GROUP

K6 FINAL REPORT

MEE40001 ENGINEERING MANAGEMENT 2

SYED TASEEN AHMEN 4905466
DENIZ ATALAY 1797654
JOSHUA KING 5567173

MEE40001 Engineering Management 2 Final Report Group K6

Contents

Creativity and the Opportunity

Customer Analysis and Market Segmentation

Market Definition
PEST analysis
SWOT analysis
Consideration of Product, Price, Place and Promotion
Product Definition and Quality Consideration-
Process Design and Resource Requirement
Location and Layout Considerations

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5
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Identification of Relevant Supply Chain

Legal and Ethical Considerations
Sustainability
Setup Costs, Ongoing Costs, and Break-Even Costs
Initial Financial Analysis-
Cost of materials
Size, Cost and Production Of Small Batches-

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8
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Payroll Estimation-
Summary of Financial Analysis

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MEE40001 Engineering Management 2 Final Report Group K6

Creativity and the Opportunity

The world getting hotter and drier and people who lives in dry and hot place need to store their food.
Conventional refrigerator require electricity in addition to that price of the product is not affordable for some
people. Clay pot refrigerator doesnt require electricity and also its cheap and people who cannot afford for a
conventional refrigerator can buy it. Moreover farmers or people who travel far from city for camping also
need a cooling system. Clay pot refrigerator also can be preferred people who cares about sustainability and
environment. Now clay pot refrigerator only suitable for hot and dry places however with some upgrade and
progress it can be possible clay pot refrigerator replace the conventional refrigerator. Without any upgrade and
progress the product can be sellable nearly half of the world.

Customer Analysis and Market Segmentation

Geographic: Clay pot refrigerator can be sold people who lives rural area or area without electricity.
Hot and dry area is main target for the product. Part of ndia and China, Afghanistan and Pakistan, big part of
Australia, Iran, Iraq, Syria, Saudi Arabia, Africa, Argentina and Mexico are suitable for the product. Considering
total population of countries clay pot refrigerator can be sellable almost half of the world.
Demographic: Because clay pot refrigerators price is low due to very low cost compering to conventional
refrigerator, its a perfect alternative for people who cant afford inverter refrigerator or conventional
refrigerator. Clay pot refrigerator can be used by any age and gender however the size of the products store is
small so product only for small size family.
Psychographic: Clay pot refrigerator doesnt require any electricity so it is an eco-friendly product. It can easily
encourage people who care about environment and sustainability to buy clay pot refrigerator.
Behavioural: To store food everyone needs a cooling system however some part of the world has no electricity
such as some part of Africa, camping areas and urban area. Benefit of the clay pot refrigerator is it can keep
food cool without using any electricity.

Market Definition
The intended sale of the clay pot refrigerator is primarily to the following groups-
1)

Farmers-

The clay pot refrigerator would be an ideal substitute for farmers that want to store their harvest, while
keeping the costs to a minimum. One of the issues with the clay pot refrigerator is that after a particular size,
due to the surface area to volume relationship, the refrigerator would not function efficiently, hence reducing
the capacity of the amount of crops the refrigerator can store
2)

People practicing permaculture and campers-

The clay pot refrigerator can also be sold to people trying to live away from urban civilization. It can be an ideal
and efficient tool to keep food fresh and water cold without the need of electricity.
3)

Doctors in rural locations-

Doctors who practice in remote locations, where electricity is not available and/or infrequent, can use the clay
pot refrigerator to store vaccines and medicines at very low temperatures.
4)

General Public-

MEE40001 Engineering Management 2 Final Report Group K6

The refrigerator can also be sold to the general public to try and reduce electricity costs of the daily household
and to replace the traditional, electricity-based refrigerator.

PEST analysis
1)

Political analysis-

The clay pot refrigerator would be a radical change in the way we store our food, water and medicine.
Governments can give tax rebates to people who purchase it. In a resource scarce, environmentally threatened
world, the clay pot refrigerator can be used as one of the ways the government can encourage people to live a
more sustainable life.
2)

Environmental analysis-

The environmental impact of the clay pot refrigerator would be far reaching. With almost every urban
household owning a refrigerator that runs twenty-four hours a day, the energy consumption of the refrigerator
is the highest in the list of appliances in any household. Since the clay pot refrigerator runs without electricity, it
would reduce the energy consumption of every household.
3)

Social analysis-

The clay pot refrigerator will greatly influence the ability of farmers to reduce wastage of harvest because of
improper storage techniques. This will result in a higher quantity of yield and the farmers will have more yield
to sell. This will stimulate the economy of the local area.
It can also reduce the wastage of vaccines and medicines in areas where they need to be stored at cool
temperatures, improving the health of the people in the rural area.
4)

Technological analysis-

Since the clay pot refrigerator is a fairly basic product, research and development into this would be mainly
centred on the issue of increasing storage space without decreasing efficiency. The main focal point of the
research would be to overcome the surface area and volume relationship.

SWOT analysis
1)

Strengths-

The basic construction material for the clay pot refrigerator is clay, which can be found readily in most places.
Clay being a very cheap material makes the initial product cost very reasonable. Semi-skilled labour is required
for the assembly of the clay pot refrigerator which keeps labour cost to a minimum. Distribution can be done
using local networks.
2)

Weaknesses-

The primary drawback of the clay pot refrigerator is that its functioning depends on the weather. The clay pot
refrigerator can only be used in dry hot climates. It cannot function when the humidity is high. Another
drawback of the clay pot refrigerator is that its lowest recorded temperature is 6 degrees Celsius. Most
traditional electricity based refrigerators can bring the temperature much lower than that.
3)

Opportunities-

MEE40001 Engineering Management 2 Final Report Group K6

Given the current environmental climate, the clay pot refrigerator would go a long way in helping people who
want to reduce their carbon footprint in any way possible. The clay pot refrigerator can also reach out to a third
of the worlds population that do not receive any electricity. Currently, there is no market (within Australia) and
a very small surge in markets like India, for this product.
4)

Threats-

The primary threat to the product is trying to change peoples perception of the ability of the product to serve
its purpose. Marketing of the traditional, electricity based refrigerators can be threat to the sale of the product.
Also, it cannot be used in humid climates, hence making its year-round feasibility questionable. The limit on its
size can also be a potential issue, as after a certain size, its efficiency reduces drastically.

Consideration of Product, Price, Place and Promotion

As the product is primarily clay with no electronic components and no need for any complicated mechanisms,
there is very little room for varying product quality. That said it would be desirable to have an apparent feel of
higher quality in terms of robustness. If the product felt like it would survive robust use, then it may improve
market adoption.
There is small amount of room for additional features to the product. They could come equipped with some sort
of thermometer, preferably battery or solar powered, or with ways of informing the user of the current water
level and therefore inform the user when to top up with water. The major feature to be varied will be the size
and capacity of the product. Weather these various sizes are fielded to the market at startup or just one model
to begin with is yet to be decided.
With the intended use of this product to be in locations where electricity may be unavailable or of reduced
availability, it can be assumed that these locations will be remote and the replacement of the product difficult.
With this in mind it will be favourable to have a reliable product and also to generate a reputation of reliability.
The most likely point of failure on the product will be the clay through brittle fracture. Though will have to be
put into reducing or overcoming this weakness.

There is virtually no comparable product in the Australian market and thus no comparable price. The
nearest product would be that of a camping/bar refrigerator which can retail from $200 up to the
low thousands. That leaves two possible pricing strategies. The first being to match the pricing of the
camping/bar refrigerators and emphasize the similar functions, or the second strategy of pricing the
product under the camping/bar refrigerators to lure customers away from camping/ bar refrigerator
market.
The most sensible Australian distribution channels would be through specialized retail stores such as
Anaconda, Rays Outdoors or Aussie Disposals. There also could be an option to go though
whitewoods retail stores such as Harvey Norman.
Promotion Advertising
Initial advertising would be best in the form on short infomercial style video presentations at the
point of sale in the retail stores. A website could also be established to cater for uninitiated contacts
from potential customers.

MEE40001 Engineering Management 2 Final Report Group K6

Initially there will be no need for promotional sales prices and in the future all promotional sales
could be decided on by the retail stores. There may be room however for an initial promotional sale
for the retailers themselves in order to the persuade the retail outlets to stock the product.
Product Definition and Quality Consideration-
The main purpose of the clay pot refrigerator is to replace the traditional refrigerators in regions in Australia
where the climate is hot and dry, or in the tropical regions. Hence, the clay pot refrigerator needs to serve the
same function as the traditional refrigerator i.e food storage. The temperatures reached in the clay pot
refrigerator depend on the ambient temperature and the relative humidity of the region the cooler is placed in.
The following chart shows the minimum temperatures achieved due to evaporation-

Given a particular temperature, with increase in relative humidity, the temperature within the clay pot
refrigerator increases. For example, at 26.7 degrees Celsius and 20 % relative humidity, the temperature within
the clay pot refrigerator can reach 13.3 degrees Celsius. Experiments conducted by the NGO Practical Action,
have shown the shelf life of food like tomatoes, guavas, arugulas being by anywhere between 4 and 20 days.
With no moving parts, there are few quality considerations to this product.

Process Design and Resource Requirement

For the initial stages of the business there will be limited range of product variation. With only one model of
evaporative refrigerator to be produced to begin with and with low production rates to gauge market
reception, a repetitive focus process design will be utilised. The limited range and volume will only be
temporary until market attitudes can be gauged. There are two paths that can be taken after the initial start
up. The first will be that of keeping the range very limited and increasing the volume of product to satisfy
demand. This path will require a change of process deign with the implementation of a product focus process
design with the used of one for more productions lines producing the same product. This process still has some
room for variation with aspects such as colour. The second possible path that could be taken after initial start
up is that of increasing product range. This would enable the process design to remain the same as a repetitive
focus with the use of predefined stations for set steps in the manufacturing process with relatively low skilled
labour, but with the addition of more stations to produce the varying product range.
The main raw resource requirement we will have to produce the evaporative refrigerator will be that of clay. A
source for the correct variety of clay will need to be sourced and their reliability and ability to maintain stocks
confirmed. Other than clay we will also need to obtain a regular supply of sand and of ceramic paint. From an
inventory perspective, large quantities of clay and sand are not desirable, thus an effective reorder system will

MEE40001 Engineering Management 2 Final Report Group K6

need to be employed with reliable lead-time from suppliers. If the lead times are deemed to be reliable then we
can keep our stock levels down by having a low safety stock level.
The equipment requirements will be simple but initially expensive to set up. Moulds of the products to be
produced will need to be designed and purchased from tool making firms, and kilns will need to be sourced of a
sufficient size to enable significant output. Our labour force will not need to be highly skilled. We will be able to
utilise unskilled labour with low to moderate onsite training in the various steps of production. We will require
a small team of skilled workers for the purposes of maintenance such as fitters and turners and electricians.

Location and Layout Considerations

When considering location of business, the main concern is that of where to setup the manufacturing wing. As
cost of production increasing the further we are from the suppliers and customers. The evaporative refrigerator
will have the strongest market in areas of high average daily temperature. Areas such as northern and western
Australia would be ideal but to not isolate our selves from the larger states and thus the competition in the
mobile refrigerator market, a location in the north east of Australia would be best. The closest major city in the
north east of Australia being Brisbane, means that this would be our ideal location for manufacturing and
therefore our corporate front in general.
Our manufacturing facility would try as much as possible to maintain a linear flow of materials and products
through the production process. Through the utilisation of predefined stations and all machinery required for a
step in the manufacturing process grouped together this should enable efficient moment throughout the
manufacturing process.

Identification of Relevant Supply Chain

A reliable clay and sand source locale to the Brisbane will have to be obtained. A preliminary search has turned
up such companies as Clay Works Australia as a clay supplier and Corridor Sands as a sand supplier. More
research will need to be put into this as the choice of supplier is vital for consistent and reliable manufacturing.
With the initial start up of manufacturing, all deliveries will have handled by courier such as Couriers Please.
With the increase of trade that we plan on, deliveries will be arranged through a lager scale transport company
such as Toll. With local suppliers and a plan to sell exclusively to the Australian market, ground shipping will
suffice for all deliveries. Information flow should be initially very simple with plans to have corporate

MEE40001 Engineering Management 2 Final Report Group K6

headquarters on the same site as manufacturing headquarters. This will enable all departments to
communicate efficiently as they can meet in person as well as via electronic communication. With this setup
information flow with be accelerated and aided greatly. Financial approval will be quick to receive in
emergency situations such as break downs. New product ideas will be able to be discussed with all departments
such as manufacturing and engineering as well as marketing and supply chain with out the hassle of
conference calling or other such convoluted communication methods. We feel that keeping corporate and
manufacturing in close proximity has many advantages. However, there is a down side of having to have
sufficient corporate offices in an industrial zoned area.

Legal and Ethical Considerations

The first step before starting the business, potential legal issues will be researched due to the simple form of
idea of the product belongs to someone else. The differences and upgrades will be finished and if there is any
patent infringement, it will be solved or certain amount of the profit will be given to the inventor. After that
business name registration will be done by Australian Securities & Investments Commission (ASIC) to provide
safety of business trademark. The second step is that, to protect the idea of clay refrigerator by applying for
Intellectual Property rights. Although this is not an invention, with some upgrades and improvements the idea
will be eligible to apply for an innovation patent. Using these rights and businesss trademark will be provide
our business to take leadership of the market and some advantages such as avoiding misusing our name for
business. The next step will be the checking the product quality to provide a product that is accommodating
with Australian standards. Also some tests and experiments will be done to make sure the product is providing
sufficient cooling for foods.

Sustainability
With the construction of the evaporative refrigerator being predominantly clay and sand, the impact on the
environment from a product point of view will be quite low if nil. Clay and sand, both being found naturally in
the environment have no impact when disposed of and could be reused for other purposes. Worthy of note is
that when clay is fired it can not be reshaped or turned back to soft clay. The fired clay components could
however be repurposed as pots or containers. However, from a manufacturing point of view, firing clay will
require significant amounts of energy and as manufacturing will take place in Australia and Australias
electricity predominantly comes from the burring of coal, this will generate a larger than normal carbon foot
print. When analysing the clay evaporative refrigerators life cycle from a carbon footprint perspective, it is
clear that the only stage of the life cycle that generates a carbon footprint is the manufacturing stage. The use
of the product generates no carbon footprint as the energy source utilised to run the evaporative refrigerator is
the difference in temperature between the water contained in the refrigerator and the outside air. Finally, the
end of life also generates no carbon footprint as no processing has to be done to the evaporative refrigerator.
All up the clay evaporative refrigerator is a very sustainable product and will have little to no impact of the
environment.

Setup Costs, Ongoing Costs, and Break-Even Costs

Initial Financial Analysis-
Initially, a financial analysis was conducted to test the viability and financial sustainability of the business using
different financial/accounting theories. The initial funds needed to start the business were analysed, taking into
account.

Materials and Labour Costs.

Organizational (Legal and Administrative) Costs.
Storage and Distribution Costs.

MEE40001 Engineering Management 2 Final Report Group K6

Payroll costs.

In-depth analysis of these factors are conducted and profit margins are estimated based on studies
conducted.

Cost of materials
Item

Quantity

Cost (each item)

Total Cost

45 cms terracotta
pot, unglazed

AUD 30

AUD 30

35 cms terra cotta

pot

AUD 15

AUD 15

Pot Feet

AUD 2

AUD 14

Planter Caddy

AUD 30

AUD 30

Sand Bag (20 kg)

AUD 6

AUD 6

4 inch bolts

AUD 0.90

AUD 0.90

2 inch bolts
Silicone Sealant

5
1

AUD 1.30
AUD 5

AUD 6.5
AUD 5

All of the materials with prices listed above is for the production of one clay pot refrigerator and are obtained
from instructables.com. The price of the terracotta clay pots include the costs of the mould, the firing kiln, the
glaze and the tools required to shape and finish the pots.

Size, Cost and Production Of Small Batches-

All units are planned to be produced in batches of 100. This specific size is chosen to reduce mass production
defects and minimising storage costs. The following table gives the costing of the production of 100 units.

MEE40001 Engineering Management 2 Final Report Group K6

Item

Quanitity

45 cms terracotta
pot, unglazed

Price (each in AUD)

1

Total
30
30

35 cms terra
cotta pot

Pot Feet

Planter Caddy

30

Sand Bag (20 kg)

4 inch bolts

0.9

2 inch bolts

1.3

Silicone Sealant

15

Total Price Per Unit

15
14
30
6
0.9
6.5
5
107.4

Other Costs
Transport
Labor
Storage

100
500
300

Price for production of 100 units

Total Price for 100 units
Estimated Selling Price of One unit

10740
11640
500

The five year production plan is as follows:

YEAR
UNITS
COST
2015
300
34920
2016
500
58200
2017
700
81480
2018
800
93120
2019
850
98940

Payroll Estimation-

The initial size and roles of the people in the organization are as follows.

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MEE40001 Engineering Management 2 Final Report Group K6

1)
2)
3)
4)

President
Vice President Of Production and Distribution
Legal
Labour

The estimated payroll for the first five years of the functioning of the business is as follows.

Annual Increase
President
65,000
20
Prodcution, Marketing and Distribution
50000
15
Legal
50000
15
Labour
2500
20

Monthly Payment

2015
65,000
50000
50000
2500
167,500

2016
78000
57500
57500
3000
196,000

2017
93600
66125
66125
3600
229,450

2017
112320
76043.75
76043.75
4320
268,728

2018
134784
87450.3125
87450.3125
5184
314,869

13958.33 16333.33 19120.83 22393.95833

26239.05208

Labour in this context is that part of the workforce that works to assemble the products at an average rate of
4 units per hour and gets paid AUD 20 an hour along with a 40% buffer.

Summary of Financial Analysis

After taking rough, over estimations of the overheads, production costs and payroll costs, the plan is to make
the company is a publicly traded company along with a bank loan. This would help in boosting initial capital
required for the business.

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