1

Part 1

What is meant by the term eco-design? Provide three examples(other than the one covered in the lectures)

What is meant by open innovation? Research and give three examples (other than the one covered in the lectures)

Part 2

The following table presents projected revenues and costs generated by a given project

2014 2015 2016 2017 2018

Initial

Investment

£30,000 £0 £0 £0 £0

Marketing

costs

£5,000 £10,000 £5,000 £5,000 £2,000

Production

costs

£10,000 £12,000 £12,000 £15,000 £15,000

Sales

(number of

units)

0 100 250 300 400

Price per unit £220 £220 £200 £180 £150

Assuming interest rates are set at i=5% calculate

1. Net present Value (NPV). 2. Estimated pay back period. 3. Accounting rate of Return (ARR).

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Table of Contents

1.0 Introduction 11

2.0 Eco Design 12

3.0 Open Innovation 16

4.0 Part 2 21

5.0 Business case for a smart refrigerator 24

6.0 References 40

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1.0 Introduction

1.1 Assignment Objective

To acquire the high-level management skills necessary to support the specification, costing,

design and manufacture of an electronic product.

To satisfy the objectives specified in a case study, which integrates at least two technical major

areas of the course together with the product management skills developed in this module.

1.2 Abstract

This assignment focuses on the definition of 2 types of business strategy, the eco-design and open

innovation. The explanation and definition for both will be explored and appropriate examples to

products related to these types of methodologies will be given. Next, in order to further understand

the Net Present Value, Accounting rate of return and the Payback period formula and calculation, an

exercise will be done to show how the values are obtained. A step by step explanation will also be

given to explain why and which values are taken. Finally, a group input is done where a business case

is produced for a smart refrigerator concept. The business case will be accompanied by a risk

assessment, mitigation plans for the risk, work breakdown structure as well as a 10-year profitability

projection. From here, a suggestion will be made to identify the length of time before the project

becomes unattractive in the market based on the sales figures.

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2.0 Eco-design

According to the European commission, 80% of product-related impacts on the environment are

determined during the design phase of the product. This can be associated with types of material,

life expectancy of the product and the manufacturing process itself. The product could be using

material that is not suitable for recycling, has a short operational life span and requires hazardous

material such as rare earth in its manufacturing process. All this contributes to the environmental

impact of a product.

However, it is possible to overcome this by applying eco-design rules. Eco-design is a legal initiative

that drives energy efficiency requirements to be considered during the design phases of the product.

By applying this rule during the design stages, suitable material and sustainable design can be

employed to further improve the impact that a product may have on the environment.

In 1994 at the International Symposium of Sustainable Consumption, a meeting defined the term

sustainable product development as using goods and services to a basic need to improve the quality

of life, yet at the same time reducing the usage of natural resources, toxic materials and emission of

waste and pollutants. In 2002, the UK government has championed the eco-design concept and

encouraged its use as a best practice design method. The government also launched the economic

regional development fund to market sustainable products. In short, this has allowed designers to

move from process efficiency to product efficiency instead. (1)

Papanek (1995) wrote that designers should consider the product’s ecological responsibility. From

here, he devised a function matrix to explain the phases of production and consideration that should

be taken during design:-

Material selection

Manufacturing process

Product packaging

Finished product

Transportation

Waste

All this should be considered in order for the product to fit the eco-design concept. Three different

examples of eco-design will be approached by performing case studies on actual companies that has

adopted this method.

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2.1 Orangebox

Between September 2007 and August 2008, the Welsh Ecodesign Centre (EDC) has supported 4

multi-level ecodesign support package. For the manufacturing sector, Orangebox was selected.

Orangebox is a UK market leader in research, development, manufacturing and service of seats for

commercial environment. Orangebox provides design and manufacture services for businesses

around UK and Europe. One of the major challenges for furniture production is the supply chain. It is

common for furniture manufacturers to obtain material and components from various suppliers.

This increases the transport cost and also makes it harder to determine the full life cycle, as each

component would be designed based on its own life cycle. Orangebox has decided to analyse several

aspects for improvement to its latest chair product, the “Ara Chair” and reduce the known aspects to

have the highest environmental impact [3]:

Production phase resource consumption

Production phase emission

Production phase energy consumption

Transportation

End-of-life treatment

One of the steps taken by Orangebox is to localise the supply chain. This has allowed the company to

work closely with the suppliers and have more control over the design of their products.

Specification can be included in the design stage and constant audits can be done to ensure that the

design of the components suit the life cycle expectancy of the product. By using local suppliers, the

transportation cost is decreased significantly as well. In short, by localising supply chain, they have

decreased transportation, cost and increased product quality.

Another method taken is the design of the chair itself. The latest chair design is based on design for

disassembly and material reduction. The chair can now be disassembled faster than any of the

previous designs and uses 30% less resources. This mean that the time taken to set-up the chairs

would be shorter for new offices and the reduction of material means that the cost of raw materials

for the chair will be much lower. [3]

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2.2 Crawford Hansford and Kimber

CH & K are designers and manufacturers of electronic and electrical equipment, particularly in

printed circuit boards. In 2008, 2 directives that were introduced changed the industry dramatically.

Waste from Electrical and Electronic Equipment (WEEE) and Restriction of the Use of Hazardous

Substances in Electrical and Electronic Equipment. Both this directives require that lead be

substituted to another less hazardous substance. Lead is used extensively in the semiconductor

industry as a solder paste.

CH & K then took this opportunity to implement the eco-design not just on its product, but its entire

manufacturing system. Several methods to replace lead have been identified, including J-alloy,

application of glue and diffusion soldering. While different methodology is required based on the

circuitry, the alternatives exist. By eliminating lead from the solder, the use of acid wash during pcb

production was also reduced significantly. This elimination method comes at no additional cost, as

the replacement material cost no more than using lead as solder paste. Hence, a more

environmental friendly method was adopted at no additional cost.

The PCB board itself was designed based on the design for recycling concept. It is easier to recycle

the components of the PCB board at the end of its life by disassembling its components. While

previously this proved to be a much more complicated procedure, the latest PCB boards from CH & K

allows for disassembly by just using one screwdriver.

In addition, the company has also subcontracted the removal of hazardous waste treatment after

PCB etching process. This treatment processes and dissolves copper in the solution, in which copper

can then be recycled. [4]

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2.3 Kelvin Hughes

Kelvin Hughes produces data acquisition unit for electronic chart display system. This unit performs

efficient management and provides the navigational data to assist a seagoing vessel. Charts are then

stored on the computer and can be uploaded via satellite. Kelvin Hughes has performed the eco

design based on several aspects to improve its products. [5]

Design for flexibility

Kelvin Hughes designed a new data acquisition unit that can be used as the basis for the electronic

chart display (ECDIS), voyage data recorder (VDR) and the radar application. This new modular

efficiency was improved by reducing the inventory requirements. A review of all specifications was

done and this reduced the manufacturing cost of the unit. This allows the unit to be more flexible

and separate components can be improved individually without affecting the other components of

the unit.

Removal of battery

The battery system for the unit now comes as an optional pack as it is not a requirement for VDRs to

have a battery pack according to the IMO regulations. Hence, by removing the battery pack, the cost

has been reduced and the need for battery recycling has also been reduced.

Cable arrangements

Previously, the modular designs have been fitted using a full range dedicated connecters. The new

design uses a simpler, more flexible arrangement. This has reduced the cabling required and reduced

the connector cost as well.

Design for ease of installation

The new units were designed to be easily installed and also maintained. The hinged cases provide

easier access for maintenance to be done or for any repairs and upgrades as the access to the power

supply, ribbon cables and the hard drive sockets are made easily accessible.

End-of-life

The products are designed and tested for a minimum service life of 10 years.

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3.0 Open Innovation

According to Chesbrough (2003), open innovation is for the use of purposive inflows and outflows of

knowledge in order to increase the speed of internal innovation and at the same time widen the

market for external use of innovation. An assumption is made that firms can and should use external

and internal ideas and paths to further advance their own product or technology.

Figure 1: Open Innovation Model [7]

Open innovation allows a firm to expand its boundaries by exploring different areas that would not

be possible in the closed innovation system. A company can now import new technology and take

advantage of the un-exploited intellectual property to improve its own research and development

method. It also allows companies to venture into new market that is similar to the direction and

strength of the company, for example, Google has ventured into the automobile industry by

providing vehicles with an on board Google Navigation system.

Open innovation also allows for companies to look at the business model differently. By applying

open innovation, companies can evaluate ideas from other sources and its own internal R&D can

then claim a portion of that value and a business case can be justified. This encourages the

companies to have a better business model than its competitors who have been in the market for a

longer period of time.

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Open innovation however does have its own disadvantages as well. There can be a serious concern

of the intellectual property, as the ownership is questionable. This can be related back to the case of

Samsung and Apple, where Apple has decided to bring Samsung to court for infringement rights to

its own IP. Due to the increased number of business interface, the management complexity also

increases as well. Companies also tend to look at short term opportunity exploitation, rather than a

business model that would be beneficial in the long term.

The 3 examples of open innovation will be explained using case studies of companies that have

adopted the open innovation method.

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3.1 Natura

Natura, originated from Brazil is the market leader in cosmetics, fragrances and personal care. They

are also involved in direct selling and distribution method and are known to be the forerunner of

innovation in the cosmetics industry. Natura adopted the open innovation method in 2006.

Natura created a centralized unit within its vice-presidency and with a department consisting of 11

people; they have focused on innovation, management of innovation and group partnerships linking

them to the directors of other firms. Their main motivators are the improvement of internal and

external communication of the company and the university. They then focus on intellectual

properties, funding and licenses and partnership with University and research institute. By utilizing

the resources from the research institute, Natura was able to focus on services more, hence the

product of the company itself. The company’s product credibility has also increased as research

done by university shows more strength of confidence in the public’s eye.

Natura employed a bottom up approach in its OI implementation, as the idea emerged from a group

that is involved with the university itself. Natura adopted a strategy that promotes internal research

and to encourage the search for openness. There is also a centralized structure within the company

and a department dedicated to open innovation itself. However, its partnership with university is

informally done by means of joint research and research contracts. Natura also has a structured

research platform that allows contracted professionals in partnership with the open innovation

system.

Despite adopting the bottom up approach, the support from top management has become an

important enabler in its implementation. The matrix structure within the company also acts as an

enabler, as a department is allocated and responsible for open innovation.

However, initially, the idea was rejected as internal researchers felt inadequate. This has improved

over the years with the support from the top management in achieving a good collaboration and

moral drive.

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3.2 Pininfarina

Pininfarina is an Italian firm that specializes in the automotive industry as well as other industries. As

a design company, Pininfarina often explores the niche market, by producing ideas and introducing

innovations in terms of technological advancement and designs way before its competitors. The

company was one of the first to work on the Nido, one of the first electric cars. Up to year 2007, the

company’s innovation process was funded by auto-financing. Collaboration with strategic partners

allowed the company to co-develop and build prototypes based on emerging technologies.

The open innovation involved in Pininfarina is commonly known as concept vehicles. The company

often creates prototypes for exhibition purposes, which automotive companies use for car shows

and marketing opportunities. Pininfarina’s lists of customers are large automobile manufacturers.

Figure 2: Pinanfarina customers in automobile industry

Pinanfarina performs collaboration and co-development with the automobile companies. This allows

it to obtain ideas and knowledge from the companies and build its own pool of resource. It then

transfers the knowledge and patents to benefit the cooperation. Through this, the company has

established a strong long collaboration with several automobile companies.

This type of open innovation is beneficial to both parties, where ideas are transferred from both

expertise in the same field. However, it does post a risk, where a competitor might establish a similar

idea that is commonly shared with Pininfarina. [8]

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3.3 Dunkin Donuts

Dunkin’ Donuts is one of the largest baked donuts and coffee franchise chain in the world with more

than 7000 stores worldwide. The company has adopted several open innovation method to improve

its product and services.

One of the products identified is their brewed coffee. While they remained a market leader in coffee

sales, they did not have the distribution network or the business model for retail purposes; hence it

misses sales on a large market where packaged coffee is a potential market. The coffee was also

designed for commercial sales, and not for home-brewing. The research and development at

another company, P&G has developed a similar roast to dunkin’ donuts and by employing the

Dunkin’ Donuts brand, this product is marketed and sold in retail stores. Due to the branding, a

premium pricing was possible. This partnership involves Dunkin’ Donuts equity and brand marketing

while employing P&G’s distribution network.

Dunkin’ Donuts also involves its customers in the open innovation. This particular method is known

as crowdsourcing. In 2010, Dunkin’ Donuts organized a “Create Dunkin’s Next Donut” competition,

which allows fans to participate and experiment with different formulas. This provided Dunkin’

Donuts with a pool of new ideas to venture and explore.

The company also sponsored a custom playlist on an internet radio station, Pandora. By doing this, it

has also asked consumers to recommend favourite songs inspired by the flavours of its product,

Coolaata. While this serves as an advertisement by itself, but it also provides new ideas to improve

its marketing method and advertisements in the future by employing the fan’s ideas.

In overall, by employing the social media and the crowdsourcing method to engage with its

customers, it allows Dunkin’ Donuts to be the brand that distinguishes its willingness to engage in a

qualitative and quantitative way with its customers. They have also shown how the brand innovation

is based on the customer’s needs.

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4.0 Part 2

Part 2 requires the table to be further expanded to show cash inflow (Sales revenue) and the cash

outflow (total cost). The net cash flow is obtained as the difference between the cash inflow and the

cash outflow.

2014 2015 2016 2017 2018

Initial Investment

30,000 0 0 0 0

Marketing costs

5,000 10,000 5,000 5,000 2,000

Production costs

10,000 12,000 12,000 15,000 15,000

Sales (number of

units) 0 100 250 300 400

Price per unit 220 220 200 180 150

Sales revenue 0 22000 50000 54000 60000

Total cost 45000 22000 17000 20000 17000

Net cash flow -45000 0 33000 34000 43000

To calculate the Net present value, the NPV formula is employed. First, the present value for each

year is calculated with an interest rate of 5%.

For year 2014, n=0

𝑃 = −45000

1

= −45000

For year 2015, n=1

𝑃 =0

1.05

= 0

14

For year 2016, n = 2

𝑃 =33000

(1.05)2

= 29932

For year 2017, n = 3

𝑃 =34000

(1.05)3

= 29370.48

For year 2018, n = 4

𝑃 =43000

(1.05)4

= 35376.20

The sum of all the values will give us the Net Present Value from year 2014 to 2018.

Net Present Value = £49678.68

Accounting rate of return is calculated based on the formula;

𝐴𝑅𝑅 =𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑎𝑛𝑛𝑢𝑎𝑙 𝑝𝑟𝑜𝑓𝑖𝑡

𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝑐𝑜𝑠𝑡 𝑜𝑓 𝑖𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡

The average annual profit is calculated by summing up the total net cash flow and dividing it by a

total of 5 years

𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑎𝑛𝑛𝑢𝑎𝑙 𝑝𝑟𝑜𝑓𝑖𝑡 =−45000 + 0 + 33000 + 34000 + 43000

5

= 13000

The average annual profit value is then input into the ARR formula;

𝑨𝑹𝑹 =𝟏𝟑𝟎𝟎𝟎

𝟑𝟎𝟎𝟎𝟎

= 𝟎. 𝟒𝟑

15

The payback period can be calculated using a graphical interpretation.

Year Cumulative Profit

2014 0

2015 0

2016 33000

2017 67000

2018 110000

As the initial investment is £45000, the graph intersection at this point is found. An approximation is

made that the graph intersects at 0.35 years into the year 2016. Hence, from here, we can calculate

the payback period.

𝑃𝑎𝑦𝑏𝑎𝑐𝑘 𝑝𝑒𝑟𝑖𝑜𝑑 = (0.35 ∗ 12) + (3 ∗ 12)

= 𝟒𝟎. 𝟐 𝒎𝒐𝒏𝒕𝒉𝒔

05000

100001500020000250003000035000400004500050000550006000065000700007500080000850009000095000

100000105000110000115000120000

2013.5 2014 2014.5 2015 2015.5 2016 2016.5 2017 2017.5 2018 2018.5

Cumulative Profit

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Business case for A Smart Refrigerator

Executive Summary

This business case recommends the design of a smart refrigerator having graphical interfacing

interface, Radio frequency identification and sensors. The project is expected to deliver a

financial benefit of £ 200 per year through reduced labour cost and process reliability.

The return on investment will be 112.6% after a period of 5 years.

Reasons

Over the years refrigerator owner often don’t remember the stock they have in the fridge and

they do buy what they already have in excess. The items in the fridge also expires without

knowing until they day it’s going to be consumed. In hotels and commercial area, the

dedicated staffs have the responsibility of checking and stocking the fridge at interval not to

run of supply for the guest.

The solution to this problem is to build a GUI Smart refrigerator having the following functions

- Barcode scanner: this actually scans every item placed and removed from the fridge.

Any item without a barcode can be inputted manually on the LED display

- Stock order- the device can be linked to any online grocery site and order can me made

automatically or manually if not direct debit is not set up.

- Multimedia- the smart touch LCD screen on the door, and allows TV programme to be

watched, picture slides, and also cook recipe

- Remote lock- this allows the fridge to be accessed remotely via a phone or pc and

locked

- Smart Tray- the glass tray in the fridge automatically measure the weight of any object

placed on it at random position e.g. weight of a jar of milk.

Business option

The business option incorporated here is to do the minimal by using existing refrigerator and

incorporating some hardware module into it like the sensors, smart tray, LCD screen, RFID

and WAN card. The product software will be a Dot Net frame work which can be accessed

over the web. this option will reduce the time spent in the kitchen, reduces buying things that

are still available , create comfort and means of advertisement with the multimedia screen

and also protection from eating expired product. The cost of integrating this entire module

would be £ 200000 the cost in developing a software and database for the food item £ 15000

cost of deploying anti-spam and anti-hacker £ 5000

Expected benefit

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The expected benefit of this project is

- Income benefits when products are advertised on the LCD display

- Reduction of time spent visiting grocery stores

Expected dis-benefit

Higher market price makes it only affordable to certain range of user

Timescale

The project is expected to take a period of 1 year from the design specification process to a

complete final product ready for sales. Manufacturing process will continue based on

customer’s demand. The work breakdown structure is included and the timescale is defined

clearly by using the Gantt chart.

Cost

Project cost:

- Hardware development cost

- Software development cost

Operational cost:

- Staff salary

Staff salary will be higher during the R&D process, as more staffs are required during

this stage for the development process. Once the development process has been

completed, salary will be distributed towards service engineers, manufacturing

personnel and customer service.

- Site rental

Site is required for office space for developers. Later a warehouse is to be converted

to a manufacturing plant.

- Annual Maintenance cost

Maintenance cost will cover the maintenance required for the manufacturing plant

- Customer support

Customer support will include warranty claims, call centre support and operating

manual production

- Overhead bills

Utility bills such as gas, electricity and water. Subject to inflation yearly.

- Manufacturing

Manufacturing cost involves purchase of raw material and other manufacturing

associated cost

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Cash Flow

Cost Year 1 Year 2 Year 3 Year 4 Year 5

Hardware development cost (200000) 0 0 0 0

Software development cost (20000) 0 0 0 0

Staff salary (465600) (327300) (337200) (347230) (357650)

Site rental (24000) (24000) (24000) (24000) (24000)

Equipment maintenance 0 (6000) (6000) (6000) (6000)

Customer support 0 (2000) (3500) (4200) (5500)

Overhead bills (9400) (9400) (9400) (9400) (9400)

Manufacturing 0 (80000) (72000) (70000) (69000)

Subtotal (719000) (448700) (452100) (460830) (471550)

Savings

Sales 0 325000 450000 880000 1200000

Repairs 0 0 4000 7000 7600

Subtotal 0 325000 454000 887000 1207600

Cash flow (719000) (123700) 1900 426170 736050

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Return on Investment

The return on investment is calculated over a 5 year period using the ROI formula.

𝑅𝑂𝐼 = (𝑠𝑎𝑣𝑖𝑛𝑔𝑠

𝑐𝑜𝑠𝑡) 𝑥 100

=2873600

2552180∗ 100%

= 112.6%

Project risk

A proper project risk assessment is done and analysed using the risk log. The risk log identifies

the possible risk associated and the mitigation plan for every risk. The mitigation plan is

divided into trigger and action. Trigger is the immediate reaction to what should be done

when the problem happens. Action is broken down to corrective action and preventive action,

where action is taken to identify the associated problem and prevent it from reoccurring.

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Risk Log

No owner Risk likelihood Impact Effect on project Risk Reduction Actions Trigger/ Actions

TEC

HN

ICA

L

1 R&D manager

Electronic component malfunction

3 4 Failure of project 1. Use credible suppliers 2.Proof of testing from supplier prior to shipment.

Trigger- inform the project manager and supplier regarding failure Action - Require new parts to be shipped and inform supplier to produce a failure analysis research to prevent the problem from reoccurring.

2 R&D manager

Energy efficiency not complied

2 3 Less acceptance by market

1. Consider energy efficiency during development and include in WBS 2. Energy efficiency should be tested for each phase

Trigger - inform project team Action - improve the design to include energy efficient components

3 Production manager

Prototype failure 1 4 Delay or failure of project

1. perform testing at every stage of production before assembling the prototype

Trigger- inform the project manager and replace the malfunction component. Action - Enforce and ensure testing is done at every stage of production

4 R&D manager

Explosion 1 5 Injury to staff or customer

1. R&D should consider chances of explosion due to refrigerant.

Trigger - inform the R&D manager about the explosions. Action - improve the refrigerant to inflammable material

21

SCH

EDU

LE

1 R&D manager

Delay in R&D Department

2 4 time escalation 1.should always verify work progress with work schedule

Trigger- inform the reason of delay to project manager. Action - allow HR department to increase the shifts and if needed recruit temporary workers.

2 R&D manager

development risk , tools and software licence expiry

3 2 time escalation and delay

1.the software can be purchased 2.evaluation of design against an existing prototype

Trigger- inform the purchaser about the need to purchase the software. Action - purchase the software licence as soon as possible

3 Purchase department

supplier demand failure

3 3 time escalation and delay in production

Purchase manager should inform the project manager and the supplier regarding the issue.

Trigger- contact secondary suppliers to fulfil the demand. Action - issue order for new supply order

4 Project manager

delay in obtaining environmental licence

2 3 time escalation and delay

1. Prepare applications for obtaining it as early as possible.

Trigger- follow up with the environmental agency to find what has gone wrong Action - to reschedule the production.

5 maintenance department

equipment failure or breakdown

4 3 time delay in production and supply

1. Always check the age and performance of equipment before employing in production. 2. Ensure electrical and mechanical and operational safety to prevent damage.

Trigger- inform the project manager and production department. Action -get maintenance and repair done as soon as possible or get replacement

22

CO

ST

1 finance department

cost escalation due to inflation, change in licence or legislation

2 4

increase the capital requirement of project and increase the cost of product

1 include a fair margin for inflation and unexpected costs while doing the cost analysis of project

Trigger -inform the finance department about the un expected cost hike Action- finance should increase the funding according to the requirement.

2 purchase department

cost escalation due to supplier failure

2 3

increase the time of project and thus cause loss in profit

1.establish proper contract from supplier to supply at a particular price and time period

Trigger- inform the project manager Action - implement the legal security from the contract between supplier and purchase.

3 maintenance department

cost increased due to the production delay by equipment failure

2 2 affects the expected profit

1 .regular equipment testing and maintenance

Trigger- immediate repair of equipment Action- perform planned maintenance to reduce breakdown.

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Work Breakdown Structure

Research and Development

1. Specification

1.1. Software

1.1.1. Operating System

1.1.2. Mobile App

1.2. Hardware

1.2.1. Components Required

1.2.2. Equipment Required

1.3. Size, Shape and Dimensions Requirements

1.4. Quality, Environmental and Efficiency Requirements

1.4.1. Quality Standards

1.4.2. Environmental Standards

1.4.3. Efficiency Standards

1.5. User Interactivity

1.5.1. Graphics User Interface

1.5.2. Connectivity with Supermarkets

2. Design

2.1. Hardware Design

2.1.1. Electronic Design

2.1.2. Electrical design

2.2. Software Design

2.2.1. Create Operating System

2.2.2. Create Mobile App

2.3. Size, Shape and Dimensions Design

2.3.1. CAD Design

2.4. Simulate Design

2.4.1. Hardware Simulation

2.4.2. Software Simulation

2.4.3. CAD Simulation

3. Prototype

3.1. Construct Prototype

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3.2. Evaluate Prototype

3.3. Prototype Adjustments

4. Testing

4.1. Test Hardware

4.2. Test Software

4.3. Test User Interactivity

5. Finalisation

5.1. Finalise Hardware Design

5.2. Finalise Software Design

5.3. Finalise Size, Shape and Dimensions Design

5.4. Finalise User Interactivity

Production

1. Pre - Manufacturing

1.1. Manufacturing Equipment

1.1.1. Search and Acquire

1.1.2. Mobile App

1.2. Manufacturing Site

1.2.1. Search and Acquire

1.2.2. Install Manufacturing Equipment

1.3. Manufacturing Testing

1.3.1. Safety Tests

1.3.2. Equipment Tests

2. Components

2.1. Ship in Components

2.2. Tests Components

3. Manufacturing

3.1. Product Production

3.2. Product Testing

4. Shipping

4.1. Package Products

4.2. Ship Products

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Marketing

1. Market Research

1.1. Potential Market

1.1.1. Bulk Buying Market

1.1.2. Individual Buying Market

1.2. Marketing Strategies

1.2.1. Online Advertisements

1.2.2. Television Advertisements

1.2.3. Other Medians of Advertisements

2. Marketing Production

2.1. Create Advertisements

2.1.1. Online Advertisements

2.1.2. Television Advertisements

2.1.3. Other Medians of Advertisements

2.2. Market to Potential Market

3. Market Feedback

3.1. Receive Marketing Feedback

3.2. Evaluate Marketing Feedback

3.3. Adjust Marketing Accordingly

Customer Service

1. Online Services

1.1. Develop Website

1.2. Acquire Online Services site and Equipment

1.2.1. Acquire Site

1.2.2. Acquire Equipment

1.3. Begin Online Services and Mobile App

1.3.1. Install Equipment

1.3.2. Test Equipment

1.3.3. Go Live

2. Telephone Services

2.1. Develop Telephone Line

2.2. Acquire Telephone Services site and Equipment

26

2.2.1. Acquire Site

2.2.2. Acquire Equipment

2.3. Begin Telephone Services

2.3.1. Install Equipment

2.3.2. Test Equipment

2.3.3. Go Live

3. Training

3.1. Train Installation and Repair Technicians

3.2. Train Online Services Staff

3.3. Train Telephone Services Staff

4. Operating Manual

4.1. Develop Manual

4.2. Make Manual Available

4.2.1. Digital Version

4.2.2. Hardcopy Version

27

Table 1: Gantt chart

Div. Item/Month March April May June July August Sept Oct Nov Dec Jan Feb March Apr May Jun

R &

D

Specification

Design

Prototype

Testing

Finalisation

Pro

du

ctio

n Pre-

Manufacturing

Components

Manufacturing

Shipping

Mar

keti

ng

Market Research

Marketing Production

Market Feedback

Cu

sto

mer

Se

rvic

e

Online Service

Telephone Service

Training

Operating Manual

28

Computing the cash flow for a 10 year period projection:

Cost Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Hardware development cost 200000 0 0 0 0 0 0 0 0 0

Software development cost 20000 0 0 0 0 0 0 0 0 0

Staff salary 465600 327300 337200 347230 357650 371956 383115 398440 414377 420952

Site rental 24000 24000 24000 24000 24000 24000 24000 24000 24000 24000

Equipment maintenance 0 6000 6000 6000 6000 6000 6000 6000 6000 6000

Customer support 0 2000 3500 4200 5500 6000 7200 7100 6200 5500

Overhead bills 9400 9400 9400 9400 9400 9400 9400 9400 9400 9400

Manufacturing 0 80000 72000 70000 69000 67000 66000 66000 41000 34000

Subtotal 719000 448700 452100 460830 471550 484356 495715 510940 500977 499852

Savings

Sales 0 325000 450000 880000 1200000 1400000 1550000 1320000 980000 620000

Repairs 0 0 4000 7000 7600 8200 8800 6400 6000 5800

Subtotal 0 325000 454000 887000 1207600 1408200 1558800 1326400 986000 625800

Cash flow (719000) (123700) 1900 426170 736050 923844 1063085 815460 485023 125948

29

Calculating the NPV for each year would separately:

For year 1, n=0

𝑃 = −719000

1

= −719000

For year 2, n=1

𝑃 = −123700

1.04

= −118942

For year 3, n=2

𝑃 =1900

(1.04)2

= 1756.66

For year 4, n=3

𝑃 =426170

(1.04)3

= 378863.60

For year 5, n=4

𝑃 =736050

(1.04)4

= 629178.62

For year 6, n=5

𝑃 =923844

(1.04)5

= 759332.43

For year 7, n=6

𝑃 =1063085

(1.04)6

= 840171.52

30

For year 8, n= 7

𝑃 =815460

(1.04)7

= 619682.58

For year 9, n=8

𝑃 =485023

(1.04)8

= 354401.56

For year 10, n=9

𝑃 =125948

(1.04)9

= 88489.40

Hence, NPV is the sum of the total values each year:

−719000 − 118942 + 1756.66 + 378863.6 + 629178.6 + 759332.4 + 840171.5 + 619682.6

+ 354401.6 + 88489.4 = 2833934

Computing the results of each year’s PV into a graph will provide us with the graphical interpretation

of NPV from year 1 to year 10.

Assumptions made:

Staff salary reduced after year 1 as no more development will be needed, hence reduction in

staff. However, salary will increase periodically with inflation rate for available staff.

-800000

-600000

-400000

-200000

0

200000

400000

600000

800000

1000000

0 2 4 6 8 10 12

£

Years

NPV

31

Manufacturing cost to be high in the beginning. Mass production will continually decrease the

manufacturing cost despite the increase in volume. Process Engineers are also responsible to

reduction of waste which would directly reduce the manufacturing cost.

Sales value to pick up until it reaches a peak period, in this case at year 7 then a steady decline

as the project reaches the end of its technological life cycle.

Based on the NPV graph, we can see that the project is approaching a limit at 0. Hence, before the

project reaches a negative value, the product should only be sold for a period of 10 years.

Assumption is made based on new innovation in the market that would be more attractive to

customers.

32

6.0 References

1. Papenek, V. 1995. The Green Emperitive: Ecology and Ethics in Design and Architecture, London,

Thames and Hudson.

2. European Commision, 2012. Eco-design of Energy-Related Products. [Online] Available at

http://ec.europa.eu/energy/efficiency/ecodesign/eco_design_en.htm

3. Palmer, L. 2011. Case Study: Orangebox Limited. [Online] Available at

http://www.ecodesigncentre.org/sites/default/files/EDC_Orangebox_EnablingEcodesignInWelshInd

ustry_1.pdf

4. Whitehead,P., Young, A.K., Charter, M. 2007. Eco-Design Case Study: Crawford Hansford & Kimber

(CH & K). Adding Value to the Supply chain with Smart ecoDesign. The centre for sustainable Design.

5. Bassett,D., 2010. Eco-Design Case Study: Kelvin Hughes. Kelvin Hughes Limited. Ilford, Essex.

6. Chesbrough, Henry W., 2003 “The Era of Open Innovation.” Sloan Management Review , 44, 3

(Spring): 35-41.

7. Ades, C., Figlioli, A., Sbragia, R., Porto., Plonski, G.A., Celadon, K., 2011. Implementing Open

Innovation: The case of Natura, IBM and Siemens. Journal of Technology Management and

Innovation, Vol 8, Special issue, pp 12-25

8. Massis, A., Lazzarotti, V., Pizzurno, E., Salzillo, E., 2012. Management of Technological Innovation

in developing and developed countries. Rijeka: InTech Europe

9. Idea Connection, 2007. How Dunkin’ Donuts uses open innovation to get ahead. [Online] Available

at http://www.ideaconnection.com/open-innovation-success/How-Dunkin-Donuts-Uses-Open-

Innovation-to-Get-Ahead-00336.html