Unstable reliability of production line a case in tri an factory, nestle viet nam

1 UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business Tran Quoc Tien UNSTABLE RELIABILITY OF PRODUCTION LINE: A CASE IN TRI AN FACTORY, NESTLE VIET NAM MASTER OF BUSINESS ADMINISTRATION Ho Chi Minh City – Year 2020 UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business Tran Quoc Tien UNSTABLE RELIABILITY OF PRODUCTION LINE: A CASE IN TRI AN FACTORY, NESTLE VIET NAM MASTER OF BUSINESS ADMINISTRATION SUPERVISOR: DR PHAN THI MINH THU Ho Chi Minh City – Year 2020 List of figure List of table: Chapter Problem context 1.1 Nescafe overview 1.2 Symptom Chapter Problem identification 11 2.2 Explore the problem mess 11 2.1.1 Limited domestic market volume 12 2.1.2 Lack of semi-product order from Nestle network 15 2.3 Possible problems identification 17 2.2.1 High competition from domestic competitors 17 2.2.2 Uncompetitive cost of production 18 2.2.2.1 High depreciation period of new plant 21 2.2.2.2 Uncompetitive variable cost 22 2.2.2.3 High fixed overhead cost 22 2.2.2.4 High price of raw material 23 2.2.3 2.3 Unstable reliability of production line 24 Central problem 28 2.3.1 Definition of unstable reliability of production line 28 2.3.2 Importance of reliability of production line 29 Chapter Causes validation 30 3.1 High unplanned stoppage from process failure 30 3.2 High unplanned stoppage from breakdown of machine 32 Chapter Alternative solution 36 4.1 Alternative solutions 38 4.1.1 Implement employee competency matrix management program 38 4.1.2 Enhance maintenance strategy by applying preventive maintenance 41 4.1.3 Building the high skill technician resource 43 4.2 Solution justification 45 4.3 Action plan for set of solution “implementation of competency matrix management” and “enhance maintenance strategy by enhancing preventive maintenance” 46 4.3.1 Action plan for implementation of competency matrix management 46 4.3.2 Action plan for enhance maintenance strategy by enhancing preventive maintenance 48 Chapter Conclusion 51 Chapter Supporting document 52 References 57 List of figure Figure 1: Structure volume of Tri An factory Figure 2: Actual volume of Tri An factory in the period 2013 to 2019 versus plan Figure 3: Instant coffee market share in Viet Nam in 2019 Figure 4: Product volume structure between local product and export semi-product Figure 5: Export product volume compare to available capacity Figure 6: Initial causes – effect maps Figure 7: Soluble coffee local volume from 2013 to 2019 Figure 8: Cost of production in Tri An factory Figure 9: Asset intensity of Tri An factory from 2013 to 2019 Figure 10: Update causes-effect maps Figure 11: Process of pure soluble coffee line Figure 12: Unplanned stoppage at Tri An factory in 2019 Figure 13: Final causes-effect maps Figure 14: Solutions causes-effect maps Figure 15: Action plan for competency matrix management program Figure 16: Cost for competency matrix management program Figure 17: Action plan for enhancing preventive maintenance Figure 18: Cost for enhancing preventive maintenance List of table: Table 1: Production volume number of Tri An factory in the period 2013 to 2019 Table 2: Product volume number between local product and export semi-product Table 3: Local product and export semi-product ratio in Tri An factory from 2013 to 2019 Table 4: Detail cost of production in Tri An factory Table 5: Fixed overhead cost structure in Tri An factory Chapter Problem context 1.1 Nescafe overview Nestlé is the world’s largest food and beverage company, based in the Switzerland, town of Vevey where it was founded more than 150 years ago Nestle are present in 189 countries around the world, and its 328,000 employees committed to the purpose of enhancing quality of life and contributing to a healthier future Nestle want to help shape a better and healthier world, also want to inspire people to live healthier lives Through more than 2000 brands ranging from global icons, like Nescafé or Maggi to local favourite one like Milo Nestle are able to offer a wide portfolio of products and services for people and their pets throughout their lives Nestle ’s performance is driven by Nutrition, Health and Wellness strategy Nestle is organized into geographic zone and globally managed business: Zone Europe, Middle East and North Africa (EMENA); Zone Americas includes North and South America (AMS); Zone Asia, Oceania and sub-Saharan Africa (AOA) and Nestle Waters, reported separately for consistency with longstanding practice of the Group The revenue mainly came from the sales of Zone AMS with 34% total sales and then Zone AOA (23%) and Zone EMENA (21%) Nestle Viet Nam is under managing of zone AOA that has been a company with great performance in nutrition, health and wellness industry Many years since it entered in Vietnam market, Nestle become successfully one of the largest companies in producing high-quality food and beverage Nestle Vietnam is continuing to become a top-rated company in Vietnam One of the most important thing for Nestle to succeed as nowadays is effective and flexible business strategy to meet their expectations in the long run Nestle Vietnam organization is divided to key divisions: Sales & marketing division, Finance & Control division, Supply chain division, Human Resource division and Technical division that is led by chief executive officer Nestlé Vietnam currently operates 04 manufacturing plants: factory produce Milo RTD (ready to drink) are located in Dong Nai and in Hung Yen province, Nescafe plant is in Amata zone, Dong Nai province and one another factory produce Maggi is located in Bien Hoa industrial zone, Dong Nai All factories are under managing of Technical Director Nestle Vietnam employs about 2300 employees around Vietnam All the factories of Nestle in Vietnam are designed and built to meet the highest standards of quality uniformly throughout the Nestle group, and always adhere to the laws of Vietnam on environmental protection, pollution prevention and adopt initiatives to reduce emissions into the environment, save water, aim to zero waste in the production environment Tri An factory was opening in July, 2013 with capacity 12,500 tons product of pure soluble coffee per year that is the biggest factory in term of producing soluble coffee in Viet Nam and 25th coffee factory of Nestle worldwide, 9th one in AOA zone (Asia, Ocean and Africa area) The factory was built with strategy to ensure demand for Viet Nam local market as well as low cost export semi-product to others Nestle factory over the world, especially in zone AOA Specifically, current domestic volume is stable around 25% capacity of the factory while export semi-product volume occupies approximately 75% capacity of Tri An factory Structure volume of Tri An factory 25% Local product volume 75% Export semi-product volume Figure 1: Structure volume of Tri An factory Source: Tri An factory, Nestle Viet Nam Additionally, Tri An plant was built together with the most advantage technology of Nestle group, total investment is up to 238 million dollars, creates more than 200 jobs for local people Given shape shows the structure of organization of the factory that lead factory manager, there are five departments support to ensure smoothly operation of the factory 1.2 Symptom Tri An factory- production volume from 2013 to 2019 14000 12000 10000 8000 6000 4000 2000 2013 2014 2015 2016 Actual 2017 2018 2019 Plan Figure 2: Actual volume of Tri An factory in the period 2013 to 2019 versus plan Source: Tri An factory, Nestle Viet Nam 10 In detail, production volume of Tri An factory [1] is showed by illustrated table: Production volume in Tri An factory 2013 2014 2015 2016 2017 2018 2019 Actual 2800 5528 5143 5579 9684 9004 9000 Plan 2800 5200 7000 9000 12000 12500 12500 Table 1: Production volume number of Tri An factory in the period 2013 to 2019 Source: Tri An factory, Nestle Viet Nam The line graphs indicate the production volume from the year of start up factory 2013 to current year 2019 Overall, the actual production volume is increasing over the period However, it is under target number since 2015 Specifically, production volume target is to reach to the 12,000 tons’ soluble coffee in 2017 and achieve maximum capacity 12,500 tons’ coffee product since 2018 as master plan Actually, production volume only reaching to 9,684 tons and 9,004 tons compare to the plan 12,000 tons and 12,500 tons in 2017 and 2018, respectively 43 4.1.3 Building the high skill technician resource Definition of high skill technician A center resource who are taking care the maintenance activities called technician Maintenance technicians are responsible for installing, troubleshooting, monitoring the production equipment to ensure smoothly production operation The routine job of maintenance technician is:  Conduct common activities in normal production time like: condition check, lubrication, calibration, write or review work instruction for specific maintenance task  Replace the parts for machine In manufacturing environment working, specific is at Nestle, Tri An factory, it can be said that there are two level of replacement part for machine: simple replacement that need small effort in short time and complex replacement parts that require high skill for complex and many activities at least whole day  Troubleshooting, diagnosing on malfunction of equipment There are also two level of troubleshooting: normally, the simple one can be done by factory technician, regarding to complex one, factory need support from manufacturers, external experts It can be said that preventive maintenance put the maintenance team in proactive condition while building high skill technician make corrective maintenance is in passive with controllable condition Beside of handling routine maintenance activities, high skill technician can conduct overhaul complex equipment, diagnosing faults of equipment He should be the subject master for some machine category that can train others The importance of high skill technician Good maintenance strategy can reduce the downtime of equipment However, equipment can not run forever Therefore, the shorter time to recover the equipment, the production line, the less impact on cost and machine breakdown hours In this period of production condition, the roles of high skill technician are recognized than ever 44  Reduce the downtime of machine: Downtime can not be avoidable because no physical structure can last forever However, the time to recover basic condition is interested topic Especially in manufacturing environment, if the complex machine has malfunction and the current resource of maintenance can not fix it, the company may wait for whole day for service from external support It is obvious the significant role of available resource to troubleshoot complex issue of machine  Lower overall production cost: Unplanned maintenance is often more expensive due to long downtime, loss of production like product rework, even waste product, energy consumption while no output of production, etc…it is obvious that technician with high skill can diagnosis, then recover the machine faster Consequence, the total loss of production is less Beside of that, company pay a big amount for service engineer from manufacturers for service complex machine If the company can make the in house service That will be significant saving for the manufacturing organization Steps to building of high skill technician Step 1: Identify the significant machine - the most face issues and complex one Step 2: Identify the list of simple maintenance task that will be transferred to production team to let technician have more time to build skill on defined machine Step 3: Allocated the resource on the machine topic to build subject master for each machine topic Step 4: Self learning and get training to have deep knowledge on the responsible topic Training can get from internal or external experts that depend on scope of topic 45 4.2 Solution justification With the above analysis, author indicates sets of solution that alternatively can solve Tri An factory’s current root cause:  Set of solution 1: combine solution 1.1 “implementation of competency matrix management” and solution 2.1 “enhance maintenance strategy by enhancing preventive maintenance”  Set of solution 2: combine solution 1.1 “implementation of competency matrix management” and solution 2.2 “building high skill technician resource” After introducing two sets of solution to production manager – Mr Hoang Quoc Truong, he said that coffee production technology is high level of automatic technology so the unexpected stoppage leads to many impact to the main key performance such as reliability of line as well as production cost It is clear that the set of solution can help us mitigate the impact of illustrated root causes Tri An will follow the strategy “control before it happen” instead of “defence” strategy In the similar advice from engineering manager, Mr Vijit Jindaphurit, he shared that Nestle is a top company in food and beverage industry, pure soluble coffee plant is the significant one in chain of coffee production of Nestle worldwide so we should follow the strategy that we can foreseen and control our production line It is obvious that set of solution 1, combination of solution “implementation of competency matrix management” and “enhance maintenance strategy by enhancing preventive maintenance” will let us in positive condition in stead of passively defence That will help Tri An factory enhance level of reliability of production line Together with personal experience of author as coffee production specialist, base on the real issues happened in the factory, the effective solution is more or less the same with proposed solution, however it come from individual, lack of alignment and support from all related department Overall, the set of solution is possible solution that can mitigate the root causes Moreover, the key resources to implement the given set of solution come from internal resource: production operators and technicians That is feasible and positive solution with current situation of Tri An factory 46 4.3 Action plan for set of solution “implementation of competency matrix management” and “enhance maintenance strategy by enhancing preventive maintenance” 4.3.1 Action plan for implementation of competency matrix management Detail planning is described through steps:  Step 1: Identify and priorities competency gaps  Step 2: Execute current development plan  Step 3: Define long term development by building trainers in critical subject  Step 4: Foster self-learning by motivating and guiding the employees on how to take ownership of their development  Step 5: Continuous improve effectiveness by understanding how much the education and training cycle (of steps) has delivered against targets, identifying the opportunities for improvement and the actions to take to improve Objective: define clearly fundamental competency and development plan for each defined competency of production operators, technicians Program detail Step Step Objective Action plan Person in charge Identify necessary competency when perform the daily task List down all daily activities of operators Monitor, interview operators and mapping nescessary competency Technical training specilist Define current Meeting with and expected production level of operators competency Production supervisor Jul20 Aug20 Sep20 Oct20 47 Define critical competency and put weight for each competency Production supervisor Define trainers for each topic Technical training specilist Align with trainer to book training plan and deliver class Technical training specilist M Gurantee the autonomy and back up resource within the team Production supervisor Reducing impact by new comer Building set competency for new comers and define buddy Production supervisor Step Motivate and guide employee how to take ownership of their development Facilitate available tools, practical room for each units HR training specialist Step Identify the opportunities for improvement Review the performance by tracking KPI HR training specialist Priority the gap of competency Step Deliver high quality of learning solution Step Figure 15: Action plan for competency matrix management program 48 Benefit:  Ensure enough resources are available on time with the right function  Ensure each employee’s critical competencies are identified and properly evaluated according to their role and position for current year priorities  Obtain necessary budget to execute the Development Plan within current year  Enhance performance of production line Cost: Activities Cost - Mio VND Facilitate for meeting room: board, decoration, highlight pen, etc Facilitate self-learning equipment: technical modules, books, etc External trainers for specific topic Reward top trainers/trainee for each topic 30 300 30 20 Total cost: 380 Figure 16: Cost for competency matrix management program 4.3.2 Action plan for enhance maintenance strategy by enhancing preventive maintenance Detail planning is described in steps: Step 1: Identify and group machine in category like: function, principle, critical level Step 2: Allocated the resource on the machine topic Step 3: Self learning and get training to have deep knowledge on the responsible topic, then define the necessary planned maintenance for the machine 49 Step 4: upload the defined data on the system and training new planned maintenance to others members Objective: increase reliability of machine by reducing breakdown time Detail program Step Objective Action plan Person in charge Define list priority machine need to be focused List down all machine and asess critical/non critical machine follow decision tree Maintenance Engineer Standardize document need for each type of machine Collect manual and training material of machine Maintenance Engineer Step Step Define Make clear technician lead Maintenance scope of each on each topic and Engineer machine topic learning solution Step Define clearly necessary planned maintenance for each machine Step Standardize planned maintenance activities on the system Read document, get training from machine experts Jul20 Aug20 Sep20 Technician Write detail steps for each planned Technician maintenance Upload planned maintenance to AMM system Maintenance planner Figure 17: Action plan for enhancing preventive maintenance Oct20 50 Benefit:  Ensure machine is running in optimum condition  Detect small failure or abnormality before breakdown happening  Proactive in maintenance activities  Reduce machine breakdown time  Optimize the cost of maintenance activities Cost: Activities Expense for training from external machine experts Facilitate special tools to perform planned maintenance Cost - Mio VND 30 80 Total cost: 110 Figure 18: Cost for enhancing preventive maintenance 51 Chapter Conclusion In the industry 4.0 time, reliability of machine is playing the significant role in any advantage manufacturing environment Specifically, the real case – unstable reliability of production line in Tri An factory, Nestle Viet Nam Author would like to let readers understand more about pure soluble coffee technology as well as the impact of reliability of production line to business objectives In other hand, author analyse some direct causes that impact to the reliability of machine and feasible solutions solving the indicated problem By the end, human factor is always playing centre element to deliver good performance of advantage production line 52 Chapter Supporting document Interview’s demographic No Name Position Working experience Time interview Ta Van Anh Finance manager years Dec-19 Hoang Quoc Truong years Dec-19 Vijit Jindupharit Production manager Engineering manager 17 years Dec-19 Ian Johson 30 years Dec-19 Factory manager Place Tri An factory Tri An factory Tri An factory Tri An factory Interview’s script Coding Category Theme What is the role of Tri An factory in Nescafe brand of Nestle world wide? Mr Ian Johnson (factory manager) First of all, the product of Tri An factory is pure soluble coffee that is basic and fundamental product to have others type of coffee So Tri An factory is the first link in Nescafe + Background + Background coffee chain The factory was built with strategy to ensure demand for Viet Nam local market as well as low cost export semi-product to others Nestle factory over the world, especially in zone AOA Specifically, capacity of Tri An factory is approximately 12,500 tons pure soluble coffee per year Currently, domestic volume is around 25% capacity of the factory while export semi-product volume occupies approximately 75% capacity of Tri An factory + Internal working situation + Internal working situation 53 How think about current volume of Tri An factory? Mr Hoang Quoc Truong (production manager) As + Internal + Internal working working situation situation + Production + Production + Production + Production + Cost + Cost of + Reliability production you know that, Tri An factory’s capacity can produce approximately 12,500 tons pure soluble coffee per year However, current volume is 9000 tons in year 2019 It means we need around 3,500 tons more to fulfil the gap of design capacity Mr Ian Johnson (factory manager) You may see the report from production planning, the volume land out with 9,000 tons, there is no change compare to the ACE number at starting time of the year (annual cost estimation) Whereas, our factory’s capacity is 12,500 tons Until now, Tri An factory is under utilization How you think about the potential causes of under performance of production utilization? Mr Ian Johnson (factory manager) Production volume come from sources: domestic market demand and most of demand come from semi-product order from Nestle network With the second source, also the main demand, there are two key factors to decide the order placing that are competitive cost of production and reliability of production line Specifically, reliability of production line indicated by AI KPI, if we look around our coffee friends like Quingdao (China), AI is around 89%, Chachoengsao (Thailand) is about 85%, Shah Alam factory in Malaysia is around 86% AI that also above the target line This is the key performance indicator to let the zone management allocated the volume to us, beside of important factor is + Reliability 54 total cost of production one In your point of view, what is the most problem leads to under performance of production utilization in Tri An Factory? Mr Mr Hoang Quoc Truong (production manager) “coffee plant is complex processing that most of machine were imported from European area In other words, the document is in English as well as training courses It is a challenge for shopfloor level to learn and build their competency for both production and engineering team If operators are really understanding the process, they would operate the line efficiency with less unplanned + Production + Production stoppage that lead to reduce energy consumption” + Cost of + Cost of production production + Reliability + Reliability “Beside of that, to have the good soluble coffee in the market, there are big effort of technical team that we need to operate machine at very high pressure, high temperature to extract the soluble parts in roasted coffee beans and balance series complex process like roasted coffee, extraction, evaporation, spray dry and filling Under extremely operation of machinery, equipment is easier damage and lost of reliability of production line” Ms Ta Van Anh (finance & control manager) “Tri An factory is new factory which is facilitated with the most modern technology in Nestle coffee network, also over the world, of course, it go together with very high investment amount First few years of operation, depreciation is occupied the big amount in our cost spending Specifically, equipment like hoist, valves, lab equipment…life cycle is years Moreover, high speed + Technology 55 rotation machine like coffee separation, rotary device…which is very expensive machine with life cycle is 10 years It is obvious that we are quite weak in term of depreciation cost compare to other coffee factory in the Nestle network” Mr Vijit Jindupharit (engineering manager) “As you know that, green coffee bean has grade 1, and with far different price At Nestle, the standard goes through globally so Tri An is using 100% grade for all type of semi product It is over words to say that raw material amount is the biggest spending from our pocket, approximately 63% in total cost of delivery However, the factory is considering to use grade coffee for some type of product I believe the chart of cost spending will change significantly when applying the change” “At Tri An factory, we are considered a new factory, moreover, the most modern technology is existing here In other side of coin, it is also the challenge that our team competency is not equal between operators as well as technicians It is evidence that the process was stoppage due to wrong operation or wrong balance flowrate tend to repeat at the same person And the way operators control their parameters is different between shift, it lacks of consistency between shifts From period 2017 to 2019, the total unplanned stoppage is about 13% compare to total running time, while portion of process failure is always around 70% occupy” How you think about set of solution: set “implementation of competency matrix management” and “enhance maintenance strategy by enhancing 56 preventive maintenance” and set “implementation of competency matrix management” and “building high skill technician resource”? Mr Hoang Quoc Truong (production manager) Coffee production technology is high level of automatic technology so the unexpected stoppage leads to many + Production + Production impact to the main key performance such as reliability of + Training + Training line as well as production cost It is clear that the set of + Maintenance + Maintenance solution can help us mitigate the impact of illustrated root causes Tri An will follow the strategy “control before it happen” instead of “defence” strategy Mr Vijit Jindupharit (engineering manager) Nestle is a top company in food and beverage industry, pure soluble coffee plant is the significant one in chain of coffee production of Nestle worldwide so we should follow the strategy that we can foreseen and control our production line It is obvious that set of solution 1, combination of solution “implementation of competency matrix management” and “enhance maintenance strategy by enhancing preventive maintenance” will let us in positive condition in stead of passively defence That will help Tri An factory enhance level of reliability of production line 57 References [1] Tri An factory Nestle Viet Nam Internal source [2] Zhang T Competition in the coffee industry November 2018 [3] Starova M, Cermakova H Method of Component Depreciation of Fixed Assetsts and Its Comparision with Traditional Methods; 2010 [4] Luca Cesaro Cost of production Defenition and concept; 2008 [5] Tsarouhas P Performance evaluation of the croissant production line with reparable machines; 2014 101-110 [6] Tsarouhas P Reliability, availability and maintainability (RAM) analysis for wine packaging production line The International Journal of Quality & Reliability Managemen; 2018 821-842 [7] Chlebus M, Wojciechowska S Assessment methods of production processes reliability state of the art; 2017 247-276 [8] Zhang Y, Yu M, Chen Y Reliability evaluation and component importance measure for manufacturing systems based on failure losses; 1859-1869 [9] Grzegorz Bartnik, Andrzej W Marciniak, operational reliability model of the production line, 2011, 361-377 [10] Hao, H B., & Su, C (2013) Reliability analysis on competitive failure processes under multiple failure modes Applied Mechanics and Materials, 442, 257 [11] Mohammad Saeed, J A., Arkat, J., & Barzinpour, F (2008) Modelling the effects of machine breakdowns in the generalized cell formation problem The International Journal of Advanced Manufacturing Technology, 39(7-8), 838-850 [12] Deon McHatton, 10 ways preventative maintenance can assist in reducing downtime, 30 November 2017 ... future maintenance may be needed At Nestle, Tri An factory, there is a system name Asset maintenance management to document and manage the next tasks automatically in case technicians input data into... Engineer Standardize document need for each type of machine Collect manual and training material of machine Maintenance Engineer Step Step Define Make clear technician lead Maintenance scope of. .. significant role in any advantage manufacturing environment Specifically, the real case – unstable reliability of production line in Tri An factory, Nestle Viet Nam Author would like to let readers