The token operated dispenser is aimed at regular shampoo users such as Rajata as described in the Circular Design Challenge Use Case and Personas who do not have sufficient income to buy shampoo in larger packing sizes. The Token Operated dispenser which would reside in the user's home aims to displace the buying of shampoo in sachets with that of tokens. When the dispenser is empty it is return to the shop and is either replaced or refilled.
There are a number of ways of organising the distribution of the dispenser and tokens. Three of which are considered below;
1) The shop keeper sells the dispenser for a nominal fee and then sells tokens as they are required. When the dispenser is empty it is returned to the shop keeper for a deposit or a new full dispenser. The shop keeper who will buy the full dispensers and tokens from a wholesaler will also be rewarded for return of the empty dispensers. This arrangement would require a reprocessing centre to remove the tokens and refill the dispensers.
2) As above but the shop keeper is provided with tools to recharge the dispensers themselves. They would also be able to resell the tokens.
3) The dispensers delivered and collected along with the selling of tokens by door to door representatives or franchisees. And as with the shop keeper they could either return the empty dispenser to a central refilling centre or refill themselves.
The reuse of the dispensers and the tokens does not allow the dispenser to fit within the existing linear supply model or wholesaler and retailer. Therefore there will need to be additional organisation to manage the distribution of bottles or shampoo to the vendors of whichever model is chosen. Part of role of this organisation would be to distribute full bottles and or shampoo and collect the empty's for reuse. This will all incur a cost that will have to be incorporated into the cost of the token.
Economics and Organisation
Critical to the successful take up will be the cost of a token to a sachet. Generally it should be less regardless of the dispenser with token having many of the attributes that make sachets popular, it will require a change in behaviour. Secondly if shop keepers are to adopt the system they will be looking for a similar level of profit.
Therefore the token cost needs to be less than that of a sachet. Therefore the costing and economics of the token system need to be done in detail. Unfortunately I have not had the time or the relevant information to go into this detail but I have been able to draw information from the internet and other sources to give some general costing.
The first point to note is that quantity of material is approximately the equivalent for the different packaging systems an empty 10 ml sachet weights approx. 1 grms whereas a 500 ml PE bottle with pump weights 55 grms
Wholesale costs from Alibaba.com for filled sachets vary between US$ 0.001 to US$0.03 whereas the wholesale cost for empty pump spray bottles vary between US$ 0.01 to US$ 0.8. Making allowances for the cost relating to Chinese factories, ambiguities in description, transport and shampoo in the case of the bottles I have assumed a factory gate price of US$ 0.001 for the shampoo and US$ 0.1 for the bottle. Although this could rise for the smaller quantities required for a trial.
Assuming the more optimistic price for the bottle raw packaging costs favour the bottle which is applies bottle wholesale cost reaches about US$ 0.5for a 500 ml bottle. This is not taking into account reuse of the bottle. How many times a bottle can be used is another unknown. PE bottles and pumps are sold for a variety of use such as school room or camping water bottles and ketchup dispensers. These can be use 100's if not 1000's of times but clearly the appearance of a reused bottle does degrade overtime. There may well be ways of protecting or hiding the appearance by using other material such card but this is something that can be explored later. Therefore an educated and conservative guess at the number of reuses would lie between 5 and 10 times.
Again quantifying the addition costs refilling needs to be an educated guess. Assuming a mainly manual handling operation set within a factory environment the time associated with each refill could between 1 and 2 minutes and assuming the average daily factory, say for India of INR 347.3 this equates to NIR 1.5 or US $ 0.02 per refill. Another unknown is the wholesale cost of bulk shampoo but assuming that a total cost of a sachet can be US$ 0.001 then it is almost negligible say 30% of the total or US$.0.015 for 500ml. An allowance will be for overheads and other factory costs and for this I am assuming that they will triple the labour costs. We can assume that as the weight per volume of shampoo is the same so the transport distribution costs will be similar for sachets and bottles and can be ignored for these comparison perhaps. Likewise I have assumed that the profits for the retailer need to be similar and can be ignored. On this basis factory gate price for sachet and equivalent amount for a token is US$ 0.001 and US$ 0.0017. This is for a central refilling centre the cost drops to US$ 0.0005 if the refilling is undertaken by the shopkeeper. However these figures should be taken for what they are, the results from very rough calculations and will require refining.
However these figures also need to be view in context of the retail prices. For instance in India this additional production cost equates to 0.04 rupees where sachets are sold at 1.5, 3 and 5 rupee price points. The difference between the production cost and the retail price suggest quite large along the supply chain. If the wholesale and refilling are combined in this model the venture may still be profitable whilst still giving a discount to the final customers. The profit can be further consolidated with the consequent lower of price by taking on retailing through the door to door sales reps.
As noted there would need to be a substantial local organisation to undertake the day to day running of this product which will include; procuring the shampoo and other items depending on model adopted; liaising with shopkeepers or the door to door reps; deliveries and collections of the dispensers; and operating the refilling centre if this is required. I would envisage this organisation being totally run by locals either within a cooperative or limited company structure. As the potential to replace sachets is enormous but this essentially a local service I would limit operation of any one of these companies to relatively small vicinities or regions. These local companies could either be federated or owned by a larger corporation.
One of the draw backs of token system is that it may be subject to abuse. This is through two means the first is that the dispenser is given at almost no cost with the acknowledgement that value of the shampoo will be paid off by tokens. Secondly because the bottle and token feed mechanism will be manufactured from plastic that will not offer any real defence to someone determined to break into it. One could counter this by making the bottle and pump out of a tougher material such as stainless steel but this may have an adverse effect on the products economics and the container may be more valuable than the contents making it more likely to theft. With only a notional defence the products success will depend on trust and if the tokens are cheaper the loss of the discount if that trust is abused. Alternatively a contact could be made but this most probably would limit take up. Being optimistic I would think that most people will abide by the rules but this is made easier if there is element of external policing that would come from the either the door to door salesman or the shopkeeper undertaking the refill. Should abuse prove to be a problem then it will need to be addressed at that time.
There are two distinct parts to the roll out these are i) the development of the hardware and ii) the introduction to the target communities.
The development of hardware is relatively straightforward; adapting an existing technology. I envisage prototype development being undertaken in the UK using 3D printing and seeking feedback by those it is intended, as described below. Once a design is finalised I would undertake trial production run of the pump mechanism within the UK. I would try to source the more bulky bottle in the country of the trial. Assuming that the trial is successful then the pump production can be moved to that country.
In the trial period I have assumed that the central refilling centre would be a mainly manual operation however once established and if the product economics deemed it necessary an element of automation could be added.
It has to be noted here that apart from the initial set up and at key stages it is not my intention to be running the organisation on a day to day basis; partly because I would not be living in the country where the trial are being rolled out and partly because of language and cultural issues. I would hope that the supervisory role would being taken on by a committee of interested people probably from the OpenIDEO community with myself participating by Skype etc. and occasional visiting. However experience tells me that remote direction may not always work as expected and I may have to be present longer than I expect.
As with any product launch there will need to be focus groups and pilot trails. These trials could be for say 3 to 6 months for up to 100 families. With 3D printing, feedback on the dispensers can be rapidly turned around allowing changes to trialled and likewise with any changes to the service. The door to door rep model will probably best suit these small trials. The small number of customers means that it is unlikely to be a full time paid position and the work would therefore fall to the supervisory committee or students looking for a part time income. I would expect the trials to answer some of these questions; what is the token/dose volume and the range of shampoos that would need to be carried.
On successful completion of the pilot the size of the trial would be expanded. At this point the company or cooperative would be set up with the supervisory committee forming the board. The ownership and management structure to be determined. The company could then employ 2-3 people from the committee or otherwise to undertake all the roles described above. It is intended that this company will be profitable on the sale of tokens only but initially other sources of funding may be needed. To be viable a minimum number of token would have to be sold daily but this is difficult to calculate without knowing the expected profit and overall costs. But if I were to hazard a guess using the Indian calculations above and assuming a 0.3 rupee profit per token then in excess of 1200 tokens would have to be sold daily to cost of each worker plus overheads. As these token sales only equate to 24 dispensers much of the early work for these employees much of the activity will be generating new sales leads be it shop keepers, recruiting door to door sale team or other product promotion.
Once the very initial focus groups have been undertaken there is no reason why multiple trials cannot be undertaken. In fact it would be beneficial the different models could be trialled as well as in the urban and rural setting. It also allows for differing levels of enthusiasm with supervisory committees. Of course this does not be limited to one country where they may have different preferences.
Once a number of companies have been set one would look for wider roll out nationally. This would need different skill sets. These may be found with those who have worked in franchise or fragmented work places such fast food outlets although these are details that can wait till then.
The roll of brands
So far the distribution companies have been described as autonomous businesses supplying generic shampoo(s) but this does not preclude the involvement or adoption of the models described by brands. So far the business model has assumed a generic or own label shampoo although the dispensers are suitable for branding. But the first question is why would they want to? At best the costing for the token system are neutral to sachet and with it comes whole new organisation that they will be responsible for and that does not take into account any cost cutting to influence customers behaviour. However a network of door to door to door salesman may be seen as a useful attribute.
If the brand were to interact there are a number of ways they could do this.
1) To supply branded shampoo in bulk
2) To provide the expertise perhaps with seconded staff to help with product design, marketing and even the general running of the organisation.
3) Ultimately they could undertake a unilateral substitution of sachets with tokens.
The involvement of brand would raise a number of questions such as would they be looking for exclusivity and what be the consequence of competition. The answers of which will be needed when the questions arise.
The roll of municipalities
One of chief beneficiaries of such a scheme will be the municipalities and they also have a role. This may vary from promotion of the scheme to running them. This is something that can be investigated during the setting up of the supervisory committees.
It is acknowledged at this point that there are details missing from this business plan. Some details can be verified by additional research but a substantial number can only be resolved as the scheme progresses. As such there will need to be a certain amount of flexibility in the implementation of this business plan. That said the clearest route will be to start with the door to door reps as this is the easiest way of introduce the scheme but for it to be financially viable it will need to be expand to as many shopkeepers as possible.
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