OPERATIONS MANAGEMENT REPORT

Submitted by: Mehreen Omer Section C - II

ORIENT

Submitted To: Ms. Maheen Shafqat

Dated: 3rd April 2013

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Brief Introduction: Orient Pakistan is one of the leading providers of consumer electronics in Pakistan. It aims to achieve this by closely monitoring and listening to the customers insight, by assessing changing preferential trends to stay ahead of its competitors and by developing a loyal and steady consumer base through unparalleled service and care. It introduces cutting-edge innovations in technology every now and then. Operations Analysis: Interestingly, Orient Group of Companies is the sole distributor of the worlds most renowned brands like Mitsubishi Air Conditioners, Samsung Home Appliances & Samsung Consumer Electronics in Pakistan. It manufactures a variety of products like air conditioners, refrigerators, microwave ovens water dispensers and vacuum cleaners. These products are manufactured and assembled at their world-class facility at Multan Road, which is just 26 kilometers away from Lahores center. Its shrewd of them to have their facility located near Multan Road, to have easy and faster transport to the industrial units outside Lahore and the retail outlets inside Lahore. Also, since their facility is located near a main road, not a lot of time is wasted in getting heavy trucks pass through small and constricted roads in the streets of that area. In this way, they ensure a faster response to the market. Also, since they have a variety of products with a wide product-live, they are again able to increase responsiveness to the market because if one product does not sell well in the market they always have other products that are able to negate the loss in sales. The assembly line for air-conditioners is used to manufacture microwaves in off-season when the demand for air-conditioners falls drastically. Also, the product variety in the same product shows that they are able to tag price points for the different features they offer in their products; hence, achieving a psychological edge in the minds of the consumers. This facility consists of a manufacturing plant, corporate and sales offices, warehouses, and an assembly line for all its products. What many people dont know is that the factory does not only manufacture all of Orient Group of Companies product range, but also assembles Samsung air conditioners, televisions, home theatres and Mitsubishi air-conditioners at its location. Mitsubishi and Samsung are proud partners of Orient. It is a completely automated factory with

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an Enterprise Resource Planning solution installed to meet its operational and functional demands. Most of their products are offered with three years warranty. The management saves and keeps a record of the data for their appliances during this period in order to analyze if there is any problem detected in that particular model during this time period. Orient gets its raw materials from countries like China and Malaysia. In the refrigerator category, they see Dawlance as their biggest competitor followed by PEL. But they say that they have their water dispenser as their competitive advantage and they compete on both quality and price on it. This shows that the refrigeration industry is characterized by price wars and that there is very less differentiation between the products and the processes are largely, if not completely, standardized. It uses Japanese technology to manufacture its products, which gives impressions of high class and quality. Even though its a Korean company, it does not desist from using Japanese technology even though there has been a tug-of-war going between the Koreans and the Japanese in consumer electronics and appliances technology which has especially heated in the past decade. If the waste is deemed useful, it is converted into raw material and then stored it in the warehouse. If it deemed not useful then it is stored in the scrap store and sold at the end of every month. Quite interestingly, one of their factory workers told that if they find out any defected product from the labs test or find any damages to the product with poor paint quality and fixing or any other mechanical issues, then these products are transferred to the warehouses. When enough quantity such products are accumulated, they are repaired and sold to non-governmental organizations and to their employees at a very low cost. Although, such a phenomenon is recorded in their books as a production loss, this is a strong testimony of the corporate social responsibility that Orient stands for. One of the bottlenecks that can be identified in the system is the foaming door operation, and in order to increase its capacity what they do is increase the main power. Although, the usual factory work days are 5 days a week, they work on Sundays too to increase the main power and avoid any choking in the system. They have a strict inventory control system with an RFID tag attached to every finished unit. In this way they can trace the movement of the unit in and out of the factory, all the way to the customer.

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The capacity of a single plant is 800 units per day. They are not able to make more than it in a given today within the current number of shifts they have. If they increase the number of shifts, that might decrease the productivity levels of the labor force. The batch size can be definitely reduced to avoid carrying excess inventory and bearing all the holding costs with it. Due to global warming in recent years and its massive toll on Pakistan especially, the demand for airconditioners has risen exponentially. Each middle-class household in Lahore has about 2 3 airconditioners installed on average. The rich can afford to have an air-conditioner in every room. Orient still manufactures window air-conditioners even though many consumers have shifted to split air-conditioners. This is a clever strategy because window air-conditioners have a finer compressor and cool more than a split air-conditioner. Also, the window air-conditioners are easier and less costly to manufacture. Hence, Orient can charge less for these air-conditioners and give the low-price advantage to its customers. Its refrigerators on the other hand are known for its massive size, although the entire product-line varies in sizes, but some are manufactured to hold bulky items and contain a lot of space. Process Flow of Air-Conditioner Manufacturing: The process for refrigerator and air-conditioner is almost the same except for some minor differences. Brazing is not done for indoor manufacturing. However, it is done only in outdoor manufacturing. There is an indoor line. Then we saw indoor and outdoor line where indoor and outdoor manufacturing is done. For indoor manufacturing evaporator is used. However for outdoor, compressor and condenser is used. Evaporator absorbs heat while condenser rejects heat and sends it outside. Continuous processing is done at assembly line. Gas filling is done in the air-conditioner. Orient currently has 4 parts in refrigerator and 4 four in ACs that are; condenser, evaporator, compressor and controller. The air-conditioners at Orient are manufactured in a series of complex operations which can be summed up in three main categories; manufacturing the parts, assembling those parts, and then charging and finishing them. These air-conditioners are made from a steel sheet. Then these metal parts are stamped together to give them the desired shape. This method is necessary to trim the metal to the required size. Then the steel sheet is galvanized. Once these parts are made, they

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are then assembled. Orient keeps an inventory of some of the pre-made parts of compressors and condensers. The condenser is a device that performs heat transfer functions and a compressor is a device that transfers the heat through the condenser. Since Orient has both window airconditioners and split air-conditioners, the size of the compressor differs in both. Assembling the air-conditioner means installing the compressor, the inside condenser, which cools the air being blown into the indoor area, the outside condenser, which transmits heat from inside the building to the outside air and various electronic controls. The condensers are connected through copper pipes to the compressor, and the electronic controls are connected to an electric motor, which causes the compressor to spin. The fin press is a process that allows the fins to radiate heat. Then a coolant gas is placed in the compressor. This air-conditioner then goes through a safety check along with the conveyer belt, where it is checked for coolant leaks. All the air-conditioners are tested in a testing room. One a.c is checked in 30 minutes. Once testing is complete if a.c is showing defects company removes it. There is a separate testing room where sound is tested it is a electric safety test machine. The temperature is kept lower here than the other areas. If all is well, the cover is placed on the air-conditioner. Once complete, the air-conditioner is packaged in a box and is ready to be transported to either the warehouse or a distribution facility. After every 40 seconds an AC is manufactured. This is the cycle time for air-conditioners at Orient.

AC : R22 Refrigerant Gases Refrigerator: R134A

The coolant gas used in air-conditioners is known as R22 while that used in refrigerators is known as R134A.

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Parts are Manufactured

Brazing is done on the parts

The steel sheet is galvanized

Coolant Gas is placed in the compressor

Compressor & Consdenser is installed

The parts are assembled

Air-conditioner passes through a testing room and is checked in 30 min

Cover is placed on the air-conditioner

A.C is transported to the warehouse or distribution facility

Process Flow of Refrigerator Manufacturing: First of all body is pre assembled where plastic and steel parts are combined. The inside part is plastic and the outer part is of steel. In between plastic and steel polyurethane is inserted. Some processes are manual and some are automatic. Foaming is done with polyurethane (PU). The filling with PU is a 100% automatic procedure. Temperature inside the refrigerator is quite low (16C to -15C) whereas outside it is high enough ranging from 25 C to 30 C as told by the management. Delta T is about 50 60 C. in order to maintain the inside temperature an insulating material is filled in which is PU. This process is similar worldwide in all the major appliance companies. It is an insulating material used for Refrigerators. Similar to the cabinets, the doors are then preassembled. After preassembling the doors, PU is filled in the door. For every door it takes 5 minutes to assemble the door. There are 7 jigs and each jigs takes 5minutes. Then plastic molding machines do preassembly and then polyurethane is filled and after that . U shell is the machine which makes the steel structure. After every 25 sec

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a shell is made out of a roll farmer. Another machine makes the inner mould of plastic. Cyclopentane is one of the 3 chemicals which are added in PU. HIPS machine/ thermoforming machine uses thermoforming sheets which is heated at a temperature of 120- 150 C. As it cools down it forms the liner for which the process time is 80 seconds and total time is 100 seconds. After this leakage testing is done with 210 testing points. Each refrigerator is tested is for 2 hours.

Plastic and steel parts combined

Foaming done with Polyutherane

Doors are pre-assembled with PU filled in each door at a time

Plastic molding machines do pre-assembly

Vacuuming

Charging

Leakage Testing done with 210 testing points for 2 hours

The leakage testing process is done through a leak testing machine which is known as leak testing process. Then packing is done and then outdoor is started then parts are assembled like compressor, then brazing is done after these gasses are removed, refrigerant is charged and after this testing is done and finally leak testing is done. The leak test machine can ever detect 0.05 gram leakage of gas. High pressure of 5 bars is maintained in this machine it is then dipped in the water which denotes leakage as bubbles in the water. If the product clears this process the final packaging is done. This shows that Orient enforces strict quality control mechanisms that has

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enabled it to offer reliable products in the market. The company has a capacity of producing 900 refrigerators every day, which means it produces 1.56 refrigerators every minute.

1.56 refrigerators per minute

Checking time: 30 min Cycle time: 40 seconds

Orient establishes a production plan for each product that is to be produced and according to this production plan, all the material resource planning is done. The forecasting of demand and production orders is done by the sales department that has no connection with the production, the orders are provided before hand and according to that the number of products to be produced is decided explained by the staff at Orient. Planning is done step wise. First of all yearly plans are executed, then quarterly, followed up with monthly and weekly plans. But generally the sales plan is made yearly at Orient.

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Conclusion & Recommendations: Ultimately, this shows the linkage between marketing and manufacturing. The marketing and the manufacturing functions both have to support each other. As we read in the novel Goal, once the products that are manufactured are of good quality, the marketing department has to generate demand for these functions. The sales function is also appropriate here because unless proper sales forecasting is done, stock-outs or excess inventory may result. And if the manufacturing end is not able to produce enough due to low capacity, the marketing end has to withhold demand by working to assure customers that their products will be available soon in order to avoid customer ill-will. Walking in the Orient Factory made me feel like Alex trying to decipher what could be the bottleneck and how we can increase the capacity of the entire system by increasing the capacity at that bottleneck. The bottleneck for me was the foaming process which caused a lag in the entire system.