CERAMIC

MANUFACTURE
CASE STUDY
(Project B – Failure to Perfect the Manufacturing Process)
2.1 SUMMARY OF THE COMPANY

The project proposed to manufacture ceramics. On the onset, the general idea of ceramic
manufacture seemed to be simple as it apparently just involves the processing of clay and a few
other raw materials and the subsequent mixing and firing. Actually, however, the manufacture is
more complicated, and takes time before it can be perfected by an individual plant. This is so
because it requires clay and water with the right chemical contents and physical properties;
intricate balancing of the materials input; and delicate handling and control of the work in
process, specially while firing in the kiln.
With a little more than a layman's concept of ceramic manufacture, the stockholders decided
to implement the project. They obtained a loan from a local financial institution, ordered the
machinery and went into commercial production. Immediately after the start of commercial
operations, however, the management realized that most of their factory products are of such a
low quality that they cannot command the projected sales price.
The operations continued for some months without a significant improvement in the
quality. The expected cash collections from the sales did not materialize. Subsequently, the
company ran out of operating capital and could not pay off the loan amortizations. Finally,
the local lending institution foreclosed the machinery.
The stockholders lost their investment. The local lending institution, after having
acquired the machinery through foreclosure, was not happy either. It could not operate the
plant. The machinery was sold later on to another group. However, the proceeds from the
resale were less than the unrecovered loan from the project so that the lending institution lost
part of its own investment. Interest was not earned on the loan. Furthermore, its funds were
tied down with the project for a number of years.
 2.2 IDENTIFY THE BUSINESS DIFFICULTY
ENCOUNTERED BY THE COMPANY

 The company has a limited cash receipts from sales of low-quality

products and failure to meet loan amortization.
 2.3 WHAT ARE THE IMMEDIATE CAUSES OF
BUSINESS DIFFICULTIES WITHIN THE CONTROL OF
MANAGEMENT?

 The management failed to perfect the manufacturing process to produce a

high quality products.

 Unforeseen high moisture content of clay raw materials.

 Unexpected high cost of gathering the raw materials.

2.4 IDENTIFY THE “RESULT” OF DIFFICULTIES IN
THE PROJECT

 Foreclosure of mortgaged machinery.

 The stock holders lost their investment.

THANK YOU!!!

Prepared by:
Agacer, Elisabeth A.
Aguilar, Hazel Marie I.
Almero, Elmera G.
Apa, Ralph Christian V.