AppliChem Case Analysis

Presented By-

SCM SEC-B Group-2

Ayush Ranjan M011-18 Himanshu Singh M154-18

Patil Shradha Kailash M031-18 Shikshit Kumar Gope M179-18
Sudipta Sen M046-18 Soumi Mandal M181-18
Y Akshay Bharadwaj M054-18 Sourav Kumar Sharma M182-18
Sagar Raj Singh M109-18
 Case Facts
- AppliChem was established in 1952 before World War-II in Chicago.
- It’s manufacturer of Specialty Chemicals.
- Produced adhesive solution namely Release Ease.
The Company has 6 production units across for Release Ease.
1 Western Europe (Frankfurt)
1 Latin America (Venezuela)
1 Sunchem
3 North America (Gary, Canada and Mexico)
Release Ease
A chemical to be added in low concentration to
the plastic molding compound during its
manufacture for easier separation of molded
parts.
• Sold as dry powder
• Widely used in molding plastic parts
• Has been a steady profit generator for
company since 1982
A large U.S. based chemical company
whose only plant in Luxembourg was
dedicated to make close substitute for
Release-Ease
 Market Requirements for Release Ease

▰ Specifications of Release Ease varied over regions

▰ Taking Europe as an example:

• Competition was more fierce than in U.S. Hence, quality and product specifications were closely
monitored
• European customers made sure to consume Release Ease with one year of purchase
• European customers purchased Release Ease in 50 kilo bags
Case Questions

Recommendations

?
Why some plants are performing better ?

To compare operations across the six manufacturing plants.

 Comparison across the units
Criteria Gary Canada Mexico Frankfurt Venezuela Sunchem
1905, 1951 acquired by
Establishment 1955 1968 mid- 1960s 1964 1957
Applichem
8 formulations, 19 other Release Ease + 4 other Release Ease + 6 other Release Ease + 12 other
Product Mix 2 products 2 products
product families + Release ease product families product families product families
many 1/2 kg,1kg etc package
Packaging Sizes 80 package sizes 50 kg package size only 50 kg package size only 50 kg package size only 50 kg package size only
sizes
Plant Design
18.5 3.7 22.0 47.0 4.5 5.0 in million pounds per
Capacity
year
Actual Production 14.0 2.6 17.2 38.0 4.1 4.0
Utilization 75.68% 70.27% 78.18% 80.85% 91.11% 80.00%
No. of people each
58.3 15.6 44.4 86.1 23.9 31.0
at operation unit
Mexican Nationals, Venezuala Nationals,
1000 Local people from Gary, Non-union canadian Education level was Education level was
Employee Mix German Nationals Non-Union workers
Loyal to the organisation nationals significantly below over significantly below over
other plants other plants
No-frills design, with no Automated proceses,
Old, Most equipments installed No-frills design, Highly state of art technology, with
Technology Design similar to Gary Plant further modification since Technically Execellent, Testing
between 1959 and 1964 maintained computerised processes
inception Labs

Manufacturing $ $ $ $ $ $
Cost 102.93 97.35 95.01 76.69 116.34 153.80
Mexican operators had
certain technical dept
because of which they were Larger number of employees
Bulkshipped Release Ease old equipments and the
able to maintain the were required in this plant
Miscellaneous to other company plants for only dryer was in poor
process improvements after due to different rules and
packaging repair
getting recommendations regulations of the Japan
from Frankfurt plant expert
Ari
 Key – Takeaways from the Comparison

 Manufacturing costs for Japan Plant is the Highest which may be because of extensive usage of technology
and automation, labs for testing and also employment of more workforce due to different rules and
regulations in Japan.

 Capacity utilization for Venezuela plant is the highest (91%) because the plant has a small capacity and it
producing maximum quantity of Release-ease.

 For the Gary plant the utilization is good (75%) also they are offering several varieties of the product and have
different packaging sizes their cost have gone up due to presence of older technology. Their main advantage
of this plant is the staff which is loyal.
Why some plants were better than others ?
-Number of people employed in R&D were
R&D
different in different plants

Government -Regulations were different region wise.

Policies - Wage difference.

-Canada Plant focused more on quality.

Focus - Gary Plant focused on sheer variety of
Orientation product mix and packaging styles.

Skilled labor and educational

Workforce levels of employees were
Qualification different from region to region
 Recommendations
Changing the production allocation units across the plants in order to minimize the overall transportation
01 and production cost.

Method used: Linear Programming

Objective Function : Minimization of total cost = Manufacturing cost + Shipping + Import costs

Constraints :
1. Demand Constraint => Unmet Demand = 0
2. Supply Constraint => Excess Capacity >= 0
3. Non-negativity constraint

Assumptions:
Total Demand for Gary’s Plant is considered as 26.4, it is assumed that all imports from North American
is coming to this region. (4.5% import tax & Larger plant with diversified packaging sizes).

The material is being exported from Mexico Plant to North America region.
 Recommendations
Production Should decrease for Mexico
Plant as from the case it is given there will (In 1982)
be higher market fluctuations.
Supply Region Actual Production Proposed Production
Production increase in Gary plant in Mexico 17.2 6.2
order to cater whole US market demand Canada 2.6 3.7
thus reducing import costs.
Venezuela 4.1 4.5
Leverage Sunchem plant in Japan for Frankfurt 38 47
R&D purposes. The demand can be Gary 14 18.5
catered by Frankfurt Plant. Sunchem 4 0
(in million pounds)
Increased Production in Frankfurt Plant
since low manufacturing cost and
presence of state of art technology.

Increase in production quantities of Microsof t

Excel Worksheet
Venezuela and Canada in order to cater
decreased production units in Mexico.
 Recommendations (Contd.)

02 03 04 05

Sharing of Latest Improve Gary Training and Focus on

technology and Plant’s Yield as it Development of reducing cost of
Expertise across has many the workforce Venezuela Plant
the plants. advantages
Thank You !