REFRIGERATORS AND FREEZERS

CASE STUDY-2
BY
THE MIND BOGGLERS
 CASE STUDY-2
MGT314 SECTION-15

Submitted to

Afnan Yusuf (Afu),

Lecturer, Department of Management
School of Business and Economics, North South University

Submitted by

THE MIND BOGGLERS (Group 3)

Name ID

Sadif Sayeed 1831131630

Maruf Al Mahmud 1912335630

Md Barkatullah Bijoy 1912481630

Abid Khan Shadhon 1912601030

A. K. M. Mushfiqur Rahman 1931243030

Date: 16-05-2021
 ACKNOWLEDGEMENT

Through this project, we have able to gather vast experience and knowledge of Operational
Management Functions, which is very remarkable.

First and foremost, we would like to give all gratitude to the almighty Allah for giving us the ability
to work hard and prepare our CASE STUDY-2 on “Walton Refrigerators”. We're very much
fortunate that we've received almost and sincere guidance, supervision, and co-operation from all
the group members while compiling this report

First of all, we would like to thank our course faculty Afnan Yusuf, department of management,
North South University, for giving us the opportunity to prepare this report & effortful supervision.
She also provided us some important advice and guidance for preparing this Case Study without
her help, this report could not have been a comprehensive one

Secondly, we would like to show our gratitude towards Hasanul Banna, Engineer, Walton Home
appliance division for giving us his valuable time and relevant information which has helped us to
prepare this Case study.
 LETTER OF TRANSMITTAL

Date: 16-05-2021

Afnan Yusuf

Lecturer

Department of management.

School of Business and Economics

North South University (NSU)

Subject: Submission of Case Study-2

Respected ma’am,

This is to inform you that with the full help and co-operation of our team members we have completed the
Case Study-2 on “Walton Refrigerator” which has been assigned by you. We are delighted to work on such
a project, it helped us to gather more practical knowledge on this course. We have tried to include all the
relevant knowledge we were able to gather. The report consists of the elements which have been taught by
you in class throughout MGT 314 course. We hope that the report meets all your requirements.

It will be an honor if you accept the submission of this report conducted by our group.

Sincerely Yours,
THE MIND BOGGLERS
 EXECUTIVE SUMMARY

This report is about how a business company like Walton carries out its operational activities for
MASS products. We will discuss different segments like process type, quality management,
inventory management, and cost side of Walton's Refrigerator and freezer industry. This report
gives a brief idea about Walton and its products. Then it focuses on the operations management of
Walton Refrigerators. Here we discuss the repetitive process of Walton’s production, which goes
through 12 steps throughout the whole manufacturing process. Then we look at the approaches
Walton takes to maintain the highest quality of their products. Then we will discuss how Walton
manages their inventory during such a time by maintaining their product quality. We will also talk
about the supply chain management of Walton. And how Walton faces different challenges and
how they try to overcome those. We also will discuss some of the operational problems that Walton
has and how they can combat them. Walton’s way of producing and delivering its mass products
like refrigerators are becoming more efficient and faster, which is helping them to catch new
markets in the world. They are trying to make products using the latest technology and improving
them at low cost, which helps them compete and gives an advantage in the market. Walton is a
country brand; they try to give their customers the best service quickly. The refrigerator and freezer
industry is gradually increasing day by day. We continue to discuss Walton and its operations
management in the report, and we concluded it with some recommendations for smoother and
faster operational activities for the company.
 TABLE OF CONTENTS
Serial No. Content Page No.
1 Introduction 1
2 Facility Layout 2
3 Quality Management and Control Issues 4
4 Inventory Management 5
5 Supply Chain Management 8
6 Operational Problems 10
7 Recommendation 10
8 Conclusion 10
9 Bibliography 11
10 Appendix i
 TABLE OF FIGURES
Figure No. Content Page No.
1 Walton Refrigerator 1
2 Product Process Matrix 2
3 Process Layout 3
4 Precedence Diagram 3
5 Cause and effect diagram 4
6 Lean Production 5
7 Inventory Cycle 8
8 Bullwhip Effect 9
9 Supply Chain 9
 LIST OF TABLES
Table No. Content Page No.
1 Line balancing 3
2 Quality cost types 4
3 Check sheets 4
4 Inventory types 5
5 ABC classification 6
6 EPQ inputs 6
7 EPQ outputs 7
8 Problems and recommendation table 10
 INTRODUCTION

Our business is about Waltons’ Home Appliances industry, specifically the Refrigerator and
Freezer. Products that help us in house cleaning, cooking, and other household activities like
washing machines, ovens, refrigerators & freezers, etc., are home appliances. People are becoming
busier day by day. They want to do the household work more easily and efficiently. To utilize their
time effectively, especially in household activities, People are focusing more on products, such as
washing machines, hand blenders, microwave ovens. Day by day, this industry is developing by
innovation eco-friendly, sustainable, and easily usable products. Walton, Vision, Transcom,
Minister, Samsung, Singer, etc. are leading companies in this industry in Bangladesh.

Waltons’ business started by manufacturing Air Conditioner, Refrigerator, Compressor, Freezer,

and other home appliances. Later expanded with television, mobiles, kitchen appliances, and other
electric appliances. (Habib, 2020) Since the beginning of our journey, products like smartphones,
air conditioners, televisions, refrigerators, compressors, kitchen appliances were the most sold
items and largely demanded in the country.

Waltons products like smartphones hold 6%, Television 27%, air conditioner 22% and
Refrigerators & freezer 67% of the market shares. Since there is a great demand for our product
both locally and foreign, walton hope to expand their products and export it to other countries.
Walton products are tagged with “Made In Bangladesh”. They are
selling products to more than 20 countries like Australia, Middle
East, and African countries. (Global Operation, n.d.)

The market growth for smartphones is 15.4%, television 13.24%,

air conditioner 450% (Kamal, 2021) and Refrigerators & freezer
is 77%. (desk, 2019) Refrigerators & Freezers are of various
types ranging from Non-frost, frost, beverage freezers with ultra- Fig. 1: Walton Refrigerator

technologies like CFC free, Inverter, Nano health care, and anti-fungal door glass freezers.
Our factory is located in Gazipur near Dhaka and supply of our products is throughout the whole
country. 10,500 units of refrigerators and freezers are produced every month.

THE MIND BOGGLERS|MGT314|SPRING21’ 1|Page

 FACILITY LAYOUT

Process Type
The process type that Walton uses to produce its refrigerators
is Repetitive/Mass Processes. Walton produces high
volumes of refrigerators with low variety. Walton has
production lines in which they repetitively use the same
process with low variations to produce the refrigerators. The
variations include some slight design changes and the size of
the refrigerators. However, the process of making the
refrigerator is the same in all the cases. This type of process Fig. 2: Product Process Matrix

is appropriate for Walton since they want to produce a higher number of products with lower
varieties as quickly as possible.

Facility Type
The facility layout type that Walton uses to produce its refrigerators is Product Layout. Walton
uses its resources in a pre-arranged route to produce a single refrigerator. This layout helps them
to have a lower unit cost, higher output rate, high utilization of labor and materials etc. for
producing their refrigerators.

Manufacturing Process
There are multiple stages in the manufacturing process of a refrigerator/freezer. Firstly, they bring
the metal sheets into the production line. And cut the metal sheets into the shapes required to make
a refrigerator. Then the pieces are taken into a press where the sheets are pressed into the shape of
a refrigerator. Then they use automated machines to do thermal foaming. In the next step, they do
doors and cabinet foaming of the refrigerators. Then painting of the body and other parts is done
using computerized digital methods. In the next step, the compressors, which are premade by
Walton, are set. Wirings and tubings, and other components are connected. Then the refrigerators
are pressure tested with nitrogen, and leak testing is also done in this step. After that, there is the
final inception of the refrigerators. Then the refrigerators are packaged and stocked in the
warehouse. (Walton Factory Production Process, 2013)

THE MIND BOGGLERS|MGT314|SPRING21’ 2|Page

 Fig. 3: Process Layout

There are 11 tasks in making the

Walton refrigerator. The expected
production per month is 10500 units.
The work hour per day is 8 hours.
Therefore, they need to make 350
refrigerators every day.

480
CYCLETIME= 350 = 1.37 min
6.95
Nmin= 1.37 = 5.007 ≈ 6𝑤𝑠
2.64
P.I.T = 7×1.37 = 0.2752 = 27.52%

Efficiency = 100 − 27.52 = 72.48%

Table 1: line balancing

Precedence diagram:

Fig. 4: Precedence diagram

THE MIND BOGGLERS|MGT314|SPRING21’ 3|Page

 QUALITY MANAGEMENT AND CONTROL ISSUES

WALTON always keeps a very sharp eye on quality, and they never compromise with it. They
always plan to serve up the highest quality product under the lowest of costs. Walton uses a TQM
approach where they do the following things: Finding out the customer demands and work
accordingly with the state of the Earth technology that meets if not exceeds customer satisfaction.
Preparing a process of the work or an assembly line through which the final product gets a perfect
touch, they keep track of their refrigerator’s performance results to keep improving their qualities,
they try to use efficiently use the raw materials and share information with the suppliers.

The quality costs related to the production of the refrigerators are Failure costs, Appraisal costs,
and prevention costs. Faulty parts, inspection costs,
training costs, etc., are incurred by Walton to maintain
quality.

Table 2: quality cost types

Tools used by Walton are checklists

and cause and effect diagrams etc.

Table 3: check sheet

A total of 7 times Walton

refrigerators is inspected. 6
of the inspections are done
during the various vital
stages of manufacturing,
from thermal foaming up to
pressure testing, then a final
inspection is done.

Fig. 5: Cause and effect diagram

Quality certifications – ISO 9001, ISO 14001, ISO 18001, BSTI, ROHS, CE, CB, etc.

THE MIND BOGGLERS|MGT314|SPRING21’ 4|Page

Walton uses lean six sigma to manage their waste. (Walton Group Documentary, 2019)

They try to minimize their

residues by eliminating the
unnecessary steps by which they
forecast demands and produce
accordingly so that there is no
overproduction. They try to
reduce their scraps / faulty parts
by strict quality control so that
there is proper inventory
management, they try to reuse
scraps. For example, the scraps
Fig. 6: lean production
of metal sheets are recycled by melting them into nuts and bolts, they drain the excess coolants
into reservoirs and reuse them. Reduce defects by inspecting at every stage.

INVENTORY MANAGEMENT

Inventory Analysis
Walton manufactures all the parts used to assemble their refrigerators in-house. For Walton’s
inventory, they have the raw material which are metal sheets, the manufactured refrigerator parts
such as compressors, and the finished product which is refrigerators. Additionally, they have spare
parts and maintenance supplies as supporting inventory. The full inventory classification is as
follows:

Type Inventory
Raw Material Metal Sheet, Metal Wire, Copper, Aluminium, Polyfoam, Plastic
Work-in-Progress Compressor, Condenser, Cooling Fan, Thermostat, Receiver
Finished Good Refrigerator
Operating Supplies Spare Parts

Table 4: Inventory types

THE MIND BOGGLERS|MGT314|SPRING21’ 5|Page

For effective management, it is important to categorize different inventories based on the
importance of their stock. The ABC classification of Walton’s inventory is as follows:

Category Inventory
A Metal Sheet, Compressor, Condenser,

B Cooling Fan, Receiver, Thermostat, Frame

C Plastic, Aluminium, Inner Compartment, Spare Parts Table 5: ABC Classification

Walton follows the Perpetual Inventory System for counting their inventories. They track the
removal of items from the inventory stock and monitors the current stock level of each inventory
item. For usage, Walton follows the LIFO (Last In First Out) method. That is why they keep the
inventories for a short amount of time, around 10 days.

Inventory Model
Since Walton follows the LIFO model and they manufacture their own parts for assembling
refrigerators, the Economic Production Quantity (EPQ) model is the most appropriate for their
inventory management.

To illustrate the process, the inventory levels of compressors will be used as it is the most important
component in manufacturing refrigerators. A single unit of compressor goes into manufacturing a
single unit of a refrigerator. Walton produces around 10,500 units of refrigerators each month,
putting the annual demand at 126,000 units. The company operates 300 days a year. So we get a
usage rate of 420 units per day. The estimated holding cost per unit is BDT 200, and the estimated
set-up cost is BDT 4,000. Walton can produce around 600 units per day.

EPQ Parameters (Inputs)

Operating Days 300 Days
Demand (D) 126,000 units
Production Rate (p) 600 units per day
Usage Rate (u) 420 units per day
Holding Cost (H) BDT 200 per unit
Set-Up Cost (S) BDT 4,000 per run

Table 6: EPQ Inputs

THE MIND BOGGLERS|MGT314|SPRING21’ 6|Page

According to the EPQ Model, the optimal run size (Qp) is 4,099.

Thus, the optimal run size for Walton’s

2𝐷𝑆 𝑝
compressors can be rounded up to 4,100 units. 𝑄𝑝 =
𝐻 𝑝−𝑢

This Qp value gives us a cycle time of (Qp / u)

or around 10 days and a run time of (Qp / p) or 2 × 126,000 × 4000 600
𝑄𝑝 =
200 600 − 420
around 7 days. This means each batch of
compressors is produced every 10 days and the 𝑄𝑝 = 4,099
production is run for a length of 7 days.

Qp
The maximum average inventory (Imax) is around [ 𝑝 (𝑝 − 𝑢)] or around 1,230 units. This gives

us the Total Annual Cost of inventory at:

𝐼 𝑚𝑎𝑥 𝐷
So the minimized Total Cost for inventory 𝑇𝐶 = 𝐻 + 𝑆 = 𝐻+ 𝑆
2 𝑄𝑝
sustained by Walton for their refrigerators is
around BDT 246,000. At this total cost, the 1,230 126,000
𝑇𝐶 = 200 + 4,000
total annual setup cost and the total annual 2 4,100
holding cost are equal. This is achieved at
𝑇𝐶 = 245,927
the run quantity of (Imax / 2) units or 615
units.

EPQ Parameters (Outputs)

Optimal Run Size (Qp) 4,100 units
Cycle Time 10 Days
Run Time 7 Days
Average Inventory (Imax) 1,230 units
Run Quantity 615 units
Total Cost (TC) BDT 246,000

Table 7: EPQ Outputs

THE MIND BOGGLERS|MGT314|SPRING21’ 7|Page

Inventory Cycle
As Walton manufactures their own compressors, the safety stock is kept at relatively low levels at
around 100 units. Production starts and runs for 7 days. After the 7 days run time, the inventory
level reaches the quantity for minimum annual cost at 615 units. The inventory stock then falls to
the safety stock amount after 3 more days marking the end of the 10 day cycle time. At that point,
production starts once again. Walton goes through 30 production runs each year.

Fig. 7: Inventory Cycle

SUPPLY CHAIN MANAGEMENT

The Covid 19 pandemic had a hard toll on their business. During the pandemic, their production
was off for a long period of time even though there Was a healthy demand of refrigerators on the
market. However soon the lockdown was eased, they started their production again following the
government rules and policies and following all the health measures.

The top suppliers of Walton are Taiwan and China. Their main raw materials for refrigerator
manufacturing, such as metal sheets are imported from there. Besides, other materials are supplied
from its own subsidiaries.

THE MIND BOGGLERS|MGT314|SPRING21’ 8|Page

The most suitable location for the suppliers of Walton is Gazipur Kaliakoir. The location is
convenient as it is in the center of the country. Therefore, easy for the suppliers to reach out to the
factory. And Walton high tech park at Gazipur is the supplier of many materials for refrigerator
production which is near to refrigerator Manufacturing unit.

The bullwhip effect is commonly

seen before the Eid-Al-Adha.
Customer demands increase
during this time, which is
forecasted and as a result,
retailers forecast a higher amount
keeping the safety stock in mind.
The distributors also order a
higher amount and which
ultimately results in a higher
order for raw materials by the
Fig. 8: Bullwhip effect
manufacturing division. Walton
manages this effect by analyzing the previous year’s data and predict the actual demand. So that
they don’t overestimate the forecast and reduce wastage due to the bullwhip effect.

The main raw materials are

imported from China and Taiwan.
And other materials are produced in
Walton’s subsidiaries. The materials
are stored in the warehouse put into
the assembly line when needed. Then
after production, it is again stored in
a warehouse, and from there, it is
transported to different distributors Fig. 9: Supply chain

who then distributes them to the retailers, and then finally retailers provide them to the customers.
Materials flow from suppliers to the customers. Information flows in both directions, Walton
also accepts return products which is reversed product flow.

THE MIND BOGGLERS|MGT314|SPRING21’ 9|Page

 OPERATIONAL PROBLEMS AND RECOMMENDATION

Operational Problems Our Recommendation

1) Unbalanced workstation workloads: Balance the workstations in a way so that each
Some workstations are taking more time, and workstation takes the almost same time.
some workstations are taking less time.
2) Underutilized workstations: some Find out ways to efficiently use the
workstations are having a long idle time. workstations.
3) Overproduction: sometimes, specific Try to design the refrigerators properly so that
models of refrigerators are in lower demand there is always higher demand in the market.
than expected.
4) Defect during compressor fitting: more Try to automate the process of compressor
chance of defect in this stage due to human fitting to reduce the chances of defects.
factor.
5) Dependency on two countries for raw Look for other sources of metal sheets so that
materials: Walton completely depends on they are not dependent on only two countries
China and Taiwan for metal sheets. for the raw materials.

Table 8: Problems and recommendation table

CONCLUSION

Walton is a very popular electronics brand in Bangladesh. From the start of its journey, Walton
wanted to become a Bangladeshi global brand. Walton has been improving their operations
throughout its inception and is trying to become a premium and customer-friendly brand. Walton
has very effective and efficient operations management. They now produce almost all types of
home appliances, electronics, mobiles, etc. It indicates that the company is evolving and trying to
improve. With an efficient and effective supply chain, strong management, and a very hard-
working and dedicated workforce, Walton is thriving to become one of the best brands in South
Asia. If further improvements are made in Walton’s operations, and their workforce is trained to
use the latest manufacturing technology, Walton can one day become a truly global brand from
Bangladesh.

THE MIND BOGGLERS|MGT314|SPRING21’ 10 | P a g e

 BIBLIOGRAPHY

1) desk, B. post. (2019, June 17). Local brand registers 77 pc growth in fridge sales Walton’s
target for five months surpassed. Bangladeshpost.net. Retrieved 4 may,2021 from
https://bangladeshpost.net/posts/local-brand-registers-77-pc-growth-in-fridge-sales-
walton-s-target-for-five-months-surpassed-4189

2) Global Operation. (n.d.). Walton. Retrieved 4 may,2021 from https://waltonbd.com/Global-

Operation

3) Habib, A. (2020, August 7). Walton, a local household name, now wants the world to take to
its products. The Daily Star. Retrieved 4 may,2021 from
https://www.thedailystar.net/business/news/walton-household-name-bangladesh-now-it-
wants-the-world-take-its-products-1941149

4) Kamal, M. A. M. I. (2021, May 3). Walton AC records 450% sales growth during Jan-April.
Unb.com.bd. Retrieved 4 may,2021 from
https://www.unb.com.bd/index.php/category/tech/walton-ac-records-450-sales-growth-
during-jan-april/68464

5) Walton Factory Production Process. (2013, October 4). Retrieved 4 may,2021 from
Www.youtube.com. https://www.youtube.com/watch?v=ynMVo5bt4J0&t=304s

6) Walton Group. (2019). Retrieved 4 may,2021 from Waltonbd.com. https://waltonbd.com/

7) Walton Group Documentary. (2019, May 26). Www.youtube.com. Retrieved 4 may,2021

from https://www.youtube.com/watch?v=N7xKxOPxMIk&t=99s

THE MIND BOGGLERS|MGT314|SPRING21’ 11 | P a g e

 APPENDIX

GANTT CHART OF CASE STUDY 2 BY THE MIND BOGGLERS

i
Fig: Process Mapping of Walton production process

ii
 Necessary data table for doing line balancing math

Task Immediate predecessor Task time (in min)

a - 0.5
b a 0.3
c b 0.5
d c 0.75
e d 0.75
f e 0.5
g f 1
h g 0.75
i h 0.5
j i 1
k j 0.4
∑=6.95

Task No. of following task Positional

a 10 9.15
b 9 8.4
c 8 7.9
d 7 7.4
e 6 6.4
f 5 5.2
g 4 4.2
h 3 3.2
i 2 2.2
j 1 1.7
k 0 0.5

iii
Fig: Metal sheets are taken into the assembly line

Fig: Metal sheets are cut into desired shapes

iv
 Fig: Metal sheets are pressed

Fig: Thermal foaming takes place

v
Fig: Doors and cabinet foaming takes place

Fig: Painting by automated machines

vi
 Fig: Compressors are set

Fig: Wirings and tubings are done

vii
Fig: Pressure, leakage and other testing

Fig: Packing and strapping

viii
Fig: COMPLETE REFRIGERATOR MANUFACTURING PROCESS

ix