A few days ago, a buyer asked us to send a formal bid for three and a quarter lakh T-shirts. We asked them for an average price of  2.30 cents. They said that the price of 1 dollar will not be more than 60 cents. After circulating e-mails a few times, we informed the buyer’s representative that it was not possible to work at this price.

We kindly asked the buyer’s representative, ‘Explain to us how to make a T-shirt with the price you have offered.’ The buyer’s representative simply told us that he could not reconcile the account. However, he said, some factories are willing to do the work at that price (1 dollar 60 cents).

A few days ago, I was talking to a well-known owner of the garment industry. I asked him, ‘Why can’t a small or medium-sized factory compete with a big factory like yours?’ He gave me an idea of ​​how to calculate their factory. He said that big factories have their own dyeing mills. The real profit they make on the market price of dyeing clothes in the case of large purchases. And when the cost of sewing clothes goes up, they take the purchase order. The owner of the garment industry added, “We get a fairly good profit at the end of the day with the cash assistance we get from the government.”

Let’s put it simply. If a big garment factory makes a profit of 5 percent by exporting goods worth one thousand crore rupees, then in terms of money it stands at around 50 crore rupees. Small and medium-sized factories, which do not have a dyeing mill, only get money for sewing garments. However, without any other value addition department, such as printing, embroidery, washing, etc., it is not possible for them to survive in the competition. This is because, unlike the big factories, they are in unequal competition with the buyer for the actual price of a product. The calculation is that if it costs 100 rupees to dye 1 kg of cloth, then the small or medium factory has to spend the whole amount. But big factories can save 30 to 40 rupees there.

However, there are several negative aspects to this calculation of large factories. First of all, big factories would not be able to make a profit if they did not get money as a result of various policies provided by the government. Second, a manufacturing industry using fuels like gas, electricity, etc. of the country offers price of goods at subsidized price rather than market price. Third, the big factories are increasing the pressure on the economy by opening new factories one after another in the name of increasing production by increasing the debt burden.

The reality is that at the end of the day, we are handing over the government subsidy money, bank loan money and government subsidy money for fuel. This is by no means the fair price of the products we produce. Another big mistake in accounting is not considering the Return of Investment (ROI). You may be earning 30 per cent on clothes with a dyeing mill, but you should also calculate when the hundreds of millions of rupees you have invested will come up.

Let’s look at another calculation. The operating cost per minute of each factory is not one. Some less, some more. Suppose the operating cost of a factory is four to six rupees per minute. The big reason for this is the ratio of workers to officers and employees. For example, if a large factory produces 500,000 garments daily.

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