The Whispr mask will be manufactured out of ABS plastic. ABS's versatility in its shaping processes along with its recyclability and lower emissions in creation led it to be the material of choice. The external shell and internal dampening unit are to be injection molded, and then brought onto the assembly line where the electronics and straps will be mounted to the external shell, while a sock that is lined with the sound absorbing material will be created and assembled into the injection molded internal dampening unit.
The customized components for Whispr are manufactured first with five parallel processes.
One injection molding machine, manned by a skilled operator will create the external shell.
Another injection molding machine will create the internal dampening unit from the mold made per the drawings above.
An extruder creates the IDU seal out of SEBS rubber, which is then passed to table #4 for mounting.
The hygienic sock is sewn at its station with its profile matching the internal dimensions of the IDU and passed to table four.
The straps are first assembled on table #1 with the buckle and adjustment hardware to create the strap subassembly.
The External Shells make their way to table #2 for the electronics (supplied by custom circuit board vendor) to be mounted onto it.
Once the electronics are mounted, the shell is moved to the next table where the strap subassemblies are ready to be attached to the shell
At table #4, the sock is first inserted and attached into the molded IDU, and the extruded seal is attached onto it.
Finally, both the IDU subassembly and External Shell subassembly make their way to the inspection table for quality check and a test fitting to ensure the two components attach to each other with ease.
To be able to calculate the total square footage area of the manufacturing plant required, we prepared a scale floor layout. The plan was designed to minimize cross over in paths that the material must travel. The walkway from the injection molding machine to the assembly zone does not cross with the walkway for the extruder, providing a clear and safe path for transport. The sewing machine is placed on the other side of the assembly zone to provide another clear pathway for material transport to its respective table.
Cost Analysis and Breakdown
Cost Analysis Assumptions
To develop the cost model, we assumed Whispr would be created here in Ann Arbor. Using this as our location, we used the U.S. Bureau of Labor Statistics database for Ann Arbor to assume our hourly wage to be $20.00 for the factory workers. For overhead managing costs, we allocated $50.00 an hour each for the production and assembly processes. Assuming we have one standard shift of 8 hours per day for 9 floor workers, we decided a production goal of 40,000 units per year is feasible.
Property Investment
To develop the cost model, we assumed Whispr would be created here in Ann Arbor. Using this as our location, we were able to find a building costing $500,000 that spans 4,372 sq ft, fitting our manufacturing layout requirements.
Manufacturing Equipment/Tooling Costs
To manufacture both our IDU and external shell, two separate injection molding machines and molds are necessary. While this increases our upfront costs significantly, it's important to have two machines to avoid a bottleneck at this part of the process.
The sealing strips are manufactured through extrusion, and the rest of the Whispr can be manufactured with various equipment at a work table. Our total investment for equipment and tooling ends up being $90,501.00.
Non-Manufacturing Costs
Non-manufacturing costs include electricity, online marketing and website maintenance, as well as distribution.
Total Product Cost
After putting together our material, manufacturing, and non-manufacturing costs, we were able to estimate our final cost per each unit of our product as shown by the table below.
Whispr will cost $12.84 in materials & manufacturing and $10.82 in non-manufacturing costs for a total of $23.66. It will be sold for $49.99, which indicates a profit of $26.33 (111%). BeltBox, our largest competitor based on estimates, prices their product at $49.99. We feel confident with selling Whispr at this price point due to our product not only providing sound attenuation like BeltBox, but also due to it providing audio playback and monitoring features they currently lack.
Discounted Cash Flow Analysis
Using this, along with our investment costs, we were able to create a 5-year discounted cash flow analysis for the business plan of our product. Assuming 2023 is our investment year and production begins in 2024, the DCF below calculates the total cash flow throughout.
Using the DCF, we were able to also calculate net present value (NVP) for each year, along with the total NPV for the plan. This is shown below on the left, with the profitability on the right.
This negative NPV in the initial investment year (2023) indicates that the investment is currently expected to result in a net cash outflow. The positive NPV in 2024 suggests that the investment is expected to generate a positive net cash inflow once production begins. This is a crucial turning point, as it indicates that the project starts contributing positively to the overall value. In fact, the breakeven period happens during the first quarter of 2025 which is very soon, indicating a very strong business performance.
The total NPV, which is the sum of the yearly NPVs, is positive. This suggests that, over the entire 6-year period (2023-2028), Whispr is expected to generate a net positive value when considering the time value of money.
For our product, the Internal Rate of Return (IRR) at 103.2% is incredibly promising for the 5-year plan. This means that over the next five years (2023-2028), Whispr is anticipated to yield returns at a remarkable rate, reaching 103.2% on our initial investment. This positive IRR indicates that, after factoring in the time value of money, the project is poised to generate significant profits. With positive Net Present Values (NPVs) for each year, our product shows financial strength and the potential for substantial returns. However, it's important to carefully examine the assumptions we've made and consider the current market conditions to make sure that our optimistic projections are realistic and feasible.
Proforma: First Three Years by Quarter
The proforma shows the first 3 years of our business, broken up into quarters of each year. An initial personal investment of $1,500,000, investor contributions totaling $1,000,000, and a small business loan of $1,300,000 will ensure that our running cash balance stays positive during the first year of production, with a low of $17,330 as a safety factor.
The below table shows the entire calculation, along with broken-up expenses and a detailed analysis based on every quarter.