Operations Management Project
Operations Management Project
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Blue Mountain Soft Drinks
Operation Management Contents
Company History
Company Background
Objectives
Missions
Strategic Decisions
Product Design
Quality Management
Process Design
Location Decisions
Layout Strategies
Human Resource and Job Designs
Supply Chain Management
Inventory Control
Maintenance
Conclusion
Company History
Loi Hein Company was established in 1996 by the owner and C.E.O,
Dr. Sai Sam Htun.
In 2000, Loi Hein Company associated with Osotspa Co., Ltd.
(Thailand) and launched Shark energy drink and gained the market
leadership.
In 2002, LHC launched his first own brand, Alpine which is
purified drinking water and also became the market leader after a
few years later.
In 2008, in association with Green Spot Co., Ltd. (Thailand) LHC
developed and launched a non-carbonated California Orange soft
drink.
In 2009, Loi Hein Company built the strong Loi Hein Distribution
Company (LHDC) as a part of business management unit to emphasize
on manufacturing soft drink products.
Company Background
Loi Hein Co., Ltd is an organization engaged in manufacturing,
marketing, selling and distributing consumer products in
Myanmar
The main manufacturing centre is located on North west of
Yangon, in the pristine area of Htauk Kyant. The manufacturing
plant comprises of a water processing plant, fully automated
bottling lines for purified drinking water and carbonated soft
drinks as well as integrated high capacity packaging line.
All manufacturing processes are ISO 9001:2000 HACCP
certified
Competitive Background of Local soft Drink industry
Types of soft drink products
Carbonated soft drinks
Energy drinks
Dairy related juices and fruit flavored drinks
NoName of ManufacturerBrands1MGS BeverageStar Cola, Pepsi2Max
Myanmar Co.,ltdMax3New Smart Co.,ltdRocker4Green Circle Co.,ltdVe
Ve5Capital Diamond Star Co.,ltdCoca-Cola
Key Success factors of Blue Mountain Soft Drinks
Experienced in bottling manufacturing
Launched by the same parent company of Alpine purified drinking
water
Strong relationship with main wholesalers and retailers
Having the substantial property assets
Locating near both customers and suppliers
Ability to shift experienced workers from predecessor alpine
company
Ability to compete with global soft drink companies and local
companies
Understanding of consumer behavior via market analysis
Key Success factors of Blue Mountain Soft Drinks
Customers
Downtown area
Wholesalers
Retail-outlets
Rep-offices
Factory Area
Htauk Kyant Town Ship, 15-20 km from supplier
Getting JIT supply control, delivering by suppliers
themselves
Experience labors in same township
Suppliers
Bago Division ( Zayawady Sugar factory)
Local farmers, contractors
20,000 kyats / ton
10-20 km
25-30 km
Objective
To ensure the most efficient storage and warehouses for a faster
delivering schedules of products through nationwide
To manage and control well in soft drink product operations
including supply chain management, inventory control and
distribution methods.
To conduct our operations with integrity and respect of each
other in entire operation with great impact to environments where
our business touches in Myanmar.
To become the leading and benchmark FMCG (Fast-moving consumer
goods ) distribution company in Myanmar.
Mission
Blue Mountain soft drinks aim to be the largest nationwide
consumer product with a value composition of safety, healthy and
customer satisfaction.
To create opportunities for the growth of employees improvement
in both skills and ethics among the surrounding environment of the
company organizational structure.
Focus to build a stronger relationship with distributors and
retail outlets
Aim to have transparency with realistic incentives and rewards
for all collaborated members in entire process.
Strategic decisions of Blue Mountain Soft Drinks Company
Strategies according to product life cycle
As in maturity stage, product design and quality standards
stabilize
Apply defensive strategy to maintain the market position
Competitive selling prices and cost become critical so
continuing improvement in production runs for long-term and
applying cost-cutting method
Blue Mountain Operation strategy
Multi domestic strategy related with high local customer
responsiveness and low cost reduction
To meet with strategic decision,
Mass Production - production process of low variety withhigh
volumes and quality standardized soft-drink product.
Flow - Mass production is associated with a flow how a product
moves through the system from one work station to another.
Human Resource Effect - great communication network between
senior experienced employees and ordinary labors work force in
production process.
Matching cost cutting the main ingredients such as sugar, water,
flavor and bottles are sourced locally with economical costs and
also in labor force. Bottling plant owned by parent company.
PLC stage of Blue Mountain soft drink
IntroductionGrowthMaturityDecline
Sales, cost, and cash flow
Blue Mountain Stage
Maturity
Market Leader
Blue Mountain Product Life Cycle Stage
Existence between the relationship of the product and customer
satisfaction
Customer notice easily the name of the product and rapidly
possess the great percentage of market shares and increase
profitability since established 2009 under the parent company Loi
Hein Co.,ltd.
As in the maturity stage, need to improve production considering
long-term
Monitoring and control the cost reduction while the product is
reaching the higher amount of sales revenues
Defining product
Main product varieties Blue Mountain Cola, Orange, Sparkling and
Club Soda
Bottle Type - Non-returnable plastic bottle
Bottle Size - 380 ml per bottle , 24 bottles per case
Nutrition Facts - Blue Mountain bottle 13oz (380 ml)
Sugars - total : 39g
Calories - total : 140g
Calories from Sugar - 140g
Bill of Materials (BOM)Blue Mountain Cola
Serial Number Description QuantityINGR 001Sodium Benzoate1.6 mlINGR
002Sodium Saccharin0.384 mlINGR 003Sodium Cyclamate3.84 mlINGR
004Citric Acid25.92 mlINGR 005Aspartame2.16 mlINGR 006L-
Carnatine29.76 mlINGR 007Carmoisine0.002 mlINGR 008Cocoa Flavor6.72
mlINGR 009Spring Water 7240 mlINGR 010Syrup1810 ml
Bill of Materials (BOM)Blue Mountain Orange
Serial Number Description QuantityINGR 001Sodium Benzoate1.6 mlINGR
002Sodium Saccharin0.384 mlINGR 003Sodium Cyclamate3.84 mlINGR
004Citric Acid25.92 mlINGR 005Aspartame2.16 mlINGR 006L-
Carnatine29.76 mlINGR 007Carmoisine0.002 mlINGR 008Orange
Flavor6.72 mlINGR 009Spring Water 7240 mlINGR 010Syrup1810 ml
Bill of Materials (BOM)Blue Mountain Sparkling
Serial Number Description QuantityINGR 001Sodium Benzoate1.6 mlINGR
002Sodium Saccharin0.384 mlINGR 003Sodium Cyclamate3.84 mlINGR
004Citric Acid25.92 mlINGR 005Aspartame2.16 mlINGR 006L-
Carnatine29.76 mlINGR 007Carmoisine0.002 mlINGR 008Lime Flavor6.72
mlINGR 009Spring Water 7240 mlINGR 010Syrup1810 ml
Bill of Materials (BOM)Blue Mountain Club Soda
Serial Number Description QuantityINGR 001Sodium Benzoate1.6 mlINGR
002Sodium Saccharin0.384 mlINGR 003Sodium Cyclamate3.84 mlINGR
004Citric Acid25.92 mlINGR 005Aspartame2.16 mlINGR 006L-
Carnatine29.76 mlINGR 007Carmoisine0.002 mlINGR 008Spring Water9057
ml
Technology Utilization of Blue Mountain
Concerns about the product quality and reduce production cost
and to attain the equipment data available on time
Utilize modernized technology based Computer aided machines to
control
Water processing plant
Carbo-Cooler
Ultra Hygienic Mixers
Quality and Low Cost Strategy
Six Dimensions to measure the quality of the soft-drink
products.
- Safety
- Commercial
- Characteristics
- Brand Identity
- Conventional
- Artistic
Quality and Low Cost Strategy
Blue Mountain soft drink product is a ISO 9001: 2000 HACCP
quality standardized product.
Among six dimensions, the company focus on safety, commercial
and brand awareness
To match with the quality of the product and meet customers
satisfaction , blue mountain is focus according to
- User Based Review
- Market Area Based Review
- Labors and Product Related Review
Quality and Low Cost Strategy
User Based Review
- established and launched standardized product
while some industries prefer more productivity
- target market area is the same in Upper Myanmar region
containing both sub-urban areas and rural areas
Market Area Based Review
- Reach a peak of sales volumes in Ayeyarwady Division located
lower Myanmar and around upper Myanmar regions
The following tables represent the market shares held by both
global soft drink brands and local brands.
Quality and Low Cost Strategy
Labors and Product Related Review
- Blue Mountain soft-drink is based on low variety with high
volumes product type
- the great connection between employees and our product is as
important as the higher volume production process
- The operation process is based on increasing productivity and
effectiveness of the labor workforce
- As in this PLC stage, established the communications between
products and employees via incentives and motivation among their
employee levels including openly supportive supervisors
Quality and Low Cost Strategy
- continue improving on the well built high morale organization
and work as a team within quality circles
- These scatter diagram indicates Blue Mountain soft-drinks
product related to the labor absenteeism
Scatter Diagram
Absenteeism
Productivity
Reducing Operation Costs Option Concerning with Quality
Reduction by Not Maintaining Six Sigma Quality Concept
Blue Mountain production process can be measured and arranged
carefully under high tech facilitating plant and senior experienced
employees how to eliminate to reach minimum number to zero number
of defects
Most Local soft drink manufacturers try not to build six sigma
program to get a competitive advantage rather the competing on
prices
Six Sigma program will increase the operation cost which Blue
Mountain trend is not matching
In a mean time BM customers are sensitive over prices rather
than BM standardized quality product.
Reducing Operation Costs Option Concerning with Quality
Six Sigma and Employee Empowerment
- necessary of high skilled quality inspectors with higher
salaries which is not also parallel with Blue Mountain economic
trend with long-term consideration
- Towards the customer satisfaction with product quality
stabilization, Blue Mountain focus more on the customer
responsiveness with lowering the manufacturing cost rather than
hiring the quality experts
Blue Mountain Process Design & Strategy
Strategy
- Blue Mountain soft drink is using the product focus
strategy
- according to the PLC maturity stage, considering for long-term
production runs based on labor efficiency and product quality
- produce low variety and high volume products
-invested in higher infrastructure costs and high technology
used facilities which are massive figure of fixed costs
- So BM is focusing to reach the long-run production based on
this product focus strategy to recover certain amount of costs and
overheads
Soft-Drink Product Focus Strategy
Few inputs
Water
Sugar Syrup
Chemical Compound
Flavors
Output variations
Size = 380 ml
Packaging and
Label for each
bottle
Blue Mountain Soft-Drink Processing Step
Reaction Chamber
Syrup
Traded City
water
Chlorine injection
Settling Chamber
Sand
Filter
Clear
Well
Carbon
Tower
Polishers
Blender
Carbo Cooler
Filler
Quality Control Lab
Filler Crowner
Filling and Bottling
Inspection
Casing and Distribution
Production Process Theory
Syrup
starts with the preparation of thick high solid syrup blending
in steel tank with
-concentrate compound
-Natural Flavors
-Sodium Benzoate
-Sugar
-Treated water
Constant rate of blending ratio
1 syrup part : 5 parts of treated
Production Process Theory
Syrup Room
is the area of a soft drink plant where the syrup is started or
prepared
at the mixing and blending stage, the treated syrup is
transferring through stainless steel pumps to the blender
Traded City Water
receive from 300ft tube of water pipe lines
starts removing various impurities passing through
chlorination step, settling chamber and sand filter carbon
tower, pH clarification step and UV conductivity.
Purified water is used in preparation of syrup
Production Process Theory
Blending Tube
is the area that prepare final soft-drinks by blending syrup and
water in specific ratio of ( 1:5 )
Carbo-Cooler
Injection of carbon dioxide to give soft-drink carbonation
through carbon dioxide cooler room.
Filler Room
Encircle the area of a bottling line that includes
- filling section -Carbo-Cooler
- Capping section
- Proportioned (Blender)
Production Process Theory
Non-Returnable Plastic Bottles Washing
- Rinse the empty plastic bottles by using a series of water
sprays
- Use the sprays and high power used blower to remove dust,
fragments and unseen germs
- Then passing through warmer to avoid excess of
condensation
- After passing through warmer, transferring into filling steps,
labeling and case packaging area.
Final Soft-Drink Product
-Stacks the final soft-drink cases of non-returnable plastic
bottles systematically
- Arranges and deliver cases to storage for distribution.
Location of Blue Mountain manufacturing center
Located on a 10 acre site, in the pristine area of Htauk Kyant,
about 40 minutes drive from Yangon
The factory is positioned in very less populated area and also
far from residential area of Htauk Kyant township.
Location of Blue Mountain manufacturing center
The satellite picture of Blue mountain soft drinks manufacturing
center ( Source-Google Earth)
Criteria used to choose the location
The Land should be cheaply available and should have enough
space for expanding of existing facilities in the future.
The factory has to be located far from residential area so that
people wouldn't be disturbed with noises and privacy and
consequently, it will avoid any legal actions by residents.
The availability of enough work force and technicians in
vicinity in order to run the factory smoothly.
The place should not be very far from the main office ,banking
and financial institutions which are located in Yangon.
The factory should be near the markets and suppliers to avoid
high transportation costs in obtaining raw materials and
distribution of finished goods to markets.
Most importantly, there should be enough water supplies to the
plant. The place has access to both massive flow of underground
water and traded city water.
Why layout is important for plant
To ensure the maximum efficiency of production such as smooth,
flexible and rapid movement of material
For utilization of space, equipment and manpower
To provides the employee's convenience, safety and comfort at
work
To achieve the benchmark quantity and quality of output at the
minimal feasible cost of manufacturing
Objectives based to design the layout strategically
To minimize imbalance in fabrication of the production
process
To guarantee that work proceeds from one point to another point
without any delay.
To provide the ease of supervision and control.
To allow the ease of maintenance.
To provide the employee safety and health.
To improve productivity
The repetitive and product-oriented layout in a Soft Drink
factory
The structure of repetitive and product-oriented layout in a
Soft Drink factory
The machines and equipment must be positioned orderly due to the
sequence of operations needed for the production.
The materials flow from one machine to another in exact
sequential order without going backward or deviation.
Clearly, the raw materials are put into the very first machine
and the processed product flow to the next machine, which means
that output of previous machine becomes the input of next
machine.
Factors favorable for using product oriented layout
1. Low variable cost of manufacturing per unit
2. Smooth and flawless operation
3. Lesser inventory costs
4. Simple and effective inspection of work and production
control
5. Rapid output with high volume
Factors unfavorable for using product oriented layout
1. Large initial capital investment for machines and
equipment.
2. Large amount of overhead charges
3. Breakdown of one machine will slow down the entire operation
process.
4. Lack of flexibility to produce different products because the
machines and equipment are set up for specific products.
Human resource and Job design
Objectives of Blue Mountains Human Resource Dept.
To provide an adequate, competent and trained labors for all
levels of factory operation from bottom to top management.
To create the mutual faith and understanding among employees,
between workers and management level.
To provide the security of employment to worker so that they may
not be worried by the uncertainties of their future.
To provide an advancement opportunities to workers who are
willing to learn and be under the training programs to improve
their ranks.
To acknowledge the work and accomplishment of workers by
offering the incentives
To ensure the well beings and work under safe conditions of all
the employees and take care of their health.
Strategies for HR
HR department has been using some strategies to provide the
suitable work force to the operation in these following areas.
Recruitment and selection
Training
Job expansion ( Job enrichment and job rotation)
Performance appraisal and reward system
Recruitment and selection
The company has to make sure to get right quantity and quality
of human resources at the right time for different operational
purpose. These are the some methods that HR department is using to
recruit personnel
The interviewee has to go through medical test approved by the
company in order to ensure the candidate is free from transmitted
diseases, physical and mental disabilities, visual and hearing
defects
The potential labors need to be tested by a task which is
designed to measure their dexterity and learning capabilities.
Training
All the recruited workers has to undergo certain amount of
training to get familiar with the factory environment and they will
be recorded in the details of skills, qualifications, abilities,
experiences and responsibilities etc.
From the training results, each of them will be assigned of
their suitable roles.
Job expansion
Need be done carefully because improper placement will cause
turnover, absenteeism, accident rates and immorality.
Job enrichment - a way of making job more interesting and
fulfilling. Entrust capable employee in both planning and
controlling of the entire task
The job rotation - the shifting of workers from one work point
to another so they won't get bored of doing the repetitive jobs.
The labor can increase their skills and knowledge about related
job.
Performance appraisal and reward system
The company gives out
Bonuses for the employee who always come regularly to the job in
time.
Extra cash to all workers if there is an improvement in
productivity of entire factory than previous months
Yearly rewards for workers who has been the role model in morale
and performance for that year.
The company use both seniority-based and performance-based merit
system for job advancements
Labor Productivity
Labor productivity =
Output
Input
Labor payrolls = 3500ks/ day
Basic Labor payrolls per operating month = 70,000ks
Operation Hours = One 8Hr Shift Duty ( 800 Labors )
Total Labor Hours = 6400 labor hours per day
Daily production amount = 60,000 bottles ( 2500 cases )
Labor productivity = 9.375 bottle per labor hour
The Supply Chain of Blue Mountain Soft Drink
Manufactures concentrated beverage base and syrup
Sugar Factory
Bottler
Blue Mountain Soft Drink manufacturer
Distributor
Retailer
Customer
Manufactures Finish Bottle and Cases
Sales and Deliver
Sales and Deliver
The Supply Chain Process
Water Blue Mountain soft drink company collects water form local
source. There is no shortage of water.
Sugar Sugar is supplied by Zayawaddy Sugar factory which is
located in Bago division
Bottles and cases - These are manufactured by a bottling factory
in Shwe Pyi Thar Town Ship
Label - Label is produced in the Blue Mountain manufacturing
plant according to forecasted demand
Production After gathering all the ingredients and raw
materials, the products are finalized in the main factory.
Distribution The finished soft drinks are then distributed to
retailors and wholesalers across the country.
Considered Factors in Supply Chain Management
Speed In Myanmar, Fast delivery is needed because the demands
for soft drinks are high and cycle time of consumption is
short.
Quality of distribution Good handling and transportation is
needed to reduce scrap and return cost
Vendor Managed Inventory Company doesnt store the finished goods
very long and distribute immediately to the retailers which helps
to reduce cost.
Two Types of management used in Blue Mountains inventory
Just in Time inventory management In Raw materials
Since the production amount is too high, the plant is not
capable of storing all the raw materials needed
Maintaining Raw materials like high fructose syrup, sweetener,
carbonated gas are too costly, thus JIT is the best option for
production cost
The plant collect the raw material as forecasted demand and
quickly produce the raw materials
Vendor Managed Inventory for finished goods
The inventory of finished goods are maintained in phases
distributor ware house and retailor shops
By this way, the factory doesn't need to hold those items and
will lead to less warehousing costs.
Most Common Equipment Problem in BM operation process
Biofilms
Microorganisms
Found in water procession
Attach to the surface like stainless steel piping via
adhesive-like material
Poor particle control upstream can lead to high maintenance cost
and an increase in system downtime
Solutions
Preventive Maintenance
To maintain the daily production run,
Routine inspection by skillful technicians
To avoid the critical equipment failure, using technology to
detect starting from early error stage and replace with the
original spare parts before it affect the entire machine
On the side of water processing plant , we can utilize 3M Series
NB Filter Bags which can provide hyper sensitivity filtration to
flow rate
Provide thermal treatment of the internal surface of the steel
pipe lines to prevent the growth of the algae within these
areas
Conclusion
In this fierce, harsh and competitive globalization era, we
continue to maintain our blue mountain soft drinks with stabilized
quality control.
Continue to focus to maintain the market leader position by
giving the same excellent customer preference taste.
Considering on the alternative cost reduction methods to improve
the long run production and forming a convenient and friendly
environment within the entire operation process.
