Cost Saving Idea: Do changeover from PKO to PO in CLSBE units only when the PO demand is

significantly high.

Thought Process: Recently, our PO factory leadership team has decided to add an additional
CLSBE unit. From my analysis of what Ive heard of our engineers and other technical employees,
the primary reason is to improve the extraction system for additional profit, to keep up with the
increasing demand of PKO, and to eliminate the chances of having wastes. I think these are also
the reason why they tapped me to come up with a cost saving project in the PKO department. I
have two grounds on why I came up with my idea.

1. Ive heard that a complaint was filed against one of the CLSBE units as a large amount of
PO was found in the PKO lot it supplied to one of our valued customers.
2. After searching for the recent demand data of our products, I discovered that the PKO
demand is higher and will get higher while POs demand will be lower in the next years
to come.

From the first point, I see that there is a high probability that the defective PKO lot was caused
by changeover of PO from PKO. I thought that reducing the times in which changeover occurs
will also reduce the chances of having defective PKO lots. But I stepped back and thought, Is it
a good idea?. Because reducing PO production from PKO changeovers might affect the
expected output quantity and thereby reduce profit.

However, as I considered point two, I realized that PO is not in a high demand and in fact, will be
decreased in the following years. To back it up, the demand of PKO is suggestively higher which
means that investing in good qualities of PKO is far more to be concerned of because the profit
from it will also be higher than that of PO. So, I supposed that reducing time in PO changeover
is reasonable. Also, the PO processed in the PKO CLSBE units are just from residual fibers. There
is a main PO department that processes PO from full palm fruit flesh.

If we do this, wastes (unsold PO) will be reduced. Defective PKO will be reduced. Processing
(energy consumption cost and time), labor and inventory cost will be lessened. These will lead to
cost saving in the PKO department.

Steps to realize cost savings:

I will use the Just-In-Time method. Since I know that the quality of PKO is more important than
producing PO, which is of low demand, doing changeover of PO only when the demand is
significantly high will lead to cost savings. I will do the following steps to implement this idea:

1. Obtain commitment from the top management.

I will get approval from the top management. They must know my plans and how this
plan will work.

2. Communications with the customers

 I will form good and long-term relationship with my customers and I will let them know
that I am doing a JIT process. This will help us in determining their demand forecast in
PO and give them the right expectations of the product details.

3. Communicate your Just in time plans to your workforce.

Once my plan is approved and the relationship with the customers have been
established, its time to work it out. I will then let the PKO department laborers know the
plans. I will also train them so that they can be flexible enough with the possible dynamic
process using the demand-based production.