Plastics : On-Demand Air Packaging Systems - Cost Impact Analysis -

Direct Cost Savings:

Storage Space Reduction:

Traditional Storage Costs (rough estimate):

• Cost of 1,000 square foot warehouse space: $1,000-1,500/month
• Pre-made bubble wrap storage: 200-300 sq ft
• Monthly cost: $200-450

With On-Demand System (rough estimate):

• Raw material storage:  20-30 sq ft
• Monthly cost:                 $20-45
• Annual savings:             $2,160-4,860

Transportation Costs:

Inbound Shipping (rough estimate):

• Traditional: one truck = 24 pallets of ready-made
• On-Demand: one truck = 120 pallets worth (in raw material)
• Cost per truck: $800-1,200
• Annual savings (mid-volume): $9,600-14,400

Material Costs:

Traditional Pre-made (rough estimate):

• Cost per cubic foot: $0.80-1.20
• Waste rate: 15-20%
• Storage damage: 5-10%

On-Demand System (rough estimate):

• Cost per cubic foot: $0.40-0.60
• Waste rate: 3-5%
• Storage damage: <1%
• Annual savings (mid-volume): $12,000-18,000

Operational Efficiency:

Labor Optimization:

Traditional Process (rough estimate):

• Inventory management: 5 hours/week
• Material handling: 8 hours/week
• Storage organization: 4 hours/week
• Total labor: 17 hours/week

On-Demand Process (rough estimate):

• System operation: 10 hours/week
• Material handling: 2 hours/week
• Maintenance: 1 hour/week
• Total labor: 13 hours/week
• Annual labor savings: 208 hours

Space Utilization:

Storage Efficiency (rough estimate):

• Traditional storage: 100 cubic feet = 1,000 filled bags
• On-Demand storage: 100 cubic feet = 5,000 filled bags
• Space efficiency increase: 500%

Production Flexibility:

Response Times (rough estimate):

• Traditional: 24-48 hours for emergency stock
• On-Demand: Immediate production
• Lead time reduction: 95%

Environmental Impact Savings:

Carbon Footprint:

Transportation Reduction (rough estimate):

• 75% fewer delivery trucks
• Lower fuel consumption
• Reduced emissions
• Carbon credit potential

Waste Reduction:

Material Usage (rough estimate):

• 40-50% less material waste
• Recycling efficiency increase
• Lower disposal costs
• Environmental compliance benefits

Return On Investment (ROI) Analysis:

ROI (Return On Investment): A measure that shows how much money you make compared to how much maney you have invested. It is usually expressed as a percentage. It's calculated by dividing the profit by the investment cost.

Initial Investment:

Small System (rough estimate):

• Equipment cost: $3,000-5,000
• Installation: $500-1,000
• Training: $500
• Total: $4,000-6,500

Large System (rough estimate):

• Equipment cost: $15,000-25,000
• Installation: $2,000-3,000
• Training: $1,500
• Total: $18,500-29,500

Payback Period:

Small System (rough estimate):

• Monthly savings: $2,000-3,000
• Payback period: 2-3 months
• First year Return On Investment: 400-500%

Payback Period: is the time it takes to recover the cost of an investment. It's calculated by determining how long it will take for the returns from an investment to be equal the original amount invested.

Large System (rough estimate):

• Monthly savings: $8,000-12,000
• Payback period: 3-4 months
• First year Return On Investment: 300-400%

PS : Prices are only given to illustrate the difference between the various costs.