SOLID PLASTICS CASE ANALYSIS

1. SPIL(Solid Plastics India Limited) came into existence in 1993 through a joint venture between MP(Mahesh Prasad) and SPL Germany. Company had completed 10 years in 2002 but was yet to make a profit. Constant attrition rate that saw 6 CEO’s and 50 managers leaving company.

2. MP set up a unit in Hyderabad assuming it would as it would be far away from nuances of Kolkata, wanted it to be a role model. Set up the plant with capital outlay of 80 million. Set up included pres to mould thick plastic sheets of2x1.Plant also had several machine tools like multipurpose lathes, grinders and gear manufacturing facilities.

3. The plant manufactured UHMP(Ultra high molecular weight plastic) that ran into thousands and thousands of spare parts and components. These could be sold to different industries like paper, bottled drinks, railways, packaging units, power plants.

1. PC for engineering purposes For parts like Gears, round bars, pump casings and plates

2. PC for filtration systems Filtration components, pump bodies, sliding and wear elements

3. Rolling steel industry For coil and coil processing components4. PC for harbor and port operations Fender facings, end uses at off shore,

piling, dredging, boats and vessels5. For bottling, packaging and

conveyor industryWear tapes, timing screws, filing rings, machined engineering components

6. For bulk material handling equipment used in power plants

Claimed high wear resistant plastics for uninterrupted trouble free material flow. Application in chutes, bunkers, silos, slider Beds, skirting, dust collectors.

7. For bulk material that could be handled by UHMP

Animal feed, bauxite, Lime stone, coal, Nickel ore..For materials and minerals industry

8. For paper and pulp industry UHMP good for extreme operating conditions, due to its high molecular weight they were resistant to wear and tear and had excellent sliding properties due to homogeneous and washy surface.

1. SPIL had a loss of 30 million in its balance sheet for the year 2002.2. Competitor scenario: Known players like Chinar, kapoor, Krishna and several small

players in Ahmedabad.

3. Meeting with NR(Product Mix)

a. Long plates of plastics that could be used as lining material in bulk materials like chutes and hoppers. Company had set up plant in kolkatta to meet these liner needs but problem was their prices were not competitive. They sold at 110 against 75 for competitors. Another problem was their press size was only 1x2 bu others made at 1x4.5 made by Krishnan which means longer sheets result in more cost competitiveness.

b. Standard Wear and Tear

Could be made through machining or directly cast through dies. Railways a major customer. It utlised them in the form of rings which were used in goods train and passengers. Also used in shopping or luggage trolleys. Through moulding could be sold at 52-82 per wheel. Contribution would be around 20/wheel. By selling 50,000 wheels they could make 1 million profit.

c. Extruded square bars..For this competitors seeling at 150/Kg instead of 300 by SPIL. Could be sold to distributors, fabricators. Product is somewhat similar to rounds and bars sold by steel plants

d.

4. Nr feels developing and marketing customized products a big challenege. For ex to fit parts in a Coke plant in Jamshedpur 8 people had to go. Sometimes order value less but they ended up producing more in case of one customer.

5. From sales break up, products for bottling and conveyor and for general engineering were customized.(May be they cud earm higher margins here).. For liners and paper they needed to be more competitive as products had become standard in industry.

6. Railway: SPIL appointed a dedicated team for liaising with the railways. But it was a tender business and they needed to be competitive on price and have strong liaising. Railways business was considered dirty and messy but necessary. Problem was without standard products of large volumes, plant could not be kept busy with small and erattic base of customers. MP considered railways as cash cow.

7. NR cudnt understand the logic or Railways pricing structure where the company supplied 11,000 pieces to railways at about 100 per pieces instead of 180. Price kept same even in 2000 when there was a order of 35000.

8. Nr also says that weight of finished ring is 1Kg. SPIL followed machining route and had to use 2.66kg of raw material and so costing shud be on that basis on not 1Kg. Nr suggests machining creates more losses and thus they shift to molding route. Via

molding he feels factory cost will only be 60 but it would require a capital investment of 1 lakh in small presses and dies.