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Quality Management Report on Orocan


Submitted By denisselim
Words 2181
Pages 9
Quality Management Report
On Orocan

Submitted to:
Mr. Gregg Garcia
De La Salle University

Submitted by:
Go, Theodore
Lim, Denisse
Rhew, Yoon Jung
Wong, Elaine
Wong, Kassandra

23 April 2015

I. Company Profile
For the past 30 years, Orocan has made its way to become the leading brand in the plastic home utilities product category in the Philippines. In fact, the company has won notable awards locally and internationally, particularly the Superbrands Philippines, Most
Outstanding Products Brand ­ National Consumers Quality Award, Golden American Award for Quality in New York, and Golden Europe Award for Quality in Paris. Established in 1984, Orocan, a company that sells a line of products valuable to own, started out with selling pails and plastic drums used for water shortages in the country back then. Although the business was profitable, it eventually developed a line of products, such as pitchers, insulated products, and dish organizers to provide the needs of Filipinos and to reach even more customers. Due to the dedication in delivering quality products to their customers, the company established a manufacturing facility in Binondo in 1990. Eventually, they launched innovative plastic products, such as Caha De Oro in 1997, a product line of drawers, cabinets, and organizer boxes. Today, Orocan carries even more product lines, which includes water coolers, plastic pitchers, plastic food containers, plastic drawers and cabinets, organizer boxers, plastic pig slats, dog slats, and chicken coops. Throughout 30 years of its existence, the company has gained the trust and loyalty of many Filipinos, as it continues to deliver quality, durability, and originality in its products. Although the company has been successful, it continues to seek ways in ensuring quality and consistency by upgrading their processes and innovating their products. True to its tagline, “Maayos Ang Buhay,” Orocan promises to make innovations work in order to improve the lives of Filipinos. II. Objectives
In the past three decades, Orocan consistently maintains its promise by delivering innovative, durable, and high quality products to their customers. Moreover, they ensure that their products are affordable and reasonably priced. However, the company encounters problems that hinder it from performing at its best.

Considering the problems encountered by the manufacturing company, the primary objective of this paper is to provide Orocan with possible solutions to alleviate their problems, specifically on quality. This paper would present alternative courses of actions for the problems by utilizing quality management tools and concepts. III. SWOT Strengths
● Affordable price
● Quality assurance as main competitive advantage
● Durable
● Trusted brand by Filipinos
● Have been operating for over 30 years Weaknesses
● Incurs high costs due to machinery ● Cheap materials from China
● High shipping fees

● More innovative products to increase sales
● Investment of high technology equipment Threats
● High, strong competition in the plastic industry
● Competitors have more innovative products ● Competitors have penetrated into higher social classes

IV. Problems
Despite the company’s success, the company still encounters various problems such as disruptions, defects, unmotivated employees, and stiff competition in the market. The production process of Orocan’s plasticware experiences disruptions; most troublingly, they experience occasional equipment breakdowns. Whenever the company encounters equipment breakdowns, the quality of the products are also at stake, which eventually results to errors and defects. Process breakdowns stemming from equipment breakdowns are costly, cutting the possible maximum production output. Accordingly, the machines are made and purchased in China, where testing and checking of the plastic moldings are also done. At times, the company’s employees fly all the way to China to ensure the problem is fixed, which adds to costs incurred and time wasted. As the company

experiences such disruptions, it is unable to maximize its resources and its profit as the company incurs cost to ensure quality. Besides the equipment breakdowns, their machinery produce a 1% or 1.5% chance of product defects occasionally. Due to the encountered defects, the products are inspected by the company’s on­site workers at the end of the manufacturing process. During inspection, products that have been found defective or that have not passed the company’s quality standards are subject to replacement. With various product categories, the group chose to focus on their line of drawers, which is currently sold at P850.00. On average, the company produces 104,000 units of drawers, with a replacement cost of around P225.00 per defective product. With 1% to 1.50% defectivity rate, the estimated defective drawers produced monthly ranges from 1,040 to 1,560 in number. When multiplied to the replacement cost, it totals to
P234,000 to P351,000, which the company is wasting on a monthly basis. Due to high costs associated with defective parts and product replacements, possible alternatives will be looked into in order to maintain the quality Orocan promises. In addition to these problems, the group observed that the workers are not treated as invested members of the company. They are not that knowledgeable in maintaining and fixing the machines as the company does not invest in trainings of their employees. Their tasks and responsibilities are instructed and given by their managers. As observed, they are treated as
“robots,” doing tasks repetitively, which probably results to apathy and boredom of employees. Moreover, there is strong competition in the plastic industry driven by new and innovative products of the competitors. However, Orocan continues to sell their mainstream products, without much innovative features. For example, Orocan sells tumblers, which are perceived as outdated and simplistic, while other companies have added features to their tumbler products such as making detox or fruits­infused water. Similarly, the plastic closets of
Orocan only focuses on targeting lower social classes, while their competitors have expanded their target market. As mentioned by the company’s manager, Orocan focuses on quality rather than the product design and attributes in order to maintain consistency and quality among their products.

In organizing problem­solving efforts to solve the company’s main problem(s), the group created a fishbone diagram, which spots possible sources or causes of the problem.
Through the Fishbone diagram, the group realized that some of the identified problems were actually possible sources of the main problem, which are defective products. The illustration below shows the Fishbone diagram created by the group. V. Solution
The group has come up with solutions or alternative courses of action for the problems identified, particularly focusing on the main problem itself. By ensuring that corrective action is taken for the causes, this will lessen the problems the company encounters.

To maximize resources and profit, the group strongly suggests the use of a quality

system since it is self­improving, self­correcting, and self­developing; in short, it is a self­sustaining system with little need for outside adjustment. In general, careful and proper application of a quality system will result in a company’s continuous improvement in terms of quality. In employing a such a system, the group recommends the use of just­in­time, “a highly coordinated processing system in which goods move through the system and services are performed as they are needed” (Stevenson & Chee Chuong, 2010) and lean operation, which is “a highly coordinated system that uses minimal resources to produce high quality goods or services” (Stevenson & Chee Chuong, 2010). By employing these two similar systems, work flow in the system is expected to be smooth, thereby minimizing resources

used and yet still ensuring high quality outputs. The aim is to make the systems flexible to eliminate disruption and waste which are the main problems of the company. In minimizing breakdowns, Orocan should create preventive maintenance programs, focusing on proper maintenance of machineries and on replacement of old parts. Moreover, should a breakdown occur, they should be prepared in making the machine work by stocking supplies of important spare parts, training their workers to be knowledgeable in repairing, and creating substantial plans for emergency situations. In order to alleviate costs incurred in internal failure of products, the group suggests that the company increases its budget on prevention and appraisal costs. Prevention costs focus on reducing potential defects while appraisal costs focus on evaluating products, parts, and service. In the long run, the company will end up saving more as they are able to cut down on wastes. Particularly, Orocan should consider inspecting during the manufacturing process. As the machinery produce approximately 3,500 units per day, an addition of 10 on­site workers will be employed by the company to inspect plastic drawers and check possible defects. Currently, the average minimum wage is at P466 with an average of 26 working days per month. This totals to P12,166, which is multiplied to ten employees, resulting to P121,660. Given this, the cost of 100 percent inspection is justified, as it turns out to be cheaper than the minimum P234,000 spent on product defects. On a daily basis, the company produces 4,000 drawers, with an average of 40 to 60 defective ones. With a 1% to
1.5% defective rate, 5 to 7.5 defective drawers are produced every hour. Multiplying this to the defective cost of P225, the company spends P1,125 to P1,687.5 per hour. The company will incur a cost of 4,660 per day, and only P582.50 per hour if they hire additional on­site workers, which would turn out to be cheaper than replacement at final assembly. In minimizing defects, the company should also consider using autonomation or jidoka, which automatically detects defects during production. This mechanism detects defects when they occur and stops production to correct defects as well. Although this causes the production process to stop, it captures the attention of the employees, allowing them to realize there is a problem, to conduct an investigation, and to create an action plan to manage the problem. As the company treats their workers as members with an investment in the company, they should be willing to spend on training, which will equip the workers with the skills needed in their respective job assignments and responsibilities. Moreover, they should also be trained

to perform different responsibilities and operate various machines, allowing them to become flexible and to be able to help co­workers in unexpected situations, should the need arise.
They should also be given more authority in making decisions, rather than just following standard procedures, making them more motivated and at the same time, contributing to their experience learning as a worker. As they are given a greater responsibility, more is expected from them as well; they would be expected to value the importance of quality and to contribute to the continuous improvement of systems and machineries. Given that Orocan has been in the market for over three decades, they should consider expanding their target market to the upper class. This is because they are already established as a trusted name in the industry. Moreover, with regards to product innovation, they should consider hiring a manufacturing consultant specializing in innovative technology.
By doing so, they will be able to come up with and produce improved and creative products more efficiently. Although hiring a consultant will add to the costs of the company, it will surely give a good return. Furthermore, they should consider investing in new machines that would be able to create and produce innovative products and to make the process faster and more efficient. Generally, the company should utilize a team concept by allowing their workers to work in small teams to achieve overall process improvement. They should ensure continuous improvement, or kaizen, in its overall operations. More importantly, in order to guarantee and maintain product quality, the following dimensions should also be considered: performance, aesthetics, special features, conformance, reliability, durability, perceived quality, and serviceability. VI. Recommendation and Conclusion
All in all, Orocan is a company that sells a variety of plastic products, consistently ensuring its customers the best quality. In the manufacturing industry, such as Orocan’s, an integrated approach of quality management system, particularly Just­in­time, helps in providing quality products. By using quality systems, it shows improvement in attaining quality requirements, allowing it to become competitive in the industry. The application of quality systems should be customized to the company’s specific needs and affordability. Since
Orocan is already a stable firm with enough capital to afford costs associated with quality

management, the solutions given above after the group’s thorough report is suitable for the company. Moreover, technical improvement, such as in machinery, are important, but humanistic aspects are equally important. Employees should receive extensive training specific to their respective job functions and responsibilities. Additional trainings are encouraged by the group to facilitate team effort when encountering a problem. Improving the quality with the use of quality management approaches may seem costly, however, it will be beneficial to Orocan in the long run as they will be able to cut their cost by minimizing defective products; thus gaining more profit by meeting the customer’s quality requirement. Lastly, the company should also focus on continuous improvement in order to deliver quality products to Filipino consumers. Sources:
Stevenson, W. & Chee Chuong, S. (2010). Operations Management: An Asian Perspective.
McGraw Hill: Singapore.

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