How US Fashion Brands Can See What Really Drives Overseas Garment Costs
Author : Coats Digital | Published On : 02 Sep 2026
For US fashion brands working with overseas manufacturers, accurate cost breakdowns from overseas suppliers can be the difference between a profitable order and an unexpected hit to margins. A supplier's FOB quotation may look competitive, but the final figure does not show how much is being allocated to fabric, labour, factory overhead or profit. Building an independent view of these costs allows brands to understand supplier pricing before committing to production.
This matters even more when brands are dealing with changing import costs. The PDF notes that US apparel tariff rates increased sharply during 2025, while additional tariff measures continued to affect sourcing conditions in 2026. Since duty is added to the factory price, brands have a strong reason to control the manufacturing costs they can influence.
The number on the quotation is only the beginning
When a factory provides an FOB price, it is giving the buyer a completed calculation rather than showing every assumption used to reach it.
A typical garment FOB price includes four main areas:
- Bill of Materials
- Cost-to-Make
- Factory overhead
- Supplier margin
The Bill of Materials covers fabrics, trims, labels and packaging, including relevant wastage. Cost-to-Make represents the labour involved in cutting, sewing and finishing the garment. Overhead can include utilities, supervision, quality control, administration and compliance. Margin represents the factory's profit.
The relationship can be expressed as:
FOB = BOM + CM + Factory Overhead + Margin
Once the product is shipped, freight, import duties and inbound handling also contribute to the brand's landed cost.
Looking only at FOB can therefore hide important differences between suppliers.
Why a supplier's own breakdown may not be enough
Requesting an itemised cost sheet is a sensible first step. It provides visibility into how the supplier has allocated its quoted price.
But there is an important limitation.
The factory is still responsible for the assumptions behind the calculation. Its labour times may reflect its own production methods and efficiency expectations. Its overhead allocation may also differ from another factory's approach.
The source describes this as disclosure rather than an independent check. A factory can explain its number without necessarily proving that every underlying assumption is appropriate.
For brands looking to establish greater cost control, the labour calculation deserves particular attention.
Labour time can create a significant gap
Cost-to-Make can be simplified to two variables:
CM = Time × Rate
The cost per minute can be developed using labour costs, working hours and applicable charges. Production time is more difficult because it depends on the garment's construction and the time assigned to individual operations.
This makes labour time one of the least transparent components of supplier costing.
The PDF provides a useful example from Suzhou Tianyuan Garments. The company reportedly found SMV differences of up to 30% across its production lines before introducing a standardised method. After standardisation, it reported 98% SMV accuracy and 95% accuracy in cost estimation.
The example shows why brands need a consistent method for establishing production time.
Build your own labour benchmark
Standard Minute Value gives brands a practical way to create that benchmark.
SMV represents the standard time needed for a qualified operator working at standard performance to complete a defined garment operation, including allowances.
Once the total SMV has been established, expected Cost-to-Make can be calculated:
CM = Total Garment SMV × Factory Cost Per Minute
This allows the brand to create an expected labour cost independently and then compare it with the supplier's quotation.
The purpose is not to assume the factory is wrong.
It is to have a reference point for understanding why the supplier's figure may be different.
Define the garment before calculating the time
An SMV is only meaningful when the construction method is clearly established.
Details such as seam types, stitch classes, closures, trims and finishing processes can affect how many operations are required and how long those operations take.
That means brands should establish the construction method before generating the Bill of Labour.
Predetermined Motion Time Systems can help make this process more consistent. The source references General Sewing Data, or GSD, as an established apparel PMTS methodology using standard motion codes and predetermined time values.
The advantage is that the time estimate is based on a defined method rather than simply relying on the factory's current line performance.
Why early costing gives brands more control
Costing is most valuable when there is still time to make changes.
If a brand discovers that a garment has an unexpectedly high labour requirement after sampling and supplier selection, the opportunity to change the product may be limited.
Creating a Bill of Labour earlier can highlight costly operations while the product is still being developed.
The PDF describes GSDQuest as an AI-assisted solution that can analyse product images, PDFs and tech packs, identify construction features and generate an SMV-based Bill of Labour. It reports that the process can reduce costing time by approximately 90%.
This allows costing to become part of product development rather than something performed only at the end of the process.
The cheapest labour rate may not mean the lowest cost
Supplier comparison can become misleading when brands focus only on the quoted cost per minute.
Efficiency needs to be included.
The PDF uses this formula:
Effective Cost Per Minute = Quoted Cost Per Minute ÷ Factory Efficiency
Consider two suppliers.
A factory charging $0.10 per minute at 55% efficiency has an effective cost of approximately $0.182 per minute.
Another factory charging $0.13 per minute at 80% efficiency has an effective cost of approximately $0.163 per minute.
The second supplier has a higher quoted rate, but its better efficiency results in a lower effective labour cost.
This is why a sourcing decision should consider production efficiency rather than simply selecting the lowest rate.
Make supplier comparisons consistent
Brands working with multiple factories can improve their comparisons by giving every supplier the same independent Bill of Labour and locked SMVs.
That means each factory is costing against the same production-time assumptions. Differences can then be examined through cost per minute, efficiency, overhead and margin.
This approach can also expose legitimate reasons for cost differences.
A factory may have higher costs because it operates with lower efficiency, has invested in more advanced machinery, carries stronger compliance costs, pays fair wages, handles small production runs or is producing a more complex approved construction.
Not every higher quote is evidence of overcharging. The important point is being able to identify what is creating the difference.
Turn a cost sheet into a long-term asset
The value of independent costing increases when brands use it consistently.
A Bill of Labour can be version controlled and reused across different products and suppliers. This creates a common costing language and prevents assumptions from changing every time a new factory is approached.
For a small brand working with one or two factories, a structured costing process may be enough. As the supplier network grows, however, spreadsheets can become harder to manage. Manual calculations take longer, assumptions can drift and detailed SMV work may be skipped when deadlines become tight.
The PDF identifies working with four or more vendors quoting similar styles as a potential point where dedicated costing technology becomes particularly useful.
Put the brand in control of the costing conversation
A strong sourcing team does not need to assume that every supplier is inflating its prices. It needs a reliable way to understand what is behind those prices.
Independent SMVs, consistent construction methods, documented cost-per-minute calculations and standardised Bills of Labour give brands that foundation.
The supplier's quotation can then be evaluated against a clear benchmark. If there is a gap, the brand can investigate whether it comes from labour time, efficiency, overhead, margin or a genuine difference in manufacturing requirements.
As tariff and landed-cost pressures continue to make apparel sourcing more challenging, this level of visibility can become increasingly valuable. Manufacturing cost is one of the areas where brands have greater ability to influence their final economics.
Ultimately, better supplier costing is not about negotiating harder. It is about knowing more.
When a brand understands how much time a garment should take, what the labour should reasonably cost and why different suppliers arrive at different numbers, it can make better sourcing decisions before the purchase order is placed.
