DSC 2322 – Operations Management

Project Report

By

R.B.K.K.B.Jamarasinghe (MC/63751),(CPM 8344)

L.E.M.Kaushalya (MC/63814),(CPM 8407)
K.V.C.I.Kumarasinghe (MC/63855),(CPM 8448)
W.K.H.Lakshan (MC/63878),(CPM 8471)
U.A.M.M.Perera (MC/64032),(CPM 8625)
R.M.A.Y.I.Rathnayake (MC/64102),(CPM 8695)
H.R.S.Sandamali (MC/64143),(CPM 8736)
S.G.P.Sandaruwan (MC/64148),(CPM 8741)
R.M.T.D.Senevirathne (MC/64177),(CPM 8770)
D.P.Wickramanayake (MC/64285),(CPM 8878)

An Analysis of Layout Planning of Royal CeramicPLC

A project report submitted in partial fulfillment of requirements of the subject

DSC 2322 – Operations Management conducted by the
Department of Decision Sciences of the
Faculty of Management Studies and Commerce
of the
University of Sri Jayewardenepura
2012

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ABSTRACT
The purpose of this report is to study regarding the Layout Planning of Royal Porcelain
(Private) Ltd which is afully owned subsidiary of Royal ceramics lanka PLC. They
manufacture and distribute porcelain tiles under the well-known brand name “Rocell”. This
factory was started by a foreign investor in early 90’s and abandoned the plant due to some
technical failures almost at the inception. Then Rocell has acquired this plant and started
operations by correcting those technical failures. Rocell has two main tile manufacturing
plants in Horana and Ehaliyagoda. Horana plant is the smallest one with daily production
capacity of 1000 square foot. Rocell is the leading tile maker in Sri Lanka and they stand for
both highest quality and elegant designs.
For our study we focused our attention on Layout Planning. Layout has numerous strategic
implications because it establishes an organization’s competitive priorities with regard to
capacity, processes, flexibility and cost, quality of work life, customer contact and image.
Through our study we identified strengths & weaknesses of the existing layout of the Royal
porcelain (Private) Ltd as follows. Their strengths are having a screen printing machine
which can digitally print designs which helps to produce tiles with different designs, having
adjustable press machines which can press differentsizes of tiles and having adjustable
production lines which can be adjusted according to the tile size.
Weaknesses of the existing layout plan of Royal porcelain (Private) Ltd is not having an
emergency exit in the factory, having a defect rate of vary in between 8%-10% and not
having enough space to add additional production lines.
In order to increase the strengths & eliminate the weaknesses our major recommendations is
to establish a separate primary plant to process raw material in order to reduce current higher
defect rate.

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Table of Contents
01. INTRODUCTION ............................................................................................................... 1

02. SELECTED FUNCTION WITHIN THE ORGANIZATION ............................................ 1

03.LITERATURE ...................................................................................................................... 2

04. DETAILED ANALYSIS OF THE PRODUCTION( see appendix 2) ................................ 3

05. RECOMMENDATION ....................................................................................................... 6

06. CONCLUSION .................................................................................................................... 7

APPENDICES
REFERENCES

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01. INTRODUCTION
As management students, knowledge & application about operations management is
extremely critical in this dynamic business environment to be successful business leaders in
the future. Within the class room, discussing the application part of the theories are much
difficult because different organizations use unique way to apply theories to their own
operations. Therefore as part of our study program we are expected to gain the knowledge
about real world applications of theories.
To study the real world business scenarios we went to a tile manufacturing plant located in
Horana which is owned by Royal Porcelain (Private) Ltd a fully owned subsidiary of Royal
ceramics lanka PLC. They manufacture and distribute porcelain tiles under the well-known
brand name “Rocell”. This factory was started by a local investor in early 90’s and
abandoned the plant due to some technical failures almost at the inception. Then Rocell has
acquired this plant and started operations by correcting those technical failures.
Rocell has two main tile manufacturing plants. And the Horana factory is the smallest one
with daily production capacity of 1000 square foot. Rocell is the leading tile maker in Sri
Lanka and they stand for both highest quality and elegant designs.

02. SELECTED FUNCTION WITHIN THE ORGANIZATION

Our study mainly focuses on Plant layout and the product layout of the factory.
Plant layout consists of two warehouses, one for raw material and for finished goods. Raw
material warehouse has the capability of storing raw materials needed for 2 ½ months
production. And the finished good warehouse has a capacity of keeping one week production.
The manufacturing plant can be divided in two main parts for ease the analysis. The primary
plant prepares the raw material mixture needed to make the tiles and has a daily capacity of
7200kg.
This factory has 3 production belts in secondary plant and capable of manufacturing 3
different variety of tile at once (one belt only one tile at a given time). Each belt has separate
kiln powered by gas. Kiln is the major constraint in this plant and these 3 belts capable of
manufacturing 10000 square foot per day. This factory continuously operates 24 hours in 365
days to avoid huge shutdown and start-up costs (specially kiln). And the monthly energy cost
is approximately 100 million rupees (both electricity & LP gas). The defect rate fluctuates in
between 8%-10%. These 3 production belts are fully automated and human contribution to
the production is very minimum. Plant only has 21 workers.

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03. LITERATURE
Operations management is one of the most critical functions in any organization. Under this
function planning a proper facility layout is very essential for smooth work flow. This is
called as Layout Planning. This involves deciding where to put all the facilities machines,
equipment, departments & staff in order to continue the manufacturing process more
efficient.
Keeping a proper layout within the organization affects the efficiency of the material
utilization, machines utilization, attitudes of the employees and the customers positively. It
reduces the cost of material usage, reduces the movements of the materials and the employees
& improves the flexibility.
A layout planning is an arrangement of everything needed for production of goods or
delivery of services or it can be defined as arrangement of machine tool, a work centre, a
manufacturing cell, a machine shop, a department, a warehouse, etc. In practical world there
are several types of layout formats within an organization. Among those different layout
formats this study is only focused on plant layout and the product layout of the Rocell tile
manufacturing plant situated in Horana.

Plant Layout
Plant layout refers to the arrangement of physical facilities such as machines, equipment,
tools, furniture etc. in such a manner so as to have quickest flow of material at the lowest cost
and with the least amount of material handling in processing the product from the receipt of
raw material to the delivery of the final product. Primary objectives of plant layout should be:
 Minimal material handling costs.
 Minimal investments.
 Minimal throughput time.
 Flexibility.
 Efficient use of space.
 Reduce accidents.
 Reduce hazards to personnel.

Product Layout
Product layout is also called flow-shop or straight line layout. It involves the arrangement of
equipment according to the progressive steps by which a product is made. Raw materials are
fed continuously into the first machine and thereafter it passes through subsequent operations
rapidly while the finished products are coming out from the last one.
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04. DETAILED ANALYSIS OF THE PRODUCTION (see appendix 2)
An analysis of the production with it'ssteps and the strengths & weaknesses of the process are
discussed below.
No 01:Raw material warehouse
Manufacturing process begins in the warehouse where the raw materials are received and
stored.
No 02: Weighting Scale
Using weighting scale, raw materials are measured according to the pre-determined
standards.After that the raw materials are transported to the grinding mill via conveyor belts.
No 03:Mill
The mills grind the raw materials in water to obtain slurry required for pressing. The mills are
large cylindrical containers that work 24 hours per day.
No 04:Under Tank
The slurry is transported to the under tank. Then the litter contaminated to the bottom of the
tank. Then the slurry is passed through magnetic field in order to remove unwanted litter.
Then slurry is passed to spray dryer tanks.
No 05:Tanks
Tanks contain all the liquid which remove any remaining litter. Then it passes to spray dryer.
No 06:Spray Dryer
Spray drying is an extremely important stage in manufacturing process. Spray dryer convert
slurry into an atomized powder ready to be pressed.
No 07:Belt
The powder passes to two tanks which can contain buffer stock. Then powder is pumped to
the pressing machines.
No 08:Pressing
Pressing is the shaping process used for porcelain tile. First air is removed from the powder.
A pressure of more than 7500 PSI is used to definitively compact each round shaped practical
in the body.
No 09:Drying.
The drying operation is important to eliminate the moisture from the suppressed products.
The fast, hot, vertical and horizontal air dryers are located to achieve heating of material.
No 10:Glazing

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Glazing is the production phase where two coats of color are applied on the surface of the
product before it is fired. This phase consists of printing a given design. First paint is applied
on the slab by a water fall system and then design is printed on the surface of the tile using
the cylinders which gives a unique design to each tile.
No 11:Protection Layout
Protection Layoutis poured to the surface of the tile.
No12:Car System
Transport painted tiles to the kiln.
No 13:Firing
Firing is the major stage of the production process. Firing operation is carried out
continuously using three layer kilns.
No 14:Robot Arms
Fired tiles are punched by 3 robot arms at the end of firing process and arrange them on the
floor in order to transport to the inventory handling area.
No 15:Sorting
Next phase of the process is sorting. The main objective of the sorting is elimination of
defective tiles with inferior quality.
No 16: Packaging
Tiles are automatically packed in special cardboard cartoons according to computerized
instructions.
No17:Warehousing
The packed tiles are transported to the warehouse.

Strengths of the product and plant layout

1. One production belt consists ofa screen printing machine which can digitally print designs
on the surface of tiles. It adds further flexibility to the plant.
2. Plant consists of adjustable press machines, which can press different size of
tiles.According to the size of the pressing tile, entire production line can be adjusted.
3.Raw material warehouse is capable of keeping raw materials which can be used for 2 ½
month production.
4. Primary plant has an excess storing capacity and it is enough to operate 9.6 hours if any
breakdown occurs in the primary plant. (See appendix 1)
4. Digital scanners are used to sort tiles which ensure no defect tile goes to the market
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5. Horana plant is located in a strategically valuable point since it is by the Colombo-Gall
highway. Asaresult,there is quick access to Colombo (main market) and both Colombo and
Hambanthota ports.
6. Sunlight is being used for day production through transparent roof sheets; it saves the
electricity power in the day time.
7.All machineriesare made by world renowned Italian and American manufactures for tile
machinery.

Weaknesses of the product and plant layout

1. One entry route is used for both entrances to the plant & exit from the plant.
2. Defect rate of the plant vary in between 8%-10%. As a result, amount of energy wasted
approximately is 7 million rupees per month. (See appendix 2)
3.There is no proper safety in the plant,because jumbled wires are lying everywhere.
4. There is a high possibility of strong sudden fire since plant heavily uses LP gas.
Theexisting firefighting system is not adequate to prevent a strong sudden fire.
5. They are not in a position to expand their production by adding additional product lines to
the layout. So it is difficult to get the maximum advantages from their strategically valuable
location.
6. Weight scale is used to weight the raw material which is essential for preparing the mixture
according to the standard ratio. There is only one weight scale in the plant. Therefore if the
weight scale breaks down whole production process have to be stopped. There is no
alternative for the weight scale.
7. Since plant is arranged according to the product layout, if a breakdown occurs at any given
point whole production line have to be stopped.
8. The factory & the office have been established close to each other. It cannot be seen as a
good thing because in an emergency situation, as an example in a fire, office premise will be
affected by the fire.
9. As there is a distance between the finished goods store & factory it is difficult to move
finished goods from factory to stores in rainy days.
10. They handle a buffer stock of raw materials for two months. Two months buffer stock is
too much when compared with the capacity of the factory.

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05. RECOMMENDATION
Major Recommendation
Major cause behind 10%-8% high defect rate is the unprocessed (not refined materials) raw
material used for production. Therefore major recommendation is targeted towards reducing
such significant defect rate.
Rocell should use processed raw material for the production. But there is no additional space
in the current plant to refine raw material.
The only option is to establish a separate plant for processing raw material. Rocell has
another plant for manufacturing tiles in Ehaliyagoda. Horana plant and Ehaliyagoda plant are
located close to each other. Therefore they should find a land somewhere between
Ehaliyagoda& Horana and build up a separate factory for processing material and preparing
powder needed for production of tiles.
As a result manufacturing plant can focus on production and new plant can focus on quality
of the raw material and powder. This approach is heavily used by Japanese and Italian tile
makers and they have reduced their defect rate to 1%-2%.
If the proposed approach is implemented a prevailing bottleneck will be eliminated which
facilitates to achieve long term flexibility as a group.
Recommendation for the plant layout
1. Production lines should be arranged vertically. That is, kiln and sorting lines should be
established vertical to the earlier parts of the production line. It helps to utilize factory
space more efficiently and achieve long term flexibility. (see appendix 3)
2. Strong fire fighter system should be established to face strong sudden fires.
3. Since plant has high exposure to sudden strong fire emergency doors should be
established. (see appendix 3)
4. Finished goods warehouse should be established closer to the main manufacturing line. It
will reduce unnecessary material handling cost. (see appendix 1)
5. LED lighting system should be placed for night shifts of production. It will help to reduce
the electricity cost of the factory.
6. High pressure water posts should be placed around the plant to fight against strong fires.
7. Separate entry and exit routes should be established to enter the plant and exit from the
plant. It will help to minimize risk and allow smooth flow of material and finished goods
within the factory.

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06. CONCLUSION
Analysis reveals that there are lots of inefficiencies within the plant than strengths. Top
management mainly focuses about product design and marketing activities and they pay little
attention to improve production efficiencies. Currently 10% abnormal loss is charged from
customers. And the main cause behind such significant defect rate is of using unprocessed
raw materials to prepare raw material powder and during the production,defects occur as a
result of that. As shown in appendix 1, within the current plant location, there is no additional
space available to process raw materials. Therefore the only option available to reduce such
significant defect rate is establishing a separate plant for making the raw material powder and
this technique is highly practiced by Japanese firms and they have reduced their defect rate
up to 1% to 2%.
Further, when analyzing the primary plant it can supports onlyone extra belt. But no more
than that. By shifting this primary plant to another location company can eliminate a major
bottle neck within their plant. This is vital to increase the longer term capacity of the plant.

The smooth inflow of high quality processed raw material powder to the plant will help to
reduce their defect rate up to 1% to 2%. And this would be essential to achieve cost
leadership in the market.

The proposed approach will help the existing plant to focuson product design and the quality
of the production. It will reduce the burden on management also. With the low cost and long
term flexibility within the proposed plant "Rocell" can achieve sustainable growth in the
future.
As shown in the appendix 5 plant would be able to reduce their defect rate up to 1%-2%. And
the energy cost saving would be 71.4 million per annum. According to the project appraisal
shown in appendix 6 this project generates a positive NPV of Rs. 99.1 million even we have
used 5 year project duration. (In reality benefits would be perpetual) Therefore the project
should be accepted and implemented.

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Appendix 4
Primary plant capacity analysis
1mn * 5Kg * 60 * 24 =7200Kg/day  Full capacity( 1 minute 5kg output)
7200/ 0.7 = 5040 Kg use( 70% uses for daily production)
7200-5040 =2160Kg extra (Hence buffer stock in kg)
7.2/ hr buffer( buffer stock in hours)

Appendix 5
Financial benefits
Current energy cost – 70 million per month (only for LP gas)
Loss of energy due to defect rate = 70 million * 0.1
= 7 million
Major reason behind effects rate is the unprocessed raw materials. If raw processed materials
are used for production, defect rate would be in between 1%-2%.

Hence maximum energy cost saving = 70 million * 0.09 = 6.3 million

Minimum energy cost saving = 70 million * 0.8 = 5.6 million
On average energy cost saving would be= 5.95 * 12= 71.4 million.

Appendix 6
Initial investment Rs.500 million
Capital allocation for existing plant* Rs.200 million
Benefits: energy cost saving** + electricity saving + raw material Rs.100 million per
saving annum
NPV evaluated at 20% cost of capital in a 5 year duration Rs.99.1 million
=Annual saving * [1-(1+r)-n / r] – Initial investment

* Let’s assume they allocate Rs.200 million capital cost to current plant since it’s smaller
than Ehaliyagoda plant
** Rs. 71.4 million directly from gas saving

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References

Books
 Operation Management for Competitive Advantage, Richard B. Chase. Nichols J. Aquilano,
F. Robbert Jacobs, 10thed., Mcgraw-Hill, 2003.

Web sites
 Rocell Annual Report 2011
 Rocell.com
 You Tube.com

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