Factors Affecting Garment Costing
Garment costing refers to the process of determining the total cost incurred to manufacture a garment. It is crucial for apparel businesses to have an accurate understanding of the factors that influence garment costing in order to appropriately price their products and remain profitable. The cost of making a garment is dynamic and depends on several key parameters related to raw materials, manufacturing, logistics, and business operations.
Fabric: The Primary Cost Factor
The fabric accounts for the largest share of a garment’s total cost, typically comprising 60% to 70% of the overall expense. The choice of fabric has a direct impact on the cost and eventual pricing of the garment. Here are some of the key considerations when analyzing fabric cost:
- Unit of Measurement (UOM): Fabrics are either priced per meter or per yard. This standard unit of measurement becomes the basis for cost calculations.
- Minimum Order Quantity (MOQ): Suppliers often have a MOQ which is the smallest fabric quantity they are able to manufacture and supply. The MOQ affects the overall fabric procurement cost.
- Order Quantity: The quantity of fabric ordered from a supplier has implications on the per-unit cost. Larger order volumes may receive discounted rates based on negotiations.
- Incoterms: International commercial terms like EXW, FOB, and CIF determine where responsibility and costs like transportation and insurance lie between buyer and seller. This further impacts cost.
- Value Added Services: Specialized processing like weaving, knitting, printing or dyeing add to the base fabric cost. Their contribution can be significant.
Trims, Buttons, Zippers, and Accessories
Although trims, threads, labels, buttons, and zippers account for a smaller component of the overall cost, their impact on garment construction and aesthetics is crucial. Here are some considerations for costing these notions:
- Quality and Quantity: Higher quality and greater quantities of notions will increase the cost.
- Size, Shape, and Material: Intricate accessories made of premium materials are typically more expensive.
- Specialized Trims: Unique trims like laser-cut buttons or engraved zipper pulls add more value.
Labels and Packaging
Labels and packaging also influence the end cost of a garment:
- Labels: The size, material, printing method, and volume ordered affect label cost.
- Packaging: Material thickness, dimensions, and material affect packaging cost.
- Hang Tags: Material, printing method, and MOQ impact the price of hang tags.
Cost of Manufacturing
The expenses incurred to stitch and assemble the garment make up the manufacturing cost. It is calculated based on:
- Hourly Rate: The wages paid to workers per hour of work.
- Number of Hours: The time taken to complete one unit of the garment.
- Number of Units: Total units of garments produced.
- Contractor’s Margin: External contractors include their profit margin in the manufacturing cost.
Shipping and Logistics Cost
Sourcing location choices have a direct impact on shipping and logistics costs:
- Domestic vs. International: Sourcing within the same country is cheaper than importing from overseas.
- Freight Costs: Weight, volume, and distance increase freight expenses.
- Additional Charges: Insurance, clearances, and duties may apply for international shipments.
Profit Margin
The profit margin or mark-up added by the garment company is key to:
- Sustaining the business
- Funding growth and expansion
- Investing in product development and research
Wholesale markups tend to range from 2-2.5x the production cost. Retail markups go up to 3-4x the wholesale price.
Conclusion
Garment costing and pricing is a multifaceted process. The cost of the fabric, notions, manufacturing, shipping, and the company’s profit margin all contribute to determining the final wholesale and retail price points. Being cognizant of the influencing factors allows companies to develop competitive and sustainable pricing strategies. Regular cost analysis ensures optimum margins and prevents overheads from eating into profits. A dynamic outlook is key to navigating the fluctuations in global textile supply chains.
Tips for Reducing Initial Sample Costs
Got it, here is the article with the additional suggestions for reducing initial sample costs incorporated into the conclusion:
Factors Affecting Garment Costing
Garment costing refers to the process of determining the total cost incurred to manufacture a garment. It is crucial for apparel businesses to have an accurate understanding of the factors that influence garment costing in order to appropriately price their products and remain profitable. The cost of making a garment is dynamic and depends on several key parameters related to raw materials, manufacturing, logistics, and business operations.
Fabric: The Primary Cost Factor
The fabric accounts for the largest share of a garment’s total cost, typically comprising 60% to 70% of the overall expense. The choice of fabric has a direct impact on the cost and eventual pricing of the garment. Here are some of the key considerations when analyzing fabric cost:
Tips for Initial Sample Costs to Start Up
When first developing a new apparel collection, brands can implement certain strategies to reduce initial sampling costs:
- Use existing stock fabrics rather than purchasing expensive new specialty materials for the first samples. This allows brands to perfect fit and design before committing to premium fabrics.
- Only sample the core, staple styles upfront that will anchor the collection. Avoid sampling every single design idea initially. Get the basics right first.
- Opt for simple design details without complex embellishments or trims when making the first samples. Focus on perfecting the silhouettes first.
- Sample only one or two core colors/prints per style in a single size first. This allows brands to evaluate options before sampling all colors/prints.
Conclusion
Garment costing and pricing is a multifaceted process. The cost of the fabric, notions, manufacturing, shipping, and the company’s profit margin all contribute to determining the final wholesale and retail price points.