APPLICHEM

CASE SUBMISSION
SUPPLY CHAIN MANAGEMENT
Submitted By
Group 8 - Section A
Himank Khulbe PGP/16/022
Mainak Guha PGP/16/028
Megha Jain PGP/16/031
Rohit Singla PGP/16/043
Debrup Ganguly PGP/16/255
Umakant Sahu PGP/16/294
 AGENDA

Applichem – Company Release-Ease Process Flow and

1 Background Business 2
Manufacturing Plants Factors affecting performance of
3 plants 4
Comprative Performance Analysis Capacity Management
5 of Plants 6
Future of Gary Recommendations
7 8
Applichem – Company
Background
A leading manufacturer of specialty chemicals

Founded in Chicago, just before World War II

Focus on a strong functional orientation

Some matrixing introduced into the organization in

1970s
Release-ease: Business
Background
Developed in 1952 in response to customer request,
Release-ease was a specialty chemical

Sold as dry powder, Release-ease would help plastic

mould to release from metal molds

When added in small concentration Release-Ease

would easily leave the mold cleaner

Though a revenue generator, Applichem had done

little focused R&D after about 1953
Market Requirements for
Release-ease: Europe v/s US
Europe
Suspendability a significant
property
Competition was fierce in Europe
Quality and Product specification
significant
Consumption mostly within one
year of purchase
Purchase mostly in 50 Kilo bags
US
Comparatively a lesser significant
property
Lesser competitive threat in US
Quality and product specification
less monitored
Consumption could be even after
three years
Purchase in bags of smaller
denominations
Release-ease: Technology

Reaction
• Raw materials combined in a precise sequence
under pressure and heat to form Release-ease
• Size and composition depended on temperature,
pressure, federates, heat-removal & agitation
Cleaning
• Cleaning and isolating the Release-ease
particles from slurry by moving it on conveyor-
belt
Release-ease: Technology

Drying
• Release-ease particles formed from the cleaning
step are dried to form Relese-ease powder
Packaging
• Release-ease powder is packaged in bags on an
automated filling and packaging-line
• Losses typically account for the physical losses
and loss due to incomplete convertibility
 Process Flow – Release- Ease

Reaction Clean Dry Packaging

Raw Clean and Release Packaging of

Materials Isolate particles are release ease
to Slurry Release dried particles
ease
particles Final
Raw
Product
Material
s
Recapturing Laboratory
Waste Materials Inspection
Applichem: Manufacturing
plants
Gary Plant
• Manufactured 19 product families in
addition to Release-ease
• Had a total of 100 non-union employees,
down from 2000 in 1960s
• Had a total capacity of 26 million pounds of
Release-ease a year
• Actual capacity of only 14 million pounds
manufactured by 60 people
Applichem: Manufacturing
plants
Frankfurt Plant
• Managed by German nationals who reported
through the European area
• Supplied customers in Europe, the Middle-East, and
Africa and other plants
• Manufactured 12 product families in addition to
Release-ease
• Had 600 employees making 38 million pounds of
Release-ease a year
• Had two manufacturing processes with major
modification to increase capacity
Applichem: Manufacturing
plants
Mexican Plant
• Manufactured 6 product families in addition to
Release-ease
• A wholly owned subsidiary of Applichem and
managed by Mexicans
• Supplied mostly to the Mexican market and some
markets in the Far-East
• Had a design capacity of 27 million pounds & actual
capacity of 17.2 million pounds
• Packaging was done in 50 Kg bags and had extra
drying capacity introduced in 1970
Applichem: Manufacturing
plants
Sunchem plant
• Applichem’s 50% Japanese joint venture for two products
• Managed by Japanese nationals and reported to
Applichem’s Pacific Area
• Automation and advanced waste-recovery system
introduced in 1969
• A designed capacity of 5 mn pounds and actual capacity
of 4 mn pounds
• Technically excellent, the Japanese employees did more
development work
• Work rules, regulations in Japan and drying capacity of
the plant constrained volume
Factors affecting performance of
plants
Worker Productivity

• Educational levels and training

Higher number of product families

Number of package sizes

• Additional setup costs of 1 day

Release – ease shelf life

• Leads to different proportions of active ingredients

Plant design and automation

 Labour Productivity
Wages taken as proxy for labour productivity

Low productivity -> Low yield

Exhibit 5 1982 figures

High labour productivity in U.S and Japan

Mexico Germany U.S Japan

(Pesos) (Deutsche Mark) (Dollar) (Yen)
Average Exchange 96.5 2.38 1 235
Rate (Currency/$1 US)
Average Gross Money 99.82 14.64 8.5 1424.86
Wages
Average Gross Money 1.03 6.15 8.5 6.06
Wages (In US Dollar)
Rank 4 2 1 3
 Influence of various factors on
average yield and performance
L - Low

M – Medium

H - High

Plant Worker No. of No. of Product Emphasi Laws

Producti product package Develop s on
vity lines types ment active
ingredie
nt
Mexico L M L L M M
Frankfurt M H L M M M
Gary M H H H H M
Sunchem H L M H H H
Comparative Performance of
Plants
Lower measure of performance for Gary and
Sunchem
• Gary
• Due to Release ease being in distribution for more
than 2 years greater emphasis on active ingredients
• Batch operation for research
• Exchange rates
• Sunchem
• Strict Japanese laws
• Labour issues
 Comparative Performance of
Plants
From Exhibit 3

Plant Mexico Frankfurt Sunchem Gary

No. of Workers 45 86 31 58
1982 17.2 38 4 14
Production
Volume(million
lbs)
No. of .38 .44 .12 .24
pounds/Worker
Average Yield 94.7% 98.9% 98.8% 90.4%
on Raw
Material A
Factors for control

What Management can control?

• No. of package types
• Plant design
• Emphasis on active ingredients
• Automation
What is outside the scope of management?
• Labour productivity
What goes where –
Exports/Imports?
Mexico – 50 kilo bags

Sunchem – ½ and 1 kilo packages

Frankfurt – 50 kilo packages

Gary – About 80 package sizes

Plant Sales 1982 Exports Imports

Productio
n
Gary 29 14 0 15
Frankfurt 20 38 18 0
Mexico 12.3 17.2 4.9 0
Sunchem 11.9 4 0 7.9
Capacity Management

Demand for Release ease expected to remain constant for

the next 5 years

Different costs of production for different plants

Different sizes available for packaging

Plants with excess capacity – Export to areas where cost of

production is high based on Production + Transportation cost
Costs of Inter Plant
Exports/Imports
From/To Cost of Gary Sunchem Frankfurt Mexico
Productio
n (US $)
Gary 85.64 90.64 98.24 95.74 97.14
Sunchem 142.42 156.42 144.42 156.72 155.72
Frankfurt 68.91 79.41 82.21 70.91 81.81
Mexico 88.75 99.75 102.85 99.85 96.25

Plants with excess capacity - Export plants where cost of production is higher
than combined cost of production and transportation at these plants

Assumption: Packaging to be done at respective import plant location

What future holds for Gary?

Shifting Gary’s Release ease production to

Frankfurt
• Not feasible
• Frankfurt has excess capacity of 9 million pounds –
Demand from Gary is 14 million pounds
• R&D facility will also need to be shifted which will
bring in inefficiencies in Frankfurt
• Different shelf lives for Frankfurt and Gary’s products
• Extremely loyal labour force in Gary - Generational
occupation and the Gary kid
Recommendations
Sunchem does not seem to be a viable plant
due to high costs
• Import from Frankfurt and package in Sunchem

Centralized R&D team for product development

rather than area wise teams
• Better adoption of new innovations

Information exchange between different plants

• One of the core pillars of SCM

Scale up small plants as yield increases with

volumes
Recommendations
Implement computer control reaction in every
plant

Recapture wastes – Important source of yield

increase
• Extensive solids recovery and waste management like
Frankfurt plant

Focus on outdated machinery

• Expected life is 20 years

• In some plants machinery installed in 1959 is being used in
1982!!
• Will result in significant yield improvements