Work in Progress (WIP) Control – An essential step towards a LEAN business.
WIP control is key to driving reduced lead times and is essential to be able cope with the increase in quick response/demand, pull-type replenishment programs that are requested by brands and retailers. Even if your buyers are not pushing for short lead time business, there are significant financial and operational benefits to be gained from controlling and reducing your WIP.
The financial benefits
We have seen factories typically carry at least 2 weeks WIP i.e. 14 days. Our customers and own experience show that with the simple controls facilitated through FastReactPlan, WIP can quickly be reduced by at least 20%.
Consider a typical factory producing 15,000 pieces per day, with an average FOB (Free on Board) value of $5 per garment.
One day of WIP costs $56,250 (assuming 75% of FOB Value). 14 days WIP ties up $787,500. A 20% reduction in WIP i.e. reduce by 2.8 days would reduce the working capital invested by $157,500.
Such a reduction in working capital can provide a return on investment for Fast React in just a few months…or put it another way this sum could finance your FastReactPlan system and purchase machines for another sewing line!
What is WIP?
WIP is simply the number or value of part-made products in the business at any one time i.e. for a garment manufacturer any part-made garments from fabric that has been spread, all the way to garments in packing that have not yet booked into the finished goods warehouse.
Why is WIP important?
- Effective use of Financial Resources – WIP costs money to produce (materials, labour and overheads). Excessive WIP means excessive working capital tied up in a resource that is not adding any value.
- Floor Space Utilisation – WIP requires storage space, the more WIP required the more space used. This space could be put to more productive use i.e. adding more sewing lines. In some cases excessive WIP leads to more serious issues such as blocked gangways and fire exits.
- Quality – High levels of WIP means problems can be created a long time before they are detected by roving or final QA; therefore increasing the chance of defects & rework.
- Housekeeping – High levels of WIP mean work is waiting in racks or trolleys for longer thus increasing the chance to get dirty and creased; this increases costs as non value added cleaning and pressing processes are required.
- Flexibility and Lead Times – WIP ‘queuing’ significantly reduces flexibility and speed of response to the market demand. Less WIP means cutting can be closer to the final delivery giving the buyer more chance to make last minute changes to style, size and colour breakdowns based on the latest market feedback.
- Production Control – High levels of WIP provide a false sense of security. Problems are less obvious, the need for solutions less urgent and so often overlooked. High WIP levels make it harder to find and quickly process an urgent order or size/colour selection through the production system.
- Risk – In today’s quick change fashion environment high levels of WIP could mean that you are making the wrong product. Compared to a roll of fabric and finished garments, WIP (i.e. part made garments) have a high cost but low value.
What is an acceptable WIP level?
For such an important business KPI (key performance indicator) it is worrying that many factories simply do not know how much WIP they have at any point in time let alone try to control it. The control of WIP is not seen as a priority, or a systematic approach is lacking so each department simply works to its own ‘perceived’ priorities typically over producing and carrying unnecessarily high levels of WIP. Acceptable levels of WIP will vary according to a number of factors:
- Product type – A more complex product with processes e.g. sportswear with embroidery, printing, higher sewing content SMV (standard minute values), washing etc. will require a higher level of WIP than a simple product such as underwear.
- Production System – A bundle system will require more WIP than a modular or UPS (Eton etc.) system.
- Subcontracting – the need to subcontract processes such as printing or washing will increase WIP levels.
How to control and reduce WIP with Fast React – six steps to WIP control:
1. Educate: It is important to remember that supervisors and workers typically see high levels of WIP as a good sign, as they see they have plenty of work, are productive and have a good opportunity to produce a bonus. Before starting a WIP reduction and control project it is essential to educate your production team about the whole WIP issue. Fast React’s (now Coats Digital) skilled team have the knowledge and experience to guide your team through this project.
2. Measure the amount of WIP currently in the system and set up a daily report to identify the WIP level by order/production department after each days production update.
3. Target: For each production process/product type/factory, a target should be agreed for the amount of WIP required. This can best be expressed in days (based on the current output target). This should be sufficient to allow for a smooth production flow allowing time for any issues to be resolved before WIP shortages occur. If current levels are much higher than your target, a gradual reduction over a period of months is better than a rapid one-off reduction. FastReactPlan facilitates quick and easy configuration of WIP levels by process and factory. The WIP levels are used to generate clear work schedules for each process. Standard WIP levels can be overridden on a case by case (order) basis when more or less WIP is required to address a specific problem.
''Now I don’t get surprising heart attacks as I can forecast well in advance if any storm is coming. We can now prioritise accurately from the yarn to finish garment. Our textile division also, follows the same schedule provided by us through FastReactPlan. Currently we are having around minimum 300 style changes with quantity varies from 500 - 100,000 pieces. Without this tool, I can’t imagine how we can manage this complexity.''
Operations GM, Epyllion Group
4. Plan and communicate to achieve targets: Clear schedules must be provided for each production process; these targets are worked backwards (e.g. cut, embroider) or forward from the sewing schedule (e.g. wash, pack). They should reflect the output requirements of the sewing plan but will be X days (depends on target WIP level) earlier or later.
It’s also critical to check this plan is achievable by looking at daily capacity available vs planned requirement, well in advance. For example, a high number of styles with striped or checked fabric could cause a bottleneck in the cutting room, or a large order with a high stitch count, i.e. embroidery, could greatly reduce output. This means the WIP target cannot be met and non-productive time would be faced in sewing. Planners need to see these issues well in advance to organise additional capacity by arranging additional machines, shifts or subcontractors.
5. Monitor and Control: Identify areas where there is too much or too little WIP and take action to correct. This is easy on a department by department basis but should also be done on an order by order basis to identify orders where WIP may not be sufficient to meet the plan hence delivery schedule. FastReactPlan greatly simplifies the monitoring and control process by quickly identifying WIP shortages (colouring orders on the plan with a red border). You are then able to drill down with a mouse-click to get the exact size and nature of the problem.
6. Improve: As with any KPI, the goal should be to achieve the target consistently and then aim for continuous improvement. Achievement against target should be plotted overall and by process/factory in order to identify trends and areas where further savings could potentially be made. FastReactPlan can process the data from daily production updates through our historic KPI analysis desktop to provide a snapshot of WIP levels and trends.
''Our internal supply chain has reduced from 7 weeks to 4 weeks and will reduce by a further week in the near future. We could not have achieved this reduction without FastReactPlan. The savings to date include 1.5m fewer garments in work in progress alone. FastReactPlan paid for itself in a few months and will continue to add considerable value to the business.''
COO, Zentrix Swimwear
In the current economic climate almost all businesses are asking themselves how to meet the demands of the market in terms of price, flexibility and speed of response. Good control of Work in Progress is absolutely essential to running an efficient and cost competitive business. Reduced Work in Progress allows you to free-up capital for re-investment and use less floor space.
Most importantly, good management of Work in Progress also allows your stitching department to spend more time sewing and supporting departments to spend more time working on the priorities that the stitching department needs. More productive time = higher production efficiency and significant cost savings.
During our worldwide travels, many people have asked us recently, ‘I can get the orders, but how do I hit those price points?’. Well, this is where it all starts! Get the right tools for the job – FastReactPlan. The potential savings through good planning are huge, whether in efficiency improvements (improved on time start, spending more time sewing), on time delivery performance (reduced air freights and penalties), or better management of WIP and raw materials (better workflow, plus reduced working capital and floor space) – it really does work!
The Fashion business is changing…are you?