Production process of IGLOO

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PROCESS MANAGEMENT

OF IGLOO ICE-CREAM

1.0. Introduction

Production and Operations management (POM) is defined as the design, operation and

improvement of the systems that create and deliver the firms primary products and services. A

business education is incomplete without an understanding of modern approaches to managing

operations. Operations management provides a systematic way of looking at organizational

processes. The concepts and tools of POM are widely used in managing other functions of a

business. The employees must know how operations work effectively to perform their jobs.

The best way one can have a comprehensive understanding of the various aspects of Production

and Operations Management (POM) is to study a business process involving the production of

goods and nothing can serve the purpose better than analyzing the production such as Ice

cream. With that end in view, the group studied the POM of one of the leading Ice cream

company of Bangladesh, IGLOO of ABDUL MONEM LTD.IGLOO is one of the leading Icecream brand in Bangladesh. The company has earned a high reputation for its quality of

products among buyers. For that reasons we have chosen the topic consumer product which

has involved huge number of production and operation activities to fulfill our objectives.

1.1. Origin of the report

As a requirement of the Production and Operations Management course of MBA program,

this group have been assigned by Lt. Col. Md. Showkat Ali, instructor of Production and

Operations management for doing the term paper about the process management of IGLOO

ABDUL MONEM LTD. Our term paper is about the production and operation process, of

IGLOO manufacturing plant as well as facility location.

1.2. Problem and Purpose

We were directed to study out the managerial aspect of an organization in light of our

theoretical knowledge and find out what practically happens in real life.This report has two objectives.

The primary objective is:

To partially fulfill the requirement of MBA course curriculum.

The secondary objective is:

To discuss the process management practices of IGLOO.

1.3. Scope

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For achieving the objectives, the study focuses on the existing production process and its

evaluation. Deviations from theoretical perspective have also been shown followed by

recommendations.

1.4. Limitation

We did not have access to some of the official company documents concerning details of

quality failures and non-conformance issues.Because of the huge usual commitments, IGLOO

officials were very busy. Moreover, due to coming fiscal year every manager is busy in his

respective area. As a result Masud Hasan (Sr. Officer, Accounts & Finance), who was helping

us with the assignment, could not be able to contact with respective managers due to their tight

schedule and at times reluctance. He himself has provided us with sufficient information as per

our requirements.

1.5. Sources and Methodology

We have given all out effort to collect relevant data for our report. However, our main sources

are:

Masud Hasan (Sr. Officer, Accounts and Finance).

Visiting the AML Website at www.amlbd.com.

Studying the booklets and publications published by the company.

1.6. Report Preview

The report chronologically represents its parts; organization part, which constitutes the history

of IGLOO, and then operation function followed by production process as well as the

abbreviations used in the report and methodology used for our work. Finally conclusion and

recommendations are drawn.

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http://www.amlbd.com/http://www.amlbd.com/


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2.5. Main features of the organization

Conglomerate or H - form (Holding) Design: As IGLOO is one of the units of AML Group

which deals with a set of unrelated business.

Departmentalization:Functional, Production and Location.

Reporting Relationship:

MD / Directors (Top Level)

Managers (Mid Level)

Officers (First Line)

Span of Control:Narrow

Authority: Mainly Line Position and few Staff Position (viz. Foreign Consultants and Zonal

Distributors) and Centralization.

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Coordination: Sequential interdependence - Factory (Planning Production Quality

Distribution) - Reciprocal interdependence Head office (Among the departments)

Structural Coordination Technique: Managerial, Rules and procedures, Liaison roles,

Integrating departments and electronic coordination.

3.0 PROCESS AND DESIGN ANALYSIS

3.1. Process Analysis

An operation is composed of processes designed to add value by transforming inputs into

useful outputs. Inputs may be materials, labor, energy, and capital equipment. Outputs may be a

physical product (possibly used as an input to another process) or a service. Processes can have

a significant impact on the performance of a business, and process improvement can improve a

firm's competitiveness.

The first step to improving a process is to analyze it in order to understand the activities, their

relationships, and the values of relevant metrics. Process analysis generally involves the

following tasks:

Define the process boundaries that mark the entry points of the process inputs and

the exit points of the process outputs.

Construct a process flow diagram that illustrates the various process activities and

their interrelationships.

Determine the capacity of each step in the process. Calculate other measures of

interest.

Identify the bottleneck, that is, the step having the lowest capacity.

Evaluate further limitations in order to quantify the impact of the bottleneck.

Use the analysis to make operating decisions and to improve the process.

3.2. Present Process Used In AML For Ice Cream Production

The operation strategy of AMLs ice cream and milk units involves decision that relate to the

design of a process and infrastructure needed to support the process. Process design includes

the selection of appropriate technology, sizing the process over time, the role of inventory in

the process and locating the process to fulfill the objective of the company. AML acquired such

a production process that is fast, reliable and of good quality. Therefore, AML has set up a

process involving the best machineries of western origin. The following table shows the

existing production lines:

Table: 02 Existing Production Lines

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SL No Production Line Products

I Bar Freezer SL 1000 Ice cream with stick

II Container Freezer KF 500 Ice cream in cup

III Mold Freezer FM 4000 Ice cream in container

IV Mold Freezer FM 7000 Ice cream in container

V AMO Milk Milk

VI Ghee Ghee

VII Cone Biscuit RM for Ice cream

VIII Plastic Container for ice cream

Source : Company Profile

However, the raw materials are procured from the best European sources like:

Skimmed Milk Powder from Australia

Sugar from Brazil & Thailand

Stabilizer & Emulsifier from Denmark

Ripples and Sauces from Denmark

Colors & Flavors from Sweden & Denmark

Wooden Sticks from China

Packaging Material from Italy, Dubai and China

3.2.1. Ice Cream Flow Diagram

From our study in AML, we find that AML follows Make to Stock strategy for their Ice

Cream IGLOO. For this reason company first estimate the demand of ice-cream in the market

and their potentials from the total market. When marketing department place the potential

demand for the ice cream than the production department takes the initiatives to produce the ice

cream and then sent to store.

In the AMLs production process, the ice cream mix is prepared well in advance of the actual

ice cream making/freezing. For consistency in production, and to comply with legalrequirements, careful formulation is necessary. Commercial stabilizers are used it is advisable

to dry-blend the powders with a quantity of the sugar to reduce the tendency of the

hydrocolloids to form lumps. Stabilizers work best if they are permitted to hydrate in water for

a short time before addition to the mix. Sugar syrups work well for a controlled hydration of

the stabilizers. Flavors are added at different points in the production line; liquid flavors

(vanilla) may be added before homogenization, dry flavors (chocolate bits) and ripple color

intended to produce special effects are added at the point before filling and packaging.

Sometimes more than one freezer (extruder) is used in combination from different mixes to

give the special visual effect of rippled colors and flavors. For various products of AML icecream it follows the batch production system, because it has a fixed machine setup but its

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products line made of various quality of ice cream. So, as per the requirement of different

quality it implements the batch production.

Figure: Ice Cream Flow Diagram

3.2.2. Analysis of the process /Description of

Operations

The concept of manufacturing ice cream is not new. AML has brought the technology as well

as the product development concept from abroad and has just set up its process. It follows the

conversion process i.e. it makes all the ingredients listed on the label of the ice cream together

and produces ice cream. Hence, it can be concluded that the process flow structure has a batch

pattern since it has relatively stable line of products, each of which is produced in periodic

batches and follows almost the same flow pattern throughout the plant. The salient features of

the operation process of AML Ice Cream and Milk unit are described below:

In AML for their IGLOO production they use batch production system

IGLOO uses fully automated machines for their production.

Product designing is accomplished in the R & D and QC Department.

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Produce sample items by Production Department and carry out market test by

marketing department.

Marketing Department conducts market survey, prepare forecast and send it to

Production Department.

Production Department calculates Raw Materials (RM) of all types required and

place demand as required to the import division at least 03 months before.

Import division places demand of RM to international suppliers, opens LC and

makes necessary arrangement to procure the RM.

RM is received and sent to warehouse from where Production Department collects

RM as required and uses in production.

On receiving any RM, first a sample is sent to QC Department who conducts

necessary tests. In case the RM is not up to the allowable limit of the standard, the whole lot isrejected and the matter informed to head office.

On receiving the appropriate RM the Production Department starts the production

process.

3.2.3. Evaluation of Operation Function

Management

AMLs production is divided into a few distinct product lines

based on the best available technology and machineries.

Besides, the capacity of the production division is much

higher than the actual production. As such, there is no

pressure on the division to meet the demands of the

marketing or human resource division. However, the cost-

efficiency of the process may be a subject to further scrutiny.

The company is not very cautious about saving the costs and

do not adopt any cost control measures. So there is noconflict with the finance division either. Our study reveals

the only problem that the production and operations division

face is that sometimes they receive calls from finance asking

why the overtime charges are high and being satisfied with

the answer like The production was up this month. To our

knowledge, this is only one of these kinds in the

organizations, which are competing in the field of business.

For specific evaluation, we can discuss the process basing on

the following terms:

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Process capacity - The capacity of the process is its maximum output rate,

measured in units produced per unit of time. In IGLOO ice cream, we found the

output rate is different for different products.

Capacity utilization - the percentage of the process capacity that actually is being

used. In IGLOO the capacity utilization rate is about 75%. The rest capacity is idle

because of low demand in comparison to the capacity of the process.

Throughput rate (also known as flow rate) - the average rate at which units flow

past a specific point in the process. The maximum throughput rate is the process

capacity. From our study we found various throughput rates for various products.

Flow time (also known as throughput time or lead time) - the average time that a

unit requires to flow through the process from the entry point to the exit point. We

found in IGLOO that a batch 1000 liter of ice cream with cup has a flow time of 1.5

hours.

Cycle time - the time between successive units as they are output from the process.

Cycle time for the process is equal to the inverse of the throughput rate. Cycle time

can be thought of as the time required for a task to repeat itself. Each series task in a

process must have a cycle time less than or equal to the cycle time for the process.

Put another way, the cycle time of the process is equal to the longest task cycle

time. The process is said to be in balance if the cycle times are equal for each

activity in the process. Such balance rarely is achieved.

Idle time - time when no activity is being performed, for example, when an activity

is waiting for work to arrive from the previous activity. In IGLOO we find the idle

time is considerably high and it is about 10% of its work time.

Work In process - the amount of inventory in the process.

Set-up time - the time required to prepare the equipment to perform an activity on a

batch of units. Set-up time usually does not depend strongly on the batch size and

therefore can be reduced on a per unit basis by increasing the batch size. From our

study in IGLOO we found that the set up time is considerably high and it is about

12% of their working hours.

Direct labor content - the amount of labor (in units of time) actually contained in

the product. Excludes idle time when workers are not working directly on the

product. Also excludes time spent maintaining machines, transporting materials,

etc. In IGLOO we found that the labor content is about 50 person work by rotation

in two shifts of 8 hours each.

Direct labor utilization - the fraction of labor capacity that actually is utilized as

direct labor. In IGLOO we found that the direct labor utilization rate is not

satisfactory.

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4.0. FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

4.1. Findings Summary

From our study in IGLOO, we have found that they dont use their capacity fully for that

reason their average cost of production is high. Improvements in cost, quality, flexibility, and

speed are commonly sought.The findings summaries of the company are given below:

The company does not take advance orders from the buyers. It only sells what it can sellon a particular day.

The company has tapped a very high level market. It supplies special cakes, ice creams

and other items in parties of President, Prime Minister and dignitaries. But management

would not tell how big is the market and how much profit they make out of it or how

much value this marketing has on companys overall objective. It also does not know

how much promotion effect this has for companys products. Management just

undertakes this kind of things to please the dignitaries.

The company is running with excess capacity and not utilizing it.

The management is very happy of their quality but does not consider the cost.

4.2. Recommendations

After carrying out the audit, we recommend the followings:

Reduce work-in-process inventory - reduces lead time.

Improve the efficiency of the activity.

Minimize non-value adding activities - decreases cost, reduces lead time. Non-value

adding activities include transport, rework, waiting, testing and inspecting, and

support activities.

Redesign the product for better manufacturability - can improve several or all

process performance measures.

Flexibility can be improved by outsourcing certain activities. Flexibility also can be

enhanced by postponement, which shifts customizing activities to the end of the

process.

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In some cases, dramatic improvements can be made at minimal cost. On the other hand, in

well-optimized processes, significant investment may be required to achieve a marginal

operational improvement. Because of the large investment, the operational gain may not

generate a sufficient rate of return. A cost-benefit analysis should be performed to determine if

a process change is worth the investment. Ultimately, net present value will determine whethera process "improvement" really is an improvement.

4.3. Conclusions

The study of Process management of an organization is indeed very critical. It entails the most

crucial aspects of an organization. Probably no other division of an industry faces so many

crucial decisions or is burdened with so much varied demand on it. Our study was aimed to

unearth the complexities that the Process Management Division of AML encounters. In course

of our audit, we found that many of the things which are pre-dominant in the text books differ a

lot from actual field. The study gave a unique opportunity of applying class room teaching on

ground. Indeed the actual operations are far more complex, demanding and cumbersome to

manage.

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Production process of IGLOO