Detailed Project Report (DPR)

Step Engineering Ltd.

Establishment of
Warehouse Rack
Manufacturing Plant

CORPORATE HEAD OFFICE

Step Media Ltd.

HOUSE- 07, ROAD - 23/B,
(LEVEL-3)
GULSHAN-1, DHAKA-1212
Synopsis of the Project
1. Name of the Step Engineering Limited
Project:
2. Location of the Zamalpur EPZ
Project:
3. Head Office: House- 07, Road - 23/B, (Level-3)
Gulshan-1, Dhaka-1212
4. The Project: The proposed project includes detailed plan on setting up of a
Warehouse Rack Manufacturing plant at _______. For
manufacturing Warehouse Rack in Bangladesh which is now being
imported from other countries and Bangladesh is spending huge
foreign currency every year. Step Media expects to meet 10% of
the total demand for warehouse rack in Bangladesh within next
five years.
5. Product Mix & The production capacity of the project has been estimated to be
Capacity: worth approximately BDT 100 crore per year
6. Implementation The project will be established with financial assistance from the
Plan: bank and equity capital of the sponsors
7. Investment Sanction of Long Term investment of BDT 30 Crore for the
Proposal: establishment of the plant and building and BDT 36 Crore of
Working Capital for smooth operation of the business
8. Land: The project is located on a piece of land measuring _____ decimal.
The value of the land has been estimated at BDT 2 crore including
cost of registration in the name of the company
9. Factory Shed and The value of the factory shed and other civil works has been
Other Civil Works: estimated at BDT 3.5 Crore including electrification, substation,
machinery room, office room, raw materials go down, boundary
wall etc.
10. Machinery to be Most of the machineries will be imported at a total cost of BDT 19
Imported: Crore
11. Technical Services The technologies involved in manufacturing of warehouse rack are
and Quality yet to be introduced in Bangladesh. Therefore, technical expert
Control: with required experience will be involved in the project.
12. Erection and Machinery will be installed, commissioned & taken into operation
Installation: under direct supervision of the erectors to be deputed by the
respective supplier. An amount of BDT__ Crore has been
earmarked for the purpose of civil, mechanical and electrical works
for erection of the same.
13. Employment Job opportunities for 50 personnel of various categories would be
Generation: created

ii
14. Contribution to The project will contribute BDT. 12 Crore per annum to the GDP
GDP:
15. Debt Service The debt-service coverage ratio of the project works out to 2.09,
Coverage Ratio 2.60, 2.90, 2.60, and 3.16 times during the first five years of
(DSCR): projected operation of the project
16. Break-even point The project is expected to break-even at 80% of the rated capacity
(BEP): utilization with sales volume of BDT 80 Crore
17. Cash/fund flow The cash flow statement based on the profitability estimate is
statement: shown in financial aspect. The projection indicates that the concern
will have adequate cash generation to meet all the operational
expenses, pay for its investment-obligation and a reasonable
surplus to pay dividend, etc.
18. Projected Balance The projected balance sheet of the company is shown in financial
Sheet: aspect. The concern is expected to maintain a healthy financial
position during the operational life.
19. Sensitivity The critical variables to which the financial viability of the project
Analysis: is sensitive have been identified to be cost of production and price
of output. Necessary sensitivity has been made and the project
withstands the tests.
20. Conclusion: The project proposal is found technically feasible, socially and
economically desirable, financially rewarding and commercially
viable. The project proposal may, therefore, be considered suitable
for funding & investment.
21. Profitability & The year-wise operating profit in BDT of the project on completion
Result of Financial and the results of financial analysis are shown as follows:
Analysis:
69,712,358.70 108,358,658.77 129,567,589.30 125,152,525.20 170,371,555.32
22. Assumption:
a) Repayment 5 Years excluding grace period
period
Term
Investment
b) Grace 6 months
Period

iii
 23. Project Initiation Timeline:

Following chart illustrates the order of activities involved within the initiation stage of the project.
The initial year of the project has been divided in four quarters during which different aspects of
the setting up will be carried out.

Task Q1 Q2 Q3 Q4
Land Development
Factory Setup
Electrification
Raw Material Procurement
Trial Production
Commercial Production

iv
Table of Contents

Synopsis of the Project ....................................................................................................................ii

Executive Summary......................................................................................................................... 8

Highlights of the Existing Businesses of the Promoters ............................................................... 10

All About Step Engineering Ltd. .................................................................................................... 12

Management of the Company .................................................................................................. 12

New Journey as a New Project ................................................................................................. 12

Justification of the project ........................................................................................................ 13

Business Environment of Warehouse Rack Manufacturing in Bangladesh .................................. 15

Evolution of Industrialization in Bangladesh ............................................................................ 15

Impact of industrialization in Bangladesh ................................................................................ 16

Establishment of Special Economic Zones in Bangladesh ........................................................ 18

Rise in E-Commerce in Bangladesh ........................................................................................... 20

Prospect of Warehouse Rack Manufacturing Facility ............................................................... 20

Management Aspect ..................................................................................................................... 23

Board of Warehouse Manufacturing Business of Step Engineering Ltd. ................................. 23

Company Overview ................................................................................................................... 25

Marketing Aspects ........................................................................................................................ 27

Benefits Offered ........................................................................................................................ 27

Market Needs............................................................................................................................ 28

Competitive Advantage ............................................................................................................ 28

Advertising and Promotion ....................................................................................................... 28

Nationwide Connectivity........................................................................................................... 28

Pricing Strategy ......................................................................................................................... 29

v
Technical Aspects .......................................................................................................................... 31

Raw Material of Industrial Racking ....................................................................................... 32

Profiling process .................................................................................................................... 33

Welding process .................................................................................................................... 34

Finish of the racking components ......................................................................................... 35

Packaging of uprights and beams ......................................................................................... 37

Product storage..................................................................................................................... 37

Financial Aspects ........................................................................................................................... 39

Project Cost Detail .................................................................................................................... 39

Proposed Financing Source ....................................................................................................... 40

Working Capital......................................................................................................................... 40

Revenue Projection ................................................................................................................... 41

Profitability Ratio ...................................................................................................................... 41

Cost of Goods Sold .................................................................................................................... 42

General, Administrative & Selling Expense............................................................................... 42

Loan Repayment ....................................................................................................................... 43

Statement of Cash Flow ............................................................................................................ 45

Breakeven Analysis ................................................................................................................... 46

SWOT Analysis............................................................................................................................... 48

Concluding Remark ....................................................................................................................... 50

Sales Revenue ........................................................................................................................... 50

Net Profit................................................................................................................................... 50

Pay Back Period ......................................................................................................................... 50

Risk & Mitigation ....................................................................................................................... 51

vi
Financial Risk ......................................................................................................................... 51

Financial Risk Mitigation ....................................................................................................... 51

Business/Industrial Risk ........................................................................................................ 51

Business/Industrial Risk Mitigation: ..................................................................................... 52

Management Risk ................................................................................................................. 52

Management Risk Mitigation: .............................................................................................. 52

Security Risk: ......................................................................................................................... 52

Security Risk Mitigation: ....................................................................................................... 52

Relationship Risk ................................................................................................................... 52

Relationship Risk Mitigation: ................................................................................................ 53

vii
Executive Summary
This project profile entails a detailed description of establishment of a warehouse rack
manufacturing facility with a yearly capacity of producing BDT 100 crore worth of warehouse.

Industrialization is on the rise in Bangladesh, as we are steadily transitioning from an agrarian

economy to a manufacturing one. The government of Bangladesh have taken substantial steps
towards encouraging both local and foreign investment by establishing economic zones around
the nation. The industrial sector has historically been the sector that has driven growth as
countries have moved from low to middle income status. This is because industry can provide
high-wage employment for large numbers of workers and can raise social productivity by
producing high-value goods on a mass scale. Poor countries can earn valuable foreign exchange
by exporting manufactured products and the foreign exchange can be used to invest in newer
machines and technologies so that a rapid move up the technology ladder becomes possible.

Experts are expecting a significant surge in industrialization by 2025 in Bangladesh, with the
extensive rise in economic zones, both by the government and private entities. Moreover, the
global warehouse racking market is poised to grow by $ 1.35 bn during 2020-2024, progressing
at a CAGR of over 5% during the forecast period. The report offers an up-to-date analysis
regarding the current market scenario, latest trends and drivers, and the overall market
environment.

Increasing demand for storage and warehousing has been instrumental in driving the growth of
the market. However, fluctuations in raw material costs might hamper market growth. With the
development of extensive economic zones around the country, the total yearly market for
warehouse rack in Bangladesh by 2026 has been expected to reach over BDT 500 crore. However,
with efficient management and prudent growth strategy, the business of Step Engineering Ltd.
In delivering international standard warehouse rack is projected to acquire over BDT 70 crore
worth of the market by 2026.

8
Highlights of the
Existing Businesses of
the Promoters

9
Highlights of the Existing Businesses of the Promoters

The promoters of Step Engineering Ltd. have been successfully running a portfolio of businesses

with a cumulative turnover of BDT 130 Crore in 2020. The portfolio of businesses owned and run

by the promoters include Printing, IT, Design, Branding to name a few. The business has been

growing steadily over the last seven (7) years. The business is closely managed by a group of

professionals who constitute the board of the directors.

Across the entire company, operating models are being made effective, fast and simple to

continuously improve the competitiveness of the processes and structures by the promoters. The

promoters are committed to acting as responsible business and are dedicated towards respecting

the diversity of opinion and constructive exchange of ideas. Following are the key metrics

regarding the businesses currently run by the promoters:

• Over 1100 manpower all over the country

• Highly educated and trained skilled people

• 15% female employees currently recruited

• Over BDT 130 Crores of revenue

• Dedicated employee salary fund

10
All About
Step Engineering Ltd.

11
All About Step Engineering Ltd.
Step Engineering limited will be one of the pioneering organizations to produce and sell
international standard warehouse rack in Bangladesh. Warehouse racking, also known as storage
or pallet racking, is a material handling system suitable for mass storage of goods unitized on
skids or pallets. It allows efficient utilization of space while providing easy access to stockpiled
items for better inventory control. Racks are used by manufacturers for mass storage of mostly
non-perishable products when storage space is not enough. Palletized products are usually
stacked up to not more than three layers before it becomes unsafe and prone to collapse. A
racking system enables the manufacturer to store palletized products for up to five to seven
stacks high, depending on the available height.

Aside from finished goods handling, racking systems are also used for raw material and parts
storage. Selective racking can be designed so that the greatest number of items can be accessed
permitting high variety. Also, some distribution systems favor the use of FIFO or first-in, first-out
method of inventory control. Having a racking system provides access to the oldest items in the
warehouse inventory allowing them to be off-loaded first.

Management of the Company

The limited company focused on building warehouse rack would be run by an efficient
management team which will be supervised by the board of directors.

Step Engineering will be practicing corporate culture and values to synchronize with our
customers to speak the same language. Being led by best people and technology, Step Media has
become one of the most respected, reputed and trusted company in Bangladesh.

There are several racking designs and configurations suited for a particular application. Storage
racks are generally divided into high-selectivity, low-density and low-selectivity, high-density
applications. Racking with high selectivity and low-density are selective, double deep, and very
narrow aisle racking systems. High-density applications are push-back, drive-in, and pallet flow.
Special systems are also possible which are basically modifications of the previous configurations.

New Journey as a New Project

The Warehouse Rack manufacturing facility will be run as an independent limited company within
the group of Step Media Ltd. The owners of the project are deeply convinced that the demand
for warehouse racks will steadily rise. In order to meet the demand within the Bangladesh, the
new Project in the name of Step Engineering Ltd.

12
Justification of the project

The racking market in Bangladesh is growing at a rapid pace, mainly due to the rising demand for
efficient warehouse storage systems. The storage systems provide comprehensive intra-logistics
solutions for supermarkets and jumbo retailers. Due to the rapidly growing eCommerce sectors
in Bangladesh, there is a huge demand for adjustable pallet racking and drive-in racking systems
equipped with a high storage capacity.

Besides, large grocery stores with different temperature storage zones that need heavy-duty
shelving racks adapted to the type of product stored, such as temperature-sensitive frozen
products, substantiate the market size. The market growth is directly related to the rising
landscape of international trades and the global economy. Therefore, the market is forecasted
to witness significant traction in the years to come.

13
Business Environment
of Warehouse Rack
Manufacturing in
Bangladesh

14
Business Environment of Warehouse Rack Manufacturing in
Bangladesh
Evolution of Industrialization in Bangladesh

After the liberation war in 1971, the country was left in dire states, the industrial development
was very slow. However, Readymade Garments (RMG) started during this period. And in this
sector, Bangladesh could lay claim to considerable success. Today garment export is the main
source of foreign exchange earnings. Its success was not necessarily influenced by government
policy but essentially by outside forces. It originated in the 1970s when the investors of other
South East Asian nations ventured to set up garment factories in Bangladesh and to work around
the export quotas imposed on their native countries by the United States. In the 1980s, the
Pharmaceutical Sector made advancement in Bangladesh. Itis one of the most developed hi tech
sector which is contributing in the country's economy. After the circulation of Drug Control
Ordinance-1982, its development accelerated. During the 80s, other sectors like tea
manufacturing, leather factories etc. also gained importance. In 1990s, sectors like shipbreaking,
steel, cement and cold storage goods etc. developed and gained momentum. From 2000 to 2012,
many industries started their journey successfully, and contributed to the economic growth of
Bangladesh. Among them are electronics, glass, aluminum, plastic, cycle, and ceramic etc.
industries. To sum up the whole thing, we can say that after 1971, Bangladesh has been slowly
and steadily turning its attention to develop its economy, through industrial development,
moving further away from the agricultural sector.

The industrial sector has historically been the sector that has driven growth as countries have
moved from low to middle income status. This is because industry can provide high-wage
employment for large numbers of workers and can raise social productivity by producing high-
value goods on a mass scale. Poor countries can earn valuable foreign exchange by exporting
manufactured products and the foreign exchange can be used to invest in newer machines and
technologies so that a rapid move up the technology ladder becomes possible. The average
productivity of industry is higher than in agriculture or most service-sector activities, so as people
move out of agriculture into industry, Gross Domestic Production (GDP)increases. Bangladesh as
a country with a poor land-person ration is unlikely to prosper through agricultural growth alone.
Agriculture is unlikely to deliver rapid growth in Bangladesh because of the difficulty of setting
up large-scale farms that can compete with countries that specialize in agriculture such as
Australia or Argentina. Bangladesh has natural resources but that can be exploited, with the
exception of natural gas. Thus, industrialization and specialization in manufacturing is the
obvious way in which Bangladesh can raise its per capita income and social productivity. The
industrial sector consists of manufacturing, together with utilities (gas, electricity and water) and
construction main industries, textiles and apparel, jute, sugar, tea, leather, telecommunications,
pharmaceuticals, cement, ceramics, shipbuilding, fertilizer, food processing, paper newsprint,
light engineering, etc.

15
Impact of industrialization in Bangladesh

Following are the primary and secondary consequences expected out of the increase in
industrialization in Bangladesh.

•Play a major role in economic development

•Provide a secure basis for a rapid of growth of income.
•Help in raising the standard of living
•Provide employment, meeting high income demands
•Brings in technological progress and change in the outlook of the people
•Has decreased the dependency on foreign resources

Since the 1990s, Bangladesh has done well in terms of increasing growth. It is apparent that the
modest growth that we had during the seventies and eighties has been overtaken by recent
growth, especially during the last few decades. Even though the growth is sustainable, it cannot
be taken for granted.

It is important to mention here that private sector investment used to be the main source of
overall growth. However, since 2010, the private sector input has stagnated, not increasing much.
The amount of overall growth, in relation to the level of private sector investment, is linked to
the latter. We are achieving growth rates now which are not compatible with the number of
investments we are making into the economy.

As the country moves upwards in regards to prosperity, technological innovation comes into the
picture, with capital-intensive factors being essential. The incremental capital output ratio which
we needed in the past to generate one unit of income is no longer applicable amidst the current
scenario. For example, farmers nowadays require various equipment in order complete their
tasks, which is a vast difference to common traditional methods. Thus, capital-intensity has
increased in all kinds of sectors in the country. The experiences of China and Korea show that as
they have increased their per capita income, their incremental capital output ratio has increased.
This is because labor becomes costly, therefore substitution of labor results as a natural
phenomenon, as more capital is utilized.

For a country to sustain its growth, the whole social fabric needs to be improved. Human capital,
education, health, social protection, alleviation of property, and infrastructure are elements of
that and investments are needed in each section. We need to mobilize our revenues significantly.
Bangladesh has miserably failed in revenue mobilization. Bangladesh's tax-to-GDP ratio has been
a matter of concern in the Five-Year Plans. In fact, since the Sixth Five-Year Plan to present time,
in spite of targets being set in the plans for an increase in the tax-to-GDP ratio, it has actually
decreased. It now stands at 9.2 percent, which is a huge obstacle for the further development of
Bangladesh. It must change in order for us to graduate to an upper middle-class nation. The
government might find it tough, therefore, to maintain a credible fiscal policy. During the last 10
years, we have actually weakened our whole financial system. All the indicators show that we are
well below the previous levels of 2010 in regards to the financial sector. That is not something

16
which can provide good support for an increase in Bangladesh's growth rate. These are
fundamental weaknesses we must work on.

Our current total annual foreign aid constitutes for about two percent of our total GDP. Our total
investment required in the economy is growing quickly. The government needs to spend and
invest a lot. Health, where 0.6 percent of our GDP is spent on, is something of note. In industrial
countries, this percentage is usually seven, eight or even nine percent. Bangladesh spends about
2 percent of its GDP on education, which is again an indication of our nation's resource-
scarceness. We must be aware of the need to use our resources efficiently. We are not getting
the right quality of services, and in addition, the infrastructures which are being invested on, are
of low quality. We are, thus, not getting value for money. That is an area which needs to be
looked at.

The export-oriented faction of Bangladesh's industrialization is dominated by the presence of the

RMG sector. Bicycle export had made a mark, but stumbled soon. These cater to the domestic
market, usually not being efficient. That is one type of industrialization, where costs are high and
the overall quality is usually low. Tariff barriers are usually put onto goods coming into
Bangladesh, where high interest rates and customs duty are major obstacles. Bangladesh has one
of the highest tariff protections in the world. The average effective rate of protection is at 27.5
percent, whereas, rates of other Asian countries linger at about 4 percent. We even have high
protection on biscuits, an industry where we have been active, locally, for more than a hundred
years.

We are at the first level of the industrial ladder. The garments sector is considered to be the very
first step of industrialization. Vietnam has now moved to the third level of industrial ladder. This
is the level which includes electronics. The second level, in between, is light engineering related,
manufacturing cycles being an example. Bangladesh has stumbled in the second level, where we
have not been able to make much advances. We do not have anything to show for the third level.
Thailand is producing 2 million units of cars every year, out of which they are selling 800,000 units
domestically and exporting the rest. They also export automobile parts, on its own billion-dollar
industry. Bangladesh is an import-oriented country. In our country, 30,000 new cars get
registered every year. So, there is a stark difference between countries like Thailand and
Indonesia and us.

We are at the bottom of the industrialization ladder and we have failed to move upward. We
have had some flickers of success, like the ship-building industry. Historically, the RMG sector has
been the industry which has been depended upon by almost all countries as the first step in the
path to industrialization. RMG was started in the United Kingdom, then moved to the United
States of America. It then caught on in Eastern Asia (Japan, Korea, China) before arriving in
Bangladesh. But Bangladesh has been stuck in the RMG sector for the last four decades in its path
to industrialization—we didn't move up the industrial ladder.

17
Establishment of Special Economic Zones in Bangladesh

The government recognizes that inadequate basic infrastructure and a severe shortage of
accessible land discourages greenfield investments and industrial development.

Bangladesh has one of the world’s most cost competitive, sizeable supply of labor, ideal for labor-
intensive production in sectors such as garments, footwear, leather products and toys. However,
despite large development success fueled by RMG, microfinance, and remittances, three out of
five Bangladeshi workers still find themselves in vulnerable employment. The country also has
one of the world’s highest population densities and some of the land is either occupied or
inundated by water. Coupled with an underdeveloped power sector, a challenging land records
and titling system, and the uncertainty associated with regulatory red-tape, investors seek safe
havens with quality infrastructure and services for their investments. Bangladesh has a
disappointing track record of attracting foreign direct investment (FDI), especially compared to
countries in East Asia. The supply of serviced land with improved governance could potentially
help attract more investment.

The Bangladesh Export Processing Zones Authority Act of 1980 was aimed to boost
industrialization and job creation through the promotion of trade and investment and it has
had some success.

The Act led to the establishment of the semi-autonomous Bangladesh Export Processing Zones
Authority (BEPZA), which leases serviced land to industrial tenants in eight export processing
zones (EPZs) across the country, primarily focused on the garment sector. Investors enjoy several
incentives of a fiscal (tax holidays, duty free imports, exemptions of dividend tax, etc.) and non-
fiscal (100 percent foreign ownership permissible, full repatriation of capital and dividend, etc.)
nature in addition to a host of support services aimed to help investors navigate the formidable
bureaucracy linked to doing business. In July 2017, BEPZA hosted 463 tenants in both RMG and
non-RMG sectors (like chemicals and footwear) —56 percent of which were fully foreign-owned,
16 percent were joint ventures between foreign and domestic investors and the remaining were
local ventures. BEPZA estimates that in the two decades until FY2017, the EPZs attracted US$4.3
billion of investment (average annual FDI inflows in Bangladesh are about US$2 billion),
contributed to US$59.4 billion of exports earnings (19 percent of the total in FY2017) and
employed 481,000 direct workers. The trend now is to move away from the EPZ model, because
it has weaker domestic linkages and instead cater both to the domestic and the export market.
The goal is also to crowd in more private participation in developing and operating zones.

The Bangladesh Economic Zones Authority Act and the Bangladesh Hi-Tech Park Authority
Act—both of 2010—created two more agencies like BEPZA and these three agencies have
overlapping mandates.

The two new acts led to the creation of two new semi-autonomous agencies—the Bangladesh
Economic Zones Authority (BEZA) and the Bangladesh Hi-Tech Park Authority (BHTPA)—tasked
to oversee the expansion of economic zones (EZs) and hi-tech parks (HTPs) in the country. These

18
new types of zones operate under different regulatory regimes from BEPZA, and allow for
production aimed both for domestic and foreign markets. BEZA aims to develop 100 EZs by 2025,
including in underdeveloped regions. Unlike the EPZs that are publicly owned and operated by
BEPZA, BEZA and BHTPA would rely mainly on private capital and expertise to build and operate
the new zones but with important government oversight. Thus, Bangladesh has today got three
agencies that sometimes compete for the same investors although they come with somewhat
different rules and have different offerings. In addition, other agencies like the Bangladesh Small
and Cottage Industries Corporation also develops some industrial infrastructure for
manufacturers.

Bangladesh’s development agenda using special economic zones is affected by internal and
external challenges that the government will need to address.

These include:

Legal and regulatory mandates: The multitude of public agencies with sometimes overlapping
mandates offers choices to prospective investors but it is a complex and sub-optimal approach
to development. The legal framework for public private partnership based institutional
arrangements will need to be carefully laid out with a clear perspective on fiscal contingent
liabilities.

Governance and technical capacity: Apart from BEPZA that has nearly four decades of
experience, the new agencies tasked with the expansion of industrial infrastructure are young
institutions and it will take time to build the technical capacity to be effective regulators and
partners in negotiations with leading industry groups and foreign multinationals. Political
interference in site selection can be a threat to investment decisions and the ability of senior
management to handle such pressure will be crucial.

Safeguards management: Social and environmental safeguards management is constantly in the

focus and an area where the agencies and ministries will need to strengthen technical capacity,
probity and enforcement. The destructive forces of climate change are also having an increasingly
negative impact along rivers and coastal areas where many SEZs are situated due to land scarcity.

Connections to the national investment climate: The attractiveness of Bangladesh as an

investment destination is dependent on the stability of its economic policies, the playing field
that the government offers investors, the overall governance situation outside the SEZs, and the
efficiency of transport and logistics networks connecting the SEZs to air- and sea-ports.

19
Rise in E-Commerce in Bangladesh

With the advent of internet and smartphones around the nation, several local and global
ecommerce platforms have gained a formidable share within the market. Due to lack of proper
data, there are different estimation about the potential size of the future of ecommerce in
Bangladesh. Since timely delivery and adequate storage in warehouse is a prerequisite for
uninterrupted delivery of goods by large ecommerce platforms, they are expected to drive
demand for warehouse racks substantially.

Prospect of Warehouse Rack Manufacturing Facility

Experts are expecting a significant surge in industrialization by 2025 in Bangladesh, with the
extensive rise in economic zones, both by the government and private entities. Moreover, the
global warehouse racking market is poised to grow by $ 1.35 bn during 2020-2024, progressing
at a CAGR of over 5% during the forecast period. The report offers an up-to-date analysis

20
regarding the current market scenario, latest trends and drivers, and the overall market
environment.

The market is fragmented, and the degree of fragmentation will accelerate during the forecast
period. Daifuku Co. Ltd., Honeywell International Inc., Interroll Holding AG, Kardex AG, KION
GROUP AG, Mecalux SA, Murata Machinery Ltd., SSI SCHAEFER Group, TGW LOGISTICS GROUP,
and Toyota Industries Corp. are some of the major global market participants. To make the most
of the opportunities, market vendors should focus more on the growth prospects in the fast-
growing segments, while maintaining their positions in the slow-growing segments.

Increasing demand for storage and warehousing has been instrumental in driving the growth of
the market. However, fluctuations in raw material costs might hamper market growth. With the
development of extensive economic zones around the country, the total yearly market for
warehouse rack in Bangladesh by 2026 has been expected to reach over BDT 500 crore. However,
with efficient management and prudent growth strategy, the business of Step Engineering Ltd.
In delivering international standard warehouse rack is projected to acquire over BDT 70 crore
worth of the market by 2026.

21
Management Aspect of
Warehouse
Manufacturing Plant

22
Management Aspect
Warehouse racking, also known as storage or pallet racking, is a material handling system suitable
for mass storage of goods unitized on skids or pallets. It allows efficient utilization of space while
providing easy access to stockpiled items for better inventory control. Racks are used by
manufacturers for mass storage of mostly non-perishable products when storage space is not
enough. Palletized products are usually stacked up to not more than three layers before it
becomes unsafe and prone to collapse. A racking system enables the manufacturer to store
palletized products for up to five to seven stacks high, depending on the available height.

Aside from finished goods handling, racking systems are also used for raw material and parts
storage. Selective racking can be designed so that the greatest number of items can be accessed
permitting high variety. Also, some distribution systems favor the use of FIFO or first-in, first-out
method of inventory control. Having a racking system provides access to the oldest items in the
warehouse inventory allowing them to be off-loaded first.

Board of Warehouse Manufacturing Business of Step Engineering Ltd.

The limited company focused on building warehouse rack would be run by an efficient
management team which will be supervised by the board of directors.

Step Media is practicing corporate culture and values to synchronize with our customers to speak
the same language. Being led by best people and technology, Step Media has become one of the
most respected, reputed and trusted company in Bangladesh.

There are several racking designs and configurations suited for a particular application. Storage
racks are generally divided into high-selectivity, low-density and low-selectivity, high-density
applications. Racking with high selectivity and low-density are selective, double deep, and very
narrow aisle racking systems. High-density applications are push-back, drive-in, and pallet flow.
Special systems are also possible which are basically modifications of the previous configurations.
Following is the short profile of the board members of Step Engineering Ltd.

23
 Mostafa Towhid Khan has a diverse professional portfolio. He
is highly experienced and has got the expertise in his line of
work to the highest level. It is to be mentioned that he had a
business set up in Moscow and get involved in direct printing
business from 1991 to 1997. He was also the member of FESPA
(Federation of European Screen Printers Associations). So, he
has got more than 8-year direct involvement with foreign
trading Europe and leading Step Media for more than 25 years
of leader of the company.

Mostafa Towhid Khan

Managing Director

Mostafa Shahid Khan, a highly experienced person with

outstanding operational capabilities looks after the accounts
and factory operation of the company. He has 35 years of
professional experience in national and international arena.
His skill sets and experience covers Event management, Social
Marketing, Sports and Cultural activities etc. He is particularly
known for being committed to his duties and responsibilities.

Mostafa Shahid Khan

Director, Accounts & Factory

Mustafa Zahid Khan is taking care of the administration and

factory production of the company. He has 30 years
professional experience having 15 years work experience of
national & international events organizing and activation. His
skill sets and expertise envelopes Marketing, Sports, Event
Management, Creative Idea, Branding & Communication.

Mustafa Zahid Khan

Admin & Factory Production

24
Company Overview

The Warehouse Rack manufacturing facility will be run as an independent limited company. The
experienced direction of the board of directors is expected to establish Step Engineering Ltd. into
the largest warehouse rack manufacturer in Bangladesh.

The table below shows the manpower requirement:

Table: Manpower Requirement

Serial Job Title Required

Number No.
1 Managing Director 1
2 Officer- Accounts 1
3 Officer- HR 1
4 Officer- Marketing 1
5 Factory Manager 1
6 Driver 2
7 Factory Supervisor 2
8 Supporting Staff 15

Figure: Organogram

Operational Process

Over the past twenty years, many warehouse rack manufacturing facilities have switched from
conventional mechanism to automated machineries. The process starts with procurement of raw
materials. The steel case and pipes procured are then put into the profiling process which is
followed by welding the steel frame. The racking components are then packaged and stored until
those are sold.

25
Marketing Aspects

26
Marketing Aspects
Benefits Offered

The warehouse rack manufacturing plant will be making both adjustable pallet racking and drive-
in racking systems. The racking systems would be customized according to the needs of the
customers.

Aside from maximizing storage space, there are other benefits that make warehouse racking
feasible. These benefits can be quantified in terms of economic value or savings from leasing
additional storage space, less manpower effort, and higher throughput. On the other hand,
compliance with safety standards and quality management are other value-adding factors that
do not directly translate to savings. Enumerated below are the benefits of a warehouse racking
system.

Efficient storage space utilization: As mentioned earlier, racking takes advantage of the available
vertical space that is otherwise unused. Warehouses that are built to contain racks are made with
high ceilings to allow racks with higher bays.

Easy inventory organization: Racks can be addressed easily in comparison to stockpiling. Storing
goods with many distinct varieties is virtually impossible with stockpiling without consuming
large floor spaces. A type of racking system, known as selective racking, allows the storing of
different types of goods while keeping the consumed space to a minimum.

Fewer damaged goods: Racking systems are designed to contain goods without damaging them.
Palletized loads are not piled on top of each other which minimizes contact. Also, there is no
need to move goods from time to time to provide access to buried goods in a stockpile. Fewer
contact results in less damage.

Increased employee productivity: In a racking system, the empty pallet position can easily be
located and accessed. This allows the elimination of small unnecessary movements that in time,
stack up to significant losses.

Storage automation: Adapting a racking system is the first step to warehouse automation. This
is achieved by integrating smart conveyor systems and guided forklifts and cranes. This can lead
to significant savings in terms of manpower costs and can streamline the business process
especially for large distribution centers.

Increased safety: As long as properly designed, racking systems are safe. Beams and columns can
be made with structural steel and other high-quality materials. The steel frame, which is missing
in ordinary storage systems, serves as the backbone for supporting stacked goods. Moreover,

27
racks can be fitted with safety devices such as motion or proximity sensors and alarms for
additional safeguards during loading and off-loading.

Clean and contaminant-free handling: By having better access, it is easy to clean goods and
storage spaces. Better segregation can be achieved to separate goods that can possibly
deteriorate or damage adjacent items.

Market Needs

Policy reforms that have improved the business landscape and ease of doing business contribute
to the market growth. Moreover, rapid globalization, alongside the growing population and
changing consumption patterns, has increased import-export activities in countries worldwide.
The rise of e-commerce over recent years has further boosted transportation revenues.

There has been considerable growth across the supply and value chain as a whole. Vast
developments in logistic infrastructures are expected to continue till 2027. Automation in supply
chains and transportation and logistics industries has become a prevalent trend. Strategic
partnerships, especially between new suppliers & competitors and policy reforms, alongside the
increasing consumerism, increase the complexity of the already fragmented supply chains.

Logistic leaders adapt changing landscape by improving collaboration skills, equipping their
teams with appropriate insights and eliminating existing system-wide silos. Pallet racking
provides access to a broad array of products and reduces supply chain waste and expenses,
delivering quality customer service with premium care.

Competitive Advantage

As Step Engineering Ltd will be one of the first businesses to introduce advanced warehouse rack
building plant in Bangladesh, they would be able to operate with substantial competitive
advantage over the rest of the warehouse rack manufacturers in Bangladesh. Moreover, the
promoters of the company are thoroughly connected with local and global FMCG brands which
will enable them to obtain orders and grow quickly.

Advertising and Promotion

Warehouse racking systems are required mostly by other businesses to maintain warehouse
storage of their own products. Therefore, the marketing efforts in this case has to focused on
building Business-to-Business relationship. Developing a B2B sales funnel with activated channels
such as in-person visits to email marketing, the warehouse racking system would be marketed.

Nationwide Connectivity

With an extensive reach all around Bangladesh, the business of Step Engineering Ltd is expected
to flourish at a significant rate. The business builders of Step Engineering Ltd. are located in

28
almost every commercially viable city and district in Bangladesh, both within and outside FMCG
industry. The benefit of connectivity with large business districts and cities around Bangladesh,
puts Step Engineering Ltd and their warehouse manufacturing plant at a distinct advantage over
almost any other competitors.

Pricing Strategy

The pricing of the racking systems to be delivered would depend greatly on the customization
required by the client. For example, on average the standard racking system with a storage
capacity of 25 tons would be priced at BDT 5.5 lac. The pricing of the warehouse racking system
would be settled upon the requirement of the client.

29
Technical Aspects

30
Technical Aspects
The manufacturing process is the process that aims to transform a raw material into a finished
product, complying with the required quality and safety requirements. For manufacturing to be
competitive, it is important that the cost of the material, the manufacturing and the storage of
the final product are as profitable as possible.

Selective Racking: Selective pallet racking is characterized by having a high SKU count but offers
the lowest storage density. Conventional selective pallet racking can be visualized as large shelves
that have storage space for a single row of items. The racks can be arranged back-to-back to
improve storage density. It has low storage density because of the space consumed by the aisles.
This type is mostly seen in raw materials warehouses, parts storage spaces, and distribution
centers where there are many distinct types of products with low volume. Selective pallet racking
can be combined with other types to accommodate SKUs with high volumes. Other properties of
selective racking are its flexibility between FIFO and LIFO inventory management, the operability
of standard forklifts, accessibility for cleaning and inventory accounting, and simple construction
allowing easy reconfiguration. Selective racking has different designs of frame and beam
connections that are divided into teardrop and slotted racks.

Teardrop Racks: Teardrop racking is a type of selective racking that has modified frame and beam
attachments that can be reconfigured and expanded easily without the use of machine tools.
Upside down teardrop-shaped holes is punched along the upright frames where pins attached to
the beams are inserted. As the pin falls into the tapered opening, friction secures it in place
without requiring additional fasteners. This connection has enough strength to be comparable
with permanent joints. Adding heavier loads causes more friction to fix the beam in place. Wire
decks are placed above the beams that become shelves for the pallets. Appurtenances such as
pallet supports, crossbars, ties, and anchors are added to further strengthen the structure.
Teardrop pallet racks are usually produced by roll forming wherein metal sheets are cold-rolled
into rectangular frames and beams.

31
Racking Production Process phases:

Raw Material of Industrial Racking

In the case of industrial racking, knowledge of the raw material, in this case steel, is key
because it provides the basis for using the appropriate quality of raw material for each
product.

To manufacture storage system components and according to each of their requirements,

different grades of steel are used in accordance with the following standards:

o EN 10025: Hot rolled steel products for structures.

o EN 10346: Continuously hot-dip coated steel flat products. Technical supply conditions.
o EN 10149: Hot rolled flat products made of high elastic strength steel for cold forming.
o EN 10139: Low carbon steel strips, uncoated for cold forming.

32
Profiling process

In this phase, a machine that produces rolled steel with advanced, robust and versatile technology
will help, through strict control of the profile dimensions, to ensure that the product is always
within the established quality parameters.

In a high quality and demanding profiling process, a full list of dimensions must be defined
for each manufactured article (beams and uprights in this case), which is continuously checked
during each production order. Each critical measurement must be controlled to ensure the
correct behavior of the product, both in the assembly of the installation and under the application
of the load.

In this part of the process, some industrial racking manufacturers implement a traceability
process in their components, identifying each component with a serial number that makes it
unique and easily identifiable.

Product traceability system is a process encompassed within the so-called Industry 4.0
philosophy.

33
Welding process

The weld between the profile of the beam and the connector is one of the critical components
of the industrial racking system. The automated manufacturing system provides uniform
welding with an excellent surface finish. Subsequently, if final control is carried out of all the
welded components, any possible defect in this operation is discounted.

For industrial racking systems, the welding process must comply with the ISO 3834-2
regulations on Quality requirements for the fusion welding of metal materials.

34
Finish of the racking components

The beams, uprights and frames must best adapt to the customer’s needs, the product
characteristics and/or environmental conditions. Consequently, the uprights and beams can
have one of the following finishes:

Pre-galvanized upright:

For those components which are more difficult to replace such as uprights and which are more
exposed to scratches. The pre-galvanized finish guarantees optimum resistance.

Paint finish:

The beams can be both pre-galvanized and have a paint finish, thus increasing the visual
contrast with respect to uprights and diagonals and therefore facilitating the work of the forklift
driver.

In cases in which the beams and some other accessories require a paint finish, an automatic
process will be implemented, where they receive prior to the degreasing phase a treatment
with a nanotechnological product of synthetic ceramic compounds and washing with 100%

35
osmosed water. This eliminates the possibility of the appearance of impurities which can cause
corrosion.

The paint is poured through an electrostatic application in an automated booth. For this reason,
it is sprayed with epoxy-polyester followed by oven compaction. Industrial racking that meets
the highest quality parameters usually has the a2 - s1, d0 paint certification according to UNE
EN ISO 13501 which regulates the fire reaction and resistance properties of construction
products and building elements.

Hot dip galvanized beams:

The beams can also be produced with a hot-dip galvanized finish, whose main characteristic is
its high resistance in extreme conditions, since the main advantage of hot-galvanizing a
component is to avoid rust and corrosion that humidity and environmental contamination can
cause industrial racking steel components.

36
Packaging of uprights and beams

It is the final phase of the racking manufacturing process and is generally also automated to
ensure a uniform finish with excellent protection against accidental impacts during the handling
and transport phases.

In this phase the uprights and beams are stored in packages. Subsequently, each package is
packed with plastic, ensuring that the products arrive protected to their destination, avoiding
damage to the material during handling and transport. Finally, the packages are arranged
together for storage and delivery, using polyester strips.

Product storage

Finally, the finished product must be temporarily stored in a facility close to where the
manufacturing process is carried out. The stock management of the finished product may vary
according to the company, type of product or external factors affecting the market at the time.

37
Financial Aspects

38
Financial Aspects
Project Cost Detail
Particulars Quantity Unit Price Total
Land development 20,000,000.00 20,000,000.00
Steel Fabricated Building 35,000,000.00 35,000,000.00
Laser Machine 3 20,000,000.00 60,000,000.00
Bending Machine 5 6,375,000.00 31,875,000.00
Dye Machine 1 10,000,000.00 10,000,000.00
Chemical Treatment Plant 1 5,000,000.00 5,000,000.00
Power Coating Machine -
Germany 6 850,000.00 5,100,000.00
Painting Booth 6 2,500,000.00 15,000,000.00
Oven System 5 2,000,000.00 10,000,000.00
Punching Machine 2 12,750,000.00 25,500,000.00
Sharing Machine 1 5,100,000.00 5,100,000.00
Generator 1 5000000 5,000,000.00
Substation & Busbar system 20000000 20,000,000.00
Crane 1 3000000 3,000,000.00
Fire Fighting 5000000 5,000,000.00
Welding Machine 20 150,000.00 3,000,000.00
Other Equipment 1 10,000,000.00 10,000,000.00
Office decoration Furniture 10,000,000.00 10,000,000.00
vehicle -Covered Van 3 3,000,000.00 9,000,000.00
vehicle -Microbus 1 3,500,000.00 3,500,000.00
other utility 5000000 5,000,000.00
Total 296,075,000.00

39
Proposed Financing Source
Existing Proposed Grand Total
Bank
Particulars Equity Total Equity Bank Loan Total Equity Bank Loan Total
Loan

Land 20,000,000.00 20,000,000.00 20,000,000.00 20,000,000.00

Steel Fabricated Building 7,000,000.00 28,000,000.00 35,000,000.00 7,000,000.00 28,000,000.00 35,000,000.00

Machinery 47,143,750.00 150,860,000.00 188,575,000.00 47,143,750.00 150,860,000.00 188,575,000.00

Office Decorations and Furniture 5,000,000.00 5,000,000.00 10,000,000.00 5,000,000.00 5,000,000.00 10,000,000.00

Vehicles 2,500,000.00 10,000,000.00 12,500,000.00 2,500,000.00 10,000,000.00 12,500,000.00

Electrification Transformer .Busbar
System 10,500,000.00 19,500,000.00 30,000,000.00 10,500,000.00 19,500,000.00 30,000,000.00

TOTAL Fixed Cost 72,143,750.00 213,360,000.00 285,503,750.00 92,143,750.00 213,360,000.00 296,075,000.00

Working Capital 72,422,222.22 289,688,888.89 362,111,111.11 72,422,222.22 289,688,888.89 362,111,111.11

20,000,000.00 20,000,000.00 144,565,972.22 503,048,888.89 647,614,861.11 164,565,972.22 503,048,888.89 667,614,861.11

Working Capital
Particulars Tied Up Period Amount
Raw Materials 90 Days 130000000
Work-in-Process 3 " 4333333.333
Stores & Spares 90 " 130000000
Finished Goods 7 " 10111111.11
Receivables 60 " 86666666.67
Cash in Hand Lump-Sump 1000000
Total Funded working Capital At 100% Capacity. 362111111.1
Total Funded working Capital At 80% Capacity. 289688888.9

40
Revenue Projection
Item Quantity (Unit) Rate (BDT 1000/ Kg) Total
Average Rack (25-ton capacity) 1750 575000 1006250000
Total Sales at 100% production capacity in a
year 1006250000

Particulars 1st year 2nd Year 3rd Year 4th Year 5th Year
Sales at Rated Capacity 1,006,250,000 1,006,250,000 1,006,250,000 1,006,250,000 1,006,250,000
Capacity Utilization 70% 75% 80% 85% 95%
Sales at Assumed
Capacity 704375000 754687500 805000000 855312500 955937500

Profitability Ratio
PROFITABILITY RATIOS:

Gross Margin, Composite % 23.36% 27.04% 28.18% 27.67% 30.10%

Operating Profit Margin, % 15.00% 18.93% 20.25% 19.88% 22.83%
Interest Expense to Sales, % 5.10% 4.57% 4.28% 3.16% 2.46%
Net Margin to Fixed Cost % 69.24% 36.60% 43.76% 42.27% 57.54%
Net Margin to Sales % 9.90% 14.36% 16.10% 14.63% 17.82%
Return on Assets, % 9.83% 13.82% 14.67% 12.65% 14.90%
Return on Equity , % 42% 66% 79% 76% 104%
Cash Withdrawal/Dividend Payout Rate, %(Dividend/Net
10.00% 12.00% 14.00% 16.00% 18.00%
Profit)

41
Cost of Goods Sold
Particulars 1st Year 2nd Year 3rd Year 4th Year 5th Year
Raw Materials
Purchase 520,000,000.00 530,400,000.00 556,920,000.00 595,904,400.00 643,576,752.00
Wages of Supporting
Staff 6,000,000.00 6,120,000.00 6,426,000.00 6,875,820.00 7,425,885.60

Utilities 8,000,000.00 8,160,000.00 8,568,000.00 9,167,760.00 9,901,180.80

Stores & Spares 1,500,000.00 1,530,000.00 1,606,500.00 1,718,955.00 1,856,471.40

Repairs & Maintenance 2,200,000.00 2,244,000.00 2,356,200.00 2,521,134.00 2,722,824.72

Rent, Tax & Insurance 1,500,000.00 1,530,000.00 1,606,500.00 1,718,955.00 1,856,471.40

Other Manufacturing
Cost 650,000.00 663,000.00 696,150.00 744,880.50 819,368.55

Total 539,850,000.00 550,647,000.00 578,179,350.00 618,651,904.50 668,158,954.47

General, Administrative & Selling Expense

Particulars 1st Year 2nd Year 3rd Year 4th Year 5th Year
Director's Remuneration 5400000 5670000 5953500 6251175 6563734
Salaries & Allowance 28800000 28800000 30240000 31752000 33339600
Printing & Stationery 1800000 1890000 1984500 2083725 2187911
Postage,Telephone, Talex & Fax 900000 945000 992250 1041863 1093956
Travelling & Conveyance 1800000 1890000 1984500 2083725 2187911
Audit fee 1800000 1890000 1984500 2083725 2187911
Advertisement/Selling Expenses 10000000 10500000 11025000 11576250 12155063
Misc. Expenses 1200000 1260000 1323000 1323000 1389150
Total 50500000 52845000 55487250 58195463 61105236

42
Loan Repayment
Loan Amount
503,048,889
Interest Rate 9%
Grace Period Month 12
Repayment Period Yrs 5
Mode of Payments/Yr 4
Number of Installments 20

Y-1 Y-2 Y-3 Y-4 Y-5

Interest Paid 42,507,166 34,730,899 26,230,791 16,939,465 6,783,272
Principal Paid 83,540,930 91,317,197 99,817,305 109,108,631 119,264,825
Principal Remaining 419,507,959 328,190,761 228,373,456 119,264,825
TOTAL PAID 126,048,096 126,048,096 126,048,096 126,048,096 126,048,096

Opening Installments
Installment Number Closing Balance
Balance Principal Interest Total
1st
503,048,889 (20,193,424) (11,318,600) (31,512,024) 482,855,465
2nd
482,855,465 (20,647,776) (10,864,248) (31,512,024) 462,207,689
3rd
462,207,689 (21,112,351) (10,399,673) (31,512,024) 441,095,338
4th
441,095,338 (21,587,379) (9,924,645) (31,512,024) 419,507,959
5th
419,507,959 (22,073,095) (9,438,929) (31,512,024) 397,434,864

43
6th
397,434,864 (22,569,740) (8,942,284) (31,512,024) 374,865,124
7th
374,865,124 (23,077,559) (8,434,465) (31,512,024) 351,787,565
8th
351,787,565 (23,596,804) (7,915,220) (31,512,024) 328,190,761
9th
328,190,761 (24,127,732) (7,384,292) (31,512,024) 304,063,029
10th
304,063,029 (24,670,606) (6,841,418) (31,512,024) 279,392,423
11th
279,392,423 (25,225,695) (6,286,330) (31,512,024) 254,166,729
12th
254,166,729 (25,793,273) (5,718,751) (31,512,024) 228,373,456
13th
228,373,456 (26,373,621) (5,138,403) (31,512,024) 201,999,835
14th
201,999,835 (26,967,028) (4,544,996) (31,512,024) 175,032,807
15th
175,032,807 (27,573,786) (3,938,238) (31,512,024) 147,459,021
16th
147,459,021 (28,194,196) (3,317,828) (31,512,024) 119,264,825
17th
119,264,825 (28,828,566) (2,683,459) (31,512,024) 90,436,259
18th
90,436,259 (29,477,208) (2,034,816) (31,512,024) 60,959,051
19th
60,959,051 (30,140,445) (1,371,579) (31,512,024) 30,818,605
20th
30,818,605 (30,818,605) (693,419) (31,512,024) (0)

44
Statement of Cash Flow
A)Source of Fund1/Inflow of Fund Cons. 1st Year 2nd Year 3rd Year 4th year 5th Year
Equity 82,715,000.00 72,422,222.22
Term Loan 213,360,000.00
Working Capital Loan 289,688,888.89
Depreciation & Write off 8,355,437.50 8,355,437.50 8,355,437.50 8,355,437.50 8,355,437.50
Operating Profit 105,669,562.50 142,840,062.50 162,977,962.50 170,043,545.50 218,248,414.91
Total 296,075,000.00 476,136,111.11 151,195,500.00 171,333,400.00 178,398,983.00 226,603,852.41
B) Application of Fund:
Investment in Fixed Assets 213,360,000.00
Increase in Current Assets 362,111,111.11
Payments:
Principal of Term Loan
28,088,644.52 33,410,373.20 33,857,676.57 37,033,760.19 40,507,782.35
Interest on Term Loan
18,062,498.80 16,586,698.73 12,293,466.75 9,117,383.13 5,643,360.97
Interest on Working Capital Loan 17,894,705.00 17,894,705.00 17,894,705.00 17,894,705.00 17,894,705.00
Total 213,360,000.00 426,156,959.43 67,891,776.93 64,045,848.32 64,045,848.32 64,045,848.32
Surplus(A - B) 82,715,000.00 49,979,151.68 83,303,723.07 107,287,551.68 114,353,134.68 162,558,004.09
Opening Balance 0 82,715,000.00 132,694,151.68 215,997,874.75 323,285,426.43 437,638,561.11
Closing Balance 82,715,000.00 132,694,151.68 215,997,874.75 323,285,426.43 437,638,561.11 600,196,565.20

45
Breakeven Analysis
Variable
Particulers TOTAL Fixed Cost Cost
Raw Material 556920000 55692000 501228000
Director's Remuneration 5953500 2083725 3869775
Salaries & Allowance 30240000 10584000 19656000
Printing & Stationery 1984500 694575 1289925
Postage,Telephone, Talex & Fax 992250 347287.5 644962.5
Travelling & Conveyance 1984500 694575 1289925
Audit fee 1984500 694575 1289925
Advertisement/Selling Expenses 11025000 3858750 7166250
Financial Expenses 33410373.2 11693630.62 21716742.58
Depreciation 8355437.5 2924403.125 5431034.375
Misc. Expenses 1323000 463050 859950
Total 654173060.7 89730571.25 564442489.5

01) Operating Year : 3rd Year

02) Capacity Utilization : 0.8
03) Sales Revenue : 805000000
04) Total Cost : 578179350

46
SWOT Analysis

47
SWOT Analysis
SWOT analysis is significant for reviewing whether the supply chain and strategic direction of the
company properly addresses the company’s short-term, time-sensitive delivery requirements,
while also addressing its long-term cost objectives. Since the purpose of supply chain
management is to ensure timely delivery of parts, raw materials and finished goods, it makes
sense to use the SWOT analysis to accentuate the positives and address the negatives within the
company's supply chain.

We perform the analysis from one end of the spectrum. They either analyze their supply chain
by reviewing the attributes the company itself brings to the table, or they do it by reviewing the
attributes its vendor brings to the table. However, we’re going to bridge these two approaches
together and try to combine them into one assessment

Following is the SWOT analysis for the warehouse manufacturing plant to be established by Step
Media Ltd.

Strength:
· Strong Customer Relationship
· Proved latest technology
· High quality products
· Inventory pooling with manufacturing
· Established R&D facilities
· Market oriented product pricing
Weakness:
· Uncertain Cashflow
· High cost for advertising and sales promotion
· Dependence on imported raw material
Opportunities
· Booming demand
· Favorable industry trends
· Low cost of debt and equity fun available
Threats:
· Fast changing technology
· Adverse environment for Covid-19
· Improvement in competitors

48
Concluding Remark

49
Concluding Remark
Warehouse racking, also known as storage or pallet racking, is a material handling system suitable
for mass storage of goods unitized on skids or pallets. This allows efficient utilization of space
while providing easy access to stockpiled items for better inventory control.

Some of the benefits of racking systems are efficient space utilization, easy inventory
organization, fewer damaged goods, increased employee productivity, automation, safety, and
cleanliness.

Important factors to consider before investing in a racking system are the available floor area and
vertical space, pallet load weight and dimensions, target capacity, throughput, number of SKUs,
type of inventory management, and cost.

Racking with high selectivity and low-density are selective, double deep, and very narrow aisle
racking systems. High-density applications are push-back, drive-in, and pallet flow.

Sales Revenue

Estimated annual Sales Revenue of the Project is expected to be BDT. 70 Crore, BDT 75 Crore,
BDT 80 Crore, BDT 85 Crore and BDT 95.5 Crore in the 1st, 2nd, 3rd, 4th, and 5th year respectively.

Net Profit

Net Profit of the Project is calculated after meeting up all operational and financial expenses and
taxes. In 1st, 2nd, 3rd, 4th, and 5th year of its operation, the Net Profit will stand at BDT 6.9 Crore,
BDT 10.8 Crore, BDT 12.9 Crore, BDT 12.5 Crore and BDT 17 Crore respectively.

Pay Back Period

Pay Back Period for the project has been calculated and found below 5 years which is satisfactory
considering the nature of the business.

50
Risk & Mitigation
Financial Risk

Financial Risk may arise due to high leverage position and non-payment of credit facility.

Gross Margin, Composite % 0.233576 0.270364 0.281765 0.276695 0.301043

Operating Profit Margin, % 0.150019 0.18927 0.202457 0.198809 0.228308
Interest Expense to Sales, % 0.051048 0.04569 0.042834 0.031582 0.024623
Net Margin to Fixed Cost % 0.671038 0.354688 0.424111 0.40966 0.557674
Net Margin to Sales % 0.098971 0.143581 0.160954 0.146324 0.178225
Return on Assets, % 0.098292 0.13818 0.146716 0.12653 0.149015
Return on Equity , % 0.423613 0.658451 0.787329 0.760501 1.035278
Cash Withdrawal/Dividend Payout Rate,
%(Dividend/Net Profit) 0.1 0.12 0.14 0.16 0.18

Financial Risk Mitigation

After implementation of proposed setup, the company will generate sufficient surplus cash as
well as income to serve Interest.

Debt Service coverage ratio is quite satisfactory and cash generation will be excellent. So, the
debt servicing ability is outstanding against this extension.

Comments: Above analysis and ratios show the company’s liquidity, Debt Equity & Debt service
coverage is favorable for financing.

Business/Industrial Risk

Business Risk may arise due to decrease in production and adverse impact due to internal or
external sovereign, regulatory changes or political instability, Interest or Foreign Exchange Rate
fluctuation and increasing competition in world market.

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Business/Industrial Risk Mitigation:

Step Media is one of the experienced incumbents within the design, printing, and logistics
industry of Bangladesh. The demand for warehouse rack is increasing among economic zones
and other industrial areas in Bangladesh.

Moreover, Step Media has a hard-earned reputation in the market. So, it is expected that the
business growth will be excellent and the warehouse rack manufacturing plant will be doing very
good and would be able to repay the bank liabilities at ease and in time.

Management Risk

Management Risk may arise due to adverse changes in key management personal & weak
decision-making capacity.

Management Risk Mitigation:

Step Media is a Limited Company and a going concern having efficient directors as its owner and
a highly efficient Management, sales & marketing team.

Security Risk:

Security risk arises due to Security/collateral coverage & support.

Security Risk Mitigation:

The warehouse rack manufacturing plant is going to be setup at entrepreneur’s own land having
electricity & water connection. The collateral is well covered against the proposed facility.

Relationship Risk

Relationship risk refers to Account conduct, utilization of limit, Compliance of covenants &
conditions & Personal deposits.

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Relationship Risk Mitigation:

The company is banking with reputed Schedule Bank with satisfactory Transaction and also avails
credit facilities in different mode having satisfactory repayment behavior.

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