Cost Reduction Process in Textile and Apparel Manufacturing

Introduction

The primary objective of any business is to make profits. Improving profits is also the top priority of business leaders. But it appears most professionals fail to truly understand how to move beyond basics, especially when it comes to cost reduction for profit improvement in textile mills and garment factories. Usually business leaders rely and focus on reducing costs primarily by reducing workforce. However this ends up being a mistake in most situations or merely a short term solution that can disrupt production efficiency, line balancing and technical skill continuity in textile production units.

There must be consistent and sincere efforts to build an inherent cost reductive culture in the organisation through lean manufacturing, industrial engineering practices, and continuous improvement programs commonly used in textile and apparel industries. Cost reduction drives should be practiced as a routine aspect in any organisation to sustain its competitiveness in the market especially within spinning, weaving, knitting, dyeing, finishing, and garment manufacturing sectors. Every individual of the organisation should be involved in this drive, given appropriate tasks and encouraged to participate and share their own creative ideas to reduce wastage, improve machine utilization, enhance SMV efficiency, and control production costs. Business leaders should have a positive approach towards involving employees, giving them reasonable chances and encouraging participation for developing cost reduction strategies so that profit improvement is perpetual and consistent across cutting, sewing, washing, finishing, quality control, and merchandising departments.

Many companies don’t have long term strategies for profit building and whenever they lose profits they cut costs in the only way they know and find instant solutions i.e. the most significant resource of the management the skilled and experienced workforce is targeted first which may reduce line efficiency, increase defects, and negatively affect production planning and delivery performance.

Organisations need to view profit building as a process similar to the processes that drive marketing, finance and HRD etc by integrating production planning, industrial engineering analysis, and cost monitoring systems within textile operations.

Before discussing cost reduction drives it is the responsibility of leadership to organise awareness programs at different levels for each employee in the organisation and inform them about the importance of cost reduction and valuable contributions they may add at individual levels for the benefit of the company including machine operators, line supervisors, quality inspectors, production engineers, and factory managers.

Daily performance reports of individual departments is a basic tool to understand their contribution in the overall performance of the company particularly through efficiency reports, DHU reports, wastage reports, and machine utilization summaries in textile and garment factories. Every employee should have access to performance reports of their respective departments or sections. The first and foremost responsibility is to follow targets. If results are below the set targets an analysis should be done for the reasons behind such losses and solutions that can improve the same to arrest further losses using root cause analysis, production data tracking, and process optimization techniques. All concerned employees should be explained the nuances of these monetary losses that may be caused due to negative variations in results in their respective departments or sections. For example they may be explained the impact and monetary loss caused due to one percent loss in efficiency or one percent higher defective production etc which directly increases manufacturing cost per piece and reduces factory profitability. However in case results are better than the set targets the next targets can be uplifted to optimum levels to achieve continuous improvement and operational excellence in garment manufacturing lines.

It is also important to remember however that there is a limit to saving costs within the periphery and the same should never compromise the quality of products as maintaining buyer standards, compliance requirements, and consistent textile product quality is critical for export oriented factories. Before deciding cost cutting one should understand the cost elements such as raw material utilization, fabric wastage, labour efficiency, overhead costs, machine downtime, and process losses in textile and apparel manufacturing.

Cost Reduction Process in Textile and Apparel Manufacturing

The cost reduction process is a systematic method comprising of developing workforce, analysing situations and coming up with creative solutions towards reducing overall costs in an organisation particularly within textile and garment factories. It involves making teams of different groups of frontline workers, lower and middle staff and senior management representing different sections of the company and motivating them to share their innovative ideas to save costs in their respective areas such as fabric utilization, cutting efficiency, sewing line balance, dyeing process optimization, and finishing operations. Training in innovation management, a unique brainstorming method and developing action plans are the backbone of a cost reduction drive.

In this age of globalisation the whole world has come together and is more or less dependent on each other especially in global textile sourcing, apparel exports, and international supply chains. Due to open markets customers now have multiple choices across global apparel brands and textile product categories. They demand value for money. In most cases it’s a buyer’s market and every sales and marketing representative ends up focusing on satisfying them and trying to meet their demands including competitive pricing, consistent quality, and faster shipment schedules in apparel business. In such a competitive market every manufacturer has to make best efforts for their survival through efficient production planning, cost control, and operational excellence in textile manufacturing.

However one needs to identify the areas that can be addressed for cost reduction drives so as to not only survive but also achieve sustainable growth in a business such as raw material wastage control, machine downtime reduction, energy efficiency, labour productivity, and process optimization in textile and garment industries.

A market demands quality products at a minimum price with complete assortment in choice within a minimum lead time particularly in fast fashion, bulk apparel orders, and export oriented textile production. Usually a customer looks for and analyses the following features in a product before buying it in different priority depending on individual needs within textile and apparel product categories.

Quality of Product: Presentation, design, features, material, durability, suitability for specific use and its brand value including fabric quality, stitching performance, color fastness, finishing standards, and compliance requirements.
Price: Needs to match with the product quality, value for money considering manufacturing cost, sourcing efficiency, and production optimization.
Assortment: Various options in the same quality in terms of colours, design, size etc such as different fabric blends, GSM variations, garment fits, and seasonal collections.
Delivery: Commitment of product availability within scheduled time including production lead time, shipment planning, and on time delivery performance.
Brand value: Consumer product or belongs to lower, middle, upper, premium or luxury segment etc depending on market positioning, compliance standards, and brand reputation in the global apparel market.

To achieve the above features a manufacturer needs to be a system driven company and may adopt following methods particularly within textile mills, apparel factories, and integrated manufacturing units:

Company’s policy must focus on customer satisfaction including buyer compliance, garment quality standards, and fabric performance requirements.
Transparent and defined sales policy prepared in consultation with all concerned departments and stakeholders such as merchandising, production planning, sourcing, and quality assurance teams.
Regular efforts to support Image/Brand building through consistent product quality, on time delivery and sustainable textile manufacturing practices.
Transparent and defined procurement policy for yarn, fabric, trims, chemicals, dyes, and accessories sourcing.
Timely upgradation of machines and equipment including spinning frames, looms, knitting machines, dyeing units, and garment sewing technology.
To achieve optimum utilization of machines and equipment (optimum speed and efficiency) through industrial engineering analysis and production monitoring systems.
To achieve optimum yield of material by reducing fabric wastage, cutting loss, shade variation, and process rejection.
Implementation of customised preventive maintenance checklist and schedule to minimize machine downtime in textile and apparel production lines.
Implementation of SOP and process control to achieve assured quality across spinning, weaving, knitting, dyeing, finishing, and garmenting processes.
Focus on ‘NO’ rework and ‘ZERO’ defects culture to reduce DHU, alteration, and quality rejection rates.
Regular innovation for development and process engineering including automation, lean tools, and workflow optimization.
Focus on design and product development to meet market trends such as seasonal fashion collections, technical textiles, and functional apparel.
Efficient production planning and control through line balancing, capacity planning, and order scheduling.
Production and timely supply of products in full assortment covering multiple sizes, colours, styles, and fabric variations.
To achieve minimum lead time through fast sampling, efficient sourcing, and optimized production flow.
To focus on efficient and cost effective logistic system including shipment planning, warehouse control, and export documentation management.
Adopting a policy of continuous cost optimisation drive across raw material sourcing, production efficiency, and operational expenses.
Allocation of efficient and optimum workforce based on SMV analysis, skill mapping, and line efficiency requirements.
Defined recruitment policy and focus to retain them by building a stable and skilled apparel workforce.
Regular training, skill development and motivational programs for entire workforce including machine handling, quality awareness, and safety practices.
To work continuously in the direction of keeping the workforce happy. Keep in mind “The first brand ambassadors of any company are its own employees” especially in labour intensive garment manufacturing industries.

With time the cost of raw materials and other input cost increases continuously while the market remains reluctant to absorb increments particularly in global textile sourcing and apparel export markets. A portion of cost increase is passed on to the customer by increasing prices based on market size, competition, demand, buying capacity of customer etc depending on buyer negotiation and sourcing strategy. Price increase is never welcomed by the market. However it is the responsibility of an efficient sales and marketing team to convince the consumer and market to absorb and adjust to such increases through product differentiation, value addition, and strong brand positioning in textile and apparel sectors.

Major Cost Elements and Ways to Control

A. Raw Material Cost

Cost increase due to low production of crops in case of natural fibers, seasonal cost increase depending on high demand, increase in input cost to produce raw material, increase in custom duty structure in case of import or export, increase in freight etc particularly in cotton, polyester, viscose, wool, and blended fibre sourcing. In textile manufacturing process out of total cost of finished product contribution of raw material is the highest especially in yarn, fabric, and garment production costing structures.

Ways to control raw material cost:

Design and implement appropriate procurement policy and follow strictly for fibre, yarn, fabric, trims, dyes, and chemical sourcing.
Identify appropriate source and follow defined process of selection of raw material based on quality parameters, supplier reliability, and testing standards.
Follow smart buying plan i.e. coverage of raw material at lowest price, regular buying and averaging the raw material price considering seasonal cotton price variation and global fibre market trends.
Maintain optimum inventory level of raw material to minimise interest cost through proper warehouse and stock management systems.
Check the raw material specifications and compare with norms approved by quality assurance including fibre length, micronaire, yarn count variation, GSM, and shade parameters.
Use appropriate quality of raw material for desired quality of finished product depending on yarn count, fabric construction, and garment quality level.
Use mixing or blending of different grades of raw material to achieve desired finished product quality e.g. mixing of different staple length and micronaire of cotton fibers, mixing of different microns of wool fibers within a limited range for specific yarn count and quality as practiced in spinning and yarn manufacturing operations.
To achieve the standard yield of raw material by optimising manufacturing process and implementing effective process control in spinning, weaving, knitting, dyeing, and finishing stages.
Work in the direction of establishing ‘No Rework’ and ‘Zero Defects’ culture within the company to minimize fabric rejection, shade variation, and garment alteration losses.
Establish a system of checking the moisture content, oil content of raw material and reduce the same in case found on higher side against standard especially for cotton bales, yarn packages, and processed fabrics.
Verify the strength of dyes and chemicals and impurities in lubricants etc. Work out appropriate recipes to achieve required shades of fibre, yarn or fabrics, check and compare the actual depth of the dyes with invoiced depth and adjust the price of dyes in proportion with the actual depth. Same procedure applied to chemicals and lubricants to control wet processing and dyeing cost variations.
Establish a system of counter checking the net weight of raw material and compare with the invoiced weight. Appropriate action to be taken in case of deviation particularly during fibre bale receiving, fabric sourcing, and trims procurement.

B. Employment Cost

Employment cost or cost to the company (CTC) includes salary and fringe benefits of senior management, middle and lower staff and wages for workers including other allowances especially in labour intensive textile and garment manufacturing operations. The main reasons for increase in employment or labour cost are disproportionate numbers of workforce, inefficient and low productive workforce, high investment cost of workforce due to frequent turn out of trained workforce, low efficiency of machineries and low productivity due to various reasons, outdated technology and low utilization of machines etc which directly affects sewing line efficiency, production output, and overall factory profitability.

Ways to control employment cost or labour cost:

Implement effective HR policy for selection of right candidates for the right job including operators, technicians, supervisors, and industrial engineers.
Regular skill development training and motivational programmes to create belongingness increasing productivity and focus on retaining them in the organisation through technical training, multi skill development, and line efficiency improvement programs.
Educate the workforce, share with them their contribution in total cost of the product and invite their participation to increase productivity levels and optimise the cost through visual KPI boards, efficiency tracking, and performance discussions.
Implement performance incentives, profit sharing schemes etc to impart a sense of ownership amongst employees especially in sewing lines and production units.
Engage optimum workforce as per industry norms. Conduct regular time and motion study through industrial engineer and set internal norms based on SMV calculation, line balancing, and capacity planning.
Implement continuous technology upgradations to increase production and productivity such as automated cutting, advanced sewing machines, and digital production monitoring systems.
Keep in mind despite adopting all these measures the employment cost may be controlled only to a limited extent as textile and apparel manufacturing remains highly labour dependent in nature.

C. Packaging Material Cost

Packaging consists of enclosing or protecting products for distribution, storage, sale and use especially for garments, fabrics, yarn packages, and finished textile goods. Materials used for packaging are known as packing or packaging materials. Packing material is required for containment, protection, handling, presentation, delivery, transporting, warehousing, logistics, sale and end use of the product within domestic and export apparel supply chains. Types of packing material required depends on the type of product to be packed such as polybags for garments, cones for yarn, rolls for fabric, cartons and pallets for export shipments. Primary packing materials hold the product keeping the contents clean fresh sterile and safe for the intended shelf life and sale including garment polybags, hanger covers, or fabric wrapping sheets. Secondary packing material is the term used to describe larger cases or boxes that are used to group quantities of primary packaged goods for distribution such as corrugated cartons and export boxes. Special packaging materials are also used to make the saleable product more attractive according to its positioning and brand value through branded labels, tags, printed boxes, and retail ready packaging.

Ways to control packaging material cost:

Selection of proper size of packaging material is important. It should neither be excess in size to avoid waste of space nor be smaller to avoid tight fitting and damage of materials packed especially for export garment cartons and fabric rolls.
Quality specifications of packaging materials should be decided based on types of materials to be packed and expected duration of its storage in the plant as well as at the customer’s godown and shops including moisture resistance, GSM strength, and stacking capacity of cartons.
The appearance of the packaging materials helps in attracting customers and reflects the goodwill and signature trade dress of manufacturers. Hence it is good to ensure that the chosen packing material is presentable matches the quality of product and its brand image does not get easily damaged in transit or affect the material itself during long distance export shipments.
While sustainability and environment friendly methods should always be given priority and incorporated as much as possible such as recyclable polybags, FSC certified cartons, and reduced plastic usage, it is also important to balance sustainable ways of packaging against high costs involved in adopting this approach.

D. Energy Cost

Energy cost is the cost of power and fuel used directly and indirectly for manufacturing a product as well as in other areas of a company including administration sales and marketing stores and purchase guesthouse accommodation etc with major consumption in spinning frames, looms, knitting machines, dyeing units, boilers, compressors, and garment production floors.

Ways to control energy cost:

Initial design and layout of a manufacturing plant plays a crucial role in energy saving. For instance the selection of the types and capacity of boiler air compressor generator sets humidifier or air conditioning electric cables and other appliances can play an important role in energy consumption particularly in humidification plants and wet processing units.
Distance of boilers and air compressors from the plant the layout and sizes of distribution pipes their insulation etc are other key factors that influence energy consumption in dyeing, finishing, and processing sections.
The architecture and design of a building should be such that natural light is utilised to the maximum extent and heat loss is minimised especially in large garment production floors.
Installation of measuring devices for electric air water and steam consumption in each section and ideally for each machine to record and monitor helps in controlling daily energy consumption through real time production monitoring systems.
Machine wise ratio of energy consumption and production should be assessed to evaluate cost per kg yarn or cost per garment.
Regular analysis of machine and section wise energy consumption including humidification plant air conditioning lighting etc should be done to identify abnormal consumption patterns.
Inverter drives energy saving motors and lighting in the plant should be installed. Necessary precautions should be taken to control transmission losses in air steam and power upto the highest extent within compressed air and steam distribution systems.
A fool proof process should be established for checking quality and quantity of coal and other fuels for each lot received in the plant as per the norms especially for boilers used in dyeing and finishing processes.

In textile manufacturing energy cost contributes significantly after raw material costs. Therefore it is important to conduct energy conservation audits at regular intervals so as to identify areas of leakages and adopt means to control energy wastage in spinning, weaving, knitting, and wet processing units.

E. Maintenance Cost

There is regular wear and tear in plant and machineries with time. Maintenance cost is the expense towards keeping these in an efficient usable condition including spinning machines, looms, knitting machines, dyeing machines, finishing ranges, and garment sewing equipment.

Ways to control maintenance cost:

Holistic implementation of customised preventative maintenance schemes is very important to control maintenance costs through planned maintenance schedules and TPM practices.
Maintenance team members must be highly skilled trained and sensitive about machine cleaning appropriate lubrication and its precise settings to ensure consistent production quality.
Maintenance senior team members must be provided proper training of machines by the machine manufacturers and the same should be passed on to every individual in maintenance team as well as in production team so as to avoid unwanted breakdowns and downtime during high volume textile production runs.
It is good to conduct internal exercises for upto five years keep records of individual breakdowns and spare part consumption and determine the life of individual items. This will give a fair idea of monthly and annual maintenance expenses. This exercise should be continued in order to review the consumption pattern with life of plant and machineries and plan spare inventory effectively.
Keep record of individual spare price and machine wise consumption and relate the same with production unit. To avoid the cost difference because of foreign currency and custom duty fluctuation it is better to monitor the number of items consumed instead of its value especially for imported textile machinery spares.

F. Manufacturing Process Cost

Cost of manufacturing process includes direct costs involved in employment energy and maintenance across spinning, weaving, knitting, dyeing, finishing and garmenting processes. The cost of manufacturing process is considered satisfactory if these elements of cost are under control and production efficiency meets planned targets.

Major reasons for cost increase in manufacturing are:

Underutilization of machines’ capacity and lower efficiency in spinning frames looms knitting and sewing lines.
Using machines at lower speeds compared to what’s recommended or considered in budget.
Losses due to higher and unscheduled break down of machines.
Losses due to higher end breakages in Winding Warping Weaving Ring frames and other machines affecting yarn and fabric quality.
Losses due to higher waiting time to attend to machine stoppages due to various reasons including manpower shortage or spare delays.
Losses due to higher energy cost of air conditioning humidification steam etc because of machine stoppages.
Higher employment cost due to lower allocation of machines per hand especially in garment sewing lines.
Higher maintenance cost because of improper implementation of preventive maintenance schedule.

Ways to control cost of manufacturing process:

Optimum capacity utilization of machines: Capacity utilization efficiency and speed of machineries depend on lot sizes and quality of product being processed such as yarn count variation or multiple garment styles. Only a few spinning mills manage to produce limited count runs continuously with big lot sizes use appropriate quality of raw material and achieve the highest utilization speed and efficiency. However mills producing multiple counts and fancy yarns run with smaller lot sizes slower speed lower efficiency higher change over and lower utilization.
It also applies to dyeing weaving knitting finishing and garmenting machines. In fancy and fashion fields lot sizes are small hence it is not practical to utilize the capacity speed of the machineries as per their size design or as recommended by manufacturers. Therefore achievable utilization efficiency and speed considered in budget and losses due to these factors are inbuilt in the product’s costing particularly in fashion driven apparel manufacturing.
It is up to the concerned department heads to tackle these challenges and achieve the budgeted utilization efficiency and speed of the machines. Lower efficiency and utilisation of machines increases the process cost and must be addressed critically by concerned department heads through industrial engineering and production monitoring systems.
If the rate of stoppages of any machine is higher than acceptable norms the losses due to excess stoppages should be calculated and shared with the machine operators and shop floor workers to increase awareness and improve operational discipline.

G. Cost of Logistics

Ways to control Logistics cost:

This is one of the important cost elements especially in export oriented garment and textile businesses where shipment volume is high. Proper compactness or density of the materials efficiently stuffing of materials within cartons bags etc quantity loaded in a truck or container can greatly affect transportation costs particularly for garments fabrics yarn cones and accessories shipments.
Proper monitoring and recording of lead time for each consignment from stuffing at the plant to loading in the ship or air should be done and should be critically analysed to minimise the same including factory to port transit time and export documentation processing.
Selection of local transport and shipping agency clearing agent for import and export activities is important for hassle free shifting of goods to the plant and customer end especially for FOB and CIF export garment shipments.
It is recommended that an auditing exercise is conducted from time to time in order to identify areas of leakages and ways of cost reduction in freight charges container utilisation demurrage and detention costs.

H. Cost of Overheads

Management expenses sales and marketing expenses finance cost logistics expenses conveyance expenses guesthouse gardening housekeeping IT telephone etc expenses are all elements of overhead cost across corporate offices buying houses and manufacturing facilities.

Ways to control Overhead cost:

There must be specific accountability and contribution from senior management in revenue growth through effective production planning merchandising strategy and order execution.
The base should always be associated with a large number of employees and the lowest number of leaders to maintain lean organisational structure in garment factories.
Expenses on top management should not be out of proportion. It is essential to assess and keep a balance between the net earning and expenses based on overall factory profitability and operational margins.
Promoting virtual conferences and meetings can also contribute to cost reductions on account of travel and other related expenses especially for buyer meetings sampling discussions and internal reviews.
Efforts should be made towards receiving competitive prices and credit terms for the materials procured including fabrics trims chemicals accessories and packaging materials.
Purchase credit terms should be more or equal than the sales credit terms but it should not be less than the sales credit terms to avoid the burden of interest in apparel export financing structures.
Sales team needs to monitor and control credit facilities to save interest cost and support cash flow focus on speeding up business cycles through faster order closure and shipment realisation.
Focus to minimise raw materials WIP and finished goods inventory to control interest cost through efficient production planning and inventory management systems.
Explore potential disposal of non core assets to optimise carrying cost such as unused machines or excess warehouse space.
Smart banking and negotiation of finance costs and critical monitoring and controlling other overhead expenses is helpful especially for export LC and working capital financing.
Capacity expansion plan must be critically assessed for its viability and payback period. It should only be approved and implement until it is mandatory to promote business based on production demand and confirmed order volume.

Conclusion

Cost reduction drives should be practiced as a routine process in any organisation so as to sustain its competitiveness in the market particularly in highly competitive global textile and garment manufacturing sectors. Every individual in this drive should be given appropriate tasks towards this end and they should be encouraged to participate and share their creative ideas to improve efficiency productivity and operational excellence. However there is always going to be a limit to saving costs and it should never compromise the quality of products or buyer compliance standards. Before deciding on cost cutting one should understand all cost elements comprehensively across raw materials manufacturing logistics and overhead structures.

Mazharul Islam Kiron

Founder & Editor of Textile Learner. He is a Textile Consultant, Blogger & Entrepreneur. Mr. Kiron is working as a textile consultant in several local and international companies. He is also a contributor of Wikipedia.