In the global world in which we live today, it is essential to know the primary needs of consumers of alcoholic beverages, and this is how after an arduous analysis, the idea of creating a whiskey-based drink with characteristics that allow a competitive advantage over the other brands that are in the market.
This is how the idea of COCOLABEL arises, a product created and designed directly to meet the needs of the market, while guaranteeing good quality and high performance in the competitive market. Basic characteristics such as: flavor, color, price and reliability were analyzed to create a drink that is not only new, but original and accessible to many. COCOLABEL is an alternative for those whiskey consumers who, not wanting to change their preference for it, seek diversity; For this reason we present a broader horizon without changing its original flavor since the whiskey comes combined with coconut water. COCOLABEL can be enjoyed in any type of environment, both elegant occasions and those that are more informal, such as the beach, the countryside, the mountains, etc.The fact that it is coconut-based allows COCOLABEL to be enjoyed mostly in hot environments, as it is a refreshing drink.
Therefore, the methods and instruments used by the senior management of the COCOLABEL production company will be explained below, in order to guarantee a reliable and profitable product for the company. In addition, the way in which the production process is carried out will be detailed, with a series of operational resources that facilitate the process and in turn are fully involved.
2. The Product: COCOLABEL
As mentioned above, COCOLABEL is born from an innovative idea that seeks to satisfy a line of the consumer whiskey market, presenting a new product available to many. It was created to directly meet the needs of consumers, being COCOLABEL a unique alcoholic drink based on coconut water and premium whiskey: White label.
Product development stages
- Name and Description: COCOLABEL (whiskey with coconut water):
- Coconut-based alcoholic drink. It has a lower alcohol percentage than that of whiskeys in the market. It is presented in a single bottle, where the whiskey is mixed with coconut water ready to drink. Smooth and light taste on the palate. Whiskey Label aged twelve (12) years. It presents two lines to the public: soft and classic.
Based on the consumption of whiskey in the Venezuelan market in a traditional way, and which has existed for a long time, the new consumption trends towards non-traditional drinks based on fruits, it has been decided to introduce a new product that combines both trends, in order to meet the needs of the market.
Earning opportunities are a function of high sales per case, as the price ranges in an acceptable range compared to pure whiskey on the market.
- Product life cycle:
As a specific technology and development progresses, it moves through its life cycle, and its functional performance characteristics improve. This change in performance characteristics often describes an S-shaped curve.
In the COCOLABEL life cycle it is observed that at the optimum point of the curve, in the year 2005, is when production reaches 2,000,000 bottles (at this point the greatest profit for the company is observed.) From At this point, a decline is observed, so a relaunch of the product should be considered, either modifying its characteristics according to customer requirements or developing a new advertising campaign.
- Market requirements:
- In view of the high Venezuelan young population, whiskey consumption has been shown to be in high proportions. COCOLABEL aims to satisfy this demand by including coconut in its new line.It is a new idea that will generate greater consumption of the product in new informal environments frequented by young people: beaches, the countryside, the mountains, etc. People with a medium income level high that they can acquire the product, COCOLABEL.
"They are those who develop new products quickly, continually outperform those who do so slowly, and thus gain a competitive advantage."
In the current market, there is no direct competition from COCOLABEL, since there is no presentation of whiskey with coconut water. Direct competitors would be represented by those whiskey consumers. Among the brands that are in the market are: Black Label, Buchanan, White Label, Old Parr, Something Special among others.
Functional specifications
Based on the fact that the production of COCOLABEL is homemade, it is planned to produce the product in small quantities, in order to satisfy demand locally (in the capital). As demand increases, it is planned to make an additional investment in machinery that allows increasing daily production, specifically treadmills that streamline the production process. In addition, there is a strategic plan to implement where alliances with suppliers were established to guarantee production based on high demand.
After having made a market analysis regarding the acceptance of the public before a whiskey with coconut water, it is known in advance that there will be an acceptance by the Venezuelan public. This is a basis for determining the reliability of COCOLABEL, which is the probability that two components (whiskey and coconut water) will work properly for a given period of time. When designing COCOLABEL, two systems were used to improve quality and reduce the probability of failure:
- Improvement of the individual components: for the production of COCOLABEL, one of the best whiskeys on the Black Label market was chosen. With this base product, good quality and reliability are guaranteed. In addition, coconut water is 100% natural, with few chemical additives for its conservation.Reduce the probability of failure: as we know beforehand, coconut water is a natural product without chemical additives, so it cannot be guaranteed that last for long periods of time. This means that the excellence of the product is not guaranteed to the consumer after the expiration date has passed. This can lead to a failure in the production of the product, but the senior management manages methods in such a way that a good quality of the product is guaranteed until an expiration date.after which the company is not responsible for the consequences of ingesting the liquor.
Quality is a concept that cannot be neglected in the COCOLABEL production process. Quality is the perception that consumers or clients have about how well a product meets their total needs. Quality encompasses many aspects that must be developed by the company, such as: performance, product characteristics, reliability, durability, durability and presentation. The higher the quality of a product, the greater the number of people who are willing to buy it. In turn, the product must satisfy the cost - quality ratio so that the customer is satisfied with its purchase. According to the author Deming, there are certain criteria that must be taken into account to guarantee the quality of the product, which are:
- Record the intention to improve products. Adopt new philosophies. Stop relying on inspections to achieve quality. End the idea of starting with the business based on the price of the label. Constantly promote each activity of the company that improves quality and productivity.Institute on-the-job training and education.Establish supervision.Away fears.Eliminate barriers between departments.Eliminate any type of exhortations.Eliminate rules that impose production quotas.Eliminate barriers that prevent pride in Worker. Establish an intensive training and coaching program. Get workers accustomed to teamwork.
Taking these points into account, COCOLABEL's senior management has set itself the objective of establishing work teams, where the base system is characterized by being horizontal, thus avoiding work barriers between employees, and allowing better communication.
As for the quality of COCOLABEL it has been divided into two categories: product quality and process quality. The quality in the design of the product depended on the market to which it was going to be directed, in this case the consumer market for whiskey. One way to establish adequate quality was to satisfy customer requirements to avoid an over-designed product at a high cost. The quality of the process was related to the reliability of the product, which refers to a product without defects and free of errors (that is why, the quantities of coconut water and whiskey to be used were previously studied to guarantee quality in flavor).
Therefore the company assumed the importance that should be given to the following elements: speed of delivery (deliver the product faster than the competitors), reliability in delivery (the ability to supply the product to wholesalers and retailers in the promised delivery date or even earlier), coping with changes in demand (the ability to respond to increases and decreases in demand reflects our ability to compete), meet the launch date, and assist with post-vendor support.
There are many methods used today to measure the quality of a product, among the most important are:
- Pareto chart.
The Italian economist Pareto presented a formula that showed that the distribution of income is unequal. Quality problems were classified as few, vital and many trivial, which he called the Pareto analysis method. If the causes of these few vital effects are identified, almost all losses can be eliminated, concentrating on those particular causes and leaving aside for the moment many other trivial defects. The use of the Pareto diagram allows solving this type of problem efficiently.
When using this type of diagram, if an item can be easily solved it must be addressed immediately, even if it is relatively minor. Said diagram, has as objective the efficient solution of problems for which it is required that we face the vital few. To find the viable solution, it is necessary to identify the causes, so it is vital to make a Pareto diagram of causes, if they are going to be better.
- Quality house
The House of Quality allows us to relate customer requirements and broad design requirements, which means that people who work in the company can easily read and understand them, even if they have different experiences. Questions of what and how are answered. If there is no relationship between the requirements, leave the space blank.
For the COCOLABEL company, this technique was used, since it directly reflects the client's requirements, a fundamental element in developing the product.
Horizontal: 5 + 0 + 10 +3 +12 +8 = 38 Vertical: 3 + 10 + 10 + 12 = 35
10 + 10 + 15 + 9 + 4 + 8 = 56 0 + 10 + 15 + 4 = 29
10 + 15 + 15 + 9 + 4 + 8 = 61 6 + 15 + 15 + 8 = 44
15 + 5 + 10 + 3 + 4 + 12 = 49 3 + 15 + 15 + 4 = 37
9 + 5 + 5 + 4 = 23
6 + 10 + 10+ 12 = 38
As we know, the quality house is an important tool to define the relationship between the customer's wishes and the attributes of the product and / or service. In a study carried out by the company among potential customers, a compilation of the most significant and representative wishes was made, including: price, quality, taste and attractiveness. Each of them represents a true demand of consumers and even more so for those who have become accustomed to our excellent product in all its presentations.
The quality of our whiskey has been noted within the market and the renown that our prestigious brand suggests allows us to enter new products while being almost sure of their success.
With the launch of COCO LABEL we are adding one more product to our classic line (Black Label, Blue Label, Red Label and Gold Label), thus expanding our classic target market, now targeting a younger and emerging consumer population.
When analyzing the quality house, we can see that the client's wishes point towards the most common characteristics, but the term "attractiveness" is incorporated, which makes us think that the need to create a product with the same has undoubtedly been generated. quality that the WALKER house ensures, but which covers the new and changing needs of the young population. This is how the idea of producing a coconut-aged whiskey was born, which is another success in our production line.
Analizando columna por columna podemos observar que hay coincidencias entre atributos y deseos, lo que nos hace pensar que vamos en buen camino. Hablamos de una alta relación entre innovación y atractivo, entre buen sabor y suavidad, entre alta y buena calidad, entre producto sustituto y buena calidad, entre producto sustituto y buen sabor, entre bajo costo y precio,y, finalmente entre target juvenil y atractivo. El hecho de que hayan aparecido ocho relaciones altas me indican que sin duda nuestro producto tiene alta posibilidad de triunfo siendo la característica de buen sabor la que mas se compenetra con los atributos del producto (61 puntos). Por lo tanto en base a que también cumple lo que hacemos con los deseos del cliente, el orden de importancia es el siguiente: Buen sabor, buena calidad, atractivo diseño, precio accesible. Ahora si analizamos verticalmente podemos decir cual de los atributos se pudo relacionar mejor con los deseos del cliente quedando en éste orden: alta calidad, target juvenil, producto sustituto, innovación, suave sabor, bajos costos de producción.
Concluding we can say that the characteristics or attributes of the product are vital to guarantee its success (high quality, a quality that is undoubtedly in our entire line); and the desire to consider as the most weight when designing the product is the good taste, characteristic or logical desire for the type of consumers surveyed (youth population over 18 years of age who are habitual consumers of whiskey (BLACK LABEL). Now based on what attributes we should relate to achieve success, our new target undoubtedly points out that a relationship that must be indisputable is that of youth-innovation target, since it is logical that the purchases and consumption of young people is more influenced by style, image, advertising, innovation, leaving aside even the quality and tradition of the brand.
- Benchmarking
Benchmarking is an essential element in the efforts that a company makes to improve its operations. Using this technique not only implies that the company can recognize and adopt world standards of its kind, but also can learn how to achieve these standards. Competitive benchmarking requires analysis of the performance and practices of best-in-class companies. Their performance becomes the benchmark against which each company can compare theirs, and their practices are used to improve those of the company.
Benchmarking constitutes a current improvement practice that must be part of the continuous evaluation of the company, its competitors and the market. It can only improve performance if a comprehensive quality program is established in advance.
- Quality loss function
According to Taguchi, the quality of a product is a function of the key characteristics of a product, in terms of performance characteristics. The ideal value of a characteristic is its objective value. The quality loss function estimates the losses that society experiences due to the fact that a product does not achieve the target value, due to certain performance characteristics. This loss can be assumed by the client, the company or the society.
FPC = C (X - T) 2
Where FPC = loss to society
C = cost constant.
X = actual average value of the parameter.
T = target value in each parameter.
This function allows the company to quantify the savings in the costs achieved, through the improvement of the product and the process, which causes reductions in the variation of the objective values.
3. Product Specifications
COCOLABEL is originally produced at home, so the consumer is guaranteed high levels of purity, both in coconut water and in whiskey. In addition, it must have the supervision of trained personnel with knowledge regarding production, in order to obtain a final product suitable for sale.
To guarantee excellence, we have raw material suppliers (coconut) that have a long history in the market, so their quality is 100% safe. For its elaboration, the process is based on the mixture of coconut water with whiskey, with previously established levels. Furthermore, the excellence of the product is guaranteed since the best whiskey on the market is used as a base. For the elaboration of the product, there are specialized machinery, in addition to labor that allows the filling, bottling and storage of COCOLABEL.
Design review
In order to save costs in the production of COCOLABEL, the coconut producer and distributor market was evaluated to choose the one with the best prices. With whiskey, the one that guaranteed quality was chosen, regardless of price, as it is the raw material of COCOLABEL. In addition, the costs in terms of labor are quite low, since the product does not require dedicated personnel to assemble it, so the rollers will facilitate the work.
In turn, it is necessary to guarantee total quality to the consumer, through standards certified by the International Organization for Standardization (known as ISO 9000), which play a crucial role in setting quality standards. In the case of COCOLABEl, White Label is used as the basis of the product, therefore the consumer is guaranteed top quality whiskey in the market, which already has a track record recognized for its good taste and acceptance.
Robust quality is a term that cannot be ignored, as it maintains the expected quality in terms of consistency and uniformity under changing or adverse conditions, allowing it to be within range. As there is a lot of variability, the robust quality concept cannot be adopted. Uniformity and consistency are essential characteristics for this type of quality to be applied in the company. Below is a clear example of the limits established for COCOLABEL in terms of robust quality:
For COCOLABEL, the aim is to guide quality towards the objective (the number of times the product is generated), so its deviation is less. This line is represented in the graph by the color orange, which is the one that interests the top management of the company.
In today's global world whiskey market, there are plenty of players engaging in competition in this alcoholic beverage sector. These actors represent the well-known competition for COCOLABEL, since in addition to having a longer track record in the market, they also compete with other brands.
The company's priorities have been developed according to the whiskey market, in order to directly satisfy consumers. Among the most important competitive priorities are:
* On-time delivery to minority and majority suppliers.
* Low prices.
* Reliability in the product.
* Performance quality.
It is important to mention that competitive priorities vary with respect to time and market needs. When buying the product, it is essential for the consumer to be able to satisfy their needs in terms of value (it means buying a product with the most important attributes at the lowest possible price).
Current product: COCOLABEL
Customer / Market Needs
Priorities and performance requirements
Verify: quality, reliability, flexibility, price, speed
By analyzing not only the company's competitive priorities, but the characteristics present in the product, COCOLABEL is a product that seeks to directly satisfy the lack of a whiskey-based drink on the market that can be ingested in all types of environments.
Launch and delivery of COCOLABEL
One of the most important stages in the life cycle of a product is its launch. For the COCOLABEL production company, great emphasis has been placed on a launch based on marketing techniques that allow the product to be known before it is officially launched. This allows its early recognition in the whiskey market, which implies a competitive advantage over other brands on the market.
The strategies to be used are the use of advertisements on billboards (highways), in the press, on the radio and through the delivery of leaflets. Another technique to be used is the distribution of samples of the product at strategic points (such as: beaches, discos, bars, cafes, meetings, etc.) that make the product known. This launch process has a work team specifically contracted to sponsor COCOLABEL.
Once the launch process has been completed, the distribution network will start up. It is extremely important that the product arrives at the right time to retailers and wholesalers, who will be tasked with supplying the new product to the public. To guarantee an immediate and always on-time supply, the company has a developed computer system that allows it to verify if the delivery trucks are on time, if there is a greater demand and if the delivery quantities should be increased.
Success evaluation
One of the fundamental objectives of the company is to verify COCOLABEL sales levels. For this, an instrument known as productivity is used, which allows measuring how well the company's resources or production factors are being used. Productivity equals:
Productivity = Production / Inputs
On the other hand, productivity can be a relative measure, so it must be compared with other indicators that allow us to know the situation of the company (profitability, production, sales indices…). Productivity indices allow the company to not only compare itself to those of competing companies, but also to measure its own productivity over time.
Other ways to measure success in COCOLABEL's performance is to assess what the public acceptance has been. This measurement can be elaborated through surveys, evaluations and questionnaires that allow knowing the opinions of consumers regarding the product, their criticisms and their needs. The opinions of the clients play an indispensable role for the good development of the product, since they play an indispensable role in the evolutionary process of COCOLABEL.
Equipment for product development
For the proper functioning of the company, COCOLABEL has the formation of work groups that streamline the process. These groups are divided according to the task they carry out, including: mixing coconut water with whiskey, filling the bottle, affixing the label and packaging. As explained above, the acquisition of machines that allow savings in terms of labor is planned in the short term, so teams that have the obligation to supervise the machinery in process will be available.
This group of machines will be made up of:
The senior management team, made up of the main investors in the business, who will make the necessary decisions for the good development of the company, should not be neglected.
- Characteristics of types of processes
1-) A large number of products without variety are produced since we only base ourselves on one article which is COCO LABEL (whiskey with coconut water).
2-) Specialized team to help in the use of an assembly line, which is made up of rolling machines, liquid pouring machines (whiskey and coconut water), bottling machine (seals the bottles) and packaging machines.
3-) Employees are relatively trained with the ability to rotate in the different tasks carried out in the production system.
4-) Work orders and work instructions are few, because they are standardized, this is because the production process of our product is not very complex, since they are processes that do not require high specialization for their handling.
5-) Inventories of raw materials are relatively low for the value of the product, since we are going to produce an article that does not require a great variety of raw materials for its elaboration.
6-) JUST IN TIME supply techniques are used, since due to previous experiences we can measure what is the amount regularly used for our daily production.
7-) A rapid movement of the units through the installation is typical, since they do not require much time to produce a unit. (Our product requires 7 minutes until its complete elaboration process).
? The materials are moved with conveyors, transfer machines, AGV's, etc., as previously stated (in the 2nd process), our production system is based on rolling machines (which transport the container through the different processes it goes through to reach its packaging), pouring machine (mixes both liquids inside the container), bottling machine (seals the bottles) and packaging machine (accommodates the bottles inside the box ready for distribution).
9-) The facility is built around equipment, machines and product flows, our production is not produced in industrial quantities, as we can see in our work, 50 bottles will be produced daily, and the physical space will be adapted to the quantity of machines, inventory and production of the company, which does not require much.
10-) The final articles are produced from frequent forecasts, our production is based on estimates, which were agreed to be 50 bottles a day, regardless of the quantity sold.
11-) Planning is relatively simple and seeks to establish a production rate sufficient to satisfy sales forecasts. As we have already mentioned, our production is based on 50 bottles a day, calculated based on what the company is prepared to produce.
12-) Fixed and variable costs tend to be high, this is because our production is constant and production costs for their processes remain regular, fixed costs are high since our product is made with a whiskey of quality and extremely expensive.
13-) The costs are normally known due to numerous previous experiences, taking into account the cost of whiskey, coconut water and the cost of bottling until packaging
5. Planning and control of COCOLABEL Production
This line is related to the life cycle designed for COCOLABEL and in turn the maturity of the product
Planning process
Every company or company must plan its activities regarding production through different levels, which allows it to operate as a system. That is why, for the production of COCOLABEL, the productive periods have been divided according to time: long, medium and short term.
- Long-term: it begins with the declaration of the objectives and goals of the COCOLABEL production company, for the following ten years. This planning covers not only the production part, but also the financial, corporate, market and resource areas. Also, the maximum capacity at the productive level is established through an equilibrium point, which allows knowing the maximum margin of COCOLABEL production. The workforce is made based on the supply and demand of the product, also depending on the period of the year in which they are. Regarding inventories, the available inventory represents existence, established through the costs generated by its existence.
Objectives and goals
- Directly satisfy the needs of customers. Establish strategic agreements with raw material suppliers, in order to guarantee reasonable and accessible prices. Acquire used machinery to streamline the production process of COCOLABEL, as long as they meet the pre-established budget. Create annual budgets based on profits and benefits, in order to rigorously fulfill what was planned. Establish alliances with banks, to guarantee future loans that allow the development to greater magnitudes of COCOLABEL. Prepare a study to know the future projections that will allow the business to expand in the long term, to produce coconut whiskey in greater quantities: COCOLABEL. To have potential investors interested in the development of the COCOLABEL product,that they are able to contribute capital, if necessary, for a possible expansion based on the studies carried out previously, that allow for the best development and increased production of COCOLABEL.
The long-term plan or aggregate production plan:
The adequate combination of resources in order to achieve the pre-established production plans, or better known as the master production plan (it is one that specifies the appropriate monthly levels to satisfy market demand), leads to the company that produces COCOLABEL to guarantee the supply of the product to retailers and wholesalers. Once the monthly levels that must be met are known, the material requirement plan is drawn up, to make known to the suppliers of whiskey, coconut water, bottles, boxes and labels the quantities necessary to reach the established monthly levels. At this point, the costs involved in preparing the production plan must be managed, as well as knowing the company's monthly cash flow,to know how much cash is available for the purchase of raw materials and comply with the company's salary obligations.
- Medium term: This activity specifies the production requirements by main product groups, either in necessary working hours or in production units. Its main inputs are the product and market plans and the resource plan. Aggregate production planning aims to find the combination of inventory levels and monthly workforce that minimize production-related costs during the planning period.
To carry out the estimates, it was taken into account that the target market for the production and sale of COCOLABEL is a small group, since it is a home-made product.
| PERIOD | EXPECTED DEMAND | DAYS OF PRODUCTION | DEMAND PER DAY |
| January | 1,000 | twenty | fifty |
| February | 1,500 | 18 | 83 |
| March | 1,700 | twenty-one | 81 |
| April | 2,000 | twenty-one | 95 |
| May | 1,800 | twenty-one | 86 |
| TOTAL | 79 |
The expected demand will increase in the months of February and April due to Carnival and Easter dates, where the demand for COCOLABEL increases as these are dates when the public goes on vacation, increasing the probability of buying and selling the product.
Below is a detailed description of the costs, depending on what will be produced.
COSTS:
* Average payment rate 1,200 Bs./hr
* Overtime payment rate 2,000 Bs./hr
* Labor hours to produce a unit 0.12 hours each.
* Cost of production rate increase 2,300 Bs. Each
* Production rate decrease cost 2,500 Bs. Each
* Inventory management cost 1,250 Bs./hr
COCOLABEL has three options for its added planning:
Case A: Daily production = daily demand
In this case, the costs and production of COCOLABEL are calculated based on a normal day of eight (8) hours a day and with variation in the size of the workforce.
| MONTH | TOTAL PRODUCTION | COST PROD. NORMAL | + PROD. | - PRODUC. | COST PROD. TOTAL |
| January | 1,000 | 150,000 | - | - | - |
| February | 1,500 | 225,000 | 1,150,000 | - | - |
| March | 1,700 | 255,000 | 460,000 | - | - |
| April | 2,000 | 300,000 | 690,000 | - | - |
| May | 1,800 | 270,000 | - | 500,000 | - |
| TOTAL | - | 1,200,000 | 2,300,000 | 500,000 | 4,000,000 |
Case B: Average daily production = 79
Produce to meet the expected demand by hiring or paying overtime personnel.
| MONTH | TOTAL PRODUCTION | INVENTORY VARIATION | INVENTORY COST |
| January | 1,580 | 580 | 725,000 |
| February | 1,451 | -49 | 663,750 |
| March | 1,659 | -41 | 612,500 |
| April | 1,659 | -341 | 186,250 |
| May | 1,659 | -141 | 10,000 |
| TOTAL | - | - | 2,197,500 |
9,480 * 1,250 = 11,850
Total cost Case B =
Case C: Average daily production = 50
Produce to meet the expected demand by hiring or paying overtime personnel.
| MONTH | TOTAL PRODUCTION | INVENTORY VARIATION | INVENTORY COST |
| January | 1,000 | - | - |
| February | 900 | -600 | - |
| March | 1,050 | -650 | - |
| April | 1,050 | -950 | - |
| May | 1,050 | -750 | - |
| TOTAL | - | - | - |
8,000 - 5,050 = 2,950 units * 0.12 hours / unit = 354 hours * 2,000 = 708,000
6 * 1,250 = 7,500 + 708,000 = 715,500
After analyzing the 3 cases, the following results were obtained:
CASE A: 4,000,000 Bs.
CASE B: 2,209,350 Bs.
CASE C: 715,500 Bs.
It is more convenient for the company to pay overtime with a daily production of 50 units that keeps the demand satisfied. This is because the cost of inventory management and the cost of increasing and decreasing production are higher than the cost of overtime.
- Short Term: within the short-term planning are the needs for planning materials; This system takes the final product requirements from the master production plan and breaks them down into parts or pieces. This short-term planning specifies when to purchase and production orders for each part and subassembly to finish products on time.
- COCOLABEL Master Production Program and Materials Requirement Plan
The master production schedule is a time plan that determines when the company plans to build each final item and how much. Based on a master schedule derived from a production plan, a material requirements planning system (MRP) creates an activity schedule that identifies the specific parts and materials needed to produce final items, the precise quantities required and the dates on which the orders for these materials must be sent and received or manufactured within the production cycle.
The primary goals of an MRP system are to control inventory levels, assign operational priorities for items, and plan the carrying capacity of production systems. The advantages of MRP systems are:
- Ability to set more competitive prices. Reduction in sales price. Reduction in inventories. Better customer service. Better response to market demands. Ability to change the master production schedule. Reduction in preparation and disassembly times. Reduction in downtime.
Additionally, MRP systems delay or cancel orders, change order quantities, advance or delay order delivery dates, and help plan capacity.
Gross Material Requirement Plan
| Day 1 | Day 2 | Day 3 | Day 4 | Day 5 | Day 6 | Day 7 | Day 8 | ||
| CocoLabel | FAITH | 50bot | |||||||
| THE | 50bot | ||||||||
| Mixture | FAITH | 375lts | |||||||
| THE | 375lts | ||||||||
| Coconut water | FAITH | 125lts | |||||||
| THE | 125lts | ||||||||
| Whiskey BL | FAITH | 250lts | |||||||
| THE | 250lts | ||||||||
| Bottle | FAITH | 50unds | |||||||
| THE | 50unds | ||||||||
| Label | FAITH | 50unds | |||||||
| THE | 50unds |
Materials Requirement Plan
| Cocolabel | one | two | 3 | 4 | 5 | 6 | 7 | 8 |
| Gross Req | fifty | |||||||
| Rec. Prog. | ||||||||
| Project Hand | ||||||||
| Net Requirements | fifty | |||||||
| Rec.Ord.Plan | fifty | |||||||
| Lib.Ord.Plan | fifty |
| Mixture | one | two | 3 | 4 | 5 | 6 | 7 | 8 |
| Gross Req | 375lts | |||||||
| Rec. Prog. | ||||||||
| Project Hand | ||||||||
| Net Requirements | 375lts | |||||||
| Rec.Ord.Plan | 375lts | |||||||
| Lib.Ord.Plan | 375lts |
| Coconut water | one | two | 3 | 4 | 5 | 6 | 7 | 8 |
| Gross Req | 125lts | |||||||
| Rec. Prog. | ||||||||
| Project Hand | 45lts | 45lts | 45lts | 45lts | 45lts | |||
| Net Requirements | 80lts | |||||||
| Rec.Ord.Plan | 80lts | |||||||
| Lib.Ord.Plan | 80lts |
| Whiskey BL | one | two | 3 | 4 | 5 | 6 | 7 | 8 |
| Gross Req | 250lts | |||||||
| Rec. Prog. | ||||||||
| Project Hand | 37.5lts | 37.5lts | 37.5lts | 37.5lts | 37.5lts | |||
| Net Requirements | 212.5lts | |||||||
| Rec.Ord.Plan | 212.5lts | |||||||
| Lib.Ord.Plan | 212.5lts |
| Bottle | one | two | 3 | 4 | 5 | 6 | 7 | 8 |
| Gross Req | 50unds | |||||||
| Rec. Prog. | ||||||||
| Project Hand | 5unds | 5unds | 5unds | 5unds | 5unds | 5unds | ||
| Net Requirements | 45unds | |||||||
| Rec.Ord.Plan | 45unds | |||||||
| Lib.Ord.Plan | 45unds |
| Label | one | two | 3 | 4 | 5 | 6 | 7 | 8 |
| Gross Req | 50unds | |||||||
| Rec. Prog. | ||||||||
| Project Hand | ||||||||
| Net Requirements | 50unds | |||||||
| Rec.Ord.Plan | 50unds | |||||||
| Lib.Ord.Plan | 50unds |
Process and Capacity Design
- Capacity Planning.
The COCOLABEL company uses the concept of the best operating level, since this is the capacity level where the production volume represents the lowest cost per unit. The capacity utilization rate is used to determine this optimum level.
TUC = Used Capacity
Better operational level
Depending on the month where the COCOLABEL production is located, this rate varies. As for example in the month of January a capacity of 120 man-hours will be used to produce 1,000 bottles of the product. This optimal operating level was calculated at 192 man-hours for the first five months, so:
TUC = 120 h / h = 0.625 TUC = 62.5%
192 h / h
The COCOLABEL company considers as part of its objectives to belong to an economy of scale, since in the long term it is planned to increase the production of coconut whiskey, which implies an increase in its production volume and the average cost is reduced.
- Experience curve.
A bottle of COCOLABEL in the month of January will cost 14,130 Bs., As long-term production increases in large quantities, the cost of the product will decrease. As can be seen in the graph, it is projected that by increasing production by 30,000 units, the cost will decrease to 12,000 Bs., And will remain stable.
This reflects the flexibility of the company, since it has the ability to quickly increase or decrease production levels. This is accomplished through manipulation of the following three elements:
- Flexible plants: there is a movable team, which allows it to be adapted to different situations.Flexible processes: it has manufacturing systems and technologies that are simple and easy to install.Flexible workers: it has a team of employees with multiple skills with respect to machinery, allowing easier change from one type of task to another (bottling, labeling, packaging).
As explained above, the company plans to increase production in the long term, this requires an increase in capacity, so the following aspects must be taken into account:
- Maintaining balance in the system: it requires a perfect balance between the supplies of the different stages of the process. In the event that there is an imbalance, different measures can be taken such as overtime, subcontracting, etc. Frequency of capacity increases: there will be direct costs as a result of replacing old equipment and, in turn, training employees to handle the equipment. All these expenses should be registered as general expenses in the expansion process. External sources of training: subcontracting can be a very expensive strategy and will therefore be used by senior management as a mechanism to increase production.
Any increase in production implies a change in capacity requirements, so it is necessary for the company to have projections that allow it to predict the sales of each product. In addition, the availability of equipment and labor must be projected, in order to estimate what will be available.
Another technique to use is the well-known decision trees that allow evaluating the capacity alternatives:
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Through the decision tree, it is recommended that the company expand with weak growth, since the difference between revenue and expansion costs generate a greater benefit for the company.
Selection of the Location for the COCOLABEL factory
It is important to emphasize that the production of COCOLABEL will start at the household level, this means, in a small facility where the coconut and whiskey will be mixed, through specialized personnel. Once there is a certain amount of time in the COCOLABEL market, it is planned to expand the production margins, so it will be necessary to acquire larger plants and land that will meet the established objectives.
Among the options to consider are land located in inland areas such as: Valencia, Maracay, La Victoria and Guarenas. There are also options at the capital level, such as: La Urbina, Los Teques, downtown and Macaracuay. The place to be selected must also be within the cost limits established in the budget, this means that those alternatives that are outside the margins in terms of costs will not be taken into account.
It is planned to locate a land that will be used as a factory and in turn as a warehouse. The intention is to minimize the costs related to: regional costs, distribution costs of outputs and inputs of the product. Those referring to regionals refer to: land, construction, taxes, personnel and energy. Those for distribution of outlets refer to sending COCOLABEL to the largest and the smallest, and in turn to other company warehouses. Those costs related to the distribution of tickets refers to the costs related to the raw material (coconut, whiskey) and supplies (bottles, labels, caps, boxes). There are certain methods used to locate the plants depending on the options present:
- Weighted factors technique: it is the most used, due to the ease of its format. Possible factors are given weight based on the mission, vision and objectives of the COCOLABEL production company. Among the factors considered for the location we find:
La Urbina = A
Los Teques = B
The Center = C
Macaracuay = D
| FACTOR | WEIGHT | TO | B | C | D |
| Cost Labor | 0.25 | 70 | fifty | 60 | 80 |
| Transport system | 0.01 | 90 | 40 | 70 | fifty |
| Taxes | 0.2 | 60 | fifty | 60 | 60 |
| Accessibility | 0.15 | 80 | 40 | 65 | 70 |
| Education / Health | 0.09 | 55 | fifty | 65 | 55 |
| Land cost | 0.3 | Four. Five | 95 | 55 | 55 |
| Amplitude | 0.2 | 55 | 85 | 60 | fifty |
| TOTAL | one | 65 | 58.57 | 62.14 | 60 |
As can be seen through the values obtained in the averages, the choice of locality A, Urbina, is more profitable for the company, since it is the one that represents a higher score. This same process can be elaborated based on the localities located in the interior of the country, when looking for the expansion of the COCOLABEL company, a future plan. It must be emphasized that the factors must be elaborated based on the company's short, medium and long-term goals and objectives.
- Break-even point: fixed costs and variable costs are taken into account, as well as the income obtained through sales.
| points | Fixed costs | Variable costs | Total cost |
| TO | 100,000 | 8,000 | 100,000 + 8,000 X |
| B | 45,000 | 5,000 | 45,000 + 5,000 X |
| C | 50,000 | 10,000 | 50,000 + 10,000 X |
| D | 80,000 | 1,800 | 80,000 + 1,800 X |
- Center of gravity method: it is a technique to locate the unique facilities, considering the existing facilities, the distances between them and the new facilities, and the volume of goods that must be transported. Inbound and outbound transportation costs are assumed to be the same, and special costs are not included. In the case of COCOLABEL, to use this method, the coordinates of the different options must be located, so the weighting method was used to choose the optimal location for the location of the plant. Detailed analysis of costs: Prepare a detailed analysis before making a final decision regarding location. The chart explained below reflects the actual costs of relocation or the need for a new plant.
| Operating expenses | Current location | TO | B | C | D |
| Transport | 100,000 | 50,000 | 150,000 | 55,000 | 45,000 |
| Personal | 1,000,000 | 600,000 | 300,000 | 450,000 | 800,000 |
| Additional plant expenses | 50,000 | 45,000 | 42,000 | 48,000 | 52,000 |
| Services | 150,000 | 145,000 | 155,000 | 130,000 | 140,000 |
| State factors | 200,000 | 180,000 | 120,000 | 150,000 | 210,000 |
| Running costs | 80,000 | 75,000 | 50,000 | 60,000 | 80,000 |
| TOTAL | 1,580,000 | 1,095,000 | 817,000 | 893,000 | 1,327,000 |
- Fixed position.
It is characterized by a relatively low number of production units compared to product and process distribution formats. For the production of COCOLABEL, manufacturing requires a rigid sequence, since the process consists of mixing, bottling and packaging the product.
- Distribution by retail service.
The goal is to maximize the company's net profits per square foot of warehouse space; This means taking advantage of every meter of space per distribution to achieve your goal. These operational modifications reflect the measures required to support the company's value strategy: speed and low prices.
- Service environment: refers to the physical surroundings in which COCOLABEL production takes place, and how these surroundings affect customers and employees. There are three elements that must be considered under this concept:
* Environmental conditions: these are the characteristics of the environment (noise level, music, lighting, temperature, odor) that can affect employee behavior and morale, as well as consumer perception. The COCOLABEL warehouse has optimal working characteristics that allow a good performance of the personnel; the facilities are equipped according to the well-being of the employee and the operating conditions of the machinery.
* Spatial distribution and functionality: it consists of the grouping of goods and the planning of the circulation of the product. In the case of COCOLABEL, the spatial distribution is in the hands of the distributors, since they will be in charge of publicizing the product through its showcases.
- Distribution of the offices.
The general trend of office layout has always been toward more open areas, with ample space for staff work separated only by low-rise partition walls. Fixed walls have been replaced to promote greater communication among employees. The signs, symbols and artifacts have been oriented in the search to indicate the importance or professionalism of the people who manage it. COCOLABEL's senior management seeks to transmit the desired image of the company through the design and projection of the administration offices.
- Production Operations Technology
Technology is an extremely important resource for the company, as it directly affects corporate profitability and growth. If handled correctly, it can be used as a competitive advantage over the competition. For the production of COCOLABEL there are specialized machineries that allow to speed up the process and at the same time save labor costs.
- Manufacturing technology:
New technological devices controlled by a computer are used in the COCOLABEL production process.
- A Hardware system: it is a mechanical numerical control tool that allows you to carry out the process of mixing coconut water with whiskey in the bottle itself. In the long term it is planned to make the investment in mechanized centers, since they would represent a higher level of automation and complexity compared to the machines described above. In turn, it is planned to invest in automated material handling systems that improve COCOLABEL's transport, storage and recovery efficiency.
- Software System: in today's market, there is an infinity of software used for this type of work, one of the best known is CAD, since it produces graphs that allow you to examine the visual characteristics of a product. There are more options such as CAE and CAPP.
- Computer integrated manufacturing
It is the automated version of the manufacturing process, where the three main functions of the process (product and process design, planning and control, the manufacturing process itself) are replaced by the previously described automated technologies. All CIM technologies are linked through a network and an integrated database making it a fully integrated system, where the areas of design, testing, manufacturing, assembly, inspection and material handling are integrated with each other and in turn with the planning and manufacturing function.
The investment by the COCOLABEL company in modern technologies represents large capital investments. Therefore, it cannot be ignored that there will be positive or negative consequences that will affect the production process. Many of the benefits are intangible and their justification may be difficult. Furthermore, rapid technological changes result in equipment becoming obsolete year after year, which further complicates the cost / benefit assessment.
The application of new technologies can generate a reduction in costs, labor, materials, inventory, quality, and transportation or distribution. These tangible benefits are reflected in traditional financial analyzes, specifically in discounted cash flows. But it is not only the costs that are affected, the new technologies allow to improve the characteristics and the quality of the product, the production cycles are shorter, which saves time, increases the volume of sales or charges an additional price.
New technologies can also generate different types of risks. These should be evaluated and compared to the benefits before making any type of decision regarding the technology.
- Technological Risks: You run the risk of acquiring an unproven technology whose problems could disrupt company operations.Operational Risks: Installing new technology produces disruptive changes in the short term, as it requires a reorganization of the plant and training. Organizational risks: the new technology implies a change in the organizational culture and the commitment of senior management to absorb the disruptions and uncertainties generated by the new adoption. There is a risk that employees or managers are unable to adapt to change.Environmental or market risks:In many cases, the option of a new technology fails due to the fact that environmental or market factors make the technology unusable (exchange and interest rates exist within the market change factors).
- Conclusions
The competitive environment in which many companies operate is constantly changing. Companies compete on all fronts, but in markets that are fragmenting, not unifying. Well-informed and value-conscious customers buy goods and services that meet their individual needs regardless of which country produces it.
Seeking an adaptation to the global market, the COCOLABEL company created a product seeking to meet current trends: reduction of operating costs through simplification of processes, use of computer-integrated operations that allow rapid incorporation, construction of small plants close to customers, design of processes capable of producing successive generations and the creation of close links between the various functional areas of the company.
These characteristics or trends drive the growth of the company and generate a good location in the market. But, competition cannot be ignored, which will pose a threat if it is not handled properly.
- Bibliography
- * CHASE, Richard; AQUILANO, Nicolás; JACOBS, Robert Production and Operations Management Mc Graw Hill, Eighth Edition, Colombia.
Summary of Work
This work will explain the methods and instruments used by the senior management of the COCOLABEL production company, in order to guarantee a reliable and profitable product for the company. In addition, the way in which the production process is carried out will be detailed, with a series of operational resources that facilitate the process and are fully involved. It is not a Marketing plan, it is a job that exposes the variables that are tested when creating a project.
This work was carried out by students of the 8th semester of Administrative Sciences in the Chair of Production Organization. Metropolitan University, Caracas, Venezuela
TITLE: PRODUCTION ORGANIZATION WORK
AUTHOR: Daniel Neira Santander - [email protected]
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