Group 03 - Alden Inc.

Alden Products Inc.
Introduction
• Alden Products Inc. (API) is a privately owned company headquartered in Peoria,

USA which manufactures premium priced personal care products for people seeking
higher quality, innovative and unique (ingredients, scents or medicinal) properties.
• They have 3 plants: one in US (Peoria plant); and two in Europe: one in Europe-
continent, Uniplant, Holland and other in UK, Buxbridge plant
• P&G, Unilever & Gillette moving up-market with new brands. To deal with this API
has begun introducing new products designed for specific seasons (tanning lotions in
summer, floral scents in spring, etc.)
• Business Strategy: Broad Differentiator (1500 different products in over 50 countries)
• Allyn & Bower as a consulting firm they partner in making Capacity decisions.
Looking back, do you agree with the logic that led Alden products international in 1962
to consolidate its continental European production into one single facility?
Yes, we agree to the logic that led Alden, to consolidate its production into a single facility in
continental Europe. We can explain the reason for consolidation in two steps: first, the factors
which lead to consolidation and next how consolidation helped them.
So, first the factors that lead to consolidation was:
• Alden used to manufacture the same product under different brand names for different
countries; many a times standard formulations were modified based on local
preferences thus there was a no need to manufacture similar products in different
geographies.
• Mainland Europe moving towards Common Market, which means most of the trade
barriers might be removed. So, even if production at a single plant might increase
transportation cost but removal of trade barriers will offset that and bring down cost
because of scale economies.
Next, how consolidation helped them
• sales growth over 40% per year in Europe but this growth varied from country to
country and Central plant would smooth out the differences in variation.
• Low investment in Cap-Ex (A Centralized plant would require at-least $ 0.5 m less in
investment compared to regional plants)
• Low investment in Op-Ex ((A Centralized plant would require about $ 1.8 m or 20%
of annual costs in investment less compared to regional plants)
• On-site polymer plant, storage facilities to reduce reliance on suppliers
• Standardized quality, quick development, debugging & introduction of new products
• Gaining Cost efficiencies & cost advantage
What is your evaluation of the Uniplant's performance during the 1980s?
The benefits of operating a Uniplant was:
• Mainly Scale Economies which brought unit costs down
• Plus other factors such as good location & transportation network, proximity to ports,
sourcing raw materials from various locations, political & social stability, etc. which
added to the cost advantage
But, there were many downsides also to the Uniplant. The Uniplant general manager, Van
Zwieten used to operate the plant in a way which brought down the cost to as low as possible
but created conflict with other performance parameters.
• To increase Efficiency, Uniplant avoided short production runs; so the plant offered
substantial discounts on low-volume products to regional marketing organizations for
accepting a year worth of sales in single shipment; The manager also resisted any
increase in no. of products as it would increase setup times and shorten production
runs.
• This increased friction between Uniplant & Alden-Europe’s country marketing
organizations were causing late deliveries & poor responsiveness.
• Also, the difference in exchange rates were deteriorating the costs of delivered
product thus many a times nullifying the gains made in cost economies. To deal with
this problem, contract fillers were used.
Thus, the gains made in Cost advantage were now conflicting with variety & flexibility in
operations.
(Here high value of Cost, doesn’t mean high cost, but Cost economies due to scale.)
Before Centralising After Centralising

Quality
40
20
Dependibility Cost
Flexibility Speed
What recommendations would you make to Mr Genet, API-Europe's Executive V.P., as

regards the operations strategy his organization should follow in the future?
Specifically, how much additional production capacity should be provided, where
should it be located, and how should it be managed?
So, Mr. Genet has the following options before him regards the capacity planning of Alden.
First, he can upgrade the existing Uniplant to capture future growth in Sales.
Second, he can set up a new plant to upgrade capacity.
Third, he can use contract fillers, to fill the gap between supply and demand.
Before making any recommendation, we would like to consider the guidelines on which the
company would like to compete and based
• Competitive Guidelines: Identification of unserved niches & creative marketing; large

no. of new products in timely manner; high product quality; customer service (critical
success factor); manufacturing flexibility (quick response to market needs &
competitors) and cost competitiveness
So, we can clearly see, that now the company wants to be better, more along the
performance dimensions of responsiveness and flexibility. Sure, it wants to be good at
quality and low cost, but it has reached a level of saturation there and there is less space
for growth along these dimensions.
Also, the company now has portfolio of more than thousand products some of them
targeted towards different geographical markets which is growing like middle-east. Apart
from that the company has been targeting very niche markets by offering personal-care
products in different seasons to protect its position against like P&G and Unilever. So,
considering these factors it seems very clear that the company wants to be strong on
flexibility and responsiveness to achieve its vision.
So, if we analyze the options now,
If we consider the first two options, we will find that upgrading the existing capacity is
obviously more favourable to installing a different capacity when it comes to cost because
Cap-Ex and Op-Ex required will be less. Also, although Uniplant might incur higher
labor cost now, it is still able to deal with the problem of higher labor expense by hiring
university students as workers which a new plant might not get that easily. So,
considering only cost we will gain from scale economies.
But, if we go for the decision of increasing the capacity of Uniplant, we will lose on the
dimension of flexibility and responsiveness. Earliar a single plant in continental Europe
was able to cater to these dimensions after Europe moved towards a common market, but
now it has to cater to very different markets where it may not have that kind of land
transportation or political stability.
Also, if we look at the way, how the General manager of the Uniplant has been operating
the facility, we will find that he is focused only on gaining scale economies so he is
resisting not only short production runs but also any increase in the number of SKUs. So,
we find out that there is a great difference in how the General Manager of the Uniplant
has been operating the plant and where the company wants to go.
So, the option we recommend is to use is Contract filler. The company has already been
using the filler option in Italy and operations has been working smoothly for them, so
they can now extend this to other countries also to diversify the risk from operating a
single plant when increase in flexibility and responsiveness far outweighs cost benefits.
The only problem with this approach that some products of Alden are proprietary and
sourcing them from other places might lead to loss in Intellectual property, but this can be
mitigated by:
• Contract fillers to outsource production of some products in maturity & decline stage
of PLC
• Controlling production of products in development & introductory stage of PLC

(proprietary formulations & ingredients)

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Alden Products Inc.

• Alden Products Inc. (API) is a privately owned company headquartered in Peoria,

• Business Strategy: Broad Differentiator (1500 different products in over 50 countries)

So, first the factors that lead to consolidation was:

Next, how consolidation helped them

• On-site polymer plant, storage facilities to reduce reliance on suppliers

• Standardized quality, quick development, debugging & introduction of new products

• Gaining Cost efficiencies & cost advantage

What is your evaluation of the Uniplant's performance during the 1980s?

The benefits of operating a Uniplant was:

• Mainly Scale Economies which brought unit costs down

Before Centralising After Centralising

What recommendations would you make to Mr Genet, API-Europe's Executive V.P., as

Second, he can set up a new plant to upgrade capacity.

• Competitive Guidelines: Identification of unserved niches & creative marketing; large

So, if we analyze the options now,

• Controlling production of products in development & introductory stage of PLC

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