Applichem Case Study Pt. 5

Recommendations

An examination of the specialty chemicals market reveals that Applichem has a number of opportunities to improve their position around Release-ease.  Perhaps the most advantageous of opportunities deals with the issue of capacity.  By consolidating their manufacturing facilities and streamlining their supply of Release-ease to their buyers (e.g., having the U.S. supply only to the U.S. Market, Mexico to Latin America only, etc.), Applichem can reduce transportation costs, import duties, control costs and allow for improved customer intimacy with local buyers.

By consolidating plant operations, Applichem will also be able to capitalize on economies of scale that exist among the plants.  Furthermore, consolidation will also result in reducing the control and coordination costs of managing the company’s plants.

There also exist yet another opportunity to educate their customer base around the importance of more timely usage of the Release-ease product.  Applichem may want to alter their package sizes/concentrations to facilitate more timely use of the product.  By moving to smaller packages or concentrations, Applichem helps eliminate the manipulation of their product that is so prevalent in the U.S. after the initial sale.

– For a mature product line the costs associated with regulation must be focused on and reduced. Move away from countries like Canada and Japan which require overlapping protections for hazardous waste.

– Labor does not need to be highly skilled, more than likely one can centralize the engineering at corporate to be the brain of the operations and implement standardized changes throughout the plants equally. There is little payback for in having overly skilled operators running the facility.

– Utility cost must be recognized and reduced by either investing in more efficient processes or moving operations to location where this is cheap. Japan utility cost is too significant of a cost relative to the total product cost.

– The United States has a relatively low import cost at 4.5% and considering that there is a plant in Mexico costs associated with importing into the United States to circumvent labor cost should be considered.