This analysis report examines the production of Release-ease, a molding plastic part, across Applichem's six plants. The goals were to determine the most cost-effective production locations and quantities while accounting for exchange rates, inflation, and future changes. Data on production costs, capacities, and transport costs for each plant were gathered and modeled. The recommendations were to keep producing Release-ease primarily in Gary, Indiana and other lower-cost locations, reduce production in Mexico, and stop production in Japan due to its high costs. Employee training was also suggested to improve efficiencies across plants.

1. Analysis Report
Amkoa, Sally
Lin, Xinqi
Senecha, Niharika
Towers, Kathleen

2.  Background
 Goal
 Data Gathered
 Challenges
 Modeling/Analysis
 Fluctuation Measures
 Recommendations

3. Applichem produces release-ease, used in molding
plastic parts
Six plants manufacture Release-ease: Gary,
Frankfurt, Mexico, Canada, Venezuela, Japan
Main competitor has one large plant

4. To determine whether or not to keep production of
Release-Ease within current plants or move
production to another location
To compare cost of operations at different plants
To include measures for exchange rates
fluctuations, inflation, etc.

5. Release-ease made in Frankfurt plant met
specifications better than that made in other
plants
Applichem:
largest market share
33% of the demand comes directly from the US
only company whose product has been approved by
Japanese regulators

6. Minimize the import duty costs as well as the
transportation costs to optimize efficiency of
manufacturing
To consider future changes due to inflation,
increase in demand, etc.

7. Production numbers from previous year (million lb units)
Plant capacities (million lb units)
Total production costs for each location (100 lb units)
Transport costs to/from each location (cents per pound)
Import duties for each country

8. TotalCostA to B = (TransportA to B + ProductionAt A ) * (1 + ImportDutyInto B)
From/To Mexico Canada Venezuela Frankfurt Gary Sunchem
Mexico 95.01 106.41 153.02 116.08 110.78 115.55
Canada 108.35 97.35 155.03 118.10 107.73 116.19
Venezuela 123.34 126.34 116.34 141.63 132.44 138.48
Frankfurt 86.69 88.19 133.79 76.69 91.85 95.39
Gary 112.93 108.93 170.90 123.66 102.93 122.36
Sunchem 167.80 166.80 249.45 183.96 174.31 153.80

9. From/To
Mexico Canada Venezuela Frankfurt Gary Sunchem Total
Remaining
Capacity
Mexico 3.0 0.0 0.0 0.0 3.2 0.0 6.2 15.8
Canada 0.0 2.6 0.0 0.0 1.1 0.0 3.7 0.0
Venezuela 0.0 0.0 4.5 0.0 0.0 0.0 4.5 0.0
Frankfurt 0.0 0.0 11.5 20.0 3.6 11.9 47.0 0.0
Gary 0.0 0.0 0.0 0.0 18.5 0.0 18.5 0.0
Sunchem 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5.0
Demand 3.0 2.6 16.0 20.0 26.4 11.9
• Recommended amounts for minimum total cost, constrained by
demand, plant production capacities

10. 1982
(million lb units)
1983
(million lb units)
Mexico 17.2 6.2
Canada 2.6 3.7
Venezuela 4.1 4.5
Frankfurt 38 47.0
Gary 14 18.5
Sunchem 4 0.0
Total Cost
(millions of $) 83.70* 79.77
Stop ReleaseEase production in
Japan (Sunchem)
Maximize production in
Canada, Venezuela, Frankfurt,
and Gary
Reduce production in Mexico
since it’s cheaper to produce in
other locations
*Calculated using cost and capacity predicted for 1983

11. Hike in gas prices would increase shipping costs
If US dollar becomes weak, importation becomes
expensive
Increased tariffs make it expensive to get the
product to the consumer or raw materials for
production
Global carbon footprint policy: companies might be
required to pay for emissions permits

12.  Keep producing Release-ease in Gary, Indiana, but work on improving production
efficiencies
 Reduce production in Mexico—can produce Release-ease at lower cost in other
locations
 Stop producing Release-ease in Japan. High costs and low productivity outweigh
plant’s technologically advanced status
 Let Japan focus on R&D and producing other products
 Employee training and rotations across plants to increase exposure about technology
and best practices
 Adjust production volumes of plants to maximize capacity and reduce transportation
costs