From fibre to customer: the chain of companies that makes one T-shirt

One T-shirt is made by a chain of companies, not by one company

When you hold a plain cotton T-shirt, you are holding the work of at least six or seven different businesses. One grew the cotton. One spun it into yarn. One knitted the yarn into fabric. One dyed the fabric. One cut and sewed it. One ordered it and put a brand name on it. One shipped it, one stored it, one sold it. Each of these businesses was paid by the one after it, and each one could have delayed the T-shirt or made it more expensive.

This is why a merchandiser cannot only look at the factory. A merchandiser is the person in a factory or a buying company who follows an order from the first request until the goods are shipped. To do that job, you have to know every company the order depends on, what each one does, who pays whom, and where the risk sits. This lesson gives you that full picture for one simple product. Every later lesson in this course adds detail to one part of it.

What you need, and what this lesson does not cover

You need: nothing but this page. You do not need to know how a factory works or how to read a costing sheet.

By the end of this lesson you can:

• name the ten stages a T-shirt passes through, from raw fibre to the customer, and say what each stage does;
• recognise the common ways real orders differ from the simple picture: who buys the fabric, who sits between the factory and the shop, how delivery and payment are agreed;
• say which way money moves in the chain and who pays whom;
• ask the three questions that tell you the true shape of any order;
• work out who carries the loss when an order is cancelled, using ownership and the contract together.

Not covered here: how a price is built (lesson 1.3), how a 16-week timeline is planned (lesson 1.5), and the details of ownership at each step (lesson 1.2).

Words you will meet in this lesson

Every T-shirt goes through the same ten jobs, in the same order

However it is made or sold, a cotton T-shirt passes through the same jobs. Someone grows the fibre, someone gins it, someone spins it, someone knits it, someone dyes it, someone sews it, someone orders it and gives it a brand, someone moves and stores it, someone sells it, and someone wears it. Ten jobs. The jobs never change. What changes from one order to the next is which companies do them and who pays whom. Hold on to that idea.

The jobs are fixed. The companies and the payments are not

The picture above is the simplest version, with a different company at every stage. Real orders come in many shapes. If you learn only one shape, you will misread the next order you see. Here are the differences you will meet most often.

None of these shapes is right or wrong. A CMT order suits a small factory working for a big brand; an agent suits a buyer who does not know a country's factories. What is wrong is to assume. The shape of each order is written in its contract and purchase order.

Order A: Northline Apparel orders 15,000 T-shirts from Delta Garments

This course follows one order. Northline Apparel, a clothing brand in another country with its own shops, asks Delta Garments, a garment factory, for 15,000 basic cotton T-shirts in one colour. The order is a full package, FOB order: Delta Garments chooses its fabric mill (Colorline Dyeing), pays for the fabric, sews the T-shirts, and ships them from its own port. Northline Apparel pays the sea freight and sells the T-shirts in its own shops, paying by letter of credit at shipment.

Notice that Delta Garments deals directly with only two companies: Colorline Dyeing behind it and the buyer in front of it. It still depends on all ten stages. If the ginner is late, the spinner is late; if the spinner is late, the knitting and dyeing mills are late, and Delta Garments cannot cut. The factory never spoke to the ginner or the spinner, but either one can still make it miss its date.

Money moves in the opposite direction to the T-shirt

The T-shirt moves forward, from fibre to customer. Money moves backward, one payment at a time; each company pays the company it bought from. These are rough teaching figures for Order A; the full costing is in lesson 1.3.

Three questions that tell you the true shape of any order

When a new order lands on your desk, do not assume it looks like the last one. Read the purchase order and the contract, and answer these three questions in writing:

1. Who does each of the ten jobs? Name the company at every stage. If you cannot name a stage, you cannot see the risk in it.
2. Who buys the fabric, and who owns it while it is in the factory? Factory buys, buyer nominates, or buyer supplies. This one answer changes the cost, the risk and the blame.
3. Who pays whom, when, and on what delivery terms? Delivery terms (ex-works, FOB, CIF, DDP) tell you who pays freight and carries transport risk. Payment terms tell you when the money arrives.

Write the answers on the working template in block 10. Do this for every order, and you will never be surprised by "but we thought the buyer was paying for that".

A new merchandiser treats the shape of one order as the rule for every order

The most common mistake of a new merchandiser is to learn one order well, then assume every order works the same way. A factory that always bought its own fabric gets a CMT order, and nobody checks who answers for short fabric. A brand that always shipped FOB agrees to DDP once, and nobody adds the duty to the price. A retailer that used to pay the brand now buys directly, and the factory waits for payment from a company no longer in the chain.

A second, smaller trap: mixing up buyer and customer. The buyer orders from the factory; the customer wears the T-shirt. A factory can have a happy buyer and still make T-shirts nobody wants; that is the buyer's problem, until the buyer stops ordering.

• If you cannot name the company at a stage, you cannot see the risk at that stage. Find out.
• Five stages work before the factory. A late ginner or spinner can make a factory miss its ship, even though the two never speak.
• Who buys the fabric decides who owns it. The company that paid for it owns it, unless the contract says otherwise.
• Delivery terms (FOB, CIF, DDP) decide who pays freight and who carries transport risk. They do not decide ownership.
• Each company normally pays the company it bought from. When a buyer pays a mill directly, write it down; it changes who carries the fabric cost.
• "Buyer" is the company that orders. "Customer" is the person who wears it. Keep the words apart.

The second T-shirt order: the buyer pays the mill directly, then cancels three days before shipping

Later in the year, Northline Apparel places a second order with Delta Garments, again 15,000 basic cotton T-shirts. This time the shape is different. Northline Apparel chose the dyeing and finishing mill itself and paid that mill directly for the fabric. This is a buyer-nominated fabric supplier. Because Northline Apparel paid for the fabric, Northline Apparel owns it. Delta Garments received the fabric, cut it, and sewed all 15,000 T-shirts.

Three days before the cartons were due to leave the factory, Northline Apparel cancelled the order and said it would not pay for the sewing.

The signed contract contains this clause:

You are the merchandiser at Delta Garments. Who has to pay for the cutting and sewing already done? Decide before you open the answer.

Order shape sheet: fill this in for every new order

Copy this table into your order file. Fill it from the purchase order and the contract, not from memory. If a cell is blank, that is a question to ask the buyer today.

Download the Order Shape sheet (Excel)

Lesson 1.2: Who owns the product at each point in the chain?

You now know the ten stages and the shapes an order can take. The next lesson looks at one question closely: at each hand-off, who owns the goods, and why having the goods in your building is not the same as owning them. Back to the course map