Understanding Productivity in Pakistani Garments (Pilot Project) - PowerPoint PPT Presentation

Understanding Productivity in Pakistani Garments (Pilot Project) Azam Mahvish Rocco Theresa Chris Chaudhry Faran Macchiavello Thompson Woodruff Lahore School of Lahore School of Warwick University Lahore School of Warwick University Economics Economics Economics September 2014 IGC – Growth Week, Pakistan R. Creedon, J. Krstic, R. Mann, K. Ruffini, M. Skuodis, K. Smula, M. Vlekke

Main Motivation DEVELOPMENT PERSPECTIVE Garments and Textile industries historically associated with • “structural transformation” A laboratory to understand broader issues underlying persistent • productivity differences across similar production units GLOBAL PERSPECTIVE China accounts for approx. 30% of world’s RMG exports. • Increase in wages in China enormous opportunity for other • countries: Bangladesh, Myanmar, Ethiopia, Pakistan … PAKISTAN PERSPECTIVE International Trade & Policy Environment • Job creation: Garments vs. Textile •

Main Motivation 3 Within Asia, Declining Competitiveness Of China Lending Opportunity To Other Low Cost Countries 5.0 Labour Cost (USD/hr) in Textile Industry, China Turkey 4.5 China, coastal 4.0 India 3.5 Indonesia 3.0 Vietnam 2.5 2.1 Pakistan 1.9 2.0 Bangladesh 1.5 Widening gap in 0.9 0.8 1.0 0.7 labour cost of 0.5 China and other Asian countries 0.0 2002 2004 2007 2008 2011 Source: Werner International, Textile Intelligence

What do we plan to achieve ? 1. INTERNATIONAL BENCHMARKING Compare productivity and managerial practices across firms • and countries (building upon data collection in Bangladesh) Target IGC countries: Pakistan, Myanmar, Ethiopia, India • Develop a benchmarking tool to be give to factories • 2. PAKISTAN CONTEXT Design interventions to increase productivity grounded on a • detailed understanding of constraints and best practices

Pakistan: What have we achieved? 1. COMPLETED DATA COLLECTION FROM 7 FACTORIES Focus on Lahore (an estimated population of XYZ factories) • Sample selected by building relationships with associations and • buyers, possibly representative of broader sector: 4 Large firms, • 1 Medium sized firms, • 2 Small firms. • (Line supervisors survey ongoing) • 2. PLANNING AND FORMULATION OF INTERVENTIONS Likely to focus on either information and/or quality • Strengthened relationships with stakeholders: • FACTORIES • BUYERS & OTHER STAKEHOLDERS •

Production & HR Data: Overview Factory Size Production Data Supervisor Main Products System Quality Survey ( lines/mixed ) ( yes/no ) OP SUP 518 28 line High yes Polo Shirts, Hoods AA BB 910 28 line High yes Denim Jeans, Jackets and shorts 1800 18 line High yes Denim Jeans CC 510 12 line High yes Denim Jeans DD 105 3 line High yes Knit Tops, Knit Bottoms, EE Woven Tops, Woven Bottoms, Scarfs 1400 20 line Low/medium Yes at least 10 Polo Shirts, Hoods FF 100 2 mixed low Yes Denim Jeans GG Data collected for 3 months [Feb. 1 st to Apr. 30 th ] Data entry expected to be completed by December 2014

Supervisor Surveys In 7 factories we conduct surveys with (line) Supervisors. The • population consists of 111 Supervisors. We estimate to survey 95 supervisors in total. Some of them will be production supervisors while some will be quality supervisors/Inspectors. Survey currently in the field (completion in September/October • 2014) Focus : • - line level practices, - worker’s well-being, - quality, - authority - compensation to workers

Spot the Difference PAKISTAN

Spot the Difference PAKISTAN BANGLADESH

Measuring Productivity Measuring physical productivity when units of outputs are • heterogeneous (apples and oranges) is challenging Need a way to convert physical output of heterogeneous products • into a common unit Each piece of garment comes with a SMV (or SAM ): standard minute • value (or allowance ): time required to produce 1 piece of garments*

Measuring Productivity

Measuring Productivity

Measuring Productivity Measuring physical productivity when units of outputs are • heterogeneous (apples and oranges) is challenging Need a way to convert physical output of heterogeneous products • into a common unit Each piece of garment comes with a SMV (or SAM ): standard minute • value (or allowance ): time required to produce 1 piece of garments* This allows us to measure (heterogeneous) output using • (homogenous) time units Output Minutes # output pieces * SMV Efficiency= = Input Minutes # operators * runtime

Watch Your Neighbours: Efficiency Around the Globe Country Average Pay- Key Product Average Technological FTA / GSP with Raw Material Countries out (USD Labour Pool Category Operational Advancement Major Markets Availability p.m.) Efficiency China 220-270 All Products 55-57% 813.5 mn High - All Indonesia 170 Woven Synthetic 44-46% 113.7 mn Medium EU, US, Japan Synthetic Fibre EU, US, Japan, Vietnam 120 All Products 40-42% 46.5 mn Medium None Aus. & NZ Pakistan 116 Denim 42-44% 53.8 mn Medium EU, China Cotton EU, US, Japan, Cambodia 88 Denim, Woven 42-44% 8.0 mn Medium None Aus. & NZ Knitwear, Woven EU, Japan, Aus., None Bangladesh 83* 38-40% 70.9 mn Low Canada, US 1 Bottoms Japan, EU 2 India 130 All Products 44-46% 467.0 mn Medium Cotton Source : Technopak Analysis 1- GSP with US has a negligible impact on T&A exports from Bangladesh to US, 2- EU- FTA under discussion,

Dispersion Across and Within Units Across factories .08 75 th / 25 th : 1.95 ; 90 th /10 th = 2.79 Benchmark .06 (Syverson 2004): 75 th / 25 th = 1.92; 90 th /10 th = 4.02 .04 Within factory (across lines) 75 th / 25 th = 1.22; 90 th /10 th = 1.64 .02 0 0 20 40 60 80 Efficiency (Output Minutes / Input Minutes) TFP Disp. (Across Factories) TFP Disp. (Within Factories) Sample: preliminary data from 5 Bangladeshi factories

Benchmarking Tool Introduction Select the time period for analysis Select the month for analysis Select the date for analysis. Financial Metrics A. Labor Cost per Earned Minute (Tk) B. Average Cost for Wasted Time (Tk) 5 6,000 5 5,000 4 4 4,000 3 Taka 3.4 Taka 3 3,000 5,467 OT 2.3 2 NH 2,000 2 - 3,063 1 1,000 1.5 - 1 1.0 0.9 1,049 191 0.6 - - Line-04 Line-05 Line-06 Line-07 Line-04 Line-05 Line-06 Line-07 Sewing Lines Sewing Lines Adequate firms capabilities • Benchmarking against other firms in same country/other country •

Next Steps 1. ENTER & PROCESS DATA, “APPEND” TO BANGLADESH DATASET 2. ANALYSIS OF DATA AND SUPERVISOR SUVEYS 3. DESIGN OF INTERVENTIONS: Two main areas have been identified: 1. Information flows within firms 2. Quality upgrading