Loctite Case Study

1. What are the key elements of the Loctite value proposition?

Customer service is a key element of the Loctite value proposition. Best technical support that ensures successful installation and trouble shoot of product usage and periodic follow ups to ensure the promised product viability.

Consistently high quality products and services.

Customer satisfaction and product suitability to address the problem.

User friendly, low waste and long life packaging.

Dependable and precise material and finished goods treatments as an important value added customer service.

1. Should Loctite sell equipment? Please list pluses and minuses.

PLUSES

• Increases Loyalty, ex:- once a Windows user, always a windows user.
• More convenient, provides a one stop shopping experience.
• Equipment could be designed with the functionality of Loctite adhesives as a main focus, hence improving the service quotient of their Most Viable Product, the adhesive.
• Could help the company provide curing and dispensing equipment for adhesives, in the name of speciality equipments, improving the trust of consumers to use Loctite adhesives.

MINUSES

• Equipment manufactured by third party manufacturers would guarantee a higher selling price compared to machines offered by OEM companies. Hence the sales margin would be less compared to existing companies.
• In addition, customer support for service and maintenance of the equipment becomes more difficult as the machines are not manufactured in house.
• Engineers have to be familiar with adhesive documentation as well as the different machinery to support customer queries quickly.
• If a company already has a dependable dispensing and curing equipment, it would see this equipment offering as an unnecessary investment .
• With reference to the case study documentation, a newly implemented systems approach could affect customer value of Loctite adhesives due to a negative perception of price, service and delivery of Loctite equipment.

Although the negatives outweigh the positives, I would consider going ahead with the systems approach by citing a few examples in the past.

• Google launched the pixel phone recently to complement its software capabilities.
• Apple computers launched its Macintosh software solely compatible with apple computers a few decades back. Their systems approach still works.
• Amazon kindle: Using its vast licensed ebook collection, Amazon followed the systems approach and created a flagship reading device viz. Kindle. Right from its inception it has created a monopoly of sorts on its own accord, with best in class support and large ebook database. Its profits were a factor in amazon moving on with its website development and investment in other devices like the amazon echo.

All these examples have one thing in common, they had a best in class product and they used that to their advantage to broaden their product horizon. Another common thing is, Although the parts are not manufactured in house, and the pricing being on the upside, customers were still interested in these products because of the brand name and their stellar customer support.

Loctite is on the right path, the only thing it needs to do is set up a clear supplier relation and either train existing staff or hire more dedicated people to support the Loctite Equipment line.

1. According to the Toyota Production system, market price - cost = profit. Should Loctite sell equipment at prices that are higher than the market price offered by 'pure' equipment providers, in order to preserve profitability?

A: There are various factors that a company should consider for a pricing strategy. Is the product a pioneer in some way, does it have an existing competition, what is the competitors product value price, does our product outperform the competitors product etc. With reference to the case study, it is evident that the equipment line is not pioneering or a new product in any aspect. So taking a free hand and escalating market price in order to make a profit is not going to help Loctite. Looking at exhibit 2, Loctites equipment line has shown no profit at all inspite of being sold at a premium price according to the sales managers. So the pricing should be decided by the amount of value the quipment provides, if it outperforms its competitors, then it is a good move to price it higher than the competition

Bottomline: No, Loctite should set try to match the market price of its competitors. They are currently setting prices as if it’s a pioneering product, which would definitely hurt in the progression of the systems approach.

1. Which statement in case Exhibit 3 should be supported by Loctite management ? Why?

 Statement B must be supported by Loctite Management. As I said in question 2, many companies have taken the systems route to help bolster their customer loyalty. A high quality and reasonably priced equipment line will definitely be embraced by the loyal customers of Loctite adhesives as a customer’s trust plays a major factor in profitable business ventures. I would like to prove it with another example although this company was already an OEM, Schneider Electric was a manufacturer of switches electrical circuits et all, they found that many of their clients tested their products using specialist prototyping firms for its builds. It came up with a plan to jump into the prototyping business, helping its own customers and independent clients. It was a huge success and they set up branches in India, Hungary, Czech Republic etc. They were successful in creating a loyal customer base other than the already existing ones. Likewise, Loctite can bolster their customer base using a systems approach  

1. What were some of the problems with Loctite's equipment business prior to the formation of the Equipment Service Cell ? What are some of the factors that caused/sustained waste?

• Staff responsible for each cell in the equipment line were also responsible for a part of the adhesive line, overburdening of existing staff made them concentrate on the much successful line  in order to both make their job easier.
• Support staff  were again responsible for both the equipment line and the adhesives. they went with the much familiar adhesives and did not care about the equipment line because mostcustomer issues concerned the adhesives as it was the most successful product of the 2. Equipment complaints could have been few but If there is no support for a burgeoning product then it is doomed to fail.
• Each functional department in the Loctite owned the equipment line in parts, there was no operating strategy on the whole, each department set its own metrics and this was the most lethal flaw with the equipment line. A department with no proper information flow and clear cut and transparent operations will definitely generate a lot of waste.
• The waste here could also be due to equipment failures, shelf life/ inventory, and equipment returns owing to cheaper equipments by OEM sellers.
• Lack of an employee trust in the equipment line. Just because its sales were dwindling, the employees and people in the equipment workcell took that for granted and started neglecting its merits and promise. Loss of trust from the very own people was by far the most lethal and vicious blow to the equipment line till then.

1. Is guaranteeing JIT delivery (vs. JIT production) of equipment to end-users an appropriate strategy for Loctite? What are some of the factors that make the implementation of a JIT production system difficult?

Guaranteeing a JIT delivery system would be beneficial for the supplier, but could offer a little disadvantage to the customer. the manufacturing lead time is 8-12 weeks for the suppliers(multiple), and order is expected to be placed once every ten weeks. so there is a probability that the orders could arrive 2 weeks late, hence the lead time for delivery to the customers could be affected that way.

On the other hand if we consider JIT production systems, it has major drawbacks, mostly because of supplier delays and rush orders. As soon as an order comes in to Loctite, the company places an order to its suppliers, who in turn have to speed up their production process and sometimes make real haste out of the situation, this could severely affect material quality and also quality testing procedures(smaller samples to save time).