Kagaz Packaging

8/8/2019 Kagaz Packaging

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CORRUGATED BOXES INDUSTRY

KAGAZ PACKAGING CORRUGATED BOXES MANUFACTURING

CORRUGATED BOXES INDUSTRY PRODUCTION:

GENERAL INFORMATION: ABOUT KAGAZ PACKAGING

Kagaz Packaging is acorrugated boxes manufacturing firm. Mr. Manoj Shah and -------founded it in 1980.The firm sells in the domestic market but it is accorded the deemed exporter status asit sells corrugated boxes to exporters.

Location:

ItemDescription

UNIT Apr99

May99

Jun99

Jul99

Aug99

Sep99

Oct99

Nov99

Dec99

Jan00

Feb00

Mar00

Corrugated

boxes

Tonnes 157

5

174

0

169

3

160

6

178

6

175

9

169

2

142

7

147

8

142

0

146

4

1456


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The factory was set up at Kandivli in 1980, in the Government Industrial Estate. Kagaz now has twounits situated close to each other, both manufacturing corrugated boxes.

Capital:The first unit was established with an initial capital of Rs.60,000 in plant and machinery and another

60,000 on land. The maximum limit for investing in an SSI then was Rs.10, 00,000.The second unit was started in 1982 with an investment of Rs.5, 00,000 in plant and machinery and

Rs.4, 00,000 in initial working capital.

Choice of industry:The family of Mr. Manoj Shah has been in the business of manufacturing corrugated boxes for the past 40 years. The 40 yearsof experience lent credibility and trust which the brothers decided to leverage to their maximum advantage by setting up asimilar unit in Mumbai.

The benefits they enjoyed for selecting the corrugated manufacturers industry were:Reputation for excellent quality and timely serviceReady source of suppliersReady customer base (Reliance)Manufacturing expertise

Choice of Location:The Government Industrial Estate at Kandivli was cited as one of the strategic locations for setting up factories, which wasone of the reasons for it being selected as the prime location for setting up the KAGAZ manufacturing unit.

There are two main factors considered while deciding the location of a factory:1) Nearness to the market2) Nearness to the source of raw materials.

In case of Kagaz Packaging, it was nearness to market as the factory is located in Mumbai. Mumbai being the commercialcapital of India, most of the clients of Kagaz Packaging are situated in the vicinity of Mumbai. However they get one oftheir raw material i.e. Gum form the same industrial estate while their main raw material paper is bought from Vapi.


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Registration:The main purpose of registration is to maintain statistics and maintain a roll of such units for thepurposes of providing incentives and support services.

Benefits of registering:The registration scheme is not compulsory. Units would normally get registered to avail some benefits, incentives or supportgiven either by the Central or State Govt.The regime of incentives offered by the centre generally contain the following:

Credit prescription, differential rates of interest, etc.Excise exemption Scheme.Exemption under Direct Tax Laws.Statutory support such as reservation and the Interest on Delayed Payments Act.

States have their own package of facilities and incentives for SSIs. They relate to development of industrial estates, taxsubsidies, power tariff subsidies, capital investment subsidies and other support.Kagaz Packaging registered itself as an SSI to avail of the above-mentioned benefits.In the wake of current reforms, registration procedure for SSI has been streamlined and registration forms simplified.Separate forms have been prescribed for provisional and permanent registration.

(a) Provisional registration:Kagaz prepared provisional registration forms in duplicate. One copy, duly endorsed, was given to the district industriescenter and the other was retained with the firm itself.

(b) Permanent RegistrationThe form for permanent registration was filled in triplicate. One copy was sent to the DIC for record, the second coy was

forwarded to the Director of Industries to facilitate consolidated record maintenance.

The Clearances needed by the firm for setting up the SSIs are as follows:

I) License/Registration:


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1) Approval, licensing and registration of Factory required under Factories Act, 1948.2) Registration as a Partnership Firm required for partnership and proprietary concerns.3) Sales Tax Registration required for commencement of sale under The Bombay Sales Tax Act, 1959 and The Central

Sales Tax Act, 1956.4) Central Excise required before commencement of sale of items covered by Central Excise and Salt Act, 1944.

II) Project Location:Site approval by the Municipal Corporation

III) Project buildings:1) Factory Construction permission required in advance from the local authority of MIDC and also from Factories

Department in respect of units falling within the purview of Factories Act, 1948.2) After the building is completed, obtain the Occupation Certificate and the Completion Certificate.3) Certificate from the Fire Department after inspection.

IV) Power:Sanction of demand and connection for electric power from MSEB.

V) Raw Materials:1) Permission for imports under EXIM Policy.2) Importer-Exporter Code No.

Project report:A project report provides all necessary information about the unit to be set up. It is useful for the entrepreneur and alsofor various development agencies who will help the entrepreneur setting up the unit. If the report is well prepared, itwill obviate various difficulties that could arise while setting up the unit.

Project reports generally consist of:

Project description.

Market potential.

Capital cost and sources of finance.

Assessment of working capital requirements.

Other financial aspects.


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Economic and social variables

In short to compile the above mentioned points, the steps taken by Kagaz Packaging while setting up the SSI unit are

explained in the flowchart below:

LIST OF CLIENTS FOR KAGAZ PACKAGING:

Reliance Industries Ltd.

Unisound group of companies.

Spherehot group of companies.

L.M.L. Ltd.

godfrey Phillips (India) Ltd.

Exotic Fruits

Amul (Gujarat Co-operative Milk Marketing Federation Ltd.)

and others


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ORGANISATION STRUCTURE & OWNERSHIP PATTERN:

Partnership organization:

Kagaz Packaging is a partnership firm.About 21% of SSIs in India are partnership concerns. The provisions of The Indian Partnership Act of 1932 govern theformation and management of a partnership organization. According to it, a partnership is the relations between personswho have agreed to share the profits of a business carried on by all or any of them acting for all. A partnership deed isessential for this kind of organization. The Partnership Act, 1932, outlines the rights and duties of a partner.

Advantages DisadvantagesMore resources will be available to the

concern

Difficulties could arise if there is no

cohesion among partnersThe expertise of different partners willbe available for the management andvarious activities

Health problem of a partner may posethreat to the administration/continuity ofthe concern


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ORGANISATION STRUCTURE:

Partners

Partner 1 Partner 2

Imports

BankingTaxation

Production

Purchase

LaborRelation

s

Marketing

SeniorSupervisor

JuniorSupervisor

AccountsManager

Accountants


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The administrative staff comprises of 4 people in the accounts department, 1 person handling marketing, 4 production

supervisors, lab helpers, peons, etc.

MANPOWER:The first plant of Kagaz Packaging has manpower strength of 40 workers and the second one has 20 workers.The labor at Kagaz is classified into three grades:1) Unskilled.2) Semi-skilled.

3) Skilled.

Skilled workers handle operation of corrugation and punching machine. The jobs of cutting by hand, unloading rawmaterials, etc does not require any skill and hence are handled by unskilled workers. Semi-skilled laborers handle theremaining operations.

50% of the labor is permanent and the rest is on a contractual basis.

Grades of Labour

Unskil l ed

60%

Semi-

Skil l ed

30%

Skil l ed

10%

Unskilled Semi-Skilled Skilled


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TRAINING:They do not provide formal training to employees. They employ people with required training and without training.Employees without any training learn on the job

FINANCIAL INFORMATION :

Sources of finance: Partners capital

Unsecured loans

Term loan from bank against building and machinery

Loans for working capital

Bank : DENA BANKINSURANCE: NATIONAL INSURANCE

ANNUAL TURNOVER : Rs. 4 croresPROFITS:

RAW MATERIAL INVENTORY: Rs. 75 LakhsFINISHED GOODS INVENTORY : Rs 3 lakhs

TAXATION BENEFITS AVAILED:

Kagaz enjoys excise benefits by virtue of its turnover being more than 1 crore i.e. 4 crores, so the excise is totallyexempted. It does not enjoy any income tax benefits.


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ANNUAL FORECAST:They prepare an annual marketing budget which gives direction to their marketing activities throughout the year.

GOVERNMENT OR INSTITUTIONAL ASSISTANCE:Kagaz packaging does not avail of any financial aid offered by SIDBI or other financial institutions as it finds the process toocumbersome

PRODUCTION :

This industry is strictly reserved for the small-scale sector. All over India there are 6000 manufacturers of which around 500are situated in Mumbai.

Raw materials requirement:

Kraft paper there are different types of Kraft paper available depending upon thestrength required by the customer. The Kraft paper varies from 80gsm to 450gsm.

PRODUCTIONLOCATIONS

0

1000

2000

3000

4000

5000

6000

7000

India

Mumbai


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Packaging:The date of manufacture and the batch numbers are then painted on the boxes. These boxes are bundled up together

with either jute or plastic ropes depending upon their weight. These are then dispatched to the customers.

Maintenance of the Machines:The company has a contract with the manufacturers of the machines for its maintenance. Other than this they carry outpreventive maintenance where the workers oil the machines everyday. Also they have in-house mechanics/ electricians whocan repair small problems in the machines.

Quality Control:Kagaz Packaging is quality conscious firm. Thus, quality checks are done at various stages of production. Also they

have a quality check laboratorythat checks various factors of quality as weight, strength and the various other specifications asasked by the customers. There are various machines such as;

Cobb tester:This is a machine that weighs the boxes whether it is as per the specifications or not.

Bursting strength machine:


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This machine tests at what pressure does the box collide or what pressure can the boxwithhold.

Puncture testing:This machine tests at what pressure the box gets punctured.

The same tests are done with the raw materials also.

MARKETING:

The company uses direct marketing for marketing their corrugated boxes i.e. company to customer.

The marketing activities of the firm comprise of the following:

Conducted through their personal contacts as their family business is into corrugatedboxes.

The goodwill they enjoy in the market enables them to have a firm market standing.

Tender system

Advertisements in:Yellow pagesIndustries publicationMembers directories

An All India Federation of Corrugated Box Manufacturers Conference is held every year,which is a platform for corrugated manufacturers to come together and discuss the issues of the industry.

They also attend other conferences where they market their products by giving samples to prospectivecustomers.

Exhibitions are held by AIFCBM once every three years.


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The company spends about 1% of their turnover on advertising & marketing. However they do nottake any help form any institution as the process is too cumbersome.

The company enjoys a strong brand image of superior quality owing to the fact that they are deemed exporters, as a result

of which the raw material they utilise is of very high quality, so the clients have confidence in their products. And as theyhave upgraded technology, they find it easier to adept to international standards.

STRENGTHS OF THE COMPANY:

Advantage of Quality

Selection of raw material

Better understanding of technical aspects

Experience & reputation

Well Equipped laboratory

Production machinery

COMPETITORS:

The company faces competition form several corrugate box manufacturers, which include:

Nice Pack Industries P. Ltd. Brown Kraft Industries Ltd.


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Girnar Packaging

Paper Flutings

Patalganga Packaging P. Ltd.

V. K. Packaging

Wadco Packaging

Core Parental Lt


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Competition is also faced from imports which include competitors from abroad:

Smurfit Packaging Italia Spa.

Corrugated Box manufacturers from Singapore.

PRICE:

The firm prices their products as:

The cost on industrial undertaking may be divided into two principal elements:a. Materialsb. Labour

The material costs incurred by the firm are the cost of basic Kraft paper, Adhesive etc.

The cost can be further classified into various types based on their nature:

PRICE Cost

Prof

itMargins

Creditcost

Overhe-ads

+ + +

0%

3%

%

%

Kraft paper

Adhesive cost

Printing cost

electricity cost

labour cost

Packing and

deliveryOthers


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Awards and achievements:

Kagaz Packaging has been the proud recipient of a multitude of awards from various prestigious institutions in thecorrugated boxes industry. It has received:

It has received 9 awards instituted by The Federation of Corrugated Box Manufacturers. These awards are mainlygiven for excellence in:

Design

Innovation

Special protection.The award is called The Corru Star Award.

It has received 8 India Star Awards from The Indian Institute of Packaging.

Kagaz Packaging has twice been the recipient of The Asia Star Award instituted by TheAsian Packaging Congress.

It has also had the privilege of receiving the coveted World Star from the WorldPackaging Organization.


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VIEWS ON GOVERNMENT POLICIES:

It would really help if thecorrugated boxes industry isdereserved. As there is a lotof growth opportunity if webecome medium or a largesized firm. But thereservation policy of thegovernment is detrimentalour progress.

Documents

Kagaz Packaging