Key takeaways
- In apparel manufacturing, the cost of making (CM) is driven by three numbers: the garment’s standard minute value (SMV), the factory’s cost per minute (CPM) and line efficiency.
- CPM is the factory’s total monthly labour and overhead cost divided by the minutes available from its operators.
- CM per piece = SMV × CPM ÷ efficiency. A few points of efficiency change CM more than most negotiations on price.
- Fabric is usually the biggest part of FOB, so consumption, wastage and fabric price control matter as much as CM.
Bangladesh’s ready-made garment (RMG) industry competes on reliability, speed and cost. Every style a buyer sends is priced by the factory before it is accepted, and that price — the FOB quotation — determines whether the order makes money. Behind the quotation sits a costing model that brings together fabric consumption, trims, washing, testing, commercial costs, finance cost and the cost of making the garment on the sewing floor.
Finance teams in garment groups are increasingly expected to own that model, or at least to challenge it. This article explains the core concepts — SMV, CPM, efficiency and CM — and shows with an illustrative example how they connect to factory profitability. The numbers are simplified for teaching, but the logic is the same one used in real costing sheets.
1. Standard minute value (SMV)
SMV is the time, in minutes, that a trained operator working at a standard pace needs to complete one garment, including allowances for fatigue and personal needs. It is built from the individual operations (attach collar, set sleeve, side seam, hem, buttonhole and so on), each measured by work study or taken from a predetermined time system such as GSD.
As a rough guide, a basic T-shirt is often in the region of 5–8 minutes, a basic woven shirt 18–30 minutes and a five-pocket jean 15–30 minutes, depending on construction and the factory’s method library. Industrial engineering teams own SMV, but finance should understand it, because every minute of SMV is a minute of factory cost that must be recovered in the price.
2. Cost per minute (CPM)
CPM converts the factory’s monthly cost base into a cost for each available production minute. Include direct and indirect labour, supervision, utilities, maintenance, depreciation, rent and factory administration — the costs of running the sewing, cutting and finishing operation — but not fabric, trims or other order-specific materials, which are costed separately.
= 1,500 × 26 × 600 = 23,400,000 minutes per month
CPM = Monthly labour and overhead cost ÷ Available minutes
= USD 520,000 ÷ 23,400,000 = USD 0.0222 per minute
The factory size, cost base and prices in this article are illustrative and rounded. They are not data from any specific factory or employer.
Some factories calculate CPM on direct operators only and load indirect staff into the overhead; others count all manpower. Either can work, as long as the definition is consistent and the same base is used when measuring efficiency.
3. Line efficiency
Efficiency compares the standard minutes produced with the minutes actually available:
A line of 40 operators working 600 minutes has 24,000 minutes available. If it produces 650 shirts with an SMV of 22, it has produced 14,300 standard minutes — an efficiency of about 60%. Efficiency is affected by style complexity, order size, learning curves on new styles, line balancing, absenteeism, machine breakdowns, input shortages and quality rework.
4. From SMV, CPM and efficiency to CM
The factory’s actual cost to make a garment is the standard minutes it requires, divided by the efficiency it achieves, multiplied by the cost of each minute.
= 22 × 0.0222 ÷ 0.60 = USD 0.81 per piece (USD 9.78 per dozen)
Because efficiency sits in the denominator, its effect is non-linear and large. The chart shows the same shirt costed at different efficiency levels with an unchanged factory cost base.
Swipe sideways to see the full chart →
Cost of making per dozen at different line efficiencies (illustrative, USD, SMV 22)
View the data behind this chart
| Category | Cost of making per dozen |
|---|---|
| 45% | $13.04 |
| 50% | $11.73 |
| 55% | $10.67 |
| 60% | $9.78 |
| 65% | $9.03 |
| 70% | $8.38 |
| 75% | $7.82 |
| 80% | $7.33 |
This is why experienced costing teams never quote CM at the factory’s best-ever efficiency. They use the efficiency the line can realistically achieve on that style and order quantity, including the learning curve. Short runs of complex styles may need to be quoted at 45–50%, while long runs of repeat basics can justify 65–70% or more. Quoting optimistic efficiency is one of the most common reasons orders that looked profitable lose money.
5. Building the full FOB price
CM is only one part of the FOB price. A full costing sheet adds fabric (consumption per piece × price, including wastage and shrinkage allowance), trims and accessories, washing or finishing, embroidery or printing where relevant, testing and inspection, commercial costs (documentation, local freight to port, C&F agent charges), finance cost (L/C charges, interest on back-to-back L/C and working capital), and the required margin.
Swipe sideways to see the full chart →
Illustrative FOB cost build-up for a basic woven shirt (USD 6.40 per piece)
View the data behind this chart
| Item | Value | Share of FOB |
|---|---|---|
| Fabric | $4.10 | 64.1% |
| Trims & accessories | $0.55 | 8.6% |
| Cost of making (CM) | $0.81 | 12.7% |
| Washing / finishing | $0.25 | 3.9% |
| Testing & inspection | $0.06 | 0.9% |
| Commercial & freight to port | $0.12 | 1.9% |
| Finance cost | $0.09 | 1.4% |
| Margin | $0.42 | 6.6% |
In this illustration, fabric makes up about 64% of FOB and CM about 13%. Two practical conclusions follow. First, fabric consumption must be verified carefully from the marker; a 5% error in consumption (about USD 0.21 per piece) costs more than a 20% error in CM (about USD 0.16). Second, CM is where the factory’s competitive advantage shows: two factories buying the same fabric at the same price will differ mainly in how efficiently they convert it into garments.
6. Controlling the costing process
| Control point | What to check | Owner |
|---|---|---|
| SMV approval | Operation breakdown reviewed by IE; SMV compared with similar past styles | Industrial engineering |
| Fabric consumption | Marker efficiency, width, shrinkage and wastage allowances documented | Merchandising / CAD |
| Efficiency assumption | Linked to order quantity, style complexity and learning curve | IE + Production |
| CPM update | Recalculated at least quarterly and after wage revisions | Finance |
| Price approval | Margin after finance cost compared with minimum threshold; exceptions approved | Finance + Management |
| Post-costing | Actual consumption, efficiency and CM compared with quotation after shipment | Finance |
The last control — post-costing — is the most valuable and the most often skipped. Comparing the quotation with what actually happened, style by style, shows which buyers, product types and lines make money, and feeds better assumptions into the next quotation. It is the garment-industry equivalent of the budget-versus-actual variance analysis used in other businesses.
7. Improving CM without cutting wages
- Line balancing so no single operation becomes a bottleneck.
- Reducing style changeover time with better pre-production planning, trial runs and feeding lines on time.
- Cutting rework through first-time-right quality at critical operations.
- Lower absenteeism and turnover, which protect the learning curve.
- Attachments, automation and better machine maintenance on high-volume operations.
- Order allocation that keeps similar styles on the same lines to reduce learning losses.
My earlier case study on workforce productivity and profitability shows how attendance, efficiency and capacity utilisation flow through to profit at factory level.
Frequently asked questions
What is the formula for CM in garment costing?
A common formula is CM per piece = SMV × cost per minute ÷ line efficiency. Multiply by 12 for CM per dozen. The cost per minute is the factory's monthly labour and overhead cost divided by the available operator minutes.
What is a typical line efficiency in garment factories?
It varies widely by product, order size and factory maturity. Many factories operate in a 50–70% range on average, with long runs of simple styles reaching higher levels and short runs of complex styles lower. Costing should use the efficiency realistically achievable for the specific style.
Why is post-costing important?
Post-costing compares actual fabric consumption, efficiency and CM with the quotation after shipment. It reveals which styles, buyers and lines actually make money and improves the accuracy of future quotations.
Conclusion
Garment costing comes down to a handful of numbers — SMV, cost per minute, efficiency, fabric consumption and price — that must be estimated honestly and checked after shipment. Finance adds most value by keeping the cost per minute current, challenging efficiency assumptions, insisting on post-costing and turning the results into better pricing decisions. In an industry where margins per piece are measured in cents, that discipline is the difference between growth and growth that loses money.
Written by Liakat Hossain
Finance and accounts professional with experience in FP&A, SAP FICO, Power BI, internal control, reporting, audit, tax, VAT and export-oriented business operations.
This article is original educational content based on professional finance practice. Real-project examples are anonymized, and scenario figures are identified as model outputs rather than guaranteed results.