FEASIBILITY STUDY FOR A HIGH-VOLUME TRUCKING COMPANY

1. Executive summary
2. Introduction
3. Proposed Business Legal Status
4. Project Cost
a. Viable Economic Size
b. Proposed Capacity
c. Proposed Location
5. Market Analysis
6. Target Customers
a. Market Demand
b. Market Supply
c. Industry Growth
7. Regulations and Licenses
a. License
b. Certificate (by LTFRB)
c. Income Tax
8. The Project CONCEPT
a. Project Cost
b. Project Financing
c. Project Details
9. Manpower Requirement
10. Basis for Financial Projections
a. Inflation Rate
b. Revenue Assumptions
c. No. of Trips

FEASIBILITY STUDY FOR A HIGH-VOLUME TRUCKING COMPANY – Nikko Longalong 1

FEASIBILITY STUDY FOR A HIGH-VOLUME TRUCKING COMPANY – Nikko Longalong 2
1. EXECUTIVE SUMMARY

1.1 PURPOSE OF THE DOCUMENT

The objective of this feasibility study is to have proof and analysis for the benefits of a
high-volume trucking services business. This will aid the investors for their decision-
making process, understand various aspects of the project from start-up, production,
marketing, finance and business management.

This particular pre-feasibility is regarding “Logistics” which comes under

“Transportation” sector.

1.2 CRUCIAL FACTORS & STEPS IN DECISION MAKING FOR INVESTMENT

Key Success Factors
Following factors are the key in making this project profitable:
 Location of the project will play a pivotal role in the successful running of the
logistics support business. The proximity of the warehouse to client delivery
locations are crucial
 Selection of proper trucking suppliers is crucial for this project

1.3 OPPORTUNITIES
The proposed project would have a number of competitive advantages:
 The project will increase the number of available logistics support providers in
Northern Luzon and Metro Manila
 Bulacan, being a new commercial area and a good location because of the growing
population and economy

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Threats
The proposed project will be facing the following threat:
 Market saturation over a longer period of time due to a large number of entrants in the
country
 Unavailability of additional truckers or suppliers to continue the supply chain or
forwarding of cargo

2. INTRODUCTION

Logistics Support services is a mature and thriving industry in the Philippines. With the
advent of globalization and multinational companies pouring investment to the country,
the need for a more robust and fast supply-chain solutions is important. The logistics
part of this is very important.

Due to increasing level of standard of living across all provinces, more Filipinos are
increasing their demand to various number of goods in the country, in and out. The
need for a more stable logistics support solutions is more and more urgent.
Development of residential communities tied with supermarkets or malls is linearly
connected for this.

The total projected cost for setting up a medium sized logistics support facility and
company in Bulacan, we have estimated at PHP 15,292,000. It includes land, building,
trucking, manpower and other equipment, spares, along with the preliminary expenses
and working capital.

The available local trucker services are varied, Cargo Forwarding, Back-hauling, Multi-
stop Booking and so on.

3. PROPOSED BUSINESS LEGAL STATUS

The proposed legal structure of the business entity is a corporation registered as TOP1
TRUCKING SERVICES and also works as the trade name.

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4. ESTIMATED COST OF PROJECT

The cost of project has been estimated as PHP 15.29 million including civil works,
fuel dispenser equipment, underground tanks and office equipment. Preliminary
expenses and Petroleum licensing and other regulatory charges are estimated at
???? and ???? respectively. The diesel, unleaded and premium equipment
comprises of dual hose dispensers and electric control panels.

Project Investment (1 year)

Land Lease (2,000sqm) 720,000
Fixed Investment 10,000,000
Working Capital – People 4,572,000
Total Investment 15,292,000

The proposed pre-feasibility is based on the assumption of 50% debt and 50% equity.

The project seems to be viable with the following returns on investment.

Project Returns
Net Present Value @ 20% 3,058,400
Payback period – based on cash inflows 5 years

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4.1 VIABLE ECONOMIC SIZE

A minimum of net revenue target of PHP 441,000 per month is required to operate at
breakeven. To achieve this number, we calculate based on the minimum trip net profit
of 7,600, and we get 58 trips per month divided to the available trucks in the company.

4.2 PROPOSED CAPACITY

To build capacity for the number of trips, we need to build our fleet of trucks. The
number of trucks to purchase are 5 units, capable of 1 trip per day. This produces a
maximum capacity of 125 trips per month.

4.3 PROPOSED LOCATION

The proposed locations for the home-base of our fleet are the following:
 Plaridel, Bulacan
 Marilao, Bulacan
 Bahay Pare, Meycauayan

The chosen locations are due to the low lease rates.

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5. MARKET ANALYSES

Multiple companies are in need of logistics services including fleet management for
trucks. Companies are unable to build-out their own capacity and resort to outsource
services to trucking companies

5.1 Target Customers

The target customers for the proposed project would be supply-chain enabled
companies for retail goods or industrial supplies etc.

5.2 Market Demand

At present there are more than at least 20 major companies that have large-scale
logistic support requirements and catered by multiple companies, including trucking
specific companies.

5.3 Market Supply

Total number of trucking services in nearby areas are not more than 10.

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6. REGULATIONS AND LICENSES

6.1 License

Obtaining a license from LTO and LTFRB is a pre-requisite for setting-up qualified
Drivers for trucks. The cost associated with this license is PHP 2,500.

As for the company operations, the necessary business permits provided by the local
government amounting not more than PHP 35,000.

6.2 Certificate (by LTRFRB

For permits to operate as a trucking business or truck for hire is provided by LTFRB
and the cost is PHP 10,000.

6.3 Income Tax

The income of the trucking services is not exempted from the income tax. The investor
has to pay corporate tax according to the nature of the business entity. The current
project is being operated as a private limited company, so the income tax is payable
at the prevailing rate.

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7. THE PROJECT CONCEPT

7.1 Project Cost

The details of the cost of project are as follows:

Table 7-1 Project Costs

Items in Construction
Land (2,000 sq. m) 720,000
Building – Civil Works 50,000
Large Volume Trucks 9,880,000
Office Equipment, Fixtures and Furniture 20,000
Licenses / Permits 50,000
Working Capital – People 4,572,000
Total 15,292,000

7.2 Project Financing

The total cost of the project is PHP 15.292 million including the working capital of
PHP 3.91 million. This will be provided out of pocket of the investors.

7.3 Project Details

7.3.1 Land and Location

 A minimum of two thousand (2,000) square meters of land with at least 75 meters front
opening is required for truck entrance, parking spaces and dwelling area of drivers.
An amount of PHP 720,000 has been allocated for the leasing two thousand square
meters of commercial land. A comparison of costs of commercial land in the various
areas of Bulacan is given below for reference purpose.

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 Table 7-2 Approximate Cost of Land in the Proposed Areas

Location Price Range for 2,000 Sq.m

Plaridel, Bulacan 1,000,000
Marilao, Bulacan 800,000
Bahay Pare, Meycauayan 900,000

7.3.3 Building

There are certain civil works required to be carried out at the proposed location. The
civil works would be carried out on an area of 100 square feet. The rest of the area
will be floored with concrete. Civil work includes the following:
 Office
 Shed for Dispenser
 Toilet/washroom
 Underground Tanks and Power Cables
 Flooring

The total cost of construction is estimated at PHP 50,000.

7.3.4 Equipment

The following equipment is required for a trucking service:

 10-Wheeler Closed Van - Wingman
This truck can have a capacity to load an amount of 10 to 15 tons. Usual
dimension is 42ft x 7.8ft x 7.8ft. Volume in cubic meters is 55 (cbm).

7.3.5 Suppliers

Additional suppliers for the company would be additional drivers that can act as
relievers

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8. MANPOWER REQUIREMENT

Manpower requirement for the Fuel filling station includes manager, cashier,
dispenser, operators, accountant, watchman and sweeper. The total staff strength
would be 13 persons for the two shifts. The staff salaries for year one are as follows:

Table 8-1 Human Resource Requirement

Designation No of Average Salary per Total Salary per
Employees month month
Truck Drivers 5 40,000 200,000

Truck Helpers 10 17,500 175,000

Admin Personnel 1 6,000 6,000

Total 36 381,000

9. BASIS FOR FINANCIAL PROJECTIONS

9.1 Inflation Rate

10% inflation rate has been considered while making the projections for cost of sales,
operational expenses and salaries. The prices for electricity, operational expenses
and staff salaries are increased by 10% every year as a result of inflation.

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9.2 Revenue Assumptions

9.2.1 No. of Trips

Based on the historical data of TOP1 Trucking services, the average number of trips
on a monthly basis are as follows:

Table 9-1 Detailed Projected Increase in Daily Cars

Years No. of Trips Average Monthly Yearly Net
Profit / Trip Revenue Revenue
2019 60 4,000 240,000 2,880,000
2020 65 3,900 253,500 3,042,000

2021 75 3,800 285,000 3,420,000

2022 80 3,700 296,000 3,552,000

2023 85 3,600 306,000 3,672,000

16,566,000

The average number of trips for the first years is estimated at 60 cars per month. It will
increase as we get more coverage to multiple clients. We can also assume to increase
costs due to inflation, or driver salary or other costs per year. Even at such event, the
projected monthly revenue is still increasing and can recover investment costs as early
as the fourth (4th) year.

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