Business Process Improvement (BPI) at Alfrea's Hydroponic Farm : A Focus on Optimization of Production and Distribution

Date

7-2025

Degree

Bachelor of Science in Agribusiness Management

College

College of Economics and Management (CEM)

Adviser/Committee Chair

Jeanette Angeline B. Madamba

Committee Member

Ezekiel C. Macatula, Camille Anne E. Mendoza, Dia Noelle F. Velasco

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For non-UP researchers, requests for access to this material may be directed to the CEM Library at cemlibrary.uplb@up.edu.ph or to the UKDR administrator at uscs-mainlib.uplb@up.edu.ph

Abstract

Alfrea's Hydroponics Farm, located in San Pablo City, Philippines, a 260-sqm screened outdoor greenhouse with a 14,629 capacity, plays an important role in lettuce production in Southern Luzon. It has a role in producing and distributing food, thereby generating income and employment. Established in May, 2022 by Engineer Fernando Algozo, Alfrea’s vision is to be the center of excellence for hydroponics systems and smart agriculture in the Philippines. Alfrea’s hydroponics expertise and experience may be a model for other hydroponics farms and businesses.

The general objective of this study was to analyze how the production and distribution practices of Alfrea's Hydroponics Farm (hereinafter referred to as Alfrea’s) can be improved through optimization. Specifically, this study aimed to: (a) describe Alfrea's business profile; (b) discuss Alfrea’s current business environment; (c) analyze the production and distribution practices and problems in Alfrea's; and (d) recommend strategies and solutions to optimize production and distribution practices at Alfrea's.

Data for this study, a 14-week sales record, from July 1 to October 6, 2024, of Alfrea’s 14 regular customers including their order frequencies, were gathered by the researcher while she was an intern at Alfrea’s, a requirement for her ABME course. Key informant interviews, on-site observations, participation in planting and deliveries to customers, Alfrea’s video documentaries on the internet, form part of the data gathered.

The research employed the Identify, Model, Improve Framework of the Business Process Improvement Method. The first phase identified and described the profile, business environment, and practices and problems of Alfrea’s, which are the first three objectives of the study. The second phase presented models in order to formulate strategies for the optimization of processes. Recommending strategies and solutions to problems for the improvement of Alfrea’s is the fourth objective of the study.

Alfrea’s Hydroponics Farm exists at a time when the world is concerned about food security. The UN reports that achieving its sustainable development goal of “Zero Hunger” by 2030 is bleak. Investors funded multi-million-dollar high-technology hydroponics farms worldwide, viewing hydroponics as the solution to the negative impact of traditional agriculture on the environment. Singapore, where almost 100% of food is imported, has encouraged its citizens to utilize all available space for hydroponics. In the Philippines, the Department of Agriculture observed that hydroponics is a smart precision farming for highland and lowland vegetables. Laguna province has the highest average lettuce production in CABARZON for 2020 to 2024. The trend towards healthy eating has increased the consumption of lettuce.

The nearest hydroponics farms to Alfrea’s are the Nagcarlan Hydroponic Growers, also in Laguna. This group of fifteen hydroponics farms support each other. If a member has an order but has no lettuce available for harvest, the other farms provide the supply. The other known farms are Percy and Cash in Gerona, Tarlac; Katanim Growers in San Mateo Rizal; and Pedro Farms in Cavite. These farms can hardly be called competitors because they support each other. Alfrea’s stimulates the local economy by giving business to suppliers of seeds, nutrient solutions, coco peat, and other materials.

Alfrea’s plants weekly so that harvest is also weekly. Demand often outstrips production. Alfrea’s greenhouse has five (5) planting tables and a wall. Table 5, used only for growing seedlings for transfer to other tables, becomes vacant when all tables are fully planted. A recommendation to optimize production is to utilize Table 5 for growing lettuce also. This means that seedlings will no longer be transferred from Table 5 but planted in-place in each table where they will grow undisturbed. A simulation of this in-place method shows an increase of 1,058 lettuce heads per two production cycles. Alfrea’s should also maintain the optimal product mix, computed via linear programming, for the other lettuce varieties that have higher selling prices (Orbital, Friseé green and purple) for maximum profitability.

Weekly sales should be forecasted to guide production how much to produce. Alfrea’s actual average weekly sales is 1,138 lettuce cups with a standard deviation (SD) of 311. The Monte Carlo Simulation Method (MCSM), gave a weekly sales of 1,150 and SD of 312. The ten other forecasting methods tested, that used simple linear regression and moving averages, had results very close to the actual mean and MCSM. It is best that Alfrea’s use several of them to forecast sales so that each method validates the other.

Alfrea’s delivers to customers when they make random orders on any day of the week, often going on special delivery trips that are costly in terms of time, effort, and transport expenses. To reduce distribution costs, the Capacitated Vehicle Routing (CVR), Savings Algorithm Method (SAM), and relative delivery frequency were used to recommend grouping customers into routes and implementing fixed delivery days. Two upper layers should be added to the delivery van so it can carry more lettuce required for the route thereby avoiding trips to reload.

Casa Ibarra, located 76.7 km away in Pasay City, and is Alfrea’s biggest customer, contributing 27% of total sales, needs special consideration. The Center of Gravity (COG), Load-Distance Method, and Least Cost Method, were all used to analyze and propose that Alfrea’s set up a branch near Pasay City to service Casa Ibarra and other prospective customers, such as the Romantic Baboy chain to leverage Alfrea’s good business relationship with Romantic Baboy in San Pablo City. Casa Ibarra is proof that Alfrea’s high-quality lettuce can compete in Metro Manila.

The MCSM, used to simulate order frequencies, showed that customers are likeliest to order on Fridays (20%) and Mondays (16%). Alfrea’s can prepare for these days.

Alfrea’s can benefit from the recommendations of this study: 1) maximize production by utilizing Table 5 for growing lettuce too; 2) forecast weekly sales to guide production how much to produce; 3) maintain the optimal product mix for the other lettuce varieties that have higher selling prices (Orbital, Friseé green and purple) for maximum profitability.

To lower distribution costs: 1) it is proposed Alfrea’s to set up a branch near Pasay City to serve Casa Ibarra and eight other prospective customers; 2) customers should be grouped into routes and implement fixed delivery days; 3) two upper layers should be added to the delivery van so it can carry more lettuce required for the route thereby avoiding trips to reload.

Language

English

LC Subject

Hydroponics, Production (Economic theory), Production (Economic theory), Industrial Management--Environment aspects

Location

UPLB College of Economics and Management (CEM)

Call Number

LG 993 2025 M17 A77

Notes

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Document Type

Thesis

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