This report will discuss about the nature, scope and extent of manufacturing and service operations strategy in the CIC, Holdings, selecting one of its subsidiaries
The operations management simply can be explained as the manufacturing process of a company (Bayraktar, Jothishankar, Tatoglu and Wu, 2007). According to Krajewski et. al (as cited in Bayraktar et. al, 2007), operations management assist organizations to acquire and utilize necessary resources for achieving organizational goals and objectives. Operations management consists with several sub functions such as Project Management, Supply Chain Management, Quality Management, Inventory Management, Waste & Lean Management, Business Process Re-engineering & ERP etc.
Among them, this report will discuss about the nature, scope and extent of manufacturing and service operations strategy in the CIC, Holdings, selecting one of its subsidiaries, i.e. CIC Lifesciences Ltd. After evaluating current operational strategy and business processes of CIC Lifesciences, the main aim of this report has narrowed to comprehensively study the capacity management process of the company, while demonstrating the application of strategies, tools and techniques in order to improve business operations.
CIC Holdings (Chemical Industries Colombo Limited) was founded in 1964, which was initially known as Imperial Chemical Industries (ICI). However, now it has become one of Sri Lanka’s leading conglomerates, which similarly has expanded its business to local and international market as well. CIC operates with the vision “to be the most respected and admired corporate for positive impact that make on society by nurturing the lives of those who are touched” and the mission of “harnessing science and modern technology, to provide solution of superior quality which are efficient and safe; and to build rewarding and lasting relationships with stakeholders and be significant entity in every sector that operates in” (CIC website, online).
CIC has currently expanded its business into several industries including Agro Products, Livestock Solutions, Health & Personal Care, Industrial Solutions and Plantations (which was summarized in figure 1.1), while producing agri products, farm products, veterinary medicines, consumer products, industrial raw materials, pharmaceuticals, herbal products and health and personal care products (CIC website, online).
Figure 1.1: Subsidiaries of CIC Holdings
Source: CIC Annual Report, 2015/2016
Operational strategy of a company focuses on creating goods or services for the satisfaction of customers through a sound operations management system. Most commonly it is recognized as a transformational process which transforms resources (i.e. inputs) to outputs (i.e. products or resources), which is demonstrated in figure 2.1 and it is alternatively known as the value creation process of a company (Stevenson & Hojati, 2007).
Figure 2.1: Operations Management as a Transformational Process
Source: Stevenson, W & Hojati, M 2007, Operations Management, USA, McGraw-Hill Ryerson Higher Education
Since operational management strategies depend on product development, location, layout, human resource & job design and scheduling strategies of a company, this section comprehensively analyze about these mentioned concepts.
The product development can be mentioned as a process of creating and offering products to the market by an organization. Modern business literature focuses on stressing the ‘New Product Development’ (NPD) concept rather than ‘Product development’ concept, which is aiming to create operational strategies to present new products to the market for achieving competitive advantages; and these new products may acquired or developed by the company (Bhuiyan, 2011). Product development process consists with several steps, in which traditional product development is operated through idea generation, assessing market, analyzing business, product development and going to market (Slidemodel, n.d) which is demonstrated in figure 2.2 and new product development process somewhat differs from the traditional process and is operated through creation of ideas, evaluation of alternatives and selection of final idea, product development, manufacturing prototypes and product promotion (Komninos, 2002).
Figure 2.2: Traditional Product Development Process
Source: Slidemodel, n.d, online, available from https://slidemodel.com/templates/traditional-product-development-process-for-powerpoint/ (viewed on 30th January 2017).
CIC, as a leading conglomerate in the country possesses several types of products such as demonstrated in figure 1.1; and some of them are targeting the end consumers, some for wholesale or retail distributors and others for companies. While considering diversified business areas, the product development strategy of CIC can be interpreted under NPD concept, which always aims to present diverse set of products to the current market as well as to new markets. Thus, NPD process of CIC can be brief as follows;
- Creation of ideas
Most of the product development ideas in CIC are generated through market & research analyses by its internal research & development unit and by competitor analyses. Since their focus on ideas from customers and from internal employees is at the moment, CIC can develop those areas for attaining better insights for product development.
- Evaluation of alternatives and selection of final idea
The alternative ideas regarding new products are then evaluated according to three main aspects such as current company objectives & strategies, revenue & profits earning and potential of big customers & users. The prioritization of CIC may differ according to the product, for instance agrishine and livestock solutions are highly based on customers & users and industrial products and agri products are decided based on revenues & profits to a greater extent.
- Product development
According to the finalized product development idea/s, the products are developed by the separate manufacturing units at subsidiaries with the incorporation of production units, finance division, research & development division, marketing division, compliance division etc.
- Manufacturing prototypes
It is vital for CIC to create prototypes on almost all the products before proceeding the bulk manufacturing process. Thorough quality assurance process is conducted through the prototypes and sometimes some of them are presented to the market to conduct market testing as well.
- Promotion of the product
Based on the results of the evaluations for prototypes, the products are manufactured as bulks with aligning to the reasonable costs, high quality strategies, which are then delivered to the targeted market.
Location can be mentioned as a key component for organizational success and survival. Organizational facilities (i.e. manufacturing facilities, distribution facilities etc) have to be determined by carefully evaluating the locations. According to Stevenson (2007), locations for an organization need to be decided by depending on the organizational strategies (such as increasing revenue, protecting environment, serving to the general community etc), factors affecting the business (such as availability of skilled laborers, expansion of raw materials, accessibility to markets etc.) and the alternative locations have to be evaluated and the location decision has to make properly.
In CIC, a strong location strategy can be seen along with their vast expansion all over the control. The corporate head office is located in the commercial hub in Sri Lanka; in Kew Road, Colombo 02 due to the convenience in reaching airports, harbor and several other networks and due to the brand image. Other subsidiaries are located all over the country, mainly based on three strategies, i.e. easy raw material & labour sourcing, easy market access and development of the community.
For instance, CIC Agri Products, one subsidiary in CIC has spread its manufacturing facilities over the country including Peliyagoda, Kurunegala, Kandy, Polonnaruwa, Rathnapura, Welimada etc (due to the convenience of getting farm lands, suitable work force & other infrastructure and to serve the community by spreading out job opportunities) and retail outlets mainly in Sri Lankan core city areas such as Pelawatta, Kandy, Narahenpita, Rajagiriya, Jawatta etc (due to the convenient of approaching a good market base).
Layout is the arrangement of all the available resources in order to achieve operational targets efficiently and effectively, which will enhance proper utilization of people, space and equipments and information & material flow, while ensuring workplace safety and customer interaction (Heizer & Render, 2014). Three main layouts can be identified in organizations as process layout (which refers to the arrangement of operational activities), product layout (which refers to the arrangement of assembly lines for products) and fixed position layouts (where sometimes the projects are arranged as fixed such as manufacturing houses, ships etc) (Russel & Taylor, 2014).
The layouts of CIC differ according to the production process of subsidiaries. The most famous layout in CIC is process layout, where agri products, crop solutions etc are manufacturing accordingly. Thus, these manufacturing processes are handled as batch productions, which may vary according to the order or according to the target and the workers of manufacturing processes are having different set of skills for meeting different kind of manufacturing needs. However, larger storage areas are needed for these productions.
On the other hand, dairy products, rice production, baby & herbal care products, pharmaceuticals etc are produced according to a product layout, where the production activities are carried on in a sequential manner and a continuous manner; products are made to stock in high volumes by utilizing special purpose machines with specialized skilful laborers. All the required machines are fixed in relevant operating stations and the main focus of the layout is to complete the targets with highest efficiency.
In addition, several common positive features of the above discussed two different layouts in CIC can be identified, which include;
- The layouts are aligned with proper standards, since many of the production processes are needed to obtain a license to startup and carry on
- Proper sanitary locations with fresh air, water and electricity
- Production, processing and packaging areas are constructed with sufficient distance to prevent pollution and fire
- All operational areas are well illuminated and ventilated etc.
Human resources are the most important and the competent resource for any organization and Human Resources Management (HRM) means the efficient and effective utilization of human resources to achieve organizational goals and objectives (Opatha, 2016, p. 7). It includes proper designing and allocation of jobs for its employees to meet the tasks. This allocation can be done by segregating similar business functions and assigning suitable employees for those segregated functions.
Similarly, in CIC, job designing has done according initially according to the business process (i.e. by segregating employees to different strategic business units – SBUs) and then by allocating them to separate functions. Then the employees are included in several layers such as senior management, middle management, executives, staff & office assistants and worker level employees. Salaries or wages of the employees, promotions & other rewards and performance appraisals, training & development are arranged according to the different layers.
In addition, several job designing techniques are implemented in order to enhance the skills and satisfaction of employees, with the ultimate aim of achieving organizational objectives in an effective and efficient manner. The job techniques are summarized below in table 2.1.
Table 2.4: Job Designing Techniques in CIC
|Job Designing Technique||Employee Type|
|Scientific Technique||Production – worker category|
|Job Enlargement and Job Enrichment||Staff category|
|Job Rotation Technique||First line employees|
Scheduling can be defined as a process, which is focused on organizing the resources and time limits in order to process all the organizational functions, which will finally assist in attaining desired yield for the organization (Morton and Pentico, 1993). Main two areas in which scheduling will always focus in are ‘priorities’ (what have to be performed) and ‘capacity’ (who has to be performed) (Wight, 1984). Earlier, several types of Gantt charts including daily balance of work sheet, machine record, progress chart, order chart etc were used for scheduling operations and now several computer based systems are emerged for more accurate and convenient scheduling process such several Logistics Management System (LMS) produced by IBM, Material requirements planning (MRP), Manufacturing Execution Systems (MES), Enterprise Resource Planning Systems (ERP) etc. (Herrmann, 2006).
CIC mainly uses SAP ERP system for their basic scheduling purposes, though which aids for manufacturing processes, basically for,
- Production Planning
- plan resources (i.e. raw material, labour, machinery, land), monitor production forecast and deadlines etc
- Material Management (Procurement)
- monitor purchasing of goods, logistic, warehousing, transportation, imports of goods, clearing of goods from customs and administration matters etc
- Marketing and Sales
- for sales forecasting, brands promotions, delivery, credit & cash collection activities etc.
There is not a universally accepted definition on business process reengineering but the majority of scholars still use the definition presented by Michael Hammer in 1990.
Imperial (2015) stresses out that the first definition of business process reengineering is published by Michael Hammer, in his publication; ‘Re-engineering Work: Obliterate Don’t Automate’ in 1990 in the Harvard Business Review. According to the publication it is the analysis and redesign of workflows within and between organizations in order to achieve ultimate goals within the relevant time period (Hammer, 1990). However Imperial (2015) emphasizes that it made radical changes to the organization.
Bhatt (2014) has presented a diagram on business process reengineering life cycle in a border manner which is demonstrated in figure 3.1.
Figure 3.1: BRP Life Cycle
Source: Bhatt, N 2014, For Process Optimization – Implement Business Process, Business Process Engineering, System Plus Group.
First, the organization needs to build a proper vision and objectives for the vision if it doesn’t own a clear vision. Then, it is vital to identify the current ongoing process of the organization and what are the deficits to achieve its objectives and how speed up the operational flow with minimum wastage. Afterwards, it should be identified a process for redesign and it is important to identify the change levers. Subsequently, the organization can implement the new process and operation the new process using proper inventors. Evaluation the new process is really important to catch up whether the new process is functioning well and ongoing continuous improvement should be done in proper time.
- Organizing outcomes instead of tasks.
- Identifying all the processes in an organization and prioritize them in order of redesign urgency.
- Integrating information processing work into the real work that produces the information.
- Treating geographically dispersed resources as though they were centralized.
- Linking parallel activities in the workflow instead of just integrating their results.
- Putting the decision point where the work is performed, and build control into the process.
- Capturing information once and at the source.
Komarva (2012) highlighted that the main reason of implementing the business process reengineering is because it is important to the business to be agile and flexible. He has pointed out that there are three main benefits can gain due to business process reengineering which include;
- Cost and cycle time reduction
BPR involves in getting rid of unproductive activities and unneeded human labor. On the other hand when a business reorganizes by teams, it reduces the importance of having management layers. BPR speeds up information flows and gets rid of errors and job duplications.
- Promotes quality
BPR diminishes breakdown of work and instead it creates a clearer picture of who does what which leads to increase the accountability among employees. At the same time it constructs the performance appraisal much easier by basing it on speedy feedback.
- Ensures customer satisfaction
If customers’ needs are fulfilled speedily, they are probably to sense satisfied.
According to Khaled et al (2008) Enterprise Resource Planning is an organizational wide information system which integrates and controls all the business processes in the entire organization system.
“Enterprise resource planning is business process management software that allows an organization to use a system of integrated applications to manage the business and automate many back office functions related to technology, services and human resources. ERP software integrates all facets of an operation – including product planning, development, manufacturing, sales and marketing – in a single database, application and user interface” (Beal, 2017, online).
Rajesh (2011) has pointed out the benefits of having ERP system within the organization;
- Total visibility into all the important processes all around the various departments of an organization (particularly for senior management).
- Automatic and articulate workflow from one department or one function to another in order to ensure a smooth and quick transition for completion of the processes.
- A combined and solitary reporting system to analyze the whole statistics/status in the organization.
- Departments do not need to maintain an own software system since ERP in generating a common system.
- ERP systems can be extended to provide Business Intelligence functionalities which can give overall insights on business processes while identifying possible areas of problems or improvements.
- Advanced e-commerce integration is possible with ERP
- There are a variety of modules in an ERP system such as Human Resource Management, Finance, Production, Marketing, Supply Chain Management, CRM, Project Management etc.
- As ERP is a modular software system, it is possible to implement either a few modules (or) many modules according to requirements of each organization.
- It is more secure as centralized security policies can be applied to them and all the transactions happening via the ERP systems can be tracked by the relevant authorities.
- ERP systems provide enhanced company-wide visibility and therefore it is enable for better cooperation across all the departments in the organization.
- It is feasible to integrate other systems such as bar-code reader to the ERP system through an Application Programming Interface.
There are various methodologies on ERP implementation process and James (2013) has combined the various methodologies and presented Datix ERP Implementation Methodology. The following figure (3.2) demonstrates his Datix ERP Implementation Methodology.
Figure 3.2: Datix ERP Implementation Methodology
Source: James, M. 2013, Datix ERP Impementation Methodology (online), available at http://www.datixinc.com/6-steps-successful-erp-implementation/datix-erp-implementation-methodology/ (viewed on 31/01/2017)
It is proven that IT has a positive impact on process improvement in many routes. Tsalgathidou (Department of Information and Technology- University of Athens) has presented how the IT impact on organizational benefits by influencing its process;
Table 3.1: Impact of IT on process improvement
|Transactional||IT can convert unstructured processes into reutilized transactions|
|Geographical||IT have a ability to transfer information with speediness and ease across large distances, making processes independent of geography|
|Automation||IT is able to restore or decrease human labor in a process|
|Analytical||IT can bring multifaceted analytical methods to stand on a process|
|Informational||IT is able to bring vast amounts or detailed information into a process|
|Sequential||IT can enable alters in the sequence of tasks in a process, often allowing various tasks to be worked on concurrently|
|Knowledge management||IT allows the confine and distribution of knowledge and expertise to improve the process|
|Tracking||IT allows the detailed to follow the task status, inputs, and outputs|
|Disintermediation||IT can be utilized to connect two parties within a process that would otherwise converse through an intermediary in internal or external|
For the convenience of further analyses, this report addresses only about the Health and Personal Care sector of CIC, which furnishes the needs Sri Lankan consumers supporting their health and well-being through a range of locally manufactured and imported products which have made available island wide through a distribution network. The Health and Personal Care sector includes several clusters such as Pharmaceuticals, Johnson & Johnson, Link Natural, Medical Devices and CIC Lifesciences;
Among the five clusters of the Health & Personal Care section, the study has further constricted its analysis for CIC Lifesciences, which has been a part of CIC Holdings from the year 2012. CIC Lifesciences locally manufactures antibiotics (own brands and generics) and imports analgesics, antiulcer drugs, diabetic drugs and cough expectorants under own brand names from leading pharmaceutical manufactures from India.
The CIC Lifescience Ltd has got a complex business process system as it is consisted with ass production flow with several service functions. It is identified that it has obtained a completive advantage due to a proper production system along with a highly technological laboratory system.
Basically the order is processed by the marketing team to the planning department to finalize the schedule production plan. Then the production team develops their production plan in daily wise while keeping the scheduled plan as the basement. However the purchasing material and storage stage has become much more complex due to not having a proper system.
When the product need passed to the purchasing department to purchase deficits, materials the purchasing team examine the inventory manually. Then they order the relevant materials over the phone from the suppliers and a purchase order. The next stage is, the accounts department received a copy of a purchasing order from the purchasing department. Then the products are received to the warehouse and the warehouse team accepts the materials after confirming with the purchasing department and then the product receiving note is passed to the purchasing department. That note is documented in the purchasing system and then it is passed to the accounts department for the payments. However the suppliers normally use to call the accounts department to figure out whether the payments are ready. Then only they can come and collect the payments. However it is noticed that the suppliers face various difficulties when collecting their payments and it is normal that the payments are delayed
Figure 4.1: Production Flow Chart of CIC Lifescience Ltd
Figure 4.2: Process Flow Chart of CIC Lifescience Ltd
After examine the above operational flow chart it is clearly indicated that the operation process has become lengthy just because of a service function of purchasing. It would take considerable time period due to the notes are passing between the purchasing department, accounts department and the warehouse. On the other hand the supplier also gets fed up and it would badly effect to the supply chain management. If the CIC Lifescience introduce a common data base for purchasing with a proper online payment facility and a inventory management system, then the whole process ladder minimize effectively. As soon as the marketing department sent the production order, the materials are checked with the inventory system automatically and indicate what the materials that need to purchase are. Then the purchasing order is sent automatically to the supplier and they can proceed according to the mail. At the mean time the accounts department is also informed the payment amounts. As soon as the supplier supply the materials to the warehouse the relevant authority can input the information to the data base and then the accounts department can immediately do the payment thought the online payment system. Whole process is a paperless and fast. It can reduce the unnecessary workforce and on the other hand it would result to enhance the relationship between the suppliers. Ultimately all would reduce the cost and increase the productivity.
Figure 4.2: Suggested Re-engineering Process for the Production Improvement
Quality Control System
According to Porter (2009) capacity should be consider as volume and its capacity over the time. He noted that capacity is the organizational ability to generate good and services to its customers according to their requests at the requested time period. Chillibreeze (2014) stressed that capacity management is determining the capacity need to achieve the priority plan as well as providing, monitoring and controlling the capacity to meet with priority plan.
Further Chillibreeze (2014) has elaborates to follow few steps to increase the productivity of the capacity management;
- Develop a priority plan consisting with the unit of demand products with needed standards
- Calculate the capacity need to achieve priority plan find the ways of making capacity available
- Determine the capacity need at each work centre in each time period
- Solve the difference between available capacity and required capacity
- Implementation and evaluate according with proper improvement
Normally the CIC Lifesciences obtains a higher rate of flexibility to catch up with the demand fluctuation due to having strengthened operations strategies. The Planning Team schedules each order properly including all the relevant details;
- Quantity and due date
- Sequence of operations and work centers needed
- Set up run time for each operations
After scheduling the team compares the demand in the order and the current capacity level of the factory to figure out if there are any imbalances and is they find out any shortage they use various tactics to catch up the desired level (the next section has presented the tactics to match the capacity with the demand).
However it is highlighted that the CIC Lifesciences uses well maintained historical data to figure out the capacity according to demand fluctuations. They documented the rated capacity and the utilization rate in each demand.
Here they capture the rated capacity by using the available time period and they consider number of hours a work centre can be used as the available time period.
Available time = No of available machine * Operations Hours * No of working days
Utilization rate = Hours actually worked * 100
They always strive to match the resource demand fluctuations especially on human resource according to the utilization rate by using various methods.
CIC Lifesciences uses various tactics to match the capacity with fluctuation demand;
- Schedule overtime or under time
- Adjust the amount of the employees by hiring (normally the company move towards the manpower solution with a temporary fluctuations)
- Shift employees from under level to overload work centers
- Use alternate routings to shift another work centre if it is highly necessary
CIC Lifesciences has got few expansion considerations in future. Here they both focus on internal growth as well as external growth. However currently the management team does not have a plan to expansion the process because of tow reason; they need to incur higher amount of initial cost and the company has not reach their maximum capacity rate. Hence they mainly focus on market penetration to sell more products in the same market. They believe it can be achieved through network expanding and much advertising. But the management team considers few moderations in the factory layout.
They also plan for a backward vertical to get closer to the raw materials in the supply chain in the India as they are currently undergo high cost for raw material import but they are still waiting for a better time period.
According to the product development nature, the company cannot go for a diversified complementary demand patterns as they have invest much on drugs producing machineries. But the CIC Lifesciences Ltd has identified complementary demand types due to the modern trends in the market.
Among them they have figure out that healthy dieting products would be much marketable. Herbal products with proper standard by using the local herbs, is also another complementary demand to the currently processing drugs. However those would be able to optimize their research and development team much productively.
According to Lu (2011) it is unfeasible to operate and exist alone for any business organization and hence the organizations should effectively connect with all other relevant parties in their supply chain for the survival (Lu, 2011). As Zigiaris (2000, page 3) states “Supply chain encompasses all of those activities associated with moving goods from the raw-material stage to the end user.”
“Supply chain management is the coordination of production, inventory, location, and transportation among the participants in a supply chain to achieve the best mix of responsiveness and efficiency for the market being served” (Hugos, 2011, page 4)
Chopra and Meindl (2001) stressed that a supply chain is focusing on customer satisfaction in its each business operations and it directs with a number of parties in operations such as customers, manufacturers, its suppliers, warehouses, and transporters retailers. However Croxton and García-Dastugue (2001) highlighted that supply chain management is focusing mostly on eight key processes;
- Customer Relationship Management
- Customer Service Management
- Demand Management
- Order Fulfillment
- Manufacturing Flow Management
- Product Development
- Returns Management
According to Zigiaris (2000) the main aim of the supply chain management is to add value while examine the strategic objectives for organizations which that coursed to reduce working capital, taking assets off the balance sheet, accelerating cash-to-cash cycles, increasing inventory turns and so on.
Supply chain process of CIC Lifesciences is described considering the manufacturing process of Metformin tablets that is produced with carefully mixed several ingredients such as;
- Metformin Hydrochloride BP
- Sodium Starch Glycolate BP
- Maize Starch BP
- Povidone (PVP K 30) BP
- Maize Starch BP
- Povidone (PVP K 30) BP
- Purified Water BP
- Colloidal Anhydrous Silica BP
- Magnesium Stearate BP etc.
The process includes all the activities starting from raw material scouring, procurement, manufacturing operations, packing & delivering in Sri Lanka as well as in global market, marketing & promotion campaigns, customer management and ending with after sales services that include training & awareness sessions, special discount rates etc. which is illustrated in figure 2.3 with the application of Porter’s Value Chain. However, figure 6.1. does not contains human resources management and administrative activities, which are excluded to the supply chain management.
Figure 6.1: Supply Chain Management Activities in CIC Lifesciences (based to porter’s Value Chain)
Special Promotions, Education
Sales & Marketing
Quality Control, Maintenance
Raw material sourcing from reputed suppliers,
Product & Technology Product & Process Design, Production Engineering,
Development Market Testing, Research & Development,
Value added less cost
Procurement Supplier Rationalization & Management,
The developing process of Metformin tablets starts with sourcing raw materials which is considered as dispensing & verification of raw materials and then they are stiffed and dry mixed to start the production process. Conversely, before starting the dispensing process, all the equipments and location and the cleanliness of all the related instruments are checked and also the Temperature and Relative Humidity (RH) is also checked and recorded by the relevant authorities. The process is performed aligning to the standard operating process of ‘Entry and Exit Procedure in Dispensing Area’. Then the granulation operation starts with referring to the SOP of ‘Entry to And Exit from Manufacturing Department’. Next stage is drying in FBD at 80ºC to 85ºC (at inlet temperature) and sent them for sizing and milling stage. Consequently, the semi products are lubricated and intermingled and a bend reconciliation record is maintained in according to compare the status of a standard tablet and an actual tablet.
Then, the compression process comes in to the action in aligning to the entry to exit from the manufacturing department. A quality control set up is appeared during compression process to check the weight, appearance, thickness, diameter, hardness, DT and friability of samples. The next stage is coating process starts and the SOP of ‘Entry to Exit from the Manufacturing Department’ is used for this process as well. Lastly, the finished tablets are transferred to the packing department and several tablet inspections are conducted at that stage by the quality control department.
There are several documents are recorded which are mainly used in the whole manufacturing process;
- Environmental Control Record
- Inspection Records
- Batch Manufacturing Summary
- Equipment Cleaning Record,
- Process Check Report etc.
However, there are several issues relating to the supply chain process which resulted in increasing the manufacturing cost to CIC Lifesciences Ltd. Main issue is related with raw material scouring, where many of the raw materials have to purchase from India at a higher rate. As the medicine manufacturing facilities are still new to Sri Lanka, the operational time period is longer and the cost per hour becomes higher at the end. Likewise, the technological improvements affect highly on the manufacturing process because though the modern technological instruments rapidity up the process, those machines contains a higher cost when purchasing. Furthermore, the locally manufactured tables are still not eminent in the Sri Lanka that results in for lower the demand.
One of the key ways to reduce the manufacturing cost is to source raw materials from several reputed suppliers, where there is a possibility to attain economies of scale. Thus, when CIC Lifesciences does not depend only on one customer, the competition among customers gets increased which results in lowering the costs for raw materials.
In addition, separate funds need to be allocated to purchase modern technological instruments in order to achieve profits while reducing production time, and related costs. Another major challenge for the manufacturing process is finding suitable qualified staff; because the rates of suitably qualified personnel are comparatively higher in the industry. That challenge also can be mitigated through the application of technological methods and instruments by automating the process up to a greater possible extent. The demand for the products can be improved only through better promotional campaign which obviously contains higher costs. But, if the demand can be increased in a drastic level, the costs can be mitigated and it becomes proportionately lesser affected.
Banuelos (2015) stressed that quality refers to the achievement of characteristics of a product or a service in a way that the requirements are met. According to Garvin (1987) identifies eight dimensions of quality;
- Perceived Quality
According to Slack, Chambers & Johnston (2010) the quality authorizes the organizations to reduce costs of rework, complaints, returns and wastage while generating satisfied customers.
“If the ‘quality’ is the final output, then ‘quality management’ is the approach and process for getting there; and it should stress on scientific focus, customer focus, innovation & learning focus strategic focus, leadership focus, process focus, people focus, continual improvement, system thinking and so on” (Knowles, 2011, page 11).
Current business organizations apply different methods for quality management, which include,
- Zero Defect Program Six Sigma
- Taguchi methods
- The Toyota Production System
Quality is the most important focus for CIC Lifesciences as it can cure a human body or it can destroy the body. Further, quality has become essential to everyday customers’ lives who always have an voracious craving for quality in every aspect. Hence, all the manufacturers struggle to do whatsoever to consistently deliver the quality in order to attract the customers.
It is expected that the quality of the Metformin tablets produced CIC Lifesciences is higher when comparing to the most of imported tablets in the country. The comany ensure the quality in each and every aspect of the production process in the production cycle. Their preliminary step is checking the quality of raw materials for which they maintain a record for raw material administration and confirmation. The cleanliness of the laboratory premises, equipments and instruments are vital and checked regularly to ensure the quality from the first step. In progress inspections are conducted in each stage of the production process to guarantee the quality of the products.
However, there is a number of concerns with the quality management system of the CIC Lifesciences, which results in occurring huge expenses to maintain the quality. As an example longer lead time in sourcing raw materials and delivering products to the customer can reduce the quality of the inventories and it would also incur more costs in speeding the transportation process. Further some of the less skilled employees perform several mistakes especially on environmental control and that results higher correction expenses.
In order to avoid the main issue that may impact the quality to a greater extent, CIC Lifesciences ought to maintain a proper planning and inventory management system. Proper inventory management system will apprehension all the relevant teams regarding the production capabilities along with production dates, processes, delivery and sourcing functions and this can be managed productively to achieve high quality in all the practices.
In addition, it is fundamental to practice a TQM approach in the production processes, by which all the employees become aware about the importance of quality. Thus, the contribution towards quality can be improved and necessary trainings can be conducted to ensure and protect the quality in a regular manner. In addition to that it will be benefited for CIC Lifesciences to comply with a globally recognized quality standard like ISO 9001. That creates a plain guarantee on the product quality to the customers. Ultimately that would improve the market share while reducing the costs of the company as well.
According to the business dictionary the innovation is stand for the process of translating an idea or inventions to build up a good or service that bring a value to the customer. It further highlighted that it should be economically cost. However innovation involves delibrate of information, imagination and initiative in delivering greater or different values for the different resources. The google dictionary stressed that technology is the application of science knowledge for practical purpose especially in idustry. According to them the knowledge management is stand as the efficient handling of the information and other resources within a commercial organization.
Downey and Technical Information Service (2007) has presented the typical innovation cycle;
Table 6.1: Typical Innovation Cycle
|1||Idea||Identify a market opportunity|
|2||Resource||Organize people, finance other facilities|
|3||Investigate||Research the possibilities|
|4||Patent||Protect the intellectual property|
|5||Design||Model and test|
|6||Develop||Improve the technology|
|7||Make||Start the production|
|8||Sell||Advertise and inform to the customers|
According to Lyke (2016) knowledge management is a combination of employee of the organization, processes and the tachnology.
The CIC Lifesiece is highly focus on the new innovation as it is vital for the sevival due to the nature of the drugs indury. So it is consisted with the thirty six labotary staff allong with specialized scientices. Their have got two major laboratories; analytical and formulation laboratory with full equipment with the modern technology. The organization is believe that the its success is highly depend with new innovation.
Further the CIC Lifesciences has got a separate knowledge management team in the learning centre. The management process is differ from the level of the employees and nomally they use training and development technique for knowledge management and it is consisted with a proper evaluation system.
The innovation team in the research and development team in only consited with the employees with diffent layers of science and engineering backgroud. But it is much more better if it expanded with psychological and marketting background as they grab much more about the customers in the industry. On the other hand the employees should be educate much more on technolody as much technological knowledge workforce enhance the productivity of the company.
Inventory can be mentioned as the “quantities of goods in stock” (CSCMP & Sanders, 2014).
According to Lee & Billington (1992) inventory includes raw materials at suppliers, finished and semi finished products at manufacturers, finished products at distributers in the organization. Further they expressed that the inventories have complex interrelationships and that need to be managed productively.
CSCMP and Sanders (2014) have presented several reasons for managing and maintaining inventories;
- Product would be stock out
Enough inventories should be maintained is needed for goods to be produced and delivered as
goods cannot arrive immediately and due to certain amount of lead time
- Maintain independence of operations
The product is moved through many operations having different processing rates during the production process and the supply chain. So a tradeoff between the operational processes and inventories is needed to maintain a smooth process.
- Balance supply and demand
Corresponding supply on one side of the supply chain with demand on the other, under some uncertainties, requires a strong quantity of inventories. Further, the inventories become much more important for organizations due to seasonal demand patterns
- Protect against uncertainty
Different unexpected events may occur affecting both supply and demand. Hence the inventory becomes essential for managing for a just in case scenarios in a successful manner.
- Economic purchase orders
Significant price discounts can be achieved from suppliers when the inventories are bought in larger quantities, and the transportation and other associated costs also can be also reduced.
Feigin (2011) the inventories and decisions on inventories consists of various costs including, holding or carrying cost, arrangement or production change cost, ordering cost and shortage cost. However, according to CSCMP & Sanders (2014), the inventories have a capacity to block the funds or resources, if they are not utilized properly. Further they elaborate that if there are no enough inventories, the production delays or stock out can be occurred and hence, inventories need to be managed effectively.
Victoire (2015) mentions several inventory management techniques;
- ABC Model
- JIT Method
- EOQ Concept
- FIFO Method
- LIFO Method
- Material Requirement Planning (MRP) Method
She further stated that the accomplishment or the success of an inventory management system can be measured through the attainment of purchasing plan and status of existing inventories.
The inventories in CIC Lifesciences regarding Metformin tablets production include raw materials semi finished products, finished tablets and other equipments. These inventories can be identified in several stages of manufacturing process. The most important factor in managing inventories for CIC Lifesciences is the environmental condition that the inventories are stored in; since it can affect on the quality and durability of all the inventory types regardless of its form (i.e. raw material, semi finished or finished goods).
Theses inventories are tracked and recorded through various documents during various stages of the production process and those documents include Master Formula, Environmental Control Record, Raw Material Requisition Slip, Sifting Detail Report, Blend Reconciliation Report, Material Movement Record, Equipment List, Product Specification, In-process Control Check List, Compression Output Details and Compressed Tablets Reconciliation Record etc. All these inventories are managed by the laboratory officers and these details are updated to the SAP ERP system as well.
The major challenge for managing the inventories for CIC Lifesciences is the advanced costs in all the types of inventory items. Due to the single sourcing approach, the raw materials are purchased for higher prices. However various inventories are difficult to monitor and control all the time as they use a manual entry system and less utilization of modern technical systems. That results in unnecessary wastes and then unnecessary costs. Further, due to a longer lead time the products and raw materials in transportation contains higher values some damages are also significant. At the same time an offensive management of environmental and temperature conditions cause for occurring additional expenses to ensure the quality and the speed of the production process.
The considerable cost amount that is engaged with the raw materials can be managed through a proper sourcing system, and maintain several supplier relationships rather than depending only on one supplier. So that it would lead to create a competition among the suppliers which create an environment on getting economies of scale by competitive sourcing in CIC lifesciences Ltd.
Further, it is essential to manage the inventory details through the SAP system. So that will facilitate for proper recording system with a high reliability and for speeding up the decision making process. On the other hand it will support to reduce lead times also as the decision can make earlier. At the same time the delivery methods need to make more speed to avoid inventory damages during the transportation process. It is vital to recruit qualified officers or train few employees to make proper controls over the production process, while minimizing redundant costs generating opportunities.
To begin with, (Swift, 2000 , p.p. 12-13)) defined CRM as a method of understanding the customer behavior through intense communication with him/her to improve the performance which is represented in attracting the customer, keeping him/her and increasing his/her loyalty and profitability. It can be noticed that this definition regards CRM as mere communication on the part of the organization to understand the customer’s behavior. (Stone & Findlay, 2001, p. 167) defined CRM as the organization carrying out a lot of information about the customer from various resources and keeping it in order to divide the territories, analyze and reuse. This definition regards CRM as only collecting and recording information about the customer.
The CIC Lifesciences Ltd has a separate unit of customer service platform. The customer service management consisted with order tracking, processing and invoicing, co-managed inventory, separate client master file management etc. the management highly based on five element to deliver excellent service;
However the customer service platform is consisted with only one staff member and the she is much knowledgeable on the company, product and its customers with higher verbal and non verbal communication and listening skills. But it is identify that the customers waiting time is bit longer rather.
It is vital to expand the CIC Lifesciences customer platform with proper staff members. On the other hand it identified that CIC Lifesciences does not have a separate website and the information appear as a separate page of the CIC Holding. But there should be a lengthy product description along with the brand sanders, laboratory expansion, and vast production capacity in order to increase the trust among the customers.
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