Purchase lead time reduction: a supplier management innovation of Avon Products Manufacturing, Inc. at CPIP, Brgy. Batino, Calamba, Laguna.

Date

4-2010

Degree

Bachelor of Science in Industrial Engineering

College

College of Engineering and Agro-Industrial Technology (CEAT)

Adviser/Committee Chair

Marc Immanuel G. Isip

Committee Member

Romark O. Cayube, Arvin Joseph M. Elauria

Abstract

Avon Products, Inc. is one of the world's direct selling organization and merchandizer of beauty and related products. Avon Philippines has its manufacturing plant named Avon Products Manufacturing, Inc (APMI) and its cosmetics distribution called Avon Cosmetics, Inc. (ACI). APMI had its first plant in Libis, Metro Manila and stayed there for 18 years. The plant is now located at Calamba, Laguna having its seventh year of operation. Avon outsources components which include plastic, paper, glass & pumps, and tubes through the 72 existing supplies working with the company. Only the top spend supplier of plastic component which is Incon was chosen for the study. Incon's performance towards Avon items can heavily influence Avon's finished product performance. Avon and Incon agreed to a definite lead time in order to complete Avon orders necessary for Avon's production. Based on historical data, Avon had started the agreement of lead time with Incon for relatively high values. AnD as years passed, they were able to reduce the purchase lead time. Whenever, Incon fails to deliver Avon items on time, lost sales are incurred. Avon experiences dilemma on how will they manage to continuously provide products to its customers. The duration of Incon's delivery of the Avon items thus effects the duration of conforming Avon customer's demand. Thus, improving the process of Incon will eventually give Avon prospect of reducing its lost sales due to customers' cancellation of order and supplier's missed deliveries. This study aims to reduce the purchase lead time of Avon's supplier to less than 14 days. At first, the current lead time for each process of Incon was studied in order to identify the process that acquire large amount of Incon's lead time. The different types of orders placed by Avon to Incon were also identified to segment which items have the same processes as compare with other. The four major classifications for plastic components are: bare/caps/ printed bottles/ shrink wrapped bottles and printed bottles with label. These said group items by its production process simplified the means of establishing a target lead time. After segmenting the items, on-site process documentation was done to further understand and verify the current Incon's lead time by process. The processes to be investigated start from Avon issuance of orders then to Incon's planning up to its delivery to Avon warehouse. With all the processes under study, the main causes of Incon's long purchase lead time were identified through the use of Fishbone Diagram. Moreover, a Critical Path Method was used to show the critical activities of each plastic classification. Problems regarding the supervision of the SRM web system portal, Incon's inventory, capacity and quality management, long waiting time for the deliveries of ncon's raw materials (resin, shrink wrapper and special colorants in particular) and the presence of Incon's job out process which is printing were identified. Then, the main causes of the problem were reviewed and analyzed. The critical paths for the plastic classifications were also identified. Moreover, CNX analysis was used to group the causes of the problem. Each root cause was classified as either controllable, experimental, or noise type of root cause. To address with these problems regarding controllable and experimental factors, solutions such as: exerting SRM web portal function to compensate the shortage of Incon's system and cooperating with Incon through intensive use of Tooling and Capacity Management and Quality Control Module were presented. In addition to that, implementing a raw material safety stock policy based on Avon and Incon agreement with SRM web portal support and building up in house capability on for printing on Incon's production system were recommended to address the problems identified. The costs and savings associated for the implementation of the alternatives were determined and computed. Proposed changes for the process involved were also raised to Avon and Incon so that changes can be implemented. APMI database, which is the SRM web portal, will then be updated and maintained. With these changes to be implemented, Incon's performance is to be reviewed and measured so that results can also be sustained. If these recommendations will be implemented, the company will have a annual savings of PhP23,649,689.68. An after ten years, the net cash flow could be expected to be PhP 130, 719.,386.92. Furthermore, Incon's lead time for the production of bare/caps, printed bottles, shrink wrapped bottles and printed bottles with label will be reduced into 3.75 days, 6 days and 6.5 days respectively.

Language

English

LC Subject

Industry analysis, Productivity progress, Inventory control--Cost effectiveness--Decision making

Location

UPLB College of Engineering and Agro-Industrial Technology (CEAT)

Call Number

LG 993.5 2010 E66 B46

Document Type

Thesis

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