Transcript Solution
Hershey Chocolate Factory
Final Production and Operations Management Project Seong-Hun AHN, Yoon Ju HWANG, Byung-Im KIM, So Jeong Yoo
Outline of Hershey Chocolate Factory • • • • Pennsylvania Plant built in 1992 Makes milk chocolate in the traditional fashion of Hershey Old video old strategies Limited amount of information
Index
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Problems from Video Additional research: ERP Solutions Additional suggestion
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Problems from Video
Additional research: ERP Solutions Additional suggestion
Supply chain of Milk and Sugar
• • Milk: one of the most fundamental supply chain Sugar: essential for sweetening the main product, chocolate
Inefficiency Layout (1)
• • Milk is carried through pipes that are located outside of the milk receiving building Milk leaves the receiving building flows through the pipes to chocolate processing are
Inefficiency Layout (2)
• • Too much unnecessary movements of products within the lab Machines located inefficiently – loss in time and costs
Inefficiency Layout (3)
• • Repetitive stages of alignment and misalignment Useless transfers of final product around the plant
Unnecessary labor input
• People measuring the temperature of the milk
Unnecessary labor input
Is the temperature information reliable?
Unnecessary labor input
Is the product clean and safe?
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Problems from Video
Additional research: ERP
Solutions Additional suggestion
Hershey’s failure
• Invested 10million on SAP R/3 program • Error in ordering and shipping process before the 1999 Halloween • Inventories 20% increased, 19% decrease in profit as a result of sales reduction
So what is ERP?
• Build Database • Unify the boundaries among functions, business units, regions, process lines • Information distribution among processes • Scheduling function • Forecasting sales/ demand function • Accounting function
So what is ERP?
Supply Chain Accounting & Financial Information Consumer Information Human Resource Management
Benefits of Usage
• Increase in average profit rates by 29% • Improve the launching of products on time by 95%, inventory reduction by 10~40% • Cost Reduction by 5~10% • Reduce unnecessary labors in assemble line by 25~40% • Reduce overtime work by 50%
Hershey’s Lesson
• Adopted hasty methodology • Confusion of managers • Reduction in process time and costs • Decrease in defects by improving working environment
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Problems from Video Additional research: ERP
Solutions
Additional suggestion
Solution
What is primary directing point
for Hershey’s?
Details in process
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Layout :
Rearrange equipments effectively
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Additional automation
Layout : More effective arrangement Example 1) : Milk truck and pipeline Example 2) : Milk balancing tank and dryer Example 3) : Process before packaging
Additional automation
Automated process to reduce errors or cost from human Safer
Solution for ERP
Elite human resource :
Get more reliable workers who can treat equipments and process
Elite human resource
How to get more trained worker who can control the process and automated equipments?
1. Training 2. Outsourcing
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Problems from Video Additional research: ERP Solutions
Additional suggestion
Suggestion - Forecasting demand
Product trait : Milk Chocolate
1) Short retention period 2) the demand boom in specific periods
Exact demand forecasting is most important to Hershey’s!
Suggestion - Forecasting demand To get cost reduction, making exact forecasting demand model must be preceded.
Collecting historical data is essential.
Suggestion - Forecasting demand Demand is very fluctuating and seasonal
Forecasting demand : additional operation Sharing demand / producing information From supplier to sale department
Cost balance
Cost up VS Cost down Cost UP
Information sharing cost for managing quality of material Cost from additional automated process Training / outsourcing cost for advanced worker
Cost DOWN
Cost cutting from Inventory managing Benefit from additional automated process Benefit from achieving lean system Benefit from effective layout
Expectations
Managing quality Managing inventory : lean system
Thanks for watching!!
Any Q & A??