Inspection Pass Rate 7

1.3 Cut to ship ratio 7

2. Productivity 8

2.1 Efficiency 9

2.2 Machine to Man Ratio (MMR) 9

3. Delivery 10

3.1 Planned Cut Date 10

3.2 On Time in Full – OTIF 10

4. Cost 10

4.1 Cost of Manufacturing 10

4.2 Cost of Quality 10

5. Profitability 11

5.1 Activity 11

5.2 Floor Cost Percentage to Activity 11

6. HR & Training 12

6.1 New Initiatives 12

6.2 Trainings 12

6.3 Absenteeism & Attrition ) 12

KPI Benchmarking 13

Know Your Performance (KYP) 15

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I.
Abstract

Textile and Apparel Industry is one of the and North America, and creating job
oldest industries of the human civilization. opportunities in Asia and other developing
The industry has evolved continuously, from parts of the world.
apparels that were hand sewn at home to
apparels sewn in bulk in factories; from draped Fast fashion, use of technological
garments to snug garments and from four advancement and changing business
seasons a year to twenty-four seasons a year. landscape are some of the variables
Clothing and textiles reflect the social customs resulting in changes in the textile and
and culture in a society. apparel industry. Cost effectiveness and
streamlined process that caters textile
Over a period of time, there has manufacturing are the result of
been multiple shifts in preferred location for advancement in technology. These apparel
apparel manufacturing, from one country to manufacturing complexities make the
other and sometimes to a different industry prone to higher process
continent altogether. Factors on which variance and changeable manufacturing
these preferences depend have been: environment; this is the reason behind more
focused approach towards performance
1. Manufacturing cost evaluation and monitoring.

2. Market proximity (Retailer/ End customer) Various approaches and indicators are
being used by apparel manufacturers to
Apparel manufacturing has been a labor improve their business conduct. In some
driven industry ever since, and relocates cases, these are also a combination of
wherever the prices both on labor and different performance indicators.
the duty structures are more economical
for the global brands and retailers. Due to This outlook is an approach towards
this, in the past few decades, apparel identifying the key performance indicators
manufacturing industry’s geographical and explaining each of them briefly for
distribution has changed completely, and application in apparel manufacturing
has resulted in loss of employment in Europe for monitoring, analysis, benchmark,
and goal setting to improve
manufacturing performance.

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 II.
Performance Indicators
Key Performance indicators are a set KPI’s are associated with organization’s goals
of measures that a company uses to and objectives. Monitoring, improvement
gauge its progress towards achieving its and evaluation is needed by every
key business objectives and set targets organization, whether it is on a smaller
To assess their success at reaching scale or a larger one. Once the
targets organizations use KPIs at two levels: organization has figured out its mission,
stake holders set the goals. This is because,
1. First level KPIs emphasise organization’s they need an approach to evaluate
overall performance progress towards the goal, and this is
2. Second level KPIs emphasise department where the role of KPIs becomes essential.
processes such as Cutting, Sewing, They are used to measure true performance
Finishing, Quality, etc. against key success factors.

Measurement of performance involves: Selecting the correct KPIs depends

rofreP• Defining what to measure
on understanding of organization’s
priorities. It depends on which industry
• Identifying methods of data collection the organization belongs to, e.g. KPIs
• Data collection that are useful for an Apparel
• Data analysis Manufacturer may differ from the KPIs
useful for an Investment Banker.
Benefits of measuring performance are:

• To learn and improve

• To control and monitor people as well as
processes
• To compare organization’s performance
against Industry benchmarks
• To report externally and demonstrate
compliance

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III.
Key Performance
Indicators for Apparel
Manufacturing
The Textile and Apparel industry is observing a drift in business like other industries. In
the present business conditions, earning only profit is not enough, but effective
sustainable growth is the key to managing the business. With increasing pressures on
pricing, combined with increasing costs, the only way to optimize profitability is through
efficient utilisation of resources. Therefore, it is necessary to follow an integrated approach and
choose KPI’s which are most compatible and give an opportunity to monitor each and every
aspect of manufacturing.

QUALITY
• Defects per Hundred Units
• First time Pass
• Cut to ship ratio

PRODUCTIVITY
• Efficiency
• Machine to Man Ratio
• Throughput Time

PROFITABILITY
• Activity
• Floor Cost %age to Activity

COST
• Cost of Manufacturing
• Cost of Quality

DELIVERY
• Planned Cut Date
• On time in Full

HR & TRAINING
• New Initiatives
• Trainings as per pre- set calendar
• Absenteeism & Attrition

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IV.
KPIs
Any garment containing one or more than
1. Quality one defects can be considered as a defective
garment. Defect per Hundred Units (DHU)
Quality is defined as complying with the can be calculated as number of defects per
requirements of buyer. Goods are accepted hundred garments checked.
only if the quality parameters meet the
required quality parameters set by them. If DHU calculation is a universal measure of
non-conformance is found, manufacturers quality which provides a platform to do an
have to rework on goods at their own cost. in-depth analysis to identify any deviant
process for improvements.
Cost of repair is not endured by the buyer;
it is endured by the manufacturer and is 1.2 Buyer Inspection Pass Rate
the unwanted or extra cost to be borne
by the manufacturer. By controlling Buyer inspection pass rate is defined as the
quality in the process of manufacturing, ratio of number of batches passing at the first
this unwanted cost can be reduced, and inspection to the total number of batches
this will in turn reduce rejections and inspected. This rate reflects the process
delayed delivery rates. capability aspect of any manufacturing facility.

Quality performance can be measured as % The improvements can be achieved through

Defective Rate, Defects per Hundred Units eliminating non-value activities such as defects
(DHU), Rejection Rate, and Inspection Pass and rework in a manufacturing environment
Rate etc. without changing the pace of work (efficiency)
or resource deployment design (MMR).
1.1 Defects per Hundred Units – DHU
1.3 Cut to ship ratio
Defects are all the non-conformances that
are not acceptable by the end customer. The ratio of the total number of garments
shipped vs the total number of garments cut is
The non-conformances may be improper known as cut to ship ratio. It indicates
shape of garment, broken button or other wastage in manufacturing process and is
trims, holes in fabric, skip stitch, broken seam calculated style wise for the styles shipped in
etc. The defects causing non- a particular month and the average of all
conformances are abrasion marks, double styles is cut to ship ratio for the month.
pick, oil stain, hole, bow, skew, crease, dye
stain, slubs, calendar line, contamination etc.

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 manufacturing facilities regardless of their
2. Productivity product profile, working hours etc.

Productivity describes various measures of the Man to machine ratio (MMR) is defined as the
efficiency o production. A productivity measure total workforce in a factory to the total
is expressed as the ratio of an aggregate number of operational sewing machines. It
output to a single or an aggregate input is used in order to monitor, control and
used in a production process, i.e. output per optimise non-operatives. It is an indicator
unit of input. Productivity can be improved which correlates no. of operatives and no. of
to a large extent by utilizing technology that operational machines and aids
allows more work to be done in less time. A management to optimise labour costs
simple way of measuring productivity could without disturbing the manufacturing
be number of garments produced divided capacity.
by number of machines in a standard
shift, although other variables such as type The expectation for high quality goods in
of fabric, construction method, machine quick time is growing on a daily basis due
type, extended working hours etc. to the highly competitive Apparel Industry.
provide alteration to the rather simple Time has become a dominant decider in the
formula. market where the lifecycle of any product
is condensed, and response time is also
diminishing. Quick response or reduced
However, productivity does not give throughput time is one of the basic strategies
correct measurement in case of variance in towards customer satisfaction and necessity to
number of working hours. And so, evaluating attain competitiveness.
efficiency is one indicator which not only
overcomes variability but also provides a
comparative analysis between two

Primary Task

SAM or Standard Allowed Minute is the

measure of the work content in a style,
Associated Task
Associated Task
which has the following components. Actual Time

Rating

SAM
Machine Task
Allowance

Personal
Allowance Fatigue
Time Allowance

Bundle
Handling Time

SAM = Basic Time X (1 + PF + MD) + BHT

BASIC TIME = Average Single Cycle Time x Rating
Allowances: PF – Personal & fatigue, MD – Machine delay, BHT – Bundle Handling Time

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Therefore, to measure productivity, one needs of information system through all processes
to understand three important factors: at what required to produce and ship the product to
rate a manufacturer is producing (Efficiency), the customer creating a “single page picture”.
how much manpower are being utilized (MMR) Value Stream maps and documents all of the
and how fast the manufacturer is turning processes used to produce and ship a product,
around the orders (Throughput Time). The tools both value adding and non-value adding.
used to optimize the same in manufacturing
processes may be: 2.2 Single Minute Exchange of Dies (SMED)

2.1 Value Stream Mapping (VSM) Changeover is the practice of converting a

line or machine from producing one product
Value-stream mapping is a method for analysing to another. This leads to a lot of time spent in
the current state and designing a future state an activity that actually has no end usage and
for the series of events that takes a product consumes a lot of time that is actually intended
or service from its beginning through to the for production. Single Minute Exchange of Dies
customer with reduced wastes as compared (SMED) is a process of reducing changeover
to current map. A value stream focuses on (setup) time by classifying elements as internal
the areas of a company that add value to a or external to a machine’s operating time
product or service, whereas a value chain refers and then converting the internal elements so
to all of the activities within a company. It is they can be done externally as the machine
the process of representing material and flow continues to operate.

End of Previous
Run
Run
Down Period
Parallel
Preparation for Setup Period
Next Run – – Internal and
Maximizing External
Activities Complete Gearing
External Setup
of New Run
Run
Up Period

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 4.1 Cost of Manufacturing
3. Delivery
Any actions taken to improve any above-
Every buyer looks for opportunity to reduce mentioned KPIs will result in reduction of cost
Inventory and WIP across their supply chain in of manufacturing. Indicators that are used for
current business scenario. To diminish business measuring the improvement in the cost of
risks, order size and lead time are constantly manufacturing are:
being optimised. Delays in deliveries and
incomplete shipments from manufacturer’s a. Cost per minute
end may result into loss of sales at the b. Cost per machine per day
point of sales. Buyers like to control over the
deliveries and quantities and often penalise 4.2 Cost of Quality
manufacturers to compensate their losses due
to any delay or short shipments. Late deliveries Cost of quality is defined as the sum of cost of
and short shipments also affect the credibility conformance and cost of non-conformance.
of manufacturer from Buyer’s viewpoint. Cost of conformance is defined as the cost
incurred for maintaining good quality in the
So, it is important for a manufacturer to process, including appraisal cost and prevention
maintain the committed delivery dates and cost. Whereas the cost of non-conformance
shipping of required quantities. Some of the can be depicted as the cost incurred due to
important terms associated with the timely poor quality during the process. It has two
delivery are mentioned below: components: cost of internal failure and cost of
external failure.
3.1 Planned Cut Date

PCD is the threshold for the Merchandising Cost of Conformance

team to complete their Pre-Production
• Preventation Cost
activities and the Production Team to start • Appraisal Cost
their Production activities. Appraisal Cost;
24.9%

3.2 On Time in Full – OTIF

On Time in Full (OTIF) is a composite

Cost of Non
measurement of deliveries with respect to Conformance
the required delivery date and quantities. Any
order which is shipped on time and meets • Cost of Internal failures
• Cost of External failures
the requisite quantity should be counted as
qualified to OTIF. In case where either there
is delay in shipment or variance in shipped
quantity, more than the tolerance mentioned
by the buyer, the order should not qualify for
OTIF.
Cost of Conformance CoQ Components

4. Cost •
•
Preventation Cost
Appraisal Cost Internal Failure;
Appraisal Cost; Cost; 22.3%
24.9%
Following are the 2 approaches to measure
cost performance –
External Failure;
o Cost of manufacturing and Cost; 1.4%

o Cost of quality

Preventive Cost;
Cost of Non 29.4%
Conformance

• Cost of Internal failures

• Cost of External failures

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 Activity Benchmark for a Manufacturer
5. Profitability depends upon the product mix, automation
level of the manufacturing facility and many
Profitability is the degree to which an activity other factors. And an Organization can define
or business yields profit or financial gain. It its benchmarks by Industry Standards and
is expressed as a relative amount instead of internal month on month comparison of
an absolute amount. No business will survive historical data.
in the long run without taking care of the
profitability factor. It is the ultimate goal of all Activity can be improved to large extent by
business ventures. Optimum utilization of available resources,
automation of the manufacturing facility or by
On the other hand, Profit is the difference optimizing the product mix.
between the amount earned and the amount
spent in buying, operating, or producing 5.2 Floor Cost Percentage to Activity
something. It is an absolute number determined
by the amount of income or revenue above and Floor Cost can be described as Total cost of
beyond the costs or expenses that a company conversion of raw materials (i.e. Fabrics &
incurs. Profitability is closely related to profit. Trims) into Final Product. This includes Salaries,
Net Profit Margin is the big picture view of an Wages, Rents, Utility Bills and other factory
organization’s profitability. expenses excluding the cost of fabric and trims.

To assess the performance, industry standards There are several factors for higher floor cost
are used as a benchmark and an internal year- but the biggest reason for high Floor Cost is
over-year comparison should be performed. the inefficiencies of operations, like low Sewing
Efficiency, High Cost of Quality, High MMR, etc.
5.1 Activity
Once again, Benchmark can be defined as
Activity can be described as the value of work per Industry Standards and internal month on
done by a manufacturer in a month or Top line month comparison of historical data
in the P&L of the manufacturer.

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 Schedule must be prepared accordingly by
6. HR & Training HR for every month, including internal and
External Trainings. And then Trainings should
Human resource is one of the most essential be done as per the schedule.
resources that every organization considers as
an asset. The better the human resource an 6.3 Absenteeism & Attrition
organization has, the better is its performance.
And so, over the last decade HR training has Absenteeism can be defined as a voluntary
played an important role in making better or habitual absence from work by an
personnel for all the organizations that employee. Though every employer expects
need competent human resource as part of his / her worker to miss certain no. of days
their growth strategy. To maintain a highly from work. Absenteeism means either
motivated and productive workforce, HR must habitual evasion of work, or wilful absence as
invest on Trainings & Development. in a strike action. Involuntary or occasional
absence due to accidents or sickness, or other
valid reasons beyond one’s control are not
included. An excessive absence can lead to
reduced motivation level and hence decrease
productivity at work.

There are multiple factors that might affect

absenteeism percentage for a factory, like
engagement level of workers with the
company, manufacturing facility’s location,
gender mix of workers, festivals, etc.

Apparel Industry is hub to migrant workers and

HR needs to take initiative to make home away
from home for them. Employee engagement
activities like appreciating a person for good/
exceptional work, celebrating festivals, family
day, increase the feeling of belonging in the
work force. And lead to lower absenteeism in
6.1 New Initiatives the factory. Continuous Awareness Sessions by
HR, Attendance based incentive schemes and
HR must promote the Middle and Junior level other planned employee engagements can
Managers to an extent where the person with also help to bring down the absenteeism level.
the most innovative or beneficial initiative is
rewarded for his /her contribution every month. Attrition is reduction in workforce by retirement
or resignations, and not planned reduction
HR Initiatives like “Know Your People”, where in work force by the manufacturer. In-depth
Supervisors are required to bond with workers analysis of attrition needs to be done by the
to a level that they know all their workers way of exit interviews or informal conversation
names, their skill set etc. This not only helps in with the person leaving the job to understand
work force engagement but also leads to Right the exact reason. Many a time’s workers leave
person at Right Job, which in turn will leads to because of an unsolved grievance which might
better efficiencies and quality levels. be small but ignored.

6.2 Training Like absenteeism, even high attrition rate can

be brought down through awareness sessions
Time to time training of existing employees is and employee engagement.
as important as for new persons joining the
team for safety, productivity and satisfaction. Both Absenteeism and Attrition can be
HR must target fixed numbers of Trainings compared internally to reduce month by
every month depending upon the month.
organizations Training Requirements. Training

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KPI Benchmarking
While all of the KPI’s are important Some of the he quantitative values like
for any apparel business, it has been Cost KPI’s would depend on country
observed that companies prefer some of business, Efficiency and MMR may
over the other. it is important to identify depend on technology adopted,
the most relevant KPI’s for a particular while the others may be generically
business. Once identified, these must defined similar in most businesses.
be measured in a way, which can Following table indicates the generic
be compared. In the absence of any KPI’s as may be applicable to apparel
process controls, it has been observed manufacturing businesses.
that businesses follow different
measures.

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Sl. No. Parameters Benchmark

1 Quality

Sewing End Line DHU around 8 and Finishing DHU

1.1 DHU
around 3-4

1.2 First Time Pass 100%

1.3 Cut to Ship 99%

2 Productivity

Depends on various factors like Technology level, Order

2.1 Sewing Efficiency size, etc. Needs to be looked in to month on month
and year on year comparison and improvements.

Again depends on the level of automation and the

2.2 Machine to Man Ratio processes. However, can be taken at 1:1.7 - 1:1.8 for the
region.

Depends on overall Supply Chain. Needs to be looked

2.3 Throughput Time in to month on month and year on year comparison
and improvements

3 Profitability

Depends on various factors and needs to be looked in

3.1 Activity to month on month and year on year comparison and
improvements

3.2 Floor Cost Percentage Around 20% of Overall Earnings of the factory

4 Cost

Depends on various factors and needs to be looked in

4.1 Cost per Minute to month on month and year on year comparison and
improvements

5 Delivery

5.1 Planned Cut Date 100%

5.2 On Time in Full 100%

6 HR & Training

6.1 New Initiatives Around 2 Per Quarter

Trainings As per Pre Set

6.2 Around 2 Per Month
Calendar

6.3 Absenteeism 6%-8%

6.4 Attrition 1%-2%

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Know Your
Performance (KYP)
Defining Vitals/ Performance Indicator

A Key Performance Indicator is a Business metric or a type of Vitals Measurement that

demonstrates how effectively a company is achieving its key business objectives or targets
set by the Management.

Common Symptoms What we offer

Our Expert Consultant will visit
Increased Overtime Bills the Factory and do the Diagnostic
audit of the Manufacturing Facility
Late to define the following KPis
Deliveries

Short Shipments Level 1: Organlzaflonal KPis

1. Productivity - Efficiency- MMR

Quality Claims -Throughput Time

2. Quality- DHU- Buyer Inspection Pass

Rate - Cut to Ship (CTS) - Order to Ship
Increasing Rejections
(OTS)

Decreasing Top and 3. Delivery- Planned Cut Date - OTIF

Bottom Line
4. Cost- Cost of Manufacturing - Cost of
Quality.

Proposal/ Objective of Engagement 5. HR & Training- New Initiatives - Trainings

as per Set Calendar - Absenteeism &.
To define the Baseline KPI of the Manufacturing Attrition
facility against various Parameters and set the
quarterly, half yearly and Annual Targets or 6. Profitability- Activity- Floor Cost
Benchmarks for the factory for Improvements. percentage to Activity

Work Steps Level 2: Departmental KPis

Step 1 Audit &. diagnostic of the factory to 1. Cutting Department - Cutting

understand the current production &. Quality Efficiency - Cutting Cost per Piece
levels
2. Sewing Department- Productivity -
Step 2 Define the Baseline KPis against various Sewing Cost per Piece
Parameters as explained earlier in the sheet
3. Finishing Department - Finishing
Step 3 Define the Benchmarks for Efficiency - Finishing Cost per Piece
improvements against all the KPis with
Quarterly, Half yearly and Annual Improvement 4. Quality Department - FTR - Rejections
Targets &. Rework Percentage

Please write to [email protected] / [email protected] to know your factory’s KPIs

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About Technopak
India’s leading management consulting firm Drawing from the extensive experience of 85+
with more than 28 years of experience in professionals, Technopak focuses on four major
working with organizations across consumer divisions, which are Retail, Consumer Products
goods and services. & E-tailing; Fashion (Textile & Apparel); Food
and Food Services, and Education.
Founded on the principle of “concept to
commissioning”, we partner our clients to Technopak also represents WGSN, world’s
identify their maximum-value opportunities, largest fashion forecasting service and Coloro,
provide solutions to their key challenges and the new color system, both from Ascential, a
help them create a robust and high growth specialist global information company, for the
business models. Indian sub-continent.
www.technopak.com
We have the ability to be strategic advisors
providing customized solutions during the
ideation phase, implementation guides
through start-up assistance, and be a trusted
advisor overall.

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Technopak’s Service
Mix for Apparel
Operations
Strategy & Planning
• Business Entry and Growth Strategy
• Business Plan, Resource Requirement, and Key Business Numbers
• Manufacturing and Supplying Capabilities

Start Up Assistance
• Planning and Design of Factory
• Implementation of Layouts and Processes
• Selection and Training of Middle Management
• Efficiency and Production Build-up

Capacity Building
• Training Need Assessment
• Middle Management Training on Master Plato
• Merchandisers, Quality Personnel, and Industrial Engineer’s training
• Establish Training Methodology

Incentive Schemes
• Monitoring of Individual Operator Performance and Efficiency
• Designing Performance-based Incentive Schemes for Operators
• Development of KPI-based appraisal for Middle Management

Performance Enhancement
• Productivity/Efficiency Enhancement
• Material Utilization and Quality Enhancement
• Streamlining Merchandising and Pre-production Activities
• Lean Manufacturing Tools
• Visual Control and SOPs
• Total Quality Management

Setting Up Operator Training Centre

• Program Design and Team Profile Development
• Setting-up Selection and Recruitment Criteria, and Procedures for Operators
• Training Operators on AAMT Methodology

Pre-Production Process Streamlining

• Capacity Analysis
• Operator Remunerations
• Setting Time and Method Standards
• Layout and Method Improvements
• Production Planning

Sourcing Services
• Industry Landscape and Product Strategy
• Selection of Key Positions
• Identification, Due Diligence, Training, and Analysis of Vendors

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Technopak Advisors Pvt. Ltd.
5th Floor, Lemon Tree Corporate Park, Sector 60,
Gurgaon – 122011, NCR
+91 124 5080100
[email protected]
www.technopak.com

Please contact
Amit Gugnani
Senior Vice President,
[email protected]

Abhishek Yugal
Associate Vice President,
[email protected]