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operation management

CASE STUDY FOR OPERATION MANAGEMEN

1. Analyze your business by SWOT analysis.

2. Define a 3-years strategic plan for your business.

3. Schedule the first week of this Summer based on your MPS. Explain your method and

strategy.

Introduction

With the mass production of consumer goods on a large scale across the world, the traditional methods of product transportation are not enough to overcome the daily needs of the goods delivery. This scale of production needs better affordable packaging methods. With increasing costs of transport and the strict regulation about the quality and health of the product, the role of sound and reliable packaging is revealed. Several packaging methods for beverages and food have been developed from the beginning, from steel containers to glass on time used and now the plastics containers. Among them, PET packages for a technical and aff Mission

Mission statements of Pet VAN are stated below:

● Going towards organizational development and strategic excellence by providing continuous improvement while serving in the local market.

● To provide our customers with cost-effective, technologically superior, and top-quality products.

● To be a rewarding and inspiring employer that supports employees’ continuous development by providing a challenging environment to create positive synergy

● Increasing profitability by aggressively tracking business opportunities both in our country and abroad and be impassioned, and accountable to our customer’s expectations.

● Gaining the best feasible outcome in the least wasteful manner by maintaining dynamic and relevant policies while consistently supporting a quality workforce.

Core Values

Integrity: Our company adopts integrity as a principle to act honestly not only to our customers but also to all our stakeholders.

Efficiency: Our company work for having the best possible output with the minimum waste manner by ensuring dynamic policies promoting a quality workforce

Effectiveness: Our company focuses on performing productive and sufficient manner by having results with consistently estimated and measurable outputs

Respect for individuals: For us, respecting individuals is not simple as only being polite or smiling at the people. It is treating everybody as equal.

ordable view are one of the best.

Business field:

Polyethylene terephthalate is the most famous and highly linear heat polyester, which has entered the polymer market three decades ago and quickly found many applications in the industry and home appliances. One of these applications is to make bottled beverages, food packaging, and many other packaging products. But in this regard, the vast growth of this material in the bottled industry is dramatic. The password of the PET mover in the bottle of soda, transparency, the power of formation, lack of effect on its taste, and its non-toxic nature. In addition, PET bottles are light, inexpensive, and recyclable.

PET is considerably saved from glass bottles in weight per bottle. Since the transportation of PET bottles is laborious, these products are displaced in preforms or perpetrators. The preform is a product that becomes the PET bottle at a bottle of PET. In this area, glass is still the main competitor of PET. Because bottles and glass containers have higher maintenance than PET bottles and keep the material for a long time, the flaw of large glass containers and fragility can compete with PET with glassware.

Also, bottles made from PVC can replace consumed PET bottles in edible oils, oil storage bottles, and cosmetics. Still, since the transparency and recycling of PET bottles are higher, it is now more attractive. They have been taken. But the lower PVC price compared to PET continues to apply relatively widespread PVC bottles in this field.

But the most basic advantage of PET bottles is their non-toxic PVC. PVC bottles have not been used in the food industry due to the release of toxic and carcinogenic substances, even dangerous in their federal health department (FDA).(“An Introduction to PET | PETRA”,2021)

Products and specification

CanPet is a company located in Vancouver city near Coquitlam district with a square feet production facility. The main office is located in the factory also; this firm has 20 employees which3 of them are managers. There are eight nonproduction staff and twelve production staff working in the firm. The main product of this company is 1.5-liter bottles in 24 grams class and food containers in 40 grams class made from PET high-quality material. At the first stage of running the company, because of avoiding the uncertainties around the new product, the manager decided to produce the two most desired products in the market to guarantee the sale’s success by arranging the minimum price and gain a reasonable share of the market. For more confidence, the company currently uses fifty percent of the machine’s capacity to increase future demand. So for few years, there is no need to buy additional machinery. With the current machines ordering and replacing the mold, the different products can be produced up to the injection capacity of machines.

Target customers

Generally speaking, each industry that needs to package small and medium-size food-related or liquid-making products can use PET-based packaging. An extensive range of liquids and powders, and solid material can be poured into PET containers. From the industry category point of view, most small bottles customers are juice making and beverage and carbonated drinking companies. Larger containers like 1.5 liters and 1-liter bottles are preferred by dairy and detergent and washing liquid companies. Recently, the vast demand for sanitizer-making companies arise.

Some other companies, like the ones, are producing health and beauty products, or medical substances and pharmaceutical product, are also a customer for the jar and low capacity bottles but with a different type of caps. For example, they may need a specific type of sprayer or funnel for the order.

From another point of view, a well-known categorizing method in the market called segmentation and targeting and positioning method there are different styles for segmentation. A segment must effectively reflect the general purchase behavior of customers. Since these packagings are related to high consuming goods and products that younger people than the older one mostly accept, we assume that our target segment is people between age 6 to 55, which includes the These groups are millennials and generation x and baby boomers. (Deshmukh, R., & Thomas, A.,2019). among them, millennials and baby boomers use more consumable products than others, so the end-users of these products are these groups. (Thomas, 2021). The expenditure pattern of ages differs because of their different preferences and beliefs. (Norris, D.,2020).

Business global and local trends

Global pet packaging market worth about 44.1 in 2020. The production output of PET for the year 2017 was 30.3 million tons, and the leading producer of this material is china, with around thirty percent of the market. Other Asian countries produce approximately twenty percent of global output. According to the chart below, North American has roughly seventeen percent of market size.

Figure 1:Global production capacity of PET material , (“Plasticsinsight”,2021)

The USA is the leading producer in this area, and its main plant in Texas produces around 1.1 million tons of pet material. Also, the market size for PET bottles is about 13.1 million tons in 2020, and without considering other factors, we can conclude that about 45 percent of a total pet goes for bottle production. In producers of china, which also are the more significant producer of the world, are as below:

Figure 2:Production capacity on the main producers of PET, (“Plasticsinsight”,2021)

In Canada total of eighty-six, companies are active in the production of plastic bottles material with average revenue of 1.5 million $ and 80 percent of the profuatble.ic.gc.ca market size is 671 million dollars.

After years of production, some new concepts were discussed and created a new line of products that cause more sustainable sources of raw materials like RPETS. There is also a trend of a new type of pet product called RPET, which means the new PET bottles are made from a considerable portion of recycled PET. Pet plastics are one of the most successful raw materials obtained from recycling.

Other products in this range are products that have a plant base in the chemical process and are more expensive than the original product that comes from oil processing. one another product that is more resistant and is more precise and the brittle behavior reduced, and there is the new application for PETG material that revolutionized part making industry that is called 3D printing manufacturing.

Despite the general pollution that plastics impose on the environment and long-life cycle, PET bottles are more recyclable than other plastics. They have a high rate of recycling that other garbage’s produce less 30 percent carbon footprint than glass bottles.

Another trend is using reusable PET products to lower resource and energy consumption .for example, ALPA produced a new PET bottle for Vöslauer, Austria’s that is stable enough to be reused twelve times could last its quality for four years. (Nielsen, 2021)

However, some provinces have put excess taxes on using onetime use products and have policies to limit one use and promote several useable products and maximize the recycling rate by putting deposited costs for each bottle. For example, Vancouver city has doubled the deposit of each bottle from ten cents.

Manufacturing process:

First, the pet material that exists in the form of granules inside the injection device to the preforms to produce preforms with different sizes and weights, which are hot and then softened and flows afterward. Come into the preform format. After this process, the preform is generated after cooling and tightening from the inside of the mold and driven to the windbreaker. In the wind, the preform produced gets softened. Softened preforms poured into the windbreaker. The desired size of this amount depends on the size, the preform weight, and the type of mold. Thus, pet bottles are produced.

Injection device

A major method for shaping plastics is injection molding. Initially, the PET grade of the bottle, which is powder or granules, is led to the extruder chamber through the feed hopper, where it is heated, softened, and melted. Then, bypassing the nozzle, a relatively cold pressure is pushed into the mold called the preform mold, the two halves that are entirely paired.

Blow molding

 Thrust blow molding is the making of a thin tube of polymer melt by an extruder that hangs vertically and freely, called the intestine. When it reaches a specific size, it closes the end and separates it from the die. Then a needle is inserted, and with its blow, it inflates the compressed air flow and sticks it to the mold’s inner surface.

The mold remains closed until the polymer cools and solidifies. Then it opens, and the product comes out. In the last step, additional parts may need to be arranged. This is done either automatically and simultaneously with the exit of the piece from the mold. (“Process Training – PET Terra Systems,” 2021)

Process flowchart for production line

Low pressure air

High pressure air compressor

Bottles packaging

Ciller

Cooling tower

preforms

Bottle blowing machine

PET preform injection molding machine

Dehumidifier and drier

Figure 3:Pet bottle production flow chart

There are some benefits for making preforms since they are somehow processed and must pass on more production processes. Sometimes, the market is saturated, or demand increases due to seasonal changes, but the firm can maintain preforms and store them for next season. Another benefit of this approach is that the firm can level the inventory and demand by having a reserve preform to arrange the customer needs at peak orders.

Figure 4:Pet prefrom process. (Process Training – PET Terra Systems. Petsystems.com. (2021). Retrieved 6 September 2021, from https://www.petsystems.com/project/process-training/., 2021)

Figure 5: Description of PET injection process.(“PET production flowchart”,2021)

Capacity of operation and the break-even point

The Capacity of each production line is a function of demand in that industry and the investors’ plans for their expansion. This issue depends on the stage of the product lifecycle to select the right strategy. Since pet bottle product is in the market’s growing phase, investing more on developing a product can be confirmed. For calculating the break-even point, we have some assumptions. We have a factory space of around 6500 square feet located in Vancouver, and the production workshop has been rented for an annual fee of 17 $ per square foot. This production line consists of two injection machines for the first phase that works with 50 percent of their Capacity for the starting year and can be increased next year. Two types of PET container produced that are 1.5-liter bottle account for sixty percent of machines capacity and total 3,880,000 pieces annually. PET food containers account for forty percent of production capacity with 1,296,000 pieces annually. The production capacity for each product depends on the size, and the mass of the PET raw material must be injected. Mold capacity determines the speed and volume of production in each stroke. Other assumptions about the equipment and the types of machinery areas are below tables:

Table 1:Prodcution capacity and product specification and raw material consumption

It is assumed that one machine for injection molding and one machine for blow molding used at the first phase with 50 percent of capacity.

Table 2:production machines and costs

Summary of fixed investment is below for information about the details refer to appendix 1:

Table 3: Summary of project fixed costs

Assumptions based on obtaining one 5-ton forklift for transportation and load the packages. The detailed assumptions for production staff and non-production staff salaries are in appendix 1. according to the available data for power consumption of the production line, one of the main critical current costs is the amount of consumption and the volume of water and also natural gas as three primary energy sources for one year summarized below:

Table 4: summary of power and fuel consumption

The prices for energy and a comparison of material consumption for two type of bottles from PET and the glass are here. The efficiency of energy for the PET is higher than glass bottles.

Figure 6:PET vs glass bottle production material – energy consumption (“20 Gram – WTF Lab”, 2021)

For more details about the amortization and maintenance ratio assumption refer to table in appendix one. Summary of current costs of this line is:

Table 5: Current costs of the project

Also, we have assumed relative coefficients for determining the share of fixed costs and variable costs of production as table below:

Table 6: summary of production related fixed costs and variable costs

According to the market prices, average price for each product mentioned in table 7.Annual production and portion of each product is based on table one with fifty percent of production capacity for the first year.

Table 7: annual sale of the company

Based on the above tables data ,the break-even point can be calculated as table 8 and other calculation done to show the net profit of the project. Quantity of revenue calculated based on the weighted average price for all type of products.

Table 8: Breakeven point sale and quantity

For calculating the quantity at break even point, a weighted average price considered.

Table 9: weighted average price of products

Balancing production lines-based capacity

Time study of the job produced the following: average cycle time = 5.12 second, performance rating = 1.15. Allowances are 18 percent of the workday (15552 second). the standard time for this job.

OT = 5.12 Second PR = 1.15 A = 18% AF day = 1/(1-0.18) = 1.2195

NT = OT*PR = 5.12*1.15 = 5.88 second ST = NT*AF = 5.88*1.2195 = 7.18 second

Number of machines and their type

Three machines are assumed to have different productivity rates with varying prices per table according to required capacity for the first year. The demand is determined, then the total processing type and the number of machines for processing are calculated. In selecting the correct type of machines, other factors must be considered as the quality of maintenance services, the reputation of the company, and past experiences. The company must look at the successful machines of the market to avoid excess costs and production interruption. Furthermore, sometimes managers prefer to have a parallel line to avoid losing the production capacity in emergency maintenance.

Product

Demand

Processing time per unit (minute)

Total demand process time

A

B

C

A

B

C

1

12000

11

10

10

132000

120000

120000

2

1700

14

12

10

23800

20400

17000

Total process time needed for each machine per year

155800

140400

137000

Total operating time per year

300Dayx24Hr/day

x60min/Hr=432000

Demand/Capacity

0.36

0.33

0.32

Actual Machine

1

1

1

Cost of each machine

650000

750000

900000

The machine A has the least cost

Total cost of machines

650000

750000

900000

These results are for the first year, and based on changing the demand of future needs of production and the cycle time that may be better in some of the machines, the selected option may be changed during the time. Another critical point in this stage is considering the forecasted demand as the current machine still has about fifty percent unused capacity that could be used.

Production line balancing the workstation time and the idle time

Process


Process Time

(second)

Predecessor

A. Drying the PET

1

B. Plasticizing the PET

1

A

C.Injection molding the Preform

2

B

D. optimizing the preform heat

1

B

E. Stretch blow molding the container

2

C, D

F. Container ejection

3

E

G. Packaging the Bottles

2

F

SUM

11

Precedence Diagram


C

G


E

F

B

A


D

Cycle Time (CT)

Number of products = 16848 unit per day

Production time per day = 24 hours per day = 86,400 seconds

Workstation (CT) = Production time per day / Number of product= 86,400 / 16848 = 5.12 seconds per cycle

Number of Workstation (NT)

NT = SUM of process time (T) / Cycle Time (CT)

NT = 11/ 5.12 = 2.14 = 3 workstation

Line Balancing (longest process time first)

Station

Time remaining

Eligible

Will fit

Assign(task time)

Revised time remaining

Idle

1

5.12

A

A

1

A(1)

 

 

4.12

B

B

1

B(1)

 

 

3.12

C, D

C,D

2

C(2)

 

 

1.12

D

D

1

D(1)

 

 

0.12

E

No

 

 

0.12

2

5.12

E

E

2

E(1)

 

 

3.12

F

F

3

F(3)

 

 

1.12

G

No

 

 

1.12

3

5.12

G

G

2

G(2)

 

 

3.12

 

 

 

 

3.12

 

 

 

 

 

Total Idle

4.36

Determine the Efficiency

Lead Time (LT) = CT * NT = 5.12 * 3 = 15.36 seconds

Efficiency = Process time / Lead time = 11/15.36 = 71.2%

or

Product idle time = [4.36 seconds / (3 * 5.12 seconds)] * 100 = 28.7%

Efficiency = 100% – 28.7% = 71.2%

References:

20 Gram – WTF Lab. Wtflab.ca. (2021). Retrieved 30 August 2021, from https://wtflab.ca/en/84-20-gram.

base, K., calculators, I., & calculator, I. (2021). Molding Machine Energy Consumption Calculator | PlastikCity. Plastikcity.co.uk. Retrieved 30 August 2021, from https://www.plastikcity.co.uk/useful-stuff/energy-consumption-calculator.

Dakumar production. (2021). Flow Chart Of PET Bottle Production Line|Flow Chart Of Preform Molding Line&Bottle Blowing Molding Line-Dakumar. Dakumar.com. Retrieved 31 August 2021, from https://www.dakumar.com/pet/Flow-Chart-Of-PET-Bottle-Production-Line.html.

Demetrakakes, P. (2021). This material, or that? packagingdigest.com. Retrieved 30 August 2021, from https://www.packagingdigest.com/beverage-packaging/material-or.

Elsass, M. (2021). Evaluating Energy Consumption of Molding Machines: What Have We Learned in 40 Years? » Plastics Business. Plastics Business. Retrieved 30 August 2021, from https://plasticsbusinessmag.com/articles/2010/evaluating-energy-consumption-of-molding-machines-what-have-we-learned-in-40-years/.

Fact Sheet – An Introduction to PET (polyethylene terephthalate) | PETRA: Information on the Use, Benefits & Safety of PET Plastic. Petresin.org. (2021). Retrieved 31 August 2021, from http://www.petresin.org/news_introtoPET.asp.

(2021). [Plasticsinsight]. Retrieved 31 August 2021, from https://www.plasticsinsight.com/resin-intelligence/resin-prices/polyethylene-terephthalate/.

(“Polyethylene Terephthalate Production, Price and Market”, 2021)

Nielsen, E. (2021). Protecting the climate with reusable PET packaging | ALPLA Blog. Blog.alpla.com. Retrieved 31 August 2021, from https://blog.alpla.com/en/blog/products-innovation/protecting-climate-reusable-pet-packaging/06-21.

(2021). [Image]. Retrieved 31 August 2021, from https://www.dakumar.com/pet/Flow-Chart-Of-PET-Bottle-Production-Line.html.

Polyethylene Terephthalate Production, Price and Market. Plastics Insight. (2021). Retrieved 31 August 2021, from https://www.plasticsinsight.com/resin-intelligence/resin-prices/polyethylene-terephthalate/.

Process Training – PET Terra Systems. Petsystems.com. (2021). Retrieved 6 September 2021, from https://www.petsystems.com/project/process-training/.

Process Training – PET Terra Systems. Petsystems.com. (2021). Retrieved 6 September 2021, from https://www.petsystems.com/project/process-training/. (2021). [Image]. Retrieved 6 September 2021, from.

Production

Per Stroke

Production

Stroke

per

minute

Processing

time

Installed

cap/day

Share in

Production

Product Mix

Cap/Day

Annual

Production

Weight

each(gr)

Raw PET(gr)

1.5 Liters PET

bottle

1031121,60060%129603,888,0002493,312,000

Food container531410,80040%43201,296,0004051,840,000

Total 17,2805,184,000Ton145.152

Production Capacity of Injection Molding Machine

Item noEquipment descriptionQuantityUnit price($)Total value($)

1

Injection Molding Machine

1400,000400,000

2

Blow Molding Machine

1150,000150,000

3

Compressor,cooling tower

and chiller

1100,000100,000

Sum $650,000

Production machinery & utilities

Item noDescriptionTotal value($)

1Project site412,500

2Site and buildings460,000

3equipments and utilities290,000

4transport vehicles40,000

5Production machinery650,000

6Official and work shop

furniture

32,000

7Other costs0

8Pre production costs5,000

Total

value($)

1,889,500

Fixed costs table:

DescriptionUnitAnnual

consumption(

Ton)

Unit price($)Total value($)

PowerKW/Hr6,615,0000.21,184,085

WaterM35001500

Natural GasM38,00018,000

0

Total

value($)

1,192,585

Power & Fuel costs

Item noDescriptionTotal value($)

1Raw material4,143,700

2Salaries& wages938,401

3Power& Fuel1,192,585

4Maintenance39,300

5Amortization/Depreciation125,700

6Marketing costs1,000

7unpredictable costs500

Total

value($)

6,441,186

Current costs Table:

PercentageValuePercentageValue

1Raw Material4,143,700001004,143,700

2Production staffs salary1701300

3Power & Fuel1,192,58520238,51780954,068

4Maintenance39,300207,8608031,440

5plant Insurrance3,7791003,77900

6unpredictable costs0350650

7Amortization/Depreciation125,700100125,70000

Total

value($)

375,8575,129,209

Fixed costsVariable costsItem noDescriptionCosts

Fixed & Variable costs of Production

Annual

capacity

Item noDescriptionPieces

1PET 1500mlx24gr3,888,0001.55,832,000

2PET food containerx40gr1,296,0001.51,944,000

Total

value($)

7,776,000

Selling priceTotal selling

Selling revenue

production capacity

Break-Even Point AnalysisPercent

0.1414

Break-Even Point selling

1,104,228($)

679,525Pieces(1.625$)

Gross Profit

2,270,935($)

Size Pieces

Price

(Rs)

Value $

Average

unit price

1.5 Liters PET

bottle

3,888,00025832000

Food container1,296,00022592000

5,184,00084240001.625

Product Average Sale Price