Polytechnic University of the Philippines

GRADUATE SCHOOL
Sta. Mesa, Manila
Master in Business Administration

Case Study on
Operations Management on Manufacturing
FOOD INDUSTRY: Ice Cream

Presented by:
Panlilio, Belinda L.
Highlights
1. History of Ice Cream Industry
2. Major Players in Ice Cream Industry:
International and Local
3 . Ice Cream Operations Management

Operation and Productivity

Operations Strategy in a Global Environment
Forecasting
Designing of Goods and Services
Managing Quality
Highlights
4. Ice Cream Operations Management
Process Strategy
Location Strategies
Layout Strategies
Human Resources, Job Design, and Work
Measurement
Supply Chain Management
Strategic Material Management
Production Planning
Material Planning
Inventory Management
History of Ice Cream Industry
The origins of ice cream can be traced
back to at least the 4th century B.C.
Early references include the Roman
emperor Nero (A.D. 37-68) who ordered
ice to be brought from the mountains and
combined with fruit toppings, and King
Tang (A.D. 618-97) of Shang, China
who had a method of creating ice and
milk concoctions.

First Ice Cream Parlor In America - Origins Of English Name

The first ice cream parlor in America opened in New York City in
1776. American colonists were the first to use the term "ice cream".
The name came from the phrase "iced cream" that was similar to "iced
tea". The name was later abbreviated to "ice cream" the name we know
today.
Major Players Ice Cream Industry
Unilever in US: Breyers, Nestlé in US: Dreyers
Ben and Jerry’s, Good Humor,
Klondike, Popsicle

The great ice cream battle

Operations Management
Operations and Productivity

When Dreyer's Edy's was reporting approximately $1

billion in annual sales, it installed a voice-picking system
from Pittsburgh, Pa.-based Vocollect – which specializes
in voice solutions for mobile workers in warehouse and
distribution center operations – in two facilities. The
technology expanded with the company, and has since
been installed in 12 facilities, helping Dreyer's Edy's reach
$2 billion in sales and become a Nestle subsidiary.
Recently, the company acquired Kraft Pizza, which
doubled its size and volume.

Voice Directed Workflow

Operations Management
Operations Strategy in a Global Environment
Strategy - Nestlé Roadmap to Good Food, Good Life
Operations Management
Operations Strategy in a Global Environment
Strategy - Nestlé Roadmap to Good Food, Good Life

Operational pillars
•Innovation & Renovation
•Wherever, whenever, however
•Consumer communication
•Operational efficiency
Nestlé must excel at each of these four
inter-related core competences. They
drive product development, renewal and
quality, operational performance,
interactive relationships with consumers
and other stakeholders and
differentiation from our competitors.
If Nestle excel in these areas it will be
consumer-centric, it will accelerate its
performance in all key areas and it will
achieve excellence in execution.
Operations Management
Forecasting

Nestle demand planner uses Exponential

Smoothing and Linear Regression to
forecast demand.

The system used is from SAP. Module

used is APO (Advanced Planning and
Optimization) and Sub Module Demand
Planning
Operations Management
Designing of Goods and Services

Main Ingredients in the Ice Cream Mix

There are three categories of ingredients in the ice

cream mix: dairy, sweeteners, and additives. Milk,
cream, and non-fat milk solids make up the dairy
portion of ice cream. Sucrose or Splenda is used
to sweeten the mix, and stabilizers and emulsifiers
are added to give the ice cream the desired body
and mouth feel. Also present in the ice cream is
air.
Operations Management
Designing of Goods and Services

FIRST PEELABLE ICE

CREAM: Television
commercials of Eskimo
Monkey in Thailand
showed how fun it is to
peel the ice cream.

Hervé Cathelin, Global Head of Nestlé Ice Cream, explained the

relevance of the ice cream snack and said: “When you work in ice cream
you need to think like a kid.  A kid wants to play, explore but most of all
have fun.  In Nestlé ice cream it is important to achieve our objective of
developing products that not only appeal to kids, but also meet the
Nestlé nutritional foundation.   The peelable ice cream achieves this in a
fun and playful way.” 
Operations Management
Designing of Goods and Services

This project was totally 2D

brand led, following strict
third party brand
guidelines.
Operations Management
Designing of Goods and Services

Stage 1. Meeting with Nestle in Geneva to be briefed on brand guidelines and

shown examples of ice cream and confectionery branded Nestle.

Stage 2. Research: EU Standards, the target market, working environment,

mechanical loads required to dispense ice cream, ergonomics re user constraints,
brainstorm 3D form branding concepts, product operation concepts. 

Stage 3. Design: The selection board of Nestle confirmed the visual direction that
we all felt to be most appropriate to portray the Nestle brand in 3D.

Stage 4. Development: Mechanical function tests, destructive testing defining the

limits. Ice cream temperature and resistance measurements. 
Operations Management
Designing of Goods and Services

Stage 5. Development: CAD integration of product form and product operative

mechanism.

Stage 6. Colour and Graphics: 3D form approved we created 4 schemes relating to

colour, graphics, on product texture and materials options that would enhance the tactility
of the product.

Stage 7. Sign Off: British Standards were invited to our premises to test and confirm that
the product was “fit for purpose”

Stage 8. Production. Signed off production drawings issued to manufactures and orders
placed for production. 5,000 assembled and packed units inclusive of accessories were
delivered to the distribution hub on time, on budget and 3D Nestle..
Operations Management
Managing Quality
Reduction of packaging
material
Use of sustainably-sourced
Renewable resource-based
materials where possible Packaging improvements
Use of Recycled content in Good packaging is critical to
packaging material where guarantee product safety and
high quality, as well as prevent
possible spoilage and food waste
Support Recycling or energy (which has its own
environmental impact). 
Recovery from used
packaging. NQS: Nestle Quality System
Operations Management
Managing Quality
For example in France between 2008 and 2009,
the La Laitière brand: La Laitière
Launched a new sorbet range with 15% more
fruit and 20% less sugar
Reformulated its bulk ice cream to be more
indulgent without any artificial colourings or
flavourings
Reduced the sugar content of sorbets further
(30% less sugar than competitive products)
Improved packaging for less environmental
impact. The cardboard tub is produced using
wood from sustainably managed forests and
formed on-site at the factory to reduce
transport.
Operations Management
Managing Quality
For example in France between 2008 and 2009,
the La Laitière brand: La Laitière
Launched a new sorbet range with 15% more
fruit and 20% less sugar
Reformulated its bulk ice cream to be more
indulgent without any artificial colourings or
flavourings
Reduced the sugar content of sorbets further
(30% less sugar than competitive products)
Improved packaging for less environmental
impact. The cardboard tub is produced using
wood from sustainably managed forests and
formed on-site at the factory to reduce
transport.
Operations Management : Process Strategy

Slow Churned Rich and Creamy Ice Cream

 
Full flavor with lower fat and calories.

Taking almost a decade to develop and perfect, Nestlé R&D established a

process to destabilize the fat droplets in ice cream, making half the fat go
twice as far.
Slow churned rich and creamy ice cream has half the fat and a third fewer
calories than conventional counterparts, but maintains the rich, creamy flavor
of full fat ice cream.
Operations Management : Process Strategy

The Basic Steps in Manufacturing Ice Cream

1. Blending of the mix ingredients
2. Pasteurization
3. Homogenization
4. Aging the mix
5. Freezing
6. Packaging
7. Hardening
Operations Management : Process Strategy

Process flow diagram for ice cream manufacture: the red section represents the operations involving
raw, unpasteurized mix, the pale blue section represents the operations involving pasteurized mix, and
the dark blue section represents the operations involving frozen ice cream.
Operations Management : Process Strategy

1. Blending of the mix ingredients

Operations Management : Process Strategy

2. Pasteurization

The mix is then pasteurized. Pasteurization is the

biological control point in the system, designed for
the destruction of pathogenic bacteria. In addition
to this very important function, pasteurization also
reduces the number of spoilage organisms such
as psychrotrophs, and helps to hydrate some of
the components (proteins, stabilizers).
Pasteurization (Ontario regulations): 69° C/30 min. 80° C/25s
Operations Management : Process Strategy

3. Homogenization
The mix is also homogenized which forms the fat emulsion by breaking
down or reducing the size of the fat globules found in milk or cream
Homogenization provides the following functions in ice cream
manufacture:
Reduces size of fat globules
Increases surface area
Forms membrane
Makes possible the use of butter, frozen cream, etc.

By helping to form the fat structure, it also has the following

indirect effects:
makes a smoother ice cream
gives a greater apparent richness and palatability
better air stability
increases resistance to melting
Operations Management : Process Strategy

4. Aging the Mix

The mix is then aged for at least four hours
and usually overnight. This allows time for
the fat to cool down and crystallize, and for
the proteins and polysaccharides to fully
hydrate. Aging provides the following
functions:

Improves whipping qualities of mix and body

and texture of ice cream
Operations Management : Process Strategy

5. Freezing
Following mix processing, the mix is drawn into a flavour tank
where any liquid flavours, fruit purees, or colours are
added. The mix then enters the dynamic freezing
process which both freezes a portion of the water and
whips air into the frozen mix.

Ice cream contains a considerable quantity of air, up to half of

its volume. This gives the product its characteristic
lightness. Without air, ice cream would be similar to a
frozen ice cube. The air content is termed its overrun,
which can be calculated mathematically.
Operations Management : Process Strategy

5. Freezing
Overview on Manufacturing Ice Cream

6. Hardening
Operations Management
Location Strategies
Dreyer’s Grand Ice Cream Manufacturing Facility,
Laurel, Maryland, USA
Key Data
Order year
2004
Construction started
November 2004
Project type
Ice-cream manufacture, packaging and distribution
Location
Laurel, Maryland, USA (east coast)
Estimated investment
$210m
Completion
October 2006, nine more manufacturing lines possible
Sponsors
Dreyer’s Grand Ice-cream holdings Inc.
Operations Management
Location Strategies
Dreyer’s Grand Ice Cream Manufacturing Facility,
Laurel, Maryland, USA
The plant has grown more than six-fold in size and boasts an area of 705,000ft²
(bigger than 14 American football fields). The plant can store enough milk to fill
ten Olympic-size swimming pools. The expansion added five new ice-cream
manufacturing lines to the original six and also added the capacity for nine future
lines, for when additional manufacturing capacity is required or for new products.
The expansion also added a -20ºF ice-cream curing facility that can hold up to
23,000 pallets of ice-cream and frozen snacks, and a 23-door distribution centre.

The five-store curing facility finishes off (hardens) and temporarily houses freshly
made ice-cream before it is loaded into freezer trucks and shipped to outlets across
the US. The company expects LOC to produce nearly 58 million gallons of
packaged ice-cream and 370 million packages of frozen snacks a year.
Operations Management
Location Strategies – LOCAL
Nestlé Phils. opens new P700-million ice cream
plant in Pulilan, Bulacan

The facility is a major initiative to beef up its production capabilities

to serve local market demand with world-class quality products
appealing to the Filipino taste.
Operations Management
Layout Strategies
Dreyer’s Grand Ice Cream Manufacturing Facility,
Laurel, Maryland, USA

Dennis Group directed the architectural design and engineering contract for
the expansion. The LOC is slightly larger than the Bakersfield Operations
Centre (BOC) in size and capacity and gives Dreyer's two of the world's
largest ice-cream facilities, one on each coast of the US.
Operations Management
Human Resources, Job Design
Dreyer’s Grand Ice Cream Manufacturing Facility,
Laurel, Maryland, USA

In August 2010, Dreyer's announced plans to increase production of its

Skinny Cow brand at the Laurel plant. To achieve this, Dreyer will employ
100 additional workers. The company will hire 65 workers by the end of
2010 and another 35 workers in 2011.
Operations Management
Supply Chain Management
Nestlè Philippines Inc., (NPI), a global
leader in food, nutrition and wellness, has
appointed OneStop Logistics Solutions,
Inc. as its 3rd party logistics partner to
manage its Central Distribution Center
for Ice Cream and Chilled Products in
Pasig City.

The Pasig Distribution Center serves NPI’s Distributors and

Key Accounts nationwide. The facility has 4,500 pallets for
Ice Cream with temperatures ranging from minus 25 to
minus 28 degrees celsius. Seven hundred pallets are
dedicated for chilled products.
Operations Management
 The underlying strategy for Nestlé’s Route to Market

DC e ries
eliv
i ck ed d outlets
P
factory TSP

Sub distr.
DC Distr. warehouse

Retailer DC

Full truck deliveries Large wholesaler

Tier I . II
Tier Ev.Tier III
200 - 8000km ~ 500 km ~ 20- 100 km
factory
Strategic Material Management

The concept of managing the flow of materials from

supplier through production to customer is what
we refer to as MATERIALS MANAGEMENT.

1.Manufacturing Planning and Control is responsible

for the planning and control of the materials flow
through the manufacturing process. This involves
Production Planning, Implementation and
Control and Capacity Planning systems.
Strategic Material Management

2. Physical Supply/Distribution, on the other

hand includes all the activities involved in
moving goods, from the supplier to the start
of the production process, and from the end
of the production process to the consumer.
This involves activities such as
Transportation, Distribution inventory,
Warehousing, Packaging, Materials
Handling and Order entry.
Strategic Material Management: Production Planning
Strategic Tactical Operational

Demand Planning (DP) Demand

Planning

Demand & Supply

Demand and Supply Review (DSR) Review

Distribution Requirements Supply

Material Requirement
Planning (DRP)
Planning (MRP) Planning

Master Production Detailed Production

Load Planning
Scheduling (MPS) Scheduling (DPS)
Strategic Material Management: Production Planning

Production Planning Effectiveness

Oriented Metrics

Schedule Adherence
Capacity Utilization
Inventory Turns
Number of Stock-outs
Order Lead-time
Delivery in Full
Strategic Material Management: Materials Planning

What are the

What are What does it rules?
What have
we going take to
we got?
to make? make it? Item data
and
Inventory planning
Demand Bills of
Data parameters
Data Material

MRP
CALCULATIONS

What we What we must

must buy? manufacture?
Strategic Material Management: Inventory Management
The inventory policies and procedures must be consistent with and
supportive of the strategies of the company, the environment in
which it operates, and the functional strategies. These would
determine the techniques to be used for controlling inventories.
There are three questions that should be answered by these
techniques:

When to replenish the inventory

How much to order when replenishing the inventory
What costs are associated with ordering the inventory
Equipments in Manufacturing Ice Cream

Freezers
These equipment freeze the
ice cream mix and
incorporate air to give ice
cream its desired texture. 
Added ingredients like
confections or fruit bits are
mixed with the semi-
frozen ice cream prior to
filling to make it more
appealing to the
consumers.  Filling is done
at -5 deg Celsius
Equipments in Manufacturing Ice Cream

Big Drum Machine

This machine sprays
the cones with
chocolate, then fills
them with  ice cream,
and sprinkles the
appropriate toppings
prior to covering  with
 plastic lids.
Equipments in Manufacturing Ice Cream

Vitaline 
This machine produces
molded stick products. 
Molds are filled with cold
mix and dipped in brine
solution at a temperature of
-38 deg Celsius to cause
instantaneous freezing. The
frozen products are then
extracted, wrapped
individually and packed in
carton cases.
Equipments in Manufacturing Ice Cream

Hardening Tunnel
The tunnel rapidly
freezes filled semi
frozen ice cream to a
core temperature of -23
deg Celsius.  The
novelties stay inside for
45 minutes, while it
takes 3 to 4 hours for
the bulk to harden
Equipments in Manufacturing Ice Cream

Vitaline Wrapping
Machine
The wrapping machine
is for molded stick line
products coming from
the extraction
machine.  It also has an
attached packing
conveyor.
THANK YOU!