apparel/garments costing methods for export order
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M u h a m m a d S a j j a d ( M e c h a n i c a l E n g i n e e r )
Garment Costing Terms Used in Apparel Industry
Different terms related to garments costing are mentioned in the following: 1. Yarn cost, 2. Process cost, 3. Buyer negotiation, 4. Quality, 5. Quantity, 6. CMT, 7. Over head cost, 8. Shortage in process, 9. Buyer specification about the definite product, 10. Process of shipment (Sea or Air), 11. Currency, 12. FOB, 13. CIF, 14. Commission (%) for the middle man, 15. Profit (%) for factory or buying house.
All the above points have discussed in the below:
1. Yarn cost:
Yarn cost is an important mater in garments costing. Accurate yarn cost helps to earn maximum profit from a garment export order. 2. Process cost:
Process cost means the total amount of processing (cutting, sewing, finishing etc.) cost needed to make a garment. Costing of garments varies depending on the process needed to make garment. 3. Buyer negotiation:
Buyer negotiation or buyer handling is very important in readymade garments sector. As a garment merchandiser you should explain your total discussion to the buyer in all possible ways by keeping those matters in your way. Buyer will automatically choose from your proposed options. 4. Quality:
Quality is the ultimate point of a garments product. Garments buyers are now invested a lot of money to satisfy the customers by providing them right quality products. 5. Quantity:
Garment costing varies depending on the quantity of garments.
6. CMT:
CMT means “Cut make and trims”. In this circumstance, garments manufacturer quotes the buyer a proposed price which covers making cost, trimmings and accessories cost of a garment. Here, all the other required materials sent by the buyer to the manufacturer.
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7. Over head cost:
Overhead cost means the cost of each operator required to make a garment. Over head cost has a significance impact in garments costing.
8. Shortage in process:
If garments made by avoiding unnecessary processes then it will be very effective for garments costing.
9. Buyer specification about the definite product:
Buyer specification about the definite garments means direction about garments making, print, embroidery, wash etc. which is contained by garments specification sheet.
10. Process of shipment (Sea or Air):
Shipment of products can be done by using sea freight or air freight which is totally depends on the buyers. Shipping condition effects on garments costing.
11. Currency:
Currency is an important matter in garments manufacturing sector.
12. FOB:
FOB means “free on board”. In this case, exporter quotes the garment buyer a price that includes all costs up to and including delivery of goods aboard an overseas vessel. Here, exporter quote the price by adding fabric cost, accessories cost, CM (cost of making), overhead cost, commission, C&F commission and transportation cost from factory to port.
13. CIF:
CIF means “Cost, insurance and freight”. In this case exporter quotes the buyer a price that covers FOB cost, insurance cost and freight cost. As a result, CIF cost is higher than C&F cost.
14. Commission (%) for the middle man:
If garment factory collects the order from a garment buying house or buying agent then he must have to pay them commission percentage for the order.
15. Profit (%) for factory or buying house:
During garments costing, garment merchandiser added profit (%) here for the factory or buying house with all the others cost.
Garments Costing for Export Order
Garments Costing: Garment costing is a very important part of export garments business. An important part of the management of the textile mill is the determination of the production costs. Cost involves numerous variable factors which are often hard to evaluate accurately and mathematical exactness in difficult to reach. The yarn market fluctuates, finishing materials and dyestuff, etc. changes from season to season, and equipment’s are often replaced by more modern
M u h a m m a d S a j j a d ( M e c h a n i c a l E n g i n e e r )
machinery. Now I would like to discuss about general costing process for an export order in the garment industry.
Garments Costing for Export Order:
For fixation of a garment price of export order followings types of costing should be observed carefully by-
1) According to relation with production
Direct Cost (Fabric and Accessories cost) Indirect Cost (Management cost, electricity cost, transport cost etc.)
2) According to Fixed and Variable System
Fixed Cost (Building cost, Machinery cost) Variable Cost (Transportation, salary etc.)
3) According to Cost Element
Material cost Labor cost
4) According to Function
Production Cost Sales and Marketing Cost Administrative Cost
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A Sample Format of Costing Sheet
Generally there are many ways to find out a standard export order costing. Here the costing function of a garment is described below:
o Cost of fabric/doz. Garments (woven/knit) or cost of yarn/doz. Or Garments (sweater). o Cost of weaving/knitting. o Cost of Dyeing (if necessary). o Cost of Printing (if necessary). o Cost of embroidery (if necessary). o Cost of accessories/doz. Garments. o Cost of manufacturing (CM)/doz. Garments. o Cost or transportation from factory to sea port. o Clearing and forwarding cost. o Commission/ profit.
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Note: There are many ways of calculating the costing of Garments such as F O B terms, C & A, C I F and some others etc. each of specific criteria.
How to Maintain Time & Action (TNA) Plan for an Order
Introduction:
The critical path or TNA is a proper collaboration of Time and action. In a Textile industry, to execute an export order, need to regular evaluation of production activates with the help of times. This regular evaluation is called Critical Path Method or Time and action plan or calendar. This is also known as TNA. By this evaluation, a merchandiser can easily know the present situation of the order. In the case of export order, we all know that, buyer mention lead time with order sheet. According to this lead time, a merchandiser make Critical path. This method helps to make sure an order delivery within lead time.
Collaboration of Time and Action:
An apparel industry has lots of work to do such as order analysis, costing, fabric and accessories booking, sampling, finishing etc. For proper execution this task, need a scheduling plan. Actually, Time and action (TNA) or critical path is sum of plan schedules. This Plan scheduled is expressed with a sheet format which is well known as time and action calendar. For execution an order requires two type of plan in the apparel industry. There are
1. Long term plan ( Ex. Sewing) 2. Short term plan (Ex. Costing)
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For more understanding here use an order main activities diagram with the help of required time. Here, need more time for sewing then costing an export order.
According to require time, diagram is given bellow:
Sample of Critical Path or TNA:
Generally TNA or Critical path method sheet has two main Columns. To make this sheet, need one action or activities and another is duration or plane dates column. TNA sheet is very important for a merchandiser because of this sheet, easily making daily or weekly working tasks. Now I would like to discuss a time and action plan or critical path calendar with the help of a buyer’s view. In the below discussed the Critical path calendar to perform an order within the to-do list.
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Suppose Here,
Lead time Is 120 days
Quantity of order 65,000 pcs
Manufacturing Quality is high.
Necessity of TNA in textile industry:
1. It helps a smart merchandiser to make out the critical tasks in an industry. 2. It is an essential element for a smooth shipment order. 3. It is essential for timely shipment an export order 4. It helps proper the execution process of export order. 5. It provides the idea about the position of running order. 6. It helps to optimize the factory inventory. 7. It gives the apparent plan about the Export order. 8. It is useful to know the status of the order processing at different level in the apparel
industry. 9. It enhances the factory inventory management. 10. It improves efficiency due to proper time schedule. 11. It enhances productivity as a result, also improve a company profits.
M u h a m m a d S a j j a d ( M e c h a n i c a l E n g i n e e r )
Conclusion:
Above all discuss, we can easily say that, Critical path method or TNA is playing an important role in the apparel industry. A Smart merchandiser should proper knowledge about details process of TNA. It is so easy to ship the goods on schedule if, a merchandiser tracks TNA correctly. A successful TNA can make on time shipment, which enhance a company’s reputation to the buyer.
How to Prepare Costing Sheet for Knit Garments
Introduction:
Costing sheet is an important factor in garments manufacturing sector. A costing sheet is that one which contains all the necessary information about the order. There’s so many garments merchandiser who have enough idea about fabric consumption and costing but unable to make the order costing sheet. As its importance in garments merchandising today I will present an order costing sheet for knitted garments items in this article, where I have shown the costing sheet structure only.
Costing sheet preparation for knit Garments:
Costing Sheet of Knit Garments
Buyer H&M Date 20.08.2015
Style H.M-03 Delivery 15.09.2015
Description Knitted polo shirt Quantity 10000pcs
Fabrication 100% cotton piquet Size M
Factory H.N Apparels Ltd.
Yarn 100% cotton (30/1) carded
GSM 180
Wash Instruction Silicon wash
(Fabric cost + Processing) Per Dozen
Fabrication Item Consumption
Unit
price($) Amount ($)
100% cotton Piquet Solid 180
GSM
100% cotton 1×1 Rib Collar
+ Cuff
Yarn 3kg 3.50 10.5
Knitting 3kg 0.30 0.9
Dyeing 3kg 1.20 3.6
Total (Fabric cost + Processing) Per Dozen) per dozen 15.00
Accessories
(Trimmings+ Packing + Embellishment) cost per dozen
Accessories
(Trimmings+ Packing +
Embellishment) cost per
dozen
Main Label
0.25
Care Label
0.15
Sewing
Thread
1.00
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Eyelet
–
Elastic
–
Twill Tape
–
Drawstring
–
Embroidery
–
3.00
Washing
5.00
Button
–
Zipper
0.60
Hanger
–
Hang Tag
0.40
Poly Bag
0.50
Carton
0.90
Others
0.10
Total Accessories (Trimmings+ Packing + Embellishment) cost per dozen 11.9
Lab Test (Fabric and Garments) per dozen –
Total (Fabric + Accessories+ Lab test) cost per dozen 26.9
Cost of making (CM) including profit per dozen 10.00
Commercial cost 4% of total (Fabric + Accessories+ Lab test) cost per
dozen 1.08
Total price per dozen 37.98
FOB price per pc 3.17
FOB – Free on Board (or Freight on Board). Indicating "FOB port" means that the seller pays for
transportation of the goods to the port of shipment, plus loading costs. The buyer pays cost of
marine freight transport, insurance, unloading, and transportation from the arrival port to the
final destination.
Garments Costing for Knitted T-shirt (factory costing)
Garments Costing:
In garments business, costing is an important part of a merchandiser. Whole business is totally depends on it. Accurate garments costing are the heart of this business. So, as a garment merchandiser you have to fix an accurate price for the garments. As its importance on garments business today I will present an easy garments costing method for in the following.
Method of Garments Costing for knitted T-shirt:
Before going to the knitted T-shirt costing, a knit garments merchandiser should confirm the following matters:
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1. Yarn Price , 2. Knitting and Washing Cost, 3. Dyeing Cost, 4. Printing cost, 5. Accessories Cost, 6. Cost of Making (CM), 7. Commercial Cost, 8. Others Cost.
The next duty is to calculate fabric consumption and costing
Normally, we calculate the grey fabric consumption. After completing grey fabric consumption and costing, all the required fabric processing
cost (knitting+ washing cost, dyeing cost) should be added with grey fabric cost. After that, we can achieve the actual fabric cost.
Then finally all the others necessary cost should be added with actual fabric cost to achieve total cost of a garment.
Now, I will present an example for knitted T-Shirt costing in the following. Hope all the confusion will be cleared.
Example:
Suppose,
The buyer “Fashion Xpress” provided you the following measurement chart of a knitted printed T-Shirt order by mentioning the order quantity and fabric GSM.
1. Fabric is 100% cotton single jersey, and fabric GSM is 160 2. Order quantity is 10000pc.
Then calculate the garments Costing (on FOB) per pcs for this order.
Solution:
Given that, Fabric GSM- 160, Body length with allowance- 90cm Sleeve length with allowance – 55cm ½ Chest width with allowance – 77cm
Let, Yarn Price per kg- $3.20 Knitting and Washing Cost per kg- $1.00 Dyeing Cost per kg- $1.70 Printing Cost per dozen- $4.00 Accessories Cost per dozen- 1.60
Now, we have to calculate the fabric consumption for this order.
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Fabric Consumption:
All the measurements are applied on the following formula-
So, grey fabrics needed per dozen garments are 4.72kg.
As yarn price per kg is $3.20 then, grey fabric cost per dozen is (4.72kg × $3.20) = $15.104 After adding all the fabric processing cost (Knitting+ Washing Cost, Dyeing Cost) with grey fabrics cost, actual fabric cost will be determined.
So,
Actual fabric cost = Total Grey fabric cost + [{(knitting cost + washing cost) + dyeing cost} × 4.72kg] per dozen = $15.104 + {($1.00 + $1.70) × 4.72} per dozen = $27.848 per dozen. So, actual fabric cost per dozen is………. $27.848 ………………….. (A) Printing Cost per dozen……………………… $4.00 ……………………. (B) Accessories Cost per dozen……………….…$ 1.60 ……………….…… (C) Cost of making (CM)……………………………. $5.00 …………………… (D) Commercial cost …………………………………. $0.60 ……………………. (E) Others cost …………………………………………. $0.20 …………………… (F)
Now, by adding A, B, C, D, E and F we will get the total FOB cost of garments per dozen.
Total FOB cost per dozen = (A +B + C + D + E + F) = $ (27.848 + 4.00 + 1.60 + 5.00 + 0.60 + 0.20) = $39.248 per dozen. Normally, in case of factory, we received the order from a buying hose (Here, we got the order from Fashion Xpress Buying House), so we have to pay 8%commission to them for that order.
So, in this situation, total FOB cost per dozen stands at- = $39.248 per dozen + 8% commission = $42.39 per dozen. In factory costing, profit% for the factory (here-12%) should be added with total FOB cost per dozen.
So, Total FOB cost per dozen with profit% stands at ($42.39 + 12%) = $47.48
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Now, total FOB cost per pcs is ($47.48 / 12) = $3.96 So, factory cost (FOB) per pcs garment is $3.96
Calculation of Garment Costing
Garment Costing:
For garments costing a merchandiser needs to have clear conception on some important terms. They are-
1. Fabric Consumption
2. Fabric Cost
3. Accessories Cost
4. Print/Embroidery/Washing Charge
5. C.M.
6. Freight (C & F)
7. Payment mode (at sight deferred payment 60days or 90 days or 120 days, TT, Sales
Contract)
Example of garment costing calculation:
The calculation of garment costing is given by assuming the following dimensions for polo neck
T-shirt,
No. of pieces = 4000,
Salary of the operator =6240 tk/month=80$/month,
No. of working days = 26,
Line efficiency considered= 50%,
Sewing SAM= 15 min.,
Cutting SAM= 7 min. 1$ =78 taka
Chest = 60 cm,
Length (HSP to waist) = 75 cm,
Sleeve length = 25 cm
Fabric used is 2/60s 100% cotton S/J fabric.
GSM is 180
Solution
The fabric consumption can be calculated as
= [{(B.L +S.L + 4-10 cm) ×( ½ chest+ 2-4 cm) ×2}×GSM ] / 10000000
= [{(75+25 + 4) ×( 60+ 2) ×2}×180 ] / 10000000
= 0.232 + Wastage 10% [if consider 10% wastage]
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= 0.255 kg/dozen
CMT (cost of making with trimming) charges may be calculated as follows
Labour cost per minute = (Monthly salary of an operators/Total minutes available in the month
= 6240/ (26×8×60)
= 0.5 tk.
Sewing cost = (SAM of the garment * Minute cost of the labour) / Line eff%
= 15*0.5 / 50%
= 15 tk.
Cutting cost = (SAM of cutting * Minute cost of the labour) / cutting efficiency (%)
= 7*0.5 / 50%
= 7 tk.
Now trimming cost is considered as 3 tk. but it depends how number of operators are there for
trimming .
CMT = sewing cost + cutting cost + trimming
= 15+ 7+ 3
= 25 tk.