Company Sri Toys International (Pvt) Ltd.

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Technology Management – Discrete Technology March 2006

Author Pieter Maarten de Jong

Company Sri Toys International (Pvt) Ltd.

Moderawila Industrial Estate Panadura

Sri Lanka

Coaching Mr. Ferdinand Swart

Mr. Jayakody Muhandiram University University of Groningen

Faculty of Management & Organization P.O. Box 800

9700 AV Groningen The Netherlands Coaching Mr. Jannes Slomp

Mr. Frans Melissen

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Pr efac e

P P r r e e f f a a c c e e

This thesis is the product of my internship at Sri Toys International in Sri Lanka. The aim of the internship and the thesis is that the student proves to be able to practise business in a self-reliant and responsible manner. Apart from this, I can say that making actual use of the gained expertise, after years of study, was an instructive and valuable experience in itself.

Sri Toys gave me the opportunity to do the internship abroad, in a country far away from home. During my six months stay in Sri Lanka I got to know a beautiful country and culture. Everyday was a day full of new impressions, which I enjoyed.

Working in a country that was completely new to me, obviously knew some challenging obstacles.

Though in general, the cooperation was very satisfying and whenever I needed help or information, it was provided to the best of one’s ability. For that reason I want to thank everybody of Sri Toys whom I worked with, especially the production engineers and Rajiv, Sarath and Nalin.

In particular, I am very grateful to the directors of Sri Toys, Mr. Ferdinand and Mr. Jayakody, for their helpful assistance and for everything they did to provide the students a very pleasant and convenient stay. It is admirable to see that so many students are being given this once-in-a-lifetime experience.

Additionally, I would like to thank Mr. Slomp and Mr. Melissen for the support and feedback they gave as coaches from the University of Groningen.

The completion of this final project stands for the end of my life as a student. I can look back upon an enjoyable period, and at the same time, I am looking forward to my new life as part of the ‘working people’.

Maarten de Jong

Groningen, 21^st of March 2006

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S S u u m m m m a a r r y y

This research has been executed at Sri Toys International in Sri Lanka. This company manufactures toys and other products for children. Sri Toys exports the products predominantly to Western markets.

The production of Sri Toys is currently dependent on the experience of a few key figures in the organization. Over time, the process has grown big and complex and therefore it is hardly possible to just rely on these key figures. The result is a process with a lot of difficulties. The system is hard to control and the output is highly unpredictable in terms of quality, costs, productivity and so on. In order to come to improvements, Mr. Ferdinand was of the opinion that the whole production process should come to a higher degree of standardization, with the final goal of increasing the output of Sri Toys. To find a point to start with this standardization, it seemed obvious that there was a need to list and prioritize the problems.

The purpose of research is defined as follows: Make recommendations to increase the degree of standardization of the production process, by means of formalization, in order to make the process more predictable and controllable to eventually increase the output of Sri Toys.

A status quo analysis proved that it is most urgent to lower the costs in order to remain competitive.

The cause analysis listed the causes of the unsatisfying performance level of the production system.

All causes are put in a scheme where relations of the causes and problems become clear. This can be seen at page 55, figure 17. Thereafter a conceptual model describes the causes on a higher level of aggregation. The most important fact of this model is that it states that the unsatisfying performance level is caused by the quality of labour and by a lack of formalization of the operations as well as by a lack of formalization to control the production system. The status quo, the cause analysis and the conceptual model together provide a profound examination of the process that gives extensive insight in the existing problems.

At this moment it was time to choose the subjects for redesign, as a starting point of the process to a system with a higher degree of formalization. Out of the causes suitable for formalization, a choice is made based on the feasibility and the cost savings that could be realized with a solution. The following subjects were chosen to be subject for redesign:

• Messy workspace

• Too much transportation between the factory sites

• Too much material handling

• Unclear material flows

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Summary

In advance of the practical recommendations that would be given concerning the four subjects, they were all put into the light of lean production and continuous improvement first.

In the philosophy of lean production, the aspect of waste reduction is crucial. Waste can be seen in the broadest sense of the word. All four subjects are in a way causing waste. Thus in order to lower the costs, the aim besides formalization, should be the reduction of waste.

A primary process with a culture of continuous improvement, one of the principles of lean production, demands the system to be highly formalized: jobs should be executed every time the same way following procedures in order to bring problems to light and to improve the used procedures. For Sri Toys, continuous improvement in a lean production system should be a long term goal to aim at during its process of formalization. The Toyota Production System is used as an example of the most ideal situation of a lean system where continuous improvement has been embedded throughout the company.

Then the practical, short term, recommendations are given:

• Make and keep the workspace tidy

The Five S model is used to be able to realize this. This model provides a comprehensive method to organize and clean the workspace.

• Reduce transport between the factory sites

The amount of possible transportations between factory sites has been recommended to reduce, by creating one line out of the factory sites.

• Reduce as much needless material handling as possible

By implementing the recommendations concerning the two previous subjects, a lot of needless material handling will already have been reduced. One important additional recommendation, dealing about the simplification of re-assembling puzzles, has been provided here.

• Make the material flow as much visible as possible

Similar to the previous subject, provided recommendations of the first two subjects will lead to more visible material flows. Additional recommendation has been given, predominantly to improve the supply of information to the workers.

Eventually, in the discussion is explained that a formalized production system is well feasible. The practical recommendations should be the starting point for this matter. On the contrary, a culture of continuous improvement such as is installed in the Toyota Production System, will be very hard to reach, though it is not impossible. It is useful for Sri Toys to see this as an ultimate goal.

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C C o o n n t t e e n n t t s s

Preface ... 1

Summary ... 2

Contents ... 4

Introduction ... 6

Part I Description of the Context ... 9

1 Sri Lanka and Sri Toys ... 10

1.1 General information about Sri Lanka... 10

1.2 Cultural aspects of Sri Lanka ... 14

2 General Description of Sri Toys ... 17

2.1 History ... 17

2.2 Products ... 18

2.3 Market and clientele... 21

2.4 Organization ... 22

2.5 Résumé... 26

3 Description of the Production Process ... 27

3.1 Production stages ... 27

3.2 Other factory sites... 35

3.3 Planning and control ... 38

3.4 Résumé... 40

Part II Problem Analysis ... 42

4 Status Quo ... 43

4.1 Importance-performance matrix ... 44

4.2 Outcome of customer's survey ... 45

4.3 Determination of problems with highest priority ... 45

4.4 Conclusion... 52

5 Cause Analysis ... 54

5.1 Causes of the problems ... 55

6 Conceptual Model ... 64

7 Choice of Subject for Redesign ... 70

7.1 Feasibility vs. Cost savings ... 70

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I I n n t t r r od o d u u c c t t i i o o n n

A student, looking for a company to do his internship, was particularly concerned with primary processes and a toy factory somewhere far away in Sri Lanka was eager to acquire some useful objective advice about their production system. In a short period of time a connection was established and a deal was made.

In a preliminary conversation with Mr. Swart, one of the directors, a variety of problems were brought up and discussed. The most important problem that came to light as a result of the conversation was one that captures most problems of the production at once. The problem can be sketched as follows.

The production of Sri Toys is predominantly dependent on the experience of just a few key figures in the organization. They are in charge of the process and know what has to be done. However, the process grew big and complex in the past decade and therefore it is hardly possible to just rely on the key figures. The result is a process with a lot of difficulties. The system is hard to control and the output is highly unpredictable in terms of quality, costs, productivity and so on. In order to come to improvements, Mr. Ferdinand was of the opinion that the whole production process should come to a higher degree of standardization, with the final goal of increasing the output of Sri Toys. To find a point to start with this standardization, it seemed obvious that there was a need to list and prioritize the problems. Therefore is decided that this thesis should include a profound examination of the process that gives extensive insight in the existing problems.

De Leeuw¹ defines standardization as follows: “The extent to which the behaviour of staff or departments is programmed beforehand.” Standardization promotes coordination – or controllability - and makes behaviour of other actors – in terms of people or departments – more predictable. In the end it will save a lot of time and money. An adequate way of standardizing is formalization: “The extent to which the programmed behaviour is described and prescribed.” The final recommendation will therefore be in terms of formalization in order to realise a higher degree of standardization. The focus of this formalization will lay on one or more existing problems with a high priority to solve.

It is now possible to define the reason for this thesis – or starting point – in just one sentence:

Make recommendations to increase the degree of standardization of the production process, by means of formalization, in order to make the process more predictable and controllable to eventually increase the output of Sri Toys.

The thesis is split up in three parts. The first part describes the context in which this thesis is done. It includes information about Sri Lanka, Sri Toys and the process of the company. It provides a comprehensive view, which is rather useful, since this has rarely been done for Sri Toys. The management can look at the company from a distant and objective view, which might give fresh insight.

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Introduction

The second part consists of a profound analysis of the existing problems of the production process.

The emphasis of the thesis lies here, because this part consists of the information to start any improvement of the process. It begins with the status quo that decides on the state of performance.

The cause analysis reveals the causes of the indicators performing unsatisfying. Those causes can be seen as the existing problems found in the production. The conceptual model provides a model to see the problems on a higher level and shows how formalization fits in. In the final section of part II is decided which problem, suitable for formalization, has priority to be redesigned in the last part.

The final recommendation to solve the chosen problem by means of formalization can be found in the last part. The thesis will end with an overall conclusion, a discussion and a reflection.

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P P a a r r t t I I

D D e e s s c c ri r i p p t t i i o o n n o o f f t t h h e e C C o o n n t t e e x x t t

Part I provides the reader a broad view on the context of the thesis. It helps to get a comprehensive understanding of Part II, where the problems of the production of Sri Toys are analysed. With some useful general information and a description of cultural aspects, Sri Lanka can be met at first. Following this, the company of Sri Toys will be portrayed. Part I ends with a description of the production process.

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1 1 S S r r i i L L a a n n k k a a a a n n d d S S r r i i T To o y y s s

At first this part will provide some general information about Sri Lanka to make the reader a little familiar with the country. Then the culture will be discussed by making use of the dimensions of Hofstede. This is done to explain why things work as they work in Sri Lanka and – more specifically – what this means for the daily practice at Sri Toys.

Figure 1 Map of Sri Lanka

1.1 General information about Sri Lanka

Sri Lanka unfurls before the senses as soon you arrive: the heavy warm air, the swirls of the Sinhalese alphabet, the multicoloured Buddhist flags, and the variety of saris, fruits, jewellery and spices on sale in the markets.

Sri Lankan festivals announce themselves with multicoloured lights strung everywhere in the streets. The sky turns deepest thundercloud black before a replenishing downpour fills the hundreds

of lakes and rivers and makes the land overwhelmingly green. Marco Polo thought Sri Lanka was the finest island of its size in the entire world and called it ‘the Pearl of the Indian Ocean’.² One of the country’s sweetest surprises is the way that wildlife mixes into daily

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Sri Lan ka and Sri T oy s

life: people are forced to protect their home-grown fruits against ‘criminal’ monkeys, even in cities, and some highways are still closed at dusk because wild elephants are attracted to headlights.

The island hangs like a pendant from the ear of India, physically and culturally. The main languages and religions were inherited from India, but Sri Lanka’s culture and society have unique, distinct qualities. Sri Lanka has a longer history of Western rule than any other Asian country in its size. Signs of Portuguese, Dutch and British influences can be found in institutions such as churches, tea estates and forts, as well as in popular folk tunes, food and alcohol.

The Democratic Socialist Republic of Sri Lanka gained independence from Britain in February 1948.

Figure 2

The climate is tropical with distinct wet and dry seasons, although it often seems to be raining when it should be sunny and sunny when it should be raining. The temperature is 27 degrees Celsius on average in the low-lying areas – as goes for the location of Sri Toys - and about 20 degrees in the hill

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country. With fluctuations of only about 5 degrees lower or higher than the average, the temperature does not vary a lot over time.

Buddhism is the dominant creed of the largest ethnic group, the Sinhalese. It plays an extremely important role in the country, both spiritually and culturally.

Sri Lanka’s literature, art and architecture are to a large extent a product of its Buddhist basis. The Tamils, the largest ethnic minority, are Hindu. A remarkable fact is that there is a lot of mixing and melding among the various religions. A Catholic female, for example, may well feel the need to pay her respects to the Hindu god that stands for the fertility of women.

Before independence, Sri Lanka’s economy centred on plantation crops - tea, rubber and coconut products - a legacy of the colonial regime. While plantation crops remain important, the economy today is considerably more diverse. The top earner is now the garment sector, which accounts for more than 50% of exports. Tea accounts for about 15% of exports, and gems 5%. The second-

most important export crop after tea is coconuts. A major source of income is repatriated money earned by Sri Lankans in the Middle East and elsewhere.

The struggle by the Tamil Tigers of the north and east for a largely independent nation continues to cast a shadow over the economy.

Tourism has long been a promising earner, but the conflict stifles growth. In late December 2004, during the internship of the present writer, a major tsunami took about 31,000 lives, left more than 6,300 missing and 443,000 displaced, and destroyed an estimated $1.5 billion worth of property.

Sri Lanka has a small population earning big money, but the majority earns little. A production worker, for example, earns monthly about 4,000 SLR (Sri Lankan Rupee), which equals $40. A standard working week in Sri Lanka is 45 hours, so a production worker earns about 20 SLR per hour.

To make a comparison: the cheapest bread costs 13 SLR, that stands for more than half an hour of work, a regular television will cost a production worker about half of his annual salary. The average salary on an educated

level, for example a journalist, is about 8,000 SLR. A university starter earns about 10,000 SLR and a bank manager hopes to bring home about 50,000 SLR a month. To put it shortly, labour is cheap in Sri Lanka, while life is very expensive for the majority of the people.

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Sri Lanka deals with Sinhalese-Tamil difficulties since the mid 1950’s. A comprehensive explanation of the conflict would cost dozens of pages, but it is kept short here. Simply said, it comes to the point that the Tamils often feel cheated and dominated by the Sinhalese, the main population in Sri Lanka. Pro- Sinhalese measures – concerning language matters mostly – taken in the past lead to this feeling. The Tamils on their part protest against these measures and more radical groups want to claim their own nation. The conflict leads to a violent civil war between the national army and several rebellion groups, predominantly taking place in the north and east of the island. The largest group of rebellions is the LTTE, also known as the Tamil Tigers. Foreign diplomats often tried to intermediate in the conflict. Up to now violent periods and ceased fires alternate with each other. After the tsunami of December 2004 more violent has occurred, as a result of the opinion of the Tamils that the government does not give them enough relief-money.

During his stay, the undersigned never experienced tension, felt unsafe or whatsoever. Quite the contrary, Sri Lanka is a nation of ever smiling people who are hospitable and always willing to help.

Friends can be made easily and families invite you for their delicious – and spicy – curries as soon as you got a connection in some kind of way. A Sri Lankan having little

knowledge of the English language will know a few polite words mostly and will immediately grab the chance to use them wherever it is only slightly appropriate. A white man cycling along the road, which is quite uncommon to Sri Lankans, avoiding the big holes in the road and overtaking slower cyclists, because it is still dry while the black sky predicts a lot of water any minute, can expect a complete class of children in uniform waving at him, an overcrowded bus slowing down to take a better look and giving a unanimous smile, and banana selling youngsters cheering for the spectacle they don’t see every day!

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1.2 Cultural aspects of Sri Lanka

Hofstede³ uses four dimensions to describe cultures. A description of culture is always subject to the

‘own culture’ of the describer, and therefore not fully objective. However, with the cultural dimensions defined by Hofstede, the way of life and the way things go as they go in a certain culture can be better understood.

The cultural dimensions are

• Power Distance (To what extent less powerful members of institutions or organizations in a country expect and accept that power is unequally divided.);

• Individualism vs. Collectivism (A society is individualistic if interrelations between individuals are loose: everybody is supposed to take care of his own and of his near family. A society is collectivistic if individuals are from birth accepted in strong close groups that provide lifelong protection in return for unqualified loyalty.);

• Masculinity vs. Femininity (A society is masculine if social sex-rolls are clearly separated: men are ought to be assertive and tough and focused on material success; women are ought to be modest and caring and particularly focused on the quality of existence. A society is feminine if social sex-rolls are overlapping: men as well as women are ought to be modest and caring and focused on the quality of existence.);

• Avoidance of Uncertainty (To what extent the members of a culture feel threatened by uncertain and unacquainted situations; this feeling reveals itself for instance in nervous tension and in a need for predictability: in a need for formal and informal rules.)

The interaction of people in organizations is highly dependent on the culture they are a part of.

Therefore the characteristics of the Sri Lankan culture will be given to provide insight, to a certain extent, in the way the culture affects the daily operations of Sri Toys.

Power Distance

The inequality of power is in general accepted and certainly expected in Sri Lanka. You accept your place, you know who is below and who is above, and if not, someone will put you back to where you belong. Sri Lanka does not have a caste system as India does, but people implicitly do consider a sort of class system. The difference is that you are not stuck for life in just one class. You can ‘climb’ the stairs, though that will not be very easy.

Employees of Sri Toys will always show deep respect to their both directors. The hierarchy of the organization is strong and inevitable. For example, after a higher employee had been yelling at a lower person, who quietly accepted his lashing, he on his part will yell at his inferiors.

New ideas or suggestions will have to be initiated from above. Workers will primarily do what is assigned to them and it is hard to give responsibilities to a group as a whole. They will always follow and obey their superior. In such a strong hierarchy, formalization - where behaviour of employees is

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programmed in procedures - seems to be very feasible. Superiors have the power to keep close control on the execution of procedures.

Individualism vs. Collectivism

Sri Lanka can be characterized as a collectivistic culture. Without exception, family ties are very important. In this matter, a ‘family’ can also be a group of friends or colleagues. Place yourself in the service of the group and you can always expect everyone to help you if needed. The other way round, you can expect the whole group to turn against you.

At Sri Toys such a ‘family’ clearly exists. The group, solely men, consists predominantly of the more powerful people in the organization and in most cases they have been working a long time for Sri Toys. The Sri Lankan director can more or less be seen as their foreman. A very illustrative example which is hard to imagine for Dutch people: one day when the undersigned paid the director a short visit at his home, he found the complete group busy with ironing, folding up and packing the clothes with which the director was about to travel abroad.

This group is very loyal and is willing to do anything for the company, the director and for the group itself. These people have meant and still mean a lot to the company.

Masculinity vs. Femininity

There are quite some women, particularly in the Colombo district, that make a career and have good jobs. The president of Sri Lanka for example is a woman. However, in general, Sri Lanka can be seen as a rather masculine country. The role of women matches the definition quite well: they are modest, caring and focused on the quality of existence, that is to say the tender pivot of the family. Most women are even so modest they are rather shy. Girls go to school until they are about sixteen, then they work a couple of years and finally they marry and bring up their children. That causes, for example, the fact that there is a large turnover of decorators at Sri Toys. When these girls worked a few years, got skilled in their painting job, they leave the company to start a family. It costs the company a lot of effort to hire and train new workers for this ‘girlish’ job.

For women that got far by having an executive occupation, it is hard. They will definitely experience resistance from their male inferiors. As goes for a lot of countries, this is slowly changing in Sri Lanka.

Avoidance of Uncertainty

An example to show that Sri Lankans do not have the urge to avoid uncertainty can be found in the traffic: this is a simple matter of getting there as quick as possible, the way how is not that important. Buses trust on their corpulence and power, motorcycles on their slim size and speed. The result is rather chaotic and hazardous, however not that inefficient!

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Overall, the Sri Lankans do not tend to nail up their society with rules, neither in a formal nor in an informal way. This is not only due to the nature of the Sri Lankans. For a great part this can be accounted for the state of poverty of the country, because it simply costs money to create a regulated society where citizens are freed from threatening uncertainties. Insurances for example – a direct instrument to avoid uncertainties – are becoming more popular in Sri Lanka. This business grows with the increasing wealth of the country: when people reach a certain level of wealth, they want to – or can afford to – secure the assets they gained.

This dimension brings us back to the starting point of this thesis, namely that Sri Toys lacks a certain level of formalization and uniformity, causing a production system which is hard to predict and control.

It can be seen as a consequence of the culture, where things just go as they go and are not necessarily fixed in rules or procedures. Yet it can only be seen partly in this way, because other Sri Lankan companies prove that highly formalized production systems can be reality in Sri Lanka as well.

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G en eral Descri ption of Sri T oy s

2 2 G G e e n n er e ra a l l D D e e s s c c r r i i p p t t i i o o n n o o f f S S r r i i To T o y y s s

Sri Toys International manufactures and exports wooden toys, furniture and other accessories for children. The office and main production plant are situated in Panadura, at the west coast of Sri Lanka thirty kilometres south of Colombo. To view this thesis in context, this chapter provides a general description of the company and its characteristics.

2.1 History

In 1989, under a jackfruit tree in the garden of a rented house, Mr. Jayakody and Mr. Swart started business. Mr. Jayakody was already experienced as an entrepreneur. He was responsible for all the public relations and other business matters. Mr. Swart, an industrial designer, concentrated on designing wooden objects for children. They put out all the wood cutting jobs to subcontractors.

Sanding and painting was being done in the garden. Sri Toys had been established.

At a certain time in 1990 a large order had been placed. Then Sri Toys could expand a bit and therefore moved to two large houses. Here they organized something which looked a little more like a real factory. In the same year they copied the idea of wooden clown and bear letters, which was a booming business in the toy market those days. They adapted this idea to their own identity of design.

This yielded its profit: at the end of 1990 the annual turnover had amounted to $200,000 and about 150 workers were employed.

In 1992 they bought an old craft school in Kalutara as their factory. After only two years they sold it and moved to the current factory in Panadura. They also took over some former subcontractors. At this point Sri Toys had a work force of nearly 200 employees, divided over the various sites, but the main part was working in the Panadura factory. Nowadays about 185 people work in Panadura and about 125 are employed at four - significantly smaller - factory sites elsewhere.

The year 2000 saw an annual turnover of almost one million dollar and became the best year in the history of Sri Toys⁴. Their main customer, FAO Schwartz, an American department store enterprise, was responsible for over sixty percent of this turnover. Shortly afterwards the company unfortunately struggled with financial problems and stopped ordering from Sri Toys International. This, together with the 9-11 disaster, caused a tremendous spin in sales for 2001 and 2002 as can be seen in Figure 3.

Since then sales are climbing up again and right now they are on the level of 1998. Last year, 2004, balanced a turnover of 560 thousand dollar.

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Figure 3

2.2 Products

Sri Toys offers an extensive range of handcrafted wooden products for children. Every year new designs are being launched. Additionally, customers have the possibility to order a specific desired product, designed by themselves or in consultation with Sri Toys. All products have a smooth surface with a bright coloured layer of paint and are decorated by hand. Most are made of rubber wood, but MDF is used if the dimensions of a product exceed the maximal size of rubber wooden planks. The products can be grouped into the following categories:

• Figures

Animals and people. Available in various sizes, separately or set wise. All rather small sized, so made of rubber wood.

• Play sets

An MDF item, e.g. Noah’s ark or a castle, including a set of figures of the particular theme. MDF items are mostly available in a big and small size and can also be purchased without the set of figures.

• Puzzles

Rubber wooden stand-up puzzles in all sorts of shapes and sizes.

• Educational items

Sorters, wooden cakes, expression masks, dominoes, letters, numbers etc. Most products in this category are made of rubber wood.

• Children’s room accessories

Growth meters, book-ends, shirt hangers, doorknobs etc. Also mostly made of rubber wood.

• Children’s furniture

Toy boxes, chairs, tables, stools, book racks and more. Some made of rubber wood, some of MDF, depending on the dimensions.

• Others

Toys on wheels, soft toys, hobby horses etc.

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Picture 1 Sri Toys Products

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Figure 4

Picture 1 shows an overview of a small selection of the Sri Toys products. Figure 4 illustrates the segmentation of the sold products from the year 2000 till 2004⁴ (i.e. indicates the part within the total turnover for which each individual product is responsible). Although this data is partially sorted to the categories, it has also been sorted to the most sold products out of a specific category.

It is plain to see that play sets have become the best selling products for Sri Toys over time. The play sets are nowadays responsible for more than seventy percent of the turnover. By contrast the segment of children’s furniture declined considerably to less than five percent. The sale of puzzles, about twenty percent, is rather constant over the years.

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2.3 Market and clientele

Sri Toys International exports all its products to foreign - more wealthy - markets. The selling area consists of more than fifteen countries, but the greater part has been sold to the United Kingdom, Unites States of America and Australia. These three countries are together responsible for around seventy percent of total sales over the last few years. Figure 5 illustrates how much is exported to the different countries from the year 2000 till 2004⁴.

Figure 5

Sri Toys has partially owned subsidiaries - or joint ventures - in the Netherlands and United Kingdom, respectively named Sri Toys Netherlands and Sri Toys Europe, which take care of all the sales in their specific selling area. In particular, they sell to mail order companies and sometimes to wholesalers, just like Sri Toys does itself when there is no subsidiary, which is mostly the case. These customers on their part sell the products via catalogues to consumers and also to schools, although considerably less. A rather small part of the products is being sold in retail shops. At the moment Sri Toys tries to increase this particular part by providing neat packings appropriate for retail business. Finally, of course, the products reach their end users: children from about three to eight years.

At international toy fairs, like for example the ones in Nuremberg, New York and Frankfurt, Mr.

Jayakody and Mr. Swart promote their - new - products and make contacts with prospective new customers. Because both manufacturers and toy sellers meet here, these fairs are of great importance to the toy industry. The Nuremberg Toy Fair is the largest one and therefore the best-known and most important toy fair in the world. Since last year the two sales agents of the subsidiaries also help to

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promote the products and to gain new customers over there. Besides participating in these fairs, Sri Toys International does not engage in other promotional activities. New customers are primarily gained during the fairs. Only a few become customer via the website or by hearing about the company in a roundabout way.

Competition is fierce in the toy industry. Suppliers of all sorts of toys exist in abundance. This goes for wooden toy manufacturers as well. Low-wage countries such as China put high pressure on the price.

Sri Toys International differentiates itself by providing original designs with a neat and hand-decorated finish. Therefore Sri Toys can rely on continuous sales to their - growing - group of regular customers.

In a lot of cases long term relationships are built up. Customers willing to purchase for a long period of time, often demand contracts concerning sales exclusivity in their region, terms of payment and delivery times for example. Large differences in purchasing behaviour exist between the customers.

This becomes clear by considering some sales facts of the year 2004 given in Figure 6.

Figure 6

2.4 Organization

Sri Group International

Sri Toys International is a member of Sri Group International, which covers eight enterprises. All are owned by Mr. Jayakody and Mr. Swart, except for Sri Buildwell, which is owned by Mr. Jayakody only.

The reason for establishment of all the companies is of course primarily to drive profitable business, but also to take the advantage of fiscal benefits. In Sri Lanka a company can drive business almost tax free the first five years. If no profit is gained during the first five years, this period can even be extended. Thus some advantageous financial constructions have been used in the Sri Group. The following explicates briefly the main activities and extent of the group members.

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• Sri Line Shipping International (Pvt) Ltd.

International air and sea freight forwarding. Mostly ships Sri Toys orders, but others as well.

About 1% of total group turnover is gained by this member.

• Sri Gems International (Pvt) Ltd.

Processes and trades gemstones to jewellers. About 0.5% of turnover.

• Sri Toys International (Pvt) Ltd. and Sri Toys Educational International (Pvt) Ltd.

The second company has been established last year. All products come out of one and the same process. Together these two are responsible for about 98% of the turnover.

• Art & Craft Trading International (Pvt) Ltd.

Formally trades and exports all sorts of domestic arts and handcrafted products. In actual practice this forms about fifty percent of the toy sales and all the sales of gems entered in the books. Additionally ACTI does some other trades as well, but the extent of this is really small.

So although the accounting of ACTI leads one to suspect that the member gains about half of the total turnover, the member only generates a negligible part of turnover.

• Sri Media International (Pvt) Ltd.

Production of advertisements for television, radio, press and outdoors. Scarcely active: very few projects have been done in the past. Very recently started to undertake more activities.

• Sri Buildwell International (Pvt) Ltd.

Construction firm. Hardly active in the past, but has become more active lately, just as Sri Media.

• Sri Villages International (Pvt) Ltd.

This company is still starting business. A hotel is being built up near the Sinharaja Rain Forrest.

To put it briefly, nearly all of the Sri Group’s income can be attributed to the sales of toys only, produced by Sri Toys, Educational or not. This is one of the reasons for changing the group name into Sri Toys Group soon. This report only considers Sri Toys International. There will be no distinction between Sri Toys Educational International and Sri Toys International here, because in fact there is none.

Mission and strategy

Most companies have a mission and strategy to point out what the objectives of the organization are and, respectively, how these objectives can be achieved. After some research it became clear Sri Toys International does not have this formulated explicitly. Although some employees claimed to have seen something like this, they could not find it or tell what was stated in there. They probably meant some of the advertisement leaflets with some respectable statements in it, but such cannot be seen as a mission or strategy, because these have to be known and observed throughout the company, which is not the case at Sri Toys.

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Internal organization

A staff of 35 people in total is employed in the office departments. The rest - about 275 workers - are employed at the production sites. A part of the office departments consists of about one or two workers only. Obviously, departmental managers do not exist over here. Therefore these are led by a manager on a higher level or directly by one of the managing directors. Additionally quite a lot of employees are responsible for jobs with respect to more than one department. So the office departments are slightly confusing.

Another important fact to take into account is that nobody has a personal computer to work with or is provided with individual storage space for his documents. In the computer room the employees of the designing department occupy most computers to work on product pictures and product information files. Other employees use the computers to write and print letters, emails and standard forms. Only the accounting department uses an application to do the bookkeeping. This means nearly everybody has his own mass of paperwork. So information is never documented centrally and therefore information is hardly shared or spread throughout the company. Employees are scarcely informed - or interested - in general issues concerning the company.

The chart in Figure 7 shows the current organizational structure of the company. Although the separation is not that strict as shown and an organization chart is never explicitly used or even made, the given figure approximates the actual situation as accurate as possible.

Figure 7 Organization chart

Mr. Jayakody and Mr. Swart, the Managing Directors, are both head of Export & Sales and Production. Their Secretariat consists of about three people, who are operating in other departments too. For example one of them also forms the Export & Sales department on herself and is on that account in charge with order placements, order confirmations, invoicing and final export.

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The production manager, Mr. Nalin, is told by the directors and by Export & Sales what to produce.

The planning is made together with Production Engineering. Besides this, the three engineers are concerned with improving and formalizing the production process. For that matter they were my most direct colleagues with whom I cooperated closely. On the basis of the planning, the production manager commands the supervisors of the production departments at all factory sites. Since there are five factory sites in total and three subcontractors, it is rather complicated to gear them to each other.

The supervisor of the Packing Department, the production manager and recently also one of the production engineers are all engaged in this complex matter. They do not explicitly form a department, but since they are the ones who take care of the coordination, it is called Internal Transport here.

Every production department has allocated workers to check the quality of the products. Together they form Quality Control. To keep track of the quality more accurately the department has recently expanded to about ten – higher educated – people. Factory Maintenance is actually only one man who repairs all occurring defects to the best of his ability.

Mr. Jayakody is head of the entire Accounting branch, but the daily operations are managed by the accountant Mr. Nalaka. The branch contains four departments. The task for the two employees of Administration and Personnel is to handle all personnel matters - payments, registering, etcetera - and some additional other administrative jobs. Both employees are also engaged with work for Stores and Purchase. These two departments - together about ten people - keep track of the stocks, order everything to be purchased and document all of the company’s expenses. In this matter by the way the production manager is responsible for the stock and purchase of raw wood. The fourth department Accounts, as the name already implies, does the accounting for the company. Six people are employed here.

Besides doing his part of managing the middle branch, Mr. Swart still is the main designer of the toys and logically the head of the Designing department. In the past, several Dutch students designed a few products, but for the rest Mr. Swart and his assistant are the only ones responsible for all of the designs. Four other employees in this department are concerned with other tasks than designing, among other things: documenting the product drawings in the archive both on paper and digital, preparing product pictures for brochures, listing product information for customers and for future computerized purposes, and preparing an “order book” which informs Production what to do.

Since both directors always keep in close touch with each other, they are also both involved in the field they are not concerned with, though indirectly via the partner.

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2.5 Résumé

This paragraph provides a brief overview of what is important to the following parts of this thesis.

Sri Toys offers a very broad range of products. In some situations this will complicate matters. Out of the assortment, sets are the most sold products. In general they consist of a lot of different pieces, which causes additional complexity in the production process.

Competition is fierce and high pressure is put on the price. Sri Toys tries to differentiate by original designs and by a neatly hand-decorated finish. Perhaps it might be more important to concentrate on a competitive price.

Sri Toys does not cling to a particular mission and strategy. However, such statements, if known throughout the company, can help the organization to achieve important goals.

The fact that office departments are somewhat confusing is an example of the low degree of standardization and formalization.

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Des cri ption of the Pro duction Pro ces s

3 3 D D e e s s c c r r i i p p t t i i o o n n o o f f t t h h e e P P r r o o d d u u c c t t i i o o n n P P r r o o c c e e s s s s

Sri Toys International exists of five different production sites. The company makes use of several subcontractors as well. These cover a part of the needed wood cutting capacity or make products Sri Toys is not able to produce itself, for example spherical shapes which require the use of a lathe. The site in Panadura is the main production plant, where about 150 of the 275 production workers are employed. Most raw materials arrive here and will be distributed over the other sites. Orders have been exported from Panadura only. Sri Toys produces exclusively on a make-to-order basis.

Therefore nothing is being kept in stock, except for unfinished orders with finished goods. This means that the in Dutch so-called KOOP, which literally signifies customer-order-disconnection-point, is at the very beginning of the process: before the stock of raw wood, because the wood is supplied in accordance with the placed orders.

This chapter will first describe the various production stages. It is based on the main factory in Panadura. At other sites or at the subcontractors there may be little differences, but in general these work the same way in the same sequence. The other plants only take care of a few of the mentioned stages of the process. This will be explained after the description of the production process as well as the coordination between the different factory sites. The last part of the chapter describes how the process is planned and controlled.

3.1 Production stages

Since all products undergo the same processes in the same order, the production has been arranged as a line lay-out or is - in other words - product organized. The figure below illustrates the sequence of the various stages. A plan of the Panadura factory can be found in Appendix I. It shows a detailed overview of the described primary process and its stock locations.

Figure 8 Production process chart

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Before the first stage the raw wood will be supplied and placed in the stock area. Because the main part of the wood is ordered following customer orders, no large stock is being kept. A great part of the rubber wood comes from the factory site in Piliyandala, which is also owned by Sri Toys. All the MDF, another substantial amount of rubber wood and a small amount of plywood is bought directly from wood suppliers.

Stage 1. Tracing

In this process the workers apply the figures to the wood by using screen prints, templates, or carbon paper to trace the drawings. Then they cut the planks into smaller workable pieces with a circular saw.

A little buffer, about one or two hours of work for the next department, is kept after tracing.

Picture 2 Screen print of snake puzzle

Stage 2. Cutting

In the Cutting Department the workers saw the planks, both rubber wood and MDF, into the given shapes with four or sometimes five electrical fretsaws. The small amount of plywood, used for very thin pieces like flags for example, is treated the same way as MDF. Additionally there is one milling machine to make slits in MDF parts and one – sometimes two - drilling machines for making holes in some of the parts. To cut the MDF parts more efficiently, they nail more boards together. When these are being cut, the parts come loose again. This is only being done with not too complicated designs, because otherwise the saw blade of the fretsaw machine would brake.

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Picture 3 Fretsaw machine

Stage 3. Machine Sanding Rough

After cutting, the shapes are sanded with a machine. The department holds a total of four sanding machines, but only two are operational. With the two machines four workers can sand shapes at the same time. Hereafter the parts are checked, counted, placed in the buffer back in the Cutting Department, and are finally transported to the buffers of the Sealing Department, all done by two quality controllers of the Cutting Department. These workers also know whether everything of a specific order has been done.

Picture 4 Sanding machine

Stage 4. Applying Sealer or Primer (First time)

In the Sealer Department the shapes are first cleaned with a high pressure air sprayer and then applied with a layer of sealer. The rubber wood items are covered completely. The MDF parts are only covered with sealer on the edges. This process provides a good undercoat for the paint that will be applied later on. One way in which this process takes place is by means of a sprayer. Here one worker handles the sprayer and another one hands him over the shapes and lays the shapes to dry in the buffer. It takes approximately thirty minutes to dry the sealed shapes. The other way to apply sealer is putting it into a dipping bath. The major part of all the produced items, consisting of the puzzles and

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only one puzzle at a time is being immersed in the bath, otherwise the pieces of several puzzles will mix up and cannot be re-assembled easily. The cutting of the objects is done by hand and can never be done so accurately that puzzle pieces will be interchangeable. After half an hour of drying on the special table - which works like a strainer - the re-assembly of the puzzles is being done.

Picture 5 Sprayer at Sealer Department

Picture 6 Dipping bath at Sealer Department

Stage 5. Fine Sanding (First time)

After the first layer of sealer has dried, the parts are transported to the first sanding worktables. Now a large group of workers, all women by the way, smooth the surface of the shapes with fine sandpaper.

Picture 7 Sanding by hand with sandpaper

Stage 6. Applying Sealer or Primer (Second time)

After transporting the shapes back to the buffer at the Sealing Department, the dust will be removed again with the air sprayer. Then the second layer of sealer is applied to the rubber wooden items.

Unlike the first layer, every item will be sprayed and none will be dipped in the bath. Again the sealer

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needs to get dry, which takes about half an hour. On a cloudy – relatively – cool day drying the sealer can take much longer by the way: sometimes more than five hours.

The MDF parts are now applied with primer. According to the colour that will be used in the painting stage, a specific basic primer colour - blue, white, green, yellow or red - is applied. Primer must dry for only thirty minutes at most, even at a less sunny day.

In a number of cases MDF parts are not applied with primer, but with a second and even a third layer of sealer. At the end those parts are supplied in their natural colour, so they will not be painted at all.

Stage 7. Fine Sanding (Second time)

When the shapes are dry they will be fine sanded for the second and last time. After this all the products are being put in the small buffer and then checked at the quality control in the Sanding Department. Here they also use filler to remove occasional dents from the items. Finally the products are put in the buffer to go on to the next process.

Stage 8. Sorting

Right before the painting stage the sorting is being done.

One particular table near the Sanding Department is allocated to sort the different pieces of the puzzles only. Before this, the puzzles are blown clean again. Then they lay the separate pieces on boards, regarding to the colour the piece has to become. Here the puzzle pieces are mixed up, but as a rule of thumb only with a maximum of about twenty puzzles at the same time. This rule is being used to keep the necessary time for re-assembling the puzzles acceptable.

The rest of the products are sorted in the Painting Department. At first the rubber wooden items are dusted off with an air sprayer too, and then sorted according to the colour they have to become. After this the worker lines up the rubber wooden shapes on boards and pushes the boards into a trolley, which is done with the puzzles as well. On the other hand all the MDF parts are being hung up in trolleys at the Painting Department, so that is why they have to attach hooks to those parts here. The MDF parts are by the way wiped clean with a rag instead of an air sprayer. At last the trolleys with the hanging MDF parts and lying rubber wooden items are placed in the buffer in front of the paint sprayer.

Stage 9 & 10. Painting and Drying

The shapes are now ready for painting. Using the paint sprayer the workers apply the main colour to the items. One worker mixes the basic paints into the specific demanded colours.

The rubber wooden items on the boards are painted on one side first. Having spent one day drying, the items are then turned over and the other side gets treated. They are then put in the drying buffer once again. Halfway during the drying process the products are being put upright, because otherwise they will stick to the boards.

Since they are hanging and can therefore be reached from all sides the MDF parts are painted at once. Thereupon the parts are being transported to the drying buffer, in which they have to dry for at

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least twenty four hours. After this, the trolleys are placed in the - quite large - buffer of the Decorating Department.

Picture 8 Paint sprayer

Stage 11 & 12. Decorating and Drying

In the Decorating Department the shapes are provided with details. The workers decorate them with a little brush on one hand and with screen prints on the other hand. They make the choice by insight and experience, but more or less it can be explained as a rule of thumb: complicated decorations, but with not too many different colours, are done by screen prints, the simple details are done by brush, and the most complicated decorations, with many colours, are screen printed in one colour first and are painted over by brush in the right colours. Large one-coloured areas and taut lined details are applied to the products by screen printing as well. A substantial part of the items needs to be both screen printed and decorated with a brush.

By the way, the screen prints itself are usual made by outside companies, also for the Tracing Department. Sri Toys manufactures their own screen prints only for certain small amounts of temporary products with not too complicated details.

Another important process that takes place is the adjustment of all the rubber wooden items. Because these items mostly have complicated outlines and the wood is quite thick, the paint sprayer cannot manage to cover the pieces completely and to distribute the paint evenly. So that is why these items are always being touched up by hand with a brush first. This is not necessary for MDF parts, since they do not have too complicated shapes and the material is thinner than rubber wood. On the other hand one process that is only needed for MDF, is the removal of the little hooks. Once this is done, the worker fills up the hole and paints the little spot. If an MDF part has to be screen printed, it will be hung up again to dry, so the removal will take place after this.

Except for screen printing, which is being done at the particular allocated table in the corner, all the mentioned processes are being done at the large worktables. Next the items have to dry in the buffers.

Screen printed items are completely dry in a couple of hours, but – when necessary - can be decorated with brush straight afterwards. By contrast after being treated with the brush, drying takes 24 hours.

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For the puzzles it is a somewhat different story again. When all the pieces of one puzzle batch are dry and have been adjusted with the brush, they are placed in the buffer at quality control of the Packing Department. Here the workers re-assemble the mixed-up pieces back into complete puzzles. This is a process of trial and error. All pieces are spread on the table, still sorted by colour and at most about twenty puzzles at the same time, as explained before. Mostly they know the puzzles and therefore they know what the piece, which should be connected to the other one, looks like. However there are just as much pieces as puzzles, all looking identical, but in fact are unique. So they have to try the pieces until one fits and then go on to the next, et cetera, etcetera, until all the puzzles are completed.

To start they take the same piece of all the puzzles and line them up. Then they fit the next connecting piece to all of them by trial and error and so on. After this, the re-assembled puzzles go back into the buffer of the Decorating Department to be provided with details the same way as the other products.

When the items are completely dry and do not need further treatment they are ready to get packed and therefore placed in the buffers at the Packing Department.

Picture 9 Decorating by brush

Picture 10 Decorating by screen print

Stage 13. Assembling

A few products, for example bookends and little chairs, need to be assembled before they are packed.

This usually consists of relatively small and simple proceedings such as gluing or nailing for example.

These acts are done at the assembling tables next to the stock with old products and packing boxes, but also in the Decorating Department. Infrequently assembly takes place earlier in the process. For example, MDF parts for castle towers are already put together after machine-sanding.

Stage 14. Packing

In the Packing Department the workers pack the finished products, some per set, others individually.

Beforehand the products will be cleaned with a brush and a little bit of turpentine is used to make them

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frequently are stated in the following. Figures, animals, or other small items, that form a set, are first packed together in a little cardboard box and in a paper stencil in which the items fit exactly. The shrink machine thereupon packs the sets in plastic film. This machine shrinks the film tight around the products. Most puzzles are packed straightaway with this shrink machine. Letters and other small products sold individually are put in a wrapping of film and then closed by melting the film with another sealing machine. MDF parts belonging to one product are packed in a box with pieces of paper in between. The specific set that goes together with this MDF product will be added. Large products are also packed in boxes with some paper to protect and usually not with too many in one box.

Finally, when the products are in labelled boxes, belonging to a particular order, they are placed in the end stock to export as soon as the complete order is finished and packed.

As mentioned before, usually the extent of the end stock in the Packing Department is limited, since there are only unfinished orders which are being exported to the customer as soon as possible.

Additionally, in this department a lot of wasted old products and piles of packing boxes are being stored.

Picture 11 Packing the finished products

Stage 15. Exporting

Finally when the complete order is ready and placed in the end stock, it will be loaded into a truck or container and shipped to the customer by cargo plane or ship.

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3.2 Other factory sites

Here the activities of the other four factories and the subcontractors are described. All the sites are responsible for only a part of the process and thus considerably smaller. At the end of this section a summarized overview is given of the coordination between the different production facilities.

Subcontractors

Three subcontractors trace, cut and machine-sand rubber wooden items for Sri Toys, basically the small pieces. All the rubber wooden planks are delivered from Panadura or Piliyandala by Sri Toys itself. After processing, the shapes are transported to Sri Toys's own sites; the greater part to the Piliyandala and Deco factory. Sometimes puzzles, which are usually completely produced in Panadura, are also sent to subcontractors. These are traced in Panadura beforehand and will normally return here again to get processed further.

Piliyandala

At this site raw rubber wood comes in that has to be treated. The greater part is delivered as planks. A small quantity still has to be cut up into planks, since this is delivered as tree trunks. First the planks are planed to the right thicknesses, next they are treated in a tank with chemicals to impregnate and to get rid of fungus and vermin. When this is done the wood is put into ovens – called kilns - to dry for about seven days. Besides, the wooden waste from all the sites is burnt to heat the kilns. The wood that is ready to use is transported to the Panadura factory and to some of the subcontractors. As explained before the remaining required amount of ready to use rubber wood is bought from suppliers and directly delivered in Panadura.

A part of the rubber wooden shapes from subcontractors are sealed and fine sanded one time in Piliyandala. Since there is no spraying equipment, which is necessary for sealing the second time, the process is continued in Panadura or Egodauyana.

Lately a small Decorating Department is installed and made operational in Piliyandala. Products to be decorated come from Egodauyana and are also returned there afterwards.

In total twenty workers are employed at the Piliyandala factory.

Egodauyana

A large part of the complete process can take place here: from First Sealing to Decorating. Sixty of the seventy-five employees are engaged with decorating by brush. This site therefore accounts for a lot of decorating, but for the other stages there is only a small capacity left.

Rubber wooden items are brought into the Egodauyana factory from various other sites and at different stages. Products from subcontractors need to be processed at the start: First Sealing.

Shapes coming from Piliyandala or Deco are sealed and sanded one time and therefore start at

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painted at Egodauyana. Additionally some painted products from Panadura need to be decorated here.

Because the capacity of the Painting department is rather limited in Egodauyana, a part of the sanded items is transported to the Panadura Painting department. Products painted in Egodauyana that need to be screen printed are transported to Panadura too, since the site does not have a screen printing facility. Since the Decorating Department in Piliyandala started, some painted products from Egodauyana are decorated there. As mentioned above these items return to Egodauyana. Finally all products are transported to Panadura to get them ready for export.

Deco

At Deco Factory they only sand and seal. Some products are being sanded and sealed only once, but most of the time they are treated twice so they are ready to be painted. In both cases the output goes to Egodauyana or Panadura. The input, the rubber wooden shapes, all come from subcontractors. The workforce over there totals twenty people.

New Factory

This plant, settled close to the Panadura factory, differs from the others. Here they produce especially the larger products of MDF and rubber wood consisting of multiple parts, for example several furniture items and sorter boxes. These products mostly contain no complicated figures, but have for example notches, holes, roundings or grooves. So the wood cutting processes for those products can be done or have to be done by making use of carpentry machines. This factory is organized in a functional lay- out and contains a moulder, a sand machine, a drilling machine, a plane machine, a router and a circular saw. Five people are employed here.

The wooden planks come from the Panadura factory. First the planks are "sized": cut to the right size.

Then the desired carpentry process or processes will be executed at the particular machine. The last operation in this factory is machine-sanding. After this the parts are moved to the Panadura factory to get finished and to assemble them to products. Almost all can go immediately to First Sealing. A small part needs to be cut additionally by a fretsaw machine. The New Factory is also concerned with

"sizing" all the MDF parts that are going to be cut further in the Panadura factory.

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Ov erview

Figure 9 shows a schematic summary of all the existing flows. Not every “arrow” is equally common.

For example the flow from Egodauyana Painting to Panadura Screen printing is avoided as much as possible by painting the products to be screen printed in Panadura. Nevertheless, the actual coordination between all the sites is rather complex.

Figure 9 Production flows between all factory sites

The production manager and the supervisor of the Packing department organize this internal coordination and thus the transportation of the materials and products. In the end a product is sometimes transported between factories for more than five times, others only one or two times: it varies a lot. First of all it depends on – and is decided according to – the type of product. But the prevailing question is when and where production capacity is available. The fact is, for the greater part of the products there is a high level of flexibility in the choice of what is going to be produced where. It can be assumed that in rare cases other flows occur which are not shown in the figure.

A ride between production sites can take five up to thirty minutes. The aim is to include as many transports as possible in a single trip. Another aim is to keep complete sets together at one production site to not complicate the material flow more. Unfortunately most of the times this is not possible, since ordered amounts often exceed the production capacity of one site. When for example 400 sets of figures have to be produced, the wood cutting work will take too much time for only one subcontractor.

Therefore the work is divided over more subcontractors and so each of them produces only a part of the set 400 times. Obviously this results in several needed transportations. Production Engineering lately started helping to improve the coordination between the locations.

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3.3 Planning and control

After an order has been accepted, Production gets the order book with the order form and all the drawings. Then a material and tool request form is given to every production department. The supervisors decide by experience how much material is required. Then Mr. Nalin, the production manager, summarizes the requests and gives this to the Purchasing department. He is also the one who decides what the amounts of raw wood are to be ordered. Recently Production Engineering is also involved in determining the material requirements, especially of the wood. From order acceptation to Production to Purchasing department takes about one till four days, depending on the amount of different products in one order. Purchasing department then orders all the needed materials and other means.

The planners - the production manager and a production engineer - now plan the order. They determine the sequence of the orders, which is indicated by Export & Sales or one of the directors.

Because of the large amount of different products and the lack of relevant explicit data, the planning is rough, only based on experience and used for just six months now. First they decide which products are going to be produced in what factory or factories. They know approximate capacities of the departments. For the items that need to be produced in Egodauyana and Panadura the planning is made as shown in Figure 10. Work for subcontractors and for the other four facilities is just ordered for a determined date, with respect to the roughly known capacities, the current workloads, the availability of material and the point on which the products are needed for further processing in Panadura or Egodauyana.

Figure 10