salt products.pdf

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Pre-Feasibility Study

Prime Ministers Small Business Loan

Scheme

(Salt Products Manufacturing Unit)

Small and Medium Enterprises Development Authority

Ministry of Industries & Production

Government of Pakistan

www.smeda.org.pk

HEAD OFFICE

4th Floor, Building No. 3, Aiwan e Iqbal, Egerton Road,

Lahore

Tel 92 42 111 111 456, Fax 92 42 36304926-7

[email protected]

REGIONAL OFFICEPUNJAB

REGIONAL OFFICESINDH

REGIONAL OFFICEKPK

REGIONAL OFFICEBALOCHISTAN

3rd Floor, Building No. 3,

Aiwan e Iqbal, Egerton Road

Lahore,

Tel: (042) 111-111-456Fax: (042)6304926-7

[email protected]

5TH Floor, Bahria

Complex II, M.T. Khan Road,

Karachi.Tel: (021) 111-111-456

Fax: (021) 5610572

[email protected]

Ground Floor

State Life Building

The Mall, Peshawar.Tel: (091) 9213046-47

Fax: (091) 286908

[email protected]

Bungalow No. 15-A

Chaman Housing Scheme

Airport Road, Quetta.Tel: (081) 831623, 831702

Fax: (081) 831922

[email protected]

September 2013
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]


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Pre-Feasibility Study Salt Products Manufacturing Unit

Table of Contents

1.DISCLAIMER .......................................................................................................................................... 22.PURPOSE OF THE DOCUMENT ......................................................................................................... 33.INTRODUCTION TO SMEDA .............................................................................................................. 34.INTRODUCTION TO SCHEME ........................................................................................................... 45.EXECUTIVE SUMMARY ...................................................................................................................... 46.BRIEF DESCRIPTION OF PROJECT & PRODUCT ........................................................................ 57.CRITICAL FACTORS ............................................................................................................................ 58.INSTALLED & OPERATIONAL CAPACITIES ................................................................................. 6 9.GEOGRAPHICAL POTENTIAL FOR INVESTMENT ..................................................................... 610. POTENTIAL TARGET MARKETS ............................................................................................... 611.

PROJECT COST SUMMARY ......................................................................................................... 6

11.1. PROJECT ECONOMICS ................................................................................................................... 611.2. PROJECT FINANCING .................................................................................................................... 711.3. PROJECT COST ............................................................................................................................. 711.4. SPACE REQUIREMENT .................................................................................................................. 811.5. MACHINERY AND EQUIPMENT...................................................................................................... 811.6. OFFICE EQUIPMENT...................................................................................................................... 911.7. RAW MATERIAL REQUIREMENTS ................................................................................................. 911.8. HUMAN RESOURCE REQUIREMENT .............................................................................................1011.9. REVENUE GENERATION...............................................................................................................1011.10. OTHERCOSTS .............................................................................................................................1012. ANNEXURE ..................................................................................................................................... 1112.1. INCOME STATEMENT...................................................................................................................1112.2. STATEMENT OF CASH FLOW........................................................................................................1212.3. BALANCE SHEET .........................................................................................................................1313. USEFUL PROJECT MANAGEMENT TIPS................................................................................ 1414. USEFUL LINKS............................................................................................................................... 1515. KEY ASSUMPTIONS ..................................................................................................................... 16

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1. DISCLAIMER

This information memorandum is to introduce the subject matter and provide a

general idea and information on the said matter. Although, the material included

in this document is based on data/information gathered from various reliable

sources; however, it is based upon certain assumptions which may differ fromcase to case. The information has been provided on as is where is basis without

any warranties or assertions as to the correctness or soundness thereof.

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. SMEDA, its employees or agents do not assume any liability for any

financial or other loss resulting from this memorandum in consequence of

undertaking this activity. The contained information does not preclude any further

professional advice. The prospective user of this memorandum is encouraged to

carry out additional diligence and gather any information which is necessary for

making an informed decision, including taking professional advice from a

qualified consultant/technical expert before taking any decision to act upon the

information.

For more information on services offered by SMEDA, please contact our website:

www.smeda.org.pk

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2. PURPOSE OF THE DOCUMENT

The objective of the pre-feasibility study is primarily to facilitate potential

entrepreneurs in project identification for investment. The project pre-feasibility

may form the basis of an important investment decision and in order to serve this

objective, the document/study covers various aspects of project conceptdevelopment, start-up, and production, marketing, finance and business

management.

The purpose of this document is to facilitate potential investors in Salt Products

Manufacturing Unit by providing them with a general understanding of the

business with the intention of supporting potential investors in crucial investment

decisions.

The need to come up with pre-feasibility reports for undocumented or minimally

documented sectors attains greater imminence as the research that precedes

such reports reveal certain thumb rules; best practices developed by existingenterprises by trial and error, and certain industrial norms that become a guiding

source regarding various aspects of business set-up and its successful

management.

Apart from carefully studying the whole document one must consider critical

aspects provided later on, which form basis of any Investment Decision.

3. INTRODUCTION TO SMEDA

The Small and Medium Enterprises Development Authority (SMEDA) was

established in October 1998 with an objective to provide fresh impetus to theeconomy through development of Small and Medium Enterprises (SMEs).

With a mission "to assist in employment generation and value addition to the

national income, through development of the SME sector, by helping increase

the number, scale and competitiveness of SMEs" , SMEDA has carried out

sectoral research to identify policy, access to finance, business development

services, strategic initiatives and institutional collaboration and networking

initiatives.

Preparation and dissemination of prefeasibility studies in key areas of investment

has been a successful hallmark of SME facilitation by SMEDA.

Concurrent to the prefeasibility studies, a broad spectrum of business

development services is also offered to the SMEs by SMEDA. These services

include identification of experts and consultants and delivery of need based

capacity building programs of different types in addition to business guidance

through help desk services.

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4. INTRODUCTION TO SCHEME

Prime Ministers Small Business Loans Scheme, for young entrepreneurs, with

an allocated budget of Rs. 5.0 Billion for the year 2013-14, is designed to provide

subsidised financing at 8% mark-up per annum for one hundred thousand

(100,000) beneficiaries, through designated financial institutions, initially throughNational Bank of Pakistan (NBP) and First Women Bank Ltd. (FWBL).

Small business loans with tenure upto 7 years, and a debt : equity of 90 : 10 will

be disbursed to SME beneficiaries across Pakistan, covering; Punjab, Sindh,

Khyber Pakhtunkhwah, Balochistan, Gilgit Baltistan, Azad Jammu & Kashmir and

Federally Administered Tribal Areas (FATA).

5. EXECUTIVE SUMMARY

This particular pre feasibility is regarding Salt Products Manufacturing Unit. The

salt products manufacturing project entails producing salt rock crystal products

ranging from lamps, tiles, candle stands, salt soups and various decorative

shapes/pieces. Salt products are known for their therapeutic/healing affects on

body and mind. There is an increasing trend and preference for organic quality

products for their natural curative properties. Salt products are equally sought for

decorative purposes due to their distinctive colors and composition. There is

growing demand of salt products in the Western countries due to its healing

properties for a number of ailments.

Pakistani salt products are well known all over the world for their distinctive

composition and craftsmanship. The country holds one of the largest reserves of

salt deposit in the world. Growing international demand for salt products,

availability of cheap and skilled labor coupled with abundant raw material offer

new startups a very promising opportunity to venture into salt products

manufacturing.

Salt Products manufacturing business venture entails a total investment of about

Rs. 1.55 million. This includes a capital investment of Rs.0.99 million and a sum

of Rs.0.55 million as initial working capital. The project is financed through 90%

debt and 10% equity. The Net Present Value (NPV) of the project is around Rs.

5.96 million with an Internal Rate of Return (IRR) of 64% and a payback period of

2.35 years. The project will generate employment opportunity for 11 personsincluding owner manager.

Higher return on investment and a steady growth of business is closely

associated with the entrepreneur having some prior experience or education in

the related field of business. This pre feasibility encompasses essential

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information regarding various aspects of starting a salt products manufacturing

unit business in Pakistan.

6. BRIEF DESCRIPTION OF PROJECT & PRODUCT

The proposed project provides information on salt product manufacturing in

Pakistan. As defined in the executive summary, there are a number of factors for

which salt products are sought worldwide however, therapeutic and decorative

are two distinct reasons salt products are bought all over the world

The proposed project provides information on key aspects of starting salt product

manufacturing.

This prefeasibility details information about investment opportunities in the area

of salt products i.e. salt lamps, candle stand and salt soap. The unit is also

capable of manufacturing other salt products like salt spa products, salt inhalers,

salt bricks, tiles and blocks etc. Salt product manufacturing unit will primarily

focus on indirect export (middleman / traders).

Salt product manufacturing unit requires an investment estimated at Rs.1.55

million. This pre-feasibility is based on a unit with 2 lathe machines (5ft capacity),

1 cutter (24 length), grinder, drill and blowers with a capacity of manufacturing

400 salt products per 8 hours shift. Total employment required for this unit would

be 11 persons including owner manager. Total area required for salt products

manufacturing would be approximately 1.5 kanals that would be acquired on rent.

Estimated rent for such an area is Rs. 30,000/- per month.

7. CRITICAL FACTORS Awareness/knowledge of international markets and their demand trends

for salt products.

High return on investment and a steady growth of business is closely

associated with continuous training and capacity building of the

entrepreneur. Prior experience/education in the related field of business

can be a big advantage.

Strict management/supervision controls to minimize wastage.

Ensuring availability of skilled labor and quality raw material.

Ventilation and adequate safety measures are to be ensured during theproduction process. Workers must be provided with safety masks to

protect them from salt dust. Salt raw material and products should be

protected from water.

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8. INSTALLED & OPERATIONAL CAPACITIES

This pre-feasibility is based on 2 lathe and 1 cutting machines with a capacity of

manufacturing 400 salt products per 8 hours shift. The total employment required

for this unit would be 11 persons. Total number of salt products produced in year

1 would be 60,000 reaching 50% of the total installed capacity, while maximumcapacity (95%) will be achieved with production reaching at 114,000 pieces in

year 10 of the project.

9. GEOGRAPHICAL POTENTIAL FOR INVESTMENT

The said project can be started in any adjoining industrial areas of Khewra,

district Jhelum, Warcha, District Mianwali, Kalabagh, District Mianwali. These

areas are preferred because of their proximity to raw material and availability of

skilled labor.

10. POTENTIAL TARGET MARKETSSalt products manufactured in this unit will be primarily exported to European

countries such as UK, Germany, France, Italy, Spain. In addition to these

countries, Korea, Japan and Australia are also potential markets of salt products.

11. PROJECT COST SUMMARY

A detailed financial model has been developed to analyze the commercial

viability of Salt Products Manufacturing Unit under the Prime Ministers Small

Business Loan Scheme. Various cost and revenue related assumptions along

with results of the analysis are outlined in this section.

The projected Income Statement, Cash Flow Statement and Balance Sheet are

attached as appendix

11.1. Project Economics

The installed production capacity of the project is 120,000 salt products per year.

However during the first year of operations it will operate at 50% of the installed

capacity producing 60,000 salt products.

The following table shows internal rate of return, payback period and net present

value;

Table 1: Project Economics

Description Details

Internal Rate of Return (IRR) 64%

Payback Period (yrs) 2.35

Net Present Value (NPV) 5,958,870

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Returns on the project and its profitability are highly dependent on acquiring and

maintaining regular orders, procurement of salt and timely deliveries. Skilled

labor constitutes an important part of the whole operations.

11.2. Project Financing

Following table provides details of the equity required and variables related to

bank loan;

Table 2: Project Financing

Description Details

Total Equity (10%) Rs.155,290

Bank Loan (90%) Rs.1,397,610

Markup to the Borrower (%age/annum) 8%

Tenure of the Loan (Years) 7

11.3. Project Cost

Following requirements have been identified for operations of the proposed

business. Rented premises for the unit has been recommended.

Table 3: Capital Investment for the Project

Capital Investment Amount (Rs.)

Machinery 849,000

Furniture & Office equipment 117,000

Pre operational expenses 32,000

Total Capital Costs 998,000

Initial Working Capital 554,900

Total Project Cost 1,552,900

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11.4. Space Requirement

The area has been calculated on the basis of space requirement for production,

management and storage. However, the units operating in the industry do not

follow any set pattern. Following table shows calculations for project space

requirement.Table 4: Space Requirement

Space Requirement Sqft

Management building 150

Production area 1,200

Store 4,500

Open area 900

Total Area 6,750

Premises will be obtained on rent @ Rs 30,000 per month.

11.5. Machinery and Equipment

Following table provides list of machinery and equipment required for an average

salt product manufacturing unit.

Table 5: Machinery & Equipment

Description Quantity Cost

Rs/unit

Total

Rs.

Cutter 24 1 60,000 60,000Lathe machine 5 2 300,000 600,000

Grinder 4 10,000 40,000

Drill machine 5 with special bit 1 20,000 20,000

Hand drill 4 3,000 3,000

Blower 2 8,500 8,500

Electrification, installation, tools, etc 1 100,000 100,000

Total 15 849,000

Following is a brief description of the process flow; blocks of salt are cut into

small pieces by cutters. Lathe machines are used to shape and size salt pieces

into lamps and candle stands etc. Finishing operations are carried out on a

grinder and drill machine. Natural profile products (natural shape) are made on

grinders and hand drills.

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11.6. Office Equipment

Following are details of necessary office equipment.

Table 6: Office Equipment Details

Quantity Cost Amount

Computer desktop (used) 1 20,000 20,000

UPS 1 7,500 7,500

Computer printer 1 10,000 10,000

Telephone set 1 1,000 1,000

Total 38,500

11.7. Raw Material Requirements

Salt mined from Khewra, Kalabagh and Warcha mines will be primarily used.

Raw materials requirements have been calculated on the basis of 4 product

categories which the unit will be producing.

Table 7: Cost of Materials

Unit Rate

(Rs)

Quantity

(Kg)

Cost

Rs./Unit

Salt lamp (24 kg)

Salt Kg 5 3.90 19.50

Candle stand (12 kg)

Salt Kg 5 1.95 9.75

Salt soap (0.40.6 kg)Salt Kg 5 0.65 3.25

Natural profile (34 kg)

Salt Kg 5 4.55 22.75

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11.8. Human Resource Requirement

Following table provides details of human resource required for this project:

Table 8: Human Resource Requirement

Description No. of

Employees

Salary per

month

Owner Manager 1 20,000

Accountant 1 12,000

Machinist 3 12,000

Helper 6 10,000

Total Staff 11

The owner will focus on acquiring orders, purchase of salt and overall

management of the unit. The unit is capable of producing approximately 400

products in a 8 hour shift. Salaries of all employees are estimated to increase at

10% annually.

11.9. Revenue Generation

Following table provides details of the revenue generated by the project in the

first year;

Product Unit

Sales

Price

(Rs./Unit)

First Year

Production

First Year

Sales

Revenue

(Rs)

Salt lamp (24 kg) No. 78.00 12,000 936,000

Candle stand (12 kg) No. 39.00 12,000 468,000

Salt Soap (0.40.6 kg) No 13.00 12,000 156,000

Natural Profile (34 kg) No 91.00 24,000 2,184,000

Total Sales Revenue 3,744,000

11.10. Other Costs

Other essential costs to be borne by the company are electricity and

communication expenses.

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12. ANNEXURE

12.1. Income Statement

Income StatementRs. in actuals

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Revenue 3,744,000 4,530,240 5,436,288 6,478,243 7,674,227 9,044,624 10,612,359 12,403,195 14,446,074 16,773,497

Cost of goods sold 2,419,361 2,789,697 3,212,016 3,693,370 4,241,761 4,866,275 5,577,221 6,386,309 7,306,837 8,353,908Gross Profit 1,324,639 1,740,543 2,224,272 2,784,873 3,432,465 4,178,350 5,035,138 6,016,885 7,139,237 8,419,589

General administration & selling expenses

Administration expense 240,000 263,367 289,008 317,147 348,025 381,909 419,092 459,895 504,671 553,807

Rental expense 360,000 396,000 435,600 479,160 527,076 579,784 637,762 701,538 771,692 848,861

Utilities expense 22,882 25,170 27,687 30,456 33,502 36,852 40,537 44,591 49,050 53,955

Travelling & Comm. expense (phone, fax, etc. ) 93, 600 91,922 110,171 131,151 155,225 182,802 214,343 250,363 291,445 338,239

Office expenses (stationary, etc.) 2,400 2,634 2,890 3,171 3,480 3,819 4,191 4,599 5,047 5,538

Promotional expense 37,440 45,302 54,363 64,782 76,742 90,446 106,124 124,032 144,461 167,735

Depreciation expense 100,450 100,450 100,450 100,450 100,450 102,577 102,577 102,577 102,577 102,577

Amortization expense 3,200 3,200 3,200 3,200 3,200 3,200 3,200 3,200 3,200 3,200

Subtotal 859,972 928,045 1,023,370 1,129,517 1,247,700 1,381,389 1,527,826 1,690,796 1,872,143 2,073,913

Operating Income 464,667 812,498 1,200,902 1,655,356 2,184,765 2,796,960 3,507,312 4,326,089 5,267,094 6,345,676

Earnings Before Interest & Taxes 464,667 812,498 1,200,902 1,655,356 2,200,165 2,796,960 3,507,312 4,326,089 5,267,094 6,345,676

Interest expense 106,200 93,318 79,368 64,259 47,896 30,175 10,984 - - -

Earnings Before Tax 358,467 719,179 1,121,535 1,591,097 2,152,269 2,766,785 3,496,329 4,326,089 5,267,094 6,345,676

Tax - 31,918 90,730 165,719 277,954 414,196 596,582 820,326 1,102,628 1,443,486

NET PROFIT/(LOSS) AFTER TAX 358,467 687,262 1,030,805 1,425,378 1,874,316 2,352,589 2,899,747 3,505,763 4,164,466 4,902,190

Balance brought forward 358,467 1,045,728 2,076,533 3,501,911 5,376,226 7,728,815 10,628,562 14,134,325 18,298,791

Total profit available for appropriation 358,467 1,045,728 2,076,533 3,501,911 5,376,226 7,728,815 10,628,562 14,134,325 18,298,791 23,200,981

Balance carried forward 358,467 1,045,728 2,076,533 3,501,911 5,376,226 7,728,815 10,628,562 14,134,325 18,298,791 23,200,981

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12.2. Statement of Cash Flow

Cash Flow Statement

Rs. in actuals

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Operating activities

Net profit - 358,467 687,262 1,030,805 1,425,378 1,874,316 2,352,589 2,899,747 3,505,763 4,164,466 4,902,190

Add: depreciation expense - 100,450 100,450 100,450 100,450 100,450 102,577 102,577 102,577 102,577 102,577

amortization expense - 3,200 3,200 3,200 3,200 3,200 3,200 3,200 3,200 3,200 3,200

Deferred income tax - - 31,918 90,730 165,719 277,954 414,196 596,582 820,326 1,102,628 1,443,486Accounts receivable - (307,726) (32,311) (69,546) (80,055) (91,970) (105,468) (120,745) (138,023) (157,550) (179,601)

Equipment inventory (12,500) (4,103) (5,268) (6,739) (8,594) (10,929) (13,862) (17,542) (22,153) (27,922) 129,613

Raw material inventory (62,400) (24,430) (32,995) (44,385) (59,495) (79,495) (105,918) (140,762) (186,635) (246,937) 983,451

Pre-paid building rent (180,000) (18,000) (19,800) (21,780) (23,958) (26,354) (28,989) (31,888) (35,077) (38,585) 424,431

Accounts payable - 82,375 19,337 23,066 27,534 32,905 39,380 47,213 56,723 68,307 (38,706)

Cash provided by operations (254,900) 190,233 751,792 1,105,800 1,550,180 2,080,077 2,657,706 3,338,382 4,106,700 4,970,184 7,770,641

Financing activities

Change in long term debt 1,397,610 (155,201) (168,083) (182,034) (197,143) (213,505) (231,226) (250,418) - - -

Issuance of shares 155,290 - - - - 49,137 - - - - -

Cash provided by / (used for) financing 1,552,900 (155,201) (168,083) (182,034) (197,143) (164,368) (231,226) (250,418) - - -

Investing activities

Capital expenditure (998,000) - - - - (49,137) - - - - -

Cash (used for) / provided by investing a (998,000) - - - - (49,137) - - - - -

NET CASH 300,000 35,032 583,709 923,766 1,353,037 1,866,571 2,426,480 3,087,964 4,106,700 4,970,184 7,770,641

Cash balance brought forward 300,000 335,032 918,741 1,842,507 3,195,544 5,062,116 7,488,595 10,576,560 14,683,260 19,653,444

Cash available for appropriation 300, 000 335,032 918,741 1,842,507 3,195,544 5,062,116 7,488,595 10,576,560 14,683,260 19,653,444 27,424,085

Cash carried forward 300,000 335,032 918,741 1,842,507 3,195,544 5,062,116 7,488,595 10,576,560 14,683,260 19,653,444 27,424,085

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12.3. Balance Sheet

Balance Sheet

Rs. in actuals

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Assets

Current assets

Cash & Bank 300,000 335,032 918,741 1,842,507 3,195,544 5,062,116 7,488,595 10,576,560 14,683,260 19,653,444 27,424,085

Accounts receivable - 307,726 340,037 409,583 489,638 581,608 687,076 807,821 945,845 1,103,395 1,282,996

Equipment spare part inventory 12,500 16,603 21,871 28,610 37,204 48,132 61,994 79,537 101,690 129,613 -Raw material inventory 62,400 86,830 119,825 164,210 223,705 303,199 409,117 549,879 736,514 983,451 -

Pre-paid building rent 180,000 198,000 217,800 239,580 263,538 289,892 318,881 350,769 385,846 424,431 -

Total Current Assets 554,900 944,191 1,618,274 2,684,490 4,209,629 6,284,948 8,965,664 12,364,566 16,853,155 22,294,333 28,707,081

Fixed assets

Machinery & equipment 849,000 764,100 679,200 594,300 509,400 424,500 339,600 254,700 169,800 84,900 -

Furniture & fixtures 78,500 70,650 62,800 54,950 47,100 39,250 31,400 23,550 15,700 7,850 -

Office equipment 38,500 30,800 23,100 15,400 7,700 49,137 39,309 29,482 19,655 9,827 -

Total Fixed Assets 966,000 865,550 765,100 664,650 564,200 512,887 410,309 307,732 205,155 102,577 -

Intangible assets

Pre-operation costs 32,000 28,800 25,600 22,400 19,200 16,000 12,800 9,600 6,400 3,200 -

Total Intangible Assets 32,000 28,800 25,600 22,400 19,200 16,000 12,800 9,600 6,400 3,200 -

TOTAL ASSETS 1,552,900 1,838,541 2,408,974 3,371,540 4,793,029 6,813,834 9,388,773 12,681,898 17,064,710 22,400,111 28,707,081

Liabilities & Shareholders' Equity

Current liabilities

Accounts payable - 82,375 101,712 124,778 152,312 185,217 224,597 271,810 328,533 396,840 358,134

Total Current Liabilities - 82,375 101,712 124,778 152,312 185,217 224,597 271,810 328,533 396,840 358,134

Other liabilitiesDeferred tax - - 31,918 122,648 288,367 566,321 980,517 1,577,099 2,397,425 3,500,053 4,943,539

Long term debt 1,397,610 1,242,409 1,074,326 892,292 695,149 481,644 250,418 - - - -

Total Long Term Liabilities 1,397,610 1,242,409 1,106,244 1,014,940 983,516 1,047,965 1,230,935 1,577,099 2,397,425 3,500,053 4,943,539

Shareholders' equity

Paid-up capital 155,290 155,290 155,290 155,290 155,290 204,427 204,427 204,427 204,427 204,427 204,427

Retained earnings - 358,467 1,045,728 2,076,533 3,501,911 5,376,226 7,728,815 10,628,562 14,134,325 18,298,791 23,200,981

Total Equity 155,290 513,757 1,201,018 2,231,823 3,657,201 5,580,653 7,933,242 10,832,989 14,338,752 18,503,218 23,405,408

TOTAL CAPITAL AND LIABILITI 1,552,900 1,838,541 2,408,974 3,371,540 4,793,029 6,813,834 9,388,773 12,681,898 17,064,710 22,400,111 28,707,081

September 2013

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13. USEFUL PROJECT MANAGEMENT TIPS

Technology

Required spare parts & consumables: The preventive maintenance of

machines should be carried out. Availability of the machinery spare parts and

consumables must be ensured.

Energy Requirement: The generator has not been recommended for the

project as it will increase the cost of production.

Machinery Suppl iers: Multiple machinery suppliers should be contacted and

purchase should be made after thorough inspection. The availability of spare

parts should also be considered. Such machinery is easily available in local

markets of Lahore, Gurjanwala, Faisalabad & Peshawar.

Quality Assurance Equipment & Standards: The finished products should

be according to the design specifications of buyers. Compliance should beensured for dimensions, weight and especially for the electrical fitting fixtures

as the buyers install accessories before exporting the products.

Marketing

Sales & Distr ibution Network: The owner should establish long term contacts

with the buyers to ensure continuous flow of orders. Moreover he should have

links with the suppliers of salt from major salt mines of the country.

Human Resources

Adequacy & Competencies: Skilled and experienced staff is necessary forthe unit. Staff having requisite shop floor experience should be preferred.

September 2013

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14. USEFUL LINKS

Prime Ministers Office,www.pmo.gov.pk

Small and Medium Enterprise Development Authority,www.smeda.org.pk

National Bank of Pakistan (NBP),www.nbp.com.pk

First Women Bank Limited (FWBL),www.fwbl.com.pk

Government of Pakistan, www.pakistan.gov.pk

Ministry of Industries & Production, www.moip.gov.pk

Ministry of Education, Training & Standards in Higher Education,

http://moptt.gov.pk

Government of Punjab, www.punjab.gov.pk

Government of Sindh, www.sindh.gov.pk

Government of Khyber Pakhtunkhwa, www.khyberpakhtunkhwa.gov.pk

Government of Balochistan, www.balochistan.gov.pk

Government of Gilgit Baltistan, www.gilgitbaltistan.gov.pk

Government of Azad Jamu Kashmir, www.ajk.gov.pk

Trade Development Authority of Pakistan (TDAP), www.tdap.gov.pk

Security Commission of Pakistan (SECP), www.secp.gov.pk

Federation of Pakistan Chambers of Commerce and Industry (FPCCI)

www.fpcci.com.pk

State Bank of Pakistan (SBP), www.sbp.org.pk

Punjab Mineral Development Corporation (PMDC) www.punjmin.com

September 2013

15
http://www.pmo.gov.pk/http://www.pmo.gov.pk/http://www.pmo.gov.pk/http://www.smeda.org.pk/http://www.smeda.org.pk/http://www.smeda.org.pk/http://www.nbp.com.pk/http://www.nbp.com.pk/http://www.nbp.com.pk/http://www.fwbl.com.pk/http://www.fwbl.com.pk/http://www.fwbl.com.pk/http://www.fwbl.com.pk/http://www.nbp.com.pk/http://www.smeda.org.pk/http://www.pmo.gov.pk/


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15. KEY ASSUMPTIONS

Table 14-1 Machinery Assumptions

Number of Machines Installed 6

Capacity Utilization (Year 1) 50%

Maximum capacity utilization 95%

Total Production of the unit per 8 hour shift 300

Table 14-2 Operating Assumpt ions

Annual Production capacity 120,000

Hours operational per day 8

Days operational per month 25

No. of Shifts 1

Days operational per year 300

Table 14-3 Economy-Related Assumptions

Electricity & Fuel growth rate 10%

Wage growth rate 10%

Table 14-4 Cash Flow Assumpt ions

Accounts Receivable cycle (in days) 30

Accounts payable cycle (in days) 30

Raw material inventory (in day) 30

Equipment and spare part inventory (indays) 30

Table 14-5 Revenue Assumpt ions

Production capacity of the unit 120,000

Sale price growth rate 15%

Local sales 100%

Table 14-6 Expense Assumpt ions

Factory & Administrative overhead (% of

Sales)

6%

Machine maintenance (% of Sales) 4%

Machine maintenance growth rate 5%

Pre-paid building Rent (months) 6

Rent growth rate 10%

Raw material price growth rate 10%

Communication Expense (%of Sales) 0.50%

September 2013

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Promotional Expense (% of Sales) 1.00%

Table 14-7 Financial Assumptions

Project life 10

Debt 90%

Equity 10%

Interest rate on long-term debt 8%

Debt tenure 7

Debt payments per year 12

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