1. Design in Society Economics and Production A2 Textiles

2. Introduction

• We will look at:

• The business of manufacturing

• Economic factors in the production of products

• Sources, availability and costs of materials

• The scale of production

• Design, planning and production costs

• Selling the product

3. The Business of Manufacturing

• Textile product manufacture has stages that combine to form the supply chain.

• Total time from fibre to consumer is six to eighteen months.

• The stages are:

• Fibre production

• Yarn production

• Fabric manufacture (weaving, knitting etc)

• Dyeing and finishing

• Product manufacture

• Retailing

• Consumer

4. The Business of Manufacturing

• Overall there are three sectors in the supply chain.

• Primary, secondary and tertiary.

• The primary sector Manufacture of chemicals for fibre production, maintenance of land for grazing sheep and growing cotton.

5. The Business of Manufacturing

• The secondary sector Manufacture of textile fibres, yarns, fabrics, dyeing finishing and product manufacture.

• High export earning sector.

• Changes in technology and global economy mean less people are employed and product manufacture in developed countries has fallen.

6. The Business of Manufacturing

• The tertiary sector retailing, advertising, marketing.

• Employs most people in developed countries.

7. Economic Factors in the Manufacture of Products Costs and Profit

• Economic =cost of designing and making.

• Viable products are cost effective.

• Viable =market potential and profit of each sector.

• Profit = sale of product minus manufacturing costs.

• Every part of a company must make a profit. Each department has a budget.

• Planning costs in order to make a planned profit works.

• Planned costs include:

• • Direct / variable costs eg materials and labour.

• • Overhead / fixed costs eg design, marketing, rent, rates, insurance.

• • Overheads are usually 25-30% of labour costs

8. Economic Factors Sales Revenue and Price

• Sales revenue = price per item multiplied by the number sold.

• Haute couture is a higher price to absorb variable and overhead costs but the sales revenue may be lower than mass produced products.

• Mass produced garments lower selling price so more may sell. Cost savings can occur because processes can be repeated.

9. Economic Factors Pricing Products

• Mass produced products need market penetration so price needs to be low.

• Retailers pay a higher price for fast delivery for exclusive products or small orders.

• Higher prices makes consumer think the product is higher quality so increase sales.

• Ranges can be sold by a loss leader set a an artificially low price to promote sales.

• Manufacturers and retailers allow for a % of mark downs (sold in sales) to sell off products at the end of the season.

10. Economic Factors Pricing Products

• Factors deciding price include:

• Style, fashion, function of the product.

• Innovation or exclusivity.

• Value of fabric / components silk, kevlar.

• Value of work content lined, hand stitched.

• Competition from other manufacturers.

11. Sources, Availability and Costs of Materials

• Cost of materials depends on:

• • Type

• • Quantity required.

• Fabric price per metre is based on current price plus estimates of increases and reductions for large quantities.

• All sewn product manufacture requires a continuous supply of raw materials eg fibres, yarns, fabrics, components.

• Cost of raw materials is based on supply and demand.

• • Those in short supply cost more than abundant raw materials.

• • Raw materials difficult / expensive to process cost more.

• • Transportation of raw materials adds to cost.

12. Sources, Availability and Costs of Materials Natural Fibres

• Come from renewable and reliable sources eg cotton and wool.

• Prices of natural fibres are mainly stable.

• Cotton is grown in 80 countries.

• Price of luxury fibres eg mohair and cashmere varies according to supply.

• Cashmere (Mongolian goat) is harvested yearly and is in short supply so expensive.

• One person can produce two tons of natural fibres per year companred to 22 tons of manufactured synthetic fibres.

13. Sources, Availability and Costs of Materials Natural Fibres - Cotton

• 75% of total market share of natural fibres.

• Australia is the lowest cost producer of cotton.

• Polyester is cheaper (but not natural).

• Many countries subsidise the growing of cotton.

14. Sources, Availability and Costs of Materials Natural Fibres - Wool

• Decline in consumption since 1990.

• Pure new wool is still prestigious.

• Consumers wear less wool garments eg suits.

• Wool lost market share with the collapse of wool consumption in Soviet Union and Eastern Europe.

• Woolgrowers of Australia and New Zealand have put money behind marketing wool to retain market share.

15. Sources, Availability and Costs of Materials Natural Fibres - Linen

• Flax is a niche market textile.

• Not used in medical and industrial textiles now.

• 90% of linen market is consumer good. 10% is industrial.

• Linen is used in designer collections.

• Recent improvements in finish will improve market appeal.

16. Sources, Availability and Costs of Materials Natural Fibres - Silk

• Prospering in India and China.

• Slow but sure rate of increase.

• Micro denier polyester filament fabrics are undistinguishable from silk but real silk is still a luxury fibre and in demand.

17. Sources, Availability and Costs of Materials Regenerated Fibres

• Viscose, modal, Tencel and Lyocell are manufactured from chemicals and cellulose (softwood).

• Softwood is grown in North America and Europe.

• Management of these forests ensures a consistent and controlled supply leads to relatively inexpensive fibres.

18. Sources, Availability and Costs of Materials Synthetic Fibres

• 93% of world production of fibres.

• Polyester has greatest market share.

• Europe consumes more than it produces and imports polyester from Asia.

• Made from crude oil.

• Synthetic fibres are inexpensive to produce and supply is reliable.

19. Sources, Availability and Costs of Materials Importance of Oil

• Worlds largest oil producing countries are not major oil consumers export most oil.

• Prices of oil climbed sharply around 1973 led to international economic downturn.

• Oil costs fluctuate resulting in higher petrol, energy and raw materials prices worldwide.

20. Scale of Production

• Predicts profitability because it influences how and where a product is manufactured, choice of products available and selling price.

• For high volume production manufacturers and retailers base sales predictions of volume and price on:

• • Testing selling in selected shops.

• • Sales of similar styles in previous seasons.

• • How product matches current and future colour, shape and design trends.

21. Scale of Production

• Economies of scale are factors that cause costs to be lower in high volume production.

• Unit price of a mass produced product is lower because raw materials are used more efficiently.

• Economies of scale is mass production result from:

• • Spreading cost of production between more products.

• • Bulk buying of materials = lower cost.

• • Specialisation dividing up work between a workforce with skills that match the job.

• • Industry concentrated in one areas.

• • Componies concentrated in one area.

22. Design, Planning and Production Costs

• Difficult for company to be profitable without developing new products.

• Cost of product development is high.

• New products require change in production methods and training costs.

• Changes in production need planning and will overlap with existing production to keep company in profit.

• Constant demand to reduce time to market of new products.

• Need right product at right time, in right quantity at right cost.

• Consumers perception of product needs to be that it provides the right image as well as value for money.

23. Design, Planning and Production Costs Costs of Product Development

• Includes design and manufacturing costs.

• Following costs must be included in cost of the product:

• Employing designer.

• Developing design concepts.

• Modelling and prototyping.

• Employing a pattern cutter to produce a prototype pattern.

• Producing a sample (materials, labour, overheads)

• Producing a production pattern.

24. Design, Planning and Production Costs Costs of Production

• Costs include adapting the manufacturing process and training operators.

• Target production costs must be established at the design stage and feasibility checked against existing styles.

• Major costs are incurred in the manufacturing stage.

• DFM (designing for manufacture) is about designing for cost.

• The aims of DFM are:

• • Minimise assembly costs

• • Minimise product development cycle

• • Manufacture high quality products efficiently.

25. Design, Planning and Production Costs Labour Costs

• Sewn products need a lot of labour not automation as production is complex.

• Cutting, sewing, pressing are direct labour costs and account for 20-25% of total direct costs.

• Sewing and pressing are most labour intensive (cutting uses CAD CAM).

• Higher the level of productivity lower the labour costs per unit and higher the potential profit.

26. Design, Planning and Production Costs Cost of Quality

• Manufacturers aim to produce a competitive product that is good quality and value for money.

• Cost of quality is budgeted, measured and analysed.

• There are three types of cost related to quality:

• • Cost of checking it is right.

• • Cost of making it right first time.

• • Cost of getting it wrong.

27. Design, Planning and Production Costs Cost of Quality

• Cost of checking it is right

• Related to checking:

• Materials, processes and products against specifications.

• That quality system is working well.

• The accuracy of equipment.

28. Design, Planning and Production Costs Cost of Quality

• Costs of making it right first time

• Designing, implementing and maintaining a quality assurance system stops things going wrong.

• It is set up before production begins and results in costs relating to:

• • Setting customer quality requirements.

• • Developing training for employees.

• • Design, development, purchase of equipment for checking quality.

• • Developing specifications for materials, processes and products.

• • Planning and using quality checks against specifications.

29. Design, Planning and Production Costs Cost of Quality

• The costs of getting it wrong

• Internal failure costs and external failure costs.

• Internal failure costs products dont reach quality standard detected before despatch. Includes costs relating to:

• • Reworking product to correct faults

• • Scrapping products

• • Inspecting reworked products

• • Selling products as seconds

• External failure costs products dont reach quality standard detected after being sold to retailer. Includes costs relating to:

• • Customer service

• • Returned or replacing products

• • Investigating returned products

• • Products liability legislation

• • Damage to company reputation relating to future sales

30. Design, Planning and Production Costs How to Cost a Product

• Cost must be an accurate price that makes product saleable and create profit.

• Too high = reduced sales below profitable margin.

• Too low = no profit even if many are sold.

• Comparing prices of competitors is an indicator used.

• Computer systems are used to estimate costs and forecast profits.

• Cost is more than adding a set percentage to cost of making.

31. How to Cost a Product Cost and Value

• The best price is one that generates the highest profit not the one that sells the most products.

• Cost of making (materials, electricity, labour)

• Maintenance, storage, transportation to retail outlets.

• Rent, administration design, marketing.

• Profit

32. How to Cost a Product Calculating the Selling Price

• Costing takes account of:

• Direct costs (variable costs). Cost of manufacture eg materials, labour, energy used, packaging. Accounts for 50-65% of total product selling price (SP).

• Overhead costs (fixed or indirect costs). Cost of design and marketing, admin, management, maintenance and repair of buildings and machinery, cleaning, security, safety, pattern cutting, sampling, quality, rent, rates, insurance, storage, lighting, heating, distribution.

• Overheads are shared between all products in a line. Marketing costs account for 15-20% of total SP.

33. How to Cost a Product Calculating the Selling Price

• Costing also takes account of:

• Profit (gross or net). Amount left after all costs have been paid.

• Gross profit is revenue from sales minus direct and overhead costs.

• Net profit is gross profit minus tax.

• Net profits pay dividends to shareholders, bonuses to employees and are used for new machinery and product development.

34. How to Cost a Product Calculating the Selling Price

• The break even point = how to pay back direct and overheads.

• Break even analysis works out how many products to sell to make a profit.

• This is done by accountants and financial controllers.

• Break even point = overhead costs

• selling price direct costs

• Eg Direct cost of garment is 13, sells to retailer for 20. Overheads for 1000 are 5000.

• Break even point = 5000

• 20-13

• Break even point = 714.

• This means 714 products must be sold to break even.

35. Selling the Product

• When setting price need to find what consumers are willing to pay.

• Pricing decisions include:

• Social values value for money and customer demand.

• Political values economic policy, culture of profit.

• Economic values booming economy, recession.

• Technological values electronic money transfer, distribution systems.