Pre-Feasibility Study S S O O C C K K S S M M ANU ANU F F ACTUR ACTUR I I NG NG UNIT UNIT Prepared By: WAQAR HUSSAIN Prepared By: WAQAR HUSSAIN Student No: 08023008 Student No: 08023008 Subject: MANAGEMENT Subject: MANAGEMENT CHINA UNIVERSITY OF CHINA UNIVERSITY OF PETROLEUM PETROLEUM
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4 MARKET INFORMATION .........................................................................................................
4.1 LEADING EXPORTING COUNTRIES OF COTTON KNITTED SOCKS IN THE WORLD ......................... 4.2 TARGET CUSTOMERS ..............................................................................................................
5 PRODUCTION PROCESS ...........................................................................................................
5.1 PRODUCTION PROCESS FLOW .................................................................................................. 5.2 PRODUCT MIX OFFERED .......................................................................................................... 5.3 RAW MATERIAL REQUIREMENT ............................................................................................... 5.4 MACHINERY REQUIREMENT .................................................................................................... 5.5 FURNITURE & FIXTURE ........................................................................................................... 5.6 MOTOR VEHICLES .................................................................................................................
6 HUMAN RESOURCE REQUIREMENT...................................................................................
7 LAND & BUILDING REQUIREMENT ....................................................................................
The purpose and scope of this information memorandum is to introduce the subject
matter and provide a general idea and information on the said area. All the material
included in this document is based on data/information gathered from various sources
and is based on certain assumptions. Although, due care and diligence has been
taken to compile this document, the contained information may vary due to any change
in any of the concerned factors, and the actual results may differ substantially from the
presented information. Organization does not assume any liability for any
financial or other loss resulting from this memorandum in consequence of
undertaking this activity. The prospective user of this memorandum is encouraged to
carry out additional diligence and gather any information he/she feels necessary for
making an informed decision.
Pre-Feasibility Study Socks Manufacturing Unit
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The objective of the pre-feasibility study is primarily to facilitate potential entrepreneurs to facilitate investment and provide an overview about textile business. The project pre- feasibility may form the basis of an important investment decision and in order to serve this objective, the document covers various aspects of socks manufacturing business concept development, start-up, production, marketing, finance and business management. The document also provides sectoral information, brief on government policies and international scenario, which have some bearing on the project itself.This particular pre-feasibility is regarding “Socks Manufacturing Unit” which comesunder “Textile” sector.
Pre-Feasibility Study Socks Manufacturing Unit
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Knitted socks are an item of general use. These have a sizeable market at home and also have an export potential. Cotton socks, as compared to nylon socks, are subject to rapid replacements. Further, due to higher rate of urbanization, local demand has also increased manifolds in recent years. So this validates the opportunity to set up a new sock manufacturing unit to capture the need of expanding market.
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Socks are broadly classified into two main categories, cotton and nylon or blended socks. Cotton socks are specially preferred by sportsmen, besides their normal use and also have export potential as well.Cotton sports socks are further classified into two types: Pouch socks and reel socks. Theproposed project will be manufacturing 60% pouch socks and 40% reel socks. It will be started with 30 machines. All the equipment for the project is supposed to be new. Second hand machinery can also be sued to reduce the cost of project, which is easily available in the market. The project will be started with 70% initial year capacity.
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Various products and services have high dependence on their commercialization timing and delivery to the customers. But the socks manufacturing unit can be started at any time during the year.
The said project can be a proprietorship or a partnership and even it can be registered under company law with corporate law authority. Selection totally depends upon the choice of the entrepreneur. This pre-feasibility assumes the legal status of a sole proprietorship.
Selection of project size is really critical. After doing thorough market research, it is decided that the proposed pre-feasibility will be based on 30 machines. As it is assumed that all the production of the unit will be exported, a sizeable production is required. 30 machines production can be exported in one container. Each machine will be having a capacity of manufacturing 55 dozens pair of socks per 24 hours. The proposed project can always be started with more machines. This feasibility study is based on 30 machines which is the minimum viable size for a sock manufacturing unit.The project will be working on three shift basis.
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Total cost of the project is worked out in the table below:
Capital Investment CNY64,987,928Working Capital Requirement CNY5,376,606
Total Investment CNY70,364,533
Pre-Feasibility Study Socks Manufacturing Unit
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The proposed pre-feasibility is based on the assumption of 50% debt and 50% equity. However this composition of debt and equity can be changed as per the requirement of the investor.
Capacity Human Resource Technology/Machinery Location535,500 dozens
pair per year128 Imported Huangdao
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The said project can be started in any industrial area. It is recommended that an area should be selected which is near to the port and export of the manufactured product may become easy. Or otherwise it should be established in an area where raw material is easily available. It may have industrial area of Huangdao\Qingdao.
There are many units existing which are indulged in socks manufacturing but still they are not successful in catering the demand. So there is a potential for new entrepreneurs to enter the market. Key success factors will be:
Wastage ratio of production should be kept at minimum. Advance orders for sale can ensure the success of the business. Strong controls on purchase price of raw material Quality maintenance will play an important role as it is assumed that 100%
Cotton sports socks manufacturing, which is a comparatively new phenomenon, has started since, last 40–50 years and its consumption has increased rapidly with the passage of time as more and more people became health conscious and adapted athletic life.
The socks production in general has been tradition since inception of China. Jiangsu and Zhejiang have been leading cities having family trade of socks manufacturing and marketing within China. Mostly socks in China are produced on old double cylinder dress socks machines and supplied to local distributors for local consumption as well as exported.
Italy is the leading exporter of cotton knitted socks in the world and exports majority of the product to countries like USA, Japan and Germany. The details of the major exporters in the world are given in the below table:
Countries Value in $ (000)Italy 930China 890USA 339Turkey 527Korea 343Germany 264Mexico 162France 103Taiwan 96Belgium 138
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Socks are being exported mainly to USA, UK, France, Germany, Japan, Netherlands, andCanada. Export of socks is not subject to quota restrictions.
Due to increase in awareness of importance of adapting athletic life for a better health, the demand for sports socks have been increasing with every passing year in countries like USA, European countries and Middle East.
The leading importers of sports socks in the world are given in the below table:
The proposed project will manufacture knitted cotton sports socks especially to cater to the international market. The business will produce high quality sports socks for men, ladies and children.
The proposed project will produce the following types of cotton sports socks:1. Pouch Socks2. Reel Socks
China is a cotton growing country and has a major advantage of availability and lower prices. Cotton fiber produced in China is of middle or short staple and of relatively coarse grade. The cotton yarns produced by China cotton especially of counts 8s, 10s and 12s are appropriate and ideal to produce soft sports socks. This is the major reason that cotton sports socks quality produced by China’s cotton yarn is appreciated in the international market.
The weight of an average pair of socks will be approximately, 65 grams. Raw material used in cotton sports socks is about 70% cotton yarn and rest 30% is nylon, polyester, acrylic or lycra etc, which is available in Pakistan.
Pre-Feasibility Study Socks Manufacturing Unit
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A total number of 30 “Single Cylinder 4 Feed machines” will be installed, out of which18 machines will be used to manufacture pouch socks and 12 machines will be used for manufacturing reel heel socks. Second hand machinery is also readily available in the market and the price is approximately half the price of the new machines. Second hand machinery can also be used to manufacture both type of socks.Following table shows the machinery & equipment requirement:
The proposed project will also be using a Loader truck for transportation purposes. The truck will be costing Rs. 1,100,000 and the depreciation will be charged at the rate of20% on written down value basis.
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Both skilled and unskilled labour will be required for the paper cone business. Some direct labor will be working on three shift basis and some will be working on one shift basis. Direct labour for the factory includes following human resources:
Salaries and wages are assumed to grow at 10% per annum.
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Total land required for the socks knitting unit is approximately 22,449 -Sq. ft or 5 Kanal. Land price per kanal is taken to be CNY 500,000. The break up of the required area is given below.
Socks Knitting area 1,680 400 672,000Bleaching & Dying area 1,064 400 425,600Drying Area 480 400 192,000Pressing Area 384 400 153,600Socks Reversing Area 210 400 84,000Linking Area 280 400 112,000Boiler Area 600 400 240,000Generator Area 600 400 240,000Air Compressor Room 600 400 240,000Packing area 1,200 400 480,000Management Office 1,200 500 600,000Accessories Store 600 400 240,000Yarn Store 217 400 86,793Dyes and ChemicalStore
600 350 210,000
Finished Goods Store 334 350 117,024Toilets 600 350 210,000Loading, unloading Bay 1,800 25 45,000Grounds 10,000Water Tank 350,000Total SpaceRequirement (sq.ft)
Building for the proposed business can be acquired on rent but it is recommended that it should be purchased or built as machinery will be installed. Construction cost of building is estimated as above.
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Utilities required for a socks manufacturing unit are
Electricity Water Telephone
Pre-Feasibility Study Socks Manufacturing Unit
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Calculations Project Costs
Year Year Year Year Year Year Year Year Year Year0 1 2 3 4 5 6 7 8 9
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10Revenue 86,136,561 97,826,523 110,609,189 124,573,599 139,815,545 156,438,059 165,824,343 175,773,804 186,320,232 197,499,446
No of Working Days in One Year 350No. of Shifts 3No. of hours in one shift 8Annual installed production capacity (dozen pairs) 535,500Initial year capacity utilization 70%Capacity growth rate 5%Maximum capacity utilization 95%
Cost (CNY/Gram)Weight (grams per pair) 65.00Wastage Ratio (%age of raw material input) 12%Cotton %age 70% 0.09Nylon 8% 0.40Polyester 12% 0.17Acrylic 4% 0.13Lycra 6% 0.58