OPERATIONS MANAGEMENT – MMS114

Due June, 2009

Ivan Larry Student No. # M0700726 Page 1
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OFF-CAMPUS ASSIGNMENT

MMS -114 OPERATIONS MANAGEMENT

by

Ivan Larry Ivarapou

Student No # M0700726

An essay on Operational Analysis and Constraints at East New

Britain Copra & Cocoa Co-operative Society Limited.

Submitted in partial fulfillment of the requirements for

Masters Degree In Management

at the

PNG University of Natural Resources & Environment

(Formerly University of Vudal)

Due: June 2009

Lecturer: Dr.Gopi Chattopadhyay

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TABLE OF CONTENTS

1.0 Introduction
1.1 Company Background

2.0 Organizational Structure

2.1 East New Britain Development Corporation – Management Structure
2.2 East New Britain Copra & Cocoa Co-operative Society Ltd – Structure

3.0 East New Britain Copra & Cocoa Society Limited

3.1 Mission / Vision
3.2 Aims and Objectives of the Society

4.0 Organizational Chart and Key Issues

4.1 Duties to be Performed to Achieve this Mission
4.2 Details of Services Provided
4.3 Public Awareness and Information

5.0 Facility Location

5.1 Buying Point Location

6.0 Process Layout for Powers and Duties of Staff

7.0 Flow Chart Processes for ENBCCC

7.1 Flow Chart for Membership Application Process
7.2 Flow Chart for Copra Purchases and Export

8.0 Operational Analysis

8.1 Constraints and Risk Analysis
8.1.1 Information Technology
8.1.2 Data Processing
8.1.3 Weighbridge Scales
8.1.4 Transportation and Logistics
8.1.5 Natural Disasters (Volcanic Ash/Eruption)
8.1.6 World Market Prices for Copra
8.2 The Good Points
8.2.1 The Intention
8.2.2 Reviving the Copra Industry through Participation
8.2.3 Financial Grant with the Injection of K1 million from NDB
8.2.4 Copra Production as Bio-Fuel Demand Increases
8.2.5 Export Tonnage

9.0 Summary
10.0 References
11.0 Appendix
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1.0 Introduction

This essay aims to introduce East New Britain Development Corporation (ENBDC
hereafter), a business arm of the East New Britain Provincial Government (ENBPG
hereafter) and its subsidiary company, East New Britain Copra & Cocoa Co-operative
Society Limited (ENBCCC) and to determine the operations management process, risk
analysis and constraints affecting the company.

1.1 Company Background

East New Britain Development Corporation was formed in 1980 as part of the then
provincial governments’ development strategy to bring tangible benefits to the people of
East New Britain province. Major shareholders included the ENBPG, Mr. David Anderson
of Anderson Foodland Limited and the people of East New Britain province.

The twin volcanic eruption in 1994 caused catastrophic destruction to its operations in
Rabaul, which seriously affected the company, resulting in the relocation of its head office
to Kokopo, about 55km from the port of Rabaul.

In 2006, the board of directors meeting resolved to buy out the major shares belonging to
Mr. David Anderson, and all supermarket operations including stock was sold to Super
Value Stores and City Pharmacy Limited to manage as a separate entity, excluding
properties.

In 2008, a major board decision saw the emergence of ENBCCC to involve the people of
East New Britain through partnership shareholding in the production and export of copra &
cocoa to overseas markets.

The company began advertising on the local radio station and made awareness through the
respective local level government and communities about the advantages of investing in
such a project. Personnel with expertise were also brought in from reputable companies to
help set up the management, purchasing, accounting, information technology, weighbridge
and export systems.

Although setbacks were experienced during the initial development, progress was made
financially, when the National Development Bank in 2009 offered a K1 million loan to
kick start the ambitious project. Lamur (2009, p.23)

The company began purchasing copra in December of 2008, with the first shipment to
Australia totaling 181 tonnes in February of this year, which is a significant start for the co-
operative and people of East New Britain.

However, proper systems, control measures and standard operating procedures still need to
be documented as policy guidelines for the co-operative to ensure accountability and
transparency.
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2.0 Organizational Structure

2.1 East New Britain Development Corporation – Management Structure

Chairman
Mr. William Lamur

PA & Admin Officer

Mrs. Jeanette Otto

General Manager
Mr. Elisa Wesley

Manager ENBCCC Financial Controller Manager M & E

Mr. Joe Logo Mr. Tony R Kabaru Mr. Paul Tau

2.2 East New Britain Copra & Cocoa Co-operative Society Limited – Structure

General Manager
Mr. Elisa Wesley

Manager -
ENBCCC
a)
Accountant

Accounts Clerk Transport Copra Purchasing Shipping & Export

Mrs. Elsie Roberts Supervisor Supervisors Manager

Data Entry Clerk 1 Copra Loaders Copra Assessors Export Clerk

Data Entry Clerk 2 Drivers Weighbridge Clerk

Varzin

Payroll Clerk Weighbridge Clerk

Kabakaul
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3.0 East New Britain Copra & Cocoa Co-operative Society Limited

The company was setup to purchase both copra and cocoa and exporting to overseas
markets and with the objective of offering the people of East New Britain ownership
through the purchasing of shares in the co-operative society.

The major exporter of coconut oil in the province is foreign owned and since ENBDC is
owned by the provincial government, its main objective is to have the people actively
participate in development of their agricultural commodities for mutual gain.

Registered members (see appendix 1) of ENBCCC will sell both copra and cocoa through
the company. Proceeds from the sale and export of the commodities are given back as
rebates at the end of the financial year to the members whilst administrative costs are
retained for effective running of the organization.

The co-operative has built two buying points with storage tank facilities for coconut oil. A
mini mill has also been setup for downstream processing of 20% of the coconut oil for
local consumption whilst 80% of the copra will be exported to overseas markets in
Australia and Europe.

Exhibit 1.0 Exhibit 2.0

His Excellency the Governor General of Samples of downstream processing

PNG, Sir. Paulias Matane officiating at products on display during the
the opening of the mini mill at Vunadidir. opening of the mini mill.

3.1 Mission / Vision

v To enable copra producers in East New Britain to get involved in the value
added chain and compete with foreign owned exporters and promoting
downstream processing.

v Provide knowledge and information towards entrepreneurship development

thus enhancing the quality of life.
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3.2 Aims and Objectives of the Co-operative Society

The objectives of the co-operative society is to promote the economic, social and
cultural interest of its members and in particular-

a) to market, store and process such produce of its members as the

Board shall from time to time decide; and
b) to provide supplies and services to its members as the Board shall
from time to time decide; and
c) to operate a retail store for the benefit of its members and the better
distribution of consumer goods; and
d) to cultivate and produce agricultural products that the Board shall
from time to time decide; and
e) to manufacture what the Board shall from time to time decide; and
f) to do all such things as are incidental or conductive to the attainment
of the objects.

4.0 Organizational Chart and Key Issues

The staffing pattern is as follows:

Item Designation of Post Sanction Strength Present Vacancy

No:
1 General Manager 1
2 Copra & Cocoa Manager 1
3 Shipping & Export Manager 1
4 Export Clerk 1
5 Accountant 1
6 Accounts Clerk 1
7 Data Entry Clerks 2
8 Weighbridge Clerks 2 2
9 Copra Purchasing Supervisor 1
10 Copra Assessors 4
11 Payroll Clerks 1
12 Information Tech Officer 1
13 Copra Loaders 15
14 Transport Supervisor 1
15 Drivers 4
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4.1 Duties to be performed to achieve the Mission

§ Promote agricultural products which will sustain livelihood.

§ Encourage farmers to be shareholders in the co-operative.
§ Identify marketable produce and provide suitable schemes.
§ Purchase and exportation of copra & cocoa.
§ Provide information technology and databases to provide accountability,
future development and transparency.
§ Provide expertise in the area of self help projects for downstream
processing.
§ Provide awareness, workshops and seminars on marketable products and bi-
products.
§ Monitor and provide technical guidance for quality of produce
§ Resource survey and recommend to relevant authorities appropriate
measures to help produce quality products for overseas markets.
§ Assist local farmers by providing new methods of quality control.

4.2 Details of Services Provided

§ Registration of local growers.

§ Issuance of shares at K1.00 per share.
§ Issuance of Copra & Cocoa producer’s identification card.
§ Create database of all growers.
§ Purchase & Export of copra & cocoa for overseas markets.
§ Identify viable projects for the benefit of the shareholders.
§ Provide copra & cocoa incentives yearly.
§ Provide expertise for quality control.
§ Assist growers with technical information of produce.
§ Promote cooperative principles for other districts and provinces
§ Organize exhibitions / seminars / workshops for downstream processing.
§ Provide efficiency and professionalism for the shareholders.
§ Provide transportation to eliminate costs borne by growers.

4.3 Public Awareness and Information

A guidance and information centre is located within the ENBCCC offices to

provide necessary assistance to all new and existing shareholders. This includes
awareness and conflict resolutions that must be resolved to maintain stability and
growth of the co-operative.

All correspondences relating to the grievance is forwarded to the relevant

departments to take appropriate action thus avoiding circumstances.
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5.0 Facility Location

In keeping with the need to focus on growers and access to communication and
banking facilities, the office is situated along the Williams Rd in Kokopo and is
located at the Dawapia Building.

It is in a strategic location making it easier for access by growers from the different
wards for which the society is divided into. The office address and contact details
are:

East New Britain Copra & Cocoa Society Limited

Williams Rd
PO BOX 454
RABAUL
East New Britain Province
Papua New Guinea

Telephone: (675) 9828133 / 9828134

Facsimile: (675) 9828308
e-mail: jlogo@enbdc.com.pg

Exhibit 3.0 Exhibit 4.0 Receptionist Molina at the

The Dawapia Building in Kokopo ENBCCCL office in Kokopo.
with easier access for growers and within
a minute’s walk to the bank.
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5.1 Buying Point Location

Decisions regarding the location of facilities may be crucial in terms of a firm’s

profitability and survival. Location decisions tend to be an important strategy for
the delivery of services for based on the geographical area. Russell & Taylor (2009)

The two buying points of Varzin and Kabakaul are centrally located within the
different wards and communities. As many village trucks charge K100 per run, the
central location of the buying points makes it less costly for transportation to the
closest buying point.

ENBCCCL has taken the challenge forward by bring services to the people hence
growers have likewise brought copra to the co-operative

Exhibit 5.0 Buying Points from left to right, Kabakaul and Varzin respectively

Exhibit 6.0 Copra loaders at Varzin Exhibit 7.0 Truck loading copra at
Kabakaul
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6.0 Process Layout for Powers and Duties of Staff

Item No: Designation P O W E R S

Admin Finance Statutory Others
01 02 03 04 05 06
01 General Head of Drawing & Certificate Monitoring &
Manager Subsidiary Disbursement Shareholding Supervision
02 Copra Head of Authorization Sign & accept Monitoring &
Manager Department Cheques new members Supervision
03 Shipping Shipping & Quarantine & Monitoring &
Manager Export Shipping Supervision
04 Export Clerk Export Shipping
Documents
05 Accountant Cheques & Document Monitoring &
Accounting New Member Supervision
06 Accounts Supervise Prepare
Clerks Clerks payments/fees
07 Data Entry Sign / enter
Clerks New data
08 Weighbridge Data Entry
Clerks
09 Copra Purch Supervise Copra
Supervisor Purchasing
10 Copra Assess Copra
Assessors Quality
11 Payroll Payment of
Clerk Cheques
12 Info / Tech Computers /
Officer Data Info
13 Copra Stack & Load
Loaders Copra at depots
14 Transport Supervision of
Supervisors Copra Trucks
15 Drivers Driving of Copra
Vehicles
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7.0 FLOW CHART PROCESSES FOR ENBCCC

7.1 Flow Chart for Membership Application Process

Figure 1.0
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7.2 Flow Chart Process for Copra Purchases and Export.

Figure 2.0
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8.0 OPERATIONAL ANALYSIS

8.1 Constraints and Risk Analysis

8.1.1 Information Technology

Accounting information systems has yet to be completed due to the
departure of the IT Manager. This has caused a setback in that all data needs
to be entered into the accounting system for accountability. Although the
company has a state of the art technology in its head office, this is under
utilized due to financial shortfalls.

Exhibit 8.0 Computer Equipment & Main Server at ENBDC

8.1.2 Data Processing

Data recording is not fool proof due to manual operations of the
weighbridge, for data capture at the buying points. However data is being
input manually in the accounting system using the Attaché 7.0 Accounting
Software. Cheques have gone missing following current procedures where
they are paid out at the office rather than the buying points. There must be
accountability and transparency.

Exhibit 9.0
Data entry clerk Darusila from ENBCCC using Attaché for data processing,
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8.1.3 Weighing Scales

Weighing Scales are too small for big trucks and are loaded by manual labor
into bins provided for these purpose, which is costing turnaround time for
the trucks and other growers likewise.

However, decision was made initially to purchase smaller ones due to the
financial constraints at the time. Management will need to address this issue
as turn around time for trucks are being hampered by this procedure.

8.1.4 Transportation and Logistics

The logistics of transportation involves planinng; implementation and
controlling the physical flow of copra from the buying points to the storage
shed and to the mini mill and the capacity to cater for cartage must cut down
costs whilst increasing profits for the shareholders.

Exhibit 10.0 Staff from ENB Port Services loading copra for ENBCCC into
containers for fumigation and export to overseas markets

8.1.5 Natural Disaster (Volcanic Ash / Eruption).

As the copra shed is located within the vicinity of an active volcano, dust
can affect the quality of copra. Care must be taken for preventive methods
as it will significantly affect income when poor quality is exported.

Also a full scale eruption may cause the closure of the shed and shipment
will be severely affected, hence the society’s existence will be threatened.

8.1.6 World Market Prices for Copra.

Copra market prices are relatively low compared to other commodities like
palm-oil which is an alternative to coconut oil. Low prices on the world
market are more likely to cause low export quota for ENBCCC.

ENBCCC must review continually market changes or diversity between

other products to maintain the society to a profitable level for the
shareholders.
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8.2 The Good Points

8.2.1 The Intention

To offer shareholding to the people of East New Britain to what they already
have in place, copra & cocoa. What makes the real difference is that the
people actually own and have a say in what they produce. Foreign
companies have being taking advantage of the industry by paying less for
the hard work that the people have put into.

The people of East New Britain can now actually produce and sell, knowing
they will benefit in the future through the objectives and role of the co-
operative.

8.2.2 Reviving the Copra Industry through Participation

Agriculture through copra, cocoa and coffee is the main sector of the people
of Papua New Guinea including East New Britain and contributes 13% of
the Gross Domestic Product (GDP). US Department of State, (2009)

These crops are mainly grown by small-scale farmers who sell the access
portion to the foreign exporters and the remaining portion is consumed
locally. At the moment 83% of copra is produced by small holders of the
informal sector. It is clear that the growth in the informal sector or
subsistence sector is promoting the agriculture sector as well as the
livelihood of the majority of the people. PNG Business & Tourism (2009)

The agriculture sector development through the government’s medium term

development strategy and the emergence of local buyers with intentions like
ENBCCC has seen an increase in production due to the people’s interest in
shareholding in the co-operative as government figures show K42 million in
exports of copra for 2008. Bank of Papua New Guinea, (2009)

8.2.3 Financial Grant with Injection of K1 million from NDB

The National Development Bank (NDB) is very keen to support and
mobilize the people so that they will not only produce from the land, but
also sell their agricultural produce for their own benefit instead of so many
middle men in between, including a lot of foreign owned companies who
have been making a large profits from the sweat of the people. Lamur (2009,
p.23)

ENBCCC received a loan of K1 million from NDB towards this cause and
has seen much excitement for the people of East New Britain for
participation in the co-operative through the government.
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8.2.4. Copra Production as Bio-Fuel Demand Increases

The traditional means of coconut export was cooking oil and pharmaceutical
products and cosmetics.

However with the emergence of bio-fuel, the demand for methyl ester, the
bio-fuel component from coconut has pushed demand up in the Asia Pacific
region including Papua New Guinea. Plant Genetic Resource News, (2008)

As fuel is expensive for the rural people of Papua New Guinea, bio-fuel is
practical and an affordable alternative with no toxic chemicals being
produced. Bio-diesel can used to run generators and any diesel engines with
little or no modification at all.

On the local market in East New Britain, demand for oil has increased,
because ordinary people have seen the financial gain on producing soap and
cosmetics from the bi-product of coconut oil such as glycerin. As people
learn the basics of soap making or cosmetic production skills, the trend to
making money has pushed coconut production up for ENBCCC.

8.2.5. Export Tonnage

Figure 3.0 Chart Showing Export Tonnage by ENBCCC in 2009

Copra Exports 2009

350

300

250

200
Tonnage

150

100

50

0
JAN FEB MAR APR MAY
Months
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9.0 Summary

The objective and role of ENBCCC is to bring tangible benefits to the people of East New
Britain by involving the people through the buying of shares in the company. This means
that the people become owners of the company and become responsible for their company.

Foreign companies have dominated the processing of copra and cocoa over the last few
decades with little returns to the people’s hard work. These companies enjoyed monopoly
until the ENBDC board embarked on an ambitious project to give back to the people what
they worked hard for, whilst indirectly reviving the copra industry through the
governments’ medium term strategy plan and green policy. The national government
through the National Development Bank (NDB) supported the cause of this project by
granting ENBCCC a loan of K1 million kina.

ENBCCC took the challenge of bringing the task of providing service for the people right
to their respective communities and in the process burden the people transport and other
costs, compared to the enormous cost which had previously suppressed most growers,
hence the low production of copra in the province.

Although the co-operative concept is not new to the country, it was the foundation to which
many businesses and plantations were built on in the last century. Since the last decade co-
operative societies have faded from the business world and people, however success for
ENBCCC has being measured by the number of growers totaling over 2000 who have
become members of the co-operative and now sell their produce to the company they own.

In order to gear up the co-operative to meet the challenges posed due to economic
liberation and super fast growth of other commodities like palm oil and cassava, ENBCCC
has opted to provide services, accountability and transparency in it’s dealing with the
people’s company.

To put in simple words, some of the ways ENBCCC will serve its’ shareholders are by:

§ Cooperation and Transparency

§ Courtesy and Understanding
§ Efficiency and Professionalism
§ Accountability in all its transactions.
§ Provision of transportation for their produce
§ Sourcing of better markets for the people’s produce.
§ Incentives and yearly rebates

ENBCCC maybe new on the arena for copra production and export, coupled with
operational risks and constraints, but new research for the use of coconut oil as an
alternative to fuel, as in bio-fuel (see appendix 2), copra may be the next best commodity to
be the country’s biggest revenue earner and for the people of East New Britain.
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10.0 References

Bank of Papua New Guinea and Commodity Boards (2008)

http://www.bankpng.gov.pg/index.php?option=com_content&task=view&id=239&Itemid=
121 [Viewed 25/05/09]

Bureau of East Asian and Pacific Affairs (2009) http://www.state.gov/r/pa/ei/bgn/2797.htm

[Viewed 25/05/09]

Lamur, William (2009) Implementing the National Agriculture Development Plan, Post
Courier, 04 May 2009, p.23

Nickels, W. et al. (2005) Understanding Business 7th Ed. New York. McGraw-Hill Irwin

Papua New Guinea Business & Tourism. (2003)

http://www.pngbd.com/forum/showthread.php?p=43136
[Viewed 25/05/09]

Planet Genetic Resources New. (2008)

http://papgren.blogspot.com/2008/03/rp-faces-copra-shortage-as-biofuel.html
[Viewed 25/05/09]

Russell, R. & Taylor, B. (2009) Operations Management – Along the Supply Chain 6th
Ed, John Wiley & Sons (Asia) Pte Ltd
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11.0 Appendix 1 (Membership Application Form – EBBCCC)

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11 Appendix 2 Bio- Fuel from Copra