10 Questions during Important Stages in Setting up a Factory – Frequently Asked Questions (FAQ)

Setting up a factory or a production unit calls for precise planning. There is a famous proverb that says :

“Well begun is half completed“

So if you visualize and plan all steps that are involved in manufacturing a product, the chances of failure will be minimum. It is not just the technical know-how, but also the commercial aspects which are equally important in planning and setting up a factory.

For the beginners in this line, once an entrepreneurs  decides to set up a manufacturing unit, we given below some very important stages which will be required to be followed. The same are covered in the form of frequently asked questions and then answers in brief to each question. They are :

1. Is the product being manufactured has a sufficient market demand, domestic or International? At what rate is the demand growing nationally or internationally ?
   Answer:  Collect authentic information either from informal or formal channels. Collect some published market surveys or market research reports. Preferable to appoint an agency or a good consultant to get the correct information.
2. Is the market demand based or supply based ?
   Answer: Mostly the products grow at a rate equal to the growth in consumption. However, there are some new products or innovative items which can be marketed based on the supply placement. Such products call for extra marketing efforts and marketing costs. 
3. How can I get the technical know-how or technology available to manufacture that product?
   Answer: For this you may appoint a consultant who will give you the know – how or technology. It is possible that you can even include not just the know – how but also engage a consultant who will do a complete techno-commercial study, which will include (a) choice of technology or process (b) detailed cost estimate of land, plant & machinery, running cost, profit margins, cash flow and expected payback period.
4. Is it costly to engage consultants to get the market study and techno-commercial feasibility ?
   Answer: As compared to the investment cost, it is not at all costly to engage the consultants, specially in view of safety of your investment decision. A small expenditure to get our facts right before entering into the project execution phase, will reduce the chances of failure of the project and will not block your funds.
5. When should I take investment decision ?
   Answer: Once the above part of the planning is done and you have a complete detailed practical project report (DPR ) ready with you, you can easily take an investment decision with much greater confidence and take a plunge without worrying about the failure.
6. How can I arrange for interest-free finances ?
   Answer: In case you or your family can not afford to finance the project on proprietary basis, you have a few options as follows :
   1. Make partners. Involve friends and relatives who have confidence on your ability and with whom you have shared the DPR. You can go for either a Limited Liability partnership ( LLP ) firm or go for a pvt limited company so that the partners’ other assets are not at risk.
   2. Arrange qarzan hasanah either from friends or relatives or from the local Jamaat Scheme or from the central QH scheme governed from the Al -Wazarat us Saifiyah Office or through the dept of Al – Tijaarat al Rabeha, Mumbai.
   3. Put up your schemes to financial experts who can arrange private equity participation from the national or international investors.
   4. Publicize your project among the mumineen business forums and try to rope in mumineen investors who have surplus funds and looking for safe and good projects to invest in.
7. Once I have the know how / technology and the required  finances, is it adequate to execute the project?
   Answer : No, unless you have experience in project implementation. Again, it is suggested to include this in the scope of an experienced consultant who will see through the entire implementation smoothly, although you may be spending a small percent say 3 to 5 % on the consultancy expenses, but you will not be let down by your own ignorance of a lot of technical and other special commercial aspects, of which you have no experience or time to spare due to your running activities.
8. What are other important stages in implementation of a manufacturing project ?
   Answer: Once the project planning and a DPR is ready, a company is constituted and the required finances are in place ( with money received in the bank account  ) these are other important stages:
   1. In case you are planning a technology or process tie up, visit the process / technology license owner and enter into an agreement. Again, it is better to include all this in the scope of your consultant so that you are not required for technical capabilities while finalizing a legal tie – up agreement with the technology or process licensor.
   2. Make tendering documents of various plant and machinery items and float the inquiries.
   3. Gather quotations for all the items of machinery and equipment and organize the information in technically acceptable bids ( quotes)
   4. Short list the suppliers who are giving favorable purchase conditions and attractive prices / assured after – sale services.
   5. Place orders for each and individual items
   6. Monitor the deliveries
   7. Prepare the site in the interim period for material receipts and erection of the equipment
   8. Call for quotations from the erection contractors for those items which are not included in the scope of suppliers. Generally Civil and Electrical jobs are not included in the scope of machinery suppliers.
   9. Supervise the erection and ensure timely completion
   10. Once the erection is complete, call the consultant or the technology supplier and commence production trials.
9. What are the post – production steps to run a factory ?
   Answer:  Once the production is established, or during the time of production trials, recruit the staff, like operators, mechanics, store house supervisor, accountant and other necessary personnel as per the DPR. Plan your marketing strategy, whether you will appoint distributors or will do direct marketing by appointing sales executive. Plan you advertising campaign like print media, electronics ( TV ads) and internet marketing by hosting a website and promoting the same through various net-marketing techniques. You may have to adopt all or a mix of these campaigns depending on the product in hand.
10. Is that all it takes to enter into a manufacturing line or a factory set up?
    Answer: This is just the beginning of your entry into the industrial line. You have to build a strong team (Human Resources)  of different functions like production team, accounts team, marketing team, govt. liaison team, IT wing for consolidation of systems.  While the team will look after you project,  you  can look for expansion plan, diversification plans by starting the planning process again to start with a new product and by engaging another consultant to work on a new techno-commercial feasibility report.

This approach will enable a continuous and sustained growth for you and your industrial career.