CASE

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Case date 2001

Supply chain relationships: Wheatco Ltd and Chemco Ltd (B)

Marie Koulikoff-Souviron, Alan Harrison and Jaques Colin

This case study should only be used after Supply chain relationships: Wheatco Ltd and Chemco Ltd (A) which gives background information on the businesses and the issues involved in the WheatcoChemco relationship. About eight years ago, shortly after the Chemco facility was built and the partnership was set up, joint team days had been organised on two occasions to allow employees from each production unit to meet and get to know each other. This allowed people to put a face to a name and thus make it easier to collaborate on the technical process. However, since these early days, such meetings have no longer been organised, and yet a number of reorganisations within Wheatco have introduced new faces, especially within the Building 150 operating room. In 1997, a new very large production process was established on the Wheatco site. All of the operators who had originally installed the Building 150 production unit were promoted to shift manager status. A completely new team of operators was appointed. Moreover, Wheatco recently put in place a new procedure of operator cross-training in order to increase the number of personnel who were qualified to operate each of the three production processes. Building 150 operators now rotate from one process to another instead of being dedicated to a single production process. There have been two impacts of these changes on employees at Chemco: on the one hand the new Building 150 operators are unfamiliar, and on the other hand they have to deal with more than one person during a shift, so they complain about a lack of follow-up in communication. Moreover, they have the feeling that the Building 150 process is a kind of training ground for new operators who, once they are suitably experienced, are moved to other, more strategic production units on the Wheatco site. There is another cause of tension among production operators. Over the last two years a new incentive scheme has been put in place at Chemco, which is based on the performance of the additive A1 production process. Thus if the process is stopped, for whatever reason, the Chemco bonus is reduced. The Chemco operators blame the Building 150 operators for not being committed and capable of running their process, and in cases of shutdowns, they use the bat phone to ask when the process will be running again. This annoys the Building 150 operators, who are busy looking for the cause of the problem. A Wheatco engineer comments:
The Chemco operator will ring up our operator and say, Are you ready yet? And our operator will say, No, we wont be ready for 12 hours. Another hour later, the phone

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rings again: Arent you ready yet? What? Are you the same person I talked to an hour ago? Clunk (as the phone goes down).

Several quality issues have recently arisen in regard to the supply of additive A1 from Chemco to Building 88. Thus during meetings in March, it appeared that some testing procedures had not been properly followed by the Chemco quality department. The Wheatco production engineer has become very upset: I cant trust them any more!

The new situation

The situation with regards to the WheatcoChemco partnership is currently very tense. It is being described as not a smooth supply chain at the moment. Although Chemco has had its fair share of technical failures in the past, the current situation seems to be better with regards to the Chemco side of the supply chain loop. Over the last four or five months it has been Building 150 which has been the source of most of the problems. This lack of reliability is due to the fluid bed reactor, whose temperature can rise beyond the 300C limit and cause the reactor to trip (cut out). Its usually possible to start up the reactor again without further problems. When this is not the case, it can take up to several days to succeed in starting up again (the number of these trips has been estimated at about 50 per year). These problems are a cause of tension and conflict. In the words of a Building 150 operator:
Through a 12-hour shift, the feed trips then you put them back online, then it trips again and it does wear you down if youre constantly having to start the plant up again.

When either of the two production units (Chemco or Building 150) shuts down, it has to carry the blame for the shutdown of the entire supply chain. Several causes have been envisaged for the reactor hot spots. One solution has been identified, which engineers estimate would have an 80 per cent chance of success, but this requires purchasing a piece of equipment, which is on order but which will not be available until March 2002. Michael Bond was made Director of the Chemco facility in March 2000. He has a solid experience of plant management at other Chemco sites. However, it is the first time that he has had to face the task of managing such an intricate partnership. His challenge is to manage his own plant performance, whilst being aware that it is very dependent on an external company. Upon arriving at the Chemco facility, Michael Bond found the relationship with the Wheatco site very open and honest with excellent information sharing between both firms at management level. However, he is very much aware of tensions existing at other levels, especially among production operators. Beside this he is under pressure because the decision to extend the site has been put on hold by the US corporate management because of the current unreliability of the Wheatco process. The final decision will be made in March 2002. Michael knows that he has no other alternative than to collaborate with his partners but the situation is difficult and conflicting at various levels. Moreover, problems within his own quality organisation are such that Michael is mulling over changes within his own organisation to reinforce the quality drive within Chemco.

Wheatco Ltd and Chemco Ltd (B)

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At Wheatco, a new Supply Chain Manager for the Basic Chemicals SBU Jonathan Price was also appointed in March 2000 to coordinate the partnership with Chemco. He has a very good experience of the WheatcoChemco relationship because nine years ago he was an Area Manager within Basic Chemicals where Building 150 is located. He is very aware of the strategic problem caused by Wheatco to Chemco. Indeed Chemcos long-term development is threatened by lack of reliability of the Building 150 process. Jonathan has to convince Chemco that Wheatco has been channelling a lot of resources in order to resolve the technical issues encountered within Building 150. Could it be that a better collaboration between both firms with regard to human resource management could help resolve the numerous sources of conflict that exist at various levels? What could be done?

Questions
1 How can Michael Bond and Jonathan Price face the crisis situation within both firms, which is expressed through the lack of trust and conflicts that make the relationship difficult to manage? 2 How can Michael Bond manage the internal difficulties within Chemco, with most of his employees questioning the level of priority that Wheatco grants to Chemco? How convincing is the Wheatco position? 3 How different would the situation be if the two organisations were 200km apart instead of being on the same site? Focus in particular on the human issues involved in the case, and ignore the likely increases in stocks and transportation costs.

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