3.6.4 Implementation
Implementation starts at eight months and ends at fourteen months. The implementation phase will cover all modules of the smart-wave.
3.6.5 Testing
Testing starts at twelve months and ends at eighteen months.
Unit Testing will begin on each module separately as it is implemented. Once each module has satisfactorily passed each unit test, the modules will be integrated and tested together.
3.6.7 Production Development
Production Development starts at fourteen months and ends at twenty months.
3.7 Installability Requirements.
Installation should be a relatively simple process. All a person is required to do is remove the SmartWave from the shipping box and plug it into the wall outlet. The SmartWave is then ready to use.
3.8 Support Requirements
3.8.10 Phone Support
Phone support will be provided by a 1-800 Number. Customers will then be directed by an automated system to the correct service technician.
3.8.20 Internet Support
A web page will be designed to answer questions about the SmartWave. It will have an online copy of the service instructions and user manuals. Information on how to order upgrade CDs will be available on the web page.
3.8.30 Repair and Service manuals
Repair and service manuals will be made available upon request.
3.9 Geographic Requirements
3.9.10 Power requirements will be different in various parts of the world so two models of the SmartWave will be produced.
3.9.10.10 120-Volt models will be produced for the United States.
3.9.10.20 220-Volt models will be produced for Europe and other countries
3.9.20 Languages
The SmartWave will have display language options for English, Spanish, Chinese, Japanese, French, German, Italian and Dutch.
3.10 Environment and Safety Standards
3.10.10 The FDA standards are described earlier in section 3.5.A
3.10.20 In addition I found the Underwriters Laboratory Standard of Safety UL 923 on microwave ovens. They were identical to the FDA standards.
3.11 Interdependence with Other Products
The Smart-Wave will need a comprehensive list of all microwave oven safe products currently on the market. This means that the Smart-Wave’s database will be arranged to accommodate the UPC format found on most products with a bar code today. The Smart-Wave’s onboard barcode scanner will also need to be able to read the codes from the products packing easily. This section describes the Smart-Wave’s interdependence with other products
3.11.1 Refills – The Smart-Wave must be capable of updating its
product database for new items on the market. Every six months a new
list of microwave oven safe consumer products will be produced on
CD-ROM.
3.11.2 Parts – The CD-ROMs will be distributed via mail or distributed
to appliance dealers that market the Smart-Wave.
3.11.3 Upgrades –
3.11.3.1 A high performance power control relay will be included in
advanced models.
3.11.3.2 A version will be released with increased processor speed,
memory capacity, and CD-ROM speed for industrial versions.
3.11.3.3 The design of the user interface will be developed to produce a
more user-friendly environment for high-grade models.
3.11.4 Systems -
3.11.4.1 Cooking Style – Rotating Food : The food will be rotated to
distribute the microwaves through the food. A plate will be mounted
on a rotating carousel turning the food slowly. This means the
cooking cavity will be large enough to enclose most microwavable
products and have enough turning power in the rotation motor turn
the food.
3.11.4.2 Scanning Style – Stationary Scanner : The barcode scanner
will be able to read UPCs so that it can identify most microwavable
products. The barcode scanner will be mounted to the front of the
Smart-Wave unit so that most products will be easily scanned.
3.11.5 Power – The Smart-Wave will use a standard 120v wall outlet.
3.12 Make or Buy Considerations
Any parts that are standard on today’s market are to be bought. Any parts that need special modifications or development are to be made. This section specifies which of the SmartWave’s components falls are to be bought and which are to be manufactured.
3.12.1 Parts to be bought – The microwave oven portion of the Smart-Wave will be purchased from the producer who can offer the highest quality for the best price. Only the components that take part in the cooking process will be bought.
3.12.2 Parts to be made – This section lists the components which form the control module. All components in the control module will be bought.
3.12.2.1 The barcode scanner which will be used to identify the product
being cooked by a UPC.
3.12.2.2 The cooking cavity will be used to contain the microwaves while
they heat the product.
3.12.2.3 The outer body will be the main shell of the unit used for
holding the components of the Smart-Wave in place.
3.12.2.4 The processor will be the unit used for controlling the
unit’s operations.
3.12.2.5 A Shielded Door will be used with the cooking cavity to contain
the microwaves while they heat the product.
3.13 Proposed Beta/Special Testing
The special testing will determine whether the SmartWave is easily operated by the common consumer. The testing will have two parts. The first part will test to see if the consumer can update the SmartWave via the CD-ROM. The second part of the testing will determine if the consumer can operate the SmartWave’s cooking features
4.0 Financial Analysis
The following paragraphs establish goals for unit pricing, costs, and resulting profit for each target market segment. The term costs as used here includes fixed and variable production costs, research and development costs, marketing costs, warehousing and distribution costs, and costs of product support after the sale.
In addition, this section addresses predicted sales volumes in both the wholesale and retail sectors, as well as of any special product variants designed specifically for institutional (versus consumer) markets. Finally, it establishes goals for product shipment, again categorized by target market and product variant (where applicable) and resulting profits both short- and long-term. It is expected to be the case that a new start-up company will be established for the development, manufacture, and distribution of this product, therefore section 4.4 (Impact on Existing Products) is not applicable to this POD.
4.1 Cost Targets
The following paragraphs provide a breakdown of target costs for both the development and manufacture of the SmartWave. Development costs are based on the 20-month development cycle described in 3.6, and include a limited initial production run of 10,000 beta units. Production costs are based on a production quantity of 100,000 units. In general, lower costs are expected to be associated with higher production quantities, assuming that production capacity, facilities, and warehousing and distribution are adequate for the quantities produced.
4.1.1 Development Costs
Development costs for the SmartWave include product research and development costs, tooling and facilities costs, and production and testing costs associated with making the initial beta test units.
4.1.1.1 Research and Development
Product research and development for the SmartWave includes product research and requirements analysis, specification development and documentation, and product design and documentation. Cost targets for research and development are listed as follows. Refer to the detailed cost breakdown, SmartWave, Inc. Internal Document No. 2001.fin.10021 [11] for a detailed breakdown of these costs.
4.1.1.2 Tooling and Facilities
Tooling and facilities costs include all costs associated with the development and production of special tooling and fixtures for producing the components of the SmartWave. In addition, they include costs of facilities and equipment to be used in the limited initial production and subsequent full-scale production runs for SmartWave products. The following is a summary of these costs. More detail can be found in 2001.fin.10021.
4.1.1.3 Beta Production and Testing
Costs for the limited initial (beta) production run of SmartWave units is targeted at $65.94 for an initial production quantity of 10,000 units. Costs of testing are targeted at $5.75 per unit, for a total of $71.69, as summarized below. Supporting detail can be found in the detailed cost breakdown, document No. 2001.fin.10021.
4.1.2 Production Costs
After the limited initial production and successful beta testing of the SmartWave product and receipt of management approval to proceed, full-scale production and deployment will begin. At this point, a stable support structure will be developed for the production, marketing, warehousing and distribution, product support, and ongoing research and development efforts at SmartWave, Inc. At that point, production costs for the SmartWave will be based on a standard product cost model. This cost model includes fixed costs, semi-fixed costs, and variable cost elements. The following paragraphs describe each of these cost elements and target values for the SmartWave.
4.1.2.1 Fixed Costs
Fixed costs, also known as General and Administrative (G&A) costs, include costs associated with the management structure of SmartWave, Inc., product marketing and advertising costs, and costs of ongoing product development efforts. Fixed costs are independent of production quantity, and are targeted to be $7.5 million per year for the first 5 years of the company?s life cycle. The following summarizes the breakdown of these costs. Refer to 2001.fin.10021 for a detailed breakdown.
4.1.2.2 Semi-Fixed Costs
Semi-fixed costs, also known as overhead costs, are those costs which are independent of production quantity over a fairly wide range. For example, manufacturing and warehouse facilities costs, production supervisor?s salaries, and shipping costs are all semi-fixed costs. Based on production quantities of 100,000 units, these costs are targeted as follows. Refer to 2001.fin.10021 for more detail
4.1.2.3 Variable Costs
Variable costs are those costs which are directly related to the quantity of units produced, and are sometimes called direct costs. These costs are broken down into parts and materials costs, subcontracted item costs, and labor costs for assembly, testing, and packaging. The following is a breakdown of variable costs by category, again based on production quantities of 100,000 units. Document 2001.fin.10021 provides a detailed cost breakdown within each category.
4.2 Market Pricing Targets
The following paragraphs describe the target markets for the SmartWave product, retail and wholesale price targets, and resulting profit margins for the SmartWave product and for SmartWave, Inc.
4.2.1 Target Markets
Four target markets segments have been identified for the SmartWave, each having different needs, buying patterns, and marketing strategies. The following paragraphs define each of these market segments.
4.2.1.1 Consumers
Consumers are defined as individuals who are buying the SmartWave for use in their home. Consumers? purchases will be heavily driven by advertising and store displays. Purchases will normally be made from retail stores but may also be made using mail-order, phone-order, or internet distribution channels.
4.2.1.2 Convenience Stores
Convenience stores are defined as retail food outlets which sell packaged, ready-to-eat foods, beverages, and other convenience items. Most of these stores are equipped with microwave ovens for heating the food items. Purchases by this market segment will be driven by targeted advertising and may be made from retail stores or wholesale outlets.
4.2.1.3 Hotel/Motel Enterprises
Hotel/motel enterprises are defined as hotels and motels which provide microwave ovens in their guest?s rooms. Purchases by this market segment will be driven by targeted advertising, trade shows, and sales calls by outside sales representatives. Purchases will normally be made from wholesale outlets or through outside sales representatives.
4.2.1.4 Other Institutional Customers
Other institutional customers are defined as commercial, governmental, and educational institutions which provide microwave ovens in break areas for heating packaged food items. Purchases by this market segment will be driven by general advertising, since the diversity of the market does not allow for targeted advertising. Purchases may be made from retail stores, wholesale outlets, or mail/phone/internet order.
4.2.2 Retail pricing and profit margins
Preliminary market research suggests that, to remain competitive with other products on the market, the base model SmartWave should be priced at just under $100 retail. A figure of $99.00 each has been established by the board as the retail price of the SmartWave. With production costs at $50.82 each in 100,000 unit production lots, this reflects a $48.18 total profit across all levels of distribution. Approximately $13.47, or 28% of this total profit is allocated to wholesale distribution outlets and factory operations, leaving $34.71 net profit at the retail level, or $62.09% based on a wholesale cost of $55.90. This is slightly higher than most competitive products, a factor in reducing the risks associated with an unproven product concept and in motivating sales within the retailer?s organization.
4.2.3 Wholesale Pricing and Profit Margins
Wholesale distribution outlets typically operate on lower profit margins than retail outlets, since they have lower overall operating costs and reduced levels of risk exposure due to the assumption of these risks, for the most part, by the manufacturer. Research has shown that a 15% profit margin for the wholesaler is typical for this type of product. This means that wholesalers will gross $7.29 on each SmartWave sold.
4.2.4 Net Profit for SmartWave, Inc.
After allocating $34.71 profit at the retail level and $7.29 at the wholesale level, as described above, $6.18 remains to be divided between SmartWave, Inc. and its independent sales representatives. This reflects a net profit margin of 12.16% based on a total production cost of $50.82.
4.3 Shipment Estimates
Materials, labor, and machinery for packaging SmartWave products for shipment will be allocated to the cost basis for the SmartWave product at the factory level. In other words, the factory cost of each SmartWave product includes all such cost elements. Actual cost of shipping, i.e. the price paid to the commercial carrier for shipment of the product to its destination, will be paid by the purchaser (retail or wholesale), FOB destination.
4.4 Impact on Existing Products
SmartWave, Inc. is a start-up company organized for the purpose of developing the SmartWave product and related products and services. Accordingly, all engineering and manufacturing resources, production lines and machinery, warehousing, and corporate partners will have to be established and in place when needed.
5.0 Risk Analysis
The integration of a UPC scanner and a microwave oven’s user interface and control system is a fairly simple task so the time and money invested would be at a minimal. This means that developing the product would be a low risk decision. This section explains the technical and marketing risks associated with the release of the SmartWave.
5.1 Market
5.1.1 Changes in defined market – When the Smart-Wave is introduced into the market, current microwave oven producers will be forced to update their technology. This means that there will be a decline in the demand for standard microwave ovens and an increase in the demand for the new automated units. The price of standard microwave ovens will fall as the Smart-Wave becomes more popular.
5.2 Technology
5.2.1Challenges in development, integration and costs
5.2.1.1 The control interface will need to be integrated with the barcode scanner.
5.2.1.2 A user interface will need to be developed for ease of use.
5.2.1.3 A comprehensive list of existing microwavable products from all major producers will need to be compiled.
5.3 Competitive
A. Existing competition – No microwave oven versions on the
market are currently equipped with UPC Scanners; however, some models feature preset programs for cooking certain substances of a specified quantity.
B. New competition – With the release of the first UPC Scanner equipped
microwave oven, competition will be a major problem the first year or two of production. A professional and easily used interface will be crucial to win the respect of the public consumer and categorize the product as a necessity and not a luxury.
C. Patent issues – A patent search will be done to search for existing patents with similar models.
6.0 Schedule and Timelines
The following paragraphs establish a timeline for the research and development, prototype, limited initial production, and full-scale production and distribution of the SmartWave. Since it is expected that a new start-up company will be formed to produce this product, many of the elements of the timeline are related to the establishment of the business, acquisition of capital, recruitment of a management team, and establishment of business practices. It is the goal of the product development timeline to break down each product phase into small enough tasks that they may be easily managed by the task leaders within each individual section. At the same time, it must be kept general enough to be used by top-level management and investors for the tracking of progress against investment dollars spent.
6.1 Product Shipment
Based on the product development schedule described in section 3.6, product shipment will begin approximately 6 months after receiving authority and funding to proceed. It is anticipated that, within about six months after initial release of the SmartWave product, competing manufacturers will begin producing similar products. During this six-month window of opportunity, SmartWave, Inc. must establish itself as the dominant producer of smart kitchen products such as the SmartWave oven.
6.2 Product Life Cycle
It is expected that the SmartWave product will undergo several ?phases? with respect to target markets and the marketplace. The first of these occurs immediately upon the introduction of the product to market. In this first phase, the product will be seen as innovative or unique and purchases will be driven by this uniqueness. Next, there will be a desire to purchase SmartWave products in order to remain competitive (particularly within the hotel/motel and convenience store market segments). Finally, as competing manufacturers enter the market and the product concept becomes established, it will become more of a ?staple? item and sales will stabilize. After researching similar products, the conclusion is that our products lifecycle will be 2-3 years in duration.