Aplichem Abridged Harvard Case Solution & Analysis

Q1: How do you explain the large differences in the performances of the four plants? Why do some plants appear to be much better than the others? To what extent can these differences be attributed to differences in scale, utilization rates, and other factors beyond the control of management? How much appears to be due simply to better management?

Applichem manufactures the similar chemical products in four plants, each of which is located in a different country. Applichem has completed an important study comparing the performance and productivity of these plants. Back in 1952 Applichem had developed a chemical named “Release ease” on specific customer request.  While making molded plastic components, one gets the impression of actually making the molded jello. The molds which are produced for plastic parts are precision stainless steel which can be relatively difficult to clean; and they are used frequently, with cleaning and unmolding often the blockage in the molding procedure. There were four plants at different locations.

Gary Plant

The plant was located in famous Gary (Just at the Exit of Chicago) The Gary plant was completely managed by the North American Area. The plant was constructed back in the year 1905 and was purchased by Applichem in the year 1951. This was the biggest facility that was maintained by the Applichem. The employees were loyal and their generations have already served the company in the past.

Release-ease was the first that was actually manufactured in this facility. As the time passes company has changed the process in an enormous manner. The majority of the changing in the plant has been conducted during 1959 to 1964.Gary employees have always been complaining they had lower volumes which result in high overhead expenses.

Product Families19
Employees1000
Design Capacity25 million pounds / year
In year 198260 people manufactured14 million pound Release-ease

The unfavorable things which are possessed by the Gary plant is the element of time because they took a relatively longer duration of time for the packaging purposes. But this is a fact that Gary shows excellent interest in achieving the high level of active ingredients in the products at the time of manufacturing. As per the study it has been found that for a plant like Gary, the company is facing issues regarding the allocation of indirect cost. As per the statistical data the raw material expense was 60.83 U.S dollars / hundred pounds of Release-case for the Gary plant. The operating cost was around 22.16 U.S dollars / hundred pounds of Release-case.

As per the exhibit 1 total manufacturing cost was 99.42 U.S dollars / hundred pounds of Release-case. This was the second highest cost which comes with the account of the Gary plant. The things which is playing a crucial part is the cost of packaging, loading and shipping which needs to be controlled by Gary plant. 13.78 U.S dollars / hundred pounds of Release-case is the cost for these accounts which is the highest among all the four plants.  It is highly recommended that this cost show should be controlled or company must look for alternatives which could help in the reduction.

Frankfurt

Frankfurt plant was completely operated by the Germans.  They have been doing an excellent job from many aspects. It has two different process fields out of which one was installed during the 1971 and 1974 and the other was installed in the year 1961.

 

Product Families12
Employees600
Design Capacity47 million pounds / year
In year 198238 million pounds Release-ease

As per the exhibit 1 the raw material cost of the Frankfurt plant is 53.00 U.S dollars / hundred pounds of Release-case which is the lowest among all the four plants. The operating expense was 15.91 U.S dollars / hundred pounds of Release-case which is the second best among all the four plants operated by the company. The packaging, shipping and loading cost of 3.35 U.S dollars / hundred pounds of Release-case was extremely low as compared to the Gary plant which possess around 13.78 U.S dollars / hundred pounds of Release-case. This exceptional low cost actually benefits the Frankfurt plant in a realistic optimistic manner. The oil usage of the Frankfurt plant is $0.35 per liter and highest among all other plants. Moreover the total cost of manufacturing was the best among all four plants which was incurred by Frankfurt plant. The production from these aspects can give them enormous benefits.

Mexico

The Mexican operates under the completely owned subsidiary of Applichem Company. This entire plant is managed by local Mexican employees.  Other than the Mexican market, they also supply product to the Far East market. In the Mexican plant the Release-ease was packed in the 50kg boxes. The extra drying capacity is playing a significant role which was enhanced back in the year 1978.................

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