XXYY Juice manufacturing company in Egypt

XXYY Co. juice manufacturing company is a leadingEgypt-based manufacturer specialized in the production, processing, and packaging of juices ready to drink. The company was established in 2004 and began producing juiceswith acapitalof 2 million pounds. XXYY Co. started operations in 2001 with one production line, growing to seven lines during 2018 and Now 12 lines. The company is operating under a strategy that aims to provide the best juice tasting experience to its customers (differentiation strategy). The Company was seeking to increase their sales through annual contracts with major schools and institutions, and to seek more supermarket and hypermarket chains.

1. Forecasting

The General Manager of XXYY shared the latest shared the latest sales numbers of juice bottles. The price of unit is EGP 15/bottle. He highlighted the constant growth in sales in years 2020, 2021 and 2022. However, the current conditions in Egypt and the world calls for reassessment of their future sales. Thus, the general manager highlighted the need to reassess the forecasting techniques that they currently use.

	Actual 2020	Actual 2021	Actual 2022
Jan	405,000	435,000	475,000
Feb	480,000	410,000	445,000
Mar	490,000	420,000	455,000
Apr	450,000	490,000	535,000
May	400,000	435,000	470,000
Jun	425,000	460,000	500,000
Jul	440,000	480,000	520,000
Aug	415,000	450,000	490,000
Sep	420,000	455,000	495,000
Oct	430,000	465,000	505,000
Nov	440,000	480,000	520,000
Dec	445000	485,500	525,000
Tot.	5,240,000	5,465,500	5,935,000

1. Capacity Planning

XXYY has 12 production lines with a max. capacity (Actual O/P) of 400,000 bottles of juice per month. During 2022, the capacity of the factory critically covered the market demand. It is forecasted that within two years, annual demand will increase by 7% and the company might face a problem to cover the expected demand in the future. Thus, it seems critical to rethink to increase the capacity to meet future demand. Operations manager proposed two capacity alternatives to increase their capacity. The first alternative is to buy a new production line. The second alternative is to outsource and to deal with a third-party producer. The following table indicates the annual fixed and variable cost per unit of each alternative:

	Buy a new line	Outsourcing
Fixed cost	EGP 12,000,000	None
Variable cost	EGP11/bottle	EGP 13/bottle

Besides, for the short term, there is a need to reconsider the use of the company resources while maintaining the same quality of their products. Accordingly, the operations manager proposed a process improvement initiative that reduces processing time for each bottle (The company operates one shift of 8 hr./day with 25 days/ month), so that output is increased by 15%, but 8 additional workers required for each production line. Originally, 15 operators are needed to operate each line (12 production lines). Operator costs are EGP 16/hour, and material input is EGP 3/bottle and operating line cost EGP 375/hr. Overhead is charged at 1.5 times direct labour cost (before and after the proposed initiative). As a member of the improvement team, you are required to assess the feasibility of the proposed initiative with respect to its effect on the productivity of the production lines (assume that the output is evenly distributed among the 7 lines).

1. Production process and quality

Generally, production in XXYY company could be considered as a batch processing that provides quite high volume and quite acceptable variety of output. As previously mentioned, there are 12 production lines that are used to produce the 5 different types of products produced by XXYY. Line 1, 2 and 3 are used to produce small bottle juice size (600 ML). Line 4, 5 is used to produce large juice bottle size (one litre). Other lines are used to produce mix fruit juice (both small and large bottles). The production processes for the different types of Juice produced are as follows:

The following are the key manufacturing stages:Selection and preparation of raw material Juice extraction, Filtration, Batch preparation Pasteurization Filling and bottling. Any fruit can be used to make fruit juice, but the most common ones include pineapple, orange, grapefruit, mango and passion fruit.

1. Fresh Fruits delivered to the factory and stored.
2. Fruits passed on to the fruit washing and grading section.
3. Washed fruits would be fed to the inspection cum sorting conveyor where unwanted, damaged fruits would be separated out manually.
4. Washed & graded fruits would be passed on to the fruit juice extraction unit.
5. Extracted juice is passed to the heat treatment to avoid the quality degradation.
6. The juice is fine pulped in pulpier cum finisher to get fine juice.
7. This juice will go for clarification in the juice clarifier.
8. Clarified juice is used for to further processing to manufacture Clarified juice is used for to further processing to manufacture ready to drink juice or juice concentrate.
9. In juice concentration section, fruit juice with 10-12 brix would be concentrated to 65 brix in multiple effect vacuum evaporators.
10. Collected concentrated juice would be pasteurized and packed in cans in canning line.
11. For ready to drink juice, other supporting formulating ingredients like sugar, citric acid, etc., would be made ready for the formation.
12. Formulation of the ready to drink juice would be done in formulation and blending tanks.
13. Finally, formulated ready to drink juice would be pasteurized and packed in glass bottles.

Quality is strongly emphasized at XXYY. Employees are trained in quality concepts and the use of quality tools. Training is incorporated on-the-job so that employees can see the practical applications of what they are learning. Employees are responsible for performing in-process quality checks (quality at the source), and to report any defects they discover to their supervisor. In that sense, several quality checks are performed.

The close monitoring of step 5 revealed that the company is frequently facing problems withquality degradation of fruits. The accepted norm ofdegradation of fruits ranges between 5% to 7%. The standard deviation of the process is 0.4 %. So, the quality team decided to collect a sample data (20 samples each with 5 observations) about the moisture content (in percentage) as shown in the following table:

Sample	Observation 1	Observation2	Observation 3	Observation 4	Observation 5
1	5.2	5.1	4.8	5.2	4.4
2	4.3	4.6	5.6	5.2	5.1
3	5.3	6.2	6.5	5.3	5.2
4	5	5.2	5.1	5.2	5.1
5	4.9	4.8	4.9	4.7	4.9
6	5.3	6.2	6.5	5.3	5.2
7	5.2	5.1	4.5	4.8	4.9
8	5.1	5.2	5.1	5.2	5.1
9	5.1	5	6.2	6	6.3
10	5.1	6.1	6.1	5	5.1
11	6.2	5.1	6.1	5.5	5
12	6.2	5.1	6.1	5.5	5
13	4.1	5.1	5.2	5.4	5.1
14	5.3	5.2	5.3	5.2	6.2
15	5.1	4.9	4.9	4.8	4.7
16	4.9	4.8	4.9	4.7	4.9
17	5.1	5	6.2	6	6.3
18	5.1	6.1	6.1	5	5.1
19	6.2	5.1	6.1	5.5	5
20	5.3	6.2	6.5	5.3	5.2

1. Inventory and order fulfilment

The company attempts to minimize the amount of inventory. There is a real need to reassess this strategy for their purchases. The current model of ordering and inventory ignores calculating economic order measures as well as quantity discounts that might be offered. For example, the needs of XXYY from one of its raw materials (fruits), the raw; being as a crucial ingredient and imported from a local supplier has a total demand of 120,000 tons/year. Ordering costs are EGP 650 per order, carrying costs are EGP 40 per ton per year. Orders less than 800 tons will cost EGP 300 per ton, more than or equal 800 to 1000 will cost EGP 275 per ton, more than1000 to 1200 will cost EGP 250 per ton and larger orders will cost EGP 230 per ton. In addition, the company determined that the lead-time needed from placing an order until having the order is around 10 days on averagewith standard deviation 3 days, while the required service level is 97%.

1. Aggregate Planning

Planners of the company are about to prepare the aggregate plan that will cover 6 months. Assuming that the company identified the following forecast for the next 6 months:

Period	Jan	Feb	March	April	May	June
Forecast	475,000	480000	450,000	460,000	540,000	475,000

They now want to evaluate a plan that calls for a steady rate of regular output (470,000 bottles/month), mainly using inventory to absorb the uneven demand but allowing some backlog. They intend to start with 100,000 inventory on hand in the first period. They decided to use overtime to make up for lost output. The maximum amount of overtime output per period is 35,000 bottles per month. The regular production cost per bottle is EGP 4.5 while the overtime cost per bottle is EGP 8. The holding cost is EGP 1.5 per bottle per month and the backorder cost is EGP 1.8 per box per month.

Module assessment:

AsanOperationsManagementConsultant,XXYY hashiredyoutohelpdeterminehowitcanimproveitsoperationsmanagement(improvingforecastingaccuracy,minimizingwaste,developingsupplierrelations,etc.)byusingitscurrentresourcesinacost-effectivemanner.Furthermore,you shouldprovideboth short-term solutions to their problems and long-termones.

You are required to undertake a group (3-5) research project and to prepare a Management Report based on the case study provided:

• Analyse the sales numbers of the company and recommend a forecasting technique to use during the upcoming period.
• Assess the two alternatives (outsourcing vs insourcing) and determine the appropriate decision based on 2023 forecast and determine when it is appropriate to outsource and which year the new production line is a must.
• Assess the proposed improvement initiative using the actual demand of 2022.
• Review and assess the process of inspection undertaken by XXYY.
• Review and assess the inventory decisions facing XXYY
• Prepare an aggregate plan for the first 6 months of 2023 based on the given forecasted demand.

Thekeyaspects that need to be covered within the reportare:

• CriticallyevaluatethekeyOperationsManagementissuesfacedbyXXYY.Youmustcriticallydiscusseachoftheseissuesshowingclearly,whyitisactuallyaproblem,howyouseeanopportunityforimprovingXXYYoperationsinthatissue,andpreferablyyoucanalso provide evidencefrom literaturethat theseissues arecommon/not commonin similarbusiness contextsand how improvements areusuallyattainable.
• Foreachissueidentified,criticallyanalyseeachissueusingthemostappropriatetopics,techniques,methods,modelsandtoolsavailablethatyouwouldhavepossiblyidentifiedwithinthelecturesandtextbooksrecommendedinthefirstlecture(youcanevenuseotheroperationsmanagementtopicsinthesebooksthatyoumightfindrelevant).Youmustclearlyshow whyyouselected anyof these topicsin the first place and in light of the casestudy,provideadetailedjustificationforthetechniques,methods...etc.thatyouhavechosen.
• Basedon whatyoupresentedinthe previous points, youarerequiredto criticallyevaluateandanalysedifferentalternativespertinenttoeachissueidentified.Iexpectyoutousebothquantitativeandqualitativeevaluations,showanyimprovementthatyoumightachieve,use appropriate illustrations,charts, and tables.
• ReflectyourfindingsinthelightofhowXXYYarecurrentlyhandlingtheiroperationsandin light of their expecteddevelopment.

Report Structure and Layout

Youneedtofollowareportformat

The following mainsectionsmustbe includedin yourreport.Cover Page: Students Name, Students Registration Number.

• Executive Summary.
• Key issues identified.
• Identification of the key approaches, concepts that apply to these issues
• Reflecting and relating your findings in point four and how they relate to what XXYY Company is doing along with your recommendations. You would be expected to provide justification of every aspect and solution to every issue you identified in the first point.
• Conclusion: Overall conclusion of your proposed action(s).

Furthertips

• Structure within the sections identified can contain further subheadings (such as Techniques, Methods, Models, Tools, Strategies etc.)
• I would expect you to expand on the case study and bring in any further information you might find suitable and that would help in further analysis ofXXYYoperations. You might even want to bring in examples from other similar companies, industries, or products.