Question from a Tech. Fest on Industrial Production Management, Supply Chain, Costing and Pricing, Inventory, Production Schedule etc.

Introduction:
All major industries create wealth but if there is one industry that plays a unique role by way of both creation of wealth through a wide range of manufacturing activities and also by way of preserving the wealth or value created by many, many other industries, it is packaging. Apart from the huge value addition and employment involved in these activities, packaging has served the Indian economy by helping preservation of the quality and lengthening the shelf life of innumerable products - ranging from milk and biscuits, to drugs and medicines, processed and semi-processed foods, fruits and vegetables, edible oils, electronic goods etc., besides domestic appliances and industrial machinery and other hardware needing transportation. With water becoming a consumer product, polymer material-based bottles are becoming an universal presence.

Packaging, as distinct from mere “packing”, plays it’s most visible and catalytic role in a
modern economy with the widespread adoption of branding of products and development of consumer preferences. To the extent that any consumer product is packaged in a manner that meets the criteria of safety, convenience and attractiveness, it gains market share. In the
aggregate, packaging as a sectoral activity boosts consumption and economic growth.
Heightened competition in all product sectors within the country as also the increasing need to look for export markets have contributed to the rising demand for appropriate, and at the same time cost-effective, packaging material and technologies.

The packaging industry’s growth has led to greater specialization and sophistication from the point of view of health (in the case of packaged foods and medicines) and environment
friendliness of packing material. The demands on the packaging industry are challenging, given the increasing environmental awareness among communities.
The World Packaging Organisation’ s (WPO) slogan, “Better Quality of Life Through Better
Packaging”, sumps up the important place that packaging occupies in a modern economy. To ensure that public appreciation of this role and the policy-makers’ support to the industry are not diluted, attention should be paid to basic issues like collection, segregation and reuse of synthetic packaging material and observation of regulatory requirements.

Indian Packaging Industry Market:

·         The Indian packaging industry itself is growing at 20-25% annually. This growth rate is expected to double in the next two years.

·         Indian Packaging industry is `20000 crores and growing at more than 20% p.a. These figures indicate towards a change in the industrial and consumer set up.

·         However, the Indian fascination for rigid packaging remains intact. It is estimated that more than 80% of the total packaging in India constitutes rigid packaging, which is the oldest and the most conventional form of packaging. The remaining 20% comprises flexible packaging.

Flexible Packaging:
It contains multi-layered laminated sheets of single or a combination of substrates such as
plastic, paper or aluminium. In flexible packaging, Aluminium Foil is extensively used for a wide range of applications especially in pharmaceutical packaging industry for packing of medicines and as Kitchen Foil.

Keeping pace with the global trends, Packaging industry for the pharmaceutical products has also undergone a sea change in the past decade. The packaging for the pharmaceutical industry in India is considered a sunrise industry, and is growing at a rate of around 20% annually. The Indian packaging industry for the pharmaceutical products is extremely competitive and is now bringing this competitiveness to the world market in many forms. The domestic packaging industry for the pharmaceutical use is offering the products in a cost effective manner by meeting the international standards with substantial export to other countries.

As stated earlier, Aluminium Foil constitutes the most important material for pharmaceutical packaging industry. Approximately 75% of Aluminium Foil is used for packaging and household foil and 25% is used in other industries. Its unique combination of properties – impermeability, flexibility, strength, ductility, corrosion resistance, conductivity and compatibility with other materials qualify aluminium foil for an infinite variety of uses.

It prevents the loss of valuable aromas and protects contents against light, oxygen, moisture
and contamination, which is very essential especially for pharmaceutical packaging. It
guarantees quality and the best protection against deterioration for sensitive and valuable
products.

TRH Resources Ltd. is a diversified and integrated metals and mining group with annual
turnover of `10,000 crores. The principal operations of the company are located in India,
where it has a major market share in each of the following metals: aluminium, copper. The
company has substantial overseas operations. TRH Resources has a strong track record in
managing operations and improving costs and output.

The Company has extensive expansion projects plan for diversification of its business. Identifying the market potential of Packaging industry TRH Resources Ltd. is planning to capture a market share in Pharmaceutical Packaging Segment. For this the company wants to establish a plant for the production of converted foils that are used in packaging of medicines.

The Market Research and Analysis Department of the company carried out a detailed study
about the converted foils.

The analysis shows that there is a fluctuating demand from pharmaceutical industry throughout the year. The demand in early quarters are more compared to third or fourth quarter. Further there is substantial demand in neighbouring countries. Keeping all the factors in mind the demand forecast for Company’s Converted Foil in the 1st year is approximately 15,000 tons and as per market trends the demand for company’s product would increase in subsequent years.

The average market cost of bare aluminium coil rolls used as raw material for foil production is approximately `135 per kg. The selling price of bare aluminium foil depending upon gauge in market varies between `180-220 per kg. The selling price of various converted foil varies between `260- 360 per kg depending upon the end product and the cost of aluminium scrap is about `50 per kg.

Further studies show that India makes most of the equipment needed by the industry, including rotogravure printing presses, laminators, slitters, and pouching machines. A full range of semiautomatic to fully automated filling, sealing and wrapping machines are manufactured in India.

These machines are of high quality and are very competitive in price. There are some 600 to
700 packaging machine manufacturers, 95% of which are in small and medium sector and
located all over the country.

A brief outline of manufacturing process is given below:

The various coating processes carried out on foil surfaces are :-

Ø Shellac Coating - Shellac coating is required to make the aluminium foil suitable for
effective printing. For this purpose, shellac solution is used which consists of 3% shellac
dust and 97% spirit. The average coating weight is .05 gm per metre. 

Ø Printing – Rotogravure technology is used for printing.

Ø Heat Seal Coating – Heat Seal coating is done on opposite side of the printed or shellac
washed surface. Heat-Seal Solution consists of 16 % Vinnol 14/45, 12 % Chemplast, 31 %
Ethyl Acetate, 32% Acetone, and 9 % MEK. The average coating weight is 4.5 gm per metre.

Ø NC Coating – Nitro-cellulose or NC coating is done to prevent corrosion on the foil
surface. NC Solution consists of 30 % Solid NC, 35 % Ethyl Acetate and 35 % Spirit. The
average coating weight given is 0.8 gm per metre.

Ø Poly Coating – Poly Coating or Lamination is done to make foil tear resistant. For this
purpose, poly of different gauge and width are used.

Some of the end products that are required by pharmaceutical industries for packaging are:-
Ø Plain Strip Foil – They are poly coated plain aluminium foils. These type of foil requires
shellac and poly coating. These are used for pharmaceutical packages after printing on
them by buyers.

Ø Printed Strip Foil – These are poly coated printed foil.

Ø Plain Blister Foil – It requires shellac and heat seal coating. Printing is done by proposed
buyers.

Ø Printed Blister Foil – These are printed on one side and heat seal coated on the other
side.

As one of the Industrial Engineer of the company you have to develop a plan for the manufacturing setup and production planning for the proposed new plant.

Hints for Submission:
Your Solution must include:

·        Suggestion of a suitable plant location with possible range of end products.
·        A proper plant layout keeping in mind all the auxiliary functions, machinery and material handling equipments. Give the plan view of the layout. (Layout should be drafted in AutoCAD/PROE with exact dimensions.)
·        Cost Estimation, Costing and Pricing of the product with break-even analysis.
·        The inventory structure and norms to be followed for smooth production.
·        Master Production Schedule (MPS) with current resources and projected demand.
·        Extra marks will be given for stating some measures for increasing the plant productivity.

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