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Operations management project

Blue Mountain Soft Drink Operations Management MBA Project

Operations management project

  1. 1. Operations Management Project ] Blue Mountain Soft Drinks
  2. 2. Operation Management Contents  Company History  Company Background  Objectives  Missions  Strategic Decisions  Product Design  Quality Management  Process Design  Location Decisions  Layout Strategies  Human Resource and Job Designs  Supply Chain Management •Inventory Control • Maintenance • Conclusion
  3. 3. Company History  Loi Hein Company was established in 1996 by the owner and C.E.O, Dr. Sai Sam Htun.  In 2000, Loi Hein Company associated with Osotspa Co., Ltd. (Thailand) and launched Shark energy drink and gained the market leadership.  In 2002, LHC launched his first own brand, Alpine which is purified drinking water and also became the market leader after a few years later.  In 2008, in association with Green Spot Co., Ltd. (Thailand) LHC developed and launched a non- carbonated California Orange soft drink.  In 2009, Loi Hein Company built the strong Loi Hein Distribution Company (LHDC) as a part of business management unit to emphasize on manufacturing soft drink products.
  4. 4. Company Background  Loi Hein Co., Ltd is an organization engaged in manufacturing, marketing, selling and distributing consumer products in Myanmar  The main manufacturing centre is located on North west of Yangon, in the pristine area of Htauk Kyant. The manufacturing plant comprises of a water processing plant, fully automated bottling lines for purified drinking water and carbonated soft drinks as well as integrated high capacity packaging line.  All manufacturing processes are ISO 9001:2000 HACCP certified
  5. 5. Competitive Background of Local soft Drink industry Types of soft drink products  Carbonated soft drinks  Energy drinks  Dairy related juices and fruit flavored drinks No Name of Manufacturer Brands 1 MGS Beverage Star Cola, Pepsi 2 Max Myanmar Co.,ltd Max 3 New Smart Co.,ltd Rocker 4 Green Circle Co.,ltd Ve Ve 5 Capital Diamond Star Co.,ltd Coca-Cola
  6. 6. Key Success factors of Blue Mountain Soft Drinks  Experienced in bottling manufacturing  Launched by the same parent company of Alpine purified drinking water  Strong relationship with main wholesalers and retailers  Having the substantial property assets  Locating near both customers and suppliers  Ability to shift experienced workers from predecessor alpine company  Ability to compete with global soft drink companies and local companies  Understanding of consumer behavior via market analysis
  7. 7. Key Success factors of Blue Mountain Soft Drinks Customers  Downtown area  Wholesalers  Retail-outlets  Rep-offices Factory Area •Htauk Kyant Town Ship, 15-20 km from supplier •Getting JIT supply control, delivering by suppliers themselves •Experience labors in same township Suppliers • Bago Division ( Zayawady Sugar factory) •Local farmers, contractors •20,000 kyats / ton 10-20 km 25-30 km
  8. 8. Objective  To ensure the most efficient storage and warehouses for a faster delivering schedules of products through nationwide  To manage and control well in soft drink product operations including supply chain management, inventory control and distribution methods.  To conduct our operations with integrity and respect of each other in entire operation with great impact to environments where our business touches in Myanmar.  To become the leading and benchmark FMCG (Fast-moving consumer goods ) distribution company in Myanmar.
  9. 9. Mission  Blue Mountain soft drinks aim to be the largest nationwide consumer product with a value composition of safety, healthy and customer satisfaction.  To create opportunities for the growth of employees improvement in both skills and ethics among the surrounding environment of the company organizational structure.  Focus to build a stronger relationship with distributors and retail outlets  Aim to have transparency with realistic incentives and rewards for all collaborated members in entire process.
  10. 10. Strategic decisions of Blue Mountain Soft Drinks Company Strategies according to product life cycle  As in maturity stage, product design and quality standards stabilize  Apply defensive strategy to maintain the market position  Competitive selling prices and cost become critical so continuing improvement in production runs for long-term and applying cost-cutting method
  11. 11. Blue Mountain Operation strategy Multi domestic strategy related with high local customer responsiveness and low cost reduction To meet with strategic decision, Mass Production - production process of low variety withhigh volumes and quality standardized soft-drink product. Flow - Mass production is associated with a flow how a product moves through the system from one work station to another. Human Resource Effect - great communication network between senior experienced employees and ordinary labors work force in production process. Matching cost cutting – the main ingredients such as sugar, water, flavor and bottles are sourced locally with economical costs and also in labor force. Bottling plant owned by parent company.
  12. 12. PLC stage of Blue Mountain soft drink Introduction Growth Maturity Decline Sales,cost,andcashflow Blue Mountain Stage Maturity Market Leader
  13. 13. Blue Mountain Product Life Cycle Stage  Existence between the relationship of the product and customer satisfaction  Customer notice easily the name of the product and rapidly possess the great percentage of market shares and increase profitability since established 2009 under the parent company Loi Hein Co.,ltd.  As in the maturity stage, need to improve production considering long-term  Monitoring and control the cost reduction while the product is reaching the higher amount of sales revenues
  14. 14. Defining product  Main product varieties – Blue Mountain Cola, Orange, Sparkling and Club Soda  Bottle Type - Non-returnable plastic bottle  Bottle Size - 380 ml per bottle , 24 bottles per case  Nutrition Facts - Blue Mountain bottle 13oz (380 ml) Sugars - total : 39g Calories - total : 140g Calories from Sugar - 140g
  15. 15. Bill of Materials (BOM) Blue Mountain Cola Serial Number Description Quantity INGR 001 Sodium Benzoate 1.6 ml INGR 002 Sodium Saccharin 0.384 ml INGR 003 Sodium Cyclamate 3.84 ml INGR 004 Citric Acid 25.92 ml INGR 005 Aspartame 2.16 ml INGR 006 L- Carnatine 29.76 ml INGR 007 Carmoisine 0.002 ml INGR 008 Cocoa Flavor 6.72 ml INGR 009 Spring Water 7240 ml INGR 010 Syrup 1810 ml
  16. 16. Bill of Materials (BOM) Blue Mountain Orange Serial Number Description Quantity INGR 001 Sodium Benzoate 1.6 ml INGR 002 Sodium Saccharin 0.384 ml INGR 003 Sodium Cyclamate 3.84 ml INGR 004 Citric Acid 25.92 ml INGR 005 Aspartame 2.16 ml INGR 006 L- Carnatine 29.76 ml INGR 007 Carmoisine 0.002 ml INGR 008 Orange Flavor 6.72 ml INGR 009 Spring Water 7240 ml INGR 010 Syrup 1810 ml
  17. 17. Bill of Materials (BOM) Blue Mountain Sparkling Serial Number Description Quantity INGR 001 Sodium Benzoate 1.6 ml INGR 002 Sodium Saccharin 0.384 ml INGR 003 Sodium Cyclamate 3.84 ml INGR 004 Citric Acid 25.92 ml INGR 005 Aspartame 2.16 ml INGR 006 L- Carnatine 29.76 ml INGR 007 Carmoisine 0.002 ml INGR 008 Lime Flavor 6.72 ml INGR 009 Spring Water 7240 ml INGR 010 Syrup 1810 ml
  18. 18. Bill of Materials (BOM) Blue Mountain Club Soda Serial Number Description Quantity INGR 001 Sodium Benzoate 1.6 ml INGR 002 Sodium Saccharin 0.384 ml INGR 003 Sodium Cyclamate 3.84 ml INGR 004 Citric Acid 25.92 ml INGR 005 Aspartame 2.16 ml INGR 006 L- Carnatine 29.76 ml INGR 007 Carmoisine 0.002 ml INGR 008 Spring Water 9057 ml
  19. 19. Technology Utilization of Blue Mountain  Concerns about the product quality and reduce production cost and to attain the equipment data available on time  Utilize modernized technology based Computer aided machines to control  Water processing plant  Carbo-Cooler  Ultra Hygienic Mixers
  20. 20. Quality and Low Cost Strategy  Six Dimensions to measure the quality of the soft-drink products. - Safety - Commercial - Characteristics - Brand Identity - Conventional - Artistic
  21. 21. Quality and Low Cost Strategy  Blue Mountain soft drink product is a ISO 9001: 2000 HACCP quality standardized product.  Among six dimensions, the company focus on safety, commercial and brand awareness  To match with the quality of the product and meet customers satisfaction , blue mountain is focus according to - User Based Review - Market Area Based Review - Labors and Product Related Review
  22. 22. Quality and Low Cost Strategy  User Based Review - established and launched standardized product while some industries prefer more productivity - target market area is the same in Upper Myanmar region containing both sub-urban areas and rural areas  Market Area Based Review - Reach a peak of sales volumes in Ayeyarwady Division located lower Myanmar and around upper Myanmar regions The following tables represent the market shares held by both global soft drink brands and local
  23. 23. Quality and Low Cost Strategy Labors and Product Related Review - Blue Mountain soft-drink is based on low variety with high volumes product type - the great connection between employees and our product is as important as the higher volume production process - The operation process is based on increasing productivity and effectiveness of the labor workforce - As in this PLC stage, established the communications between products and employees via incentives and motivation among their employee levels including openly supportive supervisors
  24. 24. Quality and Low Cost Strategy - continue improving on the well built high morale organization and work as a team within quality circles - These scatter diagram indicates Blue Mountain soft-drinks product related to the labor absenteeism Scatter Diagram Absenteeism Productivity
  25. 25. Reducing Operation Costs Option Concerning with Quality Reduction by Not Maintaining Six Sigma Quality Concept - Blue Mountain production process can be measured and arranged carefully under high tech facilitating plant and senior experienced employees how to eliminate to reach minimum number to zero number of defects - Most Local soft drink manufacturers try not to build six sigma program to get a competitive advantage rather the competing on prices - Six Sigma program will increase the operation cost which Blue Mountain trend is not matching - In a mean time BM customers are sensitive over
  26. 26. Reducing Operation Costs Option Concerning with Quality Six Sigma and Employee Empowerment - necessary of high skilled quality inspectors with higher salaries which is not also parallel with Blue Mountain economic trend with long-term consideration - Towards the customer satisfaction with product quality stabilization, Blue Mountain focus more on the customer responsiveness with lowering the manufacturing cost rather than hiring the quality experts
  27. 27. Blue Mountain Process Design & Strategy Strategy - Blue Mountain soft drink is using the product focus strategy - according to the PLC maturity stage, considering for long-term production runs based on labor efficiency and product quality - produce low variety and high volume products -invested in higher infrastructure costs and high technology used facilities which are massive figure of fixed costs - So BM is focusing to reach the long-run production based on this product focus strategy to recover certain amount of costs and overheads
  28. 28. Soft-Drink Product Focus Strategy Few inputs  Water  Sugar Syrup  Chemical Compound  Flavors Output variations Size = 380 ml Packaging and Label for each bottle
  29. 29. Blue Mountain Soft-Drink Processing Step Reaction Chamber Syrup Traded City water Chlorine injection Settling Chamber San d Filter Clear Well Carbon Tower Polishers Blender Carbo Cooler Fille r Quality Control Lab Filler Crowner Filling and Bottling Inspection Casing and Distribution
  30. 30. Production Process Theory  Syrup starts with the preparation of thick high solid syrup blending in steel tank with -concentrate compound -Natural Flavors -Sodium Benzoate -Sugar -Treated water Constant rate of blending ratio 1 syrup part : 5 parts of treated
  31. 31. Production Process Theory  Syrup Room is the area of a soft drink plant where the syrup is started or prepared at the mixing and blending stage, the treated syrup is transferring through stainless steel pumps to the blender  Traded City Water receive from 300ft tube of water pipe lines starts removing various impurities passing through chlorination step, settling chamber and sand filter carbon tower, pH clarification step and UV conductivity. Purified water is used in preparation of syrup
  32. 32. Production Process Theory Blending Tube is the area that prepare final soft-drinks by blending syrup and water in specific ratio of ( 1:5 ) Carbo-Cooler Injection of carbon dioxide to give soft-drink carbonation through carbon dioxide – cooler room. Filler Room Encircle the area of a bottling line that includes - filling section -Carbo-Cooler - Capping section - Proportioned (Blender)
  33. 33. Production Process Theory Non-Returnable Plastic Bottles Washing - Rinse the empty plastic bottles by using a series of water sprays - Use the sprays and high power used blower to remove dust, fragments and unseen germs - Then passing through warmer to avoid excess of condensation - After passing through warmer, transferring into filling steps, labeling and case packaging area. Final Soft-Drink Product -Stacks the final soft-drink cases of non-returnable plastic bottles systematically - Arranges and deliver cases to storage for distribution.
  34. 34. Location Decisions
  35. 35. Location of Blue Mountain manufacturing center  Located on a 10 acre site, in the pristine area of Htauk Kyant, about 40 minutes drive from Yangon  The factory is positioned in very less populated area and also far from residential area of Htauk Kyant township.
  36. 36. Location of Blue Mountain manufacturing center The satellite picture of Blue mountain soft drinks manufacturing center ( Source-Google Earth)
  37. 37. Criteria used to choose the location  The Land should be cheaply available and should have enough space for expanding of existing facilities in the future.  The factory has to be located far from residential area so that people wouldn't be disturbed with noises and privacy and consequently, it will avoid any legal actions by residents.  The availability of enough work force and technicians in vicinity in order to run the factory smoothly.  The place should not be very far from the main office ,banking and financial institutions which are located in Yangon.  The factory should be near the markets and suppliers to avoid high transportation costs in obtaining raw materials and distribution of finished goods to markets.  Most importantly, there should be enough water supplies to the plant. The place has access to both massive flow of underground water and traded city
  38. 38. Layout Strategies
  39. 39. Why layout is important for plant  To ensure the maximum efficiency of production such as smooth, flexible and rapid movement of material  For utilization of space, equipment and manpower  To provides the employee's convenience, safety and comfort at work  To achieve the benchmark quantity and quality of output at the minimal feasible cost of manufacturing
  40. 40. Objectives based to design the layout strategically  To minimize imbalance in fabrication of the production process  To guarantee that work proceeds from one point to another point without any delay.  To provide the ease of supervision and control.  To allow the ease of maintenance.  To provide the employee safety and health.  To improve productivity
  41. 41. The repetitive and product- oriented layout in a Soft Drink factory
  42. 42. The structure of repetitive and product- oriented layout in a Soft Drink factory  The machines and equipment must be positioned orderly due to the sequence of operations needed for the production.  The materials flow from one machine to another in exact sequential order without going backward or deviation.  Clearly, the raw materials are put into the very first machine and the processed product flow to the next machine, which means that output of previous machine becomes the input of next machine.
  43. 43. Factors favorable for using product oriented layout 1. Low variable cost of manufacturing per unit 2. Smooth and flawless operation 3. Lesser inventory costs 4. Simple and effective inspection of work and production control 5. Rapid output with high volume
  44. 44. Factors unfavorable for using product oriented layout 1. Large initial capital investment for machines and equipment. 2. Large amount of overhead charges 3. Breakdown of one machine will slow down the entire operation process. 4. Lack of flexibility to produce different products because the machines and equipment are set up for specific products.
  45. 45. Human resource and Job design
  46. 46. Objectives of Blue Mountain’s Human Resource Dept.  To provide an adequate, competent and trained labors for all levels of factory operation from bottom to top management.  To create the mutual faith and understanding among employees, between workers and management level.  To provide the security of employment to worker so that they may not be worried by the uncertainties of their future.  To provide an advancement opportunities to workers who are willing to learn and be under the training programs to improve their ranks.  To acknowledge the work and accomplishment of workers by offering the incentives  To ensure the well beings and work under safe conditions of all the employees and take care of their health.
  47. 47. Strategies for HR HR department has been using some strategies to provide the suitable work force to the operation in these following areas.  Recruitment and selection  Training  Job expansion ( Job enrichment and job rotation)  Performance appraisal and reward system
  48. 48. Recruitment and selection The company has to make sure to get right quantity and quality of human resources at the right time for different operational purpose. These are the some methods that HR department is using to recruit personnel  The interviewee has to go through medical test approved by the company in order to ensure the candidate is free from transmitted diseases, physical and mental disabilities, visual and hearing defects  The potential labors need to be tested by a task which is designed to measure their dexterity and learning capabilities.
  49. 49. Training  All the recruited workers has to undergo certain amount of training to get familiar with the factory environment and they will be recorded in the details of skills, qualifications, abilities, experiences and responsibilities etc.  From the training results, each of them will be assigned of their suitable roles.
  50. 50. Job expansion Need be done carefully because improper placement will cause turnover, absenteeism, accident rates and immorality.  Job enrichment - a way of making job more interesting and fulfilling. Entrust capable employee in both planning and controlling of the entire task  The job rotation - the shifting of workers from one work point to another so they won't get bored of doing the repetitive jobs. The labor can increase their skills and knowledge about related job.
  51. 51. Performance appraisal and reward system The company gives out  Bonuses for the employee who always come regularly to the job in time.  Extra cash to all workers if there is an improvement in productivity of entire factory than previous months  Yearly rewards for workers who has been the role model in morale and performance for that year. The company use both seniority-based and performance-based merit system for job advancements
  52. 52. Labor Productivity Labor productivity = Output Input Labor payrolls = 3500ks/ day Basic Labor payrolls per operating month = 70,000ks Operation Hours = One 8Hr Shift Duty ( 800 Labors ) Total Labor Hours = 6400 labor hours per day Daily production amount = 60,000 bottles ( 2500 cases ) Labor productivity = 9.375 bottle per labor hour
  53. 53. Supply Chain Management
  54. 54. The Supply Chain of Blue Mountain Soft Drink Manufactures concentrated beverage base and syrup Sugar Factory Bottler Blue Mountain Soft Drink manufacturer Distributor Retailer Customer Manufactures Finish Bottle and Cases Sales and Deliver Sales and Deliver
  55. 55. The Supply Chain Process Water – Blue Mountain soft drink company collects water form local source. There is no shortage of water. Sugar – Sugar is supplied by Zayawaddy Sugar factory which is located in Bago division Bottles and cases - These are manufactured by a bottling factory in Shwe Pyi Thar Town Ship Label - Label is produced in the Blue Mountain manufacturing plant according to forecasted demand Production – After gathering all the ingredients and raw materials, the products are finalized in the main factory. Distribution – The finished soft drinks are then distributed to retailors and wholesalers across the country.
  56. 56. Considered Factors in Supply Chain Management Speed – In Myanmar, Fast delivery is needed because the demands for soft drinks are high and cycle time of consumption is short. Quality of distribution – Good handling and transportation is needed to reduce scrap and return cost Vendor Managed Inventory – Company doesn’t store the finished goods very long and distribute immediately to the retailers which helps to reduce cost.
  57. 57. Inventory Management
  58. 58. Two Types of management used in Blue Mountain’s inventory Just in Time inventory management In Raw materials  Since the production amount is too high, the plant is not capable of storing all the raw materials needed  Maintaining Raw materials like high fructose syrup, sweetener, carbonated gas are too costly, thus JIT is the best option for production cost  The plant collect the raw material as forecasted demand and quickly produce the raw materials Vendor Managed Inventory for finished goods  The inventory of finished goods are maintained in phases distributor ware house and retailor shops  By this way, the factory doesn't need to hold those items and will lead to less warehousing costs.
  59. 59. Maintenance
  60. 60. Most Common Equipment Problem in BM operation process Biofilms  Microorganisms  Found in water procession  Attach to the surface like stainless steel piping via adhesive-like material  Poor particle control upstream can lead to high maintenance cost and an increase in system downtime
  61. 61. Solutions Preventive Maintenance To maintain the daily production run,  Routine inspection by skillful technicians  To avoid the critical equipment failure, using technology to detect starting from early error stage and replace with the original spare parts before it affect the entire machine  On the side of water processing plant , we can utilize 3M™ Series NB Filter Bags which can provide hyper sensitivity filtration to flow rate  Provide thermal treatment of the internal surface of the steel pipe lines to prevent the growth of the algae within these areas
  62. 62. Conclusion  In this fierce, harsh and competitive globalization era, we continue to maintain our blue mountain soft drinks with stabilized quality control.  Continue to focus to maintain the market leader position by giving the same excellent customer preference taste.  Considering on the alternative cost reduction methods to improve the long run production and forming a convenient and friendly environment within the entire operation process.

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