PRINCE 2 Project Management

Part 1   What is meant by the term eco-design? Provide three examples(other than the one covered in the lectures) What is meant by open innovation? Research and give three examples (other than the one covered in the lectures) Part 2 The following table presents projected revenues and costs generated by a given project 2014 2015 2016 2017 2018 Initial Investment £30,000 £0 £0 £0 £0 Marketing costs £5,000 £10,000 £5,000 £5,000 £2,000 Production costs £10,000 £12,000 £12,000 £15,000 £15,000 Sales (number of units) 0 100 250 300 400 Price per unit £220 £220 £200 £180 £150 Assuming interest rates are set at i=5% calculate 1. Net present Value (NPV). 2. Estimated pay back period. 3. Accounting rate of Return (ARR). 1 Table of Contents 1.0 Introduction 11 2.0 Eco Design 12 3.0 Open Innovation 16 4.0 Part 2 21 5.0 Business case for a smart refrigerator 24 6.0 References 40 2 1.0 Introduction 1.1 Assignment Objective   To acquire the high-level management skills necessary to support the specification, costing, design and manufacture of an electronic product. To satisfy the objectives specified in a case study, which integrates at least two technical major areas of the course together with the product management skills developed in this module. 1.2 Abstract This assignment focuses on the definition of 2 types of business strategy, the eco-design and open innovation. The explanation and definition for both will be explored and appropriate examples to products related to these types of methodologies will be given. Next, in order to further understand the Net Present Value, Accounting rate of return and the Payback period formula and calculation, an exercise will be done to show how the values are obtained. A step by step explanation will also be given to explain why and which values are taken. Finally, a group input is done where a business case is produced for a smart refrigerator concept. The business case will be accompanied by a risk assessment, mitigation plans for the risk, work breakdown structure as well as a 10-year profitability projection. From here, a suggestion will be made to identify the length of time before the project becomes unattractive in the market based on the sales figures. 3 2.0 Eco-design According to the European commission, 80% of product-related impacts on the environment are determined during the design phase of the product. This can be associated with types of material, life expectancy of the product and the manufacturing process itself. The product could be using material that is not suitable for recycling, has a short operational life span and requires hazardous material such as rare earth in its manufacturing process. All this contributes to the environmental impact of a product. However, it is possible to overcome this by applying eco-design rules. Eco-design is a legal initiative that drives energy efficiency requirements to be considered during the design phases of the product. By applying this rule during the design stages, suitable material and sustainable design can be employed to further improve the impact that a product may have on the environment. In 1994 at the International Symposium of Sustainable Consumption, a meeting defined the term sustainable product development as using goods and services to a basic need to improve the quality of life, yet at the same time reducing the usage of natural resources, toxic materials and emission of waste and pollutants. In 2002, the UK government has championed the eco-design concept and encouraged its use as a best practice design method. The government also launched the economic regional development fund to market sustainable products. In short, this has allowed designers to move from process efficiency to product efficiency instead. (1) Papanek (1995) rote that desig ers should o sider the produ t’s e ologi al respo si ilit . Fro here, he devised a function matrix to explain the phases of production and consideration that should be taken during design:      Material selection Manufacturing process Product packaging Finished product Transportation Waste All this should be considered in order for the product to fit the eco-design concept. Three different examples of eco-design will be approached by performing case studies on actual companies that has adopted this method. 4 2.1 Orangebox Between September 2007 and August 2008, the Welsh Ecodesign Centre (EDC) has supported 4 multi-level ecodesign support package. For the manufacturing sector, Orangebox was selected. Orangebox is a UK market leader in research, development, manufacturing and service of seats for commercial environment. Orangebox provides design and manufacture services for businesses around UK and Europe. One of the major challenges for furniture production is the supply chain. It is common for furniture manufacturers to obtain material and components from various suppliers. This increases the transport cost and also makes it harder to determine the full life cycle, as each component would be designed based on its own life cycle. Orangebox has decided to analyse several aspects for improvement to its latest hair produ t, the Ara Chair a d redu e the k o aspe ts to have the highest environmental impact [3]:      Production phase resource consumption Production phase emission Production phase energy consumption Transportation End-of-life treatment One of the steps taken by Orangebox is to localise the supply chain. This has allowed the company to work closely with the suppliers and have more control over the design of their products. Specification can be included in the design stage and constant audits can be done to ensure that the design of the components suit the life cycle expectancy of the product. By using local suppliers, the transportation cost is decreased significantly as well. In short, by localising supply chain, they have decreased transportation, cost and increased product quality. Another method taken is the design of the chair itself. The latest chair design is based on design for disassembly and material reduction. The chair can now be disassembled faster than any of the previous designs and uses 30% less resources. This mean that the time taken to set-up the chairs would be shorter for new offices and the reduction of material means that the cost of raw materials for the chair will be much lower. [3] 5 2.2 Crawford Hansford and Kimber CH & K are designers and manufacturers of electronic and electrical equipment, particularly in printed circuit boards. In 2008, 2 directives that were introduced changed the industry dramatically. Waste from Electrical and Electronic Equipment (WEEE) and Restriction of the Use of Hazardous Substances in Electrical and Electronic Equipment. Both this directives require that lead be substituted to another less hazardous substance. Lead is used extensively in the semiconductor industry as a solder paste. CH & K then took this opportunity to implement the eco-design not just on its product, but its entire manufacturing system. Several methods to replace lead have been identified, including J-alloy, application of glue and diffusion soldering. While different methodology is required based on the circuitry, the alternatives exist. By eliminating lead from the solder, the use of acid wash during pcb production was also reduced significantly. This elimination method comes at no additional cost, as the replacement material cost no more than using lead as solder paste. Hence, a more environmental friendly method was adopted at no additional cost. The PCB board itself was designed based on the design for recycling concept. It is easier to recycle the components of the PCB board at the end of its life by disassembling its components. While previously this proved to be a much more complicated procedure, the latest PCB boards from CH & K allows for disassembly by just using one screwdriver. In addition, the company has also subcontracted the removal of hazardous waste treatment after PCB etching process. This treatment processes and dissolves copper in the solution, in which copper can then be recycled. [4] 6 2.3 Kelvin Hughes Kelvin Hughes produces data acquisition unit for electronic chart display system. This unit performs efficient management and provides the navigational data to assist a seagoing vessel. Charts are then stored on the computer and can be uploaded via satellite. Kelvin Hughes has performed the eco design based on several aspects to improve its products. [5] Design for flexibility Kelvin Hughes designed a new data acquisition unit that can be used as the basis for the electronic chart display (ECDIS), voyage data recorder (VDR) and the radar application. This new modular efficiency was improved by reducing the inventory requirements. A review of all specifications was done and this reduced the manufacturing cost of the unit. This allows the unit to be more flexible and separate components can be improved individually without affecting the other components of the unit. Removal of battery The battery system for the unit now comes as an optional pack as it is not a requirement for VDRs to have a battery pack according to the IMO regulations. Hence, by removing the battery pack, the cost has been reduced and the need for battery recycling has also been reduced. Cable arrangements Previously, the modular designs have been fitted using a full range dedicated connecters. The new design uses a simpler, more flexible arrangement. This has reduced the cabling required and reduced the connector cost as well. Design for ease of installation The new units were designed to be easily installed and also maintained. The hinged cases provide easier access for maintenance to be done or for any repairs and upgrades as the access to the power supply, ribbon cables and the hard drive sockets are made easily accessible. End-of-life The products are designed and tested for a minimum service life of 10 years. 7 3.0 Open Innovation According to Chesbrough (2003), open innovation is for the use of purposive inflows and outflows of knowledge in order to increase the speed of internal innovation and at the same time widen the market for external use of innovation. An assumption is made that firms can and should use external and internal ideas and paths to further advance their own product or technology. Figure 1: Open Innovation Model [7] Open innovation allows a firm to expand its boundaries by exploring different areas that would not be possible in the closed innovation system. A company can now import new technology and take advantage of the un-exploited intellectual property to improve its own research and development method. It also allows companies to venture into new market that is similar to the direction and strength of the company, for example, Google has ventured into the automobile industry by providing vehicles with an on board Google Navigation system. Open innovation also allows for companies to look at the business model differently. By applying open innovation, companies can evaluate ideas from other sources and its own internal R&D can then claim a portion of that value and a business case can be justified. This encourages the companies to have a better business model than its competitors who have been in the market for a longer period of time. 8 Open innovation however does have its own disadvantages as well. There can be a serious concern of the intellectual property, as the ownership is questionable. This can be related back to the case of Samsung and Apple, where Apple has decided to bring Samsung to court for infringement rights to its own IP. Due to the increased number of business interface, the management complexity also increases as well. Companies also tend to look at short term opportunity exploitation, rather than a business model that would be beneficial in the long term. The 3 examples of open innovation will be explained using case studies of companies that have adopted the open innovation method. 9 3.1 Natura Natura, originated from Brazil is the market leader in cosmetics, fragrances and personal care. They are also involved in direct selling and distribution method and are known to be the forerunner of innovation in the cosmetics industry. Natura adopted the open innovation method in 2006. Natura created a centralized unit within its vice-presidency and with a department consisting of 11 people; they have focused on innovation, management of innovation and group partnerships linking them to the directors of other firms. Their main motivators are the improvement of internal and external communication of the company and the university. They then focus on intellectual properties, funding and licenses and partnership with University and research institute. By utilizing the resources from the research institute, Natura was able to focus on services more, hence the produ t of the o pa itself. The o pa ’s produ t redi ilit has also i reased as resear h done by university shows more strength of o fide e i the pu li ’s e e. Natura employed a bottom up approach in its OI implementation, as the idea emerged from a group that is involved with the university itself. Natura adopted a strategy that promotes internal research and to encourage the search for openness. There is also a centralized structure within the company and a department dedicated to open innovation itself. However, its partnership with university is informally done by means of joint research and research contracts. Natura also has a structured research platform that allows contracted professionals in partnership with the open innovation system. Despite adopting the bottom up approach, the support from top management has become an important enabler in its implementation. The matrix structure within the company also acts as an enabler, as a department is allocated and responsible for open innovation. However, initially, the idea was rejected as internal researchers felt inadequate. This has improved over the years with the support from the top management in achieving a good collaboration and moral drive. 10 3.2 Pininfarina Pininfarina is an Italian firm that specializes in the automotive industry as well as other industries. As a design company, Pininfarina often explores the niche market, by producing ideas and introducing innovations in terms of technological advancement and designs way before its competitors. The company was one of the first to work on the Nido, one of the first electric cars. Up to year 2007, the o pa ’s i o ation process was funded by auto-financing. Collaboration with strategic partners allowed the company to co-develop and build prototypes based on emerging technologies. The open innovation involved in Pininfarina is commonly known as concept vehicles. The company often creates prototypes for exhibition purposes, which automotive companies use for car shows a d arketi g opportu ities. Pi i fari a’s lists of usto ers are large auto o ile a ufa turers. Figure 2: Pinanfarina customers in automobile industry Pinanfarina performs collaboration and co-development with the automobile companies. This allows it to obtain ideas and knowledge from the companies and build its own pool of resource. It then transfers the knowledge and patents to benefit the cooperation. Through this, the company has established a strong long collaboration with several automobile companies. This type of open innovation is beneficial to both parties, where ideas are transferred from both expertise in the same field. However, it does post a risk, where a competitor might establish a similar idea that is commonly shared with Pininfarina. [8] 11 3.3 Dunkin Donuts Du ki ’ Do uts is o e of the largest aked do uts a d offee fra hise hai i the orld ith more than 7000 stores worldwide. The company has adopted several open innovation method to improve its product and services. One of the products identified is their brewed coffee. While they remained a market leader in coffee sales, they did not have the distribution network or the business model for retail purposes; hence it misses sales on a large market where packaged coffee is a potential market. The coffee was also designed for commercial sales, and not for home-brewing. The research and development at a other o pa , P&G has de eloped a si ilar roast to du ki ’ do uts a d Du ki ’ Do uts ra d, this produ t is pre iu e plo i g the arketed a d sold i retail stores. Due to the ra di g, a pri i g as possi le. This part ership i ol es Du ki ’ Donuts equity and brand marketing hile e plo i g P&G’s distri utio et ork. Du ki ’ Do uts also i ol es its usto ers i the ope i as ro dsour i g. I o atio . This parti ular ethod is k o , Du ki ’ Do uts orga ized a Create Du ki ’s Ne t Do ut o petitio , hi h allo s fa s to parti ipate a d e peri e t ith differe t for ulas. This pro ided Du ki ’ Donuts with a pool of new ideas to venture and explore. The company also sponsored a custom playlist on an internet radio station, Pandora. By doing this, it has also asked consumers to recommend favourite songs inspired by the flavours of its product, Coolaata. While this serves as an advertisement by itself, but it also provides new ideas to improve its marketing method and advertisements in the future e plo i g the fa ’s ideas. In overall, by employing the social media and the crowdsourcing method to engage with its usto ers, it allo s Du ki ’ Do uts to e the ra d that disti guishes its illi g ess to e gage i a qualitative and quantitative way with its customers. They have also shown how the brand innovation is ased o the usto er’s eeds. 12 4.0 Part 2 Part 2 requires the table to be further expanded to show cash inflow (Sales revenue) and the cash outflow (total cost). The net cash flow is obtained as the difference between the cash inflow and the cash outflow. Initial Investment Marketing costs Production costs Sales (number of units) Price per unit Sales revenue Total cost Net cash flow 2014 2015 2016 2017 2018 30,000 0 0 0 0 5,000 10,000 5,000 5,000 2,000 10,000 12,000 12,000 15,000 15,000 0 100 250 300 400 220 220 200 180 150 0 22000 50000 54000 60000 45000 22000 17000 20000 17000 -45000 0 33000 34000 43000 To calculate the Net present value, the NPV formula is employed. First, the present value for each year is calculated with an interest rate of 5%. For year 2014, n=0 = − For year 2015, n=1 = − = = 13 . For year 2016, n = 2 = . = For year 2017, n = 3 = For year 2018, n = 4 = = . = . . . The sum of all the values will give us the Net Present Value from year 2014 to 2018. Net Present Value = £49678.68 Accounting rate of return is calculated based on the formula; ��� = � � �� � � The average annual profit is calculated by summing up the total net cash flow and dividing it by a total of 5 years � � = − + + = + The average annual profit value is then input into the ARR formula; ��� = = . 14 + The payback period can be calculated using a graphical interpretation. Year 2014 2015 2016 2017 2018 Cumulative Profit 0 0 33000 67000 110000 Cumulative Profit 120000 115000 110000 105000 100000 95000 90000 85000 80000 75000 70000 65000 60000 55000 50000 45000 40000 35000 30000 25000 20000 15000 10000 5000 0 2013.5 2014 2014.5 2015 2015.5 2016 2016.5 2017 2017.5 2018 2018.5 As the initial investment is £45000, the graph intersection at this point is found. An approximation is made that the graph intersects at 0.35 years into the year 2016. Hence, from here, we can calculate the payback period. � = = . . 15 ∗ � + ∗ Business case for A Smart Refrigerator Executive Summary This business case recommends the design of a smart refrigerator having graphical interfacing interface, Radio frequency identification and sensors. The project is expected to deliver a financial benefit of £ 200 per year through reduced labour cost and process reliability. The return on investment will be 112.6% after a period of 5 years. Reasons Over the ears refrigerator o er ofte do ’t re e er the sto k the ha e i the fridge a d they do buy what they already have in excess. The items in the fridge also expires without k o i g u til the da it’s goi g to e o su ed. I hotels a d o er ial area, the dedicated staffs have the responsibility of checking and stocking the fridge at interval not to run of supply for the guest. The solution to this problem is to build a GUI Smart refrigerator having the following functions - Barcode scanner: this actually scans every item placed and removed from the fridge. Any item without a barcode can be inputted manually on the LED display Stock order- the device can be linked to any online grocery site and order can me made automatically or manually if not direct debit is not set up. Multimedia- the smart touch LCD screen on the door, and allows TV programme to be watched, picture slides, and also cook recipe Remote lock- this allows the fridge to be accessed remotely via a phone or pc and locked Smart Tray- the glass tray in the fridge automatically measure the weight of any object placed on it at random position e.g. weight of a jar of milk. Business option The business option incorporated here is to do the minimal by using existing refrigerator and incorporating some hardware module into it like the sensors, smart tray, LCD screen, RFID and WAN card. The product software will be a Dot Net frame work which can be accessed over the web. this option will reduce the time spent in the kitchen, reduces buying things that are still available , create comfort and means of advertisement with the multimedia screen and also protection from eating expired product. The cost of integrating this entire module would be £ 200000 the cost in developing a software and database for the food item £ 15000 cost of deploying anti-spam and anti-hacker £ 5000 Expected benefit 16 The expected benefit of this project is - Income benefits when products are advertised on the LCD display Reduction of time spent visiting grocery stores Expected dis-benefit Higher market price makes it only affordable to certain range of user Timescale The project is expected to take a period of 1 year from the design specification process to a complete final product ready for sales. Manufacturing process will continue based on usto er’s de a d. The ork reakdo stru ture is i luded a d the ti es ale is defi ed clearly by using the Gantt chart. Cost Project cost: - Hardware development cost Software development cost Operational cost: - - - - Staff salary Staff salary will be higher during the R&D process, as more staffs are required during this stage for the development process. Once the development process has been completed, salary will be distributed towards service engineers, manufacturing personnel and customer service. Site rental Site is required for office space for developers. Later a warehouse is to be converted to a manufacturing plant. Annual Maintenance cost Maintenance cost will cover the maintenance required for the manufacturing plant Customer support Customer support will include warranty claims, call centre support and operating manual production Overhead bills Utility bills such as gas, electricity and water. Subject to inflation yearly. Manufacturing Manufacturing cost involves purchase of raw material and other manufacturing associated cost 17 Cash Flow Cost Year 1 Year 2 Year 3 Year 4 Year 5 Hardware development cost (200000) 0 0 0 0 Software development cost 0 0 0 0 Staff salary Site rental (20000) (465600) (327300) (337200) (347230) (357650) (24000) (24000) (24000) (24000) (24000) Equipment maintenance 0 (6000) (6000) (6000) (6000) Customer support 0 (2000) (3500) (4200) (5500) Overhead bills (9400) (9400) (9400) (9400) (9400) Manufacturing 0 (80000) (72000) (70000) (69000) Subtotal (719000) (448700) (452100) (460830) (471550) Savings Sales 0 325000 450000 880000 1200000 Repairs 0 0 4000 7000 7600 Subtotal 0 325000 454000 887000 1207600 (719000) (123700) 1900 426170 736050 Cash flow 18 Return on Investment The return on investment is calculated over a 5 year period using the ROI formula. � �=( � = Project risk = ) . % ∗ % A proper project risk assessment is done and analysed using the risk log. The risk log identifies the possible risk associated and the mitigation plan for every risk. The mitigation plan is divided into trigger and action. Trigger is the immediate reaction to what should be done when the problem happens. Action is broken down to corrective action and preventive action, where action is taken to identify the associated problem and prevent it from reoccurring. 19 Risk Log No TECHNICAL 1 2 3 4 owner R&D manager R&D manager Production manager R&D manager Risk Electronic component malfunction Energy efficiency not complied Prototype failure Explosion likelihood Impact Effect on project 3 2 1 1 4 3 4 5 Risk Reduction Actions Trigger/ Actions Failure of project 1. Use credible suppliers 2.Proof of testing from supplier prior to shipment. Trigger- inform the project manager and supplier regarding failure Action - Require new parts to be shipped and inform supplier to produce a failure analysis research to prevent the problem from reoccurring. Less acceptance by market 1. Consider energy efficiency during development and include in WBS 2. Energy efficiency should be tested for each phase Trigger - inform project team Action - improve the design to include energy efficient components 1. perform testing at every stage of production before assembling the prototype Trigger- inform the project manager and replace the malfunction component. Action - Enforce and ensure testing is done at every stage of production 1. R&D should consider chances of explosion due to refrigerant. Trigger - inform the R&D manager about the explosions. Action - improve the refrigerant to inflammable material Delay or failure of project Injury to staff or customer 20 SCHEDULE 1 R&D manager Delay in R&D Department 2 R&D manager development risk , tools and software licence expiry 3 Purchase department supplier demand failure 4 Project manager delay in obtaining environmental licence 5 maintenance equipment failure department or breakdown 2 3 3 2 4 4 time escalation 1.should always verify work progress with work schedule Trigger- inform the reason of delay to project manager. Action - allow HR department to increase the shifts and if needed recruit temporary workers. 2 time escalation and delay 1.the software can be purchased 2.evaluation of design against an existing prototype Trigger- inform the purchaser about the need to purchase the software. Action - purchase the software licence as soon as possible 3 time escalation and delay in production Purchase manager should inform the project manager and the supplier regarding the issue. Trigger- contact secondary suppliers to fulfil the demand. Action - issue order for new supply order 3 time escalation and delay 1. Prepare applications for obtaining it as early as possible. Trigger- follow up with the environmental agency to find what has gone wrong Action - to reschedule the production. time delay in production and supply 1. Always check the age and performance of equipment before employing in production. 2. Ensure electrical and mechanical and operational safety to prevent damage. Trigger- inform the project manager and production department. Action -get maintenance and repair done as soon as possible or get replacement 3 21 COST 4 increase the capital requirement of project and increase the cost of product 1 include a fair margin for inflation and unexpected costs while doing the cost analysis of project Trigger -inform the finance department about the un expected cost hike Action- finance should increase the funding according to the requirement. 1.establish proper contract from supplier to supply at a particular price and time period Trigger- inform the project manager Action - implement the legal security from the contract between supplier and purchase. 1 .regular equipment testing and maintenance Trigger- immediate repair of equipment Action- perform planned maintenance to reduce breakdown. 1 finance department cost escalation due to inflation, change in licence or legislation 2 purchase department cost escalation due to supplier failure 2 3 increase the time of project and thus cause loss in profit 3 cost increased due maintenance to the production department delay by equipment failure 2 2 affects the expected profit 2 22 Work Breakdown Structure Research and Development 1. Specification 1.1. Software 1.1.1. Operating System 1.1.2. Mobile App 1.2. Hardware 1.2.1. Components Required 1.2.2. Equipment Required 1.3. Size, Shape and Dimensions Requirements 1.4. Quality, Environmental and Efficiency Requirements 1.4.1. Quality Standards 1.4.2. Environmental Standards 1.4.3. Efficiency Standards 1.5. User Interactivity 1.5.1. Graphics User Interface 1.5.2. Connectivity with Supermarkets 2. Design 2.1. Hardware Design 2.1.1. Electronic Design 2.1.2. Electrical design 2.2. Software Design 2.2.1. Create Operating System 2.2.2. Create Mobile App 2.3. Size, Shape and Dimensions Design 2.3.1. CAD Design 2.4. Simulate Design 2.4.1. Hardware Simulation 2.4.2. Software Simulation 2.4.3. CAD Simulation 3. Prototype 3.1. Construct Prototype 23 3.2. Evaluate Prototype 3.3. Prototype Adjustments 4. Testing 4.1. Test Hardware 4.2. Test Software 4.3. Test User Interactivity 5. Finalisation 5.1. Finalise Hardware Design 5.2. Finalise Software Design 5.3. Finalise Size, Shape and Dimensions Design 5.4. Finalise User Interactivity Production 1. Pre - Manufacturing 1.1. Manufacturing Equipment 1.1.1. Search and Acquire 1.1.2. Mobile App 1.2. Manufacturing Site 1.2.1. Search and Acquire 1.2.2. Install Manufacturing Equipment 1.3. Manufacturing Testing 1.3.1. Safety Tests 1.3.2. Equipment Tests 2. Components 2.1. Ship in Components 2.2. Tests Components 3. Manufacturing 3.1. Product Production 3.2. Product Testing 4. Shipping 4.1. Package Products 4.2. Ship Products 24 Marketing 1. Market Research 1.1. Potential Market 1.1.1. Bulk Buying Market 1.1.2. Individual Buying Market 1.2. Marketing Strategies 1.2.1. Online Advertisements 1.2.2. Television Advertisements 1.2.3. Other Medians of Advertisements 2. Marketing Production 2.1. Create Advertisements 2.1.1. Online Advertisements 2.1.2. Television Advertisements 2.1.3. Other Medians of Advertisements 2.2. Market to Potential Market 3. Market Feedback 3.1. Receive Marketing Feedback 3.2. Evaluate Marketing Feedback 3.3. Adjust Marketing Accordingly Customer Service 1. Online Services 1.1. Develop Website 1.2. Acquire Online Services site and Equipment 1.2.1. Acquire Site 1.2.2. Acquire Equipment 1.3. Begin Online Services and Mobile App 1.3.1. Install Equipment 1.3.2. Test Equipment 1.3.3. Go Live 2. Telephone Services 2.1. Develop Telephone Line 2.2. Acquire Telephone Services site and Equipment 25 2.2.1. Acquire Site 2.2.2. Acquire Equipment 2.3. Begin Telephone Services 2.3.1. Install Equipment 2.3.2. Test Equipment 2.3.3. Go Live 3. Training 3.1. Train Installation and Repair Technicians 3.2. Train Online Services Staff 3.3. Train Telephone Services Staff 4. Operating Manual 4.1. Develop Manual 4.2. Make Manual Available 4.2.1. Digital Version 4.2.2. Hardcopy Version 26 Div. Item/Month March April May June July August Sept Customer Service Marketing Production R&D Specification Design Prototype Testing Finalisation PreManufacturing Components Manufacturing Shipping Market Research Marketing Production Market Feedback Online Service Telephone Service Training Operating Manual Table 1: Gantt chart 27 Oct Nov Dec Jan Feb March Apr May Jun Computing the cash flow for a 10 year period projection: Cost Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Hardware development cost 200000 0 0 0 0 0 0 0 0 0 Software development cost 20000 0 0 0 0 0 0 0 0 0 327300 337200 347230 357650 371956 383115 Staff salary 465600 Site rental 24000 24000 24000 24000 24000 24000 24000 24000 24000 24000 Equipment maintenance 0 6000 6000 6000 6000 6000 6000 6000 6000 6000 Customer support 0 2000 3500 4200 5500 6000 7200 7100 6200 5500 Overhead bills 9400 9400 9400 9400 9400 9400 9400 9400 9400 9400 Manufacturing 0 80000 72000 70000 69000 67000 66000 66000 41000 34000 448700 452100 460830 471550 484356 495715 Subtotal 719000 398440 414377 420952 510940 500977 499852 Savings Sales 0 Repairs 0 Subtotal 0 Cash flow 325000 450000 880000 1200000 1400000 1550000 1320000 980000 620000 0 4000 7000 7600 8200 8800 6400 6000 5800 325000 454000 887000 1207600 1408200 1558800 1326400 986000 625800 (719000) (123700) 1900 426170 736050 28 923844 1063085 815460 485023 125948 Calculating the NPV for each year would separately: For year 1, n=0 = − For year 2, n=1 =− = − For year 3, n=2 =− = For year 4, n=3 For year 5, n=4 For year 6, n=5 For year 7, n=6 . = = = = = = = = = . . . . . 29 . . . . . For year 8, n= 7 = = For year 9, n=8 = = For year 10, n=9 . = . = . Hence, NPV is the sum of the total values each year: − − + + . + . + . = . . + . . . + . + . + . Co puti g the results of ea h ear’s PV i to a graph ill pro ide us ith the graphi al i terpretatio of NPV from year 1 to year 10. 1000000 800000 600000 400000 £ 200000 NPV 0 -200000 0 2 4 6 8 10 12 -400000 -600000 -800000 Years Assumptions made:  Staff salary reduced after year 1 as no more development will be needed, hence reduction in staff. However, salary will increase periodically with inflation rate for available staff. 30  Manufacturing cost to be high in the beginning. Mass production will continually decrease the manufacturing cost despite the increase in volume. Process Engineers are also responsible to  reduction of waste which would directly reduce the manufacturing cost. Sales value to pick up until it reaches a peak period, in this case at year 7 then a steady decline as the project reaches the end of its technological life cycle. Based on the NPV graph, we can see that the project is approaching a limit at 0. Hence, before the project reaches a negative value, the product should only be sold for a period of 10 years. Assumption is made based on new innovation in the market that would be more attractive to customers. 31 6.0 References 1. Papenek, V. 1995. The Green Emperitive: Ecology and Ethics in Design and Architecture, London, Thames and Hudson. 2. European Commision, 2012. Eco-design of Energy-Related Products. [Online] Available at http://ec.europa.eu/energy/efficiency/ecodesign/eco_design_en.htm 3. Palmer, L. 2011. Case Study: Orangebox Limited. [Online] Available at http://www.ecodesigncentre.org/sites/default/files/EDC_Orangebox_EnablingEcodesignInWelshInd ustry_1.pdf 4. Whitehead,P., Young, A.K., Charter, M. 2007. Eco-Design Case Study: Crawford Hansford & Kimber (CH & K). Adding Value to the Supply chain with Smart ecoDesign. The centre for sustainable Design. 5. Bassett,D., 2010. Eco-Design Case Study: Kelvin Hughes. Kelvin Hughes Limited. Ilford, Essex. 6. Chesbrough, Henry W., 2003 The Era of Ope I o atio . Sloan Management Review , 44, 3 (Spring): 35-41. 7. Ades, C., Figlioli, A., Sbragia, R., Porto., Plonski, G.A., Celadon, K., 2011. Implementing Open Innovation: The case of Natura, IBM and Siemens. Journal of Technology Management and Innovation, Vol 8, Special issue, pp 12-25 8. Massis, A., Lazzarotti, V., Pizzurno, E., Salzillo, E., 2012. Management of Technological Innovation in developing and developed countries. Rijeka: InTech Europe 9. Idea Connection, 2007. Ho Dunkin’ Donuts uses open inno ation to get ahead. [Online] Available at http://www.ideaconnection.com/open-innovation-success/How-Dunkin-Donuts-Uses-OpenInnovation-to-Get-Ahead-00336.html 32