Pricing a Programme Through the Learning Curve

How to read this sheet

The premium this sheet produces is arithmetic and not padding. A line that takes forty-two minutes on a garment costed at twenty is spending twenty-two minutes a piece that nobody has paid for, and the only question is whether the price carries it or the factory does. Quote the sheet price on the seeded programme and it returns four point three per cent against a twelve per cent target - the ramp takes two thirds of the margin, and it takes it invisibly, because a style is costed once and never re-costed while it runs. Read the two dates as the main output. A single month stops losing money well before the programme does, and in the months between them every monthly report says the style is fine while the programme is still deep in deficit. That gap is where a factory stops watching, and it is also where a buyer is most likely to ask for a price reduction on the grounds that the line has settled down. The programme length is the risk and it is not symmetric. The deficit is front loaded and the recovery is back loaded, so half the programme is worth much less than half the profit - on the seed it is worth less than none. A buyer who re-tenders once the line has learned is the worst case in the sheet: the factory funded the ramp, any re-bid has to be struck against the learned cost, and the deficit cannot be recovered from that buyer or from the next one. Price for the programme you will actually get rather than the one described in the meeting, and if the buyer will not commit to the length, the premium belongs in the first months rather than spread evenly. What is not modelled: the ramp is treated as a property of the style and the line, when much of it is the pattern, the marker, the trims arriving late and the sample room having answered a question wrongly - all of which are fixable and none of which are learning. A second line running the same style does not inherit the first line s position on the curve unless the operators move with it. Fabric and trim costs are held constant, though a programme usually buys better in its later months. And nothing here prices the value of a long relationship, which is the honest argument for accepting a thin programme and is a judgement rather than a calculation.