Garment CM calculation using SAM or SMV

In the clothing manufacturing, supplier gives final manufacturing cost to buyer prior to order confirmation. For that factory prepares cost sheet estimating costs in different cost heads. Cost heads like Fabric, Trims and Packing materials, Labor cost and Overheads.

At costing stage, supplier only gets one sample of the garment and specification of fabric and trims for the reference. For raw material cost suppliers directly take price quote from fabric and trim suppliers. For labor cost it is very important to estimate as near as it will be during actual production.

The scientific method for estimating CM (Cut and make) cost of a garment involves following steps

1. Determine SAM of the garment
2. Calculate average
3. Calculate direct labor cost per minute

How to calculate the minute cost of the operator?

Formula:
1. Labor cost per minute = (Monthly salary of an operators/Total minutes available in the month) at 100% efficiency.

But no line can perform at 100% efficiency, so labor cost per minute increases when line efficiency goes down. So, correct way to calculate labor cost per minute is
2. Labor cost per minute = Total salary of the labors in a month / Total SAM produced by those labors in that month.

Example:
Operator monthly salary is BDT 5000.00
Total available capacity per month (in minute) = 26 working days*8 hours/day*60=12,480 minutes

So, per minute cost of the direct labor = 5000/12480 = 0.4006 BDT at 100% efficiency

Formula for the projected labor cost per pieces
CM cost = (SAM of the garment * Minute cost of the labor)/Line efficiency(%)
(Minute cost determined from above formula 1. If you use second formula then don't divide by line efficiency)

If Sewing SAM is 15 minutes and line perform at 50% efficiency then estimated garment make cost = 15*0.40/50% =12 BDT
And Cutting SAM is 2 minutes and cutting room perform at 50% efficiency then estimated cutting cost = 2*0.40/50%=1.6 BDT

So, Total estimated CM cost of the garment = (12.00+1.60) = 13.60 BDT
Following above formula easily one can estimate garment CM cost and use it for the product costing.

Why do you need to consider line efficiency in CM costing?

Line output varies depending on the line efficiency. When a line performs at lower efficiency than standard (100%) line will produce fewer units in a day compared to what line could make at 100% efficiency. But factory spends same amount of money as salary whether line perform at 100% efficiency or less. So, per unit cost will increase when line performs at lower efficiency.

Note: For the calculation of labor cost per minute, instead of average operator salary you can take cumulative of all operators salary (monthly) and divide total amounts by total minute available to the line (total operator * total minutes per operator per month) to have more accurate value.

Role of the SMV in Production Planning and Control

SMV of a garment is defined as how much time it would take to complete a garment in sewing. This is also known as garment work content and standard minutes.

To know the role of Garment SMV in production planning, first you have to understand primary roles of a Production Planning and Control (PPC) department.

Key roles of PPC department, those can’t be performed without having garment SMV.

• Determining capacity of the factory and capacity of the individual sewing lines in terms of how many pieces (product specific) factory can make in a certain time period with existing machines capacity. 
• Order booking based on factory capacity for different types of products
• Allocating of styles to the lines
• Determining production lead time for each orders (styles)
• Process scheduling
• Production execution and monitoring 

Roles of SMV in Production Planning includes

1. Line Capacity Calculation: The scientific method of calculating production capacity of a line (in production pieces per day) is to use standard time (SMV) of a garment. So, to determine production capacity of a line (for specific products) in pieces you need to know garment SMV.

2. Lead Time Calculation: Based on the production capacity, order allocation is done for different lines. A planning guy also needs to calculate how long a style would run in a line if loaded in a single line. If you need to complete the order in less time, calculate how many lines to be considered for an order.

3. Order booking: During order booking, you need to consider capacity availability in a certain period. In such cases you can use how many minutes you need to make the new orders using garment SAM value and compare the same with how many production minutes are available in your factory for the defined period.

4. Process Scheduling: Time & action calendar or production process scheduling of each order is done by planning department. Again to schedule a list of tasks, you need to know capacity of each process per day (or a predefined period). Based on the capacity of each process you allocate no. of days for the process. Like for sewing department, you determine sewing capacity of your line (or multiple lines) and according to that you set how many days to be given to sewing department for production.

5. Order Execution and Production Monitoring: Standard minutes help planners to set target for sewing lines. Mutually agreed and calculated target given to line supervisors. On daily basis when you check production status you can compare actual production with target production. In case production is getting delayed you can push production team based on given target.

6. Labor Cost Estimation: One most important task is labor cost estimation of a specific order. To estimate how much labor cost to be considered for an order (style), you can’t make labor costing without having garment SMV.

Production Planning and Control (PPC)

Functions of Production Planning and Control

Production planning and Control department is one of the important department for the apparel manufacturing company. In the context of the apparel manufacturing primary roles of the Production Planning and Control (PPC) department has been listed below. Each functions has been explained briefly just overview about the task.  

 Job or Task Scheduling: Preparation of time and action calendar for each order from order receiving to shipment. The job schedule contains list of tasks to be processed for the styles. Against each tasks planner mentions when to start a task and what is dead line for that task. Name of responsible person (department) for the job is being listed. For example, scheduling planned cut date (PCD), line loading date etc. 

Material Resource Planning (Inventory): Preparation of Material requirement sheet according to sample product and buyer specification sheet. Consumption of material (fabric, thread, button, and twill tape) is calculated and estimated cost of each material.

Loading production: Planner defines which style to be loaded to the production line and how much quantity to be loaded.

Process selection & planning: Processes needed to complete an order vary style to style. According to the order (customer) requirement PPC department select processes for the orders. Sometime extra processes are eliminated to reduce cost of production.

Facility location: Where a company has multiple factories (facilities) for production and factories are set for specific product, planner need to identify which facility will be most suitable for new orders. Sometimes there may be a capacity shortage in a factory, in that case planner need to decide which facility will selected for that orders.

Estimating quantity and costs of production: Planner estimate daily production (units) according to the styles work content. With the estimated production figure, production runs and manpower involvement planner also estimate production cost per pieces.  

Capacity planning: PPC department plays a major role during order booking. They decide (suggest) how much order they should accept according to their production capacity. Allocating of total capacity or deciding how much capacity to be used for an order out of total factory capacity. Regularly updating factories current capacity (production capacity).

Line planning: Preparing detailed line planning with daily production target for the production line. Most cases line planning is made after discussing with production team and Industrial engineers.

Follow up and execution: Whatever plan is made is executed by PPC department. PPC department keeps close look whether everything is progressing according the plan. Chasing other department heads on daily basis to keep plan on track. They update order wise completed tasks on the Time & action Calendar.  When they found something is going to be late they expedite and create an alarm about the delay.