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Case Study

It was during the 3rd quarter of FY18-19 when an emergency meeting was called by the MD of
PQR Ltd., with the senior leadership members. The West II plant was down which was affecting the
service to all major customers. Incidentally this is their newest plant with state of the art technology
built with the latest equipment used in their industry. But having the latest technology in place, the
plant reliability has not been too optimistic and have already seen the unplanned shutdown for the
4th time in row for the last 3 months. The issue is not just confined to this particular plant, the story is
the same across other production units as well, although the production process in the plants are well
managed by competent human beings who have served the organization well before the technological
advances were brought in into the process, knowing every nitty gritty of the production process. PQR
thrives on the ability of its people on driving the process. But for the past few years the company is
facing challenges maintaining the reliability factor even after investing well in the technological
advancements across its manufacturing sites.

Unplanned shutdowns have a downside effect on the plant productivity and plant reliability through
lower production, reduced machine efficiency, wasted manpower and higher inventory loss. The
overall delivery schedule goes for a toss resulting in lack of customer happiness. While the production
is down in one line, the other lines take extra pressure to produce more, which makes them prone to
early breakdown. The issues gets even bigger, post the problem identification phase. The procurement
department needs to go to the extreme levels with the vendors to procure required machine parts for
attending the breakdown. The raw material usage pattern gets disturbed with the breakage in
consumption. The off-spec generation in the production process also increases after resumption.
Moreover, the people working in the affected plant requires to work extra shifts to take care of the
situation and production.

Being seriously impacted by the ongoing disturbance in the smooth operation of the plant, the senior
leadership team decided to take an expert help on the same. During the following two weeks, teams
from 5 top management consulting firms presented their solution to the senior management. To the
surprise of the leadership team, the consultants discussed their idea around technological
development. and plant automation. They all think that plant automation and digitization can act as
an enabler to improve plant efficiency and enhance the plant productivity to have a sustainable
business in manufacturing.

PQR Limited have taken a lot of initiatives towards automation and digitization. The production
process across their units are controlled through DCS system (Programmable Logic Control). Recently
they have upgraded to the latest SAP S4 HANA and opted for the cloud-based data management
system. They also have started their journey in HR automation with SAP success factors. Despite all
these initiatives, PQR believes it is far from benchmark and are brainstorming on how to become a
digital savvy organization and understanding the gap between the status quo and as desired state of
being.

After a journey of losses during FY13 and FY14, PQR limited has been making profit continuously since
last 4 years. They have taken huge steps on the R&D front by building a state-of-the-art R&D center
at their West I plant. They have also started their innovation center in Belgium, Europe. PQR is also
planning to expand their production capacity through Brownfield and Greenfield projects. Their
investments across projects are in line with their vision of being a trusted global player and providing
cutting edge solutions to their partners.
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Disclaimer: Sole copy right reserves lies with Phillips Carbon Black Limited.
For your Information

Introduction of the Company:

PQR Ltd is a Carbon black manufacturing company based out of India. With a total capacity of 515,000
MT and spread across 4 strategic locations (East, South, West1 and West2), PQR is the largest carbon
black manufacturer in India. Globally it is sixth largest. The company has a rich legacy of close to 60
years in the carbon black (CB) industry.

Over the period of 6 decades, the company has witnessed a lot of ups and downs. However only
recently they have started to perform consistently and started having command on not just Indian
markets but on some of the crucial international markets. The financial performances also started
looking great for consecutive years now (See Annexure A, B &C)

Introduction of Product

Carbon Black is fine black material composed of elemental carbon. It is produced by partial
combustion of heavy petroleum products under controlled environment. Carbon black is majorly used
as reinforcing filler in tyres to enhance tyre properties like rolling resistance, mileage, tread wear etc.
When added to other materials it decreases their electrical resistance and hence makes them better
conductors. Also Carbon Black possesses strong tint properties which make it a perfect pigment for
plastic, fibre and film coloring. Specialty carbon blacks provide pigmentation, UV protection, and
conductivity to various coating applications including automotive (primer base coats and clear coats),
marine, aerospace, wood, and industrial coatings.

Specialty black is a special class of carbon black which exhibits exceptional color and conductive
properties. Specialty carbon black grades cater to niche applications in plastics (food and non-food
grade), fiber, coatings and inks, plastics master batches, wire and cable etc.

Carbon Black demand has a direct dependency on Automobile Industry as nearly 74% of Carbon Black
produced goes for tyre production. However, in recent years there is a shift from commodity to
specialty grades of carbon black. The specialty market is growing twice as fast as the commodity
business and is substantially more profitable. Specialty black market is expected to grow at a CAGR of
7.5% from 2018 to 2023 owing to its increasing demand as a pigment in lightweight automotive parts,
plastic pipes, paint industry, printing etc.

In last few years PQR has changed its focus from commodity to specialty grades. PQR started its
journey in specialty black from 2013. Since then it is diligently working to revamp up its specialty
carbon black production and aims to take it to nearly 40% of its total production and more than 50%
of its turnover.

Introduction of Market

Global Carbon Black market size is nearly 15 MnT per annum, growing at 3.5-4 % CAGR. The ratio of
CB demand for advanced and developing economies is 2:3. Asian market accounts for about 63% of
the overall market demand followed by Europe with an estimated CB demand of 2.1 MnT. Together,
North America and South America have a demand of around 2.5 MnT.

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Disclaimer: Sole copy right reserves lies with Phillips Carbon Black Limited.
Continent wise Carbon Black Demand
3%
14%

5%

North America

South America
62%
16%
Europe

Asia

Africa/Mideast

Total CB Demand: 15 MnT

China is the largest Carbon Black producer, having a share of more than 42% of the global production,
with more than 100 plants producing carbon black in the country. It is also the largest automobile-
producing country in the world and hence 70% of the Carbon Black consumption comes from the tyre
industry only. Factors like country’s endless natural resources, inexpensive labor cost and lower tax
regimes altogether have resulted in strengthening China’s position as world’s largest carbon black
producer and exporter.

US based Sabot is the largest producer of Carbon Black with a production share of 13.8 % closely
followed by Mumbai Headquartered Viditya Carbon, accounting to 13.2% of global production. Europe
based Dorion Carbon is at no. 3 with a market share of 8%. But they are the leader as far as speciality
carbon blacks are concerned. Top 6 Carbon Black producing companies together produce nearly 50%
of the total Carbon Black demand.

Questions:
1. Research and benchmark current standard and find the Gaps with an As-is/To-be model.
2. Create a strategy with timeline for the organization to reach the desired automation level.
a. Create a periodic timeline for the desired time period (not more than 4 years)
b. Define functional strategies for implementation of plan
3. Cultural impact and analysis
4. Calculate the ROI and a control mechanism

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Disclaimer: Sole copy right reserves lies with Phillips Carbon Black Limited.
ANNEXURE A

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Disclaimer: Sole copy right reserves lies with Phillips Carbon Black Limited.
Annexure B

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Disclaimer: Sole copy right reserves lies with Phillips Carbon Black Limited.
Annexure C

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Disclaimer: Sole copy right reserves lies with Phillips Carbon Black Limited.

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