How is your true cost per piece calculated?

When a factory gives you a unit price, it is not talking about your cost. It is talking about the price at its own door. The gap between those two numbers can reach 40% or more, and most of what new importers lose is lost in that distance.

First, understand the delivery term

Before comparing two prices, make sure they are on the same term. Factories usually quote one of these:

• EXW (ex works): the price at the factory gate. You pay inland transport, export clearance, freight and insurance. The cheapest number on paper and the furthest from your real cost.
• FOB (free on board): includes inland transport and clearance at the export port. The most common basis, and the one to compare on.
• CIF (cost, insurance, freight): adds sea freight and insurance to your port, but duty and clearance at your end are still yours.
• DDP (delivered duty paid): everything through to your warehouse. The highest number and the fewest surprises.

Comparing one factory's EXW against another's FOB is not a comparison at all. Always ask for both on the same term.

The cost layers

• Factory price: driven by fabric and weight, quantity, colour count, and how complex the cut is.
• Printing or embroidery: always quoted separately. In screen printing the screens are paid once per colour — a fixed setup cost; in embroidery the price is by stitch count.
• Packing: poly bag, size sticker, hang tag, export carton. They look like small lines but together they run to 5–8% of cost.
• Inland transport and export clearance in China.
• Sea freight: usually charged by volume rather than weight.
• Duty and taxes in your market: wildly variable — sometimes zero, sometimes over 20%.
• The cost of money: the deposit is paid two months before the goods arrive. That is tied-up capital with a cost — count it.

What actually lowers the cost per piece

1. Cut colours, not quantity. Every colour is a separate dye run and a separate screen. Three thousand pieces in two colours costs less per piece than three thousand in six.
2. Spread the setup cost over more units. Screen cost is fixed: over 500 pieces you feel it, over 3,000 it nearly disappears.
3. Combine models into one container. It spreads the freight across more units without raising the minimum on each model.
4. Ask for flat folding. It saves 8–12% of the volume, and freight is charged by volume.
5. Use one carton size. Mixed cartons leave gaps in the container that you pay for.

A worked example

An order of 3,000 cotton tees at 180 GSM with a two-colour print:

• Factory price EXW: $2.10 per piece.
• Printing: $0.35 plus $120 for screens ($0.04 per piece).
• Packing: $0.12.
• Inland transport and clearance: $0.06.
• Sea freight: volume dependent — around $0.25 per piece in a full 20ft container.
• Duty at 10%: $0.29.

That totals roughly $3.21 against the quoted $2.10 — the factory price was only 65% of your cost. Plan on the last number, not the first.

Minimums, and how they are negotiated

The usual minimum is 100–300 pieces per model in a single colour. It is not a sacred number: the factory sets it to cover line setup and dyeing. So:

• Combining several models in the same fabric and colour lowers the minimum in practice.
• Accepting a stock colour instead of a custom one can remove the dyeing minimum altogether.
• Ordering in the slow season (January–February, July–August) buys you more flexibility.

Payment terms

The common structure is a deposit on order confirmation and the balance against a copy of the bill of lading. Do not pay the balance in full before you have seen a photographic inspection report — that final payment is your only negotiating lever if something is wrong.