Project Report for setting up a new business of Jeans Manufacturing

1.1 Business Background

Jeans are trousers made from denim or dungaree cloth. Often the term "jeans" refers to a
particular style of trousers called "blue jeans" and invented by Jacob Davis and Levi Strauss in
1873.Jeans nowadays are very popular apparel as casual or informal dress among men, women,
and kids also. In a country like India, the demand for jeans met through import and domestic
production.

1.2 Profile of Customers

Some 20 years back jeans were popular outside India. And when jeans were launched in India,
people were reluctant in buying jeans because they wanted to keep themselves away from the so
called Western Culture. But from last 10 years jeans have become popular both among the
boys and girls. Thus the customer profile is very diverse when it comes to jeans.

1.3 Long term and Short Term objective

Our short-term goal includes to contract an advertising consultant for one month to help us
analyze and capitalize on our customer's buying trends and also analyzing our primary
competition and brainstorming on what we offer that others don't.
Our long-term goal is of receiving at least 95 percent positive customer feedback regarding the
product quality, durability and life. It also includes building the company's name recognition
within the customers.

1.4 Technical Feasibility

Jeans can be prepared in different sizes, and are liked by all age groups, including children,
adults, men and women. As the size of jeans differs for different age groups, it would be
necessary to take an average size to determine the annual plant capacity. The basic outline of the
operations for jeans in general is given below.
1. Pattern design and pattern making.
2. Cloth cutting by mechanical process.
3. Sewing by high-speed industrial sewing machine.
4. Trimming and inspection.
5. Ironing and pressing as finishing process.
Unit is going to do only cutting stitching, pressing operations for the manufacture of readymade
garments, which does not involve in discharge of any type of pollution. Hence there is no need of
taking measures to control the pollution. So, it is technically feasible.
1.5 Marketability
As our company is targeting the masses of all income levels and wants our jeans to not just be
used by the urban crowd but also the rural crowd and people with comparatively less income as
India is a population with 70% people situated in the rural area. With the production being in
large scale the cost will also (economically) come down. Our motive is to make our companies
jeans popular to the masses at an affordable rate with the best quality possible.
1.6 Financing
As per the Govt. Regulations we plan to invest 40% of the total required investment from our
own side and the rest 60% will be borrowed from a suitable financial institution. The detailed
financial analysis is presented in the upcoming sections.
1.7 Regulatory Regulations
Laws related with labor
The factories act 1948
Trade union act 1926
Industrial Employment act 1946
Industrial Dispute Act 1947
The payment of wages acts 1936 amendment 2005
The minimum wages act 1948
The payment of bonus act 1965
(2) Market Analysis
Jeans is of the most promising category in Indias apparel market. In 2013 the jeans market of
India was worth INR 13,500 Cr. which accounts for 5% of the total apparel market of the
country. The market is projected to grow at a Compound Annual Growth Rate (CAGR) of 15%
to become an INR 27,200 Cr. market in 2018.

2.1 Target Clients

The jeans market in India is skewed towards mens segments with 85% contribution coming
from it. Womens jeans segment contributes 9% to the market and the kids segment the rest 6%.
The womens and kids jeans segments are expected to witness higher growth rates due to their
lower base and increasing focus of brands and retailers on those segments.

2.2 Comparison with Jeans Consumption of Some Other Countries

In general, the western life style and western fashion has accelerated the trend of casualization
across the globe. This trend has boosted the consumption of casual fashion apparel like jeans,
dress shirts, tees, casual shirts among both men and women consumers in all the developing
countries including India. The average number of jeans items owned by Indian consumer is much
lower in comparison to consuming market of the United States, Europe etc. The number is even
lower than countries like Brazil and China. This difference in the number demonstrates the huge
potential that exists for jeans in the domestic market.

2.3 Patterns of Market Consumption

The value share of jeans market is skewed in favour of mega metros and metros which account
for almost half of the total jeans market at a share of 49%. Though the markets of other urban
areas and rural India contribute high in volume terms, their combined share in market value is
only 51%. As the penetration of jeans category and the awareness of jeans quality increases in
those cities and rural India, their share in market value will start increasing with more number of
consumers willing to pay premium for the quality, design and fit.

2.4 Presence of Brands

In India unbranded jeans products dominate the market with around 60% share of the market.
The share of brands in jeans market stands at 40%. Most of the unbranded players operate on the
lower price segment of the market where awareness of quality of fabric, finishing and washes,
design and fit are relatively low. The emergence of semi-urban clusters, areas having less number
of farming communities, across the country has opened up a plethora of opportunities for
regional brands and retailers.
A typical jeans consumer of the semi-urban cluster demonstrates a blend of the characteristics of
urban and rural consumers; like an urban consumer she/he shows awareness of brand and
product quality and like a rural consumer pricing and affordability plays a crucial role in her/his
purchase decision. The regional brands have focusing to cater to these typical requirements of the
semi-urban consumers. However, presence of lots of unbranded players in such markets it a
market of intense competition to many national level brands.

2.5 Demand Flexibility

Some of the key driving factors for the jeans market in India are:
An aspiration youth ((15 to 29 year olds) with higher spending power than previous
generations, which make 26% of the consuming population
A wide range of consumer segment that consider jeans as an apparel of choice owing to its
comfort and style
Favoured preference for jeans amongst youth owing to its versatile association
Increasing usage of jeans products by women and youth in smaller cities and rural India
2.6 Past as well as present supply operations
India has an integrated value chain for jeans products starting from fibre to retail. Jeans is
primarily produced from cotton and India is expected to overcome China as the single largest
producer of cotton the world in 2014. The country is the second largest producer of cotton yarn.
The jeans fabric production capacity of India is more than 1000 million meters per year, and
India is still witnessing entrance of more jeans fabric manufacturers in the industry. Jeans fabric
production in India is concentrated in the western and northern parts of the country with more
than 45% contribution coming from Gujarat alone where Ahmedabad is the production hub.
Jeans apparel production in India remains a fragmented industry where only 20-30% of jeans
apparel is manufactured in the organized units. The jeans apparel production activities are
concentrated in Delhi/NCR, Mumbai, Bangalore and Ahmedabad.

2.7 Client Behaviour

The jeans market in India has been evolving fast with introduction of more styles, colours and
some distinct trends in the product offering. Some of the key trends in jeans market are:
In India most of the jeans manufacturers focus on the domestic markets as the value
realization remains higher in domestic market than in export markets
In the recent times the industry has witnessed entrance of new fabric manufacturers which is
expected to make the market for jeans fabric more price competitive in the coming years
Cotton remains the fibre of choice in jeans apparel. In blended jeans fabrics polyster is being
used as weft threads
The demand for stretch jeans is growing at a faster rate in India market due to its comfort and
fit characteristics
The colour of jeans is no longer limited to traditional blue colours. Indian youth has started
accepting jeans in different colours including green, red, yellow etc.

2.8 Issues & Challenges for Jeans Market

Though the jeans category is among the most promising categories in apparel market of the
country, it faces its own set of issue and challenges. The prudence in which various stakeholders
of jeans eco-system identify and address the issues and challenges associated with the value
chain will determine the growth of jeans apparel market in the country.

2.9 Technical & Production Limitation

India at present lacks behind in its ability of the jeans product development and innovation.
There is a need to develop a larger portfolio of jeans garments and accessories, including shorts,
shirts, bags, dresses, accessories among others. At present the market is skewed towards jeans.
The weight range of available jeans fabric could be broadened to widen jeans application.
There is a lot of scope of improvement in right processing and value addition in jeans through
fashion-led processes and finishes. Establishment of high quality processing and washing units
could help to improve the quality of finishes and colours, this attracting more consumers to try
jeans.

2.10 Comparison of our service with others

We will develop a consumer centric jeans value chain in order create the avenues to unleash the
great potential inherent in Indias jeans market. We will start an industry-wide initiative to
decode the mind-set of Indian consumers and their perception and receptivity of jeans and to
promote jeans among the consumers. The increasing awareness of sustainable fashion provides
additional opportunity to promote jeans as a product of natural cotton fiber which is perceived as
eco-friendlier than synthetics. A two-prong strategy that in one hand addresses the needs of
consumers encourages them to consume more of jeans and on the other hand ensures to improve
the existing gaps in supply chain market more dynamic and consumer centric with better
opportunities and scopes for all elements involved in the eco-system will be followed by us.

2.11 Site Selection

As per our estimate we will require around 1400 yards of area for building our own shade.
As per the nominal rates of Rs 321 per yard, the land will cost us around Rs 4,50, 000.Also
constructing the building is another aspect; as a rough estimate we will require 2000 sq. Feet
of building area, as per the information from some civil engineers and builders the building
cost will come to around Rs7,00, 000. This is supposed to accommodate production hall,
store for raw material and finished products, offices, and general purpose building. So, the
overall cost of the land and building comes out to be Rs 11,50, 000.These estimates can be
reduced if we get a discarded building and land of the required dimensions. Preferably we
can reduce the land and building cost if we can get a land in SEZ or any of the GIDC, so as
to reduce the per yard price of the land.
(3) Financial Assessment

Details of Plant & Machinery

No. Particulars Qty. Amount (Rs)
1 Simple stitch machine 10 2,00,000
2 Chain stitch machine 6 4,80,000
3 Folding machine 1 1,50,000
4 Stain removing machine 1 70,000
5 Washing machine 2 3,00,000
6 Cutting machine 1 2,00,000
7 Fitting machine 1 1,00,000
8 Embroidery machine 2 1,00,000
9 Iron 1 25,000
10 Printing machine 1 75,000
11 Over lock machine 2 1,00,000
12 Logo-making machine 1 25,000
13 Handling equipment - 75,000
Total 19,00,000

Total Fixed Assets

No. Particulars Amount (Rs)
1 Land & Building 11,50,000
2 Plant & Machinery 19,00,000
3 Other Fixed Assets 9,00,000
4 Preliminary & miscellaneous Expenses. 5,00,000
Total 44,50,000

Raw Material Requirements

No. Particulars Qty. Rate Monthly Annually
1 Denim cloth 3000 m 80 2,40,000 28,80,000
2 Cotton cloth 1500 m 60 1,20,000 14,40,000
3 Thread - 15,000 1,80,000
4 Button 6000 0.7 4,200 50,400
5 Zip 5000 4.8 24,000 2,88,000
6 Stickers 7000 1.5 10,500 1,26,000
Pocketing
7 500 m 8 4,000 48,000
Clothes
 8 Plastic Box 2700 2 5,400 64,800
Washing
9 500 lt 20 10,000 1,20,000
Acid
Total 4,33,100 51,97,200

Utility
No. Particulars Qty. Rate Monthly Annually
1 Electricity 1000KWH 5 10,000 1,20,000
2 Water - - 1,500 18,000
Total 11,500 1,38,000
Sources of Fund
No. Particulars Percentag Amt. (Rs.)
e
1 Borrowed Capital(at 12.5%) 60 % 36,24,900
2 Owned Capital 40 % 24,51,200
Total 60,41,500

Total Working Capital

No Particular Monthly Annually
1 Raw Material 4,17,700 50,12,400
2 Utility 11,500 1,38,000
3 Wages & salary 95,100 11,41,200
4 Administrative
11,200 1,34,400
Exp.
5 Other
3,000 36,000
contingencies
Total 5,30,500 64,26,000

Total Cost of Project

No Particulars Amt. (Rs.)
.
 1 Total Fixed Capital 44,00,000
2 Working Capital Margin 17,28,000
Total 61,28,000

(4) Marketing Assessment

4.1 Price:
The term price denotes the money value of a product or service. It is the amount of money the
seller is asking for the product he offer for sale or the amount which buyers are to pay for it.
Price is an important element in the marketing mix of a firm and affects other components of the
marketing mix. The price of the item is different for the wholesalers and customers. Customers
commonly buy jeans in number of units but the wholesalers buy in bulks. A bulk of jeans
contains ten pieces of jeans. The prices for wholesalers and customers are shown in the following
table for our main products for this segment. Our company has comparatively very low places as
we first want to establish ourselves in the market by providing our material to a lot of people
who can connect with them. The cost of production of basic simple jeans in Rs. 300. We sell it
to the retailers at a bit of higher amount obviously in order to incur the costs and the retailers sell
it to the customers. The prices charged by the competitors are really high and hence our prices
would influence the buyers and the consumers to buy our product. It is basically targeted for all
the income groups, so the price is less with an incredible quality and for daily use.
There is not much risk involved either as jeans is always in trend and the fashion of jeans never
fades out. To begin initially we will launch the following products
Product customer retailer
Bell bottom 400 350

Boot cut 650 550

Flare cut 800 690

Straight cut 900 800

Baggy jeans 1000 925

4.2 Products:
Different varieties of jeans will be manufactured by our company as per our plan
Bell bottom - Using uniform yarns, this weave is considered more rugged.
Boot cut - Slim through the legs, with a slight flare at the ankle to accommodate a boot.
Flare cut - The original denim fabric, which is known for its characteristic slubs.
Straight cut - The most popular type of denim that results in a consistent yarn thickness.
Baggy jeans - Slim through the legs, flaring right above the ankle -- to about a 21+ inch
opening. The product starts from the range of Rs. 400 for the customers and goes till Rs. 1500
depending upon the cut, variety and wash of the denim.
4.3 Place:
Place refers to distribution of products to make them available to customers for purchase and
consumption. Distribution is very important as if the products are not distributed and are not
made available to the customers at the right place, time and quantity they would not buy they
products.
Warehousing: Goods are produced in factories on a continuous basis and these are not sold
immediately after production. Location of warehouses for storage of goods depends on the nature
of the product. Since jeans are a necessity widest possible distribution is desirable.
Channel of distribution: a channel of distribution is the route or path along which products flow
from one point of production to the point of ultimate consumption or use. It starts from producer
and ends with the consumer. Our company has chosen the one level channel where the
manufacturer sells the product to the consumer directly. This channel has been selected because
it was it is the most economical of all for a new entry to the market. This channel does not
require the producer to directly search for the customers at the same time avoids overpricing as
we are a new company and want to establish ourselves. Using the two level or three level would
be expensive for a new company as longer the chain more would be the price of the product to
the customers.

4.4 Promotion
Promotion is the process of communication with the potential buyers involving information,
persuasion and influence. It includes all types of personal and impersonal communication with
customers.
Radio Advertising: -A catchy jingle and quick tag line can enhance a radio ad's effectiveness.
Matching the station, you choose with your target demographic is key. If you want to reach
adults aged 35 to 64, an adult contemporary station is a good bet. An alternative or urban station
is good to reach youth aged 18 to 24.
Door Hangers and Flyers: -Canvassing the neighborhood, placing flyers in mailboxes or
hanging ads on doorknobs, is a good way to target a specific area and to make sure your potential
customers have seen your information. Even if most homeowners will discard the information,
gaining a handful of clients may be enough for a positive return on the marketing campaign
investment.
The Print and Graphic Arts Media: -Many retailers prefer advertising in local newspaper
because it provides maximum flexibility in terms of budget, timing, coupon feedback, product
and price mix. The perception rate is high because the reader can get more than one impact from
the same message.
(5) Operational Plans:
The general sources of raw material are listed below

Sr.
Material Sources
no.
1 Denim Cloth Mumbai
Ahmedaba
2 Cotton Cloth
d
3 Thread Sirmour
4 Button Delhi
5 Rivet Delhi
 6 Zip Delhi
Ahmedaba
7 Stickers
d
Ahmedaba
8 Plastic
d
Ahmedaba
9 Washing acid
d

5.1 Production Process and planning

Total expected production per month: 60,000 pieces

Expected no of working days a year: 280/year
Shifts per day of 8 hours: 1
Expected Operating efficiency
First Year :40%
Second Year: 100%

5.2 Organization Structure :

5.3 Business Plan:

It is estimated to take maximum one year to implement this type of project the
time required for completing each activity of the project till commercial production is as
follows:
 No. Activity Completio
n Time
1 Preparation of Project 1 month
2 Selection of a site month
3 Registration of SSI month
4 Availability of finance 2 months
5 Construction of building 6 month
6 Arrangement of machines & 1 month
equipment
7 Erection & commissioning including month
electrification
8 Recruitment of personnel & Labour month

(6) SWOT Analysis:

STRENGTH:
Strong entrepreneurial class
Flexibility in production of small order lots
Ability of handle value additions
Adequate labour supply at relatively competitive wags
Growing Domestic Market

WEAKNESS:
High transition and power cost
Technological obsolescence
Initial low efficient production
Few raw material suppliers
OPPORTUNITY:
Understanding the customer bypassing language barrier
Reducing the supply chain can boom the business
Can enter in retail section
THREAT:
Changing policies with changing political parties
Decreasing available of usable water

(7) Appendices:
7.1 Break even Analysis:
Break-even analysis is a scientific analysis, which leads producers towards more systematic and
scientific production planning or sales planning. It is because of break-even analysis that the firm
can accordingly work out the required size of the plant. By break even analysis the small-scale
entrepreneur can get proper guidelines about volume of sales to be achieved to avoid the danger
of loss. Break-even analysis indicates a point where total revenues are equal total cost. It means a
volume of sales where firm earns neither profit nor suffers loss in called Break-even point.

No. Particulars Amt. (Rs.)

1 Sales 88,15,000
2 Variable cost 61,11,600
3 Fixed Cost 20,74,998

BEP = Fixed Cost

Contribution
= 20, 74,998 x 60% = 46.05%.
27, 03,400

(8) Target Market:

The target market here varies from the wide age group of 5 years to 55 year or may be sometime
60 years. In India the jeans market has grown at an exponential rate in the last 10 years. From
young to old people almost everybody wants to use them; so the bigger the market the bigger the
challenge of satisfying their different need without our variety of products.

(9) Market Approach

Value for money proposition

Ethical Conduct of Business
To fill the product gap
Grabbing the market by providing a unique customer friendly experience

(10) Predicting Trend

The popularity and the demand of Jeans are increasing day by day. Jeans have left behind the
tailor made cloth. Consumer can wear Jeans casually with shirt or short shirts & T-shirts. Today,
consumers wear Jeans even with blazers. Even in villages people have started wearing Jeans.
Each & every class of people wears Jeans.

(11) Data Analysis

The popularity and demand both are increasing day-by-day. The unsatisfied demand for jeans
is projected to reach 4,292,506 pieces and 5,908,767 pieces by the year 2017 and 2022,
respectively. Mega metros & metro cities contributes 49 % of the market share Mens segment
holds 85% share ,purchase is driven by increasing disposable income, westernization of work
culture and the ensuing rise in popularity of denim jeans as business casual wear.60 % market
share with unbranded denim players operating on the lower price segment where awareness of
quality of fabric, finishing and washes, design and fit are relatively low. With population of 1.2
billion & per capita consumption still much low, there is a huge scope for growth in domestic
market itself

(12) Ending Remarks

Jeans manufacturing or denim production business opportunity demands adequate knowledge
about textile designing and current trend. With proper planning and substantial capital
investment, jeans manufacturing project can be initiated as small scale basis.

(13) Recommendations
Todays generation is very much conscious about the garments. The consumption of new
fashionable garments increases day by day especially Jeans. A Jeans became popular garment in
all over the world. So, the demand increases day by day and the fashion trend changes every day
in jeans. At present take an example of world leading Jeans producing company Wrangles, Lee,
GAP, flying machine etc. have launched the range Jeans trend. So, the Jeans is a forever product
in the garments. It indicates that the demand of the Jeans will increase in India as well as foreign
culture the company has wide spread market. It indicates future expansion and development of
the project according to proposed project is considered to have better prospects.

(14) Appendix

14.1 Cost Analysis

 Particulars Amt. (Rs.) Amt. (Rs.)
Variable Cost
Raw Material
Denim Cloth 28,80,000
Cotton Cloth 14,40,000
Thread 1,80,000
Button 50,400
Zip 2,88,000
Stickers 1,26,000
Pocketing Clothes 48,000
Plastic box 64,800
Washing Acid 1,20,000
Other contingency 36,000 52,33,200
Semi Variable Cost
Utilities 1,38,000
Administrative Expenses. 1,34,400
Man Power (Lower Level) 6,06,000 8,78,400
Fixed Cost
Preliminary & Pre-operative expenses 50,000
written off
Man Power (Middle & Top level) 5,34,000
Interest on capital 6,43,498
Miscellaneous 6,90,000
Repairs & Maintenance 1,97,500 21,14,998

Total Cost 82,26,598

14.2 Cash Flow Analysis

Particulars Amt. (Rs.) Amt. (Rs.)
Expected Sales 88,15,000
(Less) Variable Cost
Raw Material 51,97,200
Utilities 1,38,000
Manpower 6,06,000
Admin. Exp. 1,34,400
Other contingencies 36,000 61,11,600
Contribution 27,03,400

(Less) Fixed Cost

Manpower 5,34,000
Depreciation 6,80,000
Maintenance & Repairs 1,97,500
Insurance 20,000
Int. on loan 6,43,498 20,74,998
Profit 6,28,402
(Less) 35% Tax 2,19,941
Net Cash Flow +4,08,461