Cadbury y62n

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Cadbury (India) Operations Management Darshan Nawab Ashik Khanchandani Preet Shah Varsha Baid

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Table of Contents Executive Summary: Cadbury, (India). .......................................................................................... 3 Cadbury in India .................................................................................................................................... 4 Areas of operational management covered ................................................................................. 6 PROCESS DESIGN ................................................................................................................................... 7 INVESTMENT ......................................................................................................................................... 10 Cadbury Inventory .............................................................................................................................. 11 Supply chain .......................................................................................................................................... 13 Demand forecasting ........................................................................................................................... 14 Factors affecting demand of Cadbury......................................................................................................... 15

Demand pattern................................................................................................................................... 15 Plant layout ........................................................................................................................................... 17 Capacity Planning................................................................................................................................ 19 Strategies of capacity planning ................................................................................................................... 20 Why capacity planning is important for a company? ................................................................................. 20

Location Facilities ............................................................................................................................... 21 Location Strategy ........................................................................................................................................ 21 Factors Influencing Facility Location ....................................................................................................... 21 Location facility of Cadbury India............................................................................................................ 21

Bibliography ......................................................................................................................................... 23

Cadbury (India) April 11, 2013

Executive Summary: Cadbury, (India). Prepared by: Darshan Nawab Date: 11-04-2013 Brief Synopsis     

Introduction to the company Process layout and Investment Inventory management and supply chain management Demand forecast and Plant layout Capacity planning and location facility.

This Report gives a deep insight regarding the function and operation of the multinational confectionery company into India. A brief analysis has been done keeping in mind all the key features that play a major role in defining a product and its operation.


Cadbury in India Cadbury India is a wholly owned subsidiary of Cadbury Schweppes, which has operated in the country for more than 55 years. It was originally incorporated as a wholly owned subsidiary of Cadbury Schweppes Overseas Ltd in 1948. The company today employs nearly 2,000people across India. Cadbury India is the No. 1confectionery company with a 70 per cent market share in India. Cadbury is mainly into three segments. • Chocolates - Cadbury India is the market leader in the chocolate confectionery market in India with over 70 per cent market share. The leading brands in this category are Cadbury’s Dairy Milk, Fruit &Nut, Crackle, Temptations, 5 Star, Perk &Celebrations Gift boxes.


• Sugar Confectionery – Cadbury Dairy Milk Éclairs is one of the leading brands in this category. It is amongst the largest éclair brands in the market in of value share. Cadbury also owns Halls which is amongst the largest brands in its segment of Minty/Breath freshness brands in India. • Food Drinks – Cadbury’s c

is a leading brand in the brown drinks segment of milk/ malted

food products. Cadbury’s other products include Drinking Chocolate and Cocoa powder. Overall share in the malted food drinks market is estimated to be around19 per cent.

(Preet)


Areas of operational management covered This report coves the production and operational level of activities held at Cadbury India. Topics covered are as follows:

Process deg: companies choose different way to process their products. Deciding which method to use is very important along with deciding the company's target market. Deciding the right method, establishes good productivity and efficient way for operations.

Investment decision: Investment decisions are concern with make or buy decision, payback period, and average rate of return.

Plant layout: arrangement of the plant in such a way that maximum benefit of limited resources can be reaped.

Location facility: finding best suitable way which in more feasible for setting up the company.

Capacity planning: capacity planning is mainly related to system efficiency. Demand forecasting: prediction of demand about the product in further through historical data and market scenario.

Supply chain management: managing the network of inter connected business activities starting from procurement of raw material to distribution to deals then to consumer.

Inventory management: inventory plays a very important role in the company. Which type of inventory should be followed is the main concern for the production department. (Varsha)


PROCESS DESIGN The process followed at Cadbury India is categorized under line flow. The company can come under make to order because it produces goods, which have a day-to-day basis demand. So, it comes under make to stock and maintains some amount of inventory but not a larger amount because its goods are perishable and have a certain expiry date. Cadbury has a product portfolio, which includes chocolates, beverages, biscuits, candies and gums. Its major production of chocolates undergoes a long process, which starts with the cocoa bean. It is the heart of the sweetest delicacy in the world, which is actually bitter. During the 18th Century, people only used to eat the sweetish flesh of the cocoa fruit. It has also been used as a form of currency. There are two basic types of cocoa named Criollo and Forastero cocoas. The seeds of the Criollo cocoa are of finer quality and are thus used in high quality chocolates whereas 90% of the world crop s for Forastero cocoa. The basic process of chocolate making at Cadbury India:1. Harvesting:- Firstly, the cocoa beans after harvesting, is treated to prevent the beans from rotting. The fruit is opened at fermentation sites or at any of the collecting points. 2. Fermentation:- The technique for the fermentation process depends on region to region and is thus decisive regarding the production of high quality raw cocoa. 3. Drying:- The cocoa beans are still not dry enough and contain about 60% water in them. In order to soak this water, the beans are spread out on the ground or on mats under the sun. 4. Cleaning:- After the beans are dry enough, they are thoroughly cleaned through sieves and also by brushing. Further, with the help of powerful vacuum equipment, the last vestiges of wood, sand and the finest dust is extracted.


5. Roasting:- This entire process is carried out automatically during which the temperature reaches 1300C in the 10 feet high furnaces. The roasting process is performed to develop the aroma. 6. Crushing and shelling:- With help of the crushing machine, the roasted beans are broken into medium sized pieces. 7. Blending:- In order to process special recipes, the crushed beans are weighed and blended. This is a secret of every chocolate factory that how the different types of cocoa are mixed and in particularly what ratio. 8. Grinding:- Grinding is basically done to develop the cocoa paste. The crushed cocoa beans are brought onto rollers where they are processed into a fine paste. This paste is a resultant of the heat generated and the friction which causes the cocoa butter in the beans to melt giving out the liquid mixture. The production process at this point is divided into two ways which meet soon after they are done with their respective paths. One way, a part of the cocoa paste is taken to large presses in order to extract the cocoa butter while the other way, the other part of the paste is blended and refined during which some butter is added to the mixture. 9. Cocoa butter:- Cocoa butter is an essential ingredient for chocolates because it is not only a part of every recipe but it also gives chocolates its fine structure beautiful shine and delicate, gorgeous glaze. 10. Cocoa powder:- After the butter is extracted from the paste through large presses, cocoa cakes are left which contain about 10-20% proportion of fat which further depends on the intensity of compression. These cakes are mashed again and properly sifted in several stages which results into cocoa powder. A dark and very strong aromatic powder which can be used for preparation of excellent and delicious drinks known as cocoa. The four basic ingredients for making chocolate are cocoa paste, cocoa butter, sugar and milk. Using these ingredients and blending them according to the recipe to be prepared, three types of chocolate can be obtained which form the basis of ever product assortment. These are:

Kneading



Rolling Cadbury (India) April 11, 2013



Conching

Figure 20.5.3, the above is the entire manufacturing process followed at Cadbury India for its various differentiated chocolates. It shows the in-house activities of Cadbury till the despatch. (Cadbury India, 2013)


INVESTMENT 

In 1989, Cadbury set up a new plant at Malanpur, Madhya Pradesh. This plant was set up in order to make some of benefits available to the backward area. In 1995, Cadbury decided to expand the plant in a major way which it did eventually. This plant manufactures 5 products out of Cadbury’s portfolio of 12 power brands which includes Gems, Perk, 5 Star, Éclairs and Cadbury Dairy Milk Shots. In 2012, the company tripled the current capacity of this plant which has also become one of its key manufacturing plants in India for chocolates and wafers. A memorandum of understanding was signed between Cadbury and MP Trade and Investment Facilitation Corporation Limited (TRIFAC) at the global investors meet held in Indore. This was done for additional investment in the Malanpur Plant. Cadbury India is very proud and delighted for extending its partnership with the State of MP. This partnership was established 24 years ago.

*This plant is in a backward area and thus expanding it would be cheaper than in rural areas. This is a calculated risk and also g a MOU with the State gives extra to Cadbury. The State would be delighted about the increase in employment due to Cadbury’s expansion. The Malanpur plant has also become one of the key manufacturing units for Cadbury today. 

Cadbury increased the number of stores by 25% in 2012 to more than 700,000 stores and also added 5,000 sub-stockists in order to penetrate deeper in smaller towns. It is also investing to build refrigeration in its entire supply chain and also in sales infrastructure such as visi coolers and chocolate dispensers. Cadbury (India) April 11, 2013

(Ashik)

Cadbury Inventory For running any business, managing inventory and operating it is the key factor. Various principles depend upon how an organization manages their inventory. Moreover it also largely depends upon the nature of the business i.e. the product that whether it is perishable or nonperishable. Therefore the entire product line of Cadbury India comes under the category of perishable goods. Its confectionery is diversified at a large scale as it provides various different types of products such as toffee, chewing gum, eclairs, mint, biscuits, beverages, etc. Its entire confectionery is to be projected to produce 80,00 tones of units, which can be valued as 7 Billion in India (Sople, 2004). Moreover it also continues to dominate the Indian market by a large scale of 70%. As the company that we are talking about entirely deals with the perishable goods, it becomes exceptionally important for a company to lay down unique skills for managing inventory as there are also various costs attached to the inventory and also the perishable nature of the product.

Thus, the company currently uses JIT (Just in time) technique for maintain the inventory. Firstly, many advantages can be detected while using or opting JIT type of inventory management system. They are as follows: 

It is more of a demand-pull related inventory management system, instead of the normal supply push.



This type of inventory can help an organization to save for about 5-20% on the normal inventory that is being managed.



Costs related to space, people goods, everything is saved and reduced.




Workflow is much more easier and new technological advancement helps one to monitory the inventory with help of IT sector much more easily.



In store expenses and damages are reduced as well.



And also workers can be motivated to produce defect free products.



Therefore the quality check is done on the same level, improving efficiency and wastage of time, enabling total quality control. (Chary, 2009) (Sethi, 2004)

Currently Cadbury India, outsources its transport facilities, by transporting 75% of goods under the temperature controlled transport system and remaining 15% in the normal ones. Also, it maintains 15 day finished goods inventory and at various CfA’s and warehouses 18-20 days. For further improvement they have set their deadlines and are trying to reduce the finished goods inventory to 8-10 days and CFA and warehouse to 15-16 days. Letting the customers and consumers to access the complete quality product as demanded. As accuracy is very important when we talk about managing the inventories. (Sople, 2004)


(Sople, 2004)

Supply chain Supply chain of a company works as on a multi-dimensional factor. Supply chain is required to be maintained in order to maintain the quality of the product. As changing in the raw materials can sometimes leave the consumers or the customers upset or unhappy. And when we talk about an international organization, which produces its product in different parts of the world, it becomes equally important and tough for such companies to maintain the same level of the quality, throughout the world. As the finial product is made up of the same raw materials, but different legal factors also play a major role in of supplying the raw materials and making Cadbury (India) April 11, 2013

the same quality of raw materials available to the different countries as different countries has their own import rules and tax related regulations. As we know it that the company has a diversified product line system therefore there would be various different amount of raw materials that would be needed e.g. Coco beans/powder/butter, milk products, sugar, dry fruits, edible oil, etc. Thus managing its supply chain is very important not only for maintaining the quality but also it helps the cost not to fluctuate. (Cadbury India Ltd) (Shah, 2009) (Darshan)

Demand forecasting Demand forecast is the prediction of what will happen to the demand of the product in the future. The estimation of future demand helps the firm to analyze their production, distribution, selling and ment activities.


Factors affecting demand of Cadbury

1. Price of the product: The consumers are brand loyal so slightly increase in price won’t have much effect on demand while slightly reduce in price can lead to increase in demand. 2. Income of the consumer: If the income of people will increase they can have demand for the higher range products while if income decreases demand of éclairs and shots which is 1 or 2 rupee. 3. ment: ment plays an important role in attracting the major part of the population towards Cadbury. Cadbury has associated dairy milk to celebration and every moment of achievement and success. So it’s due to ment Cadbury has got social acceptance which plays an important role increasing the demand. 4. Celebration and occasion: India is land of festival and during the festival and occasion demand tends to increase like during raksha bandhan the demand of celebration bandhan increases.

Demand pattern Cadbury’s products like dairy milk, Bournville, silk have stationary demand pattern while its special collection like celebration range have seasonal demand pattern.

Stationary demand pattern


Forecast variable of Cadbury dairy milk

Time

Cadbury enjoys a regular demand throughout the year. It had been forecasted that slight increase in price don’t have much effect on the demand while if there is slight reduce in price it’s possible to attract new customers.


Seasonal demand pattern

Festive season Forecast variable of Cadbury celebration

Time Demand of Cadbury celebration is seasonal, during festivals like diwali and rakshabandhan there is a huge demand in the market for the product while in regular days demand is quite low. Cadbury celebration had replaced sweets n mitthai and most of people in cities prefer to gift Cadbury celebration on diwali and holi instead of sweets.

Plant layout Cadbury (India) April 11, 2013

Plant layout refers to arrangement of physical facilities like machines, equipments, tool etc. in such a way that to have quickest flow of raw material at the lowest possible cost and with the least amount in processing of the product. Cadbury follow combination layout, combination of line layout and process layout. Till time the chocolate mass is made company follow line layout. Step 1: First Cocoa beans are transferred to roasting and winnowing machines. Step 2: transferred to grinding machine. Step 3: blending of cocoa liquor takes place. Now the process layout starts where different types of chocolate is made according to their distinct flavor and variation. Different add on materials are mixed with final liquid chocolate to give variation. For example: rice crackles is added to liquid chocolate to manufacture dairy milk crackle.


Source: http://www.visual8.com/portfolio/plant-simulation-cadbury-adams/ (Varsha)

Capacity Planning Capacity planning is the process of determining the production capacity needed by an organization to meet changing demands for its products. The goal of capacity planning is to minimize the discrepancy between the capacity of an organization and demand of its customer.


Strategies of capacity planning 

Lead strategy is adding capacity in anticipation of an increase in demand. Lead strategy is

an aggressive strategy with the goal of luring customers away from the company's competitors by improving the service level and reducing lead time. It is also a strategy aimed at reducing stock out costs. 

Lag strategy refers to adding capacity only after the organization is running at full capacity

or beyond due to increase in demand (North Carolina State University, 2006). This is a more conservative strategy. It decreases the risk of waste, but it may result in the loss of possible customers either by stock out or low service levels. 

Match strategy is adding capacity in small amounts in response to changing demand in the

market. This is a more moderate strategy. 

Adjustment strategy is adding or reducing capacity in small or large amounts due to

consumer's demand, or, due to major changes to product or system architecture.

Why capacity planning is important for a company? Capacity planning is long-term decision that establishes a firms' overall level of resources. Capacity decisions affect the production lead time, customer responsiveness, operating cost and company ability to compete. Inadequate capacity planning can lead to the loss of the customer and business. Excess capacity can drain the company's resources and prevent investments into more lucrative ventures. The question is that when capacity should be increased and by how much are the critical decisions? System Capacity is the maximum amount of work that an organization is capable of completing in a given period. System Efficiency is the maximum amount of work that an organization is capable of completing in a given period due to constraints such as quality problems, delays, material handling, etc. In context with capacity Cadbury Dairy Milk is producing 8,000 tones chocolates in a year. Cadbury (India) April 11, 2013

(About system capacity and system efficiency Cadbury has not disclosed its data for external s.)

Location Facilities Facility location determination is a business critical strategic decision. Facility Location is the right location for the manufacturing facility; it will have sufficient access to the customers, workers, transportation, etc. Overall objective of an organization is to satisfy and delight customers with its product and services.. A manufacturing unit is the place where all inputs such as raw material, equipment, skilled labours, etc. come together and manufacture products for customers. One of the most critical factors determining the success of the manufacturing unit is the location.

Location Strategy

The goal of an organization is customer delight for that it needs access to the customers at minimum possible cost. This is achieved by developing location strategy. Location strategy helps the company in determining product offering, market, demand forecast in different markets, best location to access customers and best manufacturing and service location. Factors Influencing Facility Location



Primary factor- man, money, material, machinery, infrastructure.



Secondary factors- facility, natural factor, political factor, religious factors, initial start, personal factors, miscellaneous factors

Location facility of Cadbury India.



Thane, Pune, Hyderabad, Bangalore, Gwalior and Himachal Pradesh:Cadbury (India) April 11, 2013

As we all know Mumbai is a business hub for each every kind of a business. Mumbai has a port from where any company can easily export or import their goods. When Cadbury came into Indian market they were simply importing their chocolates but after that they require a manufacturing unit for that they need a big piece of land, high skilled labour, a huge market, customers, suppliers for selling their products and other primary factors. thane being the neighbour city of Mumbai it has SEZ for industrial purpose even Thane has a huge market because it has a strong backup of Mumbai’s market and its suppliers even thane has a highly skilled labour, so considering all these primary factors Cadbury India has decided to established their manufacturing plant in Thane so that Cadbury can easily produce its chocolates and even they can import and export their chocolates. It is also near to its headquarter in Mumbai so the top management can have a look upon the operations.

Through having a plant in Thane Cadbury has a much benefits of political governance and they can do their business easily and smoothly other than any state. Through its Thane plant they can fulfil the needs of whole southern religion and to their increase in demand Cadbury has also established another plant in Pune.

They have another four factories to fulfil the needs of shouter, northern and middle religion of India. So they have two factories in south India. Among them one factory is in Hyderabad and another one is in Bangalore. Cadbury has a factory in Gwalior for the middle religion and the last factory is in Himachal Pradesh for the northern religion.


Even Cadbury has four regional sales offices in Mumbai, Delhi, Kolkata and in Chennai. So we can say that company has done a strong research for searching a place for its plant as well as for its regional sales offices. They have look into their primary factors of production as well as secondary factors before choosing the place for its location facilities. (Preet)

Bibliography Cadbury India. (2013, April 11). Retrieved April 11, 2013, from http://www.cadburyindia.com/in/en/About/aboutChocolate/howischocolatemade.aspx Cadbury India Ltd. (n.d.). Retrieved from http://www.indiainfoline.com/Markets/Company/Background/Raw-Materials/Cadbury-IndiaLtd/500793 Chary, S. N. (2009). Production & Operations Management (4th ed.). Tata- Mc Graw Hill. Sethi, M. (2004). Instituional Food Management (1st Edition ed.). New Age International Pvt Ltd. Shah, J. (2009). Supply Chain Management. Dorling Kindersley (India) Pvt Ltd. Sople, V. V. (2004). Logistics Management. Pearson Education. http://www.websukat.com/PAOM-plant-layout.htm (accessed on 31st march 2013) http://www.idoub.com/doc/37549673/Demand-Forecasting-Of-Cadbury-Dairymilk

(accessed

on 31st march 2013) http://ids355.wikispaces.com/Ch.+4+Product+and+Service+Design (accessed on 9th April 2013)


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