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Original Message
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| Let's do the math... |
| By Dan Davis - 10/04/2002 4:23:37 PM; IP 166.90.237.161 |
....to find out why:
Design a new head:
1 contract engineer + software x 6 months = $100,000
1 contract CAD designer + software x 2 months = $18,000
Prototype cycles x 3 = $75,000
Make it:
Sand cast tooling (match plates, core boxes): $80,000
Machining & part handling dunnage: $25,000
OK, so now we've got $298,000 and no heads yet. Let's do a run of 100 pairs.
Raw castings: $1,000 set up charge, $200/head
Machine the castings: $1000 set up charge, $300/head. These will be lower with a higher volume.
That's another $102,000.
So, we have 100 pairs of heads and have spent $400K. That's a COST of $4000 each pair. Now the manufacturer needs to get his profit (50% margin on such a low margin) and sell them to the wholesaler for $8K a pair. The retailer needs his 50% margin, so they will retail for $16K a pair.
To get the economics more sensible, like $3000/pair bare retail price, the manufacturer would need to sell about 2000 pairs to break even. That is after investing $1.3M not counting any marketing, advertising, storage or transportation costs.
Don't sound like a good business move to me.
Regards,
Dan |
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