A strategic partnership at WheatCoChemCo WheatCo and ChemCo are two US chemical corporations, both.

A strategic partnership at WheatCoChemCo
WheatCo and ChemCo are two US chemical corporations, both leaders in their
fields and with similar sales (around $2 billion per year). Eight years prior
to our study, the two companies formed a 20-year strategic partnership with the
objective of gaining competitive advantage through mutual access to low cost
raw materials. One outcome was the establishment in the UK of a small ChemCo
facility (70 employees) on a large WheatCo site (700 employees). The ChemCo
facility was located next to the WheatCo Basics unit, and linked by a bridge.
Whilst a

A strategic partnership at WheatCoChemCo
WheatCo and ChemCo are two US chemical corporations, both leaders in their
fields and with similar sales (around $2 billion per year). Eight years prior
to our study, the two companies formed a 20-year strategic partnership with the
objective of gaining competitive advantage through mutual access to low cost
raw materials. One outcome was the establishment in the UK of a small ChemCo
facility (70 employees) on a large WheatCo site (700 employees). The ChemCo
facility was located next to the WheatCo Basics unit, and linked by a bridge.
Whilst a fence divided the two plants, selected employees were able to pass
between the two by means of swipe card access. A ChemCo manager commented: We
are symbiotically linked. If you take away the ChemCo and WheatCo signs, were
really one site we have a relationship and its an umbilical cord. ChemCo was
dedicated to production of a chemical additive used in the production of
rubbers, paints and other compositions. The feedstock used in the ChemCo
process was supplied by the WheatCo Basics unit. The manufacturing process of
the additive generated a gaseous by-product, which was recycled back into the
WheatCo feedstock.

Half of the additive made on the ChemCo
site was sold to WheatCos Rubber unit, and the rest to other customers in
Europe and the USA (see Figure 8.11). The two firms thereby formed a closed
loop supply chain whereby they were both customer of, and supplier to, each
other. The production processes operated on a round-the-clock basis and there
was very little buffer stock within the supply loop: If we have a problem,
then ChemCo has a problem 10 seconds later. This close interdependency of
logistics processes meant that operating teams were in contact on a 24-hour
basis. There was a direct telephone link between WheatCo and ChemCo operators
to allow easy communication and instant warning of changes in either of the
processes, or to inform of production stoppages.

The supply relationship was multifaceted,
with interactions taking place at many levels. Locally it included plant
management, engineers and operators. In the USA, an executive contact was
appointed by each firm to manage the relationship at a strategic level. This
applied in particular to the global contract agreement, which provided the
commercial terms for the relationship. A joint steering committee determined
the local operational strategy for the relationship and provided guidelines to
two other joint teams: quality improvement and technical. Eight years after
the supply relationship began, the upstream WheatCo process had become
unreliable. There were also quality issues with the chemical additive supplied
by ChemCo, which impacted rubber production at the downstream WheatCo unit. In
the early days of the relationship, operators had been encouraged to socialise
through company events and plant visits. This allowed a common language to be
developed, through interaction: We may spend a day there, they spend a day
here, and thus, We didnt need to communicate where if something did go wrong
they would automatically take care of it. More recently, the relationship had
developed some disturbing arms-length characteristics. Both partners were
implementing internal programmes which drew attentionaway from the supply
relationship. At shop floor level, less interaction and fewer visits were
allowed. This was made worse by employee turnover. As a consequence, operators
felt that they could no longer put a face to a name. Lack of interaction,
together with the recurring technical issues, put a strain on the overall
relationship. Recognising that a blame culture had developed, site management
from WheatCo and ChemCo decided to organise a Team Day to ensure that
operators, shift managers and engineers from the three manufacturing units
could meet, socialise and be trained on the specifics of the supply loop.
However, the Team Day was cancelled due to a company-wide workforce reduction
plan announced by WheatCo: given the circumstances, such a socialisation event
was seen as inappropriate. (Source: Koulikoff-Souviron and Harrison, 2007)

Question

1 Use the template shown in Figure 8.12 to
help describe what had happened to the relationship between ChemCo and WheatCo.