footwear - prod asess rep v2

7/31/2019 Footwear - Prod Asess Rep v2

1/145

Background 143

FFFFFootwootwootwootwootwearearearearear

Sector:Sector:Sector:Sector:Sector:Production

Management

AssessmentReport

March 2005

Pearl2 Project


2/145

144 Footwear Sector: Production Management Assessment Report

Pearl2 Project

Technical Report #7 (Series 2008): Footwear Sector: ProductionManagement Assessment Report

July 2008

All rights reserved. No part of this document may be reproduced,stored in a retrieval system, transmitted in any form or by anymeans, or otherwise circulated in any form, binding or cover,other that the form, binding and cover in which it was published,without prior written permission of Agriteam Canada ConsultingLtd., on behalf of the Canadian International Development Agency.

Agriteam Canada Consulting Ltd.Suite 20014707 Bannister Road S.E.Calgary, AlbertaT2X 1Z2Canada

http:// www/agriteam.ca

Disclaimer

This report was based on information and materials gathered and

prepared by contracted advisors to the Pearl2 Project. The judg-ments expressed do not necessarily reflect the views of the Pearl2Canadian Executing Agency (Agriteam Canada Consulting Ltd.),the funding agency, the Canadian International Development Agencyor the Projects Philippine partner the Department of Trade andIndustry.

While every effort has been made to ensure accuracy of the infor-mation contained in this technical paper, this is not guaranteed.Accordingly, neither the Canadian Executing Agency, the CanadianInternational Development Agency nor the Department of Tradeand Industry accept any liability for actions taken based on thismaterial.


3/145

Background 145

Proj ect TeamMr. Ed Sutherland, Proj ect Director, Pearl2Mr. John Manzanas, Nat ional Program Manager, Pearl2

Ms. Nenit a Ong, Sr. Program Associat e, Product ion ManagementMr. Dennis Beng Hui, Lead Research Consult ant , DLSU

Dr. Anna Bella Siri ban-Manalang, Sr. Research Consultant , DLSUDr. Jose Edgar Mut uc, Sr. Research Consult ant , DLSUMr. Eric Siy, Sr. Research Assist ant , DLSU

Ms. Aileen Mendoza, Research Assistant , DLSUMs. Jocelyn Tan, Research Assistant , DLSU

Ms. Iri s Viola, Research Assistant , DLSUMs. Ma. Vict oria Anastacio, Technical and Layout Edit or

Cover Design By: Maria Vict oria F. Punay

Print ed By: Anonas Press House, Proj ect 3, Quezon Cit y, Phil ip-pines

The Pearl2 Proj ect gratef ull y acknowledges the assistance from

the Phil ippine Footwear Federat ion Inc. (PFFI) and Sigla niKapi tan Moy (SIKAPMO), Douglas Candano, Nelvin Gaba, Ivygail

Ong and Joan Go.

The Pearl2 Proj ect

Suit e 2103 Antel 2000 Corporat e Center121 Valero st ., Salcedo Vill age, Makat i Cit y Phil ippines

Telephone Nos. (632) 7515912/ 13Fax No. (632) 8841544

www.pearl2.net


4/145

Background 139

1. Background ........................................................

2. Overview of the Fine Jewelry Industry .......................Raw Material Inputs ........................................Machines & Equipment .....................................Personnel .....................................................Outputs .......................................................

Channels of Distribution ....................................

3. Assessment of Manufacturing Practices .......................Production System ..........................................Production Capacity ........................................Seasonality of Demand .....................................Work Period ..................................................Scheduling ...................................................Production Monitoring ......................................Product Costing .............................................Components of Manufacturing Costs .....................Raw Materials ................................................Packaging Materials .........................................Inventory Monitoring and Control.........................Personnel .....................................................Compensation ...............................................Working Conditions .........................................Tardiness and Absenteeism ................................Employee Evaluation .......................................Subcontractors ..............................................Skills Training and Development ..........................Quality Control ..............................................Production Process Standards .............................

Facilities Planning and Management.....................

Machines and Equipment ...................................Machine and Equipment Maintenance ....................Product Development .......................................Environmental Waste Management .......................

4. Manufacturing Issues and Concerns of the Industry .........

Industry Problems ..........................................

Contents1

33457

8

1111121314151621212325262730323232333335383839404143

4546


5/145


5. Sector Recommendations ........................................Areas for Further Study ....................................

Tables

1 Footwear Companies, by Category ........................2 Increase in Capacity of Monthly Production .............3 Components of Manufacturing Costs .....................4 Breakdown of Regular Workers Salary ..................5 List of Training Programs and Seminars Attended ......6 Rejection Rate ..............................................7 Summary of Source of Information

for Machine Purchase ......................................8 Industry Problems and Recommended Solutions .......9 Training Recommendations According

to Size of the Company ....................................

Figures

1 SIPOC Chart of the Footwear Industry ...................2 Classification of Product Lines ............................3 Footwear Industrys Channels of Distribution ...........4 Footwear Sectors Input-Process-Output Diagram.......5 Production Lead Time ......................................6 Peak Seasons ................................................7 Holidays Observed in the Industry .......................8 Reasons for Changes in Production Schedule ...........9 Percentage of Late Deliveries ............................10 Number of Weeks Exceeding Delivery Due Date ........11 Reasons for Late Deliveries ...............................

12 Workers Benefits ...........................................13 Areas Where Defects Are Found ..........................

AnnexesAnnex 1 Major Product Lines ................................Annex 2 Working Schedule ...................................Annex 3 Production Requirement and Production

Capacity .............................................Annex 4 Working Conditions .................................Annex 5 Personnel Assessment ..............................Annex 6 Workers' Skills Upgrading ..........................Annex 7 Employee Evaluation ...............................Annex 8 Facilities and Capacity Assessment ..............

Annex 9 Machines and Equipment ..........................Annex 10 Facility Layout ......................................Annex 11 Assistance Received by the Company ............Annex 12 Components of Production System ...............

4956

121222303437

4049

55

6789

13141517181919

3136

5859

636465777879

80828384


6/145

Background 141

Annex 13 Material Handling Equipment .....................Annex 14 Production Control System ........................Annex 15 New Production Methods/Technology ...........Annex 16 Product Engineering and Development .........Annex 17 Packaging ............................................Annex 18 Production Standards Development .............Annex 19 Quality Control .....................................Annex 20 Manufacturing Costs ...............................Annex 21 Cost Reduction in Shops ...........................Annex 22 Raw Materials Sourcing ............................Annex 23 Raw Materials Delivery ............................Annex 24 Raw Materials Inventory Control .................Annex 25 Common Problems with Raw Materials ..........Annex 26 Subcontractors ......................................Annex 27 Waste Management .................................Annex 28 Pearl2 Project Company Survey Form ............

86879091949697

100101105107108109111113114


7/145

Background 1

Background

The Sectoral Enhancement component of the Pearl2

Project has identified production management as one of the areas

for possible intervention to assist the various sectors covered in

the component. To determine the specific issues and concerns in

these sectors related to production, the Project conducted an

assessment of the production management systems and processes

of eight industries covered under Sectoral Enhancement. These

are processed mango, costume jewelry, fine jewelry, footwear,

leather goods, holiday dcor, furniture and housewares. This

report presents the findings of the production management

assessment study for footwear.

This study was prepared by a team of engineers from the

De La Salle University Department of Industrial Engineering. Data

on the industry were collected from a survey of productionmanagement practices of member firms of two Business Support

Organizations (BSO) in the footwear sector. These are the


8/145


Philippine Footwear Federation, Inc. (PFFI) and Sigla ni KapitanMoy (SIKAPMO). A total of 30 companies located in Metro Manila

were surveyed. In addition, the team conducted interviews with

representatives of 21 firms from the two BSOs and conducted a

plant visit to 7 companies. The team also conducted production

conferences in Manila and Cebu which were attended by

representatives of the BSOs from which data on the production

process and problems were initially obtained. The information

collected was processed and evaluated. Overall, work on the

production management assessment of the eight sectors covered

in this program lasted for about six months, from October 2004to March 2005.

The findings presented in this report are based on

information obtained from the members of PPFI and SIKAPMO. It

is not meant to be a comprehensive study of the production

management system of the Philippine footwear industry. The

report serves to provide indications on the status of production

management in the sector as of 2004 and help identify areas

where Pearl2 can provide assistance to the industry. This study

can also be useful in understanding the basic flow of the

manufacturing process for footwear on an industry level.


9/145

Background 3

Overview of theFootwearIndustry

The footwear industry covers all companies

manufacturing and producing apparel for feet. These include

sports shoes (which make up 10% of the industry production),

dress and casual shoes (30%), and sandals and slippers (the

remaining 60%). The Supply, Input, Process, Output, Customer

(SIPOC) diagram in Figure 1 illustrates the flow of inputs and

outputs.

2.1 Raw Material Inputs

The major raw material inputs to the production

process are as follows:

1. Upper (synthetic & tanned leather)

2. Upper lining (synthetic & tanned leather)3. Adhesives

4. Threads


10/145


5. Buckles6. Heels

7. Insole (leather board)

8. Nails

9. Cotton tape

10. Welt

11. Foam

12. Outsole

13. Leather dressing

14. Shoelaces

15. Shanks16. Boxes and labels

17. Chemicals and adhesives

Companies have difficulty sourcing these raw

materials. Only 6 of the total 17 items (specifically tanned

leather, foam, outsole, leather dressing, shoelaces, and

boxes and labels) can be sourced locally, and a big portion

of these materials are still imported. The other 9 items

are fully imported.

2.2 Machines and Equipment

The common machines and equipment used are:

1. Sewing machine

2. Skiving machine

3. Cutting machine

4. Heel Drilling machine

5. Lasting machine


11/145

Background 5Overview of the Footwear Industry

6. Shoe press7. Stamping machine

8. Splitting machine

9. Trimming machine

10. Buffing machine

11. Cementing machine

12. Folding machine

13. Flexible shaft grinder

14. Roughing machine

These are simple machines fabricated in thecountry, bought second-hand or imported.

2.3 Personnel

The footwear industry is made up of the following

key personnel:

1. Sample-maker

2. Cutter or Cutting machine operator

3. Upper maker

4. Shoe lasting operator

5. Assembler

6. Finisher

7. Packager

A quality control person is assigned to approve or

reject the outputs of workers.


12/145

Figure 1 - SIPOC Chart of the Footwear Industry



13/145

Background 7

2.4 Outputs

The products of the footwear industry are

categorized into sports shoes, dress or casual shoes, and

slippers and sandals. Figure 2 presents the classification

of the footwear industrys product lines:

Figure 2 - Classification of Product Lines

Overview of the Footwear Industry

FOOTWEAR

Sports ShoesDress or

Casual ShoesSlippers Sandals

Running/Basketball

Golf, Football,etc.

Formal/OfficeShoes (Closed

Shoes)

School Shoes

Military/Combat Shoes

Bulldogs,MOC, Dock

Siders

Bedroom

HouseSlippers

RubberSlippers

Party Sandals

RubberSandals

WalkingSandals


14/145


2.5 Channels of Distribution

Some of the products reach customers through

direct selling, which caters to socioeconomic classes B

to D. Some products are distributed to department stores,

which cater to classes A through D, and to boutiques,

which cater to classes A and B (see Figure 3).

Figure 3 - Footwear Industrys Channels of Distribution

Manufacturing Process Flowchart

An overview of the manufacturing process of the footwear industry

is given in the input-process-output diagram in Figure 4. Thespecific processes for the different types of footwear are detailed

in the process part of the diagram.


15/145

Figure 4 - Footwear Sectors Input-Process-Output Diagram

Overview of the Footwear Industry


16/145


Description of the Manufacturing Process

The same manufacturing process is followed for sports

shoes and for slippers and sandals. Dress or casual shoes have an

additional operation of heel attachment.

After a design is drafted, a prototype of the footwear is

made by the sample maker. This sample is then subjected to

wear tests, and sometimes to destructive testing. The next step

is to create a pattern to be used in the actual production of the

footwear.

The pattern is tracedon a bale of leather or alternate

material. The material is then cut either manually or with the

use of machines following the trace. The uppers are then

assembled, sometimes going back and forth to sewing.

After assembly, the uppers are trimmed before these are

passed to insole preparation. The assembly goes thru lasting for

the footwear to have a mold or form. The outsole is then attached

to the assembly thru the application of adhesives (other footwear

are heated or cooled) and then pressed.

Heels are attached to dress or casual shoes. The footwear

is then passed to finishing, where quality check is usually done

before thefinal packaging.


17/145

Background 11

Assessment ofManufacturingPractices

Manufacturing practices in the industry vary according

to the size of the firm. Medium-sized enterprises are more

automated and more organized in terms of production. Small

enterprises, on the other hand, generally have no established

system for managing production.

According to survey results, only eight (8) out of a total

of 30 respondents of industry members are exporters/

manufacturers with exports representing 1% to 10% of total

product sales. Overall, export sales of companies amount to

only 2% of product sales, whereas local sales represent 98%.

3.1 Production System

The industrys production system is generally

made-to-order, with some exception for certain designs

that are predictably in demand. Footwear with in-demand

designs are produced during lean months and kept in

stock. Subcontracting activities are minimal.


18/145


Company survey respondents can be classifiedinto three major categories in terms of the volume of

their output per month as shown in Table 1.

Table 1 - Footwear Companies, by Category

Around 55% of the industry players belong to the

low-volume category, 30% belong to the medium-volume

category and only a small proportion are in the high-

volume category. Majority of exporters belong to the small

and medium-volume category.

3.2 Production Capacity

Peak months require companies to double if not

triple their effort in meeting demand. The increase in

production volume of footwear firms in the industry is

shown in Table 2.

Table 2 -Increase in Capacity of Monthly Production

yrogetaCemuloV

)htnom/stinu(%

)emuloVwoL(llamS0005nahtsseL

sriap55

muideM(muideM

)emuloV

otpustinu000,5

000,0103

)emuloVhgiH(egraLdnastinu000,01

evoba51

nosaeSkaePegarevA

noitcudorP

nosaeSnaeLegarevA

noitcudorP

egarevAegatnecreP

esaercnI

llamS 839,1 680,1 %97

muideM 360,7 573,2 %791

egraL 578,26 052,62 %041


19/145

Background 13Assessment of Manufacturing Practices

Small companies increase their capacity of 1086 unitsper month during lean months to 1,938 units per month

during peak months, representing an increase of 79%.

Among medium companies, capacity almost triples

from 2,375 to 7,063 units per month.

Large companies more than double the usual lean

volume of production of 26,250 units per month to 62,875

units per month during peak months, representing an

increase of 140%.

Production lead times vary across companies.Production order completion times range from as short

as 2 days to as long as 4 weeks. The two commonly

mentioned completion times are 2 and 4 weeks. Figure

5 shows the frequency of production lead times among

respondents.

Figure 5 - Production Lead Time

3.3 Seasonality of Demand

The highest volume of production for the

footwear industry is registered in the months of May,

Production Order Completion Time

4

1

8

6

9

0

2

4

6

8

10

1 1.5 2 3 4

Number of Weeks

Response

s


20/145


October and November. Figure 6 shows the number ofcompanies registering highest levels of production volume

in these months.

Figure 6 - Peak Seasons

3.4 Work Period

Companies usually observe a 60-hour workweek

during the peak months of demand, usually having

workers work 10 hours per day from Monday to Saturday.

During lean months, companies have the normal 8-hourworkday but vary in working days per week: either 4, 5

or 6 working days. Workers are usually given two 15-

minute breaks per day.

3.4.1 Holidays Observed by Companies

Companies in the footwear industry

observe holidays, the most common of which are

All Saints Day, Christmas Day, New Years Eve

and New Years Day, and the Holy Week. The

following diagram shows the breakdown of the

holidays observed and the number of companies

observing them.

Seasonality of Demand

05

10

15

20

25

30

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Month

Frequency


21/145


Figure 7 - Holidays Observed in the Industry

3.5 Scheduling

Companies check their available production

capacity before accepting an order. On the basis of orders

placed, a production schedule is generated. Items in the

production schedule normally include type of product,

volume required, raw material requirements and

estimated time to produce. Additional information found

in the production schedule are worker and machine

assignments, design of the product and delivery date.

Production schedules are generated monthly but are

refined daily and weekly, depending on the orders coming

in and the amount of work done.

0

1

1

2

3

5

5

6

12

12

13

14

15

22

26

27

28

28

29

0 5 10 15 20 25 30 35

Company Anniversary

City Day

Ninoy Aquino Day

Ramadan

EDSA Day

Independence Day

Bonifacio Day

Araw ng Kagitingan

Town Fiesta

All Souls' Day

Dec 27, 28, 29

Rizal Day

Labor Day

Dec 26

All Saints' Day

New Year's Day

Holy Week (Th to Sun)

New Year's Eve

Christmas (Dec 25)

Frequency of Response


22/145


The usual basis of scheduling orders are first-come, first-served; rush orders first; or earliest due date.

3.6 Production Monitoring

The following lists the production forms used in

the industry:

1 Budgeted Material Consumption

2 Closing Production Report

3 Daily and Weekly Production Plan

4 Daily Work-in-Progress Report

5 Delivery Form

6 Finishing Report

7 Issuance Slip

8 Job Order Sheet

9 Job Ticket

10 Monthly and Yearly Inventory Report

11 Raw Material Requisition Slip

12 Receiving Report

The industry has not yet established a system

for raw materials storage and retrieval. Only internal

inventory forms, unique to each company, are used to

manage storage of materials. Top management decides

where to place the materials and authorizes their

retrieval. Larger companies use job tickets to monitor

raw materials retrieved from inventory and used in

production. Most of the time, there are no formal

documents recording withdrawal of items. Workers rely

solely on instructions from their managers on what items

to take out from their storage locations. These enterprises

are not too concerned with pilferage or damages since

raw materials are fast-moving following the industry

practice of not stocking items. The practice of ordering

exactly as needed serves as internal check for missing

items.


23/145


3.6.1 Factors Disrupting Production

Unavailability of raw materials is the

most commonly reported disruptor of production

schedules, followed by machine breakdown,

unavailable personnel/absenteeism and sudden

changes in orders. These factors constitute

almost 80% of the responses. Changes in customer

requirements, rework and low-quality raw

materials do not have much effect on the

production schedule. This is also true for finished

goods/work-in-process inventory and utilitiesproblems. The reasons for changes in production

schedule are shown in Figure 8.

Figure 8 - Reasons for Changes in Production Schedule

3.6.2 Delivery

About 20% of orders are delivered late

by a week due to unavailability of raw materials

(93%, 25 out of 27 responses), defective raw

27

20

13

6

5

5

5

2

1

0 5 10 15 20 25 30

Unavailable RM

Machine breakdown

Unavailable manpower

Sudden change in order

Defects rework

Low quality RM

Change in customer reqmts

FG/WIP Inventory

Utilities

Response Frequency


24/145


materials (22%, 6 out of 27 responses), rework(19%, 5 out of 27 responses), shipping problems

(11%, 3 out of 27 responses) and rejects (7%, 2

out of 27 responses). Other reasons stated are

having no capital to buy the raw materials and

overloaded production.

Figure 9 shows the percentage of late

deliveries, Figure 10 quantifies the number of

weeks exceeding delivery due date and Figure

11 compares the reasons for late deliveries byhow frequent these are cited.

Figure 9 - Percentage of Late Deliveries

0

2

4

6

8

10

12

14

16

0-20% 21-40% 41-60% 61-80% 81-100%

Percentage

Frequency


25/145


Figure 10 -Number of Weeks Exceeding Delivery Due Date

Figure 11- Reasons for Late Deliveries

0

2

4

6

8

1 0

1 2

le s s th a n 1 1 2 3 4

W e e k s

Frequency

0

5

10

15

20

25

30

Unavailable

RM

Defective

RM

Rejects Rew ork Shipping

Problem

Others

Frequency


26/145


3.6.3 Production Planning and Control

The production plans of a company are

dependent on the job orders placed by customers.

Based on the purchase orders, owners or

production managers plan weekly or monthly

schedules of production runs. The companies do

not see any need to forecast items to produce

because of the industry practice of producing only

items that have been ordered. Production

planners also work on the deadline set by thecustomers. The length of production depends on

these deadlines set. Companies know their daily

or weekly production capacity and production

rate. When they detect that the current

production capacity cannot meet the demand,

they add capacity by hiring additional workers.

The schedule of workers tasks and the

production schedule are determined together.

The production manager assigns tasks to the

workers. Some companies list the workers tasks

on boards which the production workers consult.

Smaller companies just tell each worker what

should be done for the day.

Usually, one worker is assigned only one

task based on what the worker has done best.

Worker productivity is ensured by comparing

output, that is, number of units completed with

the number of hours worked. This is possible by

conducting a physical count at each process. The


27/145


more productive workers prove to be those whosework ethic is founded on the discipline and

standards imposed by the owners.

Since most of the production workers are

piece-raters, no quota is set. Piece-raters need

to increase speed in completing units if their aim

is to earn more per day. Most of the companies

in the industry have line or division supervisors

who check the quality of work of the production

workers to ensure productivity.

Production outputs, generally, are

monitored on a weekly basis. Hence, a weekly

production report is generated.

Companies minimize waste in the

production process by maximizing the use of raw

materials in making the footwear.

3.7 Product Costing

Product cost is dictated by the price the customer

is willing to pay. Manufacturers often work with the price

quoted by the customer and then look for materials that,

when added to computed cost of labor, will meet the

dictated cost.

3.8 Components of Manufacturing Costs

The components of the manufacturing cost are

given in Table 3.


28/145


Table 3 - Components of Manufacturing Costs

3.8.1 Cost Reduction Measures

Of the companies surveyed, 76.67%

report having some form of cost reduction

program in place. These measures are usually

initiated by the owner and managers. About

53.33% of the companies declared that they

measure waste.

The survey conducted reveals that the

top three concerns of footwear company

managers on cost reduction are (based on

rankings):

1. Raw materials (price, availability, wastage

and quality)2. Overhead (rent, indirect costs)

3. Labor (productivity and cost)

tnecreP

slairetaMwaR %55

robaL %22

nimdA %7

seilppuS %6

ecnanetniaMdnaenihcaM %3

daehrevO %5

D&R %1

srehtO %1

LATOT %001


29/145


Next in ranking are (in sequence) waste,warehousing, marketing, delivery, and research

and development.

3.9 Raw Materials

Sources of raw materials vary depending on the

material. Locally sourced material is composed chiefly

of tanned leather. The remaining materials sourced locally

are packaging materials such as boxes and labels.

Imported materials are sourced through foreign traders

in the Philippines. Polyurethane is sourced locally, but is

imported from Korean manufacturers. Leatherette and

synthetic leather are sourced from Hong Kong and China,

via traders. The same is true for metal parts and footwear

accessories. Other sources of raw materials are Bangkok,

Malaysia and Vietnam. Larger companies go directly to

foreign suppliers in sourcing raw materials to gain savings

when purchasing in bulk and directly from suppliers, and

consequently minimize their capital requirement.

About 56.7% of the respondents report that theyacquire their raw materials directly from the supplier;

the rest of the respondents go through middlemen only

or to both middlemen and suppliers. About 67% of the

raw materials used are locally sourced; 33% are imported.

The lead time for the delivery of raw materials

depends on whether these are local or imported. Local

raw materials have 1-2 weeks delivery lead time, or as

little as 1 day if they are already available. Meanwhile

imported items have 2-6 weeks of delivery lead time.

Materials usually arrive on time. Locally sourced

materials sometime arrive late, but delays are

experienced more frequently with imported materials.


30/145


Ordered materials can be unprocessed (directfrom nature), semiprocessed (processed by supplier but

still need to be processed in-house) or processed (ready

for assembly). Of these, processed materials constitute

61% of the materials ordered by the industry; 18.75% are

unprocessed and the remaining ones (20.25%) are

semiprocessed.

Raw materials are usually packaged in paper or

plastic bags when delivered to factories. Companies allot

space for these raw materials. Stacking is usually doneto store the materials. Larger companies have warehouses

where the materials are kept.

Materials are purchased only when there is an

order from customers. Materials are stored generally no

longer than 4 weeks. There are a few instances when

the storage takes longer, at most 2 months. When

materials are delivered, they are immediately distributed

to the processing centers where they are used in

production. Raw materials in the footwear industry are

often fast-moving. Stocking is only done by large

companies when the production run for a particular style

of footwear is forecasted to be continuous for a given

period or season. To manage cash flows, management

chooses to stagger the delivery of orders of raw materials,

rather than buy in bulk and store them in warehouses.

Problems experienced with raw materials storage

include spoilage, dust buildup, damage due to mishandling

and damage due to pests. However, these problems

seldom occur. Raw materials are always in good condition

because of the short time they stay in inventory.


31/145


The most common problems and concerns withraw materials are unavailability, high price, late arrival

and poor quality. When raw materials are unavailable,

which happens at times, work stops.

At times, manufacturers settle for materials of

lower quality because of the high price of materials. They

choose to lower the price of the footwear at the expense

of overall quality, since the price is dictated not only by

the market, but also by the contract manufacturer.

3.10 Packaging Materials

Packaging materials, such as boxes, labels and paper

linings are also purchased only when orders are received

from customers. At times, customers provide packaging

materials.

3.10.1 Raw and Packaging Materials Ordering

Process

The ordering process in the footwearindustry starts when purchase orders from

customers come in. On the basis of the purchase

orders, owners, production managers or the

materials coordinator orders the quantity of

materials that will be purchased. Materials are

delivered to the factory most of the time.

Sometimes, manufacturers go to the supplier to

obtain the materials they need. This is especially

true in acquiring accessories that can be bought

in Divisoria, a central source and location of most

of the local and foreign traders. When packaging

materials are not provided by the customers,

companies order from shoe box manufacturers.


32/145


3.11 Inventory Monitoring and Control

No formal system of monitoring raw and

packaging materials exists for the industry. Not all

companies monitor the level and usage of their materials,

although most companies make use of their own inventory

forms to monitor movement of materials. Those that do

not monitor movement of materials inspect their level

of inventory visually. Others count materials transferred

from the storage location and record these later.

Information recorded in internal inventory forms is usually

the quantity of the materials on hand, based on the ones

delivered and contained, versus those that have been

moved. Other forms used in monitoring materials are

materials request form and return slip. Usually the

production manager monitors the inventory level.

The industry does not practice maintaining buffer

stock to have allowance for wastes, rejects or sudden

increases in requirement.

3.11.1 Finished Goods Inventory Control

The quality and quantity of the finished

goods produced are checked. A physical count is

conducted when the items reach the packaging

stage. The quantity of finished goods is monitored

thru the daily production report generated, which

feeds into the weekly and monthly production

reports. There are also inventory forms used to

monitor the amount of finished goods in storage.

These inventory records are then deducted upon

delivery of finished goods. Finished goods

inventory level monitoring is usually the

responsibility of the owners of the factory.


33/145


Deliveries of finished goods aredependent on the job order placed by the

customers. The number of items delivered is

exactly according to the number required in the

Job Order. After production, finished items are

delivered right away, if not within the week, to

customers. It is also industry practice not to

produce for stock, in the same way that no buffer

stock exists.

3.11.2 Finished Goods WarehouseManagement

Finished goods are rarely stocked. Once

they are produced they are delivered immediately

to customers. A delivery report is made upon

delivery of finished goods. The arrangement of

the finished goods in the storage location is per

style of product. Boxes in bundles are stacked

and tagged based on job order and customer

name. The deliveryman usually takes care of

retrieving the items as approved by the owner.

Footwear is protected from moisture thru the use

of silica gel packets. They are also wrapped with

paper lining. Bundles of boxes are stacked on

pallets so that they will not absorb moisture.

3.12 Personnel

The industry has no formal procedure for hiring

personnel. Usually applicants are recommended by

currently employed workers. Some are walk-in applicantswho respond to ads posted by the company outside the

factory vicinity. This explains why most of a companys


34/145


labor force comes from around the area. However, somecompanies also hire workers from the provinces.

Majority of the workers are piece-raters,

averaging Php1000 Php3000 per week. The others are

daily wagers and contractual workers. Production

managers and line or division supervisors receive monthly

wages.

3.12.1 Workforce Composition

Management Profile

Management positions in the production

department typically consist of a production

scheduler, quality control supervisor, inventory

manager and warehouse supervisor. All companies

surveyed have a quality control supervisor, and

majority (25 of 28 respondents) have production

schedulers. However, not all companies have

inventory managers and warehouse supervisors.

This may be due to the inability of management

to clearly identify separation of functions. As aresult, some responsibilities tend to overlap.

Most of management personnel are

within the 30-40 age bracket. The length of stay

of management personnel varies across

companies, ranging from 1-10 years.

Key personnel of production have

completed some years in college, and some are

college graduates. It should be noted though thatmost of the quality control personnel have

finished only high school.


35/145


The number of production managementstaff remains constant over any size of the

workforce. A management team can manage a

workforce of 20 and as well as a workforce of

200. Only the number of quality inspectors

increases in proportion to the size of the

workforce.

Regular Workers Profile

The footwear industry has almost thesame number of male and female regular

workers. Majority are in the 30-40 age bracket

and stay in the company for 2-3 years. Most of

these workers have finished high school.

Daily Rate and Piece Rate Workers

It is industry practice to hire piece-raters

instead of daily workers. Only 5 out of 28

respondents hire daily raters, compared to the

18 (64% of the respondents) that hire piece-

raters. Among companies that hire daily-raters,

the number of daily-raters hired is the same for

peak and lean months. Among those that hire

piece-raters, the number of piece-raters

employed varies significantly for peak and lean

months. During peak months, the number of

piece-rate workers averages more than 40 and

during lean months the number is reduced to

almost half or an average of 23 piece-raters.


36/145


3.12.2 Workforce Productivity

Currently, the output over the total

workforce in the footwear sector averages 180

pairs per worker per month.

3.13 Compensation

The salary of management-level personnel ranges

from Php250 Php350 per day. The salary of regular

production workers varies across companies. Table 4shows the workers salary profile.

Table 4 - Breakdown of Regular Workers Salary

yralaSsrekroWralugeR

)yadrepphPni(ycneuqerF

otegatnecreP

esnopseRlatoT

051woleB 1 3.3

081-051 1 3.3

012-081 1 3.3

042-012 1 3.3

072-042 8 7.62

003-072 5 7.61

033-003 4 3.31

063-033 1 3.3

esnopserdilavnI 4 3.31

esnopseroN 4 3.31

latoT 03 001


37/145


Almost a fourth (26.7%) of the responses fall intothe Php240-Php270 range, followed by the Php270-Php300

range (16.7%) and the Php300-Php330 range (13.3%).

Piece-raters are paid from Php1 to Php80 per

piece. The large difference between the rates per piece

may be attributed to the complexity of the task done by

the worker and the level of skilled required. The minimum

pay-per-piece in the industry averages Php28 and the

highest rate is Php38.

Workers usually receive benefits imposed by the

Philippine government, such as SSS coverage and 13th

month pay. Twenty-five of the 29 respondents said that

they give bonuses and incentives, whether in cash or in

kind. Only a third of those surveyed give PAG-IBIG

coverage, uniform and medical insurance. Recreational

activities are also supported by the companies. These

activities include Christmas parties and swimming parties

in the summer. Figure 12 details these benefits further.

Figure 12 Workers Benefits

0

2

3

3

3

4

7

9

10

18

25

27

0 5 10 15 20 25 30

Birthday leave

Profit sharing

Meals

Vacation leave

Sports and recreation

Sick leave

MedBenefits/insurance

PagIBIG

Uniform

13th month pay

Bonus/incentives

SSS


38/145


3.14 Working Conditions

The workplace of the workers is usually cramped

and hot. Workers suffer from wrong posture because of

the inappropriately designed workstations. The toxic

smell of adhesives adds to the hazards posed by the

working environment to the workers.

Incidence of accidents is reported to be minimal.

Companies usually have only 1 to 5 accidents per year.

3.15 Tardiness and Absenteeism

There are minimal instances of tardiness and

absenteeism both for management personnel and regular

production workers of the footwear industry. An average

of 1 to 2 management employees are late for 21 to 30

minutes per day. Among production workers, a maximum

of 1 to 2 workers are late for 10 to 20 minutes per day.

About 1 to 2 persons in the management level are absent

1 to 2 days per month. Among regular workers, an average

of 2 to 3 persons are absent 1 to 4 days per month.

3.16 Employee Evaluation

Management evaluation differs among

companies. The most mentioned frequency is once every

month. Other companies evaluate quarterly, semiannually

or yearly. More than a third (33.33%) of surveyed

companies do not conduct management evaluation.

Almost half of company respondents (13 of 28)

do not conduct employee evaluation. Other companies

hold regular worker evaluation once a month; some do it

annually, semiannually and quarterly.


39/145


Evaluation of contractual production workers iseither weekly, monthly or upon renewal of contract.

Thirty percent (30%) of the survey respondents said that

no worker evaluation is conducted.

3.17 Subcontractors

Only 26.67% of the companies use subcontractors.

Among these companies, product quality is ensured

through plant visits to perform inspection, assessment

of production processes, screening of the subcontractorssuppliers of raw materials and provision of training.

3.18 Skills Training and Development

Companies in the industry prefer hiring

production workers who are already skilled, or at least

knowledgeable in the tasks of making footwear. Most

companies are willing to train workers. Companies have

apprenticeship programs where workers are trained to

do specific tasks. Sometimes workers start out as utility

persons and then are promoted to shoemakers.

No formal testing procedures are utilized. No

standards or qualifications are set in hiring production

workers. Even in training new hires, no standard method

is employed. Workers are trained on the task on-hand

that needs to be completed. Continuous development of

workers is ensured by exposing them to different designs

of footwear. Their versatility comes from being able to

shift from one style to another. The average time to train

a worker is 2 to 8 weeks (1 to 2 months), but some are

trained in less than a week and some up to 16 weeks.


40/145


Based on interviews, it was gathered that onlythose in the supervisory and management level undergo

formal training and seminars, but not regularly. The list

of production-related training programs and seminars

(consolidated from survey responses) attended by

company representatives can be seen in Table 5.

Table 5 - List of Training Programs and Seminars Attended

Respondents claim that the workforce is 70%

skilled. The industry practices task specialization, where

workers are assigned a specific task and develop expertise

in that area. Experience shows that this is more efficient

than assigning one person to do a series of tasks. However,

workers who are highly skilled are rotated to various jobs

to add capacity when a bottleneck occurs. Line or division

supervisors and/or production managers monitor the shop

floor. In small enterprises, the owner sometimes also

supervises and acts as production manager.

esruoCgniniarT

.1 gnikaMnrettaPdnagningiseDdecnavdA

.2 tnemeganaMesuoheraWyrotnevnI

.3 noitcudorPcitaM-onaM

.4 noitazilitUrewopnaM

.5 gnitsoCslairetaM

.6 gnikamnrettaP

.7 ycneiciffEnoranimeS

.8 gnittuCeohS

.9 ranimeSnoitcudorPeohS

.01 noitazinagrOmooRgnikamreppU


41/145


Production workers are not asked to participatein planning activities. Planning is done by the owners,

top management, production managers and sometimes

supervisors.

3.19 Quality Control

Raw materials are often inspected upon delivery.

However, at times raw materials are not checked right

away. Sometimes, raw materials are checked the day

following the delivery. Incoming inspection is usually done

by the owner or the production manager. Typically, ocular

inspection is done to check the quality of the incomingmaterials. Although there is no formal testing procedure,

it is industry practice to check all incoming materials for

quality. In addition to having no formal inspection

procedures, there is also no standard for determining

rejects in the incoming material. Companies usually rely

on the owners discretion or the inspectors gut feel in

choosing items to be rejected.

Only physical features of the items are inspected.

Mechanical and chemical properties of the materials are

not checked anymore for quality. Physical properties ofmajor raw materials that are inspected are identified as

follows:

- Leather

Color

Texture

Appearance

Softness

Lines

- Synthetic leather:

Discoloration

Stretch (feel)

If textile will stick to synthetic/PVC


42/145


-Polyurethane Softness (feel)

Cracks

Color

Texture

Most of the defects are found before production.

According to 22 out of 27 respondents, defects are usually

found in raw materials. The rejection rate for raw

materials averages 10%. This indicates that raw materials

have inherent defects.

Fourteen (14) respondents said that defects are

found while the material is in-process. Production rejects

average 5%. Nine (9) reported that defects are found at

the final inspection stage, at an average rate of 4%.

Customer complaints constitute 6 of the responses. Five

respondents said that designs cause the material or the

product to be defective. Products returns average 2%.

Figure 13 shows where defects are experienced and Table

6 shows the rejection rates.

Figure 13 - Areas Where Defects Are Found

5

22

14

9

6

0

5

10

15

20

25

Defects found

due to design

RM supply Within

production

process

Final inspection Customer

complains

Frequency


43/145


Table 6 Rejection Rate

3.19.1 Quality Control for Work-In-Process

and Finished Goods

Aside from inspection of incoming raw

materials, some companies require their process

workers to check the quality of raw materials

before proceeding with the task on-hand. This is

one way of controlling quality of work-in-process

items. Owners, supervisors or production

managers constantly walk around to check the

work-in-process items. Finished goods quality

control is the responsibility of the workerassigned at the finishing and packaging section

of the factory. Some companies hire quality

inspectors to check the overall quality of the

units produced or in production.

All of the items are checked for quality.

The physical features checked include color, size,

cleanliness, presence of excess adhesives, stain

from handling and scratches. Some companies

employ destructive testing to ensure strength ofthe footwear.

egarevA egnaR

)ytilauqroop(slairetaMwaR %01 %04-%1

stcejeRnoitcudorP %5 %01-%1

stcudorPdehsiniF %4 %02-%1

sremotsucybstcudorPdenruteR %2 %01-%1


44/145


3.20 Production Process Standards

There are no industry-wide production process

standards. Each company sets its own. The industry,

however, has a product size standard brought about

mainly by the use of shoe lasts. There is also limited use

of wear test among members of the industry.

3.21 Facilities Planning and Management

The size of footwear companies in the small andmedium category can also be seen in the size of the area

for business premises. About 53% of the respondents have

a raw materials storage area of


45/145


Korea. In China, each worker is given his/her workstation.The workstations are then lined accordingly. A layout

technique employed in Korea and adopted here is the

use of separate buildings to hold different processes.

Owners make the decision on setting the layout of the

factory.

3.22 Machines and Equipment

The industry uses manually operated,

semiautomated, and automated machines in theproduction of footwear. Eighty percent (80%) of the

companies use manually operated machines, 36.7% use

semiautomated machines and some 16.7% use automated

machines (please refer to the list of common machines

used in the industry in section 2.2).

Only two machines were mentioned as being

made in-house. About 37% of the machines used are

purchased locally, 49% are imported, and the other 14%

have unknown origins. Among the imported machines,

32% are from China, 19 % are from Germany, 12% are

from Italy, 9% from Japan, 8% are from Taiwan, 18% from

an unknown source and the remaining 2% are from Korea

and the US.

Owners and entrepreneurs learn about machines

and technology primarily from visits of management to

other companies, followed by trade fairs and exhibits,

salesmen, endorsements from the business organization,

and the Internet and broadsheets.


46/145


Table 7 - Summary of Source of Informationfor Machine Purchase

3.22.1 Materials Handling

Manual labor is used in materials

handling, meaning items are carried from one

place to another, with occasional use of pushcarts

and trolleys in handling heavier and bulkier items.

3.23 Machine and Equipment Maintenance

No regular machine maintenance is carried out

by the industry. Most of the maintenance done is

corrective instead of preventive, meaning machines are

checked up only when they break down. About 36.7% of

the companies report that they follow standard

procedures when machines break down; however, a third

(30%) report that they repair and inspect machines only

when a breakdown occurs. Only 10% inspect machines

every week, and 16.7% inspect every month. There is

almost always no repairman in the factories. Repairmen

are called only when a breakdown occurs. Usually

breakdowns happen two to four (2-4) times a year,

requiring about two to four (2-4) hours of repair work

ecruoS ycneuqerF

seinapmocrehtotisiV 21

stibihxE/sriaFedarT 8

snoitazinagro.submorftnemesrodnE 5

namselaS 6

teehsdaorB 1

tenretnI 1


47/145


each time. Inspection is carried out by the repairmanhimself, or by the operator of the machine or equipment.

Machines generally run 5-8 hours during lean

times and 8-12 hours during peak times. Machine

breakdowns depend on the machine and equipment in

use. Machine breakdowns are the second most mentioned

reason for changes in production schedules. The first is

unavailable raw materials.

Maintenance and repair of the machines and

equipment are more often than not unrecorded. An extra

machine or equipment is on hand to support the one that

breaks down. If there is no extra machine or equipment,

most processes are done manually.

Most of tools and replacement parts are readily

available. Since most of the parts come from China,

Taiwan and Japan and are sometimes difficult to source,

companies ensure availability especially of major parts.

Minor ones can be easily obtained from repairmen.

Machines or equipment are acquired either to

upgrade the system, increase capacity or replace old

machines or equipment.

3.24 Product Development

The product development of a particular

footwear begins with the style or design created by the

owners or given by the customer. Companies have two

sample makers who create a prototype of the footwear

based on the specifications set from the design.

Customers, most of them contract manufacturers, give

the design to footwear companies.


48/145


Company-owned footwear designs are based onthe current trend. Observation is the first step in designing

a particular style. Research is conducted on the current

trend and the company tries to innovate by presenting

various alternative styles. Designs and material

specifications are revised by the designer. Another way

of coming up with a new item is by copying the design of

foreign-made shoes, predominantly those from Italy.

Changes are then made in the materials used.

It is usually the owners who create the design of

the footwear. Only a few hire designers to come up with

new designs of footwear. The number of product

designers in a company, if there are any, is usually two.

Additional findings for new products and methods

are listed below:

New products can be designed and produced in 5 days

on the average.

New designs can be produced every week, at a

reported rate of 8 new designs per company every 5weeks.

This design rate occurs even if 83.3% of the companies

surveyed did not report having any formal design

laboratory on their premises.

Concerning new methods of production: most

companies (68%) report having implemented some

innovative idea in the past 12 months.

The innovations mentioned can pertain to a new

machine (56.7% of companies) new designs (56.7%),

a new method of production (50%) or a new material

for shoes (30%).


49/145


3.25 Environmental Waste Management

Wastes generated from the manufacture of

footwear are usually trimmings from cut materials. Most

of the wastes are dry and pose only minor hazards to

workers. Adhesives can be said to be harmful to workers

health. For example, the rugby cement adhesive causes

skin irritation and is highly flammable. Companies have

tried to implement the use of protective gear but workers

often refuse to use them, finding their use annoying.

The quantity of waste generated is generally

known by the company. Wastes that can be sold as scrap

are collected. Waste is disposed thru garbage collection,

which is typically done twice a week. A utility man, if

not the owners, is responsible for waste disposal.

Materials not used are recycled and are made into

footwear sold in bazaars.

The results of interviews, plant visits and surveys

revealed that raw materials coming out as waste

represent less than 5% of the whole supply. Among

respondents, 50% practice waste disposal, 40% sell their

wastes, 16.67% reuse or recycle their waste. Only 3% of

the respondents reprocess their waste and/or treat their

waste.


50/145



51/145

Background 45

ManufacturingIssues andConcerns ofthe Industry

Footwear industry associations have identified critical

success factors for success in this industry. These factors are as

follows:

Ability to deliver on time

Product competitiveness/suitability of product

design

High quality of raw materials

Trained and disciplined workforce

Availability of working capital

Across all factors, the industry is performing poorly. The

industry is barraged with many problems, issues and concerns

both in the local home front and the international arena. The

industry estimates that the domestic market share has beendecreasing by about 8% since 1995 resulting in a very poor current

market share of only 20%. More so, the export market has had a


52/145


very dismal performance. Most of the industry players (90%)have ceased to export in the past 10 years.

4.1 Industry Problems

The entry of China in the World Trade

Organization five years ago has made an impact on the

Philippine domestic and international markets. About

70% of shoe factories in Marikina have closed down. Those

remaining are forced to lower their prices due to the

influx of very low-priced shoes from China. There areclaims that competitors engage in corrupt business

practices such as smuggling of shoes valued at millions

of pesos (tax avoidance lowers their price) and use of

Chinese shoes by some as a front for bringing in of illegal

drugs.

This scenario makes it harder for smaller players

to compete even in the domestic market. An estimated

60% of shoe manufacturers refuse to register their

businesses because of very high taxes in the last five

years.

The industry has failed to prepare itself for the

impact of globalization. Many exporters are not very

conversant with the standards being imposed worldwide

by organizations such as the International Organization

for Standardization (ISO). Most Philippine shoe exporters

are only subcontractors for well-known foreign brands.

Currently there is not one globally recognized Filipino

shoe brand.

The research and development culture in the

industry is not at all progressive. The existence of direct


53/145

Background 47Manufacturing Issues and Concerns of the Industry

selling marketers for the industry encourages contractmanufacturing and outsourcing practices. This setup does

not force companies to create designs on their own. At

one end this is very advantageous to small and medium-

scale shoe manufacturers because they only need to

concentrate on the whole production process. Their

arrangement with direct selling marketers brings in

consistent orders and ensures business viability for a long

time. On the other end, the requirements of the higher

class are neglected. The direct selling marketers focus

on the lower class markets which make up about 80% ofthe whole market. With China-made shoes at cutthroat

prices, Philippine-made shoes are priced 50% higher.

Moreover, current designs of Philippine shoe

manufacturers do not meet the higher class markets

specifications for comfort, functionality, style and

aesthetics due to lack of research and development in

this area.

The high cost of production makes Filipino

footwear noncompetitive. All factors of production have

increased by 35% - 50%.

At the production area, the problem areas are

raw materials, technology, machinery and equipment,

personnel, management and research & development

(R&D). These problems and solutions are detailed in the

next section.


54/145



55/145

Background 49

Sector

Recommendations

Table 8 lists industry problems and the correspondingrecommended solutions:

Table 8 Industry Problems and Recommended Solutions

INDUSTRY PROBLEMS

I. RAW MATERIALS

There is at least 20% shortage oflocal leather material supply in the

industry in the past two years

Locally sourced materials have poorquality

80% of shoe materials come fromforeign markets

RECOMMENDED SOLUTIONS

Improve sources of raw materialsand components through industry

coordination

Seek out supplier-industryagreements on quality standards formaterials

Seek out possible coordination withsupplier-industries and governmentagencies on standardization of rawmaterial specifications and prices

Strategize to organize industry-members to bulk-buy raw orsemifinished hides from Philippinetanners or suppliers from China

Implement industry-wide standards,measures and quality specificationsthrough accreditation and industrymapping


56/145


INDUSTRY PROBLEMS

I. RAW MATERIALS

Importation of raw materials andother components takes too muchtime and effort due to governmentbureaucratic procedures

Tariffs and duties on imported shoecomponents are relatively high

60% of shoe manufacturers in thePhilippines are now having a hardtime producing footwear made ofindigenous materials because Chinais copying the said materials

II. TECHNOLOGY & MACHINERY

90% of footwear manufacturers inMarikina have outdated machineryand technology-

- 200% increase in cost of machinery- 70% of shoe manufacturersnationwide cannot cope with the lowcost of production due to lack of

machinery for the last 3 years- The technology used in the industryis outdated

- Technology adoption rate is very low


Develop standards in shoe sizes, andleather quality specifications. Seekgovernment accreditation for thesecompanies with equivalent taxincentives and benefits such as arating to companies abiding withthese set standards as a form ofincentive and prestige. This can helpfacilitate mapping the companies andknowing their capacities andcapabilities

Advocacy with Government

Ask for lower tariffs and duties on rawmaterials and higher tariffs onimported finished goods to discourageimportation of footwear

Be ahead of China in copying/innovating on indigenous materialsusing other material variants withless cost and better aesthetics. Linkwith the Research & DevelopmentCenter on these efforts

Develop strong links with Filipinoproducers of indigenous materials tobuild loyalties, reliability and a verygood working relationship

Facilitate equipment upgrading,usage and maintenance

Conduct benchmarking on equipmentto upgrade technology. Considerestablishing a consulting program toassist the industry in automating or

mechanizing or upgrading the currentlevel of technology


57/145

Background 51Sector Recommendations

INDUSTRY PROBLEMS

II. TECHNOLOGY & MACHINERY

III. PERSONNEL

The industry suffers from lowworker productivity and efficiency-

- Lack of production standardizationand specialization among workersleads to inefficiencies at somestages of the manufacturing process

- Second-generation workers inMarikina have lost appreciation for

the job in the past 2 years

- 40% of existing footwear workforceare choosing to work abroad becauseof competitive salary in the past 2years


Under the program, provide advice onthe appropriate brand and type ofmachinery or equipment for eachspecific manufacturing process,verified by increases in productivity,together with information on sourcesof new and second-hand machinery,suppliers of spare parts and availabletechnicians for maintenance

Put in place maintenance programsfor the new technology. Under the

program, provide comprehensivetraining to workers on the utilizationand maintenance procedures required

Conduct Production ImprovementStudy

Dispatch production consultants toconduct production improvementstudies

Increase company volume ofproduction and shorten productionlead time by conducting and

implementing results of productionimprovement study

Ensure line balance in the assemblylines. Standardize productionplanning and control systems toimprove efficiency

Conduct a methods and work study ofthe footwear manufacturingprocesses to bring down costs of labor.Together with financial analysis,design a balance between increasingprofit and increasing worker benefits

Systematize layout and process

design & standardization


58/145


INDUSTRY PROBLEMS

III. PERSONNEL

IV. MANAGEMENT

At least 80% of factory owners

practice management by intuition


Analyze and standardize themanufacturing processes, and designan efficient layout, then teach theimproved process design to allemployees in order to sustain gainsin cost reduction

Train on values forrmation &excellence building

Train workers on the values ofintegrity and excellence in work.

Eliminate delaying tactics in work,slow pace, waiting for parts, andother coordinating problems byteaching workers the right values andattitudes

Conduct seminars and workshops onproductivity and efficiency of workersin relation to new ways of doing workand creating a different point of viewon several aspects of work

Discipline workers to limit productionwastages by measuring wastages,communicate to workers their levelsof wastes and teach them of how to

avoid these wastes

Consider giving more competitivesalaries and benefits to moreworkers to reduce the number ofFilipinos wanting to go abroad

Encourage second generation workersto stay in the Philippines instead ofgoing abroad by providing better payand benefits

Conduct Executive ManagementDevelopment Programs

Train factory owners and managers asprofessional managers so that theycan develop professional workers.The training may cover management


59/145

Background 53Sector Recommendations

INDUSTRY PROBLEMS

IV. MANAGEMENT

V. RESEARCH & DEVELOPMENT

Research and developmentactivities are very limited and arenot sustained on the industry level-

- There is a very big need forinformation regarding the trends onthe design preferences of the worldmarket

- Product standardization is lacking.The fit of shoes for a given sizevaries across manufacturer.


development programs, conflictresolution, managing transitions,change management, strategic riskmanagement, financial managing,basic problem solving and humanresource management

Secure financial resources either thruloans from banks, acquisition ofdeferred payment scheme or thruprivate financing

Establish a common Business Centerto manage the National FootwearResearch and Development Center

Invest in database buildup,management and research. Establisha comprehensive and reliabledatabase for the industry to improvesupply of indigenous materials at lowcost to compete with Chineseproducts

Ask the Research and DevelopmentCenter to regularly arrange for

research and travel so that industrymembers can stay abreast of trendsin designs. These designs should besystematically managed by theBusiness Center which will alsooptimize attendance in trade fairs bythe proper organizations, aggressivemarketing and strategic positioning ofPhilippine products

Focus on unique & more value-added footwear

Compete by producing items that aredifferent and have more added value


60/145


INDUSTRY PROBLEMS

VI. GOVERNMENT INTERACTION


Advocate changes favorable to theindustry

Encourage police and governmentagencies to enforce stiff penalties forsmugglers

Lobby in Congress for enforcement ofhigher duties on imported finishedgoods

The following recommendations are suggested for thefootwear industry:

1. Improve sources of raw materials and components through

industry coordination.

2. Implement industry-wide standards, measures and quality

specifications through accreditation and industry mapping.

3. Facilitate equipment upgrading, usage and maintenance.

4. Conduct Production Improvement Study.

5. Consider giving more competitive salaries and benefits to

workers to encourage them to work in the Philippines instead of

going abroad.

6. Secure financial resources either thru loans from banks,

acquisition of deferred payment scheme, or private financing.

7. Establish a common Business Center to manage the National

Footwear Research and Development Center.

8. Focus on footwear products that are unique and possess more

value-added features for the customer.

9. Advocate stiffer penalties for smugglers and lobby to enforce

higher duties on imported finished goods.

Table 9 gives the recommended training for the footwearindustry according to the size of companies.


61/145

Background 55

Table 9 Training RecommendationsAccording to Size of the Company

SIZE OF COMPANY

Small companies withbasic productionmanagement practices

Small companies withadvanced productionmanagement practices

Medium companies withbasic productionmanagement practices

Medium companies withadvanced productionmanagement practices

Large companies withbasic production

management practices

RECOMMENDATIONS ON TRAINING

Train on values formation & excellence building Develop internal capability to implement time

and motion study Systematize layout and process design &standardization

Prepare series of seminars/workshops ontechnology and management skills formanagers and supervisors


and motion study Systematize layout and process design &

standardization Prepare series of seminars/workshops on

technology and management skills for managersand supervisors


and motion study on medium to high-volumeproducts.

Systematize layout and process design &standardization

Prepare series of seminars/workshops ontechnology and management skills for managerand supervisors

Train on systematic layout and process design& standardization and lean manufacturing

Prepare series of seminars/workshops ontechnology and management skills for managerand supervisors

Conduct Executive Management DevelopmentProgram


and motion study on medium to high-volumeproducts.

Increase efficiency and productivity throughtransfer of technology and updated machinery

Get technical consultants with expertise in thelatest production techniques.

Systematize layout and process design &standardization

Sector Recommendations


62/145


5.1 Areas for Further Study

Infrastructure for raw materials available locallyto minimize importation of raw materials.

SIZE OF COMPANY

Large companies withbasic productionmanagement practices

Large companies withadvanced production

management practices

RECOMMENDATIONS ON TRAINING

Prepare series of seminars/workshops ontechnology and management skills for managersand supervisors

Prepare series of seminars/ workshops ontechnology and management skills forsubcontractors

Provide training to subcontractors employees Conduct Executive Management Development

Program

Train on systematic layout and process design& standardization

Consider implementation of leanmanufacturing, visual factory, computerized

production planning & control systemsStandardize materials management &

inventory systems Prepare series of seminars/workshops on

technology and management skills forsubcontractors

Conduct benchmarking sessions and bestpractices workshop forng production managersand owners

Conduct Executive Management DevelopmentProgram


63/145

Background 57

Annexes

Note on annexes for Production Management Assessment

of Footwear Report.

The following section presents the data derived from a

survey of footwear companies on their production managementstatus and practices. The information has been organized and

arranged in 27 separate annexes, each focusing on a specific

aspect of the respondents production management function. The

annexes cover companies located in Metro Manila. Whenever

applicable, a frequency distribution of the data per topic has

been provided. However, please note that due to rounding of

numerical data, the totals of some of the percentage distributions

may not add up to 100%. For the readers reference, a copy of

the blank survey form used to gather the information for this

report is presented in Annex 28.


64/145


Annex 1:Major Product Lines?ynapmocehtfossenisubniamehtsitahW

seniLtcudorProjaM ycneuqerF egatnecreP

ylnOraewtooF 62 7.68

sdooGrehtaeLdnayrleweJeniF 2 7.6

esnopseRoN 2 7.6

latoT 03 001

?raewtoofmorfdeviredeuneverfoegatnecrepehtsitahW

raewtooFmorfdevireDeuneveRfoegatnecreP ycneuqerF egatnecreP

%99ot%18 2 7.6

%001 62 7.68

esnopseRoN 2 7.6

latoT 03 001

?sdoogrehtaelmorfdeviredeuneverfoegatnecrepehtsitahW

sdoogrehtaeLmorfdevireDeuneveRfoegatnecreP ycneuqerF egatnecreP

0 62 7.68

%02ot%1 2 7.6

esnopseRoN 2 7.6

latoT 03 001

?selastcudorplatototselastropxefoegatnecrepehtsitahW

selaStropxEfoegatnecreP ycneuqerF egatnecreP

0 81 3.35

%01ot%1 8 3.33

esnopseRoN 4 3.31

latoT 03 001

?selastcudorplatototselaslacolfoegatnecrepehtsitahW

selaSlacoLfoegatnecreP ycneuqerF egatnecreP

%08ot%16 1 3.3

%99ot%18 9 0.03

%001 61 3.35

esnopseRoN 4 3.31

latoT 03 001

selaStropxEdnalacoLfonoitubirtsiDdethgieW

tropxE lacoL

selaSfoegatnecreP %2 %89


65/145

Background 59

Annex 2:Working ScheduleesehtnokrowoN(?evresboynapmocehtseodsyadilohgniwollofehtfohcihW

)syad

devresbOsyadiloHfoyrammuS ycneuqerF egatnecreP

)52ceD(samtsirhC 92 7.69

)yadnuSotyadsruhT(keeWyloH 82 3.39

I)13ceD(evEs'raeYweN 82 3.39

)1naJ(yaDs'raeYweN 72 0.09

)1voN(yaDstniaSllA 62 7.68

62rebmeceD 22 3.37

)1yaM(yaDrobaL 51 0.05

)03ceD(yaDlaziR 41 7.64

92dna82,72rebmeceD 31 3.34

)2voN(yaD'sluoSllA 21 0.04

atseiFnwoT 21 0.04

)9rpA(nagnitigaKgnwarA 6 0.02

)21nuJ(yaDecnednepednI 5 7.61

)03voN(yaDoicafinoB 5 7.61

)52beF(noituloveRASDE 3 0.01

)51voN(nadamaR 2 7.6

yaDytiC 1 3.3

)12guA(yaDoniuqAyoniN 1 0.3

?tfihsrepskaerbadneiremlatoteragnolwoH

srekroWyliaDroF ycneuqerF egatnecreP

tfihSrepsetuniM51-1 21 0.04

tfihSrepsetuniM03-61 21 0.04

srehtO 1 3.3

esnopseRdilavnI 1 3.3

esnopseRoN 4 3.31

latoT 03 001

?skaerbesehtgniruddiapsrekrowerA

srekroWyliaDroF ycneuqerF egatnecreP

seY 02 7.66

oN 6 0.02

esnopseRoN 4 3.31

latoT 03 001

Annexes


66/145

60 Footwear Sector: Product ion Management Assessment Report

Annex 2:Working Schedule (cont)How long are total merienda breaks per shift?

For Piece-Rate Workers Frequency Percentage

No Merienda Breaks for Piece-Rate Workers 11 36.7

1-15 Minutes per Shift 15 50.0



No Response 1 3.3

Total 30 100

Does the production cycle have peak and lean seasons?

Production with Peak or Lean Seasons Frequency Percentage

Yes 29 96.7

No 1 3.3

Total 30 100


67/145

Background 61

Annex 2:Working Schedule (cont).noitcudorpfoshtnomnaeldnakaepehtetacidniesaelP

foshtnoMnaeLdnakaePfoyrammuSnoitcudorP

kaeP naeL

ycneuqerF egatnecreP ycneuqerF egatnecreP

yraunaJ 9 0.03 02 7.66

yraurbeF 21 0.04 71 7.65

hcraM 61 3.35 31 3.34

lirpA 61 3.35 31 3.34

yaM 12 0.07 8 7.62

enuJ 31 3.34 61 3.35

yluJ 4 3.31 52 3.38

tsuguA 6 0.02 32 7.67

rebmetpeS 71 7.65 21 0.04

rebotcO 62 7.68 3 0.01

rebmevoN 32 7.67 6 0.02

rebmeceD 41 7.64 51 0.05

?keewrepsyadgnikrowforebmunegarevaehtsitahW

repsyaDgnikroWforebmuNegarevAkeeW

kaeP naeL


syad4 0 0.0 8 7.62

syad5 3 0.01 8 7.62

syad6 12 0.07 9 0.03

syadflahadna6 1 3.3 0 0.0

syad7 3 0.01 0 0.0

srehtO 0 0.0 1 3.3

esnopseRoN 2 7.6 4 3.31

latoT 03 001 03 001

?yadrepsruohgnikrowralugerforebmunegarevaehtsitahW

yaDrepsruoHralugeRlatoTegarevA)stfihsllagnidulcni(

kaeP naeL


sruoh8 02 7.66 42 0.08

sruoh21 7 3.32 1 3.3

srehtO 1 3.3 0 0.0

esnopseRoN 2 7.6 5 7.61

latoT 03 001 03 001

Annexes


68/145

62 Footwear Sector: Product ion Management Assessment Report

Annex 2:Working Schedule (cont)

What is the average total of overtime hours per day?

Average Total Overtime Hours per Day

(time in excess of regular working hours)

Peak Lean

Frequency Percentage Frequency Percentage

No overtime 6 20.0 24 80.0

1 hour 0 0.0 1 3.3

2 hours 14 46.7 2 6.7

3 hours 2 6.7 0 0.0

4 hours 5 16.7 0 0.0

No Response 3 10.0 3 10.0

Total 30 100 30 100

How many shifts are there in a day?

Number of Shifts in a Day

Peak Lean

Frequency Percentage Frequency Percentage

1 shift per day 25 83.3 24 80.0

2 shifts per day 1 3.3 0 0.0

No Response 4 13.3 6 20.0

Total 30 100 30 100


69/145

Background 63

Annex 3:Production Requirement and ProductionCapacity

Annexes

kaepotnaelmorftnemeriuqernoitcudorpfoesaercniegatnecrepehtsitahW?shtnom

kaePotnaeLmorfesaercnIegatnecrePshtnoM

ycneuqerF egatnecreP

%05nahtsseL 5 7.61

%001ot%05 6 0.02

%052ot%101 6 0.02

%005ot%152 3 0.01

%0001ot%105 3 0.01

%0001evobA 3 0.01

esnopseRoN 4 3.31

latoT 03 %001

sretropxEfonoitacifissalC

yrogetaCemuloV

)htnom/stinu(%

)emuloVwoL(llamS000,5nahtsseL

sriap55

)emuloVmuideM(muideMpustinu000,5

000,01ot03

)emuloVhgiH(egraLstinu000,01

evobadna51


70/145


Annex 4:Working ConditionssecnerruccoforebmunegarevaehtsitahW

?raeyanisesacyrujni/stnediccafo

yrujnI/stnediccAfosecnerruccOegarevA

raeYanisesaCycneuqerF egatnecreP

seirujnI/stnediccAdaHreveN 31 3.34

raeY/semiT5-1 31 3.34

raeY/semiT01-5 2 7.6

esnopseRoN 2 7.6

latoT 03 001

?srekrowynapmocybdeviecerstifenebehteratahW

srekroWybdevieceRstifeneBfoyrammuS ycneuqerF egatnecreP

stifeneBSSS 72 00.09

yaPhtnoMht31 81 00.06

gibI-gaP 9 00.03

ecnarusnI/stifeneBlacideM 7 33.32

sevitnecnI/sunoB 52 33.38

evaeLkciS 4 33.31

evaeLnoitacaV 3 00.01

mrofinU 01 33.33

slaeM 3 00.01

evaeLyadhtriB 0 00.0

srehtO 3 00.01

noitaerceRdnastropS 3 00.01

gnirahStiforP 2 76.6


71/145

Background 65

Annex 5:Personnel Assessment

Annexes

leveLtnemeganaM

?ynapmocruoynitneserperalennosreptnemeganamfoepythcaefoynamwoH

ynapmoCnilennosrePtnemeganaMfoecneserP

noitisoPrep

seY esnopseRoN


sreludehcSnoitcudorPforebmuN 52 3.38 7 3.32

sreganaMyrotnevnIforebmuN 02 7.66 21 0.04

srosivrepuSesuoheraWforebmuN 91 3.36 21 0.04

srellortnoCytilauQforebmuN 03 0.001 4 3.31

?evahynapmocruoyseodsreludehcsnoitcudorpelamefroelamynamwoH

sreludehcSnoitcudorPelameFroelaMforebmuNelaM elameF


re

footwear - prod asess rep v2

Documents