Garment Production Cost: Actual Cost Vs Cost Per SAM

One of the most important KPIs for garment manufacturing is a comparison between Actual costs Vs Cost per SAM. Factories calculate these costs and compare on daily basis. The actual cost figure shows that how much money factory is paying as make-up to the operators. But exactly how these measures are calculated? The different methods of calculating actual cost and garment cost per SAM has been explained in this article.

Actual Cost per Garment

1. Actual cost -1: Formula of the actual labor cost of a garment- 
Actual cost = Total Salary to be paid/Total Units Produced.
For a line, Calculate Total salary (W) to be paid on the day including direct manpower. Find total units produced (U) in shift time (output of the line). 

2. Actual cost -2: Second formula is Total salary to be paid /(Total minutes produced/SAM)

Though the first method is used by most of the factories, it is not true actual cost. Because, only output quantity is considered in this cost calculation, where a lot of works is produced on the line as WIP. There are two main reasons why engineers prefer the first method.

  1. It is very difficult to find how many units have been produced by individuals in a line and calculate total minutes produced in a day.
  2. To the factory management, it does not matter how much work is laid (partially stitched) in the line. How many units are completed is considered as production.

I will also suggest you to use the first method as because of it simple to calculate and easy for understanding. This cost goes down day by day during the learning curve. Secondly every day you will get different figures based online output. 

Cost per SAM 

The formula used to calculate the cost per SAM is Garment SAM x Cost factor. Where cost factor is per minute labor cost to the factory at factory average efficiency. Or simply instead of cost factor you can multiply Garment SAM by average labor salary per minute (which represent cost factor calculated at 100% efficiency). Whatever method you use must be clear to everyone (persons who see the report) within the factory. Cost per SAM is fixed for a style.

Cost Factor: Cost factor = Labor wages per day / (shift minute * Efficiency). E.g. Factory shift time 480 minutes, Daily operator wages INR 200.00 and factory run at 50% efficiency. Then cost factor for the factory will be 0.833.

Example: Factory Efficiency 50%, Daily wages INR 200.00 Shift time 480 minutes. See the comparison in the following table where style A and style B's Cost per SAM and actual cost have been shown. Use above formula to calculate figures.

Planned Production
Actual Production
Cost factor
Actual Cost

Related Articles:

Post a Comment

Previous Post Next Post


Contact Form