Strategies To Reduce Wastage In A Garment Export House

To minimise the loss incurred in a Garment export house due to the wastage and surplus
production pieces.

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 Export 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 fabricators 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 optimal utilization of
the Wastage and profitable disposal of the surplus production policy, whereby -
1. Wastage in the form of small usable fabric cuttings can be identified and optimally
utilized.
2. Formulating and suggesting alternate ways to utilize the material wastes and reduce the
overheads.
3. Utilize the waste material and surplus production to generate additional revenue for the
organization by using it in other profitable businesses.
4. Finding other profitable channels to sell and clear the surplus production to minimize the
loss.
The main objectives are to:
1. Reduce wastage.
2. Extract maximum profits.
3. Reduce overheads.
4. Extract revenue from appropriate disposal of surplus production to gain maximum cost
benefit.
5. Optimize resources to achieve efficient and profitable results.
Action Plan :
1. Visit the factory premises to determine the existing procedures and amount of wastage.
2. Analyze the prevailing thinking procedures.
3. Identify the best practice in the same industry.
4. Evaluate the cost of alternatives.
5. Investigate the vital industry standards and procedures.
6. Formulate the best processes to utilize the wastes.
7. Investigate various alternatives to extract maximum revenue from selling the surplus
pieces.
8. Design a cost benefit plan.
The identification of the problem :
The major problem in this Export house is the overhead incurred during the manufacturing
process, of which the wastage in the form of small fabric strips cut during the cutting phase
, is enormous.
Other areas of wastage and overheads are the rejections due to the dyeing and printing
defects.
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 .This
surplus production is generally 5% of the total number of pieces in each style .If there are
not many rejections in the final product , 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 , after the shipment has been sent.
The small pieces of cloth approximately less than a meter are wastes for the company ,
which is produced during the cutting of the fabric and is generally unavoidable. These small
pieces are nothing but a dump and a visible overhead for the company.
All these wastages sum up to be a large amount of loss for the company , which can be
controlled and reduced when subjected to other beneficial and profitable alternatives.
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. And although the company is aware of this unnecessary
overhead but so far nothing has been done in this regard.
What the company has been doing till today is that, 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.e. Rs. per Kg.) basis. 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 also some large pieces of two to five meters are also disposed off on the similar
basis , due to their small meter defects.
The surplus pieces are also dumped and lie idle to be eaten by the insects and rot.
These pieces are absolutely fine or have some very very minor defects. Thus they not only
occupy the valuable space but are also a net loss for the company.
These surplus pieces have either been used by the company workers or are used by the
companys owner for giving gifts or other personal uses.
To summarize , it is observed that in spite of being aware of this unnecessary overheads
and loss , the company has taken no action to avert these problems and have continued to
lose on its profits.
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, Ace Fashions.
This company has formulated other well designed plans to convert this loss due to the
wastage and surplus production into saleable commodities to yield good profits for the
company. They have undertaken the following activities to reduce these overheads and
convert them into additional profits for the company :
1. The company manufactures matching scarves from the fabric cuttings of 2 5 meters.
2. These cutting wastes from the printed fabrics are creatively used as appliqu work on
plain dresses to make them look more attractive and make optimum utilization of the
wastage.
3. These small strips of cloth are used for piping, button plackets, facing of necklines and
armholes, as they are not visible and therefore can be of any material or design. This not
only saves the cost of fresh material but also optimally utilizes the cutting waste.
4. These small fabric cuttings are sold to Bed sheets and Pillow cover manufacturers who
design and make beautiful Bed sheets from their patchwork.
5. The company makes beautiful Ruffles or hair bands from these cloth cuttings and sells
them in the market to earn revenue from the wastage.
6. They also manufacture colorful children garments by creatively using these pieces for
patch work.
7. The company is selling its surplus production in the domestic market to several retail
vendors, who are willing to buy in small quantity, large variety products for their retail
outlets.
8. The company is dispatching packed shipments of these surplus production pieces to the
countries in the Middle East, Africa and other small nations like Sri Lanka , Indonesia , Nepal
, Bangladesh etc., who are interested in such less quantity , large variety and cost effective
products .
The company hereby under study should also pursue similar activities , what Ace Fashion
has been doing to minimize their overheads and achieve maximum cost benefit.
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:
The first step was to identify and define the problem in clear terms , i.e. neither too broad
nor too wide , with respect to the company. Therefore the problem as also mentioned earlier
is :
- to determine the amount of wastage in the company and find appropriate methods to
optimally utilize this wastage.
- 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.
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.
I. Data Sources : Most of the data has been collected from the primary sources like the
proprietor of the company, various operational managers , employees working in the
company , fabricators to whom the stitching job is outsourced , the merchandiser of the
company who deals with the company buyers , the fabric suppliers , retail vendors of the
export surplus in the domestic market and managers in other Export houses.
While some of the secondary sources for the information have been the Internet , Reference
books and the reports printed by Apparel Export Promotion Council (AEPC).
II. Research Methods: This refers to the ways in which the information has been collected.
The technique used here was of Observation , Surveys and Interviews .The Observation ,
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 garments.
III. Research instrument :
Most of the information has been extracted by Informal Interviews or questions asked from
the employees and the owner of the company. 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.
IV. Development of a Sampling Plan :
The Sampling Unit was basically within the company premises. 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..
V. 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.
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. And the other parts are analyzed and presented along with the
recommendations to achieve maximum cost benefit.
Proposed Solution and recommendations for the company :
As per the objectives of the project, 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.
The company can follow the practices undertaken by the company considered as the one
implementing the best practices in the industry. Whose methods have already been
mentioned earlier in the report (like (a) utilizing the waste fabric for necklines , armholes ,
button plackets etc. to save on the cost of fresh material , (b) dispatching less quantity ,
more variety and low cost packed shipments of surplus production pieces to small buyers
and other developing countries , (c) selling the waste to Bed sheet and pillow cover
manufacturers at appropriate prices , (d) utilizing the waste to manufacture children and
other garments with appliqu work etc.)
Since the fashion trends in India are highly influenced by the trends prevailing in the
developed western countries of Europe , 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 .
The company can utilize this waste to make matching scarves and ruffles to tie hair, which
adds value to the garment it manufactures and yield additional profits for the company.
During off season , when there are not many export orders the company can manufacture
Colorful , high fashion children clothes for the domestic market , using large waste pieces to
earn additional revenues by utilizing the waste material and the idle workforce and
machinery , thus reducing the fixed cost incurred by the company during the period of less
export orders.
These waste materials can also be utilized to create new designs by using these patches in
the plain dresses.
These waste fabric cuttings can be sold at good prices to Durri manufacturers (Rugs
makers) who use these small colorful pieces (Chindis) 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.
If the fabric cuttings are of some glossy material like Velvet , then these can be sold to the
photo frame manufacturers at good prices to make the border of the photo frame .
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.
Besides the alternatives followed by the Export house identified as to be following the best
practices in the industry, to sell the surplus production pieces , 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.
Cost benefit Analysis :
With reference to Annexure ii , we can observe that the total waste sum up to a big amount
of above Rs. 2 lakhs . This loss can be avoided if the proposed solution is adopted by the
company.
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.
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.
Similar practice should be followed , as mentioned in the point above to achieve optimum
utilization of the manpower , machinery and materials by using them to manufacture Ruffles
, children clothes , Scarves and other such accessories which utilizes the waste , during the
times when the company has less Export orders.
Debit note (i.e., 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 .
This would result in the following benefits for the company :
1. The overheads would be effectively and efficiently covered.
2. Instead of a loss an extra profit of Rs. 60,000 70,000 will be earned by the company.
3. This would enable the company to improve its Goodwill .
4. This would provide more satisfaction to the buyers as they need not go to others for
matching accessories , they will get everything at one place.
5. Sometimes the buyers are more interested in buying more variety and less quantity of
garments , these surplus production pieces would enable the company to fulfill this
requirement of them and would be beneficial for both the parties.
6. 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, by optimally using and retaining them during idle period of less orders .
7. It would also enable the workers to get clothes for their children at very cheap rates ,
which is another advantage for them.
8. 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.
However , it has a few disadvantages also which are mentioned below :
1. This would involve more wear and tear of the machinery.
2. This will result in a higher consumption of power and materials.
3. It will occupy some of the valuable space within factory premises to store the waste
material and surplus production pieces.
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 .
Selling of the products in the domestic market requires a thorough analysis relevant to the
Product, its Price, Place and Promotion, in order to achieve maximum cost benefit.
Additional material required to convert waste into profitably saleable items , require proper
handling and stock control so that they are optimally utilized and do not result in generating
more waste and idle stock.
Review Literature:
Optimization of Resources to maximize Revenue :
An efficient implementation of MRP(Material Requirement Planning) should be followed ,
where a proper control is exercised over the purchasing of the materials according to the
orders received for the finished goods. This procedure is also said to be of a dependent
demand.
The organizations try to determine the value of the stock , periodically and take appropriate
measures to reduce the level of stock and increase the stock turnover. 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 , and increase the availability of space.
Cost Effectiveness refers to the cost of achieving stated objectives. A project or a process is
said to be cost effective if it achieves the stated objectives at minimum cost.
That is possible if the following activities are undertaken :
Planning Resources :
When resources are flexible and the demand is highly variable , a correct planning of
resources allow limiting service shortage and achieving higher profitability.
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. These are changing continuously. The
allocation of the resources is adapted until the consumption date in order to match the
prevailing demand.
For Example: A hospital does its resource planning (i.e. beds, operating theatre equipments,
surgeons and other facilities) according to the anticipated demand for each different type of
clinical intervention.
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.
Pricing can then be more accurately adapted according to the clients actual preferences.
For example an ISP that has limited capacity due to its dependence on other ISPs (Internet
Service Provider) gateway, defines a differentiated pricing by seasons ,days and time to
compensate for imbalances between demand and supply.
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, price sensitivity and buying patterns. Thus a single offer at the same
price does not allow to optimize the revenues.
New offers are designed by determining demand patterns and efficient utilization of
resources .
Expected implications of the proposed solution :
For the cost benefit analysis , two Buyer order sheets have been taken and the actual
amount of wastage and the cost have been determined on their basis. The order sheets are
attached as Annexure II which shows the consumption per piece and the cost for each
style.
The wastage is taken to be 10% of the average and the surplus production is done @ 5% of
the total no. of pieces in a particular style.
The total wastage per order amounts to be around Rs. 2,00,000 in the form of cutting
wastage , wasted meterage , rejected pieces , Surplus production pieces , labor and energy
costs etc.
If the proposals are evaluated in terms of cost then :
The cost of patch work will not cost more than Rs. 10 but will increase the value of a plain
dress or a scarf by Rs.50.
The waste pieces used instead of fresh cloth Piping and necklines will save another Rs. 5-8
per piece, which will amount to Rs.7000 9000 per order.
The waste cloth strips if sold to the scarp dealer would just earn Rs.7 Kg to the maximum ,
but if sold to a Toy maker or a handicraft manufacturer would easily yield Rs. 10 -15 per
Kg.
The cost of making a Ruffle can be Rs.5 per piece which can be sold easily for Rs. 5 6 in
the market.
The surplus production pieces sold in the domestic market to the retail vendors would again
yield a margin of Rs. 10 30 .That is, a dress that costs Rs.140 could be sold for Rs.160
170.
Large pieces used for manufacturing children clothes can also yield a good margin of Rs.20
30.
The Scarves if made out of bigger pieces of fabric cuttings can be sold for Rs.50 60.
All these processes would not only cover the overheads and loss but also earn a profit of
Rs.60000 70000 for the company.