Production Management Report On Water Purification Plant

Submitted on 5Th January 2009

T !"# O$ %O&T#&TS
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P+RPOS# O$ T/# R#PORT

The objective of this report is primarily to facilitate potential entrepreneurs in project identification for investment. The project pre-feasibility may form the basis of an important investment decision and in order to serve this objective; the report covers various aspects of project concept development, start-up, production, marketing, finance and business management. The report also provides sectoral information, brief on Government policies and international scenario, hich have some bearing on the project itself. This report is therefore regarding production of purified drinking ater on commercial basis. !efore studying the report one must consider follo ing critical aspects, hich forms the basis of any investment decision.

%R+%) " $ %TORS 1 ST#PS )& *#%)S)O& M 2)&3 $OR )&4#STM#&T )& T/# PROJ#%T
!efore making any investment decision, it is advisable to evaluate the associated risk factors by taking into consideration certain key elements. "or establishing ater purification plant critical factors that should be considered before launching are described belo # The market for purified bottled $ mineral ater is a gro ing market, but offers tough competition. %erception $ positioning of the ne brand. &sually the top target market for bottled mineral ater follo s the perception. 'f the perception is positive, the results ill be higher sales. The positive perception for distributors and final customers may result from direct consumer e(perience, a areness, direct promotional activities, print media and T) advertising. *istribution is very important for the success of ne brand. The stronger the distribution the more successful ill be the ne brand. The distribution strategy should be designed after a careful study of the market for going for regional distribution or for nation ide distribution. %re-launch advertising is vital for positive perception of the product, hich ill result in higher product acceptance. +ompliance of the ater ,uality standards of %akistan -tandards . /uality +ontrol 0uthority 1%-/+02 and license from the authority. 0vailability of product at 0 class, ! class or + class shops should be decided before launching the product and availability should be persistent.

Pro:ect Timeline
-.4 5 2 3 0ctivity +ivil 6orks %lant order and 7ayout %re-opening operations Time 1months2 2 3 5

The construction of civil orks has been estimated to be completed in t o months and the plant order, lay out and installation is estimated to have a time period of three months. The time re,uired for pre-operations is one month. 't also includes pre-launch advertisements on T) and in print media. The project time line may e(tend and cut back depending upon the start of activities on parallel basis or one after another.

PROJ#%T PRO$)"# Purification of Water

The process of purified bottled ater manufacturing consist of collecting ater from a suitable source, filtration, deminerali8ation, blending ith salts, aeration, testing for standards conformation, bottling and packaging. 0 process for the production of bacteria free, clean and palatable bottled ater as developed by %+-'4 7aboratories comple( 9arachi. 't had very simple process consisting of physical operations of settling, filtration and &ltra )iolet radiation treatment. *uring 5::;<s much of the mineral ater as imported. !ut today there are more than 2= brands of drinking ater available in the market thus sho ing a substantial gro th by the industry. Table: 6ear 2;;;-2;;5 2;;2-2;;3 2;;3-2;;? 2;;=-2;;@ Mineral Water Imports in Pakistan 9uantity =:3,23: >53,33> 5,==;,:?5 2,32>,3=; 4alue ;<000= R>-( 3,5>> ?,3>3 5;,@35 52,>?=

Opportunity Rationale
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The market for mineral ater has been sho ing a mushroom gro th trend over the last fe years. The country<s market is very small on a global scale and as estimated at 33 million liters a year by the end of 2;;@. The last three years have sho n more gro th and the market has been estimated to gro @; million liters and the per capita consumption is ;.? liter. The annual gro th rate for bottled ater is 3;A. 0ccording to a study conducted in 2;;3, %akistan registered the highest gro th of 53;A amongst the countries in 0sia and Biddle Cast region. The potential markets for bottled $ mineral ater consist of foreign tourists and foreigners orking in %akistan, hotel industry, patients 1bottle ater is also used to avoid the possible consumption of contaminated ater for the patients2 and travelers. Boreover the bottled $ mineral ater has been emerging as a daily preference of the elite class. 9arachi being the biggest city of %akistan has been facing the problem of drinking ater shortage. This further integrates the demand for pure drinking ater in 9arachi city.

Pro:ect !rief
This proposed project presents an investment opportunity for establishing a bottled ater plant for providing pure drinking ater. The proposed product line ill consist of bottles of 5.? and ;.? liters. 'n the initial phase of the project only ;.? liters and 5.? liters bottles ill be introduced in the local market. 0fter successful introduction of the ne brand of bottled ater the product line may be e(tended to 53 and 5: liters cans.

Pro:ect )n?e>tment
The total cost of the project has been orked out to be 4s.5?.;== million. This includes a fi(ed cost of 4s.55.3>? million and a orking capital re,uirement of 4s.3.?>; million. %eriod of construction is 2 months for civil orks and 3 months for machinery . C,uipment layout and installation.

Proce>>
T o sources of ater can be used for purification purposes on commercial basis. Ground 6ater 6ater -upply from 96-! 1in 9arachi2

The ground ater option is relatively costly as it involves more treatment. The ground ater available on 9arachi at different areas has different chemical composition and treatment ould vary depending upon the chemical composition from area to area. The ater supply from 96-! is more feasible as compared to the ground ater available in 9arachi. 6ater can be purchased from 96-! on commercial basis. This feasibility study focuses on 96-! ater as source of ater.

"or the purpose of this feasibility study, t o samples of 96-! ater have been taken and their chemical composition as analy8ed. The chemical analysis of these samples is as follo ing. The cost of purification plant is dependent on the analysis of the available ater. The treatment varies from place to place 1increase of ground ater2 and from source to source.

naly>i> of 2WS! Water

p/ %onducti?ity Sulphate !icarbonate %hloride Magne>ium %alcium Pota>>ium Pota>>ium Sodium Total *i>>ol?ed Sol?ent> Total %alifon %ount $arecal %alifon %ount Total !acterial %ount Source );*efen>e Pha>e7( 7-50 .52 u>@cm 58 ppm '07 ppm .8 ppm '' ppm 05 ppm 5 ppm 0. ppm 08 ppm 270 ppm Aero @ *" Aero @ *" .-0B'0C cfu@m Source ));3ul>han '0*( 7-52 .92 u>@cm 57 ppm ''' ppm 57 ppm '2 ppm 09 ppm 5 ppm .0 ppm .5 ppm 295 ppm Aero @ *" Aero @ *" .-0B'0C cfu@m

Pro:ect %apacity Rationale

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This study has been made ith the focus of 9arachi city. 9arachi has been facing the problem of ater shortage. The population has been gro ing at the rate of 3.3> annually. The proportion of &rban and rural population in -indh is 3>.> and ?5.2 respectively. 't also sho s that the major proportion of the population is in the cities and 9arachi comes out to be a major target market for ne product. The population of 9arachi city is :,33:,;23 according to 2;;2 population, hich is around 3;.=:A of the population of -indh. The sources of drinking ater for -indh region are as follo ing#

TableD *rinEing Water Source>

Source> Sindh Rural +rban Pipe ;&ul( .'-70 '5-8' 7.-50 /and Pump 05-5' 52-22 '5-88 Well 8-5. '2-78 2-98 Other> '0-2. '8-'8 5-75

*epending on the minimum feasible plant capacity and situation of supply of different brands of purifies bottled ater and future e(pansions, a plant si8e of 5?,;;; Gallons per day is recommended.

Propo>ed Product MiB

This feasibility has been developed for a ater purification plant ith a capacity of 5?,;;; gallons per day. The product mi( consists of ater bottles of 5.? liters and ;.? liter in the ratio of >;A and 2;A respectively.

TableD Recommended pro:ect Parameter>

%apacity 5?,;;; Gallons per day /uman Re>ource 32 Technology@ Machinery 7ocal D imported "ocation 9arachi

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Propo>ed !u>ine>> "egal Statu>

There are three main forms of business# -ole %roprietorship, %artnership and +ompany. 0n enterprise can be a proprietorship or a partnership and even it can be registered under company la ith corporate la authority. 0lthough selection totally depends upon the choices of an entrepreneur, but this feasibility study has been based on a private limited company.

$inancial Summary
The financial cost of the project can be summarized as under: Pro:ect %o>t '5F055F.85 )RR 79G PaybacE Period ;yr>( 2-20 &P4 '72F552F900

The proce>> floH

The first step for setting up a ater purification plant is the analysis of source of ater. 0fter the chemical analysis, the specifications of the purification plant are set. 'n the purification plant, source ater is stored in the feed ater tank, passes through the sand filter for preliminary ater filtration. 6ater then passes through the dosing pump-' here chlorine is added to kill the germs in the ater. 0fter the chlorination, ater passes through carbon filter. 't helps in the maintenance of proper odour and taste of the ater. 't also removes chlorine from ater. 6ater is then passes from *osing pump-'', here -odium Beta !isulphate is added. 't helps in dechlorination of ater. 6ater is filtered ne(t and passes through dosing pump-''', here anti scallant is added. 't prevents scaling of membrane from calcium, magnesium and biological gro th. 6ater then passes through reverse osmosis module. This stage of the process makes ater clear from all the contaminations and minute particles. 6ater then passes through dosing pump-'), here minerals are added for taste development. 0fter this stage, ater undergoes &ltra )iolet treatment to avoid any contamination from bacteria and other micro organisms. 6ater then passes through automatic ashing, filling and capping plant. Eere ater is filled into bottles. 0fter filling bottles are taken into the arehouse or shipped to the retailers.

The complete process flo diagram is as under.

Propo>ed "ocation
-uper high ay is easily available and is ideal for this project as city government giving subsidies to buy land for this purpose.

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STR T#3)% R#%OMM#&* T)O&S MarEet #ntry Timing

The eather is the main dynamic that may bring changes in the market si8e of the purified drinking ater as the daily ater re,uirement increases in summer. 6hen launching a ne brand of purified ater for bulk market, eather is the main dynamic, hich should be given proper consideration. The demand pattern for retail market of purified bottled ater is not affected by the eather. The advertisement including T) and print media is e(pected to bring changes in the demand. Eo ever, it is suggested that the ne brand of purifies bottled ater is launched in the start of summer season. The entrepreneur have to match the brand launching time ith the advertisement and eather that ould drive the demand of bottles ater and illingness of consumers to s itch to ards ne brands. The economy is in recession so it ould matter a lot that the time hich e are entering should be good for customers.

2#6 S+%%#SS $ %TOR

MarEeting
!randing and marketing of bottled ater is as essential as ater for the survival of the human body. The traditional marketing tools include site advertisement, T) and print media advertising and brochures. This study allocates 5;A of the revenue for advertising and promotional purposes. 0part from the traditional marketing tools, this study suggests to focus more on other marketing magnets that include interactive marketing, interactive marketing may include educating the general public about the importance of ater and its daily consumption re,uirements for human body through the participation in seminars and in general public gatherings 1e.g. +ollege and &niversity gatherings2. Fne of the marketing options is to sponsor public events like cricket matches or hospital campaigns, distributing free brochures about ater and its daily consumption, ater re,uirements in different age brackets. The interactive marketing may be designed through seminars and orkshops about the daily human consumption re,uirements and diseases originating from the lack of pure ater. Fverall marketing strategy may change ith the change of target market. 0 market research study is recommended to design the different dynamics of marketing before launching the ne brand. Barketing e(pense has been included in the total project cost and it has been estimated around 4s.? million. The entrepreneur may decide to increase or decrease the amount of marketing e(pense depending upon this choice of promotion activities and type of media used. "ollo ing table gives the breakup of the marketing e(pense.

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Pricing
The pricing strategy should be in line ith the going rate market prices of the different local brands. -ince a ne brand has to face a lot of competition from the market, it is suggested that the price ceiling should not be crossed hatever price strategy be adopted.

Product PacEaging
%roduct packaging and presentation is one of the main dynamics, hich control the flo of target customers to ards the product. %ackaging should be inline ith the industrial norms. %ackaging may also vary ith the understanding of the target market. 't is suggested that the bottles of ;.? liter and 5.? liter capacity should be used. !ottles should be clear. The bottle should give a reflection of light sky blue color, hich is considered a natural symbol of the ater. This color also adds a tinge of purity. The ater should give a shiny and a glossy reflection. The opening of the bottle should be large enough to accommodate outflo and inflo of ater. The bottles should be placed in special racks and strand meant for bottled ater at retail outlets, hich ill be having a uni,ue color and a uni,ue design. The color and the design ill create a positive perception for the ne brand. The rapper of the bottle is suggested to be on four-color printing and should have the follo ing information in addition to the logo of the company. 6ater -pecification +ertificate mark of the %akistan -tandards . /uality +ontrol 0uthority C(piry *ate 1!est !efore *ate2 0 brief intro of the company ith the address 6ebsite address of the company !rand Game $ Trade Game Get volume in -ystem 'nternational $ Betric system !atch number or code number

?ailability
'n the first phase of the launch of the ne brand, availability ill also play the key role in attracting the customers. 't is suggested that the entrepreneur decides the availability of the product at 0class, or !-class, or +-class retail outlets or mass availability of the product 1aggressive marketing2. -ince, the perception of the product is also directly related ith is availability so it is suggested that

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the strategy for the availability of the product be designed according to the target market and the perception and positioning the entrepreneur is targeting.

S#%TOR 1 )&*+STR6 & "6S)S

There are around 2= players in the bottled ater sector. 0ccording to the industry sources, the number of bottlers scales up ell above @; during summer season due to increased demand for drinking ater. Eo ever, the much publici8ed laboratory report published by the %akistan +ouncil of 4esearch on 6ater 4esources 1%+4642 after conducting a survey of 2= brands in the 4a alpindi and 'slamabad region declaring that, all the 2= brands available on the market are contaminated hile 5; out of them are unsafe for drinking, forced the %akistan -tandards . /uality +ontrol 0uthority 1%-/+02 to make it obligatory for the companies to obtain license from the authority before commencing operations. %akistan<s bottled ater market comprises of t o main segments i.e. retail market and bulk market. The retail market consists of ;.? liter, 5.? liter, 3.5 liter and ?.; liter capacity %CT bottles. The bulk market consist s of home and office delivers in 3 and ? gallon cans.

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0ccording to the market figures, the Gestle pure life brand dominates the retail market ith market share of ?;A. The -parklet holds 5;A of the market share and !-6 brand of B$- 6ah )alley +orporation has share of ?A. The rest of the market consists of small players. !rand> ?ailable in the MarEet

The price range for 5.? liter category is from 4s.2;-:? including local and imported brands and the price range for ;.? liter category is from 4s.5;->? for local and imported brands.

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"egal ReIuirement>
The %akistan /uality -tandards defines bottled drinking ater as, H!ottled drinking aters are aters other than natural mineral aters hich are filled into hermetically sealed containers of various compositions forms and capacities that is safe and suitable for direct consumption bottled drinking ater is considered food.I The %akistan -tandard /uality +ontrol 0uthority 1%-/+02 as established under section 3 of the 0ct-5::=. The establishment of any mineral ater plant in %akistan is re,uired to get a license from the %akistan -tandards /uality +ontrol 0uthority. 0n application form, hich can be obtained for 4s.5;; only from the office of the %akistan -tandard /uality +ontrol 0uthority and it, is to be submitted to the %akistan -tandard /uality +ontrol 0uthority. The manufacturer is re,uired to have a laboratory and a technical person, ho ill be checking the samples for constant ,uality. The team from the %akistan -tandard /uality +ontrol 0uthority then visits the plant and collects samples. 0fter the conformity of the samples to the standards the %akistan -tandard /uality +ontrol 0uthority issues a license. The %akistan -tandard /uality +ontrol 0uthority has developed standards for bottled and mineral ater and all the ater plants being established in the country are re,uired to follo these standards. 0 manufacturer could market bottled $ mineral ater ithout obtaining a license from the %akistan -tandard /uality +ontrol 0uthority. The authority e(amines the availability of proper facilities including standardi8ed laboratory and purification-processing plant for ensuring the ,uality of purifies drinking ater ith a team of e(perts. Banufacturing, -tocking and sale of bottled drinking ater and bottled mineral ater ithout certification marks license is prohibited under the %akistan -tandard /uality +ontrol 0uthority 0ct. )iolation of the %akistan -tandard /uality +ontrol 0uthority -tandards is punishable by imprisonment for one year or a fine of 4s.?;,;;; both. The general re,uirements for establishing a bottled $ mineral ater plant as developed by %akistan -tandard /uality +ontrol 0uthority are as follo ing#

Suitability
The assessment of the suitability of ater for human consumption shall be based on consideration of its physical, chemical and microbiological re,uirements and limits for to(ic substances. The ater should e free from all chemical and bacteriological contaminations hich are ha8ardous to health.

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/ygiene
*rinking ater for the purpose of bottling shall be prepared in accordance ith %-#3:33-5::@ for the code of practice-General principal of food Eygiene and in accordance ith the %-#3@5>-2;;5 for code of practice for the collecting, processing and marketing of natural mineral aters.

PacEaging
The containers shall be hygienic suitable completely clean and shall not cause any undesirable change in the tastes, odour or color or ,uality of the ater. 't shall be packed in hermetically sealed containers of "ood Grade material to prevent contamination of bottled ater. "illing and sealing operations of containers shall be done in an aseptic atmosphere so as to prevent any contamination.

Tran>portation
!ottled ater shall be transported by any suitable means of transport to protect it from contamination. 5=

MarEing
'n addition to the %-#53>?-5::3 for %akistan -tandard for the labeling of %re-%ackaged "oods, the follo ing provisions shall apply. a2 Game of the product for e(ample bottled drinking ater b2 !rand name or trade name c2 Get volumes in -ystem 'nternational $ Betric -ystem d2 Game and address of the manufacturer e2 !atch number or +ode number f2 *ate of C(piry g2 +hemical composition e.g. -ulphate, Bagnesium, %otassium etc. h2 %akistan -tandard number

Sampling
'n any consignment all the bottles of the same si8e and belonging to one batch of the manufacturer or supply shall constitute a 7FT Cach bottle of the sample shall be marked ith necessary details of sampling and the bottles for bacteriological testing shall be marked separately The bottles of the sample shall be stored in such a manner that there shall be no deterioration of ,uality of ater The bottles for bacteriological testing shall be brought to the testing laboratory ithin one hour, of sampling. 'f this is not possible the bottles shall be stored at 5; J+ or belo and transported to the testing laboratory ith in 23 hours. 'n case of small units, the original packing shall be treated as sample.

Scale of Sample
-ample shall be tested from each lot for ascertaining its conformity to the re,uirements of this specification. The number of bottles to be selected from a lot shall be in accordance ith the follo ing table.

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'f bottles are packed in cases, 5; percent of the cases subject to minimum of five cases shall be selected from the lot and as far as possible an e,ual number of bottles shall be selected from each case so selected to form a sample of si8es given in the table.

&umber of Te>t
0. Cach bottle selected shall be inspected for packaging and marking re,uirements. !. The bottle shall be selected and tested individually for bacteriological limits. +. 0 sufficiently ,uantity of ater shall be dra n from each of the remaining bottles and mi(ed to form a composite sample thus obtained shall be tested for the re,uirements for its suitability and chemical composition

%riteria for %onformity

0 7FT shall be declared as conforming to the re,uirements of this specification, if the follo ing conditions are satisfied. Cach bottle inspected as H0I satisfies the relevant re,uirements Cach bottle hen tested as in H!I satisfies the relevant information +omposite sample hen tested as in H+I satisfies the relevant re,uirements

Government of %akistan as initiated steps to launch programs against substandard bottled ater. The %akistan +ouncil of 4esearch on 6ater 4esources 1%+4642 has launched a campaign against substandard and unlicensed brands of mineral ater being sold in the market. The %+464 has a conducted a serried of tests of 25 brands of mineral ater last year and 55 ere found contaminated and some of them substandard. 't is recommended to fulfill all the re,uirements of the %akistan /uality +ontrol 0uthority for getting a license for the production and marketing of bottled $ mineral ater in %akistan.

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M %/)&#R6 1 #9+)PM#&T R#9+)R#M#&TS

Bost of the ater purification plants being installed in the country are reverse osmosis based. Government also recommends the 4F based technology. This pre-feasibility study is based on the reverse osmosis plant. The details of the machinery . e,uipment are as follo ing.

Table# Bachinery *etails in 4s.

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/+M & R#SO+R%# R#9+)R#M#&T

The follo ing re,uirement of staff along project. Table# Euman 4esource 4e,uirement

ith their levels and monthly salary is foreseen for this

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" &* 1 !+)"*)&3 R#9+)R#M#&TS

"or the proposed set up of ater purification plant, a total of 2;?; s,uare feet is re,uired. This land re,uirement includes space for the installation of plant and machinery, management office and store for bottles, finished product and parking.

Recommended Mode of "and cIui>ition -ince purified bottled ater is a kind of project, hich needs an e(tended span of time for its perception and brand recognition, so the recommended mode for the ac,uisition of land o ned or leased 15;; years2.

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Suitable "ocation
This project has been developed ith a focus on 9arachi city.

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$)& &%) " SS+MPT)O&S

2#6 SS+MPT)O&S
Table# %roject 0ssumption

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LETTER OF ACKNOWLEDGEMENT

6e are thankful to 0lmighty 0llah this report.

hose Grace made it possible for us in the accomplishment of

6e are also thankful to our %roduction Banagement -ir Bufaddal Bir8a, %roviding us ith information as ell as timely guidance henever

ho made this course an e needed it, e are all

enjoyable journey of learning and e(perience and also guided us in our project throughout. immensely grateful. 6ithout his help, it ould have been impossible for us to ork on this project

as ell as to develop the basic understanding of the course. 0nd lastly there as a lot of collaboration and coordination in the making of this report, there as a major loss of sleep and a lot of panic attacks to be a fun and learning e(perience. hile making the report. Eo ever the process proved

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