Jack's Plastic Welding Inc
Prototype Production Policy
PLEASE NOTE: We do not allow customers to work in our shop on product development. All hourly rates in this document are stipulated as man hours.
Fees may be assessed if we determine we need to have an attorney look at your documents. We reserve the right to charge for time spent reading and understanding legal documents like Non Disclosure agreements.
This Document characterizes the way we like to do business at JPW inc. This policy has evolved because of our need to organize and document the way a product is produced. We are confident that you will agree that this product management policy helps our company produce products in a quality conscious efficient manner. Customer needs are of primary importance. For this reason, we welcome any written comments on this policy.
Customers come in three types. Standard product customers want a standard product. Customized standard product customers, want standard products with slight modifications. New (prototype) product customers want an entirely new and unique design. We are familiar with our products. What may seem like a small modification could be a major design issue. JPW reserves the right to determine which category a customer’s project will fit into.
STANDARD PRODUCT CUSTOMERS
Standard products customers can see the price on the price list and purchase form that list at that price. Our price levels are Distributor, Rep, Dealer, Outfitter, and Retail. Customers are qualified, and then purchase at one of those price levels. We have a standard price list, a list of prices for culebra models and different modifications, catarafts of different models and modifications and self-bailing rafts that are standard, but not on the standard price list.
CUSTOMIZED STANDARD PRODUCT CUSTOMERS
Customized standard product customers pay a premium for customized products. This depends on the quantity and the amount of customization. Customized products must be tracked for the individual customer, so there is an associated administrative cost involved. Customized standard products that can not be run inside a standard production run, carry a further premium price. A typical custom charge may include the cost for 1 item that can not be placed in a production run because of the size or the extent of the modifications.
As the quantity of these items goes up, the cost of custom work goes down per unit, because the item becomes a production run in itself. This leaves only design changes and administrative costs to produce those design changes. We call this a customized production run. When a standardized product is highly customized, or unfamiliar materials are requested, we require our customer to sign off on the design changes. We may require a limited production run to smooth out the processes before a firm price can be set. The price of a limited production run will be determined through our prototype pricing policy.
NEW PRODUCT (PROTOTYPE) CUSTOMERS
This type of customer is establishing new markets for products that we build. Our product may be a whole unit, or simply a component of the entire product. New product customers have a great potential for income off of a product that we help develop with our technology. In the initial phase, we simply function as the developer of the product. New product customers are the focus of this document
New product (prototype) customers will be required to make a down payment to start the process. Depending on the complexity of the project, we may require other agreements. The down payment will be based on complexity, materials needed, and our previous relationship. These projects require research, and engineering time to design and complete. The deposit is intended to help with the engineering and design cost, and that is why it is paid up front.
PROTO TYPE DEVELOPMENT PHILOSOPHY
During proto type development there may or may not be an established market for the project that we are working on. This is not important to us. We do not own the idea, and we only wish to produce a proto type that can be tested before moving to the next step. Often there is no next step. Therefore we do not produce proto types because it will provide us with a new product line. We do not own this product. The potential for profit from this product is based on these issues:
1 the relative cost of the product in the market (perceived value),
2 efficient production of the product,
3 Control of the quality of the product through the design, production and materials selection process.
We intend to maximize the potential of a product through effective administration of the last two ideas.
It is fair to assume that the quality of a prototype may not be the same as a production model. Machine settings and techniques often need to be adjusted. Customers are required to pay for design cost and prototypes regardless of the quality produced. After the prototype is produced, we will have a serious discussion about the quality that the customer can expect from a production run to effectively sell the product in his market. This is a decision that can be made after the prototype is evaluated by the customer and by Jack's Plastic Welding inc. together.
We will provide the customer with computer models that are extremely close to the actual product, before we start any work. Customers are required to sign off on the design. Often this means downloading a free program that allows the customer to see minute details, and comment on the product. With the technology we have today, this can only be done on a computer. Smart phones are inadequate for this kind of customer involvement. This is a point where the project is accepted or rejected. We expect to be paid for this engineering and design cost even when the project does not move forward. That is the main reason for the deposit mentioned above.
JPW inc does not assume to have any knowledge about the market potential of the product. Proto types are often built to test market potential.
The Crew at JPW strives for information that will lead to the efficient production of the product. However focusing on efficient production of a product in this stage of the process is not productive to the long term efficiency of a product production run. In other words, we strive to document the process so we can produce the product more efficiently in the future should it go to a production run.
Proto types may have minor flaws, may be over built, or there may be materials or processes that are better suited for the first production run. Therefore there can be design changes. During prototype development JPW documents the process, time, and the materials that are used. We may suggest changes to be incorporated in a second proto type, or a production run. The cost of these design changes will be added to the overall cost, if the changes make sense to the customer and it is decided to move forward with them. In summary, we expect our prototype customers to pay us for the first prototype and the associated administration costs we have in developing the procedures and any redesign for this prototype.
DETERMINING IF JPW IS THE RIGHT COMPANY
Here are the steps we take to determine if we can produce your product.
1 We qualify the customer. We are not interested in marketing you product. We are not interested in purchasing your patent. We are interested in producing quality components for new markets. If the company fits with our business plan, we will move to the next step.
2 We talk briefly about the product purpose so that we can get a feel for what it is about, and if it is the kind of product that our technology can produce efficiently, or if we can develop a prototype. Potential customers often feel uneasy about this step. Rest assured. We have many projects that we wish to complete, and we are not interested in stealing any ideas. We want to be open, so that the process can quickly move forward.
3 Often potential customers require that we sign a non disclosure agreement. We resist doing this. Most of the techniques that we use are in the public domain. They are processes that apply to other products. If we develop a new technique for welding, we want to be able to use it on products not related to your product. We need to have information about your project before we can effectively design it. We are not interested in marketing your product. We reserve the right to use techniques derived on your project to construct other products in the future.
Signing Non-Disclosure Agreements can be done. They Take time to read and even more time and cost if we have to take a complicated on to an attorney. We will be happy to send ours to you. We know what is in it, and it may work well for your project. If you want us to sign a NDA, we are assuming that there will be design and engineering time, and we will require a deposit.
4 Give a budgetary estimate of the cost of a project to see if it fits into the customers expectations and market plans. A typical budgetary estimate for this phase of a project is the estimated production and administrative cost multiplied by 3.
5 On the acceptance of the budgetary estimate, the customer will decide if the project is to be built on an hourly rate, or from a firm estimate.
6 A plan for payment of services will be arranged, and the first deposit will be made.
PROTO TYPE PRICING
Hourly billing includes all administrative cost, and all production costs at a $100.00 per hour rate. There will be company employees who will work on the job specifically until it is complete. If it is a rush job, our employees may be willing to work overtime. Our staff works a 40 hour normal work week. Overtime is billed at a rate of $150.00 for up to 10 hours per week extra, $200.00 for 10 to 20 hours extra, and $200.00 for work on Sunday and holidays. Our customers with standing orders for products always have priority for standard production time. Our standard product line is very seasonal. Prototype customers can be charged at overtime rates during our busy season.
Estimated billing is a firm bid. It includes all administrative cost and production costs estimated at a $ 100.00 per hour rate. The nature of estimation leads us to estimate high for our service and it is often less costly to produce at an hourly rate. It is extremely difficult to estimate the time that it takes to revise production plans. The more complex a project is, the more difficult it becomes to give a firm estimate. To arrive at a firm estimate we will establish a preliminary production procedure, estimate the labor cost for each step of the procedure, estimate the labor cost to cover administrative costs (design, patterning,estimating, and documentation), and add time based on issues like material handling, procedural development, and changes. Customers are expected to pay for the estimation of a firm bid even if the project stops there. Therefore it is wise to do a budgetary estimate on complex projects before moving to this step. At the completion of the firm bid there is a production plan in place.
A firm bid gives a ceiling that can be charged for a project. If that price is grossly over estimated, we will reduce the price, and split the cost savings with the customer. If we underestimated, we will absorb the cost.
Budgetary estimates can usually be given in a short time, and include the cost of a project inside a ball park. The size of the ball park will also be given. The size of the ball park gets larger with the complexity of the project. For example a project may have a budgetary estimate of $2500.00 Plus or minus $750.00. This estimate usually takes only 10 minutes or less, but because of the work load we may not be able to get it to you the same day. Budgetary estimates are free of charge. Their purpose is to determine if the project is feasible within a development budget. A fast budgetary estimate for a project is the estimated production and administrative cost multiplied by 3. Our experience has shown us that prototype development has a lot of administrative cost.
PROCEDURE DEVELOPMENT AND COST
If a proto type is not very complex, we can give a production price based on the information that we gathered during the proto type phase of a project. If the proto type is very complex, we will have to perform one or more limited production runs to determine the production cost.
In the proto type phase, we develop an initial production procedure. We also develop patterns and working drawings, or we amend working drawings that are supplied to us. These procedures and drawings are often changed to better fit the customers’ needs after the first proto type.
When a limited production run is performed, employees are required to scrutinize the production process closely. Production procedures and drawings undergo another phase of development.
After the limited production run is performed, a firm price can be set for the product. Changes to a product, by the customer are considered to be a change order. These changes must be documented, and procedures established for those changes. Our customers are expected to sign designs and production documents that indicate those changes. The cost to implement these changes will be billed at our hourly rate. We anticipate changes in procedure and techniques used to produce products more efficiently, and we include the cost of these changes in the firm estimate of the limited production run.
At the completion of this process a system for producing a product is in place. These systems are never perfect or final. Jack's Plastic Welding Inc employees strive to improve products with new processes and materials, stimulating the evolution of your product and our industry as a whole.
Development of a new product can be a lot of work. However the rewards are substantial. It is our hope that this policy settles some concerns a new customer may have, and provides a blueprint for problem solving.
E. Jack Kloepfer
President Jack's Plastic Welding Inc.
Please read and sign the following form. This will enable us to build your prototype.
1- I have read and understand the information in this document.
2- I authorize a 50% deposit, and I will establish terms of payment for this product before production begins. Deposits are not refundable. Complicated designs or design changes in the middle of this process may require us to ask for more deposit money before continuing.
3- I personally guarantee the balance of payment for this product.
4- I understand that I will be responsible for any attorney, court, or collection fees associated in the collection of any outstanding balances owed to Jack's Plastic Welding Inc.
5- Acceptance of this document does not constitute an offer by Jack's Plastic Welding Inc. to build your prototype.
Prototype customer's signature____________________________________
please fax the acceptance form of this letter back to us at 505 334 1901. Thanks Jack
© 2011 Jack's Plastic Welding, Inc