Material Storage and Dispensing Device for the Kitchen

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 11 th, 2003 Mechanical Engineering Ethan Jayson Cora La. France Judy Ng Advisor: Professor Zhenqi Zhu Sponsors: Mark Miller & Josh Porter

Project Description - Technical n 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 Needs Perform Market & Patent Research Prototype FEA Analysis Develop Conceptual Designs 3 D CAD Modeling Design for Manufacturability Industrial Design Assessment

Our Design

Project Description - Business n n Design and Build a Product to Store and Dispense Common Kitchen Dry Goods Target Markets: n Homeowners n 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 10 Market to OEM, Distributors 11 Market Directly to End User 12 Train Customers, End Users XX 13 Provide After Sales Service (Training, Adjustment, Repair, Replacement, Refund) XX 14 Consult on Product/ Process/Service XX XX

Business Model-Out Source vs. Own Make Yourself Outsource Manufacture Components R&D Licensing Assembly Marketing to End Users Marketing to Retailers Distribution Customer Service

Business Type n n Product Business Consumer Market Functions n Research & Development n n n Assembly n n Market Research Customer Needs Develop Device to Store and Dispense Bulk Dry Goods for Kitchen Use In-House Final Assembly Customer Service n n Train Retailers After-Sales Service

Customer/Needs n Customer Need: n n n Benefits: n n All-In-One Aspect – Time & Space Efficient High-Tech Appeal to Kitchen Reduce Risk of Spills of Ingredients Primary Customers: n n A Centralized Location for Cooking Ingredients One Device to Store, Measure, and Dispense Ingredients Age Group: 30 to 60 Year-Olds (Male and Female) Homeowners Newborn Parents Total Market Share: n 2. 8 million People by Year 5 (1% of U. S. Population, 20% of market)

Competitor Analysis n Main Competitors: n n n Feature & Attribute Comparisons n n n Kitchen. Art® Appliance/Kitchen Goods Catalogs Ability to Store Ingredients Accurate Measuring Capability User Friendliness Aesthetic Appeal Kitchen. Art® Price/Performance to Competitors n n Competitor Product Prices: Range $20 to $75 Our Target Price: $20 to $30 Sunpentown

Competitor Analysis Sample Product Assessment n n Product Name: Adjust-A-Spoon Spice Carousel Manufacturer: Kitchen. Art® n Features n Detachable compartments n Adjustable measuring spoon (1/8 to full teaspoon) n Shaker port for light seasoning n Pour feature for heavy seasoning Pros n Centralized location for material n Detachable compartments n Adjustable measuring spoon n Different exit ports for different amounts of seasoning Cons n Difficult to refill compartments n Limited measuring capabilities n Measuring spoon must be cleaned after each use

Price of Product Price Basis Pr Ran i ge c e 1. Cost plus Profit $20 to $3 $3 0 0 2. Competitio $30 $5 n Price $8 0 0 Adjusted for Logic: Price Chosen Based on Value to Customer Features

Cost to Commercialize n n Total Cost of Alpha Test = $21, 000 Total Cost of Beta Test = $81, 000

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 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) ($3, 061) $1, 137 $3, 992 $2, 902 $231 ($1, 171) Total Cash Flow (K)

Finances-Capital-One Time Year Principal Repayment 0 1 2 3 4 5 $0 ($798, 284) ($846, 181) ($896, 952) ($950, 769) ($1, 007, 815) 6 $0 Equity Capital $3, 625, 175 $0 $0 $0 Loan Proceeds $4, 500, 000 $0 $0 $0 $80, 004 ($6, 686, 364) $0 $0 $0 $6, 686, 364 ($798, 284) ($846, 181) ($896, 952) ($950, 769) ($1, 007, 815) $6, 784, 663 Capital Gains/Losses Working Capital Total $1, 438, 811 $17, 995

Finances-Summary Fo. Ms FOM MARR IRR NPV Payback in Years VALUES 12% 64. 97% $5, 878, 339 1. 75 yrs

Financial Leverage IRR (6% APR) (3% APR) Equity Capital Loan 100% 0 39. 39% 80% 20% 39. 27% 39. 61% 60% 48. 51% 49. 36% Conclusion: GOOD NEWS! As the loans increase, the IRR increases as well

Breakeven/Payback Analysis n At 40. 41% Equity ($4, 500, 000 Loan) n Breakeven Occurs At: 1. 75 Years n Sales Level of $7, 432, 690 n Sales Volume of 126, 865 Units n n At 100% Equity ($0 Loan) n Breakeven Occurs At: 2. 6 Years n Sales Level of $7, 432, 690 n Sales Volume of 126, 865 Units n

Breakeven/Payback Analysis

Sensitivity Analysis Key (at 10%) Ratio Rank Price 5. 820 1 Volume 4. 026 2 Total Operating Expenses -4. 285 3 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 n Existing Patents n n Patent Potential n n Dispenser for Granulated and Powered Dry Material Dispenser Dry Product Dispenser The Combination of Dispensing Mechanisms Overall Assessment of Product’s Intellectual Property GOOD! n n 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 Low to Medium New High Year 0 Existing Technology New Existing Low Year 5 Medium to High

Venture Capitalist Attractiveness of Project to VC: n New Innovative Concept n Large Target Market n Low Risk & High Return n Few Competitors n n No defined competition Existing products need improvements Decision: Will Not Seek VC Funding n Would Lose Control of Business n Positive Cash Flows Will Kick in Quickly Anyway

Lesson Learned-Technogenesis® n n Economics of Engineering Business Feasibilities Technical Feasibilities Risk vs. Reward

Lesson Learned-E 421 n n n 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!