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 Ice cream 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

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.

2.0

HISTORY AND PROFILE OF IGLOO

2.1. Brief History Mr. Abdul Monem is the founder of the company and empowered to discharge the functions of the group. More than three and half a decades ago, in the year of 1956 the journey started as construction contractor and later diversified to food and beverage (sugar refinery, ice-cream and coca-cola, energy sector etc. By focusing on the philosophy, Be true to society Abdul Monem Limited grew over the years by providing the best services and highest quality products. Actually this key philosophy has earmarked Abdul Monem Limited as the most trusted and one of the leading companies in the country. Abdul Monem Limited has got diversified business line. These are: Construction contractors for roads and highways, bridges, buildings and flood embankments. Bottler of Coca-cola, Fanta & Sprite. Producer of IGLOO ice cream. Producer of Amo milk, liquid pasteurized milk. Producer of IGLOO Ghee. Marketing of IGLOO butter processed and packed in Australia. Trading and distributing products of Danone and Maliban.

Joint venture with Edna Chocolates from Sri Lanka.

2.2. Company Profile
The company profile is as follows: Table: 01 Company Profile of IGLOO
Corporate Headquarters 111, Bir Uttam C.R. Dutta Road (Sonargaon Road) Dhaka1205,Bangladesh Phones: 880-2-8610679, 9676855 Fax: 880-2-9668638, Cell:01819871798 E-mail: aml@bangla.net Wed Site: <www.amlbd.com> Mr. Abdul Monem ( Founder and Managing Director) Mr. A. S. M. Mainuddin Monem ( Director, Finance and Administration) Mr. A.S.M. Mohiuddin Monem (Director, Opreation) Chittagong and Shampur, Dhaka. Chittagong (1964), 1966 Private Limited Company

Board of Directors

Factory Year of establishment Commercial Production Status

Type of business Current Capital in Taka Number of employees

Manufacturing and Marketing of Consumer Product Taka 600 crore ( Approximate) Group(above 550), IGLOO(152) Source: Company Profile

2.3. Organization 2.3.1. Vision

Through our business activities, we wish to make worthwhile contribution to the progress of the country. We believe in ensuring long-term existence by being profitable, successful and sustainable.

2.3.2. Mission
The mission of Abdul Monem Limited is to build business ventures committed to achieving the highest quality product & service for the betterment of the society. This includes a dedication to review the existing operations, the evaluation and the creation of new and profitable ventures that are ethical and transparent coupled with development of personal, institutional and professional leadership.

2.3.3 Aim and Objectives

Abdul Monem Limited aims at providing society with significant assistance in achieving the maximum potentiality. The company generates appropriate financial results through sustainable growth and constant renewal of a balanced business structure. The company is open to and trustworthy with all its business structures including its business partners and consumers. This is achieved by the companys commitments in providing value-adding product and services, demonstrating the companys commitment to use resources optimally.

2.4. Organizational Structure

Organization charts are often subject to change, so care must be taken to see who really reports to whom. Some companies are loath to share organization charts externally. It locates operation activities within a manufacturing organization and service organization. Aside from differences in terminology, the service organizations also differ from the manufacturing firm in structure. The manufacturing company typically groups operations activities to produce its products in one department. Service firms scatter operations activities throughout the organization. Customer service division reflects the recent trend in many organizations to organize around cross-functional core processes managed by teams. This focuses more directly on the needs of the customers, enriches the work of the employee and generally enhances co-ordination. The organogram of the company is given in next page:
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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.

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

SL No Production Line I Bar Freezer SL 1000 II Container Freezer KF 500 III Mold Freezer FM 4000 IV Mold Freezer FM 7000 V AMO Milk VI Ghee VII Cone Biscuit VIII Plastic Source : Company Profile

Products Ice cream with stick Ice cream in cup Ice cream in container Ice cream in container Milk Ghee RM for Ice cream Container for ice cream

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 legal requirements, 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 ice cream it follows the batch production system, because it has a fixed machine setup but its

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.

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 is rejected 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 costefficiency 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 no conflict 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:

 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 sell on 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 whether a 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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