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Written Analysis of the Case

Cumberland Metal Industries:


Engineered Products Division, 1980

By
Prathyusha Chokkapu
PRN:18021141030

Under the Guidance of


Dr. Ramakrishna Dikkatwar

21st June 2019


1. Describe & quantify the value preposition of CMI’s metal cushion pads.

Analysis: Value Proposition is basically defined as the benefits/ final efficient


output/product/service a customer would get based on the cost/time/effort being put by
him/her on the same.

CMI Cushion pad is an integral part of the process of driving piles. The new CMI pad with
curled metal has got three dimensional resilience and the power to withstand almost any
temperature, produce shock mount and etc with temperature never going above 2500 F with
33% faster driving time which is 5 times increase in pad change efficiency and a 68 times
increase in piles per pad efficiency (Test results of Colerick and Fazio)

CMI Metal Pads could be manufactured as per old equipment or even new equipment as per
Exhibit 6 is as follows both for the manufacturer and the distributor where in it was
calculated only for 11 ½ inch pads because they were most commonly used.

Value Proposition with Existing Equipment in Dollars (111/2 inches)


Total Manufacturing Cost (A) 148.12
Estimated Volume per month(B) 250
Manufacturing Cost per pad[A/B] [C] 0.59248
Contribution margin (40%-50%) (D) 0.45
Selling Price of Manufacturer [E] 0.859096
Selling Price of Distributor of 11.5 inch pad [F] 3
Distributor Margin Percentage (30%-40%) [G] 0.35
Distributor Margin Value [H] 1.95

Value Proposition with New Equipment in Dollars (111/2 inches)


Total Manufacturing Cost (A) 69.18
Estimated Volume per month(B) 250
Manufacturing Cost per pad[A/B] [C] 0.27672
Contribution margin (40%-50%) (D) 0.45
Selling Price of Manufacturer [E] 0.401244
Selling Price of Distributor of 11.5 inch pad [F] 3
Distributor Margin Percentage (30%-40%) [G] 0.35
Distributor Margin Value [H] 1.95

2. How far CMI’s metal cushion pads are different than existing cushion pads used in
pile driving business?

Analysis: Cushion pads act as shock absorbers and heat resistors. Originally, hardwood
blocks were being used where the constant pounding destroyed the wood’s resiliency, wood
used to get ignited and had to be changed frequently.
Then, they moved to asbestos rods which had stacks of layers made up of ½ inch aluminium
and 1-inch-thick micarta slabs.

Comparative performance tests were performed by Colerick Foundation Company wherein


the test results between Asbestos rods and CMI rods of 11 ½ inch diameter were used and the
test results are as follows:

Results Asbestos CMI


Feet driven per hour while driver was at work(1) 150 200
Piles driven per set of pads 15 300
Number of pads per set 24 5
Number of sets required 20 1
Number of set changes 20 1
Time required for change per set (min) 20 4
Total feet to be driven( 50 sq. ft per pile)(2) 15000 15000
Total Working hours(2)/(1) 100 75
Time required for change per set (hrs) 0.333 0.067
Total time required to change 6.67 0.067
Combined Time 106.67 75.067
Colerick cost per sheet $50 Not charged
Total Cost 1000 NA
Cost per hour 9.374707 NA

Based on these results, though CMI pads drove piles 33% faster, Simpson- Manager of
Mechanical Products Group, was somehow not convinced if the larger pads would perform
well and was expecting the range to be around 20%.

So, a second test was performed by Fazio Construction and the test results are as follows:

Results Asbestos CMI


Feet driven per hour while driver was at work 160 200
Piles driven per set of pads 6 300
Number of pads per set 12 5
Number of sets required 50 1
Number of set changes 50 1
Time required for change per set (min) 20 4
Total feet to be driven( 40 sq. ft. per pile)(2) 12000 12000
Total Working hours(2)/(1) 75 60
Time required for change per set (hrs) 0.333 0.067
Total time required to change 16.67 0.067
Combined Time 91.67 75.067
Fazio cost per sheet $40 Not charged
Total Cost 2000 NA
Cost per hour 21.81739 NA
Thus, from both the results it is clear that CMI rods are far better than the existing Asbestos
rods wherein the total cost is being reducing to a considerable extent.

3. How big is this market? What kind of opportunity is this for CMI?

Analysis: Market Potential for CMI is as follows:

 Huge with annual demand of 290 million to 300 million feet of piles being driven
 One set of curled pads – 10,000 feet (4 initial and 2 added later)
So Market requirement is 29,000 to 39,000 sets.
 As per 1977 Construction Engineering report, 13,000 pile hammers are owned by
company and 6500 – 13000 leased wherein curled metal can be used.

This is an excellent B2B opportunity for CMI to convince the existing alternative users to
use curled metal product wherein it can show how well the productivity can be improved by
quoting at the right price and showing them the clients the increase in their efficiency as
well as margins by pricing and positioning it ideally.

4. What kind of Buying situation prevails while buying metal cushion pads? Justify

Analysis: While buying metal cushion pads it would be a “Modified Rebuying” as our
clients are the ones who have been used other cushion pads with materials like wood,
asbestos and etc with variations in price and specifications.

So while pitching in points of difference should be clearly explained in order to convince


them to use metal pads instead of their existing products.

5. Enlist the participants (decision making unit) while buying metal cushion pads. Also
describe their roles. Who is decision maker?

Analysis: In the pile driving business, as in other parts of the construction industry, a
number of entities participated in the purchases who might be the end procurers or even the
influencers who recommend and influence the buying decision.
For metal cushion rods, pile hammer manufacturers, consulting engineers, distributing
or renting companies, construction contractors and etc might act as potential influencers.

But the final decision would be in the hands of the Procurement Manager after discussing
with the product team in terms of its features, sales and administrator team to determine the
actual cost, quality control to decide and test the quality with a note to the manager above
him.

Purchase approval is done by a single person/unit but purchase decisions are taken various
parallel departments based on the requirement, need, urgency and future aspects and
prospects of the company.

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