p r a c t i t i o n e r B RIE F IN G

Group Piece Rate: A Better Measure for Lean Garment Producers

Support one-piece-flow, team effort and sustainability with

this more efficient and accurate method to track output.
By M.L. Phan

Why Piece Rate?

Executive Summary

The garment industry in Asia compensates factory

workers daily based on what they produce, so piece
ratethe number of man-hours it takes to make a single
garmentis the standard measure of output. Piece rate
also is used in price negotiations between producers
and buyers because it avoids the necessity to adjust for
currency fluctuations and conversions.

The garment industry traditionally

uses individual piece rate (along
with Standard Value Minutes
SVM) to track production and
negotiate prices. But when a
supplier transitions from batch to
one-piece-flow, it has an opportunity
to adopt a more efficient and
accurate measure that benefits the
supplier, the buyer and the worker
by improving quality and freeing
up cash for reinvestment.

Individual Piece Rate: The number of cumulative

man-hours it takes individual operators to produce
a single piece of clothing. It disregards quality, i.e.,
whether or not the garment is saleable.
Group Piece Rate: The number of man-hours it takes
a team to collectively produce a single piece of clothing
that meets quality standards and is saleable.

The garment industry uses individual piece rate to determine compensation and as an input on pricing,
but as manufacturers move from batch production to one-piece-flow, group piece rate is a better
measure for both producers and workers. Heres the difference using the example of T-shirt production:

Individual Piece Rate

Group Piece Rate

Number of Steps*

14

14

Number of Operators

25

10

Working Hours/Day

8 hours per operator

8 hours per operator

800 pieces a day

(average production output)

400 pieces a day

(good piece/saleable production output)

.25

.20

Daily Output
Total Man-Hours Per T-Shirt

*Only sewing step. Excludes embellishment, trimming and quality check.

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This example assumes a 20 percent productivity

improvement resulting from the transition to one-piece
flow. Based on our work with garment-industry clients
in Asia, this is a realistic goal; and indeed we have
garment clients in Malaysia, Cambodia, Indonesia
and China that are using group piece rate.
We still use Standard Value Minutes (SVM) as a
measure of process-time-per-piece, and this is part
of standard work and also an input for determining
price. The piece-rate measure is more related to

output and compensation; and the switch to group

piece rate creates a direct connection between
quality and compensation, which is not present
in individual piece rate. This is illustrated in the
T-shirt example: Individual piece rate is calculated
using average production output (including pieces
of unacceptable quality) while group piece rate is
calculated using only acceptable pieces. Hence,
group piece rate also improves SVM-pricing
relationships because it refocuses the conversation
solely on acceptable pieces.

Heres more detail on the benefits of group piece rate compared with individual piece rate:
Piece Rate

Individual

Group

Quality

Rewards output regardless of quality.

If the garment is completed, it counts.

Only garments that are saleable

are counted, so operators are
more quality conscious.

Administrative
Burden

At some plants, supervisors or

administrative officers gather output
numbers employee-by-employee
multiple times a day to calculate
compensation.

Output is automatically tracked

as acceptable finished goods
are packed; plus, there
are fewer opportunities for
erroneous reporting.

Because the number of hours

required to produce a complete
garment can vary by step, by
worker, and by the requirements
of the garment itself, individual
piece rate is inconsistent.

Because group piece rate is an

average, it provides consistency
for production planning as well
as pricing.

Individual piece rate encourages

individual performance regardless
of optimal output for the whole
production line.

Working as a group instead of

individuals is a dramatic shift in
thinking for garment workers,
and we have seen motivation
increase substantially.

High labor turnover is an expensive

and disruptive reality for many garment
producers. Any workplace improvements that can be madeespecially
relating to safetygive plants a
competitive edge in worker retention.

By investing the cash freed up

from a group piece rate model,
plants can minimize turnover.

Production
Planning

Motivation &
Teamwork

Workforce
Stability

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In addition to quality, group piece rate improves

safety, cost and delivery because it frees up cash
to: upgrade plants and equipment, add safety and
skills training, increase compensation, and improve
profitability. (The savings is sometimes divided
among compensation, plant investment, and more
competitive pricing).
To help garment clients achieve flow to prepare
for a piece-rate transition, we focus improvement
efforts on critical areas, i.e., bottlenecks. Often,
training solves the problems, but this training is
pulled by ongoing identification of bottlenecks so
we dont have wasteful training and so we levelload the changes in order to maintain safety and
adequate order fulfillment. We zero in on critical
skills that most directly affect quality of product and
performance, and we find that operators and plant
managers are equally in need.
In one Jakarta plant, for example, we had been
working on flow, made many improvements, and
the production manager had set a goal range of 60
to 80 garments produced in one hour for sewing
lines depending on the SVM. When I returned to the
plant later to monitor their progress, plant managers
reported that they were not meeting this goal. One
problem they had identified was below-expected
performance in the incoming end of the line. We
examined the supermarket from which the line
pulled material and found the wrong material was
often pulled. We trained the water spider on how to
randomly check that the pulled material matched the
order. These random checks were enough to correct
the problem.
Next, we examined work-in-process on the line.
Material was going back and forth between steps
instead of flowing. Once we re-established flow, it was
easier to identify where the true bottleneck was and
make adjustments to correct it. By that afternoon, the

line was producing 10 to 15 saleable garments every

15 minutes. Two days later, a quality improvement of
90 percent was achieveda record for the company.
As garment plants reach high levels of team-based
production, these two approaches become essential
to sustaining gains and capturing even more gains:
a switch from individual to group piece rate following
one-piece-flow set up; and a sharply focused effort to
correct bottlenecks with targeted training.

About the Author

Mai Lean (M.L.) Phan is a Senior Management

Consultant with TBM Consulting Group. M.L.
possesses a sound knowledge of implementing
lean production in all facets of mass manufacturing
operations including production, engineering,
material planning, purchasing, quality assurance
and finance. M.L. has been a trusted advisor for
companies such as Sumbiri, Fotexco, Meihua,
Fongs, Y.R.C. Textile, Pulse, TTI, Nike Apparel
and Mondial.

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About TBM Consulting Group

TBM is a global operations management consulting firm that maximizes enterprise value and accelerates growth
by working with clients to leverage operational excellence. Our clients achieve growth rates 35X their industry
average and EBITDA growth at least 2X their topline. We focus on results with a bias for action and work side by
side with our clients to immediately improve EBITDA, accelerate organic growth, ensure the rapid realization of
results from newly acquired businesses, and generate immediate and long-term balance sheet improvements. Our
subject-matter professionals average 1025 years of operational, management and executive experience in the
manufacturing sector and none are career consultants. We leave behind a customized framework and structure
for lasting change using our proprietary LeanSigma approach, which has been continuously improved since we
introduced it over 20 years ago.

TBM, the TBM logo and LeanSigma are registered trademarks of TBM Consulting Group, Inc.
2013 TBM Consulting Group, Inc.

05/2013

TBM Consulting Group

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