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How to Evaluate Factory Productivity Both Local and Global

In a constantly changing world, locations and factories must be closely, and constantly, scrutinized.

Although the apparel supply chain already had been undergoing plenty of geopolitical changes in recent years, the Covid-19 pandemic and the ensuing demand escalation forced brands and retailers to reassess what constitutes productivity at the factory level. In kind, many are reevaluating their suppliers as they discover optimal, cost-efficient sourcing options and are taking a stand to improve efficiency in their own manufacturing operations.

Brands don’t necessarily have to reinvent the wheel when it comes to understanding productivity, it’s just that the objective of any criteria used must be clearly defined.

One such example, according to Jason Schott, chief operating officer of leather jackets and motorcycle apparel seller and manufacturer Schott NYC, is what he calls “standard average hours,” or SAH. Every jacket style the company produces is assigned an SAH value, which indicates how much time it would take an employee working on each, to determine efficiency and even monetarily incentivize productivity.

“Each one of our jackets can have 40 to 50 value-added operations that go into the product,” Schott said. “We’re tracking every employee and each of those operations, and we’re constantly looking to see how we’re doing. And if those employees are able to do better than the average, then they can make more money.”

Beyond the production benefits, Schott NYC now has the chance to identify key operators who are excelling in their roles, enabling the company to better understand who to promote and where to make certain shop floor processes more efficient.

“We’re actually going through a process right now where we took one of our best operators off of the sewing machine, because he was always thinking ahead,” Schott told Sourcing Journal. “We just saw that there was more potential and now he’s training two people to do his old job, while becoming a supervisor for the floor.”

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Luckily for Schott NYC, the company’s manufacturing operates out of one factory in Union, N.J., which also is shared with the brand’s headquarters. While many apparel operations—especially those manufacturing in factories overseas—don’t have this luxury, having tabs on top performing employees can provide a significant immediate benefit for all parties.

Vast networks need simplicity more than ever

Beyond productivity, global brands may share more concern over exactly where their products originate, leading them to ask whether to diversify operations further or relocate sourcing entirely. This issue has only gained importance in 2021 as forced labor concerns became more prominent and ports remain clogged as the pandemic constrains operations at factories in Southeast Asian countries.

LT Apparel Group, a manufacturer, designer and distributor of children’s wear apparel for brands such as Adidas, Carhartt and school uniform brand French Toast, has a vast sourcing network that it needs to keep tabs on. The company operates its own facilities in Bangladesh and Vietnam, and also has a shared stake in vendor facilities in China, India, Sri Lanka and Indonesia among others via a joint venture partnership called Comtex.

Jill Schwartz-Cheng, vice president of global sourcing at LT Apparel Group, said the decision-making process of its sourcing matrix, and what suppliers to work with, still boils down to a simple methodology of four key criteria.

“We measure performance based on their delivery, their quality, their price value, and this last piece is difficult to measure but understandable, the loyalty of the service aspect,” Schwartz-Cheng told Sourcing Journal. “How much do they value us as their partner? Delivery is quantifiable, while quality and price value could also be measured. The last piece has more of a human factor to it, but that’s how we measure everybody, it’s nothing complicated.”

Compliance is key

When evaluating its supply chain partners, which largely come from Thailand and China, apparel and footwear designer, producer and licensor Xcel Brands prioritizes compliance above all.

Robert W. D’Loren, chairman and CEO of Xcel Brands, highlighted four areas of compliance that he felt were the most important metrics for the company to keep tabs on: systems compliance, calendar compliance, quality control compliance and materials input compliance.

He noted that the success of the four compliance indicators determines whether Xcel will reevaluate where the company sources its products, primarily since the communication and overall system integration process is easier.

“We seek production partners that can work seamlessly in our systems and with our team members to innovate production solutions in terms of materials and make,” D’Loren said. “This applies to apparel, jewelry and home products.”

Although many brands are turning to supply chain compliance companies to conduct overseas factory audits, D’Loren noted Xcel doesn’t work with third parties, instead relying on its own in-house team.

LT Apparel Group, on the other hand, recently entered a partnership with a company that offers supply chain services including auditing, factory assessment, advisory and program management.

“Our compliance team works very closely with them to help us assess new factories and existing factories in terms of compliance and financial stability, to give us more insight,” Schwartz-Cheng said. “Rather than gathering just with our homegrown methodology, we get a more global view of what’s going on.”

Schwartz-Cheng said that the focus on compliance across many apparel brands is still a relatively recent concern.

“If your vendor partner is on board with that, compliance is the new thing that five years ago was not addressed to the degree that is being addressed now,” Schwartz-Cheng said. “Right now, everybody is definitely including sustainability and social responsibility, although the latter has been around for a long time actually. But now the two seem to go hand in hand. It’s not negotiable. It’s a must.”

Don’t overlook traditional KPIs

The environment surrounding the global supply chain may be drastically changing, but that doesn’t mean fundamental metrics such as throughput, cost per unit manufactured or work-in-process (WIP) have lost their luster. If the pandemic has taught brands anything, it is that they must be more cognizant of the supply chain’s underlying issues, particularly when determining sourcing.

While production across facilities factors into Xcel’s decision making, they still go hand in hand with external issues, according to D’Loren, who said “trends in social and environmental issues have caused us to consider alternative sources of production and materials.” Once manufacturing 70 percent of clothing in China, Xcel Brands has dipped that number to approximately 20 percent.

“We maintain the same standards as in the past. That said, there is a greater emphasis on true collaboration with our production partners,” D’Loren said.

Schott agreed with the assertion, citing costs and timing as bigger impacts that must be factored in tandem with traditional metrics.

“Right now, the supply chain is in such a state of flux that many of the KPIs are kind of open ended right now. There’s a rising cost of raw materials, that we have no choice but to accept, because first of all, the cost of shipping by container are insane. And the timing is ridiculous,” Schott said. “So, it is not as much looking at new KPIs as just a new look at the same KPIs. Costs are just completely different than they were even a year ago.”

 Sustainability can’t be ignored

No conversation about production can be discussed in 2021 without highlighting the sustainability ramifications. To ensure that key sustainability KPIs such as carbon and water footprint were being reached and transparently shared with any supply chain partner, Turkish denim manufacturer Isko launched its own system of Environmental Product Declarations (EPDs).

Isko’s EPDs are designed to measure the environmental impacts of one square meter of fabric throughout its life, from growing the raw materials to delivery to the garment manufacturer, with the core fabric production under Isko’s direct control.

The idea is that efficiencies and continuous improvements in both the manufacturer’s processes and raw materials can drive down the impact of textiles.

“The EPDs were created with input from external stakeholders to create validated Product Category Rules (PCR) for denim,” said Ebru Ozkucuk Guler, senior CSR executive at Isko. “These are publicly available for other producers to use to improve transparency on actual impact across the industry and allow for fair comparison between manufacturers. We strongly encourage brands to request EPD Life Cycle Assessments from suppliers to enable a credible evaluation of actual fabric impacts. We now have EPDs covering all our fabrics. With this information we can develop fabrics that are more responsible and track improvements over time.”

The development of more responsible fabrics is yet another major benefit of reassessing factory productivity. Regardless of where a brands’ facilities are located, apparel players that are falling behind must clearly define what goals they are striving for and internally assess whether they are both overthinking their ambitions and prioritizing compliance at an appropriate level.

This article is part of a supply chain visibility report. To download the full report, click here.