Feasibility, piece costing and AQL inspection for a 12,000-piece polo shirt export order
A Ludhiana unit has quoted US$ 4.20 FOB per piece for 12,000 cotton piqué polo shirts to a buyer in the UAE, with delivery in 30 calendar days. Its single line has 45 operators. A time study gives 18 SMV per shirt including machine handling but excluding final thread trimming, which adds a further 1.5 minutes. The shift is 8 hours with 45 minutes of non-productive time, and the line's historical efficiency is 80%. The unit works 26 days a month with Sundays off. Fabric consumption is 1.60 m at Rs 130/m; trims are Rs 30 per piece; the average operator wage is Rs 15,000 per month; overheads are Rs 25 per piece; packing and inland freight are Rs 7 per piece. The exchange rate is Rs 83 to the dollar. Fabric will reach the unit on day 12. The buyer now asks for a 3% price reduction and will inspect at AQL 2.5.
1. Compute the line's daily capacity and decide whether the order can ship on time. Show the effect of the 1.5 minutes of trimming.
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Available minutes per day = 45 operators × (480 − 45) = 45 × 435 = 19,575. At 80% efficiency that is 15,660 productive minutes. Without trimming (18 SMV): 15,660 ÷ 18 = 870 pieces/day. With trimming (19.5 SMV): 15,660 ÷ 19.5 = 803 pieces/day. The trimming allowance is not optional - it is real work done by the same operators - so plan on 803. Delivery window: 30 calendar days with Sundays off is about 26 working days, but fabric arrives on day 12, leaving roughly 18 calendar days, i.e. about 15–16 working days. Capacity in that window is 16 × 803 = 12,848 pieces against 12,000 required. The order is feasible, but the buffer is under 7% - one absent operator, one machine breakdown or a rejected lot can break the date. Protect it by expediting fabric to day 9 and pre-producing the first 2,000 pieces.
2. Build the piece cost and evaluate whether the 3% price reduction is acceptable.
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Cost per piece: fabric 1.60 × 130 = Rs 208.00; trims Rs 30.00; labour - monthly minutes 45 × 435 × 26 = 508,950, wage bill 45 × 15,000 = Rs 675,000, so Rs 1.326 per minute × 19.5 SMV = Rs 25.86; overheads Rs 25.00; packing and freight Rs 7.00. Total = Rs 295.86. At Rs 83/US$, the quoted $4.20 is Rs 348.60, giving a margin of Rs 52.74, or 17.8%. A 3% cut takes Rs 10.46 per piece, Rs 125,520 across the order, and drops the margin to 14.3%. It is affordable only if the line actually delivers 80% efficiency and nothing is air-freighted; one air-freight consignment of this volume would erase the margin. Counter-offer: accept 2% and hold the delivery date, or take the 3% in exchange for buyer-supplied fabric or a 45-day window. Know your floor before the meeting, and do not accept below about 10% on an FOB order of this size.
3. Outline the QC plan you would set up for AQL 2.5 inspection and one planning action to protect the delivery date.
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Under ISO 2859-1 general inspection level II, a lot of 12,000 falls in code letter M, giving a sample of 315 pieces with acceptance 14 and rejection 15 at AQL 2.5 - confirm the numbers against the buyer's own manual, since some buyers use level I or a tightened scheme. Build the plan around that: a pre-production meeting and approved sample, an in-line check at 20%, 50% and 80% of the run on the critical operations (collar attach, placket, sleeve set, side seam, hem), 100% thread trimming and measurement of the key dimensions on 5 pieces per hour, and a final random inspection to the AQL. Keep check sheets that the buyer's inspector can see. Planning action: book the fabric in-house date as the first milestone in a day-wise plan and hold a 2,000-piece buffer by running the line at 85% for the first week rather than accepting 80% and hoping.