Overtime Work in Garment Industry – Does it Cost Effective for Factories?

I had posted this question in the OCS forum. OCS readers participated in this discussion and shared their views.

My question was

"When factories work overtime for 2 to 4 hours - Does it cost to company? Or factory gains benefit from working over time? To be more specific: Whether cost per piece (labor cost + overhead cost) will increase or reduce when a factory work overtime?
What do you think?"

I am sharing viewpoints of 4 experts who participated in this discussion. They have also mentioned alternatives other than doing Overtime. Read on. If you have a different view or agree with one of them, don’t hesitate to share yours with us.

Keerti Abe, CEO of SewEasy Pvt. Ltd.

"What I feel is company does overtime only when they know that the shipment will not be on time if they do not work extra hours.

So if company does not do overtime and saves labor cost and other costs associated then it will lose on the shipment date and due to the delay the consignment might get canceled! So better they invest in overtimes than the consignment being rejected!!"

Chandradeo Mishra 

"In my understanding is how you plan your overtime (OT). If factory capacity is less and you are over booked then by working 2 hours overtime will increase factory output by 25%, with same workforce and space. Only wage bill, electricity bill will increase other all factors remain unchanged. Also due to extra overtime workers will make more money and they will be motivated but when you plan OT due to poor efficiency then it is a loss."

Pawan

"What Mr. Misra told is very true. No second thought about it. I would like to add little to it

1. The planning of OT should be done at the starting of the month based on the orders and capacity.

2. When we find the capacity is lower than 20% of the order quantity requirement at planned efficiency, then we approve OT (as an thumb rule)

3. If it is less than 20% we need to start of Kaizen (IE projects) to reduce the OT by improving methods & reduce cycle time of some critical process. if that is not possible we try to staff extra persons on monthly basis."

Frank Makuchete, Work-Study Manager at Femina Garments

"Overtime is an unnecessary evil which should be avoided at all cost. When a factory or unit works overtime it increases the unit cost as overtime is paid at 1.5 hours rate. What it means is that for an operator who is paid at the rate of $1.12 normal rate will get overtime rate of $1.73 which will directly increase to the direct labor cost of the garment. Overtime will not increase the Direct and indirect overheads of the company but has a direct effect of increasing the general cost that deals with operator welfare and factory costs like electricity, Food for the factory, Water and so forth.

I would suggest that if you have more orders than capacity it is always good to increase capacity by paying more incentives as this does not increase the day to day cost of running the factory."

I know you also have something to share with us. Write your points in the following comment box.