Irp-The Final Papermmfi Acg-020813
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Transcript of Irp-The Final Papermmfi Acg-020813
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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)
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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
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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.
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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.
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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
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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
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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
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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
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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.
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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.
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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.
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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
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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
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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.
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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
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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
Ideal Operating Time = (Regular Time Scheduled Downtime) x Allowance
Sansan Operating Time = (9 hours 1.50 hour) x 0.90
= 6.75 hours
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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
Ideal Operating Time = (Regular Time Scheduled Downtime) x Allowance
Baker Operating Time = (9 hours 1.50 hour) x 0.86
= 6.45 hours
SLICING BUNS
Description Percent Allowance Remarks Personal Allowance 5 Personal Necessity Fatigue Allowance 3 Muscular Pain Standing Allowance 2 Stand-up Total Allowance 10
Ideal Operating Time = (Regular Time Scheduled Downtime) x Allowance
Slicers Operating Time = (9 hours 1.50 hour) x 0.90
= 6.75 hours
BANYA
Description Percent Allowance Remarks Personal Allowance 5 Personal Necessity Fatigue Allowance 3 Muscular Pain Standing Allowance 2 Stand-up Total Allowance 10
Ideal Operating Time = (Regular Time Scheduled Downtime) x Allowance
Banyadors Operating Time = (9 hours 1.50 hour) x 0.90
= 5.63 hours
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45
BAKING
Description Percent Allowance Remarks Personal Allowance 5 Personal Necessity Fatigue Allowance 3 Muscular Pain Standing Allowance 2 Stand-up Total Allowance 10
Ideal Operating Time = (Regular Time Scheduled Downtime) x Allowance
Bakers Operating Time = (9 hours 1.50 hour) x .90
= 6.75 hours
PACKING
Description Percent Allowance Remarks Personal Allowance 5 Personal Necessity Fatigue Allowance 3 Muscular Pain Standing Allowance 2 Stand-up Total Allowance 10
Ideal Operating Time = (Regular Time Scheduled Downtime) x Allowance
Packer Operating Time = (9 hours 1.50 hour) x 0.90
= 6.75 hours
SEALING
Description Percent Allowance Remarks Personal Allowance 5 Personal Necessity Fatigue Allowance 3 Muscular Pain Standing Allowance 2 Stand-up Total Allowance 10
Ideal Operating Time = (Regular Time Scheduled Downtime) x Allowance
Sealer Operating Time = (9 hours 1.50 hour) x .90
= 6.75 hour
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FINAL PACKING
Description Percent Allowance Remarks Personal Allowance 5 Personal Necessity Fatigue Allowance 3 Muscular Pain Standing Allowance 2 Stand-up Total Allowance 10
Ideal Operating Time = (Regular Time Scheduled Downtime) x Allowance
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
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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).
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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
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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.
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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
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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
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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
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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
= Standard Processing Time/Available Operating Time
=7104.00 sec/21 888 sec
=0.32 workers
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Shaping
= Standard Processing Time/Available Operating Time
= 8131.20 sec/24 300 sec
=0.35 workers
Sansan
= Standard Processing Time/Available Operating Time
= 8064.00 sec/24 300 sec
=0.33 workers
Slicing
= Standard Processing Time/Available Operating Time
=34632.00sec/ 24 300 sec
=1.43 workers
Banya
= Standard Processing Time/Available Operating Time
=43833.60sec/20 268 sec
=2.16 workers
Packing
= Standard Processing Time/Available Operating Time
=32217.60sec/24 300 sec
=1.33 workers
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Sealing
= Standard Processing Time/Available Operating Time
=33144.00sec/24 300 sec
=1.36 workers
Final Packing
= Standard Processing Time/Available Operating Time
=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
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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
Shift Length 9 hours = 540 minutes
Short Break 30 minutes
Meal Break 60 minutes
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
=Operating Time/Planned Production Time
= 14.80 minutes /14.80 minutes
=100%
Performance
=Ideal Cycle Time/(Operating Time/ Total Good Output)
= 14.80 minutes/(14.80 minutes /1 batch)
= 100%
Quality
= Good Output/Total Output
= 1batch/1batch
=100%
OEE
= Availability x Performance x Quality
= 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
Shift Length 9 hours = 540 minutes
Short Break 30 minutes
Meal Break 60 minutes
Downtime 0 minutes
Ideal Cycle Time per 3 pc 7.75 minutes
Total Good Output 1 batch
Reject None
Planned Production Time =7.751minutes
Operating Time
=Planned Production Time- Downtime
=7.75minutes-0 minutes
=7.75 minutes
Good Output
=Total Good Output- Reject Output
= 1 batch 0 =1 batch
Availability
=Operating Time/Planned Production Time
= 7.75 minutes /7.75 minutes
=100%
Performance
=Ideal Cycle Time/(Operating Time/ Total Good Output)
= 7.75minutes/(7.75 minutes/1 batch)
= 100%
Quality
= Good Output/Total Output
= 1batch/1batch
=100%
OEE
= Availability x Performance x Quality
=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
Shift Length 9 hours = 540 minutes
Short Break 30 minutes
Meal Break 60 minutes
Downtime 0.23 minutes
Ideal Cycle Time per batch 12 minutes
Total Good Output 1 batch
Reject None
Planned Production Time =12.41 minutes
Operating Time
=Planned Production Time- Downtime
=12.41 minutes-0.23 minutes
=12.18
Good Output
=Total Good Output- Reject Output
= 1 batch 0 =1 batch
Availability
=Operating Time/Planned Production Time
= 12.18minutes/12.41 minutes
=98.14 %
Performance
=Ideal Cycle Time/(Operating Time/ Total Good Output)
= 12minutes/(12.18 minutes/1 batch)
= 98.52%
Quality
= Good Output/Total Output
= 1batch/1batch
=100%
OEE
= Availability x Performance x Quality
=98.14 %x98.52% x 100%
=96. 69%
Table 19:Overall Effectiveness Equipment for Dough Rounder
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Overall Equipment Effectiveness for Oven
Oven
Item Data
Shift Length 9 hours = 540 minutes
Short Break 30 minutes
Meal Break 60 minutes
Downtime 0 minutes
Ideal Cycle Time 35 minutes
Total Good Output 1 batch
Reject None
Planned Production Time =35 minutes
Operating Time =35 minutes
Good Output
=Total Good Output- Reject Output
= 1 batch 0 =1 batch
Availability
=Operating Time/Planned Production Time
=35 minutes/ 35minutes
=100%
Performance
=Ideal Cycle Time/(Operating Time/ Total Good Output)
=35 minutes/(35 minutes/ 1 batch)
= 100%
Quality
= Good Output/Total Output
= 1 batch / 1 batch
=100%
OEE
= Availability x Performance x Quality
=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
Shift Length 9 hours = 540 minutes
Short Break 30 minutes
Meal Break 60 minutes
Downtime 3.68 minutes
Ideal Cycle Time 67.86 minutes
Total Good Output 1 Batch
Reject None
Planned Production Time =72.15 minutes
Operating Time
=Planned Production Time- Downtime
=72.15 minutes - 3.68 minutes
=68.47 minutes
Good Output
=Total Good Output- Reject Output
=1 batch 0 =1 batch
Availability
=Operating Time/Planned Production Time
=68.47 minutes/72.15minutes
=94.90%
Performance
=Ideal Cycle Time/(Operating Time/ Total Good Output)
=67.86 minutes /(68.47 minutes / 1 Batch)
=99.11%
Quality
= Good Output/Total Output
= 1 Batch/ 1 Batch
=100%
OEE
= Availability x Performance x Quality
=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
Shift Length 9 hours = 540 minutes
Short Break 30 minutes
Meal Break 60 minutes
Downtime 0.27 minutes
Ideal Cycle Time 17.66minutes
Total Output 312 packs 165 packs
Reject 150 packs
Planned Production Time =17.46 minutes
Operating Time
=Planned Production Time- Downtime
= 17.46 minutes- 0.27 minutes
=17.19 minutes
Good Output
=Total Good Output- Reject Output
= 312 150 = 165 packs
Availability
=Operating Time/Planned Production Time
= 17.19minutes/17.46 minutes
=98.45 %
Performance
=Ideal Cycle Time/(Operating Time/ Total Good Output)
=17.46 minutes/(17 minutes/ 312 packs) = 99.21 %
Quality
= Good Output/Total Output
= 780/780
=100%
OEE
= Availability x Performance x Quality
=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)
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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
=usage per day x energy cost per KWH x wattage
=1.31 x Php7.95 x 0.37 KW
=Php3.85
Spiral Mixer
=usage per day x energy cost per KWH x wattage
= 0.32 x Php7.95 x 1.3 KW
=Php3.31
Oven
=usage per day x energy cost per KWH x wattage
=0.50 x Php7.95 x 3 KW
= Php13.83
Volumetric Machine
=usage per day x energy cost per KWH x wattage
= 0.21 x Php7.95 x 2.5 KW
=Php4.17
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Dough Mixer
=usage per day x energy cost per KWH x wattage
= 0.21 x Php7.95 x 2.5 KW
=Php4.17
Dough Rounder
=usage per day x energy cost per KWH x wattage
= 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