Prepare of price quotation for buyers

Prepare of price quotation is the most important part in apparel industry. It’s very important for both buyer and seller. Manufacturer or exporter should be more careful, when they are going to apply the price quotation of the product. Here manufacturers of products are the seller of the products. Price quotation is the business proposal which is made by seller for the interested buyer who wants to buy fashionable goods as specific prices for certain terms and conditions. Manufacturer of the products or sellers always likes to offer better opportunity for his buyer. Most important, the quotation letter should contain all the information which is required for understanding all the points of dealing.

For price quotation letter, few important point should be follow before apply the letter of price quotation for garments products. They are-

• Should concern type of quotation.
• The quality of product offered for sale
• Per unit selling price of the garments products.
• Total value of the products
• Payment mode like cash or credit, cash discount (penalty) or any other allowances
• Shipment mode like Sea, Air or Sea-air & TOD (Time of delivery), Place
• Labeling & packing details
• Full instruction of insurance
• List of country destination and documentation details

In additional, there may be lots of points should be maintained in the price quotation of garments products. Actually, additional requirement depends on buyer requirement. At last, we will see a simple sample format of price quotation letter.

An introductory sample letter to a prospective buyer:

"Dear Jon,

XYZ Apparels Ltd. Manufactures a wide variety of ready-made garments and is already exporting to major buyers of the USA, Canada, UK, France and Germany.

We are interested in expanding our trade in Japan and believe that your company already imports the line of products that we produce.

We are enclosing a copy of our brochure and price list for examination at your convenience and we would be pleased to forward samples of any item of garment that may be interest to you.

Thanking you and looking forward to your positive response.

Best regards

Name

Marketing Manager / Merchandiser "

As we know, price quotation is the most important factor in apparel industry for merchandiser. Price quotation is the mutual agreement between buyer and manufacture or seller. There are many types of quotation considered for exporting products during price quotation. Those are in the following:

• LOCO: The lowest quotation of price is called LOCO. It means on the spot. When buyer will carry his product or goods from seller or manufacture factory to own factory or warehouse. In this case, all carrying cost will be bearded by the buyer.
• FAS: Means Free Along Side Ship. It determines that seller or manufacture will bear the carrying cost from his warehouse to the ship and rest of the destination cost will bear buyer. That means buyer will provide the expenses from ship loading to the buyer warehouse.
• FOW: FOW means Free On Wagon. It determines that manufacture or seller will bear carrying cost from his warehouse to the nearest railway station and rest of the carrying cost will bear by the buyer.
• CIFE: Full meaning of CIFF is Cost, Insurance, Freight and Exchange. Manufacturing cost, insurance charge, carrying cost and exchange cost will be included in price quotation of the product.
• CWO: It means Cash with Order. It determines that buyer will send money along with the order. In this case, order will not be executed without receiving the order.
• COD: Means Cash On delivery which is determine that buyer will pay cash after receiving the desired order goods to the desired destination.
• FOR: It means Free On Rail. It determines that the seller or manufacture will bear all expenses from his own warehouse to the railway station. Also seller or manufacture will bear the loading cost and rest of the cost will bear by the buyer.

In apparel industry, there are mainly four systems of calculation for price quotation which are as under:

1. FOB (Free on Board)
2. CFR / C & F (Cost of Freight)
3. CIF (Cost, Insurance & Freight)
4. CMT (Cut make and trims)

1. FOB (Free On Board):

FOB means ‘free on board’. Now most of the garments industry price quoted on FOB. It determines that seller or manufacture will bear all costs which required reaching the goods from his own warehouse to the board of ship at the port of shipment. That means manufacture or seller will include the cost of fabric, accessories, cost of making, overhead, C&F and transportation cost (from factory warehouse to shipment port) for making the price of product quotation. Here also seller will be bearded product loading expenses. Exporter does not bear the cost of freight of ship or air. It is buyer (importer) who himself bears the freight of ship or air.

2. C&F (Cost of Freight):

CFR / C & F means ‘Cost of Freight’. That means

FOB (Cost) + Freight = C & F

In the case ship or air freight is carried by the exporter while quoting price, the exporter quotes price a bit higher than FOB. The whole responsibility including the sending of goods to the selected port of the importer is shouldered by the exporter ship or air. Freight may vary from place to place and shippers to shippers. Also note that, seller will not bear the insurance cost in this quotation.

3. CIF (Cost Insurance & Freight):

CIF means cost insurance & freight. In this case in additional to the bearing of freight the cost of insurance is also born by the exporter or manufacture. The exporter, while quoting CIF price, quotes much higher than C&F value. That means

C&F + insurance = CIF

Normally we can add 1-2% insurance charge with CIF price.

4.  CMT (Cut Make and Trims)

CMT means ‘Cut make and trims’. Making cost, accessories and trimmings cost of garments has included in the quotes of garments which is provided by seller or manufacturer. In this case, buyer provides all the required raw materials to the manufacturer and exporter gets only the making cost, accessories and trimming cost of the product.

During the fixation of FOB price following notes are to be followed carefully:

• Cost of fabric/Doz. Garments (Woven/Knit) or cost of yarn /Doz. Garments (in case of sweater)
• Cost of accessories / Doz. Garments
• Cost of transportation from factory to sea port or airport
• Clearing and forwarding cost
• Overhead cost
• Commission/Profit

The notes above are applicable in case of sending goods aboard on FOB basis. 

Difference of Garments Marketing and Merchandising

Having produced garment products, marketing personnel start marketing first. They introduce the products to the potential buyers and encourage and convince the buyers to buy the products. If the buyers are interested, marketing personnel submit their price and they take their positive consent with orders.

Where there marketing finished, merchandising is started. Marketing is limited up to introduction of the products and its company to buyers but merchandising is limited from purchase order receiving to shipment. After being finished marketing job, marketing personnel introduce the buyers to the merchandisers. Merchandisers receive purchase order, make plan, develop product line, monitor productions process, ensure goods delivery on time, calculation consumption, prepare costing sheet, put up the buyer’s order file. If there are no marketing personnel or if the marketing personnel are no so qualified or skilled in marketing in that case merchandising personnel make both marketing and merchandising to survive the company.

What is Garments Merchandising ?

The “Garments Merchandising” is known to the persons specially involved in garments trade. The term merchandising has been derived from the merchandise. As a noun merchandise means products that are bought and sold and as a verb merchandise means to sell and buy products.

The term “Merchandising” may be defined as: A person who sells and buys the goods, specifically for export purposes. Garments merchandising means taking purchase order from buyers, buying raw materials from vendors say fabrics and accessories, producing garments from factories, maintaining required quality levels, getting in touch with buyers with all updates, following up the production process until shipment and exporting the garments within schedule time. Garments merchandising means the technique of selling and buying garment related products of a company in the best possible way. From the above definitions, we can say that a person involved in garments merchandising needs a wide range of knowledge and skills to perform his job successfully. The job itself is technical and general as well.  

When an export order is placed to a merchandiser, he/she has to schedule the following main functions to execute the export order perfectly on time.

• Yarn consumption calculations
• Fabric consumption calculations
• Accessories consumption calculations (e.g. sewing thread, label, button, interlining, zipper, elastic, hang tag, poly, carton etc.)
• Sourcing of yarns
• Sourcing of fabrics
• Sourcing of accessories
• Possible date of arrival of fabrics and accessories in the garments factory
• Costing
• Garments production planning
• Pre-shipment inspection schedule
• Shipping documents

All the main functions, mentioned above are important but the locating of fabric & accessories are most important as because there are many technical parameters involved in specification in this area. In most collection of fabric for the garments to be made is a major problem. To secure a fabric we should clearly specify the technical specification of the fabric during placing a fabric supply order.  

What is Garment Marketing?

The “Garment Marketing” is known to the persons specially involved in garments trade. The marketing has been derived from the market. As a noun market means an open place or a building where peoples meet to buy and sell any goods. And as a verb market means selling any product of a company to the customers by advertising, presenting or by any person or representative. The term “Garment Marketing” may be defined as: The art of selling any garment product of a company to the buyers by advertising, presenting or by any person or representative in the best possible way is called garment marketing.

Another way we can say the process of getting buyers and sellers together to exchange ownership of goods. Activities of marketing is to create the relationship among the customers and attract the new people to the product. We introduce the product and its company to the buyers through marketing and take the consent of buyers for buying our merchandise.

Marketing may be divided into two classes:

• Marketing is done by advertisements
• Marketing is done by some persons.

The assign of marketing is to meet the domestic customer’s demands and is to meet the overseas customers’ demands. Now a days marketing is being used in comprehensive meaning.

The demand of marketing is going to be increased day by day. Garments marketing are conducted by two ways;

• Some marketing’s are conducted by buying house
• Some marketing’s are conducted directly by readymade garments industries.

Marketing of these readymade garments are performed on three following conditions and basis;

1. FOB
2. CFR
3. And CIF

CM Calculation for Knit Garments

In apparel industry, cost of making (CM) is an important factor for garment merchandisers. As its importance in garments industry, every merchandiser should know the actual calculation method of it. Otherwise, factory may fall in huge loss.

CM Calculation for Knit Garments

Full abbreviation of CM is Cost of Manufacture. In garments industries, CM means cost of manufacturing for 12 garments.  We must focus in below information to calculate CM (cost of manufacturing)-

• Total monthly expenditure (electricity bill, rent, water bill, transportation, commercial cost, worker & stuff wages etc.) of the factory. 
• Total running machine of the following month
• Total no of machine quantity to complete the layout of mentioned order items.
• Daily (8 hours/day) production target of the mention order items (excluding alter & reject).
• Total working days of the following month. 
• Dollar conversation rate (if expenditure amount is rather then US dollar)

Suppose,

• Total monthly factory expense- 70,00,000 BDT
• Total running machine of the following month is - 180 machines
• Total working days of the following month- 26 days 
• Daily factory expense: 70,00,000 / 26 = 269,230.77 BDT (Formula: total month factory expenses / total working days of the following month)
• Daily expense of 1 machine: 269,230.77 / 180 = 1495.73 BDT (Formula: daily factory expense / total running machine of the following month )
• Total machine quantity to complete the layout - 18 machines
• Daily cost of the mention order item's layout: 18 X 1495.73 = 26,923 BDT (Formula: machine quantity to complete layout X daily expenditure for 1 machine )
• Hourly production quantity of following mention order layout - 200 pcs
• Normal daily working hours- 8 hours
• So, daily production of the following layout: 200 X 8 = 1600 pcs (Formula: hourly production of the layout X daily working hours )
• Cost of Manufacture for 1 pcs: 26,923 / 1600 =  16.83 BDT (Formula: daily cost of the layout / daily production of the layout )
• So, CM (Cost of Manufacture for 12 garments ): 16.83 X 12 = 202 BDT (Formula: manufacturing cost for 1 pcs X 12 )
• Dollar conversion rate: 1USD = 78 BDT
• So, CM (Cost of Manufacture for 12 garments ): 202 / 78 = US $2.5897
• Need to add 20-25% profit. So, after 20% added:  $ 2.5897 + 0.5179 = 3.11 $ US
• So, Final CM = $ 3.11 US 

CM (Cost of Making):

Formula: Overhead machine cost X require machine / production quantity 
             = [{ monthly factory expenditure of following month / (total working days of the month X total running machine of the following month) X (Number of machine to complete the layout / Production quantity of the following layout) }]
            = [{70,00,000 / (26 X 180) X 18) / 1800)}] X 12
            = [{1495.73 X 18 / 1800}]  X 12
            = 14.96 X 12
            = 179.49
            = $2.30 /dzn                   [ 1$ = 78 BDT]

Another Simple example of CM (Cost of Manufacture ):

After starting the new salary of Bangladesh, we calculate the CM of any items consider the overhead sewing machine cost of 1200 BDT to 1400 BDT per day. For compliance factory we calculate per day overhead sewing machine cost of 1800 BDT to 2100 BDT.

Q. Suppose, A compliance factory per day overhead of sewing machine is 2100 BDT. Total machine quantity to complete the layout- 18 machines. Daily production comes from one existing layout- 1800 pcs. Dollar conversion rate is 1$ = 78 BDT. Now find out the CM for 12 pcs garments?

Solution:
CM cost = Overhead of sewing machine cost X total require machine to complete the layout / production quantity X 12
              = 2100 X 18 / 1800 X 12
              = 21 X 12
              = 252 BDT
              = $ 3.23 / dzn                         [ 1$ = 78 BDT ]