MASTER'S THESIS. Furniture Production for Russian Market Based on an IKEA Concept. Anton Karzin. Luleå University of Technology

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1 MASTER'S THESIS 2005:07 Furniture Production for Russian Market Based on an IKEA Concept Anton Karzin Luleå University of Technology Master Thesis, Continuation Courses Skellefteå Campus Division of Wood Technology 2005:07 - ISSN: ISRN: LTU-PB-EX--05/07--SE

2 ABSTRACT Wood is the most ancient material used by mankind for furniture making. During the ages it was almost completely replaced by new materials like metal, plywood, chipboard, plastic, MDF and some others. But nowadays, as the world has become too filled with different chemicals and harmful substances, people have started to worry about ecological and human-friendly materials. Thus wood has received its "re-birth". The market share of solid wood glued board furniture is increasing every year. However if we take a close look at the Russian furniture market, we will notice that this process is extremely slow in our country because of local stereotypes regarding common furniture appearance which can be clearly seen through IKEA example. IKEA is one of the largest wood producers on the Russian furniture market. Four years ago IKEA opened its first store in Russia. Yet the sales share for solid wood furniture is still much lower than that in Europe. That is why there is a huge need for solid wood furniture products specifically adapted to the Russian market. The main goal of this thesis is to design a factory capable of producing a furniture set made of solid wood which could fit in the IKEA range in Russia. The choice of overall appearance and construction is based on the Russian market research. All technological and environmental requirements are based on internal IKEA specifications. The designed furniture production viability was checked from technological and economical points of view. The well-known wooden glued board production system was chosen because it gives an opportunity to increase the yield. The idea is that sawn goods are splitted into planed lamellas in 4-side molder and glued together in pressing machine to get the glued board which can be processed further like a usual board material like chipboard or MDF. Then the CNC router center used to get the non-linear shape of the edges. For finishing the UV-curing line was chosen as the system which can give us the most cheap surface treatment layer. The exact equipment models were chosen according to the needed capacities on the each stage of production process. The whole line is able to produce pieces of universal furniture unit per year in case of three shifts which corresponds to ~2600 m3 of highly treated furniture. The raw materials needs were calculated using original Russian method which allows taking into account the exact amounts of all wastes on each stage of technological process. The annual sawn goods need was estimated to ~6000 m3. Also

3 all additional need like glue, stains, sealer, lacquer and sanding paper were calculated in purpose to get the real direct production costs. The total factory layout including all additional areas was made based on Russian legislation and hygienic norms. It was needed to calculate annual electricity, water and heat assumption. The final stage of the thesis is the total economical calculation of all costs to carry out during the production of annual program. Taking into calculation all direct and indirect production costs the profitability became 36,5% which is really high figure for Russian market. The IRR of 11,3% and payback time of 4,6 years is also suitable for Russia, so the project appears to be vital and profitable.

4 PREFACE This project work was done during my constant work at IKEA office, Novosibirsk, Russia. I want to say thank you to all persons who helped me during this tough work: Micael Ohman, LTU Olle Hagman, LTU Lars Ingolf, IKEA Dmitry Timoshenko, IKEA Petr Rybickiy, ASTU Galina Borodina, ASTU Klara Lobanova, ASTU This project was made at (because of my constant business trips): -Novosibirsk -Arkhangelsk -Moscow -St.Petersburg -Vologda -Kirov -Barnaul -Bratsk -Irkutsk -Szcecin in a period from till

5 Contents 1. INTRODUCTION 6 2. THEORY Determination of product features Present market situation for IKEA Technical description MATERIALS AND METHODS Direct production costs Raw material needs Basic raw material needs Sawn goods needs Technological waste according to technological process calculations Glue needs Fittings needs Lacquering materials needs Salary costs Conclusion Indirect production costs Geographical positioning The building Invested capital ECONOMICAL ANALYSIS Investments calculations Production costs Raw material costs Nominal working time calculations Real annual working time calculations Salary calculations for basic and additional workers and other workers Housekeeping costs Equipment keeping and usage costs calculations Total factory floor costs Total production costs Profitability calculations Investments efficiency analyzes Conclusions RESULTS DISCUSSION 25 APPENDIX 26-68

6 1. INTRODUCTION As long as I was working in IKEA it was a good idea to make a project based on my everyday work. On one hand it was interesting theme to study and on another it was very useful for my work to dig in a huge amount of IKEA internal specifications and demands. The main idea is to design furniture which will be profitable to produce and sell. As long as the main IKEA designing principle is to start from the price, the whole project should be based on market analysis, so the first point will be 1. What furniture will be easy to sell in Russian stores of IKEA? The answers for this question will determine all designing and construction points of future furniture. But to produce well-wanted furniture is not enough for success you have to do it with high quality and environmental demands on one hand and with a cheapest possible price on other hand. That s why all production expenses should be carefully calculated, so several new questions will arise: 2. Will the production be profitable? Profitability is the difference between costs and earnings, so I have to clarify every cost item. In case of a new factory building they will be: 3. Direct production costs? 4. Indirect production costs? 5. Invested capital? Direct production costs are the most obvious part because it consists only from raw material costs and worker s salary costs. To calculate it I should design a complete technological process which will give me a possibility to calculate raw materials utilizing and salary assumption according to each production stage. An indirect production costs are less obvious part and consists of heat, water and electricity assumption. To calculate it I should design a whole production building with exact locations of each equipment unit and working place. Invested capital is the most huge cost part and consists mostly of equipment values. The types and quantities of needed equipment should be chosen and checked based on already designed technological process. Besides the clear equipment values invested capital should also cover expenses for transporting and installing of equipment and also for workers education. After I will get all costs figures I should connect them with each other and make a profitability analysis.

7 6. What will be the return on investments rate? 7. What will be the time of investments return? And if the figures of profitability will be high enough the whole project can be classified as successful and could be applied into reality.

8 2. THEORY 2.1 Determination of product features The furniture basically can be separated into several types according to its function. It could be furniture for storage, furniture for sleeping, furniture for sitting and so on. A new product of furniture for storage is planned to design in this project, because there is a lack of this kind of furniture in the IKEA range. The furniture for storage can be separated into several types according to the accommodation place. This can be ruling feature for some parameters of the product, because storage furniture for garage can have pretty low quality of workmanship and surface treatment, but must have high strength and durability. Kitchen furniture should have surface with high resistance to acids, alkalis, heat and so on. In this project the furniture for living rooms will be designed. This means that the surface of furniture should be treated and has good appearance. Also I should determine at what price segment our product should be placed. I chose low-price segment because of possibility of high sales volumes. Then I have to choose the designing style. According to the low price and high treated surface I chose the country style as a style with pretty simple design and production process, what will helps us to decrease the price of the product and also because of that fact, that country style usually have a dark stained lacquered surface, which will get us the impression of high quality furniture. The selection of style and price determines our material range. I chose pine glued board as a cheap, easily treated and environmentally friendly material, I chose the lacquered surface with open pores as more aesthetical, and I chose dark brown stain because it will help us to cover some defects of wood. 2.2 Present market situation for IKEA The IKEA company is one of the largest furniture sellers over the world. Over 165 retail units at 22 countries belong to this company and this number increases annually. But because of the fact, that culture and ethic at each country can differ one from another very much, IKEA tries to always concern about this variations and to have a special way of working at each country. One of such features for Russia is the attitude to untreated furniture. The IKEA company was born at Sweden, were untreated furniture is well-spread as a part of Scandinavian style. This style is still wide used by IKEA for designing its furniture. But it is too radical solution for Russia. During the Soviet time the Russian government was

9 dictating to the people what to eat, what to were, what to listen and so on. The same situation was about the furniture. The best furniture at USSR considered being from DDR, Yugoslavia and Finland. All furniture, imported from this countries, as well as produces inside USSR, had the same appearance: module veneered furniture, with stained and lacquered surface. This direction in furniture production was dominating at USSR along several decades and clearly determined the taste for furniture appearance of several generations. The USSR disappeared only 13 years ago, so almost every Russian person older than years was affected by this influence and has bad attitude to untreated furniture. So, for sure the untreated furniture will not be sold at Russia in the same volumes as it is sold at Europe now. On another hand, IKEA offers several very specific furniture solutions to its customers. I m talking about such flexible systems as GORM and IVAR. The main idea of these systems is very simple to sell not the whole product of furniture, but just the parts of it, allowing the customer to design and assemble their own models of furniture. At IVAR system this idea is realized as such: the main details are the post, the shelf and the cabinet. There are some more details as corner shelves, corner posts and so on, but the main frame is assembled using only three main details. Along the height of the post two rows of holes for shelves and cabinets fixing are drilled. These holes allow customer to buy 2 posts, a cabinet and several shelves and to assemble them at any height, whatever he will like to. The total number of assembling variation is very huge, taking into consideration that fact, those there 6 sizes of posts, 4 sizes of shelves and 6 sizes of cabinets in the IKEA range. Also it should be mentioned that shelves and cabinet can be assembled to the both sides of the post at the same time, so for assembling two standing side by side shelf unit only 3 posts will be needed and this two shelf units will become the one double unit, which will be much tougher. In theory all four walls of the room can be covered by only one complex IVAR furniture unit. This construction principle is very wide used at Europe already and can be even wider used at Russia in conditions of pretty small in common flats, but there is one huge problem the IVAR system, as all storage systems in this price segment is not treated at all. So, we have the clear dilemma there is an original constructive solution, proved to be successful from economic, aesthetic and user-friendly point of view, but it cannot be liked by Russian customer because of untreated surface, which is not considered as real furniture at Russia. The result appears to be as a gap in IKEA range, which is forced by local culture features, which should be filled. If we will try to find the linear quality/price relations for the low and middle price level storage furniture, roughly we will get GORM IVAR LEKSVIK MARKER

10 GORM and IVAR are self-assembled and untreated, LEKSVIK and MARKER are module stained and lacquered furniture. The new product should be fitted in between IVAR and LEKSVIK and furthermore has some features from both of them. So, it will be principal flexible structure from IVAR (separately sold posts + separately sold shelves = shelf unit) and design style and treating system from LEKSVIK (IKEA Brown 24 for pine). The resulting product will fit in between IVAR and LEKSVIK, and will take part of potential customers from both of them. This product will get customers, unsatisfied by untreated furniture from IVAR and customers, unsatisfied by inflexibility from LEKSVIK. 2.3 Technical description The self-assembling shelving system is a variant of everyday storage furniture. All details of the system are made from pine glued panel. The system consists of several typical details which are produced in several sizes. This fact gives a customer an opportunity to design and assemble almost unlimited number of different furniture units using only several pretty simple details. The basic typical details are the post, the shelf and the door. The raw of holes of 6,2 mm in diameter are drilled along the whole height of the post with the step of 32 mm. During the assembling two euroscrews are inserted in two holes at the same level and further are screwed in the shelf edges. The same operation is performed with the second post and other shelves. After this the observator is installed to the back side and the shelving unit is ready. Also it is possible to install the doors. The screws 6x13, which are fixing the hinges, can be screw in the same drilled holes, as were used for shelf fixing. As a result, all shelves and doors can be fixed at any height with the step of 32 mm as it will be desired by customer. The posts are produced in 6 different types: 2 sizes for depth and 3 sizes for height. Also the corner posts for corner shelves assembling are produced. The shelves are produced in 3 shapes: straight, corner and adapting. The straight shelves are produced in 6 types: 3 sizes for depth and 2 sizes for width; adapting shelves are produced in 4 types: 2 for depth and 2 for width; corner shelves are produced in 2 sizes for depth. The doors have only 2 sizes for height. For basic width 800 mm of shelving unit two doors are installed and for basic width 400 mm only one. All details are produced with pine glued panel 18 mm thickness class 1 according to IOS-MAT All edges are planned to get 9 mm in radius roundness. Post edges

11 also profile planned for depth decreasing. All products are stained and lacquered by Akzo Nobel UV-curing system to get IKEA Brown 24 color, gloss 15, gloss deviation class G5 and surface resistance class R4 according to IOS-MAT-0024 and IOS-MAT

12 3. MATERIALS AND METHODS At the Technological process part all stages of the production process are chosen and explained. Raw materials needs part includes the calculations about raw material needs for the annual production and also the calculations about number of needed pieces of equipment. Basic technical part includes the calculations of factory floor area, storaging areas and additional areas like wardrobe, toilets and so on. Also the annual need for water, energy and heat were calculated. The Economical part consists of calculations about profitability of the project, economic effectiveness, the time of investments return and also the financial profile of the project.

13 3.1 Direct production costs Raw material needs Basic raw material needs. Basic raw materials are materials which will be presented in finished goods in one way or another (sawn timber, glue, lacquer and so on) and also the fittings. The results of raw material needs calculations are so called usage limit, which means how mush of this kind of raw material we need to spend to make one piece of finished product. Only results are presented in this part. For the full size calculations please see the Appendix I Sawn goods needs. The calculations were made based on the adapted annual production volumes. It was done in the following way: The volume of each detail was calculated, and then the half-finished products volumes were calculated according to the technological process and then the volume of sawn good, needed for each detail were calculated according to the technological waste Technological waste according to technological process calculations. Wasted volumes are stated in table The results are presented in table This data helps us to analyze the rate of raw material usage, which is presented as a volume yield for each detail (table ) Glue needs. The calculation results are presented at the table All surfaces were determined according to complexity of glue applying, their areas were calculated and the glue needs were calculated. The table The annual glue needs are presented based on the usual amount of applied glue which was got from the technical description of the glue.

14 Fittings needs. A fittings needs are calculated according to the technical description of the product. This amount was increased to cover any kinds of unsuccessful operations. According to the GOST this amount should be: Fittings 5 % The results are stated in a table Lacquering materials needs. All surfaces are treated with WB stain, UV sealer and UV transparent lacquer. The list of all surface coated details is presented in a table In a table all special features of each detail are presented: the type of treated surfaces, their amount, area and so on. After this determination all parameters of surface coating were specified: type of coating, gloss, applying method and so on. Also the areas of treated and sanded surfaces were calculated (table ) and also the applied amounts of lacquering materials (tables and ) and sanding paper (table ). Annual applied amount of lacquering materials are presented in a table Salary costs Salaries costs calculations are presented in tables and 8.8 (see Appendix II)

15 3.1.3 Conclusion Based on calculations about raw material needs it was stated that we will need: Table 8.2 Raw material costs Amount Material per Price Cost, RUR product annual Sawn goods m3 0, , Glue "Klebit 303" kg 0, , Pigment kg 1, , Edge pigment kg 0, , Sealer kg 0, , Lacquer kg 0, , Edge lacquer kg 0, , Fittings set , Salaries set TOTAL Indirect production costs Geographical positioning. The factory will be build at South-West part of Siberia. All calculations were made according to Novosibirsk geographical position as a center of this region. The climate at Novosibirsk is exact continental with cold winter and hot summer. Average annual temperature is ± 6 С, the lowest is -45 С, and the highest is +37 С. The most often wind direction is south-west, south and south-east The building. The one floor building for factory is rectangular with dimensions of 54x27 meters. The construction is based on columns and horizontal frames There are 10 columns along the building. The distance between the columns is 6 meters. There are two doors from the opposite sites of a building. The size of these doors is 3x3 meters. At the one of the ends of building the additional areas are placed. Inside and outside walls are made from the 1,5 brick and have a thickness of 375 mm.

16 The total area consists of production area, buffer stock area and additional areas (toilets, wardrobe, relaxation room and smoking room) and is equal to 1455 m 2. Water assumption consists of technological needs (54 m 3 /year), additional needs (225 m 3 /year) hand washers needs (114 m 3 /year) and fire safety needs (288 m 3 /year). Total water assumption is 1020 m 3 /year. Energy assumption consists of equipment assumption ( kWt), ventilation assumption ( kwt) and illumination assumption ( kwt). Total energy assumption is kwt. Total heat assumption is 156 GJ/year. 3.3 Invested capital Based on the technological process the type and model of each equipment was chosen. Then each operation needed capacity was calculated according to annual program to get the reasonable quantity of each machine (see Appendix). The short summary is presented in Table 8.1 Table 8.1 Investments Equipment Number Cost, RUR per one total Equipment 1 CME-3B С26-2N (5) KV PS SIRIO RR S3000 L GF MAKA CNC KPF Lacquering line Cefla Boiler Kiturami FCA Total: The costs of transportation, installation and education was assumed as 15% of total equipment value and are equal to RUR.

17 4. ECONOMICAL PART. For economical calculation it was assumed that this project is intended for the company, who is willing to work with IKEA, who has his own production areas but has no needed equipment. All equipment, needed for this factory have to be bought. The annul production volume is of basic adapted shelving units. At this part of report the following calculations will be done; Raw material costs; Production costs; Profitability; Effectiveness of investments. 4.1 Investments calculations. Equipment costs were calculated according to the number of each type of units. Prices are taken from the price list from by Also the costs of unexpected equipment (10%) were added, also as costs of transportation, installation and stuff education (15%) and costs for instruments (8%). The results are presented in table Production costs Raw material costs. All needed raw material expenses also as costs of fuel, water and energy are calculated and presented in a tables 8.2 and Nominal working time calculations Here the total annual time of working is calculated for the planned 2005 year: Total number of days 365 days. Holidays 187 days.

18 Internal shifts time waste are 0,33 per shift, so annually it will be 82,5 hours. The days before holidays are shorter for one hour, this annually will give us -12 hours. Shift time - 8 hours. All this calculations are presented in table Real annual working time calculations. Here the real working hours per year are calculated. All results are presented in table Salary calculations for basic and additional workers and other workers. All calculations are made according to time/volume dependent salary system (Table 8.6, 8.7). Hour basic salary is calculated according to the Russian legislation. Hour salaries : grade quefficient Hour salary hour*ruble Volume /day salary Day/hour dependen t salary Volume/hour salary for hard conditions Hour salary for hard conditions Day salary for additional workers 1 1,0 6, ,6 6,9 52,44 47,19 2 1,1 6,6 52,8 50,16 7,59 57,68 51,91 3 1,2 7,2 57,6 54,72 8,28 62,93 56,64 4 1,35 8,1 64,8 61,56 9,32 71,28 64,15 5 1,54 9,24 73,92 70,22 10,63 81,31 73,18 6 1,8 10,8 86,4 82,08 12,42 94,39 84,95 Salaries for other workers (like white shirts ) were calculated according to the Russian legislation and region quefficients. They are presented in tables 8.8. and Housekeeping costs The norm of housekeeping costs are 2,8% per year, so the building will be used for 35 years. Total cost of the building is 2500 thousands of rubles. Housekeeping costs are calculated in table 8.10 for buildings, transport, equipment and instruments.

19 4.2.6 Equipment keeping and usage costs calculations. All costs are presented in a table They consist of: Housekeeping costs (Table 8.10); Additional workers salaries (Table 8.8); Basic taxes from salaries 35,6 %; Taxes for medical insurance 3,8%; On-going repairing: spare parts 15 % and cost of repair 25% from repairer s salaries; Capital repair 4,37% of total equipment and building costs; Total factory floor costs. All calculations are presented in a table 8.12, which consists of: Manager s salaries Table 8.9; Basic taxes 35,6 %; Housekeeping Table 8.10; Building keeping expenses 4% from total building cost; On-going repairing 10% from total building cost; Capital repair 2,7 % from total building cost; Working safety 600 rubles per each worker; Additional costs 1000 rubles per each worker Total production costs. All calculations are presented in table 8.13, which consists of: Raw material costs Table 8.2; Transport costs 8% of raw material costs; Water, energy and fuel costs Table 8.3; Basic workers salaries Table 8.8; Basic taxes 35,6%;

20 Medical insurance 3,8 %; Equipment keeping and usage costs; Factory floor costs; Basic additional factory floor costs 30% of factory floor costs; Production costs is a sum of all mentioned above; Non-direct production costs 1,5 % from production; Total production costs are a sum of production costs and non-direct production costs. 4.3 Profitability calculations. The FCA cost of each basic adapted shelving unit is 1500 rubles which is a 50% of assumed sell price 3000 rubles. The difference between FCA price and total production costs is a net profit, which is 36,5 %. A clear profit is a difference between net profit and a tax for profit, which appears to be 20% from total sales. All calculations are presented in table Investments efficiency analyzes. Effectiveness means the relations between the result (profit) and the efforts (investments). All costs and expenses are presented as a cash flow (CF) the currency movement in every moment minus investments. CF = Q U K, (8.1) t t t CF = П t K t where Qt sales; Ut all on-going costs; Kt investments;

21 Пt profit at exact moment, which is equal to: where ЧП clear profit (table 8.14); А housekeeping costs (table 8.10). П = ЧП + А, (8.2) For more exact calculations the following figures were calculated (table 8.15, 8.16): CCF Cumulative Cash Flow Ен discount - loan payment - 12 %; α - discount quefficient 1 α =, (8.3) t (1 + E ) DCF discounted cash flow shows us today s cost of tomorrow s money. н DCF = CF *α, (8.4) NPV (Net Present Value) the parameter for estimating the total project value for this moment. NPV = t р DCF = Kt + Qt U t ) * (1 + t н 1 (, (8.5) t E ) н where tн starting time; tк finishing time; t project time; α - discount quefficient; Profit index (IP) shows us how mush rubles is corresponding to 1 spent ruble the relation between NPV and total. NPV IP =, (8.6) K t

22 According to these parameters the graphs were drawn: financial profile of project (dr. 8.1) and internal profit rate (dr. 8.2). Financial profile graph also allowed us to get the following parameters of economic effectiveness: PB (Pay back time). Maximum cash investments МСЕ. Drawing 8.2 allows us to determine IRR internal profit rate the rate of profit income, related to investments. It should be higher than usual loan interest (IRR > Eн). The Pay back period appears to be 4,6 years. 4.5 Conclusions. All investments for this project will be paid back in 4,6 year. The maximum cash expanses are at the first period the installation period. Internal profit rate is 11,3%. This calculations can differ from the real situation, because there is always a risk of failure, but the rejecting of the risk means the rejecting of the possible profits.

23 5. RESULTS The structural scheme of technological process was designed, which leaded me to the choice of the most suitable for this process equipment and materials. The results were: Cross-cutting - CME-3B Four side molder - С26-2N (5) Glue applying KV2-3 Gluing machine PS-1 Calibrating sanding unit SIRIO 110-2RR Cross-cutting of the glued panels S3000 L Edge planning FCA Profile edge planning MAKA CNC KPF-6200 Drilling unit GF27 Surface coating line Cefla For surface coating the UV-curing system from Akzo Nobel was chosen. The color is IKEA Brown 24. The Klebit 303 PVA glue was chosen. Based on a calculations about raw material needs it was stated that we will need: Sawn goods 5413,342 m3 Pigment AKZO NOBEL kg Pigment AKZO NOBEL kg Sealer AKZO NOBEL kg Lacquer AKZO NOBEL kg Lacquer AKZO NOBEL kg Glue «Klebit 303» kg.

24 Number and utilization of equipment are:. Table Equipment utilization. Equipment Number of units Utilization, piece., % Тnom.=250 days CME-3B 2 85 С26-2N (5) 1 38 КВ PS SIRIO RR 1 33 S3000 L 2 89 FCA 1 78 MAKA CNC KPF GF At this part the geographical position, building construction, areas calculations and additional needs calculations are presented. The total area of additional areas (toilets, wardrobe, relaxation room and smoking room) is 166 m 2. Water assumption consists of technological needs (54 m 3 /year), additional needs (225 m 3 /year) hand washers needs (114 m 3 /year) and fire safety needs (288 m 3 /year). Total water assumption is 1020 m 3 /year. Energy assumption consists of equipment assumption ( kWt), ventilation assumption ( kwt) and illumination assumption ( kwt). Total energy assumption is kwt. Total heat assumption is 156 GJ/year. All investments for this project will be paid back in 4,6 year. The maximum cash expanses are at the first period the installation period. Internal profit rate is 11,3%. These calculations can differ from the real situation, because there is always a risk of failure, but the rejecting of the risk means the rejecting of the possible profits.

25 6. DISCUSSION The received results show us that the project is profitable and vital. Internal profit rate is 11,3% which is significant higher than the usual bank rate of 8-9% which means that the capital is really working and gives positive results. That s why this project could be interesting for potential investors. If we take a look from production site, we can see that profitability of designed furniture is 36,5% which means that this project could be interesting for potential producers too. The points for further investigations could be: - to create a business plan of the project taking into consideration credit conditions, credit payments schedule, additional credit for VAT costs and return and calculating of needed operational capital for start - to check the influence of geographical position both producing factory and selling stores - to check the possibility of presenting designed adapted for Russian market furniture to the markets of Eastern Europe - to find an additional product for the same factory for waste utilization - to increase a volume yield by covering details with blue stain by more dark IKEA Brown 26 lacquering system

26 APPENDIX I. Raw material needs Table Wood processing Programm: Technical identity Name material sort number of pieces in product Clean dimensions, mm length width thickness one detail Volume, m3 total for one piece of product annual length Marge for processing width thickness length number of detailes in half-made width thickness length half-made dimensions width thickness Standart thickness of halfmade one half-made Volume total for one piece of product annual yield sawn goods assumption # # # Shelf unit Lamel pine Post unit Lamel pine Door unit Lamel pine Shelf unit Lamel pine class , , , , , , , ,36175 class class , , , , , , , ,16905 class class , , , , , , , ,81136 class class , , , , , , , ,43675 class Total: 2601,772 Total: 0, , ,342

27 Table Waste Operation total Watsted volume including Detailes Total Reused waste from reuse waste cuts chips dust 1.softwood edged board according to GOST cross-cut 1840, , , , , ,436 cutting in size 866, , ,880 86, ,972 final 208,142 16,651 62,443 16, ,142 processing failures 104, , ,062 Total: 690, , ,612

28 Table Glue type of glue curing method applying method glued detailes glued detailes number in product number of glued surfaces length Area width Glued area total according to types of gluing lamella , ,74261 ы й PVA hot roller lamella , , lamella , , lamella , ,99014 Total: 3,78432 Table Glue needs Glue Tradename curing method type glued area, m2 applied amount, kg/m2 applied amount per one product, kg annual need, kg PVA Klebit 303 kg hot II 3, ,15 0, Total: 25544

29 Table Fittings type dimensions, мм article number length width thickness amount for one product annual amount Euroscrew 7x piece Screw 6,3x piece Hinge piece Mounting plate piece Observator piece Overbalance protector piece Table Surface coating Surface type according to OST Name Surface name type subtype actegory Gloss applying Material definition front Shelf outside WB A 1 M spray R4 G Post outside WB A 1 M spray Akzo Nobel Door outside WB A 1 M spray pigment IKEA brown 24 Shelf outside WB A 1 M spray

30 Shelf outside UV A 1 M roller R4 G Post outside UV A 1 M roller Akzo Nobel Door outside UV A 1 M roller UV sealer Shelf outside UV A 1 M roller Shelf outside UV A 1 M roller R4 G Post outside UV A 1 M roller Akzo Nobel Door outside UV A 1 M roller UV TOOPPLACK 10 Shelf outside UV A 1 M roller 2 edges Shelf outside WB A 1 M spray R4 G Post outside WB A 1 M spray Akzo Nobel Door outside WB A 1 M spray pigmentikea brown 24 Shelf outside WB A 1 M spray 1 3 edges Shelf outside WB A 1 M spray R4 G Post outside WB A 1 M spray Door outside WB A 1 M spray Shelf outside WB A 1 M spray Akzo Nobel Aqua Interior 4 holes Post inside WB A 1 M brush Akzo Nobel pigmentikea brown 24

31 Table Surface coated detailes N dimensions surface type name number type number length width area material class of surf. in a product Flat front Shelf 3 outside ,65941 pine II Post 2 outside ,57000 pine II Door 2 outside ,19472 pine II Shelf 3 outside ,11781 pine II 2 edges Shelf 3 outside ,08251 pine II Post 2 outside ,25704 pine II Door 2 outside ,05659 pine II Shelf 3 outside ,08251 pine II Door 2 outside ,02736 pine II Diam 3 holes post 2 inside ,2 0,143 pine III

32 Table Treated surfaces Name material laquering type gloss class applying number number и of of material катег. method details surfaces area покры- per per dimensions тия product product L B I II III Shelf pine A1 M II roller ,659 Akzo Nobel UV TOOPPLAC K 10 Post pine A1 M II roller ,570 Door pine A1 M II roller ,195 Shelf pine A1 M II roller ,118 roller 8,542 Shelf pine A1 M II spray ,083 Akzo Nobel Aqua Interior Post pine A1 M II spray ,257 Door pine A1 M II spray ,057 Shelf pine A1 M II spray ,083 Door pine A1 M II spray ,027 Post pine A1 M II brush ,2 0,143 pigment 0,506

33 Table Applying amount treated material lacquering material type gloss class applying area amount amount per product Pine pigment IKEA Brown 24 Akzo Nobel A1 G15 II spray 8,542 0,120 1,025 Pine sealer Akzo Nobel UV Sealer 1,025 G15 II roller 8,542 0,020 0,171 Pine Lacquer Akzo Nobel UV TOOPPLACK 10 0,171 G15 II roller 8,542 0,016 0,137 Pine pigment for edges IKEA Brown 24 0,137

34 Akzo Nobel Pine Lacquer for edges Akzo Nobel Aqua Interior G15 II spray 0,506 0,120 0,061 0,143 0,200 0,029 0,089 G15 II spray 0,506 0,120 0,061 0,061 Table Total materials amount Annual program Material GOST amount annual Akzo Nobel UV TOOPPLACK 10 kg 0, Akzo Nobel Aqua Interior kg 0, Akzo Nobel UV sealer kg 0, Akzo Nobel pigment IKEA brown 24 kg 1,

35 Akzo Nobel pigmentikea brown 24 kg 0, Sanding paper on textile base: m2 flat edges m2 GOST , GOST ,

36 APPENDIX II. Salary costs Table 8.6 Basic workers salaries Working area grade number of places shifts number of workers working days number of men*hour hour salary total salaries Wood processing area worker IV , worker V , ,5 Total per area: ,5 2. lacquering are worker IV , worker V , Total per area ,5

37 Table 8.7 Additional workers salaries Area grade number of places shifts working days number of men*hour hour salary Total salaries All areas Instrument sharpener V , transporter V , Total:

38 Table 8.8 Total salaries with all additions Area hard region Total Special addition conditions additions main total slaries salaries % rubles % rubles % rubles Total salaries I Main workers 1. Wood processing area , , , Lacquering area , ,200 Total: , , ,850 All areas II. Additional workers Instrument sharpener , , , , , ,938 transporter , , , , , ,938 Total: , , , , , ,875 TOTAL: , , , ,725

39 APPENDIX III. Indirect production costs Additional areas calculations. The areas are calculated according to Russian hygienic legislation. The incoming data are: - 3 shifts; - total number of workers-117 men, a) Wardrobe area calculation. The sizes of each locker should be 1,65x0,33x0,5 m. The benches of 0,3 meters width should be placed along the whole wardrobe 0,3 м. The passage width should be 1,5 m. S 1 м =1,420 м 2, S г а р д. = S 1 м * n, where, S 1 м - needed area for one person, м 2 ; п- number of workers, п = 117 men. S г а р д. = 1,420 * 117 = 166 m 2. b) The calculations for showers are not needed because there will be no showers at our factory. c) Toilet area calculations. The size of each toilet cabin should be 0,9x1,5 m. There should be 1 cabin per 18 workers. Number of cabins for 39 workers in one shift - 3. So, the area will be: S c у = 0,9*1,5*3+3 = 7,1 m 2 d) Hand washers area calculations. Also there should be hand washers at the wardrobe. S у м = 4 м 2 e) Smoking rooms area calculations. This area should be calculated as 0,03 m2 per each worker, but not less that 9 m2.

40 S к у р = 9 m 2 f) Room for relaxation area calculations. S к. о. = 12 m 2 Total additional area: S б. п. = S c у + S у м + S к у р + S к. о. S б. п. = 166+7, = 186 m 2 Production areas calculations. Production area in m2 is: where Fр.м. Fр. м. + Fскл + Fбыт. всп F п =, (6.1) 0,6 - area for equipment and working places F скл - buffer storage area F. -additional areas быт всп 0,6 addition for passages. All calculations are presented in table 6.1. Table 6.1. Working places areas. Equipment Number of units Area standarts Area needed Number of workers CME-3B С НN(5) KV PS SIRIO RR S3000 L FCA

41 MAKA CNC KPF GF Lacquering line Edge lacquering line Incoming buffer stock area. This area is calculated as: F = Q β * β h, (6. 2) ш ск * where h package height, м, h = 1,5 м; β ш - volume utilization of package, β ш =0,7; β скл - volume utilization of storage area, β скл =0,5; The incoming stock area is influenced by the amount of needed raw material: Q = V * A * c n, (6.3) where V sawn goods volume for one product, м³ (from the table ) 5413,342 / = 0,13 м³, V= 0,13 м³; n the time of storage, 1 shift; Ас daily capacity in products, pcs: A c = = 60 pieces; 250 *3 where annual capacity in products, pieces; Q = 0,13* 60 *1 = 7,8 m³; Incoming buffer stock area, m²:

42 7,8 F = = 15 m²; 0,7 *0,5*1,5 Outgoing buffer stock area assumed to have the same size as the incoming one because of sorting according to type of details. Total factory floor area: F F + F + F = 0, ,6 р. м. скл быт. всп п = = 1455m 2 Water needs. safety. A total water need consists of hand washers usage, additional usage and fire Hand washers. The usage, m³/year: 200 * 0,75* N * n Q y =, (6.6) 1000 where 200-hours of usage per one hand washer, l; 0,75- usage per shift; N- number of shifts per year, N=750 shifts; n- number of hand washers, pcs, n= 2 pcs. 200 * 0,75*750 * 2 Q y = = 114 м³/year 1000 Additional usage. The usage is:

43 ( ) * nч * N Qхб =, (6.7) 1000 where usage per worker per shift, л; nч - number of workers in one shift, чел.; N annual number of shifts; Qхб 25*39 * 250 = = 225 m³/year Fire safety needs. The usage is: ( ) *3600* N n (2,5...5) *3600* nг * N n Q пн = +, (6.8) where a norm for fire struggle, l/s; 2,5 5 norm for internal fire, л/с; Nn time of fire, Nn=2 h; nг - number of fire cranes, n=2; Qпн = 30 *3600 * *3600 * 2 * = 288 m³/year Technological water needs. The usage for spraying cabins: Т *V *0,5 Q = year р 1000, (6.9) where Тyear annual number of working hours, Тyear = 5400 ч; V air volume, m3, sucked out by ventilation system per hour

44 5400 *60 * 0,5 Q р = = 54 м3/year; 1000 Annual water needs, m³/year: Q = Q + Q + Q + Q, (6.10) год y хб пн Q = = 1020 m³/year год р Energy assumption calculations. Energy for equipment. Annual energy assumption is calculated according to power of installed engines and utilization. Used power, kwt: Py * η1 561* 0,65 Pn = = = 414kWt, (6.11) η * η 0,8*0, where Ру installed power, kwt; η1 - utilization of engine, η 1 =0,6 0,7; η2 -efficiency of engine, η 2 =0,75 0,9; η3 - efficiency of electrical network, η 3 =0,95; Annual assumption, kwt*h: Qэ = Рп * Т п = kWt, (6.12)

45 Energy assumption for ventilation system. For large scale calculation assumed that ventilation energy assumption is equal to 30% of equipment energy assumption. Illumination energy assumption. Total illumination power: where F illuminated area; * осв F N P p =, (6.13) 1000 Nосв illumination norm, Lc; Installed power, kwt: where a safety gap, k з =1,3. P = P * k, (6.14) y P з Assumed power, kwt: Py * β P n =, (6.15) η where η - network efficiency, η =0,95; β - total power usage according to that fact that not all lamps are working at the same time, β =0,85; Annual power assumption, kwt*h: where пчг - time of illumination. Q = Рп *, (6.16) г n чг The results are stated in table 6.3.

46 Table 6.3. Illumination energy assumption. Illuminat ed area Illuminati on limit, Lc Calculate d power, kwt Installed power, kwt Assum ed power, kwt Illuminati on time, ч Annual assumpti on, kwt Total energy assumption. Total assumption will be: Q year = + Q сил осв. Q (6.17) where Q сил annual equipment assumption, kwt*hour/year Q осв annual illumination assumption, kwt*hour/year. Q year = = kwt*hour/year Heat assumption. Heat for air heating. The heat for air heating will be: Q от = Q Q, (6.18) пот в where Qпот heat losses, J/s. The losses are coming through the walls. Qв - heat emmitions, J/s.

47 Emmitions are coming from working equipment and working people. Heat losses. Q = Q + Q where Q пер losses through walls, J/s. Q и losses because cold outside air from ventilation. J/s. The losses through walls including the ventilation losses, J/s: пот пер и Q огр + Q = 1+ µ ) * q * V * ( t t ), (6.19) и ( 0 в н. о. where µ - heat transfer quoficient, µ =0,33; q0 - heat resistance of brick wall, q 0 = 0,61 J/s [26]: V outside volume of building, м3. Vзд = 8730 м3, tв - indoors temperature, С, t в = 19 С; t н.о. - adapted outside temperature, С, t н.о. = -31 С; Q = ( 1+ 0,33) *0,61*8730*(19 ( 31)) = J/s, пот Heat emissions. Total heat emissions consists of heat fro installed working equipment, heat from illumination equipment and heat from working people.. 1) Heat from equipment, J/s: Q 10 3 * *, (6.20) об = N у К и where Nу installed power, kwt, Ки equipment utilization, Ки= 0,3; Q = 10 3 *560 * 0,3 = J/s; (6.21) об

48 Heat from illumination. Heat from all lamps, J/s: Q 10 3 * * η, (6.22) осв = N осв осв where Nосв installed illumination power, kwt. Nосв = 278 kwt; η осв - heat losses from illumination. η осв = 0,1; Q = 10 3 * 278*0.1 = J/s; осв Heat from working peoples. Heat from workers, J/s: Q = N * n, (6.23) л р p where Nр energy assumption of one human being, J/s, Np = 232 J/s; n p - total amount of workers in one shift; n p =39 men; Total heat emmittions, J/s: Qл = 232 *39 = 9048J/s; Q в = Qобр + Qосв + Qл = = J/s. Total heat for air heating, J/s: Q = = J/s. от

49 Heat for hot water. Daily heat assumption for hot water, J/day: Q г. в. * г х. з = а т * С *( t t ), (6.24) where а hot water daily assumption limit 60 С, l/day [38], a умыв = 0,07 l/day, m - number of hand washers, m = 1.; С=4190 J/kg* С; t г - hot water temperature, С, t г =60 С; t х. в - cold water temperature, С, t х. в = 5 С; умыв Q = 0,07 *1* 4190 * (60 5) J/day, г. в = Total heat for water heating assumption, J/s: Q г. в = = 11,2 J/s. 60 *8*3 Heat for ventilation. Heat assumption, J/s: Q вен = q V *( t t ), (6.25) в * в н.в where q в = 0,58 J/s*м3* С, V volume of ventilated space, m3; V =6420 m3; t t в н. в, - indoors and outdoors air temperature, С; Q = 0,58* 6420 * (19 ( 31)) = J/s, заг вен

50 Total heat assumption, J/s: Q Q + Q + Q = J/s; всп. нуж = от г. в вен = 9 Q = *60*8*3* 250* GJ/year. всп. нуж = For heat production the gas oil boiler will be installed. The assumption of fuel is 1,25 l/hour. Total annual fuel assumption is: 1,25*24*365= l. Conclusion. At this part the geographical position, building construction, areas calculations and additional needs calculations are presented. The total area of additional areas (toilets, wardrobe, relaxation room and smoking room) is 166 m 2. Water assumption consists of technological needs (54 m 3 /year), additional needs (225 m 3 /year) hand washers needs (114 m 3 /year) and fire safety needs (288 m 3 /year). Total water assumption is 1020 m 3 /year. Energy assumption consists of equipment assumption ( kWt), ventilation assumption ( kwt) and illumination assumption ( kwt). Total energy assumption is kwt. Total heat assumption is 156 GJ/year.

51 APPENDIX IV. Invested capital, machinery capacities These calculations are made according to the annual working time, annual production volume and feeding time for each equipment like this: where Qг annual production program; Пг machinery annual capacity, where PSм shift capacity; Тэф effective work time, Q г n р =, (4.5) П г П = П * Т с, (4.7) г см эф * where Тн nominal working time, Тн=250 days; Кр repairing, Кр=0,9 0,97; Тэф =250*0,9=225 days; с number of shifts, с =3. Т = Т * К, (4.8) эф н р Cross-cutting at CME-3B. Capacity will be: П ф = 60*n *К р * К m/ /m (4.9) Where n number of cutting per minute m number of cutting per board К р - working time utilization 0,65-0,85; К м - machinery time utilization 0,8-0,9. П ф = 60 * 10* 0,9 * 0,65/3 =117 longitude meters/ hour; (4.10) Т эф = 5400 hour/year; П year = 117 * 5400 = longitude meters/ в year; From the table the annual amount of sawn goods is 5413,341m 3, which is equal longitude meters/year.

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