- I • _•• .

IT REQUIREMENTS
FOR MANUFACTURE OF
LEAD PENCILS

TECHNICAL AIDS BRANCH

INTERNATtONAL COOPERAliON
ADMINISTRAliON
Washington, D. C.
 FOREWORD

This brochure is one of a series of ref....rts resulting from

overseas technical inquiries on factory or commercial estab-
lishments, operation, management, and engineering. The
report is designed to provide only a general picture of the
factors that must be considered in establishing arid operating
a factory of this type. In most cases, plans for actu<,~_
installations will require expert engineering and financial
advice in order to meet specific local conditions.

11{ention of the name of arr:t firm, prodllct, or process in

tris report is not to be considered a recommendation or an
endorsement by the International Cooperation Administration,
but merel:-r a citc~tion that is t~rpical in its field.

The original report was prepared by Essler, Thompson and

Associates, Inc., 'VJashington, D. C., in June 1956 under
contract to the Office of T~chnical Services, U. S. Department
of CO!.:1ffierce, for the technical aids program of lCA.

l'echpica1 information, as well as review, was provided by

H. Poliakoff, Industrial Cons'J.ltant, 126 Eleventh Avenue,
l:ew York 11, 1:e\<'/ York ..

This report has been revised and rewritten by

George 11 .. Andrews Engineering Associates, Inc .. ,
411 30uthern Building, ~vashington 5, D.. C.

For further information and assistance, contact should be

made with the local Productivity Center, Industrial Institute,
Semeio, or United States Operations I'1:ission.

Code Number October 1961

P-8~?
P.1 ~j
 TABLE OF CONTEN1'S
Page
Introduction 1

G~neral Assumptions 1

Manufacturing Unit 2.

Production Capacity 2

Product Specifications 2

Manufacturing Operations 3

Direct Materials 10

Supplies 10

Direct Labor 11

Indirect Labor 12

Production Tools and Equipment 12

Other Tools and Equipment 13

Furniture and Fixtures 13

Plant Layout 13

Plant Site 14

Building 14

Power 14

Water 14

Fuel 14

Depreciation IS

Manufacturing OVerhead IS

Manufacturing Costs 16

Fixed Assets 16

Working Capital 17

Capital Requirements 17
 Page
Sales Revenue 18

Recapitulation of Costs, Sales and Profits 18

Budget Control 19

Budget Control Accounts 19

Purchase Requisition 20

Voucher Check 21
Engineers 22

Training 23
Safety 24

Other Considerations 25,

Materials and Supplies 25

Market Factors 25
Export Markets 26

Marketing Problems 26

Economic Factors 27
Personnel 27
Laws and RegulatioDs 27
Financial Factors 28

Fil18DCial Requirements of the Project 28

Short Term. Bank Credi ts 28

Finaneial Plan 28

Shaping Machine 29

Stamping Machine 30

Grooving Machine 31

Plant Layout 32
 LEAD PENCILS

INTRODUCTION

The purpose of this report is to present basic information

for establishing a manufacturing plant in a foreign country
to produce lead pencils.

GENERAL ASSUMPTIONS

In order to make realistic estimates in this report, certain

assumptions are made. These are:

1. The costs of the building and general facilities are

based on United States prices.

2. Material costs are based on si~es tlnd specifications

of materials used in the United States.

3. Labor costs are based on the average for the industry

as recently published by the United States Bureau t~f
Labor Statistics.
4. Adequate Dower and water are available at the plant
site.
5. Adequate transportation facilities are available at
the plant site.

6. The plant operates eight hours a day, five days a

week, and fifty weeks per year.
 7. No special provision is made for the training of new
personnel. It is assumed that learner's rates are
paid in such cases.

8. The following items cannot be estimated realistically:

A. Land value.
B. Distribution and selling costs.
C. In-freight and out-freight.
D. Administrative costs.
E. Taxes.

While general estimates will be made of each of these

items, for the purpose of completing cost estimates,
adjustment should be made in accordance with actual
local costs.

In fact, all cost estimates contained in this report

should be adjusted to conform to local conditions.

9. Colunms are provided in the tables included in this report.

to facilitate the conversion of cost figures to conform
with local costs.

MANUFACTURING UNIT

The manufacturing unit for lead pencils is one gross.

PRODUCTION CAPACITY

This plant is designed to produce 500 gross of pencils per day.

This production is based on a single-shift, eight-hour-day operation,

five days a week, fifty weeks a year.

PRODUCT SPECIFICATIONS

Wooden lead pencils. About 76 percent will have erasers, the balance

will be drafting pencils without erasers.

 MANUFACl'UklNG OPERATIONS

The production processes in lead pencil manufacture include slat

grooving, lead laying, gluing, slAt clamping. slat drying, slat-end

sand1n~, shaping, painting, beading, tipping, stamping or imprinting,

inspecting, boxing, and shipping.

Each pencil slat is run through a grooving machine which planes one

side of the slat and mills on the other side and cuts a number of

parallel grooves. The grooves are perfectly rounded and exactly as

wide as the diameter of the lead to be laid 1.n them. The grooves

are milled on lines spaced sligbtly more than a pencil diameter apart,

and all slats for a given size lead and finished pencil are grooved

exactly alike. Thus. when leads are laid in the grooves of.me slat

and the grooves of another slat are placed down over the leads, each

lead viII fit precisely in both bottom and top grooves.

This machine should be equipped with a vacuum-type dust collector.

Leads for a plant of this capacity are usually laid by hand into the
grooves of the flbottom" slat. There is an automatic lead-laying

machine that requires three operators producing over 2000 gross per

day, but the machine is expensive and it would not prove economical

to operate in this small plant.

The upper grooved slat is glued before 'being placed down over the

bottOlD slat in which the leads have been laid.. Hand gluing is slow,

-3-
uneven. and unecol'1omicE: 1. The slat-gluing machine is set up to

operate by remote control with a foot lever at the lead-laying

table. This leaves both ~&nds of the operator at tbe table free

to assemble the two slats.

The top and bottom slats are fed from an adjustable hopper on the

gluing machine. A rotary brush au~ drum apply a coat of glue over
the grooved surface of the slat and into the grooves. A stripper

brush to remove the excess glue is adjustable so that any desired

thickness of the glue coating can be applied. The gluing machine
delivers a glued, grooved b.alf-slat by sliding it face down on two

wires to tbe lead-laying table.

The pencil "sandwich," formed by placing the glued slat down over

the bottom slat containing leads, is elamped under pressure in two

operations. First, the glued slats are placed in a long double-bar

clamp; about 40 units can be held in a single clamp. Next, tbe

fi.lled clamp is placed in a pneumatic press which applies ram

pressure of 2000 to 4000pou.:lds. Ram. pressure is adjustable accord-

ing to the type and hardness of wood used and the number of slats in

the clamp. The pneumatic press has a foot pedal for operation of tbe

pressure plston. While the piston has the clamp compressed, retaining

nuts on the clamp bars are run down tight by hand. When the foot pedal

is released, tbe ram draws back from the clamp, which is then removed

from the press. Hydraulic presses are sometimes used instea4 of the

pneumatic press.
The clamp of pressed slats is dried in a kiln. The dried slats .re
then removed from the clamps and stored for processing into finished
pencils.

The slat-end sander is a rugged machine capable of sanding stmultaneously

both ends of glued sandwiches to remove excess graphite, glue and wood

and to make all slats of equal length with ends exactly squared.. TIle
slats are fed by gravity from a hopper to the two :~nuing drums by a

carrier wheel which is moved by leather belts held firmly under spring
tension. The sanded slats are usually caught by a simple conveyor belt

that carries tbem to the shaping machine. The drums mount 24-gri.t garnet

emery cloth, 9 inches wide. A dust collactor connected with vacuum

exhaust is provided for each sanding drum.

The end-sanded slats are next passed through the shaping machine which

forms the pencils by cutting midway between the lead grooves. The key

mechanism of the shaping machine is a high-speed rotary cutterhead

with an assortment of knives for any desired shape of finished pencil.

These knives are made with precision so that cuts are perfectly and
smoothly made. The best knives are of high-grade, hardened tungsten

tool steeL

The raw pencils from the shaping process are tben painted on an auto-
matic painting machine through which the pencils may be run for as

many repeated coats as desired. Most manufacturers apply three to ten

coats depending on the quality of pencil being made. The macbine has
a hopper with up to three channels from which pencils are pushed by

spring-loaded rods into a lacquer pot. Rere the penC'ils are caught

by grooved rollers and are pushed end-to-end through the lacquer pot.

The rollers 1n the lacquer por, have separate sets of grooves for dif-

ferent shaped pencil, and the change from ODe to the other can be made

quickly without removing the rollers. These grooves must be accurately

aligned with the feed channels to avoid marking the pencils.

The painted pencils are pushed out of the lacquer pot through rubber

discharge stripper gaskets which leave just the desired amount of

lacquer on the pencils. These gaskets conform to the size and shape

of pencil being painted. The pencils are ejected onto either a

trougbed conveyor belt or a revolving table. The fresbly pain.ted

pencils are supported by their ends to avoid marring the fresh paint.

The upper helt receives the freshly painted pencils and moves them

along at a speed that allows 50 • 60 seconds for the lacquer to set

before the pencils reach the end of the belt. From the upper belt,

pencils are discharged onto a lower return belt moving much more

slowly toward the painting machine. The total elaps.ed time from

ejection onto the upper belt to return to the end of the lower belt

at the painting, machine is about six minutes. The pencils are now

ready for a second coat. Because the lower belt moves at about. 1/5

the speed of the upper belt, pencils are closely spaced on the lower

belt, which ~ll bold about 100 grosswben fully loaded. Thus, a

large batch of pencils can be painted the desired number of coats

simply by reloading the painting machine hopper with paintedpen.cils

as tbey come from the end of the return conv~yor belt. The painting

machine can give a single coat to about 200 gross of pencils an hour.

After the final coat of lacquer is dry, the pencils are placed manually

in the hopper of a heading machine which removes excess paint from tne

ends of the pencils and trims them to their exact finisbed length.

Pencils are taken from the hopper by a rotating carrier wheel which

holds them firmly in fitted grooves by a tight leather belt. The wheel

first carries the pencils past a revolving drum which sands off excess

wood and paint, tben past a rotary knife which trims a very thin slice

(0.003 to 0.005 inches) from the end that will later be pointed. The

rotary knife automatically maintains an extremely sharp, bollow-ground

edge by action of an integral sharpening device. The very thin slice

leaves the end of the pencil clean and neat without chipping the wood

or paint and without streaking the lea.d. A vacuum dust collector is

provided. The header machine has a clutch for quickly disengaging the

carri,er wheel to prevent loss of pencils in case the operation becomes

jammed. Only the untipped end requires beading for pencils that will

be tipped by an eraser. Drawing pencils. are headed at both ends.

After heading, the pencils are ready for the multiple operation. calleci

tipping. This consists of the following steps, all of which can be done

by one automatic machine:

L Shaping or sizing end of pencil to receive ferrule:

this is called sbouldering

 2. Putting ferrule on end of pencil

3. Piercing ferrule at several points to hold it on

pencil

4. Putting rubber eraser into ferrule

5. Piercing ferrule to hola eraser securely

During all of these steps, pencils are held firmly by rubber arms

which do not mar the lacquer finish.

Shouldering is done by a rotary shouldering cutter head that shaves off

just enough to bring the pencil end to the right di.ameter for tipping.

The pencils are then passed through the ferrule machine. Application

of ferrules by 'l'Aachine requires careful adjustment and frf~quent clean-

ing of the ferrule feed mechanism. Especially with a new machine,

care must be taken to remove all grease and oil to prevent. the light-

weight ferrules from sticking in the feed tube.

The eraser feeding mechanism also requires sensltiv~ adjustment to

keep the rubber plugs moving sJIlOothly down the brass tube. Clear

gasoline is made to drip slowly into the tube to moisten the plugs

and give them a bright color The needle valve should be adjusted to

yield a drop of g.~oline for about every three erasers. Care is needed

to avoid chance of fire.

Steel needles are automatically plunged Lhrough the ferrule to pierce

it and attach it to both pencil and eraSer. .The depth of piercing
and the location of the ring of pierced points can be adjusted readily

by turnbuckles under the machine table. Individual needles can be

adjusted by screws directly above the needles.

In case plastic or cardboard ferrules are used, automatic machines are

available for tipping pencils with them. Erasers are glued into these

ferrules.

Some types of pencils, notably drawing pencils, are finished without

erasers. In that case, the painted pencils, after heading both ends,

are ready for stamping, inspection, boxing, and shipping.

***********
 DIUCT MATERIAL2,

Anl1ual Annual Cost

Requirements Estimated Actual

Pencil slats 136,000 gross ~ 68,000

Leads 136,000 gross 39,000

Ferrules 102,000 gross 21,350

Erasers 102,000 gross 21,100

Glue, lacquer, boxes 3,200

TOTAL $ 152,650

SUPPLIES

Annual Cost
Item Estimated Actual

Type slugs and foil

Maintenance and repairs

Lubricants and hand tools

Office supplies

TOTAL

-10-
 DIRECT LABOR.

Number Hourly Annusl Cost

Occupation Required Rate Estimated Actual

Grooving machine

operator 1 $1.80 $ 3,600

Lead layers 1 1.50 3,000

Slat clamping and

press operator 1 1.80 3,600

Slat-end sander 1 1.80 3,600

Shaping machine

operator 1 2.00 4,000

Heading machine

operator 1 1.90 3,800

Tipping machine

operator 1 1. 80 3,600

Single line foil

stamper 1 1.60 3,200

Inspectors 2 1.50 6,000

Packaging 2 1.50 6,000

Set-up mechanic 1 2.00 4,000

Laborers --2. 1.50 18.000

TOTAL 19 $ 62,400

-11-
 INDIRECT LABOR

Number Annual Cost

Occupation Ileguired Est~ted Actual

Manager 1 $ 8,000

Foreman 1 6,000

Office 2 8,000

Maintenance 1 4,000

Reeeiving and shipping 3,000

TOTAL 6 $ 29,000

PllODUCTION TOOL AND EQUIPMENT

Cost
Estimated
-
Actual

Grooving machine $ 5,100

Slat gluing machine 1,600

Slat press-eompressor 1,500

500 drying clamps 2,600

Slat-end sander 4,700

Sbaper 5,200

2 paint machines 2,700

2 double belt conveyors 1,400

Heading machine 3,800

2 tipping machines 1,600

Single line foil stamper 1,300

TOTAL $ 31,500

-12'"
 OTItER TOOLS AND EQUIPMENT

Cost
EstLmated Actual

Racks and shelves $ 2,000

Tables 500

Tools 1,500

TOTAL $ 4,000 #,·.··'.t

te1JRNlTURE AND FIXTURES

Number Unit Cost

Description Required Cost Estimated Actual

Desks and chairs 2 $150 $ 300

File cabinets 4 75 300

Typewriter 1 150 150 --,

Adding machine 1 150 150

TOTAL $ 900

PLANT LAYOUT

A plant layout and 'Work flow schematic diagram is shown on the last

page of tbis brochure.

...13-
 PLANT SITE

About 9000 square feet will be needed for a plant of this size. The

estimated cost of the plant site is $500.

,BUILDING

A one-story building, 50 feet by 70 feet, or about ]500 square. feet will

be required for a manufacturing operation of this size. The building

may be constructed of any suitable local material.

The estimated cost of the building is ~14,OOO.

POWEll

The connected load requirements for this plant amounts to about 35

horsepower. The estimated annual cost of power amounts to about $2,000.

WATER

In production, water is used in the preparation of the glue for spread-

Water for production, drinking, sanitation and fire protection is

estimated at $400.

In the production of lead fls, any local fuel may be used. The

estimated cost of fuel is $1,000.

 DEPRECIATION

Estimated Years Annual Cost

Description Cost Life Estimated Actual

Building $ 14,000 20 $ 700

Production tools and

equipment 31,500 10 3,150

Other tools and

equ1pment 4,000 10 400

Furniture and fixtures 900 10 90

TOtAL $ 4,940

MANUFACTURING OVERHEAD
Annual Cost
Estimated Actual

Depreciation $ 4,940

Indirect labo::", 29,000

Power 2,000

Water 400

Fuel 1,000

Supplies ~ ,.........

TalAL $ 40,940
 MANUFACTURING COSTS

Annual Cost
Estimated Actual

Direct materials $ 152,650

Direct labor 62,400

Manufacturing overhead 40,940

TOTAL $ 255,990

FIXED ASSETS

Cost
-Item. Es t ima ted ~ Ac".E!:!.~~

Land 500

Buildings 14,000

Production tools and equipment 37,500

Other tools and equipment 4,000

Furniture and fixtures 900

TOTAL $ 56,900

-16-
 WOlUCING CAPITAL

Cost
Item Estimated Actual

Direct materials 30 days $ 12,700

Direct labor 30 days 5,200

Manufacturing overhead 30 days 3,400

Reserve for sales collections 30 days 32,500

TOTAL $ 53,800

CAPITAL REQUIREMENTS

Cost
~stimated Actual

$ 56,900
Fixed assets
Working capital 53,800

$ 110,700
TOTAL

-17-
 SALES REVENUE

The estimates in this report are based on the production of 500 gross

of lead pencils per day or 125,000 gross per year.

125,000 gross of lead pencils at $3.12 a gross amount to $390,000

annual gross sales.

RECAPITULATION OF COSTS, SALES AND PROFITS

Estimated Actual
-
Item Cost Cost

Direct materials $ 152,650

Direct labor 62,400

Manufacturing overhead 40,9':&

Total manufacturing cost $255,990

Interest on loaus 3,320

Insurance 330

Legal 600

Auditing 1,200

Unforeseen expense

Total administrative costs $ 14,510

Sales commis8 ions 15,000
Bad debts, travel, discounts and
allowances, freight-out 6,000

Profit before taxes 98,500

TOTAL ANNUAL GROSS SALES $390,000

 BUmEl' CONTROL:

A rpquisitioD fonn designed to provide accurate records of procurement

and nd1cate the purpose of procurement vi th the least amount of time
and effort is shown on the following page.

This f'onn has an account number for each type of the various expendi-
tures 'Which the manager will review in detail, monthly or of'tener, in
order to control his expenses. Sane 1 tems, such as power and water,
are usua.lly under contract and are easily checked by reference to
monthly bills. For simplification, items (marked vi th an asterisk
below) are anitted fran the ,{Jurchase requisition. Variations in the
labor costs are easily reviewed by examination of the payroll vouchers.
The simplified type of control thus provided makes certain that the
man.ager can control expend!tures pranptly.

FC'llowing the requisition form, a sample voucher check is shown.

Voucher checks should be used for the payment or a1.l expenditures and
the appropriate book Ilccount number placed on each vouC'.her.

At the end of each month the manager viII receive a statement of aJ.l
expend!tures broken down by budget accounts. If the expend1tures ex-
ceed the bUdgeted month.J.y allowances of any of the accounts, the
bookkeeper Will :fUrnish the manager with a break-down of all expendi-
tures relative to the budgeted accounts exceeded. AJ..1 these supporting
data can be secured by ref'erence to the purchase requ1sit10ns and the
check vouchers. This ret"erence will enable the manager to determine
what caused the over-expenditure and take corrective action.

It" at tmy time during each month 1 t becanes apparent that expend!tures
Will exceed any of the bUdget accounts, the bookkeeper will bring this
to the attention of the manager for hie information and action.

BUoom CONTROL ACC0UN!~:

Monthly Mon'thly Annual

Account Number Expense Budget Budget Actual

10 Administrative $--- $ 454 $ 5,450 $---

20 Sales 1,750 21,000
30 Direct Materials 12,720 152,650
40 SUpplies 300 3,600
51 Paveri' 166 2,000
52 'Water*' 33 400
53 Fuel 83 1,000
60 Unforeseen Expense 755 9,060
(Reserve Account)
71 Direct labor* 5,200 62,400
72 Indirect labor*' 2,416 29,000
80 Deprecia.tion
(Reserve Account) 411 4,940

_10_
 PURCHASE REQUISITION I COMPANY NAME DATE

[] 10 ~INISTRATION o 40 SUPPLIES

o 20 SA.LES o 50 UTILITIES

o 30 MATERIAIS o 60 UNFORESEEN EXPENSE

INDICATE BELOW THE USE OF MATERIALS
o DIRh."'T MATERIALS 0 MAINTENANCE SERVICES

o MAINTENANCE MATERIALS 0 OPERATING SUPPLIES

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,
QUOTES REQUISITIONED BY
FROM

QUOTES APPROVED BY
FRGi

QUOTES ORDER DATE

FROM

-20-
 . 65-22
R. W. MITCHELL MANUFACTURING COMPANY -'514
'422 BOSWORTH STREET, S, E.

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PAY DOLLARS $
TOTHEOIllOEFfOF r ~,

R. W. MITCHELl- MANUFACTURING COMPANY

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'1'0 Ii"InS'l' N A'!'IONAI. BANK BY
SAMPLE CHECK
ANYWlIEUE, u. S. A.
VICE PRESIDENT
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ACCOUNT NUMBER

Sample voucher check to be used for the payment of

all expenditures in connection with Budget Control.

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R. W. MITCHEL.L MANUFACTURING COMPANY

..21 ..
 ENGTIOOS:.qs :

The services of professional engineers are desirable in the

design of' this plant, even though the proposed plant is sma.lJ..

A correct design is one which provides the greatest econcm;,y

in the investment of' f'u..'1ds and establishes the basis of opera-
tion that 'Will be most profitable in the beginning and will
also be capable of expansion vithout expensive alteration.

The addresses of professional engineers who specialize in

industrial deslgn, scme of wan may be Willing t,o undertake
such 'Work on low cost projects overseas, can be secured by
reference to the published cards in various engineering. magazines.
They may also be reached through their national organizations,.
one of which is t.he

National Society of Professional Engineers

2029 K Street} Northwest,
Washington 6, D. C.

lWluf'ac'turers of industrial equipment employ engineers f'amiliar

with the design and installation of their specialized products.
These manufacturers are usually willing to give prospective
customers the benefit of' technical advic~ by those engineers in
determining the sUit~bility ot their equipment in any proposed
• . of-
vroJecv.

Theequipnent manuf'a.cturers also know, and can recOOlIllend,

professional engineers in private practice, who are villing and
able to provide appropriate consulting services.

-22-
 TRAINDfG:

Manufacturing an inferior quality of product during the training

period could create sales resistance that might be difficult to
cope Villi later. To avoid such possibilities, the quality of the
product should be maintained at all times, including the training
period..

In some :areas skilled operators may be available loca.l1.3r-. In other

areas all the operators may have to be trained.

Ifskillec. 0perators are not available, adequate training would be

assured by usine: one or more of t...i.e following methods:

A. If the p.1a...'~l't is designed. and installed by a ccmpetent

engineering firm, the contract should be negotiat-""d, if
possible:1 on a turn-~:ey basis. On this basis the contrac-
tor agrees to operate the plant a.l1d produce the quality
and quantity of the product stated in the contract for an
agreed period of time. Such a contract would assure
adequate personnel training, since fu.l1. quantity and quail ty
could not be produced with an untrained organization.

B. The engineering firm that designs and installs the plant

can usually mal.ce training arrangements to have key personnel
placed, for trai,ning pu.,'""P0ses, in a foreign industry that
produces the same type of product. This would provide
training for the key person.'1el while the plant is being
installed.

If neither of the above methods is ppssible, then qualified

and experienced individuals should be employed for the key
pesitj ons, either permanently or tanporarily, to perform
the key operations and assist in training the organization,
even if they must be sectU"ed outside the country.

D. The manager should have years of success~u experience in

this t:t-pe of business B..'1d be fully qualified in aJ..l phases
of' management:1 including the training of emplOj:ees.

-23"
 SAFRl'Y:

There is always danger of accident and injury in any

industrial plant. Because of this, the manager should
take specific action to bring to the attention of each
employee the importance of safety precautions and in-
telligent first aid.

Practically all machines have sa£ety appliances, and

the manager should see that these are in good 'Working
condition and that the operators are making full use of
them.

In addition to constant watchfUlness to make sure that

all practicable safety precautions are taken, first aid
supplies should be readily available. One complete
first aid kit should be maintained neat' the manager's
office, and others at appropriate places throughout the
plant. Sane of the employees should be trained to pro-
vide first aid service.

The use of accident posters in the plant have proved to

be of value in reducing accidents. It is recamnended
that such posters be used, and that same direct sJ>ecial
action be taken by the manager, at least once each month,
to bring to the attention of all personnel the :ilnportance
of safety precautions.

A fire brigade should be established and each member

trained as to his responsibility in case of fire. r~re
drills should be conducted periodically.

It is recamnended that the employees be encouraged to

offer suggestions or recommenr~tions relative to preven-
tion of accidents, removal of: fire hazards and maJntaining
general interest in all safety factors •

...24...
 OTHER CONSIDERATIONS

There are other important subjects, shown below, that should be fully
investig'1ted and considered. Information on these subjects is usually
available from such sources as banks, government agencies, export~rs
and importers, wholesalers, retailers, transportation companies and
manufacturers.

MATERIALS AND SUPPLIES

1. Are all materials and supplies available locally?

2. Is the local material market competitive?
3. Is satisfactory delIvery of local materials assured at reason-
able prices?
4. What ~~terials and supplies must be imported?
5. Are they available in world markets at competitive prices?
6. Would prompt delivery of imported materials and supplies be
assured so that large inventories would not be required?

MA~KET FACT~

1. Is there already a demand for the product?

A. Who ar~ the principal consumers?
B. Wno are possible new consumers?

2. How is demand for the product now satisfied?

A. By local production? If so, what is the volume of annual
production?
B. What percentage of consumption is filled by local produc-
tion?
c. By imports'? If so, what is the volume of annual imports?
I). What percentage of consumption is met by imports?
E. From what areas are imports derived?

3. What is the estL~ted annual increase in local consumption over

the next five years7
A. How were such estimates made?
B. By reference to official figures on population growth,
family budgets, imports, etc.?
C. By consultation with trade or industry, ministri~s.
associations, bankers, commercial houses, wholesalers,
retailers, industrial consumers, etc.?

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4. If the product is already being manufactured, can the existing
and estimated future local market absorb production of the
new pla~t wi~~out price-cutting or other dislocations?

5. Would the estilnated sales price fu~d quality of the new product
make it ccmpetitive wtth an imported eqUivalent?
A. After adjusting cost to local conditions, is the
estimated sales price of the product so high that
tariff protection is necessary to protect it from
imports?

EXPORT 14APKETS:

J. Could the product canpete in export markets on the basis of

price, qUality and dependability of supply?
2. Can export markets for the product be developed?
3. If so, in "Ihat areas and in 'What annual volume?
4. What procedures would be necessary to develop export markets?
5. Hhat would it cost?

1. In calculating costs of the proeuct, has adequate allowance· been

made for the expense of a sales department, advertising and pro-
motion that might be required?

2. Do consumer prejudices against locally manufactured products

exist?
A. If so, why?
B. Would they apply to the ney product'?
C. If so, how could they be overcane and what
would it cost to do 501

3. Do marketing ~~d distribution facilities for the product exist?

A. If' not, can they be set up?
B. What would it cost to do so?

4. Will the product be sold to:

A. Wholesalers?
B. Retailers?
C. Direc~ to consumer?
D. Other industries?
E. Goverpment?

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 EGONGiIC FACTORS:

1. Hov much foreign exchange (and in what currency) is required to

import machinery, equipnent and supplies:
A. Hov much foreign exchange (and in what currency) is
required for annual. interest pS\YDlents and amortization
of any loans contracted to imporl machinery and equip-
ment, or for p~ent of royalties and technical services 'I
B. How much foreign exchange (and in what currency) is
required for annual import of ray materials and supplies?
C. What are estimated annual foreign exchange earnings and
in what currencies?
D. Has careful consideration been given to the possibility
of' depreciation in the foreign exchange value of the
local. currency?
E. Has careful. consideration been given to the possibility
of import controls, or restrictions on availabilities of
foreign exchange necessary to operate the business?
F. What benefits would the new business bring to the econaay
in the use of local raw materials: in employment and in
technology?
G. Do dependable facilities exist for transportation, power,
fuel, water and. sewage?
(l) If not, can existing deficiencies be eliminated
satisfactorily?
(2) What would be the cost to do so?

PERSONNEL:

1. Is there an adequate labor supply near the plant location?

A. If not, hov can the problem be solved?

2. can the problem of training canpetent management and super-

visory personnel be solved?
A. Also, the training of skilled labo~
B. Is technical adVice available in the locality?
C. If not, 'Where can it be obtained and what will it cost?

lAWS AND REGUIATIONS:

1. Do existing labor laws, government regulations, laws and taxes

favor establishment of new business?
A. If not, can existing obstacles be removed?
B. If so, how and when?

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 FINANCIAL FACTORS:

1. Technical advice on selection of machinery and equiIlllent.

A. In selecting the machinery and equipnent for the
nev plant, have reputable and ccmpetent engineers
and technicians been consultedY
B. Have they been asked for advice on the most SUitable
types of machinery and equipnent for the process and
localit;yt
c. Have 'they carefully canpared costs of various suppliers?
D. Credi t tenns offered purchasers?

FINANCIAl. REQUIREMENTS OF THE PROJECT:

1. In estimating the cost of the project, has careful considera-

tion been given to:
A. The effect on costs of delays in construction schedules!
B. In delivery and installation of machinery and equipl1ent'l
c. In import of essentisJ. ray materials and supplies?
2. In calculating cash flow and working capital requirements, has
careful. consideration been given to:
A. Maintaining adequate inventories of raw materials?
B. Supplies and spare parts?
c. seasonal fluctuations in the business?
D. The time required to liquidate credit sales to
custcmers and bad debts?
E. The period necessary to get the plant into
production'?
F. cash required to amortize its principle loans'l

3. If th1eeconauy is in a period of inflation, has fUll allowance

been made ror the influence or rising prices and wages on the
cost of 'the project and on work.ing capital reqUirements?

SHORT TERM BANK CREDITS:

L Has it been possible to make arrangements with local banks to

finance short-time working capital requirements of the business'l

FINANCIAL PWI:

1. Has a definite plan to finance the proje<;t been worked out?

A. Is sufficient capital available local.1y1
B. If not, what is the plan to obtain the required
capital?

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 SHAPING MACHINE

Courtesy
Oglesby Machine Company
Nashville, Tennessee

-29-
 GROOVING MACHINE

Courtesy
Oglesby Machine Company
Nashville, Tennessee
 PLANT LAYOUT
ARROWS INDICATE FUlW OF WORK

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