MSc Thesis by nMYFuu3

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									MSc Thesis: Analysis and business plan for cost reduction and adoption of

                       Aquatherm pipe technology

    A thesis submitted in partial fulfilment of the requirements of
DISCLAIMER



I hereby certify that the attached thesis is my own work except where

otherwise indicated. I have identified my sources of information, in particular I

have put in quotation marks any passages that have been quoted word-for-

word, and identified their origins.




Signed________________________________________________________

Date________________________




Thesis     Issue 1: 9/25/08   Athanasios Koumpoulis                         Page ii
DISCLAIMER                                                                           II

LIST OF FIGURES                                                                     VI

ABSTRACT                                                                           VII

CHAPTER 1 – INTRODUCTION                                                            IX

1.1    Project Objectives                                                            ix
  1.1.1    To review Koumpoulis SA                                                   ix
  1.1.2    To propose and justify changes, and submit these for approval             ix
  1.1.3    To implement the changes as described                                      x

1.2      Project management                                                           x

1.3      Profile of Koumpoulis SA                                                     x


CHAPTER 2 - BACKGROUND AND RESEARCH                                                XII

2.1      Basics of Aquatherm materials                                               xii

2.2      Life expectancy of Aquatherm pipes                                          xv

2.3      Varieties Aquatherm pipes                                                  xvi

2.4      Physical properties in Aquatherm pipes                                   xxvi

2.5      Joining methods                                                          xxvii

2.6      Fire Resistance                                                           xxx

2.7      Aquatherm supply                                                         xxxii

2.8      Aquatherm’s quality control and manufacture                             xxxvii

2.9      Training required for aquatherm pipe installations                     xxxviii


CHAPTER 3 – EVALUATION                                                        XXXVIII

3.1 Analysis of Koumpoulis SA                                                    xxxix
  3.1.1   SWOT Analysis                                                             xli
  3.1.2   PEST Analysis                                                            xliii

3.2      Professional competition                                                  xlvi

3.3      Consideration of Koumpoulis SA’s current situation in this project       xlviii



Thesis         Issue 1: 9/25/08      Athanasios Koumpoulis                     Page iii
CHAPTER 4 – PROPOSAL FOR INNOVATION                                                              XLVIII

4.2    General cost reduction strategies                                                                  li
  4.2.1    Why companies fail in monetary savings                                                        lii
    4.2.1.1 Placing overly ambitious cost reduction targets and time scales                              lii
    4.2.1.2 An underestimation of resources required and tasks involved                                  lii
    4.2.1.3 Improperly differentiating between fundamental and technological issues                      lii
    4.2.1.4 Not enough decision making and inadequate support                                           liii
    4.2.1.5 Facilities for production not available for prove-outs                                      liii
    4.2.1.6 A lack of full-time commitment to cost reduction from employees                             liv
  4.2.2    How cost reduction is prevented                                                              liv
    4.2.2.1 The timing of required capital investment creates problems with cash flow                   liv
    4.2.2.2 A lack of confidence that capital investments could quickly be recouped                     liv
    4.2.2.3 High levels of stock exist                                                                   lv
    4.2.2.4 Cost reduction not a focus of key staff members                                              lv
    4.2.2.5 The company does not have a strategy for reducing production costs                           lv
    4.2.2.6 The manufacturing suppliers and procedures are held in too high regard                      lvi
  4.2.3    Methods to identify potential cost reduction procedures                                      lvi
    4.2.3.1 Analyse installation costs for components with highest value                                lvi
    4.2.3.2 Discuss product and installation with employees                                             lvi
    4.2.3.3 Analyze and discuss quality problems with associates when they are encountered             lvii
    4.2.3.4 Apply the principles of design for installation (see section 4.6)                          lvii
    4.2.3.5 Analyze products from competitors for superior functions and features                      lvii
    4.2.3.6 Develop installation objectives for the long-term (see section 4.8)                        lvii
  4.2.4    Main reasons for resourcing items purchased                                                 lvii
  4.2.5    The Pareto (80-20) rule                                                                    lviii
  4.2.6    Principles in Design-for-Manufacture                                                        lxii
    4.2.6.1 Rationalize the range of existing products                                                 lxii
    4.2.6.2 Eliminate any design features that are unnecessary                                         lxii
    4.2.6.3 Introduce standard design features                                                        lxiii
    4.2.6.4 Decrease variety                                                                          lxiii
    4.2.6.5 Use value analysis to eliminate components which may be redundant                         lxiii
    4.2.6.6 Blend components into single components (by design)                                       lxiii
    4.2.6.7 Eliminate waste material                                                                  lxiii
  4.2.7    Manufacturing objectives in the short-term                                                 lxiii
  4.2.8    Manufacturing objectives in the long-term                                                  lxiv
  4.2.9    Applied reduction strategies                                                                lxv
  4.2.10 Changing processes to reduce installation costs                                               lxv

4.3    Proposal plan for business over three years                                                    lxvi
  4.3.1       Past performance and future projection                                                 lxvii
  4.3.2       Profit and Loss                                                                       lxviii
  4.3.3       Cash Flow                                                                               lxix
  In the full table for cash flow (see Figure D in appendix) and in following tables the loan is
  considered in the first year, in the amount of £500,000 with a £50,000 principle as shown. Only the
  partial table has been shown here. All other values are calculated in the classic way or are simple
  estimations based on the relevant principles, past performance, and future expenditures.             lxx
  4.3.4       Balance Sheets – Projected                                                               lxx
  4.3.5       Ratios                                                                                  lxxi
  4.3.6       Conclusions                                                                            lxxii

4.3.7    Recommendations                                                                             lxxiii




Thesis        Issue 1: 9/25/08        Athanasios Koumpoulis                                        Page iv
REFERENCES                                              LXXV

BIBLIOGRAPHY                                          LXXVII

APPENDICES                                            LXXVIII

GLOSSARY                                               XCVIII




Thesis     Issue 1: 9/25/08   Athanasios Koumpoulis     Page v
LIST OF FIGURES

Figure 2.1: New technology pipe comparison

Figure 2.2: New technology size comparison

Figure 2.3: New technology application comparison

Figure 2.4: Combustion values

Figure 2.5: Decision Matrix

Figure 2.5: Expansion

Figure 2.6: Test record

Figure 4.1: Cost elements contributing towards the prime manufacturing costs in

products

Figure 4.2: Effect of reducing the cost of the highest value element

Figure 4.3: Revised cost elements contributing towards prime manufacturing costs in

product

Figure 4.4: Strategy employed to reduce the manufacturing costs of existing products

Figure D: MSDS information for polypropylene

LIST OF TABLES

Table 2.1: New technology pipe comparison

Table 2.2: Potable applications

Table 2.3: Industrial applications

Tables B-C: Product summary tables




Thesis     Issue 1: 9/25/08       Athanasios Koumpoulis                       Page vi
ABSTRACT

This paper will discuss the features of a product that is considered part of the “wave

of the future” in both technology and environmental friendliness. As the paper

discusses many aspects of innovation in terms of both a new material and new

strategies for effective cost reduction a summary of key aspects is twice as long,

proportionally. The new technology pipes, known as Aquatherm pipes, are also better

for water and human consumption as they do not contaminate from either pipe or

joints. The unique joining process for this kind of pipe joins parts in such a way that

they become chemically indistinguishable, forming one piece in a way not exhibited in

other materials. Aquatherm pipes will be discussed in detail in terms of product

innovation and how they affect business.



Koumpoulis SA is a plumbing company that seeks to gain the benefits Aquatherm

pipes offer. Koumpoulis SA’s projects typically involve hotel buildings, but they have

been providing all kinds of plumbing, heating, sprinkler, and other services for over

30 years. Implementing the environmentally friendly and pipes that are considered

new technology would improve their business reputation and product quality. Their

procedures will also vary as the joining method for the pipes is a unique heating

process, rather than sealing or bonding.



Koumpoulis SA will also be analyzed as to how they can reduce general costs as can

apply to the diversity of their projects. The classical strategic planning methodology of


Thesis     Issue 1: 9/25/08     Athanasios Koumpoulis                             Page vii
a SWOT analysis will be applied to briefly review the strengths, weaknesses,

opportunities, and threats that the company faces. As projects performed by this

company always vary in size and type, conceptual and all-purpose solutions will be

considered so that they can be applied to any project. The Pareto rule and other

classic reduction strategies will be reviewed and applied to Koumpoulis SA. The

company’s competition will also be considered.



A three year business plan will be reviewed implementing general cost reduction

strategies as well as plans encompassing a range of variables from employee salary

to reorganizing the crew and profit loss. Projected cash flow will be noted as well as a

balance sheet. Modification processes and their costs will be included as tables in the

appendix also.



By the end of this paper a variety of information that can be implemented by

Koumpoulis SA will be discussed. The business opportunities the company has will

be revealed in detail, and their development towards a better project solution will be

realized using the innovative technology as manufactured by Aquatherm.




Thesis     Issue 1: 9/25/08     Athanasios Koumpoulis                            Page viii
Chapter 1 – Introduction



1.1 Project Objectives



1.1.1 To review Koumpoulis SA



         The objective of this project is to analyse the business functions of Koumpoulis

         SA, a plumbing company, and to research business and new technology so

         that changes can be made. The company’s history, business projects,

         employees, and competition will all be considered. The company’s current use

         of pipes and methods of joining pipes can be greatly improved. The company’s

         financial   methodologies   and   procedures    can   also   be   improved   be

         implementing classic procedures. The way the company handles employees,

         crew members, and suppliers has room for improvement as well. The market

         in Greece will also be considered to some extent as this is where Koumpoulis

         SA is located.




1.1.2 To propose and justify changes, and submit these for approval


         The objective here is to propose the implementation of new technology and

         methodologies. A three year business plan will be included as well as the




Thesis        Issue 1: 9/25/08   Athanasios Koumpoulis                             Page ix
         recommendations for new materials, employment strategies, cost reduction,

         supplier handling, competitive strategy, and other financial and operational

         methodologies.




1.1.3 To implement the changes as described


         The business plan for three years will be included to demonstrate the effects

         of the new methodologies as they are proposed so that their effects can be

         considered.




1.2      Project management



         The Gantt chart is attached (see Appendix A.) The design review is also

         included (see Appendix B.)




1.3      Profile of Koumpoulis SA



Koumpoulis SA is a family owned group of companies that specialize in water supply,

freezing, heating, drainage systems, fire extinguishing systems, and other watering

systems. Koumpoulis SA has been in operation for over 30 years. The company

provides to homes and industrial sectors, but has provided mostly for hotels across

Greece.



Thesis       Issue 1: 9/25/08   Athanasios Koumpoulis                           Page x
Koumpoulis SA’s experience, professionalism, and complete solutions encompassing

multiple systems are what have led a number of areas with high growth and hotel

businessmen from tourist domains to trust their investments with the company.

Business relationships are maintained with returning clients and extended to new

ones as quality new construction takes place as well as when the replacement of old

equipment is needed.



The suppliers of Koumpoulis SA are the largest Greek companies representing well-

known global houses. Project materials are carefully selected to further ensure the

quality in the final product. Koumpoulis SA emphasizes that one of their primary

principles is that product quality is non-negotiable. The long-term business

relationships developed with suppliers allow for an economical solution using high-

quality products. This is another attraction bringing customers to Koumpoulis SA’s as

the offers are among the more competitive in the market.



One of Koumpoulis SA’s main concerns is implementing the newest technology.

While pride is taken in giving on-going training to personnel, successful on-time

delivery is assured by long-term personnel relationships and 30 years of experience.

Koumpoulis SA operates with 12 employees. There are 4 office personnel and 8

technicians.




Thesis     Issue 1: 9/25/08    Athanasios Koumpoulis                           Page xi
In a business environment, Koumpoulis SA strives to succeed and realize its

potential. Staying up to date with technology and doing strategic business planning is

a way that they can do this. A solution to their present day situation is to upgrade to a

new material and to apply conceptual cost reduction strategies that they can apply to

any project in the wide range of services that they provide.




Chapter 2 - Background and research



2.1      Basics of Aquatherm materials



Formerly known as Fusiotherm, Aquatherm greenpipe is a pressure piping system

constructed from the material polypropylene. Aquatherm pipes are resistant to

corrosion, resistant against chemicals, and have a high level of impact resistance.

The material is lightweight, resistant to algae scaling, reduce water hammering

effects and noise generation, and exhibit heat and sound insulation properties. Other

materials commonly used for pipes are more vulnerable to physical and chemical

damage. Polypropylene is also a low friction material, providing for a protection

against abrasion and a decrease in loss of pressure. The Aquatherm system is

designed for applying food-grade materials and for cold and hot potable water. The

Aquatherm greenpipe is very strong and chemically is very pure. Aquatherm

greenpipes have become regarded as one of the most environmentally friendly, high

quality, piping systems. The pipe has been used over the past 35 years in over 80

countries. Dimensions of the pipe range from ½” to 10.” The same pipes are mostly


Thesis       Issue 1: 9/25/08   Athanasios Koumpoulis                             Page xii
sold from one of two major manufactures, Aquatherm and Wefatherm. Aquatherm is

chosen as the better supplier because of its availability to the location and because

of its line of products. The website for the company is also more user-friendly.

Aquatherm does not have much competition with other companies for the products

they sell at the current time, but this may happen in the future as more companies

convert to using similar materials for their projects.



The welding properties used in Aquatherm pipe systems are regarded as superior.

The connections are not only leak-proof and permanent, but are chemically

indistinguishable from the pipes themselves.



Aquatherm pipes are fully recyclable. They can be melted, ground up, and reused in

a number of ways. Such examples include wheel linings, transport containers, and

motor protections. Neither the disposal nor manufacturing processes of Aquatherm

pipes result in hazardous waste product. The pipes are also scanned for any possible

metal contamination that may have occurred in the manufacturing process.



A key feature in Aquatherm pipes is long-term heat stabilization. The pipes are

designed to resist damaging effects of high temperatures.



Aquatherm pipes are suitable for transporting all types of water, whether it be distilled

water of the highest purity or the hardest type of ground well water.




Thesis      Issue 1: 9/25/08     Athanasios Koumpoulis                            Page xiii
Aquatherm pipe systems hold many international certificates. These include

certificates from:

        NSF, ICC (USA)

        CSA (Canada)

        DVGW, SKZ (Germany)

        AENOR (Spain)

        ÖVGW (Austria)

        WRAS (UK)

        SVGW (Switzerland)

        KIWA (Netherlands)

        SAI-Global (Australia)

        CRECEP (France)

        SII (Israel)

        SIRIM (Malaysia)

        TIN (Poland)

        LNEC (Portugal)

        SITAC (Sweden)

        …and many more

   Source: Aquathermpipe.com



Standard pipes used in plumbing are inferior to these pipes. PVC pipes and metal

pipes will be ruled out in future decision matrices as none of their properties are

comparable to the new technology or as interests Koumpoulis SA. The detailed




Thesis        Issue 1: 9/25/08    Athanasios Koumpoulis                     Page xiv
descriptions that follow reinforce this exclusion of the two basic major pipe materials,

however the information that has already been mentioned is enough for them to be

excluded according to the business interests of the company.




2.2       Life expectancy of Aquatherm pipes



The life expectancy of Aquatherm pipes is in the upwards of 50 years. The shorter life

expectancy of inferior pipes resulting from disruptions and failures from temperatures

as high as the boiling point is not a factor with Aquatherm pipes. The also note that

can be made regarding high temperatures is that a permanent temperature range of

82-90 degrees Celsius may cause a limited decrease in the pipe system’s life

expectancy. If the pipes are used for heating applications and temperature and

pressure conditions remain in the “Working Pressure” table, the pipes will likely last

even longer than the service life as projected.



The manufacturers of Aquatherm pipes take environmental issues seriously. The

color pigments and stabilizers as well as the polypropylene material are all tested by

the manufacturing laboratory and by independent researchers. Aquatherm pipes are

complaint with the highest level of ecological standards and are regarded as “future-

oriented.” Environmentally friendly points of Aquatherm pipes include:



         PVC free

         Free of heavy metals hazardous to health (such as Cu, Pb, Ni)



Thesis        Issue 1: 9/25/08   Athanasios Koumpoulis                           Page xv
         Recyclable

         High energy efficiency

         A natural insulation value

         Lasts longer

         Low-emission




2.3       Varieties Aquatherm pipes



There are a number of Aquatherm pipes available. The basic type has no extra

features other than those mentioned, so they are suitable for the majority of

application. As Greece is a nation plagued by excessive heat, dense population, and

laborers looking to save a penny where they can, a project as large as internal

plumbing or external irrigation is a serious issue. As Koumpoulis SA usually does

business with hotels and similar locations, this type of project will be kept in mind.

Obvious differences can be considered aside based on the same analysis and

conclusions. Regarding hotel and building pipe systems, metal and cheap plastic

pipes are becoming a thing of the past, newer high-technology manufactured plastic

is how this area of manufacturing. Still, there are a number of options here. Extra

features in pipes include UV protection and fire safety protection among other

statistics. The following will review the statistical information of all pipes so that the

best choice can be discussed. Again, the review will focus loosely on the piping

projects that may take place in residential buildings. While it is understood that

specialty side projects may very well take place, information shown in the charts and



Thesis        Issue 1: 9/25/08     Athanasios Koumpoulis                           Page xvi
graphs can be used to make deductions on a case-by-case basis in the event

deviation from standard projects occur. At the same time, there is no specific focus

on one particular design used in a residential piping project. Specific amounts of

materials and designs will obviously also vary on a case-by case basis. The goal

here is to consider medium to large sized residential piping projects as a whole so

that the principles considered in choosing the best material (and later cost analysis)

can be applied generally to as many custom designs and project sizes as possible.



The tables that follow show working pressures allowable in Aquatherm piping

systems based on a life cycle of 50 years. Balances between operation temperatures

and working pressures vary according to the thickness in the pipe’s wall and on the

faser-composite layer (where applicable.) The thickness in pipe walls are determined

by the standard dimension ratio (SDR) as wall thickness is displayed as a ratio of

total diameter. In example, the wall of a pipe with a SDR value of 8 is 25% of the

pipe’s total diameter. It should also be noted that Aquatherm is analogous with

Fusiotherm.

                                         Wefatherm

                                         Faser

                Aquatherm          Faser PN20-SDR               Inter-Plast

                PN20-SDR 7.4             7.4                    PP-R80

                Life                     Life                   Life

Temperature Expectancy Pressure Expectancy Pressure Expectancy Pressure

in Celsius      (In years)      (In Bars) (In years)   (In Bars) (In years)   (In Bars)




Thesis       Issue 1: 9/25/08       Athanasios Koumpoulis                             Page xvii
20           1               30          1            28.6     1         30

             5               28.1        5            26.8     5         28.1

             10              27.3        10           26.1     10        27.3

             25              26.5        25           25.3     25        26.5

             50              25.7        50           24.5     50        25.7

40           1               21.5        1            20.5     1         21.5

             5               20.2        5            19.2     5         20.2

             10              19.6        10           18.7     10        19.6

             25              18.8        25           18       25        18.8

             50              18.3        50           17.5     50        18.3

60           1               15.4        1            14.7     1         15.4

             5               14.3        5            13.7     5         14.3

             10              13.8        10           13.2     10        13.8

             25              13.3        25           12.6     25        13.3

             50              12.7        50           12.1     50        12.7

Table 2.1: New technology pipe comparison; source: aquathermpipe.com



             Aquatherm              Aquatherm          Aquatherm        Aquatherm

Temperature greenpipe pipe greenpipe pipe greenpipe                 pipe greenpipe

             SDR 11                 SDR 7.4            SDR 6            faser-




Thesis    Issue 1: 9/25/08          Athanasios Koumpoulis                        Page xviii
                                                    Aquatherm           composite

                                                    greenpipe stabi- pipe SDR 7.4

                                                    composite pipe

              Permissible working pressure (psi)

70°F          185                295                375                 355

105°F         135                210                265                 255

120°F         110                175                225                 215

140°F         95                 145                185                 175

180°F         40                 100                115                 100



SDR=Standard         Dimension       Ratio      (diameter/wall       thickness    ratio)

Working pressure is valid for all pipe sizes with the same SDR.

Table 2.2: Potable applications; source: aquathermpipe.com

                                                         Aquatherm      Aquatherm
                   climatherm®
                                       Aquatherm         greenpipe      greenpipe
                   faser-
                                       greenpipe         stabi-         faser-
Conditions         composite pipe
                                       pipe SDR 7.4 composite           composite pipe
                   SDR 11
                                                         pipe           SDR 7.4

                   Permissible working pressure (psi)




Thesis     Issue 1: 9/25/08      Athanasios Koumpoulis                            Page xix
                                                         Aquatherm   Aquatherm
                      climatherm®
                                       Aquatherm         greenpipe   greenpipe
                      faser-
                                       greenpipe         stabi-      faser-
Conditions            composite pipe
                                       pipe SDR 7.4 composite        composite pipe
                      SDR 11
                                                         pipe        SDR 7.4

                      Permissible working pressure (psi)

160°F        (71°C)

operating,     plus
                      105              130               160         160
up to 60 days at

175°F (80°C)

160°F        (71°C)

operating,     plus
                      70               85                110         110
up to 60 days at

195°F (90°C)

200°F        (93°C)
                      20               35                40          40
maximum

*This is for water only. Consult for use with other fluids.

Table 2.3: Industrial Applications; source: aquathermpipe.com




Thesis       Issue 1: 9/25/08    Athanasios Koumpoulis                           Page xx
            Figure 2.1: New technology pipe comparison; source: aquatherm

brochure, aquatherm-uk.com




Thesis    Issue 1: 9/25/08   Athanasios Koumpoulis                 Page xxi
         Figure 2.2: New technology size comparison; source: Aquatherm brochure,

aquatherm-uk.com




Thesis       Issue 1: 9/25/08   Athanasios Koumpoulis                    Page xxii
            Figure 2.3: New technology application comparison; source: Aquatherm

brochure, aquatherm-uk.com




Thesis    Issue 1: 9/25/08   Athanasios Koumpoulis                      Page xxiii
Figure 2.4: Combustion values. Source: Wefatherm.com



Next we will consider a generic decision matrix, for only conceptual purposes and

loose weighing factors (and thus not applied to the list of tables,) so that we can

consider the pipes from a slightly different angle as they apply to Koumpoulis SA.



                        Weighting
                                        Fusiotherm          Climatherm   Firestop
 Specifications         factor

 Water flow             3               (3x2) = 6           (3x2) = 6    (3x3) = 9

 Versatility       in
                        4               (4x3) = 12          (4x1) = 4    (4x1) = 4
 water

 Versatility       in
                        3               (3x2) = 6           (3x2) = 6    (3x2) = 6
 heating




Thesis         Issue 1: 9/25/08     Athanasios Koumpoulis                            Page xxiv
 Damage
                       3              (3x2) = 6          (3x2) = 4     (3x2) = 6
 resistance

 Heat stability        4              (4x4) = 16         (4x1) = 4     (4x4) = 16

 Environmentally
                       2              (2x2) = 2          (2x1) = 2     (2x1) = 2
 friendly

 Inert affect to
                       1              (1x1) = 1          (1x0) = 0     (1x0) = 1
 smell and taste

Total score (highest score is best)        49                  26           43

Figure 2.5: Decision Matrix



We can see from the tables that Fusiotherm pipes (PP-R(80)) or standard Aquatherm

pipes are the best and most practical for the majority of cases from both the tables

and price from aquatherm and the decision matrix. Weighing factors were selected

that are loosely based on Koumpoulis SA’s priorities. It is recommended for potable

water applications and is suitable for all other applications. Aquatherm pipe is also

considered the best pipe for areas with increased seismity or moving of ground areas

in specialty projects where one of the characteristics is a major factor, such as a fire

sprinkler system, another pipe may be best. These tables and decision matrix did not

consider another very important factor, price, which is yet another reason standard

pipes are best as they have the lowest cost. Generally speaking, standard

Aquatherm pipes will be the most practical and superior choice. They are the most

versatile, have superior qualities, and are the most cost efficient.




Thesis        Issue 1: 9/25/08   Athanasios Koumpoulis                             Page xxv
2.4      Physical properties in Aquatherm pipes



Unlike many other pipes, Aquatherm pipes are chemically inert. The pipes do not

alter the quality of water passing through in any way. While other pipes may

introduce VOC’s and heavy metals into water, Aquatherm pipes do not. No chemicals

from solders, glues, solvent cements, or fluxes mix with water as it is distributed

either as the joining process in Aquatherm pipes is made with heat fusion. Aquatherm

pipes also do not support formations of mineral deposits. As the pipes are opaque,

they also do not promote any microbiological growths. Simply put, water coming from

a faucet or other application is of the same quality as it was when in entered the

system in a system that uses Aquatherm piping.



The NSF Standard 14 and NSF Standard 6 requirements are both met in Aquatherm

pipes for assurance in direct contact with drinking water. The material has also been

tested to NSF 51 standards and is thus acceptable for direct contact with food or

applications in food processing in temperatures below 100 degrees Celsius. The

material quality, strength, dimension, resistance to damage, marking, and strict

quality control requirements of the ASTM F2398 and CSA B137.11 are also met.

Aquatherm pipes have even been evaluated against chlorine resistance according to

the ASTM F2023. Specific values of Aquatherm pipes are included in the Appendix.




Thesis       Issue 1: 9/25/08   Athanasios Koumpoulis                        Page xxvi
Aquatherm pipes alone have minimal protection against UV rays. If the material will

be exposed to UV radiation for a period longer than 6 months is it recommended that

composite pipes be chosen for the system. Material in storage should have direct

sunlight blocked if to be exposed longer than 6 months. The upgraded faser-

composite pipes are designed for applications to be permanently exposed to open

sunlight.

Sound insulation properties are exhibited by the Aquatherm pipes. They provide a

high level of sound dampening. They also insulate from noises caused by water flow

and hydraulic shock. Pipe systems constructed of Aquatherm pipes are preferred to

other types of pipes in building where the comfort of occupants is a concern, since

overall the noise created by Aquatherm pipes is much less than that created by other

pipes commonly used in systems.




2.5      Joining methods



The method of joining Aquatherm pipes, as mentioned, do not require any solvents

glues, or solder. Heat joining is used which literally melts the pipes into one

indistinguishable piece. Socket, butt, electrofusion, and fusion outlets are used.



The unique and unrivalled connection process of heat fusion is used in Aquatherm

installations. Welding times in this way are quite short: 20 mm OD – 1/2” ID = 5 sec

(Aquatherm 2008). The connections can be tested by pressure or they can be placed




Thesis       Issue 1: 9/25/08   Athanasios Koumpoulis                           Page xxvii
in operation close to immediately after fusion. Aquatherm pipe fusions have

absolutely no extended waiting times.



The process of heat fusion is one of the most reliable and safest joining processes in

the world for pipe systems. The process involves heating two pieces of (identical)

plastic material and allowing them to cool under medium pressure. The material

polypropylene is great for this type of joining method since it fuses at the chemical

level, and thus there is no way to tell one piece from another once fusion is

completed. This type of connection eliminates weaknesses in the pipe system which

are evident in other pipe systems. Aquatherm’s joints are leak-proof and last longer

than the pipes themselves while joints in other pipe systems tend to leak or even fail.

There is a variety of methods that can be used for heat fusion. These include



        Socket Fusion: A fusion method where the outside of the pipe is fused

         against the inside of the fitting. This creates a strong bond without restricting

         the opening of the pipe. A heating iron is used in this method.

        Butt Fusion: This fusion method involves fusing the face of one pipe directly

         to the face of another. This creates a connection without a coupling. Fittings

         match pipe walls and are installed in the same way.

        Outlet Fusion: A fusion method which involves fusing a special curved fitting

         directly into the side of the pipe. This connection serves as a branch from

         large lines to smaller ones. Outlet fusion uses heating irons.




Thesis       Issue 1: 9/25/08     Athanasios Koumpoulis                          Page xxviii
         Electrofusion: A method of socket fusion that does not use heating irons. The

          pipe is joined by running a current through a special fitting, rather than heating

          the pipe and fitting directly [1].



All of these processes involve the same basic process of heating the pipe and

carefully joining them prior to letting them cool into a permanent fusion. The heat

fusion process is often used in gas piping since it has a low failure rate and is also

used in “ultra-pure” systems as the connections are free from impurities [1].

Aquatherm’s socket-fusion technique is used on pipe sizes ranging from 3/8”-4” and

helps to streamline the fusion process so that it is even simpler and faster.

Aquatherm’s own custom engineered tools were designed to optimize the heating

temperatures and surface areas. They also decrease heating times and increase the

surface area of connections. Saddle connections help to hasten installation more so

by allowing for the majority of take-offs and branches to be installed after the main

line is securely in its place [1]. Larger pipes (between 5” and 10”) are joined using the

more traditional method of butt-fusion. Many contractors are already familiar with this

method, so for pipes this size additional training may not be necessary. Aquatherm

offers a number of its own training programs in accommodation with the large range

of       needs      plumbers        and      mechanical

contractors may have [1].



According to Aquatherm, the welder includes

“




Thesis           Issue 1: 9/25/08         Athanasios Koumpoulis                     Page xxix
         One machine body with assembly points for the remaining parts

         One set clamping jaws composed of 8 two-part jaws bars for pipes and fittings

          1/2” - 4” ID (25 - 125 mm OD)

         One aquatherm greenpipe welding head for each of the following diameters: 1

          1/2” - 4” ID (50 - 125 mm OD)

         One welding device Art.-No. 50341

         One allen key and tool change clamp

         One Installation manual

The aquatherm greenpipe welding machine was specially developed for stationary

welding of pipe and fittings with an external diameter of 50 to 125 mm. This machine

is equipped with a hand crank to facilitate a precise pre-assembly of complicated

installation parts.

(The necessary operating instructions are enclosed.)” [1].




2.6       Fire Resistance



Unfortunately polypropylene is not any more resistant to combustion and fire as other

piping materials. The same standard regulations for fire protection need to be met as

with other piping materials. It is recommended that fire prevention companies are

contacted      for    the    most    current    listing     and   installation   requirements.

Aquathermpipe.com has a list of manufacturers that have tested and listed fire

prevention productions for use with pipe systems constructed with Aquatherm.




Thesis        Issue 1: 9/25/08      Athanasios Koumpoulis                              Page xxx
The Flame Spread Index was designed in attempt to show how fast a given material

will allow fire to spread across it. Different countries have different testing methods

for this, for example, in the United States this is done per ASTM E84 while in Canada

this is per CAN/ULCS102.2. In any case, Aquatherm pipes have a FSI value below

25, making it suitable for the vast majority of applications. Of course, as it is

necessary, a review of local requirements is recommended.



A considerable amount of the danger from a fire is due to the toxins given off from the

combustion of materials. Aquatherm products do not contribute to gas toxicity in fires.

The majority of the smoke produced from the combustion of an Aquatherm pipe is

water vapor; the smoke is not dangerous to people or even animals. One should

keep in mind, however, that the standards used in codes as they are today were

developed 50 years ago. They do not account for modern differences. While not

considered a health issue, Smoke Development Index values for the standard

Aquatherm pipes range from 100 to 150. In areas where applicable, if any, this issue

would need to be addressed. Typically, the SDI is only considered a concern if pipes

are exposed in a high rise application. There are other less common cases where

this is a concern. Applications where the pipe is installed in a return-air plenum is

also another kind where this is a concern. These are also referred to as RAPs. RAPs

are known to introduce a significant amount of safety and health issues into a

building. Even air quality indoors is negatively affected. Plenums are almost

impossible to clean, so they collect a great deal of dust and mold. Fires are known to

spread to plenums and subsequently to the rest of the building at a rapid pace.




Thesis     Issue 1: 9/25/08    Athanasios Koumpoulis                           Page xxxi
Fighting fires in systems with plenums is also difficult. For all of these health and

safety reasons, it is recommended that RAPs not even be used (if possible) and that

air ducts are ducted to all spaces in each direction. There are more ways to avoid

SDI requirements in other cases. If the pipe is installed behind a wall board of

gypsum, the SDI is not required. If the pipe is routed inside of interior walls that are

rated as non-fire, the SDI is not required.



Specialized (nonstandard) Aquatherm pipe systems have been designed to comply

with more stringent requirements, namely, in cases where the code requires pipes to

meet an SDI of 50 and an FSI of 25. As mentioned, in most cases standard

Aquatherm pipe are considered to be acceptable material in systems. In cases with

the stricter values, advanced Aquatherm systems can be applied at a somewhat

higher cost to meet these needs. In these advanced design, there is a flame rating on

the thermal barrier is to protect the normal lengths of pipes against combustion. This,

in turn, reduces the overall amount of smoke produced and thus lowering the index

values. Advanced Aquatherm systems have also been tested and listed with their

fittings uncovered and lengths of pipe covered to add ease in the process of

installation. The advanced systems also only produced water vapor and carbon

dioxide upon combustion, so exposed fittings are considered safe with regards to

building occupants.




2.7      Aquatherm supply




Thesis       Issue 1: 9/25/08   Athanasios Koumpoulis                          Page xxxii
Aquatherm systems include everything needed for a complete installation. Systems

include all pipes, fittings, valves, and everything else from the water meter to the final

tap. Aquathermpipe.com’s webpage says “Mixed installations are things of the past”

(Aquatherm 2008).

Aquatherm pipes resist corrosion and scaling. Corrosion and scaling that occur in

other piping systems demonstrate gradual reductions in performance. The walls in

Aquatherm pipes create less friction than is created in other system, which in turn

eliminates abrasion that can cause pin-holing and thus lowering the life expectancy

of the system. The joints, as they are heat-fused, exhibit the same properties as the

pipes. As a result, stresses from physical forces do not damage these areas in any

extra way. Aside from having a longer life, Aquatherm pipe systems do not need as

much maintenance as other pipe systems, an obvious added value.



Aquatherm      has     developed    faser-composite     technology,    a    revolutionary

manufacturing method that increases overall performance in pipes and maximum

operating temperatures. The material used in the faser-composite pipes is mix of a

unique fiberglass and a derivative of polypropylene. The emphasis on the unique

material in the pipe is placed on the middle of the pipe, allowing for rigidity at high

temperatures without losing any other benefits exhibited by Aquatherm pipes. Other

advantages of the faser-composite pipes include a 75% reduction in linear

expansion, a 20% increase in flow while maintaining the same loading capacity due

to a larger inner diameter, a higher carrying capacity, higher stability, and higher

impact strength [1].




Thesis      Issue 1: 9/25/08    Athanasios Koumpoulis                            Page xxxiii
              Figure 2.6: Expansion; source: Aquatherm brochure, aquatherm-

              uk.com



Here it can also be seen that the standard pipe is the most practical in the general

case.



All Aquatherm pipes are flexible and resilient. Other rigid plastics shatter under

impact. Aquatherm pipes do not shatter under impact, whether the impact is from a

projectile moving at a high velocity or from a slow heavy object. When brought to the

breaking point, the material will split after flattening. Dangerous shrapnel will never be

thrown from breaking pipes. As such, the pipe is extremely safe to use in all

applications, even those considered high-risk.



Thesis      Issue 1: 9/25/08    Athanasios Koumpoulis                            Page xxxiv
Aquatherm pipe systems have a 10 year guarantee for pipes and fittings. They also

have a product liability of €4.5 million (per damage event.) The warranty covers

incidental damage due to material failure. The warranty is not valid if the system is

installed by anyone not trained and certified for Aquatherm pipes and with Aquatherm

approved tools. A pressure report must be submitted after installation for verification

of proper installation. The following is an actual test record.




Thesis      Issue 1: 9/25/08     Athanasios Koumpoulis                        Page xxxv
Figure 2.7: Test record; (forms available at http://www.aquatherm-uk.com/training.php)



The testing procedure as given by Aquatherm:



“The testing procedure consists of 3 specific processes. The purpose of this test is to

subject the piping system to maximum stress to identify any possible poor jointing or

material damage.

Phase I (test period I hour and 10 minutes)

This test will be carried out at 1.5 times the highest possible working pressure.

1) Take system to 1.5 working pressure and maintain for 30 Minutes.

2)       Drop       pressure      to      zero          and   wait     10      minutes

3) Immediately reinstate the test pressure of 1.5 Working Pressure

At the end of this second 30 minutes the pressure should not reduce by more than

0.6 Bar and no visible leakage should have been evident.

Phase 2 (test period 2 hours)

Immediately apply a test pressure of 1.5 working pressure and maintain for 2 hours.

During this period the pressure should not drop by more than 0.2 bars.



Thesis     Issue 1: 9/25/08     Athanasios Koumpoulis                          Page xxxvi
Phase 3 (test period 45 minutes)

The final phase is 3 operations repeating the following procedure 3 times

           a)                   apply      I      0     Bar    test     pressure     for       5    minutes

                b)                      reduce        to       I       bar     for         5        minutes

      c)                 reduce to zero pressure for 5 minutes

Repeat 3 times.

If at any stage of this test procedure a fault is found and repaired the full test should

be reapplied.

All results at each stage should be recorded on Test record Sheet and when

completed satisfactorily signed copies forwarded to Aquatherm sales UK ltd for

confirming full test procedure has been applied and the company warranty is then

confirmed.

It should be remembered that the warranty is dependant also upon all operatives

being trained in the application of Fusion Jointing by approved Aquatherm trainers.”

(Aquatherm, 2008).




2.8        Aquatherm’s quality control and manufacture



Quality control is of the highest importance in Aquatherm pipes. Every step in the

manufacturing process, from the selection of raw polypropylene granules to the

finished product shipment, much scrutiny is performed. All shipments of raw materials

are inspected, with those failing to meet high standards getting returned to the

supplier. Aquatherm refines the raw polypropylene into its patented material used in



Thesis               Issue 1: 9/25/08          Athanasios Koumpoulis                               Page xxxvii
Aquatherm pipes, Fusionlen PP-R (80). Aquatherm is able to guarantee the exact

chemical composition of pipes and fittings by manufacturing their own resin.

Aquatherm never uses less than 97% pure polypropylene. Aquatherm claims it is this

that ensures that piping systems will not fail due to manufacturer’s defects, and that

their level of quality is only possible with an engineered thermoplastic such as

polypropylene [1]. After the Fusiolen PP-R (80) is made into final products, testing

takes place. The products are examined for melt flow, impact resistance, dimensional

accuracy, appearance, homogeneity, and tolerance to internal pressure. The test

results are checked and verified by independent labs to ensure that the products are

meeting the standards of CSA, NSF, ASTM, ICC, ISO, DIN, and others [1].




2.9      Training required for aquatherm pipe installations



Aquatherm provides training to focus on two areas, systems advantages and

installation advantages. Customized training is provided to engineers, architects,

building owners, and contractors so they can become familiar with the methodologies

used in installation Aquatherm products. The information is made available through

catalogs, brochures, booklets, from their website, from training guides, and from

Aquatherm representatives. Aquatherm also offers course for installation to licensed

contractors and plumbers that cover installation and fusion techniques.




Chapter 3 – Evaluation




Thesis       Issue 1: 9/25/08    Athanasios Koumpoulis                      Page xxxviii
3.1 Analysis of Koumpoulis SA



A business should always be implementing the best planning strategies possible so

that they can succeed. Strategic planning and research, followed by actual

implementation are the best steps a company can take realize its success. In some

business this requires members form a board to discuss inventory and statistics so

that is methodologies and future meetings can be adjusted accordingly. For some

businesses new technologies and training need to be researched so that a company

can make an informed decision that best suits its needs. SWOT analysis and cost

reduction plans are parts of strategic planning that are universal in usefulness as they

benefit every company, non-profit and for-profit alike.



Koumpoulis SA is a plumbing company that does not focus on a specific type of

plumbing project and rather encompasses nearly all projects that can be done with

piping. As Koumpoulis SA is a growing and developing company even after more

than 30 years of experience, they also evaluate their strategies for cost reduction and

other forms of business analysis so that they can make strategic decisions for their

success.



The objective of this paper is to describe strategies for Koumpoulis SA’s evolution as

a business. Koumpoulis SA will be further described so that their business functions

and needs can be better understood. A general SWOT analysis will be applied to the

basic needs of the company. Typical scenarios and concerns of businesses will be

discussed as a new material for use within the company is analyzed and considered.


Thesis     Issue 1: 9/25/08     Athanasios Koumpoulis                          Page xxxix
Descriptions of similar products will be given and the best choice for the company will

be described after considering a variety of factors specific to the needs of

Koumpoulis SA. Following this generalized (although specific to the range of

Koumpoulis SA’s projects) cost reduction strategies will be considered. A Pareto

analysis and other cost reduction strategies will be directly applied to the business

scenarios and concerns of the company. We will conclude with a range of concepts

for Koumpoulis SA to consider so that they can evolve as business while better

meeting the needs of their clientele.



While some risk is involved in converting to a new material, or using it at all for the

first time, the potential benefits to be had are also considerably significant. High

quality material has always been the obvious factor in businesses such as this one.

Also of rising importance in today’s world of energy crises and pollution are

ecological factors. A variety of Aquatherm pipes have been developed over recent

years and are being praised for their quality and environmental friendliness. While

this seems like an obvious solution for all companies if taken for granted, the

following will analyze the properties of Aquatherm pipes in attempt to conclude if they

are a wise choice to be applied to Koumpoulis SA’s business functions. Multiple

pipes within this area will be analyzed so that the type that best meets the general

needs of the business will be realized.



Cost reductions are important to any company. Second to amount of customers and

sales or reputation, reducing cost is the next best step in maximizing profitability for a




Thesis      Issue 1: 9/25/08    Athanasios Koumpoulis                               Page xl
business. As Koumpoulis SA offers a variety of services from heating to gardens to

fire sprinklers, a general conceptual cost analysis is derived so that it can be applied

to any and all of the company’s projects. A Pareto rule is apllied with final variables

left so that the formula can be applied to any specific project numerically. As each

project varies in size, shape, and material cost, each one will experience a different

level of cost reduction but will benefit from the same application of numerical

reduction and business reduction strategies as listed. Koumpoulis SA will have

evolved and will have modernized with the implementation of new-age materials and

up-to-date cost reduction applications.



It is standard in the strategic planning process in any business, both for profit and not

for profit, to perform a SWOT analysis. Strengths, Weaknesses, Opportunities, and

Threats need to be considered so that they can be adequately addressed. These will

be considered for the company both at the present and after the implementation of

the ideals within this paper.




3.1.1 SWOT Analysis



The main strength of Koumpoulis SA at the present is their experience. They have

developed a considerable amount of business relationships with a variety of people

in Greece and have done some major projects with a variety of hotels. Thirty years of

experience is proof of success not only from a business point of view but from the

point of view of customers as well. Having done larger projects, such as the hotels,



Thesis      Issue 1: 9/25/08    Athanasios Koumpoulis                             Page xli
this gives them the verifiable experience of being competent for projects of all

dimensions so that they can stand above smaller companies and thus have a more

competitive edge. If the company implemented the ideologies and methods

discussed in this paper as best as they could, they would have the additional

competitive edge of having newer technology and benefit from increased profits by

following the cost reduction strategies.



The weaknesses facing Koumpoulis SA are their lack of formal organized strategic

planning. While this is not a considerable weakness considering the weaknesses of

less successful companies, this seems to be the area in which they could improve

with the most. If they implemented the methodologies in this paper and took their

desire to stay up to date with technology and training one step further to encompass

regularly performed analysis and considerations of changes that could be made, the

company would not have this weakness.



The opportunities for this company are essentially the basis of this entire paper.

Koumpoulis SA has the opportunity to implement new technologies and training so

that their product quality, environmental friendliness, and reputation can all improve.

The growth from tourism in the company’s location, Greece, has been constant in

recent years. Naturally this is an opportunity in itself. The company also has the

opportunity to eliminate a major weakness and implement regular cost reduction

analysis and strategies so that they can be more cost efficient. After implementing




Thesis     Issue 1: 9/25/08     Athanasios Koumpoulis                           Page xlii
these, the company still has the opportunity to expand and consider new materials as

they are made in this field.



The major threat facing Koumpoulis SA both now and in the future is competition

from companies like it. Being outbid and outshined by more cost effective or

reputable companies is a concern to any business. Another threat to projects in

Greece is the high temperature strain on them, which are than average. Because of

this extra care must be taken so that projects can withstand these conditions.

Upgrading to a new material and keeping newer materials as an option to customers

while analyzing their methods for places where cost reduction strategies can be

applied is their best way to ensure that they stay competitive in the main areas of

competitive bids, technology, and reputation.


3.1.2 PEST Analysis



Another kind of analysis used in strategic planning is a PEST analysis. These

consider political, economic, social, and technological factors. These will be

considered in detail here and are mentioned elsewhere in this writing as they apply to

other situations.



Politically there is not too much concerned with Koumpoulis SA and their operations.

The political system in Greece is free in that it does not hinder the progress and

growth of any companies, especially a plumbing company. The country attracts a

high volume of tourists, also as allowed by the political system, which increases the



Thesis      Issue 1: 9/25/08   Athanasios Koumpoulis                          Page xliii
business potential. While there are taxes which somewhat affect company

operations, is it not exaggerated to the point where businesses in Greece are

affected any more unusually as compared to other countries.



Economy follows the functions of the political system regarding taxes. The market in

Greece is fairly strong and is largely supported by tourism. Plumbing companies

thrive on this, and as hotels are being built to accommodate the growing number of

tourists, business potential increases. The global energy crisis affects business in

subtle ways such as increased fuel and other minor costs, but has not affected

material costs significantly. Transportation costs to job sites have had a small but

noticeable effect on project estimates. Aquatherm reports that the price of

polypropylene is very stable in spite of the economic factors as they are in the current

world economy. The price of polypropylene is also predicted to remain stable

(Aquatherm, 2008). The economy has also slightly affected the cost of living as

certain goods are more expensive in light of the global economy problems, but the

demand for jobs is also higher so an increase in labor price is negligible.



Social factors that affect the business of Koumpoulis SA involve word-of-mouth types

of advertising, referrals, and reputation. Personal opinion is more valuable to the

company than commercial advertising. Strong business-business contacts are also

crucial for company success. Koumpoulis SA has a semi-strong relationship with its

supplier as it can receive a 20% discount for bulk material purchases. As the

company is family owned and operated it has the advantage of being tightly knit from




Thesis     Issue 1: 9/25/08     Athanasios Koumpoulis                           Page xliv
the inside. This advantage is not one the average company has, but at the same

time, some companies view this as a negative factor and do not recommend the

mixing of family and business. The company has a small number of active employees

(12) so it is able to maintain a decent level of coordination between all employees

without too much effort. Koumpoulis SA does seek to increase its level of employees,

and in doing this they will need to increase their efforts in communication. At the

same time they will likely have a higher reputation and gain the social benefits from

doing this.



Technologically speaking, Koumpoulis SA is slightly above par. They are more

advanced than the average small company but do not have the resources or

methods as the largest companies. They have access to fairly new office equipment,

so they have the means to exhibit the qualities and procedures of a standard

commercial business. Tools and transportation are also handled within the business

so that renting and personally owned equipment is kept to a minimum. Implementing

more modern materials and installation processes would be the most useful steps in

using technology to increase their success as a business. As they do not

manufacture any product manufacturing technology is neglected for this case.

Increased office technology and transportation generally would not make for a

considerable difference, however strategically precise efforts in using computer

software to make business connections and network would have a proportionally

positive impact.




Thesis        Issue 1: 9/25/08   Athanasios Koumpoulis                        Page xlv
3.2      Professional competition



While the market in Greece is known for its high level of competition from smaller

companies willing to cut corners on quality for smaller bids, this is countered by the

importance of business connections in the culture. Social acquaintances, word of

mouth transfer of reputation, and oral recommendations of businesses have the

highest influence on customers. Competition is rough in nearly any business, and

companies have a wide variety of options of how to combat or otherwise cope with

this.



Koumpoulis SA has three direct competitors. Vasilas is in such direct competition

because of their personal acquaintances and high level of connections. Markakis is

considered a competitor and thrives mostly on their ability to save on travel expenses

due to their connectivity with the region. Karagiannis is another competitor that uses

foreign labor to increase its profitability and success.



To combat this competition so that they can achieve an increased customer base,

Koumpoulis SA has a number of choices. They could follow the cost reduction

strategies as attached so that they can bid lower numbers on estimates. In addition to

this, they could use some of the strategies their competitors use to lower estimations

and increase business connections. Placing more emphasis on acquaintances and

non-commercial advertising would increase their image in the Greek market. Using

foreign labor carries the risk of unfamiliar connections and training among other




Thesis       Issue 1: 9/25/08    Athanasios Koumpoulis                        Page xlvi
things, but would allow for lower estimates should Koumpoulis SA use the savings to

increase customer base rather than increase profitability.



Another strategy that could save on labor costs, in addition to allowing the company

to handle a large extension of customers, is to hire subcontractors to carry out the

labor. Once training is completed and a good system is developed so that the

subcontractors are operating according to the tastes of the owners, an efficient

system would be developed so that the owners could spend more time on customer

relationships. This is standard in large companies, of course, and obviously a

substantial amount of success is required for small companies to be able to take the

step from doing things themselves or with a small number of employees to being able

to hire subcontractors. As mentioned, the critical business and personal relationships

necessary for notable success in the Greek market could become a focus at this

point. Koumpoulis SA members would have the freedom to place more effort into

acquiring new customers. They would need to do this acquiring, obviously, to obtain

the same level of net income. It is a given that less physical energy would be required

however. For smaller newly expanding companies it is wisest for them to promise

only one job at a time to subcontractors so that they can be sure that there level of

income is still sufficient enough to warrant them being hired in the future. Naturally,

expanding to new customers, while adding to experience and an increased rate of

production is good for the company’s reputation. Overcoming this hurdle is risky,

challenging, and requires some kind of effective marketing effort and strategy, but

once this hurdle of an expanded customer base and subcontractors is overcome, the




Thesis     Issue 1: 9/25/08    Athanasios Koumpoulis                           Page xlvii
business’s success increases exponentially provided nothing out of the ordinary

damages their reputation. Koumpoulis SA is at a point where they can increase their

success as a business exponentially by following these principles. If they record their

activities and see that they follow the three year business plan included in this paper,

and thus the plan is followed, they will have grown considerably and will be able to

take extra steps to undercut or outshine the competition as deemed fit.




3.3      Consideration of Koumpoulis SA’s current situation in this project



While it was mentioned that Koumpoulis SA has over 30 years of experience, some

factors of procedure and methodologies will be neglected as the company plans to

reform and build its new business plan from “the ground up.” All factors have been

mentioned, but in figuring cost reductions and profit loss in the sections that follow

the reader needs to consider that the company plans to reform its business

operations rather than simply extend them.




Chapter 4 – Proposal for Innovation


4.1      Cost benefits as a result of using Aquatherm material



Aquatherm’s pipe systems are revolutionary in the business world. They are

changing the way contractors do business. As the material prices are stable and



Thesis       Issue 1: 9/25/08    Athanasios Koumpoulis                         Page xlviii
figures for labor are relatively consistent, contractors have an easier time meeting or

coming in under their budget. The reliability, environmental friendliness, and warranty

allow contractors to increase their reputations while having a level of security in their

budgets. As Aquatherm piping systems are regarded as being the future standard

with their benefits and environmental friendliness, contractors have been keeping

their competitive edge by using the products.



While there are obviously all kinds of steps business can take to maximize

profitability and to make themselves more successful, merely using Aquatherm pipes

is one step. Doing a full analysis after using these products is recommended for

business that plan to both do a cost analysis and convert to a new material, as using

Aquatherm pipes changes many variable for the best in profitability.



The heat-fusion connections allow for reliable, simple, faster connections. This, of

course, reduces some time in project completion. There is also a level of consistency

in the joining method, as opposed to other methods, which caters to the predictability

the contractors seek in estimations.



There is some benefit to profits from pipe material as well. The price of (raw)

polypropylene is very stable. On the other hand, metal materials and commodities

tend to fluctuate considerably and without warning. Contractors can safely bid

months in advance if using Aquatherm pipes, having confidence that materials can

be purchased at a price similar to the time of the bid. Aquatherm systems often cost




Thesis     Issue 1: 9/25/08     Athanasios Koumpoulis                            Page xlix
less than other comparable systems generally, obviously catering to initial savings

and profitability [1]. While generic PVC systems are lower in cost in the general case,

they do not offer any of the benefits of Aquatherm pipes. More expensive materials

(some as mentioned, addition items not discussed also exist) do not have the ratio of

cost-to-benefit to warrant purchase except in special situations, as shown in the

comparison diagram.



As heat times are consistent and preparation work is minimal, there is next to zero

unpredictable factors that can result in a project completion delay or an increase in

labor costs. The pipes are lighter in weight than metal pipes, and thus require less

power to transport at any level or assemble. Compared to other plastics, they are

less likely to be damaged and needing replacement from accidental mishandling. The

fusion outlets also help to hasten and simply installation once main lines are secured.

Fusion outlet connections take very little time to install when compared to full

reducing tees.



No matter how skilled a contractor may be, defective piping materials can cause a

system to fail without prediction. Often in these cases the contractor is still held liable.

The cost of failure for a contractor can be devastating without a compromise between

them and clients or insurance, and furthermore can damage future business for the

company as it may damage their overall reputation. This is of the utmost concern to a

business in any situation. This is another reason many contractors are beginning to

use Aquatherm piping systems. Between the high level of quality control, resilient




Thesis      Issue 1: 9/25/08     Athanasios Koumpoulis                                Page l
material, and warranty, Aquatherm provides a better solution against contractor

liability. Furthermore, a company’s reputation is likely to rise just by using the

products as they cater to the growing concern for ecology and still carry the stigma of

being new technology. Contractor failure and reputation slander is decreased to a

statistical minimum in the use of this material and adequate materials training.



Regarding pipe prices, the product range of the pipe is directly related to the diameter

and wall thickness of the pipe as well as its weight. For the pipe being investigated, it

comes in a package of a 40m pipe with diameter of 32mm and a wall thickness of

4.4mm, which roughly translates to roughly thirteen 3m pipes. The charge rate is

done by meter length, so 1m costs £2.45. So a 40m pipe which is packed as thirteen

3m pipes would cost £98 as of 25/06/08 conversion rates. Obviously, as mentioned,

total costs and cost reductions will vary in projects of different sizes in comparison to

similar projects using different materials and methodologies.




4.2      General cost reduction strategies


There are two kinds of costs in production, costs in processes and costs in products.

The majority of production costs related to product occur in the design phase as

product specifications (such as size, type, form, and finish) typically have some

influence on the production processes used to create the products. At the same time,

the majority of production costs related to processes are determined by the available

resources and “in-house” knowledge.




Thesis       Issue 1: 9/25/08    Athanasios Koumpoulis                             Page li
If selling a larger number of products or services is not a realistic option for a

company extending efforts to gain more profit, then the alternative strategy is to

attempt to gain more profit from the products or services being sold. If the sale prices

are mostly influenced by the forces of the market, then the key to increasing (or even

maintaining) profit is to find ways to decrease installation costs and operation costs.

The following is a graphical representation of how one can attempt to reduce

production costs.



4.2.1 Why companies fail in monetary savings


4.2.1.1 Placing overly ambitious cost reduction targets and time scales

Often companies will place too much emphasis on such high goals with good
intentions but this often will ultimately backfire, in some cases even resulting in a loss
of profit. New plans and procedures are best implemented with caution and strategy,
and with all aspects fully considered.



4.2.1.2 An underestimation of resources required and tasks involved


Improper planning in this way is a sure-fire method too failure. Improper training,

projection, and implementation is a major threat to savings.




4.2.1.3 Improperly differentiating between fundamental and technological issues


Typically this involves what can or cannot be physically changed. Taking steps for

one issue when it is not necessary, or failing to do so when it is necessary, is another




Thesis      Issue 1: 9/25/08     Athanasios Koumpoulis                              Page lii
example of this. Companies need to stay informed so that necessary changes of the

proper type are taken when it best benefits the company and the clients.




4.2.1.4 Not enough decision making and inadequate support


This is a necessity and should be coming from senior management in critical

situations, such as when seeking authorization for expenditure for capital equipment.

Poor strategic planning is the downfall of profit and non-profit companies alike. Larger

companies often need a form of a decision making panel or board to keep up on the

decision making process. In the absence of this, at least one individual should be

designated to handle the decision making processes properly (and formerly) from

beginning to end. Companies often choose to “wing” decision making processes and

do them from memory and loose discussions rather than formerly. This is not wise

and is often largely contributes to decrease potentials and success.




4.2.1.5 Facilities for production not available for prove-outs


In this case, there are no running trials to confirm that any changes function properly.

An absence in facilities and means to run trials and tests can quite likely lead to

improper use in an actual production, contributing to error and profit loss. Companies

are best to ensure methodologies and such will be successful prior to work done, and

not test on procedures that “count.”




Thesis      Issue 1: 9/25/08    Athanasios Koumpoulis                            Page liii
4.2.1.6 A lack of full-time commitment to cost reduction from employees


Even with the best plan, companies that do not have a dedication that involves the

action of all employees directly involved with the products or procedures will have

difficulty seeing their projections come to light without adequate dedication from

employees. Employees need to be properly instructed as well as properly observed

to ensure cost reduction goals are realized. Everything from aquatherm pipe training

to new design methodologies to material savings needs to be taught and enforced

with every Koumpoulis SA employee.



4.2.2 How cost reduction is prevented




4.2.2.1 The timing of required capital investment creates problems with cash flow


Cash flow and investments need to be coordinated so that there is a little room for

variation. Failure to do this can cause severe problems not predicted in any analysis

performed.




4.2.2.2 A lack of confidence that capital investments could quickly be recouped


No consideration and/or faith in payback figures. While not jeopardizing cash flow, so

that investments could potentially cause bankruptcy, is ideal, and failure to take any

level of risk in investing will also stunt a company’s growth. Investments need to be

made in small steps so that a company can recover from any loss incurred. A



Thesis       Issue 1: 9/25/08   Athanasios Koumpoulis                             Page liv
company that does not make substantial investments is a company that will not see

substantial returns.




4.2.2.3 High levels of stock exist


Any old stocks should be sold prior to new stock being introduced. This is not a factor

for the current state of the company but could potentially be in a number of years, in

which case the company will need to consider this principle.




4.2.2.4 Cost reduction not a focus of key staff members


When critical staff members remain committed to other activities in the company.

Employees not actively involved with cost reduction procedures still need to be

constantly aware of policy and procedural changes so that they do not indirectly

effect cost reductions by taking actions that will cater to other employee’s actions that

will directly affect cost reduction.




4.2.2.5 The company does not have a strategy for reducing production costs


This is the case where a company does not have any procedures in place to

implement and quickly record any changes as they occur. While material strategies

and loose attempts at procedural changes are often enough for most companies to

see results, a formal and thorough plan is all the more likely to generate benefits, and

usually well worth the added effort.


Thesis      Issue 1: 9/25/08      Athanasios Koumpoulis                            Page lv
4.2.2.6 The manufacturing suppliers and procedures are held in too high regard


This is bad when it is true to the point that they are considered to be above any need

for change. Nothing in business is above the need for change as soon as the market

says otherwise. Technology is ever changing, as are the needs and demands of

people.



4.2.3 Methods to identify potential cost reduction procedures




4.2.3.1 Analyse installation costs for components with highest value


These items usually provide the largest scope in cost reduction (see section 1.5.) In

some cases some less expensive items can be eliminated but typically the cost

reductions can be made by the most expensive items. We will identify these for

Koumpoulis SA in a later section.




4.2.3.2 Discuss product and installation with employees


Ask them what product or process changes would make their professional lives

easier. Craftsmen may have ideas on how to take (safe) geometrical shortcuts in pipe

design or may have thoughts and requests on how they could save time, effort, or

material under different conditions.




Thesis     Issue 1: 9/25/08     Athanasios Koumpoulis                          Page lvi
4.2.3.3 Analyze and discuss quality problems with associates when they are
encountered


This should follow a failed inspection or customer complaints. Not properly analyzing

a situation in order to save time and energy is not a good strategy to take in the long-

run.




4.2.3.4 Apply the principles of design for installation (see section 4.6)



4.2.3.5 Analyze products from competitors for superior functions and features


Here we will have a superior product so regarding pipes alone searching for superior

product features has already been solved. This strategy could be extended to other

components and methodologies alike. Researching time and pipe saving benefits

(see following section for analysis on pipe saving) in other companies would be

effective as pipe material and labor costs are likely the highest items in placing bids.




4.2.3.6 Develop installation objectives for the long-term (see section 4.8)


4.2.4 Main reasons for resourcing items purchased



         -Ensures a continuous product supply from supplier(s).

         -Reduces inadequate quality and delivery performance.

         -Avoids unacceptable increases in price.

         -Aids in obtaining desirable business terms offered elsewhere.


Thesis       Issue 1: 9/25/08    Athanasios Koumpoulis                            Page lvii
         -Aids in security and politics, for example, in the event your main competitor

         has recently gained control of an existing supplier.



4.2.5 The Pareto (80-20) rule

   The Pareto rule suggests that 20% of the cost figures will end up accounting for

   80% of the prime installation costs. The components with the highest value

   typically give the largest scope in reducing costs, so it is recommended that costs

   here be examined first to add efficiency in efforts. To further increase efficiency,

   adopt the principle of “gathering the lowest hanging fruit,” the strategy for

   achieving maximum gain with minimum effort. The elements of cost that

   contribute to the cost of prime installation in products can be plotted as a

   histogram. This is indicative of cost distribution.



   Step 1) In identifying 80% of prime installation costs in something such as a

   piping system, clearly the element in the vast majority of all cases that will

   account for this cost is the pipe itself. As this is generally fixed, the next pliable

   element is labor. Koumpoulis SA already has found one way to save on materials

   by purchasing in bulk. They do have the option, however, of attempting to

   eliminate up to 20% of the material used by applying more geometrically efficient

   designs and joint methods, but this may be challenging without giving a sloppy

   appearance. Technically the Pareto rule can be applied to both parts and labor as

   they both have the potential to be lowered and both constitute the highest

   monetary amounts in an estimate for a project. So, the larger the project is, the




Thesis       Issue 1: 9/25/08     Athanasios Koumpoulis                          Page lviii
   more this will be true. To use figures in a personal calculation, add up material

   costs before factoring in labor and taxes. Take this total material cost, and

   multiply by .8. So in a project estimated by Koumpoulis SA to include 2000

   pounds in Aquatherm pipes alone, a savings of 400 pounds is estimating bringing

   the part estimation to 1600 pounds. This of course can be applied to and will vary

   from project to project depending both on size and materials used, but the

   principle is the same in any case. We will call this number P, and will continue to

   use in calculation. While the variables involved in a business such as this the

   circumstances allowing for the changes in savings vary when pushed to extremes

   in instances of extreme material shortcuts and immigrant labour, this principle is

   still believed to be true and can be applied in this area of business.



   Step 2) Finding the minimum number of cost elements that comprise 80% of the

   prime manufacturing cost. As determined in step 1, 80% of the manufacturing

   costs P will be used in future calculations. Considering what will comprise 80% of

   manufacturing costs, as mentioned, this of course will be the pipes and fittings for

   all large projects. With the Pareto rule all costs that are less than 50% of the next

   highest cost element are not taken into consideration. Smaller items used in pipe

   systems will not be considered. The two most costly items are of course pipes

   and pipe fittings. If heaters, tanks, or other devices are used for any various

   projects, they can be factored in just the same. As such, pipes and fittings would

   be targets for analysis in potentially reducing prime installation costs.




Thesis     Issue 1: 9/25/08     Athanasios Koumpoulis                            Page lix
   After the cost of the highest costing component has been decreased, the

  histogram can be re-plotted as seen in the figures below. As Figure 4.3 shows, a

  point of saturation will be reached where the required amount of effort to gain

  further reductions in cost will be greater than the savings that can be achieved. Of

  course, it is important to cease efforts prior to reaching this saturation point and

  begin a different exercise in cost reduction.




                                          Highest cost component value

                                       Cost elements ranked in order of value

mfg. cost                              20% of these elements tend to account
                                       for 80% of the product’s prime mfg. cost

                       Individual components + installation




Figure 4.1: cost elements contributing towards the prime manufacturing costs in

products




Thesis     Issue 1: 9/25/08     Athanasios Koumpoulis                           Page lx
                                          cost reduction achieved



 mfg. cost                             elements ranked in order of value


                                          New highest cost component




                       Individual components + Assembly operation

Figure 4.2: effect of reducing the cost of the highest value element




                                  Cost components ranked in new order of
                                  value

 mfg. cost                                New highest cost component

                                                           Negligible?




                       Individual components + Assembly operation

Figure 4.3: revised cost elements contributing towards prime manufacturing costs in

product


Thesis     Issue 1: 9/25/08     Athanasios Koumpoulis                        Page lxi
4.2.6    Principles in Design-for-Manufacture



As a product’s design stabilizes, sales improve, investment confidence grows, and

quality in production increases. Opportunities for reducing the manufacturing costs of

the product through design-for-manufacture techniques are created.



Design-for-manufacture is a method used to decrease the costs of products in prime

manufacturing by implementing cost savings and cost avoidance for new products.

The method only applies to products and thus does not apply to processes.




4.2.6.1 Rationalize the range of existing products


This should be done according to the demand from the market and as suggested by

SWOT and PEST analyses.




4.2.6.2 Eliminate any design features that are unnecessary


Use feature analysis to observe the contribution made by the geometrical features to

the functionality of the system. Identify geometric features and designs that are

efficient and inefficient. Any inefficient design or pattern has potential for cost

reduction. If parts do not need to be used, or joints can be created without additional

parts due to the unique fusion process, they should not be used.




Thesis     Issue 1: 9/25/08    Athanasios Koumpoulis                            Page lxii
4.2.6.3 Introduce standard design features


These will promote the use of standard methods of installation.




4.2.6.4 Decrease variety


This should be done where ever possible, and across the range of components.

Promoting ‘interchangeability’ is the concept to keep in mind in this case.




4.2.6.5 Use value analysis to eliminate components which may be redundant



4.2.6.6 Blend components into single components (by design)



4.2.6.7 Eliminate waste material


Reuse and save material wherever this is practical. As polypropylene can be melted

and reformed, this is an option available to the company should it choose to pursue

it. Simple molds for pieces with short length could be constructed without the use of

industrial material if equipment capable of melting (without charring) is used. Without

melting and molding the material could be welded into different pieces if not reusable

in the current state.



4.2.7 Manufacturing objectives in the short-term




Thesis      Issue 1: 9/25/08    Athanasios Koumpoulis                          Page lxiii
4.2.7.1 Performance of product must not be degraded from changes due to cost

reduction.



4.2.7.2 Target programs for cost savings to achieve the following: a 5% company

turnover, or 5 times the salaries of those employed full-time on cost reduction.



4.2.7.3 Periods of investment payback should not exceed 12 months for component-

based changes or 24 months for production process-based changes.

4.2.7.4 Suppliers of new products should guarantee their proposed prices for a

minimum of 12 months following the date of sample approval.



4.2.7.5 Any advancement in technology should be justified based on the cost savings

achieved.



4.2.7.6 Undertake a whole spectrum of exercise for cost savings.



4.2.8 Manufacturing objectives in the long-term



4.2.8.1 Develop a system for, or get into the habit of, making continuing

improvements.



4.2.8.2 Decrease or stop issuing free items to sub contractors.




Thesis       Issue 1: 9/25/08   Athanasios Koumpoulis                              Page lxiv
4.2.8.3 Attain a lower amount of defective product and service. This can be done with

either inspection prior to purchase or an improved business relationship with the

supplier.

4.2.8.4 Attain a lower amount of inventory (component/tooling/product.)

4.2.9 Applied reduction strategies




Figure 4.4: Strategy employed to reduce the installation costs of existing products.



4.2.10      Changing processes to reduce installation costs

As time progresses, the following factors will increase if a product is to be successful.



4.2.10.1 Technical stability (lower risk of changes in design)



Thesis        Issue 1: 9/25/08   Athanasios Koumpoulis                            Page lxv
4.2.10.2 Market confidence



4.2.10.3 Demand for product (higher sales become equal to higher production

quantities)

4.2.10.4 Other manufacturing processes are realized


4.3      Proposal plan for business over three years


Koumpoulis SA will use the general strategies as mentioned above in the following

three years. In addition to these, the company will need to follow a specific agenda

for other aspects of their business.



As mentioned, Koumpoulis SA has 12 employees. Office employees are paid a

salary of roughly £18,000 per year while technicians earn £12,000 per year on

average. Transportation is an expense of the company as they use a van to transport

technicians to the job sites.



Koumpoulis SA may find it wise to make a considerable loan so that it can invest in

more supplies and subcontractors, provided that it can find enough projects to justify

the subcontractors. The supplier offers a higher discount when purchases are made

in a greater bulk amount than has been made by the company in the past. So, even

when loan interest is considered the loan has a high probability of being a worthwhile

investment as the discount rate of materials could double, from 20% to 40%.




Thesis        Issue 1: 9/25/08   Athanasios Koumpoulis                        Page lxvi
The following is a detailed analysis of specific figures in the past for Koumpoulis SA,

following this is a projection for the same figures when estimations of strategy

implementation is carried out over a few years.




4.3.1          Past performance and future projection


The following is a partial basic review of past performance. For more thorough

statistics see Figure J in the Appendix.

Past Performance

                      2005                    2006               2007

Sales                 £1,000,000              £1,300,000         £1,500,000

Gross Margin          £600,000                £800,000           £1,000,000

Gross Margin %        60.00%                  61.54%             66.67%

Operating Expenses £400,000                   £550,000           £700,000



Gross margin is calculated by subtracting cost of goods from the total sales revenue

and divided by the total revenue. Other values have simply been recorded based on

past values. In following future performance business expenditures include a

purchase of a van (estimated at £2000,) and includes employee salaries (£12,000-

18,000 for 12 employees.) The gross margin is calculated the same way and all other

values are an estimation based on past performance, future expenditures, and cost

reduction strategies. For values where the Pareto rule can be applied, such as

materials and given room for this application with bulk discount, values have been


Thesis     Issue 1: 9/25/08      Athanasios Koumpoulis                         Page lxvii
multiplied by P (.8) accordingly. Depreciation has also been considered for value in

welding and other equipment.

                      2009                    2010                   2011

Sales                 £1,600,000              £1,700,000             £1,900,000

Gross Margin          £650,000                £870,000               £1,200,000

Gross Margin %        67.00%                  68.57%                 69.97%

Operating Expenses £380,000                   £450,000               £600,000



It should be noted that no significant information has been researched revealing a

change in liability. Only a partial table has been included here (see Figure I in

Appendix.) Operating expenses show decrease significantly at first due to improved

cost reduction strategies and different materials, but then will show the same rise as

before as great amounts of material are purchased with a business loan and

subcontractors are hired. Fusion methodology may reduce this somewhat but for

estimation purposes it is assumed that the liabilities will follow the past cycle of the

company. Also note the factors of assets are not proportional in all areas to

accommodate a loan once ample funds are generated, although this is included in

totals for the three year table. We can see the positive impact as estimated when the

Pareto rule is applied and cost reducing strategies are considered. Considering the

loan interest and uncertainty, the margin of error is roughly 10%.




4.3.2          Profit and Loss



Thesis     Issue 1: 9/25/08      Athanasios Koumpoulis                            Page lxviii
The following is a prediction of profit loss over three years. A partial table is shown

here, more details are included in Figure H in the Appendix.

Total Operating
                         £1,313,992              £1,754,500         £2,039,000
Expenses

Profit Before Interest
                         £246,008                £1,478,500         £2,152,000
and Taxes

Interest Expense         £47,705                 £29,150            £12,470

Taxes Incurred           £50,410                 £362,338           £543,797

Net Profit               £147,893                £1,087,013         £1,595,733

Net Profit/Sales         7.55%                   26.77%             30.34%



The increase due to the loan is considered here, and it is taken as granted that the

supplies will be able to be used as they are purchased from the loan. Here margins

and profit margins are calculated in the classic way of relevant division, and all other

values are nothing more than rough estimates based on the same principles

discussed in cost reduction. Projections for cash flow follow.




4.3.3          Cash Flow

Pro Forma Cash Flow

                         2009                    2010               2011

Cash Received




Thesis       Issue 1: 9/25/08       Athanasios Koumpoulis                         Page lxix
Cash from Operations:

Cash Sales              £490,000                £1,015,000         £1,315,000

Cash from
                        £1,352,925              £2,780,277         £3,793,730
Receivables

Subtotal Cash from
                        £1,842,925              £3,795,277         £5,108,730
Operations


In the full table for cash flow (see Figure D in appendix) and in following tables the

loan is considered in the first year, in the amount of £500,000 with a £50,000

principle as shown. Only the partial table has been shown here. All other values are

calculated in the classic way or are simple estimations based on the relevant

principles, past performance, and future expenditures.



4.3.4           Balance Sheets – Projected


The company's projected balance sheets for 2000-2011 are shown below. A more

complete table is included in the Appendix (see figure F.)

Retained Earnings       £130,000                £277,893           £1,364,905

Earnings                £147,893                £1,087,013         £1,595,733

Total Capital           £327,893                £1,414,905         £3,010,638

Total Liabilities and
                        £792,100                £1,761,196         £3,224,798
Capital

Net Worth               £327,893                £1,414,905         £3,010,638




Thesis       Issue 1: 9/25/08      Athanasios Koumpoulis                          Page lxx
The information here is taken either from the above tables or combined and totalled

to fit the category. No complex calculations beyond basic mathematics operations are

required. The following uses the above estimations and loose calculations to show

more complex relationships in the form of ratios.



4.3.5           Ratios


Total Asset
                    2.47            2.31                 1.63          n.a
Turnover

Debt Ratios

Debt to Net
                    1.42            0.24                 0.07          n.a
Worth

Current Liab. to
                    0.19            0.40                 0.81          n.a
Liab.

Liquidity Ratios

Net Working
                    £372,789        £1,123,001           £2,291,934    n.a
Capital

Interest
                    5.16            50.72                172.57        n.a
Coverage



We can see that this business plan will lead to considerable success should the

strategies be followed in accordance with the instructions. A partial table is shown


Thesis        Issue 1: 9/25/08   Athanasios Koumpoulis                          Page lxxi
here, a full table is shown in the Appendix (see Figure G.) Sales are projected to

jump as shown in the second year due to the new capabilities in the first year

following the loan. Basic ratios are calculated by basic division between the two

categories reflected. Advertising expenses typically not calculated for this company,

but is a safeguard to ensure that the company can make the most of its supplies

purchased from the loan. While these numbers are in fact projections rather than

sure-fire predictions, they are quite attainable. New customers, reputation, and

project quality are critical in achieving this. The Aquatherm pipes will aid in increasing

the company’s reputation, and advertising will aid in the company being able to install

all of its material purchased at a bulk discount price from the loan.




4.3.6           Conclusions

In completing this project the following has been accomplished:

        A review and analysis of Koumpoulis SA’s business scope and needs

        A SWOT and PEST analysis to give scope to cost reduction strategies and

         calculations

        Aquatherm pipes have been proven to be better than classic materials, in both

         innovation of design, application, and fusion method

        A variety of new technology pipes have been compared, the standard pipe

         was found to be best as it met the most of the company needs

        The other new technology pipes were considered and found to be more useful

         than classic materials for specialty projects




Thesis       Issue 1: 9/25/08     Athanasios Koumpoulis                           Page lxxii
        A list of innovative cost reduction strategies were combined and applied to

         Koumpoulis SA

        A full and thorough business plan over the next three years was shown in

         detail

        A ratio analysis followed the plan to further show statistical relationships



In conclusion, Koumpoulis SA has much potential to gain more of a competitive edge

from changes made to its production. Aquatherm products alone will saving joining

time, and once training to employees has been completed this factor will really give

the company a chance to shine. Aquatherm pipes are a trend of the future, and

clients that consider Koumpoulis SA to be using high quality, new technology that is

good for the ecosystem will further increase its reputation. The principles as

described here apply to general projects, although it is recommended that

Koumpoulis SA documents their expenditures and applies the logic and economics

formulated and explained here so that they can see first hand the differences that

can be realized by following such a formal plan.




4.3.7             Recommendations


In future planning and function the following is recommended:

        Increased recording and document filing so that the actual performance can

         be tracked in direct correlation to the three year plan

        Periodic meetings with employees to review the cost reduction strategies to

         see if they can be further applied to any circumstance


Thesis        Issue 1: 9/25/08    Athanasios Koumpoulis                            Page lxxiii
        The financial situation thoroughly analysed periodically so that the best time to

         take a loan for supply purchases can be determined

        Direct action in advertising, geographically expanded availability for services,

         and increased soliciting to increase project rate so that subcontractors can be

         hired

        Consideration of exploiting foreign labour under direction supervision

        Attempt at moulding and/or joining techniques to make the most out of waste

         material. The following describes how the material is initially moulded:




   Figure 4.3: Plastic injection moulding

The company could also invest in the machine showed if it wished to attempt to make

more use of excess material from either its own projects or as a recycler of waste

from other companies as well.



Thesis       Issue 1: 9/25/08     Athanasios Koumpoulis                             Page lxxiv
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Thesis     Issue 1: 9/25/08      Athanasios Koumpoulis                     Page lxxv
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www.googobits.com/articles/932-how-to-prepare-a-cash-flow-statement.html Viewed

Sep 25th 2008



www.finpipe.com/equity/finratan.htm Viewed Sep 25th 2008




Thesis     Issue 1: 9/25/08    Athanasios Koumpoulis                         Page lxxvi
www.va-interactive.com/inbusiness/editorial/finance/ibt/ratio_analysis.html    Viewed

Sep 25th 2008



www.bized.co.uk/compfact/ratios/index.htm Viewed Sep 25th 2008



cpaclass.com/fsa/ratio-01a.htm Viewed Sep 25th 2008



Wefatherm. www.wefatherm.com. Viewed Sep 25th 2008.




Bibliography


www.businessfinance.com/

www.dol.gov/dol/topic/hiring/foreign.htm

www.entrepreneur.com/growyourbusiness/howtoguides/article81358.html

www.ezunsecured.com/

www.foreignlaborcert.doleta.gov/hiring.cfm


www.merchantloans.com/


www.sellersreference.com/wholesale_suppliers.html


www.sfmic.com/res_cat_doc/comptalk_hiring_subcontractors_mn.pdf




Thesis     Issue 1: 9/25/08    Athanasios Koumpoulis                          Page lxxvii
          APPENDICES




          Appendix A: Gantt Chart



SUMMARY of the 2008 COST REDUCTION PROGRAM

                                         Unit
                                                                  Estimated           Capital
                                         manufacturing
                                                                  Annual              Investment
               Product/                  cost
Modification
               Process    Description                                         Cost                Estimate
Number                                                            Quantity
               Code                      Current Proposed                     Saving Cost         d
                                                                  (units/
                                         (£/ unit)   (£/ unit)                (£/     (£)         Payback
                                                                  year)
                                                                              year)               (months)

MOD001         001        Part change    10          8            100+        200+    800+        12

MOD002         002        Part change    20          16           100+        400+    1600+ 12




          Thesis      Issue 1: 9/25/08    Athanasios Koumpoulis                             Page lxxviii
MOD003           003        Part change       30          24             100+        600+           2400+ 12

MOD004           004        Part change       20          16             100+        400+           1600+ 12

MOD005           005        Part change       20          16             100+        400+           1600+ 12

MOD006           006        Part change       10          8              100+        200+           800+      12

MOD007           007        Part change       10          8              100+        200+           800+      12

MOD008           008        Part change       10          8              100+        200+           800+      12

MOD009           009        Part change       10          8              100+        200+           800+      12

MOD010           010        Part change       20          16             100+        400+           1600+ 12



                                                    Batch
                                      Estimat                   Curre    Time
                                                    Order                            Replann
                                      ed                        nt Old left to                       Planned
               Produ                                Quanti                           ed       Old
Modificati                            Annual                    Stock    Suppl                       Introducti
               ct/      Descripti                   ty    for                        Stock
on                                    Quantit                   Level    y     Old                   on      Date
               Proces on                            Old                              Level
Number                                y                         (units   Stock                       for      New
               s Code                               Stock                            (units    in
                                      (units/                   in       (month                      Stock
                                                    (units/                          stock)
                                      year)                     stock)   s)
                                                    order)

                        Part
MOD001         001                    100+          tba         tba      tba         tba             tba
                        change

                        Part
MOD002         002                    100+          tba         tba      tba         tba             tba
                        change

                        Part
MOD003         003                    100+          tba         tba      tba         tba             tba
                        change



             Thesis     Issue 1: 9/25/08        Athanasios Koumpoulis                                     Page lxxix
                     Part
MOD004     004                     100+       tba       tba       tba   tba    tba
                     change

                     Part
MOD005     005                     100+       tba       tba       tba   tba    tba
                     change

                     Part
MOD006     006                     100+       tba       tba       tba   tba    tba
                     change

                     Part
MOD007     007                     100+       tba       tba       tba   tba    tba
                     change

                     Part
MOD008     008                     100+       tba       tba       tba   tba    tba
                     change

                     Part
MOD009     009                     100+       tba       tba       tba   tba    tba
                     change

                     Part
MOD010     010                     100+       tba       tba       tba   tba    tba
                     change



         Appendix B and C: Product summary tables


         Common chemical name: polypropylene

         Formula: (-C-H2-CHCH3-)n

         Generic name: polyolefines

         CAS number: 9003-07-0 and 9010-79-1

         Resistance to impacts: 18mj/square meter (ISO/R179) and 70kp/square centimeter at

         0 Celsius

         Tensile strength: 40N/square millimeter (ISO/R572)



         Thesis      Issue 1: 9/25/08     Athanasios Koumpoulis                      Page lxxx
Elasticity Factor: 800N/square millimeter (ISO178)




Thesis     Issue 1: 9/25/08    Athanasios Koumpoulis   Page lxxxi
Thesis   Issue 1: 9/25/08   Athanasios Koumpoulis   Page lxxxii
Thesis   Issue 1: 9/25/08   Athanasios Koumpoulis   Page lxxxiii
Figure D: properties of polypropylene; source: MSDS, aquathermpipe.com


Pro Forma Cash Flow

                        2009                    2010         2011

Cash Received

Cash from Operations:

Cash Sales              £490,000                £1,015,000   £1,315,000

Cash from
                        £1,352,925              £2,780,277   £3,793,730
Receivables

Subtotal Cash from
                        £1,842,925              £3,795,277   £5,108,730
Operations

Additional Cash Received

Sales Tax, VAT,
                        £0                      £0           £0
HST/GST Received

New Current             £0                      £0           £0



Thesis       Issue 1: 9/25/08      Athanasios Koumpoulis                  Page lxxxiv
Borrowing

New Other Liabilities
                         £0                      £0           £0
(interest-free)

New Long-term
                         £500,000                £0           £0
Liabilities

Sales of Other
                         £0                      £0           £0
Current Assets

Sales of Long-term
                         £0                      £0           £0
Assets

New Investment
                         £0                      £0           £0
Received

Subtotal Cash
                         £2,342,925              £3,795,277   £5,108,730
Received

Expenditures             2009                    2010         2011

Expenditures from Operations:

Cash Spending            £138,658                £224,124     £284,739

Payment of
                         £1,704,746              £2,814,733   £3,386,897
Accounts Payable

Subtotal Spent on
                         £1,843,404              £3,038,857   £3,671,636
Operations

Additional Cash Spent




Thesis        Issue 1: 9/25/08      Athanasios Koumpoulis                  Page lxxxv
Sales Tax, VAT,
                        £0                      £0           £0
HST/GST Paid Out

Principal

Repayment of            £50,000                 £0           £0

Current Borrowing

Other Liabilities

Principal               £0                      £0           £0

Repayment

Long-term Liabilities

Principal               £175,100                £166,800     £166,800

Repayment

Purchase Other
                        £0                      £0           £0
Current Assets

Purchase Long-term
                        £270,000                £200,000     £300,000
Assets

Dividends               £0                      £0           £0

Subtotal Cash Spent £2,338,504                  £3,405,657   £4,138,436

Net Cash Flow           £4,421                  £389,620     £970,294

Cash Balance            £64,421                 £454,041     £1,424,335

Figure E: Cash flow

Pro Forma Balance Sheet




Thesis      Issue 1: 9/25/08       Athanasios Koumpoulis                  Page lxxxvi
Assets

Current Assets            2009                    2010         2011

Cash                      £64,421                 £454,041     £1,424,335

Accounts
                          £247,075                £511,798     £663,069
Receivable

Inventory                 £135,600                £280,353     £362,391

Other Current
                          £15,000                 £15,000      £15,000
Assets

Total Current Assets £462,096                     £1,261,192   £2,464,794

Long-term Assets

Long-term Assets          £370,000                £570,000     £870,000

Accumulated
                          £39,996                 £69,996      £109,996
Depreciation

Total Long-term
                          £330,004                £500,004     £760,004
Assets

Total Assets              £792,100                £1,761,196   £3,224,798

Liabilities and Capital

Current Liabilities       2009                    2010         2011

Accounts Payable          £79,307                 £128,191     £162,860

Current Borrowing         £0                      £0           £0




Thesis       Issue 1: 9/25/08        Athanasios Koumpoulis                  Page lxxxvii
Other Current
                         £10,000                 £10,000             £10,000
Liabilities

Subtotal Current
                         £89,307                 £138,191            £172,860
Liabilities

Long-term Liabilities £374,900                   £208,100            £41,300

Total Liabilities        £464,207                £346,291            £214,160

Paid-in Capital          £50,000                 £50,000             £50,000

Retained Earnings        £130,000                £277,893            £1,364,905

Earnings                 £147,893                £1,087,013          £1,595,733

Total Capital            £327,893                £1,414,905          £3,010,638

Total Liabilities and
                         £792,100                £1,761,196          £3,224,798
Capital

Net Worth                £327,893                £1,414,905          £3,010,638

Figure F: Balance Sheet

Ratio Analysis

                    2009               2010                 2011        Industry Profile

Sales Growth        30.67%             107.14%              29.56%      -0.50%

Percent of Total Assets

Accounts
                    31.19%             29.06%               20.56%      24.80%
Receivable




Thesis        Issue 1: 9/25/08      Athanasios Koumpoulis                       Page lxxxviii
Inventory           17.12%          15.92%               11.24%    26.10%

Other Current
                    1.89%           0.85%                0.47%     24.20%
Assets

Total Current
                    58.34%          71.61%               76.43%    75.10%
Assets

Long-term
                    41.66%          28.39%               23.57%    24.90%
Assets

Total Assets        100.00%         100.00%              100.00%   100.00%

Current
                    11.27%          7.85%                5.36%     35.70%
Liabilities

Long-term
                    47.33%          11.82%               1.28%     18.50%
Liabilities

Total Liabilities   58.60%          19.66%               6.64%     54.20%

Net Worth           41.40%          80.34%               93.36%    45.80%

Percent of Sales

Sales               100.00%         100.00%              100.00%   100.00%

Gross Margin        79.59%          79.63%               79.68%    35.80%

Selling, General

& Administrative 72.00%             52.86%               49.17%    20.80%

Expenses

Advertising         2.27%           1.60%                1.33%     0.70%



Thesis        Issue 1: 9/25/08   Athanasios Koumpoulis                     Page lxxxix
Expenses

Profit Before

Interest and       12.55%          36.42%               40.91%   4.00%

Taxes

Main Ratios

Current            5.17            9.13                 14.26    2.20

Quick              3.66            7.10                 12.16    1.15

Total Debt to
                   58.60%          19.66%               6.64%    54.20%
Total Assets

Pre-tax Return
                   60.48%          102.43%              71.07%   7.30%
on Net Worth

Pre-tax Return
                   25.04%          82.29%               66.35%   16.00%
on Assets

Additional
                   2009            2010                 2011
Ratios

Net Profit
                   7.55%           26.77%               30.34%   n.a
Margin

Return on
                   45.10%          76.83%               53.00%   n.a
Equity

Activity Ratios

Accounts           5.95            5.95                 5.95     n.a



Thesis       Issue 1: 9/25/08   Athanasios Koumpoulis                     Page xc
Receivable

Turnover

Collection Days 59                  45                   54           n.a

Inventory
                    3.00            3.98                 3.33         n.a
Turnover

Accounts

Payable             21.55           22.34                21.01        n.a

Turnover

Payment Days        21              13                   16           n.a

Total Asset
                    2.47            2.31                 1.63         n.a
Turnover

Debt Ratios

Debt to Net
                    1.42            0.24                 0.07         n.a
Worth

Current Liab. to
                    0.19            0.40                 0.81         n.a
Liab.

Liquidity Ratios

Net Working
                    £372,789        £1,123,001           £2,291,934   n.a
Capital

Interest
                    5.16            50.72                172.57       n.a
Coverage




Thesis        Issue 1: 9/25/08   Athanasios Koumpoulis                      Page xci
Additional Ratios

Assets to Sales 0.40                  0.43                 0.61        n.a

Current

Debt/Total          11%               8%                   5%          n.a

Assets

Sales/Net Worth 5.98                  2.87                 1.75        n.a

Dividend Payout 0.00                  0.00                 0.00        n.a

Figure G: Ratios

Pro Forma Profit and Loss

                        2009                    2010              2011

Sales                   £1,960,000              £4,060,000        £5,260,000

Direct Costs of
                        £400,000                £827,000          £1,069,000
Goods

Other                   £0                      £0                £0

Cost of Goods Sold £400,000                     £827,000          £1,069,000

Gross Margin            £1,560,000              £3,233,000        £4,191,000

Gross Margin %          79.59%                  79.63%            79.68%

Expenses:

Payroll                 £635,040                £910,000          £1,000,000

Sales and Marketing
                        £167,900                £220,000          £265,000
and Other Expenses



Thesis       Issue 1: 9/25/08      Athanasios Koumpoulis                       Page xcii
Depreciation             £9,996                  £30,000      £40,000

Quality Assurance        £93,800                 £104,000     £125,000

General &
                         £96,000                 £124,000     £174,000
Administrative

Manufacturing &
                         £129,600                £130,000     £175,000
Engineering

Machining &
                         £86,400                 £100,000     £110,000
Systems Building

Payroll Taxes            £95,256                 £136,500     £150,000

Other                    £0                      £0           £0

Total Operating
                         £1,313,992              £1,754,500   £2,039,000
Expenses

Profit Before Interest
                         £246,008                £1,478,500   £2,152,000
and Taxes

Interest Expense         £47,705                 £29,150      £12,470

Taxes Incurred           £50,410                 £362,338     £543,797

Net Profit               £147,893                £1,087,013   £1,595,733

Net Profit/Sales         7.55%                   26.77%       30.34%

Figure H: Profit and Loss

Future Performance

                         2009                    2010         2011



Thesis       Issue 1: 9/25/08       Athanasios Koumpoulis                  Page xciii
Sales                   £1,600,000              £1,700,000   £1,900,000

Gross Margin            £650,000                £870,000     £1,200,000

Gross Margin %          67.00%                  68.57%       69.97%

Operating Expenses £380,000                     £450,000     £600,000

Collection Period
                        19                      25           34
(days)

Inventory Turnover      3.00                    3.00         3.00

Balance Sheet

Current Assets          2009                    2010         2011

Cash                    £40,000                 £40,000      £80,000

Accounts
                        £60,000                 £90,000      £150,000
Receivable

Inventory               £40,000                 £70,000      £110,000

Other Current
                        £6,000                  £14,000      £17,000
Assets

Total Current Assets £146,000                   £214,000     £357,000

Long-term Assets

Capital Assets          £100,000                £100,000     £100,000

Accumulated
                        £10,000                 £20,000      £30,000
Depreciation




Thesis       Issue 1: 9/25/08      Athanasios Koumpoulis                  Page xciv
Total Long-term
                          £90,000                 £80,000    £70,000
Assets

Total Assets              £185,000                £270,000   £365,000

Capital and Liabilities

                          2009                    2010       2011

Accounts Payable          £25,000                 £50,000    £75,000

Current Borrowing         £15,000                 £35,000    £50,000

Other Current
                          £5,000                  £5,000     £10,000
Liabilities

Subtotal Current
                          £45,000                 £90,000    £135,000
Liabilities

Long-term Liabilities £50,000                     £50,000    £50,000

Total Liabilities         £95,000                 £140,000   £185,000

Paid-in Capital           £50,000                 £50,000    £50,000

Retained Earnings         £40,000                 £80,000    £130,000

Earnings                  £0                      £0         £0

Total Capital             £90,000                 £130,000   £180,000

Total Capital and
                          £185,000                £270,000   £365,000
Liabilities

Other Inputs              2009                    2010       2011




Thesis        Issue 1: 9/25/08       Athanasios Koumpoulis              Page xcv
Payment Days            30                      30           30

Sales on Credit         £750,000                £1,000,000   £1,125,000

Receivables
                        18.75                   12.50        8.65
Turnover

Figure I: Estimated Future Performance


Past Performance

                        2005                    2006         2007

Sales                   £1,000,000              £1,300,000   £1,500,000

Gross Margin            £600,000                £800,000     £1,000,000

Gross Margin %          60.00%                  61.54%       66.67%

Operating Expenses £400,000                     £550,000     £700,000

Collection Period
                        19                      22           34
(days)

Inventory Turnover      3.00                    3.00         3.00

Balance Sheet

Current Assets          2005                    2006         2007

Cash                    £20,000                 £40,000      £60,000

Accounts
                        £40,000                 £80,000      £130,000
Receivable

Inventory               £30,000                 £60,000      £90,000




Thesis       Issue 1: 9/25/08      Athanasios Koumpoulis                  Page xcvi
Other Current
                          £5,000                  £10,000    £15,000
Assets

Total Current Assets £95,000                      £190,000   £295,000

Long-term Assets

Capital Assets            £100,000                £100,000   £100,000

Accumulated
                          £10,000                 £20,000    £30,000
Depreciation

Total Long-term
                          £90,000                 £80,000    £70,000
Assets

Total Assets              £185,000                £270,000   £365,000

Capital and Liabilities

                          2005                    2006       2007

Accounts Payable          £25,000                 £50,000    £75,000

Current Borrowing         £15,000                 £35,000    £50,000

Other Current
                          £5,000                  £5,000     £10,000
Liabilities

Subtotal Current
                          £45,000                 £90,000    £135,000
Liabilities

Long-term Liabilities £50,000                     £50,000    £50,000

Total Liabilities         £95,000                 £140,000   £185,000




Thesis        Issue 1: 9/25/08       Athanasios Koumpoulis              Page xcvii
Paid-in Capital          £50,000                 £50,000         £50,000

Retained Earnings        £40,000                 £80,000         £130,000

Earnings                 £0                      £0              £0

Total Capital            £90,000                 £130,000        £180,000

Total Capital and
                         £185,000                £270,000        £365,000
Liabilities

Other Inputs             2005                    2006            2007

Payment Days             30                      30              30

Sales on Credit          £750,000                £1,000,000      £1,125,000

Receivables
                         18.75                   12.50           8.65
Turnover

Figure J: Past Performance

Glossary

Aquatherm: German based company selling varieties of polypropylene pipes, also

refers to the standard line of pipe Aquatherm manufactures



Cash flow: this is a depiction of how funds are transferred within a company

Climatherm: a special design of polypropylene pipes designed to withstand more

extreme climatic conditions



Cost reduction strategy: any methodology employed to reduce the expenditures of a

given company


Thesis        Issue 1: 9/25/08      Athanasios Koumpoulis                      Page xcviii
Decision matrix: a table used in calculating factors specific to differing materials and

applied with weighing factors for a sum total



Dividends: cash transfers of a company



Elasticity: refers to the “stretchiness” a material exhibits



Faser-composite technology: manufactured by aquatherm to reduce linear expansion

by 75%



Firestop: another technology in pipes for the purpose of flame retardation



Fusion welding: a unique process in welding that does not use solvents or other

additional material, but rather heat to melt the two pieces together to form one

chemically indistinguishable piece



Fusiotherm: the original name for standard aquatherm products



Gantt chart: this chart shows a timeline for work and research to be performed in

conjunction with the progress actually performed




Thesis      Issue 1: 9/25/08     Athanasios Koumpoulis                          Page xcix
Gross profit margin: margin calculated by subtracting costs from sales revenue and

dividing by



Koumpoulis SA: Greece based plumbing company in operation for over 30 years



MSDS: stands for “material safety data sheet,” required to be public for all materials

so that anyone can be aware of any potential hazard the material may present



Pareto rule: also known as the 80-20 rule, this states that 80% of the installation

costs are due to 20% of what is involved



PEST analysis: used in strategic planning, determines the political, economic, social,

and technological issues regarding a company



pH value: refers to the acidity or caustic level of a material, ranging from -14 to 14

with 0 being neutral



Plastic injection moulding: the process of moulding in the manufacture of

polypropylene pipes



Polypropylene: a unique material known for its ability to be joined by chemical bonds

so that it forms one indistinguishable part




Thesis        Issue 1: 9/25/08   Athanasios Koumpoulis                          Page c
Profit loss: this is an analysis designed to show how excess funds in a company

depreciate



SWOT analysis: used in strategic planning, determines the strengths, weaknesses,

opportunities, and threats regarding a company



UV: ultraviolet, referring to solar radiation that is damaging to standard aquatherm

pipes after prolonged exposure



TBA: abbreviation for to be announced, often used in projections with undetermined

variables




Thesis       Issue 1: 9/25/08    Athanasios Koumpoulis                        Page ci

								
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