UNIVERSITI PUTRA MALAYSIA

MANAGEMENT INFORMATION SYSTEM AT HUME CEMBOARD FIBRE CEMENT DIVISION

VICKNESWARAN SUBRAMANIAM

GSM 1997 30

MANAGEMENT INFORMATION SYSTEM AT

HUME CEMBOARD FIBRE CEMENT DIVISION

VICKNESWARAN SUBRAMANIAM

45184

THIS PAPER IS PREPARED

AS PARTIAL FULFILLMENT FOR

MASTERS IN BUSINESS ADMINISTRATION

FAKULTI EKONOMI DAN PENGURUSAN

UNIVERSITI PUTRA MALAYSIA

SERDANG,SELANGOR

1997

PENGESAHAN KEASLIAN LAPORAN

DENGAN INI SAYA VICKNESWARAN SUBRAMANIAM

NO MATRIK 45184

PROGRAM MASTERS OF BUSINESS ADMINISTRATION

MENGAKU BAHAWA PROJEK I KAJIAN KES UNTUK KURSUS PSN598

ADALAH HASIL SAYA SENDIRI.

...... ~ .... ... ...... . VICKNESWARAN SUBRAMANIAM

JABATAN PENGURUSAN

FAKULTI EKONOMI DAN PENGURUSAN

UNIVERSITI PUTRA MALAYSIA

DENGAN INI DISAHKAN BAHAWA KERTAS PROJEK YANG

BERTAJUK "MANAGEMENT INFORMATION SYSTEM AT HUME

CEMBOARD FIBRE CEMENT DIVISION " TELAH DITERIMA

SEBAGAI MEMENUHI SEBAHAGIAN DARIPADA SYARAT

PENGANUGERAHAN IJAZAH SARJANA PENTADBIRAN

PERNIAGAAN.

TANDATANGAN PENYELlA,

L lA Il'L ... !. . ... . ..... . . :.:-... II·\J.I./.J.Y.J··· . . ..

PROhiAoYA DR SAMSINAR BT MD SIDIN

ACKNOWLEDGEMENT

I WOULD LIKE TO THANK PROF MADYA DR SAMSINAR BT

MD SIDIN FOR SUPERVISING ME IN THIS CASE STUDY

AND MY PARENTS FOR GIVING ME MORAL SUPPORT IN

COMPLETING MY MBA.

ABSTRACT

This case study is about Hume Cemboard Fibre Cement

Division which is facing problems of poor information flow

system and high staff turnover. A few scenarios and operations

in each department has been used to describe the problem.

The alternatives are :

1) Hire more staff

2) Develop a Management Information System and

motivate current staff

Developing a Management Information System and motivating

the current staff has been proposed to overcome the problem.

SCENARIO 1

SCENARIO 2

SCENARIO 3

CASE STUDY

1.0 INTRODUCTION

TABLE OF CONTENTS

2.0 ORGANIZATION STRUCTURE

3.0 OPERATIONS

4.0 MARKETING DIVISION

5.0 PRODUCTION DEPARTMENT

6.0 QUALITY CONTROL DEPARTMENT

7.0 FINANCE DEPARTMENT

7.1 ENGINEERING STORE

7.2 FINISHED GOODS STORE

7.3 PURCHASING

7.4 ACCOUNTS

8.0 ENGINEERING DEPARTMENT

9.0 RESEARCH AND DEVELOPMENT DEPARTMENT

10.0 HUMAN RESOURCE DEPARTMENT

PAGE

1

3

5

7

9

9

11

12

15

15

18

19

20

CASE ANALYSIS

1.0 PROBLEM IDENTIFICATION

2.0 ANALYSIS

3.0 ALTERNATIVE SOLUTION

4.0 EVALUATION OF ALTERNATIVES

5.0 SELECTION OF ALTERNATIVE AND

FEASIBILITY STUDY

6.0 RECOMMENDATION - MIS AND MOTIVATION

6.1 INTRODUCTION

6.2 APPLICATION

6.2.1 TRANSACTION PROCESSING SYSTEM

6.2.2 OFFICE AUTOMATION SYSTEM

6.2.3 PROCESS CONTROL SYSTEM

6.2.4 MANAGEMENT INFORMATION SYSTEM

6.2.5 DECISION SUPPORT SYSTEM

6.2.6 EXECUTIVE INFORMATION SYSTEM

7.0 CONCLUSION

8.0 REFERENCE

PAGE

21

22

31

31

33

35

48

50

TABLE OF CHARTS

PAGE

CHART 1 - REJECT RATE FOR JAN - AUG 1997 2

CHART 2 - DOWNTIME RATE FOR JAN - AUG 1997 4

CHART 3 - STOCK VARIANCE RATE FOR JAN - AUG 1997 6

CHART 4 - HONG LEONG STRUCTURE OF COMPANIES 8

CHART 5 - ORGANIZATION CHART FOR HUME FIBRE

CEMENT DIVISION 10

CHART 6 - PROCESS FLOW 13

CHART 7 - PRODUCTION DEPT ORGANIZATION CHART 25

CHART 8 - THE COST OF DETECTING A DEFECT 26

CHART 9 - ENGINEERING DEPT ORGANIZATION CHART 28

CHART 10 - X-BAR CONTROL CHART

(BEFORE ADJUSTMENT) 45

CHART 11 - X-BAR CONTROL CHART

(AFTER ADJUSTMENT) 45

SCENARIO

Scenario 1 (Rejects)

The mam constituents of conugated roof sheets are cement,

asbestos, kraft and other recycle material. The proportion is around 85%

cement, 10% asbestos and 5% of other materials. These material are mixed

and compressed at a pressure of 7 bar to obtain sheets of specific gravity

(compactness) of 1.5. If the specific gravity is low, it means the materials

are not compacted well. This causes the sheets to have lower strength and

break easily.

Specific gravity can only be measured after sheets are hardened (24

hours after manufacturing). Yield is a function of specific gravity and

thickness. Yield can be measured more frequently, so yield is used to

monitor specific gravity.

Yield a. Specific gravity x Thickness

Yield is measured once per shift (8 hours once) and the figure is filled in

the shift log. The shift log is passed to the Production Engineer and Plant

Manager at 8.00 o'clock every morning.

On the 24/7/97, all 3 shift had high yield. Action was only taken after

24 hours when the Plant Manager got the shift log. It was found that the

pressure applied to compact the sheets was 5.5 bar due to a leak in the

hydraulic system. This caused rejects of 100 tonnes which amounts to

RM70,OOO. The reject rate is quite alarming from the month of May 1997.

Refer to Chart 1. 1% reject amounts to RM30,OOO.

1

CHART 2 DOWNTIME RATE FOR JAN - AUG 1997

5

o ��������� JAN FEB MAR APR MAY

MONTH (19971

JUNE

Source: Management Report for August 1997

Hume Cemboard Fibre Cement Division

JULY AUG

4

Scenario 2 (Downtime)

Since the Maintenance Engineer, Mr Hii left the company in May

1997, no proper records were kept on the maintenance and machine

breakdown.

Recycle water is pumped to the cone tank for storage before being

used back in production. One of our raw material is cement, so the chances

of pipeline getting choked with cement is high.

When recycle water cannot be pumped to the cone t� it must be

released to the drain and stored in a specified area before sending for

disposal at Kualiti Alam Sdn Bhd. Each tonne of waste sent to Kualiti

Alam Sdn Bhd cost RM600. During the recent problem with the recycle

water, RM45,000 was used to dispose the waste.

There can be two reasons for the drop in efficiency of pumping

recycle water to the cone tank :

a) The recycle water pump needs repair.

b) The pipeline from the recycle water pit to the cone tank is choked

with hard cement.

Six months ago, similar problem occured and the reason was pipeline

choke. It took 7 days to solve the problem. On the 19/8/97, the same

problem occured and the maintenance crew took 7 days to solve the

problem because they were trouble shooting again. The downtime rate is

also alarming from May 1997 onwards. Refer to Chart 2 for the trend.

10% downtime cost RM3 5,000.

3

600

450

400

350

w 300 0 < 250 z z 0 200 t-

150

100

50

0 JAN FEB

CHART 3

STOCK VARIANCE FOR JAN - AUG 1997

MAR APR MAY

MONTH (1997) JUNE

Source: Management Report for August 1997

Hume Cemboard Fibre Cement Division

JULY AUG

6

Scenario 3 (Finished Goods Management)

Every product (stack of 1 00 sheets) manufactured will have a move

ticket attached to it for identification. When it is transfered from the

production area to the Finished Goods Store area (yard), the FGS staff will

tear one part of the ticket from the stack and enter the total transfer into

the computer.

These figures will be compared to the production figures given in the

shift log. The reconcillation of these both figures is only done 5 days once

because of manpower shortage.

On the 517/97, Mr Pannir found that there were differences between

the move ticket and shift log. When he tried to check at the yard, he

couldn't find the stacks, probably the sheets has been delivered. At the

despatch side, no move ticket numbers are recorded.

At the end of each month, stocktake will be taken to compare

physical stock with book figures. If there is a variance of 100 tonnes,

factory need to keep a buffer stock of the equivalent to avoid delivery

problems. Keeping 100 tonnes of stock means holding cost of RM500 a

month. Refer to Chart 3 for the trend of stock variance.

5

500

450

4'00

350

w 300 (!) <

250 z z 0 200 �

150

100

50

0 JAN FEB

CHART 3

STOCK VARIANCE FOR JAN -AUG 1997

MAR APR MAY

MONTH (1997) JUNE

Source: Management Report for August 1997

Hume Cemboard Fibre Cement Division

JULY AUG

6

CASE STUDY

CASE STUDY

''The way the company reacts to technology depends on the situation, our

needs and requirements. So sometimes we take a wait-and-see attitude

and sometimes we move to adopt new technologies more quickly. We

don't necessarily wait and watch others test out a technology before we

use it ourselves. It is important to keep close to the leading edge of

technology because in the present context of business, Infonnation

Technology drives competition."

- Peter Lim, Chief Operating Officer, Hume Group

1.0 INTRODUCTION

Hume Cemboard Bhd is a subsidiary of Hong Leong Group which has a market

capitalisation of RM 16 billion. It is situated at Jalan 219 off Federal Highway. An

Australian started the company in 1967 but Hong Leong took over in the year 1981.

Hong Leong is a conglomerate with 4 IG (Intennediate Group) � Hume, Hong

Leong Industries, Guoco and Hong Leong Credit. Each IG manages around 50

companies. Hume is dealing with the construction industry. Companies under Hume are

Hume Cemboard, Hume Readymix, Hume Concrete, Hume Steel and others. Hume

Cemboard has 4 division; Fibre Cement Division (Pl), Prima Board Division (Kanthan),

Cemboard Division (Chembong) and Marketing Division. (Refer to Chart 4)

7

CHART 4

HONG LEONG STRUCTURE OF COMPANIES

HONG LEONG I I

I I I CREDIT IG HUME IG HL INDUSTRIES HL PROPERTIES

IG IG I

I I I I HUME DIV OYL NANYANG I I

I I CEMBOARD QUARRIES BOARD OTHERS

& PANEL

I MARKETING � -1 FIBRE CEMENT

I CEMBOARD DIV PRIMA BOARD I

co

Hume Cemboard Bhd Fibre Cement Division (HC FC) produces asbestos cement

corrugated roof sheets and asbestos cement flat ceiling sheets. HC FC consists of 7

departments. The departments are Human Resource Department (HR), Research and

Development Department (R&D), Production Department, Engineering Department,

Quality Control Department (QC), Finance Department and Purchasing Department.

2.0 ORGANIZATION STRUCTURE

The General Manager heads the organization. Under him is the Plant Manager.

Plant Manager is assisted by 6 Head of Departments (HOD) under him. Each HOD has a

number of Executives under them to assist them. The actual organization is shown in

Chart 5.

From the month of May 1997 onwards turnover was high in the Executives and

Managers level (48%) due to the increased job oppurtunities. So the vacancies created are

shown in Chart 5. The Human Resource Department has been trying to find replacement

but couldn't find suitable candidates yet.

3.0 OPERATIONS

In this factory we have two main production lines. One of them produces asbestos

cement corrugated roof sheets. The other line produces asbestos cement flat ceiling sheets.

There are 144 workers in this factory working on three shifts. Our annual net profit is

9

CHARTS ORGANISATION CHART I?OR HUME FIBRE CEMENT DIVISION

I���I \ PWfl_\

I£lmIII'I

I I 1 I I IIIJ\fl,tMaR I'!nClffi_aR III\NJ:M\III� PlmM\�� 1IOt«:AL _� QC_�

VAC�.Nr VACANT

I I r T r I I I I I I I 1UI:r.1IQI PWfl"lltllllQl INUfA6S1 PIIlJa:r1NR WQf(1I(I'INR PlRicmi EX£C. f(lIEX£C I'\I¥lMNiIG AO:ClHI'ANT S11lR:EXBlJII/E PIIlCI.tlICJjIllJ\ RlD9lHER lAB 1lIlUlAN

VACANT VACANT VACANT VACANT VACANT (�) VACANT VACANT (31 R1DEXEOJIlIE

T I I I SlP8WIIJOOil I I 1I!mC\lASSl LNalSIDWtMRI LNalSIDWtMRI SIP�SCR PIR>!mlllJll( S11lR:Sll'!RIlSaI PLIDlIStGASSl. ACCT.SlfIR'iIlOR !NDlSlDWCIKRi lABASSSTANT LNalSIDWCIKRi

�) III QOO�SAN:; (5) AHoIIDSCfI.\H (1)

i "-I- ---

I IlI'!RIISaI I III taR) S11lR:ASSI ACCT. ASSISTANT

VACAIIf

U !NalSIDWCIKRi LNalSIDWCIHRI

(I) (11) III IaRI!I P) !NalSIDWCIKRi

I11l <lHII\l waMll !NalSIDWCIKRi 1IPCPS\I.1lR If1IIm

(1) (10) (1)

Aa:lllJll(

(1) .... o

around RMIOmillion. All the workers are male because it is considered a heavy industry

which requires hard labour.

4.0 MARKETING DIVISION

Marketing Division consists of 25 staff and they have 5 branch offices all over

Malaysia. Their job function is to study the market condition, find sales, arranging

transportation of sheets, attending customer complaint and provide daily outstanding

orders for production. Daily outstanding orders are faxed to the Production Department.

Normally marketing staffs get their information from newspapers and dealers. This

information is used by them to forecast sales. Their function also includes finding

customers and promoting our product domestically and internationally. This may include

promotion strategies such as advertising. We normally sell to 25 selected dealers

(hardware) who acts as middlemen to the end users. We also sell to big projects like

schools, mosques, new housing areas and other large orders (without going through

dealers). When Marketing Division gets their sales order, they communicate to Production

Department to cater for their needs. If there is any non-standard product, they may need

production advice on it's capability to produce this products. Marketing also has a few

transporters (lorries) which they need to coordinate to transfer sheets to customers.

Sometimes there will be functional defects Oongitudinal crack, transverse crack,

soft) and cosmetics defects ( bits, indent, watermark). When this happens, customer will

send a customer complaint form to the branch manager. Branch sales personnel will go to

the site and evaluate the damages taking photos if necessary. These evaluation will then be

11

forwarded to the Marketing Department in P J for necessary actions. If the damage is not

clearly described or if it is an unusual problem, then Marketing will send a Marketing

Executive with a QC staff to the site. Customer complaint will be prepared by these

personnel with an estimate of cost that will be incurred to overcome this problem. Then

Finance Department will look into the Customer Complaint Report and issue Credit Note

to compensate those customers involved.

5.0 PRODUCTION DEPARTMENT

Production department consists of a Production Manager, Production Engineer

and a Superintendent. There is also Supervisors for each shift. So for the existing two

production lines, there will be 6 Supervisors.

Raw material used are asbestos fibre, cement, recycle kraft, calcium carbonate and

recycled sludge. Formulation to be used will be given by R&D Department to the

Production Department. Different formulation is used for different products. The

formulation also change when there is quality problem with the asbestos fibre or the

cement.

The first section is the Fibre Treatment plant where asbestos fibres will be 'opened'

to increase surface area by using Kollergang. The next section is the Preparation Plant

where formulated amount of raw materials are mixed. Then the mixed solution (slurry)

goes to the third section., board machine where the slurry is compressed to produce sheets

of specified thickness. The fourth section is the stacker where flat compressed sheets are

cut into required size and corrugated (made into wavy form) and templates (steel plates)

1 2

are placed in between the sheets so that the wet sheets don't stick on each other. The

corrugated sheets then go through a tunnel at 38 C where it hardens. The fifth section is

the stripping (destacker) section where sheets are separated from the templates and are

stacked into 100 sheets per stack. Refer to Chart 6.

CHART 6

PROCESS FLOW

FIBRE PREPARATION PLANT

1 RAW MATERIAL PRE PARA TION PLANT

1 BOARD MACHINE

1 STACKER

1 TUNNEL

1 STRIPPING

Source : Familiarisation Report by Vickneswaran I 1995

Hume Cemboard Fibre Cement Division

13

Checklist are filled at every section: fibre treatment plant, raw material preparation plant,

board machine, stacker and stripping. Each shift operator is responsible to fill in the forms

every hour. They are supposed to be filled in every hour. Operators normally fill the forms

at the end of the shift because no one seems to check these checksheet or take any action

based on these checksheet. The shift supervisor will then transfer data from the checksheet

to the Shift Log (in four copies) which is then passed to the Plant Manager, Finance

Department, Quality Control Department and EDP Section.

The Shift Log is prepared at the end of each shift but it is only distributed every 24

hours (at 8.00 am). The Production Engineer is required to verify the correct transfer from

the checksheet to the shift log. The Plant Manager uses the Shift Log to monitor yield,

output, downtime and other machine running condition. High yield means the specific

gravity (compactness) is low and the sheets can break easily.

The Finance Department is interested in the yield, efficiency and quality which

have financial implications. QC Department will relate the machine running condition with

the quality of the sheets produced. The EDP Section will key in the quantity sheets

manufactured on that day in its database. This figures will then be compared to the actual

physical stock at the yard (yard is considered as the store for storing the sheets). Each

stack is labelled with tickets by the stripping machine operators which will be collected by

the FGS personnel to verify with the figures in the database at EDP Section (from the

Shift Log). If the FGS personnel doesn't tum up on a day, then the tickets will only be

collected on the next day. Reconciliation with the Shift Log is only done after 5 days

because we are short of staff. When there is some errors, it is very hard to trace because

by 5 days the sheets would have been mixed with other sheets produced earlier.

14