Chapter 13, Problem 3E

Lean principles

Rag Swag Inc. manufactures various styles of men’s casual wear. Shirts are cut and assembled by a workforce that is paid by piece rate. This means that they are paid according to the amount of work completed during a period of time. To illustrate, if the piece rate is $0.10 per sleeve assembled, and the worker assembles 800 sleeves during the day, then the worker would be paid $80 (800 × $0.10) for the day’s work.

The company is considering adopting a lean manufacturing philosophy by organizing work cells around various types of products and employing pull manufacturing. However, no change is expected in the compensation policy. On this point, the manufacturing manager stated the following:

“Piecework compensation provides an incentive to work fast. Without it, the workers will just goof off and expect a full day’s pay. We can’t pay straight hourly wages—at least not in this industry.”

How would you respond to the manufacturing manager’s comments?