PROJECT PROPOSAL

FOR

GARMENT FACTORY

(Different Wearing Apparel and others related product)

PROJECT TO BE IMPLEMENTED IN ADDIS ABABA CITY,

THE CAPITAL CITY OF ETHIOPIA

PROMOTER: - CHALTU SEREBESA

DEC, 2020

FINFINE, ETHIOPI

Promoter’s: - Chaltu Serbesa

 Project proposal for Garment Factory

Table of contents

I. EXECUTIVE SUMMARY

1. INTRODUCTION………...................................................................................................…..5
I.1. Rational Behind and project………………………………………………………………6
I.2. Objective and Justification of the Project………………………………………………...7
I.3. The Socio-Economic Significance of the project...............................................................7
I.4. Location and Premises required……………………………………………………….….8
I.5. Location Map of the Area………………………………………………………………...8

2. MARKET STUDY AND PLANT CAPACITY

2.1. Market Study…………………………………………………………………………….10
2.2. Demand Analysis………………………………………………………………………..11
2.3. Supply Analysis………………………………………………………………………....11
2.4. Market Prospects…………………………………………………………………….….12
2.5. Competition……………………………………………………………………………...12
2.6. Marketing Strategy and Promotion………………………………………………….…..12
2.7. Target Customer and market Share……………………………………………………...12
2.8. Plant Capacity…………………………………………………………………………...13
2.9. Production Program and Prices………………………………………………………….13

3. TECHNICAL STUDY
3.1. Production nature and Description………………………………………………………14
3.2. Raw material and input……………………………………………………………….…14
3.3. Production Process………………………………………………………………………14

4. MANPOWER AND ORGANIZATIONAL MANAGEMENT

4.1. Manpower…………………………………………………………………………….…18
4.2. Organization Structure and Management…………………………………………….…20
4.3. Flow of job process of the departments…………………………………………………21

5. FINANCIAL REQUIREMENT AND ANALYSIS

5.1. Total Initial Investment Cost..................................................................................……..24

5.1.1. Fixed Investment......................................................................................................…..24
5.3. Financial Analysis and Statements...............................................................................…28

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5.3.1. Underlying Assumption....................................................................................……….28

5.3.2. Source of Fund.................................................................................................………..28
5.3.3. Loan Repayment
Schedule.........................................................................................…29
5.3.4. Annual depreciation
schedule..................................................................................…29
5.3.5. Revenue Projection..............................................................................................
……..30
5.3.6. Balance Sheet (Beginning).................................................................................
……..30
5.3.7. Income Loss
Statement..............................................................................................…31
5.3.8. Cash Flow Analysis.............................................................................................
……...31
5.3.9. Profitability.........................................................................................................
……...32
5.3.10. Break-Even Analysis..........................................................................................
……..32
5.3.11. Pay-Back Period................................................................................................
……..32

6. FUTURE DEVELOPMENT ................................................................................................

……..33

7. ENVIROMENTAL IMPACT OF THE PROJECT

7.1. Socio Economics Environments.......................................................................
…….33
7.2 Environmental Impact Assessment of the
Project...................................................…33

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1. EXECUTIVE SUMMARY
1. Project Name:-Garment Factory (Wearing Apparel)
1.1 Status:- News
2. Project Owners:- Chaltu Sarbessa
2.1 Nationality:- Ethiopian
3. Project Location:- Ethiopia
Addis Ababa
4. Land Area and Capital
4.1 Premises Requirement :- 10,000 M2
4.2 Total Capital :-166,800,000 Million .
4.3 (30% owner Equity :-50,040,000 and
4.4 (70% Bank Loan:- 116,760,000)
5. Project Composition
5.1 Garment factory specialized in the production of quality and affordable T-shirt,
jackets, Dresses, Sport wears (Uniform) and etc
6. Planned Employment of the creation of the project
 The total manpower required for the plant will be 600 employees
6.1 Permanent Worker :- 410
 Skilled 280
 Unskilled 130
6.2 On Temporary Basic :- 190
 Skilled 90

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 Unskilled 100
7. Market Share
 50% for Domestic Market
 50% for Export Market
8. Economic of the factory for the region/country
 Produce and supply of quality garment production, source of revenue, employment
opportunity, save foreign currency, benefit for the local community and stimulate the
local economy
9. Technology :- Modern Garment Technology

1. INTRODUCTION
In dynamic economic environment like Ethiopia, industrialization has an immense force to
sustain the development particularly heavy and big industry like textile and garment has a
paramount and multi benefits on the overall development of the nation the Ethiopian economy
had remained for a long time a back ward agrarian economy. Industry was limited to traditional
handcrafts and cottage industries like weaving, blacksmith, pottery, carpentry and wood works.

Modern manufacturing industry started in the late 1950s. The government followed liberal
economic policies and a free market system, and thus created enabling environment to promote
and encourage the initiatives of the private sector. Both nationals and foreigners were allowed to
freely participate in the national development efforts. The institutional frame work of political
economy was defined as capitalism.

With such enabling environment, some foreigners who had technical, managerial and financial
capacities, skills and interest started to establish modern manufacturing enterprises such as oil
and grain mails, beverage factories and food complex industries, manufacture of cement blocks,
leather and shoe factories, textile, construction materials & metal products.

The modest industrialisation that was to take place subsequently was characterized by import
substitution and heavy reliance on foreign investment based on liberal investment policies. The
Dreg regime which came to power in 1974 introduced scientific socialism and carried out
sweeping nationalization of medium and large-scale industries, rural and urban lands, extra

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houses in urban areas, private banks and insurances, major Hotels, trading houses &super
markets. Most of the domestic and foreign trade and transport organs came under monopolistic/
semi- monopolistic state companies. Private initiatives in production, distribution & marketing of
goods & services were discouraged.

Private sector investment in manufacturing was restricted to small scale industries and handcraft
and cottage industries with a maximum ceiling of birr 500,000.00 in investment. Hand craft and
cottage industries were organized into producers’ co-operatives based on socialistic system with
heavy subsides. Thus development objectives

Were to satisfy the basic material needs of the mass and profit motivation ceased to be major
criteria in decision making.

Like the rest of other economic sectors, Industries, experienced great difficulties during the dreg
regime. These included shortage of foreign exchange to import raw materials, intermediate
inputs, spare parts and capital goods for replacement and modernization, lack of managerial and
technological capabilities, financial constraints absence of incentives to workers under wage and
salary controls and lack of appropriate economic and financial evaluation in investment. All
these led to inefficiency and under capacity utilization in the industrial sector. This had resulted
in failure to satisfy the growing demand of the population for industrial out puts from domestic
production, compelling the country to rely on aid and imports.

Recently the negative impact of the economic policy adopted by the last system has been well
acknowledged and therefore the economic policy that stimulated the role of private sector has
been advocated repeatedly at different level. A favourable investment climate has been created
for private investors as a result of the issuance of the new investment code of the country. Now a
day’s Ethiopia’s investment climate is among the most in the continent.

In the national development plan, industry has been recognized as a driving force to achieve
rapid economic development. The government involvement took the form of actual investment
in industry, financing of industrial under takings through financial institutions and the
formulation of policies intended to promote industrial development.

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It is with this back ground that, the promoter came up with this project study that aims to
establish garment factory in Addis Ababa city on 10,000 M2 of land to be provided by the
government.

1.1. Rational Behind of the project

Textile and garment industry has enormous potential and opportunities for progress, however
although there is a high potential for the production of raw materials, such as textile and leather
the garment industry has not yet developed in the country. The demand for garment products in
various parts of the world is steadily growing. The basic garment factory process includes the
spinning of fiber into yarn which is then processed into fabric in a weaving or knitting mill. After
the finishing process which includes dyeing/printing, the woven or knitted fabric is delivered to a
distributor – whole saler-retailer, who wills sale it to individuals in the making of clothes or
house hold articles.

The garment sector has the potential of employment generation and export earnings. For a
populous country like Ethiopia the contribution of a textile sector is indispensable particularly
judged from the current low level of development of the country.

There is an opportunity to get skilled manpower for making the product as there is a textile and
garment industry support institute at technical and vocational schools and Bahir Dar University
in advanced training professional skilled manpower. Given the potential of the raw material and
priority of the government for the textile and garment sub sector, the garment industry has a
major role to play in the region’s economy in general and export trade in particular.

1.2. Objective and Justification of the Project

1.2.1. Objective of the Project

The main objective of the factory is to produce quality and affordable garment productions
mainly T-shirt, men shirt sport and school wears (uniform) for domestic and foreign market.

1.3. The Socio-Economic Significance of the Project

The envisaged project deemed to contribute to the economic development of the region in
the following ways:

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A. Source of Employment

One of the problems that our country is faced is unemployment. Therefore, the current
objective of our government is working on tackling the problem of unemployment either
through creating self employment or employment in other organization.

Hence, the envisaged deemed to contribute somewhat to solve the problem of

unemployment. Upon completion, the Garment assumed to generate employment
Opportunities for about 100 persons during its construction period and more than 473
persons in its functional life time.

B. Source of Government Revenue

To redistribute income, the government collects different forms of taxes from different
business undertakings and individuals as income tax. Among the different forms of taxes,
business income taxes are collected from undertaking business activities. Therefore, the
factory will serve as sources of revenue for the region.

C. Sources of Social Service

In addition to serving as a source of employment and income for the region, the factory
renders social services for different group of people. Hence, the Garment Factory deemed
to provide the following services:

 Regular subscriptions with local and foreign textile trade and fashion magazines.
 Supply new style, fashionable, and locally made textile to the households, retailers
and wholesalers.
 Makes to flow of latest marketing and trade information to the exporter.

D. Benefit for the Local community

As a corporate responsibility the company will engage in different development activities on the
surrounding areas (Addis Ababa). This will better worse the community and contrite for the
development of the region.

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1.4. Location and Premises required

A. Location
The envisioned project is planned to be located in Addis Ababa City. Generally, the rental value
period of rural land are determined and fixed by land use regulations of the regional
governmental of Addis Ababa City. The area of land needed for development activities are based
on the types of projects. The maximum period of land allotted for investment purposed is not
greater than forty five (45) years. Rental prices in rural are determined on the types, magnitude
and location of the project areas.

An Investor has the right to hold land either on lease or rental basis in Oromia. The investment
Board of the region with priority given to approve investments delivers land to an investor within
a short period of time through its channels. Urban land in these cities and towns can also be
given with the maximum price within a short period based on the interest and capacity of the
investor. The maximum and minimum annual lease charge ranges will largely depends on the
type of project location of the land and the size of land requested. Urban Land in the remaining
small towns of Oromia is administered on rental basis and the annual rental charge ranges per
square meter is depending on the location, the type of project and size of the land According to
the 1994 national census, the town had a population

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B. Premises required

The total land holding of the project one hectare, which is equivalent to 10,000 M2, the premises
required planned as follows in the table below.
Table premises required and land use plan.
SN Description Land requirements(M2)
1 Production Hall
1.1 Cutting Section 2,500
1.2 Sewing Section 1,500
1.3 Finishing Section (Including Inspection and Packing) 2,000

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Total 6,000
2 Warehouse
2.1 Raw material (Fabrics) and Input 1,500
2.2 Finished Production (Garment) 1,000
Total 2,500
3 Office Building 500
4 Shop and showroom 400
5 Waste Accumulation area 100
6 Green area, buffer zone and parking 500
Total 1,500
Grand Total 10,000
C. Floor Lay Out

The ring was a descendant of the Arkwright water Frame 1769. It was a continuous
process; the yard was coarser, had a greater twist and was stronger so was suited to be
warp. Ring spinning is slow due to the distance the thread must pass around the ring, Other
methods have been introduced. These are collectively known as Break or Open-end
spinning.

Sewing thread was made of several threads twisted together, or doubled.

 Checking

This is the process where each of the bobbins is rewound to give a tighter bobbin.

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 Folding and twisting

Plying is done by pulling yarn from two or more bobbins and twisting it together, in the
opposite direction that in which it was spun. Depending on the weight desired, the cotton
may or may not be plied, and the number of strands twisted together varies.

 Gassing

Gassing is the process of passing yarn, as distinct from fabric very rapidly through a
series of Bunsen gas flames in a gassing frame, in order to burn off the projecting fibers
and make the thread round and smooth and also brighter. Only the better qualities of
yarn are gassed, such as that used for voiles, poplins, venetians, gabardines, many
Egyptian qualities, etc. There is a loss of weight in gassing, which varies' about 5 to 8
per cent., so that if a 2/60's yarn is required 2/56's would be used. The gassed yarn is
darker in shade afterwards, but should not be scorched

2. MARKET STUDY AND PLANT CAPACITY

2.1 Market Study

In view of the fact that the textile and garment industry are related on some value chain
they have similar demand (positive relationship), therefore this study tried to study the
market from broad view of textile and garment industry.

The textile industry is the largest manufacturing industry in Ethiopia. The sector comprises
a large number of state-owned enterprises and a growth number of private sector
participants at all levels.

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2.2. Demand Analysis

There exist many factories that boost the demand for garment and textile industry in
Ethiopia a part from its basic need like huge population, increase in income. As the time
series data there exist paramount demand for these productions.

Table 2: Ethiopian Import and Export of textile

years CIF Value in US$ (Million) Import CIF Value in US$

(Million) Export
2003 141.3 10.1
2004 142.6 12.1
2005 239.8 13.4
2006 279.2 8.3
2007 291 15
2.3. Supply Analysis

The most recent statistical abstract indicates that there were 23 factories producing garment
of which 6 were public. In addition, there are large numbers of artesian enterprises
producing traditional Ethiopian style clothes. The state owned garment enterprises are
inextricably linked with the nine state owned enterprises, six of which producing textile,
two yarns and sewing thread, and one blanket. As clearly indicated in the introductory part
of this proposal, addis ababa city is the growing town of federal.

Above all it found on the road to Addis where moderate traffic flow is recorded due to
different commodities flow to capital cities.

Thus, it has a big market opportunity for the Garment project. Moreover, since this project
encompasses different supplementary and complementary projects, it deemed to help the
customers have a stop service. Therefore, the target customers of this envisaged project
include:

 The residents of the city of Addis Ababa City and the surroundings
 Individuals all over the country and
 For export trade.

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Hence to reach customers different marketing vehicles will be used. Among the
different marketing strategies and tools for promoting and controlling the market the
factory will use:

 Sponsorship of key government activities and public support mechanism.

 Using different marketing segmentation strategies and tactics.
 Utilizing effective and customer centric marketing strategies, that is the marketing
strategies that focuses on different groups of customers based on different
segmentation tools; for example, Age , Sex, income level, and the like.
2.4. Market Prospects
From the above marketing demand and supply analysis for the garment production there
exist huge market gab in Ethiopian market. Hence, the envisioned factory will be
successful y entering in to this market.
Besides, the demand for garment in the world marketing is increasing. Garment
productions of Ethiopia have high market demand in many parts of the world, particularly
in the united state of American, Western Europe and Japan. Therefore, there will be
sufficient demand for the production in the international markets.

2.5. Competition

There are different forms of competition that may face the factory. These are price and
non-price-based competition. Moreover, there are different competitors that will compete
with the project either directly or indirectly. But the factory under discussion has
diversified marketing strategies that could enable it cope-up with the different competitors
in the market. Moreover, it will frequently conduct competitors research which focuses on,
the strength and the weaknesses, the different competitor’s strategies, the techniques they
use in rendering the product, their customer handling methods, and others.

2.6. Marketing Strategy and Promotion

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The company will follow promotional methods:

 Electronic Medias
 Advertising (Media, Flayer and newspaper)
 Public relations
 Branding,

The marketing strategy mainly focus on the satisfying the needs and the requirement of
the customers.

2.7. Target Customer and Market Share

The project target is upper and lower level of the people because our strategy is the provide
standard quality of the product at cheaper prices and to capture the market.

The project will distribute 50% of its product for domestic market and 50%for Export

2.8. Plant Capacity and Production Progress

2.8.1. Plant Capacity

Based on plant capacity and progress this plant assumed to produce 2,500,000 T-shirt
1,600,000 Jacket, Dresses and 750,000 school wears(uniform) at full capacity utilization
operating 310 days per year and 8 hours per day.

2.2.2. Production Program and Prices

Considering the gradual growth of demand and the time required to develop the required
skill the rate of capacity utilization during the 1 st, 2nd and 3rd year of production will be

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70%, 90% and 100% respectively. Full capacity utilization will be reach during the third
year of operation.

Description Years 1 Years 2 Years 3-10

Capacity Utilization (%) 70 90 100
T-Shirt in pcs 1,750,000 2,250,000 2,500,000
Jacket and Dresses in pcs 1,120,000 1,440,000 1,600,000
School wear(Uniform) in Unit 525,000 675,000 750,000
2.3Production Pricing

It would be important to examine the possible level of pricing based on the competitor
action. In this regard the existing average pricing of similar company were assessed for the
benefit of comparison. Based on the existing retail price in the market the firm stetted the
price as follows.

Product Price of company

T-Shirt in pcs 38
Men Shirt in pcs 105
School wear in Unit 170
Total 313

2.3.1 Total Price and Sales projects

Description Years 1 Years 2 Years 3-10

66,500,00 85,500,00
T-Shirt in pcs
0 0 95,000,000
Jacket and Dresses in pcs 117,600,000 151,200,000 168,000,000
89,250,00
School wear(Uniform) in Unit
0 114,750,000 127,500,000
Total 273,350,000 351,450,000 390,500,000
Increase by 5 % per annum after 2nd
year 19,525,000
Grand Total 410,025,000

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3. TECHNICAL STUDY
3.1. Product Process and Technology

The production process includes designing, measuring and cutting of the fabric. Then
sewing machine, machine designed to join pieces of fabric or leather by means of either a
lockstitch or a chain stitch is used for the process (tailoring). The lockstitch which is used in
modern sewing is formed form two threads and the chain stitch from a single thread. Other
machines, such as shuttle, loop and needle are used in the process.

3.2. Raw Materials and Input

The main raw materials for the plant will be the textiles factories such as Akaki Textile
Factory, Bahir Dar Textile Factory, Kombolcha Textile Factory and Awassa Textile Factory;
and sometimes raw materials are imported from countries such Italy, Turkish, India.

3.3. Production Process

 Ginning

The seed cotton goes in to a Cotton gin. The cotton gin separates seeds and removes the "trash"
(dirt, stems and leaves) from the fiber. In a saw gin, circular saws grab the fiber and pull it
through a grating that is too narrow for the seeds to pass. A roller gin is used with longer staple
cotton. Here a leather roller captures the cotton. A knife blade, set close to the roller, detaches
the seeds by drawing them through teeth in circular saws and revolving brushes which clean
them away.

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The ginned cotton fiber, known as lint, is then compressed into bales which are about 1.5m tall
and weigh almost 220 kg. Only 33% of the crop is usable lint. Commercial cotton is priced by
quality, and that broadly relates to the average length of the staple, and the variety of the plant.
Longer staple cotton (2½ in to 1¼ in) is called Egyptian, medium staple (1¼ in to ¾ in) is called
American upland and short staple (less than ¾ in) is called Indian.

The cotton seed is pressed into cooking oil. The husks and meal are processed into animal feed,
and the stems into paper.

Issues

Cotton is farmed intensively and uses large amounts of fertilizer and 25% of the world’s
insecticide. Native Indian variety was rainwater fed, but modern hybrids used for the mills
need irrigation, which spreads pests. The 5% of cotton-bearing land in India uses 55% of
all pesticides used in India. Before mechanization, cotton was harvested manually and this
unpleasant task was done by the lower castes and in the United States by slaves of African
origin.

Preparatory processes- preparation of yarn

 Ginning, bale-making and transportation is done in the country of origin.

 Opening and cleaning

Platt Bros. Picker

Cotton mills get the cotton shipped to them in large, 500 pound bales. When the cotton
comes out of a bale, it is all packed together and still contains vegetable matter. The bale is
broken open using a machine with large spikes. It is called an Opener. In order to fluff up
the cotton and remove the vegetable matter, the cotton is sent through a picker, or similar
machines. A picker looks similar to the carding machine and the cotton gin, but is slightly
different.

The cotton is fed into the machine and gets beaten with a beater bar, to loosen it up. It is
fed through various rollers, which serve to remove the vegetable matter. The cotton, aided

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by fans, then collects on a screen and gets fed through more rollers till it emerges as a
continuous soft fleecy sheet, known as a lap.

 Blending,

Mixing &Scotching

Scotching refers to the process of cleaning cotton of its seeds and other impurities. A scotching
machine for cotton was first invented in 1797, but didn't get much attention until it was
introduced in Manchester in 1808 or 1809. By 1816 it had been generally adopted.

The scotching machine worked by passing the cotton through a pair of rollers, and then
striking it with iron or steel bars called beaters. The beaters, which turn very quickly, strike
the cotton hard and knock the seeds out. This process is done over a series of parallel bars
so as to allow the seeds to fall through. At the same time a breeze is blown across the bars,
which carries the cotton into a cotton chamber

 Carding

Carding: the fibers are separated and then assembled into a loose strand (sliver or tow) at
the conclusion of this stage.

The cotton comes off of the picking machine in laps, and is then taken to carding
machines. The carders line up the fibers nicely to make them easier to spin. The carding
machine consists mainly of one big roller with smaller ones surrounding it.

All of the rollers are covered in small teeth, and as the cotton progresses further on the
teeth get finer (i.e. closer together). The cotton leaves the carding machine in the form of a
sliver; a large rope of fibers.

Note: In a wider sense Carding can refer to these four processes: Willowing- loosening the
fibers; Lapping- removing the dust to create a flat sheet or lap of cotton; Carding- combing

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the tangled lap into a thick rope of 1/2 in diameter, a sliver; and Drawing- where a
drawing frame combines 4 slivers into one- repeated for increased quality.

 Combing is optional, but is used to remove the shorter fibers, creating a stronger
yarn and Drawing the fibers are straightened

Several slivers are combined. Each sliver will have thin and thick spots, and by
combining several slivers together a more consistent size can be reached. Since
combining several slivers produces a very thick rope of cotton fibers, directly after being
combined the slivers are separated into roving. These roving’s (or subbing) are then
what are used in the spinning process. Generally speaking, for machine processing, a
roving is about the width of a pencil.

 Drawing frame: Draws the strand out

 Subbing Frame: adds twist, and winds on to bobbins
 Intermediate Frames: are used to repeat the subbing process to produce a finer yarn.
 Roving frames: reduces to a finer thread, gives more twist, makes more regular and
even in thickness, and winds on to a smaller tube.

Spinning- yarn manufacture

 Spinning

The spinning machines take the roving thins it and twists it, creating yarn which it winds
onto a bobbin. In mule spinning the roving is pulled off a bobbin and fed through some
rollers, which are feeding at several different speeds.

This thins the roving at a consistent rate. If the roving was not a consistent size, then this
step could cause a break in the yarn, or could jam the machine. The yarn is twisted through

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the spinning of the bobbin as the carriage moves out, and is rolled onto a cop as the
carriage returns. Mule spinning produces a finer thread than the less skilled ring spinning.
The mule was an intermittent process, as the frame advanced and returned a distance of
5ft.It was the descendant of 1779 Crompton device. It produces a softer less twisted thread
that was favored for fines and for weft.

4. MANPOWER AND ORGANIZATIONAL MANAGEMENT

4.1. Manpower
At the top of the organization structure, there will be a general manager with the responsibility of
supervising the overall activity of the plant. It is always true that Organization and Management
of the project plays a key role and bear direct impact on the success and profitability of the
project. The opportunities of being serviced by well skilled professionals well enable the
company to evaluate the internal weakness and strength of the company as well as to assess the

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global opportunity and risks in the world market so that the company can cope up with the
dynamics of the market situation.

The company will use efficient trained staffs in the area of marketing to be competitive supplier
o finished clothes in the market. Therefore, it must particularly to the project under
consideration, to give especial affection to select and recruit the appropriate total manpower
requirement for the plant will be employees at full capacity.

The total manpower required for the plant will be 600 employees

1. Permanent Workers: - 410

 Skilled: -280
 Unskilled: -130
2. Temporary Workers: -190
 Skilled: -90
 Unskilled: -100

The total number of manpower, manpower list, qualification, and salary and sex composition are
listed in the table below.
Annual
N Monthly
Description No. Qualification Salary in
o. Salary in br
br
General BA in Business
1 1 10,000 120,000
manager Management
Production BSC in Industrial
2 3 5,000 180,000
Head Engineering

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Production Degree in production

3 15 3,000 540,000
supervisor technology
Draftsman Diploma in draft
4 10 3,000 360,000
Designer technology
Diploma in general
5 Machine man 50 2,000 1,200,000
mechanics
Diploma in wood work
6 Carpenter 50 2,500 1,500,000
technology
Diploma in salesmanship
7 Sales 50 2,500 1,500,000
and marketing
8 Personnel 10 Diploma in HRM 2,500 300,000
9 Finance head 5 BA in Accounting 2,500 150,000
10+1 in wood work
10 Polish man 20 2,000 480,000
technology
10+1 in wood work
11 Carving 20 2,000 480,000
technology
BA in marketing
12 Marketing Head 20 2,500 600,000
management
Chemical 10+2 in Metal work
13 100 2,000 2,400,000
industry Worker technology
14 Helper/laborer 50 10 completed 2,500 1,500,000
10+2 in General
15 Mechanic 10 2,500 300,000
mechanics
Admin and BA in
16 3 2,500 90,000
Finance Head Management/Accounting
17 Accountant 10 Diploma in accounting 2,000 240,000
18 Electrician 10 10+2 in general electricity 2,000 240,000
Diploma in secretariat
19 Secretary 10 2,000 240,000
science
20 Clerk 15 10 completed 1,000 180,000
10+2 in store and logistics
21 Store keeper 10 1,000 120,000
management
22 Driver 15 10 completed 1,000 180,000
23 Cashier 10 10+2 in Bookkeeping 1,000 120,000
24 Office boy/girl 5 10 completed 1,000 60,000
25 General service 3 Diploma in management 1,000 36,000
26 Security 5 Unskilled 1,000 60,000
27 Gardener 5 Unskilled 1,000 60,000
28 Cleaner 5 Unskilled 1,000 60,000
Other workers 80 800 768,000
Contingency
(Lump sum) 2,550,000
10%
Grand Total 600 16,680,000

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4.2. Organization Structure and Management

The organization structure of the project is designed by including all the necessary personnel
under the right division. At the top of the organizational structure, there will be a general
manager with the responsibility of supervising the overall activities of the plant. Employees
under each unit will be supervised by the department head that is accountable for the general
manager. General Manager is accountable to the owner to the factory as indicated in figure
below.
-
Organizational Structure

General Manager

Production Dept. Administration and

Marketing Department
Finance

Administration and
Purchase Finance
Secretary General service
Waiter Department
department

Cutting Sewing Finishing Driver Clerk

Section Section Section Customer

Fig: Organizational Structure Hence the following section deals with the duties and responsibilities of some
departments.

4.3. Flow of job process of the departments

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1. General Manager
Duties and responsibilities

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 She/he will plan, organize, direct and control the overall activities of the factory
 She/he will devise policies and strategies that will enable the factory to be profitable.
 She/he will incorporate modern technological innovation that will facilitate the service
delivery of the project center and increase customer’s satisfaction.
 He/he will plan, organize, direct and control the human and non-human resources of the
plant so as to achieve the short and long run objectives of the organization.

2. The Manufacturing Department

Duties and responsibilities:-

It is the core department of the project center and has the following responsibilities.

 Use modern manufacture, processing and technologies that will enhance the quality of
those products.
 Produce quality product that will enable the center competent both in the domestic and
international market.
 Use appropriate technology to manage its products.
 Control on the quality of raw materials, inputs, quality of the product and also the
overall production process.
 Produce products in least cost so that the profitability of the center is guaranteed.
 Moreover control over the quality of the final products

3. Administration and Finance Department

Duties and responsibilities:-

 Will plan, organize direct and control the financial transaction of the plant by using the
entire necessary document.
 Will develop sound financial control system by developing modern financial control
systems.
 Will prepare the annual financial statements and prepare condensed reports for the
general manager, owner and other concerned government body.

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 Will control the human and non human resources of the plant, which include: effective
handling of the different inventories of the machineries, equipments, raw materials,
finished products, and devise strategies of controlling against fraud and damage.
 Manage and execute The promoter national and international procurement procedure
 Administer and control The promoter logistic resource
 Effectively administer the promoter Procurement process domestically as well as
internationally.
 Manage the public relation of The promoter/factory with external parties/stakeholders
 Provide and manage general supportive service to the plant.

4. Commercial Department
Duties and responsibilities:-

 Will handle the overall marketing activities of the organization which include planning,
organizing, directing, and controlling.
 Provide cost estimates in preparation for securing
 Gather information on new product design, profile
 Approval of new products profile & brand plan analyzes market research.
 Plan and execute sales.
 Will develop effective customer handling strategies
 Will design and implement effective advertisement and promotion schemes
 Will develop the marketing strategies for future project center’s development.
 Conduct both foreign and domestic market research for expanding the sales of The
promoter

5. FINANCIAL REQUIREMENT AND ANALYSIS

5.1 Total Initial Investment Cost

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Cost estimates of the envisaged project consist of capital investment cost and working capital
requirement. Total investment capital required to establish and run the envisaged project is
estimated at birr 166,800,000 Million, the project will be financed Owner equity contribution
30% that means 50,040,000 and Bank loan 70% (116,760,000) Detail financial analysis of the
project is depicted in the table blow.

SUMMARY OF FINANCIAL REQUIREMENT

No Description Cost
1 Fixed Investment
1.1 Land, Building and Construction 46,704,000 0.00
1.2 Machines and Equipment’s 36,696,000 0.00
1.3 Vehicles and Motors 5,004,000 0.00
1.4 Office Furniture and Equipment 3,336,000 0.00
Total Fixed Investment Cost 91,740,000 0.00
2 Operating Expense 0.00
2.1 Raw Materials Purchase and Products 33,360,000 0.00
2.2 Salary Expense 16,680,000 0.00
2.3 Other Operating Expense 5,004,000 0.00
2.4 Pre-operating Expense 3,336,000 0.00
Total Operating Expense 58,380,000 0.00
16,680,000
Contingency (Lump sum) 10%
Total Investment Cost 166,800,000 0.00

5.1.1. FIXED INVESTMENT COST ESTIMATION OF THE PROJECT

A) LAND, BUILDING CONSTRUCTION & CIVIL WORK

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N Description Land Unit cost in Total cost in

o Requirement(M2) br. br.
1 Production Hall 4, 3, 14,011,
000 503 200
2 Warehouse, raw material and 2, 4, 9,340,
input 000 670 800
3 Office Building, and finished 1, 3, 4,670,
product 500 114 400
4 Waste Accumulation area 1, 934,
500 868 080
5 Green area, buffer and parking 1, 1, 1,401,
000 401 120
6 Shops & Showrooms 1, 2, 2,335,
000 335 200
7 Site Development 4,670, 4,670,
400 400
8 Design and supervision 4,670, 4,670,
400 400
9 Land lease initial 4,670, 4,670,
400 400
Total 10, 14,028, 46,704,
000 091 000

B) MACHINERY AND EQUIPMENTS

Total cost in
No. Description Unit Quantity Unit cost
(Birr)
Weaving machine with
1 No. 6 2,375,000 14,250,000
accessories
Single needle stitching
2 No. 4 1,620,000 6,480,000
machine
Double needle stitching
3 No. 2 4,652,692 9,305,384
machine
4 Sewing machinery No 15 5,000 75,000
5 Lay Cutting Machines No 10 2,000 20,000
6 Needle Detectors No 5 1,000 5,000
7 Glass Cutter No 6 2,000 12,000
8 Steam Iron Boxes, No 6 35,000 210,000
9 Oil Stain Removers, No 6 50,000 300,000
10 Fabric Cutting Tables No 6 3,000 18,000
11 Vacuum Press Tables No 6 15,000 90,000
12 Line Product Tables No 10 30,000 300,000
13 Wooden Platforms No 15 1,800 27,000
14 Stitching Machine No 9 150,000 1,350,000

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Garment washing
15 No 5 829,671 4,148,355
machine 25Kg Capacity
Total Estimated Cost 36,696,000

C) OFFICE FURNITURE & EQUIPMENT

Unit cost Total cost

No Description Qty
in Br. in Br.
1 Managerial Tables 50 18,032 901,622
2 Secretarial chairs with table 50 9,016 450,811
3 Managerial Chairs 50 5,410 270,486
3 Computer and Printer 150 3,606 540,973
4 Shelf 200 1,803 360,649
5 Filing Cabinets 300 902 270,486
6 Customer Chair 100 451 45,081
7 Television 15 2,705 40,573
8 Waiting Room with sofa 1,000,000 90,162
9 others related service 3,550,000 320,076
50
10 Assembly chair and table(set) 45,081
0,000
Total 3,336,000

D) OTHER EQUIPMENT

No Description Measure Qty Total Price

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1 Factory fixture (wooden tables, stools, “ 1

boxes etc) 380,000

2 Machine Installation & Electric wiring “ 1

cost 397,178

Total 777,178

E) VEHICLES AND MOTORS

Unit Total
Description Qty Price in Price in Remark
br. br.
1 Sino truck , 1 3,015,924 3,015,924 Duty free
2 Service 1 595,070 595,070 Duty free
3 pick up 1 852,032 852,032 Duty free
4 Forklift 1 540,973 540,973 Duty free
Total 5,004,000

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5.1.2. INITIAL WORKING CAPITAL ESTIMATION OF THE PROJECT

The initial working capital is estimated to be birr 53,380,000.00

A. RAW MATERIAL PURCHASE AND INPUT

Qty
Qty Per/ Unit Total
No Description Measurement Per
price price
month Year
Colored Cotton
1 M2 6,757 110,000 93 10,230,000
poplin
2 Buttons ,Hooks Kg 2,000 130,000 60 7,800,000
3 Sewing Threads “ 2,400 90,000 45 4,050,000
4 Labels Kg 4,800 100,000 55 5,500,000
5 Zippers Kg 1,280 55,000 70 3,850,000
6 Packing material No 1,000 50,000 40 2,000,000
33,430,000

B. SALARY EXPENSE

As indicated in part 4.1 (manpower) of this study, the total cost of salary and wages is estimated
to be Br. 16,680,000

C. OTHER OPERATING EXPENSES

Sr Description Annual Cost Assumption Used

. in br
N

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o
0.032% of fixed Investment
1 Property Insurance 500,000
Cost
2 Audit & Legal Fee 100,000 350 per month
3 Uniforms 200,000 1,000*200br
4 Telephone, fax and postal 100,000 450 per month
5 Cleaning goods supplies 100,000 500 per month
2 % of the Fixed Investment
6 Repair and maintenance 100,000
Cost
7 Advertisement 100,000 % of sales
Stationery and other office
6 100,000 400 per month
supplies
8 Electricity 500,000 0.335*225,000KW per year
9 Water 500,000 1.5*3,000m3 per year
10 Fuel 1,000,000 3000 lit*20 per year
11 Oil and lubricant 700,000 10% of fuel cost
12 Miscellaneous Expense 500,000 3000 per month
Total 5,004.000.00

D. PRE -SERVICE EXPENSE

No Description Cost in br.

1 Project proposal 10,000
2 EIA 80,000
3 Licensing fee and others 10,000
4 Staff Capacity Building 1,500,000
5 For Adverting 500,000
6 Lease 3,000,000
Total 5,100,000

5.3. FINANCIAL ANALYSIS AND STATEMENTS

5.3.1. Underlying Assumption

The financial analysis of the envisioned Garment Factory is based on the data provided in the
preceding sections and the following assumptions.

A. Construction and Finance

 Construction Period ……………………………………………………….…24 Months

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 Source of finance………………………………………………30% equity and 70% loan

 Bank interest rate ……………………………………………………………………10 %
 Tax holidays ……………………………………………………………………2 years
 Operating costs increase by…………………………………………………………2%
 Operating costs and raw material increased by……………………………………5%
 Utilities and operation expense …………………increase 3% per annum after 2ndyear
 Wages and Salary increase……………………Increase 3% Per annum after 2 nd year

 Sales …………………………………………..increase by 5 % per annum after 2nd year

B. Depreciation
 Building…………………………………………………………………………….5%
 Machinery and Equipment ………………………………………………………..10%
 Office Furniture……………………………………………………………………10%

 Vehicles ………………………………………………………………………..…..20%

C. Working Capital
 Accounts Receivable…………………………………………………………….30 days
 Raw material Local …………………………………………………………..…..30 days
 Work in progress…………………………………………………………………5 days

 Finished Production ……………………………………………………………..30 days

 Cash in hand ……………………………………………………………………...5 days
 Accounts payable …………………………………………………………….…..30 days

5.3.2. Source of Fund

No Description % share Amount(in birr)
1 Owners Share 30 50,040,000
2 Bank Loan 70 116,760,000

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Total 100 166,800,000

5.3.3. Loan Repayment Schedule

Yea Principal Interest Total Annual Remaining
r Payment (10%) Payment Balance
0 0 0 0 116,760,000
1 11,676,000 11,676,000 23,352,000 105,084,000
2 11,676,000 10,508,400 22,184,400 93,408,000
3 11,676,000 9,340,800 21,016,800 81,732,000
4 11,676,000 8,173,200 19,849,200 70,056,000
5 11,676,000 7,005,600 18,681,600 58,380,000
6 11,676,000 5,838,000 17,514,000 46,704,000
7 11,676,000 4,670,400 16,346,400 35,028,000
8 11,676,000 3,502,800 15,178,800 23,352,000
9 11,676,000 2,335,200 14,011,200 11,676,000
10 11,676,000 1,167,600 12,843,600 0

5.3.4. Annual depreciation schedule of the fixed Asset ( birr)

Original Value Depreciation Depreciation

SN Description
In Birr rate in % year
Construction and Civil
1 46,704,000 5 2,335,200
Work
2 Machines & Equipment’s 36,696,000 15 5,504,400
3 Vehicles 5,004,000 20 1,000,800
4 Office Equipment 3,336,000 15 500,400
Total 91,740,000 9,340,800

5.3.5. Revenue Projection

Based on the production capacity and program of the envisioned garment factory indicated in
previous (chapter 2), the revenue of the factory at full capacity projected as indicated in the table
below.

SN Description Year 1 Year2 Year 3

1 T-Shirt 66,500,000 85,500,000 95,000,000

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2 Men Shirt 117,600,000 151,200,000 168,000,000

3 School Wears 89,250,000 114,750,000 127,500,000

Total 273,350,000 351,450,000 390,500,000

4.2.1. Balance Sheet (Beginning)

Balance Sheet
Asset
Current Asset
Cash 25,020,000
Inventory of raw materials and inputs 33,360,000
Total Current Asset 58,380,000
Fixed Asset
Land, Building and Construction 46,704,000
Machineries and Equipment’s 36,696,000
Office Equipment 3,336,000
Vehicles 5,004,000
Total fixed Asset 91,740,000
Total Asset
Liability
Account payable 116,760,000
Owners Equity 50,040,000
Capital
Total Liability & Owners’ Equity 166,800,000

Income Loss Statement

Revenue Year 1 Year 2 Year 3-
Sales 4,500,000 4,725,000 4,961,2
Sales expenses (5%)* 225,000 236,250 248,06
Purchase of Raw Material 33,360,000 265,075,095 265,07
Gross profit -28,860,000 -260,350,095 -260,11
Expenses
Salary Expense 16,680,000 17,514,000 18,389
Operating Expenses 5,004,000 5,254,200 5,516,9
Pre-operating Expense 3,336,000 3,502,800 3,677,9

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Deprecation Building 2,335,200 2,335,200 2,335,2

Deprecation machine 5,504,400 5,504,400 5,504,4
Deprecation Vehicles 1,000,800 1,000,800 1,000,8
Deprecation office Equip 500,400 500,400 500,40
Lease Expense 3,000,000 3,000,000 3,000,0
Interest Expense 11,676,000 10,508,400 1,167,6
Total Expense 49,036,800 49,120,200 41,092
Profit Before Tax 4,500,000 4,725,000 4,961,2
Tax(30% ) 1,350,000 1,417,500 1,488,3
Net Profit 3,150,000 3,307,500 3,472,8

Cash Flow Statement

Particulars Year0 Year I Year II

A. Cash Inflow 0
· Own equity 50,040,000
· Bank loan 116,760,000
· Depreciation 0 9,340,800 9
· Net profit 0 3,150,000 3
Total inflow 166,800,000 12,490,800 12
B. Cash outflow 0
· Fixed capital 91,740,000
· Working capital 58,380,000
. Contingency (Lump sum) 10% 16,680,000
· Loan repayment 11,676,000 10
Total outflow 166,800,000 11,676,000 10
Net inflow (A-B) 0 814,800 2
Cumulative balance 0 814,800 2

5.3.9. Profitability

According to the projected income statement, the project will start generating profit in the 1st
year of operation. Important ratios such as profit to total sales, net profit to equity (Return on
equity) and net profit plus interest on total investment (return on total investment) show an
increasing trend during the lifetime of the project.

The income statement and the other indicators of profitability show that the project is viable.

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5.3.10. Break-Even Analysis

The break-even point of the project including cost of financial when it starts to operates a t full
capacity (year 3) is estimated by using income statement projection.

5.3.11. Pay-Back Period

The investment cost and income statement projection are used to project the pay-back period.
The project's initial investment will be fully recovered at the 3 years of operation.

6. FUTURE DEVELOPMENT

Every business undertaking be it large or small should have future development plan. It is a plan
fact that business activities are undertook in a dynamic business nature and different
environment. Therefore, the factory will have an expansion phase depending on the condition of
the industry character particularly in producing the profile itself by installing the plant. Inthis
regard, envisioned garment factory will expand its capacity as well as the product mix a part
from T-shirt, Men shirt and Uniforms.

7. ENVIRONMENTAL IMPACT ASSESSMENT OF THE PROJECT

7.1. Socio Economics Environments

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The owner will provide the land on bases and all required compensation will be paid for the
project. The livelihood of the local people around the project area is rural dweller of various
occupation and economic background.

7.2. Environmental Impact Assessment of the Project

Environmental aspects are fundamental for the sustainability assessment of the current and novel
designs of this project garment Industry. In this regard the factory will undertake a separated and
detailed Environmental impact assessment.

To assess the impacts and design mitigation measure if any adverse impacts are there so as to
make the project benefited more society and nation.

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