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Part Two
Design
Case study
Rochem Ltd
Dr Rhodes was losing his temper. ‘It should be a simple
enough decision. There are only two alternatives. You are
only being asked to choose a machine!’
The Management Committee looked abashed. Rochem
Ltd was one of the largest independent companies supplying
the food-processing industry. Its initial success had
come with a food preservative used mainly for meat-based
products and marketed under the name of ‘Lerentyl’. Other
products were subsequently developed in the food colouring
and food container coating fields, so that now Lerentyl
accounted for only 25 per cent of total company sales, which
were now slightly over £10 million.
The decision
The problem over which there was such controversy related
to the replacement of one of the process units used; to
manufacture Lerentyl. Only two such units were used;
both were ‘Chemling’ machines. It was the older of the two
Chemling units which was giving trouble. High breakdown
figures, with erratic quality levels, meant that output level
requirements were only just being reached. The problem
was: should the company replace the ageing Chemling with
a new Chemling, or should it buy the only other plant on
the market capable of the required process, the ‘AFU’ unit?
The Chief Chemist’s staff had drawn up a comparison of
the two units, shown in Table 8.7.
The body considering the problem was the newly formed
Management Committee. The committee consisted of the
four senior managers in the firm: the Chief Chemist and the
Marketing Manager, who had been with the firm since its
beginning, together with the Production Manager and the
Accountant, both of whom had joined the company only
six months before.
What follows is a condensed version of the information
presented by each manager to the committee, together
with their attitudes to the decision.
The marketing manager
The current market for this type of preservative had reached
a size of some £5 million, of which Rochem Ltd supplied
approximately 48 per cent. There had, of late, been significant
changes in the market – in particular, many of the users
of preservatives were now able to buy products similar to
Lerentyl. The result had been the evolution of a much more
price-sensitive market than had previously been the case.
Further market projections were somewhat uncertain. It
was clear that the total market would not shrink (in volume
terms) and best estimates suggested a market of perhaps
£6 million within the next three or four years (at current
prices). However, there were some people in the industry
who believed that the present market only represented the
tip of the iceberg.
Although the food preservative market had advanced
by a series of technical innovations, ‘real’ changes in the
basic product were now few and far between. Lerentyl was
sold in either solid powder or liquid form, depending on
Source: Press Association Images
Table 8.7 A comparison of the two alternative machines
CHEMLING
Capital cost £590,000 £880,000
Processing costs Fixed: £15,000/month Fixed: £40,000/month
Variable: £750/kg
Variable: £600/kg
Design 105 kg/month 140 kg/month
Capacity 98 ± 0.7% purity 99.5 ± 0.2% purity
Quality Manual testing Automatic testing
Maintenance Adequate but needs servicing Not known – probably good
After-sales services Very good Not known – unlikely to be good
Delivery Three months Immediate
AFU