Camille M.

Mangaoil
BSAcT3H/MWF 9:30-10:30

JK Cement Industry
1968 Metro Manila
Summary/Abstract
JK Cement started operation in 1968. It is located very near Metro Manila where the
demand for cement is most concentrated. JK Cement makes use of the dry production
process. By 1988, the company supplied 10 percent of the domestic market and 15
percent of the Metro Manila market. Dr. Ancheta was reviewing the papers on
expansion of JK Cements capacity. Veering away from the turnkey expansion mode
where foreign consultants design, construct, and initially operate the cement plant, JK
Cement was planning to rely on in-house engineering expertise. The issue of expanding
JK Cements capacity could not have come at more appropriate time. In 1988, the
cement industry was suffering from shortage and such. About five million bags had to be
imported.
I.

Objectives
1. To know whether JK Cement should go to design and build new plant or
contract it out as a turnkey basis in order to expand.
2. To know what is the best design and set up of the plant operation for the
expansion of JK Cement.
3. To know if the expansion will supply the projected demands and will
increase the production.

II.

Central Problem
What decision must be taken about the unusual expansion of JK Cement
in order to increase the productions and supply the projected demands?

III.

Areas of Consideration
Strength
1. Good Location. It was located near Metro Manila where the demand for
cement is most concentrated.
2. Good sales volume. Every year the sale increases.
3. High market demand. The company supplies the 10 to 15 percent of the
Metro Manila Market.
Weaknesses
1. The procedure is done manually.

2. Increase cost.
3. Production output suffers shortage.
Opportunities
1. New machines and equipment.
2. Increase production output.
3. High technology production process.
Threats
1. Fail to done the expansion on time.
2. It is the first time to do such expansion if the company will go in turnkey
agreement.
3. High opportunity cost if the company will fail to finish on time.
IV.

Alternative Courses of Action

These are the possible solutions to the problem with corresponding
advantages/ disadvantages
1. The JK cement will go into a turnkey agreement with the foreign supplier.
This agreement means that the supplier designs, constructs, and set up
the plant operation and then turns over the plant operation to the client
company.
Advantages:
The production of the company will increase and double. T
The foreign supplier will give the company quotation and then bears
the risk with regards to the cost overruns.
Disadvantages:
The Company will be dependent on foreign suppliers.
The cost of buying the equipment and spare part to the new
operation may be more costly because the company will consider
the exchange rate.
2. The JK Cement will rely on local or in-house engineering know-how and
upgrade the output capacity of the JK Cement plant by modifying certain
parts of its cement production process and uses computers in controlling
and monitoring the production process as well as the product quality.
Advantages:
With this kind of expansion the company will fully develop their local
know-how.
The company will able to maximize their local content.
The company will be more flexible in hiring local contractors and
will not depend on foreign suppliers.
It is also much cheaper than entering into a turnkey agreement.
Disadvantages:

The production output will not be the same in turnkey agreement

but still it will increase more compare to the old production that
counter shortage.
The expansion is costly and this will be difficult for the company to
convince their creditors.

3. The JK Cement industry will combine the old machine with the new one.
Advantages:
It will surely minimize the cost of JK Cement industry.
It will also much easier for the workers to operate this production
process because the whole operation is not totally change in a new
process.
Disadvantages:
If the old and new will be combine there is doubt that it will
smoothly work together and with that it can affect the quality of the
product and also the employees.
V.

Strategy Formulation/ Recommendation

I therefore conclude that the best solution to the problem is alternative course
action no. 2. Because the company will have more benefit if they will rely in
this alternative course of action compare to other. First, they will fully develop
their local-know how. Second, they will be able to maximize their local
content. Third, they will be more flexible in hiring local contractors and it is
way cheaper than the other agreement. And lastly, they will not depend on
foreign supplier. And also, if this will be done the company will get a great
chance to show that they do not need foreign suppliers to make the company
increase their production and be successful. And also the disadvantage of this
one is not that difficult to handle compare to other because the company
could think any other ideas that will make the production increases or even
more higher compare to a turnkey agreement.

VI.

Plan of Action
1. Carefully monitor the operation regarding the expansion so that it will be
finish on the scheduled time.
2. Allot emergency budget for the company have extra money in case some
unforeseen events will happen.
3. Train the old and new employees how to operate certain machines that will
be upgraded.

VII.

Potential Problem
1. What if the Company expansions fail to done on time?
2. What if the creditors do not give enough money to help the company for its
expansion?

3. What if the expansion would not supply the demands and still suffer from
shortage?
VIII.

Contingency Plan
1. If in case the expansion fails to be done on the scheduled time. The
Company should find additional workers to done it immediately.
2. If in case their creditors will not lend them enough money for the
companys expansion. The company can borrow from the banks or find other
creditors who will give them enough money for the expansion.
3. If in case the expansion would not supply the demands and still suffer from
shortage. The company should increase their target output by adding more
machines and increase their work force in order to produce more product and
for faster production.