Product costing is an essential primary step to know profit or loss in any organization. It’s probably the toughest thing for someone to find out accurate costing and fix product selling price. There are two main hazards, and someone should be aware of under-pricing and over-pricing while evaluating and planning overall business strategies. Both elements are harmful to any organization. Costing is a procedure for counting or estimating before delivering goods or service to consumers. It is a vital process to find out raw material source, production, marketing, sales etc. to produce particular goods. He, who has to engage this task should have vast knowledge about everything associated with fabric, accessories, washing, packing, shipping, MOQ, stock & CM for garments production, is essential to make perfect garments costing. To prepare product costing should consider all functions like value chain model and supply chain management of fabrics and accessories, transportation, sewing and packing of garments, shipping, overheads, tax-vat, insurance, banking charges and commissions etc.
Essential Points should consider before Garments Costing!
Considering points before garment costing:
1) Quantity: Make sure approximate order quantity. Usually, profit margin depends on order quantity. Big order contains big margin, and small order contains small margin. So, order quantity should be considered during garments costing.
2) Fabrication: Try to get clear data regarding fabrication, approximate price, fabric width etc. before taking the order from the buyer/buying house. Once get clear data, make sure sourcing factories of the following’s fabric.
3) Size Spec: Collect update/correct size spec with full measurement of all the sizes, which will be ordered. Many times it is seen that PO sheet has come with new bigger size which was not considered during garment costing.
4) Operational cost: Please diagnosis the product properly, make machine layout by work-study and be sure that all equipment is in your hand. If not then how much time factory need to procure it? Beside this, please overview all the item requires embroidery, printing, washing etc. and considers those costs.
5) Consumption: Every element is essential to prepare cost sheet. Accurate consumption is helpful to estimate costing. Pattern maker will provide fabric consumption, and accessories use should be counted by self or by sample maker/work study. Please prepare consumption sheet before making cost sheet. Please find a costing format to become clearer so that you can accomplish it correctly.
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6) Shipment date: Ask the buyer to provide their desired shipment date and cross check with the planning department that they have enough space to keep the buyer delivery date or inform them your possible date. Besides this, should check with raw material suppliers to fix lead time.
7) Test requirement: Lab test is mandatory to prove product quality. Please make sure that the order requires any lab test report or not. If require which nominated lab they will prefer and who will pay their charges.
8) L/C payments term: Please think about L/C payment terms before fix costing. Ask the buyer to provide a previous L/C copy and discuss with commercial people regarding all the terms and conditions. There are numerous payment terms. Buyers and vendors choose each term for their convenience with mutual understanding. Logistic support plays a vital role in this regard, so it should be clear by which method they will do business like fob, C&F, CIF, X-Factory etc.
9) Inspection: Please make sure that who will inspect the goods before delivery. If buyer representative inspects the goods, it is well and good but if third party like ITS, Bureau verities, SGS, TUV do it then who will pay their charges.
10) GSP: Please ensure that GSP document is required or not. GSP is a particular document which used to get special tariff to entrance some country and sometimes buyer is serious to gain it. Different country has various types of GSP. So, please ask buyer to disclose product destination so that you can fix GSP cost.