Understanding Key Parameters Of Garments Costing

Understanding Key Parameters Of Garments Costing

Introduction

Garment costing is a crucial aspect of the apparel industry, determining the viability and competitiveness of products in the market. It involves a detailed analysis of various parameters to arrive at a comprehensive understanding of production costs. In this blog, we delve into the key parameters of garment costing, shedding light on their significance and impact on the industry. Lets discuss about Parameters Of Garments Costing.

Garments Costing

Garments costing is an vital errand for a pieces of clothing merchandiser. By and large benefit depends on it. All fabricating Companies offer their item to make benefit. The benefit on each item sold can be characterized as the contrast between the offering cost of the item and add up to taken a toll of making the item. Taken a toll hence plays a exceptionally imperative part in the item making and it is critical assignment for production line which runs for commerce purposes. To do articles of clothing costing merchandiser ought to know a few parameters. A few parameters of pieces of clothing costing are point out below.

List of Garments Costing Parameters

1. Fabric Cost
2. Trim and Accessories Cost
3. Labor Cost
4. Production Time
5. Production Efficiency
6. Overheads
7. Quality Assurance
8. Compliance Costs
9. Markup
10. Transportation and Logistics
11. Packaging Costs
12. Marketing and Advertising
13. Research and Development
14. Customs Duties and Taxes
15. Currency Exchange Rates
16. Seasonal Variations
17. Economic Factors
18. Supplier Relationships
19. Technology Investments
20. Sustainability Initiatives

General Costing parameters of garments:

• Fabric consumption.

• Gross weight of other components of garment.

• Fabric fetched per kg.

• Fabric fetched per garment.

• Other charges (print, weaving, etc.).

• Cost of trims (names, labels, identifications, twill tapes, buttons, bows, etc.).

• CMT charges.

• Cost of embellishments (holders, inward sheets, polybags, cartons, etc.).

• Cost of a garment.

• Price of a garment.

• Costing of the piece of clothing is done by the thought of the taking after factors:

• Amount of crude materials devoured. /Crude material

• Direct labor.

• Indirect labor.

• Factory cost

• Office and regulatory cost.

• Sales and dissemination cost.

• Profit

• Total utility taken a toll & Depreciation

• Wages & Salary

• Bank liability

• Transport fetched Lunch Salary

• Payment

• Entertainment cost

• Miscellaneous cost

• Government cash motivation

Details of Garments Costing

1. Fabric Cost: Fabric cost constitutes a significant portion of the overall garment cost. It involves evaluating the price of the fabric per unit, considering factors such as quality, composition, and sourcing. Variations in fabric costs can greatly influence the final pricing of garments, making it essential for manufacturers to carefully assess and negotiate fabric prices to maintain profitability.
2. Trim and Accessories: Apart from fabric, trims and accessories play a crucial role in garment costing. This includes buttons, zippers, labels, threads, and other embellishments. The cost of these components may vary based on quality, design, and sourcing. Manufacturers must accurately account for trim and accessory costs to avoid underestimating the total production expenses.
3. Labor Cost: Labor cost encompasses wages, salaries, and overhead expenses associated with the workforce involved in garment production. It is influenced by factors such as location, skill level, labor laws, and productivity. Efficient management of labor cost is essential for ensuring fair compensation to workers while maintaining competitiveness in the market.
4. Production Time and Efficiency: The time required to produce garments directly impacts production costs. Factors such as production efficiency, machinery utilization, and workflow optimization play a crucial role in minimizing production time and maximizing output. Manufacturers often invest in technology and process improvements to enhance efficiency and reduce costs.
5. Overheads and Indirect Costs: Overheads include expenses not directly attributable to the production of garments but essential for business operations. This includes rent, utilities, administrative expenses, and depreciation of assets. Indirect costs must be allocated proportionately to each garment to accurately reflect the true cost of production.
6. Quality Assurance and Compliance: Ensuring garment quality and compliance with regulatory standards is imperative for brand reputation and customer satisfaction. Quality control measures, testing, and compliance with safety and environmental regulations add to production costs. However, investing in quality assurance ultimately contributes to long-term success and brand credibility.
7. Markup and Profit Margin: Markup is the percentage added to the total production cost to cover overheads, profit margin, and other expenses. Determining the appropriate markup requires careful consideration of market dynamics, competition, and target profitability. A well-calculated markup ensures sustainable business growth and profitability.

Beyond the Basics:

• Quantity: Ordering in bulk often leads to lower per-unit costs due to economies of scale. Conversely, smaller production runs are more expensive.
• Design Complexity: A simple, clean design with minimal cuts will be cheaper to produce than a garment with multiple panels, pockets, or unique shapes.
• Value-Added Services: Printing, embroidery, washing treatments – these all add value but also add to the cost. The extent and type of these services affect the final price.

Invisible Players:

• Logistics & Shipping: The cost of transporting raw materials and finished goods from one location to another can add a significant amount to the final price.
• Profit Margin: Every business needs to make a profit. The manufacturer and retailer both factor in their desired profit margin when setting the final price.

Let’s consider a hypothetical scenario where we are calculating the cost of producing a basic t-shirt.

In this example:

• We input the cost per unit for fabric, buttons, zippers, labor, and other parameters.
• The quantity or rate is based on the amount required for producing one garment (e.g., 2 meters of fabric, 5 buttons, 1 hour of labor).
• Formulas are used to calculate the total cost for each parameter by multiplying the cost per unit by the quantity/rate.
• The total production cost is calculated by summing up all the individual costs.
• The markup percentage is input manually, and the selling price is calculated by adding the markup percentage to the total production cost.

Real life example costing of garment in excel format

Garment Costing Example – T-Shirt (USD)

A. Fabric

B. Trims & Embellishments Description Quantity Unit Cost Total Cost Thread (cone) 1 2.00 2.00 Care Label 1 0.10 0.10

C. Construction Description Time (minutes) Labor Rate ($/minute) Total Cost Cutting 10 0.10 1.00 Sewing (panels, neckline, sleeves) 30 0.10 3.00 Quality Control 5 0.10 0.50

D. Other Costs Description Cost Packaging (polybag) 0.25 Shipping (landed cost) 1.00

E. Calculations

Takeaway

Understanding these parameters empowers you to appreciate the intricate dance behind garment pricing. The next time you pick up a garment, consider the journey it took – from raw materials to finished product – and the factors that determine its final cost.