Case 22

Case 22:

Victoria Chemicals plc (A):

The Merseyside Project

Yanan Chen

Jessie Hall

Michael Lockhart

Elena Waldrop

Table of Contents

I. Introduction

II. Problem Statement

III. Alternative Solutions

IV. Decision Criteria

V. Decision

VI. Summation

I. Victoria Chemicals, one of the top worldwide competitors in the chemicals industry, is a company that focuses on producing polypropylene. This is a polymer that has a very wide variety of uses, including carpet fibers, medical products, and automobile components. The company owns two plants; one is in Merseyside, England and the other is located in Rotterdam, Holland. Both plants are identical, built in 1967 (41 years old), and running on an outdated production process, which creates high labor content. The company is a supplier to customers in Europe and the Middle East. There are also seven other major competitors producing polypropylene in the same market region, which all operate at various cost levels.

The relatively new Merseyside plant manager of 12 months, Lucy Morris, recently undertook a detailed review of the operations and discovered major opportunities for upgrades and development in polypropylene production. Some of these opportunities include: relocating and renovating tank-car unloading areas, which would enable the process flow to be streamlined, refurbishing the polymerization tank to achieve higher pressures and thus greater throughput, and reconditioning the compounding plant to increase extrusion output and obtain energy savings. All of these improvements would save energy (for the following ten years) and help with the flow of the production process that had been deferred by the past manager. Morris is estimating a budget of GBP12 million for the project, as well as a full shut down for 45 days. This would cause a loss of customers, but according to her controller, Frank Greystock, this loss would only be temporary....