# What is Cut to Ship Ratio in Apparel Industry?

#### What is Cut to Ship Ratio in Apparel Industry?

‘Cut to Ship Ratio’ is one of the key performance indicators of a garment manufacturing company. Here ‘cut’ means total pieces cut by a factory for an order. And ‘ship’ means total pieces sold to the customer (buyer) of an order.

For example, a factory gets an order of 1000 pieces, factory cuts fabric for 1020 garments (2% extra) and ship equal to 1000 pieces or less/higher than 1000 pieces.

#### Calculation method:

Cutting quantity = order quantity (1 + extra cutting percentage)

Ship quantity = actual pieces shipped to buyer

Cut to ship ratio = (Cutting quantity / Shipped quantity)

Normally, factories those make export orders, cut extra garments than the actual order quantity. In the garment making process, there are possibilities of garment damage and rejection. So to ensure that 100% order quantity is shipped to buyer after discarding damaged garment, factories cut extra garments. Garment exporters generally cut 2-5% extra garment than order quantity. Extra percentage of cut quantity is planned by merchandiser or other authorised person.

Cutting of extra garments consumes extra fabric and incurred excess cost of raw materials (fabric and trims) and increases production cost to make those extra pieces.

There are few other reasons for cutting extra garments than order quantity. Like, few buyers accept extra garments than order quantity up to certain percentage with same FOB, in such cases factories try to sell more garments to increase sales turnover. Secondly to utilize maximum fabric that are sourced for a specific order. Percentage figure of extra garment cutting varies depending on fabric types and number of processes involved in conversion process from fabric to finished garment.

#### Reasons for measuring cut to ship ratio of orders.

Some of reasons for measuring cut to ship ration are

• To check how efficiently a factory processes its orders

• To Benchmark factory performance in cut to ship ratio

• How many pieces (in percentage) are kept as surplus garments and analyse extra cost is incurred in fabrics and labor cost

• Performance of the Factory Manager, General Manager is measured by cut to ship ratio figure.

#### How to measure cut to ship ratio of an order?

To measure the this ratio following information are required

1. Order quantity: This information is available in buyer's purchase order (PO)

2. Total cut quantity: This information will be available cutting department and production report

3. Total shipped quantity: This information is available with shipping department and with merchandiser

Illustration: Suppose a factory received an export garment order of 10000 pieces of shirts. Factory cuts 2% extra shirts as buffer and finally they have shipped exactly 10,000 pieces to your buyer. Calculate cut to ship ratio for this order?

Solution: 2% of 10,000 pieces is 200 pieces. That means factory cuts total 10200 pieces.

Therefore, Cut : Ship = 10200:10000 =1.02