All you know that employees work for money. If there is a chance for earning more money through better performance employees will jump for it. As a result, an employer gets more production in the same working hours. It will work only if you design your incentive scheme scientifically and if it is fair.
I will share 3 simple ways for designing incentive scheme for sewing operators in the garment industry in 3 parts. All of these are successfully running in garment manufacturing factories. In this article, the term ‘incentive’ indicates the bonus amount or extra amount of money operators earn for their better performance.
The name itself defines that bonus will be paid to sewing operators when operators produce more pieces than target production. Production target is set for the line and bonus is paid to the line. This is one types of group incentive plan where line output will decide whether operators will get incentive or not.
This is the most easy and smart way to design incentive plan for operators. Operators would be happy and motivated as they can count extra pieces produced by them at the end of the day. Hence, they can find out their incentive earnings easily. To keep it simple, incentive rate can be kept equal or less than the current average labor cost per garment. Reason, whatever extra garment is produced by the line will cost you nothing but you can save in overheads, electricity, over time payments.
Managers, who feel operators and supervisors may cheat them in individual performance based incentive scheme, can implement this scheme. Secondly factories, who don’t track details of individual operator performance for their operators, can easily implement this scheme without any difficulty.
Read following 5 steps to design production based incentive scheme.
In this step you will set daily line’s production target to be eligible for earning incentive. Record daily line output from day one of loading the style. Once learning curve ends calculate average line output of following consecutive 3 days. For example, first 7 days line output is 40, 150, 250, 290, 300,310, 305 pieces. You can expect daily average production of 300 pieces from the line without any bonus system. Now to get more production announced bonus for extra production than 300 pieces daily.
Target production can be defined more accurately by using line efficiency% history. Here is the formula for calculating target quantity using line efficiency
I will share 3 simple ways for designing incentive scheme for sewing operators in the garment industry in 3 parts. All of these are successfully running in garment manufacturing factories. In this article, the term ‘incentive’ indicates the bonus amount or extra amount of money operators earn for their better performance.
Part#1 Incentive on extra production
The name itself defines that bonus will be paid to sewing operators when operators produce more pieces than target production. Production target is set for the line and bonus is paid to the line. This is one types of group incentive plan where line output will decide whether operators will get incentive or not.
This is the most easy and smart way to design incentive plan for operators. Operators would be happy and motivated as they can count extra pieces produced by them at the end of the day. Hence, they can find out their incentive earnings easily. To keep it simple, incentive rate can be kept equal or less than the current average labor cost per garment. Reason, whatever extra garment is produced by the line will cost you nothing but you can save in overheads, electricity, over time payments.
Managers, who feel operators and supervisors may cheat them in individual performance based incentive scheme, can implement this scheme. Secondly factories, who don’t track details of individual operator performance for their operators, can easily implement this scheme without any difficulty.
Read following 5 steps to design production based incentive scheme.
Step 1: Set production target (PT):
In this step you will set daily line’s production target to be eligible for earning incentive. Record daily line output from day one of loading the style. Once learning curve ends calculate average line output of following consecutive 3 days. For example, first 7 days line output is 40, 150, 250, 290, 300,310, 305 pieces. You can expect daily average production of 300 pieces from the line without any bonus system. Now to get more production announced bonus for extra production than 300 pieces daily.
Target production can be defined more accurately by using line efficiency% history. Here is the formula for calculating target quantity using line efficiency
Target production = Available minutes in a line * Efficiency% / Garment SAM
It is considered that operators are paid fixed salary. There is two ways to calculate daily average salary for the line.
Add up monthly salary of all operators working in the line. Now, divide total amount by number of working days in a month to calculate average salary that is paid to the line daily.
Or you can first calculate daily wages of individual operators and sump up daily wages of those workers who works in the line to calculate line’s daily wages.
Example: In a sewing line 30 operators are working. 10 of them get 180, 10 of them get INR 200.00 and rest 10 operators get INR 220. So, daily average wages for the whole line is 6000/- (1800+2000+2200). To make the calculation easy multiply operator number by highest operator salary. i.e. 220/- *30 = 6600/-
Distribution of bonus can be designed in two ways –
Include line supervisors, helpers and quality checker under the bonus scheme. Set line production target for them. On reaching the target give them lump sum amount per day.
Step 2: Calculate daily average salary for the line (W):
It is considered that operators are paid fixed salary. There is two ways to calculate daily average salary for the line.
Add up monthly salary of all operators working in the line. Now, divide total amount by number of working days in a month to calculate average salary that is paid to the line daily.
Or you can first calculate daily wages of individual operators and sump up daily wages of those workers who works in the line to calculate line’s daily wages.
Example: In a sewing line 30 operators are working. 10 of them get 180, 10 of them get INR 200.00 and rest 10 operators get INR 220. So, daily average wages for the whole line is 6000/- (1800+2000+2200). To make the calculation easy multiply operator number by highest operator salary. i.e. 220/- *30 = 6600/-
Step 3: Calculate Direct Labor cost per piece (C):
Divide daily total line wages by target production to calculate direct labor cost per piece. i.e. C=W/PT or C=6000.00/300 = INR 20.00
Step 4: Determine incentive rate per extra pieces produced (ET):
If the line performs as per target level then line will produce average 300 piece daily and your per cost of manufacturing will be INR 20.00. Now, if line produces more pieces than your target you per piece direct labor cost will go down as because you are still paying INR 6000.00 to the line. You can set incentive rate two ways
If you use first method (i.e 20.00 per garment) total bonus earning of the line in a day is equal to INR 1000.00. And if you use second method (i.e 16.00 per garment) total bonus earning of the line in a day is equal to INR 800.00.
- If line produces more garment than 300 pieces line will be given bonus of INR 20.00 for each extra garment. That is equal to the average labor cost per garment. In this case labor cost per garment will remain same but your daily production will be increased and order can be finished in less time.
- Secondly if you want to increase production and at the same bring down your labor cost per piece set bonus less than average labor cost per piece. You can set it as 80% of labor cost per garment i.e. INR 16.00 for each extra piece production.
If you use first method (i.e 20.00 per garment) total bonus earning of the line in a day is equal to INR 1000.00. And if you use second method (i.e 16.00 per garment) total bonus earning of the line in a day is equal to INR 800.00.
Step 5: Distribution of incentive amount among operators:
You got total incentive earning for the line. You have to distribute to the operator in such a way that nobody gets demotivated.
Distribution of bonus can be designed in two ways –
- Distribute total amount equally to all operators. In this example 30 operators earned bonus INR 1000.00. So, each operator will get bonus equal to INR 33.33.
- Second option instead of equal distribution, distribute bonus based on work content (SAM of the operation) ratio. For example, if SAM of the garment is 15 minutes and SMV of two operations is 0.75 and 0.45 minutes and operations are done operator X and operator Y respectively. As per SAM ratio operator X will earn bonus = 1000 * 0.75/15 = INR 50.00 and operator Y will earn bonus = 1000 * 0.45/15 = INR 30.00
Include line supervisors, helpers and quality checker under the bonus scheme. Set line production target for them. On reaching the target give them lump sum amount per day.