Financial Modeling of Large Cost Savings Projects-Part 1 of 4

You have a large outsourced product line of formulated products that you would like to consider for bringing in-house. You may know the formulae for the compounds, you may not. You may have some of the manufacturing process already (e.g. filling and packaging) but need to install the mixing operation. Or you may have none of them. It is a product line with 10 unique formula with 200 SKUs, but all made by the same vendor on the same processing equipment. Assume formula integrity across the lines, that is the same branded product has the same formula in it no matter which package size or type. You will almost invariably have several large chunks with commonalities, then a small amount of low volume, low sales stuff. How do you start such a daunting task?

All you need to start is:

1) a working knowledge of the product’s formulae and the process for manufacturing them(cleaning product, adhesive, sealant, etc).  You don’t need to have the exact formulae to do a front end assessment and will apply the concept of assumed proportionality to extrapolate a small amount of detail calculations across the entire range of product.

2) A knowledgeable manufacturing manager/engineer who can set up the process on paper and cost out the components and installation. He should also be able to staff the process(es) appropriately.

3) A motivated cost accounting/finance guy who can build a simple model and understands how the company treats capital expenditures.

For the formulae part you will be surprised how closely you can model formulae without needing to hit a formula exactly. For example, for an adhesive you will need to know what the resin is, what the major fillers are, and a general idea of the additives used(crosslinkers, stabilizers, surface active materials, etc). The resin and fillers generally account for 90% of the cost, so if you get that right you can’t be off by that much. Put down model formula and the component costs. Then make changes to the resin/filler content to see how the cost changes- you will find that once you have the generalities down, it is hard to get large swings in cost within the ranges of what you know and what is practical.  Get comfortable that you cannot be off by much and where uncertainty exists, err on the high side.

You will not need to cost all the formulae- cost out the top two in volume.  You will not need to cost out every SKU. Group them into package type and pick 2-4  highest volume packages and cost out these component (e.g. a blister carded tube packed 6 to a carton or a 16 fl oz PET bottle with closure X packaged 12 to a carton.

You job is to get all the component costs for all the formula components and packaging components. From this information 4-8 of the highest volume SKUs will be explicitly costed with as much detail as possible. My experience is that the formulae/package cost will make up 80-90% of the total of all the variable costs used in the modelling process. If the raw component costs aren’t way below your outsourced prices stop now.

Part 2 will address the manufacturing contributions to the process.

Lyrics to He’s Gone

This is a song about loss of faith and abandonment.  I never recorded this or wrote any more than the melody to it.  Not a happy song.

He’s Gone (copyright 1989)

(verse 1)

 A Street boys Monday in a Saturday-sunday town

Litter swirls in the street as if a sign to say

Boy you better turn right around

Nighttime falls and this boys on his own

Runs to the beat of a silent street knowing that

he’s gotta make it alone

(bridge)

As he walks back to where the grass grows thru the cracks

In a broken voice with a handful of broken toys, he says

(Chorus)

God don’t live on my street, God don’t live on my street

He lives uptown where the girls wear the golden gowns, but I say

God don’t live on my street

He’s gone, He’s gone, he’s gone, he’s gone

(verse 2)

Adam and Eve how much would you believe

If you were just another face in the big rat race not a human face

left to help you find your release

Nighttime falls and brings you to your knees

Snakes on every corner but no apples left on the trees

(bridge)

People on the street, like shattered glass they lay

The street boys that we meet sing in an a capella way, they say

(chorus)

God don’t live on my street, God don’t live on my street

He lives uptown where the girls wear the golden gowns, but I say

God don’t live on my street

He’s gone, He’s gone, he’s gone, he’s gone

Exploiting Curie Point in Adhesive Formulating

All magnetic and piezoelectric materials have a Curie point. The Curie point is the temperature at which the magnetic or piezoelectric properties go to zero. The curve is generally very steep, so they do not lose significant amounts their property until close to the Curie point.

Long ago we did some work using microwaves to heat thermoplastic adhesives (hot melts) or cure thermosetting materials with heat. We were working with the standard consumer microwave frequency of 2450 MHz. We found that carbon black was very effective for both, but as we know microwaves do not heat uniformly. Even microwave ovens with mixers, which reflect the microwaves throughout the cavity, have hot and cold spots.  So while carbon black heated very quickly, it also overheated some areas before the material was all at the desired minimum temperature.  This would be a huge safety problem, especially in the hands of a consumer. The adhesive could heat to the point of degradation or even auto-ignition. Consumer microwave vary so much in power and power distribution, how would you even give them a recommended heating time that would be both safe and hot enough?

Eventually we discovered ferrites and the Curie point concept.  A wide range of ferrites are commercially available, with a wide range of Curie points, and a wide range of frequency absorption. By using a ferrite for heating, when the adhesive temperature approaches the Curie point of the ferrite, the ferrite shuts down, allowing the other areas of the adhesive to get up to temperature without overheating the faster heating areas. They provide an elegant solution to the problem. It should be noted however that various resin absorb microwaves without any additives. Furthermore, their microwave absorption properties vary with temperature, so  a material that doesn’t absorb at 25C may absorb vigorously at 100C, so this needs to be understood at part of the resin selection process.

In the adhesive curing project we were making robotic adhesive traces which we then wanted to cure in a microwave oven. In this case the adhesive was a silicone material- we wanted to make a one component heat curing silicone compound that we could make rubber articles from.

One of the more interesting things about this project was that the ferrites were not found by a chemist or engineer. They were found by a very creative inventor/technician who had no college education.  He found the ferrites by finding experts who could point him in the right direction. The point is, don’t reject technical solution because they come from someone with a lower degree of education than you. There is a great deal of education prejudice in  technical groups, particularly in large companies. Don’t contribute to it.

Lyrics to Vagabond Baby

The guitarist in the band we were hanging out with (Tony), wrote this great, “big-hair”, bombastic guitar piece that I really liked. I wrote these lyrics to that piece. It is based loosely on the relationship of the lead singer and his girlfriend, Dave and Casina. At some point Casina described herself as a vagabond (we made fun of her, of course) and this is what came out of that. We still see David and he is still singing. Casina dropped out of sight.

Vagabond Baby (copyright 1988)

(verse 1)

Appeared from nowhere in leather and in black

She don’t know where but she’d be going back

From her belt hung a bag of crystal fun 

and on his hip he had a loaded gun

She could not deny his intensity and she was all that he could see

All he could see, all he could see

(chorus)

His Vagabond Baby, Vagabond Baby, Vagabond Baby, Vagabond Baby

(verse 2)

He held her hostage and she held him on chains

He was backseat driving with her hands on the reins

When he pulled the ribbon from her hair it felt so right

And he unwrapped her like a gift from the night

Oh, and she smiled all the while, he knew she had come home to be

come home to be, come home to be

(chorus)

His Vagabond Baby, Vagabond Baby, Vagabond Baby, Vagabond Baby

Creating Reactive Adhesive Films

Some time ago we explored the idea of making pressure sensitive films from reactive acrylate functional monomers and liquid resins. These are basically plastisols. The process is very simple on a lab scale. Mix a resin/monomer blend with a high molecular weight polymer powder and cast a film from the still liquid mixture. The mixture will relatively quickly convert to a solid with the degree of pressure sensitivity dependent on the type and amount of polymer.  A PEGDMA type monomer can be converted to a solid with very low levels(8-10%) of poly(oxyethylene) polymer(PEO) of very high molecular weight. THe Polyox polymers are available with molecular weights in the millions. Unfortunately the PEO is very water-soluble and the resultant films will absorb moisture from the air and change properties very quickly. Polymethylmethacrylate polymers take a higher level to get a solid film (15-30%) but are much more pressure sensitive and do not change properties upon moisture exposure. These are available under the trade name Degalan, among others.

THe problems we were not able to overcome was generating the high cured adhesive strengths we would get with the unmodified adhesive. Apparently, allow the films were very sticky, the same degree of surface wetting was not achieved so although the cured films had similar properties, the adhesive strengths were much lower. For an unmodified PEGDMA adhesive we would expect 2500 psi on either glass or steel. With the polymer modified adhesive film it was difficult to achieve 1000 psi. They required the two surfaces to be primed with a copper based accelerator. An amine cure system could also be used with an adhesive formulated for it.

THe films themselves were quite stable- after a year on the release liner backing the film still had excellent pressure sensitivity and produced adhesive results similar to the initial results obtained.  Unfortunately we were never able to make a useful product from these materials.

The Evolution of God and the Growth of an Atheist

I was raised Catholic and we went to church mostly every Sunday, which we all hated.  By the time I was about 12, I concluded that the whole God thing didn’t seem to fit in the world I experienced, although I had no more basis for not believing at that time than most people have for believing at any point in their lives. By that I mean most people believe simply because they’ve been told too, and that to critically think about what they are being told is the most direct way to end up in hell.  Over the years I picked up information that supported my lack of belief, just as believer strive to find reasons to believe.

Bear in mind I have no distain for believers. I have my belief system and they have theirs- but logic prevails in my world.

The concept of a God or Gods evolved long before the current God of Christianity/Judaism/Islam. God evolved in the human mind to explain everything and anything we didn’t understand. Volcanic eruptions, lightning, storms, droughts, plagues etc were all beyond human understanding and therefor gods were evoked to provide an explanation. THese gods were worshipped in the hopes that they would not inflict these hardships on his believers.  Eventually, this worship became organized- the more people who believed the more likely it is that the gods would spare them, I guess. Just as importantly, organized religion became a means of control of large groups of people. What better way to exert control than to threaten them with the wrathe of the gods.

I wonder who the first person was who figured out that the whole god thing wasn’t really true but learned to exploit people’s belief for their own betterment or enrichment? Organized religion is at its most basic a means to control people for the enrichment of the minority- very similar to politics and business.

My most fundamental problem arises from this old gods vs new god conundrum. If there is really one true god, why would he allow his greatest creation to believe in untrue gods for the vast majority of humanity’s existence here on earth? After all we’ve been here for 100,000 years, but he  only revealed himself in the last 4 thousand (or less) years. This dooms all the previous billions of humans to hell, if my understanding is correct. How could a just god do such a thing?

There is an interesting article on the Nov. 6th Science magazine called “On the Origins of Religion”.

There is a very interesting book I recently read about a Somali woman’s journey from Muslim to atheist. It is hard to imagine going thru the hardships she endured. It is called “Infidel” by Ayaan Hirsi Ali.

I know- God works in mysterious ways and we should not question him.

There are plenty of other things that seems incompatible with a just, all powerful. all-knowing god that will be covered in other posts. Find peace in truth and progress in analysis.

Lyrics for Rock-n-Roll Degenerate

I need to first give credit to Pat as a co-writer on this one. Pat if you find this, laugh along with me. This was written with a punky guitar riff and a drum machine 20+ years ago. We recorded it on a four track recorder, and the “So drink me” line was recorded with about 10 people saying it at once at an early morning party we had.  I think it is deeply relevant to our times.

We could say anything we want back then-now political correctness reigns. We laughed our ass off when we wrote this. Enjoy.

Rock-n-Roll Degenerate (copyright 1987)

Eat my puke, eat my vomit

I’m a rock and roll degenerate

I’ll fart on you pinch a steamy dump

My God, this must be love

Aunt Emma’s home with her yeast infection

I’m your Grandmother’s old douche bag- so drink me!

I’ve got a plan for your teenage daughter

Take her out like a lamb to slaughter

We’ll go dancing at McDonalds

She can suck my big McDick

We’ll be swinging in the urban jungle

I’m an extremely nasty monkey- so spank me!

Lyrics to What You Need From a Man

Nothing deep here. All sex, drugs and rock and roll bravado. Funky and dark horn 5ths syth part with drum machine. Ok, so at least there are a few witty lines in there.

What You Need From a Man(copyright 1987)

(verse 1)

Up tomorrow, down today

You know they’ve gotten in the way

but you won’t admit it

Forget the pills you’re thinking of

they’re no substitute for wild love

and you’ve gotta quit it

(chorus)

What you need is real intrigue

Come get the drug you really need

Come take all that you can of what you need from a man( 2 times)

(verse 2)

Your boys buy you fancy clothes

and fill the spoon thats up your nose

But they don’t get it

They say no but you just smile

they give an inch you take a mile

And you always get it

(Chorus)

But what you see here is really indeed

that extra inch you really need

Come take all that you can of what you need from a man( 2 times)

Lyrics to Simple Pleasures

This didn’t really fit into an easy category musically. It was done with syth and drum machine. I don’t remember the syth part anymore. It is about the male -female relationship and how we have difficulty letting down our the walls that separate us emotionally. I was young, so it all came down to sex, but its more about emotional disarmament.

Simple Pleasures (copyright 1987)

(verse 1)

Safe in the facade you garner

the girl inside I will not harm her

det aside your suit of armor

lay down

Soul searcher and revelations

need not intrude in our relations

We can avoid the complications

lay down

To analyze is human nature

but there are things we cannot measure

Love is such a simple pleasure

lay down

(chorus)

Lay down, lay down, lay down, lay down

Love is such a simple pleasure, lay down

(verse 2)

Insistent on that we we seek

To avoid appearing weak

Silence those words that you speak

lay down

I can see that you are shaken

but there are times we must be taken

Think of the love we could be makin’

lay down

I look into your eyes of azure

in the long hours of or leisure

love is such a simple pleasure

lay down

(chorus)

Lay down, lay down, lay down, lay down

Love is such a simple pleasure, lay down

Lyrics to We’re Still Young

This was done with simply piano and a drum machine. I would be hard pressed to remember the piano part today.  I must have been a bit obsessed with growing old as the theme appears in more that one set of lyrics.

We’re Still Young (copyright 1987)

The hard streets will harden your head

The hard girls will harden your jeans

So you learn how to walk real bad

And you learn how to look real mean

Work a job for money to run

The might starts when the day is done

Get your wallet and your knife

No time to do the walk of life

(Chorus)

You say you gotta grow old while you’re young, a matter of survival’s what you say (time 2)

When you’re young ( 5 times)

(verse 1)

Yesterday we busted up our minds

For the middle-class American dream

Rescued the with the white lines

On the mirrors and the streets

Seen to me it had to be

We’d give it up for responsibility

But somewhere girl along the way

Had had it all and we gave it all away

(Chorus)

Cause we don;t want to grow old while we’re young, we’re gonna live forever and say (2 times)

Were still young (5 times)