EXECUTIVE SUMMARY

• Description of the Project

The intention of this project is production of woven and printed fabric label. In this project the
company is designed to produce 14 million pieces of clothing labels (6,000,000 pieces and
8,000,000 pieces woven and printed labels respectively), at full capacity.
• Amount of Financial Requirement
The total initial investment cost including working capital is about Birr 8,366,499.48 and out of
which about Birr 6,296,400 is fixed capital and Birr 792,507.6 is working capital. The business
generates profit, all over the years, through the projection period of ten years.
• Market Prospect
At present there is no registered local manufacturer of fabric label. Though few garment
industries produces woven label for their own demand whereas, most garment industries
imported from foreign market. These labels are required by each and every type of garment
manufacturing unit as well as leather products. Due to the increase in the production of garments,
the demand of labels is also being increased day-by day. The export of readymade garments to
different countries has also been increased. Still there is no local manufacturer that supply
clothing label to the manufacturing units. Besides, the company has a vision to export
neighboring sub-Saharan countries which met their demand by imported [see table].
• Technical Study
A. Raw Materials and Inputs
In this project, the main raw materials are polyester yarn and fabric. It is amply available in lacal
textile factories. At full capacity the raw materials cost becomes Birr 7,707,691 Million. Of this
sum, the share of locally available raw materials is more than 96%.
B. Land Requirement
Generally the area cover for the project becomes: The total land area required for the proposed
project is about 1250 square meter. The area includes production hall, warehouses both for raw
material and finished products, design and pattern making room, product display room, canteen
both for workers and staffs, toilet and shower/wash room, security room, offices and other
facilities.

1
C. Technology & Engineering
The decision as to which process to choose as the optimum one for the production of clothing
label and determined by the intended use and the specific costs & local availability of the raw
materials. Process technologies for woven and printed labels are: Woven Labels making machine
with Jacquard and Rotary Screen Printing Machine
Both machines are current technologies and widely used in a large number of label industries in
worldwide for faster and finer printing woven label solutions.
The planned production capacity for the 1st, 2nd and 3rd year is 75%, 85% and 100 % of the full
capacity respectively.
• Financial Viability
Results of the cash flow discounting capital invested show that the project generates a net present
value (NPV) of Birr NPV (8,348,988birr) at 10% discount rate and an internal rate of return
(IRR) of 29%.
• Socio- Economic Impact
In view of the socio-economic development level it is very clear that an industrial development
in general and this project in particular will have a remarkable socio economic impact on the
Nation.
The establishment of such factory will have a foreign exchange saving effect to the country by
substituting the current imports. It has also a forward linkage effect with the manufacturing
sector.
The project is expected to have a significant range of growth enhancing impacts on the textile
industries. Besides, the project would employ around 24 workers. The large percentage of this
work force would be from the unskilled or semiskilled laborers.

2
1. INTRODUCTION
The population of the world is ever growing and almost reaching seven billion at this point in
time. Besides this, the economy of majority of the world population is also seen increasing from
time to time. This was due to the economic policy improvements adopted by most part of the
world continents like Africa, East and Middle Asia, and South America to increase the welfare of
their people. And it is obvious that the more improved the economic welfare of people, the more
they expend on purchase of apparel and food.
The textile manufacturing industries are migrating to Africa and other poor countries due to the
increase of labor cost in countries like Turkey, Italy and others. On the contrary, Ethiopia has
relatively lower cost labor force and good source of raw material.
At present after carefully analyzing the success and failure of the five year plan causes for The
Growth and Transformation Plan (GTP-1), The Ethiopian government is launched GTP-2 [2015-
2020] which also gives more emphasis for industrialization primarily aimed at reducing poverty,
improving the living standard of its people and creates favorable climate for socioeconomic
development of the nation.
Textiles and garments are one of the selected major areas of focus in the GTP, aiming to increase
export earnings and import substitutions.
The government very dedicated to growing the country's apparel manufacturing industry and is
implementing a number of prudent macroeconomic policies designed to support that growth.
Based on this Ethiopia’s clothing and textile sector is undergoing rapid expansion fuelled by
foreign investment. Despite notable growth trends in basic textile manufacturing figures recorded
over the past several years, yet there is only one company which is Be Connected Industries, a
multi-national Belgian-Dutch company engaged in manufacturing fabric label which is one of
the basic raw materials/accessories.
These labels are required by each and every type of garment manufacturing unit as well as
leather products. In the country, due to the increase in the production of garments, the demand of
labels is also being increased day-by day. There is good scope if some units come forward for
manufacturing of labels

3
1.1. OBJECTIVE OF MULU MAR LABEL FACTORY INVESTMENT
 Establish WOVEN AND PRINTED CLOTHING LABELS plant to supply for garment
industries
 Establish a modern streamlined facility with current technology for making clothing
label, and material handling facilities to receive and process the raw materials and
finished products; ensure the product quality; and repack in standard package for
distribution across the country. The facility will be supported by a quality control
laboratory and all material inputs and the product. When it is fully operational process an
estimated more than 14 million of fabric label per year produced.
 Produce and export high grade labels
 provide employment for the local people;

4
2. MARKET STUDY AND PLANT CAPACITY
2.1. MARKET STUDY
2.1.1 PRODUCT DESCRIPTION AND APPLICATION
Labels are used in every garment industry of Textile and Leather as well as by the tailors to give
the identity of the manufacturers and the specifications of the material used. With the increasing
awareness of the consumer towards the better quality product and feeling the brand
consciousness, this has become a necessity for the garment manufactures and the tailors.
There are different types of labeling to differentiate clothing, among them woven and printed
labels are mostly used by our country garment industries as well as in worldwide.
The products for labeling apparels described in international market as:
A. Woven label –
Labels, badges... of textiles, woven, in piece..., not embroidered with HS code 58071000
B. Printed label -
Labels, badges... of textiles, unwoven, in piece..., not embroidered with HS code 58079000
A. Woven labels
Woven clothing labels produced in a wide array of weaves, softness and clarity. The main raw
material required to manufacture Labels is yarn. Different yarn types such as Polyester Yarn,
Silk yarn, Cotton yarn, Viscose yarn, Blended yarn different counts and colors are used to
manufacture the label as per the apparel industries’ requirement.
Woven fabrics are produced by the process of weaving. The looms weave polyester or others
yarns called warp and weft yarns re-creating the logo in the form of artwork. Woven clothing
labels are durable and tend to launder better in the long run. There are several types woven
clothing label among them the followings are mostly used by garment industries.
Taffeta- Slightly scratchy; not particularly suitable for skin contact in higher-end garments, it is
most inexpensive woven clothing label. The detail achieved is not extremely high but rather
limited. The loom weaves this garment label at a high speed and therefore the detail on logo or
artwork is more general. This is not a clothing label for dense, intricate detail. The taffeta
clothing label achieves a simple logo or text in an economical manner.
Satin- Softer than taffeta better suited against the skin. Has a shiny final face appearance. This
woven clothing label is very popular with bridal, baby apparel, intimate or lingerie
manufacturing. It has a soft sheen in appearance, hence the "satin" name. The clothing labels are

5
very soft and are not irritating to the skin on fine garments such as cashmere or lingerie apparel.
This is the ideal clothing label for garments that have a simple logo or basic text font style.
Damask- Polyester yarns with opac flat finish, wide array of denier sizes and rich hue colors to
accommodate any complex woven label detail. The finish is opaque in appearance and has a soft,
subtle texture with a very tight weave. This clothing label is suitable for high-end garments that
require a refined trim finish. The loom weaves this clothing label slower than other labels
thereby giving the clothing label a nice uniform weave. This type of weave is the perfect clothing
label if you are searching for a clothing label that will give a high-end impression. The damask
clothing label is also ideal for intricate logo or artwork. The slower loom speed allows great
depth in logos, color separation, detail and clarity.

B. Printed/ unwoven Clothing Labels

Printed cloth labels are manufactured by silk screen or rotary screen printing on polyester or
nylon woven ribbons, tapes or other yarn goods. The main raw materials used to manufacture
printed label are fabric and ink. There are different fabric types based on their manufacturing
methods and materials used for making the fabric, mostly for purpose of manufacture label
polyester, cotton or blend fabrics are used.
Printed satin or cotton clothing labels are advantageous for applications that require very small
defined detail, shading on artwork or the ultimate softness against the skin. Printed clothing
labels are generally found on T-shirts, baby clothes or burp cloths, infant and toddler clothing,
lingerie or bridal applications. Printed cotton labels are suitable for natural clothing applications,
dye processing and general softness or natural appearance for the garment. There are several
types of printed clothing labels, each with its own advantages and limits:
Printed Satin
Thermo cured printed satin ribbon with lasting durability and stay-fast true colors.
Printed Nylon Care
Thermo cured printed nylon tape labels, soft and non-irritating against the skin.

6
2.1.2 LOCAL MARKET
2.1.2.1 Market Structure
Figure.2.1: The Ethiopian Market Structure for fabric labels
Supply side Demand side
Importers [ most garment industries] Garment
Industries
Local manufacturers of the product
 few textile factory produce for their own consumption Garment
 intermittent supply of MULU MAR LABEL FACTORY ------- Industries
manufactured woven label
 Be Connected Industries, a multi-national Belgian-Dutch
company

2.1.2.2 Past Supply Trend of the product in the country

I. Local production
At present in the country, there are only multi-national Belgian-Dutch BCI and MULU MAR
label factories that manufacture garment printing and labeling in the country. The major source
of country’s garment factories labels requirement fulfilled from foreign market.

I.II. Current production of woven label status

MULU MAR LABEL FACTORY
It is private company owned by the young business man Ato Samuel Mulegeta. The company
established in 2010 with an initial investment of about 1,000,000 Birr by rented a private house
located at kolfe keranio K/Ketema, in Addis Ababa.
The factory produces woven label in different types, design, size and supply to different garment
factories.
Performance of the company
The capacity of the plant is sufficient to substitute more than one fourth of the country’s
requirement of woven label fabric which is met by importing from foreign market.
The products are of very high quality meet all necessary standards for technical application as
equal as imported one [see Annex -attached customers--].
At present despite the machineries are the current technology and in very good conditions, the
company is not able to produce continuously due to the following reason:

7
Absence Raw Material & its associated utilities [Air conditioner], and factory setup

 Though the machineries able to manufacture woven labels from the raw materials
Polyester Yarn/Silk yarn/Cotton yarn/Viscose yarn/Blended yarn of different counts and
colors which are all types locally unavailable with the required standard, unavailability of
raw material from local market made company’s machineries to became idle for more
than a year.
 The premises for production of any product besides factory hall should include storage
and handling of raw materials and finished products, and others supporting
offices/labs/design rooms. These are an integral part of the production process and they
can make their own impact on overall production quantity, quality and on cost of the
product.
Therefore we found very crucial to reestablish the factory by studying its feasibility with the new
envisage printed label project, which help to restart the company at its full capacity, and make
the company to play its contribution for the country growth particularly for textile industries by
saving time, resource, manpower, and foreign exchange etc.
Mulu mar woven label’s production capacity at its full utilization:

The designed production capacity of the factory is 8,000,000 Labels (per annum) in single shifts
considering 25 working days in a month with different size as the following.

 8,000,000 pieces TPA Woven label with

 Size* [1" - 12"] Up to eight colors
It is a huge substitution of importing woven label with less/competitive price and the same
quality

Be Connected Industries

Be Connected Industries, a multi-national Belgian-Dutch company has started garment printing

and labeling factories on 2015 at the Eastern Industrial Zone.

8
II. Import of fabric labels

The most demand for woven as well as printed clothing labels are met from imports. However,
the imported quantities of the two products based on their HS code from the Ethiopian Custom
Authority don’t show the exact amount because of:
The garment industries of the country imported the products as accessories with zipper, shoulder
pad and the authority registered in lump sum quantity. Therefor we used by combining Ethiopian
Custom & Revenue Authority’s Report Data Base from International Trade Center’s Report Data
Base, which use mirror data to get unregistered quantity and to get the nearest imported data.
ITC is the world’s largest database of trade statistics, COMTRADE, maintained by the United
Nations Statistics Division (UNSD) -http://unstats.un.org/unsd/comtrade.
According to Ethiopian Custom & Revenue Authority’s Report Data Base and from
International Trade Center’s Report Data Base, imported quantity of woven and printed label
from 2005- 2015 is shown below in the table 1.
Table.2.1. IMPORT OF WOVEN AND PRINTED CLOTHING LABELS
Year Woven Growth Printed Growth
[kg] rate (%) Kg rate
2005 5,666 15,157
2006 17,132 19,547
202% 29%
2007 24,945 21,543
46% 10%
2008 17,588 18,007
-29% -16%
2009 21,540 14,423
22% -20%
2010 30,353 25,306
41% 76%
2011 14,451 46,919
-52% 85%
2012 38,174 101,514
164% 116%
2013 8,878 35,609
-77% -65%
2014 31,313 7,264
253% -80%
2015 40,323 18,684

Sources: ITC calculations based on Ethiopian Revenues and Customs Authority statistics

9
The above table generally reveals that import of both woven and printed labels has been
increasing during the past nine years although fluctuations occur in some years.
When the data set is analyzed in to three group periods the following results are observed.
During the period 2006-2008, the yearly average level of import of woven label was 19,888 kg.
During the period 2009-2011, the yearly average level of import has increased to 22,114.67 kg.
The increase in import during the period 2009-2011 as compared to the period 2006-2008, is
about11.19%. During -the recent four years, i.e., 2012-2015, imported quantity has grown to
29,672kg, which is higher than by about 34.17% as compared to the period 2009-2011.
Considering the fluctuations observed in some years, the average of the recent four years import
is assumed to reflect the current demand. Accordingly, current unsatisfied demand for woven
label is estimated at 29,672kg.
With regard to printed labels for clothing imported data is growing at high rate. For instance,
average imported quantity during 2006-2008 was 19,699.00kg. And the recent four years
average imported quantity became 40,767 kg; however Be Connected Industries a multi-nation
company started production in 2015, it is clear importing of printed label will decline.

trend of woven label import

45000
40000
35000
30000
25000
20000
15000
10000
5000
0
1 2 3 4 5 6 7 8 9 10 11 12

Year Woven [kg]

10
2.1.3. Sub Saharan Africa countries/ alternative market
Though the primary targeted market is local garment factories, and at the same time the company
will cover and identify possible detail export market that can be developed in the short term and
long term. As we have seen in the following table most sub-Saharan countries imported labels o
Table.2.2. List of importers for the selected product in sub Saharan countries
Product: 580710 Labels, badges and similar woven articles of textile materials
Importers 2010 2011 2012 2013 2014
World 63,918 45,632 - - -
Madagascar 62 70 77 8,529 87
Tanzania 148 152 149 138
Mauritius 83 87 106 123
South Africa 109 72 138 68
Swaziland 132 83 79 64
Kenya 123 114 110 61
Botswana 17 33 49 56
Namibia 32 74 74 30
Mozambique 1 1 6 22
Nigeria 0 372 0 18
Ethiopia 30 16 33 9 31
Burundi 0 0 0 5
Uganda 1 6 7 4
Sources: ITC

11
2.1.4 present demand
In order to estimate the current effective demand for woven and printed labels in Ethiopia, four
different methods are considered. These are:-
 Time trend Extrapolation
 Moving Averages of 2 years, 3 years and 4 years
 Exponential Smoothing
 Simple Average of Recent Six Years
Time Trend Extrapolation (2005--2015)

The principle of least squares is employed to fit a linear trend to the historical data of domestic
supply (y) and time (t) and the relation is expressed by the following equation:
Y = a+ bt,
Where ‘a‘ is the intercept and ‘b’ is the slope.
Accordingly, the estimated linear equations on the import of woven label 2005--2015 becomes,

y = 1.9626x+ 10.984
R2 = 32.71%
Based on the above equation, the estimated present demand is 34.53 tons.
2. Moving Average
A moving average is a statistic used to analyze parts of a large data set over a period of time. A
moving average is a time series constructed by taking averages of several sequential values of
another time series to smooth out random fluctuations in the series.
The term moving is used because every time a new observation becomes available for the time
series, it replaces the oldest observation in the equation. As a result, the average will change, or
move, as new observations becomes available. For this purpose moving averages 2 years, 3 years
and 4 years are considered and the results are shown in Table

12
Estimated Present Demand of woven label Based on Moving Averages
Year Actual 2 MV 3MV 4MV
Supply
(kg)
2005 5666
2006 17132
2007 24945
11,399
2008 17588
21,039 15,914.33
2009 21540
21,267 19,888.33 16,332.75
2010 30353
19,564 21,357.67 20,301.25
2011 14451
25,947 23,160.33 23,606.50
2012 38174
22,402 22,114.67 20,983.00
2013 8878
26,313 27,659.33 26,129.50
2014 31313
23,526 20,501.00 22,964.00
2015 40323
20,096 26,121.67 23,204.00
2016
35,818 26,838.00 29,672.00

After obtaining the forecasts for the different moving averages, the root mean square deviation
(RMSD), have to be calculated in order to select the one with lower values. Accordingly, it is
found that the four year moving average is found to be with lower accuracy criteria compared to
the 2 and 3 year moving averages as shown in Table below
Table Moving Average Selection Criteria
Types of Criteria MA(2) MA(3) MA(4)
RMSD 16581.50 14188.40 8760.55

Therefore, the 4 year moving average is taken to estimate the current demand. Thus, the current
(year 2016) effective demand for woven label based on the 2 year moving average method is
estimated at 29,672.00 kg/ 29.672tons.

13
3. Exponential Smoothing
The exponential smoothing method is one of the varieties of smoothing methods created to
improve the moving average method.
Ft + 1 = Ft+α ( Yt – Ft)
Where α is a constant between 0 and 1.
The method requires a smoothing parameter (α) adjusted using a range from 0 to 1 to determine
the weights to be applied to past demand history. An α close to 1 will have an adjustment value
that is substantial, making the forecast more sensitive to swings in the past historical demand
based on the previous periods error. When α value is close to 0, the forecast will include very
little adjustment, making it less sensitive to past swings in demand.
Applying this model to the 2005 – 2015 woven label import data at different values of the
smoothing parameter α, the current effective demand (year 2016) for woven label is estimated to
be 26972.61kg.
Table : Estimated Present Demand of woven label Based on Exponential
Smoothing
Year actual a = 0.2 a = 0.3 a = 0.4
supply
2005 5,666
2006 17,132 5666.00 5666.00 5666.00
2007 24,945 7959.20 9105.80 10252.40
2008 17,588 11356.36 13054.94 14753.52
2009 21,540 12602.69 13225.85 13849.02
2010 30,353 14390.15 15283.88 16177.61
2011 14,451 17582.72 19179.01 20775.29
2012 38,174 16956.38 16643.20 16330.03
2013 8,878 21199.90 23321.66 25443.43
2014 31,313 18735.52 17503.33 16271.14
2015 40,323 21251.02 22508.76 23766.51
2016 25065.41 26972.61 28879.81
RMSD 13882.60 13790.23 13810.91

14
4. Recent Six Years Average
This method assumes that first, due to the highly erratic nature of the historical data recent four
years (2010-2015) average will approximate (fairly estimate) in forecasting the present demand
by combining the extreme and insignificant figures. Secondly, it ignores the data from year 2005
to year 2009, when there are limited numbers of textile factories. Based on the above arguments
and assumptions the present (year 2016) effective demand for woven label is estimated at 27,249
kg.
The summary of the estimated present effective demand in tons based on the different
methods is shown below.
 Time Trend Extrapolation (2005--2015)………… 34.53 tons.
 Moving Average: 2005 - 2015…………………… 29.672tons.
 Exponential Smoothing: 2005 - 2015……………. 27 tons.
 Recent Six Years Average (2010--2015)………… 27.25tons
5. Evaluation of the Alternative Methods
As could be seen from the above summary, the estimate based on linear trend model shows the
highest result, which is 34.53 tons. The results of Moving Average, Exponential Smoothing, and
Recent Six Years Average models are not much deviated from each other’s.
-As can be seen from the time trend equation, the explanatory power of this model i.e. R2 is
32.71%, indicating unsatisfactory linearity of supply of woven label over the years. Because of
the above major reasons the present effective demand estimation worked out based on the linear
trend model is not selected.
Therefore the average results of Moving Average, Exponential Smoothing, and Recent Six Years
Average models are found to be acceptable to estimate the current effective demand for woven
label, which amounts to 27.974 tons.
Accordingly, the present (2016) effective demand for woven label is estimated at 28 tons.

15
2.1.5. Projected demand
The following assumptions are used to determine the current (2016) demand.
Demand for woven and printed labels is mainly related with the growth and development of the
garment and leather industries. Ethiopia, with a population of 96.6 million is the second - most
populous nation in Sub- Sahara Africa after Nigeria. Over the past years the country’s economy
reports growth rates of over 11% supported by a governmental effort to combat inflation which
is now set at 7,4%. Ethiopia's economy is primarily based on agriculture (46% of GDP) but over
the last 5 years the government has been determined to diversify the exports with a priority set
for strategic sectors like light manufacturing, textile- and garment manufacturing. The textile -
and apparel industry of the country has grown an average of 51% over the last 5-6 years.
Considering the GTP overall GDP growth and the target set for the industrial sector, demand for
woven and printing labels for clothing is conservatively forecasted to grow by 20% and 15% per
annum respectively.
The forecasted unsatisfied demand for the two products is shown in Table 3.
Table.2.3. Projected demand for woven and printed labels for clothing (tonnes)

Year Woven label projected Printed label

demand(ton) projected demand
(ton)
2016 28.00 40.77
2017 33.60 46.88
2018 40.32 53.92
2019 48.38 62.00
2020 58.06 71.30
2021 69.67 82.00
2022 83.61 94.30
2023 100.33 108.44
2024 120.39 124.71
2025 144.47 143.42

16
2.1.6 MARKET SHARE ANALYSIS
As we have mentioned in section 2.1.2.2 currently besides MULU MAR label factory there is
only one existing production of printed and woven label, leaving ample market share for the
other projects which may become operational in the future, the envisaged project is estimated to
have a production capacity of 8 million pieces per annum [or 5 ton] printed label and 6 million
pieces per annum [ 4 ton] of woven label is expected to become operational with a capacity of
75%, 85% and 100% of its full capacity during the years 2016, 2017, and 2018 respectively.
Accordingly, the market share of the envisaged project from the local unsatisfied demand for
printed label is indicated in the following tables.
Table 2.4: Market share of the project for woven label
Year Projected & The Envisaged Project
Unsatisfied Capacity Local Market
Demand Gap Share of the
Project %

2016 28.00 3 11%

2017 33.60 3.4 11%

2018 40.32 4 12%

2019 48.38 4 12%

2020 58.06 4 11%

2021 69.67 10%

4
2022 83.61 9%
4
2023 100.33 9%
4
2024 120.39 8%
4
2025 144.47 8%
4

17
Table 2.5: Market share of the project for printed label
Year Projected & The Envisaged Project
Unsatisfied Capacity Local Market
Demand Gap Share of the
Project %

2016 23.5 3.75 16%

2017 25.2 4.25 17%

2018 27.0 5 19%

2019 28.8 5 17%

2020 30.9 5 16%

2021 33.0 5 15%

2022 35.3 5 14%

2023 37.8 5 13%

2024 40.4 5 12%

2025 43.3 5 12%

Product mix
The product mix for this project is categorized under two major sections which are woven and
printed fabric labels. The product:
 Average 8,000,000 pieces per annum Printed fabric Label
Size [1" 1.5" .2" 2.5" 3" 3.5”]
Upto six colors

 6,000,000 pieces TPA Woven label with

Size [1" 1.5" .2" 2.5" 3" 3.5"]
Up to six colors

18
2.1.7. Marketing Mix Assessment
Market mix can be defined as the set of controllable, tactical marketing tools that a company
blends to produce as per the response it wants in the target market. Marketing mix includes, but
not limited to the best possible mix of four variables, namely; the nature of the product, the price
of the product, the channels of distribution which take the product to the consumer from the
producer and the promotional activities. A combination of these four elements affects the
ultimate sales success of a product.
I. Product Quality
Product quality is one of the basic and most important marketing mixes that affect the success of
a new product. Product quality has two dimensions, i.e., level and consistency. Level means the
manufacturer must first choose a quality level that will be acceptable in the target market and in
a level that comply with the quality of competing products. Consistency refers to the consistent
delivering of ones established quality through strict quality control measures.
Accordingly, the envisaged project as a pioneer in labeling industry of the country; should
acquire modern machineries and safe guarded production process with a system of optimally
combined machine operations and control of them by qualified and trained technicians and
technologists. Besides, quality control should be given top priority specially in selecting of raw
material, grade and process control so that the envisaged factory could achieve its aims through
producing the leading quality product.
II. Packaging
Packaging performs an essential function by protecting goods from damage, starting from the
point of manufacture through to the final consumer. It prevents wastage of goods and energy. In
this regard, proper packaging materials that protect the products from any quality threats during
transportation and handling is very essential.
III. Pricing
Fixing the right price is one of the most important factors in order to stay in the market. At
present, though there is no the existing label producing factories in the country, there are a
number of importers. This means, the envisaged factory has to work within a competitive
environment. In a competitive market, a straight cost plus pricing is not desirable as it is not
sensitive to demand and competitors’ price.

19
In order to be competitive the envisaged factory need to supply products of competitive quality
with the imported ones and set a lower price than the imported one. Therefore, it is assumed that
10% margin will be allowed. Accordingly, the recommended factory gate price for woven and
printed label is shown in Table.

Table 2.6: Recommended Factory Gate Price per pieces (Birr)

Factory Gate
price[birr]
Products

Woven 1
Printed 0.9

IV. Distribution
Distribution refers to the distribution of the product to the consumers by the producer while
channel of distribution is the network of middlemen through whom the products pass till it
finally reaches to the hands of the actual users or consumers.
Channel of distribution varies in its form and length from consumer goods to industrial goods
and within one class of goods; it varies from product to product. In this case the product will
supply to direct garment industries on time which will include provision of own transport service
to customers’ warehouses and availing enough quantity of products at warehouses based on
market information prior to customers’ request.
V. Promotion
The objective of promotion is to inform, persuade or remind consumers about a product’s
attributes and availability. Today’s business world is a world of competition. A business cannot
survive if its products do not get sold in the market. Thus, all marketing activities are undertaken
to increase sales. Thus, product promotion is important to increase the sale of any product. It
increases consumers’ awareness, knowledge and readiness to buy. This can be performed
through media communications (advertising) and through special offers to trade and / or
consumers (sales promotion). However, promotion efforts are not guarantee once they are
undertaken. Continuous market situation assessments and timely adjustments are necessary to

20
establish/build long-term customer loyalty. This also needs to be supported by quality and
distribution efficiency.
The envisaged factory is recommended to advertise its product by distributing calendars,
pamphlets as well as by participating in exhibitions and bazaars. In a competitive market, trade
promotion should be made to persuade or to make a product attractive for end users. Such trade
promotional tools include; credit and discount with the volume of products sold etc. The
envisaged factory is recommended to offer discounts with the volume of product bought and
credit for a limited time.
.

21
2.2 PLANT CAPACITY & PRODUCTION PROGRAMME

2.2.1. Plant Capacity

Based on the demand projection indicated in Table 3 and minimum economies of scale, the
proposed plant will have a production capacity to produce 6,000,000 woven Labels (per annum)
and 8,000,000 pieces per annum printed fabric label. The plant is envisaged to operate in a single
shift of 8 hours for 300 days per year. However, production capacity can be doubled, if the plant
is operated double shift of 16 hours a day based on actual market conditions.
2.2.2 Production program
The fact that manufacturing of labels of woven and printed are very simple processes, it may
take only a short time to develop the specific skills and knowhow of printed clothing labels
production, while woven label production is currently on going task.
Since we are already in the market for woven and the machineries are working, as soon as the
raw material fulfill will start production at existing plant with full capacity, however the planned
capacity for printed label will be achieved in the three years of the establishment year of the
factory. In a period of 12 months project time, the project will be realized. It is estimated that
production starts at 75% plant capacity in the first year, 85% in the second year, and 100% in the
third year and will continue to work with this capacity for the coming 10 years.

Table.2.7. PRODUCTION PROGRAMME for woven label

Description Unit of Production programme
measurement Year- 1 Year-2 Year-3
Woven label Pcs. 6,000,000 6,000,000 6,000,000
Capacity utilization 100% 100% 100%

Table.2.8. PRODUCTION PROGRAMME for printed label

Description Unit of Production programme
measurement Year- 1 Year-2 Year-3
Printed label Pcs 6,000,000 6,800,000 8,000,000
Capacity utilization 75% 85% 100%

22
3. MATERIALS AND INPUTS
3.1. RAW MATERIALS
I. Woven clothing label
The main raw material required to manufacture woven labels is Polyester Yarn/ Silk yarn/Cotton
yarn/Viscose yarn/ Blended yarn of different counts and colours which can be obtained from
local market.
Table 3.1 RAW MATERIALS REQUIREMENT AND COST
Sr no. Description Unit Qty Cost [birr]
1. Polyester yarn 2,000,000
2. Packaging 70,000
3. Total 2,070,000

II. Printed Clothing Labels

Printed cloth labels are manufactured by silk screen or rotary screen printing on polyester or
nylon woven ribbons, tapes or other yarn goods.
The main raw materials required for the manufacturing of printed labels for clothing are rolls of
fabric, and printing ink. The main raw material i.e the fabric can be obtained from local market
while the printing ink will be imported.
Auxiliary materials required by the plant include card board boxes which can be obtained from
local packing material producers.
Table 3.1 below shows annual requirement of major raw and auxiliary materials at full
production capacity of printed fabric label.
Table 3.1 RAW MATERIALS REQUIREMENT AND COST
Sr no. Description Unit Qty Cost [birr]
1. Fabric Roll 2870 5,255,500
2. Ink 302191.25
3. Packaging 80,0000
4. Total 6,357,691

23
B. UTILITIES
Electricity and water are the major utilities required by the plant. The total annual requirement
at 100% capacity utilization rate and the estimated costs are given in Table below. The annual
expenditure on utilities will, therefore, be Birr 73,082.
Table.3.2. UTILITIES CONSUMPTION AND COST AT FULL CAPACITY
Description Unit Qty Cost (Birr)
Electricity kWh 120,000 56,832
3
Water M 50,000 16,250

Total 73,082

24
4. TECHNOLOGY AND ENGINEERING

4.1 RAW MATERIAL AND INPUT TYPES AND PROPERTIES

4.1.1. Woven label
A. yarn
Yarns/threads/twines are manufactured in specialized spinning mills according to the raw
material and intended future use: cotton or 3-cylinder spinning mills, worsted, woolen and fiber
spinning mills etc., the first of these being the most commonly used type.
All spinning mills operate more or less on the basis of the same process: the fibrous material is
(where necessary) further cleaned, aligned and, while being stretched and rotated about its axis,
spun to a thread. Some of the yarn produced in this way is then twisted, i.e. two or more threads
are combined by rotation to form a "twisted" yarn.
The finished yarns are today supplied to the subsequent processing stages in the form of so-
called cheeses, i.e. bobbins weighing between 0.8 and 3.5 kg

Fig 4.1. Finished yarn

Most methods of fabric construction require the fiber to first be formed into a yarn.
To form a staple yarn, staple fibers are first carded (combed) to align the fibers. At this point
noils (shorter or tangled staple fibers) are sometimes also removed. Once carded, the fibers are
spun (twisted) together to form a yarn. Filament yarns are formed from filament fibers gathered

25
together and laid parallel along their lengths. Some yarns are monofilament, or formed from a
single filament fiber. Yarns can also be formed from filament fibers spun together with staple
fibers. Two or more spun lengths can also be plied (twisted together) to add strength, bulk, or for
appearance. A yarn formed in this manner is referred to as a two-ply yarn, three-ply yarn, etc.
Although not yarns in the strict sense of the word, sometimes fabrics created from what could be
referred to as unspun yarns. In these cases, carded staple fibers aren’t spun together, but are
instead just aligned into a long, thin yarn shape. But without the twist to hold the fibers together,
these unspun yarns are very weak and pull apart easily.
Sometimes yarns are spun with slubs (irregular thickened spots) along their length. These slubs
can be an accidental defect. But they’re often deliberately included to give the yarn texture. As
an example, noils that were removed in the carding process can be spun either by themselves or
added to longer staple fibers to produce noil yarn. Other decorative yarns can be created by
combining plies of different fibers or colors. In addition, plies spun with different tensions can be
combined to create textured yarns.
The simplest form of coloring fabric is to dye it a solid color. But there are many different ways
of doing so. The most basic process is to dye the raw material, known as stock dyeing. One of
the advantages of dying raw fiber stock is that different colors or shades can then be spun
together to create complex yarns. For synthetics, pigment can be added to the chemical solution
before the fiber is created. This process is known as solution dying, and has the advantage of
being extremely colorfast.
In the fabric manufacturing process at which color could be added would be after the fibers have
been spun into yarn. This is known as yarn dyeing. Yarn dyeing allows fabric to be created from
yarns of different color, allowing the possibilities of plaids, brocades, and other woven-in
designs. Space dyeing, a variation of yarn dyeing, is a technique in which yarns are dyed at
intervals along their length. Among several yarns, the following types for most used:
 cotton
 silk
 nylon
 polyester and
 Viscose yarn.

26
4.1.2. Printed clothing label
A. fabric
Fabric is made from yarns, which in turn are made from fibers. Fibers and yarns are interlaced
(woven), inter-looped (knitted) or bonded together (nonwoven) to make fabrics. Each method of
joining the yarns or fibers together creates a different type of fabric. Different fabric types are
available among mostly used in garment industries are:
• woven fabrics
• knitted fabrics
• Nonwoven fabrics
Textile used to describe any product made from fabric, yarns or fibers
Methods of textile construction
Woven fabrics
Woven fabrics are produced by the process of weaving. Weaving is the interlacing of two or
more yarns, using a loom. Generally, woven fabrics are strong fabrics.
To weave yarns together, the loom is first set up with yarns running lengthwise, from the top to
the bottom of the loom. These are called warp yarns. A second yarn is then threaded from side to
side, over and underneath warp yarns, to make fabric. This is called the weft yarn.
Warp yarn: yarns that go down the length of the fabric
Weft yarn: yarns that go across the woven fabric
Selvedge: the edge of the fabric that does not fray
During the weaving process, the weft yarn is taken over and underneath the warp yarns with a
'shuttle'. For each row being woven, selected warp yarns are either lifted or lowered, creating a
passage for the shuttle to pass through with the weft yarn.
When the shuttle completes passing through the space provided, from one side to the other, the
position of the warp yarns is again changed and the weft is brought back through in the return
direction. This process is continually repeated until the fabric is produced.
The weft yarn turning and returning to make the next row creates a strong edge on the fabric,
called the selvedge. It is the strongest part of the fabric; it will not fray like a cut edge.
A variety of weave types may be used to create fabrics with different textures and appearances.
These weaves include plain, twill, basket or hopsack, satin and sateen. The resulting fabrics

27
differ depending on the number of warp yarns the weft yarn goes over at a time, and in what
combinations.
Nonwoven fabric
It is a fabric-like material made from long fibers, bonded together by chemical, mechanical, heat
or solvent treatment. The term is used in the textile manufacturing industry to denote fabrics,
such as felt, which are neither woven nor knitted. Nonwoven materials typically lack strength
unless densified or reinforced by a backing. In recent years, nonwovens have become an
alternative to polyurethane foam.
Knitted fabric
It consists of a number of consecutive rows of loops, called stitches. As each row progresses, a
new loop is pulled through an existing loop. The active stitches are held on a needle until another
loop can be passed through them. This process eventually results in a fabric, often used for
blankets or garments.
Knitting may be done by hand or by machine. There exist numerous styles and methods of hand
knitting.
Different types of yarns and needles may be used to achieve a plethora of knitted materials; these
tools give the final piece a different colour, texture, weight, and/or integrity. Other factors that
affect the end result include the needle's shape, thickness and malleability, as well as the yarn's
fiber type, texture and twist.
B. Ink
There are two main types of ink that are used for textile printing. Water-based ink utilizes either
dyes or pigments in a suspension with water as the solvent. The evaporation of the water is
necessary to set or cure the ink. This curing can take place either at room temperature or with the
assist of a dryer depending upon the specific water-based ink used and the speed or volume of
production.
Plastisol: ink is a PVC (polyvinyl chloride) based system that essentially contains no solvent at
all. Along with UV ink used in graphic screen printing, it is referred to as a 100% solid ink
system. Plastisol is a thermoplastic ink in that it is necessary to heat the printed ink film to a
temperature high enough to cause the molecules of PVC resin and plasticizer to cross-link and
thereby solidify, or cure.

28
The temperature at which most plastisol for textile printing cures at is in the range of 149 °C to
166 °C (300 °F to 330°F).
Both types of ink are very popular. However, for the most part, they are used in very different
applications.
Plastisol is the ink of choice for printing of finished goods such as T-shirts, sweatshirts, jackets,
and tote bags.
Water-based ink is the ink of choice for the printing of yard goods; either in piece form or on the
roll.
4.2. PRODUCTION PROCESS AND TECHNOLOGY
4.2.1 PRODUCTION PROCESS
A. Woven Clothing Labels:
Woven clothing labels are manufactured using weaving looms. The looms weave polyester yarns
called warp and weft yarns re-creating the logo submitted by the client in the form of artwork.
The clothing labels come off of the looms in a tape form where they are then cut by hot knife or
laser. This method seals the yarns to prevent fraying. There are different types of looms among
them rapier looms, needle looms, double and single shuttle looms to weave clothing labels.
Woven clothing labels are more durable than printed clothing labels and tend to launder better in
the long run. There are several benefits to choosing a woven clothing label which include high-
end final appearance, durability and softness against the skin.
B. Printed/ unwoven Clothing Labels:
Printed cloth labels are manufactured by silk screen or rotary screen printing on polyester or
nylon woven ribbons, tapes or other yarn goods. The polyester satin tape is then cut and folded to
finalize the label. Printed satin or cotton clothing labels are advantageous for applications that
require very small defined detail, shading on artwork or the ultimate softness against the skin.
Printed clothing labels are generally found on T-shirts, baby clothes or burp cloths, infant and
toddler clothing, lingerie or bridal applications. Printed cotton labels are suitable for natural
clothing applications, dye processing and general softness or natural appearance for the garment.
We offer several types of printed clothing labels, each with its own advantages and limits.
C. Molded PVC, Rubber & Silicone Labels:
Molded labels are manufactured by first creating a mold. The mold is then injected with the
material of choice to fill the mold. These embossed or debossed labels are typically found on the

29
exterior of garments and are sewn down for best durability and longevity. Embossed labels have
the logo or text raised above the surface while debossed labels have the logo or text depressed
down into the face of the label. We are also able to supply the PVC labels in a flush finish where
the logo and the top face of the label are on the same level which gives a very clean appearance.
We can add a sewing groove on these molded labels to give the sewing contractor a channel in
which to sew the label down on the garment so the stitching is hidden from view. There is a one-
time mold charge for this type of label.
D. Others
Consecutive Sequential Number Labeling- sequential numbering system allows for unique labels
on each product.
Metal Hangtags & Stainless Steel Riveted Name Logos- brushed stainless steel metal hangtags
or rivet ready name plate badges for denim or handbag accessory labels. These labels are made
from 100% stainless steel with either a brushed mill finish or an orbital finish. The metal
clothing labels can then either be pre-drilled with holes at the four corners to be riveted down to
the fabric or they can be riveted down to some of our leather or imitation leather material and
then sewed down to the garment.
Stud Transfer Clothing Label - Tiny metal studs, about the size of a pin head, make up this
exciting new label. Similar to a rhinestone or stud thermal transfer, this clothing label very
popular with teenage fashion designers.
Laser Cut Felt Clothing Label
Precise laser cut letters, numbers or symbols...has the feel of a soft old baseball jersey and easily
to sew onto garments and it gives great depth detail. A
 Each type of clothing name label has unique benefits and advantages related to specific
applications.
C. Clothing Label Materials
Clothing labels are manufactured from various types of materials, both synthetic and natural
fibers. The yarns used in synthetic fibers are gauged in terms of thickness of denier yarns or
DTEX. Some yarns have a thicker gauge than others. The finer the gauge (or smaller the denier
number) the finer detail can be achieved on logos and artwork; however the opposite is true
when speaking of cotton denier yarn. Below are some of the materials used for making labels.

30
Cotton
Organic, semi-organic, twill and knit cotton labels in natural “raw” ivory ground color or
bleached white.
Damask
Polyester yarns with opac flat finish and excellent in expressing detail design. Wide array of
denier sizes and rich hue colors to accommodate any complex woven label detail.
I. Woven fabric
Woven clothing labels are manufactured using weaving looms. Weaving is the interlacing of two
or more yarns, using a loom. Generally, woven fabrics are strong fabrics.
To weave yarns together, the loom is first set up with yarns running lengthwise, from the top to
the bottom of the loom. These are called warp yarns. A second yarn is then threaded from side to
side, over and underneath warp yarns, to make fabric. This is called the weft yarn. During the
weaving process, the weft yarn is taken over and underneath the warp yarns with a 'shuttle'. For
each row being woven, selected warp yarns are either lifted or lowered, creating a passage for the
shuttle to pass through with the weft yarn.
When the shuttle completes passing through the space provided, from one side to the other, the
position of the warp yarns is again changed and the weft is brought back through in the return
direction. This process is continually repeated until the fabric is produced.
The weft yarn turning and returning to make the next row creates a strong edge on the fabric,
called the selvedge. It is the strongest part of the fabric; it will not fray like a cut edge.
A variety of weave types may be used to create fabrics with different textures and appearances.
These weaves include plain, twill, basket or hopsack, satin and sateen. The resulting fabrics
differ depending on the number of warp yarns the weft yarn goes over at a time, and in what
combinations.
4.2.2. TECHNOLOGY
I. Woven Clothing Labels
The looms weave polyester yarns called warp and weft yarns re-creating the logo submitted by
the client in the form of artwork. The clothing labels come off of the looms in a tape form where
they are then cut by hot knife or laser. This method seals the yarns to prevent fraying. There are
numerous types of weaving clothing label machines such as;
Rapier looms, needle looms, and double and single shuttle looms to weave clothing labels.

31
Description of woven label machinery
Great for large production applications where strips of jacquard weaves are required. (100 yards
minimum (on roll) or equivalent of 1000pcs) These woven tapes are available in .25, .5, .75, 1
and +1 inch widths. With a damask weave, the detail is very tight and precise therefore this lends
itself well for accent strips on fleece, neck line collars or accent bias pieces on handbags. Woven
Labels making machine with Jacquard are able to weave both sides of the custom tape thereby
allowing logo to be seen on both sides of the woven tape.
This damask woven tape is a very soft material made up of 100 & polyester yarns of 75 denier.
Manufactured in rolls of 30 yards per roll or higher or lower depending on the requirements for
the clothing label trims.

Fig. 4.2 woven label machine.

Woven label specification
1. Reel Winder 8 spindle.
2. Pirn winder 8"
3. Beam winding M/c Warping
4. Woven Labels making machine with Jacquard

32
5. Creel Stands
6. Card punching and stitching machine
7. Air conditioning unit
II. Printed clothing label
There are several methods of printing namely:
Block printing
Roller printing
Screen printing
Heat transfer printing
Block printing currently not used for mass production purpose
Roller printing
It is a high speed process capable of producing 6000 yards of printed fabric per hour. Roller
printing machines works as follows.
In roller printing, the print paste is supplied from reservoirs to rotating copper rollers, which are
engraved with the desired design. These rollers contact a main cylinder roller that transports the
fabric. By contacting the rollers and the fabric the design is transferred to the fabric. As many as
16 rollers can be available per print machine; each roller imprints one repeat of the design.
As the roller spins, a doctor blade in continuous mode scrapes the excess of paste back to the
colour trough.
At the end of each batch the paste reservoirs are manually emptied in to appropriate printing
paste batch containers and squeezed out.
The belt and the printing gear (roller brushes or doctor blades, squeegees and ladles) are cleaned
up with water.
Flat-screen printing machine
In fully mechanized machines all the colours are printed at the same time. A number of
stationary screens (from 8 to 12, but some machines are equipped with up to 24 different
screens) are placed along the printing machine. The screens are simultaneously lifted, while the
textile, which is glued to a moving endless rubber belt, is advanced to the pattern-repeat point.
Then the screens are lowered again and the paste is squeezed through the screens onto the fabric.
The printed material moves forward one frame at each application and as it leaves the last frame
it is finally dried and it is ready for fixation

33
Description of Proposed machineries for printing clothing label
ROTARY-SCREEN PRINTING
Rotary-screen printing machines use the principle in which, the colour is transferred to the fabric
through light weight metal foil screens, which are made in the form of cylinder rollers. The
fabric moves along in continuous mode under a set of cylinder screens while at each position the
print paste is automatically fed to the inside of the screen from a tank and is then pressed through
onto the fabric. A separate cylinder roller is required for each colour in the design.
Rotary Screen Printing Process
A conventional paste feeding system for rotary-screen printing machines is as follows.
 A suction pipe leads from the paste vat to a pump, from where a printing hose leads to the
squeegee (dye pipe with squeegee). From here the paste is directed inside the cylinder
roller.
 The fill volume of this so-called printing paste input system is quite high and as a
consequence the amount of paste residue that has to be removed at each colour change is
also fairly significant.
 Various systems have been introduced in order to lower the volume configuration of this
equipment, which also reduces the amount of such wastes.
 Another possibility is to recover and re-use these residues for making up new recipes.
Printing-paste feeding system for a rotary-screen printing machine
Rotary-screen printing machines are equipped with both gluing and washing devices analogous
to those described earlier for flat-screen printing. The belt is washed in order to remove the
residues of paste and adhesive. Not only the belt, but also the screens and the paste input systems
(hoses, pipes, pumps, squeegees, etc.) have to be cleaned up at each color change.
Rotary Screen Printing Machine
Rotary Screen Printing Machines are widely used in a large number of industries for faster and
finer printing solutions. These printing machines are specially designed keeping printing
precision and clarity in mind. These printing machines are apt for medium to high volume
printing. These machines are used for both industrial and graphical applications.
Salient Features
 Variable screen angle adjustment.
 High grade aluminum castings.

34
  Robust and sturdy, one-piece tubular steel base.
 High precision tapered roller bearings for rotary sections.
Applications of Rotary Screen Printing Machine
Rotary screen printing machines are used in almost every industry as they provide quick, easy
and high quality printing solutions.

Fig 4.3 rotary printing machine

35
4.3 Plant Machinery and Equipment
In this section specifications are given for the selected process technology.
1. Machinery and Equipment
The total estimated cost of machinery and equipment for both woven and printed label is
estimated at Birr 2.5 million, out of which Birr 2.25 million is in foreign currency.
Printing label specification
1. Adopt the anilox rollers to spread ink.
2. Unwinding and rewinding controlled by magnetism power brake, clutch.
3. Printing unit adopt 360º to regulate for registration.
4. Each printing unit has one IR drier.
5. The rubber roller can break away automatically while parking, and running at a low speed, in
order to avoid water being dried.
6. The main motor is adopted the import stepless regulation of frequency conversion.
7. Unwinding, printing, varnishing, IR drying, laminating and rewinding can be finished in one
process, this kind of printing machine is suitable for each printing companies to print on
adhesive-paper labels and other commercial label.
8. Meter counter can set printing quantity according to the requirement. Stop the machine
automatically at the set quantity or when the material is cut off.

36
5. Land, Building and Civil Works
The proposed plant with the existing requires a total land area of 1250m 2. The building includes
production hall, warehouses both for raw material and finished products, design and pattern
making room, product display room, canteen both for workers and staffs, toilet and shower/wash
room, security room, offices and other facilities. The total floor space of the buildings will cover
total area of 700m2. The total estimated cost of building at the rate of Birr 5,000 per m2 is Birr
3,500,000.
The lease period for the land is 80 years on average, and the payment of lease prices is in 40
years. The land lease price in the industrial zones varies from one place to the other. For
example, a land was allocated with a lease price of Birr 284 /m2 in Akakai-Kalti and Birr 341/
m2 in Lebu and recently the city’s Investment Agency has proposed a lease price of Birr 346 per
m2 for all industrial zones.
Accordingly, in order to estimate the land lease cost of the project profiles it is assumed that all
manufacturing projects will be located in the industrial zones. Therefore, for this profile which is
a manufacturing project a land lease rate of Birr 346 per m2 is adopted.
Accordingly, the total lease cost, for a period of 80 years with cost of Birr 346 per m 2, is
estimated at Birr 346,000 birr of which 10% or Birr 34,600 will be paid in advance. The
remaining Birr 311,400 will be paid in equal installments within 40 years, i.e., Birr 53,579.73
annually.

37
6. MANPOWER AND TRAINING REQUIREMENT
The plant will require about 27 workers at the beginning of the plant operation. The breakdown
of manpower allocation and annual labour cost including fringe benefit is indicated in Table 7.
The total annual cost of manpower is estimated at Birr 885,000.
A. HUMAN RESOURCE REQUIREMENT AND ANNUAL COST

The number of job positions was determined based on task analysis on different sections of the
process. The total human resources requirement, wages and salary costs , and benefits are given
in Table 7 Benefits are determined from salary provident fund/pension contribution, health
insurance, worker uniform and safety protection .
Table 6.1: Annual employee salary and benefits

Quantity Salary in birr

Type
A. Administrative Monthly Monthly Total Annual Salary

1. Manager 1 7,000 7000 84000

2. Secretary 1 2,000 2000 24000
3. Accountant 1 4,000 4000 48000
4. Store Man 1 2,300 2300 27600
5. Guard 3 1,000 3000 36000
6. Driver 1 1,800 1800 21600
Subtotal A1 8 18,100 20,100 241,200
B. Technical
B1. Technic and production head 1 6,000 6000 72000
Subtotal B1 1 6,000 6000 72000
B2. Direct Operators
1.Mechanic 1 4,000 4000 48000
2. Operators/skilled/ 3 3,000 9000 108000
3. Assistant Operators 3 1,500 4500 54000
4. Unskilled workers 6 1,000 6000 72000
5. Electrician 1 3,400 3400 40800
Subtotal B2 15 24,900 38,900.00 466,800
Total (A1+ B1+ B2) 24 43,000 59,000 708,000
Benefit 25% 10750 14750 177,000
Grand Total 53,750 73,750.00 885,000

38
B. TRAINING REQUIREMENT
Supervisor, operators and technicians (mechanic and electrician) need to be trained on the
operation and maintenance of machinery for two weeks by the expert of the machinery supplier
during commissioning and erection. The total cost of training is estimated at Birr 50,000.

39
7. IMPLEMENTATION PROGRAM
7.1 IMPLEMENTATION SCHEDULE
We divide this project in two phases:
I. Production of WOVEN Label
II. Production of PRINTING Label
I. Production of WOVEN Label
As we mentioned in the above section production woven label already started, however absence
of raw material made the machineries became idle for more than a year despite different garment
factories are requesting/ordering woven label.
Therefore, after procure the raw material from foreign market will start production at existing
rented private house.
II. Production of PRINTING Label
For this project, after completion of Feasibility study, typical Implementation schedule includes:
Procurement, Construction, Commissioning, Start-up and finally Production. Each of these
separate tasks consists of numerous tasks, each with their own deliverables.
During progress the project in a logical manner, it is essential that a significant number of
arrangements be established during the early period as their completion is necessary to mitigate
risk and ensure commercial viability. Arrangements for the continued supply of clothing label
and other crucial matters needed to be established during the early phase of the Project.
Implementation schedule is prepared within one year time. At the end of the first year from the
commencement of the project, all both Plants are expected to start after a successful
commissioning.
7.2 PROJECT IMPLEMENTATION COST
The project is estimated to be finalized within six-twelve month time and start production after
wards. During this year, the project shall be managed by a project manager and other technical
staffs. These staffs will comprise of engineers, mechanics, electricians accountant, marketing
specialist, and others.
During the implementation period the company will also employ local and if needed
international professionals to install and commission the plant and to assist the manager and
staffs to effectively implement the project.

40
The total cost to be incurred by the project during the implementation period is estimated as
8,366,499.48 birr, including costs spent for consultancy services.
8. FINANCIAL ANALYSIS
8.1 INVESTMENT AND OPERATING COST OF CLOTHING LABEL PLANTS
In view of those initiatives disclosed in the executive summary of this proposal, the project has
considered and incorporated the following financial and economic factors in the preparation of
this projected financial plan proposal for the years under considerations.
The capital investment cost of the envisaged plant will depend upon the type, capacity and
number of units it will contain, and the consequent size of the building necessary for the plant,
utilities, and storage space for raw and finished product.
The building itself represents a major portion of the total capital cost, because garment industries
required space for storage and handling of raw materials, components and products to ensure that
work flows smoothly and helps to avoid delays and bottlenecks.
The costs associated with production labeling for clothing include Woven and Printed Fabric
Label
• Yarn
• Ribbon
• Dye color
• Film
• Flexo bloke
• processing
• Administration
• Additional costs of packaging, and
• Plant amortization

41
8.2 RESULT OF FINANCIAL ANALYSIS
8.2.1 Major Strategic Financial & Economic Assumptions
 Construction period for expansion and upgrading plant 12 months
 Source of Finance 100% equity
 Discount cash flow 10%
 Local Raw material 1 month
 Raw material from foreign market 4 months

8.2.2 Project Life

According to the implementation plan of the project, the construction period allotted for the
expansion and upgrading plant from the commencement to the final commissioning is one year.
At the same time production of woven label will start production when raw material available.
With regard to operational life of the project for both, a standard assumption of 10 years is
considered. Hence, the costs and benefits of the project are computed over 11 years.

8.2.3 WORKING CAPITAL

The working capital requirement of the project during operation is calculated on the basis of the
minimum days of coverage needed for the different elements of the working capital. Hence, the
minimum days are specified as follows:-
Table 8.1: Working capital basis for raw material
Sr. No. Item Minimum Days of Coverage
1 Raw Materials
-Local 1 month
- Foreign 3 months
2 Staff salary 1 month
3 Utilities 1 month
4 Other expenses 1 month

Accordingly, the working capital computed is depicted in Table 9.2

42
 Table 8.2: Working Capital
Sr. No. Item Cost (Birr)
1 Raw Material 642,307.6
2 Utilities 6,090.17
3 Labor Cost 44,900.00
4 Repair & Maintenance Cost 31,610
5 Overhead Cost 34,850.00
6 Administrative, Selling and General
Cost 49,166.67
Total 808,924.44

Table 9.2 is shown the working capital of the Company requires keeping it running in a fruitful
way. The total working capital calculated in the above table can suffice in a condition where
production goes just as planned. However, changing raw material and operating costs might
disrupt production. Hence, on top of the calculated working capital, contingency for any
unpredicted scenario need to be included.

8.2.4. Investment Cost

The total investment cost of the project is estimated at Birr 8,366,499.48 (See Table 9). From
the total investment cost the highest share (Birr 6.3 million or 88%) is accounted by fixed capital
investment cost followed by initial working capital (Birr 792,507.60 or 10%).
8.2.5 Projections
New investment costs are estimated based on the data and information as follows:
 Capital Investment Requirement: It is determined based on the required project capacity,
equipment requirement and current price proposals of the contractors and suppliers.
 Working Capital Requirement: It is the amount of money permanently needed in cash
basis to keep sustainable business operating activities and that is determined based on
various facts and criteria used in the preparation of financial statements.

43
 Table 8.3 Investment Plan and Financing
MULU MAR WOVEN AND PRINTED FABRIC LABPLE PLC INVESTMENT PLAN
Capital/Investment Requirement
Sr.No Particulars New
Existing Total
Investment

1 CAPITAL INVESTMENT

1.1
Major Plant Machinery & Equipment 1,000,000 1,500,000 2,500,000
1.2
Hand trolleys & Weighing Machine - 120,000 120,000
1.3 Laboratory Equipment & Chemicals
65,000 65,000
1.4
Building & Civil works - 3,500,000 3,500,000
1.5
Vehicles - 700,000 700,000
1.6
Office Equipment & Furniture - 50,000 50,000
1.7
Workshop Equipment - 50,000 50,000
1.8
Land lease, 100birr/m2 - 311,400 311,400
Sub Total 600,000 1,000,000 6,296,400
2 WORKING CAPITAL
REQUIREMENTS

2.1
Raw Material Cost 642,307.6 692,672.81
2.2
Utility Cost 6,090.0 16,900.0
2.3
Labor Cost 46,250.0 46,250.0
2.4
Repair & Maintenance Cost 31,610.0 31,610.0
2.5
Overhead Cost 33,350.0 33,350.0
2.6
Administrative, Selling and General
Costs 32,900.0 32,900.0
Sub Total 0 - 792,507.6
3
PRE-PRODUCTION COSTS
100,000.0 100,000.0 200,000.0
TOTAL INVESTMENT 600,000 - 8,366,499.48

44
8.2.6 Cost of Production
The total cost of production at 100% capacity utilization during year three is estimated at Birr
688.45million. Of the total production cost the share of raw materials, depreciation and utilities
is 75%, 9% and 0.75% respectively. The remaining 15% is the share of Sales, labour,
administrative and maintenance costs.
Table 8.4 -Cost of production
Operating cost: Investment cost Share (%)
1. cost for fabric and yarn-roll 7,255,500 74.68%
2. Cost of ink: 302,191.25 3.11%
3. packaging: 150,000.00 2%
3. Processing costs:
a) Administrative overhead, Labour and supervision 653,750.00 6.73%
b) Maintenance, spares and lubricants 379,320.00 4%
C) utilities
Electricity and water 73,080.00 0.75%
4. Depreciation:
5% on building and civil works 175,000.00 1.80%
20% on plant and equipment 537,000.00 5.53%
20% vehicle 140,000.00 1.44%
20% Office furniture and equipment 10,000.00 0.10%
20% preproduction costs 40,000.00 0.41%
Total operating cost 9,715,841.25 100%

8.2.7 Profitability
The project will generate a profit throughout the years of its operation life. Annual net profit
after tax will increase from Birr 1.125 million during first year of operation to Birr 2.5 million
during the tenth year of the project life.
On average net profit is 18% of sales revenue, which is satisfactory. Net profit to equity and net
profit to total investment is also attractive.

45
8.2.8 Cash flow
The projected cash flow of the envisaged project shows that the project would generate positive
net cash flows throughout the project life. The balance ending cash flow generated by the project
towards the tenth year of the project life will amount to Birr 3.248 million. Details are shown in
Annex II.
8.2.9 Discounted Cash flow
a) Net Present Value
Net present value (NPV) is defined as the total present (discounted) value of a time series of cash
flows. NPV aggregates cash flows that occur during different periods of time during the life of a
project in to a common measuring unit i.e. present value. It is a standard method for using the
time value of money to appraise long-term projects. NPV is an indicator of how much value an
investment or project adds to the capital invested. In principle a project is accepted if the NPV is
non-negative. Accordingly, the net present value of the project at 10% discount rate is found to
be Birr 8.35 million which is acceptable. (See Table 9.4)

Table 8.5: Net Present Value of the Project in Ten Years

YEAR PRESENT
Value(‘000)
0 (8,366.5)
1 1,466.10
2 1,724.70
3 2,440.37
4 2,218.52
5 2,016.84
6 1,833
7 1,667
8 1,515
9 1,378
10 1,252
NPV 8,348,988

46
b) Internal Rate of Return
The internal rate of return (IRR) is an indicator of the efficiency or quality of an investment. A
project is a good investment proposition if its IRR is greater than the rate of return that could be
earned by alternate investments or putting the money in a bank account. Accordingly, the IRR of
the project is computed to be 29% indicating the viability of the project.

c) Break Even Analysis

As per the projected sales plan and break even analysis, the sales revenue of the project is
growing higher due to good quality product, competitive product price and good quality service
delivery.

The breakeven point of the project is estimated by using income statement projection
BEP = Fixed Cost = 32%
Sales- Variable cost

The project will break even at 32 % capacity utilization

d) Payback Period
The payback period, also called pay – off period is defined as the period required to recover the
original investment outlay through the accumulated net cash flows earned by the project.
Accordingly, based on the projected cash flow it is estimated that the project’s initial investment
will be fully recovered within 4.3 years, which is a reasonably short period of time.
8.2.10 Profit & Loss Statement
a) Total Sales Revenue
Total Sales Revenue of the project determined based on sales of both woven and printed clothing
label.
The total sales revenue increases from Birr 9.9 Million in year 2015/16 to Birr 13.2 Millions in
the year 2024/25.
b) Net Income
As per the projected profit and loss statements, the project planned a net profit of Birr 1,125,260
and Birr 2,324,290 in the first and second years. This profit increases to Birr 2,447,640 in the
tenth year (Refer Annex II for the profit and loss loss).

47
9. CONCLUSION AND RECOMMENDATION
9.1 CONCLUSION
The market study has shown that there is adequate market for the planned products in the
country. The technology of the plant is simple and conventional. The investment cost for the
machineries is relatively not big.
The project can create employment opportunities for 24 people. In addition to increasing the
supply of goods to the domestic market, the project will generate Birr 6,268,420 in terms of tax
revenue.
The technology transfer potential of the project is also substantial.
The plant alleviates to the major problems of textile and garment industries such as
• Due to lack of raw material [accessories], orders are not processed on time;
• Bureaucracy when importing raw material;
The project is a paying venture with a sound financial performance. The average annual profit
during the life of the project time Birr 2.303 million is a significant amount.
Hence, establishment of the plant is justified from the market, technical, financial, commercial,
economic, managerial, organizational, economic and social aspect.
9.2 RECOMMENDATIONS
As shown in the analyses discussed above, the business is very profitable and has a high return
on investment although it is quite sensitive to changes in selling prices and in manufacturing
costs. . Hence, the cost leader ship will be the major strategy of the company. The Consultant,
therefore, highly recommends implementing the proposed feasibility study with the suggested
measures.

48
Table 9.5: Cash Flow for Ten Years (‘000’Birr)

Description Yr1 Yr2 Yr3 Yr4 Yr5 Yr6 Yr7 Yr8 Yr9 Yr 10
Revenues (sales) 9,900.0 11,220.0 13,200.0 13,200.0 13,200.0 13,200.0 13,200.0 13,200.0 13,200.0 13,200.0
Total Cash Available 9,900.0 11,220.0 13,200.0 13,200.0 13,200.0 13,200.0 13,200.0 13,200.0 13,200.0 13,200.0
Less: Disbursements
Raw Material 6,093.8 6,919.4 7,707.7 7,707.7 7,707.7 7,707.7 7,707.7 7,707.7 7,707.7 7,707.7
Operating Labour 538.8 538.8 538.8 538.8 538.8 538.8 538.8 538.8 538.8 538.8
Maintenance & 379.3 379.3 379.3 379.3 379.3 379.3 379.3 379.3 379.3 379.3
Repairs
Utility 152.1 172.4 202.8 202.8 202.8 202.8 202.8 202.8 202.8 202.8
Sub Total 7,164.0 8,009.9 8,828.6 8,828.6 8,828.6 8,828.6 8,828.6 8,828.6 8,828.6 8,828.6
Total Over Head Cost 902.0 902.0 902.0 902.0 902.0 902.0 902.0 902.0 902.0 902.0
Total Disbursements 8,066.0 8,911.9 9,730.6 9,730.6 9,730.6 9,730.6 9,730.6 9,730.6 9,730.6 9,730.6
Balance before Tax 1,834.0 2,308.1 3,469.4 3,469.4 3,469.4 3,469.4 3,469.4 3,469.4 3,469.4 3,469.4
Provision for Tax 221.3 221.3 221.3 221.3 221.3 800.7 800.7 800.7 800.7 800.7
Balance Ending 1,612.7 2,086.9 3,248.1 3,248.1 3,248.1 3,248.1 3,248.1 3,248.1 3,248.1 3,248.1
ANNEX II: PROFIT & LOSS(‘000)
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
SALES (Revenue)
woven label sales 750 4,500.0 5,100.0 6,000.0 6,000.0 6,000.0 6,000.0 6,000.0 6,000.0 6,000.0 6,000.0
birr per 1000pcs
printed label Sales 600 5,400.0 6,120.0 7,200.0 7,200.0 7,200.0 7,200.0 7,200.0 7,200.0 7,200.0 7,200.0
birr per 1000pcs
Total Revenue 9,900.0 11,220.0 13,200.0 13,200.0 13,200.0 13,200.0 13,200.0 13,200.0 13,200.0 13,200.0
COST of SALES
Direct Costs of Sales
Raw Material 5,668.3 5,754.0 7,557.7 7,557.7 7,557.7 7,557.7 7,557.7 7,557.7 7,557.7 7,557.7
Packaging 112.5 127.5 150.0 150.0 150.0 150.0 150.0 150.0 150.0 150.0
Direct Labor Costs 538.8 538.8 538.8 538.8 538.8 538.8 538.8 538.8 538.8 538.8
Indirect Costs of Sales
Indirect Labor
Factory Overhead
Depreciation of Plant 902.0 902.0 902.0 902.0 902.0 902.0 902.0 902.0 902.0 902.0
& Machinery
Utilities [electricity & 152.1 172.4 202.8 202.8 202.8 202.8 202.8 202.8 202.8 202.8
wate]
Wages of Supervisors 90.0 90.0 90.0 90.0 90.0 90.0 90.0 90.0 90.0 90.0
& Others
Maintenance & 379.3 379.3 379.3 379.3 379.3 379.3 379.3 379.3 379.3 379.3
Repairs
Total Costs of Sales 7,843.0 7,964.0 9,820.6 9,820.6 9,820.6 9,820.6 9,820.6 9,820.6 9,820.6 9,820.6
GROSS PROFIT 2,057.0 3,256.0 3,379.4 3,379.4 3,379.4 3,379.4 3,379.4 3,379.4 3,379.4 3,379.4
SELLING, ADMINSTRATIVE & GENERAL EXPENSES
Selling Expenses
Salaries & Wages 168 168 168 168 168 168 168 168 168 168
Advertising 100 100 100 100 100 100 100 100 100 100
Other Expenses 21 21 21 21 21 21 21 21 21 21
General and
administrative
expenses
Nonsales Personnel 301.5 301.5 301.5 301.5 301.5 301.5 301.5 301.5 $301.50 301.5
Salaries

other Adminstrative 120.0 120.0 120.0 120.0 120.0 120.0 120.0 120.0 120.0 120.0
Operating Costs (tele.,
travel etc)
Total Selling, 710.5 710.5 710.5 710.5 710.5 710.5 710.5 710.5 710.5 710.5
Administrative and
General Expenses
Total Operating 8553.5 8674.5 10531.1 10531.1 10531.1 10531.1 10531.1 10531.1 10531.1 10531.1
Expenses
PROFIT BEFORE 1346.5 2545.5 2668.9 2668.9 2668.9 2668.9 2668.9 2668.9 2668.9 2668.9
INTEREST & TAXES
Taxes Incurred 221.3 221.3 221.3 221.3 221.3 800.7 800.7 800.7 800.7 800.7
NET PROFIT 1125.3 2324.3 2447.6 2447.6 2447.6 2447.6 2447.6 2447.6 2447.6 2447.6
Net Profit/Sales 11% 21% 19% 19% 19% 19% 19% 19% 19% 19%