Design in Society

1
Design in Society

• Economics and Production
• A2 Textiles

2
Introduction

• We will look at
• The business of manufacturing
• Economic factors in the production of products
• Sources, availability and costs of materials
• The scale of production
• Design, planning and production costs
• Selling the product

3
The Business of Manufacturing

• Textile product manufacture has stages that
  combine to form the supply chain.
• Total time from fibre to consumer is six to
  eighteen months.
• The stages are
• Fibre production
• Yarn production
• Fabric manufacture (weaving, knitting etc)
• Dyeing and finishing
• Product manufacture
• Retailing
• Consumer

4
The Business of Manufacturing

• Overall there are three sectors in the supply
  chain.
• Primary, secondary and tertiary.
• The primary sector Manufacture of chemicals for
  fibre production, maintenance of land for grazing
  sheep and growing cotton.

5
The Business of Manufacturing

• The secondary sector Manufacture of textile
  fibres, yarns, fabrics, dyeing finishing and
  product manufacture.
• High export earning sector.
• Changes in technology and global economy mean
  less people are employed and product manufacture
  in developed countries has fallen.

6
The Business of Manufacturing

• The tertiary sector retailing, advertising,
  marketing.
• Employs most people in developed countries.

7
Economic Factors in the Manufacture of
ProductsCosts and Profit

• Economic cost of designing and making.
• Viable products are cost effective.
• Viable market potential and profit of each
  sector.
• Profit sale of product minus manufacturing
  costs.
• Every part of a company must make a profit. Each
  department has a budget.
• Planning costs in order to make a planned profit
  works.
• Planned costs include
• Direct / variable costs eg materials and labour.
• Overhead / fixed costs eg design, marketing,
  rent, rates, insurance.
• Overheads are usually 25-30 of labour costs

8
Economic Factors Sales Revenue and Price

• Sales revenue price per item multiplied by the
  number sold.
• Haute couture is a higher price to absorb
  variable and overhead costs but the sales revenue
  may be lower than mass produced products.
• Mass produced garments lower selling price so
  more may sell. Cost savings can occur because
  processes can be repeated.

9
Economic FactorsPricing Products

• Mass produced products need market penetration so
  price needs to be low.
• Retailers pay a higher price for fast delivery
  for exclusive products or small orders.
• Higher prices makes consumer think the product is
  higher quality so increase sales.
• Ranges can be sold by a loss leader set a an
  artificially low price to promote sales.
• Manufacturers and retailers allow for a of mark
  downs (sold in sales) to sell off products at the
  end of the season.

10
Economic FactorsPricing Products

• Factors deciding price include
• Style, fashion, function of the product.
• Innovation or exclusivity.
• Value of fabric / components silk, kevlar.
• Value of work content lined, hand stitched.
• Competition from other manufacturers.

11
Sources, Availability and Costs of Materials

• Cost of materials depends on
• Type
• Quantity required.
• Fabric price per metre is based on current price
  plus estimates of increases and reductions for
  large quantities.
• All sewn product manufacture requires a
  continuous supply of raw materials eg fibres,
  yarns, fabrics, components.
• Cost of raw materials is based on supply and
  demand.
• Those in short supply cost more than abundant raw
  materials.
• Raw materials difficult / expensive to process
  cost more.
• Transportation of raw materials adds to cost.

12
Sources, Availability and Costs of
MaterialsNatural Fibres

• Come from renewable and reliable sources eg
  cotton and wool.
• Prices of natural fibres are mainly stable.
• Cotton is grown in 80 countries.
• Price of luxury fibres eg mohair and cashmere
  varies according to supply.
• Cashmere (Mongolian goat) is harvested yearly and
  is in short supply so expensive.
• One person can produce two tons of natural fibres
  per year companred to 22 tons of manufactured
  synthetic fibres.

13
Sources, Availability and Costs of
MaterialsNatural Fibres - Cotton

• 75 of total market share of natural fibres.
• Australia is the lowest cost producer of cotton.
• Polyester is cheaper (but not natural).
• Many countries subsidise the growing of cotton.

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Sources, Availability and Costs of
MaterialsNatural Fibres - Wool

• Decline in consumption since 1990.
• Pure new wool is still prestigious.
• Consumers wear less wool garments eg suits.
• Wool lost market share with the collapse of wool
  consumption in Soviet Union and Eastern Europe.
• Woolgrowers of Australia and New Zealand have put
  money behind marketing wool to retain market
  share.

15
Sources, Availability and Costs of
MaterialsNatural Fibres - Linen

• Flax is a niche market textile.
• Not used in medical and industrial textiles now.
• 90 of linen market is consumer good. 10 is
  industrial.
• Linen is used in designer collections.
• Recent improvements in finish will improve market
  appeal.

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Sources, Availability and Costs of
MaterialsNatural Fibres - Silk

• Prospering in India and China.
• Slow but sure rate of increase.
• Micro denier polyester filament fabrics are
  undistinguishable from silk but real silk is
  still a luxury fibre and in demand.

17
Sources, Availability and Costs of
MaterialsRegenerated Fibres

• Viscose, modal, Tencel and Lyocell are
  manufactured from chemicals and cellulose
  (softwood).
• Softwood is grown in North America and Europe.
• Management of these forests ensures a consistent
  and controlled supply leads to relatively
  inexpensive fibres.

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Sources, Availability and Costs of
MaterialsSynthetic Fibres

• 93 of world production of fibres.
• Polyester has greatest market share.
• Europe consumes more than it produces and imports
  polyester from Asia.
• Made from crude oil.
• Synthetic fibres are inexpensive to produce and
  supply is reliable.

19
Sources, Availability and Costs of
MaterialsImportance of Oil

• Worlds largest oil producing countries are not
  major oil consumers export most oil.
• Prices of oil climbed sharply around 1973 led
  to international economic downturn.
• Oil costs fluctuate resulting in higher petrol,
  energy and raw materials prices worldwide.

20
Scale of Production

• Predicts profitability because it influences how
  and where a product is manufactured, choice of
  products available and selling price.
• For high volume production manufacturers and
  retailers base sales predictions of volume and
  price on
• Testing selling in selected shops.
• Sales of similar styles in previous seasons.
• How product matches current and future colour,
  shape and design trends.

21
Scale of Production

• Economies of scale are factors that cause costs
  to be lower in high volume production.
• Unit price of a mass produced product is lower
  because raw materials are used more efficiently.
• Economies of scale is mass production result
  from
• Spreading cost of production between more
  products.
• Bulk buying of materials lower cost.
• Specialisation dividing up work between a
  workforce with skills that match the job.
• Industry concentrated in one areas.
• Componies concentrated in one area.

22
Design, Planning and Production Costs

• Difficult for company to be profitable without
  developing new products.
• Cost of product development is high.
• New products require change in production methods
  and training costs.
• Changes in production need planning and will
  overlap with existing production to keep company
  in profit.
• Constant demand to reduce time to market of new
  products.
• Need right product at right time, in right
  quantity at right cost.
• Consumers perception of product needs to be that
  it provides the right image as well as value for
  money.

23
Design, Planning and Production Costs Costs
of Product Development

• Includes design and manufacturing costs.
• Following costs must be included in cost of the
  product
• Employing designer.
• Developing design concepts.
• Modelling and prototyping.
• Employing a pattern cutter to produce a prototype
  pattern.
• Producing a sample (materials, labour, overheads)
• Producing a production pattern.

24
Design, Planning and Production Costs Costs
of Production

• Costs include adapting the manufacturing process
  and training operators.
• Target production costs must be established at
  the design stage and feasibility checked against
  existing styles.
• Major costs are incurred in the manufacturing
  stage.
• DFM (designing for manufacture) is about
  designing for cost.
• The aims of DFM are
• Minimise assembly costs
• Minimise product development cycle
• Manufacture high quality products efficiently.

25
Design, Planning and Production Costs Labour
Costs

• Sewn products need a lot of labour not automation
  as production is complex.
• Cutting, sewing, pressing are direct labour costs
  and account for 20-25 of total direct costs.
• Sewing and pressing are most labour intensive
  (cutting uses CAD CAM).
• Higher the level of productivity lower the labour
  costs per unit and higher the potential profit.

26
Design, Planning and Production Costs Cost of
Quality

• Manufacturers aim to produce a competitive
  product that is good quality and value for money.
• Cost of quality is budgeted, measured and
  analysed.
• There are three types of cost related to quality
• Cost of checking it is right.
• Cost of making it right first time.
• Cost of getting it wrong.

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Design, Planning and Production Costs Cost of
Quality

• Cost of checking it is right
• Related to checking
• Materials, processes and products against
  specifications.
• That quality system is working well.
• The accuracy of equipment.

28
Design, Planning and Production Costs Cost of
Quality

• Costs of making it right first time
• Designing, implementing and maintaining a quality
  assurance system stops things going wrong.
• It is set up before production begins and results
  in costs relating to
• Setting customer quality requirements.
• Developing training for employees.
• Design, development, purchase of equipment for
  checking quality.
• Developing specifications for materials,
  processes and products.
• Planning and using quality checks against
  specifications.

29
Design, Planning and Production Costs Cost of
Quality

• The costs of getting it wrong
• Internal failure costs and external failure
  costs.
• Internal failure costs products dont reach
  quality standard detected before despatch.
  Includes costs relating to
• Reworking product to correct faults
• Scrapping products
• Inspecting reworked products
• Selling products as seconds
• External failure costs products dont reach
  quality standard detected after being sold to
  retailer. Includes costs relating to
• Customer service
• Returned or replacing products
• Investigating returned products
• Products liability legislation
• Damage to company reputation relating to future
  sales

30
Design, Planning and Production Costs How to
Cost a Product

• Cost must be an accurate price that makes product
  saleable and create profit.
• Too high reduced sales below profitable margin.
• Too low no profit even if many are sold.
• Comparing prices of competitors is an indicator
  used.
• Computer systems are used to estimate costs and
  forecast profits.
• Cost is more than adding a set percentage to cost
  of making.

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How to Cost a ProductCost and Value

• The best price is one that generates the highest
  profit not the one that sells the most products.
• Cost of making (materials, electricity, labour)
• Maintenance, storage, transportation to retail
  outlets.
• Rent, administration design, marketing.
• Profit

32
How to Cost a ProductCalculating the Selling
Price

• Costing takes account of
• Direct costs (variable costs). Cost of
  manufacture eg materials, labour, energy used,
  packaging. Accounts for 50-65 of total product
  selling price (SP).
• Overhead costs (fixed or indirect costs). Cost
  of design and marketing, admin, management,
  maintenance and repair of buildings and
  machinery, cleaning, security, safety, pattern
  cutting, sampling, quality, rent, rates,
  insurance, storage, lighting, heating,
  distribution.
• Overheads are shared between all products in a
  line. Marketing costs account for 15-20 of
  total SP.

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How to Cost a ProductCalculating the Selling
Price

• Costing also takes account of
• Profit (gross or net). Amount left after all
  costs have been paid.
• Gross profit is revenue from sales minus direct
  and overhead costs.
• Net profit is gross profit minus tax.
• Net profits pay dividends to shareholders,
  bonuses to employees and are used for new
  machinery and product development.

34
How to Cost a ProductCalculating the Selling
Price

• The break even point how to pay back direct and
  overheads.
• Break even analysis works out how many products
  to sell to make a profit.
• This is done by accountants and financial
  controllers.
• Break even point overhead costs
• selling price direct
  costs
• Eg Direct cost of garment is 13, sells to
  retailer for 20. Overheads for 1000 are 5000.
• Break even point 5000
• 20-13
• Break even point 714.
• This means 714 products must be sold to break
  even.

35
Selling the Product

• When setting price need to find what consumers
  are willing to pay.
• Pricing decisions include
• Social values value for money and customer
  demand.
• Political values economic policy, culture of
  profit.
• Economic values booming economy, recession.
• Technological values electronic money transfer,
  distribution systems.