National Productivity & Competitiveness Council

Case study: Benchmarking in the Textile and Garment Industry (Mauritius) Presentation to GBN
Nikhil Treebhoohun 18 20 November 2004

Content
Overview of NPCC Achievements of NPCC in benchmarking NPCC benchmarking tools Benchmarking in the textile and garment industry Benchmarking in other sectors What next after benchmarking?

Gemba Kaizen
Continual Improvement

Innovation
Thinking out-of-the box

5S Certification
Good housekeeping

Knowledge Centre
Building Competitive Intelligence

Benchmarking
Learning from best practices

Civic Action Team

Thinking and acting together

Clustering
Collaborating for survival

ICT Applications
Using ICT smartly

MUDA

The approach
Learning by doing Focus on implementation Improvement on the Gemba Team-oriented problem solving

Benchmarking Unit

NPCC functions

Main achievements (2003-2004)

200 organisations sensitised on the benefits of benchmarking Benchmarking of listed companies Benchmarking of textile and garment enterprises (since July 2003)
Textile Emergency Support Team (TEST): 52 enterprises Launching of FiT (developed by ITC for garment making enterprises)

Main achievements (2003-2004)

Benchmarking of Insurance sector
Data from 9 insurance companies

Linkage with BenchmarkIndex (DTI) Process benchmarking on Customer Care

40 organisations (both public and private)

NPCC benchmarking tools

Overview
Productivity benchmarking based on RAPMODS (RAmsay Productivity MODels System)
Developed by Dr M. R. Ramsay Application (no limits) Current applications in Mauritius: Listed companies, Textile and garment industry (TEST), Insurance sector, Banking sector Future applications: Sugar industry, Manufacturing sector, Hotel sector

Overview
Self Assessment and Benchmarking
Process benchmarking based on the Malcolm Baldrige criteria eBenchmarking (http://www.npccmauritius.com/benchmarking/) Applications: both public and private sector

BenchmarkIndex FiT - developed by the International Trade Centre (ITC) for garment-making enterprises

The RAPMODS (RAmsay Productivity MODels System) model

A performance assessment tool developed by Dr. M. R. Ramsay A model for objective, transparent and credible performance measurement A model for identifying muda from value-adding activities Muda are activities or processes not adding to value, but adding to cost A model for linking productivity and profitability A model for assisting planning and budgeting for continuous improvement

Productivity cockpit

What does the model help to measure?

The contribution of each external input to the output of the company The contribution of each internal input to the output of the company The contribution of productivity to profitability The contribution of each input to value added Areas of low productivity and where change has to be initiated

How is productivity measured?

SYSTEM OUTPUT PRODUCTIVITY = SYSTEM INPUT

Productivity measures are developed using data from Company Financial Statements (minimum 3 years)

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The value adding process

Conversion System

Bought In Inputs (BI): Materials Accessories Utilities Finance Freight Services, etc Conversion System Input (CSI): Direct labour Repairs Management Depreciation, etc

RAPMODS System Output (RSO): Sales Finished products in stock Work in progress Other Income

Total System Input (TSI) = BI + CSI

Assessment outcome
Total Productivity Measure (TPM)
Output of the enterprise for every rupee spent

Profitability (K)
Profit of the enterprise for every rupee of output

Factor Productivity Measure (FPM)

Output of the enterprise for every rupee spent on an input

Capital Productivity (N)

Output of the enterprise for every rupee of capital

Return on Investment (ROI)

Return for every rupee invested in the enterprise

A Textile Enterprise
An example

Textile Enterprise An Example

Universal Productivity Atlas

Factor Productivity Measures

Factor Productivity Measure (MI)
1.55 1.50 1.45 1.40

Textile Enterprise An example

Total Inputs = Bought-out Items + Conversion System Inputs

1.5135

Total Productivity Measure

1.01 1.01 1.00 1.00 0.99 0.99 0.98 0.98 0.97 0.97

1.3929 1.3571

1.0045
1.35 1.30 1.25

0.9910 0.9809

Yr 2000

Yr 2001

Yr 2002

Factor Productivity Measure (CSI)

Yr 2000 Yr 2001 Yr 2002
4.50 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 -

3.8662 3.3161 2.8708

Yr 2000

Yr 2001

Yr 2002

Factor Productivity Measures

Productivity of Conversion System Inputs
Factor Productivity Measure (CSI)
5.20

Textile Enterprise Case Study

Direct wages and salaries & allowances 5.0920

4.50 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 -

3.8662 3.3161 2.8708

5.00 4.80 4.60 4.40 4.20 4.00 3.80

4.3393

4.2835

Yr 2000

Yr 2001

Yr 2002

Yr 2000

Yr 2001

Yr 2002

Depreciation (production)
70.00 60.00
70.00 60.00 50.00 40.00 30.00 20.00 10.00 -

Depreciation (production) 66.0612 50.9238

66.0612 50.9238

50.00 40.00 30.00

32.8083

32.8083

20.00 10.00 -

Yr 2000
Yr 2000 Yr 2001 Yr 2002

Yr 2001

Yr 2002

Factor Productivity Measures

Productivity of Bought-In Items
Factor Productivity Measure (MI)
1.55 1.50 1.45 1.40 1.35 1.30 1.25

Textile Enterprise Case Study

Raw materials and accessories consumed

2.50

1.5135
2.00

2.2687

2.1875 1.6238

1.50

1.3929 1.3571
1.00 0.50 -

Yr 2000

Yr 2001

Yr 2002

Yr 2000

Yr 2001

Yr 2002

Finance costs
19.50 19.00
120.00 100.00 80.00 60.00 40.00 20.00 -

Sub-contracting costs 107.0851

19.2665

19.0467

18.50 18.00

66.1973 43.9753

17.50 17.00 16.50 16.00

17.2200

Yr 2000
Yr 2000 Yr 2001 Yr 2002

Yr 2001

Yr 2002

Capital Productivity Measures

Capital Productivity
0.50 0.48 0.46 0.44 0.42 0.40 Year 1999 Year 2000 Year 2001

Textile Enterprise Case Study

Rupees of output generated for every rupee invested in Fixed Assets

Capital Productivity of Fixed Assets
0.45 0.44 0.44

0.4744

0.4779

0.4402 0.4337 0.4237

0.4310

0.43 0.43 0.42 0.42 Year 1999 Year 2000 Year 2001

Rupees of output generated for every rupee invested in Current Assets

Capital Productivity of Curre nt Assets
100.00 80.00 60.00 40.00 20.00 -20.00

69.34

-3.96
Year 1999

-5.59
Year 2000 Year 2001

Return on Investment
Return on Investment
10.50% 10.00% 9.50% 9.00% 8.50% Year 1999Year 2000 Year 2001 ROI TPM 9.19% 9.86% 10.04% 1.3500 1.3000 1.2500 1.2000
0.50 0.48 0.46 0.44 0.42 0.40 Year 1999

Textile Enterprise Case Study

Capital Productivity

0.4744

0.4779

0.4310

Year 2000

Year 2001

Total Productivity Measure

1.3500

1.3035
1.3000

1.2600
1.2500

1.2403

1.2000 Year 1999 Year 2000 Year 2001

Other possible applications

Productivity monitoring
Evolution of enterprise productivity Benchmarking economic productivity Monitoring of expenditures and budgets

Scenario building
Target pricing, Target ROI Productivity targeting

Benchmarking in the Textile and Garment Sector

Benchmarking of textile and garment enterprises

Crisis in the textile and garment industry National effort to restructure the industry Textile Emergency Support Team (TEST) since July 2003

Guiding principles for TEST

Focus on re-engineering Re-engineering through rightsizing For rightsizing, you have to measure the contribution of each unit and then each input to cost and profit Need for a commonly accepted measurement of contribution of each input to total costs Focus on fact-based analysis at enterprise level

Level I Assessment
Macroeconomic
Country, industry Monetary, fiscal, exchange rate, legal and regulatory framework Numerous reports

Microeconomic
Enterprise, management, production process

Level I Assessment
Using the RAPMODS (RAmsay Productivity MODels System) benchmarking tool 52 enterprises assessed (size: 7 to 5000 employees) One industry report based on indicators (Year 2000-2002) of 35 enterprises (report posted on NPCC website: http://www.npccmauritius.com/test/ ) Database of indicators of 52 enterprises 28 clinics (October 2004)

Purpose of measurement
Healthcheck of enterprises: 1. Sick 2. Vulnerable 3. Promising 4. Healthy

Groups of Firms According to Technological Capability

Source: World Bank 2003

Level I Assessment - process

Enterprise registers for level 1 performance assessment Data Collection Generating Indicators Analysis Confidential report sent to enterprise Enterprise contacts TEST for support Enterprise accepts that report be made available to TEST, banks

Confidentiality Agreement
Individual enterprise data and results are confidential Data and reports are not be circulated without prior enterprise approval

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Data collection mechanism

Data Collection through
NPCC facilitation Enterprise visit NPCC meeting (one-to-one) Group data gathering on regional basis Enterprise collecting data Download form from NPCC Website: www.npccmauritius.com , fills and emails completed form to NPCC (natpro@intnet.mu)

Findings

Health check

Healthy Promising

TPM >1, for last 2 yrs TPM >1, for last yr

20 10 10 12

Vulnerable TPM <1, for last yr At Risk TPM<1, for last 2 yrs
+ All indicators in the red
(Based on data of 52 enterprises, updated October 04)

Areas of difficulties
Materials utilisation and procurement Productivity planning and budgeting Human resource management Financial management Inventory management Technology enhancement International marketing Competitive pricing

Areas for action

Productivity improvement at plant level Productivity planning and budgeting Financial management, including costing International marketing Technical skills upgrading at all levels (from operators to CEOs)

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Enterprise Productivity and Liquidity Year 2002

HEALTHY
3.00

Acid Test Ratio

2.50 2.00 1.50 1.00

21% (9) Productive and Liquid TPM

1 1.1 1.2 1.3 1.4 1.5

0.5

0.6

0.7

0.8

0.9

0.50 -

43% (18) Unproductive and illiquid AT RISK

36% (15) Productive and illiquid

-0.50 -1.00

VULNERABLE

Data based on 44 enterprises

Enterprise Productivity and liquidity Year 2003

4.00

Healthy
Liquidity (Acid Test Ratio) 0.6000 0.7000 0.8000 0.9000 3.50 3.00 2.50 2.00 1.50 1.00 1.0000 0.50

1.1000

1.2000

At Risk
Productivity (TPM) Data based on data of 21 enterprises, October 04

Vulnerable

ROI Performance, 2000-2003

Number of enterprises ROI -ve +ve, <5% +ve, 5% 2000 16 13 9 2001 16 17 5 2002 17 11 10 2003 6 10 4

Position of textile and garment enterprises on Productivity Atlas in 2002 (Sample = 51 enterprises)
11 10

TPM: Total Productivity Measure

9 8 7 6 5 4 3 2 1 0 0.000 0.030 0.045 0.087 0.130 0.185 0.245 0.303 0.360 0.420 0.480 0.540 0.600 0.660 0.720 0.780 0.840

-0.500

-0.445

-0.385

-0.330

-0.272

-0.220

-0.145

-0.100

-0.073

K: Profit/ (Surplus) per unit of Revenue www.npccmauritius.com

-0.040

0.900

Position of textile and garment enterprises on Productivity Atlas in 2003 (Sample = 22 enterprises)
11

TPM: Total Productivity Measure

10 9 8 7 6 5 4 3 2 1 0 0.000 0.025 0.065 0.115 0.175 0.235 0.295 0.355 0.415 0.475 0.535 0.595 0.655 0.715 0.775 0.835

-0.455

-0.395

-0.335

-0.275

-0.225

-0.150

-0.095

K: Profit/ (Surplus) per unit of Revenue www.npccmauritius.com

Performance of the Textile and Garment Sector (Sample data = 22 enterprises in 2003)
Performance of the Textile Sector (Year 2003)
Worst case 2003 average Best Case 5.0000 4.0000 3.0000 score 2.0000 1.0000 (Sample data = 22 enterprises)

-0.045

6.0000

5.0000

4.0000

3.0000

2.0000

1.0000
0.0000 -1.0000 TPM K N ROI RAPMODS Indicators OPM2

0.0000 OPM1 FPMmi FPMcsi

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0.895

FiT international marketing

Target: garment-making enterprises International benchmarking based on criteria from international customers (USA, Europe and Japan) Approached by International Trade Centre (ITC) in April 2003 for a pilot project. A survey was launched, but no enterprise responded In October 2003, a workshop and in-plant interventions were organised with an ITC expert
Only 3 enterprises responded
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Benchmarking in other sectors

Benchmarking of listed companies

INDUSTRY GROUP Banks & Insurance Banks & Insurance Banks & Insurance Commerce Commerce Commerce Leisure & Hotels Leisure & Hotels Leisure & Hotels Industry Industry Transport LISTED COMPANY State Bank of Mtius MCB Swan Insurance Harel Mallac IBL Rogers New Mtius Hotels Sun Resorts Automatic Systems Ltd United Basalt Products MCFI Air Mauritius TPM Yr 2000 1.3535 1.2028 1.0671 1.1104 1.0616 1.0598 1.3314 1.2615 1.0302 1.1729 1.0492 1.0122 K Yr 2000 0.2612 0.1686 0.0629 0.0994 0.0580 0.0564 0.2489 0.2073 0.0293 0.1474 0.0469 0.0120

Benchmarking of listed companies

Benchmarking in the insurance sector

11 10 TPM Anglo-Life Mtius Union-Life SICOM-Life Albatross-Life Mtian Eagle-Life BAI-Life 5 Mtian Eagle-General 4 3 2 1 0 -0.500 -0.440 -0.380 -0.320 -0.260 -0.200 -0.120 -0.060 0.000 0.060 0.115 0.150 0.205 0.265 0.315 0.365 0.420 0.475 0.535 0.595 0.655 0.715 0.775 0.835 0.895 Albatross-General Swan-General

TPM: Total Productivity Measure

9 8 7 6

K: Profit/ (Surplus) per unit of Revenue

Process benchmarking on Customer Care

Self Assessment and Benchmarking Selected process for benchmarking: customer care (criterion 3.2: customer relationship and satisfaction) 40 organizations (both public and private) 2 benchmarking visits where 6 organizations participated (both in the public sector)

What next after benchmarking?

In-plant productivity improvement interventions (TEST LEVEL II) Productivity-based budgeting, monitoring and control (based on RAPMODS)
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In-plant interventions
MOU with Kaizen Institute 57 Gemba Kaizen workshops
26 in the public sector 31 in the private sector 14 in the textile industry 13 under TEST Level II

Workshop duration = 5 days

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Main results of GKWs

Quality improvement Cost savings Delivery (On time, In full & Error-free)
Throughput time Production capacity

Space release

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Areas of intervention
Improvement process flow at the shop floor and administration levels Improvement of physical environment Improvement of machine utilisation through Total Productive Maintenance Stores and inventory management Improvement of production changeover
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Space recovered

9M 3M6 25M
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5M 9M
Cell

7M
Spare m/c area

SITUATION BEFORE

spot QC QC QC QC

iron iron iron

iron fold tag

pack

FG

BEFORE office

Ratio pack

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SITUATION AFTER

spot

In In

QC iron Tag,fold QC iron & Pack QC iron Tag,fold QC iron & Pack

B O X

B O X

About 17 % Space Saved & gained, same Used for FG & Sup. Table

FG

AFTER office

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SITUATION BEFORE

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SITUATION AFTER

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SITUATION BEFORE

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SITUATION AFTER
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Thank you
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