GROUP ASSIGNMENT - OPERATION MANAGEMENT 1

Operation Management Of A Hypothetical Company

Md. Jahirul Islam MBA-09, ID: 20919004

Anamul Haque, MBA-09, ID- 20919006

Hasan Mohammed, MBA-09, ID-20919007

Army Institue of Business Administration (AIBA), Sylhet

Mr. Mahfuz Riyad

Lecturer, Production & Operation Management

07 July, 2020
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Preface
Production, the creation of products and services, is an essential function in every firm.
Production turns inputs, such as natural resources, raw materials, human resources, and capital,
into outputs, which are products and services. This process. Managing this conversion process is
the role of operations management. The profit of any business depends on productivity while the
productivity of any companies controlled by business strategy, proper locations and its mission,
vision etc.
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Table of Contents
Contents Page No.
Background 05
Company Profile 05
Mission & Vision 06
Products Line 06
Core Competitors 06
Business level strategy 07
Following Strategy 07
Distinctive competency 08
Productivity 08
Forecasting and its methods 09
Location Analysis 11
Reference 13
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Background
Following instruction of our admirable class teacher Mr. Mahfuj Riyad (Production &
Operation Mnagement), we have to start this paper with own choosing of Bashundhara
Paper Mills Ltd. where we will define the company business, its mission, vision, products
line, business level strategy, its competitors, productivity, forecasting to next year sales
based on current year performance, location analysis etc . After accumulate all the
determination, we will try to recommend shortly in conclusion.

Company Profile

Bashundhara Paper Mills Limited (BPML) is a sister concern of Bashundhara Group. The
Company was incorporated in Bangladesh in 1993 as a private limited company. Subsequently it
was converted into a public limited Company now a publicly listed company. After starting its
commercial operation as an import-substitute local paper manufacturing company another two
companies of the Bashundhara Group of same nature namely “Bashundhara Newsprint & Duplex
Board Industries Limited” (Former Shahjalal News Print Industries Ltd.) and “Bashundhara
Tissue Industries Limited” amalgamated with BPML on October 10, 2009. After the
amalgamation of all three companies caring out its business as a single legal entity and operated
three separate units as “Unit 1”, “Unit-2” and “Unit-3” for the administrative purpose. The three
industrial units, are separate in their location and product diversity. All are equipped with
industry best state-of-the-art facilities and are regularly going through meticulously opted
refurbishment processes to cope up achieving "scale of economies" and "resource conservation"
esp. in energy (power consumption) and water usage per unit output. At present, Bashundhara
Paper is the trusted source of volume Paper-needs of both Government level and, while keep
general consumers pace of exporting to over 25 different global destinations. Noteworthy, it has
been successful to become the only Company in Bangladesh having the certification of ISO
9001:2015 and FSC-CoC at the same time, certainly due to its thrust on environment is visible in
various eco-friendly initiatives at the Plant sites by adopting modern technology and process
innovations. Run by a group of sturdy technical and highly experienced paper professionals of
the Country since its inception, all the production units of BPML is absolutely environment
friendly through leverage of mostmodern Effluent Treatment Plants (ETPs). The Company runs
through unique ERP solution (SAP), where this transformational technology enables to bring
together best practices across all functions of the organization to deliver highest value to all
external and internal stake-holders. The Company continues to conduct regular audits for its
quality standards and customer satisfaction through conducting in-house resource and also by
independent agencies, which in turn helps to be updated with changing customer needs and their
preferences and develop its products to stay well ahead of the curve. These pioneering moves
have given Bashundhara Paper a pride of place as the change leader, ushering in a phase of
complete makeover in the Bangladeshi paper market. (Paper, 2017-2018)
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Mission
"We Are Passionate About Helping The World Excel In Education, Communication, Business
And Salutariness By Offering Eco-Sustainable Paper-Based Solutions"
(http://www.bpml.com/page/mission-values, 2020)
Vision
“For the People, For the Country” (http://www.bpml.com/page/mission-values, 2020)

Products Line

A product line is a group of related products all marketed under a single brand name that is
sold by the same company. Organizations sell numerous product offerings under their
different image names, trying to separate them from one another for better ease of
use for purchasers. Organizations frequently grow their contributions by adding to
existing product offerings since buyers are bound to buy items from brands with
which they are as of now recognizable. The BPML has different product line also
shown as below:

Wrapper/Packing Materials: Liner, Kraft, Corrugated Medium, Media paper etc.

Printing Paper: White Printing-42, 47, 50, 55, 60, 61, 65, 70, 80, 100, 120 Gsm
Writing Paper: Newsprint, Writing-42, 47, 50, 55, 70 Gsm
A4-Paper: 65, 70, 80 Gsm
Coated Paper: CCPM, Art Paper, Glasine Paper, Bidi Paper.
Tissue Paper: Facial Tissue, Paper Napkin, Kitchen Towel, Toilet Tissue, Baby Diaper,
Hand Towel, Clinical Bedsheet etc.

Core Competitor:
Tanveer Paper Mills Ltd. (sister concern of Megna Group) with Liner, Kraft and Corru -
gated Board.

Business level strategy:

Michael Porter, a professor at Harvard Business School, is widely regarded as the Father of
Corporate Strategy. According to Porter, there are three types of business-level strategy any
organization can pursue to gain an advantage over its competitors. These are cost leadership,
differentiation and focus.
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Cost Leadership

Organizations that pursue cost leadership gain a competitive advantage by reducing op -

erating costs to a level below the industry average. Business owners then pass these
savings on to their customers with low-priced merchandise or services or maintain av -
erage pricing to increase their profit margin.

Differentiation

Companies that leverage a differentiation business-level strategy win market share and
defend higher pricing by offering a unique product or service features that are valued
by their customers.

Focus
Here the company focuses on one or more narrow market segments. To attract cus -
tomer here use either the cost leadership or differentiation.

Following Strategy

Based on above brief description of market strategy I can say that the Bashundhara
Paper Mills is following cost leadership and differentiation both on two different
grades of products where through a lowest cost with minimum quality of liner/media
it’s following the cost leadership and with a unique product of Bidi Paper this is
following differentiation strategy.
Following lowest price with minimum quality of liner media or kraft paper BPML
captured most of the market share in Bangladeshi local market, even in some foreign
country like Nepal, Srilanka, Maldeep etc. Maximum number of packing industry
purchased this paper from BPML due to its lowest price with minimum optimal quality.

On the other hand, a unique grade of paper like ‘Bidi Paper’ is producing & supplying
with more rate than actual. Here the BPML is characterizing as only one local
manufacturer since no one can produces it like him. And the BPML providing the Bidi
Paper to different tobacco industry like Akij, British American Tobacco etc. though
another manufacturer Affil Paper Mills produce it but very far from its unique quality
of BPML. This phenomenon is similar with differentiation strategy.
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Distinctive competency
A distinctive competency is an organization's strengths or qualities including skills,
technologies, or resources that distinguish it from competitors to provide superior and
unique customer value and, hopefully, is difficult to imitate. The quality paper grade
like Bidi Paper has been given strength and superiority to BPML from others
competitors.

Productivity
The term “productivity” refers to the performance metric that is usually used to measure the
efficiency of the production process of a company during a given period of time. It can be used
to measure the efficiency of human capital or machine.
The formula for productivity is very simple and it can be expressed as output produced divided
by input provided. Mathematically, it is represented as,
Productivity = Output / Input
Here, the productivity of labor, machine has been shown on BPML historical data in below. Also
the multifactor productivity has been shown.
Monthly
Number Workin
Machine Machine Labor
Producti of Working g
Month Run Productivit Productivity
on (MT) Workers Hrs./Day Days /
Time y (MT/Hr.) (MT/Hr.)
/Day Month
(Hrs.)
January 2915.512 667.95 4.365 96 8 25 0.152
February 2765.355 671.45 4.118 96 8 25 0.144
March 2859.283 646.45 4.423 96 8 25 0.149
April 2420.702 671.45 3.605 96 8 25 0.126
May 2937.855 661.65 4.440 96 8 25 0.153
June 2910.794 651.75 4.466 96 8 25 0.152
July 2160.231 393.5 5.490 96 8 25 0.113
August 2122.058 631.55 3.360 96 8 25 0.111
September 1918.063 528.65 3.628 96 8 25 0.100
October 2475.122 551.95 4.484 96 8 25 0.129
November 2524.314 640.6 3.941 96 8 25 0.131
December 2714.878 666.45 4.074 96 8 25 0.141

Table-01: Machine & Labor Productivity Calculation in BPML (Source: Primary)

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Material Depreciatio Multifactor

Month Producti Overhead Labor Cost
Cost n Cost Productivity
(2019) on (MT) (Tk./Month) (Tk./Month)
(Tk./MT) (Tk./Month) (Kg/Tk.)
January 2915.512 160353160 12245150.4 6414126.4 9329638 0.015
February 2765.355 152094525 12245150.4 6222048.75 9329638 0.015
March 2859.283 151541999 11835719.4 6147458.45 9329638 0.016
April 2420.702 130717908 11780246 5567614.6 9329638 0.015
May 2937.855 152768460 10893159 6169495.5 9329638 0.016
June 2910.794 151361288 11780798.6 6112667.4 9329638 0.016
July 2160.231 112332012 11643176 5616600.6 9329638 0.016
August 2122.058 110347016 10153085.7 5623453.7 9329638 0.016
September 1918.063 99739276 10016113.8 5370576.4 9329638 0.015
October 2475.122 128706344 9398508.7 5816536.7 9329638 0.016
November 2524.314 131264328 10890536.8 5742814.35 9329638 0.016
December 2714.878 141173656 10930279.6 5918434.04 9329638 0.016

Table-02: Multi factor productivity calculation in BPML (Source: Primary)

Forecasting
Definition: Forecasting is a statement about the future. It is estimating future event (variable), by
casting forward past data. Past data are systematically combined in predetermined way to obtain
the estimate. Forecasting is not guessing or prediction.
Forecasting help managers to:
• Plan the system
• Plan the use of system
Forecasts affect decisions and activities throughout an organization
 Accounting, finance
 Human resources
 Marketing
 MIS
 Operations
 Product / service design
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Common features of forecasting:

 Forecasting is rarely perfect (deviation is expected).
 All forecasting techniques assume that there is some degree of stability in the system, and
“what happened in the past will continue to happen in the future”.
 Forecasting for a group of items is more accurate than the forecast for individuals.
 Forecasting accuracy increases as time horizon increases.
Here we explain and determine the forecasting sales value of BPML monthly sales for 2020
based on previous group data in 2019, where two of methods has been shown e.g- Simple
Moving average & Exponential Smoothing.

Simple Moving:
Technique that averages a number of recent actual values, updated as new values become
available.

Forecast, 2020
Sales, Forecast, 2020 (02 Forecast, 2020 (04
(03 Monthly
Month 2019 Monthly Moving Monthly Moving
Moving
(MT) Average) Average)
Average)
January 2801.646 - - -
February 1928.751 - - -
March 2318.164 2365.199 - -
April 2276.127 2123.458 2349.52 -
May 2336.46 2297.146 2174.35 2331.172
June 2686.484 2306.294 2310.25 2214.876
July 1634.903 2511.472 2433.02 2404.309
August 1535.115 2160.694 2219.28 2233.494
September 2377.046 1585.009 1952.17 2048.241
October 2178.48 1956.081 1849.02 2058.387
November 2646.918 2277.763 2030.21 1931.386
December 2394.821 2412.699 2400.81 2184.39

Table-02: Sales forecasting, 2019 calculation in BPML (Source: Primary)

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Exponential Smoothing:
Weighted averaging method based on previous forecast plus a percentage (α) of the forecast
error.
Next forecast = Previous forecast + α (Actual – Previous forecast)
Where (Actual – Previous forecast) = forecast error, α is a percentage of the error.
Ft = Ft-- 7 α (At-- – Ft--)
Where,
Ft = Forecast for period t
Ft-- = Forecast for previous period
α = Smoothing constant
At-- = Actual demand or sales for the previous period.

Sales, 2019 Forecast,

Month Error
(MT) 2020
α= 0.2 & 1-α= 0.8
January 2801.646 - -
-
February 1928.751
2801.646 872.895
-
March 2318.164
2627.067 308.903
-
April 2276.127
2565.286 289.159
-
May 2336.46
2507.455 170.995
213.228
June 2686.484
2473.256 4
-
July 1634.903
2515.901 880.998
-
August 1535.115
2339.702 804.587
Septemb 198.261
2377.046
er 2178.784 7
-
October 2178.48
2218.437 39.9566
Novemb 2646.918 2210.445 436.472
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er 7
Decembe 97.0811
2394.821
r 2297.74 5

Table-02: Sales forecasting, 2019 calculation in BPML (Source: Primary)

Location Analysis

Location decisions represent a key part of the strategic planning process of virtually every orga-
nization. And, although it might appear that location decisions are one-time problems pertaining
to new organizations, existing organizations often have a bigger stake in these kinds of decisions
than new organizations. The company is expanding its business in domestic as well as foreign
markets. To meet the rising demand and customer expectations, the company has been taken an
initiative to expand its plant to a new region. Growth has been the main criterion for the com-
pany as the location options. To enhance the existing facilities the company has chosen 4 differ-
ent locations in domestic arena.

When companies have multiple manufacturing facilities, they can organize operations in several
ways. One is to assign different product lines to different plants. Another is to assign different
market areas to different plants. And a third is to assign different processes to different plants.
Each strategy carries certain cost and managerial implications, as well as competitive advan-
tages. Using various information’s and techniques we have tried to evaluate the most possible lo-
cation for the BPML Company.

As per report by Daily Financial Express the demand for packaging paper (liner/media)
is around 5000 to 6000 tons per day (TPD), whereas local mills can produce only 1455
TPD. (https://thefinancialexpress.com.bd/trade/paper-industry-on-the-upswing-1531887884,
2018) To recover this lacking and also to export some I would like recommending to
the high-ups management of BG establishing a new plant at Mirsarai Economic Zone in
Chittagong since the BG has been got approval of Beza in 2016 with 10000 acres of
land. (Star, 2016)

If the proposed plant will be established here may will get following advancement-

 Chittagong is Economic capital in Bangladesh where most of product has been

delivered by BG. About 30% market volume here for packing materials. BG may
save millions of taka as transportation expense of FG.
 All about raw materials been imported from Chittagong Port where also millions
of taka has to pay on logistics support. It will also save if a new plant estab -
lished here.
 Also will be able to export easily in sea path.
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That means market area plant strategy should have followed here. Here, plants are
designed to serve a particular geographic segment of a market. The operating costs of this
strategy are often times higher than those of product plants, but savings on shipping costs for
comparable products can be made. This strategy is useful when shipping costs are high due to
volume, weight, or other factors.

Also a Process Plant Strategy may be followed for avoiding extra cost. As instance, BG is
continuously import limestone from India & Vietnam to prepare CaCO 3 which is most important
raw materials for paper & paper products. If here established a CaCO 3 manufacturing plant from
lime at Mirasarai, Chittagong, will be saved millions of money. Here, different plants
concentrate on different aspects of a process in same zone then. Since, the strategy is most useful
when products have numerous components; separating the production of components results in
less confusion than if all the production was done in the same location.

After all, Bashundhara Group has been achieved its top ten position in Bangladesh through
achieving better productivity (machine, labor both) with lowest productivity cost for choosing
appropriate locations following different plant manufacturing strategies.

References
http://www.bpml.com/page/mission-values. (2020). Mission & Values. Dhaka: Website of BG.

https://thefinancialexpress.com.bd/trade/paper-industry-on-the-upswing-1531887884. (2018). Paper

industry on the upswing. Financial Express.

Paper, B. (2017-2018). Annual Report. Dhaka, Bangladesh: Bashundhra Group.

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Star, D. (2016). Bashundhara to build two economic zones.