Establishment of V-Production

Tema: ´Produktionsforberedelse og opstart af en ny virksomhed´

Projekt 6
The purpose is to obtain an understanding of the preparation of the production in relation to the establishment of a new company. In specifics the report should give an understanding of the technical, economical, and market mechanisms which are controlling for the creation of the establishment. The project documentation must be of a quality which can be presented for a potential investor or lender.

This report concerns the establishment of a production company to carry out the production of 200.000 Vipp 15 waste bins per year. The company is founded as an economically independent subsidiary company to the already established sales company Vipp A/S, who wishes to extend their sales from 8.000 to 200.000 Vipp 15 bins per year.
Goals and politics for the subsidiary company - V-Production - are formulated. The main focus is high production quality carried out by committed employees obtained through good employee conditions.
The bin is analysed to prepare it for mass production, and some improvements are made.
Machinery is chosen to carry out the production of metal parts for the bin and an assembly line is constructed. A core competence in metal processing is chosen and therefore non metal parts are purchased from sub suppliers. The area needed for production, assembly, storage and administration is determined and a company layout is drawn. A building site in Frederikshavn is chosen because of building site prices, infra structure and labour accessibility.
The amount of employees is determined, and job description for each employee is made. An organisation structure based on short chain of command and self governing teams is made.
The total needed size of investment is estimated to be approximately 48 mill. Based on the investment and the expected expenses and incomes a financial analysis of the company is made. Annual reports for the year of establishment and the first representative year are made. Besides this a liquidity overview for the first three years is made. The financial analysis concludes that if the company is established under the circumstances described, it will have a very healthy economy. A risk scenario concludes that the company will be able to survive even if sales and prices drop dramatically from the expected.
The conclusion of the report, however, does not recommend to establish the company in spite of the healthy economy. The main reason is, that - based on the sales numbers of today - it is considered very unlikely that Vipp A/S will be able to sell just half of the 200.000 bins per year.