CUMBERLAND METAL INDUSTRIES
Cumberland Metal Industries (CMI) is seeking to diversify its product line. A Houston area sales representative has made us aware of the use of curled metal in pile driving as a cushion to absorb shock. The curled metal pads have been tested by two contracting groups, Colerick and Fazio, both with promising success and noticeable advantages over the current asbestos pads.
Colerick has requested pricing so that they can purchase and use our pads on other job sites. Colerick has been told CMI will give them pricing information by the end of the week. Price is the first priority which will be analyzed by cost savings to company, manufacturing costs, and break-even volume. Marketing options will also be analyzed based on the market share, market size, and sales force size.
Benefits of Coiled Metal Pads
Coiled metal pads drive 30 times more piles per pad than asbestos pads because they transfer more force and prevent shock while creating less heat than the conventional asbestos pads (Exhibit 1). This also helps to prevent piles from vibrating or cracking. Coiled metal pads only heated up to 250ºF, or 450º less than asbestos pads. Health dangers associated with asbestos have also made those who use the asbestos pads wary of the risks.
Value to Contractors
From the two experiments with CMI's coiled pads the contractors averaged 30% more feet driven per hour with our coiled pads over typical asbestos pads. The pads also drove 2800% more piles per set of pads than did the asbestos pads. The contractors averaged 630 asbestos pads used for the project; at a cost of $1,575. The total time to change sets was 700 minutes. With our coiled metal pads they used 11 pads with a change time of 4 minutes (Exhibit 1).
It is estimated that there are 19,500 to 26,000 hammers in use 25 weeks per year for 30 hours per week. These hammers average 20 feet per hour for 290 million to 390 million feet driven annually. If six pads per set will drive 10,000 feet then the market for coiled metal pads would be 174,000 to 234,000 pads annually (Exhibit 2).
Manufacturing cost estimates are based on a 250 unit per month production schedule. For twelve months CMI would produce 3000 pads per year, or 500 sets of a single coiled metal pad size. With a potential market demand of 174,000 to 234,000 pads annually CMI would only be capturing less than 2% of the market (Exhibit 2).
Basic Pricing based on Manufacturing Costs
The most common pad size is 11 1/2". Total cost per pad would be $148.12 using current equipment or $69.18 with the purchase of $50,000 permanent tooling equipment. CMI seeks for a 40-50% margin allowing for a price of $269.31 or $125.78 respectively (Exhibit 4).
With a margin of $121.19 for existing equipment the break-even volume would be 214 units per month. For the permanent tooling equipment the margin is $56.60 which has a break-even volume of 185...