1 EOQ Calculation and Optimizing the Packaging Department For Dura-Tiles

EOQ Calculation and Optimizing the Packaging Department For Dura-Tiles

STUDENT: Yunus Emre KOCA, 12348

INTERNSHIP DATE: June 20 August 12,2011 LOCATION: AKGN GRUP ERENKY HEADQUARTER BLECK FACTORY SUPERVISED BY: MR. ONUR AKMEE

SUBMISSION DATE: September 30,2011

Sabanc Unversity Faculty of Engineering and Natural Sciences Manufacturing Systems Engineering

2 EOQ Calculation and Optimizing the Packaging Department For Dura-Tiles

ABSTRACT Dura-tiles are one of the companies from AKGN GROUP. The company is involved in ceramic and porcelain. They are one of the leading companies in the ceramic industry in Turkey. My internship was about finding a better solution for packaging the goods produced and finding the EOQs for certain products. I succeeded in completing my tasks. You may find information about my intern and the company that I did intern at in this report.

3 EOQ Calculation and Optimizing the Packaging Department For Dura-Tiles

TABLE OF CONTENTS

ABSTRACT ................................................................................................................................................ 2 INTRODUCTION ....................................................................................................................................... 4 COMPANY BACKGROUND ....................................................................................................................... 4 ORGANIZATIONAL STRUCTURE ........................................................................................................... 8 PROJECT DESCRIPTION ............................................................................................................................ 9 INTERNSHIP EXPERIENCE: OBSERVATIONS AND ANALYSIS ................................................................... 18 CONCLUSION ......................................................................................................................................... 19 RECOMMENDATIONS ............................................................................................................................ 19 REFRENCES ............................................................................................................................................ 20

4 EOQ Calculation and Optimizing the Packaging Department For Dura-Tiles

INTRODUCTION
Ceramics and porcelain tiles are widely used among all places around the world. Dura-tiles is a leading company in this business. I had a chance to spend 40 days with these ceramic producing people and I tried to report what I have done and learned in this project. This paper contains a company background of AKGN GROUP, its organization schema among dura-tiles, my project description and analyzes and my experience about my 40 days in Dura-tiles.

COMPANY BACKGROUND

Image 1: Early times of AKGN GROUP small child is the founder of the company Akgn Group is a group of companies with 85 years of standing which is still managed by the third generation. The establishment has been making investments on industries using raw materials which are related to soil since the beginning of its formation and reached to the present day predominantly developing in these fields.

Akgn Group is trying so hard to become one of the leading firms by using modern technology to produce high quality goods and services. Consequently every company in the

5 EOQ Calculation and Optimizing the Packaging Department For Dura-Tiles

Akgn Group is encouraged to use the current highest standard in their field and offer a wide range of products and services to their customers. Based on corporate experience of liability, Akgn Group companies act environmental conscious in the use of natural resources and in preservation of the nature.

Starting out from its core business of Brick in 1925, Akgn Group's activities now mainly continue through 7 companies, of which 5 are in Construction related business & production.

Akgns core sectors are building products, automotive, and gasoline stations. Additionally, the Group is active in insurance and transportation.

Main companies that form the group are Aktula, dura-tile roof, dura-bagno, Akgn Vitrifiye, dura-tiles, Akgn Seramik and Akgn Ford.

Image 2: Logos of Ak tula and Dura-tile roof Aktula was the starting company of the group which started producing bricks in 1925. Today it has a brand called dura-tile roof and the biggest brick and rooftile factories of Turkey in and Eskisehir which is on a land of 70.000 m2 and has 130.000 pcs/day with these qualifications Aktula is the 2nd biggest rooftiles producer in turkey .

6 EOQ Calculation and Optimizing the Packaging Department For Dura-Tiles

Image 3: Logos of dura-bagno and Akgn Vitrifiye

Dura-bagno and Akgn Vitrifiye are operating in bathroom furniture and sanitary ware production in 2 different factories having totally 22.000m2 closed areas. In these facilities factories produce more than 30.000 units annually. Akgn, with capacity of production in sanitary wares answers 12 % of needs in this sector accros Turkey.

Image 4: Logos of dura-tiles and Akgn Seramik

Akgun Seramik which also covers the dura-tiles brand is producing its goods from three main factories.

One of them is on porcelain production and it is established in Bilecik on the land of 540.000 sqm and having 75.000 sqm covered area. This factory is producing 10.8 mio sqm porcelain tiles. By means of this capacity , Akgun Seramik porcelain tile factory , whose aim is to be a World wide name among the porcelain ceramic producers, has achieved to be a leading producer and well-known brand in its territory.

Duratiles presents the tiles with large scale of production portfolio like 33x33 , 45x45, 30x60, 60x60, 60x120 cm in both domestic and foreign markets, to the appreciation of its esteemed customers. With its approach of high quality which is appropriate to International Standarts , Akgun Seramik exports its high quality tiles to 35 Countries .

7 EOQ Calculation and Optimizing the Packaging Department For Dura-Tiles

o Second one is Gediz Ceramic Factory is the newest investment in ceramic tiles from Akgn Group . The factory started up in 2010 on the land of 125.000 sqm under 14.000 sqm covered area in Gediz Industry Zone . Annual production capacity is 4.5 mio sqm and it will be doubled by the end of the year.

o The last one is the ceramic factory which is established in 2009 on the land of 150.000 sqm under the 35.000 sqm covered area in Eskiehir, with Sacmi technologies and total production capacity of 9 mio sqm is the most modern and youngest ceramic tile factory of Turkey and Europe.

Image 5: AKGUN GROUP CERAMIC & PORCELAIN FACTORIES

When I was told that about the companies by other workers, I could not get the reason for the group having 2 companies producing the same product. But later I learned that Erhan Akgn (chairman) wanted to see literally if the name of the brand is effective on customer. And he placed a new brand called dura-tiles instead of Akgn Seramik by the way Akgn Seramik continued producing the same products. But it was seen that with the dura-tiles

8 EOQ Calculation and Optimizing the Packaging Department For Dura-Tiles

name number of saled products were much more higher than the Akgn Seramik furthermore they could sell the same quality product for a higher price. So this brilliant idea was shaped into a price discrimination policy. Now Dura-tiles is producing high quality and higer priced goods and Akgn Seramik is producing standard price and normal quality goods. With this way the company could take a bigger share from the ceramic and porcelain industry locally. This can be considered as a social experiment and as a result we can see that in our country there is an aspiration against import goods.

ORGANIZATIONAL STRUCTURE

Image 6: Organizational Structure

9 EOQ Calculation and Optimizing the Packaging Department For Dura-Tiles

Nearly 1800 people are employed under this hierarchical structure and these people are exporting the ceramic, tile and sanitary ware goods to 42 countries mostly in USA, Europe, Russia and Middle East.

My department hosting my internship was the production management and planning department in Bilecik factory and my supervisor in the factory was Onur Akmee. Although my supervisor was in the Bilecik factory I was just being able to be in touch with him by phone or by doing several trips to the factory in order to understand the situation. For the rest of my intern I tried to subscribe in anyways I could by being present in the headquarter of the company which is in Istanbul, erenky. I was told to visit the factory for 3 times. And during my visits my supervisor Onur Akmee gave adequate information about the factory.

PROJECT DESCRIPTION
Dura-tiles assigned me two different projects before my intern started. These projects are raw material and supply management of 3 different products that will be produced next year besides I will be involved in the productivity enhancement studies which will be done on quality discrimination department in this department products are packaged according to their qualities and an optimization can be done on this department by decreasing the number of workers regarding the fatigue limit and number of products that the worker must deal with. In my first project I needed to know the products with highest production rates. So I looked at the annual production report that is prepared by my supervisor and I saw that the ceramic with the 60*60 viva bej name was the mostly produced product and in descending order; 60*60 viva beyaz, 40*40 grain bej. These were the products with the highest production rates. Clearly to achieve my objective I decided to find out what were the individual EOQs of these products individually. First I obtained the formulas of these products. A ceramic is formed up from 6 to 15 different ingredients these are different types and quality of clay, feldspar - which is a mineral rock, kaolinite which is a clay mineral, binder, painting ingredient and sodium silicate which is also known as water glass, this component makes the ceramic more fire proof.

10 EOQ Calculation and Optimizing the Packaging Department For Dura-Tiles

Every ingredient is obtained from many different dealers. In order to find the EOQs, I needed the fixed cost for making an order for each ingredient, and also I needed to know the inventory cost but the company does not worry about the inventory cost because the staff told me that the factory had plenty of storage place and ceramic did not have to stay under any certain weather conditions. Later I justified that expression during my first factory visit in bilecik. I saw that even though the factory is big, it sells everything they produce so they produce the maximum amount that they can. This is because of the energy expenditures of the ovens that bake the ceramic. These ovens consume a lot of energy so it is not profitable to shut down the oven, instead the oven does not stop any time and bakes ceramic and the start up energy consumption issue is under taken which is the most energy consumption rate of an oven.

Image 7: viva bej

viva beyaz

grain bej

So if I come to the point I had to find a constant inventory cost. I made an assumption from the land price that the inventory cost should be 1.8 TL. From the material that I learned from ens 208 course the formula for EOQ is as fallows;

Q*=

2K h

For example for product 60*60 viva bej the K202 clay ingredient coefficients to calculate EOQ are the K (transportation cost) = 32.344 TL, (production rate) = 851.167 kg, h=I*c and I (inventory cost) = 1,8* 43,75 m3=78,75 here 43,75 m3 amount of place that the minimum order (one truck of 35 tons = 43,74 m3 clay) occupies and last c= 0,02 tl/kg so the h = 1,578.

11 EOQ Calculation and Optimizing the Packaging Department For Dura-Tiles

Simply;

Q*=

2K h

232344 851167 1,578

= 148 983.678 kg

This means that optimal order quantity for this ingredient is 148 984.
The time between the placement of orders is found by Q*/ here it is

T=Q*/ = 148.9840/851.167 = 0.175034981 years (=2.1

months) This means that a new order must be placed 63 days after the previous one.

Image 8: The ingredients to be mixed

Following excel spreadsheets shows the calculations among all other three product and their ingredients optimal order quantities and the placement time between the orders.

12 EOQ Calculation and Optimizing the Packaging Department For Dura-Tiles

60*60 Viva Bej

Place I Occupied (monthly by the inventory Min. cost of Amount of min. Order Order) (m3) (TL) 43,75 17.023,35 K222 CLAY TL F330 FELDSPAR TL F315 FELDSPAR TL A112 CLAY TL 42.898,83 C150 CLAY C102 CLAY BINDER SODIUM SILICATE Solutions; T (time between the orders) (day) 79,08 79,08 80,21 70,26 58,51 53,12 23,52 49,2 10,73 Table 1: EOQ of viva bej TL 55.325,75 TL 2.028,16 TL 34.046,69 TL 5 9,00 TL TL 1 18,00 TL TL 0,25 750 937,50 TL TL 0,01 43,75 78,75 TL TL 0,01 43,75 164.785,99 43,75 54.474,71 43,75 21.279,18 43,75 78,75 TL TL 0,04 78,75 TL TL 0,03 78,75 TL TL 0,03 78,75 TL TL 0,02 78,75 TL

RAW MATERIAL NAME

Raw Material Cost ( TL )

c (cost for 1 kg) (tl/kg)

h = I*c

K (amount (transportation neded cost) (TL) anually) (kg)

17.023,35 K202 CLAY TL TL

0,02 0,02

1,575 1,575 1,7325 2,52 1,96875 3,3075 12,18747343 0,107225691 2,25

32.344,36 TL 32.344,36 TL 322.081,71 TL 81.712,06 TL 22.130,35 TL 36.770,43 TL 110.651,75 TL 340,47 TL 136,19 TL 136186,8 340466,9 4255836,6 1021400,8 851167,3 1702334,6 7490272,4 851167,3 851167,3

RAW MATERIAL NAME K202 CLAY K222 CLAY F330 FELDSPAR F315 FELDSPAR A112 CLAY C150 CLAY C102 CLAY BINDER SODIUM SILICATE

Q* (kg)

186.974,10 186.974,10 1.668.822,76 332.261,70 138.331,58 150.699,74 277.990,38 46.498,67 4.060,31

13 EOQ Calculation and Optimizing the Packaging Department For Dura-Tiles

60*60 Viva Beyaz

Place Occupied by the Min. Amount of Order (m3) 43,75 43,75 43,75 43,75 750 120,00 5,00

RAW MATERIAL NAME

Raw Material Cost ( TL )

I (monthly inventory cost of min. Order) (TL)

c (cost for 1 kg) (tl/kg)

h = I*c

K (transportation cost) (TL)

(amount neded anually) (kg)

K201 KAOLINITE F330 FELDSPAR C107 CLAY C150 CLAY C102 CLAY BINDER SODIUM SILICATE

474.777,45 127.299,70 436.201,78 105.934,72 173590,5045 26.706,23 29.673,59

54,00 63,00 63,00 63,00 937,5 0,18 9,00

0,10 0,02 0,98 0,04 0,13 0,60 0,25

5,40 1,39 61,74 2,65 121,875 0,11 2,25

123.442,14 248.813,06 11.572,70 90.801,19 34718,10089 44,51 118,69

4.747.774,48 5.786.350,15 445.103,86 2.522.255,19 1335311,573 44.510,39 118.694,36

Solutions; T (time between the orders) (day) 35,33 89,67

RAW MATERIAL NAME K201 KAOLINITE F330 FELDSPAR C107 CLAY C150 CLAY C102 CLAY BINDER SODIUM SILICATE

Q* (kg)

465.902,32 1.441.359,52

12.917,54 10,45 416.064,20 59,38 27582,07724 7,436128 6.057,10 48,99 3.538,78 10,73

Table 2:

EOQ of viva beyaz

14 EOQ Calculation and Optimizing the Packaging Department For Dura-Tiles

40*40 Grain Bej

Place I Occupied (monthly by the inventory c (cost Min. cost of for 1 kg) Amount min. (tl/kg) of Order Order) (m3) (TL) 43,75 43,75 43,75 43,75 43,75 43,75 750 1 5 500 78,75 78,75 78,75 78,75 78,75 78,75 937,5 18 9 600 0,03403 0,03403

RAW MATERIAL NAME

Raw Material Cost ( TL )

h = I*c

K (transportation cost) (TL)

(amount neded anually) (kg)

K202 CLAY K222 CLAY F330 FELDSPAR F315 FELDSPAR A112 CLAY C150 CLAY C102 CLAY BINDER SODIUM SILICATE CK 31500 BROWN PAINT CK 32840 PINK PAINT

17023,3463 17023,3463 164785,9922 54474,70817 21279,18288 42898,83268 55325,75486 2028,155642 34046,69261 9374

2,67990029 19009,05193 2,67990029 19009,05193

500238,209 500238,209 4402096,24 1000476,42 500238,209 600285,85 2501191,04 200095,283 80038,1134 1512

0,037434 2,94789032 189290,1382 0,054449 4,28784047 48022,86803

0,042538 3,34987536 13006,19343 0,071464 5,62779061 21610,29061 0,02212 20,7372785 65030,96713 0,010136 0,18244709 200,0952835 0,425381 3,82842899 80,03811339 15,12

3376

500

600

6,62

662

Solutions; RAW MATERIAL NAME T (time between the orders) (day) 60,62 60,62 61,49 53,87 44,85 40,72 18,03 37,7 8,23 Table 3: EOQ of grain bej

Q* (kg)

K202 CLAY K222 CLAY F330 FELDSPAR F315 FELDSPAR A112 CLAY C150 CLAY C102 CLAY BINDER SODIUM SILICATE

84.241,16 84.241,16 751.887,90 149.700,47 62.325,28 67.897,75 125.248,54 20.949,97 1.829,37

15 EOQ Calculation and Optimizing the Packaging Department For Dura-Tiles

My second project was to prepare a plan for making the decision to buy an automatic packaging machine to the factory or not. So I researched the packaging machines in the terms of usage, price, capacity, maintenance costs, and electricity costs. I found a convenient machine to the Bilecik factory machine brand is B&T and I calculated the breakeven point of the investment that is to say when the money for purchasing the machine will turn back and according to my calculations the machine will depreciate in 47,2 months.

Here is the table that shows the cost of manual packaging;

POLSAJ

QUALITY CONTROL

MANUEL PACKAGING LABOR COST ( TL / MONTH )

POLSAJ

QUALITY CONTROL

PACKAGING

AUTOMATED PACKAGING

LOADING TO THE PALETTE + TAGGING

1 PERSON

1.023,1

1 PERSON

1.023,1

2 PERSON

2.046,2

TOTAL

4.092,4 TL / MONTH

Figure 1: Cost of manual packaging At the moment the packaging department has a total of 4.092,4 tl expenditure.

16 EOQ Calculation and Optimizing the Packaging Department For Dura-Tiles

And with the new machine that I suggested the machine will depreciate in 47,2 months, following table shows that.

AUTOMATED PACKAGING LABOR COST ( TL / MONTH )

AUTOMATED PACKAGING MACHINE DEPRECIATION ( TL / MONTH )

AUTOMATED AUTOMATED PACKAGING PACKAGING ELECTRICITY MAINTENENCE COST ( TL / MONTH ) COST ( TL / MONTH )

1 PERSON

1.023,1

1.010,1

2.250,4

2.635,2

1 PERSON ( OPERATOR )

1.023,1

TOTAL

7.941,9 TL / MONTH

Figure 2: Cost of automated packaging Machine will cost 181.810 tls to the factory so; = 181.810 = 47,2 7.941,9 4.902,4

17 EOQ Calculation and Optimizing the Packaging Department For Dura-Tiles

During my spare time I prepared a production flow by excel. It is as fallows;

Schema 1: Production flow of ceramic factory

18 EOQ Calculation and Optimizing the Packaging Department For Dura-Tiles

INTERNSHIP EXPERIENCE: OBSERVATIONS AND ANALYSIS

This was the first time i was doing some job for real life. Although it seems a short period 2 months was a long time to do intern in such a big company. My adaptation period was painfully, for almost 2 weeks i was like a stranger. People around me were always in a rush and no one told me what to do i just got to work and sat down. But in time i decided to get involved in the business and I started asking questions about ceramic; how it is made what is ingredients and slowly I saw that I was getting involved. After some time I started doing the projects that the company assigned to me and I saw that people are helping me to manage my task but also I saw that they are not giving the enough information to make me do some research I think that worked for me and at the end of my intern I saw myself as a more social person. I do not doubt if I am curious about something I just get my answer by searching or asking. The project made me learn ENS 208 again I saw that things you learn from courses are not so enduring. I needed to study some ENS 208 and that made me a more convenient person to manage my project. Also I taught some to the people around me about EOQs. Furthermore working for a company has a weight you cannot just neglect the commands that are given by a senior. It actually feels good to contribute in something. I was not expecting to learn anything new my aim was to see if I can be a part of a company, because it always seemed so hard to have a desk job in which I had to go to work at 8.30pm and get released at 5.30am. Again at first it was hard to get up at 7.30 every morning but then after having a warning for being late I tried to be more punctual. Moreover It was a great opportunity to have a real life job experience. Although it was a good experience, I am not planning to work in such a production making company instead I am willing to get involved in jobs in my family company which does works in construction industry.

19 EOQ Calculation and Optimizing the Packaging Department For Dura-Tiles

CONCLUSION
During my intern I learned that intern is for making a student see how things work in real life. I learned how things learned at school can be implemented on real life. As a Manufacturing Systems Engineering student, I saw that nearly everything can be optimized. In my intern shortly I managed to produce an idea for making the packaging department more accurate and less costly. And also I did a work on EOQs that as it is told me the company did never did one on anything I dont think but maybe in the future they might inspire from what I did and continue doing EOQ for all other products and ingredients. To sum up it was a great opportunity to work for dura-tiles. I hope my team there was also satisfied by me.

RECOMMENDATIONS
I recommend to other students to start looking for a company to do intern. It is also a big chance for students to do intern that most of the companies do not want to pay insurance to the government for a nave person who does not know much about business life. Instead university pays the insurance and a great opportunity arises for both companies and students it was a great experience.

20 EOQ Calculation and Optimizing the Packaging Department For Dura-Tiles

REFRENCES
Pictures and Some information about company, retrieved September 2, 2011 from http://www.duratiles.com/