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Author
Crecente García, Sabela
Pujol Vidal, Norah
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Abstract
Complex supply chains are controlled by big corporate OEM groups, which are constantly increasing the quality, price and lead time requirements imposed on Tier 1 manufacturers and under, which leaves companies trying to increase their productivity, repetitiveness and overall down time of their production lines. Many automotive, railway or dental components are manufactured by machine tools, specifically Swiss type lathes, which are bound to have quite important machine down time during preparation, tool changes and adjustments. Also, these machines are usually oil impregnated, hostile environments where operators must manoeuvre, which often leads to injuries.
The mission of SafeTurn Systems is to increase the productivity and safety of our customer’s production processes by offering our high-quality accessories. We provide patented SMED systems which reduce machine down time and help operators perform safer and more efficient tool changes or adjustments, greatly increasing the productivity of our customers and enabling them to compete in their respective sectors.
We offer three product lines:
A. Locking systems for safe tool change and coolant distribution rings (Patented)
i. Locking system for safe tool change
ii. Key for locking system
iii. Coolant distribution rings
B. ER tool holder protection systems and accessories for safe tool change
i. Tool protectors for safe tool change in ER tool holders
ii. Extension tubes for safe tool change and wrenches
iii. Protective caps for tool holder ER
C. Main and sub-spindle blocking systems for Swiss type lathes
We will be a B2B company, targeting companies that manufacture parts with machine tools, especially Swiss type lathes. Our final customers can be involved in a wide variety of sectors, which diversifies our risk and sets us up for success.
Revenues will come from one main stream, the sales of our products. To start operations, we will target industrial distributors of machine tool accessories to carry our accessories as unbranded. This will reduce our distribution and commercial expenses while enabling our systems to gain the trust of the industry and be accepted by our final customers. Afterwards, we will target direct customers via our ecommerce website with our branded products, which will allow us to increase our margins.
SafeTurn Systems is expected to reach a big market share quickly, since there is no direct competition to our products. One of our product lines is patented and the others offer differentiative features from the solutions already available in the industry. Therefore, we expect to reach approximately 90% of the Spanish market by year 4 of operations, which means reaching 90% of the apparent lathe consumption in the country. This scenario allows us to consider completely equipped new lathes as well as accessories sold for already existing lathes in our customer’s companies. Our company will include the main stages of the value chain until distribution, since we will develop and engineer the products, manufacture them, and distribute them either to our industrial distributors or to our direct final clients.
The industry that we are operating in can has low rivalry among competitors and medium-low threat of new entrants, since, as we have already mentioned, we do not have direct competition and entering the market entails big capital investments and the need of previous experience in the machining/bar-turning sector. Therefore, we will have the first mover advantage, which we will exploit in order to reach our target customers as quickly as possible. However, there is a high threat of substitute products, so we will focus on strengthening our competitive advantage in order to keep our customers loyal.
In order to differentiate from all the possible solutions offered by the market, our main source of competitive advantage is technological innovation, custom-engineered systems for specific machine brands and models and rigorous quality checks and highly effective products. This way, we will gain the trust of our potential customers and ensure that we can turn to be the industry standard for productivity and safety improving accessories.
Innovating in a highly traditional sector such as the manufacturing industry is not easy. We must make great efforts to convince our customers to invest in our systems in order to match up to the technological advances of the machines they are buying, since, otherwise, their productivity might be falling through the cracks. In order to promote our brand and products, we will exhibit our portfolio in the most important industry trade fairs. Firstly, this will be achieved by means of the industrial distributors that we collaborate with and, afterwards, we will promote our own brand in the fairs and with our complete catalogue online. Pricing will be considered differently for industrial distributors and for direct sales. On the one hand, to set the price for industrial distributors we will negotiate discounts of up to 40%, to ensure that they can, in turn, offer their customers personalised pricing plans. In the other hand, we will set a base price for direct sales through our ecommerce website, which will entail bigger margins for us and also allow us to include shipping costs. Moreover, we will offer personalisation at a premium price to any customer for a minimum order quantity, such as laser engraving or colour finishes. The base price for our products will range from 7.3€ to 80€, from the simpler accessories to the more complex systems.
We expect our initial investments to amount to 132000€. We will hire one engineer with a salary of 35000€, two structural employees at 30000€ and two machine and warehouse operators at 25000€ each. Our sales are projected to reach 458000€ in year 4 of operations, with a yearly growth of 60% from year 1 until then and onto year 5. SafeTurn Systems is valued using the DCF method at 3.851.677€ and with an IRR of 53.2%.
We require to raise 400000€ of funding, 150000€ from the owners of the company, 250000€ from a state subsidy and 230000€ from a financing round from external investors.
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