Pay by piece counting

Last week, I was pleasure to talk with a lean consultant in garment industry and learned so much from his experiance. One topic we discussed related the salary of operator counted by piece they made and I want to share some ideas from this post.

In 70's of Hong Kong, most of the manufacturing industries paid the workers by piece count. Especially, it was common in garment and light industry such as toys and plastic parts assmebly process. In that golden years of manufacturing industry of Hong Kong, this kind of salary scheme was an important factor of success.

In aimed at fully utilize of abandon labor and improve flexibility of capacity, at that period, there were many housewifes stayed in their home to take care of their children. The economics environment is not well growth of Hong Kong citizen, the housewifes needed to earn some money to support their family but they also needed to stay in home to take care of their children. Therefore, so many factories sent the material to the housewifes and let them to make the sub-assembly in their home, they were paid by piece counting because they are not doing the job in factory and hard to count the pay by hour. They only needed to use a common sartorius or some simple tools, they can start the production in their home in spare time but not affect their duty in family.

Excluding the transportation cost of material delivery to the housewifes, piece counting meant the pay of labor fixed. That also meant the total labor cost of the product was fixed, the factory only needed to quality control the sub-assembly and the management of delivery. In that many years, the labor cost of manufacturing was under a well control and the competance was improved.

But in the meanwhile, we always asked a question, "Is the piece counting pay conflict with lean maufacturing?"

As we known, lean manufacturing concept is using to reduce the wastes in process flow in order to reduce the cost. If we pay the operators in piece counting, we can not improve the labor cost by reduce the wastes because the labor cost is fixed. In lean concept, all the effort we spent on setup the continuous flow is aimed to dig out and elminated the wastes. From the activities of wastes elmination, the non-value-added labor cost will be reduced. But, if we pay in piece counting, the value-added and non-value-added cost is combined together and pay in a fixed amount. No matter how we improve the process, we can not improve the labor cost and only can improve the overall capacity.

On the other hand, we encourge the multi-skill operator in lean concept. Piece counting pay is also conflict with that destination. In human being, nobody is willing to change to other work-station which is not familiar because the salary we are paid refer to the quantity they made.

Offcause, what kind of payment schemen we used, we can improve amount the on-line material and semi-product by lean concept. we can also improve the overall respond time of the process, I meant the material staying on-line can be shorten by lean. There are so many items can be improved beside the labor cost, but can we have a best way to combine the idea of piece counting pay with lean concept?

In that discussion with the friends from garment industry, they are going to pay the operator by productivity. That's meant they pay the operators in group by the quantity of finsihed goods they made. It is no longer to pay by the piece they made in semi-product, the team has to find a way to complete the final product as fast as they can. I found that they have setup a continuous flow to replace the traditional mass production method, and I believed that it is most important factor in success of payment scheme changing. I am sure that the pay by productivity is only feasible if they have a well set process flow.

I have not much information how they handle for this in future but I realized everything is possible to improve only if the continuous flow was well set. Whatever you want to change, no matter it is a manufacturing process, material flow, or operation flow of company, the most important thing is setup a continuous flow. (I like to call it continuous flow rather than single piece flow.)

At last, I am sure that the implementation of above payment scheme under lean manufacturing environment would be a great step in garment industry, because it can solve a big historical problem in that industry. Good Luck!