The Cargo Container Tracking System

1
The Cargo Container Tracking System

• Project Members
• Andrew D. Nikow
• Project Leader
• Michal Kosinski
• Parminder Singh
• Michael Stabile

2
Contract Deliverables Status Report

• Business Model- Preliminary Model Information
  Complete
• Cost Estimation- Preliminary Modeling Complete
• Product price- Research And Analysis Complete
• Design Economics- SEED Model Evaluation Complete
• Financial Leveraging Best Case Evaluation
  Complete
• Break-even Analysis- Best Case Evaluation
  completed
• Sensitivity Analysis- Best Case Evaluation
  completed

Incomplete Underway Complete
3
Contract Deliverables Information

• Research data based on similar product
  development (Labor rates, equipment costs, taxes
  ,etc.)
• Utilize SEED Model to analyze a variety of
  scenarios
• Evaluate the results based on the various
  scenarios and arrive at best and worst case
  options

4
Business Model
5
COST Estimation Information

• Type of Costs and their Range of Accuracy / -
  30
• Manufacturing plant (based on square footage /
  space utilization)
• Equipment (production rate and machinery usage)
• Operating Costs
• Fixed costs (taxes, utilities, supplies,
  advertising)
• Variable costs (labor, materials, overhead)
• Loan Expenses (interest, amount borrowed)

6
Project Cost Information (1)

• Market Size
• Total Container Fleet worldwide is 13 million
  TEUs. (possible estimate 9 million units)
• Total Chassis Fleet worldwide is 900,000 units.
• Units Sold (based on 7-year lifespan of a cargo
  container)

7
Project Cost Information (2)

• Wireless Transponder
• Initial number of units sold 15000 with 30
  increase in sales each year. (at end of 10years
  product covers 9-10 of market share)
• Price 60 25 labor 12 materials 55
  overhead.
• Wireless Gate Reader
• Units are not sold used by the company with
  initial of units produced 150 and yearly
  increase of 10
• Cost of manufacturing 430 50 labor 220
  materials 60 overhead (maintenance).
• Tracking Service
• Units served is equal to the number of units sold
  that year plus the number of units sold up to
  current year (with assumption that 7 years is the
  life span and that about 2 of containers will
  not require tracking that year)
• Price 100/year 40 labor 0 materials

8
Design Economics

• Using the SEED model
• NPV 15,817,230
• IRR 81.92 - very good and higher than 25 MARR
• Positive operating cost (EBIT) each year after
  year 2 (that is very good)
• Competitive prices in regards to competition
• (Qualcomm charges 600 per unit 250 per month
  per driver service fee) Source CIO Magazine -
  June 15, 2000

9
Financial Leveraging

• Using SEED model most economical case
• Initial capital investment 2,150,000
• Initial borrowed capital 300,000 at _at_12 APR
• Increase in borrowed capital returns slightly
  higher IRR but brings higher risks (much
  greater debt ratio)

10
Break Even Analysis

• Break Even Point occurs at beginning of Year 3
  after approximately 17.5 million in sales.
• Revenue Surpasses Operating Expenses Almost
  immediately

11
Sensitivity Analysis

• Most sensitive Revenue to IRR
• Also Expenses are very sensitive

12
Venture Funding Analysis

• Using Proposed income statement (SEED output)
  company can use economical leverage for funding
• Large market
• Available technology
• Good earnings forecast
• High rate of return (IRR high)
• Possible angels
• Transport / equipment leasing companies
• Government (tracking of hazardous materials)
• Military

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Goals of Economic Analysis

• Determine the Most Profitable Option
• Further analysis using SEED model necessary
• Explore various other types of modeling
  scenarios.
• Models explored for midterm are based on ideal
  statistics and may not be realistic
• Incorporate more factors into analysis to provide
  a more realistic decision platform
• Provide more detailed information and projections
  to possible venture capitalists

14
QUESTIONS?
Pictures courtesy Interpool Inc.
http//www.interpool.com
CCTS Project Andrew D. Nikow Project
Leader Michal Kosinski Parminder Singh Michael
Stabile