Small-Scale Weaving (ILO - WEP, 1983, 144 p.) CHAPTER IV. ECONOMIC EVALUATION OF ALTERNATIVE WEAVING TECHNOLOGIES I. Introduction II. Suitability of loom types and scales of production III. Methodological framework for the estimation of unit production costs IV. Economic comparison of weaving options

Small-Scale Weaving (ILO - WEP, 1983, 144 p.)

CHAPTER IV. ECONOMIC EVALUATION OF ALTERNATIVE WEAVING TECHNOLOGIES

I. Introduction

The previous two chapters provided detailed information on alternative technologies which could be adopted by practising or would-be weavers. Information contained in the above chapters should help identify technologies which are technically feasible, given the type of cloth to be produced and the adopted scale of production. The next step is to identify the most economically efficient - or profitable - technology among those identified as technically efficient, given local factor prices (e.g. wages, prices of raw materials, cost of imported and local equipment) and wholesale or retail prices of the cloth to be produced. The purpose of this chapter is, therefore, to suggest a methodological framework for the estimation of unit production costs for alternative weaving technologies and types of cloth to be produced. The most economically efficient technology would then be the one associated with the lowest unit production cost or the highest profit per unit of production (if a choice must also be made among a number of types of cloths).

This methodological framework is mostly of interest to producers as it does not take into consideration a number of socio-economic effects associated with alternative weaving technologies. This aspect, which is of particular interest to public planners or project evaluators in industrial development agencies, will be dealt with in Chapter V.

Section II of this chapter identifies the types of looms, among those described in Chapter III, which are technically suitable for the types of cloths covered by this memorandum and the selected scales of production. Reasons are also provided for the types of looms which are not considered suitable.

Section III describes the suggested methodology for estimating unit production costs, and applies it to a selected type of cloth among those covered by the memorandum. The technical coefficients needed to estimate unit production costs are also provided.

Section IV uses the same evaluation methodology for the economic comparison of the types of looms considered as suitable (ref. Section II), on the basis of assumed factor prices, interest rates, etc. While this comparison may provide some clues on the economic efficiency of alternative weaving technologies, it is provided for illustrative purposes only, as local factor prices may greatly differ from those assumed in this section. Thus, weavers should undertake their own evaluation, based on local prices, in order to identify the weaving technology best suited to local conditions.

II. Suitability of loom types and scales of production

Table IV.1 lists the various loom types described in Chapter III, indicating in each case their suitability or unsuitability at various scales of production. This table shows that, of the 11 types of looms which are listed (3 types of hand-looms, non-automatic power looms, 2 types of automatic power looms with shuttle, and 5 types of shuttle-less looms), only four types are suitable for the types of cloths and at the scales of production covered by the memorandum. Three types of shuttleless looms (types IV.1, IV.2 and IV.3) may also be suitable for large-scale production under specific conditions. Consequently, a total of seven types of looms are considered for further economic evaluation in this chapter.

Table IV.1
Suitability of loom types

Loom type		Scale of production at which loom is suitable1	Remarks on suitability
I. Hand looms
I.1	Hand-thrown shuttle and primary loom motions manually coordinated		Not suitable at scales of production covered by the memorandum. Operational speed (below 20 picks/min) is much too low and would result in abnormally high costs for work in progress. Logistic problems involved in the deployment, supervision and accomodation of large numbers of workers. Production specification and quality control problems likely to arise.
I.2	With fly-shuttle but primary motions manually coordinated	Small-scale	Suitable for small-scale production only and provided that machine preparation of warps can be undertaken at the weaving factory or elsewhere; also good pirn winding. Logistic reasons preclude the use for higher productions.
I.3	With fly-shuttle and with both primary and secondary loom motions mechanically coordinated. These looms are treadle operated.	Small-scale	Even better suited for small-scale production than type I.2, but looms of this kind are considerably more expensive. Again, good warp and weft preparation would be essential.
II.	Non-automatic power loom with shuttle	Small, medium and large scale	This type of loom is considered to be the best choice for all three levels of production. Such looms, if available, should be relatively cheap, reliable and not greatly demanding in technical supervision.
III. Automatic power loom with Shuttle
III.1	Low-cost loom of generally pre 1950 design	Medium to large scale	The next best choice to type II looms, but only for larger than medium scale production, i.e. over 1,000,000 metres/yr.
III.2	High-precision, high cost looms of generally post 1960 design	-	Unsuitable, too costly
IV. Shuttleless looms
IV.1	Projectile looms	-	Generally unsuitable - too expensive and technically demanding
IV.2	Rapier looms	-	Generally unsuitable - too expensive and technically demanding
IV.3	Air-jet looms	-	Generally unsuitable - too expensive and technically demanding. However, may eventually be suitable for large-scale production
IV.4	Water-jet looms	-	Unsuitable for hydrophilic fibres such as cotton - Too expensive and technically demanding
IV.5	Wave-shedding looms	-	Unsuitable - too technically advanced

¹ Small-scale = 100,000 m/year
Medium-scale = 1,000,000 m/year
Large-scale = 5,000,000 m/year

Loom types and multiple cloth-width weaving

The weaving of two or more widths of fabric side-by-side in the loom - as if they were a single cloth - is one method by which a gain in productivity can sometimes be achieved. However, such gain depends on the type of loom and on the requirements of garments for which the cloth is being made. Multiple cloth-width weaving may be of particular importance for certain fabrics covered in this memorandum (e.g. cloths such as those used for many saris and lunghis). Cloths woven in the above manner (as ‘splits’) do not have fully-woven selvedges at both sides of the Separate pieces; only the outer cloth edges have woven slevedges. The inner cut edges are often secured by a leno weave which is later cut-off or turned-in at the making-up stage. For cheap and quickly made garments, which must withstand wear and severe washing, these edges may not be very satisfactory. Multiple cloth-width weaving may also require wider looms which are generally more expensive both to purchase and in power consumption. Wider looms also run at a slower speed - although the rate of weft insertion is generally higher - and fewer looms can be tended by one weaver. However, there may be many cases where multiple cloth-width weaving could reduce costs. To take multi-width weaving into account, the following options have thus been included: for type III.1 automatic looms, single-width and double width weaving; for type IV.II rapier looms, double-width weaving only; for type IV.2 projectile looms, three fabrics in a loom width have been taken as a standard option;

To summarize, four types of looms will be further analised in this chapter, covering a total of 8 weaving options. These are:

- Option 1: hand-loom with fly-shuttle, one cloth-width weaving;

- Option 2: hand-loom treadle operated, one cloth-width weaving;

- Option 3: non-automatic power loom with shuttle, one cloth-width weaving;

- Option 4: low-cost automatic power loom with shuttle, one cloth-width weaving;

- Option 5: low-cost automatic power loom with shuttle, two cloth-widths weaving;

- Option 6: shuttleless projectile looms, 3 cloth-widths weaving;

- Option 7: shuttleless rapier looms, 2 cloth-widths weaving;

- Option 8: shuttleless air-jet looms, 1 cloth-width weaving.

III. Methodological framework for the estimation of unit production costs

The estimation of unit production costs associated with alternative weaving technologies requires 14 main steps. These are described below, including assumptions and technical data associated with each step:

Step 1: Specification of the required yearly production capacity, the type of cloth to be produced, and of the weaving option which is considered. Obviously, the weaving option must be suitable for the required capacity (see Section II);

Step 2: Given the yearly production capacity, to calculate the number of looms required for this capacity, the cost of these looms, and the floor area occupied by the latter.

(i) Calculation of the number of looms

The number of required looms is provided by the following relationship:

The hourly production per loom may be obtained from the following relationship:

where:

V = loom speed, in picks per minute
W = cloth widths per loom. W = 1, 2, or 3
E = mean loom utilisation efficiency, in percentage
p = number of picks per cm (weft).

Table IV.2 provides the hourly production of looms for the 8 selected weaving options, and for a type of cloth with the following characteristics:

Reed width	: 116 cm (46 in.)
Warp	: 25 ends/cm of 24 Tex cotton (64 ends/in., 24 Ne)
Weft	: 25 picks/cm of 24 Tex cotton (64 picks/in., 24 Ne)

Table IV.2
Hourly loom production

Weaving option	Type of loom	Number of cloth widths per loom (W)	Loom speed Picks per minute (V)	Mean loom-utilization efficiency (E)	Cloth production Metres per loom per hour
1	Hand-loom with fly-shuttle	1	40	50%	0.48
2	Hand-loom - treadle operated	1	80	75%	1.44
---------------------------------------------------------------------------------------------------------------------
	Power looms
3	Non-automatic shuttle loom	1	180	85%	3.67
4	Low-cost automatic shuttle loom	1	180	92%	3.97
5	Low-cost automatic shuttle loom	2	130	86%	5.36
---------------------------------------------------------------------------------------------------------------------
	Shuttleless looms
6	Projectile (Sulzer)	3	220	84%	13.30
7	Rapier	2	240	87%	10.02
8	Air-Jet	1	375	88%	7.92

Cloth particulars:- Reed width 116 cm (46 in):

Warp 25 ends/cm 24 Tex cotton (64 ends/in, 24 Ne)
Weft 25 picks/cm 24 Tex cotton (64 picks/in, 24 Ne)

This type of cloth may be considered to be of an average construction within the range of cloths covered by this memorandum (see Table I.1). The hourly production of looms for the specific types of cloths described in Table I.1 may be easily calculated by simply using the right value of p and the relevant coefficients in Table IV.2.

The estimated values of E (the mean loom utilisation efficiency) and of V (the loom speed) for the 8 weaving options are based on the following considerations and assumptions:

- Weaving options 3, 4 and 5 are based on the use of low-cost shuttle looms with a high productive capacity per unit of fixed capital investment. The speeds assumed are modest but realistic in the circumstances. Shuttle looms capable of speeds 25% to 35% higher are available, but as the high precision involved in their manufacture results in prices 100% to 300% higher, it would be inappropriate to use them in the present context. Very few makers are currently offering low-cost looms of the types selected, but they are available in a number of countries (e.g. Czechoslovakia, India and China). It should thus be possible for other low-cost countries to produce substantially similar looms at similar prices.

- The Sulzer loom (weaving option 6) is the only weaving machine which is widely used. The 3 cloth widths, 220 picks/minute, operation is by far the most economic one.

- The low-cost rapier loom (option 7) is, for a cloth width and 240 picks/minute operation, slower than other high cost rapier looms. It is, however, the most cost-effective for conditions prevailing in developing countries.

- The low-cost air-jet loom (option 8), with a loom speed of 375 picks/minute, is also slower than other air-jet looms which use supplementary jets. It is, however, much more cost-effective as its purchase price is also much lower than that of faster air-jet looms.

- Loom utilisation efficiency: This factor is function of two variables: the quality of the yarn and the weaver’s skills. Regarding the quality of the yarn, it was assumed that high quality yarn may not always be available in developing countries, but that the yarn used for the types of cloths considered in this memorandum should not be of the lowest quality available. It has, therefore, been assumed that the quality of yarn used in the 8 weaving options is at the 75% level of the Zellweger Uster classification.¹ This means that 75% of all yarn used worldwide is better than that which would be used in the 8 weaving options, and 25% worse. Thus, the 24 Tex yarn used in these options will have the following properties:

· Irregularity index	: 16U%
· Thin places (-50%)	: 150 per 1000 metres
· Thick places (x 3)	: 700 per 1000 metres
· Neps (x 3)	: 650 per 1000 metres

¹ The firm Zellweger Uster Ltd. compiles worldwide statistics of yarn quality, including irregularities, number of thin places, number of thick places and number of neps per unit of length. The statistics show, over a range of counts, the percentage of total world yarn production which is of better quality than a series of specified values in relation to each of the four properties.

Regarding weavers’ skills, it has been assumed that the relatively low skill levels available in developing countries are, to some extent, offset by the employment of larger numbers of operatives. Thus, given the assumed yarn quality and weavers’ skills, the mean loom utilisation efficiency is assumed to range from 92% for the low-cost automatic shuttle loom to 84% for the Sulzer loom. The efficiencies of the hand-loom with fly-shuttle and that of the treadle operated one are assumed to be, respectively, 50% and 75%. The above assumptions are, to some extent, validated by field observations from a number of mills in India, Kenya and Ethiopia.

(ii) Estimation of the cost of looms

Given the estimated number of looms, the cost of the latter may be estimated on the basis of quotations obtained from local importers or loom manufacturers. The unit price of loom should include transport costs, the cost of spare parts and any import duties or taxes. Section IV provides estimated prices of the looms considered in this memorandum.

(iii) Estimation of the floor area occupied by the looms

The floor area for the machinery is a primary determinant of the cost of the mill building. The area required per loom must make a reasonable allowance for access alleys and free space within the weaving area. Estimated floor space requirements per loom (inclusive of surrounding working area and passage ways) are provided below for each weaving option:

Option 1: 8.4 m2 (90 ft2);	Option 5: 13.0 m2 (140 ft2)
Option 2: 8.4 m2 (90 ft2);	Option 6: 16.7 m2 (180 ft2)
Option 3: 9.3 m2 (100 ft2);	Option 7: 13.9 m2 (150 ft2)
Option 4: 9.3 m2 (100 ft2);	Option 8: 8.8 m2 (95 ft2)

Step 3: To estimate the number and cost of the following auxilliary equipment:

- Warper’s back-beams
- Warping and sizing machines, and size preparation equipment;
- Pirn winding spindles

To estimate the floor areas occupied by the above equipment.

Weaving mills producing up to 100,000 metres per year (small-scale production) may not justify the acquisition of a warpers’ back-beam or that of a warping and sizing machine as these would be used at very low production levels, given the mills’ requirements. It is thus preferable for these mills to buy the required materials from warp suppliers. On the other hand, medium and large-scale mills may afford the acquisition of this equipment. Table IV.3 provides estimates of the number of machines and the floor areas required for each weaving option. The floor area for warping also includes the space needed for the creeling operation (Refer to Chapter II).

Table IV.3
Back-beam warping, warp sizing and weft pirning equipment and space requirements

Production level per year and option No.	Back-beam warping		Warp sizing and size preparation equipment		Pirn winding
	No. of machines	Total floor area	No. of machines	Total floor area	No. of machines	Total floor area
100.000 m/year 3000 working hours
Option 1	0.2* (37%)+	34 m2*	0.2* (25%)+	68 m2*	3	4 m2
Option 2	0.2* (37%)+	34 m2*	0.2* (25%)+	68 m2*	3	4 m2
Option 3	0.2* (37%)+	34 m2*	0.2* (25%)+	68 m2*	3	4 m2
1,000,000 m/year 5000 working hours
Option 2	1 (37%)+	170 m2	1 (25%)+	340 m2	17	17 m2
Option 3, 4, 5	1 (37%)+	170 m2	1 (25%)+	340 m2	17	17 m2
5,000,000 m/year 6500 working hours
Options 3, 4, 5	1 (85%)+	170 m2	1 (75%)+	340 m2	63	63 m3
Options 6, 7, 8	1 (85%)+	170 m2	1 (75%)+	340 m2	Not required

Note:

^* 1/5 of machine required. Number of machines and corresponding floor areas at warp suppliers’ factory

⁺ Per cent of working hours during which machine is in use;

- Estimated machine utilisation times:

- Back-beam warping: 1,000,000 m/year; 5,000 hrs = 37%
- Back-beam warping: 5,000,000 m/year; 6,500 hrs = 85%
- Sizing machines: 1,000,000 m/year; 5,000 hrs = 25%
- Sizing machines: 5,000,000 m/year; 6,500 hrs = 75%

Step 4: To determine the cost of ancillary weaving equipment such as that required for looming operations, pin stripping, heald and reed polishing, and loom-state cloth examination. To determine the floor area required for the above equipment. Table IV.4 provides estimates of the number of pieces of equipment needed for the various weaving options and scales of production, as well as estimated floor areas. The cost of ancillary weaving equipment may thus be estimated on the basis of estimates provided in Table IV.4 and unit prices of equipment (to be obtained from importers, equipment suppliers, etc.)

Table IV.4
Ancillary weaving equipment and space requirements

Equipment	Options 1, 2, 3 (100,000 m/year)		Options 2, 3, 4, 5 (1,000,000 m/year)		Options 3, 4, 5, 6, 7, 8 (5,000,000 m/year)
	No. of machines	Total floor area	No. of machines	Total floor area	No. of machines	Total floor area
Hand-looming frames	2	30 m2	3	90 m2	5	150 m2
Reed drawing machine	Not appropriate	-	Not appropriate	-	1*	2 m2
Warp knotting machine	Not appropriate	-	Not appropriate	-	1*	2 m2
Drop-pinning machine	Not appropriate	-	Not appropriate	-	1*	2 m2
Heald and reed polishing machine	Not appropriate	-	1	20 m2	1	20 m2
Pirn stripping machine	Not appropriate	-	1*	15 m2	1*	15 m2
Examining tables	1*	30 m2	1	50 m2	3	90 m2

^* This sign indicates that the equipment may not be considered essential in every case.

Step 5: Given the total floor area requirements - obtained by summing the floor areas estimated under steps 2, 3 and 4 - to estimate the cost of required buildings at an appropriate amenity level.

Table IV.5 recapitulates the floor areas required for each operation, and provides an estimate of the total floor area needed for each weaving option and scale of production.

Table IV.5
Total floor area requirements
(Excluding warehouse and mill administration, and general office accomodation)

Production level per annum, working hours, and Option No.	Warping machines	Warp-sizing equipment	Pirning machines	Looming	Looms	Cloth Inspection	Total
100,000 m/year 3,000 wkg/hours
Op. 1	34**	68**	4	30	588	30	754
Op. 2	34**	68**	4	30	202	30	368
Op. 3	34**	68**	4	30	93	30	259
1,000,000 m/year 5,000 wkg/hours
Op. 2	170	340	17	125	1168	30	1850
Op. 3	170	340	17	125	512	30	1194
Op. 4	170	340	17	125	475	30	1157
Op. 5	170	340	17	125	494	30	1176
5,000,000 m/year 6,500 wkg/hours
Op. 3	170	340	63	191	1951	90	2805
Op. 4	170	340	63	191	1802	90	2656
Op. 5	170	340	63	191	1873	90	2727
Op. 6	170	340	NIL	191	970	90	1761
Op. 7	170	340	NIL	191	1073	90	1864
Op. 8	170	340	NIL	191	856	90	1647

^** Apportionment of floor areas required for equipment at warp suppliers’ factory - 1/5 of area

The total cost of buildings should include the cost of land, the cost of the buildings and service costs. Estimation of the above cost items should take into consideration the desired level of amenity (i.e. a choice must be made between low-cost and high-cost buildings). It may be recalled that, in the case of small-scale production, it has been assumed that the sized warps are prepared by an external supplier whose charges will include costs, on a proportionate basis, for his own premises, as well as these for power and labour. To allow for these costs, one fifth of the corresponding charges calculated for medium-scale mills may be added to the basic costs for small-scale mills.

Determination of the standards of amenity (both in technical and personal terms) is a very difficult area of decision making. A high level of amenity means a greater fixed capital investment and higher running costs throughout the life of the mill for a return which is extremely difficult to quantify. In general, the optimum level of amenity would depend upon local conditions. A mill offering amenity below the socio-industrial norms of the region cannot hope to attract the best workers, especially in the long run. On the other hand, a mill so far in advance of the norms of a region as to be beyond the aspirations of the most progressive interests will carry a heavy financial burden to little purpose. To deal with this difficulty, costs may be estimated at two levels of amenity so that cost commitments incurred by the provision of intermediate degrees of amenity may be estimated by interpolation.

The lower amenity level, referred to as low-cost building, must be considered as an absolutely minimal amenity level, although mills built to this standard during the past decade are not uncommon in India and Bangladesh. This level means that there is no air conditioning, virtually no roof insulation, and the lighting intensity in the working areas is only of the order of 250 lux. The higher level, referred to as high amenity building, is typical of mills being built currently in Europe. They have good air conditioning, along with evaporative cooling and air filtration capable of ensuring that the concentration of dust and fly does not exceed 0.5 milligrams per cubic metre in the ambient air, and 0.1 milligrams per cubic metre in the air which is recirculated. A lighting intensity of 500 lux is provided in all working areas.

Section IV provides estimates of the cost of low and high amenity levels buildings in the process of comparing alternative weaving options. Precise estimates may be obtained from local contractors on the basis of a detailed description of the mill characteristics.

Step 6: From steps 2, 3, 4 and 5 to calculate the total fixed capital investment (i.e., including equipment, land, and building costs).

Step 7: To estimate the personnel requirements for the selected weaving option, including personnel for warp and weft preparation, looming and related work, pirning, weaving, cloth inspection, etc... To estimate, subsequently, the total annual labour costs on the basis of wages and salaries paid in the mill’s geographical location.

In order to facilitate the estimation of labour costs, the mill’s personnel may be divided into 5 broad categories as follows:

- Category 1: managers and technologists;
- Category 2: supervisors and technicians;
- Category 3: warpers, weavers, winders and auxiliary staff.

An average rate for each category may be used in the estimation of labour costs.

Estimates of the number of staff (in each category) required for each weaving option and scale of production are provided in Table IV.6. These estimates are based on field studies undertaken by the Shirley Institute (United Kingdom) in a number of developing countries. These estimates should ensure the efficient operation of the looms and related equipment for each option. They are closely related to the efficiency levels assumed for each weaving operation.

Table IV.6
Staff requirements

Production level per annum and weaving option	Number per shift
	Managers and technologies		Supervisors and technicians		Weavers and others
	Weaving	Other	Weaving	Other	Weaving	Other
100.000 m/year (1 shift)
Option 1	1	Nil	3	1	77	10
Option 2	1	Nil	2	1	26	8
Option 3	1	Nil	2	1	5	6
1,000.000 m/year (2 shifts)
Option 2	2	1	6	2	150	16
Option 3	2	1	2	2	25	13
Option 4	2	1	2	2	14	13
Option 5	2	1	2	2	13	13
5,000,000 m/year (3 shifts)
Option 3	6	2	7	3	82	23
Option 4	7	2	8	3	51	23
Option 5	5	2	6	3	49	23
Option 6	3	2	2	3	22	19
Option 7	3	2	3	3	26	19
Option 8	4	2	3	3	26	19

Note: The numbers of staff per shift for options 1 and 2 are Shirley Institute estimates. The number of staff per shift for power loom weaving (options 3 and 8) are based on the Institute’s observations in India, Kenya, Ethiopia and the UK during the period 1975-1979.

Step 8: To estimate the cost of energy needed to drive the required numbers of beaming machines, sizing machines, pirning machines, looming equipment, looms, etc., as well as that needed for lighting and other services.

The cost of energy will be a function of the adopted weaving option and amenity level for the mill. The amount of energy required for each option may be estimated as follows:

- For looms and other equipment:

Energy cost/year = (Number of machines) X (KW rating) X (% utilisation) X (% operating efficiency) X (annual working hours) X (energy cost per KW/h)

- For lightning

Energy cost/year = (Machine + working area, in m²) X (KW/m²) X (annual working hours) X (energy cost per KW/hr).

The following may be assumed in estimating energy costs:

· for low-cost buildings: 0.01346 KW/m²
· for high-cost buildings: 0.02691 KW/m²

- For other services

Energy cost/Year = (Total machine + working area, in m²) X (S) X (Annual working hours) X (energy cost per KW/hr)

The value of “S” may be assumed to be equal to:

· 0.00538 KW/m² for low-cost buildings
· 0.01076 KW/m² for high cost buildings

- For humidification of high-cost buildings

To add 6.75% of total energy costs for the machines and lightning.

Step 9: To estimate the annual costs of repairs and renewals for production equipment and buildings. These costs may be assumed to be equal to a fraction of the capital costs of equipment and buildings, as follows:

- Looms:

· For 100,000 m/year: 5% of the cost of looms

· For 1,000,000 m/year: 7.5% of the cost of looms

· For 5,000,000 m/year:

- 10% of cost of looms for options 3, 4 and 5
- 5% of cost of looms for options 6, 7 and 8

- Other machines:

· For 100,000 m/year; machines used at mill: 5% of equipment cost

· For 100,000 m/year; machines at warp supplier: 7.5% of equipment cost

· For 1,000,000 m/year: 7.5% of equipment cost

· For 5,000,000 m/year: 10% of equipment cost

- Buildings:

· 3% of building costs, for all weaving options

- Services:

· 5% of costs, for all weaving options

Estimated repairs and renewals costs (based on the above fractions of capital expenditures on equipment and buildings) should enable unimpaired performance of the equipment over a period of 15 years as long as skilled and diligent technologists and technicians are used for the maintenance of equipment and buildings.

Step 10: To estimate annual depreciation costs of equipment and buildings. Annual depreciation costs may be obtained from the following formulation:

Annual depreciation cost = (K - PVS) X F where

K = Purchase price of equipment or cost of building
PVS = Present worth of the salvage value of equipment or building¹

¹ where
S = salvage value of the equipment or building
r = prevailing interest rate
n = equipment or building economic life, in years.

F = Annual recovery factor¹

¹ where
r = Prevailing interest rate
n = equipment or building economic life, in years

The value of F may be calculated on the basis of the assumed economic life of the equipment or building, and the prevailing interest rate which applies to investment projects. Alternatively, the value of F may be obtained from tables of compound interest factors such as the one provided as Appendix I.

The present worth of the salvage value of equipment or buildings may be obtained by multiplying the estimated salvage value by the present worth factor which may also be calculated or obtained from existing tables.

Economic life of buildings and equipment

The economic life of equipment is a function of three variables: the skill level of the operators, the care with which the equipment is maintained, and the rate at which new technological developments are taking place. The last variable is the most important one and will generally determine the economic life of equipment. It is difficult to forecast with absolute precision the development rate, and hence the economic life which a particular installation may enjoy before it becomes technologically obsolescent. However, case studies of machinery innovation in weaving suggest that it is extremely unlikely that any new installation of machinery will become obsolescent within 10 years. Under these circumstances, the economic life of weaving equipment may be safely assumed to be 15 years. The same economic life may be applied for one, two and three shifts use of the equipment. Obviously, renewal and repair costs will be higher for two and three shifts use than for one shift use. This is the reason for the progressively higher coefficients used to estimate repairs and renewal costs as the scale of production is increased from 100.000 m/year to 5,000,000 m/year (see step 9). The relatively low coefficient (5%) used for options 6, 7 and 8 may be explained by the fact that the type of looms used for these options are less demanding, in terms of repairs and renewals, than looms used for the other options.

The economic life of buildings may also be assumed to be 15 years as it is dependent on the economic life of equipment.

Land

It may be assumed that the value of land will remain unchanged in real terms.

Salvage value of equipment and buildings

It is highly probable that reconditioned weaving equipment can find a buyer after the assumed economic life of 15 years. Thus, its salvage value may be assumed to be equal to 12.5% of its original cost.

It may also be assumed that buildings can be sold, with or without the services equipment, at 25% of their original cost. The salvage value of services equipment may be assumed to be equal to 12.5% of its original cost if sold with the building and to 5% of its original cost if sold separately. The following table recapitulates the salvage values:

- Looms and other production equipment: 12.5% of original cost
- Buildings with services:	Buildings: 25% of original cost
	Services: 12.5% of original cost
- Services only: 5% of original cost
- Land: 100% of original cost

Step 11: To estimate annual interest payments on stocks of raw materials and finished output.

The amounts of stocks of raw materials and finished output will be function of local marketing customs and delays encountered in the importation of raw materials (whenever necessary) such as yarn. Thus, depending on circumstances, one month to three months stocks may be necessary. As these stocks constitute idle capital, annual interest payments on the value of these stocks should be added to the other annual cost items, whether the funds needed for the establishment of these stocks are borrowed or not.

Step 12: To estimate the total annual processing costs associated with the weaving option which is being evaluated:

Total annual processing costs =

(Total labour costs) + (Total energy costs) +
(Total costs of repair and renewals) + (Annual
depreciation costs) + (Annual interest payments)

The above annual processing costs do not yet include the cost of raw materials inputs, mainly yarn.

Step 13: To estimate the cost per metre of loom-state cloth produced by the mill by first dividing the annual processing costs (step 12) by the annual production rate, and then adding to the obtained figure the cost of yarn needed to produce one metre of cloth of the type considered.

The estimation of the cost of yarn per metre of loom-state cloth may be based on the international market price of yarn of 75% Uster quality classification, and the quantity of yarn required for the type of cloth it is intended to produce. It may be noted that some amount of weft is generally wasted in the case of shuttleless weaving (i.e. options 6, 7 and 8).

IV. Economic comparison of weaving options

The 8 weaving options listed in section II of this chapter are compared according to the evaluation methodology described in the previous section, the assumed technical coefficients, and assumed factor prices (e.g. wages, salaries, prices of energy and raw materials). This comparison is made with a view to providing examples of the economic viability of the 8 weaving options, and to illustrating the application of the evaluation methodology.

The following scales of production are considered in the economic evaluation of the 8 weaving options:

- Small-scale production (100,000 m/year)
Options 1, 2 and 3

- Medium-scale production (1,000,000 m/year)
Options 2, 3, 4 and 5

- Large-scale production (5,000,000 m/year)
Options 3, 4, 5, 6, 7 and 8

The number of shifts associated with each scale of production are:

- One shift (3,000 hrs/year) for small-scale production
- Two shifts (5,000 hrs/year) for medium-scale production
- Three shifts (6,500 hrs/year) for large-scale production

For the sake of simplicity, the economic evaluation of the 8 weaving options are based on the production of a single type of cloth instead of the whole range of cloths described in Chapter I. This type of cloth is of average construction within the above range. It has the following characteristics:

- Reed width: 116 cm (64 in.)
- Warp: 25 ends/cm of 24 TEX cotton (64 ends/in., 24 Ne)
- Weft: 25 picks/cm of 24 TEX cotton (64 picks/in., 24 Ne)

IV.1 Assumptions

A number of assumptions are made regarding various factor prices. These prices (1982) should apply to a large number of developing countries. However, large variations in these prices may be found in some of these countries. Thus, findings from the economic evaluation of the weaving options may not be valid in all cases.

The following assumptions were made in relation to the economic evaluation of alternative weaving technologies:

- Machinery cost

It is assumed that machinery will be bought from low-cost producers in developed or developing countries. As it was not possible to obtain reliable estimates of the cost of hand-looms from developing countries, estimates from European Community Countries and the United States have been used instead. In general, hand-loom prices from developing countries should be substantially lower than those in industrialised countries (e.g. 25% to 50% lower in the case of handlooms produced in India).

Table IV.7 provides the unit cost of looms, the number of looms required for each of the weaving options and scales of production and the total cost of these looms. The number of looms in Table IV.7 has been calculated on the basis of data provided in Table IV.3. The quoted prices are FOB prices to which should be added transport costs, customs duties, insurance, etc.

Table IV.7
Cost of looms and space requirements

		Production and hours (100,000 Metres/year) (3,000 working hours)			Production and hour (1,000,000 metres/year) (5,000 working hours)			Production and hours (5,000,000 metres/year) (6,500 working hours)
Option Number	Unit Cost of loom £	Looms needed No.	Total cost £	Floor space needed (m2)	Looms needed No.	Total cost £	Floor space needed (m2)	Looms needed No.	Total cost £	Floor space needed (m2)
1	100 +	70	7,000	588	----- Not appropriate -----			----- Not appropriate -----
2	500 +	24	10,000	202	139	69,500	1168	----- Not appropriate -----
----------------------------------------------------------------------------------------------------------------------------------------------------------
3	1,000	10	10,000	95	55	55,000	512	210	210,000	1,951
4	1,500	----- Not appropriate -----			51	76,500	475	194	291,000	1,802
5	2,000	----- Not appropriate -----			38	76,000	494	144	288,000	1,875
6	22,000	----- Not appropriate -----			----- Not appropriate -----			58	1,276,000	970
7	12,000	----- Not appropriate -----			----- Not appropriate -----			77	924,000	1,073
8	5,000	----- Not appropriate -----			----- Not appropriate -----			97	485,000	856

Note: See section II for the definition of options 1 to 8.

- Building costs

Building costs are shown in Table IV.8, These costs are disaggregated into “land”, “building” and “Services equipment” costs. They are based on 1979 unit costs for mills built in India, and on to al floor areas provided in Table IV.5.

It is clear from figures in Table IV.8 that the fixed capital burden which the provision of high amenity imposes on a company is greatest for small scale production with Option 1. For medium-scale production, it is option 2 which carries the greatest penalty, option 1 no longer being included. For large-scale production, in which both options 1 and 2 are not considered, option 3 employing non-automatic looms carries the greatest burden, this being approximately 1.7 times that for the air-jet loom (option 8).

Table IV.8
Building costs (£ Sterling)

	Production level (100,000 m/yr; 3,000 wkg hours)				Production level (1,000,000 m/yr; 5,000 wkg hours)				Production level (5,000,000 m/yr; 6,500 wkg hours)
	Land	Building	Services	Total	Land	Building	Services	Total	Land	Building	Services	Total
Low cost building
Op. 1	2,030	24,110	5,580	31,710
Op. 2	990	11,900	2,750	15,640	4,980	58,550	13,540	77,070
Op. 3	700	8,450	1,950	11,100	3,210	37,790	8,740	49,740	7,550	88,770	20,530	116,850
Op. 4					3,110	36,610	8,470	48,190	7,150	84,050	19,440	110,640
Op. 5					3,160	37,220	8,610	48,990	7,340	86,300	19,960	113,600
Op. 6									4,740	55,730	12,890	73,360
Op. 7									5,020	58,990	13,640	77,560
Op. 8									4,450	52,120	12,060	68,610
High cost building
Op. 1	2,050	153,380	88,580	244,010
Op. 2	990	75,680	43,710	120,380	4,980	372,380	215,060	592,420
Op. 3	720	53,740	31,040	85,500	3,210	240,340	138,800	382,350	7,550	564,610	326,080	898,240
Op. 4					3,110	232,890	134,500	370,500	7,150	534,620	308,760	850,530
Op. 5					3,160	236,710	136,710	376,580	7,340	548,910	317,020	873,270
Op. 6									4,740	354,470	204,720	563,930
Op. 7									5,020	375,200	216,690	596,910
Op. 8									4,430	331,520	191,470	527,420

Notes:

Land costs - these have been taken to be the same for both low and high cost buildings -- £0,25/ft² or £2,691/metre²

Building costs - taken to be £2,94/ft² or £31.646/metre² for low cost building and £18.70/ft² or £201.287/metre² for high cost building

Services costs - taken as £0.68/ft² or £7.3195/metre² for low cost building and £10.80/ft² or £116.251/metre² for high cost building

Note: See section II for the definition of options 1 to 8.

Salaries and wages

Average rates for each category of labour were calculated on the basis of data obtained from Kenya, Ethiopia and India (Uttar Pradesh) in 1979. These rates, expressed in £ sterling at January 1980 exchange rates, are as follows:

- Group 1 (managers and technologists): £ 42/month
- Group 2 (supervisors and technicians): £ 28/month
- Group 5 (weavers and others): £ 13/month

Table IV.9 provide estimates of total labour costs for each weaving option and scale of production.

Table IV.9
Salary and wages

Rates assumed:	Managers and Technologists	£42 per mth
	Supervisors and Technicians	£28 per mth
	Weavers and Others	£13 per mth

Production level per annum	Members per shift						Cost per shift/month			Total cost
	Managers and Technologists		Supervisors and Technicians		Weavers and Others		Managers and Technologists all	Supervisors and Technicians all	Weavers and Others all	Per shift/month	Per Year
	Weaving	Other	Weaving	Other	Weaving	Other	£	£	£	£	£
100,000 metres/yr (1 shift)
Op. 1	1	Nil	3	1	77	10	42	112	1,131	1,285	15,420
Op. 2	1	Nil	2	1	26	8	42	84	442	568	6,816
Op. 3	1	Nil	2	1	5	6	42	84	143	269	3,228
1,000,000 metres/yr (3 shifts)
Op. 2	2	1	6	2	150	16	126	224	2,158	2,508	60,192
Op. 3	2	1	2	2	25	13	126	112	494	732	17,568
Op. 4	2	1	2	2	14	13	126	112	351	589	14,136
Op. 5	2	1	2	2	13	13	126	112	338	576	13,824
5.000.000 metres/yr (3 shifts)
Op. 3	6	2	7	3	82	23	336	280	1,365	1,981	71,316
Op. 4	7	2	8	3	51	23	378	308	962	1,648	59,328
Op. 5	5	2	6	3	49	23	294	252	936	1,482	53,352
Op. 6	3	2	2	3	22	19	210	140	533	883	31,788
Op. 7	3	2	3	3	26	19	210	168	585	963	34,668
Op. 8	4	2	3	3	26	19	252	168	585	1,005	36,180

Note: See section II for the definition of options 1 to 8.

Energy costs

Energy cost estimates are provided in Table IV.10 for each weaving option and scale of production. These costs are based on a unit cost of electricity of 2.1 pence per KW/hr (i.e. the average industrial rate in the U.K. in January 1980). This is a realistic charge broadly applicable worldwide after taking account of currency exchange rates and local fuel costs. Even when account is taken of both of these factors, considerable local variation may be found where energy is drawn from a public supply of electricity or gas. The figure is, however, very close to the real cost of on-site power generation using fossil fuels at current world prices. In special circumstances, costs could be appreciably reduced, for example, by the use of hydroelectricity generation where there is a suitable river near the factory, or by the use of waste heat in other processes.

Table IV.10
Annual Energy Costs (£ Sterling)

Production level	LOW AMENITY (LOW COST) BUILDING						HIGH AMENITY (HIGH COST) BUILDING
	Looms (£)	Other M/c’s (£)	Lights (£)		Other Services (£)	Total (£)	Looms (£)	Other M/c’s (£)	Lights (£)		Other Services (£)	Total (£)
			Looms	Other M/c’s					Looms	Other M/c’s
100,000 m/yr
Option 1	Nil	170	500	140	260	1,070	Nil	170	1,000	280	610	2,060
Option 2	Nil	170	170	140	130	610	Nil	170	340	280	300	1,090
Option 3	750	170	80	140	90	1,230	750	170	160	280	220	1,580
1.0M m/yr
Option 2	Nil	1,170	1,650	960	1,050	4,830	Nil	1,170	3,300	1,920	2,520	8,910
Option 3	6,870	1,170	720	960	680	10,400	6,870	1,170	1,440	1,920	2,120	13,520
Option 4	6,900	1,170	670	960	650	10,350	6,900	1,170	1,340	1,920	2,070	13,400
Option 5	6,860	1,170	700	960	670	10,360	6,860	1,170	1,400	1,920	2,090	13,440
5.0M m/yr
Option 3	34,110	5,190	3,580	1,570	2,060	46,510	34,110	5,190	7,160	3,140	7,470	57,070
Option 4	34,100	5,190	3,310	1,570	1,950	46,120	34,100	5,190	6,620	3,140	7,210	56,260
Option 5	33,800	5,190	3,440	1,570	2,000	46,000	33,800	5,190	6,880	3,140	7,310	56,320
Option 6	16,620	1,340	1,780	1,450	1,300	22,490	16,620	1,340	3,560	2,900	4,230	28,650
Option 7	18,200	1,340	1,970	1,450	1,370	24,330	18,200	1,340	3,940	2,900	4,510	30,890
Option 8	34,950	1,340	1,570	1,450	1,210	40,520	34,950	1,340	3,140	2,900	5,270	47,600

Note: See section II for the definition of options 1 to 8.

Costs of back-beam warping, warp sizing and weft pirning equipment

These costs are provided in Table IV.11. The same assumptions as those made for the looms apply to this equipment.

Table IV.11
COST OF BACK-BEAM WARPING, WARP SIZING AND WEFT PIRNING EQUIPMENT AND SPACE REQUIREMENTS

Production level per annum and Option No.	Back-beam Warping			Warp Sizing			Pirn Winding
	Cost per machine ........... £23,000 Floor area per machine ... 170 m2			Cost per machine and size preparation equipment ...... £75,000 Floor area per machine ....... 340 m2			Cost per spindle .............. £1000 Floor area per machine of four spindles .................. 4 m2
	Machines needed No.	Total cost £	Total Floor area (m2)	Machines needed No.	Total cost £	Total Floor area (m2)	Spindles needed No.	Total cost £	Total Floor area (m2)
100,000 metres/yr, 3000 wkg/hr.
1	0.2** (37%)+	4,600**	34**	0.2** (25%)+	15,000**	68**	3	3,000	4
2	0.2** (37%)+	4,600**	34**	0.2** (25%)+	15,000**	68**	3	3,000	4
3	0.2** (37%)+	4,600**	34**	0.2** (25%)+	15,000	68**	3	3,000	4
1,000,000 metres/yr, 5000 wkg/hr.
Op. 2	1 (37%)+	23,000	170	1 (25%)+	75,000	340	17	17,000	17
Op. 3, 4, & 5	1 (37%)+	23,000	170	1 (25%)+	75,000	340	17	17,000	17
5,000,000 metres/yr, 6500 wkg/hr.
Op. 3, 4, & 5	1 (85%)+	23,000	170	1 (75%)+	75,000	340	63	63,000	63
Op. 6, 7, & 8	1 (85%)+	23,000	170	1 (75%)+	75,000	340	................ Not required ..............

^** Apportionment of 1/5 of machine requirement, machine costs and corresponding floor area occupied at warp suppliers’ factory

⁺ Utilization - (per cent of working hours during which machine is in use)

Estimated machine utilization times:-

Back-beam warping (1,000,000 m/yr, 5000 wkg/hp) = 37%
Back-beam warping (5,000,000 m/yr, 6500 wkg/hr) = 85%

Sizing machines (1,000,000 m/yr, 5000 wkg/hr) = 25%
Sizing machines (5,000,000 m/yr, 6500 wkg/hr) = 75%

Note: See section II for the definition of options 1 to 8.

Costs of ancillary weaving equipment

These costs are provided in Table IV.12. The same assumptions as those made for the looms apply to this equipment.

Table IV.12
Cost of ancillary weaving equipment and space requirements

Equipment	Options 1, 2 and 3 (100,000 metres/year) (3000 working hours)			Options 2, 3, 4 and 5 (1,000,000 metres/year) (5000 working hours)			Options 3, 4, 5, 6, 7 and 8 (5,000,000 metres/year) (6500 working hours)
	Machines needed No.	Total cost £	Total Floor area (m2)	Machines needed No.	Total cost £	Total Floor area (m2)	Machines needed No.	Total cost £	Total Floor area (m2)
Hand-looming frames	2	1,000	30	3	2000	90	5	5,000	150
Reed drawing machine	Not appropriate			Not appropriate			1?	5,000	2
Warp knotting machine	Not appropriate			Not appropriate			1?	5,000	2
Drop - pinning machine	Not appropriate			Not appropriate			1?	5,000	2
Heald and reed polishing machine	Not appropriate			1	5,000	20	1	5,000	20
Pirn stripping machine	Not appropriate			1?	4,000	15	1?	4,000	15
Cloth Inspection
Examining tables	1?	2,000	30	1	2,000	30	3	6,000	90

^? - Indicates that this equipment may not be considered essential in every case
Note: See section II for the definition of options 1 to 8.

Costs of repair and renewals

Table IV.13 provides estimates of the cost of repairs and renewals for each weaving option and scale of production. The assumptions made in estimating these costs are summarised at the bottom of the table.

Table IV.13
Annual repairs and renewals costs
(in £ Sterling.)

Production level p.a. and option	LOW COST BUILDING					HIGH COST BUILDING
	Looms	Other machines	Building	Services	Total	Looms	Other machines	Building	Services	Total
100.000 m/yr
Op. 1	350	1,770	720	280	3,120	350	1,770	4,600	4,430	11,150
Op. 2	500	1,770	360	140	2,770	500	1,770	2,270	2,190	6,730
Op. 3	500	1,770	250	100	2,620	500	1,770	1,610	1,550	5,430
1.0M m/yr
Op. 2	5,210	9,600	1,760	680	17,250	5,210	9,600	11,170	10,750	36,730
Op. 3	4,120	9,600	1,130	440	15,290	4,120	9,600	7,210	6,940	27,870
Op. 4	5,740	9,600	1,100	420	16,860	5,740	9,600	6,990	6,720	29,050
Op. 5	5,700	9,600	1,120	430	16,850	5,700	9,600	7,100	6,840	29,240
5.0M m/yr
Op. 3	21,000	19,600	2,660	1,030	44,290	21,000	19,600	16,940	16,300	73,840
Op. 4	29,100	19,600	2,520	970	52,190	29,100	19,600	16,040	15,440	80,180
Op. 5	28,800	19,600	2,590	1,000	51,990	28,800	19,600	16,470	15,850	80,720
Op. 6	63,800	13,300	1,670	640	79,410	63,800	13,300	10,630	10,240	97,970
Op. 7	46,200	13,300	1,770	680	61,950	46,200	13,300	11,260	10,830	81,590
Op. 8	24,250	13,300	1,560	600	39,710	24,250	13,300	9,950	9,570	57,070

Note:- The above figures are based on the data given in Tables 2, 3, 4, 6, and calculated at the following rates per cent.

Looms:- 100,000 m/yr - 5% p.a; 1.0M m/yr - 7.5% p.a; 5.0M m/yr, Options 3, 4, 5, - 10% p.a. Options 6, 7, 8, - 5% p.a.

Other machines:- 100,000 m/yr, plant at mill - 5% p.a. plant at warp suppliers - 7.5% p.a. 1.0M m/yr - 7.5% p.a. 5.0M m/yr - 10% p.a.

Buildings:- All production levels/Options - 3% p.a.

Services:- All production levels/Options - 5% p.a.

Note: See section II for the definition of options 1 to 8.

Salvage value of equipment and buildings

Estimates of salvage value of equipment and buildings are provided in Table IV.14. The assumptions made in estimating these values are summarised at the bottom of the table for both low amenity and high amenity buildings.

Table IV.14
Salvage value of buildings and equipment
(in £ Sterling)

Low amenity (low cost) building
Production level and Option No.	Sums realisable at end of 15 years						Net Present value
	1 Looms & other machines	2 Building with services	3 Building only	4 Services only	5 Land + 1 & 2	6 Land + 1, 3 & 4	7 Land + 1 & 2	8 Land + 1, 3 & 4
0.1M m/yr
Op. 1	4,070	6,730	6,030	280	12,830	12,410	3,880	3,810
Op. 2	4,450	3,310	2,970	140	8,750	8,550	2,320	2,280
Op. 3	4,450	2,350	2,110	100	8,620	7,360	1,860	1,840
1.0M m/yr
Op. 2	24,690	16,330	14,640	680	46,000	44,990	11,990	11,820
Op. 3	22,870	10,540	9,450	440	36,620	35,970	8,930	8,820
Op. 4	25,560	10,210	9,150	420	38,880	38,240	9,220	9,110
Op. 5	25,500	10,380	9,300	430	39,040	38,390	9,290	9,180
5.0M m/yr
Op. 3	50,750	24,760	22,190	1,030	83,060	81,520	20,460	20,200
Op. 4	60,870	23,440	21,010	970	91,460	90,000	21,570	21,320
Op. 5	60,500	24,060	21,570	1,000	91,900	90,410	21,810	21,550
Op. 6	176,120	15,540	13,930	640	196,400	195,430	57,510	37,350
Op. 7	132,120	16,450	14,750	680	153,590	152,570	30,420	30,250
Op. 8	77,250	14,540	13,030	600	96,220	95,310	20,130	19,970
High amenity (high cost) building
Production level and Option No.	Sums realisable at end of 15 years						Net Present value
	1 Looms & other machines	2 Building with services	3 Building only	4 Services only	5 Land + 1 & 2	6 Land + 1, 3 & 4	7 Land + 1 & 2	8 Land + 1, 3 & 4
0.1M m/yr
Op. 1	4,070	49,410	38,340	4,430	55,510	48,870	11,180	10,050
Op. 2	4,450	24,380	18,920	2,190	29,820	26,550	5,910	5,350
Op. 3	4,450	17,310	13,430	1,550	22,460	20,130	4,420	4,020
1.0M m/yr
Op. 2	24,690	119,970	93,090	10,750	149,640	133,510	29,720	26,960
Op. 3	22,870	77,430	60,080	6,940	103,510	93,100	20,360	18,580
Op. 4	25,560	75,030	58,220	6,720	103,700	93,610	20,310	18,590
Op. 5	25,500	76,270	59,180	6,840	104,930	94,680	20,560	18,810
5.0M m/yr
Op. 3	50,750	181,910	141,150	16,300	240,210	215,750	47,340	43,160
Op. 4	60,870	172,240	133,650	15,440	240,260	217,110	47,010	43,050
Op. 5	60,500	176,860	137,230	15,850	244,700	220,920	47,940	43,870
Op. 6	176,120	114,210	88,620	10,240	295,070	279,720	54,380	51,760
Op. 7	132,120	120,880	93,800	10,830	258,020	241,770	48,280	45,500
Op. 8	77,250	106,810	82,880	9,570	188,490	174,130	35,900	33,450

Note: See section II for the definition of options 1 to 8.

Depreciation costs

Depreciation costs have been estimated on the basis of an interest rate of 12.5%, fixed capital requirements shown in Table IV.15, the assumed salvage value of buildings and equipment shown in Table IV.14 and an assumed economic life of buildings and equipment of 15 years. Estimates of depreciation costs for each weaving option and scale of production are provided in Table IV.16 for both low amenity and high amenity buildings.

Table IV.15
Fixed capital requirement (£ Sterling)

Weaving options	Production level (100,000 m/yr; 3,000 wkg hours)			Production level (1,000,000 m/yr; 5,000 wkg hours)			Production level (5,000,000 m/yr; 6,500 wkg hours)
	Looms and other machines	Buildings	Total	Looms and other machines	Buildings	Total	Looms and other machines	Buildings	Total
Low cost building
Op. 1	32,600	31,710	64,310
Op. 2	35,600	15,640	51,240	197,500	77,070	274,570
Op. 3	35,600	11,100	46,700	183,000	49,740	232,740	406,000	116,850	522,850
Op. 4				204,500	48,190	252,690	487,000	110,640	597,640
Op. 5				204,000	48,990	252,990	484,000	113,600	597,600
Op. 6							1,399,000	73,360	1,472,360
Op. 7							1,047,000	77,560	1,124,560
Op. 8							608,000	68,610	694,610
High cost building
Op. 1	32,600	244,010	276,610
Op. 2	35,600	120,380	155,980	197,500	592,420	789,920
Op. 3	35,600	85,500	121,100	183,000	382,350	565,350	406,000	898,240	1,304,240
Op. 4				204,500	370,500	575,000	487,000	850,530	1,337,530
Op. 5				204,000	376,580	580,580	484,000	873,270	1,357,270
Op. 6							1,399,000	563,930	1,962,930
Op. 7							1,047,000	596,910	1,643,910
Op. 8							608,000	527,420	1,135,420

Note: See section II for the definition of options 1 to 8.

Table IV.16
Annual Depreciation Costs (£ Sterling)

Production level and Option No	Low amenity (low cost) building				High amenity (high cost) building
	Looms & other machines	Buildings	Services	Total	Looms & other machines	Buildings	Services	Total
0.1M m/yr
Op. 1	4,820	3,480	820	9,120	4,820	22,170	13,090	40,080
Op. 2	5,260	1,720	410	7, 390	5,260	10,940	6,460	22,660
Op. 3	5,260	1,220	290	6,770	5,260	7,770	4,590	17,620
1.0M m/yr
Op. 2	29,180	8,460	2,000	39,640	29,180	53,830	31,780	114,790
Op. 3	27,040	5,460	1,290	33,790	27,040	34,740	20,510	82,290
Op. 4	30,220	5,290	1,250	36,760	30,220	33,660	19,880	83,760
Op. 5	30,140	5,380	1,270	36,790	30,140	26,810	20,200	77,150
5.0M m/yr
Op. 3	60,000	12,830	3,030	75,860	60,000	81,610	48,190	189,800
Op. 4	71,960	12,150	2,870	86,980	71,960	77,280	45,630	194,870
Op. 5	71,520	12,470	2,950	86,940	71,520	79, 340	46,850	197,710
Op. 6	208,210	8,060	1,900	218,170	208,210	51,240	30,250	289,700
Op. 7	156,200	8,530	2,020	166,750	156,200	54,230	32,010	242,440
Op. 8	91,320	7,530	1,780	100,630	91,320	47,950	28,290	167,560

Note:- Calculations based, for all items and options, on residual values at end of 15 years. Machinery and services equipment is assumed to have a residual value of 12½% of cost value after 15 years and buildings are assumed to have a residual value of 25% after 15 years.

Note: See section II for the definition of options 1 to 8.

Interest payments on working capital

For the sake of simplicity, this cost item was not included in the economic evaluation of the 8 weaving options.

IV.2 Findings from the economic comparison of the selected weaving options

Prior to presenting the findings of the economic comparison of alternative weaving technologies, a few remarks need to be made. Firstly, this economic comparison of weaving technologies covers three scales of production only: 100,000 m/year 1,000,000 m/year and 5,000,000 m/year. Findings presented in this section may not, therefore, be generalised to other scales of production, especially those outside the range 100,000 m/year to 5,000,000 m/year. However, these findings should not substantially contradict those which would have been derived from the evaluation of other scales of production. Readers interested in other production levels are nevertheless urged to undertake their own evaluation in the way described in the previous section.

Secondly, the findings to be presented in this section are based on a large number of assumptions of technical and economic natures. While the former assumptions should reflect real conditions prevailing in developing countries, the latter ones (e.g. wages, salaries, unit energy costs) will not probably apply to a large number of developing countries. This is a second important reason for not adopting these findings at face value, and the interested reader is urged to undertake his own evaluation on the basis of local factor prices and conditions.

Findings from the economic comparison of weaving technologies will be analysed with respect to the following factors: unit production costs, fixed capital requirements, building costs, repairs and renewals costs, energy costs, salary and wages, employment potential and training costs, and product mix and specialisation.

IV.2.1 Unit production costs

This factor is by far the most important one among those listed above since it determines, to a large extent, the profitability - from the point of view of the producer - of the various weaving options. However, as it will be shown later in this chapter and in the next one, other factors may also affect the choice of weaving technology.

Table IV.17
Annual cost of warping, sizing, pirning and weaving

	Low amenity (low cost) building - £ sterling
	Production level 0,1M m/year			Production level 1.0M m/year
Option No.	1	2	3	2	3	4	5
Salaries and Wages	15,420	6,820	3,230	60,190	17,570	14,140	13,820
Energy	1,070	610	1,230	4,830	10,400	10,350	10,360
Repairs and Renewals	3,120	2,770	2,620	17,250	15,290	16,860	16,850
Depreciation	9,120	7,390	6,770	59,640	33,790	36,760	36,790
Conversion Cost	28,730	17,590	13,850	121,910	77,050	78,110	77,820
	High amenity (high cost) building - £ sterling
	Production level 0,1M m/year			Production level 1.0M m/year
Option No.	1	2	3	2	3	4	5
Salaries and Wages	15,420	6,820	3,230	60,190	17,750	14,140	13,820
Energy	2,060	1,090	1,580	8,910	13,520	13,400	13,440
Repairs and renewals	11,150	6,730	5,430	36,730	27,870	29,050	29,240
Depreciation	40,080	22,660	17,620	114,790	82,290	83,760	77,150
Conversion Cost	68,710	37,300	27,860	220,620	141,250	140,350	133,650
	Low amenity (low cost) building - £ sterling
	Production level 5.0M m/year
Option No.	3	4	5	6	7	8
Salaries and Wages	71,320	59,330	53,350	31,790	34,670	36,180
Energy	46,510	46,120	46,000	22,490	24,330	40,520
Repairs and renewals	44,290	52,190	51,990	79,410	61,950	39,710
Depreciation	75,860	86,980	86,940	218,170	166,750	100,630
Conversion Cost	237,980	244,620	238,280	351,860	287,700	217,040
	High amenity (high cost) building - £ sterling
	Production level 5.0M m/year
Option No.	3	4	5	6	7	8
Salaries and Wages	71,320	59,330	53,350	31,790	34,670	36,180
Energy	57,070	56,260	56,320	28,650	30,890	47,600
Repairs and renewals	73,840	80,180	80,720	97,970	81,590	57,070
Depreciation	189,800	194,870	197,710	289,700	242,440	167,560
Conversion Cost	392,030	390,640	388,100	448,110	389,590	308,410

Note: See section II for the definition of options 1 to 8.

Table IV.18
Costs per metre of cloth (Pence)

	Scale of prod. and option No.
	Low amenity (low cost) building
	Production level 0.1M m/year			Production level 1.0M m/year
Cost items	1	2	3	2	3	4	5
Conversion	28,730	17,590	13,850	12,191	7,705	7,811	7,782
Yarn	19,584	19,584	19,584	19,584	19,584	19,584	19,584
Grand total	48,314	37,174	33,434	31,775	27,289	27,395	27,366
	High amenity (high cost) building
Conversion	68,710	37,300	27,860	22,062	14,125	14,035	13,365
Yarn	19,584	19,584	19,584	19,584	19,584	19,584	19,584
Grand total	88,294	56,884	47,444	41,646	33,709	33,619	32,949
	Production level 5.0M m/year
	Low amenity (low cost) building
Option No.	3	4	5	6	7	8
Conversion	4,760	4,892	4,766	7,037	5,754	4,341
Yarn	19,584	19,584	19,584	19,584	19,584	19,584
Grand total	24,344	24,476	24,350	27,013	25,730	24,317
	High amenity (high cost) building
Conversion	7,841	7,813	7,762	8,962	7,792	6,168
Yarn	19,584	19,584	19,584	19,976	19,976	19,976
Grand total	27,425	27,397	27,346	28,938	27,768	26,144

Note: See section II for the definition of options 1 to 8.

The following table - which is based on Table IV.17 and IV.18 - provides the rank of each weaving option with respect to unit production cost (i.e. the lower the rank the higher the unit production cost).

Table IV.19
Ranking of weaving options with respect to unit production costs

Scales Weaving options	Small-scale		Medium-Scale		Large-scale
	Low build. cost	High build. cost	Low build. cost	High build. cost	Low build. cost	High build. cost
1. Hand-loom with fly-shuttle	3	3
2. Hand-loom treadle operated	2	2	4	4
5. Non-automatic power-loom	1	1	1	3	2	4
4. Low-cost automatic power loom			3	2	4	3
5. Low-cost automatic power loom			2	1	3	2
6. Projectile loom					6	6
7. Rapier loom					5	5
8. Air-jet loom					1	1

Note: See section II for the definition of options 1 to 8.

Table IV.19 shows that weaving option 3 (non-automatic power loom) is associated with the lowest unit production costs at the small-scale level and in the medium-scale, low-cost building case. Furthermore, this option is only marginally more costly in the remaining three cases at the medium and large-scale levels. Weaving options 5 (low-cost automatic power looms/two-cloth width) is associated with relatively low unit production costs at the medium and large-scale cases, ranking 1st and 2nd in 3 out of the four cases considered. The air-jet loom (weaving option 8) is associated with the lowest unit production cost at the large-scale level. Thus, depending on the scale of production and the adopted building amenity level, weaving options 3, 5 and 8 seem to be the most attractive from the point of view of unit production costs. It should, however, be pointed out that with the exception of the two hand-loom options (1 and 2) and the projectile and rapier looms, unit production costs do not diverge substantially from one option to another. Thus, small differences between local factor prices and those assumed in this evaluation could change the ranking in Table IV.19.

IV.2.2 Fixed capital requirements

Table IV.15 shows that non-automatic power looms (option 3) are associated with the lowest fixed capital requirements for 7 out of the 8 combinations of sacles and amenity levels, the only exception being the large-scale high-cost building case. These findings indicate that the high productivity of the shuttleless or automatic looms is more than offset by their high prices. For example, the productivity of projectile looms is 3.6 times greater than that of non-automatic looms (option 3) but the unit cost of the former looms is 22 times greater than that of the latter looms (see Table IV.7 which provides unit and total cost of looms for all weaving options). Weaving options 6 and 7 exhibit, by far, the highest fixed capital requirements while differences among the other options are relatively small.

IV.2.3 Building costs

Building costs are appreciably affected by the choice of weaving technology but the degree of amenity provided by the building is a far more important factor. Table IV.15 shows that high-cost buildings are approximately 8 times more costly than low-cost buildings. Similarly, while building costs are substantially lower than the cost of equipment for a low degree of amenity (e.g. building costs are equal to approximately 27% of the cost of equipment for option 3, medium scale level, low degree of amenity) they are much higher than this latter cost for high degree of amenity (e.g. twice the cost of equipment for option 3, medium-scale, high degree of amenity). It may be noted that given the substantially lower number of looms - and therefore the smaller floor areas - required by the weaving options 6, 7 and 8 than by other weaving options, building costs for the 3 shuttleless options are much lower than those for the other options.

Weavers may be of the opinion that it would be more profitable to economise on building costs and use the money saved for the acquisition of more productive looms or in order to lower production costs. This view, however, would not take into consideration the importance of raised standards of amenity for labour productivity and working conditions. Higher standards should increase labour productivity and, to some extent, the quality of output and should therefore offset some of the high building costs. They are also justified from a purely social point of view. Obviously, the need for additional building costs to improve the working environment would depend on various factors, including climatological conditions, the building design, etc. Thus, it may be possible to offer suitable working conditions at a cost substantially lower than those estimated in this section.

IV.2.4 Repairs and renewals costs

Repairs and renewals constitute an inevitable expense in the plant operation. Table IV.13 provides estimates of these costs for the weaving options covered by this memorandum. In general, these costs are directly related to the complexity of the machinery used. The major proportion of repairs and renewals costs are therefore associated with the looms and other production machinery. However, where high amenity buildings are provided, costs associated with buildings and building services become relatively more important.

Repairs and renewals costs shown in Table IV.13 are based on the assumption that spare parts and skilled labour are readily available whenever needed. However this assumption may not apply in all cases. Thus, higher renewals and repair costs may be expected in countries where foreign exchange restrictions may slow-down the importation of spare parts or where the lack of sufficiently skilled labour may not allow an adequate operation and maintenance of equipment. Thus, weaving options which require few imported spare parts and less demanding skills should be favoured with respect to this factor.

IV.2.5 Energy costs

Energy costs for each weaving option are shown on Table IV.10. As it may be expected, the cost of energy per unit of production decreases slightly as the scale of production increases as a result of economies of scale (e.g. £1230 of energy cost for 100,000 m/year versus £10400 for 1,000,000 m/year) These economies of scale apply to all weaving options and degrees of amenity for the buildings.

In the case of small-scale production, option 2 (hand-loom, treadle-operated) uses much less energy than option 1 and 3, the latter two options being fairly close in terms of energy use although no energy is needed for the operation of the hand-looms of option 1. The reason for the relatively high energy use in option 1 relates to the need for lighting a much larger number of looms than in the case of option 3. It may, however, be noted that the need for artificial lighting is dependent on the availability of sunlight (e.g. buildings equipped with large windows) and that option 1 may not always need more energy than option 3 in the case of low-cost buildings.

In the case of medium-scale production, option 2 uses, by far, the least amount of energy as the looms are manually operated and the extra energy for lighting and other services is more than offset by the extra energy needed by the other options (3, 4, 5) for the operation of the looms. On the other hand, the weaving options 3, 4 and 5 use approximately the same amount of energy.

In the case of large-scale production, options 3, 4, 5 and 8 use almost twice the amount of energy needed by options 6 and 7, as the projectile and rapier looms are much less energy-intensive than the other types of looms used at the large-scale level. Option 8 (air-jet looms) uses approximately 15% less than options 3, 4 and 5 as the ancillary equipment of these latter options use more energy than that for option 8.

In all cases, energy use associated with high-cost buildings is substantially higher than that associated with low-cost buildings, the difference ranging between approximately 25% and 100%.

IV.2.6 Employment potential and training costs

Employment generation and skills requirements constitute two important factors in the choice of weaving technology, the former factor being of particular importance to public planners while the latter should be of concern to the textile producer.

Table IV.20 based on Table IV.6, provides estimates of the total number of labour required for 100,000 m of cloth for each weaving option and scale of production. The table shows that the total number of labour decreases as the scale of production increases for all weaving options. This decrease affects the three categories of labour (i.e. “managers and technologists”, “supervisors and technicians” and “weavers and others”) shown in Table IV.20. This is to be expected since an increase in the scale of production generally results in substantial economies of scale.

Table IV.20
Total labour requirements for 100,000 m of cloth

Weaving option and scale of production	Managers and technologists		Supervisors and technicians		Weavers and others		Total
	Weaving	Other	Weaving	Other	Weaving	Other
100.000 m/year (1 shift)
Option 1	1	0	3	1	77	10	92
Option 2	1	0	2	1	26	8	38
Option 5	1	0	2	1	5	6	15
1,000,000 m/year (2 shifts)
Option 2	.4	.2	1.2	.4	30	3.2	35.4
Option 5	.4	.2	.4	.4	5	2,6	9.0
Option 4	.4	.2	.4	.4	2.8	2.6	6.8
Option 5	.4	.2	.4	.4	2.6	2.6	6.6
5,000.000 m/year (3 shifts)
Option 5	.36	.12	.42	.18	4.92	1.38	7.38
Option 4	.42	.12	.48	.18	3.06	1.38	5.64
Option 5	.30	.12	.36	.18	2.94	1.38	5.28
Option 6	.18	.12	.12	.18	1.32	1.14	3.06
Option 7	.18	.12	.18	.18	1.56	1.14	3.36
Option 8	.24	.12	.18	.18	1.56	1.14	3.42

Note: See section II for the definition of options 1 to 8.

The highest level of employment per unit of output is generated, at the small-scale level, by weaving option 1, while option 3 is the most labour-intensive option among those which make use of engine-powered looms. On the other hand, the three shuttleless options generate the least employment.

As can be expected, the category “weavers and others” contributes the most to employment generation. Labour in this category increases, as a fraction of total labour requirements, with the scale of production while the fraction of the other two categories of labour decreases. This is also to be expected as a result of economies of scale in the use of managerial and supervisory staff.

Skill requirements per unit of output - in terms of managerial staff, technologists, supervisors and technicians - decreases as the scale of production increases. On the other hand, while skill requirements for all options are identical at the small-scale and medium-scale levels-with exception of options 1 and 2 which require a larger supervisory staff in weaving - these requirements differ from one weaving option to another at the large scale of production. In this latter case, the shuttleless weaving options are generally the least demanding of skilled labour as compared to options 3, 4 and 5.

At this juncture, it is pertinent to consider the extent to which the estimates of Table IV.20 may be taken at their face value. Are ‘better’ people needed when more sophisticated technologies are used? This question may not be easily answered. It is not a matter of better people being needed for the higher technologies, but rather one of equally good people being given appropriate training, being prepared to accept the objective specifications of a machinery maker, and resisting the temptation to use personal judgement and rule-of-thumb as an alternative. So far as managers and supervisors are concerned there is no real problem. A manager or supervisor of given qualifications will usually perform his duties efficiently whatever technological option is employed. For technologists and technicians, the nature of their education and of their training in relation to a particular option can be of considerable importance. This is not to say that personnel of different qualifications are required for different options, or that there are significant differences in the inherent complexities of the technologies. In general, it may be said that technologists and technicians of equal qualifications will prove equally capable of using efficiently whatever weaving technology so long as they have been given, and have accepted, specific training in relation to that technology.

It must be noted, however, that whereas non-automatic looms - and to a large extent all low-cost shuttle looms - can be operated, albeit not so efficiently as one might wish, by diligent technologists and technicians largely dependent on native wit and rule-of-thumb methods, this approach is completely inapplicable to the more sophisticated machinery of options 6, 7 and 8. In this latter case, there is virtually no established rule-of-thumb and satisfactory working can only be obtained by meticulous observation of all instructions, and precise maintenance of objectively specified conditions which the machinery-maker will have provided.

The cost of staff training varies greatly from country to country, depending on the local educational standards, on the district in which the plant is to be located, and on the nature of the national legislation relating to industrial training. In general, a background and traditions of textile manufacture will be found to be helpful. However, where more sophisticated technologies are to be introduced in areas with experience only of labour-intensive technologies, serious difficulties of unlearning may be met. By and large, the choice of technology will not be influenced by consideration of training costs as the extent and complexity of the required training does not vary significantly from one technology to another.

IV.2.7 Product mix and specialisation

All weaving options can produce any one of the eight basic fabrics covered by this memorandum and all are capable of handling a complex product-mix involving all of these fabrics in any chosen proportions. It must, however, be stressed that a lack of specialisation inevitably leads to rapid escalation of production costs. The data in Table IV.21 illustrates the general effects of product variety on unit cost of production. This data was collected through field studies by the Shirley Institute in a number of countries.

Table IV.21
Effect of product mix on productivity and unit cost of production

Number of sorts	5	10	20	40	80
Productivity	100	98	93	86	77
Unit cost	100	104	112	130	163

Table IV.21 shows that productivity decreases by approximately 2% and unit production costs increase by approximately 4% as the product mix increases by an additional five sorts of cloth. These effects of an increase of the product mix should apply equally to all weaving options with the possible exception of hand-looms (options 1 and 2) where an increase in the product mix may have a smaller impact on productivity and cost than in the case of the other weaving options. It is therefore recommended to specialise in a narrow range of cloth varieties unless market conditions require the production of a large variety of cloths.

IV.2.8 Concluding remarks on the economic comparison of the 8 weaving options

The economic comparison of the 8 weaving options yields a number of findings of interest to both the producers and public planners. These are briefly summarised below:

- The hand-loom options, in particularly option 1, do not seem suitable for the production of large amounts of cloth for low-income groups as unit production costs are substantially higher than those obtained from other weaving options. It may, however, be noted that unit marketing and transport costs, which are usually much more higher for large-scale mills than for small-scale mills, may decrease the difference between the retail prices of cloth produced by options 1 and 2 and those of cloth produced by the other weaving options.

- Non-automatic looms (option 3) seem to be particularly appropriate in terms of unit production costs, fixed capital requirements, employment generation, etc.

- Rapier and projectile looms do not seem appropriate to conditions prevailing in developing countries both in terms of production costs and employment generation.

- Differences among weaving options 3, 4, 5 and 8 are in general small, and small variations in factor prices should be sufficient to modify the ranking of the above four weaving options in terms of unit production costs, fixed capital requirements, energy costs, etc. The suitability of these weaving options should therefore vary from country to country, and no overall recommendations may be made regarding one or another of these four options. The choice of weaving option/scale of production should therefore be undertaken on the basis of local factor prices, taking into consideration financial constraints, the availability of skilled labour, market demand, etc.

This chapter was mostly concerned with the feasibility of alternative weaving options from the point of view of the private producer, and did not take into consideration various factors of interest to public planners, such as the impact of alternative weaving technologies on the balance of payments, the satisfaction of the basic needs of low-income groups, employment generation, etc. These aspects are considered in the following chapter where a number of policy measures are also suggested with a view to promoting weaving technologies suitable to prevailing local socio-economic conditions.