Management case study

Stickley Adhesives I Case Study Page 1

BOSTON UNIVERSITY

METROPOLITAN COLLEGE

DEPARTMENT OF ADMINISTRATIVE SCIENCES

STICKLEY ADHESIVES I1

Pasquale “Cocoa” Martinez began reviewing his Operations Management course notes in preparation for his first big project at Stickley Adhesives. A recent graduate of Boston University’s Metropolitan College, Cocoa had just been hired to be an operations analyst at a Stickley facility in Puerto Rico. Cocoa holds an undergraduate degree in biology and a Master’s degree in applied business analytics. This project requires him to analyze capacity requirements for a newly designed service system. Stickley’s customers use this service when they are unsure of how to take advantage of Stickley’s extensive product line. This “applications service” supplements product sales and is an important component of Stickley’s business strategy. In fact, Cocoa’s work will be the last in a series of analyses on which a project team of scientists and consultants has been working during the past year. When Cocoa asked why a relatively inexperienced analyst should take on this role, he was told that the project’s budget did not include money for a more experienced outside consultant and, in any case, the analysis should not be too difficult.

Company Background

In the early 1910’s, Gerald Stickley and his cousin (Dean Happ) began experimenting with making glue for various bonding applications. Gerald, an enthusiastic science student finishing the 11th grade, had just learned that the protein collagen was used to make glue. Living on a farm in Kansas, Gerald’s interest was piqued because collagen, contained in connective animal tissues, was abundant on his family’s farm. After Dean went off to college, Gerald continued to work on his experiments while assisting with his farming chores. After graduation from high school, he continued to work full time on the farm, while taking on an increasing number of responsibilities for both the operation of the farm and the business of farming.

The severe drought of the 1930’s and the subsequent economic depression forced Gerald and his family to abandon farming and move to the city of Wichita, Kansas. There, Gerald took a series of low paid jobs. He supplemented his meager income with sales of glue products. Once the economic situation improved, sales of “Stickley Glue” increased, and eventually Gerald opened a small factory to make glue products. Over the years, glue production transitioned from the use of animal products to synthetics and, in 1975, the name of the company was changed to Stickley Adhesives. Gerald Stickley died in 1978 and the company was sold to an international corporation, Congisto A/S. Congisto has maintained the brand name Stickley Adhesives, due to its excellent reputation for high quality products that can be used for a multitude of bonding applications.

The Stickley Adhesives division of Congisto A/S employs 6,000 people worldwide. They include about 900 scientists, engineers, and technicians who are devoted to the development of new adhesive products and the support of customers using existing products. Because the majority of Stickley’s customers are not familiar with the science of adhesives, Stickley offers numerous support services. These support services include troubleshooting, equipment rental, and applications consultation, which are considered by Stickley management to be a key source of competitive advantage. It is the reason why Stickley can charge a premium for its products. Although its headquarters remains in Wichita, Stickley’s design, manufacturing, and support functions are located at various U.S. and international locations. It has customers located in the America’s, Europe, and Asia.

1 This case was developed by John Maleyeff based on his work in service process capacity planning. All references to people and organizations are fictional. © 2018 All rights reserved.

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Applications Service Operations

Cocoa’s project concerns Stickley’s applications service. This service responds to requests from customers who wish to know the best adhesive product to use for a specific application, and the recommended application characteristics. These characteristics could include the amount, the recommended cure time, the holding (or clamping) pressure, and other factors that affect the quality of the resulting bond. Examples include bonding requirements for products such as medical (e.g., syringes), personal (e.g., cosmetics), acoustics (e.g., speakers), and automotive (e.g., engine hoses). Often, the materials used or the conditions under which the bond must hold are unusual or extreme. For example, a manufacturer may wish to bond a rubber hose to a specialized metal alloy in an automobile engine with extreme temperature variations, excessive vibrations, and oily or dirty conditions.

The service also includes recommendations regarding the equipment needed to achieve a high quality result. Both standardized equipment (such as dispensing setups and ultraviolet curing systems) and customized equipment may be needed by customers. Customers who do not own their own equipment may rent or purchase the equipment from Stickley (they usually start by renting the equipment with an option to purchase later). Currently, the applications service is decentralized, with each region performing its own analyses for regional customers. Each region charges customers for the service in different ways, in some cases offering the service free of charge for some important customers. In every region, the system makes extensive use of scientists, engineers, and technicians to study each application, run experiments, analyze experimental results, and report results to customers.

Recently, Congisto’s management became aware of complaints from both customers and Stickley’s staff regarding the operation of the applications service. A Lean Six Sigma project found that the number of “reapplications” (i.e., requests concerning applications that had already been evaluated but did not succeed) had increased substantially. The root causes were found to include many inconsistences in the operation of the applications service across the global landscape. Many of these inconsistencies did not appear to be especially new. However, requests have become more complex and expectations of Stickley’s customers have increased as the service has become more popular. Finally, Stickley’s technical staff complained of having multiple job responsibilities with conflicting incentives. As a result, the decision was made to centralize the operation of the applications service.

Centralized Applications Service Offering

The new applications service system will centralize applications services operations while taking advantage of scale economies and low labor costs when sensible. It will use new information technology (IT) systems that will allow for the transmittal of information over great distances. At the time of Cocoa’s involvement, the system design is complete and the anticipated operational challenges have been addressed. The only remaining questions concern its capacity requirements and the revenue model (whose determination will be made by corporate finance after Cocoa’s analysis).

The service will be available 7 days per week; its process flow is shown in the Appendix. It is anticipated that an average of 24 customer requests will be received on a daily basis, and that the number of requests per day will vary. Analysis of worldwide demand data indicated that there would be no differences in the average demand across days of the week. Daily demand is expected to vary from 14 to 34 requests, uniformly distributed across this range.

Every customer request will be received on a standard form originating from the company’s web site. The first process, prioritizing, consists of an expert evaluation. It determines if the request represents a project that should be handled by a scientist or a technician. Prioritizing will take place in Puerto Rico (down the hallway from Cocoa’s office). On average, each worker can prioritize an average of 12 requests per day, but the actual number of requests each day varies depending on their complexities.

Once prioritizing is completed, the request is sent to the scoping process. Like all other transitions, the IT system will process transactions at the end of each day. Hence, the output from each process will be

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ready at the next process on the following day. Based on past scoping requests, about 1 in 8 (12.5%) of requests need to be handled by scientists, with the remainder handled by a technician. On average, a scientist can scope an average of 3 requests per day and a technician can scope an average of 7 requests per day. Again, the actual number of requests per day will vary. Scoping will be performed at the U.S. headquarters in Wichita.

After scoping, each request is sent to the experimenting process. This process will be done by engineers located on a Stickley subsidiary located in Bangladesh (at a facility known to have the best quality results in the decentralized system). Here, each worker can complete an average of 6 requests per day. After the experiments are complete, requests are sent for analysis. The analyzing process is performed at the R&D facility in Wichita. About half of these requests require equipment rental (which requires design of the equipment system and price determination), and workers performing these analyses can complete an average of 2 requests per day. The remaining half do not require equipment rental, and workers performing these analyses can complete an average of 6 requests per day.

Finally, the last process in the applications service system is reporting. This process will take place at a Stickley subsidiary located in the Philippines. Workers at this facility can complete an average of 8 customer requests per day. As with the other processes, the actual number of requests completed will vary by day.

The characteristics of each process including location, average completions per day and “fully loaded” labor costs per day are shown in Table 1 (fully loaded labor costs include allocations for benefits and other overhead expenses).

Table 1: Process Characteristics

Process Location Average Capacity per

Worker (customers/day) Labor Cost per Worker ($/day)

Prioritizing Puerto Rico 12 125

Scoping: Scientist Wichita (U.S.) 3 400

Scoping: Technician Wichita (U.S.) 7 250

Experimenting Bangladesh 6 75

Analyzing w/o Rental Wichita (U.S.) 6 300

Analyzing w/Rental Wichita (U.S.) 2 350

Reporting Philippines 8 50

Service System Simulation

During earlier phases of the project, a consultant developed a Monte Carlo simulation of the proposed system. Cocoa is told that he should make use of this simulation. He is informed that the simulation is accurate, and no changes will be necessary to its internal logic. It simulates 30 days of operation based on the structure and parameters described above. Users must enter the number of workers assigned to each process. Each “iteration” of the simulation will mimic 30 days of operations. By running the simulation repeatedly, users can observe the variation in throughput (completed requests at the end of 30 days) and other process characteristics.

A video has been prepared by the consultant describing the use of the simulation in detail. It is recommended that Cocoa watch the video before answering the analysis questions posed to him.

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APPENDIX

Applications Service Operations: Process Flow

Prioritizing

Scoping: Scientist Scoping: Technician

Experimenting

Reporting

Analysis w/ Rental Analysis w/o Rental

CUSTOMER REQUEST

REQUEST COMPLETED

12.5% 87.5%

50% 50%