Clothing manufacturing cost estimation determines your final selling price! Startup owners must read this before ordering samples.

You are interested in the idea of starting a clothing business. You’d like to produce your designs in Bali, where your holiday could also be productive. And, you need to determine the clothing manufacturing cost estimation for your business planning.

This article is written to help you find out what would be your realistic clothing manufacturing cost estimation. The currencies may be different, but anywhere in the world, the basic method for preparing a clothing manufacturing cost estimation would be similar to the following.    

Before we get to the clothing manufacturing cost estimation, let’s briefly discuss the general idea of what determines the price of clothes.

The most common (and simplest) method to estimate the cost of manufacturing is by working backward from setting the final selling price. This method of garment costing is known as Keystone Pricing Method.

Some of the things should be included in the clothing manufacturing cost estimation are:

1. Cost to produce clothing: we’ll get to this later
2. Branding (Promotion) Costs
   • Catalogue: normally made in soft copies. You need to do photo shooting(s) for this. The images are then displayed on your website, retailer stores’ websites and wholesalers’ website.
   • Showroom samples: to be put on displays of retailers or wholesalers.  
   • Endorsement: the cost you must pay to have influencers to endorse your merchandise.
   • Sponsorship: cash money and/or free merchandise to sponsor events that promotes your merchandise
3. Commissions for Agents/Salesmen: the cost you must pay to the people who, using their networking and selling skills, get Purchase Orders for your merchandise from wholesalers and retail stores.
4. Distributors’ Cut
   • Sales: wholesalers and retail stores take a cut for every piece of items sold on their stores
   • Unsold Items: normally distributors charge you a certain amount of money to cover their costs of shipping, storing, displaying, and promoting your merchandise. This is on top of their sales commissions.
5. Your overhead costs: to cover your office/store expenses, wages of your people, taxes, etc
6. Shipping costs: for the sending of raw materials, samples and finished products
7. Owner’s Profit: on top of everything, you must make a healthy profit or else your business won’t be sustainable.

Most often, ironically, cost to produce clothing is not the biggest factor in the calculation of the final selling price!

So, how do you know the realistic estimation of production cost?

Let’s make it clear that this is not about how a Bali based clothing manufacturer calculates its production cost of your designs. Instead, this is more about how you could set a realistic clothing manufacturing cost estimation for the production your design(s).   

Your clothing manufacturing cost estimation could be determined by either of the following methods:

1. Full Package Production (FPP)

This method covers all steps of the clothing manufacturing process, and this is highly recommended for start-ups with minimum experience. All you need to do is to provide the designs and some technical details. This method allows you to focus more on the marketing (branding) side of your business.

One important step in this method is fabric sourcing. It involves:

Before a clothing manufacturer could determine fabric consumption, it must develop patterns that cutting operators can use to determine the most efficient ways to cut every meter of the fabric used.

Once the fabric information is known, its consumption has been calculated, then, using its network of supply chain, the clothing manufacturer would look for the best deal for the fabric. And, if your order is large enough, a professional clothing manufacturer Bali could source the fabric directly from the fabric mill, which means its price would be a lot cheaper than retail price.     

Another important factor in the estimation of cost to produce clothing is obviously the labour cost. Producing a garment requires a lot of different workers in different roles, and on different wage levels (e.g. a pattern maker gets higher pay than a sewing operator, but both are just as important).

Once the total work hours required to produce 1 unit of your design is known, then using the guidelines of local minimum wage for 40 working hours per week, a clothing manufacturer Bali could calculate the labour cost to produce clothing (more to this later).   

So, to give a very rough example; if 1 unit of your design requires 4 meters of fine quality silk, it’d be unrealistic to estimate the cost to produce clothing of 20pcs of garment at US$20 per pcs, because 1meter of silk itself could only be procured at $16. And there are still other production steps to be included in the calculation such as Quality Control, labelling, packing, shipping, etc.

2. Cut Make Trim (CMT)

This method only provides the services of cutting the fabric, sewing, and applying the trims. This method is cheaper than FPP because a clothing manufacturer Bali only have to calculate its labour cost to produce your designs. However, you still have to source the fabric yourself, as well as developing the patterns, doing the QC, etc.

This method is more suitable for established brands with an inhouse team of merchandisers, pattern makers, sample makers, and QC. Using its own experience in producing 1 unit of garment in house, the brand could estimate the labor hours required, then roughly calculate how much would be the acceptable labor costs for producing their designs in Bali.    

To give a very rough example of how to calculate CMT cost, let’s say that it requires 3 working hours to complete 1 unit of your design. The minimum wage of Denpasar, Bali estimated at Rp3.000.000,- per month for the average working hours of 168hours per month. Using such data, our estimation for the labor cost of producing your design roughly Rp54.000,- per unit (but this clothing manufacturing cost estimation hasn’t include the calculation of the manufacturer’s over head costs and profit).  

We do Estimation of Clothing Manufacturing for You

Do you have some ideas of fashion designs? Planning to launch your own clothing label? Let us help you to prepare everything; including the calculation of the cost to produce clothing that you designed!

Read More