Window production: calculating economic feasibility

Industrial production

In this section, we briefly talk about the initial data that we would recommend taking into account in the “simplified” calculation of the economic efficiency of the production of windows and doors.

Data Groups:

  1. General economic indicators
  2. Analysis of competitor prices for a typical order
  3. Calculation of the cost of materials for a standard order
  4. Production cost forecasting
  5. Net profit calculation
  6. Volume of initial investment
  7. Summary

  1. General economic indicators

    The dollar, the euro, the cross rate. These data must be taken into account in order to reduce everything to a single denominator of the price from suppliers, some suppliers have a price in euros, some in dollars, some in rubles.

  2. Competitor Price Analysis

    The windows are made to individual sizes, and since the types of windows and opening options are endless, therefore, to analyze the prevailing selling prices on the market, you can take some kind of “standard order”, for example, a two-room apartment. This order also includes a balcony door and a tricuspid window and two double-wing windows:

The calculation should be made in full, with window sills, low tides.

Based on the results of the call of competitors, it is necessary to obtain the following types of prices for this order:

  • Price for dealers (without installation)
  • Price for private customers (without installation)
  • Price for private customers (with installation)

The more prices you get from the more companies, the better. The extreme values ​​(the highest and lowest) should not be taken into account (since a manager’s mistake is possible, in addition, some companies may underestimate the cost of an order when settling by phone).

  1. Calculation of the cost of materials for this standard order.

    To do this, you need to get price lists for the profile, fittings and double-glazed windows. Phones of suppliers (depending on the region) you can see on our website.

    The structure of the analyzed order includes the following types of components:

Name of components Who the supplier Qty
FrameSee price on profile23.17
Sash20.97
Impost5.85
Shtapik31.08
Stand profile5.16
Connecting profile1.42
Glazing seal35.93
Entrance Seal22.14
Impost mechanical connectors10.00
Sash frame reinforcement40.34
Reinforcement impost5.55
STP linings36.00
Leveling pads 1mm36.00
2mm straightening pads36.00
3mm straightening pads36.00
4mm straightening pads36.00
3.9x16 self-tapping screw170.00
4x25 screw223.00
4x35 screw16.00
5x70 screw4.00
5x90 screw impost20.00
screw 5x4010.00
Stp 32 mm. (sq.m.)See the price list of a double-glazed window supplier7.06
Sandwich panelSee the price list of the hardware supplier0.53
casement kit

surface 586х1420

Ask to calculate the manager of the supplier of hardware1.00
casement kit

set incl. surface 586х1420

1.00
casement kit

set incl. surface 723х1420

1.00
casement kit

set incl. surface 625х1420

1.00
casement kit

set surface 700x2170

1.00
Window handleSee the price list of the hardware supplier5.00
Windowsill 250 mmSee the price list. Supplied by both suppliers of profile and accessories4.97
Low tide 200mmSee the price list of the hardware supplier4.47

The complete set and cost of accessories for our two-room apartment (since there are many elements), it is easier to ask to calculate the manager of the supplier of accessories. They have the appropriate software. Phones of suppliers (depending on the region) you can see on our website.

To calculate the total cost of materials on an order, simply multiply the quantity (it is indicated in the table) by the cost of each component.

In order for the calculation to be correct, it is necessary to take into account waste and% rejects of finished products.

On plastic profiles (frame, sash, impost, glazing beads, pedestal and connecting profiles), reinforcement and rubber seals, it is necessary to set the waste rate to about 8%, it is more difficult to predict% of rejects (it all depends on the qualifications of your workers), but for starters you can put 2% of the total cost of materials to order.

Thus, now we have the cost of the order:

  1. At the cost of materials (including waste and scrap)
  2. Sale price for dealers (without installation)
  3. Price for private customers (without installation)
  4. Price for private customers (with installation)

The total number of products in the order is 7.85 sq.m.

For example, according to your data, it turned out:
  1. Cost of materials (including waste and marriage): 724 euros (92.2 euros / sq.m.)
  2. Selling price for large dealers (without installation): 910 euros (115.9 euros / sq.m.)
  3. Price for private customers (without installation): 1105 euros (140.76 euros / sq.m.)
  4. Price for private customers (with installation): 1360 euros (173.24 euros / sq.m.)

Thus, selling windows to dealers, we earn 23.7 euros / sq.m.

By selling and installing the windows we ourselves earn 81.04 euros / sq.m.

It may seem that in this situation it is more profitable to mount all the produced windows themselves. Of course this is so, BUT it must be borne in mind that when selling a window to a dealer you do not spend money on advertising, delivery and installation of this window. In addition, it is not a fact that you can fully load your own production with your orders.

To calculate the total profit from sales, it is necessary to calculate the fixed and variable production costs.

  1. Forecasting production costs.

    Since we make the most simplified calculation, we take into account only the main indicators of fixed and variable production costs.

    The variable costs include: raw materials and supplies, electricity costs, premium payroll and deductions from the premium payroll. To predict variable costs, it is necessary to draw up a production plan. When planning the volume of production, we proceed from our own facilities for glazing (if you are engaged in construction), proceed from sales results for past periods (if you are dealers and do window installation), take into account the possibility of attracting new dealers and builders, take into account sales volumes to private customers (including advertising costs). As a result, we compile a table of projected sales volume in each month of the first year of operation of the workshop.

    Two forecasts can be made "optimistic" and "pessimistic." It is extremely important to take into account the seasonal factor, the number of private orders in the “season” (June-December) is an order of magnitude higher than the rest of the year.

    We can calculate the costs of raw materials based on the above calculation of the cost of materials for a standard order and based on the forecast for sales.

    The total number of products in the order is 7.85 sq.m.

    If you plan to produce 650 sq.m. production, then the cost of raw materials will be: 650 / 7.85 * the cost of materials calculated above the "standard order".

    Variable expenses for the bonus part of the payroll depend on the wage system you have adopted.

    To fixed costs (costs that do not depend on the volume of output) we include: the cost of renting an office and production facilities, utility bills, salaries of engineers and workers, deductions from payroll, advertising and communication expenses.

    Thus, it is possible to compile a table of fixed and variable costs for each month of the 1st year of operation of the enterprise.

  2. Calculation of net profit.

    Based on the analysis of competitors prices and your forecast for sales, you have the opportunity to calculate such a financial indicator as revenue from sales. You can forecast the amount of VAT payable for each month, knowing the amount of revenue from sales and the amount of expenses for raw materials.

    To calculate the profit from the sale of products, we subtract the amount of VAT and fixed and variable costs from the proceeds from the sale. The calculation must be done in the table, calculating the indicator of profit from sales for each month of work.

    Thus, knowing the profit from the sale for each month of the 1st year of operation of the enterprise, taking into account income tax, we calculate the net profit for each month of work.

  3. Volume of initial investment

    Now it's time to calculate how much money is needed to organize the production of windows:

    1. Initial investments in OPF and IBE

      1. The main equipment for the production of windows

        You will need:

        • Saw for cutting profile. At the first stage of window assembly, we profile mode

        • Saw for cutting reinforcement. (Saws for cutting plastic and aluminum are not suitable for cutting reinforcement, so a separate saw will be required to cut the reinforcing profile).

        • Impost (face milling) machine.

        • Automatic screwdriver. For fastening the reinforcing profile with screws in a plastic profile. For small industries, you can not take an automatic screwdriver, but use a manual pneumatic tool to perform this operation.

        • Automatic screwdriver. For fastening the reinforcing profile with screws in a plastic profile. For small industries, you can not take an automatic screwdriver, but use a manual pneumatic tool to perform this operation.

        • Machine for milling drainage channels. For small industries, you can not take it, but use a special tool to perform this operation.

        • Copy milling machine. For milling holes for handles and for locking the main lock.

        • Machine for welding a plastic profile.

        • Cleaning machine.

        • Stapikorez.

        • Glazing stand. For small industries can not be purchased.

      2. Equipment for the pneumatic line.

        • Compressor.

        • Dehumidifier. For small industries, you can not purchase

        • Line Filters

        • Fittings (quick couplings, tees, etc.)

        • Metal pipes, flexible hoses.

      3. Switchboard equipment

      4. Pneumatic tool

        • Drills

        • Screwdrivers

        • Drill

        • Blow guns

      5. Mills, saw blades, consumables.

        As a rule, new equipment is equipped with saw blades and cutters, but just in case, you can immediately take spare ones. Shaped mills for the face milling and imposting machine are provided by profile suppliers (some are given free of charge for safekeeping, some profile cutters are sold by suppliers).

      6. Ancillary equipment (it can be done on its own).

        • Tables for assembling windows

        • Trolleys for the storage of convenience foods

        • Carts for storage of double-glazed windows

        • Carts for finished products

        • Shelving

      7. Special tool.

        • Bead hammers

        • Glazing trays

        • Suction cups for glass

      8. Safety and fire safety equipment

        (Headphones, first aid kit, electrical protection devices, fire extinguisher, etc.)

      9. Overalls.

        Costs depending on the number of workshop workers.

      10. Motor transport.

        In order to carry windows, you will need an onboard Gazelle with a "pyramid". You can use not your own transport, but hired.

      11. Furniture, office equipment, etc.

    2. Commissioning works.

      1. Commissioning of the main equipment. Work on connecting the machines can be performed either by your specialists or by specialists of the equipment supplier. In addition to connecting the machines, it is necessary to configure the machines for a certain type of profile (i.e., installing milling cutters on the impost and grinding machines, installing pullers on the welding machine, guides for cutting glazing beads on the bead cutter), the installation of the equipment is carried out by the technologist from the supplier of the profile system.

      2. Work on the conduct of electricity.

      3. Work on the pneumatic line.

    3. Other initial investments.

      Repair of industrial and office premises.

    4. Purchase of components

      In order to start work, it is necessary to purchase all the necessary components, a minimum of 5, 000 euros and more should be paid for the purchase of components.

    You will have 3 main groups of suppliers:

    • Profile. From the profile supplier you will receive a plastic profile (frame, sash, impost, glazing beads, etc.), reinforcing profile, rubber seals, impost connectors, seam inserts, etc.).

    • Hardware. You can purchase accessories from the hardware supplier (the range of elements is wide enough), accessories for mosquito nets, tides, window sills, accessories for the manufacture of double-glazed windows (if you want to make double-glazed windows yourself).

    • Double-glazed windows. Ready-made windows can be purchased from specialized manufacturers.

      If in your city there are no companies selling double-glazed windows, you can organize your own small site for the assembly of double-glazed windows with a minimum set of equipment.

      Accessories for double-glazed windows, as a rule, can be purchased from the supplier of accessories. With the increase in production volumes, having calculated the economic feasibility, you can subsequently purchase the necessary equipment for the assembly of double-glazed windows.

Summary

Having forecasted net profit and knowing the volume of initial investments, we have the opportunity to carry out calculations of the project payback, profitability and other indicators of the efficiency of the enterprise’s production and business activities.

So, the calculation of the economic feasibility of organizing the production of windows and doors is ready.

Source: Promokna.ru: the alphabet of window business

* The article is more than 8 years old. May contain outdated data


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