Essay about Applichem

1593 Words Sep 28th, 2014 7 Pages
Applichem was a specialty chemical manufacturer and the market leader for its main product named Release-ease.

Release-ease was a chemical which was added to plastic molding compound, helping separate molded parts and the mold

in an easier and cleaner manner. There were different requirements for Release-ease over regions. In Europe, customers

preferred packages of 50 kilos and used products within 12-month shelf life. Whereas, in the U.S. and other regions,

customers purchased packages from 0.5 kilo and product shelf life could range from 1 to 3 years.

Applichem had four plants: Gary (the U.S.), Frankfurt, Mexico, Sunchem (Japan). The management team was thinking

that Gary plant was operating ineffectively. Therefore
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Third, customers strongly required for a continuously improved product, which led to some adjustment in product

specifications over regions. However, Applichem globally had conducted little intensive research on the product and

process.

To maintain competitiveness, Applichem had to review its supply chain network in terms of facility roles, locations,

capacity and market allocation (Chopra & Meindl, 2013). Release-ease was a functional product which had been available

on market since 1952. Therefore, Applichem had to look over its supply chain configuration to ensure efficiency with cost

leadership strategy, minimizing cost in an optimal solution.

Key outcome of the recent study of performance comparison among plants:

Firstly, total manufacturing cost per hundred pounds of Release-ease was different from plant to plant. The cost in

Sunchem was almost as twice as that of Frankfurt. Gary also posed a very high number, which was claimed to be unfair

because of its different facility role.

2

$ per 100 pounds Frankfurt Mexico Gary Sunchem

Total cost 72.26 91.13 99.42 146.98

Secondly, there was a big gap of yield on raw material A per plant between Gary and the other plants:

Yield on raw material A Frankfurt Sunchem Mexico Gary

98.90% 98.80% 94.70% 90.40%

The rationale behind such big difference among Applichem’s plants:

First, the facility location of Sunchem in Japan led to its high input costs of

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