Philippine Postal OFfice_SWOT Analysis

University Degree Business and Administrative studies

INDUSTRY ANALYSIS

PIEDRA CLADDING STONES

Rebtrade is home to the Piedra Cladding Stones and floor blocks, which are manufactured stones that replicate common natural stones used for veneer applications.

Every stone piece is casted using special molds obtained from selected natural stones- imitating every small detail! The production process entails the use of high quality raw components, high level skills, manufacturing experience and an artful eye. Resulting into a stone product having a distinct combination of texture, color and cut for every design.

In addition, Piedra Cladding Stones and floor blocks are lightweight making its installation easy and affordable than natural stones.

As their slogan reads, “Piedra …………… better than natural stones.”

COMPANY BACKGROUND

Piedra Systems Incorporated started in 1993 as Piedra Product Systems under Rebtrade International Corporation. From being a product line it rapidly became a strong leader in the manufactured stone veneer industry.

With the solid reputation for innovation and high quality products, Piedra Product Systems evolved into an independent organization. In 1998, Piedra Systems Incorporated was established taking its name to high level of products. The company devised and reinforced its goal to meet the increasing demands for manufactured stones and other architectural finishes. Piedra Systems Incorporation has invested considerably in research and development providing continuous product development and monitoring to ensure that its product consistently meets high quality standard needed by its clients and its industry.

Piedra Systems, Inc. is guided with TRUST and COMMITMENT in providing reliable products, SAFETY to our people and to the environment. RESPECT the needs and requirement of our customers and excellent PERFORMANCE in both products and services. With that foundation, Piedra Sytems Inc. will continue to provide products of superior quality, excellent innovations and commitment to serve the needs of every client worldwide.

MISSION

“Our mission is to be able to give our customers quality innovative products thru constant improvement that will satisfy their needs.”

VISION

“For Rebtrade International Corporation to be known as a company that has innovative products and as a company that customers can rely on in terms of quality products.”

SCOPE AND LIMITATIONS

Among Piedra’s wide range of products, the group decided to focus on the wall cladding stones and floor blocks. With that in mind, here are the 7 Operations Management Strategy Decisions to be discussed in detail further on the report: (1) Product Design, (2) Managing Quality, (3) Process Strategy, (4) Location Strategy, (5) Layout Strategy, (6) Supply-Chain Management, and (7) Inventory Management.

PRODUCT

Product Design

The life of any business entity greatly lies on the product it offers in the market. Any product less than an excellent product strategy can be devastating to a firm. To wit, great and best products are the keys to success.

Products offered in the market will tell a lot about the company, starting from its mission vision down to its end users. Design says a lot about a product and the company itself, and increasingly is a short-hand way of saying a lot about the consumers. As a result most companies allocate a big amount of their resources in the product design process. On the average, 80 percent of the cost of a product is set at the design stage. In addition, 93 percent of production materials are never used in the final product which makes product design development very expensive for unsuccessful product design.

Excellent products are the result of an excellent product design. Arriving however at a successful product design is not an easy process and requires a rigorous analysis of the end users. As can be seen from the figure below, product development starts from idea generation and ends on the evaluation whether the product itself satisfies the needs of its customers.

Nowadays, due to tight competition and continuously improving technology, the average lifespan of a product is shrinking fast. Customers can therefore be more choosy and change their demands more frequently, stimulated and fueled by whatever product has been introduced most recently. Product design is the vehicle for product change and the more products change, the more designs will be needed. Yes indeed that successful product innovation would bring profits to the company. But statistics would show that for every 10 ideas for new products, 3 will be developed 1.3 will be launched and only 1 will make any profit.

This makes Product Design Strategy a very important factor to be considered among the Ten Operations Management Decision Strategy. Product design can be defined as the generation, development, and or implementation of a ( or ). Product Designers conceptualize and evaluate ideas, making them tangible through products in a more systematic approach. The role of a product designer encompasses many characteristics of the marketing manager, , industrial designer and design engineer. The term is sometimes equated with .

The very objective of the product decision is to develop and implement a product strategy that meets the demands of the marketplace with a competitive advantage. Product strategy may focus on developing a competitive advantage against the market competitors in terms of product differentiation, cost-leadership, rapid response or a combination of these.

However, it shall be understood that trade-off among these strategies exist. One can highly differentiate their product through quality but incurs more cost which generally makes their selling price higher than the others. Another firm can be a cost-leader meaning cheap product producer but of lower quality than its competitors. And one can be so responsive to market demand but requires higher cost. It is therefore necessary that these strategies shall be weighed properly by the firm depending on the needs of their consumers to whom the company shall be focusing on.

Not only has product strategy affected the product. It has also significant and fundamental effects on an organization’s strategy and signifies major implications throughout the operations function. Design decisions will affect the manufacture, use and disposal phases of a product

At the end of the day, what determines the success of a product design strategy of any firm is the perceived satisfaction of their consumers which can be supported by increasing sales figures and customer loyalty to the product.

The Piedra Systems Inc. and its Product Design Strategy

The Market

With an increasing trend in the construction industry in the Philippines and demand for decorative stones which replicate common natural stones used for veneer applications, Piedra Systems Incorporated started to penetrate the market in 1993 as Piedra Product Systems under Rebtrade International Corporation. From being a product line it rapidly became a strong leader in the manufactured stone veneer industry.

In 1998, with its solid reputation for innovation and high quality products, Piedra Product Systems became an independent organization. It revised its goals to meet the increasing demand of the product. It invested considerably in research and development to meet the ever changing customer wants. This was undertaken with continuous product development and monitoring to further ensure that its product consistently meets high quality standard needed by its clients.

Piedra Systems currently caters a wide array of customers. Based on the interview performed by the group, the firm seemed to have no clear market segment in which it supposed to focus on. It decided instead to cater as many customers as possible. Piedra Systems would want to be known as a firm committed to provide products of superior quality, excellent innovations and commitment to serve the needs of every client worldwide.

Future Marketability

World demand for wall claddings is forecast to climb 3.8 percent per year through 2010 to 5.1 billion square meters. Market advances will be stimulated by a pickup in nonresidential building construction activity as global economic growth accelerates and industrialization efforts continue in less developed parts of the world. Single-layer construction methods will continue to be used in many countries, but rising standards of living will help make finished siding more affordable, resulting in increased product use. This justifies the strong market demand for decorative stone products.

Products and Services

Piedra offers a wide array of product lines. This includes the Piedra Wall Cladding Stones and Blocks which have several profiles and designs in various colors. The product represents years of continuous innovation, research and development as well as technical milestones in manufacturing, production and coloration.

Among of the Wall Claddings stone products are the following:

Valley Ledgestone - A new Piedra Cladding Stone design with 11 color variations available. Valley Ledgestone has an irregular-sized profile but installer friendly. Its coverage is based on ½” mortar joints and varies on joint size, cutting or trimming preferences.

Flat Ridgestone - It comes in the standard 4” high pieces to speed installation and make piers and columns easy to create. Flat Ridgestone offers a particular solution in achieving a tailored look with small-scale, low relief stone.

Canyon Edgestone - This design offers variation in stone thickness to capture light and shadow. Canyon Edgestone comes in coordinated colors that compliment and blend with contemporary roofing and wall finishes.

Castle Stone - Large scale stones molded into massive shapes suited for modified applications capturing stone pieces unique in ancient castles. Designed for a grout-less appearance for its interlocking-cut design.

Bricks - Captures a full-thickness brick with only ½” inch thick is easy to install and suitable for walls with minimum facing clearance. Provides a stylish aged look on a simple and plain pattern.

Split Bridgestone - Offers a thin layered stacked bricks. When combined harmoniously with other finishes provides a simple and yet elegant design. Its profile allows flexibility in the design and ease installation.

Mountain Terrace Stone - Provides a powerful, rugged character no other material can duplicate. These stone design have remained the handiest and most commonly used in residential and commercial applications.

The installed cost of wall claddings is 1/3 to 1/2 less than natural stone, it is lightweight, and requires no footings, wall ties or foundations. It has a 2% waste factor vs. 10% or more for natural stone.

Piedra Systems caters projects ranging from residential to non-residential infrastructures. However, Piedra limits its product to the stone claddings itself. The firm doesn’t offer any services with regard to their business. They just sell the products (stone claddings and blocks) and it is up to the consumers to install the claddings/block. A manual for easy installation is given however at their internet site.

Product Design Strategy

Piedra Systems arrives at their product designs through their Marketing Department located on the main office at Mandaluyong. After conducting some market research, which again was not disclosed to the group how, the marketing department will design a new product based on the results of the conducted research. After the design was accomplished, it will then be forwarded to Pulilan plant where prototypes of such design will be manufactured. Operations manager on the plant will determine the costs to be incurred on such design.

The cost of production will be forwarded back to the main office to assess whether the company can produce the product or not, given the cost and market demand. With this, the marketing department will decide the quantity of product to be produced. No alterations on the design are allowed at Pulilan plant. The operations manager on the plant is strictly limited upon identifying the cost of any product. It is the job of the marketing department alone to identify and modify their plans accordingly.

However, it is to be noted that changes in the design is not that frequent. So long as their design sells in the market, the firm opts not to produce any innovative product design. Usually, it takes some moths or even years before they change or introduce a new design. Operations in the Pulilan plant are constrained by the design approved by the main office.

Product differentiation

Piedra manufactures their products following the steps below:

Natural stones are individually chosen for uniqueness.
Molds are crafted to replicate every textural detail.
Natural color hues are formulated using color fast pigments.
Colors are painstakingly hand applied to the molds.
Stones are cast, unmolded and carefully packaged.

Unlike their competitors who merely paint the claddings to comply with the color requirements of their customers, Piedra incorporates pigments and stains that will then be absorbed by the stone, thus the color becomes an integral part of the stone. The base color is blended throughout and the mortar can be colored to match as well. There are no noticeable changes in the color after years of weathering. This process requires higher cost but produces a higher quality product. This is the competitive advantage of Piedra as against to its competitors, quality versus cost.

Most of its competitors produce wall claddings and blocks a quarter lower than the cost of production of Piedra. This gives Piedra’s competitors the advantage of lowering their selling price making their products more affordable to their customers.

Common Problems Encountered

Complaints are usually due to discoloration of the claddings. This however is not a result of poor quality of Piedra’s products. Most of these complaints were discovered to be the fault of the technician installing the claddings. Improper application of the tiles adhesive seemed to be the main problem of discoloration of the products on site.

Analysis / Issues

After gathering and analyzing the necessary information, the group then arrived at the following observations of the subject at hand:

Product Differentiation

It is clearly evident that Piedra Systems gives more importance in quality or product differentiation as against to cost and rapid response. This is where they set their competitive advantage against their competitors.

No clear target market

Although it was mentioned that most of its customers are non-residential infrastructures on a contractual basis and some residential establishments, Piedra doesn’t really have a clear target market to cater and satisfy its needs. It tries to serve all possible customers in the market. This is somehow problematic since no firm can serve everyone in the market at the same time, doing so will blurry the positioning of the firm in the market.

It must be understood that product design doesn’t only pertain to its physical substance, it must also touch the psychological positioning of the benefits versus competitive products, and the fulfillment of the product promises by physical features. Any firm should be market-oriented; meaning whatever they do should add value to the perceived customer benefits. This would be troublesome if from the very beginning there really is no clear target market which the firm should delight.

Innovation Strategy

Innovation or introduction of new designs was triggered primarily because of the perceived obsolescence of their current design offered in the market.

Product Design Conceptualization

It was mentioned that new designs were strictly from the Marketing Department alone and the only job of the Operations Manager at the Pulilan plant is to produce the prototype and estimate the cost necessary to produce the product. No collaborative effort was done to arrive at the new design to be offered in the market.

The group was informed that designs were based on a market research conducted by the Marketing Department. But due to the limited information disclosed to the group, the how’s and what’s of this research were not known. The group then assumes that since the firm has no clear target market, their estimates of the market viability of their new product maybe misleading.

In addition to this, the features of their new product might not totally capture and satisfy the need of the “real” target market they are serving in the market.

Solutions / Recommendations

Set the target market

Product development must be fundamentally and comprehensively customer-oriented. The successful product designer must learn to “live” in the mind of the customers: every decision and new direction should take the product closer to realizing the dreams, needs, wishes, whims and hope of that customer.

Offering a new product with clear differentiation from existing products and with obvious added customer value provides good reason for customers to alter their existing buying habits. It can be shown from the figure (Figure 1) below that on the average products with strong market orientation are more than five times as successful as poorly differentiated products with only minor added value.

Figure 1. Success Factors in New Product Development.

This strengthens the fact that Piedra Systems Inc. should really know its target market first before even identifying and satisfying the needs of their customers.

Targeting the market segment starts from dividing the market into several segments via economic, demographic, geographic factors and the likes. After dividing the market into segments, the next step should be identifying which segment/s would give the most benefit to the firm in terms of market viability and profit. With the identified target segment, it would now be vital for the firm to identify the needs of the consumers belonging on the target segment. The capability of the firm to satisfy these needs should be given equal importance.

These needs, wants and dreams of the target consumers should then be translated and incorporated in the products that the firm will be offering in the market. The firm shall ensure satisfaction of the consumers based on their perceived value of the product.

Given the nature of the industry, it would be appropriate to divide the market based on their economic status. Most probably, it would be the upper class B and A of the society who would give the most benefit to the firm. In addition to this, non-residential establishments (malls, parks, etc.) should also be included in the target market since they require this kind of products. Given the target market, Piedra can now ascertain the needs and wants of their consumers and try to link these needs to the capabilities of the firm and ensure the satisfaction of such needs.

Product by Value Analysis

One of the major reasons why the group has decided to just focus on the wall claddings and blocks amongst the many products offered by Piedra Systems is that by virtue of Product-by-value analysis. The group determined that among the products offered by Piedra, the aforementioned (two) products give the company the highest contribution in profits. The other remaining products do not significantly affect the bottom line of the company. With this, the group further recommends that Piedra should invest their limited resources to the critical few and not to the trivial many. These two products should be given priority on research and development as well as continuous product improvement.

Nature of the industry

Figure 2. Product Life Cycle

Piedra should periodically examine their products with regard to its position in the product life cycle as exemplified above. This shall be done for the reason that for each stage requires different approach and strategy both for existing and new products.

In addition to this Piedra should not wait for their current design to be obsolete before they even make a new design. Constant improvement on designs shall ...

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Nature of the industry

Figure 2. Product Life Cycle

In addition to this Piedra should not wait for their current design to be obsolete before they even make a new design. Constant improvement on designs shall be observed especially in this kind of industry where fashion or design really matters.

Organizing for Product Development

Currently, Piedra observes the traditional U.S. approach to product development with distinct departments. This on its own has its unique advantage of specialization and fixed duties and responsibilities exist. However, the current system takes so much time and effort before they can have a new design ready for out in the market. The marketing department needs to send the design to the operations department for cost estimation. If the cost doesn’t sound good and competitive, they still have to make a new design and repeat the process again and again.

The group proposes that Piedra should adopt a new strategy for organizing a new product. They should include the Operations Manager in the meeting of making the product so that cost estimation can be done on the meeting itself. Changes, if necessary, to design or cost would then be easier resulting to greater efficiency and time effectiveness. In addition to this, the operations department really knows what the design should really look like and what needs it purports to satisfy. With this manner, the operations manager doesn’t only know the product to be produced but also the main purpose of its coming to existence.

Product Design Conceptualization

With proper market segmentation and targeting, Piedra can now identify the needs of its customers. Piedra can focus on the main consumers of their products as subjects for research for the needs and wants of the customers which should be satisfied. Since contractual arrangements are the main source of income of Piedra, Engineers and Architects of these contractual arrangements would be good sources of inputs for the needs and wants of their clients.

After knowing what the customer wants, it would be important for the firm to identify the hows of satisfying these needs through their goods and services. Linking the wants and the capabilities of the company would be the next step. After linking the two, it would be necessary to develop importance ratings with regard to the relationship of the wants and how of the customers and firm respectively. These importance ratings provide a ranking of how to proceed with the product and process design, with the highest values being the most critical to a successful product. This can be summarized in the Quality Function Deployment’s (QFD) House of Quality on figure 3.

Determining what will satisfy the customers and being able to answer and translate these desires into concrete target design should be the first priority of a company trying to succeed in introducing a new product in the market. Customers’ needs is a very significant concept wherein if taken for granted will indeed be detrimental for the company.

The group performed a survey to identify the possible needs and wants of the customers with regard to wall claddings and blocks. Listed below are the top 5 qualities identified by the 30 respondents who were given by a survey form.

Design / color / aesthetics
Comprehensive strength (includes water resistance)
Product Life span
Easy to install
Speed of delivery

Based on the analysis performed by the group with the aid of the “Quality Function Deployment House of Quality”, the group was able to arrive at innovations which intend to make Piedra System’s products unique from the others. In addition to this, these recommendations are assumed to have qualities that will add value to the company and will set the competitive position of the firm in the market. Listed below are the recommended attributes with their measurable improvements that will address the needs of the customers previously identified by the group.

Continuous Product Design Improvement- this refers to the ability of the company to continuously improve its product design. Such improvements shall be customer-oriented in a way that any further improvement will answer the ever changing needs of the customers.
Improve Total Quality Management- there is still a big room for improvement when it comes to TQM of Piedra Systems. This has to be addressed properly by the company since they would want to compete in the market via product differentiation through quality. 100 ppm defective products would be a measure for Piedra to attain.
Automated Wall Claddings and Block Driers- as of the moment, Piedra doesn’t have an automatic driers for wall claddings and blocks. This significantly affects the quality and speed of manufacturing of its current products. The group then recommends for Piedra to secure an automatic drier for faster delivery and quality products.
Offer Free Consultation for Installation Services- some of the complaints of customers lie on the discoloration of the wall claddings not because of the products quality but because of the negligence of the technician installing the claddings. Hence, the group recommends that Piedra should offer a free installation consultation to prevent such complaints.
Online Purchase option and Premiums / promos- to further distinct Piedra Systems from any other stone veneers manufacturers, the group suggests for premiums and promotional activities that will entice the customers to repurchase the product and develop brand loyalty which is a great intangible asset for the company. This can be done through giving away freebies or trade discounts after several times of purchase or amount of claddings and blocks ordered.

(These attributes are summarized in Figure 3 below.)

The aforementioned recommendations are just guide for Piedra to achieve a successful Product Design Strategy. Such recommendations are not exclusive since product development is really a combination of both science and of arts. Strong foundation and experience is required to arrive at an excellent product design strategy.

Figure 3. Piedra Systems.

QFD House of Quality

High relationship (5)

Medium relationship (3)

Low relationship (1)

Appendix A. Piedra Systems Inc., Wall Claddings Product Line.

QUALITY

To stay competitive in today’s global markets, continuously improving business processes and bringing new innovative products is increasingly important for companies. For Piedra Systems Incorporated, their leadership position in the manufactured stone veneer industry was earned through differentiation and high customer involvement through customization of their products.

They abide by total quality management principles such as a Just-in-Time (JIT) system and the discipline of continuous Improvement, so that they may maintain 100% quality in their products and attain zero-defect products. In fact, management of the plant is working towards achieving ISO 9000 accreditation. For now though, they are contented with passing their own measures and qualifying in the standards of many retailers.

Rebtrade invests in equipment and business processes that will ensure them quality. For example, a strainer is installed at the end of the drain hose to ensure that no solid materials will contaminate the CF Cement and a First-In First Out (FIFO) System is employed to release fresh stocks and guarantee customers high-quality. Another manifestation of such commitment is a check list that they use every time in the mixing operations to ensure that all the complete materials with their correct respective quantities are poured into the mixing drum in accordance to the specs.

In terms of customer service, Piedra Systems ensures fast and responsive action when customers call the main office for help or complaints. The Mandaluyong office then informs the plant to send a technician to the customer’s place. Both main office and manufacturing plant guarantee that they are able to recruit the best for the customer service job.

Quality Control on Raw Materials

In as much as they want to produce high quality products, Piedra Systems also produces a set of criteria of potential suppliers. For example, Rebtrade provides a color guide for the Solvents and smells Texine as a standard for them to follow in checking materials as received from Goodyear to control quality of cement mixing. For every batch of Cement CF, a 500-mL (min.) sample is provided to Goodyear for their incoming Quality Control Inspection. Each batch must also be tested by Rebtrade’s Quality Control for viscosity and solid content before delivery. A Quality Conformance Report must accompany each shipment.

In order to contract with only the best and most qualified suppliers, Rebtrade follows the following decision process:

Piedra Systems properly documents the control procedures of both Raw Materials and Finished Products. For raw materials such as cement, sand, gravel, pigment, and texine, they pass through a QCRM subject to full inspection and testing. Raw materials also have a standard Procurement Specification. Identification tags for raw materials are issued and grouped accordingly. A QCRM Acceptance Tag is assigned to a raw material that passes standard specifications. A Hold Tag represents a raw material that is still subject to further inspection and testing. Finally, a Q.C. Deviation Notice Form is granted to raw materials that fail during evaluation and testing.

Quality Control retains a sample of every raw material tested for at least six months with proper identification. This is for traceability and comparison of materials in case problem occurs.

Quality Control on Finished Products

Quality inspection for piedra production is accomplished only towards the end of process, during the drying stage, by a QC officer. They also randomly inspect materials and equipment like cleaning molds and sifting sands and processes, accompanied of course by a written report.

In order to consistently satisfy the Rebtrade customer, management issues standard specifications on piedra stones as well as their other products (liquid, powder, heatguard and vermiculite).

Test Method and Test Procedure of Piedra Tile Products

The Test Method involves the determination of the following:

Water Requirements
Slump Test
Color/ Appearance
Compressive Strength
Curing
Visual Inspection

Test Procedure

Water Requirements

For every first batch, they must determine the moisture content of sand, which acts as the critical material that the water requirements is dependent upon. The standard water requirements in 2% moisture content of sand is 3 ½ pails in big mixer while 5 to 6 gallons of H2O in a small mixer.

Slump Test

The Concrete Slump Test is a method of to determine and measure the rigidity and consistency of sample of a concrete mix. It involves filling a conical mold with a sample of concrete, then inverting it over a flat plate and removing the mold. The amount by which the concrete drops below the mold height is measured and this represents the slump.

The test also further determines the “” of concrete, which provides a scale on how easy is it to handle, compact, and cure concrete. A change in slump height would demonstrate an undesired change in the ratio of the concrete ingredients, hence, the proportions of the ingredients are then adjusted to keep a concrete batch consistent. This homogeneity improves the quality and structural integrity of the cured concrete.

The Slump Test requires a mold and a tampering rod. The mold is a metallic apparatus not readily attached by the cement paste in which the test specimen shall be formed. This metal also carries the following specifications:

It should not be thinner than a no. 16 gage.
There should not be any paint on the mold at which the thickness is less than 0.045 in. (1.14 mm).
It should be in the form of the lateral surface of the fraction of a cone with the base 8 in. (203 mm) in diameter, the top 4 in. (102 mm) in diameter, and the height 12 in. (305 mm).
Individual diameters and heights shall be within ± 1/8 in. (3.2 mm) of the prescribed dimensions. The base and the top shall be open and parallel to each other and at right angles to the axis of the cone.
The interior of the mold shall be relatively smooth and free from projections such as part protruding rivets.

The tampering rod on the other hand is a round, straight steel rod 5/8 in. (16 mm) in diameter and approximately 24 in. (100 mm) in length, with a tampering end rounded to a hemispherical tip the diameter of which is 5/8 in.

Steps:

Place the mixing pan on the floor and moisten with some water.
Put the sand in the pan mix with cement afterwards.
Add the coarse/fine aggregate and thoroughly mix.
Mix the water and dry cement ingredients thoroughly using the trowel.
Fill 1/3 of the cone with the concrete mixture. Compress the layer 25 times using the steel rod.
Add more concrete mixture to the two-thirds mark. Repeat tamping.
Fill up the whole cone and repeat tamping 25 times.
Remove excess concrete from the opening of the slump cone.
Slowly and carefully remove the cone by lifting it vertically.
Wait for the concrete to stabilize and measure the slump-height of the slumped cone of concrete using a ruler.

Compressive Strength

Testing the compressive strength of concrete is another quality control procedure and a decision-making criterion on acceptance of concrete. Compressive strength test results are primarily used to determine that the concrete mixture as delivered meets the requirements of the specified strength in the job specification.

Compression specimen strength is calculated by dividing the maximum load carried by the specimen during the test by the average cross-sectional area determined.

Curing of Tiles

The curing of Piedra Stones include the following steps:

Place the newly batch tiles in a pallet ; one pallet per batch.
Cover the tiles with polyethylene plaster securely.
Demold the tiles after 10 to 16 hours.

After the finished products undergo inspection and testing, management prepares the Piedra Tile Production Report and Quality Control Inspection Report.

The results of testing and evaluation will lead to issuing identification tags on Finished Products. A Hold Tag is given to a product that needs further evaluation and testing. A Disposition Tag on the other hand is given to products that have been approved for release, whether they are approved or scrap obsolete products.

Quality Control retains a sample for every test product for at least 6 months-1 year on the shelf life of the product.

PROBLEM IDENTIFICATION

Although Rebtrade exhibits high standards and meticulously planned policies on Quality Control, there are still areas in their operations that they should consider improving on. The following problems were observed by the group during their initial plant visit and subsequent interviews:

Ineffective Process (Drying Stage)
Lack of TQM in services
Lack of Inspections by QC

ANALYSIS & RECOMMENDATIONS

Ineffective Process (Drying Stage)

The last step in manufacturing wall claddings is the drying stage. Due to the absence of a drying machine, piedra stone and wall claddings are piled up and left under the sun to dry. This step is economical, but very time-consuming and risky since the products become exposed to harmful weather conditions that can eventually damage the product.

Heavy rain causes discoloration, cracks, pinholes, distortions and bubbles on the stone products. These products that carry defects are sold to class B retailers for a lower price.

It would be more beneficial for Piedra Systems to invest in a drying machine to avoid manual drying of their products.

Lack of TQM in services

After-sale service is very important in gaining customer satisfaction and loyalty. Rebtrade delivers products for a fee but do not assemble their products because they believe that it is a menial task and their customers already have the means to assemble them.

The group believes that Piedra Systems should provide assembly services to their customers in order to exceed customer satisfactions and further differentiate themselves from their competitors.

Lack of Inspections by QC officer

Rebtrade aims to perform Quality Inspection during the piedra production processes. However, because of lack of manpower, time and a strict policy on Quality Inspection, the officer only gets to inspect the finished product towards the end of the process, on the second to the last stage, which is the drying stage. If products are defective, Rebtrade has no other choice but to incur costs related to rework and scrap materials.

Although assigning inspectors for specific jobs will incur costs related to their service as well, it is advisable for Rebtrade to invest in people who will inspect each stage in the production process to ensure that they only produce piedra goods that achieve their high standards.

PROCESS STRATEGY

The key production processes of Piedra are Cement Mixing, Tiles, Wall and Floor (block) Cladding. For the sake of the analysis of Piedra’s production process strategy, the discussion will only be focusing on the production of wall and floor claddings.

OVERVIEW OF PROCESS STRATEGY OF PIEDRA

In every manufacturing organization, a good process strategy is as equally critical as the earlier discussed-- good product design and total quality management. The existing process strategy of Piedra Claddings aims to find a way to produce wall and floor claddings that meet customer requirements within production and managerial constraints.

PRODUCT FOCUS AS CURRENT PROCESS STRATEGY

Due to the orientation of Piedra into high quality product and differentiation, Piedra adopted “product focus” as its current process strategy. It operates basically in a continuous process, characterized by the swift movement of units through the facility. Piedra’s production process revolves in producing one product category (claddings) every day—with few inputs (cement, sand, pigment) into high output variations in size, color, shape, and packaging. Piedra’s operations are standardized, thus there are few job instructions.

Piedra’s production processes run through standardization and quality control. It follows a set of control procedures both for raw materials and finished products. Its equipments are utilized purposely for every production leg (there is 1:1 utilization). This and also due to automated design production, Piedra operates on high fixed costs.

Flow Diagram

Below is a flow diagram illustrating how floor claddings are manufactured.

(A) In this process flow diagram, raw materials (sand, s1, cement) are loaded on the conveyor via forklift towards the Storage which stores the aggregate materials.

(B) The aggregate pours from the Storage into the weigh bin in which quantity is made specific according to order.

(C) The aggregate (now in specific quantity) pours from the weigh bin into a mixer where the aggregate is mixed with a particular pigment.

(D) The pigmented mix is then transported to the Cooper through the conveyor belt. The cooper stores the mixed materials,

(E) where the mixed materials are molded in the Block machine.

(F) The molded block is loaded into a rack,

(G) where it is transported via the rack conveyor into the Kiln for curing (drying).

(H) A forklift manually unloads rack from the Kiln and separates the dried mold blocks from the racks.

(I) The dried molded blocks are transported via conveyor belt where it is inspected at the posterior end.

(J) The dry molded blocks (that passed inspection) are loaded to the Cuber in which the blocks are placed to pallets.

PRODUCTION PROCESS DESIGN

The process chart below shows an illustration of how value-added activities are allocated in its operations. Determination of the ratio of value-adding activities to total activities will aid us in the analysis of the production process of Piedra floor claddings.

Process chart: Present method

Production Technology

Since Piedra is highly conscious toward standard and quality control, they operate based on automated production (in terms of product design). They alter it according to customer demand (special orders). Their inventory management is also computerized. They control and monitor the logistics of the raw materials and finished products. They also have a computerized delivery schedule. They have computerized charts of delivery status per customer. Through these, they are able to oversee the coordination of scheduling of their operations.

However, some segments of the production process are manual (ie. the loading and unloading section before and after curing/drying. Furthermore, the packaging of blocks into boxes is done manually.

ANALYSIS AND RECOMMENDATION

Critical Factor Identification

Block machine: the bottleneck.

According to the operations manager, the Block machine is the bottleneck of the operation. This is due to the inaccuracy of the filling of blocks that occur prior to the transportation to the Block machine.

Note that the job of the block machine is to mold the quantified blocks. There is a problem when the blocks quantified during the weigh bin segment are less than the supposed quantity. What happens is the blocks produced are more than the capacity of the machine, thus distorting the whole operations. For instance, the standard size of one block is 5.56 kg. If the quantified blocks in a batch during the weigh bin segment are only around 5.20 kg, therefore the batch the Block machine will be receiving will only be 936 kg, short of 64 kg (the capacity of one batch is 1000kg). If the quantified blocks produced are more than 5.56 kg on the other hand, this also poses a problem since the capacity of Block machine is not sufficient to carry this size.

Delays.

On another note, the parts of the machines utilized by Piedra’s operations are difficult to replace. This poses a problem since delays occur due to inability to search for the corresponding part replacement in a short time. Another usual cause of delay is the delivery of pigment from the warehouse in the mixer segment of the production. This happens because the scheduling of the transportation of pigment from the warehouse into the production area is not monitored well.

Process chart: Proposed method

The goal is to reduce the time allocated to non-value activities for these are a waste and time resource that should have been allocated to Piedra’s value-adding activities. Below is the proposed method of the production process of Piedra floor claddings.

Computing for the total value added activities,

Total value-added time = operation time = 40 mins = 5.48%

total time 730 mins

* value adding activities include operations

** non-value adding activities include transportation, inspection, delay, and storage

Piedra allocates 85% of its operation time to storage. This is relatively large compared to a normal manufacturing firm. However, this is tolerable for such manufacturing as Piedra since the production of claddings entails a huge amount of time resource. The issue now lies to the many storage along certain segments (ie. storage before weigh bin, storage of mixed materials in Cooper). We do not alter this because the machines are a fixed investment and the segments (ie. Storage, Cooper, Block Machine, Cuber) are joint and immovable. Therefore, adjustments could be made to the human-facilitated activities instead.

According to the operations manager, 5% of the blocks are rejected upon inspection by batch prior to the Cuber segment. This means that out of 6300 blocks produced a day, 315 blocks are rejects (see computation below) and 1575 reject blocks a week. Those rejects are laid aside and sold as class B.

35 batches / day

180 blocks / batch

35 batches x 180 blocks = 6300 blocks

Batch

5% rejects: ( 6300 blocks ) ( .05 ) = 315 blocks

315 might seem a small compared to the 6300 total. What happens, though, is the rejects get stocked for a long period of time. This takes up a considerably large space in the storage area outside, taking up the space that could be efficiently allocated to more productive activities.

The solution therefore is to go to the root of the problem, and reduce or possibly eliminate the rejects. In the operation, Piedra holds visual inspection only once, and it takes place at the final part of the production—at the posterior conveyor belt before the Cuber. This is to check the state of the blocks after curing/drying.

It is recommended therefore to hold visual inspection at the critical part of the production: after mixing the aggregate with the pigment. Checking the quantity of each block and the right amount and blend of pigment in every quantified block will spell accuracy and good quality control. This will also eliminate the problem of inaccuracy of filling the block discussed earlier.

Furthermore, it is recommended to double the amount of inspection (from 10 minutes to 20 minutes). The small amount of time allocated to the inspection might be a cause of unseen blocks sold that are of less quality. This is not far-fetched since they only hold visual inspection which is liable to error and decisions subject to personal mood. The current 10 minutes inspection meant only 3.33 seconds of inspection for every block. Doubling this into roughly 6.67 seconds gives a fair chance to accurately inspect each block. The two-part inspection will also be a chance for the final inspection to have an almost zero percent reject.

As for the delays, delays due to the late delivery of pigment from the warehouse shall be solved by proper layout issues. The inventory system of the warehouse should also include the scheduling of their raw materials in the production not just during shipment of the raw materials in the warehouse per se. This way, there will be no shortage of pigment supply in the production area.

At present, Piedra implements a Weekly Preventive Maintenance Program to check the machine parts. This inspection is done manually and also visually. To address the issue of difficulty in the replacement of machine parts, Piedra could locate and store a list of possible suppliers of the respective machine parts. This will only entail effort from the side of human resource. This is arduous but they should understand that collective effort is for the attainment of the vision of the firm towards being a quality leader.

LAYOUT STRATEGY

A company’s layout strategy is crucial for a number of reasons, most notable of which is that it establishes competitive priorities – especially costs. The layout provides an insight into the company’s effectiveness, capacity, processes, workers’ quality of life, and flexibility, and also has implications on the outside, affecting customer contact and image. An effective layout is needed to address issues that may concern differentiation, low cost, or response. In today’s manufacturing world, layout designs should keep up with the growing trend of being fast-paced by employing small, movable, and flexible equipment. This flexibility will certainly lead to the fulfillment of the strategy’s main objective to develop a cost-effective layout that meets the firm’s competitive needs. What a company has to do is to create a layout that would best address their cost issues and competitive needs.

THE REBTRADE PLANT LAYOUT

The land that Rebtrade currently operates on is approximately 2 hectares. The compound is composed of a single building, with wide open spaces on each side for the operations of machines and a large storage area. The plant’s layout is shown in Figure 1. It has at least four main work areas: the office area, warehouse area, Piedra section, and the interlock area.

Fifty percent of the warehouse floor space is occupied by raw materials, stored there from a minimum of three weeks to a maximum of 1 month. These include the pigments used to color the claddings. The other fifty percent of the area houses the finished products. The Piedra section shown in detail in Figure 2 includes 6 main workstations: mixing, staining, vibrating, sweeping and surface, stacking, and drying, with storage for raw materials such as cement and gravel on the right side. Given that there are a number of work areas available for layout analysis, the group has decided to focus on the largest work area in the whole plant –the interlock area (Figure 3). This interlock area houses two huge machines called the BESSER 1 and the BESSER 2, both used in the manufacturing of the floor claddings.

Figure 1. The Rebtrade Plant Layout

Figure 2. The Piedra Section Layout

Figure 3. The Interlock Area Layout

The Interlock Area

The plant’s interlock area employs the product-oriented or repetitive layout in their processes. They produce high-volume and low-variety products per batch, averaging on 35 batches per day. Each batch of claddings is approximately 1,000 kilograms or 180 pieces of the product. In a product-oriented layout, the assumptions are shown below, side-by-side the Rebtrade counterparts:

The production process is a continuous one, with a few inputs converted with output variations in size, shape, and packaging. In a product-oriented layout, the goal is to minimize idle time at each workstation and to “balance” the tasks and the time from one station to the next. This will result in higher efficiency – proper utilization not only of the equipment but also of the work force.

LAYOUT CONSIDERATIONS

We now take a deeper look at the current layout of the Rebtrade plant.

Physical Elements Considered in the Layout

Movable Equipment

Technically, the only movable equipment in the interlock area are the 6 forklifts used to:

bring the pigments from the warehouse to the BESSER machines for coloring
transfer the claddings from the block machine to the KILN, and back
transfer the finished products from the cuber to the storage area

Aside from these, the molders used to shape the products in the block machine are also movable. They are attached to the block machine to shape the product according to specifications.

Immovable Equipment

Most of the equipment used in the production of claddings are immovable, with special mention to the two huge BESSER machines. They are stationed in the middle of the work area, occupying most of the floor space. These BESSER machines are composed of different little machines in themselves, connected by rack conveyors and the like for easy transfer of products. The BESSER machines are composed of the following:

Storage 1
Weigh bin
Mixer
Cooper (Storage 2)
Block Machine
Loader/unloader
Rack conveyor
Cube

Existence (or Non-Existence) of Automated Storage and Retrieval Systems

Even if Rebtrade employs a JIT system for its inventories, they still have a warehouse to store them in. The warehouse is the only existing automated retrieval system in the plant, where the inflow and outflow of the raw materials is controlled. Other than that, all the processes require manual labor, with the inclusion of the manning of the equipments.

Manning

The whole process of producing the claddings require a minimum of a 7-man workforce. They work at these times, as patterned from the Process section earlier:

After these production processes, the blocks are then given to workers who manually pack them then bring them to the warehouse for final storage.

Non-Physical Elements Considered in the Layout

Environment and Aesthetics

The interlock area has a high ceiling (required for the tall and huge BESSER machines) that facilitates air flow throughout the whole work area. The interlock area has no partitions of any kind, but rather it is just a wide open space, about half of which is covered by a roof to protect the BESSER machines and the whole work area from weather conditions. The un-roofed part serves as the storage area for the raw materials and finished products alike. During stormy weather, they cover the raw materials storage part only with (…) to protect the cement and the like from getting soaked. The finished products on the other hand are left out no matter the weather condition. The BESSER machines, which they have evidently been using for a long time, are located right next to each other, with the storage for the molds used in the block machine placed nearer to BESSER 2. The floor of the roofed area isn’t cemented, but rather hard soil; the un-roofed area is cemented, but covered with sand. Looking at the plant’s interlock area layout, privacy is evidently not a priority because everyone can see everyone else working. Having a wide open space, noise is definitely heightened, if present.

Flows of Information

As stated earlier, the interlock area is a wide open space, with no walls for partition whatsoever. This, I infer, facilitates a broader flow of information, a piece of which will likely be easily passed on from one worker to the next. The main information of course comes from the main office, located just two rooms away from the labor area.

Cost of Moving Between Two Areas

Being immovable, the placement of the machines within the BESSER machines is already customized according to where the product being processed will go to and where it will come from. The movable equipment considerations are:

the placement of the molders used in the block machine, which are located near BESSER 2. These should be placed near the block machines so as to facilitate a smooth flow of production
the location of the KILN, where the product being processed is stored in to dry after being molded in the block machine. This should also be placed near the BESSERS to save time and the laborer’s effort in transferring the blocks from and back to the rack conveyor
the location of the temporary storage of final products, the packaging area, and the warehouse (final storage) are far from each other

ANALYSIS

Rebtrade’s product-oriented layout poses a lot of implications on the company’s effectiveness, capacity, processes, and flexibility, as already stated earlier. Their current layout strategy poses certain issues which must be addressed so as to improve the plant’s …

While the plant claims to employ the JIT inventory system, they still have a number of storage areas – fifty percent of the warehouse, and the un-roofed open space in the interlock area
The two storage areas of the raw materials are located away from each other
The (…) used to cover the raw materials found in the un-roofed open space is not enough to protect them during stormy weather
There are certain movable locations and equipment that need to be next to or near each other:

the Loader/Unloader and the KILN
the warehouse/storage of raw materials and the BESSER machines
the storage of the final products, the packaging area, and the warehouse where they are kept in are located at different parts of the plant

These layout issues should be properly addressed because they cost the company money, time and effort, especially since they are all crucial to the production of the blocks.

RECOMMENDATION

It is important that Rebtrade decrease waste and increase value within the plant by utilizing the appropriate layout strategy. Because of the JIT system, Rebtrade should minimize the number of storage areas by simply having one for all the raw materials.

Since the BESSER machines are technically immovable, the recommendations cover only the movable locations and equipment in the interlock area. By placing certain work areas right next to each other, certain costs can be cut, and time and effort could be saved as well. The recommendations are:

Figure 4. The Proposed Layout Strategy of the Interlock Area

What the plant needs to minimize cost and increase efficiency is to utilize all the space that they have. In a JIT strategy, it is helpful to have a strategic layout to reduce waste and increase value. Locations and equipment should be placed near each other if it would save time and costs it entails to make that movement, by means of putting a work-in-progress close to a station it should be in next. Raw materials should be placed in secure locations to prevent losses and production delays. Basically, a good layout sees to it that a firm reaches its competitive needs through low costs and production effectiveness and efficiency. A good layout must achieve the following:

LOCATION STRATEGY

Rebtrade International Corporation holds its main office in Mandaluyong City. It has one plant located in 10 FR Esguerra St., Tenejero, Pulilan, Bulacan—approximately an hour and a half away north of Manila. Its previous plant was located in Cavite, which is approximately two hours south of Manila. In 1996, Piedra decided to move its factory to its current location in Pulilan, Bulacan. Main determining factors for the move were increased costs of maintaining the Cavite plant and poor accessibility. The cost of land had increased, and surrounding roads were undeveloped and difficult to travel through. The move to Pulilan has proven to be beneficial to the company. The following analysis of the Pulilan plant is based on the factors that affect location decisions.

Labor Productivity

All employees stationed in the Pulilan plant are locals of Pulilan and neighboring barangays. This puts transportation costs at a minimum as employees live nearby and the factory is easily accessible by public transportation. Employees receive sufficient training with regard to the use of the many machines involved in plant processes. Middle management employees are computer literate and well versed in inventory management.

Costs

Among the tangible plant costs, a big fraction is attributed to depreciation costs. Machines in the plant have been used by the company since its startup in the 1980’s. The same machines from the Cavite plant were transported to Bulacan and continue to operate. Costs for materials such as sand, gravel, pigments, pumice and texin are relatively uniform with the exception of cement. This will be discussed in detail in a following section.

Attitudes

Rebtrade International Corporation takes pride in making the effort to create and foster relationships within the community as well as with surrounding barangays. Since its establishment twelve years ago, the company has maintained an interactive relationship with Pulilan’s local government. It has embarked on joint projects with neighboring barangays; a current one centering on waste management. These initiatives have won Rebtrade the hearts of the locals.

The plant’s mission goes as follows:

Mission Statement of Rebtrade Pulilan Plant

Rebtrade Pulilan manufacturing plant has nothing more to offer but quality. We believe that quality is not commodity but a responsibility to fulfill. We are growing and as we grow, we shall continue our service-oriented tradition in servicing Pulilan and our outside-local and international community in the production of highly qualified and competitive specialty construction materials to make our homes and infrastructures better and a little safer.

In support of this commitment it shall provide:

Durable and less expensive products and services with consistent quality and accepted standards that will merit customer satisfaction.

Maximum efforts to provide with a reliable and quality conscious labor force sensitive to the customers’ needs.

A working environment that reflects quality as a way of life for its employees.

Proximity to Markets

Rebtrade’s market is primarily composed of homeowners, future homeowners, and professionals (i.e. architects). Normally, clients of Rebtrade visit its main office in Mandaluyong, MC Depot, or Home Depot in Ortigas. On some occasions, big clients (mainly architectural firms) go straight to the plant to make direct purchases from there.

Proximity to Suppliers

Rebtrade’s main suppliers are located near its Pulilan plant. Its suppliers for sand, gravel, and the like have plants in neighboring Pampanga. On the other hand, its supplier for cement is located in Antipolo. Rebtrade continues keeps this supplier because they are the only one that meets Rebtrade’s standards for the required cement mix. This entails higher costs, and consequently puts Rebtrade’s products at a premium.

Proximity to Competitors

Vazbuilt, another manufacturer of construction materials that also specializes in stone products, also holds a plant in Pulilan.

Recommendation

Pulilan is one of the 24 towns that comprise Bulacan. It is strategically located at the border of Pampanga (and Bulacan), where most of its suppliers are located. With an area of about 3,000 hectares, it is surrounded by Apalit, Pampanga in the north, by Baliuag in the east, by Plaridel in the south, and Calumpit in the west. The Angat River cuts its way through the southern fringes of Pulilan. This location is suitable to the company’s mission and objectives of high quality products and a quality conscious labor force. The residents of Pulilan are no strangers to industrial plants, and the company has successfully established ties with locals in and around the town. The main issue for consideration is Rebtrade’s cement supplier. It is recommended that the company search for other alternative suppliers given their required mix. Otherwise, they may request existing suppliers to provide them with a mix that fit Rebtrade’s standards so that the company may cut costs and increase efficiency of cement delivery.

SUPPLY CHAIN CRITICALITY

In the transformation process, the supply chain ensures the coordination among organizations, people, resources, activities, technology, and information involved in moving a product from supplier to customer. The activities in the process of transforming raw materials to finished products link value chains to guarantee that they only provide end customers with high-quality products.

More often than not, a supply chain begins with ecological and biological regulation of natural resources, followed by the human extraction of raw material which includes production links, and finally reaching the customer. Therefore, most of the exchanges in a business’ supply chain will be between different companies who seek to maximize revenue within their sphere of interest.

Supply chain management, on the other hand, integrates the key business processes from end user through original suppliers. The core benefit of SCM is that businesses involve themselves in a supply chain by exchanging information regarding market fluctuations and production capabilities. This allows companies to optimize the whole supply chain which will lead to a better planned overall production and distribution which can result to well-managed supply-chain relationships that can cut costs, give a more attractive product, improve sales, and provide better overall results.

The primary objective of an incorporated supply chain management is to satisfy the ultimate customer by building a chain of suppliers that focuses on maximizing value. To do so, businesses should treat their suppliers as “partners”, match demand with supply with the minimal level of inventory, liaise with suppliers to eliminate bottlenecks, source strategically to strike a balance between lowest material cost and transportation, improve manufacturing flow, and optimize logistics to maximize the efficiency of their distribution.

SCM addresses the following problems:

Distribution Network Configuration: Number, location, and network missions of suppliers, production facilities, distribution centers, warehouses, and customers.
Distribution Strategy: Operating control (centralized, decentralized, or shared); delivery scheme; mode of transportation; replenishment strategy; and transportation control.

PIEDRA SYSTEMS, INC.’S SUPPLY-CHAIN MANAGEMENT

Piedra Systems, Inc.’s commitment is to deliver only the best. As the company grows, they continue to serve Pulilan and their outside- local and international- communities in the production of highly qualified and competitive specialty construction materials to make homes and infrastructures better and safer. It shall provide the following: (1) Durable and less expensive products and services with consistent quality and accepted standards that will merit customer satisfaction, (2) Maximum efforts to provide with a reliable and quality conscious labor force sensitive to customers’ needs, and (3) A working environment that reflects quality as a way of life for its employees. Basically, Piedra aims for 100% quality in its finished products but this can only be attained with the best inputs- raw materials, people, technology, and information. For purposes of discussion, with the restricted data that they shared with our group regarding their supply chain, I will focus my discussion in their supplier relationship and not delve into the cash flows given that they did not disclose any information regarding their accounts payable and receivable.

Supply Chain

As illustrated below, the supply chain starts with the design data which is given by the Marketing Department, located in their Mandaluyong office. Since Rebtrade is highly consumer-driven, it derives the design of their molds from their customers’ specifications. After receiving the client’s design data, the marketing department determines the order and mode of payment. The design data will then be forwarded to the Pulilan plant where scheduling of the production will be finalized. Most of the raw materials are purchased locally and internationally. To manufacture wall claddings, the following materials are needed: cement, sand, gravel, pigments, pumice, and additives. Sand are delivered from the Popcorn factory in Pampanga, Gravel are from the Island factory, Texine are purchased from Shell, pigments and other additives are imported from Japan, and cement are bought from three suppliers- Portland Plus, Republic, and Fortune. When all these materials are made available in the Pulilan plant, the manufacturing of cladding stones will start. After the ordered cladding stones are dried, they are checked by the Quality Control personnel, once the order passes the Quality

Conformance Report, packing will follow. This process is being outsourced wherein Rebtrade pays by number of tiles. These finished products will be packaged in boxes. Attached in each box are the product code and batch number. These boxes will be loaded in the three trucks that are available for the transportation of the order. The cladding stones are either distributed in home depots (MC and Ortigas) or are delivered directly to the client.

Credit flow then follows wherein accounts receivable will be settled and feedback from the client will also be taken into consideration. With the tight competition in the industry that Rebtrade is in, it is critical that they determine the product design and service that will satisfy their end customers. Then the chain continues.

Supply-Chain Decisions

With the focus of Rebtrade in process, its production strategy therefore is “job shop”. The table from Heizer & Render, 2006 below discusses how supply-chain affects strategy, which in Rebtrade’s case is a differentiation strategy.

Differentiation Strategy

Rebtrade positions its products as high-quality at a higher price. When competition tries to undercut their costs, Rebtrade relies on the joint relationships with their suppliers and with their knowledge of the market. Since most of the business’ orders are highly customized, their manufacturing processes are flexible to respond to market changes, thus, allowing them to accommodate mass customization. Cladding stone orders are operated on a just-in-time (JIT) basis in minimum lot sizes. Also, changes in the manufacturing flow process lead to shorter cycle times, meaning improved responsiveness and efficiency of demand to customers. Activities related to planning, scheduling and supporting manufacturing operations, such as work-in-process storage, handling, transportation, and time phasing of components, inventory at manufacturing sites and maximum flexibility in the coordination of geographic and final assemblies postponement of physical distribution operations.

Supply Chain Strategy

As mentioned above, Rebtrade has a few suppliers. This is in accordance to their pursuit to maintain a long-term relationship with a few dedicated suppliers. When asked why they have a number of cement suppliers, they explained that cement is the primary component of their cladding stones and so they have to have a backup supplier in case one of the suppliers cannot meet their demand. In an industry where a client’s order cannot be delayed, it is critical for a business to satisfy the client’s demands at the right time. Losing a loyal client can cripple the business.

HOW THEN CAN PIEDRA IMPROVE ITS SCM?

For Rebtrade to achieve an effective supply-chain management, they should start with their relationship with their “partner” suppliers. It is also noticeable that aside from cement, their other raw materials are being supplied by only one supplier. This may pose a problem for Rebtrade when they fail to stock-up and their suppliers cannot supply the needed raw materials for production. To avoid this, they should start looking for other vendors, conduct a vendor evaluation, and strategically optimize their network by including in their criteria for vendor selection the number, location, and size of warehouses, distribution centers, and facilities. Once suppliers are selected, they should form a strategic partnership with them and coordinate for product design so that new and existing products can be optimally integrated into the supply chain.

Vendor Evaluation

They can also benchmark all their operations against competitors and implementation of best practices throughout the enterprise. As a result, Rebtrade can gain competitive advantage with the gathered information from partners. Strategic partnership should not only be between Rebtrade and their suppliers but they should also include their customers and distributors, hence, creating communication channels for critical information and operational improvement. Conversely, daily production and distribution planning of cladding stones should include all nodes in their supply chain. Sourcing planning, including current inventory, demand planning, and forecast demand, should be collaborated with all their suppliers.

As mentioned before, Rebtrade outsources the packing of their finished products. But during our plant visit, we saw on the sides of the plant employees packing products in boxes. Additional costs incurred in outsourcing can be eliminated if they keep the packaging an in-house activity.

Along with their pursuit to create ties with their suppliers, Rebtrade focuses on satisfying customer demand. Improvement on their customer relationship management can be done so as to obtain customer information and customer service provides real-time information on promising dates and product availability through interfaces with the company's production and distribution operations. To successfully build customer relationships, Rebtrade should determine mutually satisfying goals between organization and customers, establish and maintain customer rapport, and produce positive feelings in the organization and the customers. In physical distribution, they should ensure the availability of their products and services.

To improve their market share and profitability, Rebtrade can take advantage of supplier capabilities and emphasize a long-term supply chain perspective in customer. As logistics competency becomes a more critical factor in creating and maintaining competitive advantage, logistics measurement including cost, customer service, productivity measures, asset measurement, and quality should be conducted. On the other hand, external performance measurement should be examined through customer perception measures and benchmarking,

Lastly, Rebtrade should align their overall organizational strategy with supply strategy. This can be achieved through an improved Information Technology infrastructure which will support their supply chain operations. Though they may have to incur high costs to install a Computer-integrated Manufacture (CIM), it will help them achieve their objective of building a chain of suppliers that focuses on maximizing value to their ultimate customer. Through CIM, the scheme design information of the cladding is transmitted digitally from the Mandaluyong office to the Pulilan plant and the subsequent fabrication of the cladding components will be computer-controlled without the need for paper documents. This digital integration will extend beyond manufacture through stocking, dispatch, and on-site installation. All cladding project processes will be fully integrated and automated with a single software suite spanning the whole specification-design-manufacture-installation cycle. Bottlenecks inherent in the current cladding procurement, primarily associated with information clarity between the scheme and detailed design stages, are addressed by CIM working practice. This would use a cladding product model to integrate the information requirements of project delivery processes across organizational boundaries, from scheme design through detailed design to the manufacturing and installation processes. The long-term goal of CIM working practice is to improve the efficiency and competitiveness of the cladding sector through integration of the cladding procurement process, the specify-design-manufacture-install cycle. To realise this goal will require long-term commitment and participation from the supply chain, plus sufficient involvement of the application software developers, to provide a critical mass that can snap-through and thus carry (much) of the rest of the industry with it.

Piedra’s Implementation Phases

INVENTORY MANAGEMENT

Devising an efficient system for counting and maintaining a stock of inventory items has long been an arduous task for many companies. Even though the use of electronic catalogs has proliferated especially in foreign countries, most Philippine-based companies still rely on the old methods of cataloging by part or item numbers.

Ensuring total customer satisfaction entails inventory management; owners must maintain a stocking service for quick turnaround. With that said, to be successful in today's fast-paced, highly competitive environment, companies need to have the necessary parts on stock or have reliable suppliers to meet customers' demands in a moment's notice.

However, some companies opt not to stock any items at all. The philosophy behind here is that the company does not want to tie up its cash in unused inventory that often depreciates while sitting on the shelf. In this case, minimal time and money is allocated for an inventory system since it solely depends on its parts suppliers to stock the items the company uses most frequently.

Just-In-Time

Just-In-Time (JIT) is a movement that has gained wide acceptance in the business community over the past decades. As companies became more and more competitive and the pressures from Japan's continuous improvement culture dominated, other firms were forced to find innovative ways to cut costs and compete. The idea behind JIT, or lean manufacturing, is to have the supplies a firm needs at the exact moment that they are needed. In order to accomplish this goal a firm must constantly be seeking ways to reduce waste and enhance value.

Rebtrade

Rebtrade is one example of such a company that claims to be operating under the JIT principle. Of course, part of designing an over-all control system for Rebtrade, or for any other company for that matter, is deciding which of the control tools and techniques are suitable. Preferably, the company should keep a close eye on all operational activities at all levels. But then again, this will cost money. Since Rebtrade is still relatively a small-scale business, a few number of individuals are needed to monitor operations altogether. Top management therefore must examine the cost-benefit tradeoffs to be derived from the control tools that will be implemented by the company.

Physical Control

Like any other manufacturing company, Rebtrade processes a variety of raw materials before they end up with a set of finished goods. In this case, the raw materials involved in making Piedra Wall Cladding Stones and Floor Blocks are as follows: (1) cement, (2) sand, (3) gravel, (4) pumice, (5) Texine, and (6) pigments. All the aforementioned raw materials are ordered on a regular just-in-time basis, except for the pigments, as they are acquired from abroad. Hence, what usually happens is that Rebtrade orders pigments above their quantity requirement prior to production so as to save on shipping costs and comply with shipping regulations pertaining to minimum quantity level. As soon as the raw materials arrive at the plant, they are immediately transported to the warehouse claim counter where a designated person is responsible for physically receiving the orders. The warehouse counter area likewise monitors movement or usages of raw materials within the plant.

In the production area, the internal control system's center of attention must be on the safeguarding of not just the raw materials, but also the finished goods, factory machines, and spare parts. For that reason, inventory records must be continuously maintained. The utilization of stock cards by Rebtrade makes the recording of all receipts and releases for each item in the inventory possible. Once in a while, the physical count of the inventory items could then be easily compared with that of the balance shown in the stock card. Best of all, even if the manager is not physically present in the factory, he can just as instantly determine inventory levels both for raw materials and finished goods.

Determining the Level of Inventory

As much as Rebtrade is concerned, the primary objective of determining inventory levels is to ensure that the company always has enough to satisfy the projected sales estimate. Upon the receipt of the current month sales estimate and the three months forward sales estimate on the 10th of the month, the production control department prepares the production ticket and projection worksheet by the 15th of each month. But before establishing this, they first determine the estimated inventory at the end of the current month by entering the figures in this form as follows:

1.1 Beginning Inventory - this is the actual current quantity by size and type inventory nationwide

1.2 Current Production Ticket – this is the actual production ticket established the previous month

1.3 Current Month Sales Estimate – this is the data picked up as submitted by the 5th

1.4 Ending Inventory – this will be the estimated ending inventory at the end of the current month nationwide by size and type based on 1.1 above + 1.2 – 1.3 = 1.4

Since it is expected that the size and type, and the current month sales estimates will be revised either upward or downward, based on the last month's forward sales estimates, a well balanced inventory by size and type is also expected at the end of the current month. In order to attain this, it will be necessary to make adjustments in the current production ticket size and type.

At the end of each month, a stock position would only be maintained only on those items authorized by the executive committee at the approved level of inventory. Moreover, after establishing the production ticket and the projection worksheet, it would be imperative to indicate the production priorities based on urgently required items by the customers or items with critically low inventories. Finally, the production ticket and the projection worksheet would also reveal production capacity in terms of the number of molds, and etc. Thus, the management can readily signal production bottlenecks for the current month as well as the forward months.

Sales Estimate

In establishing the monthly production ticket and the three months projected production, Rebtrade correspondingly established a policy in using the three months forward sales estimates from the sales division. Every month, the sales division is required to submit the following:

2.1 – three months forward sales estimates by month, quantity, size, and type

2.2 – this sales projection period of three months must be updated every month, thus, every month a new month is picked up while the first month is dropped

2.3 – the sales management prior to submission to production control must officially approve this

2.4 – deadline of submission is every 10th of every month

For the finished goods, the purpose of the sales estimates in scheduling production is to properly control finished goods inventory levels by quantity, size, and type that must be in line with the stock on hand as approved by the executive committee. Ultimately, the goal is to provide the right stock quantity at the right place.

Determining the Level of Raw Materials

For the raw materials, the purpose of the sales estimates in projecting production is to properly determine the raw materials inventory level requirements by quantity, size, and type that must be in line with the stock on hand, in transit, on order, and to order, as approved by the executive committee.

This rationalization of production will provide the purchasing department with the accurate information regarding the following:

3.1 – purchasing the right material at the right quantity

3.2 – scheduling the right arrival time required at the factory

3.3 – providing time to develop new suppliers for the best quality, price, terms of payment and delivery

To further have a vivid picture of how the processes unfold, below is a flow chart that represents the sequence of operations:

Clearly, the level of raw materials is dependent both on the level of beginning inventory and the sales estimate. Typically, the lead time associated with purchasing raw materials locally would be 3 days, whereas purchasing raw materials abroad would be 8 weeks. Most of the time, Rebtrade pays on cash, but for some exceptions, the company is allotted with 15-30 days of credit terms.

Lastly, the sales estimate will also provide the finance department with the cost for purposes of financial estimates, cash flows, and budgets.

Control Tools and Techniques

Operational control tools or techniques are concerned with the processes that the organization uses in the performance of an activity related to specific operations such as production scheduling, and determination of raw materials and finished goods inventory. As mentioned earlier on, stock cards show the record of all receipts and releases for each inventory item. The receiving person at the warehouse must accurately receive and document all the receipts by accomplishing the materials inspection and receiving report form. Afterwards, he or she must promptly distribute to the recipients all the copies of the materials inspection and receiving report. Right away, this must be posted into the stock card with all the pertinent information required by the form fulfilled.

Upon receipt of a travel card form at the warehouse, the receiving person must accurately post and label as "outgoing" and fill up all the right quantities or descriptions into the stock card. Before releasing the raw materials for production, it is equally important to accurately compute outgoing less whatever is the stock on hand. The travel card will specify the quantity to be mixed. Immediate action must be taken to process the raw materials in order to avoid delays in delivery. Necessary precaution must also be observed in handling the finished goods. As soon as production is complete, the final production figure must then be entered into the travel card. Similar to the receiving process, the receiving person at the warehouse again inputs all the information required by the stock card form.

General Observation

As small as it is now, Rebtrade is getting by smoothly in terms of physical control of both raw materials and finished goods. Once it embarks on an expansion though, it would be impossible for a few individuals to monitor all activities. Additional personnel and other technical facilities for information processing will be required to facilitate better control. In due time, they might need to adopt more sophisticated control tools and techniques such as the Economic Order Quantity model, and establish a consistent reordering point. By working to reduce inventory levels to the lowest possible levels, a firm must constantly be adjusting its schedule of ordering and delivering. In doing so, communication both up and down the supply chain is critical. Frequent orders are placed for supplies and small production runs are constantly being initiated. Having finished goods with an over-all value of Php 5, 000, 000 and raw materials with an over –all value of Php 7, 000, 000, using the proper control tools and techniques would not just guarantee a sales value per year of Php 12, 000, 000, but might even help surpass that level.

Looking back on the flowchart, the projection of a sales estimate is crucial to the determination of the level of finished goods to be produced and raw materials to be purchased. If ever the sales department fails to develop an accurate sales forecast, everything else would be severely affected. As of the moment, there still is no means to measure how accurate the sales forecasts are, and as a result, top management simply adjusts the forecasts based on the conservative approach as they anticipate that there would be minimal cash flow.

Being a company that relies on the JIT philosophy, they save up on the costs of carrying bulky inventory. There is practically no need for them to maintain high levels of raw materials and finished goods inventory as they can always talk and negotiate with their customers, whether builders, developers, or direct consumers, to wait for delivery while the construction is still on going.

Lastly, considering that the wall claddings and floor tiles are relatively bulky, it makes it even less prone to theft.

Again, for now, the existing control tools seem to be adequate for the current size of Rebtrade.

APPENDIX

1- Stock Ledger Card

APPENDIX 2- Economic Order Quantity Model

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