Applichem Case Study
Applichem Case
OM 888 Supply Chain Modeling and Analysis
Applichem
• Produces Release-ease, a specialty chemical • 6 plants that manufacture Release-ease
– – – – – – Gary, Indiana Frankfurt, Germany Mexico Canada Venezuela Japan (Sunchem)
• Competitive Situation
– Applichem = Market Leader, Revenues $ 75 Million (1982)
• Main competitor has one large plant
What is the Objective?
– Minimize cost?
• What costs?
– Transportation – Manufacturing – Fixed versus variable?
• What are appropriate measures?
– How to incorporate exchange rate changes? – What about different sizes and capabilities of plants?
Compare Plants
Factor Plant Design, Size, Maintenance, etc Product Variety & Packaging Gary Canada Frankfurt Mexico ‘68, similar to Gary Cap. = 22M lbs Venezuela ‘64, no frills design Cap. = 4.5M lbs 1905+ 1955+ 1960s Capacity 18.5M Cap. = 3.7M lbs Cap. = 47M lbs lbs Sunchem, Japan 1957 Cap = 5M lbs
20 product families 8 formulations (of Releaseease) & 80 package sizes
5 product families Only 50 kg packages
13 products 7 products 2 formulations 50 kg packages bulk shipments; 50 kg packages
2 products 50 kg bags
2 products many ½ kg, 1 kg, etc., packages
Sales Volume & Utilization (1982) Product Cost $/CWT Raw Mat’l A Yield & % Active Ingredient Others (Labor, etc.)
14M lbs or 75.7 2.6M lbs or % 70.3 % 102.93 90.4 % & 84.6 97.35 91.1 % & 84.7
38M lbs or 80.9 17.2M lbs or % 78.2 % 76.69 98.9 % & 84.4 95.01 94.7 % & 85.6
4.1M lbs or 91.1 % 116.34 91.7 & N/A
4M lbs or 80.0 % 153.80 98.8 % & 85.4
1000 non-union Non-union 600 workers, workers, loyal workers, quality two different conscious processes, computer control
Low worker education, serves Far East + local mkt
Low worker education, old equipment
Technically excellent, have test labs, no union but more workers.
What measurement should we use?
• What is a fair comparison? (economies of scale, different technologies)
– – – – Cost per pound to
OM 888 Supply Chain Modeling and Analysis
Applichem
• Produces Release-ease, a specialty chemical • 6 plants that manufacture Release-ease
– – – – – – Gary, Indiana Frankfurt, Germany Mexico Canada Venezuela Japan (Sunchem)
• Competitive Situation
– Applichem = Market Leader, Revenues $ 75 Million (1982)
• Main competitor has one large plant
What is the Objective?
– Minimize cost?
• What costs?
– Transportation – Manufacturing – Fixed versus variable?
• What are appropriate measures?
– How to incorporate exchange rate changes? – What about different sizes and capabilities of plants?
Compare Plants
Factor Plant Design, Size, Maintenance, etc Product Variety & Packaging Gary Canada Frankfurt Mexico ‘68, similar to Gary Cap. = 22M lbs Venezuela ‘64, no frills design Cap. = 4.5M lbs 1905+ 1955+ 1960s Capacity 18.5M Cap. = 3.7M lbs Cap. = 47M lbs lbs Sunchem, Japan 1957 Cap = 5M lbs
20 product families 8 formulations (of Releaseease) & 80 package sizes
5 product families Only 50 kg packages
13 products 7 products 2 formulations 50 kg packages bulk shipments; 50 kg packages
2 products 50 kg bags
2 products many ½ kg, 1 kg, etc., packages
Sales Volume & Utilization (1982) Product Cost $/CWT Raw Mat’l A Yield & % Active Ingredient Others (Labor, etc.)
14M lbs or 75.7 2.6M lbs or % 70.3 % 102.93 90.4 % & 84.6 97.35 91.1 % & 84.7
38M lbs or 80.9 17.2M lbs or % 78.2 % 76.69 98.9 % & 84.4 95.01 94.7 % & 85.6
4.1M lbs or 91.1 % 116.34 91.7 & N/A
4M lbs or 80.0 % 153.80 98.8 % & 85.4
1000 non-union Non-union 600 workers, workers, loyal workers, quality two different conscious processes, computer control
Low worker education, serves Far East + local mkt
Low worker education, old equipment
Technically excellent, have test labs, no union but more workers.
What measurement should we use?
• What is a fair comparison? (economies of scale, different technologies)
– – – – Cost per pound to