Applichem Case 2
Executive Summary
Applichem was a Chicago based manufacturer of the specialty chemicals mainly devised as solutions to specific customer’s problems. Applichem has developed a chemical called Release-ease in 1952 as a solution to the problem faced by plastic molding industry in cleaning the stainless steel molds. This specialty chemical when added in low concentration to the plastic molding compound during the manufacturing process will ease the separation of molded parts from the mold and leave the mold cleaner. Hence Release-ease was widely used in molding plastic parts.
Release-ease was a patented product of Applichem and it used to bring steady revenues to the company through 1982. There was not much R&D done on Release-ease later to 1952, but only the process innovations had taken place in the manufacturing plant at Frankfurt. Applichem’s applications engineers worked closely with the customers, identifying the problems in the molding processes and working on the aspects of customer’s processes and aspects of release-ease to relieve the symptoms. This was one reason why Release-ease varied slightly among different regions. The company’s market research group expected little net increase in demand for Release-ease over the next 5 years.
While the plant at Frankfurt is generating profits to the company, the plants at Venezuela, Gary, and Sunchem were running at losses. Despite fierce competition in Europe, the major reasons for Frankfurt plant generating profits were 1) constant technical up gradations in the plant to improve the yields and reliability of Release-ease. 2) Manufacturing costs were the least and the production volumes were huge resulting in average yield on raw material A at 98.9%. The Venezuelan plant, started in 1964, had a no-frills design, and no improvements had been made thereafter. The educational qualifications of the Venezuelan operators were below those of other plant operators. There hadn’t been any process or capacity improvements.
Applichem was a Chicago based manufacturer of the specialty chemicals mainly devised as solutions to specific customer’s problems. Applichem has developed a chemical called Release-ease in 1952 as a solution to the problem faced by plastic molding industry in cleaning the stainless steel molds. This specialty chemical when added in low concentration to the plastic molding compound during the manufacturing process will ease the separation of molded parts from the mold and leave the mold cleaner. Hence Release-ease was widely used in molding plastic parts.
Release-ease was a patented product of Applichem and it used to bring steady revenues to the company through 1982. There was not much R&D done on Release-ease later to 1952, but only the process innovations had taken place in the manufacturing plant at Frankfurt. Applichem’s applications engineers worked closely with the customers, identifying the problems in the molding processes and working on the aspects of customer’s processes and aspects of release-ease to relieve the symptoms. This was one reason why Release-ease varied slightly among different regions. The company’s market research group expected little net increase in demand for Release-ease over the next 5 years.
While the plant at Frankfurt is generating profits to the company, the plants at Venezuela, Gary, and Sunchem were running at losses. Despite fierce competition in Europe, the major reasons for Frankfurt plant generating profits were 1) constant technical up gradations in the plant to improve the yields and reliability of Release-ease. 2) Manufacturing costs were the least and the production volumes were huge resulting in average yield on raw material A at 98.9%. The Venezuelan plant, started in 1964, had a no-frills design, and no improvements had been made thereafter. The educational qualifications of the Venezuelan operators were below those of other plant operators. There hadn’t been any process or capacity improvements.