A brief study on a paper mill to provide a solution to their efficiency problem.

1. WASTED POTENTIAL
North South University
Name- M.M. Junaid Alam
Email - jalam565@gmail.com
Mobile - 01624958100
Student id– 1711861030
Name- Zahid Alam Shovon
Email – zaidandzaid89@gmail.com
Mobile – 01716398907
Student id – 1712361630
Name- Mahdi Mohammad Mehrab
Email - mahdimohammadmehrab@gmail.com
Mobile – 01973206295
Student id – 1711659030
Name- Ashfaqul Haque Chowdhury
Email 96ashfaq@gmail.com
Mobile – 01791652383
Student id – 1712337620

2. 1
Case Analysis
The biggest strength of Darshana Mill is the manpower of the mill. The employees are loyal and
expert. The turnover is low which shows employees like working here. But in spite of that the
mill is suffering from various problems with low outputs. The bottleneck of all these problems is
the machines. As a manager Shahriar Rahman has to come up with a positioning to improve-
output, profitability and quality.
1. Problem Identification:
Going through the situation of the mill following problems can be listed-
 Grade Change for machine #6
 Breaks for machine #5
 Insufficient Output
 Inefficient Scheduling
 Outdated machines.
Doing further analysis, outdated machines and insufficient scheduling can be blamed for most of
the problems.
2. Identification of Decision Criteria and Allocation of Weights:
Based on the objectives the alternatives will be decided on certain criteria which are listed
below and they are weighted according to their importance.
3. Developing and Analyzing Alternatives:
i. Computerization: Integrate and Coordinate the workforce in Darshana Mill by installing
a computerized machine control system.
Strength: Easier grade change, less wastage of time and resources, & higher efficiency,
profitability, flexibility, quality, consistency & output (65TPD).
Weakness: High capital investment( $15 million) & employee turnover, maintenance
issues
Criteria Weights
Output 10
Profitability 9
Capital Investment 8
Flexibility 7
Quality 7
Efficiency 6
Employee Turnover 5

3. 2
Net Present Value:
Year Cash Outflow($) Cash Inflow($) Present Value($)
0 15,000,000 0 -15,000,000
1 0 7,391,250 (W) -7,608,750
2 0 7,391,250 -217,500
3 0 7,391,250 +7,173,750
(W) = Number of TPD * average contribution per ton * 365
Payback Period= 2years + 217,500*365/7,391,250 days
= 2years & 11days
ii. Coordination between Adamjee and Darshana Mills: The two mills can coordinate and
integrate the production process and reduce the amount of grade change required. The
desired output can be distributed among the two mills according to the type of grades
required so that each mill produces similar types of grades only.
Strength: Easier grade change, less wastage of time and resources, & higher efficiency,
profitability, quality & output & no capital investment.
Weakness: the effects would be minimal, outputs may not rise sufficiently.
iii. Purchase Machine: The machines were the bottleneck in the production as every other
part of the mill could run at least 200 TPD more than the machines could produce. So
Exon Papers limited can purchase a new bleach board machine with a capacity of 200
TPD. This would cost roughly $20 million. Additional cost would be incurred to make
space for the machine to run. Estimated cost of renting a factory space would be $2
million per year. This way bleach board production of the new machine can be
coordinated and integrated with machine #6. This would also raise the production of
bleach boards which is a more profitable product.
Strength: Grade change minimized, less wastage of time and resources, & higher
efficiency, profitability, flexibility, quality & output( 200TPD).
Weakness: High capital investment( $22 million), Fixed cost increased
Net Present Value:
Year Cash Outflow($) Cash Inflow($) Present Value($)
0 20,000,000 0 -20,000,000
1 2,000,000 25,550,000 (W) + 3550,000
(W) = 200TPD * $350 average contribution per ton * 365
Payback Period= 20,000,000*365/(25,550,000-2,000,000)= 310 days
iv. Integrated Decentralized System: The operations will be decentralized and the
employees at the Darshana mill will have the authority to make decisions regarding
scheduling and running of the machines. The mill scheduler and the production planner in
the corporate headquarter will collaborate more. The production planner will not be
changed so frequently and not until his/her assistant is trained enough to take his/her

4. 3
position. Grade changes will be minimized. This would also increase the quality of the
products and output of the machines.
Profits lost due to grade change per year:
=Average number of grade change per month * number of months * average cost of a
grade change * average contribution per ton for machine #6
=38 * 12 * 17.3 tons * $350 = $ 2,761,080
Strengths: Better scheduling, better quality, higher output, no capital investment, grade
change minimized, wastage of time and resources minimized, higher efficiency,
empowering employee, more efficient decision making.
Weakness: Effects would be minimal.
v. Production-focused Scheduling process: The scheduling system will be changed from
customer-focused to production-focused to optimize the production runs and ensure the
betterment of the machines. Last minute changes and orders will not be considered and the
mill scheduler will receive the planned overall monthly schedule a week earlier. The
machines would run better and depreciate less as grade changes will be minimized.
Strength: Better scheduling, better quality, higher output, no capital investment, grade
change minimized, wastage of time and resources minimized, higher efficiency, machines’
lifespan increased.
Weakness: Effects would be minimal, lose customers, less revenues.
Analysis of the Alternatives(multiplied by criteria weight):
Criteria Computerization Coordination
between
Adamjee and
Darshana
Purchase
Machine
Integrated
Decentralized
System
Production-
focused Scheduling
process
Output (10) 10 * 8= 80 10 * 4= 40 10* 10=
100
10 * 5= 50 10 * 6= 60
Profitability
(9)
9 * 8= 72 9 * 6= 54 9 * 9= 81 9 * 6= 54 9 * 5= 45
Capital
Investment
(8)
8 * 7= 56 8 * 10= 80 8 * 6= 48 8 * 10= 80 8 * 10= 80
Flexibility(7) 7 * 8= 56 7 * 6= 42 7 * 6= 42 7 * 7= 49 7 * 5= 35
Quality(7) 7 * 8= 56 7 * 7= 49 7 * 7= 49 7 * 6= 42 7 * 8= 56
Efficiency(6) 6 * 9= 54 6 * 7= 42 6 * 7= 42 6 * 8= 48 6 * 7= 42
Employee
Turnover(5)
5 * 4= 20 5 * 8= 40 5 * 10= 50 5 * 9= 45 5 * 9= 45
Total Score 394 347 460 368 363

5. 4
4. Recommendation of the best alternative:
Purchase Machine: If major capital expenditure is approved, according to the decision matrix
purchasing new machines will result in most effective and immediate result in better output,
quality and profitability. This would resolve the issue of production deficiency and help the
company to grow and expand its market share. This would also result in more revenues in the
future which would contribute in making more capital investments in the future.
5. Recommendation if Major Capital Expenditure is not Approved:
Integrated Decentralized system: Ignoring the best alternative, Integrated Decentralized
system is only 26 points behind in the decision matrix. This is a huge plus point as it requires
zero capital investment. This system only involves changing the internal management
process and by doing so it can well proves to be profitable for the company. This would
ensure smooth production run which would result in higher quality product and longer life
span of the machines thus saving the company some valuable cash which can otherwise be
invested for the betterment of the Mill.
Conclusion
Over the years the machines of the Darshana mill has let the company down. However, with
purchasing a new machine or introducing Integrated Decentralized System the company can
overcome the basic issues and move towards prosperity. Along with the loyal and experienced
employees, the Darshana mill has a great potential to grow in this thriving industry. Therefore a
major capital investment wouldn’t let the company down and the Integrated Decentralized
System would make the day to day operations run smoother making the corporate headquarter
satisfied.
394
347
460
368 363
0
50
100
150
200
250
300
350
400
450
500
Computerization Coordination
between
Adamjee and
Darshana
Purchase
Machine
Integrated
Decentralized
System
Production-
focused
Scheduling
process
Scores of the Alternative