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OPERATIONS MANAGEMENT OF ABC INCORPORATED: BASIS FOR IMPROVEMENTS

A Thesis in

IE523 INDUSTRIAL RESEARCH PROJECT

Presented to the Faculty of the Industrial Engineering Department

Cebu Institute of Technology - University, Cebu City, Philippines

In Partial Fulfilment

of the Requirements for the Degree

BACHELOR OF SCIENCE IN INDUSTRIAL ENGINEERING

By:

CHARRY A. ARONG

JESSA RONA C. CEPADA

JEENA DIVINE E. GRAFIA

October 2012

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ACKNOWLEDGEMENT

We would like to extend our deepest gratitude to our beloved Almighty God the

Father for giving us wisdom, guidance, strength and enlightenment in making this

project.

To our beloved parents and families who remained patient and understanding to

us and for their unending moral and financial support.

To Engr. Alein B. Navares, for the encouragement and the knowledge he

imparted to us.

To Engr. Anna Marie L. Arnoco, for guiding and helping us in analyzing and in

generating ideas especially in times of confusions.

To our Batch mates, for encouraging and helping us and other researchers

believe that we all can make it until the very end of this study.

To ABC Incorporated for allowing us to conduct a study in their company and for

showing their support by providing us the data needed in making this research.

The RESEARCHERS

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DEDICATIONS

This study is dedicated to my greatest inspirations in lifemy hardworking and

supportive parents, my second family CITAA IE Batch 1986, my siblingsand to the highest

creator in heaven, Our Almighty Fatheryou are truly the source of my strength, wisdom and

passion for this project.

-Cha

I dedicate this study, first of all to our Almighty God for giving me the strength to push

through, to my parents for their unending support and for serving as my encouragement and the

person who had made a great impact in my life and lastly to my special someone for the

understanding.

-Rona

This study is dedicated, first and foremost, to God Almighty for guiding, strengthen, and

enlighten my mind in making this research. To my beloved family for always being there to

show their moral support and most especially for providing me their financial support. And to

all those people who encouraged and helped me in making this project.

-Jeena

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TABLE OF CONTENTS

Title Acknowledgements ii Dedications iii Table of Contents .. iv List of Tables vi List of Figures ............. ix List of Exhibits . x CHAPTER PAGE

I THE PROBLEM AND ITS SCOPE 1.1 Introduction Rationale of the Study .. 1 Conceptual Framework . 2 Theoretical Background 4 Flow of Research Process 12 1.2 The Problem Statement of the Problem .. 13 Statement of Assumptions . 14 Scope and Delimitation . 14 Significance of the Study . 15 1.3 Research Methodology Research Environment .. 16 Research Respondents . 17 Research Instrument . 17 Research Procedures . 18 1.4 Definition of Terms

II PRESENTATION AND ANALYSIS OF DATA 2.1 Descriptive Phase Company Profile .. 22 Historical Background .. 22 Facility .. 24 Organizational Structure . 24 Geographic Location . 25 Product Lines . 26 Pareto Table .. 26 Pareto Chart .. 28 2.1.2 Facilities Planning and Design 30 2.1.3 Capacity Planning . 41 2.1.4 Methods Improvement .. 67 2.1.5 Finished Goods Inventory Management ...... 86 2.2 Diagnostic Phase

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2.2.1 Problem Selection 94 2.2.2 Root Cause Analysis Matrix 96 2.2.3 Cause and Effect Diagrams .. 97 2.2.4 Formulation of Options . 110

III PROPOSALS FOR IMPROVEMENT OF OPERATIONS MANAGEMENT

3.1 Summary of Proposals . 147 3.2 Operation Development Scheme 148 3.3 Overall Project Implementation .. 149 3.4 Comparative Analysis .. 153

IV SUMMARY, FINDINGS, AND RECOMMENDATION 4.1 Summary 168 4.2 Findings .. 169 4.3 Recommendations . 172 Bibliography xi Appendices . xiii Curriculum Vitae .. xxi

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LIST OF TABLES

Table Titles Page

1 Research Respondents 17 2 Business Market of ABC Incorporated 23 3 Pareto Table of Product Lines 27 4 Input Process Output Framework of Special Biscocho.. 30 5 Manufacturing Process Type Checklist .. 31 6 Process Sequence. 33 7 From-to-Chart for Distances............ 34 8 From-to-Chart for Number of Trips.... 34 9 Total Transportation Cost per Batch.. 35 10 Different Areas and its Descriptions . 40 11 Existing Operating Time................... 42 12 Summary of Allowance Factor.......... 46 13 Biscocho 150g Processes and Processing Time. 51 14 Operation Non-Value Added Activities 52

15 Workers Summary of Available Operating and Standard Processing Time..............................

53

16 Overall Effectiveness Equipment for Spiral Mixer 56

17 Overall Effectiveness Equipment for Volumetric Machine. 57

18 Overall Effectiveness Equipment for Dough Molder.. 58

19 Overall Effectiveness Equipment for Dough Rounder 59

20 Overall Effectiveness Equipment for Oven . 60

21 Overall Effectiveness Equipment for Bread Slicer. 61

22 Overall Effectiveness Equipment for Continuous Sealer 62

23 Total Number of Machines and its Capacity. 62

24 Energy Utilization Cost 63

25 Machine Utilization Cost (1 Batch).. 64

26 Standard Time 73

27 Value Analysis of Molding Process.. 74

28 Productive and Non-Productive Time of Molding Process.. 75

29 Productive and Non-Productive Time of Proofing Process.. 76

30 Productive and Non-Productive Time of 1st Baking Process..

76

31 Productive and Non-Productive Time of 1st Cooling Process..

77

32 Productive and Non-Productive Time of Slicing Process 77

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33 Productive and Non-Productive Time of Banya Process 78

34 Productive and Non-Productive Time of 2nd Baking Process.. 79

35 Productive and Non-Productive Time of 2nd Cooling Process 79

36 Productive and Non-Productive Time of Packing Process. 80

37 Productive and Non-Productive Time of Sealing Process. 81

38 Productive and Non-Productive Time of Final Packing.. 81

39 Summary of Non-Productive Time . 82

40 Summary of Opportunity Loss per Process .... 83

41 Pareto table of Non-Productive Time 84

42 ABC Analysis.... 88

43 Unit Cost and Unit Price of FG-Pasalubong... 88

44 Output, Sales, and Unsold FG per Month 89

45 Summary of Problem Options 94

46 Standard Selection Criteria for AHP 95

47 Root Cause Analysis Matrix 96

48 Ideal and Actual Number of Workers 104

49 Summary of Ideal and Existing Number of Workers . 105

50 Summary of Existing and Ideal Number of Labor Cost per Day . 106

51 From-to-Chart of Proposed Layout 111

52 Total Transportation of Cost per Batch of Proposed Layout . 112

53 From-to-Chart of Proposed Layout (Option 2) .. 115

54 Total Transportation of Cost per Batch of Proposed Layout (Option 2) .

116

55 Labor and Energy Cost in Option 1 .. 117

56 Total Processing Time of 11 Workers .. 118

57 Labor and Energy Cost of Option 2 . 119

58 Processing Time After Transferring the Workers .. 120

59 Total Processing Time After transferring the one excess worker. 121

60 Total Processing Time After transferring the one excess worker. 123

61 Cost Benefit Analysis of Non-Productive Time in Banya Option 1 125

62 Reduction of Unproductive Work Content in Banya Process 125

63 Cost Benefit Analysis of Non-Productive Time in Packing Process.

131

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64 Reduction of Unproductive Work Content of Packing Process 132

65 Proposed Forecasting Model Sheet . 139

66 Ave. Ending Inventory after Using Exponential Smoothing Model ..

140

67 Selection Criteria .. 144

68 Generic Five Point Impact Scale Solution Criteria 145

69 Solution Prioritization Matrix

146

70 Summary of Proposals . 147

71 Precedence Table .. 150

72 Comparative Analysis of Distance and Time . 156

73 Comparative Analysis of the Ideal and Existing Manpower 158

74 Comparative Analysis of Machine Utilization .. 159

75 Comparative Analysis of Processing Time of Slicing Area .. 160

76 Comparative Analysis of Processing Time of Sealing Area 160

77 Comparative Analysis of the Existing and Proposed Performance Index

161

78 Comparative Analysis of Finished Goods Inventory Management 162

79 Additional Cost and Losses Comparative Analysis 163

80 Cost Benefit Analysis

166

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LIST OF FIGURES

Figure Titles Page

1 Conceptual Framework 2 2 Flow of Research Process 12 3 Organizational Chart.. 24 4 Pareto Chart of Product Lines.. 28 5 Process Flowchart 48 6 General Process Flow. 68 7 Pareto Chart 84 8 Line Graph of Demand of Pasalubong Items 88 9 Receiving Procedure 91 10 Releasing Procedure 92 11 Cause and Effect Diagram of Facilities Planning and Design 97 12 Cause and Effect Diagram of Capacity Planning . 100

13 Graphical representation for the Ideal and Existing Number

of Worker ..

105

14 Cause and Effect Diagram of Methods Improvement.. 107 15 Cause and Effect Diagram of FG Ending Inventory .. 108 16 Standard Process in Banya . 127 17 Operation Development Scheme .. 148

18 Overall Project Implementation. 149

19 Network Diagram. 151

20 Gant Chart 152

21 Problem 1 Comparative Analysis in Distance and Time 157

22 Problem 5 Comparative Analysis .. 161

23 Problem 6 Comparative Analysis .. 162

24 Comparative Analysis for Plant Layout 164

25 Comparative Analysis for Capacity Planning .. 164

26 Comparative Analysis for Methods Improvement 165

27 Comparative Analysis for Inventory Management 165

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LIST OF EXHIBITS

Exhibits Titles Page

1 Facility of ABC Incorporated. 23

2 Vicinity Map .. 24

3 Product Lines of ABC Incorporated. 25

4 Raw Materials................................... 28

5 Workflow Diagram of the General Process 31

6 Workflow Diagram in Processing Area. 32

7 Functional Areas and its Description. 37

8 Allowances for Various Classes of Work (in percentage)

9 Process Schematic Diagram................ 72

10 Finished Goods Warehouse................... 86

11 Proposed Layout of Workstations.......... 110

12 Proposed Layout in the Production Area-Option Two. 113

13 Arrangement of Banya and Slicing Area .. 126

14 Kanban Card for Materials .. 129

15 Kanban Card for Ingredients.. 129

16 Proposed Workstation Design.. 131

17 Proposed Work Instruction in Packing Process 133

18 Kanban Card .. 135

19 Proposed Job Specification and Description in Hiring Material

Controller

136

20 Sample Template for Exponential Smoothing Model.. 142

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CHAPTER I

THE PROBLEM AND ITS SCOPE

1.1 INTRODUCTION

1.1.1 Rationale of the Study

The Philippine Association of Flour Millers Inc. (PAMFIL) conducted a local

study, said that 85 percent of Filipinos prefer to eat bread instead of rice for

breakfast. As the Philippines produces about 1.4 million metric tons of flour

annually, the country sources wheat, the prime raw material for flour, from other

countries. It imports about 2.4 million metric tons of wheat mostly from the United

States. Mainly, these inputs account 50% for pan de sal or any salt bread, 20% for

loaf bread and 30% for other varieties.

(http://www.txtmania.com/trivia/economy.php)

In order to compete with the changes occurring globally, Philippine industries

adopt changes by improving the machineries, methods, quality at the source ,

processes and generally the layout. Operations plan is very essential and needs

consideration and attention from the very beginning so as to avoid subsequent

problems.

With more than 10,000 baking industry in the country, Cebu is one of the

cities producing wide variety of bakery products that are sold in local and global

market. In fact, these types of industries have fundamental need to make and sell

their products, satisfy their customers and the means to satisfy the customers in the

future. Most significantly, these core operations functions are necessary to work

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effectively for the fulfillment of the customers requests. In practice, this reality looks

promising, hence, this study arise to understand and address companys operations

need and help them to satisfy these needs. Furthermore, this study concentrates on

the four areas recognized by the company such as plant layout, methods

improvement, capacity planning and inventory management and to come up

possible solutions and recommendations that can significantly contribute to the

operation of the company.

1.1.2 Conceptual Framework

INVENTORY

MANAGEMENT

FACILITIES

PLANNING

AND DESIGN

CAPACITY

PLANNING

METHODS

IMPROVEMENT

OPERATIONS

MANAGENT OF MAGIC

MELT FOODS INC: BASIS

FOR IMPROVEMNTS

Figure 1: Conceptual Framework

ABC Incorporated determined the four (4) problem areas in operation. The

areas are the plant layout, methods improvement, capacity planning, and inventory

management.

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Operations Management

Operations management is the activity of managing the resources that are

devoted to the production and delivery of products. The operations function is to

make the resources available that suffice the current and future operations in the

company. This encompasses by having a forecasting method in projecting the

number of bakery products to be produced in a day. The balance of the number of

manpower required in producing baked goods so as in planning or scheduling what

products should be made every day. Moreover, the production manager, production

plan control, quality assurance, production supervisor and others monitor operations

functions in bakery industry. They are responsible to manage inventories (finished

goods inventory is the primary focus) , assuring a best taste of bakery products,

motivating workers, deciding where to locate facilities, and more.

(Stevenson, 2002: 4)

Theoretically, operations management is the same for any size of

organization. However, in practice, managing operations in micro or small size

organization has its own set of problems. Large companies may have the resources

to dedicate individuals to specialized tasks but smaller companies often cannot, so

people may have to do different jobs as the need arises. On the other hand, for the

case of ABC Incorporated, classified as a medium enterprise can decide to allocate

workers in a specialized task. By personalizing the task, cycle time will be reduced

and there will be an increase in the productivity.

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Indeed, this is not just a challenge but a promising reality that embodies all

aspects of the business process to unite in order to create an efficient resourceful

procedure. Moreover, many businesses have come to realize that the operations

function is just important to their firm as finance and marketing and it shows firms

now realize that in order to effectively compete in a global market they must have

an operations strategy to support the mission of the firm and its overall company

strategy.

The organization strategy provides the overall direction for the organization.

It is broad in scope, covering the entire organization. Operations strategy is

narrower in scope, dealing primarily with the operations strategy relates to products,

processes, methods, operating resources, quality, cost, lead times and scheduling. It

is define as the approach, consistent with the organization strategy that is used to

guide the functions.

(Stevenson, 2002: 43)

1.1.3 Theoretical Background

Plant Layout

A plant layout is the placing of the right items coupled with the right place and the

right method, to permit the flow of production process through the shortest possible

distance in the shortest possible time.

Layout is one of the key decisions that determine the long run efficiency of

operations. Layout has numerous strategic implications because it establishes an

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organizations competitive priorities in regard to capacity, processes, flexibility and

cost, as well as quality of work life, customer contact and image. An effective layout

can help an organization achieve a strategy that supports differentiation, low cost,

or response. Layout decisions include the best placement of machines (in production

settings), offices, and desks (in office settings). An effective layout facilitates the

flow of materials, people, and information within and between areas.

Batch Processing

This method is used in producing any product in groups, or batches where

the products in the batch go through the whole production process together. In

bakery, with the aid of this method, there are different types of breads produces

separately and each bread is not produced continuously. This technique is suited

when there is a need for quantity balance.

Cycle Time

Cycle time is the maximum time that a product is allowed at each

workstation. This concept gives an idea that units required per day (demand or

production rate) divide into productive time available per day.

Cycle time Production time available per day

units required per day

Ideal Number of workstation

Production time available per day Cycle time

Efficiency ___Total Task times_____________

Actual number of workstations * Largest assigned cycle time

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Material handling and moving

This is another factor to consider in plant layout design. Material handling is

the very critical part of the design and the needs of a

manufacturing facility. Materials such as racks, tables, bread crate, trays and

machines need to be properly stored and transported to and from work

station/centers with a view towards minimizing the movement and avoiding

backtracking and repetitive travel along the process. The cost of this being

implemented incorrectly could be devastating to the profitability of the business and

also could jeopardize the job as well as to the workers who performed the job. The

design of the material handling system is an important component of the overall

facilities design. Moving a material is costly if a material travels long distance,

backtrack or on cross traffic. Having a continuous flow of movement guarantees a

short processing time to move the material from one place to another. Movement

does not only involve in moving the material but can be also done in the worker or

man as well. Aside from material handling machines, man can also be a material

handler. In plant layout, proper width of aisles should be observed so that man and

machines could pass through without being congested. Another factor that is

considered in facilities planning and plant layout is waiting.

(CEO: Operations/ Manufacturing, 2003:wwww.ceoadvice.com)

Capacity planning

This is a process of determining the production capacity needed by an

company to meet changing demands for its products.In the context of capacity

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planning, "design capacity" is the maximum amount of work that an organization is

capable of completing in a given period, "effective capacity" is the maximum amount

of work that an organization is capable of completing in a given period due to

constraints such as quality problems, delays, material handling, machine breakdown

and others. A discrepancy between the capacity of the company and the demands of

its customers results in inefficiency, either in excess workers, under-utilized

resources( machines or workers) or unfulfilled customers. The goal of capacity

planning is to minimize this discrepancy. Demand for company's capacity varies

based on changes in production output, such as increasing or decreasing the

production quantity of an existing product, or producing new products to meet and

satisfy customers. Better utilization of existing capacity can be accomplished through

improvements in overall equipment effectiveness (OEE). Capacity can be increased

through introducing new techniques, equipment and materials, increasing the

number of workers or machines, increasing the number of shifts, or acquiring

additional production facilities.

The idea of capacity planning is to balance the purchase of resources, the

maintenance of production facilities, the hiring of labor, and the final output so that

consumers have a steady supply of the products they desire. At the same time,

capacity planning also seeks to increase profits by eliminating unnecessary waste,

including the overproduction of any good or service.

(http://www.wisegeek.com/what-is-capacity-planning.htm)

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Capacity is calculated: (number of machines or workers) (number of shifts)

(utilization) (efficiency).

From a scheduling perspective it is very easy to determine how much

capacity (or time) will be required to manufacture a quantity of parts. Simply

multiply the Standard Cycle Time by the Number of Parts and divide by the part or

process OEE %.

Capacity Available

If considering new work for a piece of equipment or machinery, knowing how

much capacity is available to run the work will eventually become part of the overall

process. Typically, an annual forecast is used to determine how many hours per

year are required. To calculate the total capacity available, we can use the formula

from our earlier example and simply adjust or change the volume accordingly based

on the period being considered. The available capacity is difference between the

required capacity and planned operating capacity.

(Krajewski &Ritzman, 2005)

(Lazowska, 1984)

Methods Improvement

This is significantly used in the study as a measure of systematic recording

and critical examination of existing and proposed methods of doing work, as a

means of developing and applying easier and more effective methods and reducing

costs. In practical, this sort of study is usually done through the use of time study

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sheet, clipboard, and stopwatch. On the other hand, work measurement is the

process of establishing the time for qualified workers at a defined level of

performance, to any of the every process. In this sense, performance is primarily

the turner head of work measurement which entails the task of output which

qualified workers will achieve without over-exertion as an average over the working

day provided they are motivated to apply themselves to their work.

A time study procedure involves timing a sample of workers performance and

using it as standard. A trained and experience worker can establish a standard by

following the basic steps in conducting time study. Below shows the computation of

the standard time.

Average Observed Time

Sum of the times recorded to perform each element number of observations

Normal Time Average observed time x performance rating factor

Standard Time Normal time ( 1 + Allowance factor)

Process improvement is a systematic approach to improve a process. It

involves documentation, measurement and analysis for the purpose of improving

the functioning of the process. Typical goals include the customer satisfaction,

reducing waste, achieving higher quality, reducing cost, increasing productivity and

reducing process time. (Stevenson, 2002: 477).

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Methods Analysis

This focuses on how a task is accomplished. Whether controlling the machine

or assemble components, how a task is done makes a difference in performance,

safety and quality. This is useful in office environment and production/ factory

environment. Methods technique are used to analyze:

1. Movement of individuals or material. The analysis is performed using

schematic diagrams and process charts with varying amounts of detail.

2. Activity of worker and bakery equipment. This analysis is presented by

tracking the productive, non-productive times. Non-productive time is

categorized as necessary and not necessary.

Schematic Diagram

This is one of the methods analysis tool used to investigate the movement of

people or material. This shows the flow of the process.

Process Chart

This is chart showing the process that uses symbols to help understand the

movement of people or material. In this way, movement and delays can be reduced

and operations made more efficient.

Activity Chart

This chart is use to study and improve the utilization of an operator and a

machine or some combination to record the present method through direct

observation and then propose the improvement on a second chart.

(Heizer &Render, 9th Edition)

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Inventory Management

Inventories are materials stored, waiting for processing, or experiencing

processing. They are everywhere throughout all sectors of the economy.

Observation of almost any company balance sheet, for example, reveals that a

significant portion of its assets comprises inventories of raw materials, components

and subassemblies within the production process, and finished goods. Most

managers do not like inventories because they are like money placed in a drawer,

assets tied up in investments that are not producing any return and, in fact,

incurring a borrowing cost. They also incur costs for the care of the stored material

and are subject to spoilage and obsolescence.

Almost all industry is aiming at reducing inventory levels and increasing

efficiency on the shop floor. Among the types of inventory, finished goods inventory

is considered as critical because this accounts or converts to money and once

stocked for a span of time this may be considered as lost sales. Worst of all, if the

nature of the product is perishable then there is a chance of losing or reducing

companys profit. ABC Incorporated is practicing the First-Expiry, First-Out method in

which they endorsed or shipped products that expire first. (Russell &Taylor, 2003.)

Inventory represents an important decision variable at all stages of product

manufacturing, distribution and sales, in addition to being a major portion of total

current assets of many businesses. Inventory often represents as much as 40% of

total capital of industrial organizations (Moore et al., 1993). It may represent 33%

of company assets and as much as 90% of working capital (Sawaya Jr. & Giauque,

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1986). Since inventory constitutes a major segment of total investment, it is crucial

that good inventory management be practiced to ensure growth and profitability.

Inventories occur whenever the time an individual enters is different than when it

leaves. During the intervening interval the item is part of the inventory.

1.1.3 Flow Process

INPUT PROCESS OUTPUT

Figure 2: Flow of Research Process

Flow of research process shows how the study is conducted systematically by

the researches. This served as a guide to the researchers to evaluate and assess the

four areas of operations management. Most significantly, every area has its own

problem to which proposals for improvement must be imparted. The data needed

were gathered with document, interview, observation and questionnaire. After

OPERATIONS

MANAGEMENT

Facilities Planning

and Design

Capacity Planning

Methods

Improvement

Inventory

Management

Proposals for

Improvement of

the Operations

Management of

ABC Inc.

PRESCRIPTIVE

PHASE

Document Analysis

Interview

Observation

Questionnaire

Data Analysis and Interpretation of Results Data Presentation

DESCRIPTIVE PHASE

DIAGNOSTIC PHASE

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collecting and recording the data, these were then analyzed. This is when difficulties

or problem areas were identified. Therein, results of analyses where then

interpreted and discussion of possible options are presented. The study will be

presented to the company and proposals for improvement served as the output of

this study.

1.2 THE PROBLEM

1.2.1 Statement of the Problem

The study was launched to determine and evaluate the problem areas of

interest of the core operation functions of operations management at ABC

Incorporated. In this study, the researchers prophesied improvements that can help

the company improve its current performance in inventory management, facilities

planning and design, capacity planning and methods improvement.

Furthermore, this study specifically aimed to provide answers to the following

queries:

What is the existing setup of the companys facilities planning and design,

capacity planning, methods improvement, and inventory management?

What are the problems met in the areas identified as perceived by the

management, workers and the researchers?

What are the possible recommendations that can be put forward to solve the

recognized problems in the aforementioned areas?

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1.2.2 Statement of Assumptions

1. The Reliability of the data gathered used in this study is based on the

sincerity of the answers of the production managers, human resource officer,

and costing officer and production workers.

2. Rate of holding cost is 5% per month based on interview and observation.

3. The process starts in mixing process since premix area is not considered due

to strict confidentiality.

4. The profit values are assumed due to confidentiality.

5. The labor of all workers are equal and in minimum wage.

6. In methods improvement, the time of an average worker is considered to be

the processing time regardless of the number of workers assigned in each

workstation or process.

1.2.3 Scope and Delimitation

Subject Delimitation

The study focuses on the areas of concern in operation of ABC

Incorporated that needs improvement. These areas are the inventory management,

methods improvement, facility layout, and capacity planning. These areas were

selected by the management of the said company.

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Place Delimitation

The study is conducted at ABC Inc. It is located at Bankal, Lapu-Lapu City,

Cebu Philippines, 6014

Time Delimitation

This study is conducted in the month of June up to the month of October

for the academic year 2012-2013.

1.2.4 Significance of the Study

This study is conducted for the following beneficiaries:

Company

In this study it can help the company to evaluate the current performance

considering the application of operations management from the different areas and

to come up proposals for improvement as a result, will help the company more

productive, profitable, survive and have a competitive advantage.

Employees

With this study, the workers can benefit as they are an integral part of

the operations management. Through this study, the task of the workers will be

simplified and make their job more efficient through eliminating the non-value

added activities. Also, through this research study, the convenient working

environment can be achieved and smooth flow of production.

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Customer

This study can help in finding ways on how to improve their operation

management of the ABC Inc. which can help the customers have a consistent

satisfaction level with regards to the management. Customers can be satisfied of

their performance directed by the company that enables to meet the customers

expectation of the performance render by the workers.

Researchers

This study helps the researchers apply their knowledge regarding to the

operation management. Also, it will help the researchers to enhance their capability

and skill in making such research study and to come up a proposal that will help the

company to improve their methods improvements. Through this study, the

researchers can have a better view of what the food industry is like.

Other Researchers

This will serve as a reference for the other researchers for the future studies

in connection to operation management. This can provide them background

information out from results as guide for their research.

1.3 RESEARCH METHODOLOGY

1.3.1 Research Environment

ABC Incorporated was founded in 1999 as a small, home-scale business

specialty bakeshop catering mostly the local demands on Labangon, Cebu City by

the Lumakang family, an enterprising family who built their fortune from the lumber

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trade. And one of the facilities of ABC Incorporated is located in Bancal, Lapu-Lapu

City, Cebu.

ABC Incorporated expands their market not just in the Philippines but they

also compete globally to meet customer demands. Their market is geographically

divided into five segments which include Metro Manila, Visayas Cebu, Institutions,

Mindanao and International.

1.3.2 Research Respondent

NAME OF RESPONDENTS

POSITION / AREA INSTRUMENT USED

Plant Manager 1

Interview, Observation and Document Analysis

Production Supervisor 1

Plant Auditor 1

PPIC Head 1

Maintenance Supervisor 1

Finance Manager 1

HR & Admin. Head 1 Interview

Table 1: Research Respondents

This is the list of employees or workers in the company who were the subject

of theinterview. They were the ones, who provided us the information about the

entire operation in the company, and who gave us the documents necessary in the

study.

1.3.3 Research Instrument

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These are methods used by the researchers in getting data from the

respondents identified. The data are gathered through document analysis, interview,

observation, questionnaire and time study.

In document analysis, data are obtained from the existing records of the

company. Documents are necessary to analyze and interpret for this can give

accurate data. Interviews are used to get data that are based on the experiences

and knowledge of the people who involved directly on the production. Observation is

used in the study for this involves assessing the areas in the operations.

Questionnaire was also used to acquire particular data as perceived by the workers

involved directly in the operations and it contained interrelated questions to be

answer by the management of the company. Time study is used in gathering the

process time on each area on the production.

1.3.4 Research Procedures

Data Gathering Procedure

In gathering of data, the researches first looked for a company whether a

small or a micro business. Upon the approval of the company, getting data was

then followed. The researchers then went to the company to gather data through

conducting interview with the human resource manager, production manager and

costing personnel, observing the working area and the actual operations through

having document analysis well.

Treatment of Data

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The needed data in facilities planning and design, capacity planning, methods

improvement, and inventory management were gathered through conducting

interview, observation, document analysis, questionnaire and time study. These

were then presented and analyzed. Cause and Effect diagram was used to validate

the correctness of the interpreted data and understand the root causes of the

problems occurring to the 4 areas of concern. Through this diagram, the researchers

determined the effect of these problems to the efficiency of the workers and the

overall productivity of the company.

1.4 Definition of Terms

Banya

It is a margarine toppings which will put at the top of the sliced bread, in

order to have a deliciously taste.

Banyador

It refers to a person that is responsible in putting the banya to the slice

buns.

Bottleneck

Refers to a delay caused when one part of the process is slower than

the other processes and hinders overall progress.

Cost of Ordering

These are the costs incurred in ordering the materials needed in the

production.

Economic Order Quantity (EOQ)

20

This refers to the ideal quantity of materials or items ordered to avoid

overstocking and under stocking.

Expeditor

This refers to a person that is assigned in cooling and proofing area.

This person is responsible in putting the buns to the proofing and cooling area. The

expeditor are the one who will check the buns if it is ready in cooking, slicing, and

packing.

Holding Cost

Holding cost refers to the cost incurred in handling the materials.

Master Box

This refers to a box used in storing the finished goods for final packing.

Material Handling

Material handling refers to the movement of materials from one place to

another.

Pilferage Cost

This is the reduction in inventory caused by reject, or petty thievery by

the employees.

Proofing

It means that the dough will be place to an area with standard

temperature and let the yeast grow.

Sansan

21

This is refers to a person who is responsible in putting the shape dough

to the trays.

Stock Out

This refers to the period where in there is no available stocks of

materials or finished product.

22

CHAPTER II

PRESENTATION AND ANALYSIS OF DATA

2.1 Descriptive Phase

2.1.1 Company Profile

Company Name : ABC Incorporated

Company Address : Bankal, Lapu-Lapu City

Contact Person : Carolyn Go

Position : Proprietor

Telephone Number : (6332) 340-8619; 495-8903

Products : Special ensymadas, breads, cakes

Email Address : [email protected]

Website : www.abcincorporated.com

Historical Background

ABC Incorporated was founded in 1999 as a small, home-scale business

specialty bakeshop catering mostly the local demands in Labangon, Cebu City by the

Lumakang Family, an enterprising family who built their fortune from the lumber

trade. Armed with their time-tested recipe for their carrier product, ensaymada

(brioche), the family grew the business to its successful form today.

The first commercial products began to reach the USA and Canada in 2005,

and it was then that the company was incorporated into ABC Incorporated. With the

23

incorporation, it joins the successful Budget Builders Group of Companies owned by

the Lumakang Family.

As its export orders grew, the company also outgrew its Labangon facility.

So in 2009, marking its 10th year in the business, ABC Company built the first and

only industrial-scale, export processing baking facility in Cebu. Located strategically

in the heart of Bancal, Lapulapu City, a few minutes from the airport, it serves all

the snacks and breakfast items that millions of Filipinos around the world enjoys. A

second facility to cater to its franchise orders in Metro Manila was constructed in the

same year, along Eusebio Ave in Maybunga, Pasig City, to meet the ever growing

demands of the Metro Manila market.

Business Market

Table 2: Business Market of ABC Incorporated

ABC Incorporated expands their market not just in the Philippines but

theyalso compete globally to meet customer demands. Their market is

METRO MANILA VISAYAS CEBU INSTITUTIONS MINDANAO INTERNATIONAL

MRT (Metro Rail Transit) Ayala station, Makati

Salinas Pasalubong

Center, Lahug KFC Butuan USA

LRT (Light Rail Transit) station, Balintawak, Quezon City

SM City, Mandaue

Hotdog On Sticks

Canada

Pasig Commissary outlet

Robinsons Cybergate,

Fuente Mang Inasal Hongkong

Victory Mall, Caloocan City

Fooda, Consolacion

Flame-It Singapore and Dubai

24

geographically divided into five segments which include Metro Manila, Visayas Cebu,

Institutions, Mindanao and International.

Facility

Exhibit 1: Facility of ABC Incorporated

This is one of the facilities of ABC Incorporated where it is located in Bancal,

Lapu-Lapu City. It has an estimated area of 50,000 square meter and 100 meters

from the road.

Organizational Structure

Figure 3: Organizational Chart

25

Vicinity Map

Exhibit 2:Vicinity Map

The exhibit illustrates the location of the business. The highlighted portion is

the totality of the facility which is considered as the manufacturing site of the

business. As shown, more than 50% of the total area is not yet utilize but this is

subject for expansion.

ABC Incorporated

Bankal, Lapu-Lapu City

26

2.1.6 Product Lines

Exhibit 3: Product Lines of ABC Incorporated

ABC Incorporated is offering different products with good quality taste and

with affordable price in order to meet customer demands. These products are

categorized into three segments namely the famous breads, pastries,

PASTRIES

Loaves/Big Pack

Health Bread

Ensaymada

Brownies

BREAD PASALUBONG

ITEMS

Biscocho

Mamon Tostado

Otap

27

pasalubongitems. These products have varied flavours and sizes in order to provide

differentchoices to the demanding customers.

Pareto Table

Product Code

Product Name January to July Volume

Unit Cost

January to July Sales Volume

% Sales

Volume

% Cumulative

SBIS150 Special Biscocho 150g

43,532.80 30.03 1,307,289.98 13.16 13.16

MT100 Mamon Tostado 100g

40,216.82 30.00 1,206,504.60 12.15 25.31

OU200 Otap Ube 200g 27,581.66 41.44 1,142,983.99 11.51 36.81

OR200 Otap Regular 200g

26,613.96 35.09 933,883.86 9.40 46.22

RO200 Rosquillos 200g 24,237.12 38.02 921,495.30 9.28 55.49

HB10 Hotdog Bun *10 HOS

225,878.00 3.00 677,634.00 6.82 62.31

BS Brownies small 46,513.00 11.60 539,550.80 5.43 67.75

BIS100 Biscocho 100g 25,367.00 15.86 402,320.62 4.05 71.80

BIS45 Biscocho 45g 34,691.20 9.50 329,566.40 3.32 75.11

BB06 Burger Bun with oats *6

54,694.01 5.40 295,347.65 2.97 78.09

EU01 Ensaymada Ube 15,134.00 17.59 266,207.06 2.68 80.77

EY02 EnsaymadaYemas

15,174.00 17.27 262,054.98 2.64 83.41

SR Siopao Regular 17,312.00 14.90 257,948.80 2.60 86.00

EU03 Ensaymada Regular/plain

17,942.00 14.06 252,264.52 2.54 88.54

CC Cheese Cupcake 16,881.00 12.07 203,753.67 2.05 90.59

B100 Bayan 100g 20,252.00 9.28 187,938.56 1.89 92.49

BB15 Burger Bun *15 48,315.00 3.00 144,945.00 1.46 93.95

BB Basic Burger 39,217.00 3.30 129,416.10 1.30 95.25

IEO Inday Esper Otap 29,885.07 4.16 124,321.89 1.25 96.50

BBBS Basic Burger bun with Seeds

36,016.00 3.25 117,052.00 1.18 97.68

DR Dinner Roll 50,174.00 2.2 110,382.80 1.11 98.79

HBJ60 Hotdog Buns Jumbo 60g

15,941.00 3.85 61,372.85 0.62 99.41

HB06 Hotdog Bun *6 18,632.00 3.15 58,690.80 0.59 100.00

Table 3: Pareto Table of Product Lines

28

The result of the pareto is presented in table 3, which entails that the

highlighted product lines are responsible for the large percentage of the priorities.

However, the researchers selected only one product to focus in addressing the

problems in plant layout, capacity planning and methods improvement because they

are likely viable and gives significant impact to the other product lines. Moreover,

the top-most product selected which is considered as the fast moving product is the

special biscocho 150 grams that represents the other products.

Pareto Chart

Figure 4: Pareto Chart of Product Lines

The pareto chart shows the combined barchart and line diagram based on

cumulative percentages of each product. A vertical bar chart is constructed, from left

29

to right, in order of magnitude, using the percentages of each product and the

percentage assigned for each totals 100%. The product lines that appear to the left

of the break point known as vital fewaccount for the bulk of the effect which is

emphasized in a square form. However, the products that appear to the right of the

break point account for the least effect or known as trivial many. This graph, clearly

establish 80% prioritiy and the to-most priority that provides the mechanism to

control and direct effort by fact using sales volume as one of the baseline measure.

Raw Materials

Exhibit 4: Raw Materials

The major materials that are used in making the special bisocho 150 grams

are flour, milk, yeast, water, and sugar. This served as inputs in the production.

FLOUR SUGAR

MILK

FLOUR SUGAR

30

2.1.2 Facilities Planning and Design

INPUT PROCESS

OUTPUT

MATERIALS EQUIPMENT PRODUCT WASTE

1 Flour, Yeast, Condensed Milk, Iodized salt

Spiral Mixer 1 Mixing Dough

sack, cartoon, plastic

Knife

2

Dough Volumetric Machine

Cutting Cut Dough

Cut dough, Oil Dough Molder Shaping Shaped dough

molder/plancha/ tray Sansan

3 Rack Proofing Proofed Dough

4 Tray mover

Rack Oven Baking Baked bun gloves

5 - Cooling Cooled bun

6 Bread trays

Bread Slicer Slicing Sliced bun crumbs Bread container

7

Plastic

Banya Flavoured bun

used plastic, margarine packaging

Bun wiper

Margarine

8 Tray mover Rack Oven Baking Baked biscocho

9 gloves

10 - Cooling

11 Bread tray, printed cellophane,

Weighing scale Packing Pre-packed biscocho

crumbs and bites

12 Continuous sealing machine

Sealing Sealed biscocho

13 ABC Box and Scotch tape

Platform truck Final

Packing

tape holder

Table 4: Input Process Output Framework of Special Biscocho

Input process output framework mapped the flow from inputs of raw

materials and equipment to processand converting these inputs to product. These

inputs are mediums in the conversion process in which different procedures are

performed to produce outputs that are categorized into product and waste. Special

biscocho, the fast selling product and is the focus of this study, considered waste

31

when it is being rejected or not included in packing due to crumbs and bites and

inappropriate methods in transferring the baked product.

Characters Project Batch Production Mass Production Continuous

Production

Type of Product Unique Made-to-Order

Made-to-Stock Commodity

Type of

Customer One-at-a-time

Few individual

customers Mass Market Mass Market

Product

Demand Infrequent Fluctuates Stable Very Stable

Demand Volume

Very Low Low to medium High

Very High

No. of Different

Products Infinite Variety Many, Varied Few

Very Few

Production System

Long-Term Project

Discrete, Job Shop

Repetitive, Assembly Lines

Continuous

Process

Industries

Job order

processing

Equipment Varied General Purpose

Special Purpose Highly Automated

Primary Type of

Work

Specialized

contracts Fabrication

Assembly

Mixing,

Treating, Refining

Worker Skills Experts, Craftsperson

Wide range of Skills

Limited level of Skills

Equipment Monitors

Advantages

Custom work,

Latest

technology

Flexibility, Quality

Efficiency, Speed, Low Cost

Highly Efficient,

Large

Capacity, Ease of Control

Disadvantages

Non Repetitive,

Small Customer Base, Expensive

Costly, Slow,

Difficult to manage

Capital Investment, lack

of

Responsiveness

Difficult to change,

Limited

Variety

Total 0 6 3 2

Table 5: Manufacturing Process Type Checklist

The manufacturing process type that ABC Incorporated practicing is the batch

production wherein groups of the same products are process by batch. The checklist

presented in table 5 supports and presents the characteristics of a batch production.

32

Master Floor Plan

Wet & Premix

Area

Premix Area

Powder Area

SM1

SM3

Sheeter

VM

DM

DR

PASADADD

RHEON

CD

PM1 PM2

SM2DC

BS1

BS2

BS3

BS4

SWM

CS

1

CS

1

CS

1

BS5

Exhibit 5: Workflow Diagram of the General Process

The diagram shows the flow of the process in which this highlights the

backtracking (illustrated in kaizen burst) from process 8 to 9. Aside from the

backtrack movement of material, the existing layout of the company point up cost

disadvantage because the material travels a long distance from slicing to banya

stations (8 to 9). However, having a continuous flow of material guarantees a short

processing and this should be observed in the facility of ABC Incorporated.

Processing Area

The diagram shows the flow of the process passing every workstation

in the processing area. The process starts from mixing using a spiral mixer machine

8

12

13

14

5

6

7

9

10

11

1 2

3

4

33

and will be processed to volumetric machine to dough molder until the dough is

placed in the tray. The latter are the process being observed in the processing area.

Rack

Spiral Mixer1

Spiral Mixer3

Dough Molder

Sheeter

Table

Volumetric Machine

Dough Rounder

Dough Moulder

Table

TablePASADA

TableTable

Spiral Mixer2

Table

TableTable

TableTable

Cake Depositor

PM1 PM2 Table

Ice Maker Ice Maker

Dough Divider

PM2

Machine

Machine

Rack

Table

TableTableTable

Table

1' 6" Rise: 18' RunDough Cutting

Table

Table

Exhibit 6: Workflow Diagram in Processing Area

Process Sequence

Process Sequence

Process Description Distance (m)

Travel time (min)

Rank From To

1 to 2 Mixing Cutting 4.4 0.253 10

2 to 3 Cutting Shaping - 0.000 13

3 to 4 Shaping Sansan - 0.000 14

4 to 5 Sansan Proofing 5.2 0.218 11

5 to 6 Proofing Baking 8.4 0.318 7

6 to7 Baking Cooling 7.2 0.260 8

7 to 8 Cooling Slicing 21.6 1.132 2

8 to 9 Slicing Banya 32.0 5.000 1

9 to 10 Banya Baking/ Toasting 5.0 0.549 6

10 to 11 Baking/ Toasting Cooling 7.2 0.260 9

11 to 12 Cooling Packing 11 0.894 4

12 to 13 Packing Sealing 10.4 0.812 5

13 to 14 Sealing Final Inspection 4.0 0.146 12

14 to 15 Final Inspection Storing 7.01 1.040 3

Total 123.41m 10.88min

1 2

3

4 5

6

Table 6: Process Sequence

34

The table shows the distances and travel time of each process in producing

Biscocho 150g and tese processes were ranked. It shows that the distance between

slicing and banya constitutes the highest distance and the time travelled. Thus, the

researchers focus on the process from slicing to banya.

From-to-Chart

Distance between Locations (meters)

From To 1 2 3 4 5 6 7 8 9 10 11 12 13

1 - 4.4

2 -

3 -

4 - 5.2

5 - 8.4

6 - 14.4

7 - 21.6 11

8 - 32.0

9 5.0 -

10 - 10.4

11 - 4.0

12 - 7.01

13 -

Table 7: From-to-Chart for Distances

Number of Trips per Batch between Centers From To 1 2 3 4 5 6 7 8 9 10 11 12 13

1 - 1

2

-

3

-

4

- 1

5

- 1

6

- 2

7

- 1

1

8

- 1

9

1

-

10

- 1

11

- 1

12

- 1

13

-

Table 8: From-to-Chart for Number of Trips

35

Legend

Process Number Description

1 Mixing

2 Cutting

3 Shaping

4 Sansan

5 Proofing

6 Baking

7 Cooling

8 Slicing

9 Banya

10 Packing

11 Sealing

12 Final Inspection

13 Storing

Transportation Cost per Batch

Processes Distance

(m) No. of

trips/batch

Total Distance

(m)

Travel Time

(min)

Labor Cost per min

Total Cost (Php)

1 to 2 4.4 1 4.4 0.25

Php0.64

0.160

2 to 3 - - - - -

3 to 4 - - - - -

4 to 5 5.2 1 5.2 0.22 0.141

5 to 6 8.4 1 8.4 0.32 0.205

6 to 7 7.2 2 14.4 0.26 0.166

7 to 8 21.6 1 21.6 1.13 0.723

8 to 9 32.0 1 32.0 5.00 3.20

9 to 6 5.0 1 5.0 0.55 0.352

7 to 10 11 1 11 0.89 0.570

10 to 11 10.4 1 10.4 0.81 0.518

11 to 12 4.0 1 4.0 0.15 0.096

12 to 13 7.01 1 7.01 1.04 0.666

Total Php6.80

Table 9: Total Transportation Cost per Batch

The table shows the total cost incurred in transporting the products from the

first process to the last process. It takes a total cost of Php6.80 per batch.

Moreover, the highlighted part is the process being emphasized since it contributes

36

the longest distance with the highest cost among all process, and that the

researcher will consider this in evaluating the production layout of the company.

Computation

Total Cost = (No. of trips per batch) x (Travel Time) x (Labor cost per min)

= (1 x 5.00 min x Php0.64)

Total Cost = Php3.20 per batch

= Php3.20 x (8batches/week) x (52 weeks/year)

= Php1,331.20 per year

Total Cost = Php6.80 per batch

= (Php6.80) x (8 batches/week) x (52weeks/year)

= Php2,828.80 per year

Functional Areas

Raw Materials Storage

This is the area where the raw materials,

used in producing the goods, after receiving.

37

Molding Area

This is where the raw materials are

being converted into different forms of

dough may it be a bread, a pastry and a

pasalubong item using varied forms of

mixers and molders.

Pre-Mixing Area

This is a restricted area where top-

secret ingredients are combined and

formulated to obtain the best taste of

ABC Inc. products.

RAW MATERIALS STORAGE

This is the storage area where raw

materials are stocked and placed in

separate racks.

Baking Area

The pans enter a tunnel oven where

there are standard parameters set to

completely baked the pans.

Proofing Area

This is area is allocated for proofing

process that is set at a standard

temperature that allows the dough to

stretch or grow.

38

Exhibit 7: Functional Areas and its Description

Finished Goods Area

Finished goods are packed in cartoons

and these are piled in the finished

goods area. Prior

Cooling Area

Baked goods are transferred in this

area in which 30 minutes is the

minimum time the goods stayed and

kept cool.

Slicing and Packaging Area

The bread continues to cool as it

moves from oven to cooling area. In

this area, baked products such as

breads, pastries and pasalubong

items are packed but some mustbe

sliced before it will be packed.

39

Area and its Measurement

Area and Description

Qty Materials and

Equipment Measureme

nt (m)

Total Measureme

nt (m)

FUNCTIONAL AREA RECEIVING AREA 51.98

This is the loading and unloading area where raw materials and finished goods are endorsed to production and for shipment respectively.

PROCESSING AREA 183.79

This area is composed of different machines where majority of them are used in mixing and molding process. Baker and helper operate this area where there is only one baker and an average of two helpers per product lines.

4 Spiral mixer 0.97 x 0.61 2.3670

1 Dough molder

1.20 x 0.59 0.7080

0.68 x 0.64 0.4352

3.08 x 0.53 1.6324

2 1.45 x 0.67 1.9430

1 Volumetric machine 1.89 x 2.13 4.0257

1 Dough divider 0.57 x 0.53 0.3021

1 Dough rounder 0.60 x 0.63 0.3780

2 Planetary mixer 0.99 x 0.89 1.7620

1

Ice maker

1.88 x 1.76 3.309

1 1.88 x 1.76 3.309

1 1.22 x 0.88 1.0736

1 Rheon 2.35 x 2.98 7.003

1 Pasada 1.37 x 0.94 1.2878

1 Sheeter 2.44 x 1.13 2.7572

3

Table

1.83 x 1.11 6.0939

1 2.36 x 1.79 4.2244

1 3.19 x 0.60 1.9140

15 1.60 x 0.60 14.40

2 1.53 x 0.71 2.1726

1 1.68 x 0.42 0.7056

3 Rack 1.00 x 0.61 1.8300

1 Compressor 0.35 x 0.25 0.0875

1 Cake depositor 1.10 x 0.50 0.5500

- Tray container 2.13 x 1.2 2.5608

Total 66.83

KITCHEN

This area is the cooking area for topping and filling. This can function as washing area for baker and helper. As observed, there are

1 Steamer 0.53 x 0.59 0.3127

1 Master Cooker 1.07 x 0.98 1.0486

1 Emulsifier 0.36 x 0.27 0.0972

1 Banana Slicer 0.36 x 0.44 0.1584

1 Grinder 0.62 x 0.44 0.0756

40

machines and containers that were not utilized and placed in this area.

1 Stove 0.68 x 0.43 0.1849

1 Washing Table 2.31 x 0.53 1.2243

7 Barrel 0.32 x 0.32 0.7168

1 Push track 0.68 x 0.53 0.3604

Total 4.179

BAKING AREA 133.76

1 Rotary oven 2.40 x 2.00 4.80

1 Oven 2.00 x 2.00 4.00

5 Rack Oven 11.6 x 3.20 37.12

2 Table 1.70 x 1.00 3.400

Total 49.32

PACKING AREA 374.4

2 Aircon 0.25 x 0.20 0.050

The bread continues to cool as it moves from oven to cooling area. In this area, baked products such as breads, pastries and pasalubong items are packed but some must be sliced before it will be packed.

1 Cabinet 0.19 x 0.22 0.042

4 Bread Slicer 0.24 x 0.22 0.212

1 Sink 0.24 x 0.24 0.058

3 Continuous Sealer 0.23 x 0.23 0.159

1 Printing Machine 0.53 x 0.19 0.101

1 Shrink Wrap Machine 0.63 x 0.24 0.151

3

Table

0.44 x 0.71 0.936

14 0.63 x 0.24 2.114

1 0.67 x 0.67 0.449

1 0.53 x 0.19 0.101

1 0.47 x 0.25 0.118

1 0.57 x 0.67 0.382

1 mach.. 0.41 x 0.44 0.18

1 Machine 0.38 x 0.75 0.285

Total 5.288

OTHER AREAS EMPLOYEES ENTRANCE 2.89

LOCKER 23.90

16.60

GIFT SHOP 26.97

LOBBY 47.41

HAND WASHING AREA 16.8

PROOFING AREA 20.72

COOLING AREA 21.28

FINAL PACKING 11.72

RAW MATERIALS WAREHOUSE 341.44

FINISHED GOODS WAREHOUSE

136.06

Table 10: Different Areas and its Descriptions

41

2.1.3 Capacity Planning

Capacity Planning or also known as Head Count Analysis helps to determine

the ideal number of workers in producing product. The ABC Incorporated adapts

the piece rate method in quantifying the actual outputs of the workers, and

determining the salary of the workers. Every end of their shift the worker will list the

number of outputs they finished, and the supervisors will check it if it is exact or

not. At the end of the week, the worker will receive their salary. In this case , there

is no specific number of output that required by the company to be produced by

the worker, as long as the workers in every department will finish the number of

outputs per batch, and as long as the materials are all available.

Available Time

The company applies the Legislation in Section 9 Basic Conditions of

Employment Act it is stated that those establishments that are implementing piece

rate method must also adapt the 8-hour work. The ABC Incorporated operates 24

hours, but this company has three (3) shifts; 4am-1pm, 1pm-10pm and 7pm-4am.

Every shift has 1 hour meal break, and 30 minutes short break: 15 minutes every 4

hours, but the Biscocho 150g is scheduled from 7pm- 4am.

42

Existing Available Operating Time

Worker Job Description Operating Time

(hours) Operating Time

(Sec)

1 Mixing 6.08 21 888

2 Cutting

3 Shaping 6.75 24 300

4 Sansan 6.75 24 300

5 Proofing 6.60 23 760

6 1stBaking 6.45 23 220

7 1stCooling 6.60 23 760

8 Slicing 6.75 24 300

9 Banya 5.63 20 268

10 2ndBaking 6.75 24 300

11 2ndCooling 6.60 23 760

12 Packing 6.75 24 300

13 Sealing 6.75 24 300

14 Final Inspection 6.75 24 300

TOTAL 85.21 21 911.14

AVERAGE 6.09 306 756

Table 11: Existing Operating Time

Computations:

Available Operating Time

Formula:

Operating Time= (Regular time- Downtime) x Allowance

Scheduled Break time= 1.50 hour

MIXING and CUTTING

Description Percent Allowance Remarks

Personal Allowance 5 Personal Necessity Fatigue Allowance 3 Muscular Pain Variable Allowance 9 Lifting, pushing and pulling Standing Allowance 2 Standing up Total Allowance 19

43

Ideal Operating Time = (Regular Time Scheduled Downtime) x

Allowance

Mixer and Cutter Operating Time= (9 hours 1.50 hour) x 0.81

= 6.08 hours

SHAPING

Description Percent Allowance Remarks Personal Allowance 5 Personal Necessity Fatigue Allowance 3 Muscular Pain Standing Allowance 2 Stand-up Abnormal Position Allowance 2 Lifting, pushing and lifting Total Allowance 12

Ideal Operating Time = (Regular Time Scheduled Downtime) x Allowance

Shaper Operating Time = (9 hours 1.50 hour) x .88

= 6.60 hours

SANSAN

Description Percent Allowance Remarks Personal Allowance 5 Personal Necessity Fatigue Allowance 3 Muscular Pain Standing Allowance 2 Stand-up Total Allowance 10


Sansan Operating Time = (9 hours 1.50 hour) x 0.90

= 6.75 hours

44

BAKING

Description Percent Allowance Remarks Personal Allowance 5 Personal Necessity Fatigue Allowance 4 Muscular Pain Standing Allowance 2 Stand-up Variable Allowance 3 Lifting, Pushing, Pulling Total Allowance 14


Baker Operating Time = (9 hours 1.50 hour) x 0.86

= 6.45 hours

SLICING BUNS



Slicers Operating Time = (9 hours 1.50 hour) x 0.90

= 6.75 hours

BANYA



Banyadors Operating Time = (9 hours 1.50 hour) x 0.90

= 5.63 hours

45

BAKING



Bakers Operating Time = (9 hours 1.50 hour) x .90

= 6.75 hours

PACKING



Packer Operating Time = (9 hours 1.50 hour) x 0.90

= 6.75 hours

SEALING



Sealer Operating Time = (9 hours 1.50 hour) x .90

= 6.75 hour

46

FINAL PACKING



Inspector Operating Time = (9 hours 1.50 hour) x .90

= 6.75 hour

Summary of Allowance Factor

Table 12: Summary of Allowance Factor

Process Operator

Personal

Allowanc

e

Basic

Fatigue

Allowance

Variable Allowance Total

Allowan

ce

Allowance factor A

B

1 B2

C

1 C2

C

3

Mixing Baker

5 3 2 9 19 0.81

Cutting 5 2 2 9 0.91

Shaping helper 1 5 3 2 2 12 0.88

Sansan helper 2 & 3

5 3 2 10 0.90

Proofing 5 2 2 3 12 0.91

Baking Oven man

5 4 2 3 14 0.86

Cooling Oven man

5 2 2 3 12 0.88

Slicing Bread Slicer

5 3 2 10 0.90

Banya Banyador 5 3 2 10 0.90

Baking Oven man

5 4 2 3 14 0.86

Cooling Oven man

5 2 2 3 12 0.88

Packing Packer 5 3 2 10 0.90

Sealing Sealer 5 3 2 10 0.90 Final

Inspection Inspector 5 3 2 10 0.90

47

1. BASIC FATIGUE ALLOWANCE..4

2. VARIABLE ALLOWANCE

A Standing Allowance2

BAbnormal Position Allowance

B1 Awkward (Bending, over extent of the arms)..2

B2 Very awkward (lying, stretching).2

C Lifting, Pushing, Pulling (Weight exerted in pounds)

C1 20.3....3

C2 40.99

C3 60.17.17

Exhibit 8: Allowances for Various Classes of Work (in percentage)

Source:Niebel.,and A. Frievalds. Methods, Standards, and Work design, 11th ed.(New York:

Irwin/McGraw-Hill,2003).

48

Processes and Responsible Person

Figure 5: Process Flowchart

PROOFING

MIXING

CUTTING

SHAPING

SANSAN

1st COOLING

1ST BAKING

SLICING

BANYA

2ND BAKING

2ND COOLING

PACKING

SEALING

FINAL PACKING

START

END

49

It shows the process flowchart in producing Biscocho 150g. With this flowchart you will be able to determine

who are responsible in a certain process. The table below shows the legend. It shows the colour, processes and the

responsible person.

50

Legend

COLOR PROCESS RESPONSIBLE

Mixing and cutting Mixer

Shaping Helper 1

Sansan and Proofing Helper 2

1st Baking and 1st Cooling

Baker

2nd Baking and 2nd Cooling

Slicing Slicers

Banya Banyador

Packing Packers

Sealing Sealers

Final Packing Inspectors

51

Biscocho 150g Processes and Processing Time

Table 13: Biscocho 150g Processes and Processing Time

Note:

The sansan worker is responsible in putting the sansan dough in proofing area.

Product Line

Process Number

Process Description Number of Machines

Existing number of workers

Standard processing

time (mins)

Standard processing

time (sec)

BIS

CO

CH

O

1 Mixing 1 Spiral Mixer

1 18.13 1087.80

2 Cutting (Putting the dough to the

volumetric machine) 1 Volumetric

Machine 14.80 888.00

3 Shaping None 1 16.94 1016.40

4 Sansan None 2 16.80 1008.00

5 Proofing (Checking the buns) None 1 30

6 1stBaking (Pulling in and out the rack to the oven and checking

the breads and pastries) 1 Oven 1 37

7 1stCooling (Pulling in and out the

rack to the cooling area) None 1 1 day

8 Slicing Bread Slicer 1 72.15 4329.00

9 Banya None 3 91.32 5479.20

10 2ndBaking(Pulling in and out the rack to the oven and checking

the breads and pastries) 1 Oven 1 -- --

11 2ndCooling(Pulling in and out the

rack to the cooling area) None 1 -- --

12 Packing 1 Weighing scale 3 67.12 4027.20

13 Sealing 1 Continuous

Sealer 1 69.05 4143.00

14 Final Packing None 1 49.52 2971.12

52

The researchers conducted a TMS (Time Motion Study) in producing the

Biscocho 150g. As you can see the table above, there are processes that have a longer

process time compare to the other process. These processes are slicing the buns,

packing and baking, because this processes needs to entails precise work. It shows the

processes in making the Biscocho 150g as well as the processing time.

Operation Non-Value Added Activities

Table 14: Operation Non-Value Added Activities

It shows the non-value adding activities involve in each process area. This non-

value adding activities are necessary in production of biscocho, since it is needed to

maintain the quality of their product.

Process Non Value Added

Activities Remarks

Observed Time (Minutes)

Mixing Set up Adjust the machine 0.363

Cutting Set up Fix the machine, Weigh the dough

0.169

Baking

Quality Concern Inspection 0.501

Put the Rack Position the rack 0.371

Slicing Process Downtime Get container and place the slice buns.

6.28

Packing Process Downtime Get the baked breads 6.12

Sealed Machine Set-up

Turning on the machine

2.00

Quality Concern Adjust the speed 2.00

53

Workers Summary of Available Operating and Standard Processing Time

PROCESS AVAILABLE

OPERATING TIME (sec)

STANDARD PROCESSING TIME

(sec)

STANDARD PROCESSING TIME

per 8 Batch (sec)

MIXING 21 888

1087.80 8702.40

CUTTING 888.00 7104.00 SHAPING 24 300 1016.40 8131.20

SANSAN 24 300 1008.00 8064.00

PROOFING -- -- --

BAKING -- -- --

COOLING -- -- --

SLICING 24 300 4329.00 34632.00

BANYA 20 268 5479.20 43833.60 BAKING -- -- --

COOLING -- -- --

PACKING 24 300 4027.20 32217.60

SEALING 24 300 4143.00 33144.00

FINAL PACKING 24 300 2971.20 23769.60

Table 15: Workers Summary of Available Operating and Standard Processing Time

Computations:

Ideal number of workers:

Mixing

= Standard Processing Time/Available Operating Time

= 8 702.40 sec/21 888 sec

= 0.40 workers

Cutting


=7104.00 sec/21 888 sec

=0.32 workers

54

Shaping


= 8131.20 sec/24 300 sec

=0.35 workers

Sansan


= 8064.00 sec/24 300 sec

=0.33 workers

Slicing


=34632.00sec/ 24 300 sec

=1.43 workers

Banya


=43833.60sec/20 268 sec

=2.16 workers

Packing


=32217.60sec/24 300 sec

=1.33 workers

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Sealing


=33144.00sec/24 300 sec

=1.36 workers

Final Packing


=23769.60sec/24 300 sec

=0.98 workers

MACHINE CAPACITY

OEE stands for Overall Equipment Effectiveness evaluate and indicate how

effectively a manufacturing operation is utilized. This can be at a job level, shift level or

overall level. There are three main factors make up the OEE calculation, these are

Availability, Performance and Quality, and these are expressed in percentage.

OEE= Availability x Performance x Quality

Availability takes into account Down Time Loss, and is calculated as:

Availability = Operating Time / Planned Production Time

Performance takes into account Speed Loss, and is calculated as:

Performance = Ideal Cycle Time / (Operating Time / Total Pieces)

Quality takes into account Quality Loss, and is calculated as:

Quality = Good Pieces / Total Pieces

56

OEE is used to find the greatest areas of improvement and start with the area

that will provide the greatest return on asset. The OEE formula will show how

improvements in changeovers, quality, machine reliability improvements, working

through breaks and more, will affect the bottom line. OEE is simple and practical, takes

the most common and important sources of manufacturing productivity loss,and places

them into three primary categories and distils them into metrics that provide an

excellent gauge for measuring where you are and how you can improve.

(www.exord.com/docs.pdf)

Overall Equipment Effectiveness for Spiral Mixer

Spiral Mixer

Item Data

Shift Length 9 hours = 540 minutes

Short Break 30 minutes

Meal Break 60 minutes

Downtime 0 minutes

Ideal Cycle Time 18.13 minutes

Total batch 1 batch

Reject None

Planned Production Time =18.13 minutes

Operating Time =18.13 minutes

Good Output

=Total kilo- reject kilo

= 1 0 =1 batch

Availability

=Operating Time/Planned Production Time

=18.13 minutes/18.13 minutes

=100%

Performance

=Ideal Cycle Time/(Operating Time/ Total Good Output)

=18.13 minutes/(18.13 minutes/ 1batch)

= 100%

Quality

= Good Output/Total Output

= 50/50

=100%

OEE

= Availability x Performance x Quality

= 100% x 100% x 100%

=100%

Table 16:Overall Effectiveness Equipment for Spiral Mixer

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Overall Equipment Effectiveness for Volumetric Machine

Volumetric Machine

Item Data




Downtime 0 minutes

Ideal Cycle Time 14.80minutes

Total Good Output 1 batch

Reject None

Planned Production Time 14.80 minutes

Operating Time

=Planned Production Time- Downtime

=14.80 minutes-0 minutes

=14.80 minutes

Good Output

=Total Good Output- Reject Output

= 1 batch 0 =1 batch

Availability


= 14.80 minutes /14.80 minutes

=100%

Performance


= 14.80 minutes/(14.80 minutes /1 batch)

= 100%

Quality


= 1batch/1batch

=100%

OEE


= 100%x 100%x 100%

=100%

Table 17:Overall Effectiveness Equipment for Volumetric Machine

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Overall Equipment Effectiveness for Dough Molder

Dough Molder

Item Data




Downtime 0 minutes

Ideal Cycle Time per 3 pc 7.75 minutes


Reject None

Planned Production Time =7.751minutes

Operating Time


=7.75minutes-0 minutes

=7.75 minutes

Good Output



Availability


= 7.75 minutes /7.75 minutes

=100%

Performance


= 7.75minutes/(7.75 minutes/1 batch)

= 100%

Quality


= 1batch/1batch

=100%

OEE


=100% x 100% x 100%

=100%

Table 18:Overall Effectiveness Equipment for Dough Molder

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Overall Equipment Effectiveness for Dough Rounder

Dough Rounder

Item Data




Downtime 0.23 minutes

Ideal Cycle Time per batch 12 minutes


Reject None


Operating Time


=12.41 minutes-0.23 minutes

=12.18

Good Output



Availability


= 12.18minutes/12.41 minutes

=98.14 %

Performance


= 12minutes/(12.18 minutes/1 batch)

= 98.52%

Quality


= 1batch/1batch

=100%

OEE


=98.14 %x98.52% x 100%

=96. 69%

Table 19:Overall Effectiveness Equipment for Dough Rounder

60

Overall Equipment Effectiveness for Oven

Oven

Item Data




Downtime 0 minutes

Ideal Cycle Time 35 minutes


Reject None

Planned Production Time =35 minutes

Operating Time =35 minutes

Good Output



Availability


=35 minutes/ 35minutes

=100%

Performance


=35 minutes/(35 minutes/ 1 batch)

= 100%

Quality


= 1 batch / 1 batch

=100%

OEE


=100%x 100% x 100%

= 100%

Table 20:Overall Effectiveness Equipment for Oven

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Overall Equipment Effectiveness for Bread Slicer

Bread Slicer

Item Data





Ideal Cycle Time 67.86 minutes

Total Good Output 1 Batch

Reject None


Operating Time


=72.15 minutes - 3.68 minutes

=68.47 minutes

Good Output


=1 batch 0 =1 batch

Availability


=68.47 minutes/72.15minutes

=94.90%

Performance


=67.86 minutes /(68.47 minutes / 1 Batch)

=99.11%

Quality


= 1 Batch/ 1 Batch

=100%

OEE


=94.90% x 99.11% x 100%

=94.06%

Table 21:Overall Effectiveness Equipment for Bread Slicer

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Overall Equipment Effectiveness for Continuous Sealer

Continuous Sealer

Item Data





Ideal Cycle Time 17.66minutes

Total Output 312 packs 165 packs

Reject 150 packs


Operating Time


= 17.46 minutes- 0.27 minutes

=17.19 minutes

Good Output


= 312 150 = 165 packs

Availability


= 17.19minutes/17.46 minutes

=98.45 %

Performance


=17.46 minutes/(17 minutes/ 312 packs) = 99.21 %

Quality


= 780/780

=100%

OEE


=99% x99.21 % x 100%

=98.22%

Table 22:Overall Effectiveness Equipment for Continuous Sealer

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Total Number of Machines and its Capacity

BISCOCHO

NAME OF MACHINE QUANITY CAPACITY

Spiral Mixer 4 50 kg Dough Molder 1 1 batch

Dough Rounder 1 1 batch Volumetric Machine 1 780 pcs

Oven 4 780 pcs Bread Slicer 4 3 pc at a time

Continuous Sealer 3

Table 23:Total Number of Machines and its Capacity

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Energy Utilization Cost

Material/Equipment Used

Qty No. of hours used

Power (Kilowatt

)

Rate/Kilowatt-hour

(pesos)

Energy Cost

(pesos)

Total Energy

Cost (pesos)

Electric Fan 2 24 hours

0.075 Php7.95 Php14.31

Php28.62

Aircon 4 24 hours

0.186 Php7.95 Php35.49

Php141.96

CCTV Cameras 12 24 hours

0.00005 Php7.95 Php0.001

Php0.012

Fluorescent 58 24 hours

0.040 Php7.95 Php7.63 Php442.54

Telephone 1 24 hours

0.00005 Php7.95 Php0.001

Php0.012

TOTAL Php613.44

Table 24: Energy Utilization Cost

Machines Utilization Cost (1 Batch)

Machines Used

Quantity No. of hours used

Power (Kilowatt)

Rate/Kilowatt-hour

(pesos)

Energy Cost

(pesos)

Total Energy

Cost (pesos)

Spiral Mixer 4 0.25 1.3 KW Php7.95 Php3.31 Php3.31

Volumetric Machine

1 0.21 2.5 KW Php7.95 Php4.17 Php4.17

Dough Rounder

1 0.21 2.5 KW Php7.95 Php4.17 Php4.17

Dough Molder

1 0.21 2.5 KW Php7.95 Php4.17 Php4.17

Oven 4 0.58 3KW Php7.95 Php13.83 Php13.83

Bread Slicer 4 1.31 0.37 KW Php7.95 Php3.85 Php3.85

Continuous Sealer

3 0.29 0.5 KW Php7.95 Php1.15 Php1.15

TOTAL Php48.48

Table 25: Machine Utilization Cost (1 Batch)

65

It shows the machine utilization cost per batch. As you can see it the table

above, the total cost in one (1) batch is only Php33.92 which already includes the

spiral mixer, volumetric machine, dough rounder, dough molder, oven, bread slicer

and continuous sealer. This cost is needed in diagnostic phase.

Computations:

Formula:

ENERGY COST=usage per day x energy cost per KWH x wattage

ENERGY COST (MACHINE)

Continuous Sealer

=usage per day x energy cost per KWH x wattage

=0.294 x Php7.95 x 0.5 KW

=Php1.17

Bread Slicer


=1.31 x Php7.95 x 0.37 KW

=Php3.85

Spiral Mixer


= 0.32 x Php7.95 x 1.3 KW

=Php3.31

Oven


=0.50 x Php7.95 x 3 KW

= Php13.83

Volumetric Machine


= 0.21 x Php7.95 x 2.5 KW

=Php4.17

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Dough Mixer


= 0.21 x Php7.95 x 2.5 KW

=Php4.17

Dough Rounder


= 0.21 x Php7.95 x 2.5 KW

=Php4.17

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2.1.4 Methods Improvement

The ABC Incorporated is concerned about Methods Improvement significant

analysis on the process on how the job is being performed effectively and efficiently.

Methods and time element are factors used to evaluate the existing performance of

the production of Special Biscocho 150grams. As explained in the pareto, the

researchers selected the top most priority which is the fast moving product because

this would represent other products that are included in the 80% range.

The new plant and its management look forward on the techniques of

scientific management which they believe can help in their operations. The

philosophy of job standardization

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