This is the Open Cost Sheet of a 5-pocket pant that was in production when we were doing our Internship. We assumed some costs as they were reluctant to share the internal costs as they were confidential.
| Fabric & Trims | Composition | Consumption/pc | Waste | Unit Price | Unit | Total | ||
| Main Fabric | Cotton/Polyest er | 1.35 | 5% | $2.95 | per meter | $4.18 | ||
| Pocketing Fabric | Cotton | 0.4 | 5% | $1.65 | per meter | $0.69 | ||
| Fabric & Trims | Composition | Consumption/pc | Waste | Unit Price | Unit | Total | ||
| WB & WB Piping | Polyester | 0.2 | 5% | $1.00 | per meter | $0.21 | ||
| Fusible Items | Various | N/a | N/a | $0.50 | per unit | $0.50 | ||
| Button | Plastic/Metal | 1 | 3% | $0.10 | per unit | $0.10 | ||
| Hangtag | Paper | 1 | 3% | $0.05 | per unit | $0.05 | ||
| Care Label | Polyester | 1 | 3% | $0.03 | per unit | $0.03 | ||
| Zipper | Metal | 1 | 3% | $0.15 | per unit | $0.15 | ||
| Fit Label | Polyester | 1 | 3% | $0.03 | per unit | $0.03 | ||
| Size Label | Polyester | 1 | 3% | $0.02 | per unit | $0.02 | ||
| Polybag | Polyethylene | 1 | 3% | $0.03 | per unit | $0.03 | ||
| Polybag Sticker | Paper | 1 | 3% | $0.01 | per unit | $0.01 | ||
| Carton | Cardboard | 1 | 3% | $0.50 | per unit | $0.52 | ||
| Thread | Polyester | 1 | 3% | $0.20 | per spool | $0.21 | ||
| Test Cost | N/A | N/A | N/a | $0.10 | per unit | $0.10 | ||
| Labor Cost | $1.50 | |||||||
| Overhead Cost | $1.40 | |||||||
| Machine Cost | $0.50 | |||||||
| QC Cost | $0.50 | Total Fabric Cost | $5.08 | |||||
| Packaging & Shipping Cost | $1.00 | Total ACC & Trims Cost | $1.75 | |||||
| Others Cost | $0.30 | CM | $5.20 | |||||
| FOB | $12.04 | |||||||
| Financial & Commercial Charge | $0.60 | |||||||
| Total FOB | $12.64 | |||||||
Here the CM (Cost of Making) was at $5.2 which can be reduced by adopting some strategic approaches. Also reducing the waste percentage can reduce the total FOB price of the garment.
Revised Costing using Cost Minimization Strategy
We tried to follow some cost minimization strategies that we studied in our theoretical courses in the following.
| Cost Type | Existing Practice | Improvement |
| Labor Cost | Inefficient and Untrained Workers causing less utilization of time | Trained through training programs to enhance the skills of the workforce, making them more efficient and productive |
| Overhead Cost | Conventional Energy usage, Improper Space utilizationplanning, ineffective utilization of Lean Management | Usage of renewable energy such as using solar power, proper space utilization to reduce unwanted renting of warehouse and maintenance cost, implementation of lean manufacturing |
| Machine Cost | They usually follow breakdown maintenance or preventive maintenance which are costly. | Using a predictive maintenance system will reduce the maintenance cost by a lot. |
| Packaging and Shipping Cost | They use only one shipping partner which restricts them to get better rates of shipping. Also manual packaging causes more defects and takes up too much time. | Having backup shipping partners that could help to negotiate a better rate can reduce the cost of shipping. Also implementation of automated packaging and optimized packaging can reduce this cost. |
| Others Cost | Reviewing contracts with existing suppliers to negotiate for better prices. | |
| Waste Minimization | Implementing recycle and reuse techniques, implementation of waste minimization techniques such as Kaizen, Lean to reduce waste. | |
| Efficient Inventory Management | The demand forecasting technique is a bit obsolete. This causes a huge amount of carrying cost of the inventory. | Implementing JIT to reduce the carrying or holding cost can reduce thee inventory management cost by a lot with proper demand forecasting |
Following is the revised cost that we calculated.
| Fabric & Trims | Composition | Consumption/ pc | Waste | Unit Price | Unit | Total | ||
| Main Fabric | Cotton/Polyest er | 1.35 | 5% | $2.95 | per meter | $4.18 | ||
| Pocketing Fabric | Cotton | 0.4 | 3% | $1.65 | per meter | $0.68 | ||
| WB & WB Piping | Polyester | 0.2 | 3% | $1.00 | per meter | $0.21 | ||
| Fusible Items | Various | N/a | N/a | $0.50 | per unit | $0.50 | ||
| Button | Plastic/Metal | 1 | 2% | $0.10 | per unit | $0.10 | ||
| Hangtag | Paper | 1 | 2% | $0.05 | per unit | $0.05 | ||
| Care Label | Polyester | 1 | 2% | $0.03 | per unit | $0.03 | ||
| Zipper | Metal | 1 | 2% | $0.15 | per unit | $0.15 | ||
| Fit Label | Polyester | 1 | 2% | $0.03 | per unit | $0.03 | ||
| Size Label | Polyester | 1 | 2% | $0.02 | per unit | $0.02 | ||
| Polybag | Polyethylene | 1 | 2% | $0.03 | per unit | $0.03 | ||
| Polybag Sticker | Paper | 1 | 2% | $0.01 | per unit | $0.01 | ||
| Carton | Cardboard | 1 | 2% | $0.50 | per unit | $0.51 | ||
| Thread | Polyester | 1 | 2% | $0.20 | per spool | $0.20 | ||
| Test Cost | N/A | N/A | N/a | $0.10 | per unit | $0.10 | ||
| Labor Cost | $1.45 | |||||||
| Overhead Cost | $1.30 | |||||||
| Machine Cost | $0.50 | |||||||
| QC Cost | $0.50 | Total Fabric Cost | $5.07 | |||||
| Packaging & Shipping Cost | $0.85 | Total ACC & Trims Cost | $1.74 | |||||
| Others Cost | $0.20 | CM | $4.80 | |||||
| FOB | $11.61 | |||||||
| Financial & Commercial Charge | $0.58 | |||||||
| Total FOB | $12.19 | |||||||
Current scenario –
| Cost of making (CM) | $5.20 |
| FOB | $12.64 |
| Proposed – | |
| Cost of making (CM) | $4.80 |
So, cost reduction in CM = $5.20 – $4.80 = $0.40
So, cost reduction in FOB = $12.64 – $12.19 = $0.45
Per dozen cost saving = $0.45 x 12 = $5.4
In a financial year with around 1,20,000 pcs of pants the company,
Cost saving = $0.45 x 1,20,000 = $54,000
