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International Journal of Operations & Production Management: Article Information
International Journal of Operations & Production Management: Article Information
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Specialty
Agile manufacturing practices in chemical
the specialty chemical industry industry
An overview of the trends and results of a
specific case study 625
A. Guisinger
Saint-Gobain Crystals, Newbury, Ohio, USA, and
B. Ghorashi
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can be found in motor oil, transmission fluid, and even gasoline to facilitate better
performance and increased lifetime to our automobiles. Europe leads the world in fine
chemical production with a 39 percent share in the market. Stinson (1997a) states that
the strength in European companies is “based on” or “due to” their abilities in
specialized chemistry. North America is second in the production of fine chemicals
market with a 28 percent share of the market. Parekh notes the USA’s strengths in the
availability of raw materials and technology in addition to US excellence in quality
control, quality assurance and basic infrastructure (Stinson, 1997a).
Peaff (1997) cites that with the help of steady economic growth and the reputation of
resilience, competitiveness and creativity, the US chemical industry posted 230.5
billion dollars in sales in 1996. Out of the top 100 US chemical firms, 28 companies
operate under the classification “specialty chemicals”. W.R. Grace was the top specialty
chemical producer in the USA (Peaff, 1997), and 21st overall with chemical sales of
approximately 3.5 billion dollars. The next four US specialty chemical companies, all
with over 1.5 billion dollars in chemical sales, are Dow Corning, National Starch,
Rhone-Poulenc, and Great Lakes Chemical. All of these companies rank within the top
34 chemical firms in the USA.
having some kind of a lock on the market, perhaps patented know-how or integration
back to raw materials (D’Amico, 1996). He is actually referring to a market niche which
must be entered into confidently, easily, and without huge outlays of investments in
order to attain a competitive edge. Many specialty chemical companies are using
custom manufacturing to enter these market niches. Custom chemicals, a $6
billion-per-year business, is assuming greater importance than ever in the sourcing
strategies of user firms. As with fine chemicals, the drug industry uses approximately
half of all custom chemicals produced. Enrico T. Polastro of Arther D. Little
International states that custom chemicals are growing at 8-10 percent annually
(Goldman et al., 1995). As a result, the fertile custom chemicals market has become
highly competitive with many custom chemical producers struggling to find capacity
to meet customer demand. For example, Dixie Chemical is adding reactor capacity in
order to meet their contracts (Chemical Week, 1996).
Since commodity producers do not have a diversified number of markets, specialty
chemical producers can retain a competitive edge through their ability to enter new
markets more easily. A main advantage of being diversified is that risk of economic
cycles can be spread around. For instance, a large commodity chemical producer must
make huge investments in order to enter another market. Consequently, they might
easily miss market opportunities. On the other hand, the diversification of specialty
chemical firms allows for rapid response to customer demand for products that
commodity chemical companies cannot easily produce.
Given all the competition in the custom chemicals sector and the growing number of
participants, the question lies in how are these companies differentiating themselves
from one another? Process capabilities are important to any firm, however, a more
important factor for differentiating oneself from another is in response time (Chemical
Week, 1996). In other words, the customer must be dealt with not only as a trusted
partner, but must be treated on a real time basis. These trends have forced the fine and
custom chemical firms into an agile mode of operation.
company (A). The observations made and the final analysis were based on a
comparative analysis against an ideal agile manufacturer. The survey questions were
divided into three sectors: production, engineering, and management.
request it or not?
A. Only required information and information as requested by the customer is
provided since much of the information is proprietary.
Ob. All customers, whether they request it or not, should be provided with all
pertinent information and services related to product provided. As opposed to
just selling product to the customer, customers should be given solutions to
their problems as they perceive them through information, services, and
customer input. Customer input should be vigorously sought and valued in
every aspect of the operation.
Q. How is quality performance measured for products and services?
A. Performance is measured using analytic analysis with customer
specifications, performance reports, and management review of customer
complaints.
Ob. For the agile manufacturer, quality is measured in customer delight over the
lifetime of the product. This can be measured by rating (over time) the product
in how the product meets the needs of the customer.
Q. What measures do you take to eliminate fear among employees, i.e.
convincing the employees to voice their opinions and/or concerns without fear
of management?
A. Employees are dealt with individually and are evaluated every six months.
There is an open door policy. There is no reward system in place.
Ob. The primary role of management should be to motivate the employees.
Employees should be routinely encouraged by the highest level of the
management team to come forward with their views and comments and
should be rewarded for suggestions that have merit and would improve the
existing operations. These suggestions could be seemingly as insignificant to
the overall operations as saving a few dollars here and there. Yet as a whole
would invite a culture of employees searching for new and innovative ideas
and expressing them without fear. A system to reward employees should then
be established. This is to be distinguished from significant logistic
interventions that could be categorized as “putting out fires”.
IJOPM Q. Do you have reliable single source suppliers for raw material?
24,6 A. [There are] one to two single source suppliers.
Ob. Ideally, one should adhere to one reliable supplier for raw materials. However,
given the nature of the specialty chemical industry and current trends, relying
on single sources for raw materials may not be practical for company (A).
632 Q. Is there a system of cross-training for operating the process equipment and is
technical assistance available regarding the operation of the equipment?
A. Company (A) trains their operators internally using a training procedure
involving a supervisor or senior production person. When the operator shows
that he/she can properly operate the equipment as determined by the
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supervisor or senior production person, the operator signs off on the training
procedure form.
Ob. Do not rely on peer learning, i.e. one floor shop operator training the other. In
this way, procedural mistakes may be passed from one operator to another.
Company (A) may want to investigate the feasibility of using an outside
professional training service for training operators.
Q. Are operators encouraged to make unilateral decisions when necessary in
order to enhance product quality and/or production requirements?
A. Operators only have the authority to stop the process. They should adhere to
the job instructions.
Ob. It is understood that many of the operators may not have the technical
background to make unilateral decisions regarding changes in process
procedures (recipe changes, etc.). The operators should be sufficiently trained
regarding the chemical processes they are utilizing.
Q. What procedures have been taken for identifying and eliminating non-value
adding activities?
A. Efforts in this area are just beginning. Current efforts are ambiguous.
Ob. There should be a mind-set to continuously search for and identify ways to
eliminate non-value added activities. This should be articulated by the top
management on a continuous basis and should be fostered through a reward
program to recognize the efforts of those who participate and contribute.
Ob. In fact, a team of scientists, manufacturing, sales and marketing could come
up with far better ideas than one or two individuals. Past customer
experiences would surface in discussions among team members that could
benefit everyone. Employee compensation and the reward system should also
be based on team performance and its effect on the company’s bottom line.
Q. Are individual computer systems (process control, modeling, SPC, process
information, etc.) integrated into a plant-wide/company-wide information network?
A. There are 43 computers on 1 network mini-mainframe. Company (A) is working
towards SPC.
Gap assessment
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Company (A) seems to be a very efficient and well-managed company. The company is
on the right track with respect to many of the agile manufacturing criteria that are
described earlier in this paper. Some of these practices include:
.
systematic procedures for evaluating and responding to customer complaints/or
concerns;
.
handling and transporting finished product to customer specification;
.
the existence of a quality team to periodically review and make
recommendations on quality improvement efforts;
.
requiring quality certificates for all raw materials that are lot specific;
.
utilizing flexible process equipment that are multi-usable;
.
forming collaborative industry-wide research teams;
.
the constant search for innovations within the industry through attendance at
professional society meetings and scientific correspondence; and
.
team work and the formation of reconfigurable teams including members from
management, quality, production, and marketing.
Due to the relatively small size of the company, it has been easier so far for company
(A) to remain more agile than its large commodity producers. Few managerial levels
exist giving every employee direct access with upper management and fewer barriers
to communication. Moreover, by the nature of the specialty chemical industry,
company (A) is forced into continuous pursuit of new innovative processes and
products dedicated to custom production.
Company (A) does have some areas of concern with respect to agility. A
company-wide dedication to providing solutions to customer’s problems needs to be
articulated and integrated within all organizational functions. This “customer focus”
philosophy must be instituted within company (A)’s mission statement. Customer
participation and input needs to be vigorously sought in order to accomplish this task.
Also a reward system for employee suggested improvements has to be established
with a system of continuous training/retraining and education available to every
employee.
Conclusions
The emergence of custom chemical firms have been facilitated by the ever expanding
area of global competition and the need for these firms to enter niche markets without
very significant capital investments. Customer supplier relationships in the specialty Specialty
chemicals industry are becoming more agile through trusted partnerships and the
decreasing number of first and second tier suppliers. Additionally strategic
chemical
partnerships are being sought by many specialty chemical firms to provide better industry
customer service, optimize technological advantages, and enter new markets.
Fine chemical producers can deepen their product and technology portfolios by
either establishing “chemical trees” or by developing new reaction technologies that 635
complement their core reaction technologies. Finally, virtual practices are becoming
widespread in the specialty chemical industry with some chemical companies selling
diverse multi-generational products without owning a production facility.
References
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Further reading
Das, N., Ghorashi, B. and Ghorashi, A. (2001), “A case study of the application of agility
principles to adhesive and sealant manufacturing industries”, Proceedings of the 2001
Portland International Conference on Management of Engineering and Technology
(PICMET).
Hunter, D. (1996), “Views on custom manufacturing’s prospects”, Chemical Week, Vol. 158 No. 20,
p. 9.
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