Part Four of Brick Manufacturing: A Business Plan
Operational Plan
Now that we have discussed the concrete brick products and the market in which they will be sold, it's time to plan out how the business will operate. In this article, we will discuss the equipment and tools, the employees, the processes and other important business workings. This section will cover topics relating to running the business on a day-to-day basis.
Let's start with the following outline:
Production Process
Quality Control
Site
Legal Environment
Personnel
Inventory
Suppliers
Credit Policies
Production Process
The production of bricks using a Doubell machine follows one of two methods - the mobile brick-producing machine and the stationary machine. The choice between these two styles of production will affect much of the site preparation but the actual methods of production will remain the same. Additional variance will present itself if you decide to run more than one machine (this is due to the way you can have a single mixing area for the multiple machines instead of simply duplicating the entire production line).
The business plan should offer the potential investor or partner full explanation as to how the process will occur to convert investment capital, to raw materials (and equipment), to bricks, and finally into more money than at the start. The production process will address the all-important part of the actual brick process down to the detail so let's be sure to cover all aspects, regardless of actual building unit choice (hollow-block, solid brick, paving brick, decorative brick, etc.).
RAW MATERIAL
Using the supplier selected (for appropriate price, location, delivery and service), calculate the raw materials required for a production that will fit the space available. The trick to work out here is to manage a delivery of aggregate in an affordable way.
You would not spend money on a year's worth of aggregate; equally you would not arrange a delivery for a single day's production everyday if the truck can hold 8 times the amount (otherwise you'll overpay for petrol and delivery costs).
Typically the delivery of aggregate comes at once or twice a week per machine deployment.
Material grading is also an important specification for making bricks. Paving requires a very smooth finish and thus a finer grading of crushed stone and/or sand. A building block can be made with a fine finish, but usually customers prefer a rough appearance so that plaster can stick when plastering a wall, which is the typical application for a building block. That means bigger granules are required of the crushed stone (6.7mm for example). This can be mixed with sand but for we are going to assume that 6.7mm crushed stone refers to everything from 6.7mm down to dust. Since this includes such fine particles already, there's no need to mix sand (unless it is much cheaper or available as an opportunity on the property).
Example:
An 8-tonne truck will deliver crushed stone everyday. The material will be kept in a semi-protected space that is walled on three sides but open at the top.
On the same day, cement will be acquired - 14 bags of cement (50kg each). This is calculated at 8:1 ratio as decided in the other section(s) of this business plan; and the product with be a hollow block (metric 6-inch) at 500 units per day production.
Water will be available on-site as municipality-supplied water.
MIXING
The size of the production for the day will determine the best strategy. For a small operation, some time can be taken at the start of the day to set out the dry mixture of ingredients into heaps. For the mobile machine, the heaps can be placed at intervals where it is expected the machinery will reach by the time the next mixture batch is required.
For a stationary system, material will be continously mixed and fed into the machinery. Batches of 200kg to 300kg will be repeatedly blended every few minutes and thus it is not necessary to pre-mix the dry ingredients. This method will also be used for the larger machinery where the consumption is rapid.
Mixing is very important. If mixing is done poorly, the brick will be of poor quality no matter the quantity of cement or the compaction ratio. A concrete brick is only as strong as the weakest seam. For this reason, a panmixer is the ultimate solution to mixing properly. But because it is an expensive piece of equipment, it is acceptable to mix by hand before generating profit to procure one.
Mixture is first blended when dry and then water is added afterwards. Any additives are usually added to the dry mix (oxides, etc.) or the water prior (hardening agents, etc.)
Example:
For accuracy in measurement, builder's buckets will be used to quantify the required materials for consistency. 8 buckets will be filled with crushed stone and 1 bucket with cement. These buckets will be added to the panmixer. After a few rotations of the panmixer, water will slowly be added in a sprinkled way to spread out the moisture over time and avoid clumping.
The water has been mixed with "Doubell Quickmix" prior to use, which will have a positive effect in the brick-manufacturing process. (See appendix on Quickmix).
Material will be mixed for 4 to 6 minutes where the chute will be slightly opened to let some mixture through. That sample will pass a "squeeze test" to gauge if more water is required or not. If fine, all the mixture will be ejected into the available custom-made swivel wheelbarrows. The mixture is then ready for used and transported to the machinery.
MANUFACTURE
The actual manufacturing of the bricks is a process that is uniform for all concrete products, although different for a "wet mix" versus "dry mix" method. A "wet mix" method uses a very watery slurry that is poured into a mould, vibrated and left to set in place. The "dry mix" method uses a damp mixture of aggregate that will be compacted into form that will be able to stand on its own. It is then left to harden in place before moving.
The vibrating table process requires a mould for each unit of a shift's production; whereas the Doubell brick machinery has a single mould to cast many units of production. With this understanding, let's review the actual procedure.
A mould has the shape of the concrete brick to be made and accepts the mixture. Since the mixture is not compacted, the mould will typically load in more mixture than the size of the brick. That mixture is then compressed down to the actual dimensions of the concrete brick product. After the dimensions are achieved, compaction is completed and extraction ensues. The bricks are extruded and released from the mould with their shape & structure intact.
In a stationary deployment, the bricks are made on wooden boards that will be transported away to a holding area for some time (6 hours to 1 day) before they are cleared, stored and the board reused. In the mobile machinery implementation, the bricks will be left on the ground instead.
Example:
The mixed material is brought to the mobile brick-manufacturing machine. It is then loaded into the feeding chute and funneled towards the mould. Using a rake or shovel, the material is guided into the mould box to ensure all the cavities are filled. Once levelled, the machinery will be utilised to compact the brick units. (See Appendix for the visual guide on machinery operation).
After compaction, the machinery will be used to lift off the mould box and leave the bricks on the ground. The machine will be moved away from the bricks and reset for the next fabrication cycle. The previous batch of production will be left undisturbed until the next day or shift of production.
One full cycle will be one minute with a target of 500 cycles per 8-hour work shift. Bricks that break before setting will be recycled into the mixture and recorded as a recovered breakage.
During breaks and at the end of the day, the equipment will be cleaned from sticking cement with water and a brush. Bolts will be checked in case they are loose from vibration. When starting again after any break, the first batch of brick production will be checked for dimensions to ensure machine settings are correct.
CURING / HARDENING
At the start of the work day, brick production from the previous day will be picked up from the work floor. Some facilities might pick up after the "initial set time" but more breakages are likely the quicker bricks are retrieved. It is advised to simply collect the next day.
These concrete blocks are hard enough to handle but still have 20 more days of hardening (crystallisation process) to eliminate further changes in dimensions (called shrinkage). The concrete will further harden for many more months but won't change as significantly as the first 21 days.
Space will become an issue as production begins to stockpile. Fortunately, the blocks are hard enough to stack into cubes. Doing this will reduce the space requirement as well as make it easy for watering the products.
Moisture is essential and cement needs about 25% of its weight in water to keep hydrated. Drying out will impede or stop the process entirely. With 500+ blocks in a cube stack, water can be poured over and the water will propagate throughout the stack. Using black plastic sheeting will also assist to trap the moisture inside.
Cold is another antagonist to cement hardening; the black plastic sheeting will also assist with trapping the heat in the stack.
The area for this process will be based on the production output as well as expected stock turnaround time.
STORAGE
Storage of the bricks is usually the same area for the hardening process. The difference is the readiness to be sold. Always work on a FIFO system (in English) - First In First Out. Whilst it might not be detrimental to the customer to get newer or older production, it is advisable to eliminate production in the batches they were made. Any tests made on the bricks are likely to remain similar rather than varying.
Customers who collect usually buy in batches - pre-pack the batches (if not already) into stacks on wooden pallets for easy loading.
TESTING
The confidence of the customer will be boosted if they can see results of independent testing conducted on the concrete bricks. There are many types of tests and it can be very expensive; Instead, simply test batches for "crushing strength" - the amount of pressure a brick can withstand before breaking. Typically, 3 bricks from the same batch are needed to perform the same test to provide confidence and samples should be drawn periodically (according to the willing budget). This will verify that supplier aggregate, the mixing process, the production procedure, and hardening are all consistent.
Quality Control
Testing will be conducted as stated previously. If the tests come back substandard, you will need a plan on how to deal with the situation. First ascertain that the issue is not simply a single non-conformance. Then contain the problem the problem by identifying the batch (will need more sample tests). Then isolate the batch to make a decision on it (if the batch is below your average standard but still above the national standard, then you might just sell it anyway). If the compromised strength is below standard for a critical structure like a load-bearing house, they could be sold at a discount rate for a boundary wall.
Site
The property that will be used for making bricks must be at some level of preparation. At the very minimum, an concrete floor must be present (if using a mobile Doubell machine) or a small concrete slab (for a stationary Doubell machine) with space for the brick products to harden and storage.
Depending on your environment, you might require overhead cover to protect against the elements; or security in the form of a lock-up warehouse. These are important considerations and there is another article or two on site preparation.
For this exercise, we will assume a "Doubell Jumbo MK3" brick machine in alignment with the products section.
Consider the accessibility from the road for the customer and the supplier. A very rural dirt road will make access difficult and break bricks on the trucks.
Make sure that the site chosen does not exceed the city zoning restrictions. Be sure to show a satellite photo of the proposed site; and lay out the costs of the rental.
Legal Environment
Always make sure you will be fully compliant when running a business. That means getting a proper registration, bank account, tax number, etc. Hiring employees means filing EMP501 and EMP201 forms as well as PAYE and other taxes in South Africa; and every country will have similar legal requirements for operating a business.
An easy way to get assistance is joining the local chamber of business, but not necessary if you get advice from one of those a legal advisor. Don't spend money unless you need to - start by looking on the government website about starting a business and what certifications are required.
For health and safety, whether it is applicable to your local law or not, make sure you have a first aid officer as well as a stocked first aid kit.
If you have a secure property, you might decide against a security guard. Consider taking insurance against some of the machinery - if theft or vandalism occurs, there is no recourse or reimbursement otherwise.
With employees, a signed contractual agreement should be in place, at least after 3 months of working. This protects the employee as far as job security goes (provided that they do not breach the rules) and it protects you (you know what you expect from the worker and if they do not fulfil their role you can terminate their employment without fear of legal recourse).
Personnel
This section is coupled with management and organisation in the organogram. The concept of "roles and responsibilities" is a recurring theme across all business types in the world. It is the single most important theme to make or break a business.
Workers must be aware of what the job entails, what output is expected; and they must be given the training to be able to accomplish these tasks (or hired with that training and experience in place).
For a brick production facility, try keep rotating workers so that they become multi-skilled and learn each job position.
Mixing will involve the measurement of the ingredients and blending them either by hand or with a panmixer. The speed of the mixing output should match at least with the machine requirement. If the bottleneck is at the mixing station, it will mean lost production. Equally severe is if the mixing is not done properly and the bricks are weaker than expected.
Machinery operators will fill the machine with mixture. They should be able to minimise the time it takes to fill the mould, free air pockets, compact and extrude the bricks. This position should also feature some technical knowledge on how to adjust machinery settings when needed and how to clean the machinery when not in use.
General workers will be picking up bricks, watering stacks, cleaning the work area and transporting mixture or bricks.
Office workers will handle customers, administrate paperwork, organise the money payments, arrange delivery of the products to the customers, and the purchasing of materials from suppliers.
The business plan should be as detailed about the job description as is needed to account for the daily tasks and production work. Technical descriptions of non-expectant or infrequently used skills can be set out in the appendix.
In the case where potential employees have not already been identified, an investor will want to know how you will go about finding appropriate workers.
Inventory
Inventory is not merely the final products to be sold - it also covers all input consumables. Since everything in the business plan is interconnected and based on the output plus the property size available, inventory planning for a brickyard hinges on the capital available for stockpiling as well as physical stacking area.
Resellers will hold inventory at your expense until they are able to sell the products. This facility is beneficial since it frees up space for production at the production site. The concrete bricks will still remain the property of the business until they are sold and should reflect that in stock-taking every month.
Each month, the bricks must be counted; the production made, the bricks broken and the bricks in stock. These figures will be used by the bookkeeper to calculate the income statement and balance sheet updates.
The raw materials aren't so easily calculated since there is not a convenient way to measure out the size of the heaped aggregate. An estimation will be fine to gauge how much is left for bricks. Try keep the storage of cement and aggregate also in the same ratio as will be used for convenience and ease of stock estimations.
Inventory control is important for quality control as well as financial management.
Seasonal is another consideration for the business plan - perhaps more money is spent by municipalities towards the end of the budget year as unspent money gets a boost in expenditure for construction purposes. Research to find out if there are various times of year where more inventory is needed; or whether supply will become restricted.
Suppliers
In many business practices, there are multiple suppliers that can offer similar goods. Choosing between the suppliers will become easier when your requirements are clear. For brick production, a cheaper supplier isn't more preferable than a supplier that is punctual to deliver. If your "cheap" supplier delivers a day or more late and your production is halted, the cost will likely be more than the savings from using that supplier.
Keep a file on all incidents that occur with suppliers in order to remember. These past occurrences might help in future decisions about whether to switch suppliers or not.
Build up a relationship with the suppliers (or a representative from the supplier) so that leniency is available in some circumstances; Whether it is some grace period for payment, priority on deliveries or premium grade products.
For the business plan, have a list of identified suppliers with preselected ones as preferred initially. Detail the expected requirement for each (this will be corroborated by the financial plan). Along with their details, ensure the investor can see their credit policies and terms of payment (which will affect cash flow analysis).
Credit Policies
Offering credit facility is a double-edged sword. It is an absolutely excellent way to increase sales; but depending on your local situation, it can also be a way to accumulate bad debts if reliable customers are not found.
It is recommended to only offer credit for well-established businesses or resellers instead of individuals. Background checks and chasing down bad debt requires a person with experience in that regard. If a legal contract has been drawn up and background checks done by a reputable consultant, then at least debt collection could occur by a third party for a fee. Detail out these processes for the investor.
In the business plan, research what competitors are offering. This will give you a good idea on what the market is like.
Management and Organisation
Biographies
An investor wants to know who is going to execute the business plan. Having the biographies and background information on the key members of the business will do much to instill confidence that the right people are involved. Testimony to this capability will be proven skills developed as well as related experience gathered.
Skill Gaps
In the case where certain skills are not strongly available, the investor can maintain confidence as long as this has been identified and a plan of action to compensate for it has been laid out. For example, financial accounting is an important aspect of any business; if the management team does not possess an accountant or diploma in accountancy or book-keeping skills, it must be expressly revealed how this will be compensated for. Perhaps extensive training prior to the launch of the business or simply to hire a professional in the field.
This can be a skill gap in the management or the ground-level workforce. There are some skill gap analysis tools on the internet but since the workforce is yet to be hired it's not easy to detect what is lacking. The best thing for the business plan is simply to provision for training in areas where appropriate employees are not found.
Advisors
Some aspects to business skills are not going to be available. Investments, legal matters, technical support, etc. - there are careers in fields that would not make sense to have in the brick production factory full-time. In these cases, it would make more financial sense to simply use consultancy where needed.
If the machinery has a problem beyond the trained knowledge of operators, keeping the manufacturer on stand-by would be more cost-effective than employing a full-time engineer.
For money-related matters, beyond the accountancy - a tax consultant will best advise on how to minimise the accumulated tax debt.
Give plenty of thought to consider all the consultants you might need and what to budget in their regard.
Organisational Chart
The hierarchy of authority is important for decision-making and to eliminate wasting time arguing. Equally, roles and responsibilities should be clearly defined so that no worker can be uncertain about what they are being paid for. From the start of employment, make sure there is an outline on what the daily work entails and keep enough scope to allow for general work that might arise.
This section will be better illustrated in the business plan template when it gets compiled at the end of this series; but if you are a business owner that plans to be less involved, make sure there is an on-site person you trust to manage and oversee the operation in your stead. Even if the local culture is majoratively honest and hardworking, temptation is corruptive. Don't leave the cash money up to any individual for an extended period of time and don't leave valuable products or equipment easily accessible by the roadside.