Jack's Plastic
Welding Inc
HOW WE DO
BUSINESS
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.
INTRODUCTION
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.
CUSTOMER CLASSIFICATIONS
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.
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.
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
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 is not the same as a production model. Customers are required to pay for prototypes
regardless of the quality produced.
After the prototype is produced, we may have to admit that it is not
possible for us to achieve the quality that a customer needs 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.
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.
Efficient production of the
product is not an issue in the proto type stage. Focusing on efficient production of a product
in this stage of the process is counter productive to the outcome of the final
product. Proto types often have minor
flaws, are over built, and there may be materials or processes that are better
suited for the first production run.
Therefore there can be a lot of design changes and associated
administrative cost associated with a proto type. During prototype development JPW documents
the process, time, and the materials that are used. We will suggest changes to be incorporated in
a second proto type, a limited production run, or a standard production
run. This cost of process development is
included in the proto type cost. We
expect our prototype customers to pay us for the first prototype and the
associated administration costs we have in developing the procedures 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.
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.
PROTO TYPE PRICING
HOURLY BILLING
Hourly billing includes all
administrative cost, and all production costs at a $75.00 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 $112.50
for up to 10 hours per week extra, $150.00 for 10 to 20 hours extra, and
$150.00 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
Estimated billing is a firm
bid. It includes all administrative cost
and production costs estimated at a $ 75.00 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, triple the
labor cost to cover administrative costs, procedural development, and
changes. Add the estimated
administrative costs of design and the estimating process. 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
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 typical budgetary estimate for a
project is the estimated production and administrative cost multiplied by
3.
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 patters and working drawings, or we amend working
drawings that are supplied to us. These
procedures and drawings are nearly always amended 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.
Sincerely,
E. Jack Kloepfer
President Jack's Plastic
Welding Inc.
Document acceptance
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.
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