PRE-FEASIBILITY STUDY (FURNITURE MANUFACTURING UNIT)

Imam Hassan Furnitures and Fixtures

For

Jalozai Economic Zone

INTRODUCTION:

This information memorandum is to introduce the subject matter and provide a general idea and
information on the subject. 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 from case 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.

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 concept development, start-up, and production, marketing, finance
and business management. The purpose of this document is to facilitate potential investors in
establish in Furniture 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 importance, as the research that precedes such reports reveal certain thumb
rules; best practices developed by existing enterprises by trial and error, and certain industrial
norms that become a guiding source regarding various aspects of business set-up and it’s
successful management. Apart from carefully studying the whole document one must consider
critical aspects provided later on, which form basis of any investment decision.
EXECUTIVE SUMMARY:

The proposed project is for setting up a Furniture Manufacturing Unit. This unit will be capable
of integrated furniture manufacturing from sourcing and cutting of wood and plastic, to retailing
of product to the end customer. The project will cater to the growing needs of domestic furniture
market. The housing and construction industry has seen a steady growth over the last many
years due to a number of factors. These include; development of new housing schemes,
introduction of housing finance schemes / loans by different banks, increased urbanization, a
growing middle class and enhanced purchasing power of the public. All these factors have
contributed directly and indirectly towards an increased demand for furniture. The furniture
business venture entails a total investment of about Rs. 3 million. This includes a capital
investment of Rs. 2 million and a sum of Rs. 1 million as initial working capital. The project is
financed through 100% equity. The Net Present Value (NPV) of the project is around Rs. 3
million.

BRIEF DESCRIPTION OF PROJECT & PRODUCT:

This unit is capable of producing different types of furniture i.e. bed sets, dinning sets, sofa sets,
center tables, tables for sofa set and office furniture. The entire finished product depends on the
quality of wood and plastic. Detailed technical know-how about the quality of wood and the use
of seasoned / dry wood plays as well as plastic a vital role in the manufacturing of quality
furniture. It is recommended that dry wood, from forests is used for manufacturing quality
furniture. Forest reserves like Changa Manga, Pakhowal, Kundian, Chicha watni, Bahawalpur
and other forests are potential sources of quality wood. Furniture manufacturing units in
Pakistan mostly use Sheesham. Other types of wood used in manufacturing furniture are; Teak,
Walnut and Keekar. Besides this, substitute material like Lasani and Vinboard are also used in
the manufacturing of furniture. Other materials used in furniture manufacturing process are
nails, screws, glue / solution, spirit, lakh, thinner, lacquer, sealer, hardener etc. These raw
materials are easily available in the market. The demand for furniture in the domestic market is
consistent throughout the year; however, it significantly increases during the period of October
to March due to ‘wedding season’. The demand for furniture almost doubles during this period
and is a good time to enter the market. Since strong competition already exists in the domestic
market, manufacturing of high quality trendy designs and aggressive marketing is essential to
get a prominent place in the market. Despite the introduction of new / alternative materials in
furniture manufacturing, furniture is still preferred in the domestic as well as in the international
market due to its traditional appeal and durability. Over the years, entry into the global market
has also become more competitive, due to demanding factors like green furniture, multi-
functionality, simplicity and neutral colors, Ready-to-assemble (RTA) and Do-it-yourself (DIY)
furniture. Malaysia, Philippines, Indonesia and China have established strong brand names and
have emerged as key market players.
CRITICAL FACTORS:

 Ensuring availability of seasoned (dry) wood for high quality furniture manufacturing.
 Seasoned wood minimizes deforming that may occur due to dampness in wood.
 Selection of skilled labor is an important factor, as it can improve quality of finished
products by better craftsmanship & lower wastage.
 Pre-Feasibility Study Furniture Manufacturing Unit
 New designs and styles can build brand equity for the business.
 Creation of new designs and styles is vital for setting new trends as the market is quite
competitive.
 Aggressive virtual marketing needs to be undertaken in the absence of a physical
showroom.
 Though skilled labor is available in the market, additional manufacturing workload can be
sub-contracted to save time and resources.
 The manufacturing unit will require selling directly to showrooms and direct clients, for
which the owner would need to develop extensive knowledge of the market.
 Higher return on investment and a steady growth of business is expected with the
entrepreneur having some prior experience / education in the related field of business.
 Easy access to raw material should be ensured.

INSTALLED & OPERATIONAL CAPACITY:

The proposed project is capable of manufacturing complete range of furniture and other allied
products to meet the demand of domestic market. The Unit will work on 8 hours shift for 300
days. Total number of furniture items produced in year 1 would be 202 i.e. 60% of total
production capacity.

GEOGRAPHICAL POTENTIAL FOR BUISNESS:

The demand for furniture is higher in densely populated cities of Pakistan i.e. Lahore, Multan,
Karachi, Peshawar, Quetta, Rawalpindi and Islamabad, making all these cities viable for
business. However, establishment of the unit in the vicinity of established furniture clusters i.e.
Lahore, Chiniot or Gujrat gives the added advantage of easy availability of skilled labor.

POTENTIAL TARGET MARKETS:

Potential markets for furniture can be categorized into the following; newly constructed house,
gift on weddings, for renovations, institutional buyers (public & private sector), etc. Majority of
customers in the domestic market belong to first and second category. These customers require
furniture for their newly built houses and usually buy a range of products like bed sets, dining
sets and sofa sets with other decorative material for their entire house. Initially, entrepreneurs
should target these customers to establish the business and increase their customer base.
Flourishing hotel and tourism industry can considerably increase the demand for furniture
whereby, large orders can also be secured to supply furniture to hotels and resorts. Furniture
retail clusters are found in most areas of all big cities of Pakistan, where manufactured furniture
can be sold.

PROJECT COST SUMMARY:

A detailed financial model has been developed to analyze the commercial viability of Furniture
Manufacturing Unit. Various costs and revenue related assumptions along with results of the
analysis are outlined in this section.

Project Economics The unit is capable of producing different types of furniture, as it builds
predominantly upon craftsmanship of skilled labor. However, this particular prefeasibility focuses
on manufacturing of bed sets, dinning sets, sofa sets, office furniture and miscellaneous
furniture (center table & tables for sofa set etc.).

CAPITAL INVESTMENT FOR THE PROJECT

Capital Investment Amount (Rs.)

Furniture & Fixtures Machinery & 100000

Equipment
Office Equipment 250000
Pre-operating Cost 50000
Civil Work 2000000
Initial Working Capital 600000
Total Project Cost 3000000

SPACE REQUIREMENT:

2 Kanals (with covered area of 7,200 sq. ft) land is sufficient for setting up the proposed
furniture manufacturing unit. The land would be acquired on lease. Covered area details of the
manufacturing unit are as follows.

Factory (Covered Area in Sq. Ft)

 Factory Main Hall 2,000

 Carving Room 750
 Polish Room 1,000
 Store for un-finished products 1,000
 Store for finished product 1500
 Office for factory admin officer & CAD operator 300
  Rooms for Labor 500
 Kitchen & Washrooms 150
 Total 7,200 Sq Ft

MACHINERY & EQUIPMENT:

Machinery & equipment required for Furniture Manufacturing unit can be easily purchased
locally. Following table provides list of machinery required for the factory:

 Saw 18” 1
 Saw 27” 1
 Saw 30” 1
 Cutter sliding 1
 Cutter round 1
 Gauge 14” 1
 Gauge 18” 1
 Planer / Shaper 12” 2
 Spindle Molder Machine 2
 Chapaka 2
 Hand Chapaka (jig saw) 2
 Grinder 2
 Drill machine 10
 Compressor 2
 Miscellaneous Tools (Hand Tools, Paint Gun etc.) 1 Set

MACHINE MAINTENANCE:

Technically advanced machines are not required in the manufacturing process. Therefore,
machine maintenance cost is also expected to be on the lower side. The major maintenance
cost will be of oiling and greasing of machines.

FACTORY FURNITURE

Following furniture will be required at the factory:

 Office Table Set for CAD Operator 1

 Visitors Chairs 4
 Table & Chair set for admin, store & production 3
 Fire Extinguishers 2
OFFICE EQUIPMENT:

Details of office equipment are as follows:

 Computer with LCD 1

 Printer 1
 UPS 1.5 KW 1
 Telephone Sets 1
 Fax Machine 1
 Generator 6 KVA 1

USEFUL PROJECT MANAGEMENT TIPS

Technology

 Required Spare Parts & Consumables: Suppliers credit agreements and availability as
per schedule of maintenance will be ensured before start of operations. The machines
proposed are new and locally made, hence requiring little maintenance and repairing.
 Energy Requirement: A generator is required but would be used only for operating the
machinery and other necessary equipment.
 Machinery Suppliers: In selecting the machinery, multiple sources would be explored.
The availability of spares would also be considered. Such machinery is easily available
in local markets e.g. Gujranwala, Lahore and Karachi.

Marketing

 Product Development: Creation of new designs and styles is vital not only for setting
new trends in the furniture business but can also build brand equity for the business.
 Advertisement and Promotion: Brochures, Website and Cable Ads of the business
should be developed and regularly updated.
 Sales & Distribution Network: The owner should develop contacts/linkages with
prospective buyers and suppliers through email, fax and telephone and social media.

Human Resources

 Adequacy & Competencies: Skilled and experienced carpenters are necessary for the
unit. Staff having experience in craftsmanship, carving, polishing, etc. would be
preferred.