15 Pages Posted: 1 Jun 2017
This case is used in Darden's Supply-Chain Operations elective. The field-based case gives supply-chain educators the ability to teach the newsvendor model with pricing under a capacity constraint using real-life decisions. By 2005, Eastman Chemical Company, based in Tennessee, had created a new specialty plastic, Tritan, which demonstrated heat resistance and durability properties that might allow Eastman to compete in the lucrative polycarbonate plastics market. Development of this product was a major breakthrough for both Eastman and the broader chemical industry. The Eastman specialty plastics team had to contend with numerous challenges, however, before producing Tritan at full scale. First, Eastman had to commercialize a completely new material that only had been produced in the lab; second, the team had to develop a supply chain to manufacture a new component (monomer) and a new product (polymer) simultaneously; and finally, it had to analyze market entrance options given capacity constraints. Thus, the specialty plastics team faced several dilemmas: who should the initial launch partners be, given Eastman's limited manufacturing capacity, and how aggressively should Eastman price Tritan, given that price would drive demand in the launch markets and in new markets?
Rev. Nov. 20, 2014
Returning to her desk after lunch, Debbie Crain, operations director at Eastman Chemical Company (Eastman), glanced at her calendar. It was June 15. Only four months until the 2007 International K Trade Fair, or “K show,” the plastics industry's leading trade event—which occurred only once every three years—at which Eastman, a global specialty chemicals company based in Kingsport, Tennessee, was going to launch Tritan, a new copolyester and Eastman's latest specialty plastic.
Crain was in charge of the operations and launch phase for Tritan, a product Eastman was excited about because it demonstrated heat resistance and durability properties that might allow Eastman to compete in the lucrative polycarbonate plastics market. But Crain was nervous because Eastman had not yet decided which Tritan applications it would announce at the show. Given Eastman's current limited capacity to produce Tritan, it was important to be very selective in choosing its initial entrant markets.
Crain's Outlook calendar chimed, reminding her that it was time to meet with the specialty plastics team: Lucian Boldea, business unit director; Burt Capel, sales director; and Chris Killian, technology director. In this meeting, the Tritan leadership team was preparing recommendations for Eastman's top executives regarding market entrance, pricing, and capacity allocation. As she gathered her files for the meeting, she reflected on the importance of the team's recommendations, which could change Eastman's position within the plastics industry.
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Keywords: supply chain, BPA, plastics industry, chemical industry, capacity allocation, pricing, product development, operations, market entry, newsvendor model
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