Saturday, 5 April 2014

Value Chain Analysis in a readymade garment manufacturing unit

The following is quoted verbatim from this source:

Value Chain analysis

As there are a number of items and different types of raw material i.e. cotton, polyester blends, viscose, etc. used by the RMG industry, it is not possible to give value chain analysis for all the products. After discussing with the units, the value chain analysis has been done on percentage basis as given here under –

1. Basic raw materials i.e. Grey Fabric - 50 to 60% (of sale price of products)
2. Processing charges
 (i.e. Bleach or dyeing or printing) - 10 to 15%
3. Cutting and fabrication - 10 to 15%
4. Fittings and Accessories - 10%
5. Finishing and Packaging - 5 to 6%
Embroidery and Handwork (if needed) - 25% (extra on nominal sale price)

For example, if we take the garment of costing Rs.100/- without embroidery) the value chain analysis will be as under –
1. Grey fabric - 50.00
2. Processing charges - 15.00
3. Cutting and fabrication - 10.00
4. Fittings and accessories
 including buttons - 05.00
5. Finishing and packaging - 6.00
 Total 86.00
 Market Price - Rs.100.00
 Gross Margin - Rs. 14.00
Net profit is much lower after adjusting the expenses for establishment, electricity, transportation, depreciation etc.
 Cost with embroidery will be - Rs.108.00
 Market price with embroidery - Rs.125.00

1 comment:

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