I performed my IE 400 summer practice between the dates 23th of January and 12th of February, in Arcelik Cooking Appliances Plant which is located in Bolu. The main product of this factory is oven and also cookers and range hoods. During my summer practice, I had to several chances to see real production and assembly line and I could participate all production sections. It was required that use theoretical information that were learned at courses while I was performing my summer practice.
Eight main parts is consisted of this report. First of all introduction section.
1. INTRODUCTORY FEATURES
1.1 Information About Arçelik CAP
The firm was established at 1955 by KOC group in Turkey. The main building of the firm the other called headquarter is in Sütlüce, İstanbul
Full title of the firm: Arçelik Cooking Appliances Plant
Full address of the firm: Yukarı Soku Köyü, Deliklitaş Mevkii, 14300 Bolu
Arcelik CAP (Cooking Appliances Plant) was founded at 1977 with Demirdöküm and Arcelik with the name of Ardem . Then at 1981 the first cooker was produced.
Furthermore there are factories in turkey except that Bolu CAP ;
- Refrigerator - Eskişehir, Turkey
- Compressor Plant - Eskişehir, Turkey
- Electric Motors Plant - Çerkezköy / Tekirdağ, Turkey
- Electronics Plant - Beylikdüzü / Istanbul, Turkey
- Dishwasher Plant - Ankara, Turkey
- Washing Machine Plant - Tuzla / Istanbul, Turkey
In addition to national plants, there are some plants at abroad
- Arctic Cooling Appliances Plant - Gaesti, Romania
- Washing Machine Plant - Changzou, China
- Refrigerator and Washing Machine Plant - Kirzhach, Russia
- Defy Appliances Limited- South Africa
- Refrigerating Appliances Plant - Ezakheni, Ladysmith,
- Refrigerator Plant - East London,
- Refrigerator Plant Thailand, Rayong
Arcelik gets into the act to production all over the world with its 9 brands in addition to Arçelik ; ElektraBregenz, Grundig, Blomberg, Beko, Arctic, Flavel, Leisure, Defy and Altus. Approximately 100 countries work with these brands.
1.2 Shareholders of the Firm
Arcelik is a partnership which is in business with KOC group. . The main stakeholders are KOC Group with leader Ömer KOC with 58% and Burla Group with CEO Hakan Bulgurlu 18%. Furthermore, remaining share that is 24 percent are free float.
And also the graph is shown below illustrate the main stakeholders.
1.3 The Sector, Products the Firm , The Field of Activity, Market Shares
When I was performing my summer practice, I had never been any white appliances plant before. In Arcelik Bolu Cooking Appliances plant is in white appliances sector. The plant is the biggest plant in Europe according to capability as a single manufacturing factory. The rivals produce their goods in a factory that produce refrigerator, TV, small house appliances, washing machines. However, Bolu CAP produces only oven cooker, range hoods and toaster. Arcelik has the nearly half of the market share. Beko is the biggest firm in West Europe according to durable goods. Arctic is the biggest firm and nearly has 70% of market share at Romania. In addition to this Grundig is the well-known brand all over the Europe especially in Germany and it is owned by Arcelik since 2001. Elektrabregenz is the most famous brand in Austria which is governed by Arcelik. The daily production capacity both oven and cooker is approximately 40000. In addition to this information there are 1800 types of models are produced in factory. These types can be sorted under four main categories.
Large ovens : In Arcelik CAP ovens are categorized due to their chassis size and their some special features. Large ovens can be stated 50*50, 60*50 and 60*60. They can be full-gas or full-electrical model. In addition they can be divided into categorize by their clock types as Better, Good, Adora ect. Large ovens can be separated as Built-in and freestanding models. At assembly line 1 , 9 , 10 and 11 can produce built-in (integrated models) and freestandings models can be produced in 2,3,4,5,6,7,8 assembly lines. The biggest models called as double’s are sent to USA and the other models are exported UK , France , Austria as their orders(You can see the pictures of some of the toaster ovens in Appendix B.)
Midi ovens: These type of ovens are not big as large ovens and not small as microwave ovens. Their chassis are 25*25 or 30*30. They can be produced as full-electrical or full-gas (You can see the pictures of some of the toaster ovens in Appendix B.)
Countertops: There are 4-cooker 5-cooker and 4-cooker with wok. They can be produced with these main headings; full-gas , full-electrical , induction , and 4of gas and 1 of electrical models.
International and domestic sales have been increased by % 15 last 5 years. At this month Arcelik A.S net consolidated revenue is explained as 16.092 billion TL. In addition the 4.8 billion is owned by the Arcelik CAP.
1.4 Customers and Stakeholders of the Firm
In KOC group and Arcelik A.S, which products will be produced and how much will be produced are considered in Sütlüce, İstanbul which is the headquarter of Arcelik is established. They consider the amount and date of producing and then Bolu CAP is received and fixed the production report according to the orders.
The stakeholders have a high importance because of the Arcelik invited the stakeholders to meetings whenever needed. These meeting are so important because in the short or long run decisions the stakeholders’ opinions are so effective.
1.5 Functions of Industrial Engineers in the Plant
Industrial engineers are employed in Arcelik Cooking Appliances Plant as most of the factories. In addition there are several functions that industrial engineers involve in. In summer practice that I performed, my department is Production Engineers Management. There three teams in it and one them is which me involved it is Industrial Engineers Team.
There are 4 industrial engineers in this team and one of them is me.
As industrial engineers in our team , all line balancing works , time studies , productivity analysis , MTM studies , all operation plans , man-hour calculations , weekly and monthly budget calculations and facility layouts studies.
In addition Production planning department, there are 3 industrial engineers and they decided to weekly and monthly production plans according to HQ orders. Activities related to the entry and stocking all materials
Also production & assemble department has 5 industrial engineer. They work for line improvement and all problems that faced with while assemble process is performing.
2. ANALYSIS OF THE MACRO ASPECTS
2.1 Overall Production System
Labor Products (Dishwashers)
Equipment After-sales services
Materials, labor, energy, money, knowledge, equipment and supplies are major inputs of the production system. There are three different ways of providing the materials; home production, domestic firms, or foreign firms. Firstly; some materials such as chassis and some plastic materials are produced in the factory. Secondly, domestic firms provide materials like sheet metal, glass and PIPO buttons etc. These materials are ordered a month earlier than production. Then, these materials are sent before a week from the production. Finally, some materials such as some plastic materials, clocks and electronic cards etc. are imported. Naturally, order of these materials is given at least three months earlier from the production because of the transportation. Labors come from Bolu. There are 1650 blue-collars and 150 white collars in the plant. 79 of the white collars are engineers. Also, 15 of engineers are industrial engineers. Equipment and supplies are also provided by domestic or foreign firms. Arçelik CAP determines which equipment and supplies are needed and it gives order to the firms. Then, firms give an offer to meet equipment and supplies. Finally, Arçelik CAP decides the firm whose offer is the most reasonable. Money is supplied by KOÇ Holding and its shareholders. Energy is supplied by transformers in the plant. Knowledge is provided by many different sources. Some sources of Arçelik CAP for knowledge are engineers, competitors, workers who work in the firm and mainly customers.
2.2 Mission and Vision
“Respects the globe, respected globally” is the vision and catchword of Arçelik A.Ş.
The mission of the firm is “To ensure profitable and long-term sustainable growth, to increase market share acting on global target market approach, to reach more consumers with innovative products and applications in rapidly changing world, to secure the future with the consciousness of corporate responsibility, to integrate and optimize the components of global organization to be a global group”.
Figure 3: Vision of Arçelik
2.3Location of the Plant
Most of the plants and the company headquarters are in İstanbul and the others are in the cities closer to İstanbul. Arçelik CAP is the facility of Arçelik A.Ş. in Bolu. The factors that lead Arçelik to locate plant in Bolu are as follows:
• Since Bolu is near to Ankara and Istanbul, it is convenient in terms of transportation. It is easy to carry the finished goods to the retail markets and stores. Thus, the transportation costs reduce with the help of railroads, highways etc. to all over Turkey.
• Near to the area of plant in Bolu, there are three subsidiary industries. It is easy and quick to get materials needed from these places.
2.5. Research and Development in the Firm
Arçelik A.Ş. has its own R&D activities. Arçelik’s R&D targets can be described as “designing and manufacturing products respectful to the environment, supporting consumer comfort, meeting their current and future needs, compliance to standards and affordable”. Arçelik A.Ş. has been operating R&D, product development and technology since in the late 1980’s. Currently, the company has 7 different R&D Centers in the headquarters in addition to the plants operating separately. Arçelik CAP has its own R&D department working on the new designs, products and innovations.
Arçelik A.Ş. is the leader of Turkey in the number of patent applications per year. Approximately 130 patent applications made to TPE (Turkish Patent Institute) every year. In 2015, the company has been awarded for Highest Number of Patent Applications, Highest Number of Patent Registrations, and Highest Number of International Patent Applications by TPE.
Arçelik has gained its high technology, processes and designs thanks to its qualified engineering and design workforce. Cooperating with different universities, institutes and organizations in academic and scientific research and development projects, theses, etc. helps Arçelik to improve. Recently, Arçelik A.Ş. has turned its resources towards to developing energy efficient and environmental friendly products. A new automation has been established for recycling in the plant (as I will mention in the project part).
In R&D center in Arçelik CAP, there are two teams working; Structural Design Team and Electronics Team. In general, they are responsible for the design of the new cooking appliances to be manufactured in the plant. They are responsible for following the developments in the markets and making propositions about the new product/process designs and improvements in the current ones. Duties of Structural Design Teams are determining the customer demands, designing and 3D modeling new products. The Electronics Team is responsible for designing, verification of functions and mounting onto the products of the electronic cards, components and cables, and making software and interface studies of the cooking appliances. All teams use CAD-CAM stations and computers to perform their work.
3.AN OVERVIEW OF THE PRODUCTION SYSTEM
3.1. Operation Chart of a Subassembly
An operation chart that is created by me about subassemble about front housing can be seen in appendix (malzeme akıs )
3.2. Rated Capacity in the Firm
In Arcelik Cooking Appliances Plant there is no exact yearly capacity calculations or document is kept that is related with rated capacity. But the times are calculate by industrial engineering team with time studies and MTM studies. Starting from this points, every oven cycle time and also every assemble station cycle time is specified. In addition every operators are expected to finish his/her work this specified times. Our team always works for shortened this cycle times in order to improve hourly, shifty and daily production by use line balancing and struggle with bottleneck. For instance at assembly line 1 the daily production is 1000 ovens. 22, 5 hours/day*270 days/year* 133 cars/ hours = 807,975 ovens/year.
The year before I performed my summer practice the yearly production rate was just 531,000 ovens/year
After automation studies and also continues improvements the rated capacities are being better continuously.
3.3. Types of Operations in the Firm
In Arcelik CAP, there are three types of operations. First of all assembly lines. All materials that are required for assemble are transported to lines. This process is applied all lines regardless of types of good. The things that change only material types which are required. All lines operation types are same .Secondly, the name is called as inside production, sheet metals are shaped with transfer press machines and also forming. In addition to this there is enamel and painting process for chasses and trays.
It is the most important things that having the biggest role in white goods industry is be quick to satisfy demand and high quality. Because of this some finished goods are kept in stock
Blueprint of the Production Area
A blueprint for of the production facilities in Arçelik BMİ is given in the Appendix VI.
3.4. Types of Layout in the Firm
In Arcelik Bolu CAP there are two types of layout. One of them is product layout and the other one is process layout. There are 12 assembly line in Factory 1 and 8 assembly lines in Factory 2. Both of factories the assembly lines cover the area and they are all parallel. Some of models are categorized because of making assemble process easy. In addition to this , last station that finished goods audit station , the finished goods are transported to shrinking area with a railway system between roof and lines.
3.5. Detailed Layout of a Department
The managing building at the front of the factory 1 is involved all managing offices. Production planning management, production management and production engineering management at the top story in two-story building. First story is involved human resources and dressing room for blue-collars. Next to this department, there is Research & Development building which contains Structural Design 1 and Structural Design 2 teams. The next to these buildings there is Factory 1. 12 assembly lines, enamel and painting department, interior production, and front housing joining departments are there. Opposite of the managing building there is Factory 2 which cookers are produced. In addition there are 8 assembly lines.
3.6. Unit-manufacturing Cost Calculation
The cost calculation in Arcelik CAP is making as labor-hour/product. This calculation is made by number of workers and amount of products that are produced in a shift by taking into consideration that bought materials, labor and inventory.
Every end of month accounting department use LIFO method in order to lowered the LIFO effect to the cost of inventory
Unit cost of a product is calculated as follows:
1) A product BOM is selected and all of their components are taking into consideration.
2) Purchasing cost of all materials are taking into consideration. Some of them is produced in plant but some of them are purchased auxiliary industry firms
3) Standard times are calculated in order to find labor cost.
4) Purchasing cost, labor cost, depreciation cost is calculated in order to find production cost of machines
5) The product’s R&D costs and overhead costs plus the production cost and so production cost of one product is calculated.
Unit Cost = (Material Purc. Cost1 + Labor Cost2 + Depreciation Cost) + R&D cost3 + Factory overhead cost
Material purchasing cost is calculated, all used materials in a product is known from BOM
1) Unit Material Cost = Unit purchasing price × Number of units used in a cooker.
2) Labor Cost = (Labor-hour/product × Number of machines produced ÷ total hours spent) × unit labor cost
3) R&D costs are not calculated directly. All R&D costs are distributed for all product from total sales from cooking appliances plant
There are different types of calculating factory overhead costs in plant. Energy, total maintenance and indirect labor cost and improvement cost of plant features are some of them. Indirect labor costs includes all labors that is not directly affect the production. There are some blue-collars at management departments and also forklift and crown operators in addition engineers and managers. Depreciation is also considered as on overhead cost. Overhead costs are calculated taking into consideration to the ratio of the labor-hour/ total labor-hour in the plant.
Example: Privacy policies are guaranteed by hide all of the direct, labor and the other costs.
All of the numbers are imaginary.
Assume that a double oven which is called as “amerika” in plant and full-gas freestanding oven which brand are both Beko. First product is sold 1250TL and second one is 1000TL.
Each type of product amount of sold are 100.
Sales of DoubleOven = 1250 × 100 = 125.000 TL
Sales of Freestanding = 1000 × 100 = 100.000 TL
Total sales from these two types of product = 225.000 TL
Material purchasing cost of DoubleOven and Freestanding are 80 and 70 TL per unit respectively.
Product Code Labor-hour/unit Units manufactured Labor-hour Percentage
DoubleOven 1.5 1500 2250 0.33
Freestanding 1.5 3000 4500 0.67
Total direct labor cost = 300 TL
Total overhead = 5,000 TL
Total depreciation = 550 TL
Total R&D costs = 2,250 TL
Unit cost of DoubleOven:
Total overhead cost = 5,000 × 0.33 = 1650 TL
Unit overhead cost = 1650 ÷ 1000 = 1, 65 TL
Unit material cost = 80 TL/unit
Total direct labor cost = 300 × 0.33 = 99 TL
Unit labor cost = 99 ÷ 1500 = 0.066 TL
Total Depreciation = 550 × 0.33 = 181 TL
Unit depreciation cost = 181 ÷ 1500 = 0.121 TL
Total R&D cost = 2,250 × (20,000 ÷ 45,000) = 1001 TL
Unit R&D cost = 1,001 ÷ 1500 = 0, 66 TL
Unit Cost = (Material Purc. Cost + Labor Cost + Depreciation Cost) + R&D cost + Factory overhead cost
Unit Cost of DoubleOven = (80 + 0.066 + 0.121) + 0,66 + 1,65 = 82.497 TL
If we want to calculate the Freestanding unit cost we must use the same calculations
3.7. Comparative Ratio Analysis
An annual report is established at the end of the year or beginning of the year about the previous year’s financial status, goals activities, all assets and liabilities etc. by Arcelik A.S. Income statements and balance sheets are also included this yearly report. This documents that are balance sheets and income statements are illustrated for the end of the years 2015 which is consolidated for five years millions of Turkish Liras
Current ratio= = = 1,66
This means that Arçelik can pay its current debts by 1,5 times equally of its assets.
Quick ratio = = =0.428
Quick ratio is smaller than current ratio because of ınventories and receivables are excluded. In addition to this, the large differences between this values illustrates that Arcelik could not be successful to find liquidity in short term to cover their debt.
Profit margin = = = 0.158 = 15.8
This equation illustrates that the ratio of net sales to net income. If this ratio is higher the company is profitable. For Arcelik A.S this ratio was about 7 points before 6 years ago
Debt-to-equity ratio = = = 1.002
Debt-to-equity ratio is better if it is small not large. If not Arcelik, for another company this ratio’s is large. Because cannot debt against the shareholders investments. However Arcelik can afford it because have bigger and bigger income. The above debt-to-equity ratio of 1.002 illustrates that the creditors of firm put a more money to the company than the shareholders but this ratio is not related to say Arcelik is getting into bankruptcy.
4. PRODUCTION PLANNING AND CONTROL SYSTEM
4.1. Forecasting Activities in the Firm
In Arçelik A.Ş., the marketing and sales departments located in the headquarters in Sütlüce are responsible for the demand forecasting activities instead of the individual plants’ production planning departments. The marketing and sales departments inform the production planning department of Arçelik CAP in every three month about the forecasted sales of the next three months and ask to plan the operations as required. These sales predictions of each product and model are entered in the ERP system called SAP every time the forecasts arrive from the headquarters.
Forecasting methods like moving averages with N = 12, winter’s method with seasonality factors and regression models are used. When new forecasts are obtained and entered to the SAP system, the records are updated. The forecasted numbers of the models’ sales immediately give the amounts needed for each material used in the manufacturing of the cooking appliances because BOM is present in the SAP system. The production planning department confirms the amounts and order times of the materials in compliance with the lead times of the materials. Arçelik must be accurate in its forecasts and predictions about the sales amounts to be able to remain competitive in the market. For this reason, some market researches obtained from the customers are used as a factor in forecasting the demands apart from the past sales data of the stores. Arçelik deals with the huge demands and needs to manage this demand successfully thanks to the forecasting activities done in the headquarters of Arçelik A.Ş.
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