Poster

Operations Systems and Concepts

Lean systems accomplish waste reduction by improving process productivity, reducing inventory, improving quality, and increasing worker involvement. The waste reduction accomplished by lean systems has a direct impact on costs, so it should not be a surprise that it enhances profitability through cost reduction. Improved response time, greater flexibility, and improved quality all add value for customers and increasing sales. For our case organization, Laleli Olive Oil, several lean techniques are used to solve the problems that facing by the company.

Quality Management
As a prerequisite to leanness, a commitment to quality is necessary in all aspect of the business. High levels of quality reduce the amount of inventory needed, and service quality results in on-time delivery. When Laleli Olive Oil applies quality management in its operations system, it will influence the workforce because it changes the way workers do their jobs. It gives them responsibility for ensuring quality and empowers them to make improvements that eliminate waste. It also provides them with tools that help improve quality.

Besides that, by applying quality management in operations system, Laleli Olive Oil will able to reduce the amount of capacity wasted on defective products. Quality management affects facilities because quality extends to housekeeping and facility maintenance. The facility, like any other resource, must be maintained with utmost care, or that lack of care will eventually affect quality.

Matching Production to Demand (Takt Time)
Takt time is how often a company must produce a product in order to meet its demand. It is calculated by dividing the time available by the number of units the customers is demanding:

Takt Time = Hour of Available Capacity / Demand

By calculating the takt time, Laleli Olive Oil is able to produce the amount of products that needed by the customers so that there will have enough products to provide to the customers.

Kanban
Kanban systems are used to link the production rate to the demand rate so that the end result is production of only what is needed when it is needed. By applying kanban systems, Laleli Olive Oil can utilize small buffers of inventory between work centers, departments, and manufacturing plants. The unique characteristic about each inventory buffer is that it has a maximum size determined by management. When the maximum size of a particular inventory buffer is reached, no more inventories can be added. The signal is incorporated in the system through a simple, visible mean of detecting when the buffer is full or not.

By applying kanban systems in the operations management, Laleli Olive Oil can also link together work centers that are not physically adjacent to each other. There are many scenarios where work centers or suppliers provide parts but are a long distance away. The distance need not diminish the applicability of kanban as a means of authorizing deliveries of components parts and raw materials. When work centers are not located next to each other, the signal is posted when a buffer is not at its maximum level. When a container of components is produced, the kanban is attached to it and delivered to where it needed. Controlling the number of kanban cards in the system has exactly the same effects as controlling the number of containers.

Because the number of containers or kanbans determines the amount of inventory in the system by authorizing production, the decision as to how many containers or kanbans is important. Laleli Olive Oil must considers the fact that the container not only must spend time being filled, but also may spend time being transferred from one work center to another and may spend time in queue waiting to be filled by a work centers that also processes other parts.

The formula of computing the appropriate number of kanban is:

k = D + S / C

k = number of kanbans or containers
D = average demand during the replenishment lead time
S = safety stock
C = number of units per container

Small-Batch Production
Small-batch production is the primary means of matching production rate to demand rate. The ability to produce a small quantity of parts or products and then switch over equipment to produce a small batch of another part or product enables Laleli Olive Oil to match the demand rate in relatively small time increments. Producing in more frequent but smaller batches drives the average inventory level of Laleli Olive Oil down.

The formula for determining the batch size is:

Batch size = D / [(HA – HR) / T]

D = demand during the planning horizon
HA = hours of available capacity
HR = hours of required capacity
T = time it takes to perform a changeover

Fixed-quantity Reorder Point Model (ROP)
In a fixed-quantity, variable-interval system, the order quantity is the same each time an order is placed. In a reorder point model, an order is placed whenever the level of inventory drops to a predetermined point. Laleli Olive Oil can determine what the reorder point should be by applying this model in their operations system. The inventory on hand of Laleli Olive Oil when the order is placed will be sufficient to meet demand during the replenishment lead time, where the demand during the replenishment lead time can be forecast. By applying fixed-quantity reorder point model in their systems, Laleli Olive Oil is able to order enough inventories to produce their products to meet customers’ needs.

The formula for the fixed-quantity reorder point is:

ROP = ¯dLT + σLTZ

¯dLT = average demand during the replenishment lead time
σLT = standard deviation of demand during the replenishment lead time
Z = number of standard deviations above the average demand during the replenishment lead

time required for the desired service level

Economic Order Quantity Model (EOQ)
The reorder point system tells us when an order should be released, but the order quantity still needs to be determined. Besides of using fixed-quantity reorder point, Laleli Olive Oil can use economic order quantity model (EOQ) to identify the order quantity that will minimize the costs associated with the order size. By applying economic order quantity technique in their operations system, Laleli Olive Oil can reduce their total cost of their products and thus increase their long-term organization profit.

The formula for the economic order quantity is:

EOQ² = 2DS / H

The total cost equation for EOQ is:

Total Cost = S(D/Q) + H(Q/2) + DP

S = cost per order
D = annual demand
Q = order quantity
H = carrying cost
P = price per unit

Solution Model: Cause and Effect Diagram

The organization that we have chosen is Laleli Olive Oil which is operating in Queensbay Mall, Penang. We have decided to use the Cause and Effect Diagram or also known as the Fishbone Diagram to develop an innovation to a particular aspect of organization. Cause and Effect Diagram provides structure for evaluating possible causes and narrowing the field down to the most likely cause. Their most common use is for the analysis of possible causes. Creating the diagram typically starts with the identification of potential causes and gradually, through a process of elimination, moves to the root cause.

The cause to the problems faced by Laleli Olive Oil in producing their products include machines, materials, manpower and methods.

Machines:
The machines are rusted machines and they are slow and run down.

Materials:
The inventory check which is not done systematically and also low quality materials from the suppliers.

Manpower:
Shortage of manpower, workers that lack of experience, tardy managers.

Methods:
products are not well known by many consumers, company does not offer delivery service.


These problems faced by Laleli Olive Oil will have negative effects on their profits/sales. There fore solutions have been thought of to improve these problems. Example, the company must check the machines at least once a month and service them quarterly.

Mapping Trends: Case Studies

Our discussion:
We have selected five companies as our case studies which are Laleli Olive Oil Sdn. Bhd, Yakult (Malaysia) Sdn. Bhd., OSIM (M) Sdn Bhd, Nestlé (M) Berhad and Vita Agrotech Sdn Bhd. Some which are foreign-based companies and some Malaysian-based companies. In our discussion we have realize that all of these five companies show their efforts in being a CSR company especially Nestlé (M) Berhad by producing products which are health-based. Demands for health-based products are increasing which shows the importance of health by consumers.

Laleli Olive Oil Sdn. Bhd.
Laleli’s products are made from natural resources that is an olive tree called Olea europeae adremittion. This shows that their products are chemical-free and they do not cause any harm to consumers. Besides that, they are the pioneer for the establishment of the Technical High School in the field of Olive Agriculture and Production in Edremit and still giving their support by creating the practical training opportunities to the students in order to increase the interest of young people on the subject. They arrange many competitions in the primary schools and would award the students. They also give their support in the meaning of knowledge to official and unofficial organizations dealing with olive and olive oil production in Turkey.

Yakult (Malaysia) Sdn. Bhd.
Yakult is a yoghurt drink made by fermenting a mixture of skimmed milk with a special strain of the intestinal bacteria Lactobacillus casei strain Shirota which was created by Dr Minoru Shirota. He believed that a healthy intestinal tract would lead to longer life and advocated the prevention of illness rather than reliance on medical treatment when a person falls ill. From yoghurt drinks, they slowly expand to develop cosmetics based on the lactic acid bacteria and the Bifidobacterium which boast moisturising, antioxidant, lifting and anti-wrinkle effects.
Yakult then branched out into pharmaceuticals and today it is a major developer of the cancer chemotherapy drugs irinotecan (Campto) and oxaliplatin (Elplat) that is marketed by pharmaceutical giants Pfizer and Sanofi-Aventis.

OSIM (M) SDN. BHD
OSIM innovative products covering the four focuses of Health, Hygiene, Nutrition and Fitness. From massage chairs and air purifiers to health supplements and treadmills. Their success in Malaysia can be seen through the winning of numerous industry awards and consumer accolades for technology, management, trust and value for consumers including the Asia Pacific Honesty Enterprise-Keris Award 2002. Malaysia Book of Records recognizes OSIM as the "Largest health check and care equipment retail chain".

NESTLÉ (M) BERHAD
Their part of Corporate Social Responsibillities are as stated:
1. Nutrition, Health and Wellness: Ongoing innovation and renovation on their products to reduce sugar, salt, fat content, no added MSG.
2. Environmental: Ensure environmentally friendly production techniques and ways to recover by-products, as well as processing methods that minimise water and energy consumption, and waste generation.
3. Employees: Prepares with the necessary skills required for the future role of being multi-skilled in running a mini-business.

VITA AGROTECH SDN. BHD.
A pair of husband and wife started with Vita Mushroom Enterprise in 1989 and later their marketing arm, Vita Marketing, was formed. As their company grew bigger, Vita Agrotech Sdn Bhd was established in 1997 and Ganofarm Sdn Bhd in 2006. Their farm which is free from chemicals and pesticides would grow the mushrooms in plastic bags packed with sawdust which can produce between 30 and 40 tonnes of mushrooms per month. The stringent measures taken to ensure quality had resulted in the company being awarded the ISO 9001-2000 standard certification, SALM certification (Good Agriculture Practice) and now going for SOM certification (Organic Farming). Their farm also has collaborations with local universities and the Agriculture Department for research and development in mushroom cultivation, training of undergraduates and new growers and research of medicinal values of various mushrooms grown in Malaysia by postgraduates.

Mapping Trends: Articles

Discussion:
The blue boxes shows articles from the year 2006, where as the yellow boxes shows articles from the year 2007 while 2008 is showed in red boxes.

In year 2006, products that are produce by the companies are either traditional or modern (pills). Products are made from natural resources such as herbs. All these done are to help consumers maintain a healthy lifestyle.
In the year 2007, technologies has advanced and creating machines to detect diseases. Other than that, majority of the products produce are in the form of pills. But the trend to use herbs as a part of the ingredient maintains. Well-known companies who do not mainly produce health-based products has been aware of health issues by the community and consumers and starts to produce them.
In the year 2008, the trend of producing pills are a health-based product changes into products which focuses on florals and herbs as their ingredients for consumers to lead a healthy lifestyle.

In conclusion, using herbs or florals has been a trend at this era. Using natural sources by these companies shows that, they realize using chemicals in products would harm the nature and also the community.

Laleli Olive Oil Sdn. Bhd.

The organization that we have decided to do a case study on would be Laleli Olive Oil Sdn. Bhd. which is located in Queensbay Mall, Penang. Laleli Olive Oil Sdn. Bhd. sells products that are made from olive oil for health and skin.


The founder of Laleli Olive Oil is Dr. Yahya R. Laleli. He is an indisputable lover of olive oil, a medical doctor, research scientist and an academician. Dr. Yahya R. Laleli is an internationally-renowned expert in nuclear medicine and radiobiology and an education philanthropist and the aforesaid describes in a nutshell the founder of LALELI brand of olive oil.

Dr. Yahya R. Laleli

Laleli Olive Oil is known for its olive oil products. Since ancient times, olive oil has been known as the “secret of youth”. In response to the growing interests in natural beauty care products, LALELI proudly presents its range of olive body oil, hair oil and soap. Here are some their products:

LALELI BODY OIL
Made from a combination of wild and cultivated olives, almond and tea, Laleli Body Oil is 100% natural and chemical-free. It helps keep the body moisturized and lustrous by delivering intense hydration and is highly effective for stretch marks. The product not only soothes irritated skin, it also increases the skin’s effectiveness in self-repairing against damage caused by sunlight. Laleli Body Oil comes in different flavours. For best results, use for body massage or after shower.


LALELI HAIR OIL
Laleli Hair Oil is produced from Selection Olive Oil, almond oil and a mixture of natural plant extracts from bay leaf and rosemary. This 100% natural and chemical-free product prevents dandruff and hair loss and helps keep the hair soft and healthy. Apply the oil on wet hair and scalp. Then, gently massage them for a minute before shampooing.



LALELI OLIVE SOAP
Laleli Olive Soap is 100% natural and hand-made with no salts, preservatives, colourings, animal fats and chemicals, making it suitable for all skin types and daily usage. Made from Laleli’s selected olive oil and essential oil extracted from plants, the soap is a natural moisturizer by itself. Olive oil, the main ingredient in the soap, has superior ability to form a moisture barrier and soften the skin while keeping irritants at bay. Olive oil is also highly effective in neutralizing the free radicals that damage the skin. Various natural flavours are available for selection.

Shining Stars

Before we start posting about our topic which is regarding Health-Based Products under the CSR component, marketplace, we are going to do a brief introduction of the group.

Shining Stars, from left to right: Luanne, Pei Pei, Adeline and Zien Vein.

We are called Shining Stars and the group consists of four members. We will start off with the introduction of the group leader which is Luanne Lee Pei Hwa who comes from Subang Jaya, Selangor. Luanne is also the manager for this project.

Luanne Lee Pei Hwa

Next is Adeline Chew Wan Ling from Ayer Itam, Pulau Pinang. She takes the role of the editor of this project.

Adeline Chew Wan Ling

Followed by Aw Yong Pei Pei from Georgetown, Pulau Pinang. She is the creative/presentation manager.

Aw Yong Pei Pei

And lastly, Cheng Zien Vein from Kota Bharu, Kelantan, who is the solutions-based idea manager.

Cheng Zien Vein

Each of us have played our roles in finding and selecting information, designing the weblog and poster, managing/dividing the groups duties in this project and much more.

Introduction

As stated on Operations Now Supply Chain Profitability and Performance, Third Edition by Byron J. Finch,

“Operations management is the management of the resources used to create salable products and services. It consists of the traditional business resources-employees, equipment, inventory, and facilities-combined with some not-so-traditional assets-knowledge, skills, customer relationships, and reputation.”

Through Operations Management we are able to learn to create value in products/services in order to fulfill the satisfaction of the consumers/customers. To create value, not only do we have to put in product/services benefits but also to put in social benefits in them. This is related to Corporate Social Responsibilities (CSR) which has become an important issue in today’s modern era.

CSR is about approaching businesses’ aims responsibly, with an awareness of your surrounding social and environmental needs, in order to fulfill stakeholder demands, achieve a profit and remain competitive. The potential benefits of CSR for companies or organizations include enhanced reputation, competitive edge, better risk management and a more committed and efficient work force; all of which could have a considerable effect on profits. Practising greater responsibility could also have a positive impact on wider society and the environment.

It is important to measure progress towards becoming more socially responsible, in order that mistakes and achievements can be identified and learned from. For some large companies or organizations this may take the form of a CSR report, for others it might involve identifying where and how you have tried to be more socially responsible and how the company has benefited.

All businesses can benefit from engaging in 'stakeholder dialogue', which means defining and talking to the groups and individuals that affect, and are in turn affected by, your operations. Other ways of approaching CSR depend on the size of the company/organization but include building on existing business aims and policies that demonstrate social responsibility by producing plans and value statements to show the ways in which you and your staff aim to progress.

(taken and edited from http://www.ciob.org.uk/filegrab/corporate_social_responsibility_revised.pdf?ref=73 )