Manufacturing Piece Rate: American Apparel
American Apparel had selected an enterprise software app, but had not begun implementation. Complex requirements for implementation of manufacturing piece-rate calculations. At that time, American Apparel operated 4 manufacturing locations in and around Los Angeles which employed 5,000 people. The CIO preferred not to rely on the software vendor’s professional services team for implementation, because the scope of what the vendor’s professional team would be allowed to do would be more narrow than what was needed for this implementation, and because the cost of implementation would likely be higher if done by the vendor.
This implementation required not only a lean approach (smaller project team) which has a lower “burn rate” (lower cost per month) but also more versatility, broader consulting experience.
Complexity: Knowledge of piece rate calculations was held mainly by a few individuals in manufacturing operations and payroll. Since this knowledge was mostly undocumented, it required implementation consultants to document and essentially re-create existing calculations in the new software.
Risk: Piece rate calculations directly affect pay of approximately 3,500 of the 5,000 total manufacturing employee population. Any mistakes in the calculation could result in costly corrective action, but more importantly would damage trust among employees. Piece rate calculations are key to a trustworthy employment relationship.
The client’s CIO had both the personal confidence and freedom within the organization to approach projects, solutions and implementations in ways that skipped excessive costs of unnecessarily cautious measures (such as relying exclusively on the vendor or using a traditional consulting firm). The goal was to find versatile independent consultants who would focus on delivering the project according to American Apparel needs and not the software vendor’s agenda.
Independent consultants were identified and engaged. The app was configured, tested and implemented within 90 days with basic calculations.
Over subsequent months, development and testing of functionality for piece rate calculations was completed. Calculations required use of custom extensions to the software application: not only custom Java code to handle calculations, but also custom imports to integrate production data for each employee. The system went live in 2011.
The same project team went on to implement the same system (without piece rate calculations) in more than 150 stores throughout the United States. The third phase of the project implemented the software in the remaining 150 stores in 20 countries around the world: Europe, Asia, South America.