[Type the company name] | Assignment :Operation Management | How the sugar sector in Mauritius responded to the different challenges it faced due to changing market environment | | Chandonee DEEPCHAND RENE | 9/15/2014 |

Operations Management is of primary importance to any business or organization. This paper gives an overview o f the different areas which affects operational decision makings and the challenges that operations managers face with changing market environment. Finally it looks into how the Mauritian Sugar Industry have risen to these challenges through operations changes and maintain both the industry and Mauritian economy viable. |

Contents 1. Introduction 4 2. Factors affecting operations decision making. 5 2.1. Quality 5 2.2. Product/service Design 6 2.3. Layout facilities 7 2.3.1. Economies in Handling 8 2.3.2. Effective Use of Available Area 8 2.3.3. Minimization of Production Delays 8 2.3.4. Improved Quality Control 8 2.3.5. Avoidance of Bottlenecks 8 2.3.6. Better Production Control 9 2.3.7. Better Supervision 9 2.4. Location the facility and Transporting materials and products 9 2.5. Designing jobs and work 10 2.6. Forecasting Demands for products and services 11 2.7. Production planning and scheduling 11 3. Changing Challenges for operational Managers 12 3.1. Globalisation 12 3.2. Just-in-time performance 12 3.3. Supply chain partnering 12 3.4. Rapid product development 13 4. Case Study: The Sugar Sector in Mauritius 13 4.1. Historical Background 13 4.2. Challenges to the Sugar Sector 14 4.3. Operational costs 15 4.4. Change in technology 15 4.5. Innovation and Demand for new products: from raw sugar producer to agro-industry stakeholder 17 4.6. Flexibility of production systems 19 4.7. Environmental Constraints 21 5. Conclusion 21

1. Introduction
Operations are an inherent part of all organisations irrespective of whether they are product or service based. Operations Management can be described as a series of activities that creates goods and services by transforming inputs into outputs. It also helps the organisation to improve its profitability or give better services. Operations Management is one of the three major functions of any organisation along with Marketing and Finance and it is integrally related to all other functions of the organisation and it absorbs the greatest part of an organisation budget.

The type of activities involved in operations management include organising work, selecting processes, arranging layouts, locating facilities, designing jobs, measuring performance, controlling quality, scheduling work , managing inventory, and planning production. (Russel/Taylor 1998). In brief operations managers deal with people, technology, deadlines and recently with environment issues and, as such, operations managers have important responsibilities with regards to an organisation sustainability and competitiveness.

In today’s business, with the world trade liberalisation process, .operations managers have to continually adapt their organisation strategies under rapidly changing market conditions. 2. Factors affecting operations decision making.
Operations management is based essentially on decision making and operations managers are required to make decisions and carry out decisions made by others (Russel/Taylor 1998) in line with the organisation and government strategies. There are different areas of operational decision making in both production and operational areas and each sector support and complement one another to achieve the final product or services. These can be classified as follows:
Quality
Quality is the ability to produce a product or service in line with customer expectations or beyond. Different customers have different expectations and these directly impacts on a firm operational decision making. Quality directly influence product design, jobs and work activities, planning of production process, location and development of the production facilities and the flow and schedule of production throughout the production process or the delivery of services.
Having a good quality product or services is a competitive advantage over competitors offering similar product or services and it helps to build a company's reputation, rationalize prices, decrease liability costs, increase productivity, increase customer loyalty, and increase customer satisfaction. On the other hand poor quality can damage a company's image leading to a loss in the company’s market share, legal liability and increase costs.

Product/service Design
Production process starts with the designing of the product or service. A product and service should be designed so that it both attracts customers and is cost effective. An expensive well designed product will be less competitive on the market and may not find buyers. Hence the design is considered a failure.
When planning a new product or service, some basic principles must be considered to achieve a successful design. These are: * Translating customer needs * Refining existing products and services * Develop new products or design * Set down quality goals * Set cost targets * Control and test prototype * Documents specifications * Translate products and service specifications into process specifications.
Legal and environmental concerns are also taken into consideration during process design. Organizations also need to look at "sustainability" when designing their product/service.

The four aspects of Sustainability are: * Life Cycle Assessment which focuses on how the product will impact on the environmental during its life cycle. * Value Analysis which analyses the different parts of the product and find where the cost can be reduced. * Remanufacturing which involves replacing worn-out and defective products. This is common practice in high price machinery industries. * Recycling and recovering older materials for reuse to save money and satisfy environmental concerns.
The choice of appropriate technology is also important in product design. Computer aided design (CAD) and Computer aided manufacturing (CAM) are now extensively used in the design process because they can anticipate what the design will look like, as well as allow for better manufacturing. Layout facilities
A production process must be housed in a physical facility. An ideally laid out plant reduces manufacturing costs through reduced materials handling, reduced personnel and equipment requirements and reduced process inventory.[Sree Rama Rao, 2007].
The importance and objectives of a good layout is briefly outlined below:

2.1.1. Economies in Handling
30% to 40% cost involved in manufacturing is through material handlings. A proper layout minimises material handling and decreases production cost of a good. 2.1.2. Effective Use of Available Area
In area where land is scarce, a properly planned layout can make proper use of available space. Equipment and services should be located in such a way so that they may be used to perform multiple functions and to optimise labour utilisation. 2.1.3. Minimization of Production Delays
An ideal layout eliminates causes of delays due to shortage of space, long-distance movements of materials, spoiled work thus contributing to the speedy execution of orders. 2.1.4. Improved Quality Control
To ensure quality, inspection should be conducted at different stages of the process. An ideal layout provides for inspection to ensure better quality control. 2.1.5. Avoidance of Bottlenecks
Bottlenecks is any place in a production process where materials tend to pile up or are produced at a speed, less rapid than the previous or subsequent operations. Bottlenecks are caused by inadequate machine capacity, inadequate storage space or low speed on part of the operators which results in delays in productions schedules, congestion, accidents and wastage of floor area. All these are overcome with an efficient layout. 2.1.6. Better Production Control
Production Control is concerned with the production of a product of the right type, at the right time and at a reasonable cost. A good plant layout provides the production control officers with a systematic basis upon which to build organization and procedures. 2.1.7. Better Supervision
A good plant layout ensures better supervision by enabling a supervisor to get a full view of the entire plant at one glance. It also help to decide on the number of workers under a particular supervisor. A good plant layout is, therefore, the first step to good supervision.

Location the facility and Transporting materials and products
After process and layout design, it is important to locate a site for the facility. The location process is referred to as location analysis and logistics management. The factors that influence the location of industries are: * availability of infrastructure: Infrastructural facilities like water, good and available transport system are provide for the location of industry. * Availability of Power * Availability of Labour : Efficiency of labour is an important factor affecting location of industry. A higher labour force will improve production process for goods with elastic effect will create revenue. In other hand, diminishing return will be applied for industry if more or more labour is used for the production of goods. * Government restrictions * availability of raw materials, capital,transport and market.

Designing jobs and work
Labour, alone or associated with machinery, is a primary component of the production process. It is of vital importance that jobs are designed to meet the requirements of the production process in the most efficient manner.
A well design job will ensure quality of products in the short run and will encourage staff to improve on the job so as to eliminate errors. It also helps workers to understand the proper sequence of the process thus contributing to rapidity and autonomy of workers. A well design jobs will look into all health and safety aspects thus contributing to the quality of life.
Jobs can also be designed to allow the operation to change the nature of activities in terms of new products, mix products, increase in volume and delivery among others.

Forecasting Demands for products and services
Forecasting plays a vital role in operations. Once production process is finalised, it is important to know how much and when to produced. These will depend on demands for products from customers. Forecasting uses a number of methods and techniques to forecast demands. The forecasted demand is then used to plan the level of production and services. Forecasting is almost never accurate but it is an important aid to planning. Production planning and scheduling
Production planning and scheduling involve decisions linked with how much materials is needed, how many parts to order, when material or parts should be ordered, how many workers to hire and how they will be scheduled on jobs or machines. Operations Managers should ensure that sufficient amount of inventories is available at each stage of the production process so as to avoid all stoppage and delays so as to ensure a smooth production flow so as to have the of final inventory on hand to satisfy customer demands. For service operations this means that the right amount of personnel required to serve customers must be established.
Production planning includes aggregate production planning, inventory management, materials requirement planning, scheduling, just in time and continuous process improvement.

3. Changing Challenges for operational Managers 2. Globalisation
The pace of globalisation has increased due to rapid development in communication technology and transport. This led to the opening up of markets worldwide and the setting up of trade treaties. Resources such as capital, material, knowhow and labour also turned global. Firms faced increased completion to both acquire resources and sell goods or services. Operations Managers are condemned to constantly generate new ideas, process, products and finished goods rapidly for firm to remain competitive. Just-in-time performance
Due to limited space and short life of products, inventories are not only costly but seriously impede rapid market changes thus present a serious drawback to firms.
Operations Managers have to cut down inventories at every level of productions and reduce cost. Supply chain partnering
Demanding customers compounded with rapid changes in technology and process has led to shorter product life cycles. Hence it has become more important to meet customer needs in time.
So as to meet the customer needs operation managers have started to outsource to firms having unique expertise thus establishing long time partnership with other firms in the supply chain.
Rapid product development
Rapid international communication of news and entertainment is constantly bringing changes to lifestyles. These coupled with increasing competitions in the market are responsible for the drastic decrease of life span of products. Operations Managers have to respond accordingly with fast improving technology, management structures and partners that are more effective.
Below is a case study of how the Sugar Industry in Mauritius responded to the various market demands to become the cane industry so as to continue to be sustainable and competitive. 4. Case Study: The Sugar Sector in Mauritius 3.
Historical Background
Sugar Cane was first introduced by the Dutch in 1639 to produce artisanal rhum and the first mill was set up at Villebague. Later, the French and English expanded the Industry using slaves and Indentured labourers. In 1838 there were a maximum of 1838 mills in Mauritius.
The Sugar Industry is one of the pillars of the Mauritian economy along with the Textile industry and the Tourism industry. Sugar has been traded under the Commonwealth Sugar Agreement since 1951 [4 ] and since 1975, Mauritius, as a member of the African Caribbean and Pacific (ACP) group of countries has, through the Sugar Protocol annexed to the LOME Convention, been benefiting from a preferential market access, including a fixed quota and a guaranteed price, higher than the current market price, for its sugar exports to the European Union.[11]

Challenges to the Sugar Sector
As from 1984, Mauritius embarked on the restructuring of the Sugar Industry so as to palliate the forthcoming effect of the reform of the European Union Common Agricultural Policy and the world trade liberalisation process.
In 2009, with the implementation of EU sugar reform and end of the sugar protocol, there was a drastic price cut of 36% for sugar. Mauritius also had to face competition from ACP countries as well as Least Developed Countries (LDCs) and non-ACP countries for access to the EU market.. Nevertheless Mauritius has an advantage over other ACP and LDC producers with respect to white sugar for direct consumption, taking into account food standards and just-in-time delivery.
The Sugar Protocol came to an end on 1 October 2009. These factors accelerated and enhanced the reform of the sugar sector so that the Mauritian economy continues to be viable.
In 2006 the Multi Annual Adaptation Strategy (MAAS) for the sugar industry was published with the aim to help the Industry to be competitive, viable and sustainable in the long term. The MAAS action plan focused on the operational components and subcomponents which will help the industry to respond viably to the challenges of the new market environment and at the same time addressing the constraints of the sugar industry. The operational and non operational measures included cost reduction, additional revenue, and optimal use of by products, pro-poor dimension, dept alleviation, adapting regulation and synergies. Operational costs
In order to substantially reduce the sugar industry’s overhead cost at operational, administrative and institutional level all the sugar factories were closed down except for four factories namely Fuel under the Alteo group in the East, Savanah under the Omnicane group in the south, Medine Sugar Milling in the west and Belle Vue Mauricia under Terra group in the North. Change in technology
In Mauritius, the harvesting period is from May to December. The remaining months of the year is scheduled for repair and modifications in the milling plant and to allow the cane to grow and attain maturity for next harvest. Due to the closure of the several factories, the existing mills in the remaining plants had to be redesigned for greater crushing capacity and efficiency. The crushing capacity at Alteo Milling Limited was increased from 285 to 380 tons of cane per hour.
To reduce humidity of bagasse which is used in the power plants for generating electricity, a six roller mill was added at the last stage before bagasse is channelled toward the power plant. By reducing humidity a higher thermal efficiency is obtained from the burnt bagasse for steam generation.
To process the higher volume of juice produced to sugar, a traditional evaporator was replaced by a falling film evaporator. This brought about process steam savings resulting in optimum internal thermal consumption and more juice could be processed into sugar in less time.

Preparation of cane before channelling towards mill for extraction of juice was also upgraded to optimize extraction of juice.

New equipment and better automation for processing juice was introduced and the process was optimized. The result was an increase in the amount of sugar produced, reduction of cost and improvement of sugar recoveries.

In order to be more competitive the sugar sector turned to intensified mechanisation and rationalisation of all resources in the farming system of sugar cane. Coporate growers are gradually introducing more efficient and productive farming practices including wider rows, dual row planting, controlled traffic, break cropping, and green cane harvesting, reduction of fuel and maintenance costs among others.

Belle Vue S.E, from the Terra group, was the first sugar estates to adopt a new cropping system which leads to the full mechanisation of all sugar cane agricultural activities - from land preparation to harvesting. The “New Farming System” (NFS) is an adaptation of the Australian’s ‘improved farming system which consisted of [13] * Planting sugar cane in dual rows on raised beds using a GPS controlled dual row billet planter. * Freeing the beds from stones with machines which crush stones, up to a diameter of 3cm, inside the soil. * Create straight soil beds of 1.9m. * Restrict the passage of farm machinery to well defined wheel tracks created by using GPS. * Reduced compaction by matching cane rows with machinery wheel tracks

The NFS, besides reducing labour cost, minimizes soil compaction through controlled traffic, reduces tillage and allows legume rotation. Under the prevailing conditions, the NFS can make a significant difference to farming costs and provide the basis for future sustainability of the industry.

Innovation and Demand for new products: from raw sugar producer to agro-industry stakeholder
In line with the MAAS for the Mauritian sugar, the industry turned towards the production and sale of refined sugar instead of only raw sugar. The seven countries that competed with Mauritius for the supply raw sugar to the EU are more competitive and have the capacity to supply over 3.5 million tonnes. [3]. which means that Mauritian exports to the EU are potentially at risk under the new trading regime.
In 2008, the Mauritius Sugar Syndicate decided to terminate its long term contract with Tate and Lyle sugars, a company which focuses principally on bringing specialty sugars and functional ingredients made from sugar cane to the EU marketplace – a market dominated by sugar produced from domestically grown sugar beet under Europe’s Common Agricultural Policy.
In 2009 the omnicane group set up a sugar refinery at La Baraque using Brazilian technology. An investment of MUR 1 250 millions (USD 4 millions) was disbursed for the refinery. The refinery, with a capacity of 600 tonnes per day, produces direct consumption sugar for the European market.
Similarly in December 2009 the Alteo group refinery at Fuel started its operation and exported 162 000 tons of white sugar to the EU market via Sudzucker. The group is currently investigating the possibility of producing higher added value products from refined white sugar and the by-products of refining.
By 2011 Mauritius was exclusively producing value added sugars which was marketed in the EU under a six year contract (2009-2015) with Suedzucker of Germany. Exports now consist of 70% refined white sugar (known as EEC Grade 2) and 30% of 15 varieties of speciality sugars. [bloomberg.com 2011]

Flexibility of production systems
Another measure taken to optimize the potential of sugar cane, in the new economic order which resulted in drastic cut in the price of sugar, was the flexi-factory concept. Already established in large sugar cane producing countries such as Brazil, the concept was adapted to the Mauritian context well before the end of the sugar protocol in 2009.

The flexi-factory is usually composed of a milling section, a sugar refinery, a power station and a distillery. It can therefore produce at the same time white and special sugars, electricity, rum and/or ethanol and has the ability to adapt, within limits, its production programme according to market demand. All components of the flexi factory are found in close vicinity because they are interdependent. The geographical proximity of the different components of the flexi-factory will facilitate the flow of the products between the various units, and this will in turn minimize transport and other production costs.
In 2005 and 2009, the omnicane group whose agricultural activities is concentrated in the centre and south of the island, set up two electric power generation plants at La baraque and saint Aubin respectively.. Omnicane Thermal Energy Operations (La Baraque) Limited is one of the largest coal/bagasse cogeneration plants in the world and is equipped with two units of 44.5 MW each. They are of the condensing type with extraction and they use either bagasse or coal as fuel. The Group’s power plants contributes about 28.06% of exported electricity to the national grid as a percentage of total electricity generated in Mauritius annually.
Sixty percent of electricity produced is from the sugar sector and the biggest contributor from the Omnicane group with a total production of 107.5 MW in 2011.
In 2013 Omnicane ethanol distillery came into operation with a production capacity of 25 millions litres per year which is exclusively for the EU Market. Along with its power generation plants and distillery, Omnicane also has a refinery which produces refined and special sugars solely for exportation.
The Terra group also has a power generation plant using cogeneration coal/bagasse and produces 71.2 Mwatt of electricity and produces up to 75,000 tonnes of specialty sugars for the international market. The group under the Grays Inc. is one of the pioneers of the distillation industry in Mauritius is the leading producer of alcoholic drinks derived from sugarcane locally.
Medine Sugar Milling Co. Ltd has signed a contract with CEB to supply 10 GWh to the National Grid as from next harvest. The power generated will be from the burning of bagasse.

Environmental Constraints
Used water was reduced to a minimum due to recycling and reuse in the plant itself and for irrigation purposes thus responding to environmental constraints.
Omnicare is finalising the plans and procurement to begin the construction of the carbon burn out unit imminently. It will use of carbon burn out technology to make cement additive for the construction industry and steam for the distillery, from the residues of their power-generation operations. 5. Conclusion
The reform undertaken by the Sugar Sector under the MAAS 2005-2015 has enabled the Industry to respond to the challenges caused by globalisation, changes in market conditions and demands, scarcity of labour and to envisage the future with more serenity. It has also safeguarded a crop which, from 2015 onwards, will be an invaluable asset in terms of the production of renewable environment friendly energy, and which has the potential of being an efficient multiproduct biofactory for the production of high value-added products including proteins, pharmaceuticals, vaccines, polymers and textiles. It is to be noted that, of all cultivated crops, sugar cane is one of the most efficient converter of solar energy into renewable biomass.[15]

References 1. Slack, N., Chambers, S. & Betts, A., 2009. Operations and process management : principles and practice for strategic impact, Prentice Hall/Financial Times. 2. Slack, N., Chambers, S. & Johnson, R., 2010. Operations Management, Prentice Hall. 3. Greasley, A., 2010. Operations Management Pearson Education International, eds. Operations Management, 1(1), p.1-7. 4. Bloomberg.com, ‘Mauritius’s sugar export income to increase on shift to refined, specialty’, 23 June 2011 5. http://wps.pearsoned.co.uk/ema_uk_he_slack_opsman_4/17/4473/1145169.cw/index.html 6. The importance of layout by SREE RAMA RAO on JANUARY 7, 2006 more at http://www.citeman.com/108-the-importance-of-layout. 7. Business Magazine No. - 1117 - du mercredi 29 janvier 2014 au mardi 4 février 2014 8. Anon, 2004. Government of Mauritius a roadmap for the Mauritius sugarcane industry for the 21. , p.1-15. 9. Anon, Integrated Assessment of Trade-related Policies and Biological Diversity in the Agricultural Sector in Madagascar Transition strategies for the shrimp farming industry Summary. , p.1-12. 10. http://www.alteogroup.com/ 11. http://www.mspa.mu/ 12. http://www.omnicane.com/ 13. http://www.terra.co.mu/ 14. Multi Annual Adaptation Strategy 2006 - 2015 , 2006. 15. http://www.open.edu/openlearn/money-management/management/leadership-and-management/understanding-operations-management/content-section-3