BEST WEAR BD

A name of comfort

AUGUST 8, 2017

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 A business plan
For

“Best Wear BD”

Prepared for:
Mahbub Parvez
Associate Professor
Department of Business Administration
Faculty of Business & Economics

Prepared by:
Abdullah Al Mamun 152-11-4619
Md. Arafat Ali 152-11-4613
Nadim Alam 152-11-4588
Nafija Tabassum 152-11-4592
KM. Neshat Farjana 152-11-4664

Department of Business Administration

Semester: 7th (Summer: 2017)
Section: A
Daffodil International University

Date of Submission: August 8, 2017

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Date: August 8, 2017

Mahbub Parvez
Associate professor
Department of Business administration
Daffodil International University

Dear Sir,
We would like to inform you about our new business plan. So, we have prepared this report.
The plan is about “Apparel manufacturing” in our factory called “Best Wear BD”. This report is
an important part of our course. We have tried our best to work on it carefully and sincerely to
make it informative as possible.

We have visited some manufacturers to gather information regarding our business plan, we
have researched on the web to accumulate ideas. We need your consultancy for evaluating our
steps according to our business plan.

We thank you for assigning us such task that could really enrich our knowledge in business.
Lastly I would be thankful once again if you please give your judicious advice on our effort.

Sincerely yours,
On behalf of the group members
Abdullah Al Mamun
Department of BBA
Batch: 41; Sec: A
Daffodil International University

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 Executive Summery

Our company is an apparel manufacturer called “Best Ware BD”. We are making
this company to produce apparels for the young peoples of local and global
market.

The aim of our term paper is to find out a pros and cons of our new business. We
have learnt a lot of things of a new business doing this task. A business should
maintain all the terms and measurements we have implemented in this report.

A new business needs a lot of planning’s and research, decision making,

management, measurements etc. We have made a long term plan, we produced
our strategy for making our production and implementation better.

We have estimated our budget, predicted the business costs, revenues profits.
We have used break even analysis, Decision analysis, Make and buy analysis,
Quality management strategy, Inventory management process etc.

We want to make a better position in the market earlier by our quality of product.

We have aimed our local materials to produce our apparels that would help the
local economy of our country.

Our main target is the young people of Bangladesh but we will export our goods
in the international market in order to make an establishment on abroad also.

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 Table of content

Content Page number

Introduction 1
Background 2
Objectives 3
Methodology 4
Limitations 8
Idea Generation 9
Strategy Formulation 11
Strategy implementation 13
Select best alternative 15
Decision analysis 16
Over Coming barriers 25
Make or Buy decision 25
Break Even Analysis 27
Inventory management 27
Quality Management 29
Findings 31
Recommendation 31
Conclusion 32

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6
 Introduction

“Best Wear BD” is a name of comfort. We will make garment goods specially “T-
Shirts”. We have established our business this year. So we are looking for a good
profit in future. We are now in a starting stage. So we need some decision to
make and running toward our goal.

“Best Wear BD” is comprised of an excellent that is involved with the

manufacturing of many Custom T-Shirt Wholesale from Bangladesh and also the
world. Currently we are growing to fame as one of the leading Wholesale t shirt in
Bangladesh. This is due to our commitment to provide all of our T-Shirts reliably,
this is the main goal of “Best Wear BD”.

“Best Wear BD” want to be one of the most export oriented garments
manufacturers and suppliers in Bangladesh. By depending on demand along with
quality, we make sure that the buyer gets their products on their demands. For
this consideration, we have been including many of thoughts alike international
quality standard which are based on codes.

In this report, we will try to show our company future planning about production
and import export.

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 Background

The global fashion apparel industry is one of the most important sectors of the
economy in terms of investment, revenue, trade and employment generation all
over the world. Apparel industry has short product life cycles, tremendous
product variety, volatile and unpredictable demand, long and inflexible supply
processes.

Bangladesh, the eighth most populous country overall, is the second-largest

garment exporter in the world, trailing only the Chinese mainland. Bangladesh is
hugely in demand as a garment production base, securing its status as one of the
world’s major suppliers of low-cost, ready-made garments (RMG) over the past
two decades. Many foreign companies now either have their own export-oriented
production plants in Bangladesh or source garments for the international market
from the country.

The clothing and apparel industry produces finished clothing products made from
both natural and manmade fibers like cotton, silk, wool, Lenin, polyester, rayon,
lycra and denim. The important segments covered in apparel industry include kids
clothing, men’s clothing, clothing for women, bridal wear, men’s wedding wear
and intimate apparel. The apparel is sold through three major channels, which
includes, brick & mortar, catalog and through internet.

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 Objectives

1. To create a shopping environment that caters to the T-shirt needs of local

and global young customers.
2. To earn 80% market, share and become the number one T-shirt
manufacturer in Bangladesh and achieve name recognition in the local and
global young community.
3. To receive a 50% profit margin within the first year.
4. To have a customer base of 10,000 by the end of the first operating year
from the local market.
5. To make a healthy export oriented T-Shirt manufacturing brand.
6. To be an active and vocal member in the community supporting youth
events, and organizations working with youngsters.
7. To acquire a good amount of foreign revenue by exporting quality T-shirts
abroad and contribute the country economy.
8. Introducing new design and fashion apparel to the young customers and
grab the sight of new young folks.
9. To come up with new tastes of customers and coping up with new era of
fashion.
10. To encourage different sectors in the textile and apparel supply chain to
become more cost-effective logistically by using and producing raw
materials that we are importing still.

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 Methodology

“Best Wear BD” will follow the under methodology for its production process.
Below here, we have described the process how we will go through some steps of
manufacturing from sampling to final inspection & dispatch.

Sampling:

Our first step would be sampling. Sampling is a process where factory develop
garment samples according to buyer's specified design. This is also known as
product development stage. Samples are required at various stages to get approval
from buyer on a particular design. As per the development stages; samples are
named as Proto sample, Fit sample, Size set sample, Sales man sample, production
sample, Top of production (TOP) sample and shipment sample.

Costing:

We have to minimize our cost and maximize the production. So correct costing of
a product before order finalization is very important. Costing of garment is the
cumulative cost of raw materials, direct labors and direct and indirect overheads.
After developing sample or directly receiving buyer's sample, we need to send FOB
(freight on board) price of the garment. To decide FOB of a garment factory makes
cost sheet including raw material cost, total of direct labor costs of each processes,
factory overhead. An FOB is the sum of garment cost, factory margin and taxes.

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Production Planning:

After receiving the order, we will plan for raw material requirement for the order.
Raw materials like fabrics, sewing threads, packing materials, hang tags and other
accessories. Factory plans timelines like when to start cutting, when to submit pre-
production sample, when to finish sewing and finishing, final inspection date and
shipment date.

Cutting:

In this stage of our production process fabrics are layered on a table layer by layer
up to a certain height. Then by means of a cutting machine fabric are cut into
garment shapes or pattern and separated from the layer. Fabric layering is possible
both manual spreading and automated spreading. Cut parts are then numbered
and bundled and send to sewing room. The quality of end product (garment) is very
much depends on the good cutting quality. Secondly, fabric the main raw material
of the garment represents about 70% of total garment cost. That is why cutting is
an important process like others where control the fabric saving and garment
quality.

Sewing or Stitching:

Garment panels are stitched together in sewing room by means of sewing

machines. In sewing 2D fabric patterns are converted in 3D forms. An operator run
the machine and using sewing threads garment parts are joined together. Various
types of sewing machine are available for sewing. Machines are selected according
to the seam and stitch requirement. In industry traditionally sewing machines are

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laid in a raw. Cut parts are feed at the start of the line, passed through the line and
at the end of the line a complete garment come out. Each machine is run by
individual operators and an operator sews only one or two operations of the
garment. A line consists of sewing operators, helper to feed them with cut parts,
thread and other trims, quality checker and one fully or partially devoted
supervisor.

Thread trimming:

After stitching, all hanging thread are cut by means of hand trimmer. We have auto
thread trimming machines that are also available to perform this task. All loose
threads inside a garment are removed as well. Garments without any loose thread
and long tail are basic quality requirement and commitment.

Washing:

We will perform this process when buyer want washing or special finishes to the
garments. For light color garment washing is carried out to remove dirt and stains
though buyer does need washed garment for orders.

Finishing:

Generally, this process includes checking of garment, measurement checking,

ironing, and spotting. After sewing of the garments, all pieces are checked by
quality checker to ensure that garments are being made as per buyer quality
standard. Checking normally is done for visuals appearance and measurements.
Spotting is required to remove stain in the pieces. Various chemicals (solvents) are
used to remove various kinds of oil stain, marks and hard stain. Each garment then
ironed to remove creases by means of press.

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Packing and folding:

Each pressed garment is then folded with tissue or card board. Folding varies
product to product and also buyer to buyer. Hang tags, special tag and prices
stickers are attached with plastic Kimble or threads. Folded and tagged garment
are then packed into poly bag. During packing garments are randomly checked by
internal quality controllers to ensure that only quality goods are being packed.

Other Processes:

In current fashion trend very few garments are made without value added
processes, like printing, garment dyeing, special washing, embroidery, adda work
(hand embroidery with lot of bead work)

Final Inspection and dispatch:

Once garments are packed (also known as shipment), before dispatching quality
inspection of the garments is carried by buyer quality assurance (QA) department.
Many times a third party quality auditor is hired for this final inspection job. If the
packed goods meet the buyer’s quality standards, shipment is accepted by buyer.
Factory then dispatches goods to the buyer.

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 Limitations

The Apparel Industry is growing at a very high rate but still there are some
barriers, which are hindering the growth of this industry. Some of them are:

 Though the demand for garments is increasing day by day but the production
rate has still not been able to match with the ever rising demand. More
production facilities are needed to meet the demand.

 Most of the raw material needed for apparel manufacturing is available in

the developing or under developed countries like Bangladesh and these
countries do not have enough resources and manpower to explore them.
These countries also do not have finance to set up factories for clothing and
garment production.

 Globalization has helped the trade in many ways but due to globalization the
competition has increased and so it is not very easy for the firms to cope up
with so much competition, as they have to meet the deadlines and also
maintain quality.

 The importers of developed economies are facing very stiff competition as

countries like China are producing good quality products in low prices due to
availability of very cheap labor.

 Some trade laws still are very much in favor of developed countries and they
need to be reviewed, to facilitate imports from the developing countries.

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  As apparel industry is fashion driven, and fashion keeps changing, the firms
have to cope with the changing apparel industry trends and still complete
orders in time. Thus they usually have to work under pressure.

Idea Generation

Due to increasing the demand among the customers nationally and globally,
Apparel manufacturing is an attracting business today. The demand of apparel is
rapidly growing day by day worldwide. Bangladesh is facilitated with many sides
that could powerfully help the industry of apparel manufacturing or garments. At
present, Bangladesh is in Second position in Garments sectors among all the
countries in the world. This contributes the national economy and drives it
towards growth and development.

According to the demand trends, we are thinking about starting an “Apparel

manufacturing” business. We have set the name of our company that is “Best
Wear BD”. We will target the young peoples as our customers mainly. So we will
make apparels specially for them. We have decided to produce a specialized
product. So we have chosen “T-Shirts”.

T-shirt is an attractive apparel category across consumer segments. The formal

introduction of t-shirts happened in 1913, t-shirts have graduated from being a
uniform category to becoming a multipurpose, multiuse, all-occasion apparel
category across the globe. Bangladesh too offers no exception to this trend.

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Men love to wear t-shirts as casual wear and the sky is the limit for fashion
conscious guy. T-shirts are the staple of all men’s casual wardrobes. They are not
only comfortable and light but also give a trendy look. Generally, men prefer the
classic round neck t-shirt or collar t-shirt but in today’s fashion world, there are
different types of men t-shirts available in the market in every possible color, fit
and style.

Different Types of T-shirts for Men

 Polo T-Shirt
 Henley T-Shirt
 V-neck T-Shirt
 Striped T-Shirt
 Graphic T-Shirt
 Pocket T-Shirt
 Solid/Plain T-Shirt
 Hooded T-Shirt
 Crew Neck T-Shirt
 U Neck/Scoop Neck T-Shirt

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 Strategy Formulation

Strategy formulation is the process by which an organization chooses the most

appropriate courses of action to achieve its defined goals. This process is essential
to an organization’s success, because it provides a framework for the actions that
will lead to the anticipated results.

Strategy formulation consists of five basic steps:

 Defining a primary task:

The primary task represents the purpose of a firm-what the firm is in the business
of doing. It also determines the competitive arena. Our primary task is to make
“T-shirts”. We will make export quality T-shirts for selling in the glocal market.

 Assessing core competencies:

Core competencies are what a firm does better than anyone else, its distinctive
competence. A firm’s core competence can be exceptional service, higher quality,
faster delivery or lower cost. Our core competency is to make superior, Quality
product using our own country made raw materials. We will use the domestically
produced raw materials for manufacturing our T-Shirts. That will differ us from
the other manufacturers in terms of Quality, Cost minimization, Differentiation
etc.

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  Determining order winners and order qualifiers:
As an apparel manufacturing company, “Best Wear BD” will determine its order
winners and order qualifiers. As order winners, it will choose Flexibility, Speed,
Quality, Reputation are the order winners. On the other hand, Price, Affordability
etc.

 Positioning the firm:

Strategic positioning involves making choices- choosing one or two important
things on which to concentrate and doing them extremely well. “Best Wear BD”
will make its strategic position using product Quality and Flexibility. We will
compete in the marketplace with these two strategies. Our unique value would
be the quality denim using our locally produced raw materials like color, yarn etc.

Company generally positions itself to compete on cost, quality, flexibility and

speed.

 Deploying the strategy:

Different departments or functional areas of “Best Wear BD” will implement the
deploying strategy in different ways. Implementing strategy can be more difficult
than formulating strategy. Our effort might would be coordinated and
accumulated, so that we can achieve and move towards our goal.

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 Strategy implementation

The four primary functional areas of Best Wear BD are marketing, finance,
operations and human resources. For Best Wear BD operation is the technical core
or ‘hub’ of the organization, interacts with other functional areas to produce T-shirt
for customers. For example, to obtain monetary resources for production,
operations provide finance and accounting with production and inventory data,
capital budgeting requests and capacity expansion and technology plans. Finance
pays workers and suppliers, performs cost analysis, approves capital investments
and communicates requirements of shareholders and financial markets.

Operations managers deal with people, technology and deadlines. These managers
need good technical, conceptual and behavioral skills. There activities are closely
intertwined with other functional areas of a firm, including the following scopes,
issues, concepts and techniques associated with the field of OM.

Strategy: We have already discussed about Best wear BD s Strategy in Strategy

Formulation.

Forecasting demand for providing T-shirt: Best Wear BDs Forecasting involves
using a number of different methods and quantitative techniques to provide
accurate estimates of demand, which are later used to make production decisions.

Production Planning and Scheduling: Best Wear BDs Production planning

represents a major area of decision making in operations management. ‘Capacity
and Aggregate Planning’, ‘Inventory Management’, ‘Enterprise Resource Planning’,
‘Just-in-Time and lean Production’ are the topics of production planning and
scheduling.

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Ensuring Quality: Best Wear BDs Quality underlines all operational decisions.
Ensuring quality entails establishing a quality management system using statistical
quality control, improving customer service and managing human resources wisely.
Topics are ‘Statistical Process Control, ‘Quality Management’, and ‘Human
Resources in Operations Management’.

Product and Services: The traditional starting point in the production process: Best
Wear BDs in designing the produce T-shirt. Decisions related to design include
converting customer requirements to product or service characteristics
determining the desired level of quality, selecting materials and evaluating the
resulting production cost.

Process & Technology: A process is a group of related tasks with specific inputs and
outputs. Best Wear BD actually do for process, Processes exist to create value for
the customer, the shareholders or society. Process design defines what tasks need
to be done and how they are to be coordinated among functions, people and
organizations. Plans are developed for acquiring materials, determining the types
of job skills, equipment and technology required and managing the process.

Facilities: Best Wear BDs The production process that has been designed must be
physically housed in a facility and laid out in an effective manner so that the product
can be produced or service delivered as efficiently as possible.

Project Management: Best Wear BDs Project management is a technique that

breaks down complex processes, schedules activities and ensures that the project
is completed on time and on budget.

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 Select best alternative

Best Wear BD is an apparel manufacturer. We have already mentioned that our

target is the young folks of our country and abroad. Teenagers to the 30 age of
peoples are our main targeted customers. After looking up the apparel industries
wide range of goods, we have decided to make T-Shirts for our targeted
customers. We had a lot of alternatives but we choose it because of its growing
customer base and demand. So, we think that, T-shirt is the best alternatives for
us.

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 Decision analysis

Decision analysis is a set of quantitative decision making techniques for decision

situations in which uncertainty exists.

 Now, uncertainty can be classified into two ways/ types:

1. Subjective Probability: Subjective probability is the degree of belief

to occurrence of the event.

2. Objective Probability: Objective probability is the probability

which can be derived either based on historical occurrences or based on
experimentation. Alternatively, can be derived from statistical formula.

 The types of decisions people make depend on how much knowledge or

information they have about the situation. Three decision making
environments are defined as follows:

1. Decision Making Under Certainty:

In the environment of decision making under certainty, decision makers know

with certainty the consequence of every alternative that will maximize their- well
– being or will result in the best outcome.

2. Decision Making Under Risk:

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In decision making under risk, the decision maker knows the probability of
occurrence of each outcome.

3. Decision Making Under Uncertainty:

In decision making under uncertainty the decision maker does not know the
probabilities of the various outcomes.

Decision Making Under Risk

Decision making under risk is a probabilistic decision situation. Several possible

states of nature may occur, each with a given probability.

There are three types of methods or criteria available, which could be of help to
make decision of our company “Best Wear BD”. Now we will show our decision
making strategy using these 3 methods or criteria below;

Expected Monetary Value: EMV is the weighted sum of possible payoffs

for each alternative.

“Best Wear BD” has the following probabilities of selling a T-Shirt:

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 No of Shirt sold (Thousand) Probability
10 0.10

11 0.15

12 0.20

13 0.25

14 0.30

Cost of a shirt is 30 Paisa, Sales price 50 Paisa. We cannot store it more than one
month due to storage capacity. We will calculate now that, how many shirts we
should manufacture in order to maximize our profit.

Here,

Cost=30 paisa (.30*1000=300 Taka/Unit) (Amount taken in thousand)

Sell=50 paisa (.50*1000=500 Taka/Unit) (Amount taken in thousand)

So, Profit=20 paisa (.20*1000=200 Taka/Unit) (Amount taken in thousand)

Conditional profit table;

Possible Demand (No of Shirts to make) Alternative course of action
Probability Possible stock action (Shirts/Thousand)
10 11 12 13 14
State 10 0.10 200 170 140 110 80
of
nature 11 0.15 200 220 190 160 130

12 0.20 200 220 240 210 180

13 0.25 200 220 240 260 230

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 14 0.30 200 220 240 260 280

Expected Monetary Value 200 215 222.5 220 205

(EMV)

EMV(alternative) = (Payoff of first state of nature) x (Probability of first state of

nature)

+ (Payoff of second state of nature) x (Probability of second

state of nature)

+ …. + (Payoff of last state of nature) x (Probability of last state

of nature).

So,

EMV (10) = .10(200) + .15(200)+ .20(200)+ .25(200)+ .30(200)=200

EMV (11) = .10(170) + .15(220)+ .20(220)+ .25(220)+ .30(220)=215

EMV (12) = .10(140) + .15(190)+ .20(240)+ .25(240)+ .30(240)=222.5

EMV (13) = .10(110) + .15(160)+ .20(210)+ .25(260)+ .30(260)=220

EMV (14) = .10(80) + .15(130)+ .20(180)+ .25(230)+ .30(280)=205

Since, the maximum (Expected Monetary Value) EMV is 222.5 So, “Best Wear BD”
Should produce 12000 T-Shirts in order to make the maximum profit.

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 Expected Opportunity Loss (EOL): It is an approach alternative to the EMV
approach. Opportunity loss, sometimes called regret, refers to the difference
between the optimal profit or payoff and the actual payoff received. In other
words, EOL is the cost of not picking the best solution.

Now, we will calculate our Expected Opportunity Loss(EOL) of “Best Wear BD”

Market Probability Possible Production action (amount in thousand)

size
(Thousand) 10 11 12 13 14

10 0.10 0 30 60 90 120

11 0.15 20 0 30 60 90

12 0.20 40 20 0 30 60

13 0.25 60 40 20 0 30

14 0.30 80 60 40 20 0

Expected Opportunity Loss 50 35 27.5 30 45

(EOL)

So,

EOL (10) = .10(0) + .15(20) + .20(40) + .25(60) + .30(80) =50

EOL (11) = .10(30) + .15(0) + .20(20) + .25(40) + .30(60) =35

EOL (12) = .10(60) + .15(30) + .20(0) + .25(20) + .30(40) =27.5

EOL (13) = .10(90) + .15(60) + .20(30) + .25(0) + .30(20) =30

EOL (14) = .10(120) + .15(90) + .20(60) + .25(30) + .30(0) =45

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Hence, the lowest opportunity loss here is amounting 27.5 paisa (amount in
thousand per unit). So producing 12000 T-shirts will minimize the Expected
Opportunity Loss (EOL) for “Best Ware BD”

Expected Value of Perfect Information (EVPI): Complete and accurate

information about the future demand, referred to as perfect information would
remove all uncertainty form the problem. With this perfect information, the
decision maker would know in advance exactly about the future demand.

EVPI = Expected profit with perfect information (EPPI) – Maximum EMV

= (0.10*200) + (0.15*220) + (0.20*240) + (0.25*260) + (0.30*280) –
222.5
= 250-222.5 = 27.5

Decision Making Under Uncertainty

When we cannot assess the outcome probability with confidence or

when virtually no probability data are available, other decision criteria
are required. This type of problem has been referred to as decision
making under uncertainty. “Best Wear BD” will follow these criteria to
make decisions under uncertain situations.
1. Maximax (optimistic)
2. Maximin (pessimistic)
3. Minimax
4. Hurwicz Criterion (Criterion of realism)
5. Laplace Criterion or Equally likely criterion or Criterion of Rationality.

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“Best Buy BD” is going to introduce its one of three new products in the
market. That are Polo T-Shirt, Graphic T-Shirt and Hooded T-Shirt.
Present market condition will determine the profit and loss the
company realizes, as follows in the following payoff table.

Product Condition 1 Condition 2 Condition 3 Condition 4

Polo 4000 -100 6000 18000
T-Shirt
Graphic 20000 5000 400 0
T-Shirt
Hooded 20000 15000 -2000 1000
T-Shirt

Table:1
Product Maximum Minimum Equally Likely Probability
Polo T-Shirt 18000 -100 1
4
(4000-100+6000+18000)=6975
Graphic T-Shirt 20000 0 1
4
(20000+5000+400+0)=6350
Hooded T-Shirt 20000 -2000 1
4
(20000+15000-2000+100)=8500

1. Under Maximax or optimistic criterion, Graphic T-Shirt and Hooded

T-Shirt is the optimal act.
2. Under Maximin or Pessimistic criterion, Graphic T-Shirt is the optimal
act.
3. Under Laplace or Equally Likely Probability criterion, Hooded T-Shirt
is the optimal act.

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 Table: 2 (Regret Table)
Product Condition 1 Condition 2 Condition 3 Condition 4 Maximum

Polo 16000 15100 0 0 16000

T-Shirt
Graphic 0 10000 5600 18000 18000
T-Shirt
Hooded 0 0 8000 17000 17000
T-Shirt

4. Under Minimax or Regret criterion, Polo T-Shirt is the optimal act.

*Degree of realism here is 70%

Product Maximum Minimum Payoff=α(maximum)+(1-α)(minimum)
Polo T-Shirt 18000 -100 .7(18000)+.3(-100)= 12570
Graphic T-Shirt 20000 0 .7(20000)+.3(0)= 14000
Hooded T-Shirt 20000 -2000 .7(20000)+.3(-2000)= 13400

5. Under Hurwicz criterion Graphic T-Shirt is the optimal act.

Now, we will elaborate the meanings of these criterions below. So that,

it makes a clear idea about our decision making.

1. Maximax (Optimistic) Criterion: Under this, “Best Buy BD” found the
maximum possible payoff for each alternative and then chooses the
alternative with maximum payoff within this group.

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 2. Maximin (Pessimistic) Criterion: by following this criterion, “Best
Buy BD” found the minimum possible payoff for each alternative and
then selected the alternative with maximum payoff within this group.

3. Minimax Criterion: “Best Buy BD” tries to minimize the regret before
actually selecting a particular alternative. For this the company
determines the maximum regret amount for each alternative and then
choose the alternative with the minimum of the above maximum
regrets.

4. Hurwicz Criterion: Also called the weighted average criterion. It is a

compromise between the maximax and maximin decision criteria. It
takes both of them into account by assigning them weights in
accordance with the degree of optimism or pessimism.

5. Laplace Criterion: It is based on what is known as the principle of

insufficient reason. Because of the probability distribution of the states of
nature is not known, the criterion assigns equal probabilities to all the events
of each alternative and select the alternative associated with the maximum
expected payoff.

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 Overcoming barriers

To overcome the Barrier, we will take some strategy that’s are given billow,

1. Producing technology based production

2. Hiring labor in low cost those must be skill full.

3. Providing high facility to labor

4. Providing appropriate work environment in work place

5. Purchasing best material in low cost.

6. Appropriate place for the large production.

7. Business owners should invest their own money in business.

8. Business owners should invest a lot of money in business.

9. Access to supply and distribution channel.

Make or Buy decision

“Best Ware BD” got a new big order of manufacturing T-Shirts. Due to its amount,
the company is thinking to take a new decision. Either the company have to Hire
some employees to make the products or the company have to Buy it from the
local market. The estimated Fixed cost of making the shirts is about 120000 and
variable cost is about 150 takas per shirt. On the other hand, the company can
buy pre-assembled shirts from the local market at a fixed cost of Tk24000 and a

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variable cost of Tk240. The company got the order for 1500 shirts. For this
demand, we will calculate the either we should Buy or Make now.

Make Buy
F= 120000 F= 24000
V= 120 V= 200

Fixed cost for make option = Fm

Fixed cost for buy option = Fb

Variable cost for make option = Vm

Variable cost for buy option = Vb

Total cost for make option = Vmq+Fm

Total cost for make option = Vbq+Fb

At breakeven, Vmq+Fm= Vbq+Fb

𝐹𝑣−𝐹𝑏
Break even quantity q= 𝑉𝑏−𝑉𝑚

120000−24000
= 200−120

=1200 Shirts

The make option is preferred as 1500 shirts orders are exceeded the amount.

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 Break Even Analysis

“Best Ware BD” company wants to produce T-Shirts. Due to quality and
availability problems, it has decided to produce its own yarn to use it in its own
shirt production. The initial investment on fixed cost of the plan will be Tk200000
and Labor cost and raw material cost is approximately TK5000 per kilometer of
yarn. The T shirt made of 1 kilometer of yarn sold at Tk8000. We will calculate the
breakeven amount for our company production.

Here, the fixed cost is F= 200000

Variable cost (Per km) V= 5000

Price (Per km) = 8000

𝐹
Break even Quantity=
𝑃−𝑉

200000
=
8000−5000

= 66.67 Kilometers of yarn.

Inventory Management

Inventory is a stock of items kept by an organization to meet internal or external

customer demand. The purpose of inventory management is to determine the
amount of inventory to keep in stock –how much to order and when to replenish
or order.

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Inventory management process of “Best Ware BD”

“Best Ware BD” has its own manufacturing facility in which it produces T-shirts.
The ordering Cost K is $150/order of setting up the production process to make a
supper T-shirt. Recall that h=$.75 per T-shirt annual demand D=10,000 T-shirt per
year. The manufacturing facility operates the same days the factory is open (ie311
days) and produce 150 pieces of T-shirt per day. Determine the optimal order
size, total inventory cost, the length of the time of receive an order, the number
of order per year and maximum inventory level.

Solution:

Demand D= 10000/y

Carrying cost h= .75/y

Ordering cost K= 150/order

Production P= 150/day

10000
Demand d= = 32.2/day
311

2𝐾𝐷 2𝑥150𝑥10000
1. Optimum order quantity y= √ 𝑑 =√ 32.2 = 2256.85 piece/year
ℎ(1− ) 0.75(1− )
𝑝 150

𝐾𝐷 ℎ𝑦 𝑑 150𝑥10000 0.75𝑥2256.85 32.2

2. TCU = + (1 − ) = + (1 − ) = 664.64+664.65
𝑦 2 𝑝 2256.85 2 150

= $1329.28

𝑦 2256.85
3. Production run = = = 15.05 day per order
𝑝 150

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 𝐷 10000
4. No of orders = = = 4.45 Run per piece
𝑝 2256.85

𝑑 32.2
5. Maximum inventory level = y(1- ) = 2256.85(1- ) = 1772 piece
𝑝 150

Quality Management

Problem 01:

The “Best ware BD” Company start production for particular T-shirt. The
production process began with 100 T-shirt each day. The purchase of good shirt
produced each day average 80% and percentage of poor quality shirt that can be
rework is 50%. The company wants to know the daily product yield and the effect
on productivity if the daily percentage of good-quality shirts in increase 90%.

Solution:

Yield= I (%G) + (I) (1-%G) (R)

= 100(.80) + 100 (1-.80) (50)

= 90 Shirts
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If product quality is increased 90% good shirt then,

Yield = 100 (.90) + 100 (1-.90) (50)

= 95 Shirts

Yield increased to (95-90) =5

Productivity increased5.5%

A 10% increase in quality product results a 5.5% increase in productivity

Problem 02:

The best ware BD company produce shirts cost of tk30 per shirt. Defective shirt
can be rework at cost of Tk12 each. The company produce 100 shirts per day and
average 80% good quality shirt resulting in 20% defects 50% of which can be
rework prior to shipping to customer. The company want to examine the effect of
(1) increasing the production ref to 200 shirts per day (2) reducing the processing
cost to Tk 26 ad the rework cost Tk10.

Solution:
The quality productivity Ratio
80+100
QPR = (100)(30+10)(12) ∗ 100

=2.89

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 Findings
After the completing the of the term paper we got some findings

1. Increase Export and that can earn Govt. remittance

2. It can develop our whole economic development
3. Reducing poverty by providing employment
4. A fixed number of people lead stander life.
5. Develop of new collection of product.
6. Increase a good trade relation with other country.
7. Cultural development in our country.
8. Country’s GDP and GNP are increasing.

Recommendation

After completion of a long term paper we have some recommendations, these

are billow;

1. Increase relation with foreign investor.

2. Improvement of technology in business.

3. Government should provide more facilities in privet sector.

4. Through producing product producer must notice foreign needs and demand.

5. Producer should improve of the quality of product.

6. Emphasis on one-line marketing

7. Business owners must have hired skill labor.

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 Conclusion

We are so lucky by learning this new thing for the first time. We have achieved
sound knowledge about forming a company. The task will bring many
advancements to us. Thank you sir for assigning such a beautiful task to us.

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