Ateneo de Davao University

School of Business and Governance

Production/Operations Management
Mgt 428

PCPPI Davao

Bae, Goeun
Cada, Marrion Allana
Castro, Anthony Benedict
Mendiola, Myka Angela
Pido, Nikki Louise
Rapisura, Coleen

Submitted to:
Dr. Antonio Emberda, BSCE

Abstract
In the production process flow, it is optimal to minimize idle time to fully
utilize the capacity of machineries and human resource. Idle time is the time
associated with waiting or when an item of machinery is not being used but could
be. In other words, it is the unused time within a production cycle. Idle time could
also be associated with computing and in that case refers to processing time. This
could avoid expansion for new production lines, because unused capacity in the
old lines could be used effectively. This study was conducted at Pepsi Cola
Products Philippines Incorporated (PCPPI) Davao City plant. This study aims to
identify, if there is any, relationships between the distance of one warehouse to the
production lines in the facility layout, the idle time that the transfer time creates
and the efficiency of each production line. It is said that it is efficient for the
company to have a low idle time or to minimize idle time. The researchers would
like to find ways on how to reduce idle time and identify the effects it will cause to
the whole production process. This research paper aims to propose optimal facility
layout for PCPPI and mainly to reduce idle time to be effective and efficient for the
company.

Acknowledgement
This study would not have been possible without the support of many
people.
To Mr. Robert Tongcua, the Vice President Senior Manager of Pepsi Cola
Products Inc., who allowed us to have an interview with his Operations Manager
and to have a walk through in their production lines.
To Mr. Jessie Lamsen, the Operations manager of Pepsi Cola Products Inc.
who was the one who taught us every detail of the operations in Pepsi Cola and
willingly answered our questions regarding their production.
To Mr. Francis Largo, the Maintenance Manager of Pepsi Cola Products
Inc., who welcomed us in our walkthrough and willingly answered our questions
regarding their production.
To our Production Management Professor, Dr. Antonio Emberda, BSCE for
his support and guidance. Without his teachings, this study would not have been
successful.
Special thanks also to the group members and our families who supported
us in this study.

Chapter 1

Introduction
Background of the Study
Pepsi is a carbonated soft drink that is manufactured and produced by the
company named PepsiCo. (https://en.wikipedia.org/wiki/Pepsi) They are mainly
into food and beverage industry. PepsiCo owns several of brands worldwide;
including the coffee brand, Starbucks; carbonated drinks such as Mirinda, 7-Up
and Mountain Dew; non-carbonated drinks such as Tropicana, Gatorade, and
Lipton; chips like Lays and Doritos; and especially the namesake, Pepsi, that
comes in different variants, the regular, Max, and diet. PepsiCo's products are sold
in more than 200 countries and territories around the world.
Pepsi-Cola Products Philippines
In the Philippines, Pepsi-Cola Products Philippines Inc or also known as
PCPPI is the bottler of PepsiCo beverages in the period of 66 years. PCPPI
produces and sells famous brands the same with the products they produce in
United States, only to differ in few products that are only made for the Filipino
market such as Sting. They only produce carbonated and non-carbonated drinks.
It has built producing facilities over the country, serving at least 500,000 outlets
and providing employment through its extensive distribution network. It is also
evident the tight competition they had with Coca-Cola, and adding up RC Cola as
their new rival. (http://jobs.jobstreet.com/ph/jobs/5930905?fr=21)

PCPPI - Davao
PCPPI Davao City plant is located at Dumoy, Davao City. It started
production in this plant in 2003. The company manufactures products continuously

for 22 hours a day, seven days a week. Their current production capacity is
approximately 58,000-66,000 cases per day or 1,000 bottles per hour of Pepsi
alone. With regards the flavored products like Mirinda and 7-Up, the plant only
produces such products in every 18 days for they have to meet the required
turnover of 18,000 cases before producing such. The production time in the plant
is divided into two shifts a day from 8:00 AM to 6:00 PM and from 6:00 PM to 6:00
AM with at least 30 workers in each production line. Production in the plant is
improved through time, before they only produce until 12 midnight but now they
extended production hours to catch up with the increasing demand. Every shift has
a quota of 1,000 cases per hour making the first shifts quota 10,000 cases and
the second shift 12,000 cases or a total of 22,000 cases per day. Maintenance
schedule for minor problems are 2 hours daily from 6:00 AM to 8:00 AM where no
working production hours are consumed. While for the heavy maintenance of the
machines, the company does it on the first Sunday of the month. The company
provides products to the whole Davao region going up to Butuan and through the
Cotabato region. Due to this rise in demand, they continuously increase their
production capacity by building new production lines. Their priority is to ensure the
quality of their product and to meet the peoples demand.
Manufacturing Process
The processes that one unit or one batch of product goes through are: (1)
empty bottles are placed to the empties placement area, (2) empties are
transferred to the palletizing area to be depalletized, (3) empties are then uncased
(4) and are put to the pre-infeed inspectors, (5) to the bottle washer, (6) human
empty inspector, (7) electronic inspector, (8) to the filler and crowner, (9) date
coding, (10) fulls inspection section, (11) case packing, (12) then to another
palletizing, (13) and lastly, finished goods are transferred to the warehouse for
storage and inventory.(See Figure 1 below)

LINE 3BACK AREA

PALLETIZIN
G AREA

Figure 1.
Facility Layout of Production Line 3

PCPPI- Facility Layout

Figure 2 below shows the overall plant facility layout. Lines 1, 2 and 3 are
fully operative and all together could produce 58,000 to 66,000 cases per day.
Looking at the figure, the distance of the empties warehouse to the production
lines has a 100 to 200 meters distance. And the way the empty bottles are
transferred from the empties warehouse is through loading in trucks or fork lifter
and delivering in to each production line. Currently, the company is constructing
another production line to meet capacity requirement that will start operating in
November of the current year.

Figure 2. PCPPI Plant Facility Layout

PCPPI - Davao hardly meet their demand in the production line due to
some production constraints. The plants cycle time is 1.5 hours in one rotation of
cases of which 70% is consumed by the bottle washer. The cases that the
company was currently able to receive back from outside distributors and which
were directly put into production are approximately 55,000 cases per day which is
not equivalent to the 66,000 cases they distributed resulting to lack of empty
bottles to be used in production. They need to improve their production processes.
The managers of the company have to identify the companys barrier and make
plan about implementing new process to fix the potential problem of the company.
The company is in need of investigation to provide possible solutions for the
problem. And in spite of the industrys tight competition, many consumers are
demanding Pepsi. And due to such, the company has to meet these demands for
the satisfaction and loyalty of consumers. Therefore, the company has to increase
the capacity to produce more and find solution to fix some problems that obstruct

in expanding its capacity to produce, such as the lack of empty bottles in the
palletizing area. There is also the problem of not meeting expected productivity
due to long cycle time of the bottles.

Statement of the Problem:

PCPPIs productivity and capacity are declining due to lack of empty bottles
and long cycle time.
Objectives:
These changes should be implemented within 20-30 working days:
1. Reduce cycle time by 23.33% of 1.5 hours.
2. Increase productivity by at least 5%.
3. Increase efficiency by at least 19%.
4. Use system line-balancing in assessing capacity and efficiency.
Hypotheses
1. Reducing cycle time by 23% of 1.5 hours would not increase productivity
and capacity.
2. Increasing productivity by at least 5% would not increase capacity.
3. Increasing efficiency by 19% would not increase productivity and capacity.
4. Using system line-balancing would not increase productivity and capacity.

Conceptual Framework

CYCLE
TIME
PRODUCTIVITY AND CAPACITY
INPUT

Figure 3. Conceptual Framework of the study

Significance of the Study
Pepsi Cola Products Philippines Incorporated. It provides relevant information
regarding the status and how effective their production is. It will also show them
how productive they are in terms of meeting their expected capacity.
Respondent. This will provide him new ideas as to what to change and improve to
operate more efficiently. Details about their production time will be provided. This
will give them the opportunity to improve and maximize their resources.
Students. This will give additional knowledge to students about how to apply
system line balancing in determining the capacity and efficiency. This study will be
used as a basis for their current standing and to convey new learnings. Students
now will be more informed and equipped in handling these kind of experience.
Future researcher. This could be a basis for future studies and can be a source for
improvements. This could also be a basis of a future research about the same
problem and may unfold great ideas and new ideal solutions.

Scope and Limitations

This investigation and study was conducted September 2015. The
respondent of such study is Mr. Jessie Lamsen, the Operations Manager of Pepsi
Cola Products Philippines Inc. Davao Plant, and Mr. Francis Largo, the
Maintenance Manager of Pepsi Cola Products Philippines Inc. Davao Plant.
This investigation focuses mainly on the production process of Pepsi Cola
Products Philippines Inc. Davao Plant and was conducted to determine the
problem that the company is currently experiencing in their production process.
The aspects looked into such investigation were the cycle time, the
companys current capacity, their expected and current productivity, the efficiency
rate, the reason(s) of which a problem was able to exist, its probable solutions
and objectives, ways for it to be put into action, and the results that will most likely
happen. This study is limited to the production process only and does not take into
account the outside operations and the financial performance of the said company.
Definition of Terms
Cycle time: the period required to complete one cycle of an operation; or to
complete a function, job, or task from start to finish. Cycle time is used in
differentiating total duration of a process from its run time.
Facility layout: is simply the way a facility is arranged in order to maximize
processes that are not only efficient but effective towards the overall organizational
goal.
Transfer time: the estimated time for the completion of a data transmission.
Because most data transfers are not fixed, transfer times may increase and
decrease as the data transmission is occurring. In the picture below is an example
of a progress indicator indicating the time remaining (transfer time) is about 15
seconds.

Distance: a numerical description of how far apart objects are.

Empties warehouse area: empties warehouse area is where empty bottles are
stored.
Palletizing: is simply the process of putting items onto a pallet for convenient, highvolume shipping. This is used in PCPPI to file and transfer bottles.
Bottle washer: is the machine that washes bottles.
Filler: the machine where the bottles are filled with soda.
Carbonated drink: is a drink that bubbles and fizzes with carbon dioxide gas. The
process by which the gas dissolves in the drink is known as carbonation. cite
Non-carbonated drink: beverages that do not have added carbon dioxide. Cite.
Examples include bottled water, tea and coffee.
Pre-in feed inspector: it is a person that inspects material fed into a machine to be
processed.
Human empties inspector: it is the person who inspects the warehouse for empty
bottles
Electronic Bottle inspector: it is the device that takes picture of each bottle for
inspection.
Inspector: is the one who is appointed or employed to inspect something.
Crowner: the cover of the bottle.

Chapter 2

Review of Related Literature and Study

LINE BALANCING
According to the study of Jaggi, Patra, and Chaubey (2015), line balancing is an
effective tool to improve the throughput of assembly line while reducing non-value
added activities cycle time. Their main objective in this study is application and
assessment of the line balancing of workstations in the automobile firm production
line. To know the results, they calculated the cycle time of process, total work load
on each station by line balancing. Their study concluded that efficiency increases
when line is balanced.
CYCLE TIME
The cycle time of any product is significant since it is the total time from the
beginning until the end of the production process. Reducing it would result in
higher capacity of production therefore it could maximize the efficiency in the
production process. Higher capacity means that you can cater the demand of the
market. Reducing the cycle time, increases capacity and thus increases customer
satisfaction. Along with this is the study by William B. Hetzel. According to Hetzel,
reduced cycle time can improve quality and increase customer satisfaction.
Another is the study entitled Cycle Time Improvement by White, Garcia,
Hernandez, and Meza (2009). According to their study, the team was looking to
find the main problems related to long time cycle for opening a new account.
Some of these are the lack of a standardized process and transit times. This
creates impact on account cycle time. The results of the customer study
suggested that the customers would like a faster process. Not only they get
complaints from the customers but also it shows a strategic disadvantage. They
have to reduce cycle time to satisfy customers needs. As to conclude this study,

the process map analysis proposes that alterations to non-value added activities
affect the process by reducing overall cycle time.
Capacity Utilization
The importance of capacity utilization was emphasized because it measures to
how extent your capacity was fully used. A business has to make most of the
capacity they have, for them to be fully functional as to their operations. One study
that asserts this is the research entitled Optimize Machinery Capacity Utilization
for Sustainable Manufacturing Performance by Lee Shahidul. It says that capacity
utilization and capacity gap should be measured for production performance. In
this study, the production and operations managers at factory level would benefit
for achieving higher production efficiency. The need to achieve the full capacity of
production lines is supported also by a study in the journal by WJEC (2012),
obtaining full capacity is when all employed factors of production are utilized and
producing at the maximum level of output. However, most of the times, businesses
operate below its full capacity with this they cant meet their expected capacity.
With these, spare capacity now exists which will lead to possible problems: one of
which is reduced profits.
Productivity and efficiency
The goal of this study is both for the increase in the productivity and to
provide possible solutions on how to attain it. Productivity is about how well
people combine resources to produce goods and services. It is important for the
company to increase productivity for the company to increase the output.
Measuring productivity is the ratio of outputs to inputs as large as practical. With
this the researchers like to increase productivity in PCPPI.
In production, to be successful, must have high productivity. One factor that
can affect the productivity of a manufacturing company is through using the
machines efficiently. According to the study done by Tae Hoon Oum and Chunyan

Yu, the raised output corresponding to inputs refers to a productivity gain. This
could be a sectional measure comparing an increase in one of many output
classification with that in one or more inputs, or a more complete measure such as
an index of total output compared to an index of overall inputs. Productivity can be
compared among the firms, and/or over time in a period of a firm. One of the major
goals of productivity measurement is to make inferences about the effectiveness
of an organization, of a firm or an industry or even of a division and of a line.
Therefore, to make inferences about productive efficiency, one must remove the
effect on productivity caused by the differences in operating environment and
other external factors. A production function specifies the maximal output
obtainable from an input vector given the production technology, that is, the
frontier. One can show the frontier for a one input one-output(y) production
function denoted by f(x).
Another study is from Honeywell Process Solutions, according to them,
decreased production rates, delays to production utilization and unplanned
shutdowns are regular occurrences. With minimal maintenance resources, plant
assets often do not perform to their capability. They presented two solutions,
downtime and production reporting solution. These solutions are designed to help
people cope up with the change in market, supplier, raw materials, and production
conditions. These solutions use a combination of advanced monitoring technology
to monitor specific equipment and plant units. In a fully automated production line,
maintenance is of need to prevent more serious damage in the production.
Industry Study
Industry Study
The industry is divided into categories, the carbonated and non-carbonated
beverages, and the alcoholic and non-alcoholic. Carbonated drinks include sodas,
A forecasted statistic data about the global beverage sales shares from
2011 to 2016 is shown below. In the figure shows that the packaged water has the
most sales, this is because of the fact that water is a basic necessity and

packaged water is convenient to people to bring anywhere. Another reason for this
is, people nowadays are more conscious about their health. And thus are shifting
to the RTD tea and bottled water and demands familiar flavours. It is also said by
the Euromonitor, that carbonates are now losing its momentum, and Asian
demand is faster leading to a post-carbonates world.

Figure
Across time, two major entities have dominated the non-alcoholic landscape and
these are Pepsi (PEP) and Coca-cola (KO). They both produce carbonated and
non carbonated drinks globally via different bottling companies.
According Euromonitor, regional brands from the local market have strong
leverage because of their better understanding of local customers. With this
advantage they could both imitate the international products and at the same time
they could incorporate local tastes and include their own formulations and flavours.
The power global brands of beverages are beginning to lose its charm and local
players have benefited.
In an article in Nasdaq, The big trend in the U.S. is that we're seeing a
continuing decline in carbonated soft drinks and good growth in noncarbonated
beverages," said Morningstar analyst Adam Fleck
Read more: http://www.nasdaq.com/article/beverage-companies-face-watereddown-industry-trends-cm504009#ixzz3mqNzRfiN
But inspite of the forecasts that the industry is now declining, Pepsi and
Coca-cola still proves they are still in control. They are still part of the Fortune 500,
a prestigious list that acknowledges companies with the biggest revenue.
In the Philippines, the industrys growth could be somehow being
interrelated to the boom of the fast food industry. Fast food industry primarily offers
soft drinks as their beverage.

Chapter 3

Methodology
Research Methodology
This chapter discussed on the research method and design and research
instrument that were employed in the analysis of data. The study focused on how
the decline in capacity and a low productivity rate was caused by the long cycle
time and few inputs to be processed.
Research Design
The researchers employed the use of quantitative, descriptive method.
Wherein numeric data gathered were used to describe current situation in the
production process and utilized as a way to propose solutions.
The researchers gathered information by interviewing the respondents, who
are managers from the PCPPI and by observing the actual production in the plant
by having a plant tour. The data given to the researchers were all approximated
and averaged based on the current actual production activity. The researchers

then examined the data gathered with the use of production and operation
management tools, books and other related studies.
The computations would include the calculation of the productivity rate
which is,
Productivity=

Output
input

Another equation would be the

Efficiency=

ActualOutput
Standard Output

Research Method
The researchers conducted a plant walk-through in Pepsi Cola Products
Philippines Inc. located at Dumoy, Davao City on September 12, 2015, where they
have toured the production line together with the Maintenance manager, Francis
Largo.
The researchers were guided by Mr. Largo in the production line 3. There is
a walkway where the production could be observed. First in the Pepsis process
flow is the depalletizing area where they store cases by means of pallets. The
cases from the pallets were now placed at the conveyor belt, the start of the
continuous production process flow. Bottles would go from one process to the next
with the use of this technology. The next step is the uncasing, and then it would go
through the pre-inspection process that is operated by two personnel. The next
step would take the longest time to complete, the bottle washing. Bottles will be
inverted so that any trash inside the bottle will fall off. After which, it will be rinsed
and then put inside the second compartment which is around 65 Celsius to
sterilize. The third step is the bottle washer. It is a big washer that could wash up
to 15,000 bottles within an hour. The next step would be the human inspector.

Although, the conveyor in the human empty inspector is not working, the process
was still explained properly to the researchers. Then, aside from the human empty
inspector, there is an electronic bottle inspector. Every bottle goes through a
camera to check if the bottle can still be reused or not. The walkway now turns
right to the filler room where 600 clean bottles per minute are filled and will be
directed to the crowner machine which closes the bottle. After it, there will be a
final inspection for the bottles to check the fill height of the bottles then placed
back in the cases and then to the palletizing.
Then at the very end of the line, the room for non-carbonated drinks is
shown to us. The production of non-carbonated drinks during that time are put to a
temporary halt for they only produce non-carbonated drinks once in every two
weeks and it so happened that during that time, production for non-carbonated
drinks are already done.
After the walk-through with Mr. Largo, the researchers had an interview with
the operations manager, Mr. Jessie Lamsen. Matters relating confidential records
and data were not included and are respected by the researchers.
Research Instrument
Questionnaire:

Chapter 4
Analysis and Conclusion
Significant Research Results
Capacity
The proposed cycle time of 1.15 hours, which is lesser than the old cycle time by
23.33%, produces 60,000 cases or 15,000 cases more than the old capacity
resulting to an efficiency of 91% which is greater than the old efficiency by 28%.
PARAMETER
OLD
Cycle Time
1.5 hours
Cases Processed
45,000 cases
Efficiency
68%
Table 1. Capacity Measurements

PROPOSED
1.05 hours
60,000 cases
96%

Productivity
The proposed output of 60,000 cases and input of 65,000 cases, which are greater
than the old output and input by 10,000 cases, results to a productivity of 92%
which is greater than the old productivity by 15.18%.
PARAMETER
OLD
Output
45,000 cases
Input
55,000 cases
Productivity
81.82%
Table 2. Productivity Measurements

Presentation, Interpretation, and Analysis of Data

PROPOSED
60,000 cases
65,000 cases
97%

Given a 1.5 hour cycle in a 22-hour working hours a day, the actual outputs
produced at the average of 1,000 cases per cycle time is,
22hours
=14.67 cycles15 cycles
1.5 cycle time
15 cycles 1,000 cases per cycle=15, 000 casesa day
15,000 cases per line 3 production lines=45,000 cases the whole plant

Reducing it by 23.33% or
1.5 hours ( 10.3 )=1.0 5 hours
22hours
=20.9521 cycles
1.05 cycle time
21 cycles 1,000 cases per day=21, 000 casesa day
21 ,000 cases per line 3 production lines=63 ,000 cases the whole plant

In computing for the efficiency rate,

Efficienc y=

Efficiency=

Actual Output
Standard Output

45,000
66,000

Efficiency=0.6868
Using the new cycle time,

Efficiency=

63 , 000
66,000

Efficiency=0.95596
In calculating for the productivity rate using the old,
Productivity=

Output
input

Productivity=

45,000
55,000

Productivity=0.818281.82

Productivity=

63 , 000
65 , 000

Productivity=0.96997

Findings
The lack of empty bottles and long cycle time causes the decline of
PCPPIs productivity and capacity. The current cycle time of 1.5 hours gives the
process approximately 15 production cycles given the 22 working hours which
produces an overall of 45,000 cases per day despite the quota of 66,000 cases
per day. The capacity efficiency for the current cycle time used results to 68%. In
order to address such concern, the researchers reduced the cycle time by 30% of
the current cycle time making it 1.05 hours. The reduced cycle time of 1.05 hours
will give the process approximately 21 production cycles given the 22 working
hours which will then be able to produce an overall of 63,000 cases per day
enabling the capacity efficiency to increase by 28% making it 96%. Therefore, by
reducing the cycle time, the objective of an efficiency increase of at least 19% is
met and capacity increased as well. Increasing productivity by at least 10% is met
by adding additional 10,000 cases to the input making it 60,000 cases with the

new output of 63,000. The resulting productivity is 15.18% higher than the old
productivity of 81.82% making it 97%.
Cost-Benefit Analysis
New Technology (Bottle Washer)
Krones Lavatec D4/D5 Bottle Washer
Industry Price: approximately Php 70,000,000 (alibaba.com)
Quantity needed: 3
NCF: Inflows Outflows
63,000 cases per day * 30 days = 1,890,000
1,890,000 * 24 = 45,360,000
45,360,000 * 4 = 181,440,000
181,440,000 30,000,000 = 151,440,000
Payback Period = investment required/cash flow
210,000,000/151,440,000 = 1.157 months = 35 days
The problem about cycle time could be reduced by purchasing new bottle washer
machine. A bottle washer machine could cost, in average, Php 70,000,000. The
current bottle washer machine in each production line, according to the operations
manager, the machines will not be replaced as long as they are still working. They
are only maintaining and repairing the machines. With the proposed new machine,
capacity would increase up to 63,000 cases per day. Producing an inflow of
181,440,000 per month less outflow of 30,000,000 per month gives a net cash flow
of 151,440,000. Given the net cash flow, we could compute for the payback period
by dividing the cost of the machine over the net cash flow. And this will give us a
payback period of 1.157 months or approximately 35 days. The company will be
able to have a return of investment within 35 days while also having higher
capacity.

Purchasing new 10,000 cases of bottles

Purchasing additional 10,000 cases is immaterial to the company because it will
be absorbed by the cost of per bottle. Also, the bottles will just circulate and
reused in the production process making the cost covered up.
Chapter 5
Recommendations