It is possible to illustrate the huge benefits improvement in productivity by using some simple numbers. Consider the following scenario...
Imagine a company making a range of products with a factory capacity of 100,000 pieces/month and, on average, it sells its products at $10 per piece.
The $10 is made up of material costs, labour costs, overheads and profit. The material costs of the product is $5.00, the Labour cost $2.00 and the company overheads $2.00 giving a profit of $1.00 (10%). By calculation, this provides a profit for the company of US$ 100,000 per month.
On the basis of our proposal to implement GSD and increase productivity by 10%, the company can create an additional 10,000 pieces per month. Since these pieces have been manufactured as a direct result of an increase in productivity, they attract no labour cost and are made in “zero time”. So in effect they have been created with no labour cost and no overhead, therefore the value of these additional garments is equal to the selling price minus the material costs which in this case is $5.
The value (or profit) of the additional garments then is $5.00 per garment x 10,000 (additional pieces) = $50,000 per month. The profit has been increased by 50% from a productivity improvement of just 10% (and 10% is, in our experience, conservative). So, when applying the same logic to higher productivity gains , we are able to offer the following scenarios.
|Productivity Increase||Additional Garments/Month||Additional Monthly Profit|
Ultimately, whichever figure is accepted as the expected result of the GSD implementation, it is clear that the effects of Productivity Improvement far outweigh the cost of implementing GSD, and the ROI can be measured in a matter of months - even when allowing for a “run-in period” of, say, 6 months.