The company is losing money during peak season due to inefficiencies in their manufacturing and distribution processes. They plan to use DMAIC and activity cost drivers to analyze costs. They will rearrange their warehouse using slotting and tap partnerships to increase production capacity. Key implementation strategies include utilizing cold storage facilities, rearranging truck flow, and focusing on core competencies. Process control involves senior management support, including projects in performance reviews, and taking the right measurements.

1. TQM Final Case
Chua, Dolojan, Lopez, Ramos, Templonuevo, Zabarte

3. Conflict
1. The Question of Efficiency
2. Why is it that the company is losing money
during their Peak Season?

4. Objectives
• To know the manufacturing and non-manufacturing cost
• Use DMAIC in the Case
• Use Activity Cost Drivers to quantify the cost of activities in manufacturing
and distribution of cakes
• Use Slotting as tool in the manufacturing process

5. Facts
• They get the help from the Cold
Chain Association during peak
season
• They Rent out trucks and chillers to
meet demands
• Triple the workforce to be able to
meet the demand
• A great deal of the losses comes
from shipping or logistics.
• Prices are constant
• Cake quality is maintained even
though freezed
• Production is based in the
commissary

6. Facts
• Cakes are shipped to the port area
• The point of dispatch in the C5
area is a choke point due to the
narrow driveway which limits the
movement of trucks
• Labor increases by 3 times but
production increases by 5 times
• Cakes are Semi-Assembled
• Cakes are frozen for 15-21 days
• Multiple delivery runs during peak
season

7. Basic Manufacturing Process of a Cake

8. Pre Mixing, Ingredients
Addition, Sugar and
Milk Solution,
Preparation of Flour
and Additives
Mixing, Mixing Time,
Water, Creaming,
Dough Consistency
Forming, Molders
Baking Time,
Temperatures, Burners,
Oven Output
Cooling and Shipping
to Manila Port Area
Storing of Cakes till
ready for final
Assembly
Final Assembly in the
Commissary includes
packaging
Distribution to all the
stores

9. Measure
Activity Cost Drives

10. Measure
• In This part we want to quantify the cost per activity
• We want to know the cause-and-effect relationship between a change in the
level of activity or volume and change in the level of total costs of that cost
object.
• Thus we want to know the cost drivers signify factors, forces or events that
determine the costs of activities in creating and distributing of cakes to the
different branches and kiosk

11. Cost Drivers
Function
Activity
Suitable Cost Drivers
Store Management
Storing of Materials
Storage Rent / Holding Fee
Servicing of requisitions
Number of Requisitions
Stock Taking
Value of Inventory
Logistics
Dispatches
Number of orders
Personnel Management
Recruitment of Employees
Number of Employeees

12. Analysis

13. Slotting
Why use slotting?
• We want to rearrange the current warehouse
layout
• The possibility of building a new facility
• We are attempting to reduce your warehouse
operational costs
• We operate in a seasonal industry which drive
different product demand cycles during the year
• We want to decrease the movement of warehouse
staff around the warehouse
Benefits
• Improved order picking efficiency
• Reduce product damage
• Increase replenishment and putaway efficiency
• “Health Check” of the design of
the pick fac

14. Implement
• Tap into the Cold Chain Association of the Philippines acquire their
assistance with the use of their Cold storages
• Tap into the connections of the owners of Red Ribbon and get connections
of indirect competitors to use their facilities.
• We’ll use the facilities of the indirect competitors at night to produce cakes
and we’ll use Red Ribbon Employees.
• We’ll rearrange the flow of trucks in the warehouse so that we could
maximize the visit of trucks and reduce the movement inside the compound

15. Implement
• The reason why we have a significant increase in productivity during the peak
season is that we hire more staff that can do the icing on the cake since the
final production takes the most amount of time compared to other part of
the manufacturing process.
• We can also use the Pareto Principle in this case in terms of Human
Resources. (80:20 principle)
• In terms of using the trucks, We’ll assign trucks to the stores according to
their sales performance.

16. Implement
• We can also create a lean six sigma by using the Priority Matrix. With this
tool, We can already asses what activities do we concentrate on. From there
we create a plan of approach in term of how do we make the flow of
products more efficient.
• Focus on core competency

17. How do we Control?
• Senior Management Involvement
• Top management team members must show
their support for the deployment. they must
take the responsibility of leading from the
front, through involvement in the following
areas:
• Reviewing project milestones
• Approving improvement ideas
• Resolving conflicts
• Recognizing teams
• Inclusion of Six Sigma Projects in
Performance Appraisals
• Another significant success factor is the
inclusion of project efforts in the
performance objectives of all team members
working on a project. The objectives should
be measurable and have clear deadlines.
Communicating these objectives to all the
team members and their managers at the
beginning of the project will bring
accountability and apply positive pressure on
the team to deliver as planned.

18. Control
• Take the Right Measurements
• What cannot be measured cannot be improved. By creating a measurement system,
practitioners can determine baseline performance and use the data in objective
decision making and analysis of variation.
• Organizations also must find a way to measure process performance to ensure they
receive data at a fast pace. Having too many items on a scorecard may shift
practitioners’ attention from the critical few metrics. They need to identify and
measure the key leading indicators instead of measuring the many lagging
indicators.