In a textile unit, performance in some areas often remain unreported and thus goes unnoticed by the top management. Such areas are discussed by S Srinivasan, Retired Director (Operation), Bhojraj Ind Plc.
Many textile mills in India operate with a slender margin and thus there is a dire need to control various relatively smaller costs in a competitive environment where selling price is determined largely by the market. The utilisation of raw material, energy, labour and machinery are critical and hence always reported in comparison to the industry norms. But a scrutiny of utilisation of some resources often left unreported. Maintenance of a few records which are otherwise not necessary for a financial or cost audit will be needed to get details on the utilisation of these resources. [These items are marked (*) in the following paragraphs.]
In machinery utilisation
- Loom width utilisation (*):
- A loom has an important specification called “width of a loom” which indicates the maximum width of fabric that can be woven on it. Eg: On a 52”loom, the fabric corresponding to a final (processed) width of 44” (or say 1.1 m) can be woven. This means, for every single lin.mtr, 1.1 sq.m of fabric will be produced. In case the width utilised is 48”, then correspondingly less sq.m (=48*1.1/52=1.02 sq.m) i.e. there is a loss of 0.08 sq.m (approximately 7 per cent) for every lin.metre produced. This loss arises due to less utilisation of available width on loom. A CMA should ask for a record on loom width utilisation. Many weaving units do not record this utilisation and ignore this under the plea that the weaving department produces fabrics as per the requirement of the sales department. Thus there can be under utilisation of capacity in terms of sq.m of fabric that can be produced.
- The reed space utilisation has another aspect also. For eg: let a textile mill sell a processed fabric of width 40” for Rs 30/lin.mtr (=Rs 30/sq.m approximately) and say the prorata sel.price for 44” fabric (i.e 1.1 sq.m) is expected as Rs 33. But, if the additional (differential) cost for a fabric of 44” is Rs2/lin.mtr, any price above Rs 32 will benefit the seller and any price less than Rs 33 will benefit the buyer. In case, the buyer is a garment unit, the linear length of the fabric of 40” width saved, on using 44” fabric is more than 7 per cent, based on the saving, the garment unit may offer a price higher than Rs 32/lin mtr of fabric of width 44”. Thus working closely with the need of the customers, a win-win situation may arise.
- In a shuttleloom with a “dobby”, say of reed space 58”, a grey fabric of width of about 110 inch can be made by a suitable weave. Large size bed sheets without joints in the middle, can be made from looms of nearly half the width. (A suitable yarn count and the reed that do not adversely affect the process of weaving should be selected). A query can be raised by a CMA whether any sales order is left out thinking that the available reed space is not enough for making such wider fabrics.
- No. of product changes (*): In a spinning unit, a frequent product changes indicate too many yarn counts in the production line. Frequent changes reduces machine utilisation. A simple index may be the number of products made at a time and the total number of products made in the reporting period. For a spinning mill, SITRA suggests only five yarn counts at any time and a maximum of eight yarn counts in year for a 30,000 spindle unit. There will be more downtime at ring frame due to creel change, if the change is in terms of change of raw material and back material hank(count) and in case of man made fibre (MMF ), if the lot size of the MMF is small. Frequent count changes indicate vulnerability of the company’s product in the market.
Index on machine parameters used (*)
- For a given cotton and a given yarn count, the expected yarn-strength can be found using SITRA recomendations. The ratio “Actual StrengthX100/Expected strength as per SITRA” indicates process efficiency. The norm for the ratio is: Good: 100, Average: 95 and Poor: 90. Lower figs for the ratio indicates poor m/c conditions and/or improper process parameters.
- As a corollary, for a given yarn strength and yarn count, find the required cotton quality index (=Ls/f)#and if the index of the actual cotton used is more, it shows that the mill uses richer mixings (due to poor mechanical condition of m/cs or improper process parameters). The difference in cost of the two mixings can be quantified and reported. In some spinning mills, instead of improving the mechanical condition of the machines (a cheaper option), the costly option of richer (raw material) “mixing” is used to get the required quality. (#)L=Length , s=strength and f=fineness of the cotton fibre.
Machine productivity (*)
A CMA should check whether the figures reported as “actual output” is actually weighed/measured physically. For this purpose, it is necessary to check whether the output is of the principal machine (ring frame, O.E machines, looms, etc,) or it is of the packing dept. In line with the excise-dept. requirement, delivery may be taken as the production. Then, such production should not be taken as the output from the principal machines said earlier.
- To check whether the output is a derived figures from part actual and part formula (Eg: Ring Frame hank meter reading X a constant)
- To check the actual count is coarser or finer than the nominal count (*) and whether actual count is used in the production calculations (some mills use nominal count). (*)
- To check whether the moisture is added to yarn (*)
- as per the need of the customer. To get the details. (*)
- To check if adjustment for moisture is given and the input-output are adjusted for standard ambient condition (*).
Utilisation of raw material
- Comber waste/noil (*): (In comber short fibres in cotton are removed). SITRA has given a empirical formula which says ”yarn strength will increase by 1 per cent for every 1 per cent comber waste extracted”. Conversely, if a mill requires, (say due to customer demand) 10% higher yarn strength than what can be obtained without extracting the Comber Waste, then it should extract 10 per cent noil and not more. Often, higher wastes are extracted (than what is necessary) in the name of better quality demanded by customers.
- Saleable waste: It is the waste extracted and sold. The actual quantity of waste to be extracted depends on the impurities (called trash) in the RM. For a given level of trash (and hence the level of cleaning required), compare the norm with the actual percentage of waste removed. The waste removed at the cost centres “blow room” and “cards” should be looked into. The waste contains both trash and lint. The extra waste removed indicates more loss of good RM (called lint). The norm is to remove 1 per cent trash in RM, 1.3 per cent (max) waste can be extracted in blow room and 1.45 per cent in cards. [If the waste levels is more, various Settings (feed plate, grid bars, etc.), fan speeds, number of beating points, etc, should be looked into by the production personnel.]
- Invisible Loss: (Norm: 0.5 per cent): To arrive at proper invisible loss one should check whether the mill, separates transportation/purchase loss in quantity (*), adjust for moisture in RM, yarn and waste in quantity packed and in stock (*) and check whether regular calibration of weighing scales is done.
In textiles, the loss in sales realisation due to discount to be offered for defective fabrics is called value loss. This is an important parameter to be looked into as it has direct bearing on sales realisation. Higher than the standard value loss may arise due to higher percentage of sub standard fabrics made (classified as sub standards, two parts, short lengths, seconds, fents, rags, chindies, etc.) and/or due to higher (than standard) discounts offered to these categories. The variance analysis should quantify the loss due to these two reasons separately, at least for “A” category products (as per ABC analysis based on sales value)(*). This representative value loss (rather than the standard value loss) is to be incorporated in stock valuation of the finished goods (*).
The standard ring frame operator and doffer allocations for ring frame is given by SITRA. The actual may be compared, discussed and large variations may be reported. In an over enthusiasm to reduce labour cost, some spinning mills give over allocation without considering the load on tenters on actual end breaks, skill levels (trainee, experience on higher spindle speed etc)and enter into problems of excess roller lapping, more pneumafil loss, machine break downs, etc.
Before commenting on no. of labour:
- Check the # of trainees, average years of experience – the information is available from HRD (*)
- Availability of training for tenters, doffers and mechanics
- Allowance for absenteeism should be taken for each category of workers and accordingly the additional workers are to be provided.
Power and energy conservation (*)
- The level of motor burnouts especially of ring frame and humidification motors. The burnout should not be more than 0.25 per cent in a year in spinning preparatory departments and 0.1 per cent in ring frame.
- A look on energy conservation measures taken in the following areas may be looked into:
- Use of thermic heaters instead of steam or electrical heaters for drying in printing machines
- Lowering steam pressure and thermic oil temp when thermosetting is not in operation
- Reducing idle running of m/cs, over drying, cold air infiltration in drying chambers
- Regular cleaning of radiators where heat transfer takes place
- Use mangles for removing water/liquor before drying and check mangle expressions
- Using wet cloth for stretching for printing and optimise the sequence
- Cutting liquor to material ratio
- Use temperature-gauges to avoid over use of steam
- Cutting down water, steam and compressed air leakage
Looking at these minor areas for improvements will bring in tighter control on cost. The actual may be compared with respect to industry-norms. Superior norms (for EOU units and other well performing units) should be taken for comparison.
S Srinivasan is M Tech (Textiles), FCMA, MBA (Finance). He is a Retired Director (Operation) from Bhojraj Ind Plc, Lagos and a practicing cost accountant, Chennai. He can be contacted at: Email: firstname.lastname@example.org | Mob: 9840398160