STREAMLINED FINISHED GOODS WAREHOUSE OPERATIONS OF

JG SUMMIT PETROCHEMICAL CORPORATION

THRU LEAN SIX-SIGMA PRINCIPLES

A Research Paper Presented to the Faculty of College of Accountancy,

Business, Economics, and International Hospitality Management

In Partial Fulfillment for the Requirements for the Degree of

Master in Business Administration

GARCIA, ALLAN ANGELO U.

December 2019
 Chapter I
THE PROBLEM

Introduction

The primary aim of the Lean method is to reduce waste. The goal of Six

Sigma is to reduce variation for optimal quality control. The discipline known as

Lean Six Sigma (LSS) blends these two approaches. Refinements to the

production process are essential to managing and reducing the 8 wastes

analyzed by the Lean method. By paying careful attention to how waste affects

production processes (and vice versa), business leaders can take significant

strides toward optimizing their operations.

Lean Six Sigma is a powerful, proven method of improving business

efficiency and effectiveness. In a nutshell, there are five key principles of Lean

Six Sigma Business Transformation to bear in mind, and these are: customer

focus, problem identification and solution, removal of variations and bottlenecks,

improved process flow, and flexibility and responsiveness.

In the 21 year run of JG Summit Petrochemical Corporation, Logistics

Department has been a key functional area that brought an avenue of growth

and revenue to the company. Since its inception in the year 1998, JG Summit

Petrochemical Corporation utilized two state of the art warehouses, a 3.5Ha

warehouse with storage capacity of 25,000 MT, and a 1.5Ha warehouse with

storage capacity of 13,000 MT. Storage expansions are currently undertaken and

now a modern 2.4Ha warehouse is now nearly completed.

Since Lean Six Sigma is a method that relies on a collaborative team

effort to improve performance by systematically removing waste and reducing

variation, it combines lean manufacturing/lean enterprise and Six Sigma to

eliminate the eight kinds of waste such as defects, over-production, waiting, non-

utilized talent, transportation, inventory, motion, and extra processing. These

wastes are highly present in the company since the plant is operational round-

the-clock and requires human, system, and equipment intervention to get all the

works done.

Many lean purists believe that all warehouse functions are nothing but

pure waste. Unfortunately, efficient and effective logistic operations in the global

economy create significant competitive advantages and simply cannot be

ignored. The Lean warehouse is necessary and plays a crucial role in the entire

supply chain. The use of facilities for inbound material logistics and outbound

finished goods distribution are the bridges that connect all the imbalances and

lack of flow in the entire stream. Leaders inside the warehouse must be

knowledgeable about Lean warehouse techniques. By using lean principles,

warehouses will see a remarkable improvement in organization and product flow

as well as their ability to meet the demands of customers.

Creating a Lean warehouse is not something to accomplish overnight. It

takes vision, planning, strategy, tools and tactics. The company need to develop

team members into problem solvers and then provide a leadership infrastructure

to support their efforts. Identifying and solving problems may seem simple

enough, it can prove to be elusive for some leaders.

Background of the Study

The visibility of material flow, inbound logistics, internal warehouse flow,

and outbound logistics are crucial to the Lean warehouse. The management

needs to understand the flow of material and support the perfect order, which is

the right quantity, at the right place, at the right time in the right quality. The lean

concept of visual management allows leaders to understand the score of the

operation so they can make decisions in real time that impact the overall flow of

material to the customer. This concept is counterintuitive to many warehousing

operations. Most warehouse operations simply react to what orders show up at

the facility on any given day.

Since results achieved through Lean warehouse efforts can be powerful,

improved customer fill rates, decreased inventory levels, decreased inventory

carrying costs, improved inventory accuracy, increased asset and team member

utilization are some of the benefits that JG Summit Petrochemical Corporation

may harvest out of toils. The concept of standardization is a key Lean warehouse

principle. Creating standardization of processes is to create tasks are easily

repeatable with planned zero waste. The creation of standard work allows the

warehouse team to understand processes from the point of view of inputs,

procedures, timing and outputs.

With this dilemma in mind, the researcher came up with the study that

justifies the goal to create all three finished goods warehouses of JG Summit

Petrochemical Corporation Lean warehouse in which where visible problems can

be solved by solutions which resolves the root cause. Having success in this

commitment will create an ideal Lean warehouse which drives powerful business

results.

Statement of the Problem

The study ought to provide formal recommendations to JG Summit

Petrochemical Corporation regarding the benefits it may acquire out of this

research work.

Specifically, the study is outlined to answer following questions:

1. What is the current status of JG Summit Petrochemical FG warehouse in

terms of the following attributes;

a. Total warehouse space,

b. Total available space,

c. Manpower,

d. Available equipment,

e. Software solutions?

2. What are the positive values that the company may acquire given that

they adopt Lean Six-Sigma Principles?

3. What strategic plans may be proposed to sustain the operational

equilibrium of the Lean Six-Sigma compliant warehouse?

4. How can efficiency and effectiveness of the project be measured?

Theoretical Framework

The theoretical framework is a summary of the theory regarding a particular

problem that is developed through a review of previous research on the variables

involved. It identifies a plan for investigation and interpretation of the findings. The

theoretical framework involves a well-supported rationale and is organized in a

manner that helps the reader understand and assess a given perspective. The

purpose is to demonstrate that the proposed relationships are not based on personal

instincts or guesses, but rather formed from facts obtained from authors of previous

research.

The development of the theoretical framework helps to clarify the implicit

theory in a manner that is more clearly defined. It helps to consider other

possible frameworks and to reduce biases that may sway the researcher’s

interpretation. The researcher develop the theoretical framework and consider

alternative theories that might challenge multiple perspectives and consider the

limitations associated with different theories, and quite possibly, that the problem

could be better understood by other theoretical frameworks.

The design of this study was philosophical in nature. A clear philosophy

serves to develop cannons for what is ‘real, true, and of value’ for a profession.

Philosophical approaches to research are generally void of traditional research

methods, but rather serve to argue a specific aspect of a disciplinary knowledge

base (Burbles & Warnick, 2006). Sound philosophical methods include rigor in

research review, well-articulated focus, and acknowledgement of Kitchel and Ball

Quantitative Theoretical...Journal of Agricultural Education 189 Volume 55, Issue

1, 2014 multiple perspectives (Burbles & Warnick, 2006). The researcher

approached this philosophical paper through a constructivist epistemological lens

(Guba & Lincoln, 2005), viewing knowledge as a product of collective human

consciousness, with the goal of creating a narrative to expand the professional

discourse regarding this topic. To ensure rigor, the researchers focused the

philosophical lens and subsequent review of literature toward the scope of theory

use in Lean Six-Sigma principle theories from year 2008 to present. Frequent

peer debrief was utilized to ensure credibility and trustworthiness of the

philosophical reflection.

Conceptual Framework

The conceptual framework indicates the effect of the input variables to

assess the major concerns, gather data, and generate ideas for the streamlined

finished goods warehouse operations of JG Summit Petrochemical Corporation.

It elaborates the research problem in relation to relevant literature. This section

may summarize the major (dependent and independent) variables in the

research.

The framework is summarized in a schematic diagram that represents the

major variables and their hypothesized relationships and become a sort of map

that includes the research question, the literature review, methods and data

analysis. It helps a researcher to properly identify the problem they are looking

at, frame their questions and find suitable literature. Research uses a conceptual
framework at the outset because it helps the researcher to clarify his research

question and aims.

The figure below shows the conceptual paradigm used in the study. The

IPO or Input-Process-Output model was adapted by the researcher for its

appropriateness to show how the input variables and the company’s current

finished goods warehouse status in terms of total warehouse space, total

available space, manpower, available equipment, and software system solutions;

then, interacts and undergo the process of analysis and statistical treatment of

data to bear the desired output which is the application of Lean Six-Sigma

principles in JG Summit Petrochemical Corporation finished goods.

Figure 1.1
Conceptual Framework

Current finished Analysis and

Application of Lean
goods warehouse statistical treatment
Six-Sigma Principles.
status. of data.

INPUT PROCESS OUTPUT

Hypothesis

This study is pursued with the desire of testing if:

Ho: There is significant relationship between the perceived finished goods

warehouse variables and the effectiveness of the proposed Lean Six-Sigma

principles undertaken by the researcher. As seen on the figure above, the

assessment and evaluation of each variable will shed light to the study by giving

important data necessary for the formulation of an effective and efficient Lean

Six-Sigma compliant warehouse.

Significance of the Study

The results of the study will be of great benefit to the following:

To the host company - JG Summit Petrochemical Corporation, data given

herein will provide the management with information on how an effective practice

of Lean Six-Sigma principles can be streamlined throughout the entire finished

goods warehouses. The results will enable the top management to improve the

existing practices and alleviate warehouse wastes.

To the students, this study will provide information regarding the subject

which commonly becoming a topic of interest in modernizing corporate world.

This study will evaluate the effectiveness and efficiency of a Lean Six-Sigma

compliant company as well as the needed attitude and approach to execute such

changes. Data gathered will also help the students improve academic

understanding which they may use in future researches.

To the academic institution, this study will improve the school in the

development of graduate school research papers. This study will foster new ways

of enhancing knowledge, skills and attitude, thus preparing globally-competitive

businessmen and professionals in the future. This study will also help in the

advancement of school management, critical leadership and teaching-evaluation

approach.
Scope and Limitations of the Study

Every study has limitations. Study limitations can exist due to constraints

on research design or methodology, and these factors may impact the findings of

the study. However, many researchers are reluctant to discuss the limitations of

the study in their papers, feeling that bringing up limitations may undermine its

research value in the eyes of readers and reviewers.

Although limitations address the potential weaknesses of a study, writing

about them towards the end of the paper actually strengthens your study by

identifying any problems before researchers or reviewers find them. Furthermore,

pointing out study limitations shows that the researcher considered the impact of

research weakness thoroughly and have an in-depth understanding of the

research topic. Since all studies face limitations, being honest and detailing these

limitations will impress researchers and reviewers much more than ignoring

them.

In the study, the research was comprised the examination of warehouse

functions in JG Summit Petrochemical Corporation Finished Goods Warehouses

gathered through in-depth management interviews, survey questionnaires, focus

group discussions, time and motion study, and through observations.

However, there is a limitation in the study since not all warehouses were

covered by the data gathering tools (Finished Goods Warehouse 3 is yet to be

opened mid this year). Answers gathered from employees may also vary based

on their perception towards the workplace.

Definition of Terms
 The following terms used in the study are defined conceptually and

operationally for further clarity and better understanding of the facts presented

herein.

Effectiveness. The degree to which objectives are achieved and the

extent to which targeted problems are solved. Effectiveness means ‘doing the

right thing’. In the study, it is used to determine if the proposed countermeasures

can solve the storage capacity concerns faced by the company.

Efficiency. The ability to do things well, successfully, and without waste.

Efficiency means ‘doing the thing right’. In the study, it is used to determine if the

proposed countermeasures can alleviate the storage capacity concerns faced by

the company.

Finished Goods. These are goods that have been completed by the

manufacturing process, or purchased in a completed form, but which have not

yet been sold to customers. In the study, finished goods represent the product of

JG Summit Petrochemical Corporation that occupies the finished goods

warehouses.

Logistics. The detailed coordination of a complex operation involving

many people, facilities, or supplies. In the study, it is the business department in

which the study is undertaken.

Lean Principle. It is a business methodology, born of a manufacturing

practice that is transforming the world of knowledge work. In the study, Lean

Principle is half the cornerstone that the researcher wants to establish.

 Profile. A set of identified determinants that gives a brief description

about something, or someone. In the study, it determines the basic profile of the

respondents as to their number of years engaged with the company and as to

their position held in logistics section.

Petrochemical. Anything that relates to or denoting substances obtained

by the refining and processing of petroleum or natural gas. In the study, it is the

industry to which the hosting company is economically involved.

Six-Sigma Principle. It is a systematic approach for eliminating errors

which uses statistical methods to improve quality by minimizing variability in

different fields and stages of business processes. In the study, Six-Sigma

Principle is the other half of the cornerstone that the researcher wants to achieve

for the company.

Warehouse. It is a large building where raw materials or manufactured

goods may be stored before their export or distribution for sale. Operationally, it

is the facility in which logistical activities of the company commences.