Using Open Costing as a Negotiation Tool

Open Costing as Negotiation Tool

You need to know which components go into your products, from which supplier and which location. On top of enabling sustainability, open costing gives you the tools to negotiate with your suppliers. This is a tip for any negotiation - ask for a cost breakdown. Let's go through an example together:

How much should a jacket cost to produce?

€5 / $30 / GBP 80+? All valid responses and it depends on the product details and the volume of course.
So let's breakdown how much a product could cost in three steps.

1The biggest component cost is typically the fabric.

If this is a key style for you then you should reach out to the fabric supplier directly and negotiate with them. It could be that your garment manufacturer will get a better deal (as they possibly have a better purchasing position) but you don't know if your garment manufacturer is giving you their cost or cost + margin. Plus if you use this fabric across several garment manufacturers you may well have a better negotiation position with the fabric supplier.

Aside from price per m2, you should also verify the consumption, how much material is actually needed? Take a size medium as your base, and then look at the impact of having a smaller or larger size. It's important not to have too many variables that can confuse the discussion.

2Then we have trims, where zippers play an important role but also zipper pullers, speciality items (badges), buttons can have a big impact. The label pack is the area which is often the most complicated as it contains variable data so there are costs with managing this which is not part of the item price.

Reach out to your zipper supplier (if you don't know which zipper supplier your garment manufacturer is using, ask!) and talk to them about your key styles. Zipper pricing is price per item adjusted by the length of a zipper. For example a typical zipper that is the main zipper of a jacket is 55cm long. It's a size 5 Vislon automatic lock. The item price is $160/1000 (16 cents) for a 20cm version and each additional cm costs $2/1000 (0,2 cents) so our total price is $160/1000 + $70/1000 = $230/1000.

Label pack items (labels, hangtags, heat transfers, packaging) also need to broken down and understood where they come from. This is important as these items are your brand points (your logo on the front of the jacket) and you need to "own" this. It's surprising how many apparel brands just let their garment manufacturer source those items locally, often at an inflated price to hide margin.

3Next we have the suppliers costs such as workforce and factory overheads (electricity, depreciation of machinery etc.) and factory profit.

Here is where you can achieve the biggest improvement but only if you have points 1 and 2 nailed down. Then you can easily ask for quotes from three qualified garment manufacturers and compare point 3 as 1 and 2 are already defined.

It is also in this area where you can have an impact on the welfare of the people making your product. is a tool provided by
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