Pop Quiz: Which size should be used for costing?

In the what is an optimal size range pop quiz from last week, I said that entry was really a pre-pop quiz to prime you for another pop quiz to be published later. This is that entry.

I also suggested that having too many sizes could dilute the size spread such that your medium is not a medium for costing purposes. It is perfectly acceptable if your medium is not the size you calculate your fabric costs from as long as you know it and take measures to use the right size whichever it may be. The point of knowing which size should be your size for costing purposes is the topic for today’s pop quiz. This from an email (specifics redacted):

The company I work for is a [well known and respected] vertical manufacturer in Asia, starting with textile processing greige goods all the way through to full apparel manufacturing and delivery to customers. We do full package, make-to-order, servicing demanding customers with multiple labels.

Because the systems and requirements were set up based on the fabric yield of the average size, we are experiencing unbelievable variances in our processes. For example, for cotton bottoms, sizes 28 through 48 (all inseam lengths 28-36) all reflect the same yield required for average size 34/32. Needless to say, we are skewed in the purchase of greige as well as in the production of finished fabric required to meet the actual sizes on a customer order.

Our MRP process examines the requirements on the BOM and, since they are all the same, generates purchasing and manufacturing proposals to meet the demand. If my sales order was actually for sizes 36/32,33,34,35,36 through 42/32,34,35,36 I absolutely will not have adequate fabric available to meet the order requirements. Likewise, if my sales order is sizes 28/32,33,34,35,36 through 36/32,33,34,35,36 I will purchase and finish excess fabric.

Our in-house garment manufacturing expertise is composed of few individuals who share an identical frame of reference and set of experiences. Certainly the best effort and practices known were leveraged, but the opportunity to benefit from a broader and differentiated set of experiences did not exist, resulting in a less than optimal start-up.

The writer thanked me for a great site, great book and wanted to know how to go about hiring me to solve this and other problems for them. That was all very good and well and I always love compliments but the problem was my greatest interest. I love problems like this and didn’t even care if they hired me, I sent her the solution to her costing problem.

The challenge for today is: what answer did I send her? That presumes there is only one answer and that I knew what it was but you know what I mean. Maybe I should phrase it as, what is the answer you would give the person who wrote this email?

PS. If you’re not sure why a medium is the base size for costing purposes, Analyzing sales by size is required reading -as is part two in the series. However, this does not mean a medium should be the base size always, far from it. Not knowing when it should or shouldn’t be -or even which size should be- can bury you.

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  1. kathleen says:

    Absolutely Alison but in some ways and on this scale, it becomes a chicken and egg problem. Long story. For all practical purposes, enterprises as large as this one are administratively top heavy. Marking is sorted off into its own production cubbie following the directives of higher up costing decisions rather than being integrated with them. To solve the root cause would require a company wide re-organization, the suggestion to do so is rarely welcomed.

    Let’s assume pulling allocation from markers is not tenable for whatever reason, how can this issue be solved for the costing manager?

  2. Kerryn says:

    My manager is always telling me that the fabric consumption would be 15% more or less from the base size. I am generally against “rules of thumb” as my brain doesn’t like rough estimates it likes cold hard facts…. but I would be interested to know if anyone else uses this as a guide. I’ve never got into costings enough to test it.

  3. Clara Rico says:

    Can you have more than one medium? If a line is usually a Medium with two sizes to either side, should they divide their huge size range into smaller chunks (of five for example) and use a different “Medium” for each range?

  4. dosfashionistas says:

    The size to use for costing purposes would be the median size of the size range and then fabric would be allocated based on what sizes were ordered up and down from that. I make the median size to be 38/34, or something close. With that large an operation they should know to the inch how much more or less for every size and length they make. I am surprised they do not have yields for each size and length down pat and set up in tables to work from.

  5. Ok, then wouldn’t you cost based on the median for the order? In the examples given:

    sizes 36/32,33,34,35,36 through 42/32,34,35,36
    > cost based on 39/34, or since 39 doesn’t exist, the average of 38/34 and 40/34.

    sizes 28/32,33,34,35,36 through 36/32,33,34,35,36
    > cost based on 32/34.

    No? If this is the answer, it doesn’t seem as though she’d have to write to you to get it. So either this isn’t the answer, or it is the answer and she’s writing for get help getting it through to the bosses.

  6. Barb Taylorr says:

    IF most customers do not place orders for the largest sizes you could base your cost on the median size for the majority of orders placed, then have an upcharge for the largest sizes. That keeps your price more competitive without losing sales from the few customers who will only order if they can get the full size range their stores need to carry.

  7. Sally Albright says:

    It’s trick question. The answer begins, “Move operations to the USA to be closer to retailers and shorten lead time. Fast fashion rules!”

  8. Esther says:

    CAD systems have the ability to do a costing marker, some even do it automatically. With CAD you could select the sizes or size to use for your cost analysis and have even greater control than just guessing.

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