| dc.description.abstract | Technological development is the direct cause of the
establishment of capital intensive undertakings. The
installation of labour-saving machinery in the textile
industry during the past few years has compelled management to consider the choice of location.
In the past the textile industry has been established
as near as possible to the available sources of labour,
and is still one of the most important sources of
employment in South Africa. The problem exists that
the industry has gradually developed from a labour
orientated industry in the past to a capital intensive
undertaking in the future. It is especially the manufacturing of cloth consisting of synthetic fibre,
combined with textiles such as wool and cotton, that
is responsible for this trend. Production of synthetic
fibre is almost impossible without the availability of
expensive capital machinery. The Government's decentralization programme provides benefits for labour-intensive industries as well as capital intensive
industries. Management will as a result be substantially
influenced in their choice of location by the above mentioned factors in the future.
Distribution of textiles will become more complex in pro-
portion to foreign distributors' penetration of the
domestic consumer market. Intensive market segmentation
will have to be undertaken in order to identify consumers' needs and preferences. Allocation of distribution costs shall in the future more than likely be
according to new bases.
Investment in capital machinery as well as the establishment of capital intensive factories combined with manual
labour, can largely influence the choice of allocation
bases.
Distribution consists mainly of order-getting costs as
well as order-filling costs. The other connotation
applicable to distribution today, namely continuity in
the production process up to the point where the final
product reaches the consumer, confirms the necessity
of the implementation of advanced allocation techniques.
This dissertation incorporates allocation techniques for
each phase in the product life-cycle as it is applied
in the textile industry. Bases of allocation as it
appears in theory as well as techniques that are applicable in practice, are discussed. Classification of costs
for production - and ·service departments must take place.
Transportation planning as well as the influence of
transportation costs on the profit structure in the textile industry are summarized. Effective separation of
distribution costs ensures that optimal allocation
occurs which is reflected in the nett profit. Variable
costs must be precisely defined because the difference
between turnover and variable costs represents the
contribution to the redemption of fixed costs.
In the textile industry the cost of material forms a
significant part of the final selling price of the
product. Management must not only strive to increase
the productivity of labour to distribute final goods,
but must also endeavour to increase the efficiency of
material requirements, planning and thereby improve the
productivity of capital. The principal aim of distribution management is to keep stocks at an acceptably
low level consistent with the risks involved. The
setting of stock levels and levels of service for
apparel companies, must therefore involve a trade-off,
hence the need for up to date information, continuous
monitoring and frequent review. Inventory control
that resorts directly under order-filling costs is very
important for the efficient allocation of distribution
costs.
Order-getting costs are primarily concerned with costs
involving the attraction of consumers to get them
interested in the buying of a new product, like advertisement for instance. Order-filling costs, on the
other hand, are applicable to costs after completion
of the production process. All costs whether fixed,
variable or both, concerning the introduction of a
product, the attraction of consumers as well as the
effective turnover of such product belongs to distribution costs. A proper allocation basis for each cost
item is reflected in the financial position of things
and this also ensures the implementation of effective
internal control measures.
The optimal utilization of the break-even-analysis for
certain product lines is insured if distribution costs
are effectively allocated. To sum up, it can be said
that the allocation question of distribution costs of
apparel companies is centralized around the following
problems, namely:
1. Identification. of distribution cost factors;
2. effective separation of order-getting costs
and order-filling costs is fixed, variable,
semi-fixed and semi-variable;
3. choice of proper allocation bases;
4. optimal allocation of cost items to production and service departments as well as
administrative departments;
5. after allocation of distribution costs, the
optimal utilization of advanced techniques
like the break-even analysis, as well as
the contribution margin technique, that
simplifies decision-making. | en_US |
