Team 4 Fall 2012 Final Business Plan Business Idea: GreenClean: It Grows On You Team Members: E-mail address: Megan Adcock _________________________________ ________________________ Megan Anise _________________________________ ________________________ Evan Duso _________________________________ ________________________ Kari Fujiwara ________________________________ ________________________ Michael Morsch _______________________________ ________________________ Table of Contents Executive Summary GreenClean: It Grows on You Evan Duso 3201 NW Lower River Road, Vancouver, WA 98660 Phone: 1 (732) 539-8503 Fax: 1 (732) 539-8504 Email: evanduso@gmail.com Web Address: http://www.greenclean.com Management: General Manager First-Line Supervisors Advertising & Promotion Manager Industry: NAICS 322291 – Sanitary Paper Product Manufacturing Number of Employees: 23 FTE Bank: Bank of America Future Auditor: Barrett Company Law Firm: Schwabe, Williamson & Wyatt Law Office Amount of Financing Sought: $8,645,000 Current Investors: Personal Funds: $50,000 (00.58%) Bank of America: $4,225,000 (48.87%) Stock Issued: $4,370,000 (50.55%) Use of Funds: PPE: $6,510,900 Salaries Expense: $1,150,817 Business Description: GreenClean is a corporation that takes pride in producing and delivering napkins that are made from 100% recycled tealeaves. Our corporation will produce a line of recycled tealeaf napkins in Washington state, made form post-production tealeaves used in bottled green tea production. Products/Services: The tealeaf napkin will create revenue of $664,038 (66,403,800 individual napkins) and our cost of goods sold is $65,000, both in our first year of business. Each napkin will sell for $0.01. Our tealeaves will be shipped from Arizona Tea. This unique napkin will fulfill the need for highly eco-friendly napkins that are completely free of paper, thus sustaining the environment and building a brighter and greener future. Company Background: GreenClean is a growing corporation who is truly passionate about sustainable development in every day paper products. Management: In order to ensure the safety and quality of our process, our general manager will be OSHA certified and our first line supervisors will be certified in lean manufacturing. Competitive Advantage: GreenClean will use a niche strategy and focus on flexibility, the quality and innovation of our process to gain competitive advantage. We will be competing on Porter’s threat of substitute products. Our unique operation process gives us an enormous competitive advantage because without these machines we would not be able to pulp the tealeaves for further production. Because we are the only corporation in America with this distinctive pulping process, we may wish to patent it depending on our success. Markets: Our target markets are universities and catering companies who are concerned with social responsibility and are based on the West Coast. Our market segments are large, medium, small for-profit and non-profit businesses also based on the West Coast. There are 5,821,277 small businesses, 128,299 medium businesses and 981 large businesses, and 1.4 million non-profits in the United States. There are 9,702 catering companies in the West Coast and 2,713,096 students at universities in the West Coast (West Coast Universities, 2012). The growth rate for paper napkins is currently 2.5%, which is low but relatively stable. Distribution Channels: As a B2B sector, we will use our website and direct sales force comprised of regional sales representatives who will work as a team to focus on the West Coast of the United States to distribute our product. Our product will be delivered directly to our customer through NationWide Trucking. Competition: GreanClean’s current direct competition is Proctor and Gamble, Kimberly Clark, and Georgia Pacific. These three corporations hold 74.5% of the entire market for paper napkins and are also B2B. Our potential indirect competition is substitutes such as cloth napkins. We will be the sole producer of these highly unique, 100% recycled, green tea napkins the in the United States. Financial Projections (Unaudited): 2009 2010 Revenue: 664,038 3,125,500 EBIT: (1,339,342) 218,051 2011 4,030,400 976,509 2012 4,965,000 1,534,807 2013 4,812,375(dollars in thousands) 1,632,723 Product Description GreenClean is a company that takes pride in producing and delivering one of the most unique and environmentally friendly products of its time. We will produce a line of 100% recycled tealeaf napkins that are originally used in bottled green tea production. We are passionate about providing products that are friendly to the environment while delivering one of the best quality standards in the industry. Businesses in other countries have already begun to adopt this product line. For example, Ito En is a company that has created a growing trend in Japan of using post-production tealeaves to make paper products and by doing so they have received numerous awards for their contributions to the environment. Their success in creating value out of waste has inspired us to replicate this product line in America, beginning with napkins (Ito En, 2012). Our product is not only innovative because of our unique process and inputs, but also because it is customizable, green in color, eco-friendly, and smoother than generic brands. The green tea leaves also have properties that include reduction in poor odors and antioxidants that fight off bacteria, resulting in a more sanitary napkin. These properties are retained through our unique napkin making process using our customized machines purchased from Sandusky International Inc. (Sandusky, 2012). Our main focuses in terms of differentiation from other paper product brands are flexibility and quality. By using our converting machine to print various business logos on the napkins, it allows the companies buy from us to exemplify their support to the green movement and overall social responsibility to their own customers and employees. We will also differentiate ourselves by ensuring quality in our products and processes by using a lean manufacturing process along with ISO 9001 certification. Our production will exponentially grow over the next five years, eventually leading to the production of paper towels, plates, envelopes, boxes, and many more invigorating products. Business Description GreenClean is a company built on strong principles and ethical beliefs. We hold the environment to be of utmost importance and always take precautionary steps to reduce the impact made on our ecosystem. We feel that the businesses we sell to and our ultimate consumers will appreciate and learn from our initiative to ‘go green’ and will continue to buy only ‘green’ products. GreenClean believes that we not only have a responsibility to improve the current condition of our environment, but also part of this “corporate social responsibility” is to create jobs and products manufactured in the United States. This is why we are choosing to locate in the state of Washington at 3201 NW Lower River Road, Vancouver, WA 98660 for our manufacturing facility, and 112 W 11th Street, Vancouver, WA 98660 for our office property (Showcase, 2012). As stated on US News and World Report in 2009, Washington is first among the states in steps towards energy efficiency and using more alternative energy sources, which is clearly a strong goal within our business. Also, Washington has very low taxes, as well as no income tax nor capital gain taxes (US News and World Report, 2009). Although we are located in Washington, our five sales representatives will work to serve the Western region of the U.S. to promote our business as well as build contracts with businesses. For the first 5 years, we will only deliver our products to companies within the United States, but hope to eventually expand to other countries worldwide, which will result in an expansion of our sales workforce to include international sales representatives. Staffing size is listed more in depth on our organizational and staffing charts. We have hired one General Manager that will lead the entire operation of the business. The General Manager will be OSHA certified in order to ensure a certain level of safety within GreenClean, which will reduce workplace accidents, as a result, lowering workers insurance rates (OSHA, 2012). The two first-line supervisors and one Advertising and Promotion Manager will each report to the General Manager. One first-line supervisor will work during the day and one will work at night in order to ensure that we always have people to supervise the ten manufacturing workers. Our manufacturing workers will be NAM-Endorsed Manufacturing Skills Certified and trained through OSHA as well. The first line supervisors will be certified in APICS and lean manufacturing in order to ensure a high quality process. We also have two technically skilled workers, one for each shift, which have more specialized skills and will also assist in multiple quality control procedures. We chose to have one Advertising and Promotion Manager that will gather reports from the five regional sales representatives and assist our General Manager in overall decision making for the business and two market researchers to help evaluate what steps will be taken as far as promoting our business. GreenClean’s key assets are the employees as listed previously, the input of tealeaves from Arizona Tea, our unique and customized machinery produced by Sandusky, and our physical buildings. The manufacturing of our tealeaf napkins is a unique process that will take place in our customized machine, which includes the processing, production and converting mechanisms (Paul Martin, Sandusky, 2012). It is this converting process that allows for our customization and flexibility within our product through the option of printing on the napkins. The demand for napkins has been stable over the past few decades, however the trend of environmentally friendly products has recently seen rapid growth. There is a tremendous need for ‘green’ products in businesses all across our nation. Corporations such as Wal-Mart and GE have stated that since customers are increasingly buying from companies that are ‘going green’, they feel the need to join the bandwagon before they fall off and lose customers to competitors (Stark, ABC News, 2006). Many American companies can benefit from buying our product by promoting their sustainability and social responsibility with a small venture into the ‘green’ industry. Industry Size The industry for sanitary paper products is comprised of toilet tissue (45%), paper towels (36 %), napkins (12%), facial tissue (6%) and other uses, including sanitary (1%) (Brad Kahil, RISI, 2009). In 2007, tissue consumption in North America was approximately 2.5 billion. Therefore, the napkin consumption was approximately 300 million units total. Important trends Why purchase napkins made from tealeaves instead of paper? Napkins are unquestionably important to our society. On average, Americans consume six napkins per day, in relation to the consumption of food and beverages (Ito En, 2012). While standard paper napkins diminish the earth’s natural resources, one of society’s major challenges, GreenClean uses 100% recycled tealeaves, thus supporting these non-replenishable natural resources. According to Environmental Paper Network “recovery of paper continues to grow in North America, helping to reduce the high environmental costs of disposing of paper in landfills. The U.S. paper recovery rate rose from 46% in 2000 to a record high 63.4% in 2009” (Environmental Paper Network, 2009). Following this social trend, GreenClean turns used tea leaves from bottled tea products can both reduce the use of natural resources such as trees and reuse the tea leaf waste. External factors There are multiple interrelated external factors that influence the paper product industry as a whole. These include competitive, social, economic, legal/regulatory, and technological factors. The factor that has the largest impact on our company is competition. Our company is one of many in a growing trend towards sustainability. Due to businesses having a plethora of paper companies to buy from, it is crucial to establish core competencies in key areas to obtain market share. According to Pickton and Broderick, “The main forces that are operating in any industry are: customers, competitors, suppliers and potential substitutes for goods and services” (Pickton & Broderick, 2012). Social factors such as education, locality and social trends may also greatly impact our industry. Potential customers may not be as educated on the importance of sustainable products to the environment as well as to the perception customers have of their businesses for buying those products. Locality may be a great influence for our target market that consists of smaller businesses. Customers may want to purchase from companies that are nearby, hence creating a barrier to customers who are not based in the western region of the United States. Also, there is an exponentially growing trend in social media websites including Facebook and Twitter that prove to be an important part of new advertising campaigns, which we may take part in. As technological forces go, there may be an impact on the capabilities of machinery for producing and printing on the napkins. For example, Gordon Moore, Intel's founder, observed that the processing power in the world doubles about every 18 months, while costs remain constant (Adam Theirer, Forbes, 2012). This is evidence that newer technologies could increase producing capacity and ultimately lead to a higher competitive advantage for our company in the future. Similarly, Economic factors such as the recent recession could hinder our company’s performance. The recent downturn in 2008 that has continued over the past four years could be causing businesses to cut back on their expenditures and choose more basic products that are at cheaper prices. Exposing customers and ultimate consumers to the benefits that ‘going green’ has our environment in the long-term may however help to overcome the price barrier. This may encourage people to spend a little bit more to help do their part in restoring the planet, despite a bad economy. Lastly, legal and regulatory forces will also impact our company mainly in terms of our labor force and facilities. Requirements for breaks during shifts, special safety training courses and health and safety acts can create greater costs for our company, however we have decided to instill OSHA certifications and lean manufacturing in order to ensure the quality and safety of our poeple and process. Competition GreanClean’s current direct competition is Proctor and Gamble, Kimberly Clark, and Georgia Pacific. These three corporations hold 74.5% of the entire market for paper napkins and are also B2B (Household Paper Products, Mintel, 2012). These corporations currently sell to retailers such as Officemax and Staples, who in return sell to our market segments. We differentiate from this competition by eliminating the intermediary of the retailer and the input of tealeaves, and instead sell directly to our customer. For example, Proctor and Gamble makes the recycled napkins and sells them to Officemax who may in turn sell than to various offices at Fannie Mae. GreenClean plans to make the napkins and deliver them right to the offices at Fannie Mae, thereby reducing the number of places for the napkins need to travel before reaching the customer. Characteristics, target market and positioning Our business targets other businesses as the ultimate consumer. The specific metrics of small businesses include having less than 100 employees, medium range businesses classify as having between 100 and 9,999 employees, and large corporations are sized as having more than 10,000 employees (Dolan, 2011; Pettijohn 2011; Stark 2006) (Figure 1). While we aim to sell to as many businesses as we can, one of our target markets are educational services such as colleges, and schools in the Western region of the United States. We will be marketing to this geographic area because according to Mintel, people in the Western region of the United States are a more responsive to recycled paper products than the other regions of the United States (Mintel, 2012). It also states that they are looking for cost savings as well so if there are environmentally friendly paper products that are cost effective it would be well received in this region. Also, by focusing on businesses that are closer to our manufacturing plant, we will help to decrease our shipping costs associated with delivering napkin orders. The other reason we will target schools is because they have similar behavioral factors in that nearly all schools have cafeterias so we know their demand for napkins and eco-friendly products will be much higher than general businesses that use napkins for a break room. As the need for environmentally friendly products increases and more businesses make the transition to this, we expect to receive higher rates of sales from this region. According to an original survey completed by PC Dukes Manager ... their business is willing to pay up to 8 times more for eco-friendly products, such as GreenClean napkins, and stated they were very interested in the purchase of eco-friendly products. Our other target market will be catering companies in the west coast region. Similar to educational services, we know that companies like catering companies are a good target market because they will have a much higher demand and usage rate for napkins in their business. From her article, Catering to Environment, Elizabeth McGowan quotes one Maryland catering company owner, Josh Carin. When speaking on the need for going green within his business Carin said, "Of course, we're a caterer, so we're selling food, But this green initiative is really important to those who hire us. For us, that's the icing on the cake." (McGowan, 2010). This displays how catering companies have a need for not only napkins but for specifically ‘green’ napkins. Owners see eco-friendly products as an influential factor when potential customers are deciding where to have their events and feel the need to buy them to please their market. Break Down of Market (Figure 1) Our positioning strategy is going to be within the business production and industrial market. GreenClean has decided to position this way as a result of original or survey, which in return guided the creation of the perceptual map (Figure 2). We hope to create an impression in our target market’s mind that our products are higher quality than other generic paper product competitors because of the additional sanitary and aesthetic benefits contained within our napkins; however they are also less expensive than other eco-friendly napkins. Furthermore, our napkins are at the same absorbency standards as other generic paper napkins. These napkins are up to standard of absorbency compared to other standard paper napkins, yet have multiple additional sanitary and aesthetic benefits. Therefore, buying our napkins is a way that businesses can receive the same, if not better quality standards and help the environment, while not spending an outrageous amount of money. Perceptual Map (Figure 2) Product and Brand Strategies GreenClean is a groundbreaking company that will help to restore our planet’s ecosystem by using tealeaves instead of the basic wood pulp. We will begin by creating napkin products from tealeaves and hope to ultimately brand our company into one of the largest sanitary paper product companies that includes various lines of paper products. The core aspects of our product include the composition of used tealeaves in the production, and its cleaning and antibacterial properties. The actual aspects include the green color, the potential to include logos, and the napkins’ other tangible qualities such as the softness and low-ply of the napkin (ITO EN, 2012). It has a strong texture despite still being relatively thin and inexpensive. The Core product is comprised of the main benefits which include its low impact on the environment, antioxidants that fight off bacteria, and the ability to have them customized. The actual product is the napkin itself, which is smooth and green. The augmented product would be the guarantee that if the product is damaged or poor quality in any way, we will pay for the product to be shipped back to us and send them a new batch of napkins as well as a 10% discount on their next purchase. The paper napkin market is in the mature stage of the product life cycle (Household Paper Products, 2010). The paper napkin industry has an extensive history and has also become an oligopoly. Our company is in the introduction stage, so this means that initial sales will grow rapidly before settling out to match up and compete with the established market. The oligopoly that is established has created high barriers to entry and competition has a strong presence. The life cycle changes that our brand will have to adapt to will not come from the market, but rather from within our own company. The market is and has been in the mature stage for multiple years, and is not expected to change, thus there will always be a demand for napkins. Our product will pass through both the introduction and growth stages, so GreenClean must adapt to the rapid sales growth, possibly by increasing production, and then must eventually establish routine practices and forecasts as demand settles into the mature stage. Catering companies in city areas with big businesses contract out to office buildings, providing food for whichever businesses rent the facility. GreenClean will seek to contract with them, gaining access to every business that they feed. One company in particular, in the San Diego area, named Bekker Catering, caters to many businesses. Businesses that use thousands of napkins a day, such as college campuses, would place bulk orders to place in dining facilities across their campus. These campuses would order by the ton, and perhaps on a biweekly to monthly renewal basis. Social responsibility is not only a fad, but also an ingrained trend for the future of the business world. The opportunity to promote our napkins’ ecofriendliness, as well as to even print their own custom logo on the napkins is a trend that companies seem highly interested in. Price Strategy The pricing objective that GreenClean seeks to use is keeping prices low due to our input comprised of waste, which is lower priced than our competitors using wood pulp or other recycled products. The idea is to manufacture 5 tons of napkins per day, so this is not one special order product. Our prices are determined first and foremost on the basis of the cost of our resources. Since the cost of getting the used tealeaves is shipping and a small premium fee to the supplier, this means we can keep costs low. We are going to use a competitor-based pricing strategy, which involved researching the prices of our various competitors, generally more so our competitors that produce environmentally friendly napkins, and pricing our napkins at around the same price as those competitors. Since our inputs are generally at a lower cost than those of our competitors, we will be priced slightly lower than some of our eco-friendly competition. With strong promotions done by our sales representatives, we hope to entice some of our competitors’ customers to try out our brand instead of their usual purchase. Later, as our brand becomes more established and people realize the benefits of GreenClean, we will build an even larger customer base. We will also be able to advance our process over the years and cut out excess errors in production that will ultimately lower our costs and thus our prices. This close grouping of businesses seeking our product also provides us with the ability of simplistic pricing. An individual napkin is sold for $.01, meaning we fit the low-cost desires of the businesses (subject to change). This also helps in competition-based pricing, seeing as most companies with a large market share charge between $.016 and $.025 per napkin. Seventh Generation, our most similar competitor, even charges 1.8 cents per napkin (Household Paper Products, 2010; Recycled Napkins, 2011). This, when factored into the high-volume market is a vast profit margin difference, which will help us undercut the competition and gain market share, in what could be considered our niche competition. Price can be slightly elastic in this mature market. Another thing is that our products competitive advantage, its all-natural, recycled tealeaf composition, allows for GreenClean to flex the price point somewhat. This is due to the tangible benefits of saving trees and paper. Timing, however, does not have a factor with our products pricing. To elaborate, when video games go on sale, they tend to begin at a price of $60 and decrease in price as time passes. Our napkins, however, do not follow that trend. They will stay at an established price, that may fluctuate based on the market, but not on timing issues which coordinates with our make-to-stock inventory strategy. As a result, we would implement a fixed quantity production schedule along with sales forecasting. We have listed both of our break-even analysis and fixed and variable costs respectively in Figure 3. Break-even Analysis (Figure 3) Distribution Strategy GreenClean will use a direct sales force comprised of five sales representatives and will also take advantage of web-based sales. Our sales representatives will work as a team and travel around the West Coast of the United States to seek out our segmented customers in order to instill contracts, ideally long term ones. If companies outside of the West Coast desire to purchase our product, they can use our web-based sales and customer service phone line for questions. Our regional sales representatives will report back to our advertising and promotion manager once a contract has been created in order to prevent the same customer from being targeted and contacted repeatedly. After the contracts are set and the web-based orders are submitted, GreenClean will directly ship our product to our customer through NationWide Transport services. Our product is neither perishable nor heavyweight, thus our carrying cost are relatively low cost and low risk. If the transportation experiences an accident that ruins our product and fails to deliver our napkins, we will give the customer a rebate of up to 15% of their order cost. Promotional Strategy Since we are doing business to business selling we will not be focusing on general advertising and will use a more direct selling strategy to advertise our business. We have 5 sales representatives and they will focus primarily on meeting with big corporations to purchase our product. During our startup we will be sending out direct mail to our two target markets in the West coast. While we offer our product to any company that is interested, our sales representatives will focus on personal selling in only the western region. This will help to cut down on transportation costs for traveling expenses as well as shipping costs. We also expect higher purchase rate because of the higher response rate for inexpensive eco-friendly paper products in the West coast region. Each representative gets a 1% sales commission on their sales and any future sales their customer makes with our company. This will not only motivate them to get businesses to make initial purchases but also help build a lasting relationship with our company. The 1% commission during our startup will not be significant, however as they continue to build our customer base the expected commission once we build up is around $45,000-$50,000 per year. Monthly Revenue Chart (Figure 4) Because our production machines are customized, we will not start producing napkins until July. We plan to sell 100% of our napkins during the remaining year. The amount of napkins sold will rise each month due to increased awareness of our brand and new contracts being formed with businesses that hope to satisfy their need and/or want with GreenClean’s napkins. Quantitative Review of Marketing Decisions Our first month of sales will not be until July because of the 6 months required for the equipment to get shipped and set up. Then our sales team will go around 3 months prior to production to meet with companies interested in a meeting to learn more about our product. In July we are expecting sales of $80,800. According to (insert name here) Dukes orders approximately 90,000 napkins a week or 360,000 napkins a month, which would be $3,600 and is a midsized business. The first month we are expecting about 22 mid-sized customers to purchase from us since this is our first month. In August we expect some of our customers to be repeat buyers along with expanding our customer base and expect $90,900. For September we expect a bigger increase in sales now that we have been operating for two months and are able better show our product to potential customers and also have them talk to existing customers to get their inputs as well. We expect that by now we will be able to secure two bigger customers who will purchase a million napkins per month for $10,000 each. The rest of the sales will continue from our middle orders resulting in estimated sales of $120,350. As the holiday seasons approach, we expect sales for napkins to increase more heavily as the use for them increase during this time. Sales in October of $165,780 come from one additional big purchaser of a million napkins or more, and 35 medium businesses. Then for the remaining revenue we expect smaller local businesses in our area to begin to purchase our napkins too. As we continue with our direct sales and grow our reputation the expected sales for November and December are $201,450 and $250,240 respectively. Human Resource Management At GreenClean, our employees’ will have the passion and drive to create success for our business. In her journal on organizational commitment to the green movement Zee, Hartman and Fok wrote, “Specifically, as organizations become greener, we should see a move toward a more empowered, employee-centered, and customer-centered culture. Additionally, however, a culture which is supportive of the green movement should lead to better outcomes and, perhaps in part through self-selection, to employees who, themselves, are more supportive of the green movement” (Zee,40). If the employees truly care about the green products we are producing, the investors will be compelled to care about what we have to offer as well. This provides our investors with incentive to put their money into our business. Alongside passion, our employees will have expertise, knowledge, ethical beliefs, and communication skills that will allow for accomplishing our goals. Our General Manager will have the knowledge of a Bachelor’s degree and 8-10 years top management work experience involving a manufacturing company. They also are required to have experience in developing company health and safety programs that are compliant with OSHA and become lean certified. Moreover, they will have to have the ability to mentor, lead, be ethically sound, and genuinely care about the product and the environment. GreenClean’s Advertising and Promotion Manager will have a Bachelor's degree with a concentration in marketing, and 3-5 years of work in the sales or promotion field. This manager will be proficient in communication, leadership, forecasting, and research. Our first line supervisors will have the knowledge of a Bachelor’s degree and 3-5 years work in the operations field, preferably at a paper manufacturer. The Association for Operations Management offers certificate programs in production and inventory management, which we will require our first-line supervisors to obtain (OSHA, 2012). First-line supervisors must also be lean certified in order to achieve our companies desired quality assurance. They will have the ability to understand how the machine works, be organized, approachable, and timely. Our manufacturing employees need to have a minimum of a high school degree. We would prefer at least one year of previous manufacturing experience, however it is not required. Once hired, the employees will become NAM-Endorsed Manufacturing Skills Certified, which directly addresses the deficits in manufacturing education and training on our machines (The Manufacturing Institute, 2012). They have to be trained through OSHA, which helps to ensure that workers are more knowledgeable about workplace hazards and their rights (OSHA, 2012). We will recruit our manager and supervisor positions from other companies by offering high incentives to make the switch to our company, such as a handsome salary and health insurance benefits. We will also seek to hire people that have been recently laid off from companies due to the recent recession. As for our manufacturing workers, we will be recruiting from within the Washington state area through advertising. Listed below is the visual hierarchy of GreenClean’s employees (Figure 5). Organizational Chart (Figure 5) As listed in our employee-staffing chart, we will motivate our various employees with commission, health benefits, vacation time and retirement plans (Figure 7). In addition, we will have an employee of the month, whose name will be presented on our employee of the month wall. Along with the pride, personal confidence and recognition that accompany this reward as employee of the month, we will offer these specific employees various stock options. As stated in Small Business Center from Fox Business, "Managers must help the employee build confidence, establish routines, and set realistic, difficult goals. They need to remind employees of past successes, not past failures” (How to Motivate Your Employees, FOX News, 2012). Thus, instilling the employee of the month program will increase productivity and motivation. GreenClean will also implement peer evaluations semi-annually, which will motivate employees to perform their best even when top management is not present. Due to the commitment and motivation of GreenClean’s employees, we expect our company to grow in the future. The successful growth of GreenClean is dependent on a strong foundation and clear organization of vital dates and completion points, which is shown in our timeline of vital events (Figure 6). GreenClean will expand further, to toilet paper, paper towels, paper plates, boxes, envelopes and more. We will continue with napkins for 5 years and if profitable, we will expand during our 6th year to include these products. With the increasing trend in sustainable products and our increasing knowledge within the paper product industry, we will have a great advantage in this industry. Our customer will be satisfied with the quality of napkins, which in turn will produce not only long-term relationships and contracts, but hopefully the faith in our company to expand to our other products. We are ensuring the quality of our products by instilling a lean manufacturing system, and an ISO 9001 certification, as well as customer feedback forms on which we can use to improve our product. If the customer is unsatisfied with their product, we will pay the shipping cost, and will offer 10% off their next order, along with a free shipment to replace any faulty napkins. To insure that GreenClean is growing at the rate that we expect, our accounting firm, Barrett and Co., will report to our general manager on a monthly basis regarding our profit and the percent change in our profit. If this percentage change is not met, and thus our growth objectives are not met, we will first identify the problem and then react accordingly. Possible options of increasing the growth of our business are increasing our sales representatives, expanding to different target markets, enlarging our workforce and increasing our operating days because we currently operate Monday to Thursday. As we expand our business, we will purchase more machines to make these diverse products. We hope to also expand to multiple locations across the East and West coast. As a result, we will need to expand our line and staff positions within our operations, finance and advertising and promotions departments. We plan on providing increased training as we develop the business and expand our product line. The strategy that will drive our business from Porter’s Five Forces Model is the threat of substitute products. GreenClean is the first company making 100% tealeaf napkins in the US and because it is new, it is easy for companies to start-up and begins competing with GreenClean. A speculative start-up cost that could act as a barrier to entry is the cost of machinery, however the cost of materials is relatively low, whether companies were to use tea leaves or wood fiber. The customer has a large proportion of control in this market, because if they are not satisfied with our products quality, price, or image, they can easily move to a competitor such as Proctor & Gamble. Substitute prices differ very little from ours, but on a per napkin basis we are less expensive ($0.01 per napkin). The switching cost from our company to another is practically non-existent unless a company is under a contract. If the company is not, it is simply a change in purchasing decision at the next reorder point. An important aspect in this threat category is that there is little to no quality depreciation because our product is very durable in inventory. Until used, napkins retain the same level of quality, pending some kind of product destruction. We will protect our investment in equipment through maintenance that will occur on a quarterly basis. Paul Martin, head of Sandusky Company, determined that this would be an appropriate time length for each maintenance check-up and offered their services. We will pay them $100,000 a year ($25,000 per check-up) for their maintenance team to visit our facility and preserve our machinery so that it may last up to its useful life. By spending this amount each year, we feel we will ultimately be saving money in the long-run because maintaining our equipment will ensure higher quality napkins and preserve our equipment so that it will last longer. We will have insurance on our rented facility and this amount can be seen as part of our monthly rent expense. We will also have insurance on our processing, production and converting machinery of $150,000 a year. Timeline of Vital Events (Figure 6) Week Two: January 6 – 12th, 2013 Founders hire General Manager through previous advertising; founders purchase equipment from Sandusky Co., founders rent factory and sign the lease and obtains licenses (5-11 days from inception) Month Three: March 1-31st 2013 General manager hires the first-line supervisors, the Advertising & Promotion Manager, the sales representatives and the market researchers. General manager will set up company structure, refine website and add ordering service option. Our advertising and promotion manager will begin other marketing tactics along with market researchers. (85-116 days from inception) Week 26: June 8-12th 2013 First -line supervisor will receive tealeaves, machine is fully assembled by Sandusky employees, first-line supervisor will train workers to use machines, run a pilot test week and send out 100 count samples to companies within our target markets who have expressed an interest. (188-194 days from inception) Week 27: June 13-19th 2013 All employees will work together to produce the first official batch of napkins and deliver them to customers. The sales representatives will establish contracts with companies (195-202 days from inception) Employee Staffing Chart (Figure 7) Competitive Advantage GreenClean will use a niche strategy and a focus on flexibility, the quality and innovation of our process to gain competitive advantage over our competitors. Because we are the first company in America to create napkins from 100% recycled tealeaves, we are unmatched in the current domestic market place. We will advertise this on our napkins through the customization option of having “Made in America” printed on the napkins, with many other customization options. This domestic strategy follows the current trend of supporting the American economy by creating new jobs being formed on American soil and that may be a primary selling point for our business (Business Week, 2011). This relates to our niche strategy and flexibility by targeting customers who want American made products and different customization options. Our unique operation process gives us an enormous competitive advantage because without these machines we would not be able to pulp the tealeaves for further production. As stated below, Sandusky will create these machines for us, which will enable our company to utilize our distinctive process. This process is further explained in below in the process flow chart (Figure 7). Other standardized napkins and even eco-friendly napkin companies do not have this unique process, and thus all use wood pulp. According to The Daily Green 2007, “Compared to using virgin wood, paper made with 100% recycled content uses 44% less energy, produces 38% less greenhouse gas emissions, 41% less particulate emissions, 50% less wastewater, 49% less solid waste and -- of course -- 100% less wood.” Not only is sustainability of vital importance in our current day in age, it will only become more of a vigorous issue in years to come. If, and when, more paper companies turn to alternate sources for pulp besides wood in the US, this will give our company an extreme competitive advantage because of our expertise in the area. Our process will also be ISO 9001 certified, which will add quality and value to our distinctive process against other napkin companies who are not ISO certified. This relates to our niche strategy by targeting customers who feel that they have a social responsibility towards the environment, and who also want to be ensured quality. Key Operational Elements Our tealeaf napkins will begin with the recycled tealeaves from Arizona Tea Company that have been packed into bricks and then transferred by specific Nationwide Transport Trucking. They will be relatively moist in order to retain their beneficial properties (Ito En, 2012). As stated below, we will use acceptance sampling upon the tealeaves arrival to our facilities to ensure the quality of the leaves. Once the tealeaves are accepted, they will be placed into our customized machine, which is approximately 40 feet wide by 150 feet long by 30 feet high, and has a four-step process. According to Paul Martin at Sandusky, the first process begins with pulping and then retting, which corresponds to our competitive advantage (Sandusky, 2012). Our pulping process is extremely innovative and unique in the United States, and it is this that allows us to differentiate our machines from standard paper making machines. This unique process takes the wet tealeaves, which we receive from Arizona Tea, and turns them into a paper pulp in a large vat. This will reduce 500L of oils and reduce 1.3 tons of CO2 normally used during the drying process. (Ito En 2012). In fact, the tealeaf is that it absorbs CO2 like other plants do, thus by producing 1,000 recycled tealeaf napkins; we can reduce about 165g of CO2 for the environment. (Ito En, 2012) It is this pulping step that isolates our company and gives us an advantage. After this step, the leaves are manufactured in a similar manner to standard napkin making machines, as discussed shown in our process flowchart below. Our general manager, first line supervisors, and manufacturer workers all have unique skills, which are discussed earlier in the management section, which will ensure a high quality process and product leading to our competitive advantage. The placement of workers is vital to our operations running with fewer mistakes. Workers will be placed at each one at acceptance stage of the leaves, at the output stage before storage, and after customization. This will help with efficiency in production, and more output will give us a competitive advantage. Part of our strategy involves two rotating shifts – day and night. This will ensure that in the time span of Monday – Thursday, when the machines never shut off, that the quality is maintained to our companies’ standards. It also allows for rapid response time in the event of an error in production. Having different people on different shifts allows for people to be fresh and motivated to provide quality work; tired employees make more mistakes and create more waste. As described in our quality approach, the workers on the machines will hand pick 10 napkins at the end of our hour to for visual and physical inconsistencies. This will ensure that a sample from each batch has been inspected, which will ensure quality consistent with the ISO 9001 standards. Operational Processes Outsourcing We are outsourcing our accounting and payroll services as well as our legal services through Barrett Company and Schwabe, Williamson & Wyatt Law Office, respectively. These businesses were chosen because they are located in Vancouver, Washington and thus will be simple to meet with if needed. We are also using NationWide Transport to ship our products to our customers because they are able to ship from Arizona Tea Company, located in New York, to our manufacturing plant. Proactive Quality Approach Our company is make-to-stock, therefore our first step in our process would be to look at a sales forecast of demand for the week. We will then place an order with Arizona Tea Company to receive the desired quantity of tealeaves on a weekly basis. The operations manager at Arizona will ensure that the recycled leaves are placed in the Nation Wide Transport trucks, which will be insulated and cooled to no higher than 77 degrees Fahrenheit to ensure the leaves are able to be used in production (Ito En, 2012). Our first line supervisor will examine the condition of the leaves upon arrival through acceptance sampling in order to ensure the quality of leaves before they are transformed into pulp (Q1) . This will reduce the probability of a poor quality napkin, thus reducing the costs that would be entailed if we did not perform this process. After the tealeaves are accepted and blended into a pulp, they are processed through high-pressured mechanisms that should preserve the green color of the leaves by using the correct 120-130 degree of Celsius in 30-60 minutes. However, if the leaves are no longer green, the pressure simply needs to be lowered and the leaves re-pressurized and the green color will reappear (Q2, F1). This will ensure that our final product will in fact have a green aesthetic color. After any remaining bacteria are killed off, the pulp will be checked for any bits of tealeaves leftover by our first-line supervisors (Q3). If the pulp still has bits of leaves, then it will be deposited into the stair-step configuration to remove the last bits and the process will continue thereafter. After the pulp is entered into the production equipment, it will be dried and then scraped down to the desired thickness. Manufacturing workers will check the quality of the thickness and adjust the equipment to fit the correct thickness specification (Q4). Our final two quality checks will be based on the visual appearance of the napkins and the physical properties, such as if the napkins are being produced at the proper size, the smoothness and if the customization printing is clear. At the end of the cutting process, the workers on the machine line will look for visual inconsistencies in the napkins, while also picking up ten individual napkins to feel for the proper consistency, which can be identified through touch. These checks will be positioned at the point where the napkins are produced before customization on the machine line (Q5), and also after they are customized and before being packaged (Q6, F2). Our first-line supervisors will check the machines weekly for mold, and if any is found, it will simply be removed and sterilized using steam and cleaning products (F3). With our tealeaf napkin production machines running 24 hours in 4 days, we can prevent the molding of tealeaf pulps and our operation is guaranteed to run as efficiently as possible to produce 5 tons of napkins per day. If our final product does not meet our quality standards either after the cutting process or after printing, we will have to dispose of the faulty products (F4). If our consumer would like to have their napkin customized, they will send in their desired logo as a PDF, then the napkins will simply be removed from inventory, and they will be entered into the converting equipment and printed on using the Animation Creation Tool. Although GreenClean is due to have failures at some point, this is will rarely occur due to our various quality checks throughout the process and because of our lean and ISO 9001 certifications. Process Flow Chart Start Start Look Look at at sales sales forecast forecast Purchase Purchase used used tea tea leaves leaves (UTL) (UTL) from from Arizona Arizona Tea Tea Company Company Deposit Deposit pulp pulp back back into into stairstairstep step configuration configuration to to remove remove bits bits of of UTL UTL Q3 No Transport Transport via via Nationwide Nationwide Transport Transport Tucking Tucking Comapny Comapny Does Does the the pulp pulp not not have have leftover leftover bits bits of tea leaves? of tea leaves? Yes No Clean Clean machinery machinery to to ensure ensure no no mold mold or or residue residue Pulp Pulp deposited deposited into into cylinder cylinder Are Are the the UTL UTL usable? usable? Unload Unload UTL UTL into into factory factory Store Store in in warehouse warehouse until until shipping shipping isis needed needed Package Package napkins napkins in in boxes boxes by by certain certain quantity quantity specifications specifications Q4 Fine Fine blade blade scrapes scrapes tissue tissue down down to to the the desired desired thickness thickness F4 No Does Does customer customer place place order order for for customized customized napkins? napkins? Print Print designs designs on on napkins napkins F2 Tissue Tissue isis reeled reeled and and cut cut into into size size specifications specifications Yes High High pressure pressure and and heat heat extracts extracts liquid liquid from from the the bits bits of of UTL UTL that that remain remain Q2 IsIs itit back back to to the the color color green? green? No Lower Lower pressure pressure to to 1.2 1.2 mpa~2 mpa~2 mpa mpa and and lower lower temperature temperature 10 10 degrees degrees Celsius Celsius Q5 Do Do napkins napkins meet meet specified specified standards? standards? (color, (color, smoothness smoothness etc.) etc.) Receive Receive payment payment from from customer customer for for order order Receive Receive PDF PDF of of design design from from customer customer Enter Enter napkins napkins into into converting converting equipment equipment and and use use Animation Animation Creater Creater Tool Tool No Dispose Dispose of of napkins napkins Keep Keep pressure pressure temperature temperature within within 120~130 120~130 degrees degrees Celsius Celsius in in 30~60 30~60 min, min, 1.2 1.2 mpa~4 mpa~4 mpa mpa Q6 Are Are designs designs correct correct and and clearly clearly visible? visible? Yes Pulp Pulp continues continues down down stair-step stair-step configuration configuration F1 End End No Yes Yes UTL UTL and and water water added added to to blender blender to to turn turn them them into into aa pulp pulp Make Make sure sure the the pulp pulp isis flowing flowing to to high high pressure pressure (the (the process process should should only only contain contain about about 1~10 1~10 micro micro grain grain diameter diameter of of UTL UTL reside) reside) No Dispose Dispose of of faulty faulty napkins napkins Pulp Pulp isis processed processed through through aa Yankee Yankee Dryer Dryer Make Make the the Pulp Pulp into into aa ‘purer ‘purer pulp’ pulp’ by by disposing disposing of of remaining remaining bits bits of of UTL UTL Enter Enter UTL UTL into into processing processing equipment equipment Do Do he he napkins napkins need need to to be be shipped shipped now? now? Pulp Pulp pushed pushed through through two two pressure pressure rolls rolls to to eliminate eliminate moisture moisture Kill Kill any any remaining remaining bacteria bacteria from from pulp pulp with with water water that that will will reach reach aa temperature temperature of of 500 500 degrees degrees farenheit farenheit Yes Yes F3 Q1 Reorder Reorder from from Arizona Arizona Tea Tea Company Company Transport Transport napkins napkins Pulp Pulp entered entered into into napkin napkin production production equipment equipment End End Test Test concentrated concentrated UTL UTL pulp pulp Reactive Quality Assurance We will use ISO 9001 in order to confirm our standard quality and certify this to our customers. Our factory workers are responsible for the cleaning the production machine and exchange ink for our logo-printing machine on the last day of production of every week. The first line supervisor is then responsible for checking the production and converting machines for mold since our product begins as a liquid as well as the ink supply in our logo printing machines as well. Our general manager will create a program in which every employee is required to attend upon employment, in order to clarify expectations of quality in our process and product. The manufacturing workers and first line supervisors will be trained more in depth about the quality and process. By doing this, the general manager will make sure that the employees who involved in the process are properly educated on the manufacturing process and how to exactly check to quality during the process. Our advertising and promotion manager will also contact each of our customers that purchase a batch of napkins to confirm that they are receiving the proper quality napkins and their logos are being printed correctly if they request customization, thus ensuring that they will continue to purchase from us. Our customers will be provided with a copy of the ISO 9001 certification, confirming that the customer receives the expected quality (Lean Certification, 2012). This should eliminate the customer receiving poor quality goods, however, if a customer receives a poor quality batch of napkins, they can send the product back to us and we will pay for the shipping. If the first line supervisors agree that we, GreenClean, are at fault, we will send the customer a fresh batch of napkins free of charge and offer a 10% discount on their next purchase. We will also create a survey that will accompany each batch of delivered napkins, thus we will receive customer feedback on the quality of our product and direction in how to improve in the future. We will also build an evaluation based on our Project Flowchart that will include quantitative data about our inputs such as raw materials and labor, machinery such as specific tealeaf compressing temperate, and finished product. This will allow us to monitor and control the threat of unwanted species during our operating process. Quality Strategy Our company will implement a lean process in order to ensure the quality of our process and product, along with ISO 9001. We will practice lean manufacturing by keeping relatively low inventory levels by basing production off sales forecasts. This approach to quality relates to our business because our napkins are previously made, and then customized once the order is placed, which is why inventory management quality is vital. It is important that we limit excess inventory, overproduction, waiting, transportation, errors in processing, poor quality, and wasted labor, which can all be done though the lean system. This process works particularly well for our business the workers are close to the process. By implementing the lean quality process, we are ensuring our competitive advantage because it will decrease our costs by properly managing the seven deadly wastes of lean, while improving quality and customer satisfaction (Integrated Functional Systems, 2011). This process will be applied though a clear company wide definition of quality, a process that is ISO 9001 certified, having first line supervisors who are lean certified, and strategically placing manufacturing workers at specific points along the machines doing quality checks on the product. 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