Tuesday, 20 December 2011

Start a Leather Garment Business




                  
(252). Start a Leather Garment Business 

Introduction 
Leather Garments are one of the sophisticated products of finished leather. Leather Garments consist of articles of leather apparel and other cloth accessories as per ITC Classification which would include more specifically Gents Leather jackets, Long Coats, Waist/Shorts, Leather Pants/Shorts (Gents), Leather Jackets for ladies, Long Coats, Waist Coats/Shirts, Pant/Shorts and Children Garments. These are used only in cold places and usually garments made for autumn – winter are made of some what heavy leather from Hides with thick lining of either wool or artificial fur. Demand for Goat suede and light sheep nappa is generally high for European markets in spring summer while that for cow hides and somewhat heavy sheet skin is high for the autumnwinter in Europe and the USA.

Market Potential
Digital Technologies are changing the perspectives of business and culture with the advent of new computing tools for the home and office or new communication net works in the world. Technology is the single most important force behind the creation of enterprise. The Leather Garment sector is in close contact with the latest trends in the fashion. Therefore, the new winds in the fashion world always have a direct effect on the development of the sector and gives a wider scope for marketability.
Leather Garment production in India is almost exclusively for export. Some demand for Jackets exists but this is limited to some North Indian towns, which experience severe winter.
India's export for Leather Garments has been 5.28 million, 6.50 million and 6.9 million pieces during the year 1997, 1998 and 1999 respectively. The estimated production capacity for Leather Garments in India has been estimated at 18 million pieces a year. In 1998, the total value of India's Garments export was the third highest next only to that of China and Turkey. In 1999, India has reached the second place next to China, Korea, which used to command the second position in export of garments has fallen way behind.
Now that the demand seems to be picking up from the beginning of 2000, it would open up scope for new garment units which will help the country to increase the export of garments. As a matter of fact, it is heartening to note that the total export of Leather Garments during the year 2000-01 was higher than the export during the same period in 1999-2000 by as much as 33% in terms of US $.
In the circumstances, it would, therefore, be prudent to concentrate India's efforts in the currently strong importing countries viz. USA, U.K., Germany. Italy, France, Netherlands etc.


    
Basis and Presumptions
1. For achieving the full capacity utilisation of the plant, the efficiency should be 100% with 2400 working hours.
2. The time period for achieving the full capacity is three years - 60% in Ist year, 75% in 2nd year and 90% in 3rd year.
3. Labour wages as per the existing rates in the region.
4. Interest Rate: 12% for the fixed and working capital
5. Margin Money: 33 % of the total capital investment
6. Pay back period: 5 years after starting the regular production
7. Land and Building: Own

Implementation Schedule
The implementation schedule is anticipated to be about one year which is necessary considering the time required for preparation of project report and appraisal, registration, obtaining loan, acquiring land, building, plant and machinery, organising working infrastructure, establishing contacts with parties, buyers and market agencies etc.

Process of Manufacture
The manufacturing process in the industry does not involve much complicated techniques. Leather garment industry is normally based on strict specification of buyer and country to which items are exported. Due care has to be taken in the manufacturing garments as follows:

(i) The component of the article is to cut from the materials as per specification or keeping in view the quality. This comprises a complete list of properly evaluated materials both leather and auxiliaries, components in addition to correct pattern for cutting leather, lining etc.
(ii) The design evaluation may be conducted in a small batch or trial production to find out the production difficulties so that these can be sorted out and timely corrected.
(iii) The items should be manufactured as per strict design and specification of the buyer or standards.
(iv) Component Specification: This consists of details of materials plus dimensional stability or tolerance so that the component will fit up or stand satisfactorily.
(v) Process and Production Control: This is an area where control could be actually implemented. As for materials, Leather lining and auxiliaries should be tested for tear, stitch tear and tensile strength. Fastness of colours of Leather has to be tested repeatedly.
Threads: One of the most important requirement in thread is a level of properly balanced twist, particularly in Garment industry, stitching plays a vital role and synthetic thread is much stronger than cotton and does not absorb moisture so readily.
Glue and Cements: Adhesive plays a dominant role in the fabrication of leather joints and testing of emblem. Invariably, the closing of joints is first secured by adhesives and later by means of stitching.
Grindery and Hardware: These are known as metal grindery or hardware and some of the embellishments and fittings are also grouped in this category.
Zip Fastener: In Garment Industry Zip Fastener plays a key role and oftenly tear and wear related complaint come from buyers. So the imported fastener may be used duly tested by repeated closing and opening method. Finally in the assembling section, which is mainly concerned with the workmanship is carried out at each stage. The final inspection takes place before the goods are packed and sent for stores.
Embellishment: Due care should be taken while doing this job, a small negligence will damage the whole product.

Quality Control and Standards
No particular specification of this product is available. The specifications in the export market mainly relate to the quality of leather i.e. colour fastness, softness and resistance to moisture and cold. Other specifications like pattern, design would be as per the requirements of the buyer. However, the following specification for accessories has been given below which are as per BIS.
Standards Related To Leather Garments Industry and Related Items
Elastic TapesIS 9686
Metal BucklesIS 96986:1980
ThreadsIS 1376/1803
Leather Garment Sizing SystemIS 10397
Care of Leather GarmentsNIL
Metalic Slide FastnerIS 3148:1983
Garment Quality GuideIS 12675
Leather For GarmentsIS 12718
Fur LeatherIS 3840/2961
Fusible LiningIS 12806
Zip FastenersIS 8894/3184/4829
Production Capacity
It is proposed to manufacture 90,000 pieces of Leather Garments for Men, Women and Children valued at Rs.
Quantity:90,000 pieces
Value:216750000
   
Motive Power 5 KV.
Pollution Control
The Leather Garment Manufacturing unit does not contain any environmental hazards, the performance of Production System is through waste minimisation/utilities and it is revealed that the waste emanating from 70% of the unit is utilised by the small leather goods (Tiny Sector) industries i.e. Chappal Manufacturing, Small Coin Purses manufacturing and Key Chain Purse Manufacturing units.
Energy Conservation
Energy is spent in the factory in the form of electricity and fuel. The workers should be properly trained to operate the machines as and when required. They should be trained cautioned to yield maximum units during the machine operation which would not allow the machine to run by motive power unnecessarily. The electrical lines should be properly made and checked at regular intervals.
Financial Aspects
A. Fixed Capital
(i) Land and Building(Rs.)
i)Land 1 Acres @ Rs. 20000002000000
ii)Building Covered Area Office cum sheds – 3000 sq.ft. @ Rs. 10003000000
iiiWater System and electricity backup including tube well and generator set for electricity backup500000
 
Total
5500000
(ii) Machinery and Equipments
Sl. No.Machinery and Equipments DescriptionImp./ Ind.HPQtyRate Rs.Value (Rs.)
1.Flat Bed, Lock Stitch Sewing M/c.Imp.33540000200000
2.Flat Bed Two Thread, Double Needle Lock Stitch Sewing M/c.Imp.33475000300000
3.Zig-Zag Stitch Sewing M/c.Imp.3323500070000
4.Cylinder Bed Lockstich Sewing M/c.Imp..5290000180000
5.High Speed Single Thread Lock Stitch Sewing M/c.Imp..5250000100000
6.Strape Cutting M/c.Imp..2512000020000
7.Post Bed Lock Stitch Sewing M/c.Imp..33250000100000
8.High Speed Single Thread Chain Stitch Sewing MachineImp..3313900039000
9.Button Stitching Sewing, Single ThreadImp..25138,00038000
10.Hem Turning M/c. Clicking PressImp..25130,00030000
11.Skiving MachineImp..5140,00040000
12.Cliking PressImp.11400000400000
13.Tools and EquipmentsLS   60000
14.Office and Workshop FurnitureLS   200000
15.Taxes ,Electrification and installation of machinery @ 40% of machinery cost    606800
 
Total
2383800

(iii) Total Fixed Cost(Rs.)
i)Land and Building5500000
ii)Plant and Machinery2383800
 
Total
7883800
B. Working Capital (per month)
(i) Raw Material (per month) (for 7500 Pcs)
Sl. No.DescriptionQty.Rate (Rs.)Total (Rs.)
1.Nappa Leather, Suede Leather, Cow Softy Leather, Cow/Sheep/Goat 1st grade Leather187500 sq.ft leather @ 25 sq.ft. per piece6011250000
2.Lining, Non woven/ Woven Fusible, Interlining, Ribcloth, Satin, Jacqards, polyester, staple yarns22500 Mts. @ .90 mtr.2025000
3.Zip, Buttons, Threads, Adhesive, Embellishments and Other AccessoriesFor 7500 Pcs. @ Rs. 120/ pcs 900000
4.Packing MaterialsFor 7500 Pcs @ 20/ Pcs 150000
 
Total
14325000
(ii) Staff and Labour (per month)
Sl. No.DesignationNo.Salary (Rs.)Total (Rs.)
1.Manager/Designer12000020000
2.Supervisor3700021000
3.Clerk-cum-typist140004000
4.Accountant-cum-Store-keeper160006000
5.Watchman-cum-peon230006000
 Technical, Skilled and Semi-skilled  0
6.Skilled Worker15600090000
7.Semi-killed Worker10500050000
8.Unskilled Worker5300015000
 
Total
212000
 Perquisites @ 22%46640
 
Total
258640

(iii) Utilities (per month) (Rs.)
i)PowerL.S.30000
 Total 30000
(iv) Other Contingent Expenses (per month)
Sl. No.DescriptionValue (Rs.)
1.Postage and Stationery10000
2.Advertisement and Publicity100000
3.Telephone10000
4.Transportation20000
5.Consumables10000
6.Legal Expenses20000
7.Insurance8000
 
Total
178000
(v) Total Working Capital (per month)
Sl. No.DescriptionAmount (Rs.)
1.Raw Materials14325000
2.Salary and Wages258640
3.Utilities30000
4.Other Contingent Expenses178000
 
Total
14791640
 (vi) Total Working Capital for 3 months44374920
C. Total Capital Investment
Sl. No.DescriptionAmount (Rs.)
1.Fixed Cost7883800
2.Working Capital for 3 months44374920
 
Total
52258720
Financial Analysis
(1) Cost of Production (per year)
Sl. No.DescriptionAmount (Rs.)
1.Total Recurring Expenditure177499680
.Depreciation on Machinery @ 10%151700
3.Depreciation on tool and Equipment @ 25%15000
4.Depreciation on furniture @ 20%40000
5.Depreciation on Building @ 5%275000
6.Interest on total Capital Investment @ 12%6271046
 
Total
184252426
(2) Turnover (per annum)
Sl. No.DescriptionQty. PcsRate (Rs.)Value (Rs.)
1.Leather Coats Men/Women450003000135000000
2.Leather Jacket, Shirts, Blouses and Trousers22500250056250000
3.Leather Short, Shirts and Mini Skirts15000120018000000
4.Leather Children Garments750010007500000
 Total60,000216750000

(3) Net Profit (per annum)
 =Annual Turnover – Cost of Production
 =Rs. 216750000 – 184252426
 =32497574
   
(4) Net Profit Ratio  
  Net Profit x 100
 =————————
  Turnover per annum
   
  32497574x 100
 =—————————
  216750000
   
 =14.99
   
(5) Rate of Return  
  Net Profit x 100
 =———————————
  Total Capital Investment
   
  35160069x 100
 =——————————
  52258720
   
 =62.19
(6) Break-even Point
 Fixed Cost(Rs.)
1.Depreciation on Machinery151700
2.Depreciation on tools ,Office Equipments and Furniture55000
3.Depreciation on Building275000
4.Interest on Capital Investment6271046
5.Insurance96000
6.40% of salary and wages1241472
7.40% of other contingent expenses816000
 
Total
8090218

B.E.P.  
  Fixed Cost x 100
 =————————
  Fixed Cost + Profit
   
 =13.37%
Addresses of Machinery and Raw Material Suppliers
1 M/s. Prototype Dev. Training Centre
B/24. Guindy Estate,
Ekkaduthangar,
Chennai –9
2. M/s. Cochin Leathers Pvt. Ltd.
Industrial Dev. Area,
Edayar, Muppathadam PO,
Cochin 683 102
3. M/s. Twin Star Engineering
2, Thiruneermala Road,
Pammal, Chennai 75
4. M/s. Atlant Trading Pvt. Ltd.
Atur House, Worli Naka,
Mumbai 400 018
5. M/s. Valliappa Leather Corporation
3/5, Narayana Chetty Street,
Periamet, Chennai – 3
6. M/s. Solar
Atur House,
Worli Naka,
Mumbai 400 018
7. M/s. T. Abdul Wahid and Co.
26, Vepery High Road,
Chennai –3
8. M/s. Chandra's Chemical Ent. Ltd.
5, Naval Hospital Road,
1st Floor, Periamet,
Chennai –3
9. M/s. Akay Sales Corporation
Office: C-8-346, Ring Road,
Naraina, New Delhi –110028
10. M/s. Zeb Exports Pvt. Ltd.
280 Sidappa Lay Out,
Bommanhalli Post,
Madivala,
Bangalore–560 068
11. M/s. Jay Cee Enterprises (P) Ltd.
E-357, Greater Kailash – II,
New Delhi–110048.

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