solution

Sun Plastics a medium enterprise, is a manufacturer of Plastic Packaging Products. The company produce Plastic Packaging materials ranging from 10 ML to about 10 Liters capacity.

The company established in the year 2000 in a small industrial shed with 4 machines, has grown over the years and had 40 machines and employed more than 150 workers with a turnover of over $4 Million a year in 2014.

Machineries and Moulds:

Sun Plastics were doing two types of Processing.

1. Blow Moulding – This is the process for making containers (example: Shampoo containers, Oil containers etc) and
2. Injection Moulding – This is the process of making the lids for the containers.

For each type/design of containers the required ‘Mould’ is to be made first. These moulds are made of Irons at different locations under different process in exclusive workshops.

Production Process:

The process is simple, the plastic granules (raw material) is fed in the top of the machine through a ‘hopper’ and melted through a long barrel at a high temperature ranging from 200 to 360 Degree depending upon different raw materials, and the molten plastic is fed at high pressure through a plunger inside the barrel into the ‘Moulds’ of desired design and size. On cooling down, the mould is opened automatically, and the product of desired size, shape and design is produced.

Machine Maintenance Policy:

Sun Plastics had a policy of using a brand-new machine for about 4-5 years and replace them with the newer ones from the market, by which, the company was able to reduce down time on machines and also were able to implement the latest production technology in their process. This helped the company in achieving 100 PPM (Parts Per Million) defects.

Management:

The company had a lean management system, with the Owner of the company was taking all the managerial/business decisions and was passing on the commands down the line to various departments. He was also acting as the Marketing Head for the company, with two assistants under him to attend to customer needs from time to time.

Under him, he had a Production Manager, who was handling all the production related activities as well as was handling the Planning and Control Process. He had a few production supervisors under him, who were responsible for the day to day running of the machines and product outputs.

The Company had a Maintenance Manager, who was in charge of both the maintenance of the Machines and Moulds. Preventive maintenance is the policy of the company and in the process used to shut down the machines one by one periodically for maintenance and this has helped the company to achieve a very low-down time of machines and mould. The maintenance manager was assisted by qualified Technicians and also had a dedicated in-house workshop for their needs.

The company had an exclusive Quality Assurance department headed by a Quality Assurance Manager, who had under him Quality Control Supervisors, who were both line supervisors as well as supervisors for final clearance of products for dispatch.

Workforce:

The company had a workforce of about 150 employees, comprising mostly of expatriates. The salary of the expatriates was higher in the country than that of the local employees. But it was hard to get trained and qualified employees for this type of industry and hence the company had to heavily depend on the foreign workers. Employing foreign workers started to become harder by the day as the employees in this field were getting better opportunities in their home country and were demanding a lot of compensation to work in the company. Food, Accommodation and Salary is the norm for any expat worker, which was not the case for the son of the soil. The new recruits in the place of those who left the employment or for any of the additional requirements, were almost untrained and were getting trained on the actual job. The company didn’t have any specific policy for training of their employees neither at induction nor at any period intervals for refreshing their skills.

Clients:

The company had developed a dedicated cliental base over the years. Almost all the top consumer of plastic packaging materials in and around the region where Sun Plastics was operating, were their clients. The clients were very much satisfied with the timely supplies of quality products of Sun Plastics so that they never had to think of any other source for their plastic packaging requirements.

Financials:

Having started the business in the year 2000 with a very small investment over 4 machines, the company has grown to have deployed around 40 machines and employed around 150 employees. In the year 2010 Sun Plastics has become a ‘NIL’ liability company. The company has a robust receivable of 90 days, and its payables are almost ‘NIL’. The company policy is to purchase raw material in cash, which gave it enough bargaining power to get good discounts from the market price. The company has been maintaining about 21 days inventory, thereby controlling the inventory holding cost. Of the operating cost, Labor and Labor related cost has been the highest at around 20%.

Scenario in the years 2015 to 2017:

The owner, who was keeping the entire operations under his own control through his Production, Maintenance and Quality Assurance managers, had become the president of the welfare association of his locality and started assuming many roles in the communities around his areas and his concentration in the business started drifting away and he was at times not accessible to his own employees for days together. The process of getting newer clients or new products from the existing clients started to diminish.

Sun Plastics started to have a reversal of fortunes and the company’s turnover had started to dwindle and come down to almost $2 Million in the FY 2017. The rejection rate had increased superfluously to around 20% and ever depend cliental base has started to withdraw their products one by one from Sun Plastics. The labor turnover has increased alarmingly to about 17% in these two years and the cost of hiring new employees have consequently increased too. The existing employees have started feeling fatigue of extra workload due to the alarmingly high rejection rate. Their work-life balance has slipped away so much that a few of the expat employees, who were married, and their wives were working in the near-by province, could not even meet with them once in 3-4 months. The production manager in the meantime, went for vacation and could not return due to his personal commitments and things started to drift around for the owner.

Now,

As a management expert, you have been approached by the Owner, with a request to analyze the problems faced by the business and suggest him ways and means to rectify the situation and bring back the business to track.

1. You may prepare a SWOT analysis of the current status of the business

2. Prepare Balanced Score Card to measure the performance of the business and help the business to come out of the present crisis.