Kaltim Plywood: Production Improvement in Developing Countries

Article excerpt

CASE DESCRIPTION

This is a field researched case about a failing plywood plant in East Kalimantan, Indonesia during the plywood manufacturing boom in that region. The research team had full access to the plant manager. The purpose of this case is to introduce students to the considerations in decision making in operational process improvement in accordance with capacity constraints and market conditions. This case is intended for use in an upper-level undergraduate Operations Management course early in the term and can be used as a scenario for discussion of capacity management. Students are expected to spend 2 to 3 hours of outside preparation reviewing concepts of capacity analysis, reading the case materials and brainstorming process improvement options. The instructor should advise students to pay attention to the particular relevance and importance of the bottleneck step in process capacity. The case can be taught in one 75- minute class period.

CASE SYNOPSIS

The events in this case took place when many logging firms in Indonesia were venturing into plywood production business with little experience. Ching-Mia Hung, a Taiwanese veteran of the plywood production business, was asked to turn around a failing plywood plant in East Kalimantan, Indonesia. Ching-Mia accepted the challenge and studied the plant patiently for a month before taking any action. Among his observations of the plywood production operation, Ching-Mia noticed several anomalies in inventory and capacity management with respect to external market conditions. This case presents students with a complex plywood production process with realistic and hard-to-come-by details, including the composition design of different plywood products, their respective production steps, common production challenges, and market demand information. Students are challenged to analyze the scenario and identify operational process improvement opportunities. Embedded in the case information are clues on improving operation without requiring additional equipment investment or new hiring. The instructor should encourage students to formulate action plans that utilize current resources more efficiently to cater to existing market conditions.

KALTIM INDONESIA PLYWOOD PLANT

Eleven long hours from Taiwan to Singapore to Jakarta to East Kalimantan, Indonesia and the Samarinda plywood plant at last. Ching-Mia Hung was tired, but he stood at the entrance, ready to take his first stroll through this plant. Just three months earlier, in early April, Ching-Mia had agreed with Kaltim Indonesia (Kaltim) to take over the management of the plant in an attempt to reverse its four year losing streak.

Ching-Mia had managed many plywood plants before - he had been in the plywood industry since 1965. Since then, he had acquired extensive experience in different functions of the plywood industry ranging from sales to production engineering. He knew that new plywood plants often miss production targets initially. After all, it takes time to identify and solve production problems. But losing money for years? "Can I really help this one?" Ching-Mia wondered.

CHING-MIA HUNG

Ching-Mia grew up in a small northern city in post WWII Taiwan. Being from a large family, Ching-Mia learned the importance of hard work early in his life. After his national service in the Navy, he entered the National University of Taiwan and graduated with a Bachelor's degree in natural science in 1965 . During the 1960s, Taiwan was going through an unprecedented economic boom. Many local industries, including logging and plywood manufacturing, were in their heyday. After graduation, Ching-Mia immediately joined Forest Product, a plywood company in southern Taiwan.

Ching-Mia had no experience in plywood production. But, being a hard working young man and one of the few with a college degree in the company, Ching-Mia moved up through the ranks. He started out in the Quality Control department. …