CMT

CMT vs. Other Fee Structures

CMT differs from traditional FOB (Free on Board) manufacturing, where the manufacturer quotes a total price including materials and labor. Under CMT, the brand pays material costs separately from manufacturing costs, providing price transparency and enabling the brand to control material sourcing. This structure is common in developing manufacturing countries where labor is a significant cost component and the brand wants to optimize material sourcing separately.

CMT Advantages and Challenges

CMT provides brands with transparency into true manufacturing costs and enables material optimization (sourcing yarn or fabric from preferred suppliers). However, CMT shifts responsibility for material sourcing, inventory management, and quality control to the brand, requiring more sophisticated supply chain operations. CMT also creates cash flow challenges: the brand must fund materials inventory in addition to manufacturing costs.

CMT in Practice

CMT is especially common in countries like Bangladesh, Vietnam, and Cambodia where labor costs are low. Brands or material suppliers provide cut fabric panels and trims to factories, which cut (if necessary), sew, and finish garments. The factory invoices only for labor and overhead. CMT requires close coordination between material suppliers, factories, and quality control to ensure materials arrive on schedule and meet specifications.

OSF Perspective

OSF recognizes CMT as a pragmatic structure for international manufacturing where brands need direct material control and cost transparency. The structure's complexity is justified when brands have sophisticated sourcing operations and material optimization strategies, but it creates operational burden that smaller brands may not be equipped to manage.

Related Terms

FOB  |  Sourcing  |  Landed Cost  |  Bill of Materials

Notable Brands

Brands manufacturing in Bangladesh, Vietnam, Cambodia typically use CMT