Mantex Carbon Ring Spinning Tube is an awesome spinning utility and has caught the fancy of each spinner around the world. However, when it comes to trying the same , many technicians struggle with the price of the product.
Now, the irony is that a Technical man is not trained to be a finance person and finance person is not trained to be a technical person. However, interestingly in the Industry, the jobs are such defined that each one wants to try his hand on other jobs without having the expertise of it. An accountant tries to become an engineer and an engineer tries to show his financial acumen and both screw up heavily.
The Mantex carbon ring spinning tube is around USD 2.00 per peice and a generic tube is around 30 cents a peice. So for any technical person, the price to price ratio of around 7 times higher. Now unless you are a finance or a economics graduate, it is difficult for a technical man to understand that money is only a resource, which is exploited to make more money. If we don't know, how to exploit this resource, any price paid is high. It does not really matter, if the product is 2 or 3$, but what matters is how fast it supports the growth of money or accelerates the returns or what you say as Return on capital employed.
If you buy money from bank at 6% and the product returns a capital of 125% in one year, then you have be to brain damaged to not switch your complete plant to such a product. In short , you are screwing the opportunity to get very large returns , because you feel , why to pay 7 times higher price for a product, which you bought till yesterday for almost free.
Interestingly, technician struggles ,when he has to pay 7 time higher price for a novel product. Not because, he does not love the product, but because he feels insecure and shaky and guilty in increasing the cost of production, . Something, which he learnt from the first day to reduce the cost was being a hero and increasing cost was considered criminal in a commercial set up.
Now, the moral dilemma can only be addressed, if the man is first taught the difference between investment and cost. Capital and Revenue expenditure. Returns and Taxes. In short , the financial engineering of the product. But finance is a very deep subject and takes many many years to understand and master. So, why not just leave the finance part to the fiance guy and just stick to the technical part of the product.
But each technical man tries to get into prices ,without understanding the returns and resources created by the opportunity .He than invariably finds his heroism in either selecting the cheapest product or delays the investment and shows the management that he is saving the company thousands of dollar, though actually screwing the company and biz.
It is such a simple and easy explanation : Say, you buy a house and the house is USD 100k. Now you go to bank and borrow money at say 6 % to buy this house. So, total cost of the house is now USD 106k. Now, you choose to rent this house for say USD 125K per year. Practially, you get back the complete USD 106K invested and also get back another bonus of USD 19k. This is becuase, you are a smart ass, who could find an opportunity in the market to rent his house at such a price and get his returns back.
In short, it was the returns, which mattered and not the cost of the product. If the return was only USD 25 k and say, the cost of money was 1%, yet it was more expensive. Therefore price is not a threshold criterion. But returns created from the opportunity is the final number . Does the product create enough returns to be viable and attractive and profitable. Money, we can always buy from the bank.
Let us now look at Mantex Carbon Ring Spinning Tubes
Price of USD 2.00 per peice
Key deliverable s
Now, the irony is that a Technical man is not trained to be a finance person and finance person is not trained to be a technical person. However, interestingly in the Industry, the jobs are such defined that each one wants to try his hand on other jobs without having the expertise of it. An accountant tries to become an engineer and an engineer tries to show his financial acumen and both screw up heavily.
The Mantex carbon ring spinning tube is around USD 2.00 per peice and a generic tube is around 30 cents a peice. So for any technical person, the price to price ratio of around 7 times higher. Now unless you are a finance or a economics graduate, it is difficult for a technical man to understand that money is only a resource, which is exploited to make more money. If we don't know, how to exploit this resource, any price paid is high. It does not really matter, if the product is 2 or 3$, but what matters is how fast it supports the growth of money or accelerates the returns or what you say as Return on capital employed.
If you buy money from bank at 6% and the product returns a capital of 125% in one year, then you have be to brain damaged to not switch your complete plant to such a product. In short , you are screwing the opportunity to get very large returns , because you feel , why to pay 7 times higher price for a product, which you bought till yesterday for almost free.
Interestingly, technician struggles ,when he has to pay 7 time higher price for a novel product. Not because, he does not love the product, but because he feels insecure and shaky and guilty in increasing the cost of production, . Something, which he learnt from the first day to reduce the cost was being a hero and increasing cost was considered criminal in a commercial set up.
Now, the moral dilemma can only be addressed, if the man is first taught the difference between investment and cost. Capital and Revenue expenditure. Returns and Taxes. In short , the financial engineering of the product. But finance is a very deep subject and takes many many years to understand and master. So, why not just leave the finance part to the fiance guy and just stick to the technical part of the product.
But each technical man tries to get into prices ,without understanding the returns and resources created by the opportunity .He than invariably finds his heroism in either selecting the cheapest product or delays the investment and shows the management that he is saving the company thousands of dollar, though actually screwing the company and biz.
It is such a simple and easy explanation : Say, you buy a house and the house is USD 100k. Now you go to bank and borrow money at say 6 % to buy this house. So, total cost of the house is now USD 106k. Now, you choose to rent this house for say USD 125K per year. Practially, you get back the complete USD 106K invested and also get back another bonus of USD 19k. This is becuase, you are a smart ass, who could find an opportunity in the market to rent his house at such a price and get his returns back.
In short, it was the returns, which mattered and not the cost of the product. If the return was only USD 25 k and say, the cost of money was 1%, yet it was more expensive. Therefore price is not a threshold criterion. But returns created from the opportunity is the final number . Does the product create enough returns to be viable and attractive and profitable. Money, we can always buy from the bank.
Let us now look at Mantex Carbon Ring Spinning Tubes
Price of USD 2.00 per peice
Key deliverable s
- 4% Power saving and 20% cop content.
- 1% increase in production as higher avg speed for larger cop content
- 2% improvement in auto coner efficiency .
- 0.5% improvement in Ring frame efficiency .
Net result is payback of 9 months . Or Return on capital employed is 125%.
Now, if a technical man delays installation of Mantex carbon tubes in the spinning plant, or is not able to standardize the product, he is practically screwing the company of very large profit resource.
In short, one could buy money from bank at 6% and get 119% higher returns by exploiting that money via this product from his current biz. This is called Financial Engineering or Financial genius.
Those companies, who will understand this simple equation fast will quickly make money, others will do it slowly. But this is the future, no one can ignore it. Like it or dislike it. Delay it or start it, but how can you ignore 119% return on capital employed ?
Further, if you are Finance guru, than you classify the product as revenue expenditure and write off the cost within the first year itself and get 100% tax rebate. Practically, it is tax which is paying for your product and your cost is zero. And if you classify it as a capital product, yet, you get 25% depreciation benefit.
Further, if you are Finance guru, than you classify the product as revenue expenditure and write off the cost within the first year itself and get 100% tax rebate. Practically, it is tax which is paying for your product and your cost is zero. And if you classify it as a capital product, yet, you get 25% depreciation benefit.
By delaying the non usage of such a utility is only either on account of laziness of the management or incompetence. For me ,this is simple Science and the commerce does not matter.
Mantex carbon tubes an example of Quantum Mechanics and Applied Materials.
Mantex carbon tubes an example of Quantum Mechanics and Applied Materials.
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