Why the apparel industry must rethink KPI benchmarks in changing times

The global apparel industry is in a state of rapid transformation. Technological advancements, shifting consumer demands, and increasing competition have challenged traditional operational paradigms. Yet, amidst these changes, one crucial aspect remains under-examined: the relevance of existing Key Performance Indicator (KPI) benchmarks. As the industry progresses, it is imperative to revisit all key KPIs—not just efficiency—to ensure they align with the demands of modern manufacturing.

The Problem with Legacy Benchmarks

Historically, apparel manufacturing KPIs have been pegged to benchmarks that, while reasonable for the era of manual processes and limited technology, are now inadequate. Metrics such as a 60 per cent efficiency rate or traditional defect tolerances fail to capture the potential of today’s operations.

Consider the advancements in automation, data analytics, and lean manufacturing techniques. These tools enable factories to achieve higher standards across all KPIs, from quality and delivery to cost and workforce management. As Steve Jobs once said, “Innovation is the ability to see change as an opportunity—not a threat.”

Why the Industry Must Rethink KPIs

Kaizen, a principle rooted in continuous improvement, is integral to modernizing KPI benchmarks. By focusing on incremental changes rather than sweeping overhauls, Kaizen empowers factories to improve productivity, quality, and cost-efficiency systematically. Its adoption has led to significant advancements, such as a 15 per cent reduction in production time and a 10 per cent increase in quality compliance in leading apparel hubs like Vietnam and Bangladesh.

1. Efficiency: Beyond the 60 per cent Standard

Efficiency is a cornerstone KPI in apparel manufacturing. While a factory operating at 60 per cent efficiency was once considered effective, it is no longer sufficient. With the integration of automation and digital monitoring tools, a 75 per cent efficiency benchmark should now be seen as the minimum standard. Recent industry data shows that top-performing factories in Bangladesh and Vietnam are already achieving efficiencies between 72 per cent and 78 per cent, setting new benchmarks for others to follow.

2. Quality Metrics: Raising the Bar

Quality remains a critical factor for customer satisfaction and cost management. KPIs such as Defects per Hundred Units (DHU), Buyer Inspection Pass Rate, and Cut-to-Ship ratio must be re-evaluated. Factories should aim for:

• DHU below 5 to minimise rework and maintain brand trust.
• Buyer Inspection Pass Rates of 98 per cent-100 per cent, ensuring consistent product quality.
• Cut-to-Ship Ratios above 99 per cent, reducing waste and maximising material utilisation.

A 2024 study revealed that reducing DHU by just 2 in a 1,000-worker factory can save over US $ 250,000 annually.

3. Delivery KPIs: Meeting Modern Expectations

On-time delivery is critical in a fast-paced, demand-driven market. KPIs such as Planned Cut Date (PCD) and On-Time In-Full (OTIF) must align with the realities of shorter lead times and just-in-time inventory models. Factories should aim for:

• 100 per cent adherence to PCD to avoid production delays.
• OTIF rates above 98 per cent, reflecting reliability and trustworthiness.

According to McKinsey, brands with reliable supply chains experience up to 20 per cent higher customer retention rates.

4. Cost Management: Holistic Tracking

Cost KPIs must evolve to provide deeper insights into financial performance. Instead of merely tracking the cost per minute or cost per machine, manufacturers should include:

• Cost of Quality (CoQ): A detailed breakdown of conformance and non-conformance costs to highlight areas for improvement.
• Energy and Resource utilisation: Metrics to track energy efficiency and resource consumption as part of sustainability efforts.

The International Energy Agency (IEA) estimates that implementing energy-efficient measures in factories can reduce energy costs by up to 30 per cent.

5. Profitability: Beyond Basic Margins

Profitability KPIs such as Activity (monthly work value) and Floor Cost Percentage (conversion costs as a percentage of revenue) should focus on maximising resource utilisation and optimising the product mix. For instance:

• Activity benchmarks should account for automation and labor optimisation.
• Floor costs should not exceed 20 per cent of overall earnings.

A leading factory in Vietnam reported a 15 per cent increase in profitability by optimising its product mix and automating low-value processes.

6. HR and Training: Workforce as a KPI

Human resources and training are pivotal for operational success. KPIs like absenteeism, attrition, and training hours must be integrated into strategic decision-making. Factories should:

• Maintain absenteeism rates below 6 per cent to ensure workforce stability.
• Keep attrition rates under 2 per cent by enhancing worker engagement and satisfaction.
• Implement monthly training programs to upskill employees and adapt to new technologies.

“The greatest asset of a company is its people,” said Peter Drucker, emphasising the critical role of workforce management in operational success.

How Groyyo Consulting is Assisting Clients in Redefining KPIs

At Groyyo Consulting, we have been partnering with apparel manufacturers to rethink and redefine their KPI benchmarks, ensuring they remain competitive in a rapidly evolving industry. By conducting in-depth diagnostic audits, we help factories identify inefficiencies and set achievable, yet ambitious, targets. Leveraging our expertise, we have enabled clients to improve efficiency by up to 57 per cent, reduce DHU rates to below 5, and achieve over 98 per cent OTIF compliance. Our tailored approach integrates advanced analytics, lean manufacturing techniques, and workforce training to optimise every facet of operations.

For instance, in a recent engagement with a leading factory in Bangladesh, our interventions led to a 20 per cent reduction in energy consumption and a 12 per cent increase in profitability by aligning KPIs with sustainability goals and modern production techniques.

Strategies for KPI optimisation

1. Kaizen for Continuous Improvement: Originating from Japanese manufacturing, Kaizen emphasises small, continuous improvements in processes to enhance productivity, quality, and efficiency. By encouraging every worker to contribute ideas for improvement, factories can sustain a culture of operational excellence. Kaizen-based practices have helped factories in Vietnam and Bangladesh reduce waste by up to 10 per cent annually, according to recent industry reports.
2. Data-Driven Decision Making: Implement systems for real-time data collection and analysis. This enables proactive interventions across quality, delivery, and cost KPIs.
3. Lean Manufacturing Principles: Techniques like value stream mapping and Single Minute Exchange of Dies (SMED) can streamline operations and improve multiple KPIs simultaneously.
4. Technology Integration: Use advanced analytics and IoT devices to monitor performance and identify inefficiencies.
5. KPI Benchmarking: Regularly compare internal KPIs against industry standards to identify gaps and areas for improvement.
6. Employee Incentives: Link performance metrics to reward systems to drive improvements across all operational areas.

Rethinking KPIs for the Future

The discussion around KPIs must extend beyond efficiency to include all aspects of operational performance. By redefining benchmarks and integrating modern tools and techniques, the apparel industry can unlock new levels of profitability and sustainability.

For example, improving delivery metrics ensures customer satisfaction and strengthens buyer relationships. Similarly, enhancing quality KPIs reduces rework costs and wastage, directly impacting the bottom line.

The apparel industry can no longer afford to cling to outdated KPI benchmarks. As technology reshapes the manufacturing landscape and competition intensifies, factories must adopt higher standards across all KPIs to remain relevant.

By redefining and aligning KPIs with modern manufacturing capabilities, the industry can achieve operational excellence, sustainability, and customer satisfaction. Factories that embrace this change will secure their position as leaders in the future of apparel manufacturing. As W. Edwards Deming famously stated, “Without data, you’re just another person with an opinion.”