Material Storage and Dispensing Device for the Kitchen Charles E Schaefer, Jr. School of Engineering Department of Mechanical Engineering E 421 Engineering Economics Final Presentation Thursday, December 11th, 2003 Mechanical Engineering Ethan Jayson Cora LaFrance Judy Ng Advisor: Professor Zhenqi Zhu Sponsors: Mark Miller & Josh Porter Project Description - Technical To Develop a Conceptual Design and Prototype for a Material Storage Device with the Ability to Accurately Measure and Dispense Powdered or Dry Food Items for Kitchen Use. Define Customer Perform Market & Develop Conceptual Design for Needs Patent Research Designs Manufacturability 3D CAD Industrial Design Prototype FEA Analysis Modeling Assessment Our Design Project Description - Business Design and Build a Product to Store and Dispense Common Kitchen Dry Goods Target Markets: Homeowners Parents of Newborn Babies Business Model ITEM BUSINESS FUNCTION OUTSOURCE IN HOUSE 1 Conduct Market Research, Preliminary Design XX 2 Research and Development (R&D) XX 3 Product/Process/Service Testing: Alpha, Beta XX 4 Licensing Technology FROM Others XX 5 Fabricate Components XX 6 Develop Software XX 7 Assembly Components (Final Assembly) XX 8 Test Final Assemblies, Pack & Ship XX 9 Distribute Product/Process/Service to Customer XX 10 Market to OEM, Distributors XX 11 Market Directly to End User XX 12 Train Customers, End Users XX 13 Provide After Sales Service XX (Training, Adjustment, Repair, Replacement, Refund) 14 Consult on Product/ Process/Service XX 15 License Technology TO Others XX Business Model-Out Source vs. Outsource Own Make Yourself Manufacture R&D Components Licensing Assembly Marketing Marketing to to End Users Retailers Distributio n Customer Customer Service Business Type Product Business Consumer Market Functions Research & Development Market Research Customer Needs Develop Device to Store and Dispense Bulk Dry Goods for Kitchen Use Assembly In-House Final Assembly Customer Service Train Retailers After-Sales Service Customer/Needs Customer Need: A Centralized Location for Cooking Ingredients One Device to Store, Measure, and Dispense Ingredients Benefits: All-In-One Aspect – Time & Space Efficient High-Tech Appeal to Kitchen Reduce Risk of Spills of Ingredients Primary Customers: Age Group: 30 to 60 Year-Olds (Male and Female) Homeowners Newborn Parents Total Market Share: 2.8 million People by Year 5 (1% of U.S. Population, 20% of market) Competitor Analysis Main Competitors: KitchenArt® Appliance/Kitchen Goods Catalogs Feature & Attribute Comparisons Ability to Store Ingredients Accurate Measuring Capability KitchenArt® User Friendliness Aesthetic Appeal Price/Performance to Competitors Competitor Product Prices: Range $20 to $75 Our Target Price: $20 to $30 Sunpentown Competitor Analysis Sample Product Features Assessment Detachable compartments Adjustable measuring spoon (1/8 to full teaspoon) Shaker port for light seasoning Pour feature for heavy seasoning Pros Centralized location for material Detachable compartments Adjustable measuring spoon Different exit ports for different amounts of seasoning Cons Product Name: Adjust-A-Spoon Spice Difficult to refill compartments Carousel Limited measuring capabilities Manufacturer: KitchenArt® Measuring spoon must be cleaned after each use Price of Product Price Basis Range Price 1. Cost plus Profit $20 to $30 $30 2. Competition Price $30 - $80 $50 Adjusted for Features 3. Value to Customer $20 - $30 $22 Logic: Price Chosen Based on Value to Customer Cost to Commercialize Total Cost of Alpha Test = $21,000 Total Cost of Beta Test = $81,000 $90,000 $80,000 $70,000 $60,000 $50,000 $40,000 $ $30,000 $20,000 $10,000 $0 Alpha Beta Finances-Income Statement Year 0 1 2 3 4 5 Operating Revenue (K) $0 $12,320 $19,219 $16,657 $10,394 $7,206 Cash Expenses (K) $0 $2,982 $12,049 $11,110 $8,619 $7,410 Depreciation (K) $0 $125 $200 $120 $72 $72 Pretax Net Income (K) $0 $2,587 $6,627 $5,256 $1,585 ($336) Income taxes (K) $0 $776 $1,988 $1,577 $475 ($101) Net Income (After Tax) (K) $0 $1,811 $4,639 $3,679 $1,109 ($235) Total Cash Flow (K) ($3,061) $1,137 $3,992 $2,902 $231 ($1,171) Finances-Capital-One Time Year 0 1 2 3 4 5 6 Principal $0 ($798,284) ($846,181) ($896,952) ($950,769) ($1,007,815) $0 Repayment Equity Capital $3,625,175 $0 $0 $0 $0 $0 $17,995 Loan Proceeds $4,500,000 Capital $0 $0 $0 $0 $0 $0 $80,004 Gains/Losses Working Capital ($6,686,364) $0 $0 $0 $0 $0 $6,686,364 Total $1,438,811 ($798,284) ($846,181) ($896,952) ($950,769) ($1,007,815) $6,784,663 Finances-Summary FoMs FOM VALUES MARR 12% IRR 64.97% $5,878,339 NPV Payback in Years 1.75 yrs Financial Leverage IRR IRR Equity Capital Loan (6% APR) (3% APR) 100% 0 39.39% 39.39% 80% 20% 39.27% 39.61% 60% 40% 48.51% 49.36% Conclusion: GOOD NEWS! As the loans increase, the IRR increases as well Breakeven/Payback Analysis At 40.41% Equity ($4,500,000 Loan) Breakeven Occurs At: 1.75 Years Sales Level of $7,432,690 Sales Volume of 126,865 Units At 100% Equity ($0 Loan) Breakeven Occurs At: 2.6 Years Sales Level of $7,432,690 Sales Volume of 126,865 Units Breakeven/Payback Analysis Sensitivity Analysis Key (at 10%) Ratio Rank Price 5.820 1 Volume 4.026 2 Total Operating -4.285 3 Expenses MARR 0.555 4 Interest Rate 0.693 5 Borrowed Capital 0.1435 6 Conclusion: Unit Price is the most sensitive element with Sensitivity Ratio of 5.820 Patent Analysis Existing Patents Dispenser for Granulated and Powered Dry Material Dry Material Dispenser Dry Product Dispenser Patent Potential The Combination of Dispensing Mechanisms Overall Assessment of Product’s Intellectual Property GOOD! Possible Alteration or Improvement to Patented Ideas Project Encourages of Innovative Thinking Patents! Patent Analysis Patent Num: 4,856,681 Patent Num: 3,344,958 Risk Analysis of Venture Markets Existing New New Low to Medium High Technology Year 0 Existing Low Year 5 Medium to High Venture Capitalist Attractiveness of Project to VC: New Innovative Concept Large Target Market Low Risk & High Return Few Competitors No defined competition Existing products need improvements Decision: Will Not Seek VC Funding Would Lose Control of Business Positive Cash Flows Will Kick in Quickly Anyway Lesson Learned-Technogenesis® Economics of Engineering Business Feasibilities Technical Feasibilities Risk vs. Reward Lesson Learned-E421 Combination of Economics and Engineering Impact of Economics on Engineering Design Importance of Patent and Existing Product Research Value of Team Work Project Management/Leadership Thank You!
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