“An Operation`s Driven Strategy for Vitarich Feed Mill Business”

Transcription

VITARICH CORPORATION
“An Operation’s Driven Strategy for Vitarich Feed Mill Business ”
ESTACIO, MARY ANNE DC
EMG - 4
1
Acknowledgement
This study would not have been possible without the guidance and the help of several
individuals who, in one way or another, contributed and extended their valuable assistance in the
preparation and completion of this study.
First and foremost, the researcher would like to thank her family and the One above all. Thank
you, Dear Lord. Her utmost gratitude to her adviser, Prof. Marvin I. Noroña, for his unfailing support and
encouragement. The researcher will never forget that he has been her mentor as the researcher went
through the completion of this study. Dean Rex Robielos for his guidance and tolerance and also
challenging the researcher to work harder.
The researcher would also like to thank her panel committee, Prof. Madonna F. Andrada, Prof.
Jenalyn Shigella G. Yandug and Prof. Cecilia S. Cruz, for their comments and constructive suggestions in
making this study more significant. Her deepest appreciation to the Production Department staffs of
Vitarich Feedmill, for the great learning experiences and for allowing her to conduct the study in their
company and for providing the necessary data to complete this study.
Lastly, the researcher would like to thank her friends and colleagues inside and outside the
Institute , their encouragement and sincere concern are deeply appreciated.
M.A.D.C.E
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CHAPTER 1
Introduction
Vitarich Corporation was incorporated and organized in 1962. The forerunner of Vitarich was
established in 1950 by the brothers Feliciano, Lorenzo and Pablo Sarmiento, when they founded
Philippine American Milling Co. Inc. (PAMCO). PAMCO eventually moved from its original location to a
more modern feed plant in Marilao, Bulacan. This move marked the beginning of Vitarich’s fully
integrated operations and the trade name “Vitarich” was subsequently adopted.
In 1962, after PAMCO acquired additional machinery and equipment to increase capacity, the
Corporation was registered with the Securities and Exchange Commission (SEC) under the name
“Vitarich Feedmill, Inc.” The corporation entered the poultry business and built an experimental poultry
farm. In the years that followed, the corporation entered into agreements with U.S. companies Cobb
International and Bobcock Poultry Farm for the exclusive franchise and distributorship of Cobb broiler
and Babcock layer breeds respectively in the Philippines.
The corporation is presently engaged in the production and distribution of various poultry
products such as live and dressed chicken, day-old chicks and animal and aqua feeds, among others. It
has operating offices in some parts of Luzon, in Iloilo, and in Davao, and various satellite offices in some
parts of Southern Philippines. As an integral poultry producer, the Corporation overseas every aspect of
the poultry production from breeding and hatching to processing to sales.
Subsidiaries

Gromax, Inc.

Philippine’s Favorite Chicken Inc.
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VITARICH CORPORATION: Company Situation
By the year 1970’s, the corporation further expanded its operations and extended its vertical
integration by acquiring dressing plants and cold storage facilities. In 1981, the corporation expanded
outside Luzon by setting up the Davao satellite feed mill. The following year, the corporation increased
its feed milling capacity in Marilao, Bulacan and at the same time, started operating its Cagayan De Oro
feed mill and hatchery. Subsequent areas of expansion in the Visayas included the cities of Iloilo and
Bacolod. In 1988, the Corporation entered into a joint venture with Cobb-Vantress, Inc. (CVI) and formed
Breeder Master Inc. (BMI) to engage in the production of day-old parent stock. CVI is 100% owned by
Tyson Foods, Inc., the world’s largest chicken company. BMI, which is currently known as Cobb Vantress
Philippines Inc., is a domestic corporation which is 80% owned by Vitarich and 20% owned by CVI.
In 2002, the corporation decided to dispose of its investment in BMI and agreed to pay its
liabilities to BMI by returning all of its shares of stocks to BMI. Thus, on Feb 2003, the corporation
entered into a Memorandum of Agreement with BMI and CVI, the minority of shareholder of BMI.
Under the MOA, the capital investment of Vitarich in BMI will be returned in payment of Vitarich’s
outstanding liability to BMI. This will leave CVI as the sole shareholder of BMI. From then, the
corporation starts to have difficulties.
The company loan an investment for expansion. But after some time they failed to response on
the debt duty. The interest of the money they borrowed rises year after year. In order to survive, the
company entered into an Omnibus Agreement with various local creditor banks where its existing debt
amounting to P3.17 billion was restructed into a Revolving Credit Line in the amount of P503.0 million, a
7-year term loan amounting to P1.668 billion and 10-year Convertible Notes amounting to P1.0005
billion. In 2006, the company filed a petition for corporate rehabilitation before the Court and proposed
several strategies in order to effect a viable rehabilitation such that within the proposed period, the
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company will not only be able to pay-off its liabilities to creditors but at the termination of the
rehabilitation will have an ample supply of cash to support its operation. Year after year, the overall
sales of the company continuously decline while the cost for overall production and operations increase.
In spite the company’s crisis, the company will continue to focus on its core business and strive to
improve operations.
CROP
FEEDS
ANIMALS
PROCESS
FOOD
Feeds
Poultry
Food Products
The graph shows the percentage of its product distribution. As of 2010, contribution to gross sales of the
corporation’s business groups was as follows: feeds 70%, poultry 25% and dory at 5%
5
Vitarich under a Corporate Rehabilitation
On September 2006, the company filed a petition for corporate rehabilitation before the Court
and proposed several strategies in order to effect a viable rehabilitation such that within the proposed
period, the company will not only be able to pay-off its liabilities to creditors but the termination of the
rehabilitation will have an ample supply of cash to support its operations. Based on such Court-directed
Stay Order, the company suspended payments of its interest-bearing loans and trade payables and
stopped accruing interest on such loans or recognizing the interest following the effective interest
method starting on the month-end immediately preceding the date of issuance of the Stay Order. The
company’s management believed that the Court’s order to stay the enforcement of claims included the
non-recognition of interest expense from the date of the issuance of the Stay Order, including the
amortization of the excess of the face value over the fair value of the interest-bearing loans. The
company’s position was based on the opinion of its legal counsel that the Stay Order also covers the
non-accrual of interest. The accrued interest as well as amortization of excess of face value over the fair
value of the interest-bearing loans not recognized amounted to P72.6 million in 2006 and remained
unrecognized until the re measurement of the amortized cost of interest-bearing loans in 2010.
The Court-approved rehabilitation plan provides the following:

A modified debt restructuring scheme for a period not exceeding 15years.

Payments of interest to all the Company’s creditors on the following basis:
- Years 1 to 3 - at 1% per annum to be accrued on Year 4
- Years 4 to 6 – at 2% per annum,
- Years 7 to 9 – at 3% per annum, and,
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There are two options for Vitarich;
TURNAROUND STRATEGY

Revise existing strategy

Launch efforts to boost revenues

Cut costs

Sell off assets to generate cash and/or
reduce debt
END-GAME STRATEGY

Disengaging from an industry during
early stages of decline

Gradual phasing down of operations

Loss the goodwill of the company
Through the Corporate Rehabilitation approval, Vitarich still has the opportunity to still continue
and revive the company. They have been given a chance to revise the strategy that will come up with a
feasible solution for the company’s survival and be back as the leading corporation in their industry.
SALES
YEAR
SALES (in billions)
COST (in billions)
2006
3.1
1.5
2007
3
1.6
2008
2.8
1.6
2009
2.6
1.7
2010
2.3
1.8
7
Vitarich Corporation
3.5
3
2.5
2
SALES (in billions)
1.5
COST (in billions)
1
0.5
0
2006
2007
2008
2009
2010
The graph shows the five year data of Vitarich that correspond to the problem in sales and
expenses of the company.
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Problem Statement
For Vitarich that has an attractive industry which is a big opportunity for the company to still
continue the business. Vitarich is an established company which it has resources, brand equity and
market share, by using this and a study for a strategic formulation, Vitarich can survive from its
difficulties. The main problem of Vitarich now is how this remaining asset of the company will be used in
order to come up with a feasible study to boost the revenue of the whole corporation. It is important
that every department should be observed for the possible solution that will help the company and one
of the biggest shares in the corporation is the Feed Mill Production.
The Vitarich Feed Production has the 70% shares in overall sales of the company. One of the
problems is that the supply of feeds is low and couldn’t meet the demand of the market. The under
production problem of feeds is caused by the machines inability to produce the target number of goods.
Old machines have been frequently breakdown and have output problems. The below data shows the
capacity and the demand of Vitarich per decades according to the machine operation;
Capacity
Demand
Loss
YEAR
(vol)
(vol)
(vol)
1960-1970
8.3
8
1971-1980
8.1
8.1
1981-1990
7.8
8.2
0.4
1991-2000
7.3
8.4
1.1
2001-2010
6.7
8.5
1.8
The data shows over the decades the incapability of Vitarich to meet demand resulting in a loss
opportunity. This actually led to the financial woes that Vitarich is in and the company’s inability to
invest in new machines and equipment because of its paying obligations. The company has no capital
available for modernization and maintenance.
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Objective of the Study
The study is to come up with a new strategy for the Vitarich Feed Mill Business. Also, this study
aims to identify the cause and do feasible studies of every department in corporation in order to make a
new long term strategy that will help the whole corporation lift from the rehabilitation. And while doing
steps to fulfill this strategy short term tactics that will finance the focus objective will have to be
identified. The production of supply should meet the demand in order for the sales to lift up.
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Scope and Limitation of the Study
The study will focus on doing a turnaround strategy for the Vitarich Corporation; this will be
covered studying every factor that the company should be improved. While aiming for the long term
strategy for the company, a short term tactics will also be conducted. By systematize its Feed mill
production to meet the demand in the market; the company can produce finances for their long term
objectives.
Expected Learning
This study will show that a company which struggling to improve their overall performance can
solve their problems by the help of engineering methods taught to an EMG student. To understand a
strategy without good execution is useless.
Direct Contribution of Study
To the company, this study would help it to cope up with an idea of rebuild and remake their
strategy to improve their performance. The study will definitely contribute to the growth of the
company as it can possibly decrease its expense. The study can also eliminate costs for a higher
profitability.
To the student, this study will help them apply all the knowledge they have learned. This will
help putting the management skills into action and into the real company situation. Furthermore, the
students will have additional knowledge on factors that may affect such industry with the possible
changes in the macro environment.
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CHAPTER 2
REVIEW OF RELATED LITERATURE
According to Fred (2006) in Corporate and Investments, corporate rehabilitation is distinct and
separate from insolvency. Rehabilitation is intended to enable a distressed corporation to gain a new
lease on life, so to speak, and to continue its business as a going concern. On the other hand, insolvency
is intended to close and liquidate an insolvent corporation (please note that insolvency is also available
to individuals or natural persons, while rehabilitation is available only to corporations, partnerships and
associations). With the increased media coverage these past months regarding businesses undergoing
corporate, even the general public has started asking questions regarding this legal option that is
available to distressed corporations.
According to Chopra (2010), outsourcing is not necessarily a flawless and easy solution for
business. It is absolutely essential for a company to look at all the variables of outsourcing before
making the decision to use it as a tool for growth. There are several problems with outsourcing that
many businesses fail to assess and find that they are not profiting as much as they may have anticipated.
First and foremost, one needs to be wary of some hidden costs of outsourcing that are usually skipped
by some negotiators, especially when outsourcing to countries overseas. Always inquire about the legal
costs of signing contracts and time to spend on contract coordinating. Taking cautious steps is essential
to help prevent one from committing mistakes while outsourcing software development. The first thing
that one must do is to try his best to choose the right company. Looking for the cheapest solutions may
backfire as the cheapest does not guarantee quality. Find an experienced company. Contact their clients
to know if they offer quality outsourcing services like website architecture. There are other non-financial
problems to outsourcing with another country time zone differences, language barriers, unexpected
cultural differences, and the necessity for data security are all areas that could make off shoring more of
a hassle than financial savings are worth. In fact many US companies only save about twenty-five
percent which is very comparable to savings which may be acquired through remaining outsourcing
domestically to a financially depressed region. Another problem with outsourcing of any kind today is
what responsibilities are being outsourced. Many companies end up outsourcing crucial core company
functions, like accounting and even secretarial services.
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According to Worsham (2010), it is possible to have a successful preventive maintenance
program. From a cost reduction viewpoint, it is essential, but it does entail risk. When the proper care is
taken, the risks, however, can be minimized. In order to minimize risk, preventive maintenance has to
be carefully planned and carried out by well-trained and motivated workers. The biggest benefits of a
PM program occur through painting, lubrication, cleaning and adjusting, and minor component
replacement to extend the life of equipment and facilities.
According to Hoffman (2011), with today's limited internal resources, it is tough to transform
machine maintenance from reactionary to preventive, and ultimately proactive, despite the obvious
upsides in higher overall equipment efficiency (OEE), better process control and lower total cost.
Outsourcing this requirement to a third-party specialist, however, is a cost-effective alternative,
according to companies that have crunched the numbers. Manufacturers of all sizes — from single plant
to multi-plant and multi-national — can benefit from outsourced maintenance to achieve world-class
productivity and competitiveness. There are six primary areas where a single-source maintenance
partner can optimize the capital investment and provide cost savings through lower total cost of
ownership and increased return on investment.
According to Wikipedia (2001), rebranding is the creation of a new name, term, symbol, design,
or a combination of them for an established brand with the intention of developing a differentiated
(new) position in the mind of stakeholders and competitors. Far from just a change of visual identity,
rebranding should be part of an overall brand strategy for a product or service. This may involve radical
changes to the brand's logo, brand name, image, marketing strategy, and advertising themes. These
changes are typically aimed at the repositioning of the brand/company, sometimes in an attempt to
distance itself from certain negative connotations of the previous branding, or to move the brand up
market. However, the main reason for a re-brand is to communicate a new message for a company,
something that has evolved, or the new board of director’s wishes to communicate. Rebranding can be
applied to new products, mature products, or even products still in development. The process can occur
intentionally through a deliberate change in strategy or occur unintentionally from unplanned,
emergent situations.
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According to Raffoni, Gadiesh, Gilbert, Mankins, Steele, Sull, Spinosa (2009), in a sluggish
economy, no firm can afford strategic missteps. Raffoni points out that even the most visionary, creative
strategy is useless if it is not well executed. Think simplicity, clarity, focus--and review progress
relentlessly. Gadiesh and Gilbert stress the power of an overarching, well-communicated strategy that
allows a company to maintain its focus, encourages workers to innovate and take risks, and creates
products and services that meet subtle shifts in customers' needs. Mankins points out that management
teams often get bogged down in unfocused, inconclusive discussions instead of making rapid, wellinformed strategy decisions. He offers seven techniques--for example, addressing the issues that exert
the greatest impact on the company's long-term value--to help management teams make better and
faster strategic decisions. Mankins and Steele explain how leaders can avoid the common mistakes of
planning and execution that often result in crippling financial shortfalls. They offer seven simple rules to
enable leaders to boost financial performance by 60 to 100%. Sull and Spinosa claim that what really
drives successful execution are promises--employees' personal pledges to satisfy the concerns of
stakeholders both inside and outside an organization. Well-crafted promises--which should be managed
as carefully as any other company resource--are public, voluntary, and clearly understood by all parties.
They enhance cooperation among colleagues and allow the company to seize new business
opportunities.
According to Pinkerton (2006), lean manufacturing is a business performance improvement tool
that focuses on enhancing quality, cost, delivery, and people. It helps expose waste and makes
continuous improvement possible by identifying and eliminating non-value-adding activities in design,
production, supply chain and management. In the world of lean manufacturing, companies try to
produce only what has been demanded by the customer, and only when the product is required. To
optimize benefits of lean throughout the supply chain, it is essential to build a partnership with
suppliers. This partnership must work on the basic principle that you pull only what you consume, and
nothing more. Suppliers restore what has been consumed. In this way, inventories are maintained at
their smallest for both dealer and customer.
According to Campbell and Alexander (2001), over the past two decades, the strategic plan has
become almost as common a management tool as the budget. But few executives are satisfied with it.
Many planning sessions result in no new actions, and the plans themselves often end up buried in
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bottom drawers. Most planning processes are met with groans rather than cheers. So what is wrong
with strategy or the way we develop strategy? First, people misuse objectives. They fail to distinguish
between purpose (what an organization exists to do) and constraints (what an organization must do in
order to survive). That confusion results in directionless strategies. Second, people are confounded by
process. Objectives are intertwined with strategy and with implementation in a way that makes it
difficult for an organization to decide where to start. Should managers set objectives and develop
strategies to achieve them? Or should they look for a winning strategy and then carve objectives out of
their understanding of what is achievable? Such confusion about where to begin causes planning
paralysis. Third, people expect that planning processes will lead to new and improved strategies. But the
basic ingredient of a good strategy—insight into how to create value—rarely emerges from planning
meetings. Instead, it originates in many varied and hard-to-control ways, some of which are more about
implementation than about strategy development. Thus, managers who focus on planning processes
often create flat-footed plans. The answer to developing a good strategy is not new planning processes
or better-designed plans. The answer lies in managers’ understanding two fundamental points: the
benefit of having a well-articulated, stable purpose, and the importance of discovering, understanding,
documenting, and exploiting insights about how to create more value than other companies do.
According to Christensen (2000), managers face two particularly vexing challenges in developing
and implementing competitive strategies. The first is to ensure that the strategy is not a reflection of the
biases (and possibly ignorance) of the management team—biases that are likely to be rooted in the
organization’s past successes. The second challenge is to ensure that once a company has outlined a
viable strategy, it allocates resources in a way that accurately reflects the strategy. In other words, the
strategy must mirror the realities of the company’s environment, and the resource allocation process
must mirror the strategy. But such alignment rarely occurs. The formal processes and de facto
mechanisms for formulating and funding projects to develop new products, processes, and services
usually are separate from strategy-formulation processes. And the personal, political, and institutional
factors that often heavily influence the process of strategy development are frequently disconnected
from the realities of the marketplace.
According to Mintzberg (2003), when strategic planning arrived on the scene in the mid-1960s,
corporate leaders embraced it as “the one best way” to devise and implement strategies that would
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enhance the competitiveness of each business unit. True to the scientific management pioneered by
Frederick Taylor, this one best way involved separating thinking from doing and creating a new function
staffed by specialists: strategic planners. Planning systems were expected to produce the best strategies
as well as step-by-step instructions for carrying out those strategies so that the doers, the managers of
businesses, could not get them wrong. As everyone now knows, planning has not exactly worked out
that way. While certainly not dead, strategic planning has long since fallen from its pedestal. But even
now, few people fully understand the reason: strategic planning is not strategic thinking. Indeed,
strategic planning often spoils strategic thinking, causing managers to confuse real vision with the
manipulation of numbers. And this confusion lies at the heart of the issue: the most successful strategies
are visions, not plans. Strategic planning, as it has been practiced, has really been strategic
programming, the articulation and elaboration of strategies, or visions, that already exist. When
companies understand the difference between planning and strategic thinking, they can get back to
what the strategy-making process should be: capturing what the manager learns from all sources (both
the soft insights from his or her personal experiences and the experiences of others throughout the
organization and the hard data from market research and the like) and then synthesizing that learning
into a vision of the direction that the business should pursue.
According to Tadelis (2007), few recent business trends have received as much attention as the
practices of outsourcing and offshoring. Many cases of failed outsourcing contracts suggest that the
strategic use of outsourcing may not be as beneficial as some believed, and hidden costs are often cited
as a main source of failure. A business leader can successfully innovate the sourcing practices of his
organization by employing strategic frameworks that will anticipate the hidden costs of outsourcing. The
author offers such a framework and argues for its wide use.
Based on Vashisht (2006), an important function of marketing planning is accurately estimating
the demand for a product. Demand forecasting is estimating sales of a product during some future
period. Estimating the total market demand and estimating particular share of their company is equally
important to the marketers. Company’s demand forecast, also called sales forecast, is the basis for
budgeting and operational planning, production and finance. Finance department uses these forecasts
to raise the needed cash for investment and operations; production department uses these forecasts to
establish capacity and output levels, and to purchase the right amount of supplies.
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According to Mather (1999), planning and scheduling functions are the key deliverables of the
planning role. This is where the most gains in execution have the potential to be made and acted upon.
In some larger organizations these are split, allowing more adequate resources for each role. The role of
the planner needs to cover the full range of the work order system, from input into coding, prioritization
and a degree of autonomy in execution. As such these roles, more and more need to be staffed by
skilled and versatile people. The difference between planning and scheduling needs to be clear within
each company. These are differing areas worthy of differing measurement and improvement initiatives.
According Hykin (2000), the industry is facing vastly different circumstances than they never
have before. New low-cost producers and an ever-shrinking world market have left the old, dominant
mills fighting for survival. No stone is being left unturned in the search for improvements that will allow
a mill to stay economically viable in these difficult times. One area of increasing focus is the maintaining
of our facilities. In the past, the maintenance department was viewed as a “necessary evil.” They were
the high priced wrench turners who sat in the shop and waited for equipment to fail. In more recent
history, people are finding ways to prevent failures before they occur. Tools such as vibration analysis,
infrared imaging, acoustic testing, and preventive maintenance help industry maximize profits by
minimizing downtime. To actually realize those potential increases in profits, it must be taken a step
further through maintenance planning and scheduling. In addition to identifying potential failures,
industries must also focus resources to correct them before the failure occurs. With decreasing work
forces and increasing responsibilities of those left at the facility, the efficiency of the resources easily
becomes a second priority. This becomes a slippery slope as less work is completed, more failures occur
and time is spent repairing failures, not on preventing the failure from happening. The only way to break
this cycle is to approach maintenance planning and scheduling as a new profit center. To do this,
industries must develop a new, disciplined approach to identifying, prioritizing and completing
maintenance work. The mill must understand that an effective maintenance planning and scheduling
program will produce a more efficient work force and decrease overall maintenance downtime. This
equates to higher profit margins for the mill and in turn increases the facility’s ability to survive.
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According to Rushton (2007), production involvement is extremely important. Without this, any
maintenance program will be jeopardized. Commitment to the success of a maintenance program must
extend from top production management through the front-line supervisors. If production management
is not committed to a maintenance program, then unrealistically high or low requirements may be made
of the maintenance forces. Either situation can cause poor performance and low morale. The system
will go in easily at facilities where the production and maintenance managers work as a team in an effort
to achieve common goals. In these cases, the production manager will want to see what he will receive
in service from the maintenance department if such a program is started. A basic outline of the systems
must be
developed prior to selling
the
concept to upper
management.
An overall
maintenance philosophy will be developed by the production and maintenance team leaders. A system
to fit this philosophy will then be developed by the maintenance group.
According to Farrell (2004), the concept of Best Practice is easy to describe and discuss – the
more difficult part is determining your path towards reliability and maintenance Best Practice and more
importantly,
sustaining
standards
and
developing
a
continuous
improvement
culture.
However, being armed with the best techniques, procedures and systems does not mean that one will
enjoy a trouble free life with the best reliability figures on the planet. The approach to maintenance and
equipment reliability must be considered in full view of the papermaking business with all parties and
departments aware of the targets and goals of the individual mills and business units. In short each
department, and in most cases this refers to the daily interface between Production and Maintenance
must be aware of the points of focus. Above all, a production plan must exist in response to the market
demand. The maintenance effort must then be built around the production plan to support the
business. The risks involved in the delivery of the production plan from the point of view of each
department much remain in full focus of all concerned. The impact of the short and long term decisions
is seen in how the business functions and the many cases of balance of the ‘risk’ component is different
if you work in Operations or Maintenance. The ‘risk’ of running equipment beyond repair intervals is
clear to maintenance personnel – the ‘risk’ of not meeting the market or not achieving production
targets is clear to operations personnel. The management of this ‘risk’ can be made easier if the ‘right
things’ are done to support the business.
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According to an article from reliableplant.com (2008), an equipment that is started, stopped
and/or operated incorrectly, or beyond its operating limits, will simply experience a higher failure rate. A
reliability-focused operations team follows and enforces well-conceived standard operating procedures.
They also understand that, in some instances, producing more can result in profit erosion. The mentality
extends beyond plant operations to the sales and marketing department. An enlightened sales and
marketing team understands that the profitability of sales contracts and the reputation of the firm
depend upon the reliability of the machines or plant, especially when transactions carry penalties for
late or non-delivery – in some cases, total-loss penalties. They factor projected reliability into their pro
forma estimates of contract profitability. The reliability-focused operations organization works closely
with the maintenance team, particularly to provide inspection and operating health feedback on a
regular basis, and supplies design engineers, procurement specialists and strategic suppliers with the
information they need to improve equipment operability. While maintenance can’t improve the
reliability of equipment, they can ensure that its inherent reliability, based upon design and operating
context, is maximized. A reliability-focused organization does not just employ modern techniques like
Reliability-Centered Maintenance (RCM), condition-based maintenance (CBM) and precision
maintenance techniques. A reliability-focused maintenance organization works hard to optimize
maintenance activities, with a focus on running time activities. It also works closely with operations to
ensure that the equipment is available to produce as much product as required, meet quality goals and,
most importantly, satisfy customer demands. And, a reliability-focused organization works closely with
design engineers, procurement specialists and strategic suppliers to improve design for reliability and
maintainability, and to avoid purchasing the same problems over and over again.
Teplansky (2001) stated that demand management consists of activities designed to monitor
and manage business unit demand and internal purchasing processes to ensure that you consistently
realize the benefits of your supplier relationships over time. The importance of demand management to
the success of supplier relationships can not be overemphasized. Without an up-front investment in
demand management (pay now), even stellar supplier performance can be eroded by internal factors
that are out of the supplier's control, resulting in higher costs and reduced effectiveness (pay later).
Demand management begins with a thorough understanding of current business unit needs, historical
purchasing patterns, and projected demand for the product or service you are sourcing. This research
may include a review of purchase orders, product or service specifications, and business plans. Include
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the supplier in your research. The supplier may have unique insight into the market for the product or
service or its application that may prove valuable to your effort.
According to Alfeche (2006), aggregate planning is an attempt to match the supply and demand
for a product or service by determining the appropriate quantities and timing of inputs, transformation,
and outputs. In aggregate planning in manufacturing, one allocates the right amount of resources for
every process of the manufacturing. In aggregate planning in services, it serves to schedule the
employees and it varies as to what particular season. Services are much more labor intensive than
manufacturing but it can actually be an advantage because of the variety of service requirements a
person can handle.
According to Idhammar (2005), many organizations believe they are good but do not know what
good really means. If one is the driver of this improvement initiative, he himself needs to know what
best practices are and how he can compare the organization’s performance to these practices. Next step
is for one to start the selling of what he wants to do and get some disciples who will follow. A very cost
effective way to do this is to bring in an outsider who in one presentation can present best practices and
facilitate the organization to discover how good they are compared to how good they could be. The next
step is a formal evaluation of the practices and performance compared to Current Best Practices. This is
where one will pull together your organization towards the same goals and understandings.
According to Idhammar (2004), "Operations, maintenance and engineering are joint partners and
together form a production team. Maintenance is responsible for equipment reliability, operations for
process reliability, and engineering helps both with technical expertise." This means that people shy
away from having maintenance as a supplier to operations. A customer-supplier relationship is different
than a joint partnership. The customer-supplier set-up does not work well because if operations is the
customer, operations will get what they request at all times, meaning they manage maintenance.
20
According to Idhammar (2004), if one’s basic maintenance practices (Planning & Scheduling,
Preventive Maintenance, Stores, Technical Data Base) are not instituted as a way of life, do not make
this move! Why? It will lead to having many poorly performing maintenance organizations instead of
having one poorly performing maintenance organization. On top of that one will expect several, often
inexperienced, maintenance managers to implement and/or improve on these maintenance basics.
Because of lack of knowledge in maintenance management, time, interest, willingness or all of the just
mentioned the following things are very likely to happen within six to nine months:

More maintenance people on shift. Because it feels more secure that way. As one consequence
of more maintenance people on shift, operators will request a lot of “Honey Do” jobs.

More maintenance people will be stationed in areas to be available and ready to react to
problems. Because this leads to faster repairs of problems.

Work requests will not be entered into computer system, because it is easier and more
convenient to just call people.

It will become more difficult to move people between departments for shut downs.

Overtime and contractor hours will start increasing even though there are more people on shift.

Backlog will start to go up.

Equipment reliability starts declining. At this point the total maintenance cost has gone up, but
operations managers might not see the whole picture.
According to Idhammar (2005), in today’s highly competitive market, mills cannot afford to be
let down by their machines, so maintenance procedures are a crucial element in any company’s
performance strategy. In a bid to improve reliability and performance, mills can chose one of two ways
to carry out their maintenance tasks, both of which lead to higher production throughput and lower
costs. Using the first approach, mills can invest in maintenance prevention. Under this system, it is
essential that companies specify and buy the right equipment. Added to that, attention needs to be paid
to basic operations such as lubrication, alignment, balancing, proper storage of components, filtration
and detailed cleaning. Where possible, mills should also look into using a Fixed Time Maintenance (FTM)
program. And, last but not least, it is crucial that mills follow proper operating practices. The second
way in which mills can improve their maintenance performance is to carry out the remaining
maintenance work in an efficient manner. This can only be achieved with adequate planning and
21
scheduling, which involves leaving enough time between identifying and carrying out the work.
Prioritizing requests and condition monitoring must be standard practices at mills that go for this
approach. Clearly, there is nothing new or revolutionary about these two methods, but in most
organizations the improvement potential of these processes is huge. Mills often overlook the
opportunities on offer, but improvements can easily be achieved if companies go back to implementing
the very basics of maintenance. Few investments in maintenance improvements pay off faster than the
implementation
of
new
or
revised
cost-effective
preventive
maintenance
procedures.
According to Smith and Munn (2008), the first major initiative was to address the existing roles
and responsibilities of the various maintenance groups. Maintenance tasks had been conducted by
personnel in both day and shift maintenance groups. Day personnel were to handle all maintenance
issues within day shift hours and shift maintenance personnel were responsible for issues occurring
during other hours. Preventive maintenance tasks were the primary responsibility of the day crew, with
some tasks handed off to shift personnel. But break-in work and “emotional” maintenance decisions
often got higher priority than the preventive maintenance tasks on the schedule. Management’s answer
to this problem was to form a separate group with only the responsibility for completing scheduled
preventive maintenance. Day maintenance was assigned the primary responsibility of completing
corrective repairs that had been properly planned and scheduled. The entire maintenance department
organization was revised to bring the entire reliability program under the direct supervision of one
leader. The group was given a charter and a vision statement. Shift maintenance in the mill was
consolidated into a central concept that consists of a supervisor and seven mechanics on a 12-hour shift
schedule. The intention was to take the break-in element out of the preventive maintenance equation
by assigning break-in work to shift maintenance. Break-in work would be the exclusive responsibility of
shift personnel.
22
Reliability Centered Maintenance has its place, but many times plants jump into training
programs and attempt to implement Reliability Centered Maintenance long before they are ready for it..
Some even say that if it is not done exactly the way they prescribe, then it is not RCM. So what? The
whole idea is that you want to achieve more cost-effective reliability through the implementation of
better operations and maintenance practices. Reliability Centered Maintenance (RCM) has its definite
place in the specification and design phase of new equipment and systems, and for existing critical and
complicated systems. The thought process used, for example, to analyze existing preventive programs, is
good, but can easily be made overcomplicated to serve the purpose. I have analyzed the results of many
RCM implementations, and the fact is that after a very lengthy criticality and failure mode analysis, the
end results have not changed the fact that a V-belt drive needs to be inspected for an obviously critical
belt conveyor! What is often missing is a document describing how to inspect it while the equipment is
operating. In the worst cases, belts, couplings, heat exchangers, control valves, and other common
components are, even after the RCM analyses, inspected during shutdowns. Perhaps some inspections
have been deleted because equipment was not critical. So, there you might have saved an inspection
that only takes two minutes for an operator who will inspect the process in that area every shift anyway.
23
SYNTHESIS
The most important agenda in a company that is under rehabilitation is to gain a new lease on
life, so to speak, and to continue its business as a going concern. Rehabilitation contemplates a
continuance of corporate life and activities in an effort to restore and reinstate the corporation to its
former position of successful operation and solvency. The company should consider using its remaining
assets to finance its operations toward recovery and to maintain goodwill with its loyal customers. In so
doing, it gives the company the opportune time to rethink its mission and to re- evaluate its long term
goals and objectives to adapt to the current state of rehabilitation with the view of enhancing its
competitive position beyond company survival.
It is incumbent upon companies under rehabilitation to make good and productive use of its
remaining assets if it were to continue its market presence and revive its business standing in the
industry. Also, in the face of such challenge, such companies need to put in a strategic intent in its
operations to turn the situation around to one of having decent returns and sustained profitability.
24
CHAPTER 3: METHODOLOGY
The following phases were done to understand the business process and to become familiar
with the system and procedures in the company. A number of problem-solving tools shown below are
initially thought of to help analyze cause and effect relationships, in focusing on the root causes of the
problem, and in generating alternative solutions.
CONCEPTUAL FRAMEWORK
25
i.
DATA GATHERING

COMPANY ORIENTATION. The author went through plant orientation by reading all the manuals
of every department and its processes. The purpose of this orientation is to be familiarized with
the procedures and processes written on the manuals and to be familiarized with the plant and
warehouse. The manuals that will be read are as follows, Procedures Manual, Quality Policy
Manual, Quality Manual, and Inventory Manual. This phase was done to gather information and
data from the company.

DIRECT OBSERVATION. The author conducted direct observation of the processes in the plant.
By observing the employees and observing the process flow of the system, the author compared
the procedures in the manual and the actual process. By doing this, the author completed
understanding about the processes and systems.
26

INTERVIEW. The author interviewed several employees, managers and operators to get their
feedbacks on the process and to have additional knowledge on the processes. This was done by
asking a series of questions about the work done by the company. The purpose of this is to
know if the employees know what they are doing or following the procedures in the manuals.
This was useful in finding data and gathering knowledge from the actual employees that is doing
the process.

DATA GATHERING. The author gathered data from the employees; these data will include
reports, forms and historical data. This is for determining how the company is doing and what
move the company will make for the following months.

REVIEW OF DOCUMENTATION. Review of documentation was used to study the official
documents of the company. This helped gather data from procedures, copies of policy, or any
document that can help in giving information from the company. This determined the strengths,
weaknesses, goals and errors.
27
ii.
TOOLS

STRAMA
o
ENVIRONMENTAL SCANNING. This is for gathering, analyzing strategic purposes. This
process entails determining both factual and subjective information on the business
environments where the company is operating. A business unit has to monitor key
macro-environment forces and significant micro-environment factors that affect its
ability to earn profits.
o
SWOT ANALYSIS. This is strategic planning method used to evaluate the Strengths,
Weaknesses, Opportunities, and Threats involved in a project or in a business venture. It
involves specifying the objective of the business venture or project and identifying the
internal and external factors that are favorable and unfavorable to achieve that
objective.
o
TOWS MATRIX. This matrix is an important matching tool that helps managers develop
four types of strategies: SO Strategies, WO Strategies, ST Strategies, and WT Strategies.
This could be applied to the development of tactics necessary to implement the
strategies, and to more specific actions supportive of tactics. SO Strategies use a firm's
internal strengths to take advantage of external opportunities.
o
PORTER’S MODEL. Porters Model is a framework for industry analysis and business
strategy development. It draws upon Industrial Organization economics to derive five
forces that determine the competitive intensity and therefore attractiveness of
a market. Attractiveness in this context refers to the overall industry profitability. An
unattractive industry is one in which the combination of these five forces acts to drive
28
down overall profitability. A very unattractive industry would be one approaching pure
competition, in which available profits for all firms are driven down to zero.
o
KERNER-TREGOE (decision analysis) MODEL. This will help to find the best possible
choice based on achieving the outcome with minimal negative consequences. It is
marketed as a way to make unbiased decisions in that it is to limit conscious and
unconscious biases that draw attention away to outcome.
o
STRATEGY FORMULATION. Strategy formulation is the process of determining
appropriate courses of action for achieving organizational objectives and thereby
accomplishing organizational purpose.


Business Strategy

Operations Functional Strategy
PRODUCTION/ OPERATIONS MANAGEMENT
o
CAPACITY PLANNING. Capacity planning is the process of determining the
production capacity needed by an organization to meet changing demands for
its products. Capacity planning is a long-term decision that establishes a firms' overall
level of resources. It extends over time horizon long enough to obtain resources.
Capacity decisions affect the production lead time, customer responsiveness, operating
cost and company ability to compete.
29
o
AGGREGATE PLANNING (OUTSOURCING). Aggregate Planning is concerned with
matching supply and demand of output over the medium time range, up to
approximately 12 months into the future. Term aggregate implies that the planning is
done for a single overall measure of output or, at the most, a few aggregated product
categories. The aim of aggregate planning is to set overall output levels in the near to
medium future in the face of fluctuating or uncertain demands. Aggregate planning
might
seek
to
influence
demand
as
well
as
supply.
The
quantity
of outsourcing, subcontracting of items, overtime of labor, numbers to be hired and
fired in each period and the amount of inventory to be held in stock and to be
backlogged for each period are decided. All of these activities are done within the
framework of the company ethics, policies, and long term commitment to the society,
community and the country of operation.

TOTAL PRODUCTIVE MAINTENANCE
This aims to create a culture where operators develop ownership of their equipment, and
become full partners with Maintenance, Engineering and Management to assure equipment
operates properly everyday.
o
ISHIKAWA / WHY-WHY DIAGRAM. Common uses of the Ishikawa diagram are product
design and quality defect prevention, to identify potential factors causing an overall
effect. Each cause or reason for imperfection is a source of variation. Causes are usually
grouped into major categories to identify these sources of variation. And a Why-
30
Why Diagram is very similar in use to a Cause-Effect Diagram, and techniques may be
borrowed from Cause-Effect Diagram usage. Its simplicity can make it useful in less
formal situations.
o
DOWNTIME ANALYSIS. Downtime ensures that production facility is operating at its
peak efficiency by identifying where, how and why production delays are occurring. By
reporting scheduled and unscheduled events, as well as under-performing equipment,
this module enables a complete analysis of production downtime causes. This gives the
person the information needed to prioritize maintenance, order new equipment and
improve operating procedures.
o
PREVENTIVE MAINTENANCE. The primary goal of maintenance is to avoid or mitigate
the consequences of failure of equipment. This may be by preventing the failure before
it actually occurs which Planned Maintenance and Condition Based Maintenance help to
achieve. It is designed to preserve and restore equipment reliability by replacing worn
components before they actually fail. The ideal preventive maintenance program would
prevent all equipment failure before it occurs.
iii.
EXPECTED OUTPUT
The study expected to come up with a strategy of a long term and short term plans for
the company. This will help the VItarich to have an idea of strategic formulation and
production management in order for the company to survive and lift their rehabilitation.
31
This framework shows that in the process phase of this study, the author highlights the main
focus of the overall concept that is the improvement.
32
Framework of the Study
Input

Environmental Factors and other related studies
o
The author would draw together information about the changes in the environment to
create a study that is attuned to the present day environment through reading news
papers, articles and journals.

Demand and Output Rate
o
The authors would gather detailed information, organized to meet the needs of capacity
to meet the demand. The authors should know how to keep a company’s customers and
to retain their revenue contribution by getting the demand for the company and also
knowing the demand in the industry.

Historical Machine Performance
o
This will be used to study the performance of the machine over the years. It will be used
to observe the capability of the machine in production.

Variance (Demand-Supply)
o
The author will use the variance by getting the demand and comparing to the supply
that the company produces. This will be use to know the target supply they have to
reach in order to meet the demand of the customers.
33
Process

Strategic Management
o
The author will conduct a new strategy for the improvement of the overall production of
the company. Strategy formulation is the process of determining appropriate courses of
action for achieving organizational objectives and thereby accomplishing organizational
purpose.

Production Management
o
The author will gather data and know the specific cause of the under production
capacity of this company. This study wants to know the root cause and aim to make
specific strategy to propose and implement for the improvement of production.

Total Preventive Maintenance
o
This process aims to maintain what the company has. A distress company couldn’t
afford to lot a budget to buy machines and all so want this TPM aim is to preserve the
remaining asset they have while doing an improvement for production.
Output

Business Strategy, Capacity and Efficiency and Production Plan
o
The authors will generate a strategic business plan to help them provide
recommendations for the company. It is an Internal document that outlines an
organization's overall direction, philosophy and purpose, examines its current status in
terms of its strengths, weakness, opportunities, and threats, sets long-term objectives,
and formulates short-term tactics to reach them.
34
Feed Mill Process Chart
35
Feed Mill process as the layout shows, the production of feeds have continues operation
meaning when one part of this steps is absent the whole production is affected. There are 2 types of
machine in Vitarich Marilao Plant, the 40T and the 20T. The first machine is for animal feeds and the
other is for aqua feeds, they both have a same process but differ when it comes to grinding.
The main process in production

BATCHING
o
Weighing of RM
o
Elevation to grinding bin
o
Grinding
o
Mixing
o
Elevation to mash /pellet bin

PALLETING

CRUMBLING
No. of working hours

2 shifts a day from 7AM-7PM and 7PM-7AM
Name of Process Engineer

Fortunato Aquino

Benito Sarmiento

Maximo Perez

Jojit Villa Juan

Chris Ortega
36
CHAPTER 4
RESULTS AND DISCUSSION
This chapter presents the results and discussion of the methods that were given in the previous
chapter and explain further on the findings gathered in this study.
MACRO
ANALYSIS
STRATEGY
FORMULATION
FOR BUSINESS
STRATEGY FOR OPERATION
The study covered first the industry environment of the Feedmill business. It illustrates how
attractive the industry that it gained a lot of opportunities for the company. It shows the result from
macro analysis, the competition and the present company situation. The result of the macro analysis will
help to come up with a business and operational strategy formulation that will lift the Vitarich from
rehabilitation and will give a chance to continue and expand the whole Corporation.
37
STRAMA FORMULATION
ENVIRONMENTAL SCANNING
Global Feed Industry Background
As the material foundation of the modern animal husbandry and the aquiculture industry, the
development of feed industry is directly related to the improvement of agriculture and people's living
standard. Till 2009, the global feed industry has experienced a 10-years stable growth. During the past
two years, despite an economic slump, persisting animal diseases and uneasy commodity markets, the
worldwide total quantity of industrial animal feed have set new records again. They stated that the key
to the future of feed industry worldwide is the global demographic shift population balance tipped to
cities. In other words, an increasingly urban world has become the bedrock of further growth for the
global feed industry, and with a positive impact on industrial feed demand across all species.
World feed volumes, 1995-2009 (million metric tons)
Figure 1.1
Figure 1.1 illustrates the trend that has taken world feed volumes from just over 600 million
metric tons in 2000 to pass 700 million metric tons for the first time in 2008.The global output of feeds
for farm animals and fish has grown nearly 18% in the last 10 years and by almost 15% since 2000.
Inevitably, the overall view is influenced most heavily by the big players.
38
Philippine Feed Industry
Demographics
Count 2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Philippines
82,841,520
84,525,640
84,619,980
86,241,700
87,857,470
89,468,680
91,077,290
96,061,680
97,976,600
99,900,180
101,833,900
81,159,650
The increase in population gives more opportunity for the Feed Mill Industry. Food is
commodity, so increasing in population means increasing of demand for foods. Feed Mill Industry is part
of the food processing so it’s gives a lot of opportunity for this industry.
Economic
PHILIPPINES
RANKING
Aid as % of GDP
0.80%
[97th of 129]
Big Mac Index
$1.56
[55th of 65]
Business efficiency
51.103
[40th of 51]
Exports to US
$2,614,600,000.00
[22nd of 224]
GDP > PPP
$378,225,000,000.00
[24th of 163]
4.97 annual %
[83rd of 187]
$80,844,900,000.00
[36th of 172]
GDP
growth
>
annual %
Gross
Income
National
Figure 1.2
The economy of feed mill industry is positively an opportunity. According to the updated GNP
and GDP of the Philippines, the overall rate of our GNP and GDP is increasing in the past 3 years. This is a
good sign for all the companies in our country especially those in agriculture. When the growth rate of
the country is increasing, opportunity rises. As show in the data, the agriculture sector is also increasing
over the year.
39
Technological
In technological aspects, high tech materials and equipment are being released, much improved
and upgraded that will help for a production capability for a company. The industry focuses its
production into improvement of Product Quality and Animal Nutrition. The industry tends to pose for
more improve materials and equipment that they can use in order to meet the high demand. Also, in
raw materials of the industry, promotion of growing and usage of alternative products for the supply will
solve the difficulties of the industry.
Legislation / Political
Compliance with environmental laws enhances good community and industry relationship and
provides assurance to employee’s health and safety. The industry also needs government approval for
its principal products and services from BAI and the National Meat Inspection Commission for the
registration of its feed mill, accreditation of chemical laboratory, accreditation of meat plant, cold
storage that will ensure that only safe and wholesale products reach the consumers. The Philippine
administration government develops a national agriculture development plan known as “Philippine
Agriculture 2020 (PA2020). This plan has a goal of boosting agricultural output by about 7% per annum
over the period between 2005 and 2020. It focuses on raising income levels in rural areas and amongst
farming households. If the program is successful, it will almost certainly boost demand for a range of
different imported animal feed ingredients and inputs.
 The Macro Analysis results to how attractive the industry was. The demand for feed mill is
constantly increasing. More of advantage in the Philippines is that our government is focusing
on prioritizing feed mill business in the country and for exportation. They are giving attention
into this industry because it will benefit to the economy of our country. It is also an advantage
that our country is rich with all the raw materials like crops.
40
PORTER’S MODEL
Porter’s Model - Figure 1.3
41
The Porters model shows that the rivalry has the strongest threat. In terms of supplier-company
relationship it was not quite strong because the supplies are commodity and because of the fast
technology aspect good substitute of raw materials are existing. In terms of substitute of the
product being produce, though feeds can be just any food the important of process feeds is the
nutrients that the animal gets so good substitute is still not available. In terms of new entrant, this
industry needs a large capital, training, experience and approval from government, many factors
has to consider so it’s so hard for a new company to enter in this industry. The buyer’s power is also
weak; the product should be delivering with quality that is very important for the buyers and also
there’s a high buyers demand which is an advantage for the industry. So, the strongest force is the
rivalry. Many companies tend to do integration from supplied to processed foods.
 The Porters is also an advantage for the Vitarich which is one of the pioneer big companies
for feed mill business in the country. Though competition among rivalry is tight, they already
gain market share. A established company like Vitarich wouldn’t be threatened with the
other competitors because they have already known and they already have shared with
customers what the VItarich should consider now is how to supply the demand of the
customers.
42
FEED COMPANY IN THE PHILIPPINES ANALYSIS
Feed Mill Company : Market Share 2010
San Miguel Foods Corp. (Manila)
Cargill Philippines
Swift Foods, Inc (Mandaluyong)
General Milling Corp. (Lapu lapu
City)
Vitarich Corporation (Bulacan)
20%
22%
Tyson Agro-Ventures
3%
11%
4%
Sun Jin Philippines
4%
Foremost Farms
5%
10%
Universal Robina Corp. (Manila)
5%
7%
Grain Handlers
9%
OTHERS
Figure 1.4
Top Ten Feed Millers in the Philippines
Feed Mill Company 1990-2000
Capacity/day
Feed Mill Company 2005-2010
Capacity/day
1,122.66
3,229.00
1,122.00
Cargill Philippines
1,760.00
Swift Foods, Inc (Manduluyong)
800.00
Swift Foods, Inc (Mandaluyong)
1,612.00
General Milling Corp. (Lapu lapu City)
720.00
General Milling Corp. (Lapu lapu City)
1,520.00
Purina Philippines, Inc. (Pangasinan)
640.00
1,187.00
450.00
Tyson Agro-Ventures
800.00
Nutrimix Feeds Corp. (Bulacan)
450.00
Sun Jin Philippines
760.00
Purina Philippines, Inc. (Bulacan)
420.00
Foremost Farms
720.00
General Milling Corp. (Pasig)
400.00
598.00
Purefoods Corp.
240.00
Grain Handlers
450.00
Figure 1.5
The data shows the list of top ten feed millers in the Philippines in year 1990-2000 and 20052010. From the topmost feed mill company in 2000, Vitrarich goes down in top 5 in year 2005-2010.
43
 According to the author of the study, the industry is already in the mature phase and
precipitates companies to start to fight for market share. The relevant issue here, of course,
is that in mature markets, growth can come only from a competitor. The feed products in
market lacks differentiation. Huge number of brands in with the nearly identical functions
and quality are cowed in the market, as well as service provided by feed company, and
there are few switch costs for buyers. However, although the rivalry among Philippine feed
industry is high, that rivalry has its positive phase. The competition happens on product
features, support services, delivery time, or brand image other than price, and it is less
likely to erode profitability because it improves customer value and can support higher
price. Also, these kinds of rivalry focused on such dimensions can improve value relative to
substitutes or raise the barriers facing new entrants. Moreover, when each competitors
aims to serve the needs of different customer segments, with different mixes of price,
products, services, features, or brand identities, such competition can not only support
higher average profitability but also expand the industry, as the need of more customer
groups
are
better
met.
44
SWOT ANALYSIS
SWOT - Figure 1.6
45
Strength
Vitarich has been operation for almost 60 years. They are one of the pioneer feed companies in
the Philippines and because of this they gain market share among different company. In the year 19902000 they have been the number one supplier of feeds in the country. In terms of experience and
training, Vitarich is the most matured about the process of feeds. They have a high capability for
production and experienced employees which are good advantages for the company. Vitarich has the
biggest plant of feed production in the Philippines having a 3 hectares plant in Marilao Feed Mill. It is
also revenue generating for the fact that the Feed Mill Industry has gaining a high demand.
Weakness
The main problem of the company based on the observation of the author is that in terms of
their financials. The company is burdened with too much debt that they can’t access for the
improvement in terms of technology aspect. Because they lack capital for production, some of their
customers tend to look for another company to meet their demand so they will not lose share.
Debt Ratios
Debt Ratio
2007
2008
2009
2010
0.74
0.84
0.88
0.93
Opportunities
The sharply-rising demand is a good opportunity for the company. Using its remaining resources
and asset in order to boost the production to supply the demand is a way for the company to survive.
The company has also been approving to undergo rehabilitation; it’s an advantage for the company to
lighten their burdens. This rehabilitation is given for the company under distress to have a chance to
revive the business.
46
Threats
The threats cover by the company is that the competition among rival is becoming strong and
competitor of Vitarich are those known and big corporation also. The Vitarich threaten by the increasing
cost of the maintenance for the machines and other equipments. The present status of company is a big
problem for this increasing cost.
 The SWOT analysis shows that Vitarich should come up with a strategy to match to its resource
strengths and weaknesses and to aim at capturing its best market opportunities and erecting
defenses against external threats to its well-being. There’s a big chance for the company it’s just
that they are suffering from the debt and so they have lack of asset to use and finance the
strategy improvement.
47
TOWS MATRIX
Opportunities
Threats
 Sharply rising buyer
 Increasingly intensity of
demand
for
the
competition
among
industry’s product, O1
industry rivals, T1
 Serving
additional
 Costly maintenance for
market segments, O2
machines
and
 The company has been
equipments, T2
approved
into
 New capacities are being
rehabilitation, O3
added by global players,
 New alternative raw
T3
supplies exist, 04
 Steep price increases, T4
Strengths
SO
 The company is a
established company, S1
 Presence of resources,
S2
 Strong brand name, S3
 Highly
integrated
company, S4
 The business is viable, S5
 Revenue- generating, S6
 Economy of scale and
has learning experience
curve advantage, S7
Weakness
WO
 No access for new
capital, W1
 A weak balance sheet;
burdened with too much
debt, W2
 Losing market share
because of the capacity
problem, W3
 Too much underutilized
plant capacity, W4
ST
Resource
exploration
(O4, S2)
Forecast
supply
of
materials for maximum
availability (S2, O4)
Training for improved
performance (S4, O3)
Get client for maximum
capacity
-
Marketing management
(T1, S1, S3)
Preventive maintenance
of equipments (S2, T2)
Attend expos to be more
popular (T1,S1,S3,)
New
markets
to
conclude, making the
most productive out of
production plan.
WT
Use their remaining
resources to revive the
company: Do preventive
maintenance (O3, W1,
O1)
Maximize
production
capacity: Do production
capacity
planning
(W3,O1, W4, O2)
-
Diversification: Do joint
venture (T1, W3, W4)
Outsource:
Aggregate
planning (T2, W3, W4)
Figure 1.7
48
Strength to Opportunities
o
The company should take advantage of their strengths to maximize their opportunities.
High demand in the industry will help Vitarich to gain revenue coming from its
remaining resources asset. By this the company has to do strategy formulation in order
to come up with much aggressive strategy to boost supply of capacity the demand has.
They also have to have a resource exploration for the possible alternative to minimize
the cost of production.
Weakness to Opportunities
o
Vitarich has a weak financial standing they have been burdened with too much debt.
But still, Vitarich has its remaining resources that could be used to meet the opportunity
for the company. They have to study how they could maximize their production.
Strength to Threats
o
The threats of rivalry is strong in the industry but then Vitarich already gained market
share it just that now they have production capacity problem. They should do marketing
management in order not to lose customers in spite of their situation. They also have to
do preventive maintenance of their remaining asset because they can’t afford to spend
in buying for new machines.
Weakness to Threats
o
A weakness of the company is lack of control over the production and threat of rival
companies. A strategy that they can use is to benchmark other companies and compare
the results from their process and the benchmarked process. After comparing the
results they can come up with a new strategic plan to resolve this problem. They can
also outsource production to minimize the cost yet they could meet the demand of the
customers.
 This strategy from TOWS will be used in the proposed strategy goal of the company. Those
strategies will explain on the later part of this study.
49
ANALYSIS:
METHOD
MACRO
ENVIRONMENT
PORTERS
SWOT ANALYSIS
SUMMARY
The Macro Analysis results to how attractive the
industry was. The demand for feed mill is
constantly increasing. More of advantage in the
Philippines is that our government is focusing on
prioritizing feed mill business in the country and
for exportation. They are giving attention into
this industry because it will benefit to the
economy of our country. It is also an advantage
that our country is rich with all the raw materials
like crops.
The Porters is also an advantage for the Vitarich
which is one of the pioneer big companies for
feed mill business in the country. Though
competition among rivalry is tight, they already
gain market share. An established company like
Vitarich wouldn’t be threatened with the other
competitors because they are already known and
they already have shared with customers what
the Vitarich should consider now is how to supply
the demand of the customers.
The SWOT analysis shows that Vitarich should
come up with a strategy to match to its resource
strengths and weaknesses and to aim at
capturing its best market opportunities and
erecting defenses against external threats to its
well-being. There’s a big chance for the company
it’s just that they are suffering from the debt and
so they have lack of asset to use and finance the
strategy improvement.
ANALYSIS
POSITIVE:
The
macro
shows that there is a high
demand and have lots of
opportunity
for
the
industry not only in the
country but globally.
POSITIVE: There is a
competition threat among
rivalry but then it shows
that Vitarich has a market
position. And also the
rivalry has its positive
phase, the competition
happens
on
product
feature, support service,
delivery time and brand
image other than price,
and it is less likely to erode
profitability because it
improves customer value
and can support higher
price.
POSITIVE: Vitarich in spite
of the financial problems
still have a high standard
name, resources,
remaining asset and a high
demand.
50
BUSINESS STRATEGY
Nine cell matrix of Vitarich
Figure 2.0 (The Nine Cell Matrix is based on the market share and the capacity of the companies under
the Feed Mill Industry)
Nine cell matrix is use to show that Vitarich has an industry attractiveness but average in
competition strength. The level of industry attractiveness of Vitarich is high because the industry chain it
belongs is food which is commodity. The competition strength where Vitarich is included is in the
average because the company find hard to compete because of its current situation. A company which is
under rehabilitation has a reputation risk and couldn’t aggressively compete also because of the lack of
finances.
According to analysis of the nine cell matrix, the company has to have a strategic prescription of
grow and build. The strategy advice for this cell is to invest for growth. Vitarich is in favorable position
with relatively attractive growth opportunities. Growing more a business requires a lot of resources and
investments but like the Vitarich which is suffering from their debt problems how this company could
supply that grow and build strategy in order to lift up the business is a concern.
51
The figure shows that Vitarich Corporation has three main businesses line; feed, poultry, and
processed foods. Among the three, feed is the largest unit with 70% share from the Vitarich. It has also
the most revenue-generating business having an attractive industry and average market share. The feed
mill line has the highest possible unit of Vitarich that could help the whole corporation to lift up. The
feed mill business has to come up with the effective strategy that will help the corporation. This strategy
will survive the company and revive from its distress.
STRATEGY GOAL
Figure 2.1 shows the different possible survival strategy that the Vitarich can consider. The
Partnership: Joint venture is the most feasible of all. Putting the company’s present situation, they have
less capital, they are under rehabilitation and couldn’t get credit capital from banks and yet they have an
attractive industry which is possible for revenue-generating.
personal
or family
souces
savings
credit
purchase
Survival
of the
company
asset sale
Partnership
: venture
capital
Figure 2.1
52
The company needs to consider some possible strategies in order to survive:
One is credit purchase, it is a purchase which has been made without paying the money at present
but liable to be paid in future. The person to whom we are liable is called creditor.
Another is asset sale. Asset sale is the sale of certain named assets of a corporation, partnership or
sole proprietorship. Usually the seller retains ownership of the cash and cash equivalents and the
liabilities of the entity. The seller then will pay the liabilities with the cash, any down payment and the
cash equivalents as they become cash. Assets named are typically trade name, trade fixtures, inventory,
leasehold rights, telephone number rights and goodwill. Assets sold can be tangible or intangible.
The other way is through savings account funds. Savings account funds are considered one of the
most liquid investments outside of demand accounts and cash. In contrast to savings accounts, checking
accounts allow you to write checks and use electronic debit to access your funds inside the account.
Savings accounts are generally for money that you don't intend to use for daily expenses. Joint venture
is a contractual agreement joining together two or more parties for the purpose of executing a
particular business undertaking. All parties agree to share in the profits and losses of the enterprise.
Among other strategies, joint venture is the most possible way to help Vitarich. For the fact that,
Vitarich has a negative bank reputation and that the other asset of the company is freeze out because of
the rehabilitation.
 Joint Venture. The Vitarich Feed Mill Business should come up with a diversification technique
of joint venture. According to Wikipedia, a joint venture is a business agreement in which parties
agrees to develop, for a finite time, a new entity and new assets by contributing equity. They
exercise control over the business and consequently share revenues, expenses and assets. By
taking the joint venture approach, it will continue to find favor for the Vitarich because even as
the value of some assets has recovered considerably, many positions remain and will continue
to need to be nurtured through. Because Vitarich Feed Mill is a feasible business for generating
high revenue, there are lots of possible other company who are willing to do a joint-venture for
the company. In order to keep the lead to Vitarich, the company should come up with a 51%49% sharing. The high percent still belongs to the Vitarich and the other is to its possible
venture.
53
Formulating the JV is a series of steps, one which needs a lot of work and yet, at the same time,
precision. Here one can only underline the steps or information that will be needed by the JV candidate.
They are the objectives, structure and projected form of the joint venture, including the amount of
investment and financing arrangements and debt the JVs products, their technical description and usage
alternate production technologies estimated cost of equipment, estimated product prices, costing,
market analysis for the product, inside and outside the ‘territory’, analysis of competition, projected
sales and methods of distribution, details of offered site, including output projections, transport and
warehousing, testing and quality control, by-products and waste; supply, utility, and transport
requirements, staff requirements and training, financial projections, environmental impact and social
benefit.
Benefits of the Joint Venture for Vitarich Feed Mill Business
o
Provide Vitarich with the opportunity to gain new capacity.
o
Access to greater resources
o
Sharing of risks with a venture partner
o
New asset and capital that can help the other business line of Vitarich.
The venture partner will become the cash cow business for the Vitarich. It can generate cash
surpluses over what is needed to sustain present market position. This cash cow business is valuable
because surplus cash can be used to pay corporate dividends, finance new acquisitions and can use to
invest in promising cash hogs. On the other hand, the venture partner will also gain share from the
revenue of the feed mill business of Vitarich.
This joint venture can help only in the growth of the Feed Mill business but also can sustain the
needs of other business line of Vitarich. The finance that the venture partner will share can be used to
supply the needs of the other business lines of Vitarich. It will be a big help for the company to lift from
their rehabilitation and bring back the company’s reputation.
Selling assets can obviously bridge a budget gap in the short run. But it’s not just a desperation
tactic and can also be a smart long-run strategy. A company that’s working with a joint venture, for
instance, could sell an additional stake to that partner to lower its operating costs while still realizing
the gains of shared work. On the downside, the company would probably lose some revenue, too, but
if it’s averting a cash crunch or making a major debt payment with proceeds of the stake sale, then that
may be a bigger gain. Losing ownership stakes in non-core assets can come back to bite a company
54
later. What if that non-core asset accumulates a lot of value over time? Also, running a business with a
partner means that partner becomes a variable, rather than a fixed, aspect of business operations they
may have more of a say over how business gets done, for example.
Feed Mill Companies that undergo joint venture successfully:

“Tyson Foods, Inc.(Nasdaq: TYSNA) and PM Nutrition Company, Inc. announced today that they
will enter into a joint venture with the Philippine-based holding company, Aboitiz Equity
Ventures, Inc. PM Nutrition Company, Inc. is a wholly owned subsidiary of Purina Mills, Inc.,
located in St. Louis, MO. The joint venture, Fil-Am Foods, Inc., is being formed to create a
commercial feed and swine operation in the Philippines.”

“The Purefoods-Hormel Company (PHC), now a part of San Miguel Food Group, is a joint venture
between the processed meats division of Pure Foods Corporation and the US-based Hormel
Food Corporation. This venture culminates the long time partnership between the two
companies which started in 1972. In the Philippines, PHC is the market leader in both
refrigerated and canned meats. Hormel Foods is one of America's biggest food companies and is
known for their brands SPAM, Dinty Moore and Jennie-O.”

“Leong Hup Holdings Berhad ("LHH") was incorporate in Malaysia in 1979 and listed on the KLSE
Main board on 29 October 1990. From a small backyard farm in the early 1960's, LHH with
nearly 40 years experience has developed into the largest integrated poultry operations in
Malaysia. In 1992, LHH formed a joint venture in Philippine to breed, distribute and sell parent
stock.”

“Charoen Pokphand Feedmill Co., Ltd, entered into a joint venture with Aviagen, Inc., to
establish Ross Breeders Siam Co., Ltd., to produce and distribute parent-stock chicks (broiler
line) in Thailand. CPF indirectly has 49.99% shareholding in this company.”
55
OPERATIONAL STRATEGY
The following strategy will help the company monitor and document the actual performance
versus the standard unit that the production can produce. This strategy will help to know the
capability of the company to meet the demand of the market.
What the company wants to achieve?
Capacity and efficiency, that’s the two major goal of the Vitarich for the feed mill production. To
generate a strategy that will help the company supply the demand of the customers. This strategy is for
short term objectives which will lead the company to gain more revenue to finance the needs of the
whole corporation.
PRODUCTION AND OPERATION
WHY-WHY DIAGRAM
Inefficient
Equipment
Wrong Forecast
on Raw Materials
Under
production of
Feeds
Machine
Breakdown
No proper
machine
maintenance
Undetermine
Lead Time
Lack of data
No proper
monitoring of
documents
No standard
procedure for
recording data
Transition of
shifts
Idle time
Diffucult in
meeting the
demand
Unutilized
Employee
Manpower
Ineffeciency
Procedures are
not followed
No budget for
new equipments
Limited asset
Employees are at
ease with the
system
Covered with
many debt
Figure 3.0
56
DOWNTIME ANALYSIS
Downtime ensures production facility is operating at its peak efficiency by identifying where,
how and why production delays are occurring. By reporting scheduled and unscheduled events, as well
as under-performing equipment, this module enables a complete analysis of production downtime
causes. This gives you the information needed to prioritize maintenance, order new equipment and
improve operating procedures.
According to Why-why diagram (Figure 3.0), downtime is one of the major problems of the
production department. Based on the historical data, downtime is caused by machines, manpower,
methods and raw materials.
Machine breakdown often occurs because the equipments are old and not properly maintain.
The overrunning of the machine puts a strain on all the drives and makes breakdowns much more likely
to occur. They run machines to maximum performance or at the top of the engineering curve for which
the machine was designed.
Manpower is also one of the problems of downtime in production. It has often had idle time due
to unutilized employee.
Procedures are not followed properly because most of the operators are too at ease in their
work. They are too much comfortable with the procedure that they are used to.
Insufficient raw materials are caused by poor forecasting. The delay of supplies causes the
production to have a high down time rate.
57
Efficiency Evaluation
120.00
100.00
Fortunato
Aquino
Benito
Sarmiento
Maximo
Perez
Jojit Villa
Juan
Chris
Ortega
80.00
60.00
40.00
20.00
0.00
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31
Figure 3.1
The graph (Figure 3.1) is the actual efficiency evaluation for the September 2011. Based on the
data there was 15 days of no production due to down time. The down time is mainly cause by machine
breakdown, lack of supply, manpower and procedures. This occurrence is recorded by observing day to
day activities by the production workers.
Causes
Occurrence Percentage
Machine Breakdown
17
27
Lack of Supply
30
48
Manpower
10
16
Procedures
5
8
Figure 3.2
Based on the (Figure 3.2) the most common cause of down time is the lack of supply due to
wrong forecast of raw materials. Therefore, the cause that has most percentage have to be give priority
in order to eliminate down time.
58
Propose Strategy:
 Regular Maintenance of Machines and Equipment
According to the downtime analysis of the production, machine breakdown has the highest
occurrence that the company experience.
Maintenance is the combination of all technical and associated administrative actions
intended to retain an item in, or restore it to, a state in which it can perform its required
function. The production is seeking to gain competitive advantage with respect to cost, quality,
and service and on-time deliveries. The effect of maintenance on these variables has prompted
increased attention to the maintenance area as an integral part of productivity improvement.
Maintenance can be divided into four different types:
Routine maintenance consists of servicing equipment on a scheduled basis. This may consist of
activities such as lubrication of bearings, replacing hammer mill screens, turning or replacing hammers,
checking drive V-belts, and checking oil levels in gear boxes.
Emergency maintenance entails reacting to unscheduled breakdowns. This maintenance must
be done immediately and supersedes all other types.
Call-in maintenance usually involves an emergency situation where the people required are not
at hand and must be summoned from somewhere else, such as a millwright service or contractor.
Preventive maintenance consists of scheduled inspections and making adjustments and repairs
to equipment to make sure they are in proper working order. This includes the replacement of worn
parts prior to failure.
The first step in developing a maintenance program entails collecting good information. This information
may be gathered under the following headings:
1. Equipment Identification
2. Equipment Information
3. Equipment Maintenance Requirements
4. Parts Inventory
5. Maintenance Records
59
SAMPLE SHEETS
* Equipment Identification
60
*Maintenance Calendar
-
Schedule regular maintenance
o
Scheduled maintenance utilizes a previously developed maintenance schedule for
each machine tool. This schedule may be regularly done daily or weekly depends on
the machine standing.
61
Sample Sheet:
-
Raise the preventive maintenance
o
Preventive
maintenance
encompasses
activities,
including
adjustments,
replacement, and basic cleanliness, that forestall machine breakdowns. Preventive
activities are primarily condition based. The condition of a component, measured
when the equipment is operating, governs planned/scheduled maintenance. Typical
preventive
maintenance
activities
include
periodic
inspections,
condition
62
monitoring, critical item replacements, and calibrations. In order to accomplish this,
blocks of time are incorporated into the operations schedule. One can easily see
that this is the beginning of a proactive mode rather than a reactive one. The
purpose of preventive maintenance is to ensure that production quality is
maintained and that delivery schedules are met. In addition, a machine that is well
cared for will last longer and cause fewer problems.
-
The following activities below should be done for the maintenance of machines and
equipments;
ELIMINATE

RAISE
Machine breakdown

Machine check

Cleaning of equipments

Repair work

Regular inspection of machines
REDUCE
CREATE

Machine over use

Forecast

Idle time operation because of

Schedule of regular maintenance
machine
4 Frameworks - Figure 3.3
Figure 3.3 shows the activities which have to eliminate, raise, reduce and create for the
maintenance of the machines and equipments. The Vitarich should put this in action in order to prevent
the machine breakdown which is the highest reason of the underproduction. With these procedures
Vitarich can minimize the problem that causes machine breakdown. Also the manager should assign
personnel to be in charge of the maintenance and inspection of the equipment for better monitoring.
 This implementation of maintenance is used to minimize the machine breakdown. By preventing
machine crash, the flow of production would not be disturbed. This will help for the efficiency of
the production and to facilitate the underproduction problem of Feed mill.
63

Proper monitoring of raw material
One of the causes of underproduction at Vitarich is that there are times when
they have been out of stock of raw materials. Raw materials are used in the primary
production or manufacturing of a good. The main raw materials of feed mill production
are crops. Vitarich has no strict monitoring of raw materials. There are times when the
operation has been down because they have no proper forecast on the order of the raw
materials.
The operation management needs to implement a strict monitoring of raw
materials and packaging materials. Reports or listing the record of the movement of
materials can prevent spoilage of raw materials and save the company from opportunity
loss. If the monitoring is strictly implemented and standardized, the company will easily
know the movement of materials and make the necessary adjustments or move that can
lessen the rejects and spoilage. Right forecasting of raw material in order for the
operation not to be delayed should be implemented.
 Proper monitoring of raw materials will lead to delay prevention for the production of feed mill.
This will prevent idle time for production. Right forecasting is also a best way for the monitoring
the raw material. When this is implemented, the standard time and goods per shift will be met
and the efficiency will increase.
64

Strict Monitoring of Employees
Operations of Vitarich feed mill production operates 24 hours and there are
about 100 employees who are working in production. Most of them are veterans and
work for the company for a long time. Now that the company couldn’t afford to employ
new trainees, the aged employee still prefer by the company because of their
experience and skill expertise. But then, because these employees are old in the
company, they tend to be so at ease. The production performance of production
employees have been deteriorating, absenteeism and idle time while working is one of
the major reasons for the downtime of production.
Workers and employees need to be encouraged to perform better and minimize their
absences. Workers are encouraged with the following:
-
Giving Incentives - providing incentives to employees who have perfect attendance; reward
the person in ways that are important to the individual. Consider options such as more pay,
time off, time and attention from the supervisor, a special assignment, a committee
leadership role, or a training and personal development opportunity.
-
Rewards System – monitors performances and provide awards for employees who have
excellent performance.
-
Promote self-discipline – people need to know exactly what is expected of them. If you want
to see continuous improvement, initiative, and problem solving, let them know.
 Motivating employee will lead them to do more productive jobs. Implementation of these giving
incentives to employee will help the whole business meet the target improvement for the
production.
65

Training of Personnel and Direct Supervision
The manpower problem of Vitarich is also because of the aged employees that become
accustomed with the old system and they cannot adapt to changes in the technology. Another
problem is rejects. Rejects may be the result of incorrect adjustment of a machine tool,
malfunctioning of equipment and tools, errors in technical specifications, disruption of production
discipline, or the workers’ low level of skill. Characteristic of production rejects is a discrepancy
between the quality of the part or article and current requirements.
This can be prevented with proper training and direct supervision. Workers may lack skill in
handling the production and this result to rejects. The company should provide more training and
seminars to add knowledge to the workers. These trainings and seminars will also increase their
discipline in the plant during production hours. Direct supervision will also help workers to be
disciplined and work efficiently.
Progressive companies today need to better recognize downtime and reject causes to improve
their manufacturing performance. Not only does it affect the revenue of a company, but it also
affects the quality. The company can’t take rejects to a zero-level but they can minimize it.
 Training personnel will prevent the employee to do wrong things in the workplace. If they have
been trained and informed properly about the procedures and rules inside the working area
they wouldn’t cause delays for the production.
66

Monitoring and Documenting Production
The Vitarich has no standard monitoring of documents. Though they have a specific
target production, the operator engineer has no proper document on the standard time and
production. They have no standard value on what they can produce in a shift.
The author uses the Time and Motion in order to get the actual and theoretical capacity
of the plant. This method is created to determine the `correct time’ it takes to complete a
certain task at a normal pace. Time and Motion can be effective for performance evaluation; it
also can be used for planning purposes in order to predict the level of output that maybe
achieved. Time and Motion is to determine a `normal’ or average time for a job, by using
observers to record exactly much time is being developed to each task.
Steps on how the author comes up with the Time and Motion Study:
i.
Established the standard job method.
ii.
Break down the job into elements.
iii.
Study the job.
iv.
Compute the average time.
v.
Compute the Normal Time Nt = t*RF or Normal Time = element average time * Rating Factor
vi.
Compute the Standard Time ST = NT*(1+AF) or Standard Time = Normal Time * (1 + Allowance
Factor)
67
20T – AQUA FEEDS PRODUCTION
20 tons Batching
Process
Weighing
Weighing to Grind
Grinding
Mixing
Mash to Bin
1
5
3
24
15
14
2
6
4
25
15
14
3
6
4
25
21
13
4
7
6
26
14
11
Process
Weighing to
Total Time
Bottle Neck
Target Efficiency
Capacity@hrs
1
6.25
Note:
Machine set up during 1st day of production is 2 hrs
Machine set up daily is 1 hr
Range is + 10% of the average time
5% allowance factor
approximately 10mins for dp
20 tons Pelletting
Line 2 (3.5mm die)
Process
1
From Bin to Bin (Mash to Pellet)
43.08
2
47.33
3
41.62
Start up is 1 hr
Range is +10% of the average time
5% allowance factor
Note:
Start up is 1 hr
Range is + 10% of the average time
5% allowance factor
4
45.11
2
67.2
3
64.5
4
57.14
8
6
4
24
15
14
9
4
4
26
15
13
10
6
6
24
17
16
Std.
Time
6.00
4.00
25.00
15.25
13.63
Std.
Time
6.00
4.00
12.50
15.25
13.63
Range
Allowance
10
Total 1 Average 1 Min
Max
Total 2
Average 2
46.67 452.34
45.23
40.71
49.76
452.34
45.23
100%
Std.
Time
45.23
Range
Allowance
Total 1 Average 1 Min
Max
Total 2
Average 2
256.34
64.09
57.68
70.49
199.20
66.4
100%
Std.
Time
66.4
Total 1
56
44
250
157
136
TWO MACHINE GRINDING
Volume (in batch 1 batch = 2000 kgs)
Destination bin (mash form)
51.38
(hrs/batch)
0.86
15.25
(hrs/batch)
0.25
95%
Batches
Kgs
Bags
3.74
7,475.41
299.02
23
46,721.31
1,868.85
5
47.67
Process
Weighing to
Total Time
Bottle Neck
Target Efficiency
Capacity@hrs
1.5
Note:
20 tons Crumbling
Line 2 (3.5 mm die)
Process
1
From Bin to Bin (Mash to crumble)
67.5
Cycle Time (mins)
6
7
6
4
4
4
25
26
15
15
14
13
5
6
5
25
15
14
5
Process
Weighing to
Total Time
Bottle Neck
Target Efficiency
Capacity@hrs
1
Cycle Time (mins)
6
7
44.75
45.25
8
Process
Weighing to
Total Time
Bottle Neck
Target Efficiency
Capacity@hrs
1
11
9
46.86
Range
Average 1 Min
Max
5.60
5.04
4.40
3.96
25.00
22.5
15.70
14.13
13.60
12.24
44
Total 2
6.16
4.84
27.5
17.27
14.96
36
24
250
122
109
Average 2
6.00
4.00
25.00
15.25
13.63
Allowance
100%
100%
100%
100%
100%
SINGLE MACHINE GRINDING
63.88
(hrs/batch)
1.06
25.00
(hrs/batch)
0.42
95%
Batches
Kgs
Bags
2
4,560.00
182
25
50,160.00
2,006
45.23
(hrs/batch)
0.75
0.00
(hrs/batch)
0.00
95%
Batches
Kgs
Bags
1.89
3,780.34
151
Cycle Time (mins)
6
7
8
9
10
66.40
(hrs/batch)
1.11
0.00
(hrs/batch)
0.00
95%
Batches
Kgs
Bags
0.86
1,716.87
69
The Average Standard production of 20T (1 batch=2tons=2000kg)
PROCESS - 20T
Capacity @hrs Batches Kgs
Bags
BATCHING - SINGLE
1
3.75
7,475.41
299.02
BATCHING - DOUBLE
1
2
4,560.00
182
PELLETING
1.5
1.89
3,780.34
151
CRUMBLING
1
0.86
1,716.87
69
Figure 3.4
Based on the Time Motion Study conducted, the standard time that the 20T machines can
produce per process is shown in the Fig. , the process is divided into 3 activities; batching, pelleting and
crumbling. The standard time for this job is computed with 5% allowance factor. Using the formula on
each element; NT = T * RF. To get the normal cycle time we get the longest NT of the element or the
bottle neck of the process.
68
40T – ANIMAL FEEDS PRODUCTION
SINGLE GRIND
Process
3x3
1
Weighing
Weighing to Grind
Grinding
Mixing
Mash to Bin
2
5
4
19
5
10
3
5
5
18
6
9
4
Cycle Time (mins)
6
7
5
Process
1
2
5
5
11
5
10
3
5
5
12
5
11
4
5
5
11
4
10
5
5
6
12
5
10
5
5
12
4
11
Cycle Time (mins)
6
7
5
5
5
5
12
12
5
6
9
10
Process
Weighing to
Total Time
Bottle Neck
Target Efficiency
Capacity@hrs
1
Process
1
2
44
73.33
47.5
64.62
3
44.29
68.57
Process
Total 1
Range
Allowance
Average 1 Min
Max
Total 2 Average 2
5.33
4.80
5.87
10
5
100%
4.33
3.90
4.77
8
4
100%
17.67
15.90
19.43
53
17.67
100%
5.33
4.80
5.87
10
5
100%
10.00
9.00
11.00
30
10
100%
Std.
Time
5
4
17.67
5
10
41.67
(hrs/batch)
0.69
17.67
(hrs/batch)
0.29
95%
Batches
Kgs
Bags
3.23
12,905.66
258
1
60.2
94.33
2
67.33
95
2 hrs of down time includes change type and change die
feeding of crumble averaging to 30 to 40% for line 1
feeding of crumble averaging to 15 to 20% for line 1
4
43.48
60
5
47.5
53.91
Cycle Time (mins)
6
7
48.77
46.5
62
62.5
8
9
6
5
12
6
10
10
5
5
11
5
10
3
63.93
95.2
4
5
Process
Weighing to
Total Time
Bottle Neck
Target Efficiency
Capacity@hrs
1
Cycle Time (mins)
6
7
Range
Allowance
Total 1
Average 1 Min
Max
Total 2 Average 2
5.12
51.12
5.11
4.60
5.62
45
5.01
105%
4.35
50.35
5.04
4.53
5.54
40
5.00
105%
12.09
117.09
11.71
10.54
12.88
117
11.71
105%
5.39
50.39
5.04
4.54
5.54
30
5.07
105%
11.25
102.25
10.23
9.20
11.25
82
10.25
105%
Std.
Time
5.26
5.25
12.29
5.32
10.76
38.89
(hrs/batch)
0.65
12.29
(hrs/batch)
0.20
100%
Batches
Kgs
Bags
4.88
19,521.00
390
8
51.19
64
9
10
46
69.44
44.62
66
Line 2 (Average feeding 60-70%)
Process
Weighing to
Total Time
45.85
(hrs/batch)
0.76
0.00
Bottle Neck
(hrs/batch)
0.00
Target Efficiency
95%
Capacity@hrs
Batches
Kgs
Bags
1
1.24
4,972.62
99
2 hrs of down time includes change type and change die
feeding of pellet mill averaging to 30 to 45% for line 1
feeding of pellet mill averaging to 60 to 70% for line 2
Crumble (feeding 30-40%)
Crumble (feeding 15-20%)
10
3x6 4x6 screen
Weighing
Weighing to Grind
Grinding
Mixing
Mash to Bin
Pelleting Line 2
Pelleting Line 1
9
16
13
53
16
30
Process
Weighing to
Total Time
Bottle Neck
Target Efficiency
Capacity@hrs
1
DOUBLE GRIND
8
6
4
16
5
11
8
9
Line 1 (feeding 30-40%)
63.82
(hrs/batch)
1.06
0.00
(hrs/batch)
0.00
95%
Batches
Kgs
Bags
0.89
3,572.55
71
Range
Total 1
Average 1 Min
Max
Total 2 Average 2
463.85
46.39
41.75
51.02
412.66
45.85
644.37
64.44
57.99
70.88
517.13
64.64
Allowance
100%
100%
Std.
Time
45.85
64.64
Line 1 (Average feeding 30-45%)
Process
Weighing to
Total Time
64.64
(hrs/batch)
1.08
0.00
Bottle Neck
(hrs/batch)
0.00
Target Efficiency
95%
Capacity@hrs
Batches
Kgs
Bags
1
0.88
3,527.16
71
10
Range
Allowance
Total 1
Average 1 Min
Max
Total 2 Average 2
191.46
63.82
57.438
70.202
191.46
63.82
100%
284.53
94.84
85.359 104.3277
284.53
94.84
100%
Process
Weighing to
Total Time
Bottle Neck
Target Efficiency
Capacity@hrs
1
Std.
Time
63.82
94.84
Line 1 (feeding 15-20%)
94.84
(hrs/batch)
1.58
0.00
(hrs/batch)
0.00
95%
Batches
Kgs
Bags
0.60
2,403.96
48
The Average Standard for 40T production
PROCESS - 40T LINE 1 Capacity @hrs Batches Kgs
Bags
BATCHING - SINGLE
1
3.23 12,905.66
258
PELLETING - LINE1
1
0.88
3,527.16
71
CRUMBLING (30-40%)
1
1.89
3,572.55
71
CRUMBLING (15-20%)
1
0.6
2,403.96
48
PROCESS - 40T LINE 2 Capacity @hrs Batches Kgs
Bags
BATCHING - DOUBLE
1
4.88 19,521.00
390
PELLETING - LINE 2
1
1.24
4,972.62
99
Figure 3.5
69
Implementation:
In order to get the actual capacity of the daily production, this sheet must be filled up with the
process engineer for the daily production.
Feeds Production Department
COMMAND DESK REPORT
Operator:
Schedule:
Plant:
Shift:
Run Time
Start
0:00
0:00
0:00
0:00
0:00
0:00
0:00
0:00
0:00
0:00
0:00
0:00
0:00
0:00
0:00
0:00
End
Feed Type
Total
QTY
(batch)
HM SCREEN
HM FEED
LINE 1
LINE 2
Date:
1st OR 2nd
MICRONS
1ST BATCH 2ND BATCH
DIRECTED
Remarks
TO
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
TARGET EFFICIENCY NLT 80%
TOTAL Working hrs
RATED CAPACITY TPH
TOTAL Volume
EFFICIENCY ACTUAL
TROUBLED ENCOUNTERED / TIME:
BATCHING
Figure 3.6
In order to monitor the efficiency of the company and if they meet the standard time, figure 3.6
have the formula of the following
TARGET EFFICIENCY NLT 80% BATCHING
TOTAL Working hrs
RATED CAPACITY TPH
TOTAL Volume
EFFICIENCY ACTUAL
The total working hours will be base on the sum of the total effective hours of production. The rated
capacity is the standard time computed that they have to reach in their daily production. The total
70
volume will be per batch of the produce
formula;
goods per shift. The efficiency actual is computed by the
.
 The standard time will be use to monitor the production if they are efficiently meet the required
output they can produce. It will help to monitor every shift if the workers attain the standard
production, this will help to organize and predict the exact output they are producing in order to
properly record the data for projection of materials and orders.
71

Aggregate Planning in practice
AGGREGATE PLANING: VALUE CHAIN ANALYSIS
Figure 3.7
In the planning stage that occurs once a week they conduct a meeting to discuss issues, demand
and objectives of the production for the next week. Research and Development activities cover the
study of new product improvement. Quality control is where quality assessment and control must be
observed.
Production/processing companies or mills produce animal feed which relate to each form of
physical action on or to feed. Examples of physical actions during the production or processing of feed
are: collection, drying, cleaning, mixing, packaging, storing, transshipping. The products they produce
include compound feed, concentrated feed, and feed pre mixtures. Compound feeds mix of at least 2
feed materials, with or without additives, to be used for feeds in the form of complete animal feeds or
supplementary feeds. It also included mineral mixes, milk replacement feeds, molasses feeds, and diet
feeds. Concentrated feed is a generic term to describe any non-forage dietary ingredient, usually for
herbivores.
Storage is where the process material is being stored before it delivers. The storage of feed mill
is a huge warehouse that has a specific temperature for the feeds. Distribution channel of the company
is the one that handles delivery of the feeds.
72
Aggregate Planning
The demand for feeds of Vitarich is high and yet the company found hard to meet it. Almost just
80% of the needed demand has been met. The company’s problem is how they can supply and give the
100% demand from the customers knowing that the company is suffering from its debt problem.
Using the aggregate planning, this study will attempt to balance capacity and demand in such
way that costs are minimized. The objective of aggregate planning frequently is to minimize total cost
over the planning horizon.
The data shows that almost 20% variance that the VItarich couldn’t meet the demand. This is
caused by the under production of feeds.
2011
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
TOTAL
Demand
118,434.00
119,735.90
118,054.20
111,155.70
115,328.70
125,470.60
136,121.00
146,095.50
144,844.00
132,958.30
143,419.92
135,372.10
1,546,989.92
Output
Variance
118,875.70
(441.70)
106,003.40
13,732.50
105,918.60
12,135.60
96,122.00
15,033.70
111,696.00
3,632.70
111,479.98
13,990.62
114,385.48
21,735.52
119,345.48
26,750.02
117,922.98
26,921.02
117,808.98
15,149.32
116,316.98
27,102.94
113,984.98
21,387.12
1,349,860.56 197,129.36
Figure 3.8
The option which can be used to increase the capacity to match the current demand:

Subcontracting. Frequently firms choose to allow another manufacturer or service provider to
provide the product or service to the subcontracting firm's customers. By subcontracting work
to an alternative source, additional capacity is temporarily obtained.
73
Based on the study of value chain activities, the production of feeds can be outsourced. In order
to minimize cost of production, Vitarich can search for company that can provide service for their
production.
The following are the possible companies that Vitarich could outsource in order to supply the
demand of their customers. These are companies who are no much known to be the competitor of
Vitarich. They are big company but not aggressively fighting in the feed mill industry.
 The use of aggregate planning is used for operational activity to supply and meet the demand.
The supply chain has been presented to use to distinguish which activities can be outsourced. If
the production plan did not work then it is necessary for the Vitarich to consider doing
outsourcing and lay-offs. This will help the company minimize the cost from production and to
supply the needed output of the customers.
74
CHAPTER 5: CONCLUSION AND RECOMMENDATION
Conclusion:
Based from all the IE-EMG tools the author has used, they were able to strategize the correct
things in creating a new strategic business plan to revive the Vitarich Corporation from its present
situation.
The author was able to develop the Strategic Business Plan that best suits for the Vitarich
Corporation very well. The study shows that Vitarich has a big potential for a market success. The
company just suffered from its debt that they have limited financial that will supply the needs for
development. If those given strategy will be implemented right and if they consider the diversification,
the Vitarich could lift from rehabilitation and continue the business with a new strategic objective that
leads them to be one of the best feed providers in our country.
The company can produce goods and meet the demand if they make reports, record data,
implement strict policies and apply discipline. The management should implement standard monitoring
of materials so that they can have data on the movement of materials and the processes.
The causes of not meeting the demand in Feed production according to the Why Why Diagram
are no proper monitoring of documents, no strict policy regarding deadline deliveries, warehouse
constraints, no direct supervisions, no standard work instructions in calibrating machines and lack of
manpower efforts. These are the internal factors that affect the company’s production.
75
Recommendation:
Vitarich Corporation has a very attractive industry that gains lots of opportunity. The problem of
the company is in its internal environment. The downfall of Vitarich started when they aim for a lot and
over expansion happens. What Vitarich should do now is to turn back and continue the business in order
to survive. Choosing the best partner that will give them the fund that they need should be put in
consideration. There’s no other chance for the company but to sell off some of their share. As in the
present situation of Vitarich, the sales are consistently going down. If they do nothing about it, this will
direct them to much worst case for the company. So now, that they still have customers and shares in
the market, they should think of accepting partners that will help them.
Vitarich should also hire Industrial Engineers and Engineering Management to help them in the
production and management of the processes. Though they have present IE, the implementation of the
strategy should be put into execution. This study has been formulated to improve the business strategy
for Vitarich Feed Mill. These strategies will help the company increase efficiency in their production,
minimize waste and decrease opportunity loss. In the study the author identified factors and methods in
formulating the suitable strategy like identifying the problem using the why-why diagram, determine the
strengths and weaknesses and proper monitoring of production. The study also gave recommendations
on how to improve the business process.
76
APPENDIX
FINANCIAL RATIOS
Liquidity Ratios
2007
2008
2009
2010
Current Ratio
1.77
1.59
1.37
1.31
Quick Ratio
1.13
0.99
0.88
0.88
The current ratio of Vitarich shows that the company is decreasing its capability to pay their short term
obligation. Also, the quick ratio of the company is decreasing which shows that the position of company
is not good.
Debt Ratios
Debt Ratio
2007
2008
2009
2010
0.74
0.84
0.88
0.93
The debt ratio indicates the total assets by firm’s creditor, shows that the Vitarich is near to its economic
failure because when the ratio is greater than 1 the company has more debt than assets.
Profitability Ratios
2007
2008
2009
2010
Gross profit margin
0.08
0.04
0.07
0.07
Operating profit margin
0.02
-0.03
0.00
0.00
Net Profit Margin
-0.44
-0.52
-0.63
-0.80
Return on total assets
-0.27
-0.35
-0.41
-0.47
According to the Profitability Ratio of the company, the operating ratio is unhealthy, meaning the
company doesn’t have much revenue to pay for the fixed costs. The net profit of Vitarich shows that the
company has no better control over its costs compared to its competitors.
77
APPENDICES
The Green Zone consists of the three cells in the upper left corner. If one’s enterprise
falls in this zone, it is in a favorable position with relatively attractive growth opportunities. This
indicates a "green light" to invest in this product/service.
The Yellow Zone consists of the three diagonal cells from the lower left to the upper
right. A position in the yellow zone is viewed as having medium attractiveness. Management
must therefore exercise caution when making additional investments in this product/service. The
suggested strategy is to seek to maintain share rather than growing or reducing share.
The Red Zone consists of the three cells in the lower right corner. A position in the red
zone is not attractive. The suggested strategy is that management should begin to make plans
to exit the industry.
Characterize Your Enterprise
The vertical axis represents the industry attractiveness. The expert system will position your
enterprise on the chart based upon your description of:





bargaining power of the buyers
bargaining power of the suppliers
internal rivalry
the threat of new entrants
the threat of substitutes
The horizontal axis represents the firm's competitive strength or ability to compete in the
industry. It includes an analysis of:



the value and quality of the offering
market share
staying power
78
Analysis of Your Enterprise Position
High Attractiveness
Strong Competitive Position
The strategy advice for this cell is
to invest for growth. Consider the
following strategies:




provide maximum
investment
diversify
consolidate your position
to focus your resources
accept moderate nearterm profits to build share
Medium Attractiveness
to selectively invest for growth.
Consider the following strategies:



invest heavily in selected
segments,
establish a ceiling for the
market share you wish to
achieve
seek attractive new
segments to apply
strengths
Low Attractiveness
to selectively invest for earnings.




defend strengths
shift resources to
attractive segments
examine ways to revitalize
the industry
time your exit by
monitoring for harvest or
divestment timing
High Attractiveness
Average Competitive Position
The strategy advice for this cell
is to invest for growth. Consider
the following strategies:



build selectively on
strength
define the implications
of challenging for
market leadership
fill weaknesses to avoid
vulnerability
is to selectively invest for
earnings. Consider the following
strategies:







ride with the market growth
seek niches or specialization
seek an opportunity to increase
strength through acquisition
Weak Competitive Position
The strategy advice for this cell is to
preserve for harvest. Consider the
following strategies:

segment the market to
find a more attractive
position
make contingency plans
to protect your
vulnerable position
Low Attractiveness
is to restructure, harvest or
divest. Consider the following
strategies:

High Attractiveness
The strategy advice for this cell is to
opportunistically invest for earnings.
However, if you can't strengthen your
enterprise you should exit the market.


act to preserve or boost cash
flow as you exit the business
seek an opportunistic sale
seek a way to increase your
strengths
Low Attractiveness
The advice for this cell is to harvest or
divest. You should exit the market or
prune the product line.
make only essential
commitments
prepare to divest
shift resources to a
more attractive segment
Credits to : http://www.brs-inc.com/models/model17.asp
79
Currency
in
Millions of
Philippines
Pesos
As of:
INCOME STATEMENT
31-Dec
31-Dec
31-Dec
31-Dec
2010
2007
2008
2009
Restated
Restated
Restated
PHP
PHP
PHP
Revenues
2,452.30
2,757.50
2,630.70
2,263.90
TOTAL
REVENUES
2,452.30
2,757.50
2,630.70
2,263.
90
Cost of Goods Sold
2,260.90
2,635.70
2,434.40
2,094.70
GROSS PROFIT
Selling General &
Admin Expenses,
Total
191.4
121.8
196.4
169.1
323.8
365
299.6
325.8
-171.4
-167.6
-114.8
-151.4
152.4
197.4
184.8
174.4
39
-75.6
11.6
-5.3
-175.5
-162.1
-176.7
-192.6
0.1
3.9
0
0.4
-175.4
-158.2
-176.7
-192.2
Other Non-Operating
Income (Expenses)
-28.7
-53.6
-55.2
EBT, EXCLUDING
UNUSUAL ITEMS
-165.1
-287.4
-220.3
-289
Gain (Loss) on Sale of
Assets
0.1
0.4
0.1
31.8
Other Unusual Items,
Total
990.1
--
-30.1
-1.5
Other Unusual Items
859.7
--
--
--
EBT, INCLUDING
UNUSUAL ITEMS
825.1
-287
-250.3
-258.8
Income Tax Expense
55.3
-18.6
-19.9
-54.3
Earnings from
Continuing Operations
769.7
-268.4
-230.4
-204.5
769.7
-268.4
-230.4
-204.5
769.7
-268.4
-230.4
769.7
-268.4
-230.4
Other Operating
Expenses
OTHER
OPERATING
EXPENSES, TOTAL
OPERATING
INCOME
Interest Expense
Interest and
Investment Income
NET INTEREST
EXPENSE
NET INCOME
NET INCOME TO
COMMON
INCLUDING EXTRA
ITEMS
NET INCOME TO
COMMON
EXCLUDING EXTRA
ITEMS
PHP
-91.5
-204.5
-204.5
80
BALANCE SHEET
Currency in As of:
31-Dec
31-Dec
31-Dec
31-Dec
2007
2008
2009
2010
Millions of
Philippines
Pesos
Restated
Restated
Restated
PHP
PHP
PHP
PHP
Cash and Equivalents
TOTAL CASH AND
SHORT TERM
INVESTMENTS
62.5
75.6
56.5
65.9
62.5
75.6
56.5
65.9
Accounts Receivable
452.2
481.9
411.7
335.6
Other Receivables
314.7
302.4
401.1
477.1
766.9
784.3
812.8
812.7
Inventory
479.3
527.3
486.7
437.6
Prepaid Expenses
--
4.1
0.8
11.4
Other Current Assets
TOTAL CURRENT
ASSETS
Gross Property Plant and
Equipment
Accumulated
Depreciation
NET PROPERTY
PLANT AND
Accounts Receivable,
Long Term
Deferred Charges, Long
Term
12.1
7.6
8.8
7
1,320.90
1,398.80
1,365.60
1,334.60
2,189.10
2,234.40
2,321.80
2,242.10
-411.3
-490.6
-572
-642.2
1,777.80
1,743.80
1,749.80
1,599.90
180.3
173
190.6
139.9
15.6
31.4
20.9
20.9
Other Long-Term Assets
718.8
719.7
715.7
721.3
TOTAL ASSETS
4,013.40
4,066.60
4,042.60
3,816.60
Accounts Payable
Current Portion of LongTerm Debt/Capital Lease
Current Income Taxes
Payable
TOTAL CURRENT
LIABILITIES
744
876.9
857.4
939.7
--
--
140.9
78.2
4
1.7
2.1
1.5
748
878.6
1,000.40
1,019.40
Long-Term Debt
Pension & Other PostRetirement Benefits
Deferred Tax Liability
Non-Current
Other Non-Current
Liabilities
1,696.30
1,963.70
1,999.60
1,992.40
79.3
97.1
97.8
105.7
240
217.1
214.2
154.5
216
250.1
249.7
268.1
2,979.70
3,406.60
3,561.60
3,540.00
Common Stock
410
410
410
410
Additional Paid in Capital
913.7
913.7
913.7
913.7
Retained Earnings
Comprehensive Income
and Other
-1,070.90
-1,440.70
-1,667.40
-1,803.60
781
777.1
824.7
756.4
Assets
TOTAL RECEIVABLES
LIABILITIES & EQUITY
TOTAL LIABILITIES
81
CASH FLOW
Currency in As of:
31-Dec
31-Dec
31-Dec
31-Dec
2007
2008
2009
2010
Millions of
Philippines
Pesos
Restated
Restated
Restated
PHP
PHP
PHP
NET INCOME
Depreciation &
Amortization
DEPRECIATION &
AMORTIZATION,
TOTAL
(Gain) Loss from Sale of
Asset
Asset Writedow n &
Restructuring Costs
Provision & Write-off of
Bad Debts
Change in Accounts
Receivable
769.7
-268.4
-230.4
-204.5
52.7
79.3
81.4
69.1
52.7
79.3
81.4
69.1
-0.1
-0.4
-0.1
-31.8
-130.4
--
30.1
1.5
--
53.6
55.2
91.5
-82.1
-63
-110.5
-39.8
Change in Inventories
Change in Accounts
Payable
Change in Other Working
Capital
CASH FROM
OPERATIONS
-101.2
-47.9
40.5
47.2
190.1
162.8
-19.9
17.9
2.3
-0.1
9.2
0.3
72
59.1
10.7
87.5
Capital Expenditure
Sale of Property, Plant,
and Equipment
Sale (Purchase) of Real
Estate
Properties
CASH
FROM
-62.7
-44.7
-14.3
-62.7
0.5
0.4
0.1
--
--
-1.8
-15.6
-15.4
-62.2
-46.1
-29.8
-78.1
9.8
13.1
-19.1
9.4
INVESTING
NET CHANGE IN CASH
PHP
82
FINANCIAL RATIOS
Liquidity Ratios
Current Ratio
Quick Ratio
Activity Ratio
Inventory turnover
Average Collection Period
Fixed Asset Turnover
Total Asset Turnover
2007
1.77
1.13
2008
1.59
0.99
2009
1.37
0.88
2010
1.31
0.88
2007
2008
2009
2010
4.72
5.00
5.00
4.79
67.3054 63.78731 57.12187 54.10751
4.99
5.12
5.30
4.96
0.61
0.68
0.65
0.59
Debt Ratios
Debt Ratio
Time interest earned
2007
0.74
-4.70
2008
0.84
1.81
2009
0.88
1.42
2010
0.93
1.35
Profitability Ratios
Gross profit margin
Operating profit margin
Net Profit Margin
Return on total assets
2007
0.08
0.02
-0.44
-0.27
2008
0.04
-0.03
-0.52
-0.35
2009
0.07
0.00
-0.63
-0.41
2010
0.07
0.00
-0.80
-0.47
83
Sample Sheet:
VITARICH FEED MILL
MAINTENANCE SCHEDULE
In charge:
Date:
Daily
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
Check Grease Bearings
Check Gearbox Oil
Change Gearbox Oil
Grease Motor Bearings
Check V-Belts
Oil Chains
Check Leg Belt
Check Leg Cups
Check Root Guard/Oil/Belt
Check Head Pulley
Check Grad Chain Paddles
Check Hanger Bearings
Check Air Filter
Blow Off Condensate
Check Crankcase Oil
Change Crankcase Oil
Check Hydraulic Oil/Leaks
Check conditioner of die
Check condition of scrapper
20
Check condition of at coating
drum/nozzles and fat pump
Weekly
Monthly
6 Months
12 Months
Additional Maintenance
-
Raise the preventive maintenance
Preventive maintenance encompasses activities, including adjustments, replacement, and basic
cleanliness, that forestall machine breakdowns. Preventive activities are primarily condition based. The
condition of a component, measured when the equipment is operating, governs planned/scheduled
maintenance. Typical preventive maintenance activities include periodic inspections, condition
84
Equipment Information:
PROCESS / SERVICES
1. Replacement of hammer
mill screens 20TFM - 8
40TFM - 4
RESPONSIBLE
- Process Engineer
DETAILS
> Replace screens
> Checking of
alignment
> Checking of cover
2. Replacement / rearrangement of beater
blades
20TFM
- P.E.
- Maintenance
40TFM
>Estimate time of
work 30 minutes
for 8 screens
>Every week
> Check edge of
beater blades if still
usable during PM
>Replacement
30minutes HM
> Possible PM works
> 45 minutes / hm
a. replacement if
worn out
>Every 2weeks
-112 blades/hm (4hms)
48 blades / crusher (2
crushers)
REMARKS
Reverse rotation
no time spent
b. reverse rotation
-60 blades/hm (2)
c. invert blades
3. Batch Mixer
-P.E.
>Check for Safety
procedure.
>Maximum of 1
hour.
>Check / verify
paddles, casing and
housing done by
Maintenance.
>Check / verify
cleanliness by P.E.
4. Cleaning of chain
conveyors
40TFM – intake
conveyors (5)
batching
conveyors (4)
20TFM intake
- Batching
Operator
>Checking sprocket
and removal of strings
/ clogged materials.
> Checking of chains
links / chain links with
flights, pins and
>30 minutes – 1
hour / conveyor
>Every month
>30 minutes /
conveyor
85
conveyors (5)
circlips by
maintenance and P.E.
Batching
conveyors (4)
5. Cleaning of filters
(aspirators)
- Advise Maintenance
if for replacement or
any necessary repairs
-P.E.
>Check / verify service >Every week
done by Utilities.
-5minutes
>Sign the service
accomplishment
report
PROCESS / SERVICES
RESPONSIBLE
DETAILS
REMARKS
1. Cleaning of conditioner
20TPH -3, 30TPH-2, 40TPH-2,
2T-1
-P.E.
>Verifies cleaning by
P.E.
>5 minutes /
conditioner
40TPH/20TPH
>Every 2 weeks
> Cleaning of
30TPH/2TPH
>1 hour /
conditioner
>Check conditioner of
die
>5 minutes
PELLETMILL OPERATIONS
2. Pellet mill servicing
Dies: 40T-2, 20T-3, 2T-1,
30T2
-P.E.
-counter bore (pikit)
>Every week
-die bolts if complete
is not loosen
Roller: 40T-4, 20T-6, 30T4,2T-2
> Check roller
> 5 minutes
- roller gap between
die should be ___, use
torque trench to
measure it.
> Condition of roller if
not worn out or
deformed
86
3. Check scrapper and roller
holder lower and upper
scrapper
-P.E.
> Check condition of
scrapper
> 5 minutes
>Every 3 weeks
> Check tightness of
roller holder
4. Magnets
-P.E.
> Check cleanliness of
magnets by P.E.
> 5 minutes
5. Cooler
-P.E.
bed plates (40T) and
housing
> 5 minutes
> Every month
> Check inner surface
of cooler / check
ducting for possible
clogging of mash
6. Crumble
-P.E.
>Check machine inlet
housing / casing and
machine outlet for
leaks and cobwebs
> 5 minutes
7. Sifter screen
-Pellet mill
Operator
screens. If worn out
advise Maintenance
Crew for repair
replacement
> 5 minutes
8. Air lock
-Pellet mill
Operator
> Check chute and
impeller for any
clogging and cyclone
leaks
> 10 minutes
9. Bagging system
-Pellet mill
Operator
inlet duct and
discharge hopper for
leaks and cobwebs.
> 5 minutes
RESPONSIBLE
DETAILS
REMARKS
-Extruder
screen. Replace or
> 5 minutes
EXTRUSION
PROCESS / SERVICES
1. Sifter screen
87
Operator
repair if necessary
2. Circular bin
-Extruder
Operator
> Check/verify
cleanliness of paddles
and outlet leading to
feeder screw
> 5 minutes
3. Conditioner
-Extruder
Operator
> Check / verify
cleanliness of
paddles/shaft and
conditioner housing
> 10 minutes
4. Extruder
-Extruder
Operator
> Check clearance
between screw and
liner. Advise
Maintenance to
adjust if necessary.
> 5 minutes
> Check/verify
cleanliness of
extruder barrels and
base
> 5 minutes
5. Dryer
-Extruder
Operator
bed plates plates, air
ducting, heat
exchanger, screens
and blower fans
> 30 minutes
6. Cooler
-Extruder
Operator
> Check / verify
cleanliness of cooler
>Every month
> Check cyclones and
air lock
7. Rotex sifter
-Extruder
Operator
screen. Advise
Maintenance to repair
or replace if necessary
8. Fat coating drm
-Extruder
Operator
at coating
drum/nozzles and fat
pump.
88
9. Bagging bins and hoopers
-Extruder
Operator
bagging bins for leaks
and presence of
cobwebs
-Pulp Operator
filter bags and
cyclones
PULVERIZER
1. Cyclones and blower fans
89
SAMPLE SHEETS
* Equipment Identification
EQUIPMENT LIST
#
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
Description
Hammermill
Hammermill Screens
Hammermill Discharge Conveyor
Hammermill Air System
Hammermill Feeder
Grinding Elevator
Grinding Distributor
Beater Blades
Mixer
Magnet
ReceivingElevator
Rail Receiving Conveyor
Truck Receiving Conveyor
Two- Way Valve
Transfer Conveyor
Turnhead Distributor
Corn Storage Bin
Receiving Scalper
Receieving Distributor
Storage Bin Feeders
Gain Transfer Conveyor
Gain Transfer Elevator
Surge Bin and Level Control
Grain Screener
Crimped Grain Elevator
Ingredient Bin Screw Feeders
Main Ingredient Scale
Scale Air Gate
Batch Mixer
Overs Regrinder
Mash Distributor
Mash Transfer Conveyor
Slide Gates
Mash Cleaner
90
*Maintenance Calendar
-
Schedule regular maintenance
o
Scheduled maintenance utilizes a previously developed maintenance schedule for
each machine tool. This schedule may be regularly done daily or weekly depends on
the machine standing.
91

Strict Monitoring of Employees
Operations of Vitarich Feed mill production operates 24 hours there are
employees which is about a 100 working in production. Most of them are veterans and
work for the company for a long time. Now that the company couldn’t afford to employ
new trainees, the aged employee still prefer by the company because of their
experience and skill expertise. But then, because these employees are old in the
company, they tend to be so at ease. The production performance of production
employees have been deteriorating, absenteeism and idle time while working is one the
major reason for the downtime of production.
Workers and employees need to be encouraged to perform better and minimize their absences.
Workers are encouraged with the following:
-
Giving Incentives - providing incentives to employees who have perfect attendance; Reward
the person in ways that are important to the individual. Consider options such as more pay,
time off, time and attention from the supervisor, a special assignment, a committee
leadership role, or a training and personal development opportunity.
-
Rewards System– monitors performances and provide awards for employees who have
excellent performance.
-
Promote self-discipline – People need to know exactly what is expected of them. If you want
to see continuous improvement, initiative, and problem solving, let them know.
Incentives and rewards will be based on performance appraisal. The performance appraisal is done
every end of the year. Sample performance appraisal:
92
The scores that the employee will get will indicate if he/she will receive a raise. If the employee gets a
total of 100% (no absences, no tardiness, no violation) he/she will get a 10% salary increase. If the
employee scores 95%, the employee 5% increase. And 3% increase if the employee scores 90%.
93

“An Operation`s Driven Strategy for Vitarich Feed Mill Business”

Transcription

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