Professional Documents
Culture Documents
TABLE OF CONTENTS
Contents
Page
s
Table of contents...................................................................................................................................
Tables: .....................................................................................................................................................
1. Executive Summary....................................................................................................................
2. Product Description and Application.....................................................................................
3. Market Study, Plant Capacity and Production Program....................................................
3.1
I
II
1
2
2
Market Study....................................................................................................................
3.1.1
Supply-Demand Analysis.........................................................................................
3.1.2
Projected Demand...................................................................................................
3.1.3
12
13
Plant Capacity............................................................................................................
13
3.2.2
Production program.................................................................................................
4. Raw Materials and Utilities.....................................................................................................
14
15
3.2
3.2.1
4.1
Raw Materials....................................................................................................................
15
4.2
Utilities...................................................................................................................
5. Location and Site........................................................................................................................
6. Technology
and
16
16
17
Engineering......................................................................................................
6.1
6.2
17
Production
22
Process............................................................................................................
22
Source
of
23
technology.......................................................................................................
6.3
6.4
Land
use,
building
and
works..................................................................................
7. Manpower
and
civil
Training
24
Requirement......................................................................................
24
7.1
25
Manpower
requirement.................................................................................................
7.2
Training
requirement.....................................................................................................
8. Financial
25
Analysis.........................................................................................................................
25
2
8.1
8.2
Underlying
26
Assumption....................................................................................................
26
Pre-production
27
cost..........................................................................................................
8.3
Total
investment
cost......................................................................................................
8.4
Production
Costs................................................................................................................
9. Financial
27
Evaluation.....................................................................................................................
TABLES
Table
Pages
Table: 3.4 World and Ethiopias Apparel import demand projection for years 2011-2022........
Table: 3.6 Summary of apparel surplus import demand projected for years 2011-2022.........
10
11
Table: 3.8 Estimated Average selling prices of unit kilogram for different product
categories.........................................................................................................................................
12
13
14
15
16
22
24
25
3
26
26
27
1. Executive Summary
According to 2011 trade report, by International Trade Center (ITC), the total apparel
products imported by the world was about 196,786,089,000 USD in value, from which
about 83,324,000.00 USD was imported by Ethiopia. Taking these values as a base line
and average growth rate of 2% and 4% respectively, the present (2013s) world import
demand for apparel products is estimated to be 204,736,247,000.00 USD, which is
approximately about 50 billion pieces/year, and the amount to be imported by Ethiopia
is estimated to reach 90,123,238.00 USD, which is approximately about 22million
pieces/year. There is a total production capacity of about 73 million woven and knitted
garments existing current in the country, from which only about 75% (56.25 million
pieces) is utilized yet. In the previous year, about 27.5% (15.48 million pieces) of total
production was exported by the country.
exists about 25% (18.25 million pieces) unutilized capacity, currently, which would
cover about 13 million pieces of local demand proportionately. Hence, deducting 13
million from 22 million, we get 9 million capacity gaps to meet only the local extra
demands for various garment products. The import demand is likely to reach at 60
billion pieces/year globally, and 31.5 million pieces/year for Ethiopia by the year 2022.
Different fabric types; such as cotton fabrics, polyester fabrics, nylon fabrics,
polyester-cotton blended fabrics, denim fabrics, and others, are used to
manufacture these products tailored to customers requirement.
3. MARKET STUDY AND PLANT CAPACITY
3.1 MARKET STUDY
3.1.1. Supply-Demand Analysis
The population of the world is ever growing and almost reaching seven billion at this
point in time. Besides this, the economy of majority of the world population is also
seen increasing from time to time. This was due to the economic policy
improvements adopted by most part of the world continents like Africa, East and
Middle Asia, and South America to increase the welfare of their people. And it is
obvious that the more improved the economic welfare of people, the more they
expend on purchase of apparel and food.
Therefore, as long as the peoples expending capacity continues improving parallel
with population growth, it makes this time the most strategic for textile industries
in general and garment factories in particular than ever before.
Besides the globally increasing demands for textile products, there are also a
number of advantages and incentives that motivate project promoters in Africa in
general and in Ethiopia in particular. Among these are:
Tax free and unlimited quota market for textile products in economic giant
continents like US and Europe.
capacity in 2012/13- source TIDI), there is still bigger domestic and international
apparel product demand.
The market segment for proposed project is 69% targeted to the international market
and 31% to local market for the coming 10 years. Ethiopia has exported few amount of
apparel products for the past 10 years despite the fact that the market for
developing nations are still at large and the government had planned in its five years
7
Knitted Garment
Weaved Garment
Total
Growth Rate
(million USD)
(million USD)
(million USD)
(%)
2010/11
35
30
65
2011/12
70
60
130
100
2012/13
158
135
293
125
2013/14
245
210
455
55
2014/15
350
300
650
43
Table 3.2 List of apparel products exported from year 2002 up to 2011
a/ Export in Net-Mass (Kg)
2002
2003
Products Category
GC
GC
2004 GC
Men's suits, jackets,
trousers etc & shorts
159.00
Men's Shirts
Babies Garment
Sub Total
Others
TOTAL SUM
2005 GC
35,781.00
26,074.80
73,497.80
26,898.00
113,882.10
34,918.02
16,053.00
3,343.10
2006
GC
127,464.7
3
137,871.6
8
2010
GC
2009 GC
2011
GC
2007 GC
2008 GC
101,580.33
230,794.83
63,259.93
79,146.87
34,035.38
133,414.37
37,887.51
84,623.30
2,608.00
10,929.00
56,354.30
168,343.60
14,044.80
132,173.7
5
4,588.74
3,329.15
79,551.63
17,302.40
114,430.25
178,382.56
29,748.88
15,147.27
12,000.00
14,767.0
0
3,206.00
76,814.0
0
1,617.00
213,981.2
0
190.00
280,292.5
2
60.00
411,614.
96
0
254,634.7
0
0
545,920.9
1
619.00
211,066.9
5
35,716.00
41,306.00
481,825.90
156,163.38
90,865.30
97,335.35
251,502.14
172,913.76
62.00
196,281.
84
573,969.2
3
50,483.
00
118,120
.00
695,807.
10
436,455.
90
502,480
.26
351,970.
05
797,423.
05
383,980.
71
770,251
.07
NA
NA
NA
NA
NA
NA
NA
NA
Source: Extracted from Ethiopian Custom & Revenue Authoritys Report Data Base
2002
GC
2003
GC
2004 GC
2005 GC
2006 GC
2007 GC
2008 GC
2009 GC
2010 GC
1252.66
109,395.3
8
133,701.84
416,199.55
256,069.92
383,349.92
640,583.54
181,833.87
372,782.61
81,672.84
296,523.54
150,779.52
332,130.43
161,705.54
897,504.22
173,275.85
302,803.55
104,850.00
9,673.67
24,351.95
15,328.78
17,170.95
134,671.80
114,523.37
5,523,000.0
0
3,010,000.0
0
1,707,000.0
0
29,985.7
0
14,927.5
2
46,165.8
8
109,022.9
4
252,770.04
558,504.26
387,911.84
180,010.20
932,301.12
80,681.26
75,125.11
934,000.00
4,789.11
304,880.
27
2,601.42
790,446.8
4
913.75
1,136,070
.75
651.59
1,001,115
.73
0
740,394.4
4
0
2,487,559
.83
4,465.41
574,928.1
9
556.88
865,791.5
2
11,175,000.
00
93,812.
56
136,632
.52
1,281,53
0.73
712,240.
8
283,456.
27
389,269.
79
1,211,13
5.26
949,765.
65
5,504,11
7.22
2011 GC
1,000.00
3,904,000
9
TOTAL SUM
139,97
8.44
441,512
.79
2,071,97
7.57
1,848,31
1.55
1,284,57
2.00
1,129,66
4.23
3,698,69
5.09
1,524,69
3.84
6,369,90
8.74
.00
15,079,00
0.00
Source: Extracted from Ethiopian Custom & Revenue Authoritys Report Data Base (for 2002-2010) and from International Trade
Centers Report Data Base (for 2011)
Table 3.3 List of apparel products imported from year 2002 up to 2011
a/ Import in Net-Mass (Kg)
Products
Category
Men's suits,
jackets, trousers
etc & shorts
Men's Shirts
Womens Blouse
& Shirts
Women's suits,
jackets, dresses
skirts etc &
shorts
Babies Garments
Sub Total
Others
TOTAL SUM
2011
GC
2002 GC
2003 GC
2004 GC
2005 GC
2006 GC
2007 GC
2008 GC
2009 GC
2010 GC
3,386,339
1,058,841.0
0
1,424,375.0
0
3,158,269
1,075,427.0
0
3,352,335.0
0
3,117,306.1
1,166,219.6
7
4,408,382.1
5
3,338,977.9
1,362,717.4
4
5,282,327.2
5
3,975,624.0
3
1,400,606.9
3
4,428,796.8
6
4,607,668.0
3
1,261,987.1
8
3,909,073.7
2
4,174,741.2
9
1,090,756.9
6
3,793,738.6
7
2,803,183.5
6
2,567,027.7
1
1,089,465.7
8
3,559,410.1
9
858,196.92
3,086,521.8
2
NA
NA
NA
NA
733,204.00
1,024,064.0
0
7,626,823.
00
1,094,561.0
0
1,091,768.0
0
9,772,360.
00
1,732,912.6
3
1,272,262.0
0
11,697,082
.55
2,025,307.7
5
1,332,488.8
6
13,341,819
.20
1,895,197.3
3
1,930,724.1
7
13,630,949
.32
1,940,545.2
1
1,564,047.9
8
13,283,322
.12
2,158,051.1
9
1,517,166.1
8
12,734,454
.29
2,386,480.4
3
1,822,585.2
5
10,956,967
.98
3,126,041.4
6
1,879,744.8
6
12,221,690
.00
2,475,49
2.00
3,875,49
5.00
3,467,175
.47
3,505,380
.22
3,782,793
.26
4,237,241
.26
4,048,017
.78
4,080,570
.40
4,672,460
.83
NA
10,102,31 13,647,85
15,164,25
16,847,19
17,413,74
17,520,56
5.00
5.00
8.02
9.42
2.58
3.38
Source: Extracted from Ethiopian Custom & Revenue Authoritys Report Data Base
16,782,47
2.07
15,037,53
8.38
16,894,15
0.83
NA
NA
NA
2002 GC
2003 GC
2004 GC
2005 GC
2006 GC
2007 GC
2008 GC
2009 GC
2010 GC
13,766,670.
83
2,789,159.2
5
13,130,278.
60
3,120,870.9
3
15,001,308.
90
4,394,774.9
3
17,974,381.
63
5,401,072.2
7
21,889,123.
00
6,247,318.3
9
27,225,822.
62
5,660,860.3
2
23,062,478.
78
4,315,687.6
5
18,855,294.
69
3,953,866.7
0
18,717,243.
38
5,282,019.7
4
2011 GC
27,843,000.
00
18,992,000.
00
10
Womens Blouse
& Shirts
Women's suits,
jackets, dresses
skirts etc & shorts
Babies Garments
Sub Total
Others
TOTAL SUM
4,045,438.9
5
7,245,238.5
8
10,129,091.
21
15,484,537.
70
14,248,330.
31
15,172,403.
72
15,250,053.
17
14,174,649.
41
18,983,938.
03
7,109,000.0
0
11
12
According to this report (ITC report), the average growth rate for apparels world
import for the years 2007 - 2011 was 2%, and about 16% for the years 2010-2011.
The Import growth rate for Ethiopia was reported as 4% for the years 2007 -2011
and 7% for the years 2010-2011. (But according to data obtained from ECRA, it was
indicated that there was reduction in import by 14.7% for the year 2010-2011, which
was noted as the result of data differences from one source to the other).
Likewise; regarding export, it was indicated in the ITC report that the growth rate
was 93% for the year 2007-2011 and 267% for the years 2010-2011, for Ethiopia.
According to the Growth and Transformation Plan (GTP) of the country, it was
targeted to increase the export of apparel products, in general, as presented in table
3.1 above.
Therefore, assuming that the world and national imports continues to increase with
the same average growth rate of the year 2007 2011, which is 2% and 4%
respectively; and taking the values of 2011 as the base line, which was
196,786,089,000.00 USD and 83,324,000.00 USD respectively, we can predict that
the demands of apparel products in general to have the following trends.
Year
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
National Import
(USD)
Import (USD)
83,324,000.00
86,656,960.00
90,123,238.40
93,728,167.94
97,477,294.65
101,376,386.40
105,431,441.90
109,648,699.60
114,034,647.60
118,596,033.50
123,339,874.80
128,273,469.80
196,702,765,000.00
200,635,153,840.00
204,646,123,761.60
208,737,243,732.06
212,910,114,105.35
217,166,366,813.60
221,507,666,658.10
225,935,711,300.40
230,452,232,552.40
235,058,996,566.50
239,757,804,525.20
244,550,493,830.20
Table 3.4: World and Ethiopian Apparel Import projections for years 2011 -2022
13
Assuming that the factories available in the year 2011 are remaining to exist and
continue to produce and sale the amount imported in that year, we can calculate the
supply gaps resulted in the market because of the demand growths in the following
consecutive years. These can be obtained by deducting the supply of the year 2011
from the projected ones for the years covered in the plan, as presented in Table 3.5.
Considering the export and import situations of apparel products at national and global
levels, we can reasonably conclude that there is very huge market demand for the
mentioned products both locally and globally. Therefore, it will be the matter of
competing and taking the market share
Table 3.5: Apparel Supply Gaps Projected for the years 2011-2022
a/ National supply gap
Year
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
National Import
National Supply
Supply Gap
(USD)
(USD)
(USD)
83,324,000.00
86,656,960.00
90,123,238.40
93,728,167.94
97,477,294.65
101,376,386.40
105,431,441.90
109,648,699.60
114,034,647.60
118,596,033.50
123,339,874.80
128,273,469.80
83,324,000.00
83,324,000.00
83,324,000.00
83,324,000.00
83,324,000.00
83,324,000.00
83,324,000.00
83,324,000.00
83,324,000.00
83,324,000.00
83,324,000.00
83,324,000.00
0.0
3,332,960.00
6,799,238.40
10,404,167.94
14,153,294.65
18,052,386.40
22,107,441.90
26,324,699.60
30,710,647.60
35,272,033.50
40,015,874.80
44,949,469.80
14
Year
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Import (USD)
(USD)
196,702,765,000.00
200,635,153,840.00
204,646,123,761.60
208,737,243,732.06
212,910,114,105.35
217,166,366,813.60
221,507,666,658.10
225,935,711,300.40
230,452,232,552.40
235,058,996,566.50
239,757,804,525.20
244,550,493,830.20
196,702,765,000.00
196,702,765,000.00
196,702,765,000.00
196,702,765,000.00
196,702,765,000.00
196,702,765,000.00
196,702,765,000.00
196,702,765,000.00
196,702,765,000.00
196,702,765,000.00
196,702,765,000.00
196,702,765,000.00
0.0
3,932,388,840.00
7,943,358,761.60
12,034,478,732.06
16,207,349,105.35
20,463,601,813.60
24,804,901,658.10
29,232,946,300.40
33,749,467,552.40
38,356,231,566.50
43,055,039,525.20
47,847,728,830.20
Therefore, surplus demands for apparel products at world level and national level could
be summarized as follows.
Table 3.6 Summary of Apparel Surplus Import Demand Projected for the coming ten
years
Year
World Surplus Import National Surplus Import
Total Surplus Import
Demand (USD)
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
7,943,358,761.60
12,034,478,732.06
16,207,349,105.35
20,463,601,813.60
24,804,901,658.10
29,232,946,300.40
33,749,467,552.40
38,356,231,566.50
43,055,039,525.20
47,847,728,830.20
Demand (USD)
6,799,238.40
10,404,167.94
14,153,294.65
18,052,386.40
22,107,441.90
26,324,699.60
30,710,647.60
35,272,033.50
40,015,874.80
44,949,469.80
Demand (USD)
7,950,160,013.00
12,044,884,914.00
16,221,504,415.00
20,481,656,216.00
24,827,011,117.00
29,259,273,018.00
33,780,180,219.00
38,391,505,610.00
43,095,057,411.00
47,892,680,312.00
Therefore; the world surplus demand presented in table 3.6 can be taken as a base to
set the capacity of the plant for export sales, and the total national demand for
import, as projected and presented in Table 3.5, can be used as a base to set the
15
capacity of the plant for local market. Accordingly, 0.05% of the world surplus demand
of year 2013s projection for apparel demand, which is 3,971,679.00 USD, for export;
and 2% of the 2013s national total demand, which is 1,802,465.00 USD, for local
market are considered to set the total production capacity of the plant to be
envisaged.
The average price per unit kilogram of garment products varies from year to year due
to the effect of factors like inflation and others. An average of 5% increment in
average selling price per unit kilogram of the products is assumed to calculate the
sales achievement over the plan year.
The following Table portrays the amount planned for export and local market, which is
calculated based on assumptions stated above.
Table 3.7 Sales plan for the envisaged project (Export & Local sales)
Yea
r
World Surplus
Import Demand
(USD)
Export Plan
(USD)
National Total
Import
Demand
(USD)
7,943,358,761.60
3,971,679.00
90,123,238.40
1,802,465.00
12,034,478,732.06
4,170,263.00
93,728,167.94
1,892,588.00
16,207,349,105.35
4,378,776.00
97,477,294.65
1,987,217.00
20,463,601,813.60
4,597,715.00
101,376,386.40
2,086,578.00
24,804,901,658.10
4,827,600.00
105,431,441.90
2,190,907.00
29,232,946,300.40
5,068,980.00
109,648,699.60
2,300,452.00
33,749,467,552.40
5,322,430.00
114,034,647.60
2,415,475.00
38,356,231,566.50
5,588,551.00
118,596,033.50
2,536,248.00
43,055,039,525.20
47,847,728,830.20
5,867,978.00
6,161,378.00
123,339,874.80
128,273,469.80
2,663,061.00
2,796,214.00
Local Sales
Plan (USD)
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Total
Sales Plan
5,774,14
4.00
6,062,85
1.00
6,365,99
3.00
6,684,29
3.00
7,018,50
7.00
7,369,43
2.00
7,737,90
5.00
8,124,79
9.00
8,531,03
9.00
8,957,59
16
2.00
As presented in the table about 69% of the total sale will be targeted for export and
the remaining 31% is reserved for local market.
U/M
Unit Price
Kg
(USD/Kg)
8.00
Kg
Kg
Kg
7.80
7.25
7.50
25
20
20
1.95
1.45
1.50
Kg
9.00
10
0.90
100
7.80
(USD)
2.00
Note that products mentioned as mens and womens covers all the sizes from
small to extra large sizes, which are dressed by boys, girls, men, and women.
17
The following Table presents summary of the production capacity of the plant,
converting the measuring units from Kg to pieces. Total of 320 working days per
annum, 8 hour per day in one shift is assumed to set the plant capacity.
Accordingly, a total of 1,493,242 pieces of different garments will be produced on
100% capacity utilization, and a total of 5,774,140 USD (Birr 106,821,600, with
average exchange rate of 1 USD = 18.5 Birr) sales is planned to be achieved.
Table: 3.9 Annual Sales plan for the envisaged plant
Product Mix
Annual Production
Average Unit
Capacity
Price /piece
Quantity
Quantity
(Kg)
185,069
(Piece)
105,754
185,068
148,055
(1 pc = 300gm)
Women's suits, jackets, dresses
(USD)
Selling Price
(USD)
(Birr 000)
14.00
1,480,552.00
27,390.20
528,766
493,517
2.73
2.18
1,443,530.00
1,073,398.00
26,705.30
19,857.85
148,055
118,444
9.38
1,110,412.00
20,542.60
74,028
246,760
2.70
666,252.00
12,325.65
Total
780,289
1,493,241
3.87
5,774,144.00
106,821.60
18
Note that the average weight for unit product categories is taken by estimation,
taking the size (small extra large) and material variations (cotton, polyester,
nylon, etc...) in to considerations.
3.2.2 Production program
The planned capacity will be achieved in the fourth year of the establishment year of
the factory. In a period of 12 months project time, the project will be realized. It is
estimated that production starts at 85% plant capacity in the first year, 95% in the
second year, and 100% in the third year and will continue to work with this capacity
for the coming 10 years. Since production capacity of garment factory is highly
dependent on operators performance, here the average attainable Ethiopian machine
operators performance is taken in to consideration to determine the overall capacity
of the envisaged plant. The factory is assumed to work 300 days in a year and 8 hours
per day in a single shift.
Table 3:10 Production Program
Plant Capacity Utilization
Product Categories
3rd
year
and
above (100%)
U/M
1 year (85%)
Pcs
89,891
100,466
105,754
Men's Shirts
>>
449,451
502,328
528,766
>>
419,489
468,841
493,517
>>
100,677
112,522
118,444
Babies Garments
>>
209,746
234,422
246,760
>>
1,269,254
1,418,579
1,493,241
st
nd
year (95%)
Total
The factory will have a set up to accommodate production facilities for both knitted
and woven garment products. Based on assumptions stated above the plant will have a
total capacity of manufacturing 5000 pieces of varies woven and knitted garments on
average per day in one shift. Depending on the simplicity of the product type and
19
The raw materials required to produce garments include fabrics, buttons, sewing
threads, and accessories like zipper, shoulder pad, labels etc. Except some
materials and accessories which are not produced locally, for a short run, all the
raw materials will be purchased locally. However, in the near future all the raw
materials will be expected to be available locally as there are a number of projects
in the pipeline and also some bonded warehouses to be opened locally by foreign
manufacturers.
Table 4.1 below presents annual requirements and corresponding costs of raw
materials at full production capacity.
Table 4.1 Raw materials requirement and Cost at full capacity
S/
N
1
2
Material
type
Fabric
Buttons
Sewing
thread
Accessorie
s
Packing
U/
Qty
Unit
Price
M
kg
780,28
85.0
56375880.00
9948685.00
66,324,565.00
kg
9
15,554
0
50.8
118,638.00
672,283.00
790,921.00
8,789
5
74.5
98,283.00
556,937.00
655,220.00
516,040.00
2924223.00
3,440,263.00
2,064,158.00
2,064,158.00
Grand Total
59,172,999.0
14,102,128.0
73,275,127.0
kg
LC
Cost (Birr)
FC
Total Cost
Lump
sum
>> >>
material
20
4.2 Utilities
Electricity and water are the two major utilities required by the envisaged plant. Total
annual cost of major utility items at full operation capacity of the plant is Birr
281,300.00. Details are shown in the table below:
Table 4.2 Utilities Requirement and Cost at full capacity
Annual Requirement
(KWh/year)
S/N Utility
1
Electric power
2
3
Unit
price/KWh
Total
Cost(Birr)
Remarks
350m/n * 150W/m/n *
126,000KWh
0.55
69,300.00
8hrs/day * 300days/year
Water
10,000 M3
3.80
38,000.00
20M3/day*300day/year
12,000lit
14.5
174,000.00
40lit/day*300day/year
Total
281,300.00
21
Receiving fabrics
Under this process step the fabric to be used in production process of apparels will be
received from the supplier. Depending on the type of procurement and type of
products, the supplier could be either the manufacturer, or whole seller or retailer.
The fabrics received from the supplier are preserved in the raw material stores
temporarily before they are issued for next step.
Fabric Relaxing
Relaxing refers to the process that allows material to relax and contract prior to
being manufactured. This step is necessary because the material is continually under
tension throughout the various stages of the textile manufacturing process, including
weaving, dyeing, and other finishing processes. The relaxing process allows fabrics to
shrink so that further shrinkage during customer use is minimized.
22
Fabric relaxing could be done either manually or mechanically. Manual fabric relaxing
typically entails loading the bolt of fabric on a spinner and manually feeding the
material through a piece of equipment that relieves tension in the fabric as it is pulled
through. Mechanical fabric relaxing performs this same process in an automated
manner.
Quality assurance process is integrated into this process to ensure that the quality of
the fabric meets customer standards. This step is performed by manually spotchecking each bolt of fabric using a backlit surface to identify manufacturing defects
such as color inconsistency or flaws in the material. Fabrics that fail to meet customer
standards are returned to the supplier (manufacturer or whole seller of retailer).
control the tension and slack of the fabric during cutting; and
The number of plies in each spread is dependent on the fabric type, spreading method,
cutting equipment, and size of the garment order.
Next, garment formsor patternsare laid out on top of the spread, either manually
or programmed into an automated cutting system. Lastly, the fabric is cut to the shape
23
Sewing
Garments are sewn in an assembly line, with the garment becoming more complete as it
progresses down the sewing line. Sewing machine operators receive a bundle of cut
fabric and repeatedly sew the same portion of the garment, passing that completed
portion to the next operator. For example, the first operator may sew the collar to
the body of the garment and the next operator may sew a sleeve to the body. Quality
assurance is performed at the end of the sewing line to ensure that the garment has
been properly assembled and that no manufacturing defects exist. When needed, the
24
garment will be reworked or mended at designated sewing stations. This laborintensive process progressively transforms pieces of fabric into designer garments.
Ironing
After a garment is fully sewn and assembled, it is transferred to the ironing section of
the facility for final pressing. Each ironing station consists of an iron and an ironing
platform. The irons are similar looking to residential models, but have steam supplied
by an on-site boiler. Workers control the steam with foot pedals and the steam is
delivered via overhead hoses directly to the iron. In most facilities, the ironing
platforms are equipped with a ventilation system that draws steam through the ironing
table and exhausts it outside the factory.
25
In the last steps of making a product retail-ready, garments are folded, tagged, sized,
and packaged according to customer specifications. Also, garments may be placed in
protective plastic bags, either manually or using an automated system, to ensure that
the material stays clean and pressed during shipping. Lastly, garments are placed in
cardboard boxes or pp bags and shipped to client distribution centers to eventually be
sold in retail stores, or to customers, if they are produced on orders.
Fabric Relaxing
Sewing
Inspection
Ironing
26
Packing
Apparel Shipping
Sr.
No.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
Description
Qty.
FOB price
176
19
55
42
9
3
4
3
7
7
1
2
2
4
8
2
4
1
2
20
20
4
1
396
Unit
Price
600.00
750.00
800.00
800.00
800.00
225.00
2,500.00
600.00
1,500.00
1,500.00
80.00
1,350.00
1,350.00
2,700.00
570.00
570.00
1,350.00
20,000.00
270.00
54.00
267.00
267.00
15,000.00
Freight, Insurance, customs & Bank charges, Material handling cost (10%)
Sub total
Contingency (5%)
5,400.00
105,600.00
14,250.00
44,000.00
33,600.00
7,200.00
675.00
10,000.00
1,800.00
10,500.00
10,500.00
80.00
2,700.00
2,700.00
10,800.00
4,560.00
1,140.00
0
20,000.00
450.00
1,080.00
5,340.00
1,068.00
15,000.00
303,043.0
105,600.00
14,250.00
44,000.00
33,600.00
7,200.00
675.00
10,000.00
1,800.00
10,500.00
10,500.00
80.00
2,700.00
2,700.00
10,800.00
4,560.00
1,140.00
5,400.00
20,000.00
450.00
1,080.00
5,340.00
1,068.00
15,000.00
308,443.0
30,404.30
35,804.30
0
303,043.0
0
30,404.30
338,847.3
1790.20
37,594.50
0
15,152.15
318,195.1
0
16,942.35
355,789.6
5,400.00
28
floor space of the buildings will cover total area of 3600m 2 (See Appendix-1). The
total estimated cost of building at the rate of Birr 6,000 per m2 is Birr 21,600,000.00.
The lease period for the land is 80 years on average, and the payment of lease prices
is in 40 years. The land lease rate of Birr 6.5 /M 2/year is adopted, which is the
minimum lease rate in Oromia 1st grade towns. 10% down payment is expected at the
initial year of land acquisition. Accordingly, the total lease cost of Birr 3,094,000, of
which Birr 309,400.00 will be paid in advance in the first year and the remaining Birr
2,784,600 will be paid in equal installments of Birr 69,615 .00 within 40 years, after
the grace period of 3 years annually.
7. Man power and training requirements
7.1 Man power requirement
The manpower requirement is considered at 499 personnel for various levels. This
includes Machine operators, helpers, technicians, supervisors, Marketing, and
administrative staffs. Table below, shows the list of manpower required along with
annual labor cost.
Table 7.1 Man power Requirement and annual salary
S/
N
Description
No
1
2
3
4
5
6
7
8
9
11
12
13
14
15
16
17
18
Factory Manager
Executive Secretary
Departmental Secretaries
Departmental Clerks
Production and Tech Manager
Production Head
Technical Head
Quality Head
Production supervisor
Quality Control supervisor
Mechanical maintenance supervisor
Electrical maintenance Supervisor
Machine Operators & helpers
Quality Inspectors
Mechanic
Electrician
Marketing Manager
1
1
4
5
1
1
1
1
9
4
1
1
416
11
4
3
1
Monthly salary
10,000.00
3,000.00
10,000.00
5,000.00
7,500.00
5,000.00
5000.00
5,000.00
31,500.00
14,000.00
3,500.00
3,500.00
416,000.00
11,000.00
5,200.00
3,900.00
7,500.00
Annual salary
120,000.00
36,000.00
120,000.00
60,000.00
90,000.00
60,000.00
60,000.00
60,000.00
378,000.00
168,000.00
42,000.00
42,000.00
4,992,000.00
132,000.00
62,400.00
46,800.00
90,000.00
29
19
20
21
Sales person
Administration manager
General service personnel
2
1
1
5,000.00
7,500.00
2,500.00
60,000.00
90,000.00
30,000.00
22
23
24
25
26
27
28
29
30
31
32
HR Personnel
Nurse
Guard
Messengers
Driver
Cleaner
Financial manager
Accountant
Cashier
Purchasers
Store Keepers
1
2
8
3
3
5
1
2
1
2
2
2,500.00
4,000.00
6,400.00
1,800.00
3,000.00
3,000.00
7,500.00
7,000.00
1,500.00
3,000.00
3,000.00
30,000.00
48,000.00
76,800.00
21,600.00
36,000.00
36,000.00
90,000.00
84,000.00
18,000.00
36,000.00
36,000.00
Sub Total
Employee Benefit (15%)
499
Grand Total
7.2 Training requirement
604,300.00
90645.00
7,251,600.00
1,087,740.00
694,945.00
8,339,340.00
On job training for operators and short term trainings for supervisors, technicians,
and designers is planned, with estimated cost of Birr 100,000.00.
8. Financial Analysis
8.1 Underlying Assumption
The financial analysis of the envisaged plant is based on the data provided in the
preceding chapters and the following assumptions.
Table: 8.1 Financial Assumptions
A. Construction and Finance
Construction period
Source of Finance
Tax Holidays
Bank Interest rate
Discount for cash flow
Value of Land
Spare parts & Repair and Maintenance
12 months
30% equity and 70% Loan from bank
5 years
8.50%
8.50%
Birr 6.50/M2/year
5% of the fixed investment
5%
30
10%
10%
20%
20%
Estimated
Budget(Birr)
1
2
300,000.00
100,000.00
200,000.00
500,000.00
Total
2,558,500.00
3,658,500.00
31
The investment cost of the project including working capital is estimated at Birr 34.27
million. The owner shall contribute 30% (12,335,100.00) of the finance in the form of
equity while the remaining 70% (28,781,913.00) is to be financed by bank loan.
Table 8.3 Total Initial Investment
Item
Land
Building and Civil Work
LC
FC
Total
3,094,000.00
14,040,000.00
7,560,000.00
3,094,000.00
21,600,000.00
Office Equipment
600,000.00
600,000.00
Vehicles
Plant machinery and equipment
6,000,000.00
6,582,108.50
6,000,000.00
6,582,108.50
17,134,000.00
20,742,108.50
37,876,108.50
3,658,500.00
3,658,500.00
17,134,000.00
6,470,060.00
24,400,608.50
-
41,534,608.50
6,470,060.00
Total
8.4 Production Cost
23,604,060.00
24,400,608.50 48,004,668.50
The total production cost at full capacity operation is estimated at Birr 88.077million.
Raw materials and utilities account for 83.20%, while the rest together costs 16.80%
of the total production cost.
Table 8.4 Total Production cost at full capacity
Items
1. Raw Material
%age share
Cost
73,275,127.00
83.20
281,300.00
0.32
7,101,480.00
8.06
1,533,640.00
1.74
3,729,910.00
4.23
952,200.00
1.08
1,203,900.00
1.37
88,077,557.00
100
2.Utilities
32
9 Financial Evaluations
9.1 Profitability
Based on the projected profit and loss statement (see appendix 2), the project will
generate a profit beginning from the first year of operation and increase on wards
throughout its operation life. Annual net profit after tax will grow from Birr 10.856
million to Birr 16.15 million during the life of the project. Moreover, at the end of the
project life the accumulated cash flow amounts to Birr 154.45 million.
9.2 Financial Ratios
In financial analysis financial ratios and efficiency ratios are used as an index or yard
stick for evaluating the financial position of a firm.
strength and weakness of the firm or a project. Some of these ratios calculated for the
first year of the project life are:
33
= Fixed Cost/ (Average Unit selling price Average Variable cost per unit
product)
= 6,523,870 (71.22 - 55.54) = 6,523,870/15.68
= 616, 055 pieces (BEP in production volume)
= Birr 29,629,939.00 (BEP in Sales volume)
= 27.74% (BEP in percentage)
9.4 Payback Period
The payback period is defined as the period required to recover the original
investment outlay through the accumulated net cash flows earned by the project.
Accordingly, based on the projected cash flow it is estimated that the projects initial
investment will be fully recovered within 3 years.
9.5 Internal Rate of Return
The internal rate of return (IRR) is the annualized effective compounded return rate
that can be earned on the invested capital, i.e., the yield on the investment. Put
another way, the internal rate of return for an investment is the discount rate that
makes the net present value of the investment's income stream total to zero. It is an
indicator of the efficiency or quality of an investment. A project is a good investment
proposition if its IRR is greater than the rate of return that could be earned by
alternate investments or putting the money in a bank account. Accordingly, the IRR of
this project is computed to be 28.71 % indicating the viability of the project.
34
36