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How does replacing an existing worker with a cheaper, newer worker affect a company's bottom line?  Labor costs are indeed reduced. But Value Created is also reduced, usually by an amount that dwarfs the labor savings.  We can measure Value over Replacement Personnel--VORP--by comparing the difference in both Value Created and Labor Costs for a typical employee and her replacement.  First, some definitions:

It may be easy to train employees to sew as fast as a veteran in front of an engineer with a stopwatch, but there is a big productivity difference between rookies and veterans—because the veterans spend much more time creating value. Veterans know where the thread is, where the scissors are, how to fix the needle, how to read the work instructions, what to do when an order doesn’t seem right, what to do when the manager isn’t there, what work to do next, how to avoid injuries, how to stop an order with a quality problem, etc. Rookies can sew fast on the cheap but can’t do anything when the work runs out until an expensive manager or mechanic comes over and tells them what to do next.

We have a team incentive program based on the number of minutes worked by a group of sewers.  For 90 days, new employees (and we only hire experienced sewers) only count half of the minutes they worked toward  the bonus. For the next 90 days the employee counts 75% of her minutes. They don’t sew any slower than the veterans, but they produce half as much because they spend so much less time creating value.  This progression from 50% to 100% has proven pretty accurate—bonuses remain static when a new team member is hired, and the team leaders neither complain about nor fight over new employees, which they would if a newbie made bonuses less likely or more likely.

So, by the end of year one, one average new employee has produced 81% of what a veteran employee has.  However, a veteran is never replaced by one average employee.  Because another skill that separates these so-called "unskilled laborers" is the ability to show up for work on time, every day, stay healthy, keep their personal problems out of the work place and play well with others.  After 90 days the team leaders have to decide whether this employee is a keeper.  For every employee we keep, one lasts about six weeks, and one lasts 90 days.  Which means after one year, the 3 replacement employees produces 62% of what a veteran employee produces (45 days, 90 days, and 90 days at 50%, 90 days at 75%, and 45 days at 100%).

We'll call this 62% Productivity Loss.  You need a few other variables to calculate your company's VORP:  Average loaded wage, Entry level loaded wage, and loaded labor costs as a percentage of value created ((labor costs) / (sales - materials costs)).

Value Created Per Hour for your company is simply:

(Average Loaded Wage / Labor as a percent of Value Created) 

With an entry level employee Value Created Per Hour would be 62% of that figure.  However, labor costs would be reduced by (Average Loaded Wage less Entry Level Wage).

So at the bottom of the blackboard, we get:

VORP = (1-Productivity Loss) x (Average Loaded Wage / Labor as a percent of Value Created) less (Average Loaded Wage less Entry Level Wage).

Lets try it with a company with where labor is 40% of Value Created, employees cost $15 per hour, and entry level employees cost $10 per hour.

The company's average employees create $15/.4= $37.50 per hour of value. Entry level employees would create 62% x 37.50 = $23.25 per hour.  But the entry level employee would save that employer $15-$10=$5 per hour in labor. You just saved $5 an hour in labor. Congratulations, Einstein! You just cost your company ($37.50-$23.25)=$14.25 in lost Value Created.

The "VORP", or difference in Net Value Created between and existing and an entry level employee, is (1-.62)($15/.4)-($15-$10)=$9.25. That means existing employees are worth $14.25 per hour more than an entry level employee, or $9.25 after the labor savings are considered... and those were real numbers from a union shop.  The formula goes nuts in sweatshops, where labor costs are tiny percentage of the value created and the difference between veteran and rookie pay is miniscule.  In a sweatshop where labor is 10% of the value added and veterans make $.10 more than rookies a veteran sewer creates four times as much net value as a rookie... DO THE MATH! 

Next:  How did the Garment Industry get this SO WRONG?

The Ethix Merch Blog is launching what will be a regular feature: interviews with the leading authorities in the fields of ethical business, the labor movement, and the environmental movement.

Our first interview is with Robert J.S. Ross, Ph.D., one of the country's best known scholars on sweatshops in the United States and author of Slaves to Fashion: Poverty and Abuse in the New Sweatshops.

In your book Slaves to Fashion you spoke of three pillars of decency that determine working class conditions. In a few sentences, how have each of these pillars evolved since you wrote your book?

Robert Ross: The first pillar is labor unions. Labor unions in the U.S. continue to lose ground in the private sector; BUT have been highly activated during the 2008 election and are now, for the first time in many years, within sight of important labor law reform. The proposal is called the Employee Free Choice Act (EFCA). This is the most strategically important moment for labor in just about thirty years (i.e. since they lost labor law reform during the Carter Administration.) It will be immensely difficult, and I am personally worried that the President’s team is not willing to go all out on it. The opposition has pulled out all stops and is making crazy end-of-the-world claims about its passage.

The second pillar is middle class reformers. At the peak levels (e.g. Washington think tanks and left liberal magazines), the importance of EFCA is recognized. But the communication of this urgency to grass roots, middle class Obama supporters has not yet hit. There thus remains the difference between this era and the turn of the 19-20th century: then the "social question" and the rights of labor were at the forefront for reformers. Now it takes its place lower down on the laundry list. However, health care -- shared concern of many classes -- is consensually at the top. That's good, except that the new administration has accepted the limits of the Beltway Consensus against single payer, and thus is on the brink of muddling through another confusing reform that will not control cost nor simplify access. It will predictably decrease the number of uninsured.

The third pillar is government regulation. We now have a democratic government and open-minded partially liberal President. Already he has agreed to hire more investigators in the Dept of Labor and named a workers' champion for the Department of Labor; that's good. I'm cautiously optimistic.

On an individual level, why should U.S. consumers feel good about supporting Union Made in USA products, if that means taking away business from workers living hand to mouth in developing nations?

RR: In the first instance, our industry is now so small, it supplies only about 10% of demand. So there is surely a lot of upwards room before there is an important dent on worldwide employment.

In addition, this is an ethical matter about which I do have a view, though not a widely articulated one among professors who claim to be globally oriented. I think I owe some allegiance to the society and community from which I have sprung. If American consumers of conscience don't care about American workers, who will? I once sat on a panel between a sewing machine operator working in New York City, from El Salvador, and another woman, same job, in El Salvador. I can't find an ethical standard that would privilege one side or the other; but I can think of a political strategy that has more efficacy where I live than elsewhere.

Finally, what I really want to see is a regulated international trade regime that guarantees workers' rights -- to organize, etc., and to living wages. Let retailers and manufacturers come into the U.S. market with union-made goods from other countries and compete with union-made goods here. That is what Adam Nieman does in his product mix. That would drive labor standards up worldwide. Similarly, the Cambodians are trying to make good labor standards their national brand: and they have lost almost no market share to China in the big Asian surge after the expiration of the Multi-Fibre Arrangement (MFA) quotas.

So, bottom line: buying union is good for U.S. workers; and if others come into the market competing with union made goods from elsewhere it will be good for those workers too.

Let’s indulge in a fantasy for a moment. If the movement succeeds and U.S. sweatshops are relegated to history, will the price of goods go up? Will corporate profits go down? Will the U.S. garment industry completely disappear?

RR: A union goods dominated market WOULD increase prices. They are too low. They are declining portions of family budgets and have increased MUCH less than the cost of living. Studies show we have more (cheap) clothes (and shoes) in our closets than ever before. In 1933, Secretary of Labor Frances Perkins said: "The red silk bargain dress in the shop window is a danger signal. It is a warning of the return of the sweatshop, a challenge to us all to reinforce the gains we have made in our long and difficult progress toward a civilized industrial order." Well, the bargain that is too good to be true is not so good for workers -- and includes fifteen dollar jeans. I have been calculating the cost of imported clothes (now about 90% of all clothing bought.) The price is declining over the last decade for which I have calculations. Mind you, I don’t go out personally trying to pay more in the Department Store. But the fact is we'd probably do better with "fewer but better" clothes in our drawers and closets.

How realistic is a regulated international trade regime? Are you optimistic that it will happen eventually? How soon?

RR: Drastic revision of the WTO or of NAFTA/CAFTA etc. is not likely soon. Requiring Dems in three branches, it still won’t happen in this four-year cycle because this President seems to still be in the "liberal globalist" camp -- not so different from Bill Clinton. However, I could imagine a) a social democratic led EU teaming with labor governments in South America and a few Asian allies b) getting a Democratic president to allow change in WTO. This requires imagining, however, a way of neutralizing China-India or some drastic change in their political dynamics. I don't have a story line that takes me there in an imaginable near term.

Do you think it is possible that President Obama is "biding his time" on labor issues, using less controversial achievements of his initial term to increase Democratic party representation in congress?

RR: "Possible" is a big word. Lots of things are... However, clearly labor forces are making the push for EFCA now -- their calculations are that now is the time. Presidents do not usually gain, and usually lose Congressional seats at mid-term. By 2012 who knows? I might even be a grandfather by then! The imponderables for the conditions of a second term are beyond such calculation. I can think of few of FDR's major legislative accomplishments that were not in the first term. One indeed was the Fair Labor Standards Act (1938) -- but this was a replacement for and foreshadowed by the National Industrial Recovery Act (1933) declared unconsituational during the second term. I do not think the President is "biding his time." I think he (and perhaps more importantly, his Beltway imprisoned advisers like Rahm Emmanuel) either thinks he can't win the whole thing or doesn't care to spend the political capital it takes to get it. Our job is to be the wind that pushes the politicians to do the right thing.
 

Have you ever suddenly forgotten something that you’ve known for years or even decades? Like the words to The Star Spangled Banner or the name of an old friend?

Sometimes we forget things that are second nature to us. We take them for granted for so long that one day they simply float out of our consciousness and fall onto the floor without making a sound.

This phenomenon doesn’t only happen with names and song lyrics. It can happen with our most cherished values. If we don’t think about them and re-examine them from time to time, we can forget the reasons why those values are a part of us. And that leaves us wide open to complacency and makes us vulnerable to clever arguments from those whose values are in fact contradictory to our own.

The problem of sweatshops offers a perfect example. There’s always been a somewhat tempting argument out there that we needn’t worry about sweatshops because they are a “natural” and temporary step in the lifecycle of developing nations. The proof of this, the argument goes, is that they are better than the alternative, otherwise people wouldn’t take the jobs.

The appeasement of injustice inherent in this argument is easily seen through when the argument is spoken by people who view success in the free market as a moral good. But a similar argument has also come from more compassionate voices, notably in a recent op-ed in the New York Times by Nicholas Kristof.

This piece generated substantial buzz. If you google the term "sweatshops," it now comes up as the sixteenth entry. (Thus, support for sweatshops from the left is now a standing part of the international dialog on this issue.) And—judging by the echoes and plaudits that it received around the web—the piece caused a great deal of second-guessing among progressives about whether or not we need to keep fighting to eradicate sweatshops.

As the popularity of Kristof’s article shows, the anti-sweatshop movement can’t afford to assume that rational people who are proponants of justice have fully internalized the reasons to oppose sweatshops. So, for those who find Kristof’s argument appealing, allow me to offer the following counter point.

Kristof claims that working in a sweatshop is “a cherished dream” for many people in the developing world. This may be the case, but dreams don’t always turn out so well when they come true. Just ask the thousands of young Chinese girls who are sent by their families to work in big-city factories only to become indentured servants without the funds to return home to the countryside, even if they wanted to.

And even in those cases where sweatshop labor is an improvement, how does that excuse us from inaction when so many workers are subjected to forced overtime, criminally low wages, unsafe conditions, verbal abuse, and sexual harassment; all while the executives of the clothing giants who order from these factories are living high on the hog?

The main problem with Kristof’s argument is that he seems to assume that the goal of the anti-sweatshop movement is to shut down factories where sweatshop abuses take place. In fact, it is understood within the movement that shutting down a factory in the face of a campaign by workers to better their condition is in and of itself a sweatshop condition. Sweatshop activists don’t want workers to lose their jobs. We’re saying that those jobs should be dignified ones in which workers earn something approaching their fair share of the profits of their labor.

Some factory workers may indeed prefer sweatshops over the alternatives Kristof presents, which include trying to scratch a living out of the garbage dumps in Phnom Penh. However, most still reside in abject poverty without meaningful hope for upward movement. One of the main goals of the anti-sweatshop movement is to help create a global middle class of blue collar workers. Wherever the movement succeeds, greater democracy and a thriving civil society are likely to follow. And this, as much as direct aid or anything else that sweatshop apologists might propose to do, will help that family living in a garbage dump in Phnom Penh, dreaming of sweatshops.

UPDATE: Here's a link to a diary at Talking Points Memo with more discussion on this same topic.

In the eighties, a statistician named Bill James developed "SABeRmetrics (Society for American Baseball Research)"--measurements of baseball player performance that enabled a new breed of general manager, like Oakland's Billy Beane, to compete with the Yankees' willingness to overpay established stars. For example, the Yankees paid for hits, not walks, despite the old baseball saw "a walk is as good as a hit". This allowed Oakland to sign, at a discount, players similar to Kevin Youkilis who got on base via their uncanny ability to discern balls and strikes.

Although Michael Lewis' book Moneyball lionized Beane's prowess in underpaying employees, Oakland has not reached the World Series during Beane's tenure. A Beane disciple, Theo Epstein, has won two World Series with the Red Sox during this time. The difference? SABeRmetrics plus a Yankee-sized payroll. He simply paid more for Youkilis than Beane did.

And the Yankees, in spite of an ever-metastasizing payroll, remain the major league's most profitable team.

My team is Unionwear. We can't win a World Series, but we've been able to win apparel contracts by using "Labormetrics" to hack garment industry paradigms and figure out how to pay employees more-and charge customers less-than the competition.

VORP-Value Over Replacement Personnel-is perhaps THE key stat contributed by SABeRmetrics. VORP uses an elaborate formula to calculate how many more runs a player contributes to his team versus the contribution of freely available talent at that position. How many more games will the Yankees win starting Marx Texiera at first base instead of the 31st best first baseman?

Unionwear can actually calculate VORP. Unlike piecework shops, we operate our factory in teams and track team production meticulously because employee bonuses depend on it-we measure runs, not hits. We only hire experienced sewers, so we can see how team production is affected when a veteran is replaced by the best garment worker who is not starting on another team.

VORP assigns a dollar cost to replacing an employee, but its utility is not limited to employee turnover-it works when analyzing any policies that favor new (usually cheaper) employees over veteran employees. For example:

" Deciding, during temporary expansion, whether to offer existing employees voluntary overtime or whether to hire rookies.
" When overtime is necessary, whether to offer it to new or veteran employees
" When veteran employees have circumstances restricting their hours, whether to offer flex time, or to stick to strict hours and have new hires pick up the slack.
" How much to invest in worker safety and ergonomics.
" Company policies toward maternity or family care leave.
" How much to invest in a positive workplace environment that discourages turnover.

NEXT: how to measure VORP.

It’s not hard to understand why the sweatshop issue gets a lot of attention in the United States. The tragic stories of abused, chronically-poor factory workers make headlines because the garments they produce are bought by name brand corporations and then sold to almost all of us. It makes people uncomfortable and frustrated to be implicated in a system that enriches corporate executives yet keeps factory workers around the world in a state of perpetual, abject poverty.

It’s also not hard to understand why, despite all the attention, solutions to sweatshops have been so difficult to develop and enforce. Simply put, the garment industry has been fully globalized, but international labor laws are effectively non-existent. And as we have learned from the current economic meltdown, the absence of regulation is a recipe for disaster for those on the bottom of the economic ladder.

It is crucially important for consumers to understand that creative solutions are out there, but that they need people to believe in them and support them.

For that reason, Ethix Ventures, Unionwear, Sweatfree Communities and a delegation of garment workers from Hondurus and Purerto Rico attended the National Association of State Procurement Officers this week.

We were there to promote the Sweatfree Consortium, one of the most innovative and comprehensive solutions to ever come out of the anti-sweatshop movement. And the effort is gaining steam. Basically, the consortium makes an end-run around the absence of international labor laws by pooling together the buying power of consumers who care enough to demand basic rights for the men, women, and children in the factories. These consumers can direct their purchasing to specific factories that voluntarily agree to legitimate enforcement mechanisms to protect against child labor, forced labor, sexual harassment, intimidation, verbal abuse and all of the harsh realities of sweatshops.

So who are these benevolent consumers? They are cities and states around the country, and more are joining the effort all the time. These government entities – backed and encouraged by active citizens – are standing up to guarantee that government uniforms for contracted and subcontracted employees will be made ethically, according to the standards of decency that we would demand in our own workplaces.

Ethix Ventures was so proud to be involved in the direct appeal by workers and organizers to state procurement officers from around the nation. We believe that 2009 will see massive growth in this program, and we plan to be there to support the process with our bodies and our dollars, learn about government procurement, and offer our skills and services to help clean up the public sector.

It is all the more exciting to know that if this effort is successful, it can spread to other large groups of purchasers (USAS and WRC are heavily engaged in this process at the university and college level), gradually reducing the proliferation of sweatshops until that wonderful day when the international community gets its act together and enforces human rights in the workplace.

In all the uproar about AIG bonuses in the recent news, it was easy to miss the official swearing in of Hilda Solis, our new Secretary of Labor. 

The secretary was sworn in by swearer-inner-in-chief, Vice President Joe Biden. In this otherwise ceremonial occasion, there was a glimmer of substance for those of us who care deeply about worker abuse and exploitation in the garment industry, here and abroad.

Take a minute to read the transcript and see if you can pick out what was notable about the VP's remarks.

The big news? Vice President Biden actually used the term "sweatshop." It was a somewhat passing reference to Hilda Solis's background as a champion for worker rights, but it did not go unnoticed here. While EFCA has been officially introduced -- and the president looks to be gearing up to fight on its behalf -- the U.S. garment industry is notoriously difficult to unionize and is unlikely to be considered "low-hanging fruit" for the union movement. 

When and if EFCA passes, does the administration intend to let union organizers wage war against sweatshops alone, or will Obama/Biden work to give Ms. Solis the tools and the cover to enforce wage, hour and safety violations that are still commonplace in this country? 

At this point it is anybody's guess, although I am inclined to believe that the president's agenda will not always be geared toward the middle class, but also toward the expansion of the middle class.

However, at the moment, the administration has its hands full, so we look for small hints of an impending full-scale war on sweatshops. I couldn't find the word anywhere on whitehouse.gov, but it was nice to hear it spoken by the Vice President.

My Fellow Employers:

Industry groups who cash my dues checks keep telling me why I should fight the Employee Free Choice Act, and they all make the same argument: EFCA will make it easier for employees to join a union because the Act's transparent election process will enable unions to pressure employees into joining.

Implicit (and often explicit) in this stance is that the existing secret ballot process is more democratic, and that in private a majority of employees would not chose to join a union...because unions will just cash their dues checks and turn around and spend that money on telling employees how to think.

This much is true: EFCA will make union organizing much easier. This Act is not a referendum on “Free Choice”. Even Big Labor isn’t “pro-choice”… it is pro-union. Employers certainly don’t want more democracy in the workplace—do workers get to vote on their paychecks next? And what asshole employee wouldn’t join a union if he was given that opportunity? The rhetoric is about “choice” because "union" is such a polarizing concept (so polarizing that it needs to use the same euphemisms as the abortion issue??), but this Act is not about unions either.

The hand to hand combat over this bill is about universal health care. The main difference between a union shop and a non union shop is that the union workers have health insurance. Unions put so much effort into raising all working standards and the minimum wage that there is not a huge difference between union and non union wages anymore. And no one is fighting over pensions right now. But a union job is a job with health benefits, and a non union job in service or manufacturing is generally one without.

I pay for my employees' health care premiums. If you don’t pay your employees’ premiums, then I guess I pay those too—through higher premiums and higher taxes. If you are my competitor, your lower costs enable you to really undercut my pricing and make it more difficult for me to pay for everyone’s health insurance. So how am I still in business? Well, remember those asshole employees that didn’t join a union when they could have? They work for YOU. You got my sloppy seconds, the workers who showed up late a dozen times during their probationary period, the ones that coworkers didn't want to have to rely on to get their incentive bonuses. Health benefits and union wages pay for themselves, because we are able to attract and retain the most talented, productive, loyal, and resourceful workers.

So how can I afford to pay health premiums for these workers? Unions have quietly become very adept at negotiating fantastic deals on health insurance. Our union plan costs $350 per person. A similar plan for our office workers, who are not union, costs $750. There are a number of reasons for this. First, our union's insured pool is large, homogeneous, and local. 94% of Unionwear’s union employees are women aged 30-55 who live within 7 miles of the factory. None of our office workers lives within 7 miles of the factory. This enables a carrier to tailor a policy towards a demographic and make a deal with a local clinic for the majority of health care--a three tier system: clinic is free, network is affordable, out of network is very high. Second, unions are non profit and do all the marketing, customer service, and paperwork inhouse in spartan offices. How much of AIG’s premiums went to profits, marketing, salaries, and bonuses? A good guess would be (($750-$350)/$750) x (AIG's Revenues).

So if you do pay health insurance for your employees, you can only gain by supporting EFCA. If you are union already, this will make your nonunion competition less competitive and it will lower society's overall health care burden. If you are non union and you pay health insurance costs, chances are a union can lower your health costs without affecting many of your other costs.

That's why the Obama administration has placed EFCA so high on the agenda in the middle of an economic crisis. If EFCA were about strengthening unions, Obama would not be simultaneously proposing policies to weaken the Auto Workers and Teachers Unions. EFCA is about the Obama administration letting the AFL-CIO take a stab at solving the health care crisis. Obama isn't rewarding the AFL-CIO for supporting him. They waited too long after Hillary's funeral to come out for Obama, and it's not like they were going to support McCain. No, Obama is handing the AFL-CIO the same shit sandwich Hillary gagged on 16 years ago, because the health care crisis can't be dealt with when all hands on deck are struggling with the food, shelter, and clothing issue. If union organizers become foot soldiers in the war on uninsured working families, leaving only the unemployable as uninsured, then the health care crisis becomes more manageable.

Does that mean that if you don't offer health insurance you should be fighting against EFCA? Here are some things I can predict with some certainty that will occur during the Obama administration: employers will either be incentivized to offer health care or penalized for not offering health care, or both; it will be easier to organize a union; and the economy will improve. As the economy improves and people get back to work, they are going to want jobs that offer health care. And if you believe my earlier analysis that unions offer much more affordable health care, that means that if most employers end up offering health care, the union employers will actually be more competitive than nonunion employers.

So the last companies to offer health insurance or allow union elections will end up with their reward: the least desirable workers and the most expensive health care.

Even if you don't buy my previous arguments (and frankly, if you compete with my company, I'd rather you keep fighting unions and health care so I can buy your equipment for pennies on the dollar when you goose egg) consider this: Union workers are consumers. Unions are gigantic consumers. In fact, Unions are one of the only growth industries in our economy right now. For example, I sell logo products--uniforms, gear, etc. When a company becomes union, I now have two potential customers: The company, who buys a lot of logo merchandise, and the union, who buys even more logo merchandise, because that's the stuff the employees actually wear.

No matter what you sell, can you imagine how much more you would sell if everyone else's employees enjoyed the benefits of being in a union?

So, when it comes time to decide if you want to take a stand on EFCA, do what most employers do best: think for yourself, and do what's in your best interest: support EFCA.
 

It’s not really in my nature to cast blame, but I’ve been getting pretty sick of this recession and in need of blowing off some steam. So, while talking with John today I decided to unleash the full fury of my anger on…the recession itself, who I’ve dubbed Thurston Horrible Recession, II.

“Screw you, Mr. Recession!” I yelled. “I’ll teach you to cause so much misery…meet me out behind the shed-if you got any guts, that is.”

You know, it really helps to finally have someone to blame. And now that I’ve channeled my anger, I am actually reminded of the many reasons to be optimistic.

Every day when I show up for work there is more bad news to read about the state of our economy—about unemployment, consumer confidence, “walking dead” banks and all the rest. And I’ve been waiting for the other shoe to drop…for orders of Union made, Fair Trade and Green merchandise to dry up along with our supposedly desiccated economy.

But you know what? It hasn’t happened yet. Every day new inquiries come in from folks who are continuing to spend, and continuing to care about what happens to their dollars once their check is in the mail.

Right now I am working on an order of USA made and Union-printed mugs for firefighters in Ellensburg, Washington. They want to give them as a gift to the retired firefighters who come by once a
week for coffee.

We’re also printing organic t-shirts for a company that wants to spend the extra money to ensure that everything they touch meets with the high ethical standards on which they run their business.

I’m working with a large Jewish summer camp in Los Angeles who have been burned by a sweatshop free operation in the past, yet who consider it a worst-case scenario for their young campers to be playing and growing in garments stitched in deplorable conditions by workers no older than they.

So f-you, Mr. Recession! Excuse us if we just go on about our business, along with our brothers and sisters in arms. We were here before you started, and we’ll be alive and kicking long after you’re gone. So do your best. With “Honest O” in the White House and the Ellensburg firefighters hot on your trail, your days are numbered.
 

The Lean Manufacturing consultant had never been in a sewing factory before. But that didn't stop him from promising to double our productivity after a thirty minute tour.

"What a scam artist," I thought.

"If you promise to stay in Jersey and maintain employment levels the Department of Labor will foot the bill."

"Sign me up this instant," I said.

Dozens of us began training to identify, locate and destroy non-value-added work, and permanently create an environment hostile to the return of this parasite.  Our first mission was to increase the productivity of our embroidery machines so they could keep pace with our manufactured goods.  Embroidery machines automate logo stitching and only add value while sewing.  We discovered that between orders—around ten times daily—these 20 sewing-head machines could be idle for two hours while operators worked hard to “get the thread.”

Within weeks we reduced the embroidery machine downtime from two hours to thirty minutes just by eliminating the wasteful, non value added work done "getting the thread".

Before:

• Supervisor would ask for grey thread 
• Operators--many with language barriers-- would sift through sealed boxes labeled “charcoal”, “pewter”, or “asphalt” and bring options back for supervisor approval.
• Operators would return cones and find twenty cones of the color grey approved (which were boxed by the dozen).
• Cones would be dusted off and hand carried in two or three trips to the machines. The ends of the threads would be located and needles would be threaded. Then operators would move to the next color.

We brainstormed how to reduce the time between orders and implemented dozens of ideas:

• Inventory was taken of the thread and supervisors began issuing requests for specific colors by number.
• Labelling of the thread was standardized to include the color family "Yellow" and the thread mill's product name and number "Canary 1234."
• Threads were stored in groups of 20 in clear plastic Ziplock bags and placed in colored bins that represented the color family. Thread ends were to be stored in a notch inside the cone.

Now the supervisor could give an operator a request for 3 thread colors, and the operator could locate the three colors immediately and carry them to the machine in one trip. No counting, cleaning, or untangling would be necessary.

This would not have been possible without two policies: First, we assured the operators we would not lay them off after the reduction in work. Second, we set up an incentive system to share the productivity gains.  So--how did we actually save any money? It sounds like our labor costs increased!  Well, they did--but in embroidery our productivity ultimately tripled, eliminating the need for any subcontracting and blowing our capacity wide open. Its amazing what a big improvement in turnaround time can do for sales.

We repeated this elimination of non value added work throughout the factory over the next two years, increasing profits and wages in tandem every step of the way.