Cost-plus pricing for export garment orders
An export buyer sends a tech pack for 12,000 polo shirts and asks for your best FOB price by Thursday. You know the competition includes factories in Bangladesh, Turkey and elsewhere in Egypt. You also know that if you quote too high you lose the order, and if you quote too low you may spend three months working for nothing.
Cost-plus pricing is the most straightforward way to answer that question: calculate what the garment really costs you to make, then add a margin you can defend. The method is simple. Doing it accurately is where most factories struggle, because the numbers it depends on are often estimates rather than records.
The structure of a cost-plus quote
A quote for an export order is built from a handful of cost blocks, each of which should come from your own data, not from a rule of thumb you inherited:
- Fabric, including the consumption per piece from the marker and an allowance for cutting loss.
- Trims and accessories: buttons, labels, zippers, hangtags, polybags and cartons.
- Cut-make-trim (CM) labour, based on the garment's standard minutes and your cost per minute.
- Factory overhead: electricity, rent, supervision, maintenance and depreciation, allocated per minute.
- Outside processes such as washing, printing or embroidery.
- Commercial costs: testing, inspection, inland freight to port, financing and a reject allowance.
The margin goes on top of the total, not on top of each line.
A worked example
Here is a simplified quote for a pique polo shirt, using an illustrative exchange rate of 50 EGP per US dollar.
| Cost block | Basis | EGP per piece |
|---|---|---|
| Fabric | 1.2 m at 90 EGP, plus 3% loss | 111.2 |
| Trims and packing | Buttons, labels, hangtag, polybag, carton share | 24.0 |
| CM labour | 14 SMV at 0.90 EGP per minute | 12.6 |
| Factory overhead | 14 SMV at 0.70 EGP per minute | 9.8 |
| Embroidery | Chest logo, subcontracted | 8.0 |
| Commercial costs | Testing, inspection, freight to port | 5.0 |
| Financing and rejects | 3% of the above | 5.1 |
| Total cost | 175.7 | |
| Margin | 15% of total cost | 26.4 |
| FOB price | 202.1 EGP, about 4.04 USD |
Notice how dominant fabric is: 111 of 176 EGP, or 63% of the cost. A one-point error in the cutting-loss allowance moves the cost by about 1.1 EGP per piece, which on 12,000 pieces is almost 13,000 EGP. That is why marker efficiency and cutting-room waste matter so much to pricing.
Where quotes go wrong
Most mispriced orders fail for the same few reasons:
- Loss is guessed, not measured. A factory that quotes 3% fabric loss while actually losing 6% is giving away margin on every piece. The only way to know the real figure is to reconcile material against output on past orders.
- Cost per minute is out of date. Wages, electricity and rent in Egypt have all changed significantly in recent years. A cost per minute calculated two years ago is almost certainly too low.
- Efficiency is assumed at 100%. If your SMV-based labour cost assumes perfect efficiency but your lines run at 55%, your real labour cost is nearly double. Divide by your actual efficiency, as explained in how to calculate SMV and line efficiency.
- Small orders are priced like big ones. A run of 1,500 pieces never reaches the efficiency of a 12,000-piece run, and setup costs are spread over fewer pieces. Add a small-order surcharge.
- Currency and payment terms are ignored. A 90-day payment term costs real money in financing, and exchange-rate moves between quote and payment can erase a thin margin.
Using cost-plus to decide, not just to quote
The real value of an accurate cost sheet is not the number you send to the buyer. It is knowing your floor. If the buyer comes back with a target of 3.70 USD, which is 185 EGP, you can see immediately that this leaves a margin of about 5% on this cost base. You can then decide calmly: accept it because the order fills an empty month, negotiate on trims or packing specification, propose a fabric with lower consumption, or decline.
Some factories also compare contribution per minute across orders: price minus material and outside costs, divided by SMV. An order with a lower price but simpler construction can be more profitable per minute of line time than a higher-priced complex one. That view helps you choose which orders deserve your best lines.
Closing the loop after the order ships
A quote is a forecast. Once the order is finished, compare the quoted cost with what actually happened: fabric received against fabric used, real loss, actual efficiency, and rejects. This is the step most factories skip, and it is the one that makes the next quote better. Our playbook for true per-piece costing covers the post-order calculation in detail.
How Nasij supports accurate pricing
Nasij does not generate quotes, but it keeps the records a reliable quote depends on. Material intake, issue, return and loss movements are recorded against each production order, and purchase-order reconciliation on completion shows exactly how much fabric was received, used, returned and lost. Over a few orders, that gives you real loss percentages by fabric type and style instead of assumptions. Production tracking by stage shows actual output, which, together with your own SMV data, tells you what efficiency to price for. Results can be exported as Arabic PDF reports for partners, and you can read more on that in Arabic PDF reports for clients and auditors.
