CORRUGATED BOXES INDUSTRY

KAGAZ PACKAGING – CORRUGATED BOXES MANUFACTURING

CORRUGATED BOXES INDUSTRY PRODUCTION:

Item UNIT Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
Description 99 99 99 99 99 99 99 99 99 00 00 00

Corrugated Tonnes 157 174 169 160 178 175 169 142 147 142 146 1456
boxes 5 0 3 6 6 9 2 7 8 0 4

GENERAL INFORMATION: ABOUT KAGAZ PACKAGING

Kagaz Packaging is a corrugated 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 as
it sells corrugated boxes to exporters.

Location:
CORRUGATED BOXES INDUSTRY

The factory was set up at Kandivli in 1980, in the Government Industrial Estate. Kagaz now has two
units 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 years
of experience lent credibility and trust which the brothers decided to leverage to their maximum advantage by setting up a
similar unit in Mumbai.

The benefits they enjoyed for selecting the corrugated manufacturers industry were:
Reputation for excellent quality and timely service
Ready source of suppliers
Ready 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 was
one 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 market
2) 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 commercial
capital of India, most of the clients of Kagaz Packaging are situated in the vicinity of Mumbai. However they get one of
their raw material i.e. Gum form the same industrial estate while their main raw material paper is bought from Vapi.
CORRUGATED BOXES INDUSTRY

Registration:
The main purpose of registration is to maintain statistics and maintain a roll of such units for the
purposes 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 support
given 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, tax
subsidies, 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 industries
center and the other was retained with the firm itself.

(b) Permanent Registration

The 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:
CORRUGATED BOXES INDUSTRY

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 also
for various development agencies who will help the entrepreneur setting up the unit. If the report is well prepared, it
will 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.
CORRUGATED BOXES INDUSTRY

● 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
CORRUGATED BOXES INDUSTRY

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 the
formation and management of a partnership organization. According to it, “a partnership is the relations between persons
who have agreed to share the profits of a business carried on by all or any of them acting for all”. A partnership deed is
essential for this kind of organization. The Partnership Act, 1932, outlines the rights and duties of a partner.

Advantages
More resources will be available to the
concern
The expertise of different partners will
be available for the management and
various activities
Disadvantages
Difficulties could arise if there is no
cohesion among partners
Health problem of a partner may pose
threat to the administration/continuity of
the concern
CORRUGATED BOXES INDUSTRY

ORGANISATION STRUCTURE:

Partners

Partner 1 Partner 2

Import Taxatio Labor Purchas Productio

Banking Relation
s n e n
s

Accounts
Manager Marketin Senior
g Superviso
r

Accountant
s Junior
Superviso
r
CORRUGATED BOXES INDUSTRY

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.

Grades of Labour

Skil l ed
10%
Semi-
Skil l ed Uns kil l ed
30% 60%

Unskilled Semi-Skilled Skilled

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

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

CORRUGATED BOXES INDUSTRY

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:
 Partner’s capital
 Unsecured loans
 Term loan from bank against building and machinery
 Loans for working capital

Bank : DENA BANK

INSURANCE: NATIONAL INSURANCE

ANNUAL TURNOVER : Rs. 4 crores

PROFITS:

RAW MATERIAL INVENTORY: Rs. 75 Lakhs

FINISHED 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 totally
exempted. It does not enjoy any income tax benefits.
CORRUGATED BOXES INDUSTRY

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 too
cumbersome

PRODUCTION :

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

PRODUCTIONLOCATIONS

7000
6000
5000
4000 India
3000 Mumbai
2000
1000
0

 Raw materials requirement:

 Kraft paper – there are different types of Kraft paper available depending upon the
strength required by the customer. The Kraft paper varies from 80gsm to 450gsm.
CORRUGATED BOXES INDUSTRY

 For 4-colour printing, white duplex paper is used whereas for 1 or 2-colour printing, white
Kraft paper is used.
 20% of this paper is imported from foreign countries and 80% is bought from Vapi (Gujarat).
 Gum/glue is the other major raw material required which is procured from the same industrial estate.

The firm has a policy of storing 80% of the raw material required as inventory and purchases the remaining raw material only
after the order is received.

BENEFITS ENJOYED BY VIRTUE OF BEING A DEEMED EXPORTER:

If they supply boxes under D.E.E.C. scheme as an intermediate supplier, they get duty free import license for the raw
material i.e. Kraft Paper They pass on benefits of duty free import license to their
exporter-clients.

 Product Mix and capacity utilization:

 The firm, Kagaz Packaging produces 90% outer boxes and 10% inner boxes.
 The inner boxes include boxes, which are ordered for storage of yarn by
Reliance. To hold the yarn, there are three layers of corrugated sheets- bottom
plate, middle plate and top plate fitted inside the box. These plates contain holes for the yarn to fit in and not
collide with the other ones. The also have ventilating holes in these plates.
 Also there are certain products that require cushion packing. For the cushion the scrap sheets of corrugated
paper is passed through a Corrugating machine which makes it soft and porous and these sheets
are fitted in the corners and Machine Machine empty spaces of the boxes so that the articles are not
damaged.
 Capacity of the firm is 800 Slotting machine boxes for 8 hrs production .
 The total capacity utilized by the corrugated box industry is 33%.

Scoring Machine
 The production process:
Stitching Machine

Packaging
CORRUGATED BOXES INDUSTRY

• Corrugating machine:
Rolls of paper are placed one above the other on 2 reel stands. The upper sheet enters into the electrically heated
corrugated machine and gets corrugated and cut in the required size. The lower sheet of rolled paper is cut into the required
size and stuck to the corrugated sheet above.
The sheets are then allowed to dry for around 12 hours. There are different varieties of corrugated boxes depending upon the
number of such sheets you stick together as asked by the customer. There are 2 ply, 3 ply, 5 ply, and 7 ply corrugated boxes
available.

• Slotting Machine:
The sheets when dried are moved to the Slotting Machine. Here the sheets are cut into shapes as per the requirements
of the customer. The Slotting machine can cut around 10 pieces in a minute.

• Scoring Machine:
These cut pieces are then sent to the scoring machine where the edges are trimmed and the band marks are made for
folding the boxes.
In case of boxes with multiple complex folds, a special punch is made which has the bending and
cutting rules such that the sheet when pressed against the punch gets slotted and bended wherever
required.

• Stitching Machine:
The sheets are then passed on to the stitching machine. Two sheets are stitched together with
galvanized wire. This machine works like a sewing machine. It has a lever, which is moved manually by
the worker that helps the wire to staple/stitch the two sheets together.
CORRUGATED BOXES INDUSTRY

• 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 out
preventive maintenance where the workers oil the machines everyday. Also they have in-house mechanics/ electricians who
can 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 laboratory that checks various factors of quality as weight, strength and the various other specifications as
asked 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:
 CORRUGATED BOXES INDUSTRY

This machine tests at what pressure does the box collide or what pressure can the box
withhold.
 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 corrugated
boxes.
 The goodwill they enjoy in the market enables them to have a firm market standing.
 Tender system
 Advertisements in:
Yellow pages
Industries publication
Member’s 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 prospective
customers.
 Exhibitions are held by AIFCBM once every three years.
CORRUGATED BOXES INDUSTRY

The company spends about 1% of their turnover on advertising & marketing. However they do not
take 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 they
have 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.

CORRUGATED BOXES INDUSTRY

 Girnar Packaging
 Paper Flutings
 Patalganga Packaging P. Ltd.
 V. K. Packaging
 Wadco Packaging
 Core Parental Lt
CORRUGATED BOXES INDUSTRY

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:

Prof
Ove Cre
it
PRICE Cost + rhe- + dit + Mar
ads cost
gins

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

The material costs incurred by the firm are the cost of basic Kraft paper Kraft paper, Adhesive etc.
The cost can be further classified into various types based on their nature:
Adhesive cost
22.25%
0.25%
Printing cost
3% electricity cost

labour cost
1%
Packing and
0.50% 70% delivery
Others
3%
CORRUGATED BOXES INDUSTRY

Awards and achievements:

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

 It has received 9 awards instituted by The Federation of Corrugated Box Manufacturers. These awards are mainly
given 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 The
Asian Packaging Congress.

 It has also had the privilege of receiving the coveted “World Star” from the World
Packaging Organization.
CORRUGATED BOXES INDUSTRY

VIEWS ON GOVERNMENT POLICIES:

“ It
would really help if the
corrugated boxes industry is
dereserved. As there is a lot
of growth opportunity if we
become medium or a large
sized firm. But the
reservation policy of the
government is detrimental
our progress.”