Académique Documents
Professionnel Documents
Culture Documents
ME 225
6/1/15
Table of Contents
Table of Contents.........................................................................................................................................1
Executive Summary.....................................................................................................................................1
The FlOW Sprinkler....................................................................................................................................2
Nested BOM................................................................................................................................................4
Costed BOM with Manufacturing Costs......................................................................................................5
Wired Assembly......................................................................................................................................5
Solar Powered Assembly.........................................................................................................................5
Manufacturing Plans....................................................................................................................................6
Assembly Line Layout...............................................................................................................................10
TLA Software............................................................................................................................................10
Capital Investment Requirement................................................................................................................11
Executive Summary
Flock of Water, is a newly established smart irrigation system company, introducing the worlds
first ever smart sprinkler head system, FlOW. Flow is an innovative and new benchmark standard for
smart and water conscience irrigation for both commercial and home landscape use. The Flow irrigation
system connects all sprinkler heads by utilizing a mesh network, in which each sprinkler head can act
independently of each other. Each sprinkler head acts as a node in the total network of sprinkler heads.
The mesh network allows for each sprinkler head to be controlled from a central source, such as a tablet
or mobile device, all without having to connect the sprinkler heads to a central brain (control box). Flock
of Waters patented and innovative flocking algorithm allows each sprinkler to be controlled
independently. This algorithm will revolutionize the landscape irrigation industry, setting a new irrigation
standard.
The Flow system will debut at the 2016 iLandscape conference, where two models of the
sprinkler system will be showcased, our wired and solar powered models. The wired model will be
introduced into the market Quarter 1 of 2016 with the solar powered model to closely follow at the
beginning of Quarter 3. Financial planning and outlook for the upcoming fiscal year estimates that Flock
of Water will need an initial inventory amount of 1000 wired sprinkler heads. Post trade show the Flow
irrigation line is expected to sell at a rate of 1000 units per month during Quarter 1. This prediction also
forecasts an increase in sales to 15,000 units per month in Quarters 2 and 3. At that point it is predicted
that sales will decrease to 1,000 units per month from October to the end of the year for the Fall season in
the United States. Sales for the Flow system will be handled through our online retail store and through an
exclusive partnership with the Lowe's Home Improvement Company, where they will stock our sprinkler
head system in stores across the country.
This executive document will detail a break-down for an initial capital investment in order to start
production of the Flow Irrigation system. This document will outline the costs for manufacturing, part
materials, labor, inventory management software, and supply chain analysis both in the United States and
for overseas production. The Flow system will initially be manufactured in the United States, with a
potential to move production overseas to China.
Nested BOM
Wired Assembly
The above Nested BOMs show the component break down of the sprinkler assembly for both the solar
powered and wired models. The total assembly will only require one of every component listed in the
BOM.
Wired Assembly
Solar Powered Assembly
The estimates for labor were calculated from average labor costs for both the United
States (California) and China. In the United States, the California average assembly worker wage
is approximately $15.00 per hour with the company also paying an additional $5.00 per worker
for benefits cost. While in China the average assembly worker wage is approximately $2.25 per
hour without an additional cost for benefits. Using these hourly wage values and an approximate
assembly time of 1 minute per sprinkler assembly we were able to extrapolate a total labor cost
per part and total cost per assembly for both countries.
USA (California)
China
Manufacturing Plans
Manufacturing for the Flow system will take place in California. Flock of Water specializes in
software and engineering currently, so manufacturing is not our field of expertise. For this reason we have
decided to outsource all of the manufacturing. Our central office is in Palo Alto, so manufacturing close to
home will ensure we can get a high quality product and keep in close communications with our
manufacturers and suppliers. As discussed above, the cost of manufacturing in the US will be higher due
to a higher labor rate; this equates to a $0.19 difference per part. However, when we consider the cost of
shipping parts, sending engineers to China, and ease of communication and local relationships, the
difference is negligible. Shipping from China to the United States breaks down to be about $0.10 per part
(See Table 1). Additionally, shipping from China causes an increase in inventory due to the long shipping
times which is approximated at 40 days to go from China to California including customs.
Table 1: Total cost and Time to Ship a 24 shipping container from China to California.
Export Cost
$864
Transit Cost
$2000
Import Cost
$1289
Total Cost
$4153
Total Days
40
Cost/Part
$0.10
Sending an engineer to China monthly to check in with the quality control and supplier every
month would cost about $5,000/month or $60,000/ year just for airfare. An alternative would be to hire an
engineer to relocate to China, but this too will cost about $100,000/year and may be difficult to find.
Figure 1 shows what a supply chain in China might look like. Raw materials, electronics, and plastic parts
would be made and assembled in a central space, and then product would be shipped overseas by boat and
air. Overall for a small company like Flock of Water, and because our productions volumes are small, we
believe it is of utmost importance to have a good line of communication between our engineering team,
suppliers, and manufacturers, and we have decided to keep manufacturing permanently in the United
States.
This increase and decrease in production will decrease the inventory required to meet the seasonal
demand, as compared to steady level manufacturing which would require a maximum inventory of
approximately 7,000 units. Given the change in manufacturing during season months the maximum
inventory required is approximately 3,000 units just before the increase in April. Additionally there will
be raw material and WIP inventory during that time frame to meet the 15,750 units to be manufactured in
April. In total this equates to about $1 million in inventory and will require about 50 sq. ft. of warehouse
space.
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TLA Software
Implementing a TLA software to manage inventory, supply chain, and inventory is key to the
success of Flock of Water. Currently Flock of Water is a small company, but we have the potential to grow
if the Flow System truly takes off, so we want to use an ERP system that offers solutions for both small
and midsize companies. Due to the seasonal demand expected for the FlOW System, it will be especially
important to keep track of inventory and supply chain to ensure that we are ready for the large upswing in
April. Because Flock of Water is small, cost is still a large obstacle, eliminating many ERP systems. Table
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2 lists the ERP software systems we have explored as options for Flock of Water with respect to our
company needs.
Table 2: Summary of ERP Softwares features compared to Flock of Water needs.
We have decided to go with Epicor ERP System because it meets the most of our companies
needs, especially the important ones like Inventory Management, Quality Control, and cost. Epicor costs
$2,500 for initial startup cost of the software. For one user it is $399/month and $199/month for every
user after that. We think having two computers registered with the Epicor is sufficient for our needs,
leading to a total cost of $600/month for ERP Software. For the first six months of manufacturing we will
be working to transition our current Excel financial system into the Epicor system so that we are fully
converted by the middle of peak demand.
340,000
60,000
340,000
10,000
12
660,000
Tooling
100,000
90,000
Total Ask
1,600,000
Factory workers salary is based off a $20/hour wage, 8 hours a day with factory manager at
$25/hour. The tech team salary includes the salary for the four of the original founders at $85,000/year.
The HR salary is to hire two new employees to cover office tasks. Epicor ERP costs $2,500 initial start up
cost and $600/month for two users. Marketing consulting for 6 months costs at $500/day. Material costs
will cover all materials to manufacturing one years worth of inventory. Office space is based off a 2,500
sq. ft. at $1/sq.ft/month plus utilities and furniture. These costs will cover all of the company costs for
one year at which point will be in the positive revenues and can sustain our manufacturing and business
on our own.
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