ApplichemCompany was one of the leading manufacturers of specialty chemicals in the early 1982s. As a result of the increased demand for its products in the global market, the company’s top management was forced to establish additional branches in different places across the world.
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Four of its major plants were built in Gary, Mexico, Frankfurt, and Sunchem. Release-ease is a product that earned the company a global recognition for many years. The company’s performance in terms of production and distribution of release-ease varied from one plant to the other.
Looking at the general performance of all plants from a profitability perspective, one can easily note that Frankfurt plant was the best performer overall followed by the Gary and Mexico plants. The Sunchem plant was the least performing branch. Despite its expansive market, the Frankfurt plant incurred low manufacturing costs compared to other plants.
The raw materials were relatively cheap in Germany compared to the US and Mexico. The manufacturing costs in Japan were so high that the Sunchem plant’s expenditure on inputs was huge. This reduced the revenues to a great extent and eventually affected the productivity of the plant.
Since profitability is positively correlated to productivity, the different profit levels attained by different plants also impacted the productivity levels. This implies that the productivity of each plant depended on the prevailing conditions of the location.
The productivity of labor was the highest in the Frankfurt plant. This can be attributed to the introduction of computerized processes. The technical team was equipped with computer skills making it to be effective with regards to performance. This not only ensured that time was put in its optimal use, but also minimized raw material wastage.
Additionally, the Frankfurt plant was headed by an experienced manager who understood every detail of release-ease production. He understood the needs of customers very well. By doing that, he incorporated certain specifications in the production of release-ease. This attracted a large market for his plant in comparison to others.
The Gary plant had the highest number of employees. However, the productivity of each employee was low, because the hiring processes were based on loyalty to the plant and the plant manager and not on merit. However, the Mexican plant had operators with the lowest education levels. This hampered innovation and problem solving as no decision would have been made without consulting the plant’s general manager.
On the other hand, the Japanese plant had most of the processes automated forcing the employees to do product development work rather than production. Although the workers of the Sunchem plant acquired the necessary skills through training, their productivity was low. This was due to the few hours of work rule that was enforced by the Japanese labor laws.
The Gary plant had more capacity and facilities required in the production and storage of release-ease. This explains why the products manufactured in the Frankfurt plant were shipped in bulk to Gary for packaging.
Moreover, the computerization of processes in the Frankfurt plant increased the effectiveness and efficiency of production in relation to other plants. The same applied to the Sunchem plant. Nearly all production systems were automated and also managed to stand alone as the only plant that effected the recycling of waste.
In summary, the success of the Frankfurt plant was not only due to the extensive investment in capital, but also as a result of its optimal utilization. This was the prerequisite for profit maximization that was sustainable in the long run. The least performers like the Sunchem plant needed to boost their productivity to allow for profitability in the long run.