The talented and divers ZAP Technologies team intends to start a MM2 moulding machine manufacturing business. The MM2 machine is an improved version of the existing HMP-20 moulding machines currently used in the foundry industry.
The MM2 consists of modern technology, standard industrial components and tight machine tolerances. As a result, it provides Hunter machine owners with sizeable cost savings and added efficiencies. The machine is able to directly replacement existing HMP-20ís, reducing foundry capital equipment costs.
There is currently no competitor that provides the Hunter modification that ZAP Technologies offers. ZAPís main competition are Ďhigh-efficiencyí mould machine producers, however ZAP will not be directly competing with these companies, as ZAPís target market are smaller low budget foundries.
As a result of primary and secondary market research, MM2 sales expectations are 1,3,5,5 and 6 machines sold per year during the first 5 years of operation respectively. Analysis of the benefits the MM2 provides customers and ZAPís production costs have lead to the MM2ís targeted selling price of $550k. Bottom line profits earned by ZAP are estimated to reach $605k by the fifth year of operation.
ZAP Technologies requires $850k of capital to begin the proposed MM2 manufacturing operation. This capital is primarily required to finance $204k of capital equipment, start-up COGS and operation expenses. ZAP is offering 49% of the company equity to the financing venture capitalist. Break even is projected to be 3.5 years. As a result of the estimated value of the business at end of the 5th year and the steady state net income growth of 10% per year, the venture capitalist is anticipated to earn 28% annualised interest. Sensitivity analyses considering pessimistic and optimistic sales leads to anticipated venture capitalist earnings of 4% and 46% respectively.
ZAP intends to manufacture its MM2 moulding machine. This ZAP designed machine is an upgraded and improved version of the existing Hunter HMP-20 moulding machine currently used in the foundry industry. Hunter Automated Machinery Corp, an American foundry focused manufacturing company, has been manufacturing and selling mould machines since 1964. Their moulding machines were originally designed to eliminate the backbreaking task of hand moulding by automating the entire mould making process. One of Hunterís most predominant moulding machines is the HMP-20. This machine is simple and economical, and was revolutionary when it was first manufactured. But, over the years, Hunter has failed to keep up with current day technologies, and as a result, demand for an improved version of the old Hunter moulding machines has developed . Zap Technologies MM2 moulding machine is designed to meet this demand.
ZAP is proposing to establish a manufacturing business to produce MM2 moulding machines to replace existing Hunter HMP-20 moulding machines in the foundry industry. ZAP plans to market and sell their MM2 moulding machines to medium and small sized foundries hoping to improve their production efficiencies while incurring a relatively low level of capital expenditure.
ZAP is strongly looking to pursue the production and sale of their MM2 moulding machines because their product could provide Hunter machine owners with sizable cost savings and added efficiencies .
ZAP plans to locate its manufacturing facility in the south-western Ontario region, specifically in Stratford. The final location was determined based upon several criteria, the most important of which was to minimize land and building costs. The location of ZAPís manufacturing facility was also dependent on the distance from its third party material and component suppliers, as well as its own personnel . Stratford is an ideal location, as many material suppliers are located in or near Stratford. Also, Stratford is near major highways and is central among ZAPís potential clients, many of which are located in Michigan and throughout Ontario.
The ZAP team, composed of Carl, Mike and Kim , possesses a variety of complementary qualities and skills. Our educational backgrounds encompass civil and mechanical engineering as well as business and management sciences. Our most defined strengths are our analytical skills, initiative, work ethic, and entrepreneurial spirit.
The skills and attributes each team member brings to the team, as well as the role they will play for ZAPís Technologies business, are summarized below:
A) Carl: Civil/Structural Engineering
Zap Technologies Focus: Marketing and Sales
Carl will be graduating from the University of Waterloo with a Bachelor of Applied Science in Civil Engineering with a Structural Certificate and Management Science Option. He brings a civil and structural engineering educational background to the group. He possesses excellent, organisational and interpersonal skills. Through his academic and co-op career he has proven to be a quick learner and possess a strong work ethic.
Carl will primarily be focusing his energies on selling MM2 moulding machines. He will be marketing Zapís moulding machines and communicating directly with various foundries who currently own Hunter moulding machines. Carl will be performing the sales and marketing duties at ZAP technologies because of his excellent interpersonal and organisational skills.
B) Mike : Mechanical Engineering, Management Sciences Option
Zap Technologies Focus: Engineering and Manufacturing
Mike will be graduating from the University of Waterloo with a Bachelor of Applied Science in Mechanical Engineering with a Management Science Option. He brings an academic and co-op background of mechanical design and solid mechanics. His mechanical inclination, initiative, and open-minded attitude highlight his strengths.
Mike will be the ZAP moulding machine expert, being the lead mechanical designer of the moulding machines. He will be in charge or the manufacturing of the moulding machines as well as upgrades and improvements. He will also provide technical expertise when visiting potential clients for sales.
C) Kim : Mechanical Engineering
Zap Technologies Focus: Finances and Business Management
Kim will be graduating from the University of Waterloo with a Bachelor of Applied Science in Mechanical Engineering. His academic background consists of mechanical engineering and a variety of business focussed courses. His work experience includes research and development, machine design, programming, plant operations, and supervision. Kimís most defined strengths are his problem solving and business skills.
Kimís primary responsibilities will include managing Zapís finances and business affairs. He will be creating Zapís business systems to allow for efficient business processes. He will also manage ZAPís accounting and financial reporting.
Zap Technologies plans to manufacture MM2 moulding machines for existing foundries who currently own old Hunter 20 moulding machines. The MM2 moulding machine produces sand moulds containing a cavity to facilitate the production of metal castings. The MM2 has the same perform and functions as the HMP-20 but consists of modern technology and tolerances, which result in increased performance. The MM2 moulding machine use hydraulic and pneumatic power to translate hundreds of components to produce sand moulds . The MM2, on average, produces 200 moulds per hour. The moulds proceed to be filled with molten metal. Liquid metal assumes the shape of the cavity/impression made in sand mould .
The MM2 moulding machine provides several cost savings over operating Hunterís HMP-2. The MM2 operates more reliably, which results in less down time. Replacement parts on the MM2 are relatively inexpensive because it is manufactured from standard industrial components. Lastly, the machine also allows foundries to upgrade their manufacturing capabilities at relatively low capital cost .
The original Hunter HMP-20 suffered a lot of downtime and produced a relatively large quantity of unusable parts. ZAPís machine has several superior functionalities that have allowed it to improve in these areas. The essence of the MM2ís competitive advantage is its ability to translate internal components at high tolerances with minimal wear. Moving components that were continually embedded with sand particles on the old Hunters were replaced, eliminating premature wear and constant machine adjustment. ZAPís moulding machines efficiency is 20% higher than Hunterís old models. That is, 65% of the product produced by the old HMP-20 is acceptable product, where 85% of the product produced by the MM2 is acceptable product. Foundries can avoid additional cost associated with expending additional labour, energy, and time to re-melt and re-manufacture their product .
The MM2 has a much-improved hydraulic system. This system allows translating and rotating components to be ramped up to speed, avoiding sudden movements and excessive component loading. This helps to reduce vibrations and component failure through fatigue. Consequently, machine reliability is improved .
The HMP-20 is comprised of many Hunter made components. These components are generally not industry standard, and as a result, foundries had no choice but to repair their machines with over-priced Hunter replacement parts. The MM2, on the other hand, largely use industry standard hydraulic, pneumatic, and mechanical components. As a result, replacement components for the MM2 are relatively inexpensive .
The interchange ability of the MM2 with the HMP-20 allows foundries to upgrade their manufacturing capability with minimal capital expenditure.
The MM2 upgrade uses the same boundary conditions as the old Hunter mould machines. The machine footprint, sand entry, and mould exit centrelines are identical. The hydraulic, pneumatic, and electrical components are fully compatible with Hunterís systems. The MM2 upgrades allow foundries to maintain their original plant layout. Expenditures on moulding machine support machinery can be avoided, saving the foundry on possibly excessive capital costs .
Customers will see a definite increase in productivity due to reduced downtime, lowered repair cost, improved quality, and extended machine life. All these benefits will make the MM2 upgrade desirable.
Currently the upgrade solution provided by ZAP for the HMP-20 machine is unique. There is currently no known competitor that provides the same modification that ZAP offers. However, it is possible that copycat start up companies start offering similar upgrades in order to capitalise this profitable product. The complexity and quantity of the components and tight tolerances on the MM2 will make it very difficult to quickly reproduce the MM2 mould machine .
ZAP may in the future face competitive forces from existing moulding machine manufacturers such as Hunter, Sintas, Osborn, or Dina-matic. Foundries not convinced by ZAP technologies, which require a larger output capacity, could look to moulding machines produced by other companies. These companies, however, will not compete directly with ZAP because their product involves a much greater capital cost, and doesnít provide the same advantage as the MM2 upgrade .
ZAPís biggest competitive concern is with Hunter. If Hunter realizes the benefits of MM2 upgrade, it might invest time and resources into a similar solution. Since Hunter is a large company with many resources, and has a more direct access to its machines, Hunterís entry might heat up the competition.
ZAP believes that its uniqueness, the overwhelming benefits of its design, and its early entry into a new market will be its competitive edge leading to success and profitability.
Research and development of the MM2 has already been completed by ZAP. One MM2 machine has already been built and sold. Its performance and reliably has been proven. The manufacture of the prototypes has allowed a manufacturing process and timeline to be established. ZAP built the previous machines by renting space and subcontracting parts. In the future, ZAP plans to establish its own manufacturing facility with its own machine shop and labour force. This will allow it to reduce manufacturing costs thereby increasing profit .