Proposal for tpm application to improve the efficiency of manufacturing business in san miguel vietnam company limited

Av | mm HH 119€11MINIH €12Y + OPEN UNIVERSITY: Project PROPOSAL FOR TPM APPLICATION TO IMPROVE THE EFFICIENCY OF MANUFACTURING BUSINESS IN SAN MIGUEL VIETNAM COMPANY LIMITED Submitted in partial fulfilment of the requirement for the HOCHIMINH OPEN UNIVERSITY AND ESTC TOULON —- EUROMED MANAGEMENT TRƯỜNG ĐẠI HỌf HỒ TP |THƯ VIỆN NGUYEN MINH TRI 2011 MASTER IN INDUSTRIAL BUSINESS MANAGEMENT PROJECT SUPERVISOR: PROF JACQUES MARTIN Abstract San Miguel Vietnam Company Limited (SMVCL) is a PET- beverage manufacturer, starting its manufacturing business from November 2007 In the first years, the main activities of company is manufacturing and selling PET-beverage product like juices, green tea in Vietnam market Since May 2010, SMVCL beverage products” to has changed its strategy from “Manufacturing and selling PET “Co-packing PET beverage products for other beverage manufacturers” With new strategy, the organization of company has restructured in order to meet new objectives However, SMVCL performance seems has going not reached down its new objectives, In order to explain and the reason the why trend of SMVCL business could not achieve its objective, | have decided to choose the context of SMVCL for my project with the purpose of pointing out root causes of the system and suggesting with sufficient solutions For the clear understanding of situation of SMVCL | have decided to collect production data of the last years for analysis, all areas related to manufacturing activities like training for production people, achievement of production KPI, maintenance implementation are examined in order to show out weak points of the system Based on the analysis result, | tecommend to SMVCL management with proper solutions that will help the company for short term improvement For the long term improvement, Total Productive Maintenance (TPM) program is suggested to apply in SMVCL, however the sound understanding of this system is not easy, therefore the principle, objective, benefit of TPM and the way of applying will be introduced in this Project Following is a proposal plan of TPM program that is expected to apply successfully in the new business context of San Miguel Vietnam Company Limited Index PartA: Introduction Purpose and objective of this project Literature review Methodology Part B: Company analysis Background of the company The company in tolling business context Problem that company is encountering Problem analysis 10 13 14 Root.cause analysis 21 Recommendation for short term improvement 28 Recommendation for long term improvement 30 3: Challenges when doing business with PepsiCo Part C: TPM application TPM introduction 31 Proposal of TPM application 53 Conclusion 61 References 62 Proposal for TPM application to improve the efficiency of manufacturing business in San Miguel Vietnam Company Limited Part A: INTRODUCTION Purpose and objective of this project 1.1 Project purpose The purpose of this project is to have a clear understanding of San Miguel Vietnam Company Limited context though doing research at this organization Based on the result of analysis, suitable solutions will be recommended for short term improvement, and a “Total Productive Maintenance” program will be introduced for applying in SMVCL as a long term solution for improving the efficiency of company business 1.2 Learning objectives ¢ Have a clear understanding about the context of San Miguel Vietnam Company Limited « Have a better knowledge of TPM through theory research ¢ Find a common methodology of applying TPM in PET-beverage manufacturing business 1.3 Personal objectives ¢ Increase my analysis skill e Enrich my knowledge of TPM “ e Increase capability of analyzing manufacturing business situation ¢ Master in TPM theory and have capability in TPM application >> Master in Industrial Business Management Page5 Proposal for TPM application to improve the efficiency of manufacturing business in San Miguel Vietnam Compan Literature review For this project, these sources of data will be used to analyze the situation of SMVCL: SMVCL policy, objectives and its organization chart: show the context of the company and expectation targets « SMVCL production documents and reports: provide information of target achievement, problems encountered, and problem had solved ¢ SMVCL maintenance documents and records: provide information of master plan for maintenance , and how it has being implemented ¢ SMVCL training document and records: provide information of human resources, training activities for employees For the principle, objective, and benefit of “Total Productive Maintenance”, these following materials are used for reference: ¢ TPM Instructor Manual — Japan Institute of Plant Maintenance (JIPM) — 2003 _ ¢ Lean Maintenance — Ricky Smith and Bruce Hawkins — 2004, Elsevier Inc Master in Industrial Business Management eee Page Proposal for TPM application to improve the efficiency of manufacturing business in San Miguel Vietnam Company Limited OOOO Methodology For this project, two main research tools that are case study and observation will be applied in my project, however experiment tool may be partly used also, these tools are chosen as following reasons: 3.1 Case study « My research will be conducted in the context of SMVCL with the history of years of operation, therefore the research tool of case study will be used to examine the activities of the company | decide to use this research tool as my purpose is understand clearly the performance of SMVCL in the past, and the current situation also As an employee of SMVCL | have opportunities to access to relative records and join with actual activities of the company, therefore | can get information, analyze the situation, point out the strength and the weakness of the organization, and then having recommendation for improvement 3.2 Observation e As mention above, the research context is SMVCL and the organization is in its activities now, therefore the research tool of observation is also chosen to examine the effectiveness of the company e | decide to use this research tool as | have opportunities to involve actively in the research Moreover, context, therefore | can collect this tool will helpful in the case what information if some that is necessary key information cannot be gathered from historical records 3.3 Experiment e My research will be in manufacturing context, especially in PET beverage industry, there are some technical issues that we need to verify by experiment in order to find out root causes Therefore the methodology of experiment may be used partly in this project « | decide to use this tool as | can involve actively in actual trouble shooting process of SMVCL, | hope with this tool many hidden issues will be addressed then suitable solutions will be applied for improvement Master in Industrial Business Management Page Proposal for TPM application to improve the efficiency of manufacturing business in San Miguel Vietnam Company Limited Part B: COMPANY ANALYSIS Background of the company San Miguel Vietnam Company is established in Oct 31, Limited (SMVCL) 2003 under is a 100% foreign-owned company that investment license no 243/GP-KCN-DN The registered investment capital of the company is USD 39,500,000 and the legal capital of the company is USD 11,850,000 SMVCL is a brand of Non-Alcoholic Beverage International group (NABI), which belongs to San Miguel food and beverage international limited located at Road Town Tortola, British Virgin Islands — a subsidiary company of San Miguel Corporation, Manila - The Philippine The objective and business scope of company are: ¢ Manufacturing high quality beverages primarily from domestic material including fruitbase drinks, fruit/ vegetable juices, ready to drink teas and other kinds of drinking water and beverages « The company’s products are for export and sale in Vietnam market SMVCL is located on the area of 16,000 square meters in AMATA Industrial Park, Bienhoa city, Dongnai province, around 40 kilometers far away from HCM city, South of Vietnam, The plant was under construction from Jan 2004 to May 2006, then it was the phrase of equipment installation and commissioning The successful trial run was in November 17, 2007, after that SMVCL has been started its manufacturing business The product of SMVCL is PET-bottle beverages, all equipments with latest technologies were imported from Europe through two main subcontractors are KHS-Germany SIDEL-France Therefore, SMVCL has capability to manufacture and high quality beverage products, including bottled-drinking water, ready-to-drink tea and fruit-based drink In the first phrase of investment, capacity of the plant is designed with the volume of 7,200,000 liters of beverage per month (equal to 400,000 cases per month or 4,800,000 cases per year), moreover capacity will be doubled if the second packaging line be installed, the expansion of capacity is expected to come true in 2012 From November 2007 to April 2010, the main product of SMVCL was ready-to-drink tea with brand name of “SHIKI Green Tea” for the Vietnam market Beside manufacturing for Master in Industrial Business Management Page8 Proposal for TPM application to improve the efficiency of manufacturing busi in San Miguel Vietnam CompanyLi its own SMVCL also co-packed fruit-based juices product for “Del Monte International’ with brand:name “Fit n Right’ which are exported for the Philippine market, and co- packed “giao co lam” products for Nnat Le Beverage Company, these products are for Vietnam market However, SMVCL has had to change its strategy since May 2010, decision is made by Head Office Management as SMVCL cannot achieve any sale target during the last 2.5 years in local market Therefore, the business of SMVCL was demanded to switched from “producing & sale its own product” to “co-packing for other beverage manufacturers only” The company in tolling business context a Organization From May 2010, SMVCL started its new business model as a beverage co-packer, in order to operate the business in the new situation the plant was re-organized its structure with a simpler one that is described on below chart 1: Plant manager | HR (Department | _ | Finance | ; Department | | Logistie| | Department —l_., [Pease Department | ——T———] _ | Engineering | | QA | Department i | Department Chart 1: Organization of San Miguel Vietnam Co Ltd Source: SMVCL HR department b Objectives: ¢ Do business as a co-packer for other beverage manufacturers e Attract more customers/ key accounts to fulfill capacity of the plant « Maximize profit by increasing production volume, and achieve 90% plant efficiency e Achieve all critical KPI, and 80% of other KPI c Key customers a.Del Monte International (DMPI) Since June 2008, SMVCL has co-packed juices products - “Fit N Right” for DMPI, which has been exported to the Philippine market, as DMPI ———- Master in Industrial Business Management had succeed with Page Proposal for TPM application to improve the efficiency of manufacturing business in San Miguel Vietnam Company Limited these products in his local market, therefore the ordered volume was recorded of 1,485,624 cases in 2008 and 1,123,255 cases products has being decreased in 2009 However “Fit N Right” in market share, therefore the ordered volume in 2010 was only 211,454 cases, and there is still no order of DMPI from Aug 2010 b.Nhat Le beverage Company Limited (NL) As a new comer in local beverage market, NL has had contract with SMVCL in tolling their product since 2008, the ordered volume of this year was recorded of 210,000 cases, and around 80,000 cases for year 2009 However, there was no order from April, 2009 as NL has not succeeded in the market c PepsiCo International — Vietnam (PepsiCo) Starting from May 2010 up to now, SMVCL has won the contract of tolling “Carbonated Soft Drink Beverage Product” for PepsiCo Based on the agreement, in the first two years SMVCL will pack products in 500ml and 1500mI PET bottle, brand name of these products includes Pepsi Cola, Mirinda 7-UP, Mirinda Sarsi, and Mirinda Orange The minimum order for each year is committed with volume of 2,400,000 cases, about 50% capacity of SMVCL plant Conclusion: Since May 2010 up to now, PepsiCo has been the most important customer of SMVCL, therefore the company has tried its best to satisfy all requirements in order to get more volume from this key account Challenges when doing business with PepsiCo a Product type From November 2007 to May 2010, SMVCL only has experience for manufacturing “hot-fill” (HR) products such as “Shiki green tea’, juices “Fit N Right”, For Carbonated Soft Drink (CSD) product like Pepsi Cola, Mirinda “giao co lam’ Sarsi, 7-UP, SMVCL has no experience for real production except days of trial run in Nov 2007 The first challenge: Develop experience for CSD production in a very short time b Production planning As mention above, PepsiCo commit to order with minimum volume of 2,400,000 cases per year, however, it does not mean that monthly production volume will be even of 200,000 cases Because the production plan of PepsiCo has been basing on Master in Industrial Business Management Page 10 Proposal for TPM application to improve the efficiency of manufacturing business in San Miguel Vietnam Company Limited the sale volume provision, therefore the monthly production volume in SMVCL plant could be varied from 100,000 to 400,000 cases per month, totally depended on the market demand The provision volume form PepsiCo for the first 2-year is illustrated in figure Tine Provision Volume of PepsiCo for the first 2- year tolling contract (1,000 cases) Jun | Jul | Aug | sep | Oct | Nov | Dec | Jan | Feb | Mar | Apr | May Year1 (lun2010 - May 2011) 200 | 250 | 280 | 300 | Year 250 | 250 | 300 | (Jun 2011 - May 2012) ˆ 350 | 150 | 380 | 400 | 400 | 200 | 200 | 250 300 | 350 | 400 | 400 | 400 | 150 | 200 | 200 | 250 Figure 1: Provision Volume of tolling PepsiCo product for the first 2-year The second challenge: This provision is really difficult for SMVCL in planning its own production schedule in order to fulfill demand of PepsiCo, especially in peak season from October to January of the year c, Raw materials supply As agreement, PepsiCo will supply all main raw materials for beverage production, such as sugar, concentrate, liquid CO2, plastic cap, plastic label, wrap around PET perform (for blowing to PET bottle), carton, wooden pallet, glue for labeling process, and glue for carton packing process However, PepsiCo has been applying pull production therefore raw materials will be sent to SMVCL warehouse just days before production In the side of SMVCL, production such as, man the plant will supply the remaining needed resources for power and utilities (water, power, steam, chilled water, cooling water, compressed air, and facility for treating waste water) Supply chain management of SMVCL when tolling for PepsiCo is illustrated in chart as following: Master in Industrial Business Management Page 11 ... Master in TPM theory and have capability in TPM application >> Master in Industrial Business Management Page5 Proposal for TPM application to improve the efficiency of manufacturing business in San. .. of PepsiCo has been basing on Master in Industrial Business Management Page 10 Proposal for TPM application to improve the efficiency of manufacturing business in San Miguel Vietnam Company Limited. .. when tolling PepsiCo products -— Master in Industrial Business Management Page 12 Proposal for TPM application to improve the efficiency of manufacturing business in San Miguel Vietnam Company Limited