Operations Management II

Assignment 2: Case Analysis

Applichems Case

Submitted to
Prof. Janat Shah

On
January 27, 2015

By
GROUP A10
Mayank Jain (Roll No.: 144054)
Raj Walia (Roll No.: 144084)
Rashmi Somani (Roll No.: 144102)
Subhraprakash Mondal (Roll No.: 144107)
Victor Roy (Roll. No. 144114)

Q1. Compare the performance of Applichems 6 Release plants.

Applichem was founded in Chicago. It is a manufacturer of speciality chemicals. It has 6
manufacturing plants:
- 1 in Western Europe (Frankfurt)
-1 in Latin America (Venezuela)
-1 in Sunchem
- 3 in North America (Gary, Canada and Mexico)
Each plant has some qualities and drawbacks which were analyzed by Applichem to know the
best processes followed in their company all around the world. Based on their capacities and
yield following data has been made.
Capaci
ty

Actual Production

Gary
Canada

18.5
3.7

14
2.6

Mexico
Frankfurt

22
47

Venezuela
Sunchem

Unutilized
Capacity

Yield

17.2
38

4.5
1.1
4.8
9

90.40%
91.10%
94.70%
98.90%

4.5

4.1

0.4

91.70%

98.80%

*Figures in million pounds

Other comparisons are between the plants are as follow
Criteria

Mexico

Plant Design (Setup)

Capacity (million
pounds)
Sales
Utilization
Production
Cost($/hundred
pounds

Product Design and

Packaging

Miscellaneous

Canada

Venezuela

Frankfurt

Gary

Sunchem

1968
similar to
Gary

1955

1964 , no
frills
design

1960s

1905

1957

22
17.2

3.7
2.6

4.5
4.1

78.18%

70.27%

91.11%

47
38
80.85%

18.5
14
75.68%

5
4
80.00%
153.8

95.01
7
products
and 50
kg
packagin
g
Low
educatio
n level of
workers

97.35
5
product
families
, and
50kg
packin
g only
Non
-union
worker
s,
empha
sis on

116.34

2
products,
50 kg
bags
Low
education
level of
workers,
old
equipmen

76.69
2
formulat
ions, 13
product
s, 50kg
package
s
600
workers,
2 dif
process

103
8
formulatio
ns, 20
2
product
product
families
s, many
and 80
1/2
packaging kg,1kg
sizes
etc bags
1000 non- Excellen
union
t
workers, technolo
loyal
gy, have
multiple
labs

quality

ts

We can notice that the production cost per pound is highest in Japan branch. This may be because
of extensive high technology they use and the labs used for testing. Capacity utilization for
Venezuela plant is the highest (91%). This has a small capacity and they are producing very large
quantity of Release-ease. Since an economy of scale is not implemented here the production cost
is also high compared to other plants. Moreover old equipment may need to be updated to get
current technology and save cost. For the Gary plant the utilization is good (75%) but as they are
giving many varieties and have different packaging sizes their cost have gone up. Their main
advantage is the staff which is loyal. At Frankfurt they have computers and deploy two kinds of
processes. In Canada a single packaging standard of 50 kg is followed but they give high
importance to quality.
Q2. Why was some plants better performance than others?
Some plants are performing better than others due to the following reasons
1. People employed for R&D: As shown in exhibits, Gary plant has highest number of people
working for the development. This affects the efficiency and innovation in plants.
2. Regulations of the host countries: In Japan plant, they have to maintain high number of
employees as demanded by the law.
3. Number of product lines: Gary plant has 20 product lines apart from producing Release-Ease
and Frankfurt has 13 products. This may increase performance of a plant as sharing of resources
may be there and thus economies of scale may be implemented.
4. Quality: Some plants like in Canada are quality conscious and hence their final products will
also be of better quality due to this.
5. Skilled Labor: In Mexico and Canada the education level of employees is low which may
affect the productivity of employees. Some plants use training also to increase productivity and
efficiency of the staff.
6. Variety in packaging: Gary plant use 80 different packaging styles while others use a
standard of 50 kg packing. This increased variety increase cost but may attract customers.
Two plants: Gary and Japan are performing better than others due to the above listed factors.
However they have some other advantages also.
-

Gary plant was used to manufacture the prototype samples for customers. So, it needs to
put extra efforts in R&D facilities and thus spent $0.97/hundred pounds (second highest)
of Release-Ease. It also has highest number of people working for development.

Due to law of Japan, Sunchem employs a large number of people. They also use
advanced technology with different testing labs.

Other factor that may have created difference in the performing level may be the wages given to
the employees. This may be a important factor as the wages prove to be a motivation factor for

the employees to work better than others. As seen in the analysis, Gary plant gives the highest
salary to employees and thus employees are happy and work efficiently.

Mexico
Canada
Venezuela
Frankfurt
Gary
Sunchem

Average Gross Money

Exchange
Average Gross Money
Wages
Rate
Wages/Exchange Rate
99.42
96.5
1.030259067
10.25
1.23
8.333333333
14.37
14.64
8.5
1424.86

4.3
2.38
1
235

3.341860465
6.151260504
8.5
6.063234043

Q3. How would you advise Joe Spandro to configure his worldwide manufacturing system?
Management needs to make changes in the current processes followed by them in order to
maintain stability throughout all plants. Some of the recommendations are:
-

Share technology and innovations across plants: Currently each plant has its own
R&D department. Rather they should try to maintain a central R&D center which
innovates and dissipate the new process across all plants for progress in all of them.
Reduce cost at Sunchem plant. Though it is most efficient and use latest technology but
at the same time it is costing them too high. Try to shift the cost factors to other factors.
Improvement of yield of plant in Gary. The utilization is not good and thus the plants are
idle for a large amount of time which is not good for the companys point of view.
Improve the information exchange between plants and implement the best practices
across plants. This sharing may be increased by holding global meetings, video calls,
change of company structures etc.
Computers are used in Frankfurt plant which gives them an edge. This should be
implemented in other 5 plants also.
As stated in case, higher volumes increase the yield and reduce waste. Hence smaller
plats must be scaled up.
Remove bottlenecks like low drier capacity in some plants to increase productivity.
Training should be given to employees to educate them about the new process so that
they are more familiar with the process and thus improve their efficiencies.