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 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. 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 3D CAD Modeling Perform Market & Patent Research Develop Conceptual Designs Design for Manufacturability FEA AnalysisPrototype Industrial Design Assessment

Our Design

Project Description - Business Design and Build a Product to Store and Dispense Common Kitchen Dry Goods Design and Build a Product to Store and Dispense Common Kitchen Dry Goods Target Markets: Target Markets: Homeowners Homeowners Parents of Newborn Babies 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 (Training, Adjustment, Repair, Replacement, Refund) XX 14 Consult on Product/ Process/Service XX 15 License Technology TO Others XX

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

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

Customer/Needs Customer Need: Customer Need: A Centralized Location for Cooking Ingredients A Centralized Location for Cooking Ingredients One Device to Store, Measure, and Dispense Ingredients One Device to Store, Measure, and Dispense Ingredients Benefits: Benefits: All-In-One Aspect – Time & Space Efficient All-In-One Aspect – Time & Space Efficient High-Tech Appeal to Kitchen High-Tech Appeal to Kitchen Reduce Risk of Spills of Ingredients Reduce Risk of Spills of Ingredients Primary Customers: Primary Customers: Age Group: 30 to 60 Year-Olds (Male and Female) Age Group: 30 to 60 Year-Olds (Male and Female) Homeowners Homeowners Newborn Parents Newborn Parents Total Market Share: Total Market Share: 2.8 million People by Year 5 (1% of U.S. Population, 20% of market) 2.8 million People by Year 5 (1% of U.S. Population, 20% of market)

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

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

Price of Product Price BasisRangePrice 1. Cost plus Profit$20 to $30$30 2. Competition Price Adjusted for Features $30 - $80$50 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 Alpha Test = $21,000 Total Cost of Beta Test = $81,000 Total Cost of Beta Test = $81,000

Finances-Income Statement Year 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 Principal Repayment $0($798,284)($846,181)($896,952)($950,769)($1,007,815)$0 Equity Capital $3,625,175$0$0$0$0$0$17,995 Loan Proceeds $4,500,000 Capital Gains/Losses $0$0$0$0$0$0$80,004 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 FOMVALUES MARR12% IRR64.97% NPV$5,878,339 Payback in Years 1.75 yrs

Financial Leverage Equity Capital LoanIRR (6% APR) IRR (3% APR) 100%039.39%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) At 40.41% Equity ($4,500,000 Loan) Breakeven Occurs At: Breakeven Occurs At: 1.75 Years 1.75 Years Sales Level of $7,432,690 Sales Level of $7,432,690 Sales Volume of 126,865 Units Sales Volume of 126,865 Units At 100% Equity ($0 Loan) At 100% Equity ($0 Loan) Breakeven Occurs At: Breakeven Occurs At: 2.6 Years 2.6 Years Sales Level of $7,432,690 Sales Level of $7,432,690 Sales Volume of 126,865 Units Sales Volume of 126,865 Units

Breakeven/Payback Analysis

Sensitivity Analysis Key (at 10%) RatioRank Price Volume Total Operating Expenses MARR Interest Rate Borrowed Capital Conclusion: Unit Price is the most sensitive element with Sensitivity Ratio of 5.820

Patent Analysis Existing Patents Existing Patents Dispenser for Granulated and Powered Dispenser for Granulated and Powered Dry Material Dry Material Dispenser Dry Material Dry Material Dispenser Dry Product Dispenser Dry Product Dispenser Patent Potential Patent Potential The Combination of Dispensing Mechanisms The Combination of Dispensing Mechanisms Overall Assessment of Product’s Intellectual Property Overall Assessment of Product’s Intellectual PropertyGOOD! Possible Alteration or Improvement to Patented Ideas Possible Alteration or Improvement to Patented Ideas Project Encourages of Innovative Thinking  Patents! Project Encourages of Innovative Thinking  Patents!

Patent Analysis Patent Num: 4,856,681 Patent Num: 3,344,958

Risk Analysis of Venture Low to Medium High Low Medium to High Markets New Existing New Technology Year 0 Year 5

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

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

Lesson Learned-E421 Combination of Economics and Engineering Combination of Economics and Engineering Impact of Economics on Engineering Design Impact of Economics on Engineering Design Importance of Patent and Existing Product Research Importance of Patent and Existing Product Research Value of Team Work Value of Team Work Project Management/Leadership Project Management/Leadership

Thank You!