Abstract

This case focuses on production and inventory management at Synthite, an oleoresin manufacturer in Kerala, India. It discusses the problems the company faced in the production of pepper oleoresin, one of its flagship products, and traces the problems to Synthite's make-to-stock (MTS) production strategy, inventory management practices and several material flow practices at the plant.

Synthite, established in 1972, had grown to become the largest exporter of spice oleoresins from India, with a 35% share in the global oleoresin business. Yet, the company faced several challenges in inventory management, production planning, and ultimately, in meeting customer expectations on order lead times. Driven by uncertain demand, their ad-hoc finished goods stocking strategy came to naught. Manual transfers of materials in the plant resulted in the waste of resources labour, plant capacity and materials. Extended quality tests on a single order blocked 30% to 50% of production capacity for extended periods.

The case provides quantitative data to analyze Synthite's inventory management, material flow and order lead times, and outlines the company's approach to addressing the challenges it faced. Synthite eventually decided to invest in additional production capacity and automated material flow at the plant. It also put into practice the concept of a “motherbatch,” the essence of which was to stock semi-finished goods (SFGs) instead of finished goods (FGs).

Learning Objectives

To understand the characteristics of a food business and food processing plant; To understand impact of make-to-stock and make-to-order strategies on plant capacity; To understand the role of flexible capacity in making  an operation agile and efficient; To use quantitative analysis to analyze production problems