As a chemical company grows, organizational changes occur that alter the manner in which things are done. Some changes are beneficial while others are detrimental. A beneficial change is one in which the process of order fulfillment improves in efficiency. Order fulfillment is the core activity of any manufacturing business. Improvements that do not affect order fulfillment may be little more than decoration.

A detrimental change is one in which order fulfillment is negatively affected. Any change that reduces the speed or increases the cost of order fulfillment is a detrimental change.  Some detrimental changes are unavoidable. Improvements in infrastructure due to growth may lead to detrimental changes. Increased overhead expense due to new warehousing, increased regulatory compliance costs due to crossing a volume threshold, upgrading the pots and pans, or any number of other “improvements” may lead to negative change. 

Equipment upgrades can easily lead to unexpected organizational changes. New equipment leads to new procedures and new failure modes.  A new piece of equipment integrated into a system can lead to modes of failure and risks that were unanticipated. New equipment can lead to new manpower requirements and new demands on infrastructure. Suddenly, a new piece of equipment can cause the reorganization of activity around it. Machines may be limited in flexibility, but people can change their work habits to accomodate the device.

On a day-to-day level, a company may not sense that it has undergone growth, but in fact it has. The acquisition of new equipment can change the manner in which a company operates over the long term.  This is especially true if it increases the capacity of the plant. Equipment upgrades that increase throughput will lead to increased sales and, hopefully, increase profit. Soon, more cash is available for more upgrades.

Where a company can go wrong is the failure to tend to the institutional changes that have to occur with increased growth.  A company that grows in the plant but not in the front office (the overhead suite) is one that finds itself slipping behind the power curve.  Suddenly, increased volume leads to increased chaos. Unless institutional changes are made, the system may become dangerously unstable despite rising receipts. 

It is interesting to watch the storm brewing around Mattel over it’s contract manufacturing in China. Initially, Mattel came out on the victim side, claiming that 21 million toys manufactured in China had to be recalled due to leaded paint, magnet, and choke-hazard issues. Now, it appears, Chinese quality control has been vindicated to a large extent and it’s Mattel that has egg on its face.

Mattel contracted with Chinese manufacturers to produce products that had small removable parts that posed a choke hazard to children. Whether the toys were of US design or of foreign vendor design makes no difference. Mattel should have been on top of the design questions before the injection molds were made. Period.  The Chinese vendors made product to spec. 

Mattel has issued apologies to various parties in China over the unwarranted accusations that Chinese manufacturing lapses were responsible for the massive toy recall.  This is a major hiccup for Mattel, much akin to a container ship hitting a sand bar. When a ship runs aground, it is the captains fault. When Mattel ushers its investors through a major business fiasco like this, the CEO, President, and a few VP’s must be made to take the hit personally. The Mattel toy disaster is just bad product development, which is a management exercise.  Putting a dangerous toy on the market is a liability they should be very familiar with.   

In the Mattel case, a major organizational shakeup is needed to knock loose the ossified Mattel managers who should have caught the design flaws. I don’t know about the leaded paint issue, but certainly choke hazards and dangerous magnets that can be swallowed by children are not part of some new problem.  Corners were cut and and now the guilty parties from management have to line up at the Guillotine. It’s a bummer, but it has to happen to save the Mattel brand.

Note added 9/22/07:  Mattel has apologized in a public apology to Chinese product safety chief Li Changjiang, among others.  It is unclear, however, as to whether the apology applies to the leaded paint issue. It’s too late for at least one character. The manager of the factory that supplied the Sesame Street figures containing lead paint was found hanged at the factory, an apparent suicide.

It must be very frustrating for Chinese officials to find themselves subject to negative publicity generated by foreign companies and amplified by their governments.  This Marxist-Capitalist chimera founded by Mao finds itself being out of control of negative information echoing around the world and within China itself.  Chinese leadership is much more accustomed to providing processed information in order to guide the populace to the more correct thinking.  It is like a comb carefully lining up all of the individual hairs to lie in the same direction. If the Mattel fiasco had been entirely internal to China, I wonder if there would be any imprisonments or executions? 

The cover story of the latest issue of C&EN is concerned with the “Global Top 50” chemical companies.  To nobody’s surprise, Dow, BASF, and Royal Dutch Shell occupy the top three positions again this year.  The dollar numbers are impressive enough, but have a look at the column on the far right of the table on page 14- “Return on Chemical Assets”.  This is an important column.  It signals which operators can squeeze the greatest value out of their plants.  The winner in this column is 11th ranked SABIC with a 30 % return on assets and reported 43 % operating profit margin.  Compare that with 2nd ranked Shell (11 and 9 %) and 3rd ranked ExxonMobil (6 and 2 %).  There has to be a story there.

On page 16 of the cover story, the figure titled “Narrowing In” shows the market coverage over several decades.  It is clear that the big chemical players exited the pharmaceutical business in favor of chemicals.  One of the euphamisms is that this is a return to core competencies.  A more cynical comment might be that the players fled from core incompetencies. There is truth in both views.

Another table shows R&D spending as % of chemical sales.  These numbers have been flat across the industry since Y2000.  An investor might look at this and conclude that the players are conservative, and that would be right. Chemical industry does tend to be conservative.  But a chemical catalog president would look at the numbers and proclaim that this is indicative of a cash cow for sales of specialty R&D chemicals.  OK, the growth is flat. But it is safe.

By 12:15 AM saturday we had copies of the latest and final installment of the J.K. Rowling franchise, Harry Potter and the Deathly Hallows.  It was an evening of standing-room-only at the local Borders bookstore, elbow to elbow with muggle Potter enthusiasts.  Many were in costume but all were anxious to get their copy of the book and once again enter the magical world of Harry Potter.

As we made our way to the parking lot it became apparent that flyers had been affixed under the wiper blades of cars outside the store.  Under the orange afterglow of the evening we could see the colorful flyers festooned with Potter graphics and the congratulations to the reader on their early purchase of the book.  Then the flyer went on to reveal the the fate of the characters!  These flyers were SPOILERS!#&*@!  It was an unthinkable act of desecration forced upon innocent followers of the story. 

For the love of God!!  What kind of fiendish mind could conceive of this heinous act?!  Someone printed these flyers and then, when the moment was right, quietly planted them when anticipation was at its highest.  What mothers child could do this? Who are these sick puppies, these bomb throwing literary terrorists who could execute such a felonious theft of innocence?  Think of the children.

Well, anyway, we intercepted the flyer and tucked it away to protect some unsuspecting citizen from picking up this booby-trap from the ground and reading it.  Unfortunately, Th’ Gaussling suffered some acute exposure to this bit of printed poison. Bummer.

I keep running into people who claim that atmospheric CO2 levels lag atmospheric temperature rises rather than lead them. That is, higher CO2 levels are a result of global temperature increases rather than a cause.  I’m not a researcher in this area, so my opinion is approximately meaningless. But on basic principles, it would seem that the partial pressure (or mole fraction, really) of CO2 might be expected to increase in the atmosphere over a warming ocean containing carbonate. 

Aqueous CO2 equilibria is complicated by its reaction with water, but one should still expect that the decrease in solubility of CO2 in surface waters might have some bearing on the present atmospheric CO2 levels.  For a given dT of an aqueous system with dissolved CO2, how does the mole fraction of CO2 in the gas phase change? The last time I worked a problem like this Ronald Reagan was president. Sigh.

Th’ Gaussling will be leaving contrails over some of America’s greatest flyover states for a week in Chicago on business.  Ciao baby.

Th’ Gaussling will be spending a few days in a midwestern flyover state bounded in longitude by two rivers beginning with the letter M and in latitude by two states beginning with the letter M. This state’s name derives from the Ioway Indian word for “corn-fed” and produced a president named after a dam.   

An article by John Richardson in the May 7-13 issue of ICIS Chemical Business reports that China will surpass the United States as the leading emitter of Greenhouse gases by the end of 2007, according to the International Energy Agency (IEA). I wasn’t able to trace the actual IEA report down, but perhaps some sleuth out in the blogosphere can find it.  More details can be found in this article in the Guardian.

I was amused by this quote in the Scotsman–

In a separate briefing yesterday, Jiang Yu, of China’s foreign ministry, said Beijing was willing to play its part in curbing greenhouse gases from industry, agriculture and vehicles. But she said that wealthy countries bore the blame, and the solution lay in their hands.

“It must be pointed out that climate change has been caused by the long-term historic emissions of developed countries and their high per-capita emissions. Developed countries bear an unshirkable responsibility,” Ms Jiang said, adding they should “lead the way in assuming responsibility for emissions cuts”.

I’d like to suggest to Ms Jiang to ask a few of her countrymen who did their graduate work and post-docs in the USA to pitch in on the problem.  China has benefitted in no small way from her citizens taking their education in the USA and helping to generate the very technology that has contributed to our greenhouse gas emissions.  The cause of our prodigous CO2 emission is our great facility with converting combustion gas expansion into torque. This torque drives the wheels and generators of civilization. 

Chinese citizens have benefitted personally through our university/research complex, their graduate stipends often funded by US tax dollars.  The Chinese nation has benefitted collectively with the help of returning students by manufacturing the inventions of the Wright Brothers, Mr Westinghouse, Th. Edison, Philo Farnsworth, Lee De Forest, Edwin Armstrong, Jack Kilby, the Steves Jobs and Wozniak.  These are just a few of the Americans. Then there is a whole crop of Germans, Brits, French, Russians, Japanese, Canadians, Dutch, Scandinavians, Swiss, etc. You get the point. 

The great engine that drives China’s economic boom is in large part leveraged from technologies developed elsewhere- television, radio, computers, cars, chemistry, medicine, etc.  I would say that Chinese society has benefitted significantly from these high consumption, CO2 belching societies that they now point their fingers at. 

I’m glad to see China boosting the standard of living and enjoying the benefits of technological society.  But, Chinese leaders should shut their pie holes and pitch in to solve the problem.  They should remember that the electrical devices and the copper from their smelters afford “high per capita” exports to foreign consumers which helps to sustain our “high per capita emissions”.  There are no clean hands in this matter.