BS BUSINESS ADMINISTRATION

Major in Management
School of Management
The University of Asia and the Pacific

Operations Management Plan for Umbrelight

Submitted in Partial Fulfillment of the Requirements for

MGT 251: Operations Management with TQM

Submitted By:
Agapito, Angela Kim
Aparis, Jarod David
Cruz, Ma. Angelica
Enverga, Wilfrido Matthew
Salazar, Maria Salve
Santos, Mark Gabriel

Submitted to:
Nogin Bunda
Faculty-in-Charge

December 2019

Table of Contents
I. Executive Summary…………………………………………………….…………... 1
II. Chapter 1: Introduction …………………………………………………………… 2

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 a. Background of the Company
b. Industry Analysis Background
c. Trends Affecting the Industry
III. Chapter 2: Market Information ……………………………………………………
6
a. Usage, Attitude, Image Report
i. Classification Data
ii. Brand Awareness Data
iii. Purchase Data
iv. Attitude Data
v. Product and Brand Image Data
b. Competitor Analysis
c. Segmentation, Targeting, Positioning
d. Price Information
e. Place Information
f. Promotions
IV. Chapter 3: Product Design …………………………………………………..…… 26
a. Benefits and Uses of the Product
b. Product Documentation
i. Assembly Drawing
ii. Bill of Materials
iii. Assembly Chart
c. House of Quality
V. Chapter 4: Total Quality Management …………...………………………………
37
a. Tools for Generating Ideas
i. Check Sheets
ii. Scatter Diagrams
iii. Cause and Effect Diagrams
b. Tools for Organizing Data
i. Pareto Chart
ii. Process Flowchart
VI. Chapter 5: Location and Layout Strategy …………………………..……………
52
a. Equipment, Machinery, and Facilities
b. Location Considerations
i. Center of Gravity and Factor Rating Analysis
c. Layout of the Factory and Warehouse
VII. Chapter 6: Human Resource Management ………………………………………
62
a. Organizational Chart
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VIII. Chapter 7: Supply Chain Management ………..…………………………………
72
a. Upstream
b. Midstream
c. Downstream
IX. Chapter 8: Inventory Management ……………………………………………… 74
a. ABC Analysis
b. Annual Costs
c. Cycle Counting
d. Holding Costs
e. Setup Cost
f. Product Cost
g. Economic Order Quantity
X. Chapter 9: Financial Management ……………………………………………… 84
a. Assumptions
b. Financial Statements
i. Income Statement
ii. Financial Projections
c. Investment Decision Criteria
i. Payback Period
ii. Net Present Value
iii. Profitability Index
iv. Internal Rate of Return
XI. Conclusion ……………………………………………………………………….…
90
XII. References ……………………………………………………………………….… 91

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4
 I. Executive Summary

Umbrelight, Inc. was established in 2019 by Mark Santos, together with his colleagues
Wilfrido Enverga, Jarod Aparis, Angela Agapito, Angel Cruz, and Maia Salazar. The company
wants to introduce to customers a new change of pace and a new outlook on the normal
umbrella. With this purpose in mind, the company created the Umbrelight, an umbrella product
that aims to integrate aspects of multi functionalism, style and durability. Umbrelight, Inc.
believes that the umbrella can become more than your average rainy-season or hot-summer
necessity. With the Umbrelight, customers will feel safer when walking at night.

The company’s target market consists of a mix of Class A and B income earners and the
upper portion of Class C income earners. The company will distribute its products through online
platforms such as Lazada, Shopee and retail stores that sell specific, quality umbrella brands.
After conducting the factor rating analysis, the company’s factory and warehouse will be situated
in Santa Rosa, Laguna. The company has consolidated their expenses for 2020 and have noticed
their company is profiting from the business (earned a net income of P1,047,048.93. However, it
is common for businesses to experience misfortunes in their first years. True enough, the
company has projected net income downfalls in 2021 and 2022. After adjusting themselves in
the industry, profit started slowly increase in 2023 and 2024.

Umbrelight, a one of a kind product, is set to break and surpass the substandard quality a
number of umbrellas possess. After some years of settling in the industry, it is certain for the
company to do well in the future.

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 II. Chapter 1: Introduction
a. Background of the Company

Introduction to the company

Umbrelight, a for-profit organization, formed by 6 enthusiastic 4th-year students from the

BSBA program of the University of Asia and the Pacific, was founded because it wants to
change the average person's perspective when it comes to the use of the umbrella. Aside from its
function of keeping you dry when it rains, or keeping you from sweating on a warm sunny day,
an umbrella could be so much more than that. Currently, a corporation, the company looks to
provide its customers a guarantee of safety as well as convenience when using an umbrella with
more functionality, style and durability than most other umbrellas, the Umbrelight.

Vision

Umbrellight, Inc.’s vision is to become a leading distributor in umbrellas in Metro

Manila, eventually the whole Philippines and in the later future, a competitive distributor in other
countries in Asia. We want to provide a product, the umbrelight, that will be able to assist people
in their daily commutes and long walks to their destination without fear of the weather. Ensuring
that our consumers will feel safe while using our product is our number one priority.

Mission

Our mission is to provide our customers with a high-quality umbrella that can protect
them from harsh rains, strong winds, and dark alleys.

Core Values

Umbrelight, Inc. is committed to creating umbrellas with the best materials and provide
functions that will make it convenient to use. We keep the customer at the height of our interests
and we value integrity, reliability, dependability, and compliance with rules under law with every
umbrella that is produced at Umbrelight, Inc..

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 b. Industry Analysis Background

PSIC Industry Classification

Section Section C (Manufacturing)

Division Division 32 (Other Manufacturing)

Group Group 329 (Other Manufacturing, n.e.c)

Class Class 3292 (Manufacture of Umbrellas, Walking Sticks, Canes, Whips,

and Riding Crops)

Subclass Subclass 32920 (Manufacture of Umbrellas, Walking Sticks, Canes,

Whips and Riding Crops)

Figure 1.1. PSIC Industry Classification of Umbrelight

The Umbrella industry falls under Section C, Manufacturing. This section deals with the
process of converting raw materials into finished goods. Section C presents different divisions
and one of which is Division 32, Other Manufacturing, which the Umbrella Industry specifically
falls under. This division involves manufacturing activities. Furthermore, the industry is under
Group 3292, Manufacture of Umbrellas, Walking Sticks, Canes, Whips, and Riding Crops. In
addition to that, it is under Class 3292 and subclass 32920. The data garnered for Umbrella was
defined by the Philippine Standard Classification 2009.

Size in terms of Peso Value

This product is under the manufacturing industry of the Philippines. The manufacturing
industry makes up more than half of the industrial sector of the economy in the Philippines. The
industrial sector makes up almost a quarter of the GDP (Gross Domestic Product) of the
Philippines.

For this chapter, the researchers have decided to benchmark the growth rate of the
umbrella industry with the global market. The global market is forecasted to expand at a
compound annual growth rate (CAGR) of 1.72% by the year 2023. By that forecasted year, the

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Umbrella industry is predicted to be worth ₱368,574,977,950. This could be attributed to the
unpredictable weather conditions, higher consciousness for skin cancer, and other key factors
that can be attributed to its continuous growth (Marketwatch, 2019).

Stage in the Industry Life Cycle

The umbrella industry falls under the maturity phase of the product life cycle. Umbrellas
have been manufactured for centuries, dating as far back as 4,000 years ago (Bellis, 2019). There
are hundreds of established manufacturers of umbrella globally. With the high volume of
establishments in the industry, innovation may be needed for there to be differentiation
occurring. True enough, many companies have started adding new features to their umbrella.
Among them are wind-proof structures, transparent designs, water-repellent coatings, and
foldable structures. With maturity, there is an improvement in cost controls. Given that the
industry has been present for a long period of time, it is highly likely that industry growth is to be
very small.

c. Trends Affecting the Industry

Seasonal trends may affect the industry. It is common to use umbrellas only during the
rainy season. Others may neglect the use of umbrellas in other seasons of the year. This may
affect the sales of our product as there may be high gross sales in the rainy seasons and low sales
during the dry season.

Another trend that can affect the industry would be the changing of customer preferences.
Moreover, the age gap would also become a factor. Younger age groups may prefer aesthetically
pleasing designs while the older age groups may prefer a more convenient and practical design.
This would affect our product by the company needing to compromise some aspects of the
design in order to satisfy a wider target market.

Umbrellas represent a general utility that is, more often than not, used every day.
However, many people do not see any greater function to the normal use of the umbrella, which
is to shield the user from warm sunny days and rainfall. It is for this purpose that international
umbrella manufacturers look to produce a product (umbrella), one that is equipped with unique
features. Advancements in technology will assist in the innovation of new concepts for the

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umbrella design, durability, and functionality but it would also require companies to thoroughly
research the implications of utilizing new technologies and to purchase these new technologies
which could either save or induce more cost. In short, utilizing these advancements in technology
would incur more time and more cost to a company’s Research and Development

Seeing an increased demand for personal umbrellas, more customers are seeking these
products out through e-Commerce platforms. The fast-paced carrier of information (internet) is
influencing the customer’s purchasing decisions. Fashion trends that come and go, tend to
persuade the customers to pursue a temporarily popular design. Umbrelight focuses more on an
innovative and multi-functional umbrella that can convince consumers to buy the product instead
of the umbrellas that can be seen in e-Commerce platforms (Shopee, Lazada, Carousell,
Watsons).

III. Chapter 2: Market Information

a. Usage, Attitude, Image Report

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Classification Data

The group conducted a Usage, Attitude, and Image (UAI) survey on 104 respondents
from different cities in Metro Manila. The group used random sampling and convenience
sampling in order to reach 100 respondents. The purpose of the UAI survey is to help the group
analyze and further understand the umbrella industry. Based on the UAI study, the group has
gathered general information about their consumers.

The respondents are divided into classifications such as:

Table 2.01. Socio-Economic Class

Based on the UAI study, most of the respondents come from Class B, with an average
monthly household income of Php 100,000-249,000. This is followed by Class A with 24
respondents, having a monthly household income of more than Php 250,000 and then Class C

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with 20 respondents. There are certain outliers such as Class D and E, accumulating less than 5
respondents per class. People tend to buy umbrellas for its essential function: to protect the user
from rain or from the sun. With this, the group will only focus on Class A, B, and C because
these are the target market of the company. Given that the product is considered a “want” more
than a “need”, the target market of the company should be people with a higher purchasing
power.

Table 2.2. Educational Attainment According to Socio-Economic Class

Since Umbrelight’s main target market is young professionals under the socio-economic
Classes A, B, and C; it is worth noting the respondents who have finished college or graduate

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school. Considering that young professionals either walk or commute to their designated
workplaces, they are more likely to use umbrellas to protect them from harsh environments.

Brand Awareness Data

Brands First Other Unaided Aided Total

Mention Mention Awareness

Fibrella 47 2 49 13 62

Fulton 3 8 11 13 24

Hydro 10 13 23 5 28
Techno

Senz 2 7 9 4 13

Totes 5 9 14 9 23

Other 21 5 26 3 29
Assorted
Brands

Table 2.3. Table of Total Awareness

The table above shows that the brand with the highest first mentioned by the respondents
who answered the survey is Fibrella. This is followed by other various brands not stated in this
study. Coming in third is Hydro Techno. A very few number of respondents have also stated
Fulton, Senz and Totes as a First Mention. As regards to total awareness, Fibrella takes the top
spot with its total awareness accounting for 62% awareness. The is followed by other assorted
brands mentioned by the respondents having 29% awareness. Lastly, Hydro Techno has
approximately 28% awareness. Taking into consideration the data above, we can say that
Fibrella is the more popular choice when people select an umbrella.

Brand Share of Mind Market Rank Share of Market Rank

Market

Fibrella 53% 1 20% 2

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 Hydro Techno 11% 3 7% 3

Fulton 3% 5 3% 5

Senz 2% 6 4% 4

Totes 6% 4 1% 6

Other Assorted 25% 2 69% 1

Brands

Table 2.4. Market Share

The UAI results show that Fibrella possesses the largest share of mind in the market
while other assorted umbrella brands possess the largest share of the market. In terms of Share of
Mind market, we can see from the data that Fibrella takes the top spot with a 53% awareness
followed by the challenger which are numerous assorted brands in the market with a 25%
awareness. Hydro Techno is then placed at 3rd in share of mind awareness with 11%. Totes,
Fulton and Senz are placed in latter positions respectively with awareness lower than 10%. As
for market share awareness, other assorted umbrella brands still dominate with a market share
percentage of 69%. In the 2nd spot for market share awareness is Fibrella having a market share
less than half of the market leaders. It is to be followed by Hydro Techno, Senz, Fulton and
Totes in 3rd, 4th, 5th and 6th place who have market shares of less than 10%

Contact Point Count Percentage

Television 2 1%

Radio 2 1%

Newspaper 2 1%

Magazine 6 4%

Stores 52 33%

Online 30 20%

Word of Mouth 62 40%

Table 2.5. Contact Points

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 According to the UAI, the top contact point that contributes to the awareness of the brand
is through word of mouth with 39%. Stores placed second with 33%, followed by online with
20%. Other contact points that are helpful but certainly not recommended are Magazine,
Newspaper, Radio, and Television. We can see that the rise of e-commerce, more companies
look to distribute its products online due to better reach to customers and sharing information;
however, with Umbrella brands, people look to buy more from retail stores, department stores,
groceries and many more because it is more convenient and accessible to customers.

Advertising First Other Unaided Aided Total

Awareness Mention Mention Advertising
Awareness

Fibrella 29 2 31 2 33

Fulton 3 7 10 2 12

Hydro Techno 11 9 20 0 20

Senz 3 2 5 4 9

Totes 3 5 8 1 9

Other Assorted - - - - -
Brand

Table 2.6. Advertising Awareness

The UAI data showed that Fibrella has the highest advertisement awareness which could
imply that it is the most common advertised brand in the market. The advertising awareness
could directly correlate to the success of Fibrella in both top of mind reach and market share
which could mean that Fibrella’s advertisements are making an impact on their brand awareness
in the market. The brands that follow by total advertising awareness results are Hydro Techno,
Fulton, Senz and Totes tied for the last spot from highest to lowest respectively.

Purchase Data

Occasions

When it’s raining 83

When it’s hot outside 31

While Commuting 6

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 In case of emergencies 1

Table 2.7. Occasions When Using Umbrellas

As seen in Table 2.7, umbrellas are mostly used when it rains. Another reason is when it
is sunny and humid outside. Other respondents answered that umbrellas are used when they are
commuting or when faced with emergencies. This shows that majority of umbrella users use an
umbrella to protect them from unfavorable weather.

Brands Total Reach Total Ever Conversion Total Used Retention

Awareness Tried Rate in the Past Rate
6 mos.

Fibrella 62 62% 35 56% 20 57%

Fulton 24 24% 3 13% 3 100%
Hydro 28 28% 8 29% 7 88%
Techno
Senz 13 13% 1 8% 1 100%

Totes 23 23% 4 17% 1 25%

Other
Assorted 29 29% - - - -
Brands
Table 2.8. Retention Table

According to the UAI results, Fibrella holds the biggest conversion rate and reach
compared to the rest of the major players in the umbrella industry. This means that umbrella
users are more likely to change their umbrella brand to Fibrella. Hydro Techno follows Fibrella
with a reach of 28% and conversion rate of 29% This is followed by Fulton, Totes, and Senz
respectively. As for the retention rates of the major players, Fulton and Senz have accumulated
100% retention rate which means that people who used Fulton and Senz are still currently using
the same brands. Comparing the retention rates of Fibrella and Hydro Techno, Hydro Techno is
more capable of retaining their customers' brand loyalty throughout time with an 88% retention
compared to Fibrella’s 57% retention rate.

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 Brands % Aware % Tried % Stayed % Found % Most
Used

Fibrella 62% 56% 45% 100% 33%

Fulton 24% 13% 9% 100% 3%

Hydro 28% 29% 18% 100% 8%

Techno

Senz 13% 8% 0% 1%

Totes 23% 17% 13% 100% 4%

Other 29% 29% 15% 100%

Assorted
Brands
Table 2.9. Percentage of Usage
Table 2.9 shows the competitor brands detailed percentage of their established awareness,
loyalty, convenience and usage of umbrellas in Metro Manila. The already established brands in
regard to awareness are Fibrella (62%), Other Assorted Brands (29%), and Hydro Techno (28%).
Fulton (24%), Totes (23%) and Senz (13%) fall on the bottom of the list. According to the data,
it is evident that most users of these specific brands do not stay with the same brand.

Users

Siblings 87

Parents 78
Maids 57
Their Children 4
Table 2.10 Household Members Who Use Umbrellas
The UAI study revealed that majority of the respondent’s household members who use
umbrellas are their siblings with a frequency count of 87 followed by their parents with a value
of 78. Fifty-seven respondents also answered that their household help also use umbrellas and
only 4 respondents indicated that their children use umbrellas as well. The data presented above
implies that umbrellas are household necessities that are used by almost all members of the

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family. With this, umbrellas are perceived as an everyday product to be used by anyone in the
household.

Product Count

Clothing Apparel 5
Raincoat 4
Boots 1
Umbrella Accessories 1
Jacket 1
Towel 1
Slippers 1
Others 13
Nothing 77
Table 2.11. Products Purchased Along with the Umbrellas

Table 2.5. shows the products that the respondents have purchased along with the
umbrella. With this data, the group will be able to know more about the possible market basket
of umbrellas. Based on the table, consumers buy clothing apparel with their umbrellas as well as
raincoats, boots, and slippers. However, the majority of the sample (77 respondents) did not buy
anything along with their umbrellas. This may imply that umbrellas are usually bought
individually without any other products to go along with it.

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 Table 2.12. Commonly Used Types of Umbrella and Size of Umbrella
Table 2.12 indicates what type of umbrellas consumers use as well as the size of
umbrellas. As seen in the graphs, the most commonly used type of umbrella is the automatic type
and the most commonly used size of umbrella is the foldable size. This information from the
UAI study will help the company further analyze and distinguish which type and size of
umbrella should Umbrelight be according to the demand and usage attitude of the consumers.

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 Graph 2.13 Location of Purchase

Graph 2.13. indicates that the Department Store is the location where most customers
purchase their umbrella followed by other retailers. This may be because the majority of the
umbrella brands are available in the department store.

Category Average Unit of Measure

Frequency of Purchase 0.61 Times in 365 days

Quantity of Purchase 1.29 or 1 Umbrella per purchase
Price Paid 475.98 Pesos
Table 2.14. Purchase Attitude of Consumers

Based on the UAI study, customers buy umbrellas 0.61 times in a year or at least once
every 222 days. Moreover, they only purchase one umbrella per transaction, costing them an
average of Php 475.98.

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Attitude Data

Satisfaction criteria Looked For Satisfied Dissatisfied

Dries fast 97 78 5

Easily foldable 103 92 2

Durable 103 92 2

Easily transportable 103 86 1

Can last up to a year 103 90 12

Eco-friendly 89 72 10

Lightweight 104 95 2

No smell after drying 100 83 12

Reasonably priced for its value 102 91 2

Accessible to buyers 100 90 8

Table 2.16. Purchase Attitude of Consumers

When the respondents were asked about what criteria they consider when selecting an
umbrella, 100% of the respondents greatly consider how lightweight an umbrella is before
buying it. In relation to buying a specific brand, about 91% of the respondents have said that
they were satisfied and only about 2% were dissatisfied. The next criteria they considered was
the umbrella should be easily foldable, easily transportable, durability and longevity of the
umbrellas life up to a year. Similarly, these criteria account for around 99% of the respondents
where their satisfaction of specific brands range from a little over 82% to about 88% and
dissatisfaction of specific brands range from 2% to 12%. The other important criteria the
respondents considered were the access of umbrellas to buyers, reasonability of price, no stench
after drying, and a fast drying function. Regardless of what criteria, the number of satisfied
customers with specific umbrella brands are more than that of those dissatisfied with specific
umbrella brands.

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Product and Brand Image Data

Attributes EI QI LI NI Weight Rank

(4) (3) (2) (1)

Durable 96 7 0 0 4.05 1

Easily transportable 83 17 3 0 3.89 2

Easily foldable 85 13 4 1 3.88 3

Lightweight 77 21 5 0 3.81 4

Can last up to a year 74 21 7 1 3.74 5

Reasonably priced for its value 66 26 9 2 3.62 6

Does not smell after drying 67 21 12 3 3.58 7

Accessible to buyers 64 26 9 4 3.56 8

Dries fast 59 25 13 6 3.43 9

Eco-friendly 46 28 14 15 3.11 10

Table 2.17. Purchase Attitude of Consumers

According to the UAI data, the primary attribute for an umbrella is that it should be
durable. This is the most crucial factor of an umbrella because it measures the sturdiness of the
materials, especially its effectiveness during harsh weather conditions and the like. The next
important attribute of an umbrella is that it should be easily transportable, meaning it should be
taken on-the-go with ease, especially when it comes to commuting. To add to the previous
attribute of transportability, the umbrella should also be foldable. This will allow umbrella users
to store their umbrella in small compartments and spaces both on-the-go and when stationary.
The 4th most important attribute of an umbrella is its weight. See as an umbrella is lighter, it is
much more convenient to carry and move around. It is also evident in the data that the umbrella
should be able to last for a year, meaning that it should be effectively usable for a long period of
time before replacing it. The 6th most important attribute is that the umbrella is reasonably
priced in regard to its value. A person would want to pay a fair amount of money in exchange for
an umbrella with good functionality and other handy features. Giving customers the utmost
satisfaction is key. Equal importance is given to the next 2 important attributes of an umbrella
which are the no smell after drying function of an umbrella and the accessibility to buyers.
Lastly, there is little importance to the ability of an umbrella to dry fast as well as the umbrella
being eco-friendly according to the customer responses.

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b. COMPETITOR ANALYSIS

1. Fibrella

Description

Fibrella has made its mark in the umbrella industry with their automatic and manual
umbrellas in different sizes. The brand also offers several designs to cater to different target
customers. Their product promises to be as durable as possible and at the same time satisfying
their customers’ wants in terms of design.

Overall Strategy

Fibrella’s overall strategy focuses on the quality of their umbrella fabric. They use
Formosa Taffeta fabric, a leading brand for umbrella fabrics as it provides fashionable and
healthy materials.

Products

Automatic and manual umbrellas

Price

₱500-1500 pesos

Place

SM Department stores, Landmark stores, and Lazada

Promotions

Word of mouth and online advertisements

Strengths and Weaknesses

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 The main strengths of Fibrella are their distribution channels such as SM Department
stores and Landmark stores nationwide, as well as online stores such as Lazada. These
distribution channels and retailers allow Fibrella to reach as many customers as possible. On the
other hand, Fibrella’s weakness is in the types of umbrellas that they offer. Their major
competitors offer golf umbrellas as well as storm umbrellas.

2. Hydro Techno

Description

Hydro Techno is a local umbrella brand established in 1950. The company focuses on fun
designs to attract a younger market. They offer the class type of umbrella with automatic and
manual options as well.

Overall Strategy

Hydro Techno prices their umbrellas significantly lower than Fibrella and other brands.
This may be their biggest advantage as well as their overall strategy in order to increase their
market reach, catering to more socio-economic classes.

Products

Automatic and manual umbrellas

Price

₱420-500

Place

SM Department stores and online

Promotions

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 Online platforms

Strengths and Weaknesses

The price of Hydro Techno’s umbrellas are significantly lower compared to other
competitors. The company has also made their products available in SM Department stores as
well as SM Hypermarket malls. Despite being accessible to customers, Hydro Techno lacks
marketing presence online and other modes of advertisements. This is one of their weaknesses
considering that their other competitors have been promoting their products aggressively.

3. Fulton

Description

Fulton Umbrellas is a company based in the United Kingdom established in 1956. They
aim to “brighten up” their customer’s day through innovative designs and a wide range of
umbrellas to choose from.

Overall Strategy

Fulton Umbrellas focuses on the quality and the durability of their umbrellas. Fulton is
constantly pushing the boundaries of development and creativity. With this, Fulton has been
constantly trying to innovate and develop their products to its maximum quality. Their umbrellas
go through rigorous testing for strength, safety, and durability.

Products

Foldable umbrellas, non-foldable umbrellas, automatic and manual umbrellas

Price

₱1,000- 2,500

Place

Online stores

Promotions

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 Online platforms

Strengths and Weaknesses

The main strength of Fulton is that the company is recognized globally and is the leading
brand of the umbrella industry in the UK. However, given that their only way of reaching
international customers is through means of delivery. This may discourage potential buyers
because they need to pay additional fees for shipping and wait for their deliveries to arrive
instead of purchasing umbrellas directly to retailers. In addition, the price of their umbrellas are
quite expensive compared to other competitors.

4. Senz

Description

Senz is an umbrella company that specializes in producing wind-proof storm umbrellas,

established in 2006. Senz umbrellas are lightweight and easy to hold with one hand. The
company prides itself with their creation of an umbrella that can withstand any weather, even
harsh environments with winds up to 100km/h.

Overall Strategy

Senz’s overall strategy is to focus on one type of umbrella only in order to innovate and
continuously improve their storm umbrella. This strategy helps the company ensure their product
quality is at its best.

Products

Foldable and stick storm umbrellas

Price

₱500- 10,000

Place

Online stores

Promotions

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 Word of mouth and online platforms

Strengths and Weaknesses

The main strength of Senz as an umbrella brand is that they specialize in wind resistant
storm umbrellas which most companies don’t offer. However, with only specializing in one type
of umbrella, Senz does not offer many varieties of umbrellas compared to other brands.
Moreover, their product pricing may be too expensive for people lower classes.

5. Totes

Description

Totes is an American umbrella company established in 1924. They first manufactured

rubber rain boots then started manufacturing umbrellas and other products such as scarves,
rainwear, hats, expanding bags, and slipper socks in the 1970s.

Overall Strategy

Totes is the only umbrella brand that offers different products among the major players of
the umbrella industry. Their product variation is a strategy as they are able to satisfy many needs
from consumers.

Products

Umbrellas, scarves, rainwear, rain boots, hats, bags, and slipper socks

Price

₱ 399 - 3,700

Place

Online stores

Promotions

Online platforms, commercials

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 Strengths and Weaknesses

The main strength of Totes is that the company offers several products other than
umbrellas. Their umbrellas have different types and sizes that cater to adults and kids. The
weakness of company may be its pricing and their availability to all customers. Their umbrella
prices range from ₱ 399 to ₱ 3,700 which is more than an average Filipino commuter can afford.
They also only accept purchases online for Filipino customers which may be more costly since
they involve shipping fees.

Product Place Price Promotion Strengths Weaknesses Market

Share

₱500- Caters to Known for their Less variety in 20%

SM 1500 Classes A, B, umbrella’s terms of types of
Department and C durability umbrellas
stores and
Lazada Online Product is
platforms accessible to
more socio-
Word of economic classes
mouth

₱420- Online Price is They only offer 3%

SM 500 platforms significantly foldable
Department cheaper umbrellas
stores and compared to other
online brands Their website is
currently not
Targets lower available
classes
Their Facebook
account is not
active

Brand ₱1000- Generally only Worldwide Mostly exclusive 7%

website ₱2500 caters to recognition to European
European countries
countries The company
however their constantly Expensive
umbrellas can innovates their
be shipped product and
worldwide strives for the
highest quality

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 Online ₱500- Online Specializes in one Senz only offers 4%
stores 10,000 platforms type of umbrella one type of
umbrella
Known for their
umbrella’s
durability

Grocery Television Product Expensive 1%

stores in ₱ 399 - commercials. differentiation
United 3,700 Only available in
States Online They offer the United States
advertisements several product
Online store designs

Table 2.18. Profile of Competitors

c. Segmentation, Targeting, Positioning

Segmentation and Targeting

Umbrelight’s main target market are socio-economic classes A, B, and C1 in National

Capital Region (NCR). Catering to these classes will be a marketing strategy since Umbrelight is
more of a “want” rather than a “need” and these classes are more likely to be able to afford the
product as their annual income range from Php 60,000 to more than Php 250,000. Moreover,
upper C consists of people who are constantly on the move and they are more likely to be
exposed to harsh environment. Umbrelight also targets young professionals because they have
higher purchasing power compared to teenagers and they are the ones who are active. Based on
the Philippine Statistics Authority (PSA), Umbrelight’s estimated target population is 553,207.
According to PSA, the overall population of NCR is 12,877,253 however only 3,718,725 are 20-
34 year old young professionals and 15% of these young professionals are from classes A, B, and
C1.

Product positioning

The UAI study have given possible ways to promote Umbrelight and majority of the
respondents have answered that the use of testimonials from customers and the use of online
platforms shall be taken to the advantage of the company. First, customer testimonials will
encourage the company’s target market to try out the umbrella and to see for themselves how
efficient the product is. Second, as Umbrelight’s target market are Classes ABC1 young
professionals aged 20-34 years old, advertising using social media and other online platforms
would be best suitable as Umbrelight’s main mode of marketing.

Price Information

24
 Umbrelight looks to adopt a cost-plus strategy which will add a markup of 15% to the
original total base cost of the umbrella (which is P764.15) totaling to an amount of P899. The
cost includes all the raw materials and labor used to create the product. Although the Umbrelight
costs more than the average umbrella in the local market, it is but also gives a reasonable value
in respect to the quality a consumer can get in return.

Place Information

Umbrelight Inc.’s warehouse will be located in Santa Rosa, Laguna as it is the most
suitable option for the company considering all kinds of cost and accessibility to major
highways. Since the company will not be establishing any flagship branch in Metro Manila
because it plans to distribute its products through e-commerce platforms and retail stores, the
company will only have to ensure that there will convenience in proximity to the key suppliers of
the company.

Promotion

The goal for Umbrelight Inc.’s Promotions is to change the way people look at the
normal umbrella. It aims to persuade people to consider using a newly designed umbrella that
has several features that could enhance the overall perception of what an umbrella is capable of
doing. The Umbrelight is an innovative product that is the first of its kind on the market. It has
several features such as its extra-duty durable material that can provide longevity as well as its
lightweight function that can make it easy to carry on-the-go. Moreover, it’s main feature is the
addition of the LED light function that provides a bright source of light at night to ensure the
safety of any person. Umbrelight Inc. plans to promote Umbrelight through social media
advertisements through the following platforms: Facebook, Instagram, Youtube and utilize e-
commerce platforms such as Shoppee and Lazada. In addition, Umbrelight Inc will further
promote the use of its product through testimonials from new and satisfied customers who are
open to sharing their overall experience with the product. The company also plans on tapping
social media influencers to help garner awareness for the new and innovative product so the
company may increase their awareness and market share. 

IV. Chapter 3: Product Design

25
 a. Benefits and Uses of the Product

Umbrelight’s primary user benefits are fast, safe, and efficient to use while still being
protected under harsh environment. Umbrelight provides the user to a worry-free mind when
using the umbrella with its fast drying, wind resistant, and easy to transport properties. Listed
below are the benefits and uses of Umbrelight:

Benefits:

● Fast Drying
● Wind will not be a hindrance when walking
● Easy use for people who are always on the go
● For safety purposes during night time due to the light emitting from the tips of the
umbrella (both in the perspective of the user and the drivers)

Uses:

● Flashlight alternative
● Everyday Commute
● Protection under the rain
● Shade on a sunny day

b. Product Documentation

26
1. Assembly Drawing

Figure 3.0 Assembly Drawing

27
 2. Bill of Materials

Bill of Materials for One (1) Umbrella Unit

Bill of Materials

Part Description Qty for 1 Unit of Supplier Price Supplier

Number Unit Measure per Piece

AA1 Shaft 1 Piece Php 20 Power Steel Specialist

(Aluminum) Trading Corporation
(Sampaloc, Metro
Manila)

AA2 Ribs 8 Piece Php 11 Power Steel Specialist

(Fiber Trading Corporation
Plastic) (Sampaloc, Metro
Manila)

AA3 Runners 8 Piece Php 20 Power Steel Specialist

Trading Corporation
(Sampaloc, Metro
Manila)

AA4 Tips 8 Piece Php 4 Power Steel Specialist

Trading Corporation
(Sampaloc, Metro
Manila)

AA5 Stretchers 8 Piece Php 5 Power Steel Specialist

(Steel) Trading Corporation
(Sampaloc, Metro
Manila)

AB1 Led Light 1 Piece Php 13 Akari Lighting and

Technology Corporation
(Quezon City, 1113
Metro Manila)

AB2 Insulated 3 Inches Php 4 Akari Lighting and

Electric Wire Technology Corporation
(Quezon City, 1113
Metro Manila)

AA7 Handle 1 Piece Php 10 OfficeMan, Inc. (Quezon

City)

AA8 Canopy 42 inches Piece All Good Traders

28
 (210T 100% (Binondo, Metro Manila)
polyester Php 52
pongee
fabric)

BB1 Coin Cell 3 Piece Php 5 Panasonic Philippines

Battery 3.7V (Ortigas Ave, Taytay,
1920 Rizal)

PKG Packaging 1 Piece Php 3 Pacific Rim Packaging

(Folding Inc. (The Enterprise
Cartons) Center, Ayala Avenue,
Makati, 1226 Metro
Manila)

PKGLB Packaging 1 Piece Php 147 Printixels Enterprise

L Label of (412 J.M, Loyola St,
Umbrelight Carmona, 4116 Cavite)

3. Assembly Chart (4 step process)

29
 Figure 3.1 Assembly Chart of Umbrelight

As seen in figure 3.1, the production process of Umbrelight will be done in four assembly
lines. Assembly line 1 consists of the creation of Umbrelight’s structure through the use of the
Bone Processing Machine. Assembly line 2 will be the process of creating the Canopy - cutting
the fabric using the Fabric Cutter Machine and sewing them together using the Sewing machine.
Assembly line 3 will consist of the handle that was made in assembly line 1 and following that,
the LED light will be installed into it using the Insulated Electric Wire as well as the coin cell
batteries (3.7V) that will be used for its power source. Following the process, the product will
undergo a Polka Yoke Inspection where the workers will be checking the completion of the
product if there are any issues that are present before packaging it. If the product has a defect, the
product will go through the same process and be corrected until it comes back for the Polka
Yoke Inspection. After the Polka Yoke Inspection process, the product will go through the last
assembly line - assembly line 4 consists of general packaging; specifically, packaging using

30
folding cartons and the packaging label after the product has been stored inside the folding
carton. Following this process, the product will be stored in the inventory of the company.

4. House of Quality

Figure 3.2 Umbrelight, Inc. House of Quality

31
 With the help of the UAI study, the company identified the customer requirements of the
umbrella. According to the information derived from the UAI, the customer requirements are as
follows: can last up to a year; convenience/accessible to the buyers; can be easily folded;
lightweight; easy to transport; Dries fast; Value is worth the price/Reasonable price; Does not
have a smell after drying; Eco-friendly; Durable. Based on the marketing survey, these customer
requirements were actually rated with the following weights: 9, 3, 9, 9, 3, 9, 9, 9, 9, 9
respectively on how important each customer requirements are.

The customer requirements mentioned were correlated with the given functional
requirements which are: length of the shaft; intensity of the light; length of the ribs; weight of the
umbrella; light coverage; cost of the lights; cost of the canopy; cost of the shaft; cost of the ribs;
quality of the canopy; quality of the shaft; the quality of the ribs; the quality of the handle;
bulkiness of the handle; and the packaging.

Relationship Matrix

Based on the House of Quality illustrated above, there are specifications provided by the
company and the UAI respondents. These specifications are compared side by side to show the
relationship between them. The first customer specification that was provided in the House of
Quality above is that Umbrelight “can last up to a year” which has a weak relation to the length
of the shaft of umbrellight. This is due to the small chance of it being broken through its length.
For the same specification that was mentioned earlier, the intensity of the light, the cost of the
shaft, and cost of the ribs and cost of the canopy, moderately affects the first customer
specification. For the same specification mentioned earlier, the cost of the lights, the quality of
the canopy, quality of shaft, and quality of the handle of Umbrelight greatly affects the
specification “Can last up to a year.” Lastly, for the specification mentioned earlier, the length of
the ribs, weight of the umbrella, light coverage, bulkiness of the handle, and the packaging has
no relation to the specification: “can last up to a year.”

The second customer specification mentioned is Umbrelight’s “Convenience/accessible

to buyers” - in relation to that the cost of the lights, cost of the shaft, cost of the ribs, cost of the
canopy, and packaging are moderately related to the specification mentioned earlier. The rest of
the functional requirements mentioned: length of shaft, intensity of the light, length of the ribs,
weight of the umbrella, quality of the canopy, quality of the shaft, the quality of the ribs, quality
of handle, and bulkiness of the handle are not related to the “Convenience/accessible to buyers”.

The third customer specification mentioned in the House of Quality is that the product
“Can be easily folded” - in relation to this, the length of the ribs, cost of the shaft, and the cost of
the ribs have a weak relationship to the products foldability. In addition to that, the length of the
shaft, and the quality of the shaft are moderately related to the foldability of the product - also,

32
the quality of the ribs has a strong relationship with the specification. Lastly, the intensity of the
light, weight of the umbrella, light coverage, cost of the lights, the quality of the canopy, the
quality of the handle, bulkiness of the handle, and the packaging are not related to the
specification mentioned earlier.

The fourth customer specification mentioned in the House of Quality is that the product is
“Lightweight” - in relation to the specification, the length of the shaft, the quality of the shaft,
quality of ribs, bulkiness of the handle have a weak relationship with how lightweight the
product is. However, the weight of the umbrella has a strong relationship on how lightweight the
umbrella is. In addition to that, the intensity of light, the length of the ribs, light coverage, cost of
the lights, the quality of the canopy, cost of the shaft, cost of the ribs, the quality of the handle,
cost of the canopy, and the packaging has no relation to how “lightweight” the product is.

The fifth customer specification mentioned is Umbrelight’s “easy to transport” - in

relation to this specification, the length of the shaft, the length of the ribs, weight of the umbrella,
and the bulkiness of the umbrella have a moderate relationship with the specification mentioned
earlier. On the other hand, the intensity of the light, light coverage, cost of the lights, the quality
of the canopy, quality of the shaft, quality of ribs, cost of shaft, cost of the ribs, the quality of the
handle, cost of the canopy, and the packaging have no relation to how the product is easy to
transport.

The sixth customer specification mentioned in the House of Quality is that the product
“dries fast” - in relation to the specification, the length of the ribs have a weak relationship with
the specification; while the quality of the canopy and the cost of the canopy have a strong
relationship with the specification. In addition to that, the length of the shaft, intensity of the
light, weight of the umbrella, light coverage, cost of the lights, the quality of the shaft, the quality
of the ribs, cost of the shaft, cost of the ribs, the quality of the handle, bulkiness of the handle,
and the packaging has no relation to the sixth statement mentioned in the House of Quality.

The seventh customer specification mentioned in the House of Quality is the “Value is
worth the price/reasonably priced” - in relation to this specification, the length of the shaft,
intensity of the light, length of the ribs, weight of the umbrella, and the packaging have a weak
relationship to the seventh suggestion mentioned in the House of Quality. On the other hand, the
light coverage has a moderate relation with the price of the product. In addition to that, the cost
of the lights, the quality of the canopy, the quality of the shaft, the quality of the ribs, cost of the
shaft, cost of the ribs, and the cost of the canopy have a strong relation to the price of
Umbrelight. However, the quality of the handle and the bulkiness of the handle has no relation to
the price of Umbrelight.

The eighth customer specification mentioned in the House of Quality is “does not have a
smell after drying” - in relation to this, the bulkiness of the handle has a weak relation to the
specification; on the other hand, the quantity of the handle and the cost of the canopy have a

33
moderate relationship with the smell of the product after drying. However, the length of the
shaft, intensity of the light, weight of the umbrella, light coverage, cost of the lights, the quality
of the shaft, the quality of the ribs, cost of the shaft, cost of the ribs, and packaging have no
relation to the eighth specification mentioned in the House of Quality.

The ninth customer specification mentioned in the House of Quality is “Eco-friendly” - in

relation to this specification, the length of the shaft and length of the ribs are moderately related
to the product’s eco-friendliness; and on the other hand, the light coverage, quality of the canopy,
the quality of the shaft, the quality of the ribs, and the quality of the handle have a weak
relationship with the products eco-friendliness. In addition to that, the packaging has a strong
relationship with the specification. However, the intensity of the light, weight of the umbrella,
cost of the lights, cost of the shaft, cost of the ribs, cost of the canopy, and bulkiness of the
handle have no relationship to the ninth specification mentioned in the House of Quality.

The tenth customer specification mentioned in the House of Quality is “Durable” - in

relation to this specification, the length of the shaft, cost of the shaft, and the cost of the ribs have
a moderate relationship towards the durability of Ubrelight. On the other hand, the intensity of
the light and the weight of the umbrella have a weak relationship with the durability of the
product. In addition to that, the cost of the lights, the quality of the canopy, the quality of the
shaft, the quality of the ribs, and the quality of the handle have a strong relationship with the
Umbrelight’s durability. However, the length of the ribs, light coverage, cost of the canopy,
bulkiness of the handle, and the packaging has no relation whatsoever to the durability of the
product.

Based on the customer requirements under the House of Quality, it is seen that
Umbrelight’s main features based that should be focused on are “dries fast” and “doesn’t smell
after drying”. These two factors scored 5 in the customer competitive assessment under the
House of Quality - thus, being the highest of all the customer requirements that were given. Out
of all Umbrelight’s competitors, these two factors are the competitive edge of Umbrelight.

Correlation Matrix

Looking at the correlation of each functional requirements you can see that the length of
the shaft has a positive relationship with the weight of the umbrella since the longer the shaft the
heavier the umbrella will be. It has a positive relationship with the cost of the shaft since longer
shaft means more materials will be needed to make the shaft. Also, having a longer shaft implies
that it will be needing a bigger packaging which is why the length of the shaft has a positive
correlation with the packaging of the product itself.

Looking at the aspect of the intensity of the light, it can be seen that it has a positive
correlation with the cost of the light since having a stronger light would imply having to invest in
better quality lights. In addition, the length of the ribs has a positive correlation with the weight

34
of the ribs since the longer the ribs then the heavier the umbrella will be. The cost of the canopy
and the ribs is also directly proportional to the length of the ribs since longer ribs would me more
material to be used for the canopy and the ribs itself.

As for the light coverage, it is only positively correlated with the bulkiness of the handle
since if the handle has a bigger diameter. Even though light coverage is not as correlated with
most of the functional requirements, it is still an important aspect since the umbrella user will see
better at night with a wider range of the light.

There is a positive correlation between the quality of the canopy and the cost of the
canopy in the correlation matrix. This is because having better quality products would cost the
company more in order to make the umbrella more durable. The same goes with the quality of
the shaft and the ribs as well because it also has a positive correlation with the cost of the shaft
and cost of the ribs according to the correlation matrix. Lastly, according to the correlation
matrix, the cost of the ribs is correlated with the cost of the canopy because the longer the ribs of
the umbrella the bigger the canopy it will need so the cost of both materials is directly
proportional to each other.

Customer Requirement on customers

Umbrellight had identified that their main competitors are Fibrella, Hydro Techno,
Fulton, Senz, and Totes. The company surveyed about 103 respondents from different parts of
the NCR. The respondents were asked to give their perception regarding the customer
requirements of the main competitors in a scale of 1-5, with 1 being the lowest and 5 being the
highest.

First, in the aspect of “can last up to a year,” Fibrella got the highest rating out of all
competitors with a rating of 4.2. This is followed by Hydro techno with a rating of 3.9, Totes
with rating of 3.8, fulton with a rating of 3.5, and Senz was the lowest rating in this aspect with a
rating of 3.4. In terms of convenience/accessible to the buyers, Fibrella is still the highest of all
competitors with a rating of 4.4 and the companies which garnered lowest rating on this aspect is
Fulton and Senz with a rating of 3.3 out of 5. Second is how easy the umbrella can be fold and it
can be seen that Fibrella has one of the highest ratings of them all with a rating of 4.3 out of 5
and Fulton is the lowest in this customer requirement with a rating of 3.59 but it’s also close to
the rating of Senz which is 5.6. Third, Fibrella tops the rating again among all the other
competitors, garnering 4.3 out of 5 in terms of their umbrellas being lightweight.

Fourth, for the customer requirement of easy to transport, Fibrella got the highest rating
out of all the competitors with a rating of 4.3 and Senz being the lowest with a rating of 3.6.
Fifth, in the aspect of how fast the canopy of the umbrella can dry, Fibrella received the highest
rating of all competitors with a rating of 4 out of 5 and Senz with the lowest score of 3.3. On the

35
aspect of how worth the umbrella is in terms of price Fibrella has the highest rating which is 4.3
out of 5 and Senze still being the lowest with a rating of 3.3.

The last 3 customer requirements were dominated by Fibrella and Hydro Techno. These
attributes are namely: umbrella durability, not having a smell after drying, and being an eco-
friendly product.

Given the rating of the customers requirements of each company, it can be deduced that
Fibrella’s product is the strongest among the other branded umbrellas since Fibrella received the
highest rating in most of the customer requirements and if you actually add up all the ratings it
has a 43 out of 50 in the overall aspects while Senz got the lowest overall rating in the marketing
survey.

36
 V. Chapter 4: Total Quality Management
A. Tools for Generating Ideas
a. Check Sheet

Based off the annual demand of 11,976 umbrellas, the researchers have approximated the
number of defects that could happen monthly.

ERROR Jan Feb Mar Apr May Jun

Loose Runners 130 134 131 143 161 179

Broken Umbrella Frames 52 50 51 69 71 77

Cracked LED Bulbs 43 41 46 49 50 54

Canopy Fabric Damage 37 39 41 39 41 43

Supplied Parts Rusted 27 32 23 26 27 31

Packaging Error 8 6 9 4 9 11

TOTAL ERRORS 297 302 301 330 359 395

Jul Aug Sept Oct Nov Dec TOTAL

183 130 133 132 140 155 1,749

83 52 51 51 64 69 739

61 43 42 45 48 49 570

51 37 38 40 39 41 486

39 27 31 25 26 27 340

13 8 7 8 5 8 96
430 297 301 301 321 348 3,981

Figure 4.1. Umbrelight Inc.’s Errors Check Sheet

37
 The data shows the number of total errors per month for 6 specific error. Out of the six
foreseen errors, the one with the most frequent number of errors are Loose Runners. This is the
most prevalent error in producing the umbrella because the main cause is due to a lack of quality
on parts, due to lack of quality checks of the same parts or due to mistakes in the assembly
process itself.

Moreover, the data clearly indicates that the total number of errors start relatively low in
the month of January but steadily increases over time until the month of July where the number
of total errors for that month are about a 45% increase in errors from the last January month.
This could be due to the employees experiencing difficulties in properly following the assembly
line process which will also affect how the umbrella is put together creating inefficiencies when
parts are not properly installed. Over the span of the first 5 months, demand is also expected to
rise especially on the Month of June as by the six month the company looks to increase its
production capacity. In addition, since sales for umbrellas vary per month due to seasonality
there is more reason to produce as demand for umbrellas go up during the rainy season.

For the months of January to July, the defects were manually assumed while the defects
for the months of August to December were forecasted using exponential smoothing. This was
done because the company wants to make up for the increase in demand during the start of the
rainy season and so it will be better for the company to increase production to regulate the
demand again but it would also entail more defects. From the annual demand of the 11,976
umbrellas, 11,800 are produced and from producing the umbrellas, the company has realized that
during the rainy seasons they must have produced enough umbrellas to cope up with demand
even if that brings about more defects.

38
Scatter Diagrams

The following scatter diagrams show the correlation between the most frequent error
which is the Loose Runners and the other 6 errors.

Figure 4.2. Scatter Diagram - Loose Runners in relation to Broken Umbrella Frames

There is a positive correlation between loose runners and broken umbrella frames
represented by the function y = 0.583x - 23.424. There is a positive correlation present because
the runner should be able to adjust the height of the umbrella properly and a loose runner limits
the umbrella frames to fully stretch out the umbrella.

39
 Figure 4.3. Scatter Diagram - Loose Runners in relation to Cracked LED Bulbs

There is a positive correlation between loose runners in relation to cracked LED Bulbs
represented by the equation y = 0.2762x + 7.2538

Figure 4.4. Scatter Diagram - Loose Runners in relation to Canopy Fabric Damage

There is a positive correlation between loose runners and canopy fabric damage
represented by the equation y = 0.1584x + 17.45

40
 Figure 4.5. Scatter Diagram - Loose Runners in relation to Supplied Parts Rusted

There is a positive correlation between the loose runners and supplied parts rusted which
is represented by the function y= 0.1391x + 8.0665. The reason behind this is because loose

Figure 4.6. Scatter Diagram - Loose Runners in relation to Packaging Error

There is a negative correlation between loose runners and packaging error represented by
the equation y = 0.0862x - 4.5648

1. Cause and Effect Diagrams

41
 Figure 4.7. Cause and Effect Diagram - Loose Runners

The runner is the part of the umbrella that slides up and down the shaft. If they are loose
it can mainly be caused by poor quality of raw materials, improper handling of parts, and rusted
raw materials. If the runners are improperly placed, the height of the umbrella cannot be
adjusted.

42
 Figure 4.8. Cause and Effect Diagram - Broken Umbrella Frames

Broken umbrella frames can be caused by low quality of materials, thin umbrella ribs,
and strong winds. When a gust of wind catches the umbrella the wrong way, it often becomes
inverted, stressing joints, and occasionally snapping.

43
 Figure 4.9. Cause and Effect Diagram - Cracked LED Bulbs

The most common cause of cracked LED bulbs is low quality of materials, improper
handling of materials, and carelessness of workers.

44
 Figure 4.10. Cause and Effect Diagram - Canopy Fabric Damage

The Canopy Fabric Damage can be caused by too much heat that can cause the umbrella
fabric to warp. It can also be caused by poor quality of fabric, improper fabric cutting caused by
workers, and inconsistent measurement of fabric.

45
 Figure 4.11. Cause and Effect Diagram - Supplied Parts Rusted

Rust spots on the joints of the ribs or brackets makes the umbrella open improperly this
can mainly caused by low quality of materials ordered from the supplier, temperature or weather
conditions may be the cause for rusting and materials and machines were not well maintained by
employers.

46
 Figure 4.11. Cause and Effect Diagram - Packaging Error

The product’s packaging would come directly from our supplier then the employees will
be the one to assemble. If packaging error occured it would be most likely the employees fault
this can mainly be caused by carelessness and improper handling of materials.

47
b. Tools for Organizing Data
1. Pareto Chart

Figure 4.12. Pareto Chart of Umbrelight Errors

Causes # Cumulative Total Cumulative %

Loose Runners 1749 1749 44%

Broken Umbrella 739 2488 62%

Frames

Cracked LED 570 3059 77%

Bulbs

Canopy Fabric 486 3545 89%

Damage

Supplied Parts 340 3885 98%

Rusted

Packaging Error 96 3981 100%

Total 3981

48
 Figure 4.13. Table Identifying the Errors

A Pareto Chart is used to identify the defects in making a product (in this case, an
umbrella) in descending frequency. This chart specifically highlights the most important set of
factors that contribute to mistakes a company may make. According to the company, loose
runners make up most of the defects (1,749) in making an umbrella, followed by broken
umbrella frames (739), cracked LED bulbs (570), canopy fabric damage (486), supplied parts
rusted (340), and packaging error (96) respectively. The chart illustrates that in order to lower the
number of defects in making an umbrella by 89%, the company must first solve the first 4 main
issues (loose runners, broken umbrella frames, cracked LED bulbs, and canopy fabric damage) in
order to improve their business processes significantly.

2. Process Flowchart

49
 Figure 4.14. Flow Chart of- Production Process of Umbrelight

The production of Umbrelight involves a series of steps. Manufacturing umbrellas are

basically a hand-assembly process where various parts are joined together in a methodical
manner. The flowchart above shows the manufacturing process of the umbrella. Furthermore, to
explain the process it will start by ordering of raw materials from the supplier. If the raw
materials saw some defects, it will be immediately returned to the supplier and be replaced.
However, if the sourcing of raw materials passed, it will proceed to large fabric cutting, It uses of
machine or manual labor to cut fabric in rectangular shape from a pile of fabric.

After Large Fabric Cutting, it will proceed then to Fabric Edge Locking, this process is
crucial to the quality of the umbrella because fraying could occur if we don't place an edge finish
on the fabric. A sewing machine areathe edge finishes on the pieces of fabric. Since the edges of
the cut fabric are secured, it will proceed then to small fabric cutting, it will be done manually to
cut them further to form a small triangular panel.

50
 If the small triangular shaped panels all meet the customer's requirements, it will then
proceed to the printing process. The printing begins with placing the triangular panels on a table,
Afterward, each fabric piece gets a wooden frame. The frame ensures that the graphic print does
not go beyond the panel dimensions.

Once the panels themselves have the intended graphic design, it will proceed then to an
electric sewing machine placing the triangular pieces of fabric together. Once the canopy is
complete, it will be inspected to check it with a lightbox. The fabric lightbox is made up of
various light sources such as artificial daylight, store light, and an ultraviolet light. The purpose
of the lightbox is to check for consistency in color among the triangular panels.

After inspection it will proceed then to installing the tips and sewing the strap to the
cover. this allows the process to mount the cover on the umbrella frame then sew the umbrella
strap onto the cover.

After installing the tips and sewing the strap to the cover, it will proceed then to installing
the LED handle and Top before quality inspection. The LED handle completes the bottom
section of the Umbrelight product. On the other hand, the top part keeps the shaft and the
umbrella cover together while forming the uppermost tip. Now that the umbrella is produced and
all parts are connected, it's time to for a final quality inspection. Finally, after the final quality
inspection the product will be them be ready for packaging and will be sent out to be sold to the
public.

51
VI. Chapter 5: Location and Layout Strategy
a. Equipment, Machinery, and Facilities

Costs of Machines

Machine Cost

Umbrella Bone Processing Machine P100,880 - P9,079,200

Large Fabric Cutting Machine P176,540 - P655,720

Sewing Machines P6,000 - P17,000

Figure 5.1. Cost of Machines

Umbrelight, Inc. produces an innovative and multifunctional umbrella that can help
consumers protect them from UV rays, harsh environments, and walking at night time. In order
for the company to make the product, it needs raw materials, machines, tools/equipment and a
facility for it to be assembled. The facility of Umbrelight, Inc. will depend on the location of the
suppliers for the raw materials to enhance efficiency and decrease production time. The raw
materials for the umbrella will come from different companies that specialize for certain
materials and give reasonable prices. The raw materials that are needed for the production are:
ribs, runners, and stretchers for the umbrella shaft; the umbrella cloth for the canopy; LED lights;
and umbrella handles.

The first machine needed for production is an Umbrella Bone Processing Machine. This
machine specializes in the making of the steel parts of the umbrella. In this process, holes will be
placed inside the shaft to make way for the circuit wires for the lights which will later on be
connected to the umbrella handle. The second set of machinery is a fabric cutting machine that
will be used for the cutting and shaping of the umbrella canopy. The fabric material that will be
used for this is a water repellent fabric. This machine is essential to the production because it will
help lessen the workload of the factory workers, reduce the time of production, and increase
productivity. The last set of machines that will be needed are the sewing machines that will
enable the factory workers to fix the edges of the canopy and smoothen its shape.

As for the equipment needed for manufacturing an umbrella, the first thing needed is a
round knife. This knife will be used to cut the fabric of the umbrella. Other equipment will be
needed for the wires, circuits, and bone of the umbrella. These specific tools are pliers, cutters,
and screwdrivers for the handle of the umbrella.

52
 After conducting the factor rating analysis for the potential location of Umbrelight, Inc.’s
warehouses, the results show that the most suitable location for the equipment, people, and
stocks is in Santa Rosa, Laguna. Santa Rosa is considered as one of the best places to put up a
facility because of its rapid-growth in the number of establishments present in the area. Santa
Rosa is becoming increasingly popular for businesses and commercial areas. Take for example,
Nuvali, which is a famous mall destination many people flock to from different cities.
Furthermore, Sta. Rosa Laguna has a vast amount of land that has yet to be occupied. This would
give other businesses more opportunities to start their venture in this location.

Referring to the table in Figure 5, the three most defining factors that eventually led to
the selection of Santa Rosa, Laguna as Umbrelight, Inc.’s potential factory and warehouse
location were namely the price per square meter (accounts for 25% importance), labor
availability and cost (accounts for 20% importance) and cost of utilities (accounts for 20%
importance). For the price per square meter factor, Santa Rosa has the cheapest price per square
meter compared to the other three which means it is more feasible to put up or build the facility
inside or around Sta. Rosa, Laguna to cut down capital requirements. This is why a number of
automotive companies such as Toyota, Mitsubishi, and Honda have placed their plants in this
location. Next, the labor availability and costs are much cheaper if the company were to hire
people in the city - since most people come from the outskirts of the city just to work in the city
center for about 8 hours a day. However, placing Umbrelight, Inc.’s factory and warehouse
closer to people who come from outside the city will be much more convenient for workers.
Lastly, the cost of utilities is reasonable since Sta. Rosa Laguna is powered by MERALCO.
After evaluating the top three major Key Success Factors, the researchers can say that Santa
Rosa is the best choice to put up the company’s facility.

b. Location Considerations
1. Center of Gravity and Factor Rating Analysis

Center of Gravity for Suppliers

Coordinates Computations

Materials Units Supplier Latitude Longitude Latitude Longitude

Shaft 11,800 Power Steel 14.618940 120.991960

Specialist
Trading
Corporation

53
Ribs 94.400 Power Steel 14.618940 120.991960
Specialist
Trading
Corporation

Runners 11,800 Power Steel 14.618940 120.991960

Specialist
Trading
Corporation

14.60378497 120.9999302
Tips 94,400 Power Steel 14.618940 120.991960
Specialist
Trading
Corporation

Stretchers 94,400 Power Steel 14.618940 120.991960

Specialist
Trading
Corporation

Led light 11,800 Akari Lighting 14.6117020 121.013700

and Technology
Corporation

Insulated 11,800 Akari Lighting 14.6117020 121.013700

Electric and
Wire Technology
Corporation

Handle 11,800 OfficeMan, 14.599480 120.976230

Inc

Canopy 35,400 All Good 14.599920 120.973800

54
(fabric) Traders

Coin Cell
Battery 3- 11,800 Panasonic 14.582970 121.137790
3.7V Philippines

Packaging
(Folding 11,800 Pacific Rim 14.554420 121.025887
Cartons) Packaging Inc.

Packaging
Label of 11,800 Printixels 14.280000 121.117890
Umbreligh Enterprise
t

Figure 5.2. Center of Gravity

The result of computation for the center of gravity is Sampaloc, Metro Manila (14.57553031,
121.0386475).

Factor Rating Analysis (FRA) for Factory and Warehouse with Center of Gravity
(Sampaloc, Metro Manila)

Key Success Weight Weighted Score

Factors

Angeles Parañaque Santa Rosa Sampaloc

(Pampanga) (NCR) (Laguna) (Metro
Manila)

Price per 0.25 (0.25)(80) (0.25)(75) (0.25)(95) (0.25)(75)

Square meter
= 20 = 18.75 = 23.75 = 18.75

Labor 0.20 (0.20)(80) (0.20)(70) (0.20)(85) (0.20)(75)

Availability

55
 and Cost = 16 = 14 = 17 = 13

Proximity to 0.15 (0.15)(60) (0.15)(90) (0.15)(75) (0.15)(100)

Suppliers
=9 = 13.5 = 11.25 = 15

Cost of 0.20 (0.20)(90) (0.20)(70) (0.20)(80) (0.20)(70)

Utilities
= 18 = 14 = 16 = 14

Regional 0.10 (0.10)(45) (0.10)(40) (0.10)(45) (0.10)(40)

Competencies
= 4.5 =4 = 4.5 =4

Distance to 0.15 (0.15)(70) (0.15)(90) (0.15)(85) = (0.15)(95)

Major 12.75
= 10.5 = 13.5 = 14.25
Highways

Total 1.00 78.00 77.75 85.25 79.00

Figure 5.3. Factor Rating Analysis

Price per Square Meter

The first Key Success Factor is the price per square meter in the areas in which the company
is planning to establish its factory and warehouse. The price per square meter will be based on
the zonal prices created by the BIR, a standard price per square meter depending on the region or
city. Paranaque (75) garnered the lowest score in terms of price per square meter which costs
about P60,000 per square meter compared to Sta. Rosa, Laguna and Angeles, Pampanga who’s
price per square meter costs much lower which are P5,000 per square meter and 15,000 per
square meter respectively. The reason behind the lower score given to Paranaque was based on
proximity to Metro Manila where a closer proximity would entail higher cost due to more
convenience.

56
Labor Availability and Cost

Labor is one of the most expensive costs in establishing a business and the cost usually varies
depending on the location of the company. Philippine Statistics Authority’s minimum wage
index for workers in the manufacturing industry is used as a basis to compare labor costs per
region. Parañaque has the highest minimum wage of P475 per day, P415 for Sampaloc, whereas
Pampanga has P380, while Laguna offers P347 per day to its workers. Given this data, Santa
Rosa (85) comes in first in the rating, followed by Angeles (80), Sampaloc in third (75) and
Parañaque (70) coming in last.

Proximity to Suppliers

The main suppliers of the company are Power Steel Corporation, Green Light Energy
Solutions, Inc., OfficeMan Inc., and All Good Traders. These suppliers are located in Sampaloc
Manila, Alabang, Quezon City, and Binondo respectively. Power Steel Corporation is 1 hour and
21 minutes away from Angeles. Moreover, it is 38 minutes away from Parañaque. Lastly, it is 1
hour 11 minutes away from Santa Rosa. Green Light Energy Solutions, Inc. is approximately 2
hours and 20 minutes away from Angeles, 25 minutes from Parañaque, and 34 minutes away
from Santa Rosa. As for the company’s third supplier, OfficeMan Inc. is around 1 hour 44
minutes away from Angeles, 53 minutes away from Parañaque, and 1 hour and 22 minutes away
from Santa Rosa. The last supplier, All Good Traders, is about 1 hour 58 minutes away from
Angeles, 41 minutes away from Parañaque, and 1 hour and 14 minutes away from Santa Rosa.
Clearly, Parañaque has the closest proximity to the suppliers. Angeles, on the other hand, is the
farthest from the suppliers. It would be a big burden to the company if the company were to
place the warehouse in Angeles. Being far away from the raw materials, other costs may arise
(such as transportation costs). Thus, making Angeles an unfavorable place to set up a facility.
Sampaloc, lastly, is an ideal location as its proximity to its key suppliers are just about 1 hour or
less away from the center of gravity location (maximum time) with no regard to traffic. With
these facts, the researchers have rated Sampaloc (100) the highest, with Parañaque (90) coming
in second, followed by Santa Rosa (75), and Angeles (60) in last.

Cost of Utilities

Angeles, Pampanga is powered by the electric distributor called Angeles Electric

Corporation (AEC). As of December 2018, the company’s price per kilowatt-hour (kWh) is at
P5.4066. As for Parañaque, Sampaloc, and Santa Rosa, their electric distributor is the Manila
Electric Company (MERALCO). As of April 2019, the price per kilowatt-hour (kWh) is
P10.5594 (Rivas, 2019). The MERALCO rates are nearly double of AEC, making it more
favorable for Umbrelight to place their warehouse and factory in Angeles, Pampanga. This
would lessen utility costs. Moreover, the water services provider of Angeles is the Angeles City

57
Water District (ACWD). As for Parañaque and Sampaloc, the provider in these locations are
Maynilad Water Services, Inc. (Maynilad). Lastly, for Santa Rosa, the provider would be Laguna
Water. Laguna Water is a wholly-owned subsidiary of Manila Water Company. The researchers
have decided to give Angeles the highest rate (90) because of its overall cheaper cost of utilities.
The second-highest rating would be Santa Rosa (80) because of the location being strategically
not in Metro Manila, but having higher rates compared to that of Pampanga. Parañaque and
Sampaloc would have the lowest rate (70) mainly because the cost of living in the National
Capital Region is usually higher compared to the rates in other areas of Luzon.

Regional Competencies

The competencies of a certain region may place one location at an advantage compared to
the others. As for this case, none among the 3 locations has the exact competencies needed to
manufacture an umbrella, therefore all 3 locations have been given low ratings. Despite this
deficiency in skill, the researchers wish to decipher each location’s specialty and see if there
may be some potential for these regions to manufacture the product. Pampanga is known more
for the agricultural industry, placing emphasis on farming and fishing. The province is known for
sophisticated culinary work with masterpieces such as beef tapas, longganisa, lechon kawali, and
so on. With skills relating more to manufacturing, Pampanga has a thriving cottage industry
where the people specialize in wood carving, furniture making, and handicrafts. With somewhat
experience in creating pieces, the group has rated Angeles the highest (45). Moving on to
Parañaque and Sampaloc, the disadvantage of being located in Metro Manila is that there is no
specific specialty found in that place. Parañaque is more often known to be a location for hotels,
shopping malls, and casinos. Moreover, Sampaloc is known to be the flower market of the
region. With this in mind, Parañaque and Sampaloc got the lowest rating (40). Lastly, Santa
Rosa, Laguna is known for the automotive industry because of vehicle companies such as Nissan
Motor Philippines, Mitsubishi Motor Philippines, Honda Motor Philippines, and Toyota Motor
Philippines placing their plants in this location. Moreover, Laguna has a growing business
processing outsourcing industry with established call centers set up in Santa Rosa. Given that the
automotive industry may mean that the people would have skills in knowing parts of a product
well, the researchers have rated Santa Rosa with the same rating as Angeles (45).

Distance to Major Highways

Accessibility would be an important factor when it comes to choosing which location to

place a warehouse and factory. If the warehouse is too far away from major highways, it may
bring inconvenience to Umbrelight, Inc. and its workers to transport products from the
warehouse to the actual retail stores. Given so, it would be better if the location may be nearer to
Metro Manila, which is the target location where the stores will be located. With this information
in mind, Sampaloc would have the highest rating (95) because it is located close to the heart of
Manila and with its access to roads such as espana, quirino avenue and quezon avenue Parañaque

58
would have the highest rating (90) since the city is right beside South Luzon Expressway
(SLEX) which is also connected to main roads such as C5 and EDSA, followed by Santa Rosa
(85) which is located near SLEX, and lastly Angeles (70), which is accessible via the North
Luzon Expressway Angeles exit.

c. Layout of the Factory and Warehouse of Sta. Rosa, Laguna

Description Image

Interior of
Warehouse
(frontview)

Interior of
Warehouse
(sideview)

59
Wide open 3,000 m²
parking lot

Figure 5.4. Images of Santa Rosa, Laguna Warehouse

Layout of Factory

Figure 5.5. Layout of the Factory

60
 The factory is 1,000 sqm and will be divided into two parts which are mainly canopy
production and umbrella bone production considering that these two are the most essential parts
of the product itself. The accessories will be processed and attached under the assembly line once
the two main parts are finished. The production begins with the raw materials that need
processing before it can be used for the product. The umbrella cloth for the canopy and the steel
for the umbrella bones are located at the entrance part of the factory because these materials
involve heavy-duty work when it comes to transportation. Placing the cloth and steel at the
entrance will reduce transportation costs for the overall production. The umbrella canopy
production involves a cutting machine that shapes the cloth into an umbrella canopy which will
then be sewn by factory workers to close the edges of the fabric and smoothen the canopy.

As for the umbrella shaft, the company will also be using an umbrella bone processing
machine that transforms the raw steel into umbrella bones and will be used as the main structure
of the umbrella. In addition to that, once the umbrella’s handle is finished, factory workers will
then install the LED flashlight into the handle.

The sewn umbrella canopy and the finished shafts will be transported to the middle of the
factory for the assembly line where additional parts of the umbrella are assembled in sequence as
the last step of the umbrella production. The finished goods are kept at the end of the assembly
line where the product is stacked randomly (since the product is homogenous), waiting to be
transported to the distribution docks beside the factory.

61
VII. Chapter 6: Human Resource Management

Figure 6.1. Organizational Structure

JOB DESCRIPTION

Position Chief Executive Officer (CEO)

Brief Job Description The CEO is the head of the company who makes
decisions about the company’s policies and final
strategies. The CEO makes sure that the company
achieves its goals by communicating with the owners,
managers, staff, and the public. The CEO is responsible
for overseeing the job done by supervisors.

Qualifications ● Graduate of any business-related course

● Has organizational and leadership abilities
● Has excellent communication and public speaking
skills
● Has analytical and problem-solving skills
● Has competency in strategic planning

62
Position General Accounting

Brief Job Description The General Accountant provides information to

management by researching and analyzing accounting
data and preparing financial reports.

Qualifications ● Candidate must possess at least a Bachelor's

Degree in Finance/ Accountancy/ Banking or
equivalent
● CPA is an advantage but not required
● At Least 5 years of working experience in
General Accounting field is required for this
position
● Has strong computing skills and detail-oriented
● Must be proficient in MS EXCEL and familiar
with other accounting software

Position Chief Marketing Officer

Brief Job Description The Chief Marketing Officer is responsible for

overseeing the planning, development and execution of
an organization’s marketing and advertising initiatives.
The primary responsibility is to generate revenue by
increasing sales through successful marketing for the
entire organization, using market research, pricing,
product marketing, marketing communications,
advertising and public relations.

Qualifications ● Bachelor degree in business, marketing or

economics
● Experience in sales
● A commitment to excellent customer service
● Excellent written and verbal communication
skills
● Able to work comfortably in a fast-paced
environment

Position Market Research Analyst

Brief Job Description The Market Research Analyst performs a valid and
reliable research using modern (online, social media, etc)
and traditional (polls, focus groups, surveys, etc)
methodologies.

63
 ● Check and create studies to understand
competitor’s strategies, market trends, customer
preference and behavior
● Created industry sales reports

Qualifications ● Candidate must possess at least a Bachelor's

Degree in Marketing or equivalent
● At least 3 years of working experience in the
related field
● Knowledgeable in technical writing
● Excellent communication and presentation skills
● Strong Analytical and Planning skills

Position Advertising Sales Agent

Brief Job Description The Advertising Sales Agent Sell or solicit advertising
space, time, or media in publications, signage, TV, radio,
or the Internet. Includes individuals who obtain leases for
outdoor advertising sites or persuade retailers to use sales
promotion display items.

Qualifications ● Bachelor's Degree in Marketing Communications

or related to the field
● Excellent Communication and Persuasion skills
● Excellent knowledge of Facebook, Twitter,
Instagram, and Google - this will eventually
include booking TV advertisements
● Speaks and writes fluently in English
● Good understanding of social media KPI

Position Public Relations Officers

Brief Job Description The Public Relations Officer is responsible for overall
media, PR, event, and outgoing communications for
Umbrelight and its products.

Qualifications ● Candidate must possess at least

Bachelor’s/College Degree in any field
● At least 2 years of working experience in a
related field is required for this position
● Excellent oral and written communication skills
● Must have minimum 2 years experience in Public
Relations or equivalent

64
Position Product Specialist

Brief Job Description

The Product Specialist works with a team to ensure
excellent product delivery. They have a wealth of
knowledge about a product or range, and also analyze
market trends, develop sales, price and profitability
strategies, recommend improvements, identify
opportunities, and increase revenue. They should have
strong customer service and analytical skills.

Qualifications ● Graduate or Undergraduate of any 4 year business

course
● With at least 1 year work experience in sales
● Has good communication skills (both written and
oral), marketing, and presentation skills
● Must be confident, persuasive, creative,
proactive, and customer service oriented
● Computer proficient

Position Sales Director

Brief Job Description The sales representative works with customers to find
what the want, create solutions and ensure a smooth sales
process. Also, they present and sell products or services
to organizations, business or government agencies. They
contact potential buyers, present products and services,
answer questions and discuss pricing.

Qualifications ● Bachelor degree in business, marketing or

economics
● Experience in sales
● A commitment to excellent customer service
● Excellent written and verbal communication
skills
● Able to work comfortably in a fast-paced
environment

Position Sales Supervisor

Brief Job Description The Sales Supervisor is responsible to guide and

motivate the sales team, which may include sales

65
 representatives, sales agents and cashiers. He/She works
with the sales manager to draw job descriptions for
various roles within the sales team, participates in the
recruitment of these positions and allocates tasks
accordingly. When the sales team is not meeting their
sales targets, the sales supervisor implements appropriate
strategies to improve sales.

Qualifications ● Preferably a graduate of Business Administration,

Marketing or other related courses
● Has at least 2-3 years of sales experience
● Excellent listening, business analytical, and
negotiation skills
● Good command of English skills both spoken and
written

Position CHIEF OPERATIONS OFFICER

Brief Job Description The Chief operations officer oversees the day-to-day
operations and production of the company. He evaluates
the production process for continuous improvement in the
company’s day-to-day activities.

Qualifications ● Graduate of any business-related course

● Has organizational and leadership abilities
● Has excellent communication and public speaking
skills
● Has analytical and problem-solving skills
● Must be familiar with different International
Organization for Standardization (ISO)
procedures

Position Quality Control Specialist

Brief Job Description The Quality Control Specialist work as part of a

manufacturing team, maintaining records of defective
materials and ensuring that defective parts are repaired,
re-tested, or pulled from production. They may deliver
their reports to other team members to address persistent
quality issues in manufacturing and identify problem
areas.

Qualifications ● Graduate of any business-related course or has a

66
 professional certification in quality control
● Has organizational and leadership abilities
● Has excellent communication skills
● Has analytical and problem-solving skills
● Must be familiar with different International
Organization for Standardization (ISO)
procedures

Position Purchasing Agent

Brief Job Description The Purchasing Agent Obtains requirements by verifying,

preparing, and forwarding purchase orders; verifying
receipt of items; authorizes payment.

Qualifications ● Bachelor’s degree in business administration,

procurement, or a related field preferred.
● Previous experience as a purchasing agent or in a
similar position
● Excellent communication and negotiation skills
● Strong organization and documentation skills
● Strong research and analytical skills

Position Warehouse Personnel

Brief Job Description The Warehouse personnel are responsible for performing
an array of duties such as receiving and processing
incoming stock and materials, picking and filling orders
from stock, packing and shipping orders, or managing,
organizing and retrieving stock and other.

Qualifications ● Candidate must possess at least Vocational

Diploma/ Short Course Certificate,
Bachelor's/College Degree in any field
● At least 2 years of working experience in a related
field is required for this position
● Preferably 1-4 years experiences employee
specialized in Logistics/ Supply Chain or jobs
related to the work
● Can work under pressure and with minimal
supervision

67
Position Packaging Personnel

Brief Job Description Packaging specialists put supplies and finished goods in
bags, boxes and crates and then move them to loading
areas for delivery. They do final inspections, weights and
counts of items to ensure they meet production standards,
seal containers with tape and other adhesives, and label
boxes with the names of their contents and their intended
destinations.

Qualifications ● No formal education is required for the position

Position Cutting Personnel

Brief Job Description The Cutter Operator is responsible for completing all
cutting and trimming operations for fabrics with the
company’s quality standards. The Operator performs
daily/weekly/monthly on all cutting equipment to ensure
optimum output. The Cutter Operator works closely with
other production staff members to finish any cutting
specifications listed on the project.

Qualifications ● No formal education is required for the position

Position Sewing and Stitching Personnel

Brief Job Description The Sewing and Stitching Personnel either designs, make,
alter, repair the umbrella

Qualifications ● No formal education is required for the position

Position Assembly Line Personnel

68
Brief Job Description The Assembly Line Personnel fabricates parts and joins
them together to construct products like aircrafts,
automobiles, electronics and household appliances. Some
assemblers specialize in a particular part, such as electric
motors, or a type of product, such as office machinery.

Qualifications ● Candidate must be a high school graduate or

associate's degree for some positions

Position Security Guard Personnel

Brief Job Description The Security guard is responsible for

● Protect company’s property and staff by
maintaining a safe and secure environment
● Observe for signs of crime or disorder and
investigate disturbances
● Act lawfully in direct defense of life or property
● Apprehend criminals and evict violators
● Take accurate notes of unusual occurrences
● Report in detail any suspicious incidents
● Patrol randomly or regularly building and
perimeter
● Monitor and control access at building entrances
and vehicle gates
● Watch alarm systems or video cameras and
operate detecting/emergency equipment
● Perform first aid or CPR

Qualifications ● Candidate must be a high school graduate or

associate's degree for some positions
● Proven work experience as a security guard or
relevant position
● Trained security officer with diploma
● Ability to operate detecting systems and
emergency equipment
● Excellent knowledge of public safety and security
procedures/protocols
● Surveillance skills and detail orientation
● Integrity and professionalism

Position Maintenance and Repair Personnel

69
 Brief Job Description The Maintenance and Repair Personnel are the ones who
fixes and maintains mechanical equipment, buildings, and
machines. Tasks include plumbing work, painting,
flooring repair and upkeep, electrical repairs and heating
and air conditioning system maintenance.

Qualifications ● Candidate must be a high school graduate or

associate's degree for some positions
● Proven Maintenance Experience
● Skilled in the use of hand and power tools
● Ability to take apart machines, equipment, or
devices to remove and replace defective parts
● Ability to check blueprints, repair manuals, or
parts of catalogs if necessary.

Position Sales Director

Brief Job Description The sales director works with customers to find what the
want, create solutions and ensure a smooth sales process.
Also, they present and sell products or services to
organizations, business or government agencies. They
contact potential buyers, present products and services,
answer questions and discuss pricing.

Qualifications ● Bachelor degree in business, marketing or

economics
● Experience in sales
● A commitment to excellent customer service
● Excellent written and verbal communication
skills
● Able to work comfortably in a fast-paced
environment

Position Human Resource Director

Brief Job Description The Human Resource Director supports the development
and implementation of HR initiatives and systems,
provides counseling on policies and procedures, and
being actively involved in recruitment by preparing job
descriptions, posting ads, and managing the hiring
process

Qualifications ● Bachelor’s or Master’s Degree in Business

70
 Administration or relevant field
● Proven experience as an HR director’
● Knowledge of HR functions
● Excellent communication and interpersonal skills
● Problem solving and decision making skills
● Outstanding organizational and time management
abilities

Position Human Resource Assistant

Brief Job Description The Human Resource Assistant is a certified professional

who handles the daily administrative and HR duties of an
organization. They assist HR managers with recruitment,
record maintenance and payroll processing, and provide
clerical support to all employees.

Qualifications ● Candidate must be a graduate of Psychology,

Human Resources Management, Business
Administration or its equivalent
● With at least 1 year of experience in the facets
Human Resources operations
● Can execute tasks related to Labor Relations;
knowledgeable in the Labor Code of the
Philippines
● With above average communication skills (both
oral and written)

71
VIII. Chapter 7: Supply Chain Management

Upstream

The upstream channel of Umbrelight Inc. will be located in the following areas: Makati,
Sampaloc, Quezon City, and Alabang.

The Shaft, Ribs, Runners, and Stretchers of the umbrella will be provided by Power Steel
Specialist Trading Corporation since this company is known as one of the most trusted
distributors of steel products in the Philippines. The company delivers a complete line of
construction materials and offers a competitive price to meet the construction needs of the
customer from households to large corporations.

The LED Light under the handle of the umbrella will be provided by Akari Lighting and
Technology Corporation. Akari is a trusted provider of quality LED lights and they also sell
their products online to Shopee or Lazada. Their products are sure to be energy saving products
they distribute their products to 500 DIY or 800 Hardware stores nationwide.

The Handle of the umbrella will be provided by OfficeMan, Inc. This company sustains
distributorship of office and computer supplies. Moreover, it is recognized as the trusted and
reliable Master Distributor of GMP laminating products and equipment. Their core businesses
are business machines, computer products, and supplies, lamination and filling systems, office
furniture and equipment, corporate novelties, and printing services. The company also has
personalized umbrellas (from handle to canopy), ID laces, ballpens, notebooks, and sticky notes.

The Canopy, or otherwise known as the fabric of the umbrella, will be coming from All Good
Traders. This company is a wholesaler/retailer of cotton, polyester, nylon fabrics. Moreover, the
company supplies towels, socks, rain gear, and other equipment like these.

Midstream Channel

As of the moment, the company is looking into logistics firms that have locations in
multiple areas of Metro Manila so it would be easier to reach the customers. Potential 3PL
providers that the company is looking into are CEVA Logistics, Yusen Logistics, ASEAN
Manufacturing Industry Supply Chain, Procurement and Logistics and SGS Philippines.

Umbrelight Inc. looks to incorporate the services of a third-party logistics provider in

order for the company to focus more on its core competencies as the third party company will
take care of things such as warehousing, distribution and order fulfillment. The company is
interested in working with a third-party logistics provider because it will also give Umbrelight
Inc. time to assess other things related to operational costs as well as give more time to control
the quality of the products. Furthermore, working with this type of logistics provider will allow
access to larger resource networks that provide fast and quality discounts, not to mention assist
the company in delivering products on time and with the efficiency given that the company has

72
multiple branches and warehouses across different areas of Metro Manila. Lastly, it will help
save additional costs as Umbrelight, Inc. would not have to invest a lump sum of money for it is
the job of Third Party Logistics providers to help companies by utilizing the latest technology,
software, developments, warehouses for storage and staffing to develop new strategies to
compete in the market.

Downstream Channel

The downstream channel of Umbrelight Inc. will be located in the following areas:
Taguig City, Makati City, Pasig (Ortigas), and Quezon City. Umbrelight Inc. strategically wishes
to place the physical stores in these locations because the residents in these areas have a higher
disposable income. The company wishes to target Socio-Economic Class AB residents.
Primarily, the company wishes to target those who reside near their office or school and walk
daily to get to their desired locations.

Ultimately, these places contain commercial areas such as Ayala Malls, Rustan’s, and
SM Supermalls. These shopping malls, specifically their department stores, are the retail stores
that the company wishes to sell the product. The company can use these department stores as a
downstream channel for Umbrelight Inc. to make its mark in the market of umbrellas. Aside
from physical stores, the company wishes to expand online. As for e-commerce platforms, the
company will utilize websites such as Amazon, Lazada, and Alibaba to sell umbrellas. Having
an e-commerce platform will enhance the company’s presence nationwide. Moreover, aside from
the use of e-commerce platforms, the company will also use social media platforms such as
Instagram as a way to market and sell the product in order to maximize its market reach and
boost sales through an accessible platform. Umbrelight Inc. will work under a consignment
agreement with these companies for the partners to gain a certain percentage whenever these
retailers get to sell Umbrellight; thus, strengthening the relationship with them.

73
 IX. Chapter 8: Inventory Management
a. ABC Analysis

Raw Quantity Unit Actual % items Supplier Annual % Class

Material Quantity stocked Price Peso Annual
Demand (Php) Volume Peso
Volume

Canopy 23 inches 275448 34.85% 53 14,598,744 71.41% A

Runners 8 pieces 95808 12.12% 20 1,916,160 9.37% B

Ribs 8 pieces 95808 12.12% 15 1,437,120 7.03% B

Stretchers 8 pieces 95808 12.12% 10 958,080 4.69% B

Coin Cell 3 pieces

Battery 35928 4.55% 12 431,136 2.11% C

Tips 8 pieces 95808 12.12% 4 383,232 1.87% C

Shaft 1 piece 11976 1.52% 20 239,520 1.17% C

LED Light 1 piece 11976 1.52% 13 155,688 0.76% C

Handle 1 piece 11976 1.52% 10 119,760 0.59% C

Insulated 3 inches
electric Wire 35928 4.55% 3 107,784 0.53% C

Packaging 1 piece
(folding
cartons) 11976 1.52% 5 59,880 0.29% C

Packaging 1 piece
Label 11976 1.52% 3 35,928 0.18% C

Table 8.1. ABC analysis

After conducting the ABC analysis, the raw materials based on the bill of materials can
be classified into 3 inventory classes. These inventory classes are divided based on their
percentage product cost with 70%, 20% and 10% for classes A, B, and C respectively. The
canopy of the umbrella under class A, with an accumulated product cost of 71.41%. The next
class consists of runners, ribs, and stretchers with 21.09% of the annual Peso volume. Moreover,
the last 8 raw materials fall under class C, with a total of 7.5% of the total product cost.

74
 b. Cycle Counting

Class Total Classified Items Cycle Cycle Counting

A 275,448.00 21 13,116.57143
B 287,424.00 63 4,562.285714
C 227,544.00 125 1,820.352

Table 8.2. Cycle Counting

Umbrelight constantly needs to recount their inventory to ensure that the company does
not incur unnecessary costs and to ensure that the company has enough raw materials to operate
the manufacturing smoothly. With this, inventory classes were to be counted every monthly,
quarterly, and semi-annually respectively. As a result, Class A has 13,117 materials to be
counted daily, Class B has 4,562 pieces, while Class C has 1,820 pieces to be counted daily.

c. Holding Costs

Computation of Holding Costs

Budget for Machine Defects 61,991.67
Security Guard personnel 260,365.01
Maintenance and Repair personnel 260,365.01

Rent of Warehouse 2,400,000.00

Total Holding Cost 2,982,721.69

Table 8.3. Holding Cost Computation

The following costs must be taken into consideration when computing for the holding
costs: budget for machine defects, security guard personnel, maintenance and repair personnel,
and rent of warehouse. The overall holding cost is Php 2,982,721.69.

d. Setup Cost

75
 Set-up Cost Computation
Processing Fees 33,000
Telecommunications 2,000
Total Set-up Cost 35,000

Table 8.4. Set-up Cost Computation

There are only two expenses that need to be added for the total set-up costs which
are: processing fees and telecommunications. The sum of the said expenses is Php 35,000.

e. Product Cost

Product Cost Computation

Direct Material Shaft 236,000.00
Ribs 177,000.00
Runners 236,000.00
Tips 47,200.00
Stretchers 118,000.00
Led Light 153,400.00
Insulated Electric wire 35,400.00
Handle 118,000.00
Canopy 625,400.00
Coin cell battery 141,600.00
Packaging (folding cartons) 59,000.00
Packaging label 35,400.00

Direct Labor
Packaging personnel 260,365.01
Cutting Personnel 433,941.68
Sewing and Stitching personnel 520,730.02
Assembling personnel 520,730.02
Utilities
Water 144,000.00
Electricity 480,000.00
Total Production Cost 4,342,166.73

Table 8.5. Production Cost Computation

76
 The total production cost is Php 4,242,166.73. The reason as to why the production cost
has reached up to Php 4 million is because it takes into account all direct materials, direct labor,
and manufacturing overhead costs.

f. Economic Order Quantity

Economic Order Quantity

Annual
quantity
Raw material demand 2DS H 2ds/h Q
Canopy 275,448 19,281,360,000 2,982,721.69 6,464.35 80.40
Runners 95,808 6,706,560,000 2,982,721.69 2,248.47 47.42
Ribs 95,808 6,706,560,000 2,982,721.69 2,248.47 47.42
Stretchers 95,808 6,706,560,000 2,982,721.69 2,248.47 47.42
Coin cell battery 35,928 2,514,960,000 2,982,721.69 843.18 29.04
Tips 95,808 6,706,560,000 2,982,721.69 2,248.47 47.42
Shaft 11,976 838,320,000 2,982,721.69 281.06 16.76
Led Light 11,976 838,320,000 2,982,721.69 281.06 16.76
Handle 11,976 838,320,000 2,982,721.69 281.06 16.76
Insulated
Electric wire 35,928 2,514,960,000 2,982,721.69 843.18 29.04
Packaging
(folding cartons) 11,976 838,320,000 2,982,721.69 281.06 16.76
Packaging label 11,976 838,320,000 2,982,721.69 281.06 16.76

Table 8.6. Economic Order Quantity

Annual Set-up Cost

General Set Up General Annual Set-up Real Set Up Real Annual Set-
Raw material Cost Cost Cost Up Cost
Canopy 35000 119,907,183.5 0.127 435.32
Runners 35000 70,717,398.76 0.365 738.12
Ribs 35000 70,717,398.76 0.365 738.12
Stretchers 35000 70,717,398.76 0.365 738.12
Coin cell battery 35000 43,305,385.73 0.974 1,205.34
Tips 35000 70,717,398.76 0.365 738.12
Shaft 35000 25,002,376.11 2.923 2,087.71

77
 Led Light 35000 25,002,376.11 2.923 2,087.71
Handle 35000 25,002,376.11 2.923 2,087.71
Insulated Electric
wire 35000 4,3305,385.73 0.974 1,205.34
Packaging (folding
cartons) 35000 25,002,376.11 2.923 2,087.71
Packaging label 35000 25,002,376.11 2.923 2,087.71

Table 8.7. Annual Set-up Cost

Annual Holding Cost

General Holding General Annual Real Holding Real Annual

Raw material Cost Holding Cost Cost Holding Cost
Canopy 2,982,721.69 119,907,183.5 11 435.32
Runners 2,982,721.69 70,717,398.76 31 738.12
Ribs 2,982,721.69 70,717,398.76 31 738.12
Stretchers 2,982,721.69 70,717,398.76 31 738.12
Coin cell battery 2,982,721.69 43,305,385.73 83 1,205.34
Tips 2,982,721.69 70,717,398.76 31 738.12
Shaft 2,982,721.69 25,002,376.11 249 2,087.71
Led Light 2,982,721.69 25,002,376.11 249 2,087.71
Handle 2,982,721.69 25,002,376.11 249 2,087.71
Insulated Electric
wire 2,982,721.69 43,305,385.73 83 1,205.34
Packaging (folding
cartons) 2,982,721.69 25,002,376.11 249 2,087.71
Packaging label 2,982,721.69 25,002,376.11 249 2,087.71

Table 8.8. Annual Holding Cost

Expected Number of Orders

Annual quantity Expected Number of

Raw material demand Q Orders
Canopy 275,448.00 80.40 3,425.92

78
 Runners 95,808.00 47.42 2,020.50
Ribs 95,808.00 47.42 2,020.50
Stretchers 95,808.00 47.42 2,020.50
Coin cell battery 35,928.00 29.04 1,237.30
Tips 95,808.00 47.42 2,020.50
Shaft 11,976.00 16.76 714.35
Led Light 11,976.00 16.76 714.35
Handle 11,976.00 16.76 714.35
Insulated Electric wire 35,928.00 29.04 1,237.30
Packaging (folding cartons) 11,976.00 16.76 714.35
Packaging label 11,976.00 16.76 714.35

Table 8.9. Expected number of Orders

Expected Time Between Orders

Expected Number Working Expected Time

Raw material of Orders Days/Year Between Orders
Canopy 3,425.92 250 13.70
Runners 2,020.50 250 8.08
Ribs 2,020.50 250 8.08
Stretchers 2,020.50 250 8.08
Coin cell battery 1,237.30 250 4.95
Tips 2,020.50 250 8.08
Shaft 714.35 250 2.86
Led Light 714.35 250 2.86
Handle 714.35 250 2.86
Insulated Electric wire 1,237.30 250 4.95

Packaging (folding cartons) 714.35 250 2.86

Packaging label 714.35 250 2.86

Table 8.10. Expected Time Between Orders

Reorder Point

79
 Annual Lead
quantity Working AQD/Worki Time in Reorder
Raw material demand Days/Year ng days Months Point
Canopy 275,448 250 1,101.79 8 8,814.34
Runners 95,808 250 383.23 4 1,532.93
Ribs 95,808 250 383.23 4 1,532.93
Stretchers 95,808 250 383.23 4 1,532.93
Coin cell battery 35,928 250 143.71 4 574.85
Tips 95,808 250 383.23 4 1,532.93
Shaft 11,976 250 47.90 4 191.62
Led Light 11,976 250 47.90 4 191.62
Handle 11,976 250 47.90 4 191.62
Insulated Electric
wire 35,928 250 143.71 4 574.85
Packaging (folding
cartons) 11,976 250 47.90 4 191.62
Packaging label 11,976 250 47.90 4 191.62

Table 8.11. Reorder Point

Summary of Economic Order Quantity

expected
Expected time
Number of between
Raw material Q ASC AHC Orders orders ROP
Canopy 80.40 18,369,099.05 782,713,001.44 3,425.92 13.70 8814.336
Runners 47.42 10,833,503.59 461,618,944.16 2,020.50 8.08 1532.928
Ribs 47.42 10,833,503.59 461,618,944.16 2,020.50 8.08 1532.928
Stretchers 47.42 10,833,503.59 461,618,944.16 2,020.50 8.08 1532.928
Coin cell
battery 29.04 6,634,138.98 282,682,717.20 1,237.30 4.95 574.848
Tips 47.42 10,833,503.59 461,618,944.16 2,020.50 8.08 1532.928
Shaft 16.76 3,830,221.93 163,206,942.87 714.35 2.86 191.616
Led Light 16.76 3,830,221.93 163,206,942.87 714.35 2.86 191.616
Handle 16.76 3,830,221.93 163,206,942.87 714.35 2.86 191.616
Insulated 29.04 6,634,138.98 282,682,717.20 1,237.30 4.95 574.848

80
Electric wire
Packaging
(folding
cartons) 16.76 3,830,221.93 163,206,942.87 714.35 2.86 191.616
Packaging label 16.76 3,830,221.93 163,206,942.87 714.35 2.86 191.616

Table 8.12. Summary of Economic Order Quantity

LEGAL ENVIRONMENT AND CREDIT POLICIES

Before Umbrelight Inc.can operate there should be a series of permit that needs to be
acquired. The first step to get a permit is to go the Securities and exchange and commission
(SEC) to make Umbrelight Inc. legal entity in the market as a corporation type of business. The
process of getting a permit to the SEC is first you have to check if the desired business name is
available in the SEC office and if the desired name is available then you can reserve and register
it immediately. The following papers should be signed and notarized to get a permit in SEC:
Articles of Incorporation; By laws; Treasurer’s Affidavit; and joint Affidavit. After these papers
are signed and notarized, Umbrelight Inc. will need to submit this to the main office of Securities
and Exchange Commission located in Mandaluyong City. Afterwards, Umbrelight Inc. can claim
the Securities and Exchange Commission certificate of registration. The processing time for
accepting the permit would take about 1 week upon submission of complete documents.

Once the Umbrelight Inc. is registered with the Securities and Exchange Commision the
next step would be acquiring a barangay clearance in Sta. Rosa Laguna. There would application
forms that need to be filled up. The application form should be submitted with the Certificate of
business registration from the SEC, two valid id’s, proof of address such as Contract of Lease
(rented) or a Certificate of Land Title (owned); the processing time of acquiring a barangay
clearance will take one (1) day to process for the submission of complete documents.

Following the step of acquiring barangay clearance, Umbrelight Inc. must be able to
acquire a business permit from the Mayor’s office of Sta. Rosa, Laguna. To do that, Umbrelight
Inc. will go to the municipal office of Sta. Rosa, Laguna to fill up an application form that will
be provided. Umbrelight will be submitting their completed application form that was provided
by the municipal office of Sta. Rosa, Laguna - along with their Certificate of Business
Registration form SEC, Barangay Clearance Certificate, Two (2) Valid IDs, and their Proof of
Address such as Contract of Lease (rented) or their Certificate of Land Title (owned). The
processing time will take at least one week upon the submission of complete documents -
however, the processing time may take longer depending on the permit requirements based on
the industry.

81
 The final step that Umbrelight Inc. must take is that they must register with the Bureau of
Internal Revenue. Umbrelight Inc. must go to the Regional District Office (RDO) in Sta. Rosa
Laguna. Then, Umbrelight Inc. must fill up the BIR Form 1903 which is an application for
registration (For Partnership/Corporation). Following this, Umbrelight Inc. must submit their
completed registration form together with the Certificate of Registration from the SEC, a
Barangay Clearance and a Business Permit from the Mayor’s office in Sta. Rosa Laguna, Proof
of Address such as Contract of Lease (rented) or their Certificate of Land Title (owned) and
Valid IDs (if applicable). After the submission of the completed forms, Umbrelight Inc. must pay
the Registration form (BIR Form 0605) and the Documentary Stamp Tax (BIR Form 2000) if
applicable to Umbrelight Inc. After the payment, Umbrelight Inc. can register their book
accounts and receipts/invoices. Once all of those steps mentioned are done, Umbrelight Inc. can
claim their Certificate of Registration (BIR Form 2303) and finally be registered as a legal entity
in the Philippines.

Certificate/Permit Agency Purpose

SEC Certificate of SEC This Certificate enables the business

Registration to legally engage in trade, issue
receipts, trade assets, and be entitled
to certain rights provided by the
country’s corporate and investment
laws.

Barangay Clearance Barangay Hall of Sta. To be able to establish the business in

Certificate Rosa, Laguna (LGU) the area of the barangay. (small area)

Business Permit Mayor’s Office of Sta. To be able to establish the business in

Rosa, Laguna (LGU) the area’s municipality. (large area)

Certificate of Registration BIR Gives the business legal rights to

(BIR Form 2303) operate in the Philippines.

Table 8.13. Summary of Legal Environment and Credit Policies

82
 X. Chapter 9: Financial Management
a. Assumptions

The company has made the following assumptions to come up with their income
statement for the year of 2020. Out of the annual demand of 11,976 umbrellas for the company,
the researchers have assumed that 98% of these umbrellas were successfully produced (11,800
units). This fact will be needed in order to consolidate the total amount of costs needed to
produce the umbrella. Moreover, 93% of these umbrellas were sold (11,226 units). This new
fact will be used in order to formulate the income statement. It is worth take noting that the
company has decided to sell its umbrellas for a price of P899.00. This would mean that the sales
for the year 2020 would equate to P10,092,174.

An interview was conducted with an employee of Fibrella (a local competitor of

Umbrelight) named Arlene Ocmar on December 6, 2019. The researchers benchmarked the cost
of goods sold Fibrella currently has with Umbrelight’s expenses. Moreover, other costs were
given weights by the researchers in respect to the significance the costs bear to the company. The
group has assumed that 55% of Umbrelight’s costs will be coming from its cost of goods sold.
40% of the remaining costs would be allocated to the company’s operation expenses. Moreover,
the group has estimated a total of 18 factory workers that would partake in the production of the
umbrellas. Namely, 2 packaging personnel, 3 cutting personnel, 4 sewing and stitching
personnel, 4 assembling personnel, 2 security guard personnel, and 2 maintenance repair
personnel. All 18 factory-based employees are given a little above the minimum wage of P500
per day. The cost of the rent of the warehouse is based on the actual price being of the warehouse
in Sta. Rosa Laguna. All other costs were meticulously approximated by the group.

83
 b. Financial Statements
1. Income Statement

UMBRELIGHT, INC.
CONSOLIDATED INCOME STATEMENT OF OPERATIONS YEAR 2020

Year Ended December 31, 2020

Sales P 10,092,174.00
Cost of Goods Sold (COGS)
Direct Materials
Shaft 236,000
Ribs 177,000
Runners 236,000
Tips 47,200
Stretchers 118,000
Led Light 153,400
Insulated Electric wire 35,400
Handle 118,000
Canopy 625,400
Coin cell battery 141,600
Packaging (folding cartons) 59,000
Packaging label 35,400
Direct Labor
(2) Packaging personnel 260,365.0088
(3) Cutting Personnel 433,941.6813
(4) Sewing and Stitching personnel 520,730.0175
(4) Assembling personnel 520,730.0175
Manufacturing Overhead
Utilities
(Water) 144,000
(Electricity) 480,000
Budget for Machine Defects 61,991.66875
Security Guard personnel 260,365.0088
Processing Fees 33,000

84
 Maintenance and Repair personnel 260,365.0088
Total COGS 4957,888.411
Gross Sales P 5,134,285.59
Operating Expenses (OPEX)
General & Administrative Expense 432,814.56
Rent of Warehouse 2,400,000
Insurance costs 72,135.76
Advertising Costs 288,543.04
Telecommunications 2,000
Office Supplies 72,135.76
Depreciation Expense 324,610.92
Total OPEX 3,592,240.04
Earnings Before Interest and Taxes P 1,542,045.55
Interest Expense (30%) 46,261.37
Earnings Before Taxes 1,495,784.18
Taxes (30%) 448,735.25
Net Income P 1,047,048.93

Figure 9.1. Umbrelight, Inc.’s Income Statement for Year 2020

Shown above is the income statement of Umbrelight during the year 2020. Fortunately,
the company has made a profit in their first year (P 1,047,048.93). That would mean its profit
margin is 10.37%. The next following years (2021-2024) will be forecasted using risk analysis.

2. Financial Projections

For the financial projections, the researchers have used risk analysis to project the next 4
years of the company (years 2020-2024). Risk analysis removes the bias humans tend to make
when being too optimistic or too pessimistic in projecting cash flows. Moreover, the researchers
have decided to use the scenario analysis to understand the uncertainty of future cash flows.

Scenario analysis looks at various combinations of value drivers such as the units to sell,
selling price, expected sales, variable cost, and fixed costs. Moreover, you can divide the
scenario analysis into best-case and worst-case. It is most common to experience hardships on
the first few years of starting up a business. Therefore, the researchers have forecasted the years
2021 (down by 5%) and 2022 (down by 3%) with a worst-case scenario format. Moreover, after
3 years of conducting business, the company sees a turn in their misfortunes and see their

85
business slowly performing better. This is precisely why 2023 (up by 5%) and 2024 (up by 10%)
were given a best-case scenario format.

Risk Analysis
Year 0 2020
Revenues 10,608,200.00
Less: Variable Cost (VC) 4957888.411
Less: Depreciation Expense (DE) 324610.92
Less: Fixed Cost (FC) 3267629.12
Net Operating Income (NOI) 2,058,071.55
Less: Taxes (30%) 617421.4646
NOPAT 1,440,650.08
Plus: Depreciation Expense (DE) 324610.92
Less: Increase in CAPEX 4,798,580
Free Cash Flow -4,798,580 1,765,261.00
Worst-Case Scenario Best-Case Scenario
Rate of 5% Rate of 3% Rate of 5% Rate of 10%
2021 2022 2023 2024
Revenues 10077790 9775456.3 10264229.12 11290652.03
Less: VC 5205782.832 5361956.317 5093858.501 4839165.576

Less: DE 324610.92 324610.92 324610.92 324610.92

Less: FC 3431010.576 3533940.893 3533940.893 3533940.893
NOI 1116385.672 554948.17 1311818.801 2592934.637
Less: Taxes (30%) 334915.7017 166484.451 393545.6402 777880.3912
NOPAT 781469.9705 388463.719 918273.1606 1815054.246
Plus: DE 324610.92 324610.92 324610.92 324610.92
Less: Increase in
CAPEX
Free Cash Flow 1,106,080.891 713,074.639 1,242,884.081 2,139,665.166

86
 Figure 9.2. Umbrelight, Inc.’s Financial Projections for Year 2020-2024

c. Investment Decision Criteria

1. Payback Period

Payback period
Initial Investment: 4,798,580
Year Cash Flow Cumulative Cash Flow
1 1,765,261.00 1,765,261.00
2 1,106,080.89 2,871,341.89
3 713,074.64 3,584,416.53
4 1,242,884.08 4,827,300.61
5 2,139,665.17 6,966,965.78
PP 3.98 years

Figure 9.3. Umbrelight, Inc.’s Payback Period

2. Net Present Value

Net Present Value

Year Cash Flow
0 -4,798,580
1 1,765,261.00
2 1,106,080.89
3 713,074.64
4 1,242,884.08
5 2,139,665.17
k 10%
NPV P 433,532.98

Figure 9.4. Umbrelight, Inc.’s NPV

The net present value of the company is P 433,532.98. A positive net present value would
dictate that this project is profitable for the company.

3. Profitability Index

87
 Profitability Index
Net Present Value 433,532.98
Cash Flow Year 0 301,420
Profitability Index 2.438301958

Figure 9.5. Umbrelight, Inc.’s Profitability Index

The profitability index of the company is 2.4. A positive profitability index would denote that the
project is attractive.

4. Internal Rate of Return

Internal Rate of Return

Year Cash Flow
0 -4,798,580
1 1,765,261.00
2 1,106,080.89
3 713,074.64
4 1,242,884.08
5 2,139,665.17

IRR 13%

Figure 9.6. Umbrelight, Inc.’s IRR

The internal rate of return of Umbrelight is 13%. The IRR is used in capital budgeting to
give an estimate of the attractiveness and profitability of a company’s project.

XI. Conclusion

88
 Given the following Investment Decision Criteria: Payback period; Net Present Value;
Profitability Index; and Internal Rate of Return, it shows that investing on Umbrelight, Inc.
would be a good idea for it shows good results on the stated investment Decision Criteria.

Based on the Payback Period of the Umbrelight, Inc., it shows that in 3.98 years, the
Umbrelight, Inc., can finally break-even or recover from their initial investment. For a start-up
company with an initial investment of Php 4,798,580, having a payback period of 3.98 years is
already worth investing for. Normally, it takes a start up company approximately 4-5 years to
recover from the initial investment.

In the aspect of the Net present Value, Umbrelight, Inc. showed also a good result
because it has a positive Net Present Value in the end. Meaning that Umbrelight, Inc. has a
higher amount of cash inflow compared to the cash outflow. Having a higher amount of cash
inflow than cash outflow means that Umbrelight, Inc. receives more cash than the use of cash so
this shows that for 5 years Umbrelight, Inc. generates more cash that is enough to recover from
the expenses.

For the Profitability Index of the company it shows on the comparison between the cash
inflow of the company and the cash outflow. Profitability Index shows how much a company can
receive cash for every cash they use. This is why the formula is (cash inflow/cash outflow) and
for the Umbrelight, Inc. it shows that for every cash outflow they make, there would be a 2.44
times in return. This is promising for a start-up company. Based on the standard measurements
for Profitability Index, if the company shows a profitability index of greater than 1 then it means
it is worth investing for. This shows that there are more cash inflow for every cash outflow.

In the Internal Rate of return, Umbrelight, Inc. shows that it has an IRR of 13% or in
other terms it shows a growth rate of 13% for 5 years. The ideal Internal Rate of return for a
company is usually 12% - 18% and as you can see that Umbrelight, Inc. is in the usual IRR
standards.

Over all, we can say in the results of the investment decision criteria is that Umbrelight,
Inc. is a company that is worth investing for with the given results of Investment Decision
Criteria.

89
XII. References

Assessment Performance and Monitoring Division 2. (n.d.). Retrieved ………

from https://www.bir.gov.ph/index.php/zonal-values.html#rdo052.

Fibrella Web Editors. (n.d.) “About Us.” Retrieved from http://fibrellaumbrella.com/

How to Register Your Company with SEC – Philippines: PBR.com. (n.d.). Retrieved from 
https://philippinesbusinessregistration.com/company-registration/requirements/sec-
registration/.

How to Register a Corporation in the Philippines? (2016, September 9). Retrieved from 
https://mpm.ph/how-to-register-a-corporation/.

Hydro Techno Umbrellas. (n.d.) “About” Retrieved from 

https://www.facebook.com/hydrotechno/

Interview: Arlene Ocmar (Fibrella Employee of SM Department Store) : interview conducted on 
December 6, 2019

Kenton, W. (2019, November 18). What Is the Internal Rate of Return (IRR) Rule? Retrieved 
December 7, 2019, from 
https://www.investopedia.com/terms/i/internal-rate-of-return-rule.asp.

Psa.gov.ph. (2019). Philippine Statistics Authority | Republic of the Philippines. 

[online] Available at: https://psa.gov.ph/philippine-industry-yls/table/Wage Statistics.

Senz. (n.d.) “We create a smooth commute with our premium weatherproof products” Retrieved 
from https://www.senz.com/senz-umbrellas/

The Importance of Payback Period for SaaS Startups. (n.d.). Retrieved from 
https://tomtunguz.com/payback_period_cash/.

Totes Web Editors. (n.d.) “Corporate Information” Retrieved from 

https://www.totes.com/aboutus

What Is The Average Utility Cost Per Square Foot Of Commercial Property?: Iota. (2019, May 
14). Retrieved from https://www.iotacommunications.com/blog/average-utility-
cost-per-square-foot-commercial-property/.

Wilkinson, J. (2019, February 8). What is Profitability Index?: Profitability Index Formula & 
Calculation. Retrieved December 7, 2019, from 
https://strategiccfo.com/what-is-profitability-index/.

2018 Philippine Statistical Yearbook: PSA.gov (2018, October) Retrieved from 

https://psa.gov.ph/sites/default/files/2018%20PSY_final%28revised%20asof26Mar19%2
9_0.pdf

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