Overview Garments Factory

In Solo, Central Java.

Indonesia.

By : Dedi Rosandi, A.p, S.E.

I. Introduction.
Garments is a continuous business that will never end, and it’s a part of human
civilization. However, due the unevenness resource either in natural resource,
human resource or social and demographic issue. Selecting the right region are
critical points that have be considered to established a business, in this matter, a
factory location has to be carefully selected.

II. Disparity
As mentioned afore, several issues that affecting the disparity on cost of production.
Java divided by 6 province,
1. Banten
2. DKI Jakarta (Capital city)
3. West Java
4. Central Java
5. DIY Jogjakarta
6. East Java
Each province has its own advantage and disadvantage. But the main points that
affecting the cost of production is wages. Every region and city in Indonesia has its
own living standards that local and central government research. And by
government also, they set the minimum wages for each region (UMR) and cities
(UMK).

For example :
Jakarta :
DKI Jakarta : Rp 3.940.973

West Java :
Region of Bogor : Rp 3.763.405
City of Bogor : Rp 3.842.785
Bekasi Region : Rp 4.146.126
City Of Bandung : Rp 3.339.580

Central Java :
Semarang Region : Rp 2.055.000
Boyolali Region : Rp 1.790.000
Solo Region : Rp 1.802.700
III. Resources
In Indonesia there’s 2 main regions for garments manufacturing, either for its
quality, delivery or competitiveness of pricing. The regions are West Java and Central
Java.
West Java :
Advantage : Near capital city, as it today, Jakarta is the main business hub
for Indonesia.
Multiple choices for international quality fabric mills and easy
access to various garments accessories.
Disadvantage : High annual wages increment.
Vulnerable for work strike

Central Java : Steady annual wages increment

Government has started the infrastructure development in
bigger cities.

Disadvantage : In several cities, worker do not have the necessary skills for
garments manufacturing.
Cheap labor inversely proportional with public infrastructure
and worker skills.

IV. Average Cost

After we understand the big picture of garments Industry in Java. Next step we will
calculated average cost for a garments to be manufactured.
Factory
Location : Solo
Lines : 4 Lines with 30 operator set up.
T. Workes : 185 workers.
Average production worker expenditure :
185 workers / 4 lines = 47 workers
Average wages with 24 work days
Rp 1.802.700 /24 = Rp. 75.112,5/ day
Daily expenditure for 1 production facility :
Rp. 13.895.812.5 ($992.56)/day
Daily expenditure per line for production wages in Solo :
Rp. 3.530.287.5/Day ($252.2)
While west Java (Bogor UMR) :
Rp. 7.370.001.5/day with the same config.
 I will construct a simulation as example, as below configuration :
*All lines are working on the same styling
Short Sleeve Shirt :
Quantity : 10000pcs
Price : $ 4.5 FOB (Ex VAT). *competitive price
Total Price : $ 40.000
Fab Price : $ 1.6 (Poplin Polyester 65% cotton 35% col white)
Cons : 1.2 Yards
Fab + Trims : $ 2.32
CM : $ 2.18
Total CM : $ 21,800

Output : 500pcs/lines *On average output

T. Output : 2000pcs/day
Prod. Time : 5 work days + 2 (Cutting Loading Packing)
T. Prod wages : $992.56*7 days = $ 6,947.92
Diesel oil : $372.5 (7 days)
Machinery : $ 31.5 (9 days)

Total Average Production Cost : $ 7354.92 (exclude Staff salary)

Average staff salary $ 4793
T. CM - (T.Production Cost + Staff Salary)

= 21,800 - 12,147.92 = $ 9652.08 (7 days)

On average daily basis of 24 days, net income (exclude tax) will be $ 33,093/Month
V. Investment
Initial Investments for a factory as below :
*price are estimate

No. Item Qty Price (USD)

1 Sewing Machines 120 78000
2 Overlock Stitch 4 12000
3 Cutting Machine 3 643
4 Pattern Machine 1 15000
5 Welting machine 1 1800
6 Generator 100KVA 1 12720
7 Property Rent 5 years 53572
8 Machinery Consumables Part ± 1% machine cost 1200
TOTAL
$174,953