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					  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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