Drawing a Line Between Socialist and Capitalist Structures in American Society- Judical System

I am a proponent of the capitalist system in general. It has provided a nice living for me and my family. I’ve only been employed by two business in the 25+ years since I graduated (but 5 changes in ownership!). But conservatives, in my opinion, make a mistake when they try to extend capitalism from businesses to social structures- rights based social programs.

Justice System- we have a right to a fair trial and if found guilty pay our debt to society, sometimes thru incarceration. Privatized for profit prison systems are become more and more prominent. Similar to charter schools, there is no reason why the private sector should be able to do this better or cheaper.  If they are making a profit, we should always be able to do it cheaper by taking back the facility and returning the profit to the tax payers. The second issue is that the for-profit system exerts undo influence on the political system to set up laws and incarceration rules that will attempt to maximize their potential profits. We incarcerate more people as a percent of population than any industrialize nation. What a waste of human resources on both sides of the cell door. Our prison population could be reduced significantly by the legalization of marijuana- but that is a separate issue. It will likely not happen with a for-profit prison system in place. Business money would pour into the political system to prevent it.

Unfortunately, we are in an era where our elected officials listen more to money than to their constituents. Eliminate this avenue to corruption- keep all aspects of our judicial system public.

Drawing a Line Between Socialist and Capitalist Structures in American Society- Health Care

I am a proponent of the capitalist system in general. It has provided a nice living for me and my family. I’ve only been employed by two business in the 25+ years since I graduated (but 5 changes in ownership!). But the conservatives, in my opinion, make a mistake when they try to extend capitalism from businesses to social structures- rights based social programs.

Health Care- It’s hard to believe there is so much resistance to universal health care. I have yet to hear a good argument that our health care system is both good and cost-effective. Many other countries have cheaper systems with better outcomes. The health insurance industry has huge built-in overheads and profits and we pay them. Profits have no place in the insurance side of health care. We are talking about people’s lives and wellbeing here, not their cable bill or car payment. I would rather pay our government(thru taxes) what it really costs to insure me than pay the private sector for their bureaucracy, year-to-year greed and profit. Take all the money we currently pay to the health insurance industry for their profits and for all the effort they put out trying not to pay our bills and use that to cover everyone. What we sometimes forget is that all those people who get hospitalized and cannot pay their bills are costs we pay for already in the form of higher costs. Effectively, we are already paying for everyone’s health care- it is just not very good health care. Those who argue against Health Care Reform will try to distract us with death panels and other blatantly untrue arguments because they have no good arguments. The health insurance industry want to protect its profits and individuals are simple greedy- they would rather live in a society where they get to keep as much of their money as possible but thousands die unnecessarily. Some of them probably call themselves Christians, too. I’ll cover the greed of the monied minority on another post.

 I think the “Medicare for Everyone” , single payer type approach is absolutely inevitable. It will happen. I’ll take the “public option” with the other protections that are currently in the bill for now. Force the private sector to compete with a government program and they will get creative in ways they have no incentive for now.  We can build on that and drag the naysayers kicking and screaming into a better future.

Drawing a Line Between Socialist and Capitalist Structures in American Society- Education

I am a proponent of the capitalist system in general. It has provided a nice living for me and my family. I’ve only been employed by two business in the 25+ years since I graduated (but 5 changes in ownership!). But the conservatives, in my opinion, make a mistake when they try to extend capitalism from businesses to social structures- rights based social programs.

I’ve never bought into the slippery slope argument used to argue against change. We are collectively bright enough to walk up to the edge of the slippery slope without falling down it.

I think Medicare and Social Security are good examples of  functional, never to be undone, rights based social programs. We now have a right to bottom line medical care and income when we retire. We did the right things here. Liberal values won the day. We can and will eventually win elsewhere. The liberal values of yesterday become to conservative values of tomorrow. No conservative who hopes for re-election would argue for the elimination of either.

Education and charter schools- a basic education is a right in our society. Charter schools are an attempt to move this right into the business sector. By doing so, we are missing the point. If our education system is inadequate in any way, we should focus on fixing it not throwing up our hands and saying “maybe the private sector can fix it”. There is absolutely no reason why the private sector should be able to do it better or cheaper. Charter schools may produce better result in some cases, but they certainly produce very poor results also. They will never do it cheaper, as that isn’t even in the program. We should focus our public money and efforts on making public schools everything they need to be. FOCUS without distraction.  Isolate them from the swings of political influence. Politics can have a hand in regulating expectations but not day-to-day issues. They also need to be isolated from undo religious influence. Although I am an atheist I really don’t have a problem with kids saying “one nation under God”- they can define God however they see fit. Collective human goodness is a good definition for non-believers. Personally, I think a course in religion should be a mandatory high school course, covering all the major religions. Religion(s) influences the lives of everyone whether we believe or not. A broad understanding of religion is important and the current troubles with Muslim extremism is a perfect example. But the Biblical creation story and creationism, by any name, have no place in mandatory public education science classes.

Adventure in Willow Chair Making

This isn’t really art but I had to put it somewhere.

In the spring of this year I had the urge to try something new. I’ve always like the look of rustic furniture so I decided I’d try to make a chair from willow.  I did a little searching on the internet but ended up largely making up the process as I went along. I suspect some or all of it may have been done before they found a better way.

Down by a lake near us is a large area where the right willows grow- about 6-8 ft long first or second year growth. I cut them and strip the leaves off. Over a period of a couple days I stripped them of their bark, which peels of easily. For what I did the stripped of bark was useful to temporarily tie the willow together and in place while it dried. I would use a strong string were I to do it again.

First I tried to make a chair without a form to shape the legs and hold them in position while they dry. This was a bust- the outcome looked OK but didn’t have any strength to it as I couldn’t put enough of the willows together to make it strong enough. Secondarily, the willow that I first cut was too thin.

I went back and cut more willow this time picking more stout pieces- where the skinny end was no smaller than a pencil.  Were I to do this again I would cut even thicker willows.

Since the freeform approach didn’t work I built a square form with a height of my kitchen chairs and a bottom in the corners for the willow to bottom out against.  I them bend the willows to make all four legs of the chair but left what would be the back open- I would put the back also if I did it again. For the legs from which the back would be attached I used fewer willows since putting in the back would add to the thickness. To make the center of the chair to sit on, I put maybe 6 particularly stout pieces  on the diagonal, 3 one way, 3 the other way. Most of the  bent pieces were cut to be slightly higher than the top of the form( maybe 1 in. max). I tied the legs into bundles with the willow bark, and tied any of the crossing pieces making the center of the chair to prevent them from moving to far while they dried. I put a board on top of the filled form and put bricks on it to get all the willows to be flush with the form.   These needed to dry several day before they were permanently formed and didn’t spring back up when the board was removed.

Finished Willow Chair

Willow Chair form

After the legs dried I made the back. Willows were placed in the form and crossed at different heights with several used to form the rounded back of the chair. The willows were tied in place with willow bark strips wherever they crossed and as much as needed to hold them in the rounded form of the back. I put the board back on and also used some heavy bricks to bend the backrest somewhat so it was not straight up and down. I allowed this to dry for a week or so before the next step.

After I could remove it from the form, I applied glue to bond the willows together to increase rigidity. Where willows crossed, I used a round file to produce a rounded notch to increase the contact area and applied glue to them. I bought some leather strips from Jo-Ann Fabrics and tied the leg bundles and the bonded willow crossing points. Below is a picture of the end result. Not great but not bad for a novice.

Never Burn a Bridge

In the course of your path thru the working world you will meet all types of people- smart and no-so-smart, know-it-alls, politicians, people who work across functions effectively and those who stay within their field, those who are not afraid to give their perspective and those who you need to put in a dentist chair to get it out of them, those who can speak with crystal clarity and those who have great difficult finding the right works to communicate even simple information.

As a scientist/manager I have always valued those who are smart, bold, understand the big picture and voice their perspective with great clarity. The story is told of a self-righteous technical manager who was a peer with an unimaginative, not-so-smart yes man who was over operations. In spite of this operations manager’s lack of skill and knowledge, he never bucked our boss and when the boss said jump he jumped until the boss said stop.  Where I had already been with the business for 10 years, he was new to the business, hired when our division was sold. His experience was really inadequate and when I talked to him as part of the interview process I recommended that he not be hired due to his lack of knowledge and experience. They hired him anyway.

While I never undermined him and was fully supportive of any of the project he was in-charge of, I also never missed an opportunity to point out his poor thought processes and conclusions. Luckily for him, he has a very competent group of managers below him and I generally work with them when I needed to get something done or needed operations support.

After 7 more years we were sold again. By this time he had grown into his job to some degree, but realistically, its was the high quality of the people who reported to him that made operations successful, not him. By this point I was resigned to the fact that he would be there for the long run and we settled into arms length relationship. 

 I worked with his people and we validated several big in-sourcing projects that delivered very nice cost savings with acceptable capital outlays. We had a list of other similar projects yet to be fully validated but looked promising.

The company who bought us valued acquisitions more than bold cost savings projects requiring capital and new product development programs. They were very good at buying small companies on the cheap, slimming them down and/or bolting them on other successful businesses and increasing their profits significantly. The profits from these companies funded the next acquisition.  Well, the operations manager was the first one us to find and acquire a good bolt-on opportunity. When it was time for our boss to move up, the operations manager became my boss. Needless to say he let me go, with a group of other when the downturn hit. It wasn’t a performance issue, it was a oportunity to lose some high salaries, and potential competition.

My lesson is simple- no matter how little respect you may have for anyone at any level in the company, never be condescending and always be nurturing. Teach people and allow them to teach you. Develop functional relationships without negativity. The company will be better for it and that can only improve you prospects at the company.

Never burn a bridge, even if you think you will never need to cross it for someday, it may cross you.

Carbodiimides in Adhesives and Sealants

A variety of supplier have carbodiimide functional materials available. The general recommended uses are as a curative for carboxy functional lattices( and as an additive to plastics to improve hydrolysis resistance(Raschig). They react with a wide variety of acids and bases so could have much greater utility in reactive  systems. They are quite expensive currently so cost will likely limit how broadly they can be applied.

One interesting application I found for them was scavenging  the free acetic acid in acetoxy silicone sealants. You are like familiar with the silicone sealants that smell like vinegar when you apply them. This odor can be quite strong and offensive.  By adding carbodiimide to these sealants you can dramatically the odor generated while applying the product. The odor will still be generated during the cure process but you will not have the product so close to your nose after the application process.

Need to scavenge an acid or base on your product that is causing an unpleasant odor? Try a carbodiimide.

Have at it.

 

The Importance of Market Validation in Product Development

If I only had a dollar for every new product development project I’ve participated in that promised millions of dollar in sales and deliver almost nothing- I’d have 50 bucks or so.

I’ve worked with some exceptional marketing people over the years,  and many not so good, but even the best of them missed the mark many times. This is the hardest part of the new product process- determining how much of a product will be sold, particularly if it is truly a new product- one that no one has previously marketed. I’ve attended many focus groups and not found them to extrapolate well. That’s not really their purpose so I’m told. Surveys, prototype product trials with users, individual interviews with potential end-users- none of them has produced a close estimate. We always had a marketing profile(sales estimate, unit cost, gross margin, key customers, etc) and a product profile (key product attributes, package types and sizes, cost target, capital needed if any, etc), but we never defined resources needed after the project was done.

I don’t have the answers here but do have an opinion (go figure). You know people have use for the product, you know they like it and R&D delivered on the key attributes. There are, however,  a huge amount of post development issues that affect the sales outcome-the amount of money used to get product awareness, the sales incentive, spiffs, etc , etc. . This is where many new product marketing projects falter in small to medium size businesses, in my opinion.  Pepsi and Unilever may have the discipline and commitment to define all of these project parameters before launch, or even at project inception, but none of the businesses I’ve been involved with did.

How many projects have you been involved with that fail to define up front what resources they need to commit to a new product launch? Without them defined you’ve basically said they aren’t needed to hit the sales target. You will not get the same results with no market and sales support as you will with a million dollar launch program. I’ve tried in the past to get the marketing group to do this as part of the validation process, but with no success. I would be very interested on others views on what the most important part of new product validation process is.

What have you done to improve the process that most impacted a successful outcome?

Financial Modeling of Large Cost Savings Projects-Part 4 of 4

You got either a two-year or one year payback. But there are invariably small groups of SKUs that won’t fit into the model- what do you do with them?

The answer is situational but you should be able to reason thru them.

1) You have a low volume formula that you will not be making. Will the current vendor continue to make it for you, and you can package it? This will likely be a nominal cost reduction or cost neutral. Or perhaps you can continue to outsource it from them, but someone raises the point that they will not make if for you out of spite-  this has never happened in my career. They will want a price increase because their volume is going down dramatically this has always been brought up, but never happened either. To be conservative you can, however, put in a reasonable price increase, spread it across the number of SKUs and subtract in from your cost savings. We did this in one project although it never came to pass.

2) You have other low volume package types that use compound you will be making. If the come from the vendor who was making everything else the same various scenarios apply as above. Consider the most likely outcome and account for it. If they are filled by a different vendor with compound from the compounding vendor, they can be switched to purchasing compound from your operation. This will likely be a small cost benefit- not worth accounting for at this point.

There are probably other scenarios, but the point is you can reason your way thru them and account for them as the group sees fit. The point really is that they are low volume and therefore low impact on the project. Don’t spend an inordinate amount of time and effort on them. Some people end up concentrating on the minutia and never get the big picture.

Your company will have cost accounting methods that may differ in specifics but the generalities will remain the same. Some people will be uncomfortable with the assumptions in the model, but take the model once it is set up and do so “what if” changes to it. You will find that you will have to be almost negligent to be off by enough to sway the outcome.

Assumed proportionality- the quick way to assess a large cost savings endeavor without having to spend 6 months on an explicit model only to find out the project is a non-starter.  I hope this provides some use to you. I would be interested in your comments.

Financial Modeling of Large Cost Savings Projects-Part 3 of 4

Now you have all the component costs, labor costs, capital costs and indirect costs (non-direct labor and consumables). This provides the cost accounting group with everything they need to produce a simple financial model that will give you a high level picture of the project. It is not the final analysis, but the first analysis that will tell you whether you should look deeper or not.  If the analysis looks favorable you will look deeper, if you will look elsewhere for savings.

The financial models we have used are a set of nested spreadsheets. Below is a gross oversimplification of a typical analysis, but demonstrate the principle.

Compound(or formula) cost spreadsheet. The compounding operation takes 2 laborers so you spread those costs across the total product of compound. For example you will produce 1MM kg of compounds with 2 laborers( $100K) so the labor costs are $0.10/kg. This spreadsheet feeds to SKU spreadsheet. Cost accounting should also add anyother know variable overhead.

SKU spreadsheet includes amount of compound needed per SKU, the package and closure, carton, pallet, etc. The remaining 4 laborer cost are spread over the unit volume as appropriate for each package type/size. The $50K  is consumables is spread appropriately where it belongs. Every piece that going into the product as a palletized, shrinkwrapped pallet in your warehouse. Again,variable overhead should also be added.You now have a total unit cost to compare to your out-sourced, or purchased complete cost. This will feed the spreadsheet that will generate the cost saving for that particular SKU.

You have a total cost for the SKU both in-sourced and out-sourced and know the volume of that SKU. This generates a savings number for that SKU. You do this for two compounds (formula) and 6 different SKUs of two different package type.  Package type A is 7% cheaper to produce in-house, and package type B is 10% cheaper to produce in-house. This feed the spreadsheet for the entire product line.

This is where the assumed proportionality is used.You sell $5MM of package type A and $5MM of package type B  for a savings of  $350K and $500K respectively for a total on $850K annual savings.

The next part vary depending on how your finance group handles thing, but in general a 2 year or less payback is consider acceptable.  So we have $850K savings and $850K capital for a 1 year payback. If it is looked at on an after tax basis and you are in a 50% tax bracket( if there is such a thing), you would have a two year payback.

Looks like any interesting project- requires a more in-depth analysis. This analysis should be able to be completed by an experienced and committed group in 1-2 months. The assumed proportionality takes a huge amount of time and detail out of the process. It is also where the anal retentive will have the most difficulty.The purpose of this analysis is not to provide the last analysis, but a quick and reliable way to get a big picture view of a project.

How detailed the final analysis will be up to the you.

At this point, you will invariably have some SKUs that didn’t fit into the model.  Different package type that you will not be capable of filling, or compound (formula) of such low volume that you will not be making them. The next part will try to deal with what is left.

Financial Modeling of Large Cost Savings Projects-Part 2 of 4

Ok, you’ve selected the high volume formulae for costing, and several high volume package configurations for costing. You’ve gotten price quotes for each component in a volume representative  of  the entire product line (e.g. 2 million 16 oz PE bottles screen printed with 25 different labels with closure Y and 3 million PE squeeze tubes, screen printed with closure X with 30 different labels).

Now you need to be able to manufacture and package as much of the product line as you’ve chosen to do. You need to work with mfging management and engineering to get the equipment needed quoted, installed and integrated. If you have good mfging people (as I’ ve always been blessed with) they will design the mixing, filling and packaging process and quote out each piece of equipment needed.  For example, they quote out a mixer with any automation needed for material handling and process controls, bulk storage tanks and process piping to filling. You may have a filler and capper already but now need a palletizer. They will provide an estimate for all installation needs( building modifications, power needs, etc). They think the entire process thru and quote everything you need. Smaller companies may not have all the resources for this. There are consultants who can do this part for you at reasonable costs. They generate a number for the total capital costs of the project- $850K. It doesn’t have to be perfect at this point, it just needs to be representative. The real number might be $800K or it might be $950K. That is close enough for the first cut.

Now mfging management also need to generate a labor cost for the process. This could be as simple as you will needs 3 people per shift for a 2 shift operation for a total of 6 people at 80% of the rated production rate of the system. You know a fully loaded laborer costs $50K for a total direct labor cost of $300K. At this point you don’t need much more detail than that.

Also, they need to think thru any indirect labor costs such as supervision, material handling or additional QC needs. Lets say you don’t need any of this for this exercise.

Lastly consider supplies for the processes- cleaners or sanitizers or solvents for clean out between runs, any specialty disposables for the process or for QC testing. My experience is that these are generally very small, but not always. Lets say you find $50K in annual expenses for this class of expenses.

Now, all this gets fed to your cost accounting/finance  group to compile and digest into the financial model.