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Benchmarking against International Standards for spinning mills
working on cotton type machinery: Ring and Rotor frames
- Now check your profitability online
- Know your global position
- Know where exactly to improve and how much
- Fill in few simple forms and get instantaneous results
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OFFERED AT AN UNBELIEVABLY
LOW COST !!!
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For the current Quarter, Oct
- Dec. 2010, data filling is open from 25th Jan, 2011 to 25th Mar 2011
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FAQ - Some Frequently Asked Questions 
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FAQ's
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CAPP and Benchmarking
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1. Is CAPP – Comprehensive Analysis of Profit Performance – an exercise in benchmarking?
Yes, it is benchmarking with respect to the best results, not with respect to the
best practices. CAPP analyses the key factors of production and of market to show
how the best possible level of profitability can be achieved by YOUR spinning mill.
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2. If benchmarking means aiming at the best results amongst participants, how pre-set
standards can be used to ‘fit’ all spinning mills on the cotton system?
Two kinds of key factors govern the total profitability of a spinning mill: production
factors and market factors. Production factors like productivity of men (and women)
and machines or wastages are mostly within control of the mill. Market factors of
fibre price and yarn selling price are controllable by a mill to only a little extent.
Standards can be set for production factors at the optimum levels achievable economically
and thus do not depend on the number of participating mills. The norms for market
factors depend upon the current data from the markets, and therefore depend to some
extent on the number of participants. These norms are estimated from quarter to
quarter. Once the minimum required data (count-wise in different categories) is
available from about 30 mills, the estimates are quite reliable. Additional data
from more participants helps only to reduce further the margin of statistical error
of estimates.
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Production Factors
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3. How to identify a key factor from amongst the numerous factors that need to be
controlled?
Any primary factor which – when improved – contributes about 1% to the net profits
is termed a key factor.
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4. What is a primary factor?
Take productivity at ring frames – grammes per spindle shift of 8 hours for any
one count. This is a primary factor. Secondary factors are: spindle speed, twist,
machine efficiency etc. Standards are set for those primary factors which can be
classified as key factors.
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5. The type of machinery and its mechanical condition differ from mill to mill. How
can ONE set of standards serve any meaningful purpose?
Given the globalised markets in the world, today and tomorrow, any spinning mill
in any country needs to be internationally competitive even in its domestic markets.
Therefore, the minimum necessary level of technology of machines is the same all
over the world. Some small differences in the extent of automation may exist and
are usually justified in economic terms .But their impact on overall profitability
is marginal. The standards are set for such modern machines maintained in excellent
mechanical conditions.
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6. Why is machine productivity only at ring and rotor frames considered as key factors?
Why not at any other machine in spinning preparatory or post spinning processes?
Two reasons: firstly, the more your mill produces at the final stage of yarn making,
the more is the contribution per spindle/rotor shift. Extra production here means
adding directly to profits, not just saving on spinning costs. When a mill increases
spindle productivity, all other expenses on labour and power are nearly the same.
The net gain in profits is the contribution per kg of extra yarn produced, where
contribution is given by “Sales price – Variable cost”. This contribution is several
times more than the reduction is spinning costs. Secondly, increasing machine productivity
at pre or post spinning machines is equivalent to reducing labour cost, which ranges
from 3% to 8% of sales. Lower machine productivity at these stages reflects in a
higher Labour Employment Ratio.
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7. What if my mill does not have modern machinery to the level of standards?
The gains through increased machine productivity show how much more your mill would
get if the ring frames/rotor machines are modern, well maintained and used with
appropriate process parameters. You can compute the approximate cost of modernization
– either up-gradation or replacement – and work out the benefit to cost ratio. Usually
this will be high enough to prompt your mill to modernize the machinery.
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8. Does excellent performance of a mill on Production Factors – as indicated by low
values of achievable gains – guarantee higher profits? Conversely, does poor performance
here mean lower profits?
Not quite: a mill doing well on production factors may be doing poorly on market
factors to give a lower profit. On the other hand, a mill performing poorly on production
factors may make up for it in market factors and or may be placed favourably in
terms of lower fixed costs of power and labour, and lower interest costs etc. It
is for this reason that CAPP computes the GAINS from improvement in performance
on production or market factors. A profit making mill increases its profits by the
amount of gain shown; while a loss making mill reduces its losses by the amount
of gain showed.
As a thumb rule, one can say that a spinning mill can control the effects of production
factors about 80% while 20% is governed by elements outside its control.
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Market Factors
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9. Why is contribution rate a market factor?
The share production on any count of yarn produced by any mill is most often less
than even 1% of the market. Therefore, a textile mill can not use the formula “cost
+ profit margin = price”. The price for a yarn is dictated by market forces. So,
yarn price realized is a market factor. Similarly, the prices of cotton varieties
are dependent on several variables in the climate and business environments. The
prices of manmade fibres are similarly decided. An individual mill has to operate
with whatever fibre prices prevail in the market, making fibre price also a market
factor. Together, the sales price of yarn and the fibre prices decide the contribution
rate [= 100 x (sales price – variable costs)/sales price]. In the case of grey,
unprocessed yarns, the contribution of packing materials to the variable cost of
yarn is very small compared to that of raw materials –fibres. So, the contribution
rate is a market factor independent of mill’s performance.
As a thumb rule, one can say that a spinning mill can control the effects of market
factors about 20% while 80% is governed by the markets.
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10. How does the market factor – contribution rate – behave over time?
The market position of a mill is represented by its average contribution rate over
all yarn counts sold in specific markets. (e.g. combed cotton yarns, export) If
the contribution rate of a mill is found to be, say, 3% below standard in a given
quarter, then it will remain similarly low in other quarters of the year and in
the following years also; unless the mill takes specific steps to improve its market
strength.
Contribution rate is well correlated with yarn count. The nature of this relationship
remains the same over periods, but the position of the plot goes up and down. Some
periods give high contribution while some other periods give low contribution for
the industry as a whole in a country. Hence, a mill needs to compare its market
performance by viewing their contribution rate in relative terms.
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Improving Profitability
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11. Why determine the scope for improvement every quarter — every 3 months?
We are aware of the general industry practice of reviewing performance every month:
that is supplemented by giving additional inputs of
a) comparing with the best results and
b) converting the physical values into money terms via CAPP.
We recommend CAPP once in 3 months because:
- The time span of action for improvement in any production factor is a week or two.
- Follow up in the next quarter is the only way to ensure that real improvement has
taken place due to corrective actions
- Since all computations are on-line, and the data filling is minimal, the efforts
needed to get a CAPP report is very small, compared to the advantages it offers.
- Quarterly assessment of market strength –contribution rate –is needed to see whether
a consistent improvement is taking place over quarters, every quarter.
- If the first year of such quarterly effort shows that the need for quarterly analysis
using CAPP has reduced, then the mill can opt for CAPP once or twice a year.
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12. CAPP only expresses the improvement scope in physical and money terms; but does
not give any hint on HOW to improve!
Mill technologists and managers know the steps to be taken for improving any aspect
of mill’s performance. However, very often, the URGENT takes precedence over the
IMPORTANT! And the management may get bogged down into a buzz of activities not
truly focused on profitability. CAPP is THE tool to direct your mill in the right
direction, and to keep on doing so all the time.
If needed, the textile experts on the CAPP team can help a participating mill in
identifying the right means and actions for achieving the desired improvement. This
kind of help through correspondence on e-mail is offered FREE as a part of the CAPP
On-line. The CAPP team can also help locating a capable consultant to visit the
mill and to help the mill to achieve the desired goal speedily, with less efforts
and costs.
CAPP results –Exhibit I and III –show where the gains are maximum. Mills that find
less scope in production factors may find more in market factors. Mills with excellent
performance on both kinds of factors will generally show profitability of above
5% of sales. But if it happens to be less than say 2%, then the mill needs to search
for products with much higher levels of contribution per spindle/rotor shift.
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Accuracy
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How accurate are the computations of CAPP? Arithmetically, full hundred percent!
After all, computers do compute as programmed. But the use of CAPP results for deciding
to take improvement actions needs to allow for some approximations and for statistical
uncertainties of estimation. Improvement actions are certainly needed when the mill
value falls short of the standard by about 2 times the error values given below.
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13. Machine Factors
For a participating mill ‘accuracy’ really means, “Are the standard productivity
levels (g/ss at MPI=100) exact to the last gramme? Is the standard value for yarn
realisation applicable irrespective of the quality of yarn being sold?”
The answer for such questions is - YES. For production factors related to machines
and wastes, the error is only about ± 1%. If the mill value of Production (g/ss)
or of Yarn Realisation (%) within ± 1 of standard, it is OK. There is no need to
take corrective actions.
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14. Employment
The strength of direct and indirect workers computed using standard allocations
and standard machinery is accurate to about ± 1% For mills with non-standard lower
technology machines, some (usually small) part of their labour employment may be
unavoidably more than the standard.
The validity of the strength of non-production workers holds for mills that possess
the minimum necessary facilities such as a small garden. Mills that have elaborate
facilities like residential colonies for workers/staff etc need to account for such
staff separately.
The designations and duty allocations differ considerably in the cases of staff
in administrative, technical and management cadres. And this also affects the way
in which the staff gets classified into these 3 categories in different mills. Therefore,
it is best to consider first the total staff strength of the mill against the total
of standard numbers. If the mill strength is within ± 5% of the standard, it is
OK.
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15. Market Factors
The expected statistical error of estimation of the standard contribution rate based
on correlation analysis is about ± 2%. i. e. a value of standard contribution rate
of 30% may in fact range from 28% to 32%. Therefore, if a mill finds its ‘mixing
cost (Rs/kg)’ or its 'yarn sales price (Rs/kg) to be different from standard
by 2%, it can be considered OK. (Even though the impact of even 1% increase in either
of them can mean a large difference in profitability.)
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For any other information/queries please mail us at :
assistance@textilestudies.com
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