Evolution of operations management in chlor alkali

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The chlor-alkali chemicals industry has seen the technology used in the manufacturing process change and evolve over the recent decades. The term chlor-alkali refers to the two chemicals (chlorine and an alkali) which are simultaneously produced as a result of the electrolysis of saltwater (GreenFacts, 2010). The predominant technology used to manufacture chlor-alkali chemicals before environmental regulations were more closely monitored was mercury cells. However, major producers have since switched to the more environmental friendly membrane cells and diaphragm cells. While each technology has its own advantages and disadvantages, more and more chlor-alkali manufacturers, especially those in Asia, are adopting the membrane cells technology for a variety of reasons, not least of which is the considerably low energy costs. This report will be focusing on manufacture via membrane cells, which is increasingly the most widely used method to manufacture chlor-alkali products.

The most common chlor-alkali chemicals are chlorine and sodium hydroxide (caustic soda) but can include potassium hydroxide and muriatic acid (GreenFacts, 2010). This report will focus mainly on sodium hydroxide and the various concentrations in which it is commonly manufactured.

2. Purpose

This report aims to show the inter-links and synergies of the five objectives of Operations Management, i.e. cost, quality, speed, flexibility and dependability and how they influence and affect an organisation that is involved in the chlor-alkali industry. The author will also identify methods in which the operation process was improved to make it work more efficiently and effectively. This report will also highlight control systems that the organisation utilises and how these can be used to further improve the process design, along with how relevant emerging technologies can be used to positive effect by the said organisation.

3. Background

Before the advent of membrane cells technology, the most common method to manufacture chlor-alkali chemicals was via mercury cells. The use of mercury cells demands measures to prevent environmental contamination and also the mercury must be removed from the hydrogen gas and caustic soda solution (Euro Chlor, 2010). These process complications made it difficult for manufacturers to comply consistently with prevailing environmental regulations. As such, manufacturers had to find different ways to manufacture these chlor-alkali chemicals in a more environmentally acceptable and cost effective manner. Customers are also increasingly aware of the technologies used to manufacture these products and as a result of this, it would be prudent for chlor-alkali manufacturers to opt for a less controversial and safer option.

4. Performance Objectives of Operations Management

An organisation requires a tightly defined set of objectives that relates specifically to its basic task of satisfying customer requirements (Slack, N. et al., 2007). These objectives can be defined as cost, quality, speed, flexibility and dependability. The five operations performance objectives trade off with one another, and the extent of these trade-offs are time and context specific (Neely, 2007). For example, a wide range of product mix will increase flexibility but could also result in higher cost of manufacturing. As any other organisation, an organisation involved in the chlor-alkali chemicals industry is also influenced by these five objectives.

a. Cost

All operations have an interest in keeping their costs as low as is compatible with the levels of quality, speed, dependability and flexibility that their customers require (Slack, N. et al., 2007). The biggest cost component in the manufacture of chlor-alkali chemicals is electricity. This is because the primary process in the manufacture, i.e. electrolysis, consumes a huge amount of electricity. As such, one easy way in which manufacturers can better control the manufacturing cost is by adopting a more cost effective method of manufacturing chlor-alkali chemicals, i.e. membrane cells. This is especially vital in countries where the cost of electricity is significantly high. Thus, a reduction in manufacturing costs is duly attained, which undoubtedly plays an important role in any organisation's strategic objectives.

b. Quality

It would be safe to say that the quality of the products manufactured or services rendered is largely reliant on customers' needs. An organisation in any sector will not be able to survive if its customers' needs are neglected. Chlor-alkali chemicals are generally manufactured to different grades and concentrations. For sodium hydroxide, the industry standard is 50%, and depending on customers' requirements, it is also sold in different concentrations such as 30%, etc.

Membrane cells produce caustic soda with about 30% concentration and this is then later concentrated to 50%, which, as previously mentioned, is the most commonly used grade in the chemicals industry. Mercury cells however produce directly, without the need for further concentration, caustic soda with 50% concentration. However, the amount of steam required for the concentration of the caustic soda, from 30% to 50% for the membrane cells, is relatively small compared to the electricity required for manufacturing via mercury cells. By using membrane cells technology, products of equal quality can be produced at much lower costs. An added bonus will be that these products will also be safe from any mercury contamination.

c. Speed

Speed means the elapsed time between the customers requesting products or services and their receipt of them (Slack, N. et al., 2007). In the manufacturing sector, the largest internal customer will often be the production department, or process department, as they are sometimes known. As such, all other departments, e.g. maintenance, procurement, instrumentation, etc will more often than not identify this department as their most important customer. It is therefore imperative that the largest internal customer is serviced promptly so that the external customers are able to obtain their products within the required time.

In general, the speed at which chlor-alkali chemicals are manufactured will depend greatly on the size of the plant, ancillary equipment and piping, among other things. All things being equal, the different types of technology have negligible difference in terms of the time taken to produce any given quantity of the chemicals. As such, an organisation will then have to take into consideration other aspects when it comes to choosing the manufacturing technology. When the influence of a performance objective, speed in this instance, is not significant, it will be prudent for an organisation to take into account other extenuating factors such as mercury contamination, high operation costs, etc in order to decide.

d. Flexibility

From a business point of view, flexibility means the ability to meet the needs of the markets without too much cost, time, effort, performance, or organisational disruption (Aggarwal, 1995). For an organisation involved in the chlor-alkali chemicals industry for example, it can save cost, time and effort by opting for membrane cells technology mainly because, when compared to mercury cells technology, the energy consumption is much lower and it will not have to face issues with mercury contamination.

When it comes to increasing or decreasing a plant's capacity, the membrane cells technology also has a greater degree of flexibility. As a result of the membrane cells operating in modules, an organisation will have better options to tailor their plant capacities according to prevailing market demand. This option is not readily available to organisations that use other technologies. Thus, for organisations that require relatively fast expansions to meet increasing market demand, membrane cells technology offers the best flexibility option.

e. Dependability

Dependability means doing things on time and keeping to the delivery schedule that has been promised to the customer (Rowbotham, F. et al., 2007). As such, from a manufacturer's point of view, it needs to ensure that its production runs as smoothly as possible, with minimal interruptions so as not to disrupt the supply of products to its customers. For a chlor-alkali chemicals manufacturer, this would mean that plant turnarounds, i.e. shutdowns for renewing and replacing equipment need to be kept to a minimum. Mercury cells generally do not last as long as membrane cells due to the materials that are used to manufacture the cathodes and anodes of the cells.

Where mercury and graphite are used in mercury cells, titanium lined steel and metal-metal oxide electrodes are used in the membrane cells. These materials are much longer lasting when compared to their mercury cells counterparts. As such, as well as greater dependability, an organisation can also greatly reduce the costs associated with frequent replacement of key equipment at the end of their respective shelf lives. This would also translate to customers being supplied the required chemicals with minimal disruptions due to equipment failures.

5. Organisational Control Systems

When it comes to organisational control system, there are five essential elements and they are planning what is desired, establishing standards of performance, monitoring actual performance, comparing actual achievement against the planned target and rectifying and taking corrective action (Mullins, 2007).

Planning what is desired can be related to an organisation's goals and objectives. In other words, these goals and objectives are what the said organisation has chosen as its business path and with that, the organisation is then able to have a clear direction of where it wants to be within a period of time. As such, all other control systems will now be put in place taking these goals and objectives into consideration.

In the chlor-alkali chemicals industry, the standards of performance, in terms of product quality at least, can be considered as the same for all global manufacturers. Hence, there are opportunities for consumers to import the relevant chemicals if necessary. This makes it more challenging for organisations to regularly satisfy customer requirements, in particular the price of products. Where a manufacturer can distinguish itself from other manufacturers or suppliers is in other value-added services provided as well different grades of products, i.e. manufacture custom grades for exclusive supply to certain consumers.

If an organisation decides to manufacture chemicals of different grades, i.e. grades which are not the industry norm, it would then necessitate the organisation to change its process designs accordingly. Say, for instance, an organisation decides to manufacture sodium hydroxide of 10% concentration; this would mean that the process would then have to be modified in order for the plant to manufacture the chemical to the consumer's specifications. Naturally, manufacturing niche chemicals will mean that the volumes involved will not be large and this also means that the costs involved will be relatively high. However, the profit margins will be normally significantly higher compared to mass production of industry grade chemicals.

The organisation will now have to decide how to apportion its plant capacities in order to increase its product mix while at the same time, maximise its potential earnings. Chlor-alkali manufacturers are fortunate in the sense that not much modification will be required to produce the niche products since the major process design change will be in adding a concentration or dilution stage. While there will be costs involved in doing so, an organisation can price its product accordingly taking into account these costs as well as its desired payback period for the capital investment.

As such, by making the necessary process design changes, a chlor-alkali chemicals manufacturer can in theory manufacture sodium hydroxide of various grades, say, 50%, 30%, 12%, 10%, etc. The eventual product mix of the said organisation will have to be determined by taking into account the opportunity for maximising the potential earnings. However, determining the product mix should be a dynamic process which should be tied closely to the organisation's goals and objectives. This way, the organisation will be able to make more informed decisions on how best to proceed strategically.

While it is important to have goals and objectives, it is equally important to realise when they need to be tweaked and refined if for some reason or another, those goals and objectives prove elusive. Without any monitoring, an organisation can fall into the trap of straying too far from its original targets. Conducting frequent reviews will also allow the organisation to analyse the advantages and disadvantages of its current set-up and make the necessary changes.

This then leads to the final element of an organisational control system, i.e. corrective actions. In the event an organisation realises that its current process design does not allow it to manufacture chemicals of the right specifications, it will then have to make the relevant changes in order to rectify the situation. Doing so could mean an altogether different set-up compared to its prevailing situation, however, these steps are crucial in determining whether an organisation can achieve its original goals and objectives. By changing its process design accordingly, an organisation can then have the right product mix to meet its customers' specifications.

6. Emergent Technologies

For an organisation involved in the chlor-alkali industry, the membrane cells technology is the most advanced technology currently available. However, even for the membrane cells technology, there are different versions of the cells, similar to web browsers for example. For instance, the author's employer has 2 chlor-alkali plants in Malaysia, of which one plant uses the older DD cells technology and the other, the newer bipolar BM cells. The newer cells consume less energy as well as last longer compared to the DD cells.

The future versions of the BM cells will have even more improvements done by the technology providers based on their own research as well as customer feedback. As such, this membrane cells technology is a continually evolving technology which presents users with many different and useful options. Manufacturers also have the option of designing a plant to cater for any eventual expansion and then, when the opportunity presents itself, purchase the relevant equipment for installation.

Due to the relative ease of installing new capacity or replacing old equipment, with minimal space requirements, an organisation will be able to maintain its prevailing layout, without too many modifications. Thus, operational disruptions during this exercise are minimised. By keeping up with emergent technologies in their relevant industries, organisations would also be able to manage the five performance objectives more effectively.

7. Conclusion

Performance objectives are key tools for any organisation in that they allow the organisation to better manage its operations and strategic objectives in order for it to better serve its customers, whether internal or external. The five performance objectives discussed in this report, i.e. cost, quality, speed, flexibility and dependability, are very useful drivers for an organisation because they are intrinsically linked with one another. They allow the organisation to have greater manoeuvrability when it comes to setting goals and objectives since the organisation can easily determine the effects it may face by changing or modifying any one of the performance objectives.

Organisations' control systems as well can be largely driven by these five performance objectives. Their visibility and inter-links will allow the organisation to continually review and refine its strategic objectives and thus develop them as dynamic ones compared to previous modes of setting strategic objectives but only reviewing them periodically. The danger in the old method was that organisations may still be targeting objectives that may no longer be relevant and thus be left behind in this rapidly growing world.

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