Seven Key Performance Indicators for a Successful Apparel Manufacturing Company

Introduction

For any apparel manufacturing business to be successful, it is essential to track, measure, and calculate all aspects of operations. This includes cost of goods sold, lead time, product quality, inventory accuracy, employee retention, customer satisfaction, and revenue per employee. By tracking these key performance indicators (KPIs), companies can identify weak areas and correct them before they become major problems. In this article, we’ll discuss the top seven apparel manufacturing KPIs, how to track and calculate them, and the benefits of doing so.

Cost of Goods Sold

Definition

Cost of Goods Sold (COGS) is a metric used to measure the direct costs associated with manufacturing a product. It includes the cost of materials and labor that go into producing the product, as well as all other costs associated with the production process such as shipping and handling.

Benefits of Tracking

Tracking COGs allows companies to monitor their production costs and assess the efficiency of their production process. This metric also helps businesses make pricing decisions because it can provide insight into what their customers are willing to pay for their product. Finally, tracking COGs allows companies to identify trends in their production costs, allowing them to make more informed decisions about their production strategy.

Industry Benchmarks

The exact cost of goods sold varies from industry to industry, and even from company to company. As a general guideline, the average cost of goods sold as a percentage of sales tends to be between 30-60%.

How to calculate

The formula for calculating the cost of goods sold is relatively simple. This involves adding up the cost of materials and labor used to create the product and subtracting any remaining inventory at the end of the period.

Calculation example

For example, let’s say a clothing manufacturer has a beginning inventory of ,000, purchases materials and labor for ,000, and has an ending inventory of ,000. The cost of goods sold would be calculated as follows:

Tips and tricks

• Track costs by product, not just a company total.
• Monitor changes in your costs over time to ensure your production process is efficient.
• Compare your COGs to industry benchmarks to ensure you’re rating your products appropriately.

Turnaround time

Definition

Lead Time (TAT) is a metric used in apparel manufacturing companies to measure the time it takes from when an order is received to when it is shipped to the customer. This is a critical factor for companies in the apparel industry, as it directly affects customer satisfaction.

Benefits of Tracking

Lead time tracking helps apparel manufacturers monitor their production process and ensure their orders are delivered in a timely manner. By keeping track of this metric, companies can identify areas for improvement in their production process and take the necessary steps to ensure their orders are shipped on time.

Industry Benchmarks

The average lead time for apparel manufacturing companies is around 7-10 days. However, this may vary depending on the complexity of the order, the type of materials used and the number of customers that need to be served. It is important for businesses to set their own benchmarks for lead time as this will help them stay competitive in the market.

How to calculate

Lead time is calculated by subtracting the time of order receipt from the time of order shipment. The formula is:

Calculation example

For example, if an order is received on July 1 at 10:00 a.m. and shipped on July 8 at 3:00 p.m., the lead time is 7 days and 5 hours. The formula is:

KPI Tips and Tricks

• Set realistic goals for the turnaround time and measure progress consistently.
• Identify areas for improvement in the production process and take action to reduce lead time.
• Monitor customer feedback and take action to ensure customer satisfaction.

[right_ad_blog]

Product quality

Definition

Product quality is a key performance indicator (KPI) that measures the level of quality within a garment manufacturing company. It is used to gauge the company’s success in producing garments that meet customer expectations.

Benefits of Tracking

Tracking product quality is an important KPI for apparel manufacturers. It can help them identify areas for improvement and increase customer satisfaction. Additionally, tracking product quality can provide valuable information about the production process and help the company increase efficiency.

Industry Benchmarks

The industry benchmark for product quality should be determined based on customer expectations. Generally, a quality product should meet or exceed customer expectations for design, fit, material, and durability.

How to calculate

Product quality can be measured by calculating the number of garments produced that meet customer expectations divided by the total number of garments produced. This calculation can be expressed in the formula:

Calculation example

For example, a clothing manufacturer produces 1,000 garments. Of these 1,000 garments, 950 meet customer expectations. The product quality would be calculated as follows:

Tips and tricks

• Regularly review product quality metrics to identify areas for improvement.
• Set industry benchmarks and strive to exceed them.
• Use technology to automate data collection and analysis.
• Encourage customer feedback to help improve product quality.

Inventory accuracy

Definition

Inventory accuracy measures the percentage of time that the company’s inventory accurately reflects the actual inventory on hand. It is calculated by subtracting the difference between the recorded inventory (what the company thinks it has in stock) and the actual inventory (what is physically in stock), then dividing it by the actual inventory.

Benefits of Tracking

• Tracking inventory accuracy helps businesses reduce the amount of money they spend managing inventory.
• This helps them better plan their operations and reduce time spent on manual processes.
• It also helps them identify deviations early on and take corrective action quickly.

Industry Benchmarks

The industry benchmark for inventory accuracy is usually between 95% and 99%. This means that recorded inventory should accurately reflect actual stock on hand at least 95% of the time.

How to calculate

Inventory accuracy can be calculated by subtracting the difference between recorded inventory and actual inventory, then dividing by actual inventory. The formula is:

Calculation example

For example, if a company has a recorded inventory of 100 units and an actual inventory of 98 units, the inventory accuracy is 98%. The calculation is:

Tips and tricks

• Ensure that all inventory records are updated regularly and accurately.
• Perform physical inventory counts regularly to ensure accuracy.
• Invest in a good inventory management system to help track and manage inventory more efficiently.

Employee retention

Definition

Employee retention is a KPI metric that measures the number of employees who stay with a company over a period of time. This metric is important for apparel manufacturing companies because it helps measure the success of recruitment and onboarding efforts, as well as employee satisfaction ratings.

Benefits of Tracking

Tracking employee retention can help apparel manufacturing companies understand the success of their employee recruitment, onboarding, and satisfaction efforts. It can also help the business identify areas where they may need to make improvements. Additionally, tracking employee retention can help the business plan for future staffing needs and budget accordingly.

Industry Benchmarks

The industry benchmark for employee retention in apparel manufacturing companies is typically between 75-85%. This benchmark may vary depending on the size of the company and the industry in which it operates.

How to calculate

Employee retention is calculated by dividing the number of employees who stayed with the company for a given period by the total number of employees at the start of that period.

Calculation example

For example, if a clothing manufacturing company had 100 employees at the beginning of a month and 90 employees at the end of the month, the employee retention rate would be calculated as follows:

KPI Tips and Tricks

• Be sure to track employee retention over time to identify trends or changes in employee satisfaction.
• Encourage employees to provide feedback and be sure to take action on their suggestions.
• Provide competitive salaries, benefits and other incentives to attract and retain top talent.
• Create a positive work environment and cultivate an open and collaborative culture.

Client satisfaction

Definition

Customer Satisfaction (CSAT) is a metric used to measure customer satisfaction with a product or service. It is typically measured by asking customers to rate their experience on a scale of 1-5, with 5 being the highest score. This metric can be used to track customer sentiment over time and make decisions about product improvements.

Benefits of Tracking

• Identify areas for improvement in customer service
• Measure customer loyalty
• Understanding customer satisfaction with the product or service
• Provide feedback on product improvements
• Monitor customer feedback over time

Industry Benchmarks

When tracking customer satisfaction, it’s important to compare your results to industry benchmarks. The average customer satisfaction score for the apparel manufacturing industry is 3.5 out of 5. This number can be used as a benchmark for your own customer satisfaction metrics.

How to calculate

Customer satisfaction can be calculated using the following formula:

Calculation example

For example, if you have a total of 100 customer responses and 80 of them are positive, your customer satisfaction score would be calculated as follows:

Tips and tricks to improve the KPI

• Make sure customer surveys are easy to understand and complete.
• Encourage customers to provide feedback, both positive and negative.
• Take customer feedback seriously and use it to make improvements.
• Give customers incentives to provide feedback.

Revenue per employee

Definition

Revenue per employee is a KPI metric that measures the total revenue generated per employee during a given time period. This metric is often used to assess the efficiency of a company’s workforce and can be tracked to help identify areas for improvement.

Benefits of Tracking

Tracking revenue per employee can provide valuable insight into the efficiency of a company’s operations. It can also be used to identify areas for improvement, such as decreasing costs or increasing productivity. Additionally, tracking this metric can help companies better understand their workforce and how to best allocate resources.

Industry Benchmarks

Average revenue per employee varies by industry. Generally, companies in the retail and hospitality industries have lower revenue per employee than those in the manufacturing and technology industries. Additionally, companies in the professional services industry generally have higher revenue per employee than other industries.

How to calculate

Revenue per employee is calculated by dividing total revenue by the number of employees. The formula for calculating revenue per employee is as follows:

Calculation example

For example, a clothing manufacturing company with ,000,000 in total revenue and 25 employees would have the following revenue per employee:

KPI Tips and Tricks

• Periodically track revenue per employee to get an accurate picture of business efficiency.
• Compare performance against industry benchmarks to ensure the business is operating at an acceptable level.
• Look for areas of improvement, such as increasing productivity or decreasing costs.

Conclusion

Tracking, measuring, and calculating the top seven apparel manufacturing KPIs are essential for any apparel manufacturing business to be successful. By tracking these KPIs, companies can identify weak areas in their operations and make the necessary corrections. The benefits of tracking, measuring and calculating these KPIs include better control over production costs, measuring operational efficiency and customer satisfaction.

Ultimately, having reliable data helps manufacturing companies stay competitive and improve processes. With these seven essential KPIs, apparel manufacturers can gain valuable insights into their business and make more informed decisions.