Arborite Term Paper

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[. . .] 84 per square foot for the Canadian product and $1.21 to $1.05 per square foot for imported HPL from the U.S. The percentage of U.S. imports is also expected to rise and that of the Canadian product is expected to fall.

Manufacturing process and suppliers of HPL raw materials

The process to manufacture HPL involves the following eight stages:

Resin mixing: Resin is the bonding agent used to glue paper stock together and create the laminate composite product. Three basic chemicals were required to be mixed to obtain the desired resin. None of the HPL manufacturers were backward integrated and did not control the suppliers of the raw chemical material. The company manufacturing the HPL can either mix the resin or it can be obtained premixed from the resin manufacturers. The HPL industry had negotiated with the suppliers of resin to get the best possible price for bulk purchases. The consumption of resin depended on the weight of the paper used and the thickness of the laminate product desired by the HPL manufacturer. The thicker the product, the more difficult it was to curve and shape. Inventory requirements of the resin are important for the HPL manufactures. Warehousing and tracking inventory levels are required to ensure that the company does not run out of this critical product, as this would shut down the entire manufacturing process.

Paper treating: There are basically two types of paper (Core stock and cover paper) used to manufacture laminates. Essentially, these two types of paper constitute approximately 33% of the total cost of the final product. The cost of the two papers therefore becomes critical to the manufacturing process. The core and cover paper are cut into the desired size and then infused with the heated resin. The cost of this process depends on the following factors:

Cost of the cover paper

The weight of the core paper

Paper treating technology (air floatation or bar treater)

The system control for the entire paper treatment process

Core stock: This is the second basic requirement of laminate manufacturing. The thickness of this product determines the thickness of the laminate that is finally created and constitutes the bulk of the weight of the product. This material constitutes 12% of the total cost of the product. There were two major suppliers of core stock paper with market shares of 60% and 40% and they did not offer any volume discounts to the HPL manufacturers. With respect to the variety of core paper used, thicker paper was cheaper but made the laminates less flexible. Thinner core paper could be made more durable by increasing the number of layers of paper used and using more resin per panel, but this was expensive.

Cover paper: This decorative paper is used over the core stock in the laminate. The cover paper determines the style and the variety of color and design that laminates possess. This is important in the market, as it is the first aspect of HPL that crosses a customer's line of sight. The cost of this raw material is approximately 21% of the total cost of the laminate. HPL manufacturers can get a volume discount of up to 50% if they buy in large volumes. The cost of this raw material has also increased over the years and there are three major suppliers of this raw material.

The paper treating technology also determines the quality and cost of the laminate. The bar treater is an older method that is less efficient than the air floatation treatment method. The bar treater does not allow operator control in the process which the air floatation process allows. The operator control that air floatation introduces can help control and reduce the waste of raw material (resin and paper) and process cost if faulty operations are observed. The more efficient HPL manufacturing plants are moving to the air floatation methods in an effort to improve the quality of the laminate and reduce the rate of rejections.

Lay-up: This is the third stage of the operation and involves sizing and cutting the two papers to the desired size as required by the end user. The cost of this process was dependent on:

Lot sizes that were produced

Level of automation in the plant

This process was very labor intensive and the cost of material was approximately 8% of the total cost of the HPL.

Pressing: Heating the sheets and using high pressure to fuse the layers together formed the sheets. Different surface finishes were obtained either by using textured paper between the pressing place and the cover sheet or by using a textured pressing plate. Texture plates were cost effect only if the plant was producing high volumes of the product and the plates could be used for extended periods of time. The cost of this process was depended on the following factors:

Method of heating used (steam or hot water)

The capacity utilization

The pressing technology used

Methods of texturing (textured paper or textured press plates)

Automation had the potential to reduce costs if the capacity utilization is high. Textured plates factories also had to take into account the downtime that was needed to change plates and the wear and tear on the plates that were incurred as a part of the operation. The number of runs was constrained by the life of the textured plates that were used on the automated presses.

Finishing process: The HPL that were pressed and formed were cut and trimmed in this stage. This process was very labor-intensive. Dedicated workers had the potential to lower these cost, but only if the throughput through the factory was high. Although some HPL manufacturers developed an automated process, the quality produced by these automated finishing machines was not of the desired quality.

Packaging: The costs of packing were lower if the HPL were packed in pallets as opposed to cartons and if the process was automated. In order to automate and ship in cartons however, the process through the plant had to be high. The orders had to be shipped in large lot sizes. Some HPL underwent a two-stage delivery process where large quantities were shipped to a central warehouse from where the laminates could be redistributed to the smaller distributors and dealers.

Plant maintenance and overheads: Maintenance of HPL plants depend on the age of the plant, the extent of automation and the quality of the equipment used. Based on the desired quality of the laminates the overheads incurred by the operators also vary. Outbound logistic needed to distribute and ship orders also varies. Manufacturers ship the products in larger volumes to avoid the laminates from getting chipped or cracked. Warehousing is also a major concern for HPL manufacturers and trucking and delivery are major components in ensuring the product gets to the end users in the time frame desired.

Marketing and sales: all manufacturers of HPL undertook low levels of advertisements and promotions for the products with the general public. Rather, they concentrated on marketing and selling of their product lines to the designers, architects and OEMs that are the major consumers of the product. Direct contact with these users is needed if the company hopes to attract the customer towards the products manufactured by the company. In addition, sample and new products introduced into the market have to be provided to these users at regular periods of time.

At present Arborite is faced with the following issues in its operations:

Low capacity utilization at both plants compared to its competitors

The use of bar treaters as compared to air floatation

Low use of automation making the processes very labor intensive

One old plant that needed high maintenance and one new plant

Low levels of innovation and product quality and variety are considered appropriate for the inventory driven market

Inability to deliver products within the industry time frame was sometimes observed due to the use of contract carriers from the company's warehouse to the customers location

Low incentive programs for the sales force in the region

This case study will evaluate some of the options that are available to the company to introduce changes to improve the operations and the make this division (Arborite) of Domtar profitable. In 1986, the company had reported a negative rate of return on assets of -19%. The manager Mr. Brian Nutter is interested in improving the company and making it more profitable in the market.

Chapter 2: Discussion of variables affecting the organization

An organization has to constantly grow and evolve if it has to be competitive in a constantly changing market. In the journal article "What is strategy?" The author, Porter, states that the current environment in which organizations operates is very dynamic. (Porter, 1996) And positioning, which was once the core of strategic management does not work any longer. Modern organizations are challenged constantly by a combination of technology changes, market changes, logistic challenges, customer demands and human resource challenges. Companies, by identifying their core competencies and cultivating these options to generate… [END OF PREVIEW]

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