The garment industry is a very tight-margin business, and proper costing is particularly important in matters of profitability and sustainability. CMT costing is one of the widely adopted costing methods in the apparel industry. CMT is an abbreviated term that is defined as Cut, Make, and Trim and has been extensively used in subcontracting and export garments manufacturing, particularly in such countries as Bangladesh.

Dhaka-apparel.com is here to let you know how to calculate CMT in the Garments Industry!

What Is CMT in the Garments Industry?

CMT is the cost of production that a maker of garments attaches to the fabric cutting, garment sewing, trims, and finishing. In a CMT-based order:

The primary fabric is most commonly provided by the buyer. Other times, the buyer gives key accessories as well. Labor, production, finishing, and quality are the responsibilities of the factory.

CMT is typically applied in subcontract orders and export manufacturing where the buyers desire to have control over the sourcing of raw materials. To the factories, CMT orders lower the financial risk since they do not require large sums of money as an investment in fabric or inventory, which is especially relevant when working with a wholesale clothing supplier in Bangladesh.

Why CMT Costing Is Important

Both buyers and factories need to have accurate CMT computation. It has a direct effect on pricing, profitability, and long-term business relationships, particularly when deciding how to choose an apparel manufacturer in Bangladesh.

The major reasons why CMT costing is important are:

● Prevents the factories from under-pricing and the losses that occur unpredictably.
● Makes sure that production is cost-covered.
● Enables the factories to plan the labour and capacity.
● Enhances transparency in the negotiation between buyers.
● Helps to maintain sustainable profit margins.
● Aids in the comparison of the efficiency of various types of garments.

Even a minimal error in CMT calculation may cause a lot of losses when production volume is large.

Main Components of CMT Cost

There is no fixed cost of CMT. It is a totality of a number of cost factors that add up to the final price per garment, and these costs vary depending on apparel vs garment manufacturing differences.

Cutting Cost

Cost-cutting encompasses all the operations in terms of fabric preparation and cutting.

● Marker making
● Fabric spreading
● Fabric cutting
● Cutting room labor wages
● Reducing the use of electricity and equipment in the cutting room.

The computation of cutting cost is often carried out on a per-piece basis and spread among the overall volume of production, and it is closely linked to the types of fabric and their uses.

Making Cost (Sewing Cost)

The most important segment of CMT is the making cost, which refers to the cost of sewing and assembling garments.

It includes:
● Sewing operator wages
● Salary of helper and line assistants.
● Quality supervisors and line supervisors.
● Depreciation of the sewing machine.
● Maintenance and spares of machines.
● Electricity use in sewing lines.

Efficient sewing operations will aid in the reduction of making costs as well as enhance profitability, particularly for factories handling large orders with defined MOQ in clothing manufacturing.

Trimming and Finishing Cost

Costs to trim and finish the garment, and make sure that the garment satisfies the buyer’s quality standards.

These costs include:
● Sewing thread (in case provided by the factory)
● Identification, labels, and accessories.
● Thread trimming
● Ironing and pressing
● Washing (if required)
● Quality inspection
● Folding and packing
● Polybags and cartons (in case of inclusion).

Certain customers bring the trims themselves. When this happens, cost reduction can be omitted in CMT, which is common in private label production explained in the clothing brand label guide.

Factory Overhead

The factory overhead covers the indirect costs, which are used in the production process but do not correlate with a specific garment.

Examples include:
● Factory rent
● Basic commodities like water and electricity
● Salaries of administration and office employees
● Costs of compliance and safety
● Cleaning and security services
● General maintenance

The use of overhead costs is normally estimated for all the production units in order to come up with a reasonable per-unit price, especially in large-scale operations such as the top garment factories in Bangladesh.

Profit Margin

When all the production and overhead costs are estimated, a profit margin is applied.

● It is usually between 5 and 15 percent.
● Relies on buyer relationship and order quantity.
● Depending on the complexity of garments and the use of factory capacity.

The profit margin should be reasonable in order to guarantee business growth and sustainability, particularly when supplying global buyers listed among the top garment buyers in Bangladesh.

Explaining How to Calculate CMT in the Garments Industry

Step 1: Determine the Total Labor Cost

Divide the total monthly wages of sewing operators. Add support, supervisors, and support staff. Take into account overtime pay in case. This offers the overall labor cost of running the production floor.

Step 2: Find out the Available Working Time.

Determine the number of days in a month that one works. Decide on the number of hours to work every day. Consider the number of shifts. Divide total working hours by a hundred minutes. This aids in knowing the amount of available production time.

Step 3: Decision made on Cost Per Minute.

Divide the total cost of labor by the total available working minutes. This reveals the rate at which the factory will spend per minute of production. One of the critical issues in making a cost calculation is the cost per minute.

Step 4: Determine Garment SMV

SMV (Standard Minute Value) is the time required to make a garment. SMV is different according to the type and complexity of the garments, as explained in the from fabric to fashion step by step guide.

To do proper costing, it is essential to estimate SMV accurately.

Step 5: Calculate the Making Cost

Divide the garment SMV by the cost per minute in the factory. This provides the cost of sewing per unit. Cost making often constitutes the greatest part of the total CMT.

Step 6: Add Cutting Cost

Add per-piece cutting cost with respect to the operations of the cutting rooms. Add labor, electricity, and use of equipment.

Step 7: Add Trimming and Finishing Cost.

Add thread, labels, ironing, inspection, and packing expenses. Eliminate products provided by the vendor.

Step 8: Add Factory Overhead

Add indirect costs, rent, and administration costs. Share equally on volume of production.

Step 9: Add Profit Margin

Provide a fair profit margin. Make sure the ultimate price of CMT ensures sustainability.

Common Mistakes in CMT Calculation

Several factories commit some mistakes in CMT costing, which impact on profitability. Common mistakes include:
● Underestimation of garment SMV
● Application of no consideration about indirect labor costs
● Application of old wage or overhead figures
● Failure to measure efficiency loss
● Ignoring machine failures
● Omission of compliance-related costs

Preventing these errors would result in better and more reliable costing, especially for suppliers serving the top clothing brands in Bangladesh.

Conclusion

Computation of CMT is a basic ability of the garment industry. Manufacturers can afford to price their services correctly and competitively when they take care in consideration of cutting, making, trimming, overhead, and profit. A good knowledge of labor efficiency, SMV, and cost allocation will enable the factories to avoid losses and enhance productivity as well as sustainability in the very competitive global apparel market, including those involved in ready-made garments benefits.

Hopefully, you understood how to calculate CMT in the Garments Industry!