Changing Directions

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THOMAS C. DABOVICH Morton Chemical Co., Chicago, Ill.

Changing Directions Take stock of what you have, whip it into shape, and make the most of it

CHEMICAL

companies have been started for different reasons and to serve different functions. Some have begun by supplying a single product to a single customer; ' to a some by supplying a special seririce community-a consulting laboratory or specialized analytical work; others by producing small quantities of otherwise unavailable chemicals. This discussion is centered around a small company that starts with a product or two for a very limited number of customers. Once the initial efforts are successful, the founders of the company start looking about for nevi opportunities, and the easiest and probably the most common direction is to continue lookin? for specialized custom manufacturing. While some rather sizable companies were built in just this way and this is still probably the most common way for an individual or group of individuals to start a small company, this is now one of the more difficult routes for rapid growth because competition has been increasing in this area.

Here, private label manufacturing, which is a separate category, is specifically excluded and only manufacturing on contract of bulk chemicals and chemical intermediates is considered. Such contract manufacturing can cover a broad range of profitability; however, there are other problems which lead to a great deal of uncertainty. Some products have a very short life span. Occasionally, if the volume increases enough, the customer will decidr he can make it cheaper himself, or, perhaps it is a hazardous product to make. Sometimes neither company kno\vs its costs. Diversification The company that desires to diversify its manufacturing base is considered now. What is its best course of action? The simplest answer is to start producing chemicals that can be sold on a broad basis; however, this is ever so much easier said than done because it is not often that chemicals are found (jvithin

Management Have you been running your company by the seat of your pants, or do you have an objective? If you have had an objective, was it a realistic one, and have you kept sight of it?

the ability or finances of this company) that are in short supply or in a rapidly grolving field. Before deciding on a course of action, the strong and weak points of the company must be evaluated carefully: special technological skills (research, production. service), relation of plant location to markets and raw materials, marketing ability or disability, manpoiver, and finances. There must be willingness to recognize weaknesses and ability to procure the necessary supplementary skills or facilities. Raiv material position is of limited importance when the raw material is a low-priced generally available commodity; it is significant when the contemplated process is based on a high-priced: high-profit specialty chemical or intermediate. The decision to change from contract manufacturing to broad base can be a n easy one: but carrying it out is extremely difficult at best, and there are many approaches in addition to the one suggested below.

Evaluation of plant facilities-do you have any specialized processing equipment which might give you direction?

Marketing Is there a marketing organization?

Obiectives Having decided that you are going to change the complexion of your company, well defined objectives should be drawn up. These objectives should be tempered with common sense and in keeping with the physical and material assets of the company.

Eva1uat ion Careful appraisal of the company's technical strength and weaknesses. Evaluation of present products:

Does the research department have objectives consistent with corporate objectives? Does it have any special skills that haven't been utilized that might indicate an area to be explored?

Customer Service Don't underestimate the importance of customer service regardless of the type of products involved.

Has competition forced the price of some products to an unprofitable level? Should they be dropped?

Manpower

Is there a common vein to your products or could you make one if you were to go back one or two

Is the company manpower good enough to be able to switch over to your new objectives?

steps in your processing?

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Research

Are you currently using raw materials which might give you ( I sense of direction?

location

Do you ;lave specialized processing know-how which could be put to use in other areas of chemistry?

What are the advantages or disadvantages of plant location as to raw materials and markets?

INDUSTRIAL AND ENGINEERING CHEMISTRY