Applichem Essay

971 Words4 Pages
Case Write-up: Comparison of plant productivity – Applichem ------------------------------------------------ In this write-up we are trying to explore weather it makes sense for Applichem to keep their production of Release-ease within their current plants or move production to another location. This could be one, or more, of Applichems’ production locations including: Gary (Indiana/USA), Mexico, Frankfurt (Germany/Europe), Sunchem (Japan). To determine this, a cost analysis must be conducted to verify the benefits of keeping production of Release-Ease in their current locations, or moving production to another location. When determining the cost benefits, transportation and production cost differences must be considered In the current scenario, Applichem has a lot of excess capacity available at its current locations. This can be leveraged to redistribute its production in order to meet the overall demand. At current level, it costs Applichem $83 million to produce and ship its worldwide production. To shut down Gary, every other plant would have to be used to its maximum capacity and total costs would increase by $4 million per year, assuming demand stayed constant. It would also be useful at this point to take into account the exchange rate fluctuations that affect the overall competitiveness of the plant (Exhibit 5). While comparing the costs, it becomes evident that the Japanese plant should not be used as the overall production costs are really high, driven by high labor and utility costs (Exhibit 3). The cost decrease generated by the plant closure would be around $4 million. At the same time, production from the Mexico plant should be shifted to the Gary plant to reduce the overall costs. To compensate for the lost production, Gary and Frankfurt plants would have to be operated at full capacity (Exhibit 2). This arrangement also provides
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