17 November, 2015
By Iyyappan C, Research Analyst, Facilities Management
A Steady Cost Rise
For the clothing sector, raw materials and wages constitute a major stake in cost drivers. Raw materials, the biggest driver in production, range from 50% to 55% of the total cost of production. Though Western companies can introduce better advanced technology and management to the supplier market for efficient production and have a win-win situation there, the raw material cost is something that cannot be controlled totally; especially when the sourcing market is importing raw materials from countries like Bangladesh and Vietnam. However choosing the right country with local sources for raw materials can benefit global companies, and also gives more control over it, compared to imported raw materials.
The next big driver is labor wages, which is in the rising phase in Asia and constitutes about a thirdof the total cost. The best way to overcome the rising trend is to utilize an upcoming market, which has the potential and capacity to serve global garment needs, and, at the same time, has low labor wages that will continue to be the same for further foreseeable years.