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Hanin Garment Manufactory saved 20 per cent by adopting the one-piece flow system |
The global economic downturn has made cutting costs paramount. But cost cutting need not mean reducing staff. Many companies have implemented measures to save money by raising efficiency, whether it's through cutting non-staff overheads or raising productivity.
Take Hong Kong's Hanin Garment Manufactory, which has been making woven shirts and trousers primarily for the United States market since the 1970s. About two years ago, the company adopted a "one-piece flow" system.
"At the time, the renminbi was rising, which meant our costs were increasing," says Paul Chan, Managing Director of Hanin. "We had two options: we could either increase capacity, or we could become more efficient. We chose the latter."
One-Piece Flow
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| Raising efficiency is the only way to survive, says Hanin Garment Managing Director Paul Chan |
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According to Mr Chan, the one-piece flow approach makes the production process as efficient as possible. "It maximises the efficiency of non-value-added skills such as quality control and transportation as opposed to value-added skills that clients pay you for, like sewing, packing and buttons," he explains.
The system, which focuses on producing only the necessary quantity with the minimum input of resources, has been adopted by large manufacturers, including Japanese carmaker Toyota. But it's rarely used by small and medium-sized garment firms, because "there has been no incentive to do so with the supply of cheap labour in the Chinese mainland," Mr Chan says.
Hanin previously employed the divisional system, which involves each worker specialising in one part of the garment-making process. But, according to Mr Chan, the old system left an imbalance. "You would end up with 1,000 collars and 300 sleeves. One-piece flow synchronises manufacturing by calculating how much time one person can do their job in before passing it on to the next person."
According to Mr Chan, the major investment needed is the necessary time to overcome initial scepticism. "We had to convince our workers, who get paid by the piece, that the system would work to their benefit," he said.
There was an initial drop in efficiency as workers adjusted to the system, which requires team effort. "In the first year, we struggled. We had to convince people to try it," Mr Chan says.
Efforts Pay Off
Eventually, their efforts paid off. Mr Chan says efficiency went up 15 to 20 per cent, which translated into similar increases in staff pay. Meanwhile, the production cycle was cut from 14 to five days, allowing the company to improve scheduling, resulting in a 35 per cent cut in staff overtime.
"The idea is very simple, but breaking people's mindset was the most difficult," he adds.
Efficiency and cutting costs are not necessarily at the forefront of company policy when business is good. A survey conducted by the cost-management and procurement consultancy Expense Reduction Analysts (ERA) found that 48 per cent of respondents said they had no cost strategy in place, while 74 per cent said that the concept was low on their priority. The survey was conducted before the economic downturn.
Is This Necessary?
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Simon Chan,
Consulting Services Director,
Expense Reduction Analysts |
"In good times, people tend to forget, as they're busy expanding or raising revenue. They think the savings that can be achieved is just a small percentage," says Simon Chan, Consulting Services Director at ERA.
Represented in more than 20 countries, ERA works with private and public sector companies to identify non-staff overhead savings opportunities.
"Many firms don't understand the value of cost cutting," says Mr Chan, who adds that there are more than 100 areas where business can look to make savings. ERA Hong Kong focuses on about 30. They range from printing and telecommunications to IT, office supplies and energy costs. Added up, Mr Chan says, it offers potential savings of up to 20 per cent of a company's non-strategic expenses. "The question we often ask our client is, "Is this necessary?'"
One of the easiest cost-saving measures is reducing a company's telephone bills. "Even though the cost of long-distance calls has come down in the last 10 years, there's still room to cut by making phone calls through the Internet."
According to Mr Chan, printing is another area of savings. He says companies can save money by using the photocopy machine to print directly from the computer instead of the laser printer. And, by reducing the variety of print copy options, firms can save up to 95 per cent of their total printing cost.
Smart Savings
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Using the photocopier instead of the laser printer is one simple way of reducing costs |
Bigger savings can also be realised through changes that require an overall policy review. Companies can consider relocating to a less expensive area or reviewing their insurance coverage. Mr Chan points out some businesses are overspending on coverage that they don't even need.
In one instance, Mr Chan cites a client, whose restaurant chain saw half a million dollars in savings from toilet paper costs alone through better inventory and sourcing.
Experts say smarter choices, whether by enhancing efficiency or cutting waste, help the bottom line, an issue that has special relevance during tough economic times.
"I don't regret what we've done," Hanin's Mr Chan says. "And, after the financial tsunami, I appreciate the decision even more."
Related Links
Hanin Garment Manufactory
Expense Reduction Analysts
