VEHICLES AND

MACHINERIES SPARE PARTS

MANUFACTURING INDUSTRY

Girmaye Abebe Consultancy

0994614040

ADDIS ABABA, 2023

1
 TABLE OF CONTENTS
TABLE OF CONTENTS ................................................................................................ 2
LIST OF TABLES AND FIGURES ............................................................................... 4
LIST OF TABLES ........................................................................................................ 4
LIST OF FIGURES ...................................................................................................... 4
LIST OF ABBREVIATIONS .......................................................................................... 5
1. EXECUTIVE SUMMARY........................................................................................... 6
2. PRODUCT DESCRIPTION AND APPLICATION .................................................. 8
3. MARKET STUDY, INDUSTRY CAPACITY AND PRODUCTION PROGRAM ........ 9
3. 1. Market Study ........................................................................................................ 9
3. 2. Pricing and Distribution ........................................................................................ 9
3. 3. Industry Capacity .................................................................................................. 9
3. 4. Production Program .............................................................................................. 9
4. RAW MATERIALS AND UTILITIES ...................................................................... 10
4. 1. Availability and Source of Raw Materials.......................................................... 10
4. 2. Annual Requirement and Cost of Raw Materials and Utilities .......................... 11
5. TECHNOLOGY AND ENGINEERING................................................................... 12
5. 1. Production Process of Spare Parts of Machineries and Vehicles ....................... 12
5. 2. Machinery and Equipment .................................................................................. 12
5. 3. Land, Building and Civil Works Cost ................................................................ 12
6. HUMAN RESOURCE AND TRAINING REQUIREMENT ................................... 13
6. 1. Human Resource ................................................................................................ 13
6. 1. 1. Training Requirement ................................................................................. 14
6. 2. Organizational Structure ..................................................................................... 14
6. 2. 1. General Manager ........................................................................................ 16
6. 2. 2. Production and Technical Department ....................................................... 16
6. 2. 3. Finance and Administration Department .................................................... 16
6. 2. 4. Commercial Department ............................................................................. 16
 6. 2. 5. Quality Control and Assurance Department ............................................... 17
6. 2. 6 MIS Services Department ............................................................................ 17
7. FINANCIAL ANALYSIS........................................................................................... 18
7. 1. Underlying Assumption ...................................................................................... 18
7. 2. Implementation Schedule ................................................................................... 19
7. 2. 1. Implementation Cost ................................................................................... 21
7. 3. Office Furniture And Equipment ........................................................................ 23
7. 4. Investment .......................................................................................................... 24
7. 5. Production Costs ................................................................................................. 25
7. 6. Financial Evaluation ........................................................................................... 26
7. 6. 1. Profitability................................................................................................. 26
7. 6. 2. Breakeven Analysis .................................................................................... 27
7. 6. 3. Payback Period ........................................................................................... 27
7. 6. 4. Internal Rate of Return , IRR and Net Present Value, NPV ....................... 27
7. 6. 5. Profit Generation ........................................................................................ 27
7. 6. 6. Tax Revenue ............................................................................................... 28
7. 6. 7. Employment and Income Generation ......................................................... 28
7. 6. 8. Import Substitution and Foreign Exchange Saving ..................................... 28
7. 6. 9. Technology Transfer .................................................................................. 28
7. 6. 10. Diversification and Inter-Sectoral Linkage. .............................................. 29
7. 7. Environmental and Social Impact Assessment (ESIA) ................................. 29
ANNEXES: FINANCIAL ANALYSIS .......................................................................... 31
 LIST OF TABLES AND FIGURES
LIST OF TABLES
TABLE 3. 1 : TYPES OF THE LIST OF SPARE PARTS OF DIFFERENT
AUTOMOBILES AND MACHINERIES WITH ITS PERCENTAGE ................................ 9

TABLE 4. 1 : ANNUAL MATERIAL REQUIREMENT AND RESPECTIVE COSTS AT

FULL CAPACITY .............................................................................................................. 11
TABLE 4. 2 : ANNUAL UTILITY REQUIREMENT AND RESPECTIVE COSTS AT
FULL CAPACITY .............................................................................................................. 11

TABLE 5. 1 : MACHINERY AND EQUIPMENT ............................................................ 12

TABLE 6. 1 : HUMAN RESOURCE REQUIREMENT.................................................... 13

TABLE 7. 1 : CONSTRUCTION AND FINANCE; DEPRECIATION AND

WORKING CAPITAL (MINIMUM DAYS OF COVERAGE) ........................................ 18
TABLE 7. 3 : IMPLEMENTATION COST ....................................................................... 21
TABLE 7. 4 : OFFICE SPARE PARTS AND EQUIPMENT COST, ETB ....................... 23
TABLE 7. 5 : TOTAL INITIAL INVESTMENT (000 ETB) ............................................. 24
TABLE 7. 6 : PRODUCTION COST (000 ETB) ............................................................... 26

LIST OF FIGURES
FIGURE 6. 1 : ORGANIZATIONAL STRUCTURE OF THE VEHICLES AND
MACHINERIES SPARE PARTS MANUFACTURING INDUSTRY.............................. 15

FIGURE 7. 1 : PROJECT IMPLEMENTATION SCHEDULE ......................................... 19

4
 LIST OF ABBREVIATIONS
ANRS : Amhara National Regional State
CAGA : compound annual growth rate
CNT : Caron Nanotubes
EPA : Environmental Protection Authority
ETB : Ethiopian Birr
FMCG : Fast moving consumer goods
kt : Kilo ton
IRR : Internal Rate of Return
MIS : Management Information System
M² : Square meter

M3 : Cubic meter

NPV : Net Present Value

UNEP : United Nations Environment Program

5
 1. EXECUTIVE SUMMARY
This project profile deals with the establishment of Vehicles and Machineries
Spare Parts Manufacturing Industry at Debre Birhan City Administration,
Amhara National Regional State (ANRS). The following presents the main
findings of the study.

The supply of vehicles and machineries spare parts was increasing in the last
decades at Ethiopia due to the expansion of automobile industries and industrial
activities in the last decades. Demand projection divulges that the domestic
demand for spare parts is substantial and is increasing with time. Accordingly,
the planned industry is set to produce 150. 00 tons of spare parts of vehicles
and machineries annually.

The principal raw materials required manufacturing spare parts of different

machineries and automobiles are steel and aluminum. All raw materials have to
be imported from abroad.

The total investment cost of the project including working capital is estimated
at ETB 121. 00 million at 13,000 square meter of land and creates 166 jobs and
ETB 18. 94 million of income per year. Most of the costs go to working capital
and machine equipment.

The financial result indicates that the project will generate profit beginning from
the first year of operation. Moreover, the project will break even at 39. 49% of
capacity utilization and it will payback fully the initial investment less working
capital in 5 years and 3 months. The result further shows that the calculated
IRR of the project is 12. 30% and NPV discounted at 10% of ETB 14. 81million.

The establishment of such factory will have a foreign exchange saving effect to
the country by substituting the current imports and exporting most of its product.
The project will also create backward linkage with chemical manufacturing sub

6
sector and forward linkage with the vehicles and machineries manufacturing
sub sectors. The project also generates income for the Government in terms of
tax revenue and payroll tax.

7
 2. PRODUCT DESCRIPTION AND
APPLICATION
Spare parts are a duplicate part to replace a lost or damaged part of a machine
in many industries. Spare parts are the key to the execution of equipment
operation and maintenance (O&M), whose life cycle includes production,
transportation and working stage. Usually, the production and transportation of
spare parts are the responsibility of the service manufacturer.

Spare parts play a crucial role in the manufacturing industry as they help ensure
that production processes run smoothly and efficiently. Without spare parts,
equipment downtime would be much more frequent, resulting in costly delays
and lost productivity. In addition, the availability of spare parts is critical for
maintaining and repairing equipment, which helps to extend its lifespan and
minimize the need for costly replacements. The common spare parts are
presented for vehicles and different machineries.

Spare parts is one of the common technologies with different types and sizes widely used
for day to day activities in most industries like transportation and production at larger
scale. The top advantages that effective spare parts management can bring to your
operations related to production machineries and automobiles are reduced downtime,
increase productivity, better inventory, reduced waste, limited costs and monitor issues
in your line. Manufacturing process involved include mixing, molding, and coloring. The
out-put of the industry will serve as a service material for the outputs of many industries.
The linkage effect of the industry is, therefore, forward.

8
 3. MARKET STUDY,IN
CAPACITY AND PRODUCTION PR OGRAM
Y
R
T
S
U
D

3. 1. Mar ket Study

Spa r e pa r ts ha s no w a da y be c om e ve r y e xpe ns ive a n d t he pr ic e i s e xor bi ta nt ly gr ow i ng f r om y e a r toy e a r d ue t o inc r e a si ng sc a r c i ty a ndr is i ng pr ic e of m
ietal n t h e w o r l d . T he spa r e pa r t s i nd us tr y is a s ig ni f ic a nt a nd gr ow in g m a r ke t. A c c o r d in g t o r e c e nt e st im a t e s , the g l oba l spa r e pa r ts m a r ke t i s e xpe c te d to r e a c h $1 . 5 tr i ll io n by 20 27 , gr o w i ng a t a CA G R o f 4. 5% dur in g t he f or e c a st pe r i od . The i nc r e a si ng d e m a nd f or spa r e pa r t s i s dr ive n by f a c tor s s uc h a s po pu la t i on gr o w th , ur ba n i za ti on , a nd i nc r e a si ng in du st r ia li z a t io n .
A dd i ti ona l ly , the gr ow th of e - c om m e r c e a n d a d va nc e m e n ts i n te c h no l ogy ha ve m a de it e a sie r f or m a n uf a c tur e r s a nd c u st om e r s to a c c e s s spa r e pa r t s, f ur the r dr iv in g th e m a r ke t ’ s gr o w t h.

As the global economy continues to grow, so too w ill the demand for spare parts. The manufacturing and industrial sectors are expected to see significant expansion in the coming y ears, particularly in developing countries, w hich will drive the need for spare parts to keep equipment runnin g smoothly . Additionally , the increasing adop tion of Industry 4. 0 technologies s uch as IoT and automation is also ex pected to drive demand for spare parts as these technolog ies require more frequent maintenance and replacement of parts. .

Spare Parts Logistics Mar ket s ize was valued at U SD 43. 10 Billion in 2 022 and is projected to reach USD 5 6. 10 Billio n by 2030, grow ing at a CAG R of 3. 46% from 2023 to 203 0. The same trend is happen in Ethiopia For ins tance , Ethiopia is among Africa’s most impressive growth performers over the past decade averaging 10. 9% annual growth between 2005 and 2022. W ith a GDP of U S$11 2 billio n in 2022 it is the ninth largest economy in Africa and the th ird largest in Eastern Africa. The Spare Parts Logistics Mar ket refers to the market for the storage, transportatio n, and delivery of spare parts and components used in various indu stries. T his mar ket inclu des the sales of spare parts and their related services, such as warehous ing, inventory management, and dis tribution. The Spare Parts Logis tics Market serves a wide range of ind ustries, includ ing automotive, aerospace, indus trial machinery , electronics, and healthcare. The market is driven by the need to maintain and repair equipment to ensure o ptimal performance and minimize
downtime. The increasing complexity of modern machinery and equipment, coupled with the need for just-in-time delivery , has led to a signif icant demand for spare parts logistics services.

The supply of vehicles and machineries spare parts was increasing in the last decades at Ethiopia due to the expansio n of automobile indus tries and in dustrial activities in the last decades.

The increasing demand for spare parts is driven by factors such as population growth, urbanization, an d increasing in dustrialization. A ll the factor showed that spare part consumption is growing ion alarming rate that needs huge demands.

3. 2. Pricing andDistribution
The ty pe of ve h ic le s a n d m a c h i ne r ie s spa r e p a r t s pr o duc t s ha s a lm o s t the sa m e pr ic e ba se d on t he si ze a n d ty pe s of the pr o duc ts ba se d on the w e i gh to f t he pr od uc t. The se p r o duc tm i xe s i sse le c te d t o a ttr a c t va r io us ta r ge t soc ie t ie s a s se e n i n Ta b le 3. 1. Som e o f t he ta r ge tc l ie nt sf o r a m a nuf a c tu r e r of ve h ic le s a nd m a c h ine r ie s s pa r e pa r ts a r e ve h ic l e s a nd m a c h ine r ie s ow n e r s . T he a va ila ble r e ta i l a nd w h o le sa le ne tw or k sha l l be use d by t he e n v isa ge d i nd us tr y . The c ur r e n t w ho le sa le pr ic e of t he ve h ic le s a nd m a c h ine r ie s spa r e
pa r t s a r e E T B of 1,0 00 ,0 00 . 00- 1, 15 0, 00 0. 00 pe r to n. T h e r e f o r e , t h i s i n d u s t r y h a s s e t a p r i c e o f E T B 80 0 , 0 0 0 . 0 0 pe r to n t oc om pe te i n t he m a r ke t w it h f e a s ib le pr of it .

The spa r e pa r t s pr o duc t io n in du s tr y e x por ts m o st of t he pr od uc t t o the i n te r na t io na l m a r ke t e s p e c i a l l y f or t ho se of the de ve l op i ng na ti on s . T he in du st r y w i ll d is tr ib ut e o n ly 3 5% of the pr od uc t to t he loc a l m a r ke t the r e m a i ni ng w il l e x por te d t o m a ny na ti on s suc h a s S uda n, Som a lia , M id dle Ea st a n d ot he r A f r ic a n N a ti on s.

3. 3. I ndustry Capacity
Co ns i de r i ng the e x pe c te d de m a n d f or ve hic le s a nd m a c h ine r ie s spa r e pa r t s a s pr e se n te d e a r l ie r , a n d t he pla nne d te c hn ol ogy , t he e n vi sa ge d i nd us tr y is se t t o a nn ua l ly pr o duc e 1 50 . 00 to ns of s pa r e pa r t s of ve h ic le s a n d m a c hi ne r ie s . Th is pr o po se d pr o duc t io n a m ou nt is e qu iva le n t t o 1 50 . 00 t on s of t he spa r e pa r ts of ve h ic le s a n d m a c h i ne r ie s . T he m a in spa r e pa r t s of t he in du s tr y a r e m e ta l c up s, c y l in de r s a n d ba tte r y c o ve r s . A d di ti on a l ly , the in du st r y w il l m a nuf a c tur e o t he r spa r e pa r t s t ha t de sc r ibe d in Ta b le 3 . 1 .
The i nd us tr y c a pa c i ty c o ve r s o nly f e w pe r c e n t of t he loc a l d e m a n d a s r e p o r t e d a b o v e. A l l the l is t o f spa re p a r t s h a s d e s c r i b e d o n Table 3 . 1 be lo w .

TABLE 3. 1 : TYPE S OF THE LI ST OF SPARE PARTS OF DIFFERENT AUTOMOBILES AND MACHINERIES WITH ITS PERCENTAGE

Sr . No. D e sc r ip t io n Percentage OfThe S p a r e P a r t s P r o duc t

1 Me ta l C up s 15. 00

2 Cy l in de r s 15. 00

3 Ba tte r y C ove r s 15. 00-

4 W in g 5. 00

5 Bum pe r 5. 00

6 Co w e l P a ne l 5. 00

7 Be a r in gs 5. 00

8 Cr a n ksha f t 3. 00

9 Ey e le t 3. 00

10 A xl e s 3. 00

11 A xl e s 3. 00

12 A xl e s 3. 00

13 Fa ste ne r s 3. 00

14 Se a ls 3. 00

15 Br a ke s A n d C lu tc he s 3. 00

14 Lub r ic a nt s 3. 00

15 O th e r Re q ue st By c u st om e r s 8. 00

3. 4. Production Program
The pr o gr a m is sc he d u le d ba se d o n the c o ns i de r a t i on t ha t t he e n vi sa ge d in du s tr y w il l w or k 30 0 da y s in a y e a r in 1 s hi f t 8 h our s, w he r e the r e m a i ni ng da y s w i ll be h ol ida y s a n d f or m a i nte na nc e . D ur in g the f i r s t y e a r of ope r a t io n the i nd u str y w i ll o pe r a te a t 70 % c a p a c i ty , gr o w i ng t o 8 0% a nd 9 0% in the 2n d a n d 3 r d y e a r r e spe c t ive ly . T h e c a p a c i t y w i l l g r o w ot 1 0 0 % sta r t in g f r om the 4 th y e a r . Th i s c o n si de r a ti on i s de ve lo pe d ba se d o n the a s s u m p t i o n t h a t m a r k e t a n d l o g i s t i c s b a r r i e r s w o u l d t a ke p l a c e f o r t h e f i r s t t h r e e y e a r s o f operation .

The m a nuf a c t ur i ng pr oc e s s i nc l ude s in vo l ve s a r r a n ge m e n t of t oo ls a n d se r v ic e s so t he m a n po w e r i n p r o duc ti on w il l ta ke a c o ns ide r a b le tim e u nt i l the y de v e lo p a s ki l l in o pe r a t i on a nd tr o ub le s ho o ti ng of t he pr o duc t io n pr oc e ss s o the p r o duc ti on pr ogr a m of s pa r e pa r ts of ve hic le s a nd m a c h ine r ie s f o r the e n vi s a ge d i nd us tr y f o r thr e e y e a r s.

9
 4. RAWMATERIA LSANDU TI LITIES
4. 1. Availability a nd Source of Raw Materials
The a u tom o t ive a n d pr o duc ti on in du str y ne e d s m a ny ty pe s of c om p one nt s – tha t i s w hy c a r a n d m a c h ine r y pa r ts pr od uc ti on de m a nd s a va st va r ie ty of m a te r ia l ty pe s . W it h the e v o lu ti on of t he w h ole i nd u str y , c o nc e r n s le f t w o od f or m a ny a ll oy s of ste e l , a lum in um , a nd p la s t ic s . A str on ge r f oc u s on sa f e ty a nd e c ol ogy c a use d the b ig ge r po pu la r i za ti on of e le c tr on ic s a n d r a r e Ea r t h m ine r a l s .

Co n te m por a r y a u tom ot ive a n d in du s tr ia l pr od uc t io n sy s te m s pa r ts pr od uc ti on ne e ds p le n ty of m a te r ia ls s uc h a s :

 steel – a backbo ne of the automotive and machinery production and maintenance indus try , a crucial alloy for the production of engines bloc k, con structio n parts, and p owertrains (althoug h cast iron and alumin um are now more popular, steel remains a key material in the automotive indus try ),

 aluminum – is used in a vast variety of application s, from engine bloc ks to small construction parts of the different machineries and automobiles,

Each of these materials requires different ty pes of machining, but s till, the biggest part of that mix belon gs to traditional alloy s (steel, aluminum) and other materials. Its prod uction can differ but u sually is based on machining. The automation of millin g, turn ing, or sand ing processes and the introd uction of computerized numerical control (CNC) allowed for speed-up production of car and machinery parts. That lead to decreasing the cost of the sin gle part and more precision in prod uction (thus: fewer problems with unmatched parts) .

1
0
 4. 2. Annual Re quire ment a nd Cost of Raw Materials and Utilities
The a n nu a lr a w m a te r ia la n du ti l ity r e qu ir e m e n ta n dt he a ss oc ia te dc o stf or the e nv i sa ge d in du str y a r e li st e d i n Ta b le 4. 1 a nd 4 . 2 he r e un de r .

The t ota l c os t of r a w m a te r ia l s a t f u ll c a pa c i ty of pr o duc ti on is e s tim a te d to be ET B 3 9. 12m il l io npe r y e a r . Fur t he r m or e ,t he pr od uc ti onr e qu ir e se le c tr ic ity , w a te r , l ubr ic a nt oi l, a n d f ue l f or t he pr oc e s s. Ene r gy i s t he m a in u ti l it ie s tha n o t he r s i n spa r e p a r t s in du s tr y . W a te r i s one of t he im p or ta n t ut il i tie s i n c o ol in g of the sy s te m of t he f a c tor y . L ubr ic a nt o il i s a l so v ita l f or sm oo th pr oc e s s in g o f m a c h i ne .

The t ota l r un n in g c o s t f or ut i li t ie s r e a c he s t o E T B 3. 87 m i l li on pe r y e a r . The t ota l r u nn in g c os t f or r a w m a te r ia l s a nd u t il i tie s r e a c he s to ET B 4 3. 00 m i ll io n pe r y e a r .

TABLE 4. 1 : ANNUAL MATERIAL REQUIRE MENT AND RE SPECTIVE CO ST S AT FULL CAPACITY

QUANTITY

UNIT TOTAL CO STPER UNIT(InETB) FOREIGN COST (IN000ETB) TOTAL COSTPERYEAR(IN000 ET B)

RAWMATERIAL

VEHICLES

Steel Ton 103. 09 71,500. 00 7,371. 13 7,371. 13

Aluminum Ton 103. 09 181,500. 0 0 18,711. 34 18,711. 34

MACHINERIE S

Steel Ton 51. 55 71,500. 00 3,686 3,686

Ton

Aluminum 51. 55 181,500. 0 0 9,356 9,356

39,123. 71

Total

TABLE 4. 2 : ANNUAL UTILITY REQUI REMEN T AND RE SPECTIVE CO ST S AT FULL CAPACITY

UTILITY UNIT QUANTITY PRICE PERUNIT (INETB) LOCAL COST(IN000 ETB) TOTAL CO ST PER YEAR(IN000 ET B)

Electricity KWH

729,600. 00 3. 40 2,480. 64 2,480. 64

Fuel Li

17,500. 0 0 77. 00 1,347. 50 1,347. 50

Lubricant Li / kg

23. 00 550. 00 12. 65 12. 65

Water m3

300. 00 10. 00 3. 00 3. 00

ICT

33. 00 33. 00

Total Utility Cost

3,876. 79 3,876. 79

1
1
 5. TEC HNOLOGY AND ENGINEERING
5. 1. Production Process of Spare Parts of Machineries and Vehicles
Mo de r n c a r s a nd m a c h ine r ie s a r e m a de up of th ou sa n ds o f dif f e r e n t pa r ts , a nd w i th te c hn ol ogy c o nt in ua lly e vo lv i ng ; t he li s t of pa r ts a ls o c on t in ue s t o gr ow . T he r e a r e m il l io ns of ve h ic le s a n d m a c hi ne r ie s r e g i ste r e d e a c h y e a r . Ea c h o ne m u st ha ve i ts in te gr a l pa r ts m a n uf a c tur e d a nd a s se m ble d i n a f a c tor y , be f or e be i ng s hi ppe d t o the d e s ti na ti on c o un tr y , w h e r e i t is so ld . A s a ve h ic le a nd m a c h ine r ie s pa sse s th r o ug h a n a ss e m bly l ine . I f a pa r t i sn ’ t q ui te r i g ht , th i s c ou ld c a u se s ig n if ic a nt is sue s f ur the r do w n
the l ine , so m a n uf a c t ur e r s pu t a l ot of tim e a nd e f f or t i n to t he pa r t s m a nuf a c t ur i ng pr oc e ss .

Different car and machinery parts are manufactured in different way s. Metal parts are made using a millin g/ cutting and metal forming process. Without au tomotive and machineries metal forming, modern cars and machineries would not loo k as they do. Sheet metal can be worked ho t or cold. The bas ic processes are below:
 Milling is a ty pe of machining process that uses a rotating cutter to remove material in a controlled manner from a workpiece. This subtractive manufacturing technique aims to turn the workpiece into the required shape .
 Metal forming is an ancient s kill. Before the ind ustrial revolutio n, blac ksmith s wor ked metal into the required shapes using hammers and heat. Today , the same j ob is done on a vast scale using specialist machines.
A blan k piece of sheet metal is the s tarting p oint for many car and machinery parts. This metal is then reshaped, s tamped, cut, and molded into the part needed. Presses are used to shape metal into curves. The rig ht amount of pressure is needed or the metal won’t retain the desired s hape.
 Stamping presses are used to ma ke car and machinery parts such as hub caps. Here, the metal is literally stamped into a specific shape us ing a die.
Drawing metal involves u sing a d ie to shape the metal. Sheet metal is pressed against a die usin g a hy draulic press or punch. Lubricant is used to minimize the pos sibility of wrin kles. Forging is also used to produce the same effect. Extrusion Processes force metal through a die to produce lon g tubes and ro ds.
In short, automation of millin g/ cutting, turning / forming, or sanding processes and the introduction of computerized numerical control (CNC) allowed for speed-up production of car and machinery parts.

5. 2. Machinery and Equipment

The machineries and equipment required for producing the spare parts of the vehicles and machineries are presented in in Tab le 5. 1 below.

TABLE 5. 1 : MACHINERY AND EQUIPMENT

NO DESCRIPTION QUANTITY PRICE PER UNIT (IN000ETB) PRICE PER UNIT (IN000ETB)

1 Metal Millin g Machine for Steel and Aluminum 1

13,750. 0 0 13,750. 0 0

2 ALE Double Cran k H Frame Power Press Punching Machine for Steel and A luminum 1

22,000. 0 0 22,000. 0 0

3 Extrusion Stamp ing Mach ine for Steel and Alumin um 1

11,000. 0 0 11,000. 0 0

FOB

46,750. 0 0

Insurance, Bank Charges, Port Handling And Inlan d Transport (10%) 1

4,675. 00

51,425. 0 0

The t ota l c os t of m a c hi ne r y a nd e q ui pm e n t inc lu d in g f r e ig h t, in s ur a nc e a n d ba n k c os t is e st im a te d to be a b ou t ET B 5 1. 43 m i l li on .

The f ol lo w i ng a r e som e of t he m a c h ine r ie s s up p lie r s ’ a d dr e s s f or the e n vi sa ge d project

1. Shando ng Sunrise Cnc Machine Co. , Ltd. In ternational: +86 137931 79476 D omestic: +86 136 886068 08 Technical: +86 15 964541 668, E-mail：melody @sunrisecnc. com , Address: Qizhong Road, Qihe Econ omic Development Zone, Shando ng Province, Ch ina

2. C he n gd u Zhe ng xi H y dr a ul ic P r e s sur e E qu ipm e nt Ma nu f a c t ur e Lim i te d C om pa ny , A dd r e s s N o. 1 69 8, W i s dom A ve nue , Q i ng ba ij ia n g D i str ic t, C he n gd u C hi na . H ot l ine ：8 6- 2 8- 67 99 91 99. Te le ph one ：8 6- 2 8- 6 79 99 19 9. , Fa x ：8 6- 2 8- 6 79 99 19 9, Z ip c o de ：6 10 30 0, Em a i l ：i nf o@ c d zhe ng x i. c om , W e b s ite ：h t tp :/ /w w w . z zy y yy . c om /

5. 3. La nd, Building a nd Civil Wor ks Cost

The t ota l si te a r e a f or th e e n v isa ge d i nd us tr y is e s t im a te d to be 1 3,0 00 m 2 . T he m a j o r b u il di ng s a nd c i v il w or ks inc lu de bu i ld in gs f o r pr o duc ti on , of f ic e s , w or ksh op s a nd w a r e ho use s. T he to ta l c os t o f b u il di ng a nd ot he r c i vi lw or ks is e s t im a te da t ET B 31 . 3 5 million.

1
2
 6. HUMAN RESOURC EAND TRAINING REQUIREMENT
6. 1. Huma n Resource
The l is t of r e q u ir e d m a n pow e r f or the e nv isa ge d i nd us tr y is sta te d in Ta b le 6. 1 be l ow . The e n vi sa ge d in du str y the r e f or e ,c r e a te s 16 6j ob sa n da b ou t ET B1 8. 9 4m i ll i o nof inc om e . The pr of e ss io na ls a n d su pp or t s ta f f s f or th e e n v isa ge d i nd us tr y sha ll be r e c r ui te d f r om t he su r r o un di ngr e g io nof the D e br e B ir ha n C ity A dm i ni s tr a t io n,A m ha r a N a t io na l Re gi ona l S ta te ( A N R S) .

TABLE 6. 1 : HUMAN RE SOURCE REQUIREMENT

Position No. Annual Salary (In000 ETB)

Sr.No. Month ly Salary (ETB)

1 Overhead Labour

1. 1 General Manager Office

1. 1. 1 General Manager 1 25,000. 0 0 300. 00

1. 1. 2 Executive Secretary 1 15,000. 0 0 180. 00

Sub To tal 2 480. 00

1. 2 Finance And Administration Department

1. 2. 1 Department Head 1 15,000. 0 0 180. 00

1. 2. 2 Senior Accountant 2 12,000. 0 0 288. 00

1. 2. 3 Junior Accountant 4 7,500. 00 360. 00

1. 2. 4 Senior Cost Accountan t 3 10,000. 0 0 360. 00

1. 2. 5 Personnel 4 7,000. 00 336. 00

1. 2. 6 General Service 5 7,000. 00 420. 00

1. 2. 7 Driver 3 14,000. 0 0 504. 00

1. 2. 8 Security Head 1 10,000. 0 0 120. 00

1. 2. 9 Guard 6 7,000. 00 504. 00

1. 2. 10 Janitors 17 6,000. 00 1,224. 00

1. 2. 11 Gardner 5 6,000. 00 360. 00

Sub To tal 51 4,656. 00

1. 4 Commercial Department

1. 4. 1 Department Head 1 15,000. 0 0 180. 00

1. 4. 2 Purchaser 5 10,000. 0 0 600. 00

1. 4. 3 Salesperson 7 10,000. 0 0 840. 00

1. 4. 4 Store keeper 2 7,000. 00 168. 00

1. 4. 5 Assistan t Store Keeper 3 6,000. 00 216. 00

1
3
 Sub To tal 18 2,004. 00

Total-Sub Total 71 7,140. 00

Employ ee’s Benefit And Expense (20% Of Basic Salary )

1,428. 00

Total Overhead Labour 71 8,568. 00

2 Direct Labor

2. 1 Production And Technical Department

2. 1. 1 Department Head/ Specialized In Metal Engineering 1 15,000. 0 0 180. 00

2. 1. 2 Production Su pervisors 1 13,000. 0 0 156. 00

2. 1. 3 Textile Processing 6 9,000. 00 648. 00

2. 1. 4 Textile Expert 7 8,000. 00 672. 00

2. 1. 5 Assistan t Operators 45 7,000. 00 3,780. 00

2. 1. 6 Operators 20 6,000. 00 1,440. 00

2. 1. 7 Mechanic 5 10,000. 0 0 600. 00

2. 1. 8 Electrician 5 10,000. 0 0 600. 00

Sub To tal 90 8,076. 00

2. 2 Quality Contro l And As surance Service

2. 2. 1 Service Head Specialized In Metal Eng ineering 1 15,000. 0 0 180. 00

2. 2. 2 Quality Contro ller Technologist 2 8,000. 00 192. 00

2. 2. 3 Laboratory Technician 2 8,000. 00 192. 00

Sub To tal 5 564. 00

Employ ee’s Benefit And Expense (20% Of Basic Salary )

1,728. 00

Total Direct Labor Co st

95 - 10,368. 0 0

Grand Total Co st 166 - 18,936. 0 0

6. 1. 1. Training Requirement
Tr a i ni ng of ke y pe r so nne l i s ve r y e s se n tia l a nd sha l l be c on duc te d i n c o l la b or a ti on w i th t he s up p lie r s o f t he in du str y m a c h i ne r ie s. The tr a in i ng sh ou ld pr im a r ily f oc u s o n the pr o duc t io nte c hn ol ogy a n dm a c h i ne r y m a in te na nc e a n d tr o ub le s ho o ti ng . I t i ss ug ge s te d, to tr a in pr o duc t io n a n d te c h nic a l m a na ge r , pr od uc t i on a nd te c h ni c a l he a d , a n d q ua li ty c o ntr ol he a d, m e c ha n ic s , e le c tr ic ia n s a n d o pe r a tor s o n- the - j o b tr a i n in g a t t he a c t ua l s i te o n t he a c tua l w or ki ng c on di t io n b y c om pe te nt e xpe r t of the m a c hi ne r y a nd te c hn ol og y
su pp lie r f or a bo ut o ne m o n th du r i ng e r e c ti on a n d c om m is s io ni ng pe r io d.

6. 2. Orga nizatio nal Structure

The r e a r e num e r ou s r e a so ns w hy ha vi ng a n or ga n i za ti ona l s tr uc tur e is ke y f or a V e h ic le s a n d Ma c hi ne r ie s S pa r e P a r t s Ma nuf a c tu r i ng b us ine s s. The r e a r e a c ti vi t ie s i n so ur c in g f in ds , se le c t s, c o ntr a c t s a nd m a na g e s t he be s t po ss i ble s our c e of s up p ly .
 P r ov ide s a m a na ge m e n t pla nn in g to o l: A n or ga ni za t io na l s tr uc t ur e c a n he l p a c om pa ny pla n m o r e str a te gic a l ly f or t he f ut ur e s o it c a n m e e t i ts g oa ls . I t c a n he l p de te r m ine t he h ir i ng pr oc e s s a nd h ow i t p la n s to e x pa n d in t he f ut ur e .
 I m pr o ve s de c i s io n- m a kin g:I tc r e a te sa c om pa ny - w ide un de r s ta n d in gof ho w i nf or m a t io n f lo w s t hr o ug ho u t the b us ine ss , w he the r it' s f r om e xe c u ti ve s t o m a na ge r t o e m pl oy e e or e m p loy e e t o e m p loy e e .
 H e l ps e m p loy e e e n ga ge m e nt : H a v in ga n or ga ni za t io na l s tr uc t ur e g ive s e a c h e m p loy e e a s pe c if ic r o le w it hi n the in du str y . I t c a n he l p e m p loy e e s un de r s ta n d ho w th e ir w or k f it s w i t h the i nd us tr y ’s v is i on a n d m a y e na ble m or e e f f e c ti ve te a m w or k a n d m a n a g e m e n t expectations.
 P r ov ide sa v i sua l: Ma ny i nd us tr ie s th a t use a nor ga n i za ti ona l str uc tur e c r e a te a c ha r tt ha t t he y c a n u se a s a n e m pl oy e e .
The c om pa ny or ga n i za ti ona l s tr uc tu r e sha ll c o ns i st of t he f o ll ow in g si x de pa r tm e n t s r e la te d t o V e h ic le s A n d Ma c h i ne r ie s S pa r e P a r t s Ma n uf a c tur in g I n du s tr y :

1. GeneralManager Department,

2. Management Information Sy stem Service

3. Production and Technical Department,

4. Finance and Administration Department,

5. CommercialDepartment, and

6.
The or g a n i za t i ona l str uc tur e o f
Quality Control And A ssurance Department.
the i nd us tr y i s sh ow n in F ig ur e 6 . 1.

1
4
FIGURE 6. 1 : O RGANIZATIONAL STRU CTURE OF THE VEHI CLE S AND MA CHINERIE S SPA RE PART S MANU FA CTURING INDUSTRY

GENERAL MANAGER

QUALITY CONTROL DEPARTMENT INFORMATION MANAGEMENT SERVICES

ADMINISTRATION AND PRODUCTION AND TECHNICAL COMMERCIAL

FINANCE DEPARTMENT DEPARTMENT DEPARTMENT

Finance Division Production Division Procurement and Stores

Division
Personnel and General Service Technical Division
Division Market Research and Sales
Division

2
7
 F u n c t i o n a l d e s c r i p t i o n o f e a c h o f t h e s i x d e p a r t m e n t u n i t s i s a s s u m m a r i z e d below.

6. 2. 1. General Manager
The G e ne r a l Ma na ge r 1 d isc ha r ge s a l l the d ut ie s a n d r e s po ns ib i li t ie s . Be si de s s tr a te g ic a nd p ol ic y d ir e c t i ng r o le , t h e G e n e r a l M a n a g e r 1i s i n c h a r g e o f t h e f o l l o w i n g m a i n d u t i e s a n d r e sp on s ib il i tie s.

 Developsstrategic andoperatio nalplansandorgan izes,administersandcontrols the overall operatio n of the in dustry in line with Company policy ,

 Manages the day to dayaffairs of the industry,

 Represents the in dustry before courts of law and all other parties, and delegates his power as may be necessary ,

 Draws, signs, en dorses, accepts and negotiates any commercial documents in accordance with the internal regulation s of the in dustry ,

 Authorizesexpenditures,s ignchecquesandauthorize sig natoriesonchecquesas appropriate,

 Ensures the accomplishment of the enterprise objectives, plans and policies set,

 Issues policy guidelines to the various managerial staff, and

 Chairs management and other higher committee meetings of the industry.

6. 2. 2. Productio n and Technical Department

 The major duties and responsibilities to be performed by the Production and Technical Department include:

 Planning,organizing, directing,coordinatingand supervis ingthe productionand technical operations of the ind ustry ;

 Ensuresthatthe necessarymanpower,equipmentandfacilitiesthatare organized for industry and maintenance operations;

 Assess the requirements in relation to production capacity and performance, manpower availability and materials supply ;

 Sets indus try processing and performance targets in cons ultation w ith top management;

 Ensuresthatthe requiredty pe,quality andquantity of rawmaterialsareavailable to maintain continuous and optimum level of operation;

 Ensures that industry plan and program, records etc are properly maintained for future reference;

 Stud ies equipment developments and improved industry techniques;

 Devises inspection program to control quality and develops indus try reporting procedures;

 Ensures that all equ ipment and machinery are operated and maintained in accordance with the required standards;

 Develops and recommends equipment management sy stem for efficient operation, usage maintenance and replacement of equipment and machinery

 Assists management in establishing criteria, policies and procedures for replacement, disposal or obso lesce of equipment and vehicles

 To carry out the above activities, the Production and Technical Department will have two functional d ivis ions, namely Production Division , and Technical Service Div ision

6. 2. 3. Finance andAdministrationDepartment
The m a j or du tie sa n dr e sp on si b il i tie st obe pe r f or m e d by the F ina nc e a ndA dm i n is tr a ti on D e pa r tm e nt i nc lu de :

 Plans, directs, coordinates, organizes and con trols the overall activities of personnel, man power planning and develo pment, health and safety and general service activities;

 Ensures that personnel polic ies, regulation s and procedures of the company are compiled;

 Develops an efficient human resource planning and development sy stem and on approval, ensures its implementation ;

 In consultation with concerned departments, performs personnel actions such as recruitment, placement, promotions; and demotion s;

 Ensures that maintenance of vehicles are properlycarried out;

 Provides efficient office services in the areas of communications (telephone), transpor t, safety protections, and cleanlines s;

 Makes sure that, the properties of the in dustry are identified, well pro tected, safely handled and guarded;

 Makes sure that each personnel file is up-to-date and well documented with the pertinentinformation. Handlesalso the generalarchivesandrecordsmanagement system;

 Ensures that the indus try has modern accounting and costing sy stems and fiscal policies and procedures; als o ensures their implementation ;

 Keeps up-to-date and reliable accounting and cost records;

 Coordinates the preparation of annual bud gets and contro ls its allocations and utilizations;

 Checks and ensures the regularity and authority of requests for pay ment and effects disbursements;

 Sends bills and statement of accounts to clients and ens ures their prompt payment;

 Receives cash and deposits daily collections intact in the in dustry ’s Ban k Accounts;

 Ensures timely reconciliation of ban k accounts, creditors, debtors and other accounts;

 Effectively manages the working capital of the company and with the approval of the Boardof Directorsand/or Management,arrangesshortandlong-term ban k credits; and

The F in a nc e a n d A dm i ni s tr a t i on

D e pa r tm e nt i s in te r na l ly
Prepares and issues daily , monthlyand annual financial reports.
s tr uc t ur e d c om pr is in g di vi s io ns i nc lu di ng :

 Finance Div isio n and

6. 2. 4. CommercialDepartment

The m a j or du tie sa n dr e sp on si b il i tie st obe pe r f or m e d by the P r oc u r e m e n ta n dMa r ke ti ng
Personnel and General Service Division.

D e pa r tm e nt i nc lu de :

 plans, organizes directs, coordinates and controls the overall activ ities of the domestic and foreign sales and purchase and the store and property administration;

 Develops sy stems and procedures necessary for the efficient and effective operation of the sales, purchasing and storage function s of the industry ;

 Promotes the business of the company through sales campaigns and advertisements;

 Identifies suitab le supp ly markets forlocal and foreign purchases on the basis of established sy stems and procedures and bargains prices; ascertains the delivery of supplies o n time;

1
The general manager has a discipline from engineering especial metal engineering science.

16
  Ensuresthatalls uppliespurchasedareof the requiredty pe,quality andstandards;

 Initiates and prepares operational directives and guidelines governin g procurement, sales and store and property administration of the company ;

 Ensuresthatallmaterials(raw materials,spareparts,office suppliesandfinished pro ducts) are properly received and kept in stores as per established rules and regulation s; and

 

Exercisesinventory controland materialsprogrammingthatensuresan effective materials management sy stem
The P r oc ur e m e nta nd Ma r ke t in gD e pa r tm e n ti si n te r na l ly str uc tur e dc om pr i s in gd iv is i on
P r o c u r e m e n t d i v i s i o n and
M a r k e t r e s e a r c h a n d s a l e s division
including:

6. 2. 5. Quality Controland Assurance Department

The m a j or d ut ie s a nd r e sp on si b il i tie s t o be pe r f or m e d by the Q ua l i ty Co nt r o l a n d A ss ur a nc e inc lu de :

 Selecteasyquality controlandassurance methodsfor Vehicles And Machineries Spare Partsproduction process,

 Respons ible to prepare environmental management plan per year,

 Develops a standard of the raw materials for Vehicles And Machineries Spare Parts and over all activities in written document to other department,

 States the quality of the in puts and o utpu ts of the sy stems of Vehicles And Machineries Spare Parts Manufacturing ,

 B
grathe quality of itsproductsfor localandg lobalcustomerswiththe state- of-art-technology , and
in
d

The
 m a j or d u tie s a nd
Training the s taff of the indus try in consideration of g lobal s tandard related to Vehicles And Machineries Spare Parts Manufacturing .

6. 2. 6MI SServicesDepartment
r e s po ns i bi l it ie s to be pe r f or m e d by the MI S Se r v ic e s D e pa r tm e n t include:

 Develop input-o utpu t follow-up software platform for staff of the production to customize the goo d wor kin g practice within the sy stem,

 Coordinate researchers from Production and Technical Department and Quality Contro l and Ass urance Department to innovate a new way of sustainable plastic productio n in con sideration of Veh icles And Machineries Spare Parts quality and profit,

 Promotes the business of the company through modern internet platform in discussion with commercial department,
 Prepare business pamphlets as a company profile in local and international
languages, and
 Develop accessible data for all the staffs in written and online for
sustainable production and technology transfer.
The MIS services department in Vehicles and Machineries Spare Parts
production develops computer software platforms used to track to and document
transformation of raw materials to the finished products. The data management
within the system of the industry used to monitor the flow of inputs and products
throughout the organization that update the critical business data. Additionally,
this department coordinates research and product development within the
vehicles and machineries spare parts production process. All the experts who
have bachelor degree in chemistry and other related discipline will participate to
get a more plastics. The research will looks into inputs of vehicles and
machineries spare parts to transportation of the different product. Finally, the
MIS grows into Research and Product Development.

17
 7. FINANCIAL ANALYSIS
7. 1. Underlying Assumption
The financial analysis of Vehicles and Machineries Spare Parts Manufacturing
Industry is based on the data provided in the preceding sections and the
following assumptions as seen in Table 7. 1-7. 3.

TABLE 7. 1 : CONSTRUCTION AND FINANCE; DEPRECIATION AND

WORKING CAPITAL (MINIMUM DAYS OF COVERAGE)

CONSTRUCTION AND FINANCE UNITY VALUE

Construction Period year 1
Tax Holidays year 2
Source Of Finance (Equity) % 30%
Source Of Finance (Loan) % 70%
Bank Interest Rate % 11. 5%
Discount For Cash Flow % 12%
DEPRECIATION UNITY VALUE
Building % 5%
Machinery And Equipment % 10%
Office Spare parts % 10%
Vehicles % 15%
WORKING CAPITAL UNITY VALUE
Raw Material Local day 30
Raw Material Foreign day 120
Factory Supplies In Stock day 50
Spare Parts In Stock And Maintenance day 60
Cash In Hand day 10
Accounts Payable day 30
Work in progress day 10
Finished products day 30

18
 Accounts receivable day 30

7. 2. Implementation Schedule
The implementation schedule covers the activities starting from the project
construction to operation period, bid-purchase-trial run of machineries, and
commissioning. It is envisaged that the complete implementation program
requires a total of 12 months as seen in Figure 7. 1.

FIGURE 7. 1 : PROJECT IMPLEMENTATION SCHEDULE

ITEM ACTIVITIES MONTH

SR. 1-2 3-5 6-9 10 11 12
NO.
1 Preparatory Period, 1. Approval xxxx
Of Feasibility Study, 2. Financial
Arrangement
2 Tender Document Preparation xxxx xxxx
For Construction of the
Warehouse and Machinery
Supply
3 Tendering For Machinery Supply xxxx xxxx
4 Tender Evaluation, Negotiation,, xxxx xxx

And Contracting
5 Design of Installation ofxxxx
Machinery And Equipment
6 Equipment Delivery xxx
7 Erection xxx
8 Manpower Recruit And Training xxx
9 Trial Run And Commissioning xxx
10 Start Of Operation xxx

The formation of implementation team, employment of the implementation

consultant and financial arrangement will be carried out within one month after

19
 the approval of the feasibility study.

Machinery and Equipment: Tender document preparation for production machinery and
equipment will start a month after project approval and will take 4 month period. Tender
floating will start 4 month after the approval of the project study and will be completed
within 2 month. Tender evaluation, contract negotiation, signing and LC opening, which
will also start 2 months after the approval of the project, will be completed within 2
month. Installation Vehicles And Machineries Spare Parts Manufacturing machinery and
equipment will start after 4 months from project approval and supply will be completed
within 5 months’ time frame from contract is signed.

Erection of machinery and equipment will start after completion of the

machinery and equipment delivery and will take one month. Delivery of raw
materials will be arranged before of erection of machinery and equipment is
completed.

Completion of the warehouse: Finalizing of the construction of warehouse will

commence after 10 months from approval of the project in consideration of
machine arrival to the park.

Recruitment and training of human resource will start 12 months after the
project approval and before the start of erection of machinery and equipment
and will continue up to commissioning and start up. The production will start
commissioning 11 months after the project approval and will be completed in
1 month. Similarly, technology and knowhow transfer will be conducted
starting from together with the erection and commissioning activities for one-
month duration.

Finally, the industry will start production at the end of 12th months from the
approval of the project and be operational then after. Moreover, project
activities will be handled by project management tools so as to optimize time
and project cost utilization towards realization of the project on the ground with
minimum project implementation cost and time as per the planned duration.
Many activities of the project may undertake in similar period if it does not need

20
 sequential work plan.

7. 2. 1. Implementation Cost
The Vehicles and Machineries Spare Parts Production Project implementation
cost for which comprises project office running and follow-up expenses, and
erection and commissioning is estimated at ETB 2. 36 million the breakdown
of which is indicated in Table 7. 3.

TABLE 7. 2 : IMPLEMENTATION COST

Sr. No. Position No. Duration Cost ( In 1000 ETB)

Month Monthly Annual
I Project Staff
1. 1 Project Manager 1 12 25,000. 00 300. 00
1. 1. 1 Project 1 12 10,000. 00 120. 00
Coordinator
1. 1. 2 Executive 1 12 10,000. 00 120. 00
Secretary
1. 2 Finance And 0. 00
Administrative
Team
1. 2. 1 Accountant 1 12 8,000. 00 96. 00
1. 2. 2 Personnel And 1 12 5,000. 00 60. 00
General Service
1. 2. 3 Driver 0 12 15,000. 00 0. 00
1. 2. 4 Security Guards 1 12 5,000. 00 60. 00
1. 3 Procurement And 0. 00
Supply Team
1. 3. 1 Procurement 1 12 8,000. 00 96. 00
Expert
1. 3. 2 Supplies And 1 12 5,000. 00 60. 00
Store
Management

21
 Expert
1. 3. 3 Store Keeper 1 12 5,000. 00 60. 00
1. 4 Engineering, 0. 00
Technical And
Quality Control
Team
1. 4. 1 Metal Expert 1 12 10,000. 00 120. 00
1. 4. 2 Civil Engineer 1 12 12,000. 00 144. 00
1. 4. 3 Mechanical 1 12 12,000. 00 144. 00
Engineer
1. 4. 4 Electrical And 1 12 12,000. 00 144. 00
Automation
Engineer
Sub Total 1,524.
00
II Project Supplies And Office Running
Sr. No. Descriptions Quantity Unit Unit Cost Amount
1 Fax 1 Pcs 20,000. 00 20. 00
2 Telephone 1 Pcs 20,000. 00 20. 00
3 Printer 1 Pcs 20,000. 00 20. 00

4 Office 5 Set 23,000. 00 115. 00

Furniture
5 Office 1 Set 170,000. 00 170. 00
Running Cost
Sub Total 345
III Detailed Design, Supervision, Erection And Commissioning
1 Engineering, 130. 00
Erection And
Commissioni
ng Service
Sub Total 130. 00

22
 IV Erection Machineries Rent
Sr. No. Descriptions Rate/ Durat Qty. Cost
ion
Day Days
1 Crane 30,000. 12 1 360. 00
00
Grand – Total Cost 2,359. 00

7. 3. Office Furniture And Equipment

The office furniture and equipment are vital component of the initial investment
for conducive environment of the production processes. The details of the Spare
parts and equipment are presented in Table 7. 4. The total cost related to office
Spare parts and equipment is estimated at ETB 3. 48 million.

TABLE 7. 3 : OFFICE SPARE PARTS AND EQUIPMENT COST, ETB

Unit Price Total Price

Sr.
Item Description Unit Quantity (In 000 (In 000
No.
ETB) ETB)
Presidential High Back Gas Lift
1
Swivel
Chair (Genuine Leather) And 177,000.
Set 1 177. 00
Executive 00

Desk, Hanging Side Cabinet

Conference Table And 8 Standard 140,000.

2 Set 3 420. 00
Chairs 00

4 High Quality Guest Chair Pcs 11 15,000. 00 165. 00

Executive Managerial Table And

5 Chair With High Back Gas Lift Set 4 46,000. 00 184. 00
Swivel, Side Cabinet

6 Office Chair And Table Pcs 23 25,000. 00 575. 00

23
 7 Shelves Pcs 4 25,000. 00 100. 00

8 Filing Cabinet Pcs 4 25,000. 00 100. 00

9 Guest Chairs Pcs 14 15,000. 00 210. 00

10 Laptop Pcs 13 21,000. 00 273. 00

Personal Computers With

11 Pcs 7 20,000. 00 140. 00
Accessories

12 Printer Pcs 2 16,000. 00 32. 00

13 Copy Machine Pcs 2 40,000. 00 80. 00

14 Scanner And Fax Machine Pcs 2 22,000. 00 44. 00

15 Telephone System Set 1 75,000. 00 75. 00

450,000.
16 Cafeteria Furniture And Equipment Set 2 900. 00
00

17 UPS Light Duty Pcs 0 12,500. 00 0. 00

Total 3,475. 00

7. 4. Investment
The total investment cost of the project including working capital is estimated
at ETB 121. 00 million as shown in Table 7. 5 below. The investor shall
contribute 30% of the finance in the form of equity while the remaining 70% is
to be financed by bank loan. The foreign component of the project accounts for
38. 64% of the total investment cost. Most of the total investment goes working
capital, machineries, and warehouse construction. The remaining goes to
vehicles and others. The detail of the investment cost has been presented in
Table 7. 5.

TABLE 7. 4 : TOTAL INITIAL INVESTMENT (000 ETB)

24
 SR. LOCAL FOREIGN TOTAL
COST ITEMS %
NO. COST COST COST

1. 0 Fixed Investment

1. 1 Land 4,550. 00 4,550. 00 3. 76

1. 2 Building And Civil Work 31,349. 85 31,349. 85 25. 91

1. 3 Machinery And
42. 50
Equipment 4,675. 00 46,750. 00 51,425. 00

1. 4 Vehicle 5,019. 03 5,019. 03 4. 15

Office Spare parts and
1. 5 2. 87
Equipment 3,475. 00 3,475. 00

Sub -Total 49,068. 88 46,750. 00 95,818. 88 79. 19

2. 0 Pre-Operating Cost

Pre-expenditure Cost*
2. 1 2,359. 00 2,359. 00 1. 95
Interest During First
2. 2
Year/Construction

Sub -Total 2,359. 00 2,359. 00 1. 95

Total Investment Cost 81. 14

51,427. 88 46,750. 00 98,177. 88

3. 0 Working Capital 22,822. 16 22,822. 16 18. 86

Grand Total 74,250. 04 46,750. 00 121,000. 04 100. 00

38. 64%
Foreign Currency

*Pre-production capital expenditure includes - all expenses for pre-investment

studies, consultancy fee during construction and expenses for company‘s
establishment, project administration expenses, commission expenses,
preproduction marketing and interest expenses during construction .

7. 5. Production Costs

25
 The total production cost at full capacity operation is estimated at ETB 83. 73 8
million as detailed in Table 7. 6 below. Most of the production cost goes to raw
materials and inputs. The main raw material in this industry is steel and
aluminum materials that imported from abroad especially from developed
nations. China is the world's leading exporter of aluminum and steel. In 2021,
China's aluminum exports were valued at 34. 7 billion U. S. dollars,
approximately 16 billion U. S. dollars more than Germany, the second-largest
exporter at around 18. 8 billion U. S. dollars. Exports In 2021 the top exporters
of Iron & steel were China ($61B), Japan ($35B), Germany ($32. 8B), Russia
($30. 5B), and South Korea ($28B). Imports In 2021 the top importers of Iron
& steel were China ($41. 9B), United States ($37. 3B), Germany ($34B), Italy
($27. 7B), and Turkey ($25. 4B).

TABLE 7. 5 : PRODUCTION COST (000 ETB)

Item COST PER YEAR %

Raw Material 39,123. 71 46. 72
Utilities 3,876. 79 4. 63
Repair And Maintenance 7,814. 35 9. 33
Direct Labour 10,368. 00 12. 38
Overhead Labour 8,568. 00 10. 23
Administrative Costs 450. 00 0. 54
Marketing Costs 300. 00 0. 36
Warehouse Rent Cost 15. 00 0. 02
Total Operating Costs 70,515. 85 84. 21
Depreciation 6,399. 53 7. 64
Cost Of Finance 6,818. 35 8. 14
Total Cost 83,733. 73 100. 00

7. 6. Financial Evaluation
7. 6. 1. Profitability
According to the projected income statement attached in the annex part (see
Annex) the project will generate profit beginning from the second year of

26
operation. Ratios such as the percentage of net profit to total sales, return on
equity and return on total investment rises in the subsequent years. Furthermore,
the income statement and other profitability indicators show that the project is
viable.

7. 6. 2. Breakeven Analysis
The breakeven point of the project is estimated by using income statement
projection. Accordingly, the project will break even at 39. 49% of capacity
utilization. The break- even analysis establishes a relationship between
operation costs and revenues. It indicates the level at which costs and revenue are
in equilibrium. To this end, the break-even point for capacity utilization and
sales value estimated by using income statement projection are computed as
followed.
 BESV = Brake- Even Sales Value = ((Fixed Cost + Financial Cost) / Variable
Margin ratio) (%) = ETB 47,385,900. 40
 BECU = Brake -Even Capacity utilization = ((Brake -even Sales Value)
/ Sales revenue) X 100 = 39. 49%.

7. 6. 3. Payback Period
Investment cost and income statement projection are used in estimating the
project payback period. The projects will payback fully the initial investment
less working capital in 5 years and 3 months .

7. 6. 4. Internal Rate of Return , IRR and Net Present Value, NPV

Based on cash flow statement described in the annex part, the calculated IRR
of the project is 12. 30% and the NPV at 10% discount is ETB 14. 81million.
These results related to IRR and NPV value showed that, the project is feasible .

7. 6. 5. Profit Generation
The project is found to be financially viable and earns on average a profit of
ETB 263. 62 million within the project life. Such result induces the project
promoters to reinvest the profit which, therefore, increases the investment
magnitude in the region.

27
 7. 6. 6. Tax Revenue
In the project life under consideration, the region will collect about ETB 94. 15
million from corporate tax payment alone (i. e. excluding income tax, sales tax
and VAT). Such result creates additional fund for the regional government that
will be used in expanding social and other basic services in the region.

7. 6. 7. Employment and Income Generation

The proposed Vehicles and Machineries Spare Parts production project is
expected to create employment opportunity to several citizens of the City. That
is, it will provide permanent employment to 166 persons with different
disciplines and laborers. Consequently, the project creates income of ETB 18.
94 million per year. This would be one of the commendable accomplishments
of the project.

7. 6. 8. Import Substitution and Foreign Exchange Saving

In line with the volume of production and the import volume, it is expected that
this industry substitutes a huge amount of the import volume. Accordingly,
Vehicles and Machineries Spare Parts Manufacturing will save an estimated
amount of US Dollar 13. 33 million. At the same time this industry uses starch
instead of imported plastic materials from petroleum producing nations.
Additionally, in the future, the project can also expand its investment related to
Vehicles and Machineries Spare Parts production. This will create room for the
saved hard currency to be allocated to other vital and strategic sectors. In short,
the industry saves hard currency by three ways. The two ways of hard currency
saving are exporting its product to international market, and substituting
imported product.

7. 6. 9. Technology Transfer
As stated above this industry will also work to manufacture vehicles and
machineries spare parts from high quality steel and aluminum. As the
technology is related to metal industry, it will transfer basic application and
production of vehicles and machineries spare parts related sciences. The

28
industry will work with research centers related to vehicles and machineries
spare parts processing concepts. The universities are the main stockholders to
transfer the technology to communities.

7. 6. 10. Diversification and Inter-Sectoral Linkage.

The proposed project helps to diversify ANRS’ and Ethiopian economy. It
contributes to industrialization of the region as well as the county’s economy.
mining minerals, steel and aluminum production, production of chemicals,
metal and aluminum recycling industries, and manufacturing sub-sector and
forward linkage with the automobiles and many types of machineries
manufacturing sub sectors.

7. 7. Environmental and Social Impact Assessment

(ESIA)
The proposed production process is less polluting industry. Based on cleaner
production principles, an ESIA has been conducted for the envisaged industry
with the objectives of identification of effects or impact of production of
vehicles and machineries spare parts on the environment (if any) and if negative
impacts are identified for proposing possible measures that could compensate for
the damaging consequences. Accordingly, for the purpose of identifying the
main environmental problems of the envisaged industry (if any), an EIA has
been conducted. The following environmental regulations must be observed in
Ethiopia. These are Environmental Policy of Ethiopia (1997); EIA
Proclamation (2002), Environmental Pollution Control Proclamation (2002),
Regulation to Provide for the Prevention of Industrial Pollution (2008) and
Solid Waste Management Proclamation (2007).
Potential positive environmental impacts among other benefits, the project is to:

1. Create opportunity for the community or population related to cereals

especially corn cultivation sector.
2. Makes job opportunity for 166 people which generate income.

3. Contributes to the realization of the development strategy particularly in the

area of life-standard facilities improvements.

29
 4. Earns considerable profit to the promoters as well as to the city administration
through tax.
Vehicles and machineries spare parts production has got resources from the
minerals with energy intensive production . Increases of Vehicles and
Machineries Spare Parts production aside, Vehicles and Machineries Spare
Parts production in itself has a profound, adverse impact on the environment,
including diminishing biodiversity during inputs production, depletion of
natural resources, and contributions to climate change. The diminishing
biodiversity and resilience, depletion of natural resources and global warming
are the backward and forward impact of the Vehicles and Machineries Spare
Parts Manufacturing Industry. The major and specific adverse environmental
impacts expected as a result of the vehicles and machineries spare parts project
are generation of solid waste, noise environment and offensive odor. The
assessment has been made considering the following three main thematic
Metals production and processing businesses can have a number of impacts on
the environment. Examples include: air emissions from scrap metal processing,
furnace fumes, oil mists, dust, mould production and casting and cooling
processes.

30
ANNEXES: FINANCIAL ANALYSIS

31
Appendix 1. 1: Net Working Capital (in 000 ETB)

Item Year 1 Year 2 Year 3 Year 4 Year 5

0. 7 0. 8 0. 9 1 1

30,125. 38,732. 43,036. 43,036.

Total Inventory 34,428. 87
26 47 08 08

Accounts Receivable 2,738. 66 3,129. 90 3,521. 13 3,912. 37 3,912. 37

Cash-In-Hand 1,825. 77 2,086. 60 2,347. 42 2,608. 25 2,608. 25

25,560. 32,863. 36,515. 36,515.

Current Assets 29,212. 37
82 92 46 46

Accounts Payable 2,738. 66 3,129. 90 3,521. 13 3,912. 37 3,912. 37

Current Liabilities 2,738. 66 3,129. 90 3,521. 13 3,912. 37 3,912. 37

Total Net Working 22,822. 29,342. 32,603. 32,603.

26,082. 47
Capital 16 78 09 09

x
x
 Year 6 Year 7 Year 8 Year 9 Year 10

1 1 1 1 1

43,036. 08 43,036. 08 43,036. 08 43,036. 08 43,036. 08

3,912. 37 3,912. 37 3,912. 37 3,912. 37 3,912. 37

2,608. 25 2,608. 25 2,608. 25 2,608. 25 2,608. 25

36,515. 46 36,515. 46 36,515. 46 36,515. 46 36,515. 46

3,912. 37 3,912. 37 3,912. 37 3,912. 37 3,912. 37

3,912. 37 3,912. 37 3,912. 37 3,912. 37 3,912. 37

32,603. 09 32,603. 09 32,603. 09 32,603. 09 32,603. 09

x
x
Appendix 1. 2: Production Cost (in 000 ETB)
Year
Item Year 1 Year 2 Year 3 Year 4 Year 5
0
27,386. 31,298. 35,211. 39,123. 39,123.
Raw Material
60 97 34 71 71
3,098. 3,489. 3,876. 3,876.
Utilities 2,707. 29
79 11 79 79
Repair And 7,812. 7,813. 7,814. 7,815.
Maintenance 7,811. 35 35 35 35 35
8,294. 9,331. 10,368. 10,368.
Direct Labour 7,257. 60 40 20 00 00
Overhead 6,854. 7,711. 8,568. 8,568.
Labour 5,997. 60 40 20 00 00
Administrative
Costs 315. 00 360. 00 405. 00 450. 00 450. 00
Marketing
Costs 210. 00 240. 00 270. 00 300. 00 300. 00
Warehouse
15. 00 15. 00 15. 00 15. 00 15. 00
Rent Cost
Total
51,700. 57,973. 64,246. 70,515. 70,516.
Operating
43 91 20 85 85
Costs
7,802. 7,063. 6,399. 5,803.
Depreciation 78. 10
94 40 53 12
Cost Of 8,766. 7,792. 6,818. 5,844.
9,740. 50
Finance 45 40 35 30
61,519. 74,543. 79,102. 83,733. 82,164.
Total
04 31 00 73 27

x
x
 Year 6 Year 7 Year 8 Year 9 Year 10

39,123. 71 39,123. 71 39,123. 71 39,123. 71 39,123. 71

3,876. 79 3,876. 79 3,876. 79 3,876. 79 3,876. 79

7,816. 35 7,817. 35 7,818. 35 7,819. 35 7,820. 35

10,368. 00 10,368. 00 10,368. 00 10,368. 00 10,368. 00

8,568. 00 8,568. 00 8,568. 00 8,568. 00 8,568. 00

450. 00 450. 00 450. 00 450. 00 450. 00

300. 00 300. 00 300. 00 300. 00 300. 00

15. 00 15. 00 15. 00 15. 00 15. 00

70,517. 85 70,518. 85 70,519. 85 70,520. 85 70,521. 85

5,266. 89 4,784. 38 4,349. 88 3,958. 30 3,605. 13

4,870. 25 3,896. 20 2,922. 15 1,948. 10 974. 05

80,654. 99 79,199. 43 77,791. 88 76,427. 25 75,101. 03

x
x
Appendix 1. 3: Net Income Statement (in 000 ETB)
Item Year0 Year1 Year 2 Year 3 Year 4 Year 5
- 84,000. 96,000. 108,000. 120,000. 120,000.
Sales revenue
00 00 00 00 00
Less variable 34,644. 39,593. 44,542. 49,491. 49,491.
costs 20 37 54 71 71
Variable 49,355. 56,406. 63,457. 70,508. 70,508.
-
Margin 80 63 46 29 29
in % of sales
58. 76 58. 76 58. 76 58. 76 58. 76
revenue
Less fixed 17,056. 18,380. 19,703. 21,024. 21,025.
121,000. 04
costs 23 54 66 14 14
Operational (121,000. 32,299. 38,026. 43,753. 49,484. 49,483.
Margin 04) 57 09 80 15 15
in % of sales
38. 45 39. 61 40. 51 41. 24 41. 24
revenue

Financial
9,740. 50 8,766. 45 7,792. 40 6,818. 35 5,844. 30
costs
Depreciation 78. 10 7,802. 94 7,063. 40 6,399. 53 5,803. 12
(121,000. 22,480. 21,456. 28,898. 36,266. 37,835.
Gross Profit
04) 96 69 00 27 73
in % of sales
26. 76 22. 35 26. 76 30. 22 31. 53
revenue
Income
10,879. 11,350.
(corporate) 8,669. 40
88 72
tax

x
x
 (121,000. 22,480. 21,456. 20,228. 25,386. 26,485.
Net Profit
04) 96 69 60 39 01
in % of sales
26. 76 22. 35 18. 73 21. 16 22. 07
revenue
36,300. 36,300. 36,300. 36,300. 36,300.
Equity 36,300. 01
01 01 01 01 01
Interest to
9,740. 50 8,766. 45 7,792. 40 6,818. 35 5,844. 30 4,870. 25
investment
Ratios (%)
Net profit to
(3. 33) 0. 62 0. 59 0. 56 0. 70 0. 73
equity
Net profit to
1. 00 1. 00 1. 00 0. 70 0. 70 0. 70
net worth
Net profit +
(111,259. 31,247. 29,249. 27,046. 31,230. 31,355.
interest to
54) 42 10 95 69 26
investment

x
x
 Year 6 Year 7 Year 8 Year 9 Year 10
120,000. 00 120,000. 00 120,000. 00 120,000. 00 120,000. 00
49,491. 71 49,491. 71 49,491. 71 49,491. 71 49,491. 71
70,508. 29 70,508. 29 70,508. 29 70,508. 29 70,508. 29
58. 76 58. 76 58. 76 58. 76 58. 76
21,026. 14 21,027. 14 21,028. 14 21,029. 14 21,030. 14
49,482. 15 49,481. 15 49,480. 15 49,479. 15 49,478. 15
41. 24 41. 23 41. 23 41. 23 41. 23

4,870. 25 3,896. 20 2,922. 15 1,948. 10 974. 05

5,266. 89 4,784. 38 4,349. 88 3,958. 30 3,605. 13
39,345. 01 40,800. 57 42,208. 12 43,572. 75 44,898. 97
32. 79 34. 00 35. 17 36. 31 37. 42
11,803. 50 12,240. 17 12,662. 44 13,071. 82 13,469. 69
27,541. 51 28,560. 40 29,545. 68 30,500. 92 31,429. 28
22. 95 23. 80 24. 62 25. 42 26. 19
36,300. 01 36,300. 01 36,300. 01 36,300. 01 36,300. 01
3,896. 20 2,922. 15 1,948. 10 974. 05 -

0. 76 0. 79 0. 81 0. 84 0. 87
0. 70 0. 70 0. 70 0. 70 0. 70

31,437. 71 31,482. 55 31,493. 78 31,474. 98 31,429. 28

x
x
Appendix 1. 4: Cash Flow for Financial Management (in 000 ETB)
Item year 0 Year 1 Year 2 Year 3 Year 4 Year 5
Total Cash
Inflow
Inflow funds
36,300.
equity
01
84,700.
Bank loan
03
Inflow 84,000. 96,000. 108,000. 120,000. 120,000.
-
operation 00 00 00 00 00
Other income - - - - - -
121,000. 84,000. 96,000. 108,000. 120,000. 120,000.
sub total
04 00 00 00 00 00
Total Cash
Outflow
Increase in 95,818.
- - - -
fixed assets 88
pre production
2,359. 00
costs
initial working 22,822.
capital 16
51,700. 57,973.
Operating costs - 64,246. 20 70,515. 85 70,516. 85
43 91
Income tax - - - 8,669. 40 10,879. 88 11,350. 72
Financial costs - 9,740. 50 8,766. 45 7,792. 40 6,818. 35 5,844. 30
Loan
- 8,470. 00 8,470. 00 8,470. 00 8,470. 00 8,470. 00
repayment

x
x
 121,000. 69,910. 75,210.
sub total 89,178. 00 96,684. 08 96,181. 87
04 94 36
14,089. 20,789.
net cash flow - 18,822. 00 23,315. 92 23,818. 13
06 64
Cumulative 14,089. 34,878.
39,611. 63 42,137. 91 47,134. 04
Cash Balance 06 70
ner cash flow (121,000. 14,089. 20,789.
for npv,irr 04) 06 64 18,822. 00 23,315. 92 23,818. 13

x
l
 Year 6 Year 7 Year 8 Year 9 Year 10

120,000. 00 120,000. 00 120,000. 00 120,000. 00 120,000. 00

- - - - -
120,000. 00 120,000. 00 120,000. 00 120,000. 00 120,000. 00

- - - - -

70,517. 85 70,518. 85 70,519. 85 70,520. 85 70,521. 85

11,803. 50 12,240. 17 12,662. 44 13,071. 82 13,469. 69
4,870. 25 3,896. 20 2,922. 15 1,948. 10 974. 05
8,470. 00 8,470. 00 8,470. 00 8,470. 00 8,470. 00
95,661. 61 95,125. 22 94,574. 44 94,010. 78 93,435. 59
24,338. 39 24,874. 78 25,425. 56 25,989. 22 26,564. 41

48,156. 52 49,213. 17 50,300. 34 51,414. 78 52,553. 63

24,338. 39 24,874. 78 25,425. 56 25,989. 22 26,564. 41

x
l
Appendix 1. 5: Discounted Cash Flow (in 000 ETB) @12% discount rate
Item year0 Year 1 Year 2 Year 3 Year 4 Year 5

121,000.
Total Cash Inflow 84,000. 96,000. 108,000. 120,000. 120,000.
04
00 00 00 00 00

121,000. 89,178. 96,684. 96,181.

Total Cash Outflow 69,910. 75,210.
04 00 08 87
94 36

18,822. 23,315. 23,818.

Net Cash Flow - 14,089. 20,789.
00 92 13
06 64
Net Cash Flow for
18,822. 23,315. 23,818.
NPV &IRR (121,000. 14,089. 20,789.
00 92 13
calculation 04) 06 64

Year 6 Year 7 Year 8 Year 9 Year 10

120,000. 00 120,000. 00 120,000. 00 120,000. 00 120,000. 00
95,661. 61 95,125. 22 94,574. 44 94,010. 78 93,435. 59
24,338. 39 24,874. 78 25,425. 56 25,989. 22 26,564. 41

24,338. 39 24,874. 78 25,425. 56 25,989. 22 26,564. 41

x
l