When it comes quoting price of the garment to the buyer for an order, it is done either in CMT or in FOB terms. The contract may include various clauses with the FOB and CMT price.
Let's explore the difference between Cut, Make, and Trim (CMT) and Free On Board (FOB) terms in the context of the garment industry.
CMT (Cut, Make, and Trim):
As you know CMT stands for Cut, Make and Trims, the CMT cost included labour costs for these processes. A garment factory estimates the costs on these processes and adds margin to that estimates to calculate the final CMT price.
The garment factories who work on CMT orders is known as CMT manufacturer. CMT manufacturers handle specific tasks such as cutting fabric, assembling garments, and adding trimmings to the garments.
They work with raw materials provided by clients. In some case, fabric is provided to manufacturer, or the final cutting is given for stitching garments. If the client provides direct cutting, there is no need to cuttings again by CMT manufacturers.
In CMT orders, clients supply materials, designs, and sometimes packaging item to the manufacturer.
CMT manufacturer needs less manpower in managerial level. Due to this they work with less overheads. Normally, CMT manufacturers are specialized expertise, quality control, and flexibility for smaller orders.
In CMT orders buyer can save money and earn a higher profit on retail price.
FOB (Free On Board):
FOB stands for Free on-board. In the FOB shipping terms, FOB quote includes all the costs incurred in materials to manufacturing to handing over the shipment to the forwarder until the shipping board. They client or buyer no need to worry about any expenses incurred in the order processing until they received the order into the shipment dispatch port. Manufacturer takes responsibility up to shipping point. At that point buyer assumes responsibility for the merchandise, damages, loses and freight costs.
FOB manufacturers handle the entire production process, including sourcing materials, making garments, quality inspection, finishing and shipping.
The garment manufacturer manages everything from start to finish. They need to take care of sampling, production scheduling, any additional processes involved in the design like embroidery, printing and washing processes. While estimating the FOB cost, a manufacturer needs to be very careful in preparing cost sheet including all the raw material cost, processes and accurate costing in each process. Then consider the factory overheads and margin to come out with a final FOB.
By working with FOB manufacturers, client gets many benefits such as they no need to work for material sourcing, pattern making and cutting fabrics. For brands and clients FOB order is cost-effective for larger orders.
In summary, CMT focuses on specific tasks, while FOB covers end-to-end production. Each has its advantages based on business needs. If you have further questions, feel free to ask!
Conclusion:
It is not necessary the CMT manufacturer only work for the CMT orders and cannot make FOB orders. It mainly depends on the company's infrastructure and availability of team. Some manufacturers work on FOB orders and CMT orders at the same time. Normally, when manufacturers see their capacity is not booked by FOB orders for a season, they take CMT orders.
As you know, to work on FOB orders, a manufacturer need all the required employees and department with team for executing all the processes required to complete the FOB orders. They need enough funds to purchase raw materials (Fabrics and Trims) for FOB orders and pay a larger team of employees.
For a start-up manufacturing company, starting work with CMT orders is a good choice. But it is not necessary that they should only work for CMT orders.
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