De La Salle University

Graduate School of Business

In Partial Fulfillment of the

Refresher Course Requirement in
Operations Management, MSC512R

TERM PAPER ON THE

Quality Management Audit of
Simitomo Bakelite Philippines, Inc.
(SB Flex Philippines)

Submitted to:

Professor Cesar Lim

By:

Frank G. Calucin
ID No. 10482768

16 March 2006

Frank G. Calucin ID No. 10482768 - Operations Management, Page 1 of 35

TABLE OF CONTENTS

I. Introduction

II. Company Background

III. Bakelite - Phenolic Resin

IV. Company Product Lines and Application

V. Business Process Flowchart of SB Flex Philippines, Inc.

VI. Business Process Description of SB Flex Philippines

VII. Selected Operational Audit Areas

VIII. Operational Audit Analysis based on what was learned in Operations

Management

IX. ISO - International Organization for Standardization

X. Status of Philippine Standards and ISO Certificates

XI. (Total) Quality Management System

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I. INTRODUCTION

This paper was written in conjunction with the assistance from the management of
Sumitomo Bakelite Philippines, Inc. (SB Flex) of which a gap analysis was conducted with
the company's existing system to determine what is required to comply with the
requirements of the international standard ISO 9001: 2000, Quality Management System.
This audit was conducted by Frank G. Calucin on behalf of Frank Calucin Consultancy and
Training Services. The result of the quality system audit, which is summarized in this
paper, was analyzed to ascertain how this is related with the topic on quality
management, a topic in operations management.

II. COMPANY BACKGROUND

Company Outline - Sumitomo Bakelite Co. Ltd

The oldest known plastic is called phenolic resin. In 1907, Dr. Leo Hendrik Baekeland, a
Belgian-American, succeeded in commercializing a phenolic resin, and named the
product, Bakelite, and the name has since become the generic name for phenolic resins.
The company's name originated with the achievement of Dr. Jokichi Takamine, a close
friend of Dr. Baekeland who authorized to use the patent rights legally, which led to the
establishment of Sankyo Co., Ltd. In 1911, Sankyo Co. Ltd. started manufacturing trial
products in its plant is Shinagawa plant, where it pioneered the Japanese plastic industry.

The company started manufacturing bakelite in 1911 in Japan. In 1932, the bakelite
department of Sankyo Co., Ltd. independently separated into Nippon Bakelite Co., Ltd.
In 1955, Nippon Bakelite Co. Ltd merged with Sumitomo Kakozai Industries Ltd. forming
a new company name, Sumitomo Bakelite Co. Ltd. As pioneer of plastics, the newly
formed company developed new methods to make use of high technology and modern
facilities in order to contribute to society's continual drive to realize a safe and
comfortable living.

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MANUFACTURING PLANTS:

Akita Sumitomo Bakelite Co., Ltd.

 Performs technological development and controls overall manufacturing

SB Flex Philippines, Inc. (SFP), First Philippine Industrial Park, Sto. Tomas, Batangas,
Philippines

 Completes the finishing stages of processes

Company Profile - Sumitomo Bakelite Flex Philippines, Inc.

SB Flex Philippines Inc. is located at Lot 6B, Phase 1A First Philippines Industrial Park in
Sto. Tomas Batangas, Philippines. It was organized and duly incorporated on January 07,
1998. SFP is an export-oriented entity and under jurisdiction of Philippine Economic Zone
Authority (PEZA). SB Flex Philippines a wholly owned subsidiary of Sumitomo Bakelite
Co., Ltd. (SB) of Japan.

SFP (Sumitomo Flex Philippines) is engaged in the manufacturing of Flexible Printed

Circuits (FPC) for Personal Computer (PC)’s peripheries. These products are distributed
locally (constructive export) and directly exported to ASEAN countries and to Japan.

SB Flex Philippines has three major departments; 1) Administration Department, 2)

Manufacturing Department and 3) Quality Department. Administration Department
handles personnel, accounting, financing and general affairs. Manufacturing
department is in charge of various aspects of production. Quality Department will
manage product quality and standards.

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III. BAKELITE - PHENOLIC RESIN

Around the turn of the century, the Belgian born scientist Dr. Leo Baekeland, working as
an independent chemist, came upon the compound quite by
accident. Anyone familiar with the newspaper printing
business is aware of the Velox used as a proof; that was his
first discovery. Velox was invented in 1899 and is still in use
today. After selling the rights to this product to Eastman Kodak
for three quarters of a million dollars, he started developing
less flammable bowling alley floor shellac; bowling was
becoming the latest rage in New York City. Dr. Baekeland soon
realized that a resin that was both insoluble and infusible
could have a much wider appeal when used as a molding
compound. He obtained a patent and started the Bakelite Corporation around 1910.

At the time, it was known that phenol (commonly used as a disinfectant) reacted with
formalin to create a new resinous substance, but extracting that substance in a stable,
practical form proved to be a challenge. Researchers experimented extensively with
different catalysts and with different heating timings, but no-one had found a forming
technology for producing the new substance economically—not, that is, until Dr.
Baekeland’s compression molding technique overcame the problem.

Phenolic resin could be produced in a multitude of colors, commonly yellow, brown,

butterscotch, green and red. Omitting the pigment could produce a transparent or
translucent effect. The resin could be molded or cast, depending on variations in the
formula. For molding, the formula was cooked until resinous, spread out in thin sheets
to harden, then ground to a fine consistency. At this point, powdered fillers and pigment
were added, to enable the resin to be molded and to add color.

This mixture was then put through hot rollers which created large sheets of colored,
hardened resin. These sheets were then ground into a very fine powder which was
molded under high heat and pressure into the final product form. As a molded material
the resin's drawback was the limited range of colors which could be created. For casting,
the formula was modified slightly, enabling the resin to be poured into lead molds and
then cured in ovens until it polymerized into a hard substance. The liquid resin could be
tinted to any color or "marbelized" by mixing two colors together.

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Bakelite was first manufactured in Japan in 1911. The impetus was efforts by Jokichi
Takamine, a chemical scientist and close friend of Baekeland, to procure the Japanese
patent rights to Bakelite for the president of a certain pharmaceutical manufacturing
company. Takamine is also known for isolating and manufacturing Takadiastase and
adrenaline.

This was the time at the beginning of the 20th century when electricity was first being
put to practical use powering things like lights and telephones. But for electricity to be
used efficiently, an effective insulating material was required, and the newly developed
Bakelite proved to be just the thing for telephone mouthpieces and insulators, as well as
sockets for electric lights. And so Dr. Baekeland’s invention became a common feature
both in homes and industrial facilities alike.

Indeed, in recognition of the proven capabilities of the Japanese Bakelite operation, Dr.
Baekeland provided half the capital for the establishment of a new company in 1932:
Nippon Bakelite Co., Ltd. The company’s products were widely recognized for their
excellence, and the company increased its lineup, expanded its markets, and grew to
produce some 80% of the entire national production of synthetic resins.

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IV. COMPANY PRODUCT LINES AND APPLICATION

FLEXIBLE PRINTED CIRCUIT BOARDS SUMILITE® TFP

Inside increasingly small machines, such as PCs and compact electronic devices like cell
phones, 3 dimensional and space saving wiring, as well as wiring at bent and curved part
via flexible PCBs, exhibit superior capabilities. Some examples of such services are
bending durability, cell-phones, hinge design, impedance control design and cost
reduction design.

APPLICATIONS FOR MOBILE PHONES

Widely used for PCs, peripheral equipment and devices of PCs, HDDs, PDAs, optical
memory storage devices like CDs-RW/DVDs, wiring and interconnections of cell-phones
and LCDs . Highly durable in bending use of hinges, this is mainly used for cell phones
and also for the hinge part of laptop personal computers.

PHOTOGRAPHS OF CELL-PHONE APPLICATIONS

Application as flex durable printed circuit board with shield layer

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Interconnecting parts of cell-phones and PCs in which high hinge bending property is
required.

Features 1. Superior in flexibility and bending property owing the use of

silver paste as a shielding layer.
2. Shielding effect is as high as that of copper foil.
3. Outstanding cost performance.
Applications 1. At the hinge parts of PCs and LCDs.
2. Other shielding purposes in general.
Structure

Application on the use for optical storages

For use in frequently bending parts of optical pick-ups, these are thin and compliant FPC
boards which also have strong bending durability. The product also demonstrates
superior quality in friction drive parts with limited space such as optical pick-ups.

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V. BUSINESS PROCESS FLOWCHART OF SB FLEX PHILIPPINES, INC.

CUSTOMER

ORDER
HANDLING

MATERIALS &
FINISHED PLANNING PRODUCTION
GOODS CONTROL SUPPORT
CONTROL

PRODUCTION

DELIVERY TO
CUSTOMER

REVIEW AND
IMPROVEMENT

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VI. BUSINESS PROCESS DESCRIPTION OF SB FLEX PHILIPPINES

For the purpose of this paper, we will only be discussing the following processes as we
want to be consistent with the topic, that is, quality management system with emphasis
in operations: 1) Planning Control; 2) Production Process and 3) Production Support

Planning Control

Based on P.O. Monitoring Report and Purchase Order received from purchasing and
import/export section, weekly production plan is generated, which contains the
production requirements specifying the quantity to be produced per section.

Production time, manpower, machine availability, material needed and finished stocks
are also considered in making a production plan. Production control is responsible for
scheduling the quantity of models to be produced per section based on the delivery date
of that model.

Production Process

Upon the receipt of the production schedule from Production Control Section,
Production Engineers discusses the necessary information of the parts ordered by the
customer to all Line Leaders of every process or sub-section. These sub-sections are
Punching, Assembly, Electrical Testing, and Process Inspection.

Line Leaders of the said Sub-sections are responsible for assigning and monitoring of
required job with their respective operators. Production Engineers are responsible in
monitoring the productivity of every sub-section in order to accomplish and deliver the
product on the required delivery date.

SB Flex had provided all documented procedures, work instructions, guidelines,

inspection standards and product limit samples in order to control and maintain good
quality of production. These documents define the proper manner of production and
standard tolerances that conform to customer’s specification.

In addition to this, the company had established a Defect Monitoring Committee that
controls non-conforming product during production process. In-process inspection of
quality is conducted with a time interval of fifteen minutes to constrain the multiplying
of non-conforming product.

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Production Support:

HUMAN RESOURCES

SFP gives importance to a qualified and competent workforce to better serve and satisfy
its customers. Thus, it is one of the quality policies of the company to select new
employees according to defined job specifications. SFP is also committed to continuously
improve the knowledge and enhance skills of its workforce by establishing a system for
evaluating the training needs of its employees. This training evaluation is integrated in
the annual performance evaluation. Provision of training is divided into five categories:

a) Company Orientation and ISO Awareness Training;

b) On the job training for newly hired employees;
c) Continuous training when new product or equipment is introduced;
d) Internal and external training as identified during the annual training needs and
analysis;

PURCHASING

Purchasing activity is initiated whenever purchase requisition form is forwarded to

Purchasing/IMPEX Head with the approval of the General Manager to procure office
supplies and capital expenditures other than raw materials and sub-materials. However,
in the case of raw materials and sub-materials it begins with the receiving of purchase
order from SBS and a monthly production target from ASB. Materials and services
requested for purchase are then verified (for availability) in the Approved Suppliers List
(ASL). If the requested material / service are not available in the ASL, Purchasing/IMPEX
will source out for new suppliers.

A quotation is requested from the suppliers. The basis for selecting which supplier is to
procure the material / service is Price (cheapest), Delivery (least lead-time) and Quality.

INSPECTION

All received WIP and Sub-materials are inspected prior turn over to the next process for
the continuation and completion of process to produce a product. Random sampling
using AQL standard is employed when conducting incoming inspection. Quantity of
items inspected is therefore dependent on the level of inspection.

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In case the WIP and Sub-materials are urgently needed for production, these are
identified and recorded in order to permit immediate recall and replacement when non-
conformity is detected during production process. To prevent a product reject before
reaching the final inspection, process inspection is conducted on the semi-finished
product. As a policy, all finished products are inspected before they are dispatched to
the customer.

These inspections are verified against any of the following: quality plans, inspection
standards, and procedures. Inspected products are identified in a variety of means to
indicate its conformance of nonconformance. As a rule, all inspection conducted on
materials, semi-finished products and finished products are recorded, reviewed and
approved by respective personnel.

CONTROL OF NONCONFORMING PRODUCT

This system was established in order to prevent the usage and delivery of non-
conforming products to customer. Production Engineers & QA Engineer have the
authority for the disposition of nonconforming product using product limit sample and
inspection standard. Disposition of nonconforming product is categorized either rework
or scrap. In case the nonconforming product is identified, the operator segregates and
records all the data on the respective forms to be used. Each sub-section has frequency
of quality checking to avert the passing of defect to the next process.

CORRECTIVE AND PREVENTIVE MAINTENANCE

Preventive maintenance is one of the most important goals of the organization to

increase productivity and reliability of machines to be conducted periodically by the
Maintenance Engineer. The Management is committed to provide maintained facilities,
tools, equipment and manuals to guarantee the efficiency and high quality of production.

All workers who are in-charge in every machine and equipment are responsible in
conducting a daily periodic maintenance to preserve and maintain its performance
ensuring the continuing process capability. Maintenance and Production Engineers are
responsible in monitoring and updating the Preventive Maintenance Plan to ensure that
all equipments are maintained accordingly. In case any major problem is encountered
during the use of equipment, SB Flex will invite or call a qualified sub-contractor who will
conduct corrective action for repair. The Maintenance Engineer/General Manager is
responsible for the verification of the conducted repair.

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VII. SELECTED OPERATIONAL AUDIT AREAS

ORDER RECEIVING / PURCHASING

 Documented system for receiving and reviewing the orders from the customers,
whether from the mother company or from the sales agent of SB FLEX needs to be
established.
 A documented system for all purchasing activities including local and foreign vendors
needs to be established.
 The evaluation of suppliers for accreditation needs to be formally documented on
criteria like product conformance to specifications through sample approval, terms
and conditions, company profile against its financial stability and range of suppliers,
and availability of delivery facilities. System for evaluating the suppliers which
includes suppliers of materials, shipping services, brokers, hauling services, hand
tools used for maintenance, spare parts, accessories, among others, when material
is received should be established.
 Documented system for conducting supplier quality audit, which includes the
process, involved for conducting second party audits, availability of quality audit
reports and/or quality records of previously demonstrated capability and
performance of suppliers need to be established.
 Presently there are no available trained and qualified personnel to conduct supplier
quality audit. A formal training is required of designated individuals to enable them
to conduct such audits.
 Systems for recording acceptable suppliers, including maintenance and monitoring
system for reviewing the performance of these suppliers need to be established.
 All purchasing activities which includes preparation of purchase requisition;
methodology for canvassing and selection process; purchase order preparation and
approval; and processing of government permits needs to be formally documented.
This should also include revisions made to purchase order and follow-ups need to be
established.
 All export activities and local deliveries needs to be defined and established. This
should include all activities, which includes the preparation of paper work needed for
exporting the product, scheduling of delivery and coordination with the brokers’
needs to be defined and documented.
 A documented control system during planning and provision for delivery which
includes: delivery schedule, review of truck availability, qualification of
subcontracted truckers, liaison activities with SEZ and checks required before
delivery needs to be established.

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PRODUCTION PLANNING

 A system for handling customer orders should be established which should include
the preparation and review of production and delivery schedules and material
planning. The review and planning of delivery orders should be all encompassing to
include material and finished goods stock availability as compared to the daily
production activity, availability of machines (due to machine breakdowns) and
manpower availability.
 There should be a documented system for revising production schedules and
coordination with the customer when the organization does not have the capability
to meet the order delivery due to machine breakdowns or non-availability of
materials.
 Logistics on the availability of materials and finished goods should be established and
defined in the quality system to ensure the organization’s capability to meet the
order requirement.
 A documented system for handling customer supplied materials needs to be
established.
PRODUCTION/MATERIAL CONTROL, SHIPPING

 Handling and storage of raw materials such as WIP, adhesive tape, carton boxes,
spare parts and office supplies needs to be established and documented.
 Location plan specifying the area where items can be located with consideration to
proper segregation, protection from environmental conditions should be established
and documented. The system should include the method of updating the plan when
there are changes in the location of these items.
 A documented control system for the receipt of local and imported materials needs
to be formally established. This should include the inputting in the computer system,
observance of minimum stock limits and monitoring system when material stock has
reached its minimum stock level.
 A controlled system for issuance of production materials needs to be established and
documented. This should include the preparation and authorization of materials
request and the process of updating the computer system for whatever materials
were issued. A controlled system should be established for controlling the data
inputted in the computer. System control should include what needs to be done
when responsible individuals for approving material request and its issuance are not
available.
 System for handling and stacking of received materials needs to be established and
documented. This should include the use of a First-In First-Out system, regular
assessment on the condition of the materials against environmental conditions.

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 The process and use of an appropriate method of identifying the materials against
the materials control system needs to be documented.
 A documented system for receiving / transfer of finished goods from production to
production control needs to be established. The system should also include the
process of handling the finished goods from warehouse to delivery trucks.
 Location plan specifying the area intended for final inspection, stocking and
packaging with consideration of proper segregation, protection from environmental
conditions such as temperature and humidity, insect infestation, etc. should be
established and documented. The system should include the method of updating the
plan when there are changes in the location of these items.

PRODUCTION

 Manufacturing procedures are available, but detailed work instructions, and

guidelines, defining the manner of production from retrieving and handling the
materials to production area, setting up of electro-checking machines and packaging
of finished product needs to be formally established.
 The process of monitoring the product-output during all stages of production needs
to be defined to ensure nonconforming product is prevented needs to be defined.
The system should include the use of a monitoring sheet.
 Current system whenever samples are taken in production of when and how much
of the sample was taken needs to be recorded. The system should include the use of
guidelines to accompany the process.
 Documented system for controlling how nonconforming products during production
process are handled needs to be defined.
 Documented system for the disposition of nonconforming products when detected
during manufacturing stage needs to be established. This should include the
recording system of product nonconformity, authorization for its disposition and the
corrective / preventive actions needed to prevent recurrence.
 Changes or cancellation to production schedules from production planning needs to
be identified, and the system for communicating and recording such changes needs
to be defined and documented. This should include such activity as production
constraints due to machine breakdown or non-availability of materials and its effect
on the production commitments should be considered.
 Qualification system for production staffs performing skilled operations where
product quality is dependent on the production staff needs to be defined.

 Product quality workmanship standards such as dimensions, flatness, appearance,

etc. needs to be formally defined and documented as a quality specification.
 Method of Identifying materials either through a unique reference number or some
other method needs to be established and documented. This unique identification
needs to be in place at all stages of the manufacturing process and should be evident
physically in the production area.

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 The process of handling, identification, packaging and provision of storing the
finished goods pending shipment needs to be defined according to company
standard and customer specification. This should include observance of stacking
height to avoid damage.
 System for conducting training to newly hired operators and their continuous
training, including the maintenance of individual training records of operators, line
leaders and engineers need to be established.
 Documented system for controlling the environmental condition of the
manufacturing area with details on the environmental constraints needs to be
defined and established.

MAINTENANCE

 Documentation on the manner of conducing preventive and corrective maintenance

of manufacturing machines needs to be formally defined and documented. This
should include activities relating to mechanical and electrical maintenance.
 A documented system for controlling the approval of new machines or modification
of existing machines needs to be formally established and defined.
 Preparation of Preventive Maintenance Plan needs to be established and defined to
ensure a continuous production operation.
 Use of a machine history card, detailing the corrective and preventive maintenance
performed on the machine needs to be established and defined.
 Machine reference manuals used as an aid for conducting preventive and corrective
maintenance should be available in the English language and needs to be controlled.
 Methodology for requesting spare parts when conducting corrective and preventive
maintenance needs to be defined and documented.

QUALITY ASSURANCE

 Documented procedures, work instructions, quality plan and records defining the
inspection and test activities during receiving, in-process and final inspection for all
products, to satisfy the requirements of the standard should be established and
defined. Although some procedures are available in draft stages, these have yet to
be reviewed to satisfy the requirements of the standard.
 Inspection standard stating the acceptable criteria and parameters for conducting
inspection of all products should be established and documented.
 Existing Defect Monitoring System for controlling the process inspection during
manufacturing stage also needs to be reviewed.
 Statistical applications for verifying the process capability of inspection activities
needs to be defined and established.
 The process of conducting one hundred percent inspection (100%) prior to delivery
to the customer needs to be defined and documented.

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 The process of returning the finished goods to production when the result of QA’s
100% inspection is not as per the customer’s specification should be defined and
documented.
 All standards whether internationally, nationally or customer imposed to all company
products including inspection; testing, packaging and methods of delivery should be
available as reference.
 Criteria for workmanship specifying in the clearest practical manner (e.g. written
standards, customer samples or illustrations) needs to be established documented
and controlled.
 All inspection and measuring test equipment used for inspection and testing needs
to be identified and calibrated.
 A documented system such as the calibration plan for ensuring all inspection and test
equipment is calibrated on a regular interval needs to be established.
 A documented system on how inspection and test status of inspected materials and
products are identified by suitable means should be addressed and defined. The
system should include all manners of inspection from receiving of materials to final
inspection of the product.
 System for controlling nonconforming product during all stages of production and
inspection activities will have to be defined and documented. The documented
system should include controls required for identifying nonconforming product, its
segregation and disposition.
 Quarantine area for nonconforming product awaiting disposition for rework or scrap
may have to be established.
 The current system for segregating “Good” and “No Good” during process inspection
needs improvement to satisfy the requirements of the standard.

 There is a need to establish a documented system for review and disposition of

nonconforming product such as rework and scrap.
 A documented system for controlling the activities of the occurrence of defective
material / product, which includes authority to give disposition / actions and the re-
inspection activities of reworks, and records of inspection from rejection to rework
to re-inspection activities, needs to be established.

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VIII. OPERATIONAL AUDIT ANALYSIS BASED ON WHAT WAS LEARNED IN OPERATIONS
MANAGEMENT

ORDER RECEIVING / PURCHASING

Based on the discrepancy details cited pertaining to the production specifically that of
order receiving, purchasing and shipping, the following recommendations are suggested
to drive down purchasing related costs. It is advantageous for the company to design and
implement a comprehensive purchasing and supply management system into its current
operations.

This would entail rethinking and redesigning their supply chain to help it attain cost
savings and efficiency in this area. First is by reducing the number of suppliers by about
40-50% would be an ideal starting point. The rationale behind this is that we would want
to reduce transaction and processing costs considerably by limiting the number of
suppliers to about half of the existing number.

This can be established by setting criteria based on the companies via ISO certification
standards and making them have to qualify for accreditation. We can also employ an AHP
selection process for determining the most favorable supplier (The basis for selecting
which supplier to procure the material / service is according to Price (cheapest), Delivery
(least lead-time) and Quality.) But the firm should reconsider the price criteria when
selecting suppliers because it should not compromise quality by just simply selecting the
lowest bidder. Instead, as part of its PSM strategy, it should consider developing long
term partnerships with its suppliers.

This strategy offers several advantages for the both the firm and its suppliers. (Borrowing form
the JIT philosophy: Few suppliers, Long-term contract agreements, Steady supply rate, Frequent
deliveries in small lots, Buyer helps suppliers meet quality (cross enterprise teams can
coordinate processes between the company and the supplier to ensure quality as well as reduce
costs and eliminate waste for the supplier).

Frank G. Calucin ID No. 10482768 - Operations Management, Page 18 of 35

Forming partnerships is a win-win situation for all parties involved as the purchaser (SBS) will be
assured of the quality of the products it purchases while reducing transaction costs and the
suppliers are assured of steady demand and it will find ways to improve quality and eliminate
waste because it is getting assistance in design from SBS. This partnership will result in creating
a shared value within the supply chain between the purchaser and supplier. And working in
partnership with members in the supply chain will allow for continuous improvement as
members are working hand in hand and sharing information with each other to help improve
processes, designs resulting in cost savings and reduction of waste. The current practice of
sourcing out new suppliers in the event that materials or services are not available is inefficient
and far costly to continue. The quotation based system also needs to be reevaluated and
perhaps modified for efficiency reasons.
Once the supplier network has been reconfigured and setup, an efficient information system has
to be established between the SBS its suppliers and even its customers. One viable option is to
develop an e-procurement system to make the order taking and purchasing process more
efficient and to help reduce transaction costs for both the firm and its suppliers. In this kind of
system the flow of information is vital that is why part of the success of this strategy is developing
strategic partnerships with trusted suppliers so that it is easier to share information within the
supply chain.
Part of the order procurement system to be designed is to develop an efficient documentation
system involving all of the purchases and shipments to be made since the company is dealing
with both local and foreign vendors. (See info about paperless documentation for shipping
below).
There is a current trend now that addresses the need for exporters to electronically convey all
relevant information needed for a bill of lading to the relevant shipping company. The generated
bill may then be made available over the internet by the shipping company to the exporter for
their endorsement and subsequent use. The bill of lading is a core document in the overall set
of documents used product exporters and is usually initiated with a written “forwarding” or
“shipping” instruction faxed from the exporter to the chosen shipping line. Sending this
instruction electronically and receiving the resulting bill of lading, also in electronic form, is a
significant step towards reducing costs and achieving paperless trading.

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The benefits of electronic information communication arise from minimizing data errors
and decreasing the time needed to transfer this data, hence significantly reducing
documentation costs. This demonstrates how collaborative use of supply chain tools can
enhance processes along supply chains reducing costs, improving business relationships,
saving time and expanding sales.
The process is based on existing international documentation procedures and essentially
replaced the present paper based communication with electronic methods. Thus it
minimizes staff training and provides immediate and potential future supply chain
benefits by all participants in international trading. The shipping bill of lading is a
commercial document that is issued on behalf of the shipping line or carrier, describing
the kind and quantity of goods being shipped from the shipper (consignor) to the
importer (consignee), the ports of loading and discharge plus details of the carrying
vessel. It is the written evidence of a contract for the carriage and delivery of certain
goods with any marks and numbers, sent by sea. It usually comprises three parts - the
original, one copy sent by mail to the consignee, and a third copy that is retained by the
shipper. The bill is assignable and the assignee is entitled to the goods, subject to certain
rights. The information contained in the bill originates from the exporter. Of the many
international data transmission standards, the Electronic Data Interchange (EDI) is at
present the most widely used in the sea freight industry. This supply chain management
tool can be a tremendous advantage for SBS and its suppliers.
Another recommended strategy to implement is to outsource delivery of the products
after manufacturing. This will allow SBS to focus on its core competency of
manufacturing and divert assets and resources to other vital areas of the business and
operations. This also helps lower inventory costs.
PRODUCTION PLANNING
“There should be a documented system for revising production schedules and
coordination with the customer when the organization does not have the capability to
meet the order delivery due to machine breakdowns or non-availability of materials.”

The company needs to improve efficiency by preventing machine breakdowns and

eliminating shortages of materials based on the customer orders. A JIT systems
philosophy is recommended to help address these concerns. SBS’ objective should be
not simply developing a documentation system for revising production schedules as this
is very costly for the firm in all aspects. First having breakdowns and supply shortages
will disrupt production and will result in dissatisfied customers that SBS might end up
losing.

Frank G. Calucin ID No. 10482768 - Operations Management, Page 20 of 35

With regards to planning for production based on customer orders, it can employ a mixed
strategy for its aggregate production plan (a combination of the chase strategy and level
strategy) and adjust the strategy accordingly depending on the forecasts of demand from
its customers.
Related to the strategy pertaining to developing partnerships with suppliers, SBS can
make use of collaborative planning: sharing information and synchronizing production
across the supply chain.

PRODUCTION/MATERIAL CONTROL, SHIPPING

SB Flex Philippines should give primary consideration to the accurate documentation not
only of the manufactured flexible printed circuit boards but also of the materials coming
from different suppliers and the unfinished goods. The inspection mechanism in all
received WIP and sub-materials, prior to its turn-over to the next process, serve as a
reliable system of recording the received materials and practically monitor the intake of
materials, as well as the process itself of producing their product.

A comprehensive control system for the receipt of materials and the procurement of
request for said materials could be established and entered into the company’s computer
system. Since observance of minimum stock limits should be strictly enforced, SFP can
implement an extensive materials resource planning (MRP), not only with the
procurement of raw materials but also with the release of materials within the company
itself as it is needed in the production process. It is equally significant that SFP conducts
regular assessment on the condition of the materials during its distribution so as to
maintain quality in the production.

The Production Control Section of SFP may utilize Input/output (I/O) control reports
during the inspection to effectively monitor the progression of their production process
and single out any manufacturing problems that the company may encounter. This I/O
mechanism will enable SFP to regulate the flow of work and identify the immediate source
of any over-production and backlogs.

The Defect Monitoring Committee must have a controlled system of recording and
documenting the non-conforming products and come up with a defect-prevention
checklist to particularly address the source of such non-conformity with the company and
client’s standards. In effect, the process of inspection of quality effectively restricts the
generation of non-conforming product.

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The location plan of materials and finished goods should equally be considered with
regards to its inspection, proper segregation, and protection from environmental
conditions, which may cause non-conformity to standards or its deterioration and overall
affect its quality. A process layout for management of its facilities can be fitted out with
particular emphasis on the inspection process being done by the company at every level
of production in line with its commitment to quality. It allows flexibility to the production
process and since SFP mainly manufactures customer-specified circuit boards, it is
important that the inspection process be integrated to the layout to meet such standards
or requirement.

Ultimately, SPF must establish a comprehensive production control from the time that
the materials are shipped in the company up to the time that the finished products are
packaged and ready for delivery or export to its clients. Furthermore, since SFP often
procure to customized and client-specified products, it is important that they clearly
control and check the status of the materials and the finished products.

MAINTENANCE

Corrective and preventive maintenance is important in every production/ manufacturing

company in order to ensure good quality of goods. Well-conditioned machines and
equipments help the production process to become more efficient and productive,
resulting to low rate probability of crack-ups, disposals of non-conformities and danger
to workers. Maintenance measures should be well defined and properly documented, as
well as suitably instructed and delegated to employees/workers who will become
responsible with these equipments and machineries. Monitoring shall be on a daily basis
so as to identify inefficiencies on the earliest time possible and solve or conduct necessary
remedies. A Preventive Maintenance Plan shall be developed and appropriately
disseminated to all concerned individuals, making it company-wide, thus increasing
awareness of the operation and maintenance of these equipments.

In the case of contingencies, SB Flex Philippines shall be prompt and responsible in

communicating with the builders/manufacturers of these machines, those who can
expertly repair and reprogram them. After which, regular check-ups should be performed
until there is 100% guarantee of safe and efficient flow of machine operations. Otherwise,
SB Flex’s Plant Manager/Engineer should prohibit and discontinue the use of said
machine.

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SBF Philippines’ Corrective and Preventive Maintenance Plan enables the company to
produce higher quality of goods, increases productivity and reliability of these
equipments, and limits or if possible eliminates slack time in the process flow. In the long-
run, it also reduces the equipments and machines’ depreciation value, thus adding more
to these assets’ useful life.

QUALITY ASSURANCE

SB Flex Philippines Inc. started manufacturing Flexible Printed Circuits (FPC) for Personal
Computer (PC)’s peripheries with a goal to provide customers with a high-quality
product. Today, SFP (Sumitomo Flex Philippines) still follows the philosophy that every
SFP employee has a responsibility for maintaining the high-quality of their products.
Dedication to quality has been of the first importance in the operation of the company.

The Quality Assurance Department is responsible for total commitment to quality

throughout the organization. They are responsible for implementing and improving this
commitment. Also, all SFP employees are dedicated to serving the customer through
quality in all aspects.

SFP manufacturing plant employees are responsible for assuring that the company’s
quality standards are met. Extensive use of total quality methods contributes greatly to
meeting these high standards.

Raw materials, processing, and packaging operations are frequently checked to assure
that the production of Flexible Printed Circuits (FPC) are consistent with the customers
specifications.

Many of SFP standards are even more stringent than those required by the customer.
The Quality Assurance team regularly visits the plants to assure that proper procedures
are being followed and that the materials being used meet customer’s specifications.

Quality Assurance Department is organized and authorized by the management. They

have the overall responsibility for the organization and operation of the company.
Quality Assurance works with the various departments within the company to ensure
that quality procedures are implemented, understood, maintained and followed by
company employees. All of them share in the responsibility to manage quality. The
purpose of this is for them to identify and record quality problems. They can also initiate
recommendations and provide solutions. In addition to this is to implement corrective
actions to prevent future occurrences.

Finished goods are carefully checked, making sure they are within specifications. Samples
are collected at several steps through the production process and are evaluated. Quality

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 control tests do not stop once the Flexible Printed Circuits (FPC) is packaged. Packages
are periodically collected and sent back to Quality Assurance for thorough analyses.
Quality Assurance department evaluates the quality of products and implements the
quality policies. They also serve in a problem-solving role.

The Quality Assurance Department performs several functions. In an auditing function,

it helps ensure that the plants use the best technology available and produce uniformly
standard products. The group also assists in analytical and technical problem solving by
drawing from the collective expertise of the many SFP manufacturing locations. The
department establishes the quality practices that are carried out by the manufacturing
facilities.

Numerous techniques are used at SFP to continually assess the reliability of its quality
systems. Since SFP feels strongly that quality must be an essential part of its products,
each employee has a responsibility for maintaining quality. The goal of the Quality
Assurance Department is for the continuous improvement in SFP’s process, products and
services.

IX. ISO - INTERNATIONAL ORGANIZATION FOR STANDARDIZATION

In the beginning…

Based in Geneva, Switzerland, ISO has been developing voluntary technical standards
over almost all sectors of business, industry and technology since 1947.

With the exception of ISO 9000 and ISO 14000, the vast majority of ISO standards are
highly specific. They are documented agreements containing technical specifications or
other precise criteria to be used consistently as rules, guidelines, or definitions of
characteristics to ensure that materials, products, processes and services are fit for their
purpose.

The World of ISO

The acronym ISO does not stand for International Standard Organization because the
organization’s full name in English is International Organization for Standardization.

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ISO is a non-governmental organization, which now sees its mission as the promotion of
the development of standardization and related activities in the world with a view to
facilitating the international exchange of goods and services, and to develop cooperation
in the area of intellectual, scientific, technological and economic activity.

International Organization for Standardization was duly formed and began its official
function on February 23, 1947, in Geneva, Switzerland. Initially, there were only 15
member countries including the USA, UK, Russia, France, Germany, Italy, Canada,
Australia and Japan. Their purpose for establishing this organization is for them to have
a common set of standards in manufacturing and communications.

Since its inception in 1947, this has now grown to 137 member countries. Since the
original member countries speaks of different languages such as Russian, Italian, French
and Nippon and English, it was from this situation that the member countries came up
with a word that was common to all of them. The word was ‘ISOS”.

ISOS is a Greek word, which means EQUAL. It was from this Greek word where the words
“Isosceles” (two sides are equal), “Isometric” (equal in measurement) and “Isonomy”
(equality of laws of people before the law) were derived from. Later on, second “S” of
ISOS was omitted, thus became ISO. With the worldwide use of ISO, this prevented the
potential abundance of acronyms (for example: AISC, SSPC, AWS) by individual member
countries based upon the literal translation of International Standard Organization in
their own language.

Then, in 1987, came ISO 9000, followed nearly 10 years later by ISO 14000, which have
brought ISO to the attention of a much wider business community. These are very
different from the majority of ISO's highly specific standards.

Since then, the ISO 9000 standard had undergone two revisions, the second of which was
an overhaul of the standard, now called ISO 9001: 2000 standards. ISO 14000 standards
introduced in 1996 was revised in 2004 and to this date has remained unchanged.

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ISO 9000

ISO 9000 is primarily concerned with "quality management". In the everyday context, like
"beauty", everyone may have his or her idea of what "quality" is. But, in the ISO 9000
context, the standardized definition of quality refers to all those features of a product (or
service) which are required by the customer.

"Quality management" means what the organization does to ensure that its products or
services satisfy the customer's quality requirements and comply with any regulations
applicable to those products or services.

In the case of ISO 9000, the efficient and effective management of processes is, for
example, going to affect whether or not everything has been done to ensure that the
product satisfies the customer's quality requirements. In the case of ISO 14000, the
efficient and effective management of processes is going to affect whether or not
everything has been done to ensure a product will have the least harmful impact on the
environment, at any stage in its life cycle, either by pollution, or by depleting natural
resources.

Please note that ISO 9000 is not a product standard. The management system standard
state requirements for what the organization must do to manage processes influencing
quality (ISO 9000).

The philosophy is that a quality management system requirement is generic. No matter

what the organization is or does, if it wants to establish a quality management system,
then such a system has a number of essential features which are spelled out in the
relevant ISO 9001 standard.

Certification, Registration and Accreditation

ISO 9000 families contain a single "certification" standard. "Certification", "registration"

and "accreditation" are three words that will certainly crop up on any company's journey
in ISO 9000 certification process. Just what exactly does this mean?

According to the standardized definitions*, they are not quite the same thing. In the
context of ISO 9001:2000, "certification" refers to the issuing of written assurance (the
certificate) by an independent, external body that has audited an organization's
management system and verified that it conforms to the requirements specified in the
standard. "Registration" means that the auditing body then records the certification in
its client register.

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The organization's management system has therefore been both certified and registered.
For practical purposes, in the ISO 9001:2000 contexts, the difference between the two
terms is not significant and both are acceptable for general use.

"Certification" seems to be the term most widely used worldwide, although registration
(from which "registrar" as an alternative to registration/certification body) is often
preferred in North America, and the two are also used interchangeably.

On the contrary, using "accreditation" as an interchangeable alternative for certification

or registration is a mistake, because it means something different. In the ISO 9001:2000
context, accreditation refers to the formal recognition by a specialized body - an
accreditation body - that a certification body is competent to carry out ISO 9001:2000
certification in specified business sectors. In simple terms, accreditation is like
certification of the certification body. Certificates issued by accredited certification bodies
- and known as "accredited certificates" - may be perceived on the market as having
increased credibility.

Therefore, it is okay to state that your organization has been "certified" or "registered"
(if, indeed, it has!), but inaccurate to state that it has been "accredited" (unless your
organization is a certification/registration body).

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Frank G. Calucin ID No. 10482768 - Operations Management, Page 28 of 35
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Frank G. Calucin ID No. 10482768 - Operations Management, Page 30 of 35
X. STATUS OF PHILIPPINE STANDARDS AND ISO CERTIFICATES

Introduction

The world is fast changing and it is important to highlight the emergence of globalized
market both for products and services. Globalization has put pressure not only to
developing countries but even to economies in transition. Together with globalization are
development in regional cooperation and an increasing number of regional free trade
agreements. These dramatic changes in world trade combined with increased global
concerns for health, life and safety protection of the environment have affected the needs
of consumers and have altered as well the regulatory and standards landscape. As tariff
barriers fall coupled with rising awareness of quality and safety, the importance of
standards and conformity assessment activities.

Status of Standardization in the Philippines

In 1964, Republic Act 4109 was passed creating the Bureau of Standards under the
Department of Commerce and Industry. The Bureau then was charged with the
establishment of standards for and inspection of all agricultural, forest, mineral and fish,
industrial and all other products of the Philippines for which no standards have as yet been
fixed by law.

Executive Order (EO) 133 issued in 1987, reorganized the Department of Trade and Industry
and its attached agencies and reiterated the Bureau's mandate to establish standards for
all products of the Philippines for which no standards exist. The same EO also renamed the
Bureau into Bureau of Products Standards.

In 1992, Republic Act 7394, otherwise known as the Consumer Act of the Philippines,
identified three government departments responsible for the development and
implementation of standards for consumer products. The Department of Health (DOH) for
drugs, cosmetics, medical devices and substances, Department of Agriculture (DA) for
agriculture and agricultural related products and Department of Trade and Industry for
other consumer products not covered by the two agencies.

There are standards activities in the other departments of governments, however in the
absence of a body or office that does coordination these activities are not known or
accounted for.

At the moment, most standardization activities are undertaken by government.

Participation of the private sectors is quite limited. The potential of the private sector to
assist in standardization work needs to be harnessed.

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 As of December 31, 2004, there are 4,005 National Standards that have been developed
and adopted by DOH, DA and DTI of which 91 standards cover products under mandatory
product certification. The number of laboratories accredited, product, ISO 9000 and ISO
14000 certificates issued in the Philippines as against some ASEAN countries, the country
ranks 3rd, of which Singapore ranks 1st and Indonesia, 2nd.

XI. (TOTAL) QUALITY MANAGEMENT SYSTEM

Total Quality Management (TQM), a buzzword phrase of the 1980's, has been killed and
resurrected on a number of occasions. The concept and principles, though simple seem to
be creeping back into existence by "bits and pieces" through the evolution of the ISO9001
Management Quality System standard. The latest changes in ISO 9001:2000 standards
"Process Model" seem to complete the embodiment. TQM is the concept that quality can
be managed and that it is a process.
By definition, TQM is a management philosophy that seeks to integrate all organizational
functions (marketing, finance, design, engineering, and production, customer service, etc.)
to focus on meeting customer needs and organizational objectives. TQM views an
organization as a collection of processes. It maintains that organizations must strive to
continuously improve these processes by incorporating the knowledge and experiences of
workers. The simple objective of TQM is "Do the right things, right the first time, every time".
TQM is infinitely variable and adaptable. Although originally applied to manufacturing
operations, and for a number of years only used in that area, TQM is now becoming
recognized as a generic management tool, just as applicable in service and public sector
organizations.

Now, what is TQM really?

Total = Quality involves everyone and all activities in the company.

Quality = Conformance to Requirements (Meeting Customer Requirements).
Management = Quality can and must be managed.

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TQM = A process for managing quality; it must be a continuous way of life; a philosophy of
perpetual improvement in everything we do.

TQM Compared to ISO 9001

ISO 9000 is a Quality System Management Standard. TQM is a philosophy of perpetual

improvement. The ISO Quality Standard sets in place a system to deploy policy and
verifiable objectives. An ISO implementation is a basis for a Total Quality Management
implementation. Where there is an ISO system, about 75 percent of the steps are in place
for TQM. The requirements for TQM can be considered ISO plus. Another aspect relating
to the ISO Standard is that the proposed changes for the next revision (1999) will contain
customer satisfaction and measurement requirements. In short, implementing TQM is
being proactive concerning quality rather than reactive.

TQM as a Foundation

TQM is the foundation for activities which include;

 Meeting Customer Requirements
 Reducing Development Cycle Times
 Just In Time/Demand Flow Manufacturing
 Improvement Teams
 Reducing Product and Service Costs
 Improving Administrative Systems Training

Ten Steps to Total Quality Management (TQM)

1. Pursue New Strategic Thinking

2. Know your Customers
3. Set True Customer Requirements
4. Concentrate on Prevention, Not Correction
5. Reduce Chronic Waste
6. Pursue a Continuous Improvement Strategy
7. Use Structured Methodology for Process Improvement
8. Reduce Variation
9. Use a Balanced Approach
10. Apply to All Functions

Principles of TQM

1. Quality can and must be managed.

2. Everyone has a customer and is a supplier.
3. Processes, not people are the problem.
4. Every employee is responsible for quality.
5. Problems must be prevented, not just fixed.

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6. Quality must be measured.
7. Quality improvements must be continuous.
8. The quality standard is defect free.
9. Goals are based on requirements, not negotiated.
10. Life cycle costs, not front end costs.
11. Management must be involved and lead.
12. Plan and organize for quality improvement.

Frank G. Calucin ID No. 10482768 - Operations Management, Page 34 of 35

 TQM Process Improvement and Problem Solving Sequence
ACTION
DO CHECK
PLAN (EMBED THE FIX
INTO
(IMPLEMENT THE (OBSERVE THE
(PLAN A CHANGE) THE PROCESS FOR
CHANGE) EFFECTS)
GOOD)
DEFINE IDENTIFY EVALUATE MAKE TEST TAKE
THE POSSIBLE POSSIBLE A THE PERMANENT
PROBLEM CAUSES CAUSES CHANGE CHANGE ACTION
1. Recognize that 6. 8. Determine 10. Determine what 11. Determine what 12. Ensure the fix
what you are "BRAINSTORM" the change would help change worked is embedded in
doing is a what is causing relationship (confirmation). the process and
"PROCESS" the problem. between  Your that the resulting
cause and knowledge  Histograms process is used.
2. Identify the 7. Determine effect of the  Control
commodity what past data o Scatter process charts Continue to
being processed. shows. diagrams  Scatter - sampling monitor the
- Process o Frequency o Regression diagrams  Scatter process to
Inference distribution analysis  Control diagrams ensure:
o Pareto charts Charts
3. Define some o Control charts 9. Determine - sampling A. The problem is
measurable - sampling what the  Pareto fixed for good.
characteristics of process is analysis
value to the doing now and
commodity. o Control ****Then make
charts the change. B. The process is
4. Describe the - sampling good enough
"PROCESS"
o Process Flow o Control charts
Analysis's - sampling
o Flow charts
o List of steps ****To ensure
continuous
5. Identify the improvement,
"Big" problem return
o Brainstorming to step 5.
o Checklists
o Pareto analysis

References:

Frank G. Calucin ID No. 10482768 - Operations Management, Page 35 of 35

1. Sumitomo Bakelite Co. Ltd. Company Outline, accessed on August 27, 2005,
http://www.sumibe.co.jp/english/company/
2. Bakelite: a revolutionary early plastic, Lloyd Fadem and Stephen Z. Fadem,
http://www.deco-echoes.com/bakelite.html, accessed on August 27, 2005
3. Supporting industry with materials borne of human ingenuity, Sumitomo Bakelite Co.
Ltd., http://www.sumitomo.gr.jp/english/history/origin/bakelite01.html, accessed on
August 27, 2005
4. International Organization for Standardization, accessed on August 27, 2005
http://www.iso.org/iso/en/iso9000-14000/understand/basics/general/basics_2.html
5. Philippines Standardization Strategy, 2004, Bureau of Product Standards, Department
of Trade and Industry, accessed on August 27, 2005
http://sites.k2ia.com/dti/filedirectory/Philippine%20Standardization%20Strategy%202
004%20web.pdf
6. TQM Tutorial, Dexter Hansen, accessed on August 27, 2005
http://home.att.net/~iso9k1/tqm/tqm.html#Planning%20a%20Change

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