Calculating a garment factory's break-even, one day at a time

In CMT garment work, the CM (cut-make) price is paid on pieces that pass QC. To know whether the factory made money today, you need two numbers: how many people worked today and how many pieces passed QC today. A cost sheet for a single order cannot answer that. SeamStream is production software for garment factories, and this is how it calculates factory break-even. Below is the formula, followed by the places where we got it wrong.

The formula

Daily production value is the number of pieces that passed QC multiplied by the CM price. Divide it by the number of people who worked that day and you get revenue per person per day. Break-even is measured in the same unit. What one person costs the factory per day is the base break-even; add a fixed buffer on top and you have the target break-even. Instead of a monthly fixed-cost total, the question becomes: how much does one person need to bring in per day for the factory to cover its costs?

Daily margin is production value minus (target break-even × total headcount). The same frame works for a line, a building or a style: output for the period times CM, divided by man-days for the period. Man-days are the number of people who worked on that line each day, added up over the month.

This asks a different question from pre-costing or post-costing an order. Pre-costing asks whether an order is worth taking. Factory break-even asks whether the factory covered its costs today.

Where we got it wrong

The first problem was who to count. If you count only line operators, revenue per person looks too high. So we decided to include office and support staff who work off the line (back office) in the denominator. But there are periods when headcount data arrives only for the lines, so we are still checking this.

Styles with no CM price were another problem. If CM is 0, the break-even calculation also comes out at 0. Filling the blank with any number just to keep a 0 off the screen makes the figure look plausible and the decision wrong. A style with no CM stays at 0 until the real CM is confirmed and entered.

Sometimes the numerator and the denominator covered different lines. At one point production records came in from 32 line codes while headcount covered only 20 lines. The same factory can then look profitable or loss-making. Match production and headcount to the same list of lines before dividing.

Records for the same line could also appear as several rows. One line came in as four rows, one per style, and each row showed 10 people. Add them up and headcount is four times too high. Count people once per line.

The last one is telling missing data from production that really is zero. When a query fails and returns an empty list instead of an error, the screen shows zero output. When a number is 0, first check whether the data actually arrived.

In short

The formula is one line. The time goes into making the numerator (production) and the denominator (people) cover the same ground. In SeamStream, a device at each workstation counts output, and from those counts SeamStream shows cost by style and factory break-even. More at https://ssm8.app/.