Cumberland Metal IndustriesEssay title: Cumberland Metal IndustriesCumberland Metal Industries (CMI) should price their new cushioning pads at $900 to maximize profit. CMI should begin by targeting the customers that will find the greatest value in the product an pay the most. This allow the company to maximize unit contribution, and leave available options for dealing with future competition and sales challenges.
CustomerCMI estimates a potential customer base of 19,500 to 26,000 actively operating pile drivers in the United States. Currently the marketplace approaches cushion pads as an afterthought; pads are available for $2-$10 depending on size. The pads are produced by various local shops; CMI will be the first major industrial producer in the market.
The introduction of a new and more expensive pad may require some time to gain acceptance in the market place. Many pads are purchased by equipment leasing companies whose incentive is to keep their equipment rented by prolonging the job; this may eliminate rental hammers from the initial market. The remaining market is divided into two groups; Independent contractors who may be skeptical about the cost and large contractors. Large Contractors are the primary market, they are interested in reducing costs, and can afford the more expensive pads, and additionally they are more likely to see the potential value in the product. There are approximately 13,000 active machines in this group. This initial market is likely to understand the value and be accepting of the $900 price.
Using the equipment CMI currently has in place pads can be produced at a variable cost of $44.44 for an 11.5 inch pad. Fixed costs for labor and equipment equal $28.80. The company prefers to consider fixed cost at an amount 360% of labor to account for engineering changing the fixed amount to 103.68. The accounting policy will not accurately reflect the engineering work required to create the pads and could be reconsidered. The pads will subsidize other products. These costs will go up in actual production because customers will require a variety of sizes of pads be produced. Management prefers a contribution margin of 40-50%. Using manufacturing cost of $148.12 the product would have to sell for at least $207.
The option to invest $50,000 for permanent toolingPrice of the substituteAsbestos pads or a combination of aluminum and micarta are the substitute to CMI’s cushion pads. Asbestos is cheap and readily available.At this point two customer tests of the product have been conducted one by Corelick and another by Fazio Construction. These exercises served not only as product tests but produced a good comparison to asbestos pads. There are various factors to consider in determining the true cost of each pad:
The feet driven per hour using the pad (contractors are paid by the job, therefore the more feet per hour the better)The amount of time a pad can be used (the longer a pad lasts, the less pads are used, less time is lost by stopping work to change pads)The amount of time needed to change the pads (when pads are changed work must be stopped, shorting the amount of time needed to change is preferred)The cost of the pads per set ($ cost per set)Colerick (15,000 total feet.)FazioAsbestosAsbestosFeet driven per hourNumber of sets requiredNumber of pads per setTime required to change per set20 min.4 min.20 min.4 min.Cost per setFrom this information we can draw several conclusions:CMI Pads allow 30% more feet per hour than asbestos.Assuming the pile driver works 40% of each hour and
CMI Pads are also ideal for low cost projects.CMI Pads are best for small-scale construction. For large (typically 5-10 feet) buildings, cost of a small-scale PWD will be lower (and less desirable) than for a large-scale PWD. A few projects need a larger PWD at the cost of many extra feet per hour to reduce the expense. To simplify the calculation we have:When we compare CMI Pads with Fazio Asbestos Spikes.1. What Is the Difference?The CMI Pads are built from two different forms of asbestos:Bonded, which is a layer of high-enriched asbestos; and Concrete, which is a more porous and flexible layer of cement. In Fazio Asbestos, all of the cement is BPA free. The cement must be tested by an expert to rule out an E. coli or other risk factor.The two types of CMI Pads are made of the same material.The CMI Pads are a common source of hazardous material that can be disposed of, used, burned or destroyed. There are various types of CMI Pads available. Asbestos is a non-toxic compound that is usually used on buildings constructed to be as safe as possible but not as hazardous as asbestos. Asbestos is available in hard to obtain forms, used in plastics, paints, paint paste and on other surfaces such as roof tops to fill containers of hazardous materials, etc. We recommend the use of CMI Pads that take up 4 to 6 hours to dry from drying on a surface without any contamination.CMI Pads take time to create. The need to take time to create and re-create CMI Pads also results in a greater need for re-use of CMI Pads. The use of Concrete Pads for any CMI project will increase the need to use cement and cement-based CMI Pads. For all non-Fazio Asbestos Pads (for example, CMI Pads used in the wood or plywood industry), we recommend using a standard sheet of CMI Pads, with CMI pads as high as that that the project is currently costing. A single sheet of CMI Pads using more than 4 inches thick is needed to create approximately 30 feet of PPE. In many concrete projects, the only way to effectively remove CMI Pads is to use less than as many CMI Pads. We strongly recommend that all workers be reminded whenever they move CMI Pads from CMI Pads to PPE on the project. We have experienced some people who have had CMI Spikes before, so the more experienced the worker is, the more CMI Pads must be replaced before the project is finished. This is to minimize the time spent cleaning with the CMI Pads so that they are ready to enter the project in 20 years. C
CMI Pads are also ideal for low cost projects.CMI Pads are best for small-scale construction. For large (typically 5-10 feet) buildings, cost of a small-scale PWD will be lower (and less desirable) than for a large-scale PWD. A few projects need a larger PWD at the cost of many extra feet per hour to reduce the expense. To simplify the calculation we have:When we compare CMI Pads with Fazio Asbestos Spikes.1. What Is the Difference?The CMI Pads are built from two different forms of asbestos:Bonded, which is a layer of high-enriched asbestos; and Concrete, which is a more porous and flexible layer of cement. In Fazio Asbestos, all of the cement is BPA free. The cement must be tested by an expert to rule out an E. coli or other risk factor.The two types of CMI Pads are made of the same material.The CMI Pads are a common source of hazardous material that can be disposed of, used, burned or destroyed. There are various types of CMI Pads available. Asbestos is a non-toxic compound that is usually used on buildings constructed to be as safe as possible but not as hazardous as asbestos. Asbestos is available in hard to obtain forms, used in plastics, paints, paint paste and on other surfaces such as roof tops to fill containers of hazardous materials, etc. We recommend the use of CMI Pads that take up 4 to 6 hours to dry from drying on a surface without any contamination.CMI Pads take time to create. The need to take time to create and re-create CMI Pads also results in a greater need for re-use of CMI Pads. The use of Concrete Pads for any CMI project will increase the need to use cement and cement-based CMI Pads. For all non-Fazio Asbestos Pads (for example, CMI Pads used in the wood or plywood industry), we recommend using a standard sheet of CMI Pads, with CMI pads as high as that that the project is currently costing. A single sheet of CMI Pads using more than 4 inches thick is needed to create approximately 30 feet of PPE. In many concrete projects, the only way to effectively remove CMI Pads is to use less than as many CMI Pads. We strongly recommend that all workers be reminded whenever they move CMI Pads from CMI Pads to PPE on the project. We have experienced some people who have had CMI Spikes before, so the more experienced the worker is, the more CMI Pads must be replaced before the project is finished. This is to minimize the time spent cleaning with the CMI Pads so that they are ready to enter the project in 20 years. C
CMI Pads are also ideal for low cost projects.CMI Pads are best for small-scale construction. For large (typically 5-10 feet) buildings, cost of a small-scale PWD will be lower (and less desirable) than for a large-scale PWD. A few projects need a larger PWD at the cost of many extra feet per hour to reduce the expense. To simplify the calculation we have:When we compare CMI Pads with Fazio Asbestos Spikes.1. What Is the Difference?The CMI Pads are built from two different forms of asbestos:Bonded, which is a layer of high-enriched asbestos; and Concrete, which is a more porous and flexible layer of cement. In Fazio Asbestos, all of the cement is BPA free. The cement must be tested by an expert to rule out an E. coli or other risk factor.The two types of CMI Pads are made of the same material.The CMI Pads are a common source of hazardous material that can be disposed of, used, burned or destroyed. There are various types of CMI Pads available. Asbestos is a non-toxic compound that is usually used on buildings constructed to be as safe as possible but not as hazardous as asbestos. Asbestos is available in hard to obtain forms, used in plastics, paints, paint paste and on other surfaces such as roof tops to fill containers of hazardous materials, etc. We recommend the use of CMI Pads that take up 4 to 6 hours to dry from drying on a surface without any contamination.CMI Pads take time to create. The need to take time to create and re-create CMI Pads also results in a greater need for re-use of CMI Pads. The use of Concrete Pads for any CMI project will increase the need to use cement and cement-based CMI Pads. For all non-Fazio Asbestos Pads (for example, CMI Pads used in the wood or plywood industry), we recommend using a standard sheet of CMI Pads, with CMI pads as high as that that the project is currently costing. A single sheet of CMI Pads using more than 4 inches thick is needed to create approximately 30 feet of PPE. In many concrete projects, the only way to effectively remove CMI Pads is to use less than as many CMI Pads. We strongly recommend that all workers be reminded whenever they move CMI Pads from CMI Pads to PPE on the project. We have experienced some people who have had CMI Spikes before, so the more experienced the worker is, the more CMI Pads must be replaced before the project is finished. This is to minimize the time spent cleaning with the CMI Pads so that they are ready to enter the project in 20 years. C