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Pencil Love
Pencil Love
PEN
PRODUCTION
PEN AND PENCIL PRODUCTION 2017
1 Executive Summary
The proposed business is on production of pen and pencil in Bhutan and it has potential to
produce domestically as the major raw materials are available. According to the Annual
Education statistics 2016, there are 522 schools, which consist of 486 public schools including
51 central schools, and 36 private schools with the total number of1 72, 741 student. The demand
for the both pen and pencil is likely to grow at a very fast pace keeping in view the future
economic growth in Bhutan leading to higher purchase power.
The pen and pencil have become most important items required by the students and along with
exercise book, pen and pencil constitute the major segment of the school supplies which are
mostly purchased in the market by the student. At present, there are no manufacturing facilities
for the production of pen and pencil in Bhutan and the requirement is being met through imports
from India.
Pen and pencil production being a monopoly business, it can render its product to entire school
in Bhutan
The report presents in detail the justification of the project, market analysis, Resources required,
technology used, plant location, environmental aspects, implementation of project, cost
presentation and financial analysis:
i. Justification of the Project: Every year a large number of pen and pencil are imported
form Indian and other countries. The proposed business has a monopoly power and
available of raw material in the Bhutan.
ii. Market Analysis: Presently there is no business that produces pen and pencil in Bhutan.
Every year number of school and student increases and there is high demand for imported
pen and pencil.
iii. Resources required: The main raw material for the production of pen and pencil is
Pencil slat, black lead, and glue, packing material, pipe, ink, nozzle and plain rapper. Part
from all the raw materials machinery, water and electricity are required.
iv. Technology required: The production of pen and pencil will use automatic machinery
which will be imported from Zhengzhou Gashili Machinery co. ltd and
www.CHINA.HAIJIANG.COM from china.
v. Plant location: Location of the business will be at Thimphu, Phuentsholing and Paro
since this place have high number of schools and student whereby the proposed business
can distribute it product.
vi. Environmental Aspects: The production of pen and pencil causes’ air and water
pollution as well as degradation of the environment but this may reduce up to a great
extent by the recommended measures.
TABLE OF CONTENTS
1 Executive Summary ...................................................................................................................................... 1
2 Justification of the project ........................................................................................................................... 5
2.1 The need of the project ........................................................................................................................ 5
2.2 Competition Analysis ........................................................................................................................... 5
2.3 SWOT analysis ...................................................................................................................................... 5
3 Market Analysis .............................................................................................................................................. 6
3.1 Structure of the industry ...................................................................................................................... 6
3.2 Demand vs. Supply ............................................................................................................................... 7
3.3 Pricing and Marketing Strategies .................................................................................................. 7
3.4 Technological changes that could impact costing................................................................... 8
3.5 Competitiveness of the project....................................................................................................... 8
3.6 Packaging & Transportation ........................................................................................................... 9
3.7 Assessment of Comparative Advantage ...................................................................................... 9
3.8 Determine potential for marketing collaboration ............................................................... 10
4 Resources ..................................................................................................................................................... 10
4.1 Sources of inputs............................................................................................................................... 10
4.2 Sources of raw material ................................................................................................................. 10
4.3 Assess the availability of manpower & skills ......................................................................... 11
4.4 Assess the need for skill development ..................................................................................... 12
5 The plant ....................................................................................................................................................... 12
5.1 Choice of the technology ................................................................................................................ 12
5.2 Rate of consumption of power, fuel, utilities & consumables ......................................... 14
5.3 Man power requirement and organization chart ................................................................ 15
5.4 Extent of technical assistance needed including training ................................................. 15
6 Plant Location & Infrastructure with layout ................................................................................... 15
6.1 Raw material Availability .............................................................................................................. 15
6.2 Environmental aspects- Regulation & environment issues ............................................. 15
7 Project Implementation Schedule....................................................................................................... 16
8 Financial Analysis...................................................................................................................................... 16
The pen and pencil have become most important items required by the students and along with
exercise book, pen and pencil constitute the major segment of the school supplies which are
mostly purchased in the market by the student. At present, there are no manufacturing facilities
for the production of pen and pencil in Bhutan and the requirement is being met through imports
from India.
The proposed business has been drawn for the production of pen and pencil. The proposed has
two separate departments, the first for the production of pen and the second for the production of
pencil. As there is no such industrial unit’s production, there exist a good potential for
establishment of setting up of business in Bhutan. The proposed business unit would be equipped
with the machines for the production of pen and pencil. The ideal location for the proposed
business would be Thimphu, Phuntsholing, and Samdrupjongkhar as they constitute the major
market both school supplies as well as general market supplies.
Opportunities Threats
Contribute o the nation’s economy New entrance
Growing number of schools and Technological advance
students Availability of similar product at
Produce pen and pencil of better cheaper rate.
quality Threat of losing market.
To reduce import of pen and pencil
and limit the outflow of foreign
exchange.
The proposed business has a threat and weakness in terms of losing its market, advance
technology, and new entrance. However, the proposed business has a monopoly power to capture
all the market in the Bhutan as well as it will contribute to the nation economy.
1) Monopoly Market
2) Location and it accessibility
3 Market Analysis
Wholesalers
Retailers
Ultimate users
Presently, there are no manufacturing units for Pen and pencil. The demand is being met through
imports. There being sufficient demand, both in school supplies sector as well as in open market
and the proposed unit is expected to have bright prospects for capturing a substantial share of
domestic market. As the unit is setup in the vicinity of Thimphu, Phuentsholing and Samdrup
Jongkhar, the distribution channels could be well utilized for marketing of the readymade pen
and pencil all over the Bhutan. Similarly, every student needs pen and pencil for noting down the
note in the school. The maximum life of pen is 7 days and pencil is 4 days, the student buys a
new pen and pencil and a demand becomes a recurring demand. A wide variety range of pen and
pencil in varying price range are available in the market and the proposed business needs to
product it at a reasonable price as per product being currently sold in the market
Presently, most of the pen and pencil are being imported in Bhutan. As of now there are no
organized business units in Bhutan that produce pen and pencil and the requirement is being met
through imports. Accordingly, the following marketing strategies could be adopted by:
Marketing through trade channels by whole- sellers in major cities or direct sales to
stationery shops.
Distributing the pen and pencil around twenty dzongkhag schools and institutions.
The proposed business needs to mainly focus on school supply sector and market their products
through school students on major educational centers. The proposed business must identify shops
which could function as the retail outlets for selling its product. The business need to produce the
pen and pencil as per the demand of the customer with all the quality to that of imported one.
One of the biggest technological changes that can impact the way the unit would conduct
business in the future would be the progress of information technology in shaping e-commerce
and its adaption in the Bhutanese economy.
It may be used to find out the customers on line. Similarly, it may be possible to generate and
respond to customer enquiries on line and transact business with those who stay outside the
country. It has been also found out that most of the raw materials are imported. So, if these
things are produced within the country it would make the product more cost effective.
The basic impact of all this would help to reduce the cost and therefore the price of the product.
The unit aspires to deliver quality product which would be beneficial for the student, institute
and market as a whole. It is expected that there would be a demand pull at the customer end
which can be further strengthened through innovative promotional strategies. The demand pull is
estimated to be significant thereby ensuring lowering of costs through economies of scale.
However, the customer needs and wants may vary from one customer segment onto the other.
The proposed business is for production of two distinct products, viz., Pen and pencil. The
proposed unit shall comprise of following two product departments.
The pen and pencil will be packed into “4 x 6” high quality paper and cardstock featuring
designs and each of the pack will include six cards, six envelopes and six sentiments for a final
touch. It needs to satisfy the objective to protects the quality of the product and provide
information to buyers, such as quality, producer and name of the producer, country, area, etc.
Bhutan is an energy surplus state. 97% of its energy is obtained from hydro power. According
to Bhutan Trade Statistic 01st January- 31st March, 2017, total exports to India were Nu. 549.23
million. The cost of electricity is lower than many power deficient economies.
b) Availability of Water
Bhutan is endowed with rich perennial water resources fed with permanent glaciers, glacier
lakes and recurrent monsoons. The per capita mean flow availability is as high as 109,000 m3.
This compares very favorably with a developing economy like India which has per capita mean
flow availability as low as 1,588 m3.
4 Resources
4.1 Sources of inputs
Utilities required by the plant consist of electrify and water.
Electricity is required to run the production machinery and to provide lighting for the plant. So
except for very remote areas availability of electricity is not a handicap.
Water is required for general purposes and for supplying to the boiler, where steam is
produced to be supplied to the molasses tank. Bhutan is drained by many rivers flowing south
between these ranges and for the most part ultimately emptying into the Brahmaputra River in
India. The river basins are oriented north-south and are, from west to east, the Jadalkha, Torsa,
Raidak, Sankosh, Mao Khola/Aie, Manas and eastern river basins, this last basin being
composed of the Bada and Dhansiri rivers. Two wastewater treatment projects are being
implemented in the cities of Thimphu and Phuntsoling.
Ink: Ink is a liquid that contain pigments used to produce an image, text, or design.
Nozzle: Nozzle is a tube use to fill the ink. Nozzle can be of brass and other metal.
Pencil slat: Pencil slats are the wooden component used for pencil manufacturing to produce
wood-cased pencil.
Black Lead: The lead of the pencil is a mix of final ground graphite and clay powers.
Glue: Glue is used to inject in a groove. Glue helps to stick the groove slat in to sandwich to
prevent the breakage.
Lacquer enamel: Lacquer is used for the shiny finished applied to material.
According to the Trading Economic report 2016 state that the unemployment rate in Bhutan have
decreased to 2.50 percent in 2016 from 2.60 percent in 2015.
However, higher technical courses for engineering and technology, international law and finance
are required to meet the requirement of the imminent future.
5 The plant
For the production of pencil, automatic pencil production machinery is used and the machinery
will be imported from Zhengzhou Gashili Machinery co.ltd from China. The process starts with
the grooved slat which will be imported from India at the initial stage. The grooved slat is a half
pencil, is coated with the glue and the lead are placed in the groove and then covered with the
second slat. The block is dried in the drying machine and it’s passed through shaping machine
that shapes the raw pencil. The raw pencils are then lacquered in a painting machine, which is
made to apply three to ten times of lacquer coating depending on the quality of finish required.
After the final coat of lacquer, the pencil is placed in heading and sizing machine which sands
off excess wood and paint from the ends of the pencil and trims the pencil in good finished
length.
For the production of Pen, automatic pen producing machinery is used and the machinery will be
brought from China Haijiang.com ltd. For the pen production process the pipe and ink will be
imported from India. Raw plastic materials are injected into injection molds and the readymade
ink is filled into the pipe.
Step
the wooden slats are formed/ shaped on the slat machine
1:
Step
Pencil slat are treated with wax
2:
Step
groovier machine cuts grooves in to slat to accept the writing core
3:
Step Writing core is placed in to the grooves
4:
Step A second grooves is glued on to the first grooves by a lead layering and its dried in
5: drying machine
Step
The grooved slat is cut into individual pencils.
6:
Figure 3: Pencil manufacturing process
Press Ink
Start: Raw Fill Ink pen Press Plug Pen Finish :
Place Pen
pen cartridge into pen Cartridge assembled
cap on Pen
materials with Ink Barrel into Pen Pen
Barrel
2. www.gsl-machine.com
Contact: Nancyle:
Mobile: 0086-13643842763
TEL\FAX:0086-371-60317344
Email: gashilinancy@gmail.com
Yahoo: gashilinancy@yahoo.com
MSN: gashilinancy@hotail.com
Skype: gashilinancy
3. Daphne Zhou
Tel:86-451-86646708
Fax: 86-451-86811059
Skype: meixue.zhou
We chat: 1322468646
What’s up: +8618345168420
Add: No.388 Songhua Road, Haping Centralized Zone, Economic Developing
Area.Harbin china 150090
The production process involved in the production of pen and pencil is basically a conversion
process from wood into pencil and plastic into a pen. There is no as such gaseous and liquid
affluent are generated in the process. Dying is the only process in the manufacturer of pen and
pencil which has pollution both noise and air. Some solid waste would be generated in the form
of plastic and other dust which can be easily disposed off. But the waste generation could be
minimized by using the method of economic cutting.
8 Financial Analysis
8.1 Total Project capital Costs
Total Project Startup Cost 1,778,810
Total Investment 1,879,110
Working Capital 100,300
Direct Labor
21,000 252,000 264,600 277,830 291,722 306,308
Salary &
Allowances 12,000 144,000 151,200 158,760 166,698 175,033
Wages
3,500 42,000 44,100 46,305 48,620 51,051
Total
36,500 438,000 459,900 482,895 507,040 532,392
Expenses
589,322 605,822 623,147 641,338 660,439
Net Operating Income
/ (Loss) 829,079 883,499 940,640 1,000,638 1,063,636
Loan Proceeds
1,879,110
Sales &
Receipts 1,836,000 1,927,800 2,024,190 2,125,400 2,231,669
Other:
Total Cash
Inflows 3,919,110 2,142,000 2,249,100 2,361,555 2,479,633
Available Cash
Balance 3,919,110 3,078,700 4,064,020 5,098,606 6,184,921
Advertising
6,000 6,300 6,615 6,946 7,293
Inventory
Purchases 360,000 378,000 396,900 416,745 437,582
Miscellaneous
18,000 18,900 19,845 20,837 21,879
Payroll
396,000 415,800 436,590 458,420 481,340
Rent or Lease
120,000 126,000 132,300 138,915 145,861
Other:
303,600 318,780 334,719 351,455 369,028
Subtotal
1,203,600 1,263,780 1,326,969 1,393,317 1,462,983
Capital
Other Cash Out
Purchases 1,778,810
Flows:
Subtotal
1,778,810 - - - -
Total Cash
Outflows 2,982,410 1,263,780 1,326,969 1,393,317 1,462,983
Ending Cash
Balance 936,700 1,814,920 2,737,051 3,705,289 4,721,938
Assets
Total Assets
2,660,189 3,239,287 3,912,807 4,632,968 5,402,104
Accounts Payable
486,113 1,351,900 2,355,034 3,453,829 4,657,559
Total Current
Liabilities 486,113 1,351,900 2,355,034 3,453,829 4,657,559
Long-Term Notes
Payable 1,593,720 1,268,938 899,325 478,693 (0)
Total Long-Term
Liabilities 1,593,720 1,268,938 899,325 478,693 (0)
Total Liabilities
2,079,833 2,620,838 3,254,359 3,932,522 4,657,559
Net Profit
580,355 618,449 658,448 700,446 744,545
Total Capital
580,355 618,449 658,448 700,446 744,545
10 Conclusion
The proposed business is based on production of pen and pencil and until now there is no such
business established in Bhutan which acts as one of the advantage of the business since the
market can be captured with monopoly power. Even though the business has capability of
capturing with monopoly business in Bhutan. But the business not financially feasible since the
total start up cost leads to BNT 1,778,810, total investment BTN 1,879,110 and working capital
BTN 100,300.
Secondly, according to the Constitution of the Kingdom of Bhutan act, under Article 5
Environment, Bhutan should conserve the country’s natural resources and to prevent degradation
of the ecosystem, a minimum of sixty percent of Bhutan’s total land shall be maintained under
forest cover for all time. So, in order to produce pen and pencil the basic requirement is wood
and every year to produce pencil for 175,393 students will leads to destruction of environment.
Thirdly, the proposed business cannot compute with the India market price and quality since
they have a capability of producing high quality product at reasonable price which customer
prefer for
11 References
Labour Force Survey Report 2015, Department of Employment, Ministry of Labour and
Human Resources, Royal Government of Bhutan (2015).
Statistical Yearbook of Bhutan 2016, National Statistics Bureau, Royal Government of
Bhutan (2016)
www.alibaba.com
Annual Education Statistics 2016