Company Visit: Yakult
Company Background
Minoru Shirota, the founder and the developer of Yakult – a probiotic drink. He believed that there is a relationship between the conditions of digestive system and health. During his Doctor of Philosophy in Medicine, he discovered lactic acid bacteria could destroy bad bacteria living in intestine so that human’s health can be maintained and improved. Due to this research, lactic acid bacteria was named Lactobacillus casei strain shirota after Shirota.
Yakult launched their third branches in Hong Kong in 1969. The Yakult factory was first located in Kwan Tong, then moved to Tai Po after 25 years. Yakult used to serve in glass bottle and sold by “Yakult Lady” by delivery. However, after two years, they found that the selling strategy were not that effective as they thought in Hong Kong. Therefore, they started to sell Yakult in supermarket and convenience store instead and changed the package from glass to plastic bottle. To boost the sales, they created a variety of advertisement that raise the awareness of benefits brought by Yakult.
In 21 Century, people pay more attention on health issue. To cope with the rapid change of market trend in Hong Kong, Yakult published Bansoreicha and Yakult Light in 2009 and 2011 respectively. Bansoreicha helps diabetes patients to stabilize the blood sugar level which normally sells in hospital. On the other hand, Yakult Light is a new flavor with less sugar and high vegetable fibre.
Visit
During the visit, the host first introduced the development of Yakult in 80 years. Then, she showed us around the factory and explained the whole production process, how they do the quality management and storage management.
The display of Yakult from different countries
The three ultimate goals of Yakult
Short movie of Yakult
Manufacturing process of Yakult
After that, he showed us a video about the investigation and development process of Yakult and how do they maintain the environmental sustainability. In fact, to reduce the emission of CO2, Yakult has already adapted environmental-friendly infrastructure with supporting system in European Research Centre in Belgium since 2005. Moreover, Yakult recycles the plastic bottles used and process into prosthetics and donate to the needy. These action has made Yakult becoming one of the successful Japanese corporation in the world.
Case Question
Q1 How do you forecast the market demand in different distribution channels?
In 2005, more than 637000 Yakult have been sold per day in Hong Kong (Yakult Honsha Co., Ltd., 2015). As a manufacturer, having a sales data and accurate forecasting are important to the production planning, such as the production volume and schedule. In order to forecast the market demand, Yakult will collect the sales data from different distributors, like chain stores, supermarket directly. Hence, building up a good supplier-distributor relationship is extremely important to Yakult. For example, they will keep refilling the Yakult (Shelf life equal to 1 month) of various distributors to ensure that all the volume purchased from the distributors have been sold.
Reference:
Yakult Honsha Co., Ltd. (2015). Annual Report 2015. Retrieved March 23, 2016 from:
http://www.yakult.co.jp/english/ir/management/pdf/ar2015.pdf
Q2 What is the most significant supply chain crisis in your company history and how do you tackle the problems?
Transportation process in the supply chain is a main and challenge problem, especially, Yakult’s fresh product. But, how can they solve the transportation accident and transfer the product to the retailer in a timely manner. From the answer of the manager, solving the supply chain crisis in Yakult seems not a difficult problem for them. Once the accident happen, they will schedule the backup car to take the goods and then send it back to the factory to check the quality. After the checking, if the quality of the goods are fine, they will send it back to the retailer, if not, they will destroy that goods as well as send another qualified goods to retailer.
Q3 How does quality control help Yakult to ensure the product quality? Once a quality problem is occurred, what Yakult can do?
Maintaining high quality products has been one of Yakult’s main concerns. Yakult have employed laboratory analysis to collect samples in the production process. They will then process those samples with more than 200 tests, measuring the number of bacteria, contaminants, acidity as well as the microbiological quality. Inspections will be also conducted for screening out incorrect printing products. If a quality problem is detected, all of the problematic products would be scrapped. Yakult would also call back products if the product quality is not up to standard.
Reference:
Hong Kong Yakult Limited. (2010). How is Yakult made in our modern and high technology
factory. Retrieved from: http://www.yakult.com.my/html/making_yakult.html.
Q4 How does the company maintain its product quality under different temperature change during transportation?
As Yakult is a probiotic product made with a special bacterium, change in temperature affects significantly to Yakult as it forester the bacterium to grow makes it much more active. Active bacteria will produce lactic acid, which makes Yakult sour. The bacteria will die when it produces too much lactic acid, which reduces the effectiveness of Yakult.
Yakult company has been using truck with refrigeration system in transportation to maintain product quality. All Yakult products are stored lower than 10 ℃ for lowering the activeness of bacteria. 3 years ago, Yakult have adopted a new tactics. Yakult will provide refrigerators to all downstream distributors if they do not have one. It provides a better temperature control in the view of logistic process. Furthermore, Yakult will randomly check retailers to see whether they have fulfilled the quality control requirement.
Reference:
Hong Kong Yakult Limited. (2010). Frequently asked questions. Retrieved from:
http://www.yakult.com.my/html/faqs.html#d01
Q5 Why does Yakult HK have less favor than the other neighbor countries such as Singapore?
The major obstacle setting Yakult back from providing more flavour is the limited factory space. Factory space have been fully occupied by 3 production lines. There is no more spare space for Yakult to create a new production line for new flavour. Besides, transiting ownership of industrial space is not appreciated by Hong Kong Government, it hinders the decision of expanding factory space. What’s more, Yakult has conducted a market research for the existing probiotic drink market in Hong Kong. The result suggested that Yakult should not provide a new flavour in Hong Kong because a new flavour is not easily accepted by Hong Kong people. The Yakult light with dietary fibre has created to satisfy local needs in 2011. However, The Yakult light is still unpopular until 2016, indicating it takes time for Hong Kong people to accept a new product.
Q6 As the expiration date of the product is 30 days, the estimation of market demand become critical to the profit. How do you make an estimation of the market demand in an effective way?
To increase the reliability and accuracy for the demand forecasting, Yakult is using the historical data which is regional sales recorded from the same date in previous year. Other than the sales records, Yakult studies the customer buying pattern as well. From the record, they discovered that seasons and weather condition are factors that influencing the demand. For example, the sales boost in summer but drop in raining days. Therefore, all these factors are take into account, then make the best estimation of the demand.
Q7 In order to protect the brand reputation and maintain the quality standard, what are your criteria in choosing the suppliers?
For the sake of protecting the brand reputation and maintaining the quality standard, Yakult insists on different criteria in choosing supplier. According the annual report of Yakult, while the company selecting the supplier, they will follow the ensuring of safety of raw materials, the safety of products and traceability system of their supplier.
The safety of raw materials
When selecting raw materials including raw materials for packaging. Yakult selects suppliers based on thorough investigations and analyses conducted at the product design stage that enable the safety issues to make sure that required quality standards are strictly complied. With respect to raw materials used at Yakult plants both in Japan and overseas, the company will only receive the raw materials with achieved relevant standards.
The safety of products
Yakult establishes internal product quality standards for suppliers that are much more rigorous than standards set by relevant laws and regulations. Moreover, they employ Hazard Analysis and Critical Control Point (HACCP) systems, ISO9001-certified quality management systems and other quality management systems to ensure the safety of products from their supplier.
The system of suppliers
Each individual Yakult product package bears a recommended use-by date and a production lot code printed with a printer. The Yakult company require the suppliers to install traceability system to ensure “trace-back” capabilities so that they can access the manufacturing history (raw materials, packaging materials, production situations, etc.) of specified products and “trace-forward” capabilities so that we can determine primary shipment destinations of specified products.
Reference:
Y. (2014). Yakult Social & Environmental Report. Retrieved March 21, 2016, from:
http://www.yakult.co.jp/english/pdf/eco2014_en.pdf
Q8 What technologies do you adopt for quality control?
After the Yakult were produced, the quality assessment should be adopted to make sure that the product fulfill the standard. For this reason, samples are collected for laboratory analysis throughout the production process to confirm that the quality assurance measures in place have been effective.
Their testing involves more than 150 samples per production run, until more than 200 tests are conducted in total. These determine lactobacillus casei numbers, check for potential contaminants, microbiological quality, composition, acidity, physical attributes and taste. In addition, each bottle produced is inspected for undesirable markings and incorrect printing.
Quality assurance measures should maintain standards for personnel and factory hygiene, equipment cleaning, processing methods and parameters, and product handling. Yakult's quality assurance utilizes a system called "Hazard Analysis and Critical Control Points" (HACCP). The principles of HACCP are internationally recognized as an excellent method for assuring stringently high standards.
Reference:
Yakult. (n.d.). Retrieved April 03, 2016, from:
http://www.yakult.com.my/html/making_yakult.html
Q9 The population of Yakult drinks is increasing in the Mainland nowadays. How does Yakult adjust the production plan to respond to the rapid increase in demand?
To make better forecasting in a growing market, Yakult will estimate the demand that the market can digest based on the daily sales. To calculate the optimal demand forecast, Yakult gathers all the information from different regions, then analysis the data and draw a reasonable conclusion. The lead time of Yakult from manufacturing stage to ready-to-sale stage is 7 days. Therefore, the estimation need to be prepared one week to half of the month ahead.
Q10 There are many growing competitors from China these years. How does Yakult stand out from the market to gain back the market share?
Brand reputation is one of the reasons why Yakult can stand out from the market. Yakult established in Hong Kong in 1969 which is already 47 years for Yakult to operate their business in local market. The brand image is well established in the customer mind, and the customers are much more confident to the brand. Visiting a Yakult’ factory not only enhances the customer confident on their production, it also benefits for building up good customer relationship. Besides, promotion is also a good strategy to maintain a market share. For example, Yakult are emphasizing on educating their product advantages to the healthy lifestyle. Thanks to those factors, Yakult believed that they stand out among their competitors.
Reflection
“Have you drank it today?” (你今日飲咗未?) Tasted a fresh Yakult in the factory is our memorable experiences. We can buy a Yakult easily in everywhere, but it is not easy to run a production line in Hong Kong. After the company visit, we recognize that Yakult pay a lot of effort on the production planning, quality control as well as transportation and distribution.
As mentioned, the demand of Yakult is affected by the seasons and weather, the production planning and schedule need to become more flexible and responsive to the demand. For example, they will arrange more holidays for the factory workers in the off-season, like January to April. Also, their production line will be adjusted based on the product sales. We get some insights on how the factory develops their production planning.
In customer perspective, we take the acquisition of product in good quality for granted. In view of the company, Yakult spent much of the efforts on their quality control, like the Outgoing Quality Control. Besides, Yakult will also do the sampling and quality checking through buying back the products in the market. Those of the practices lead we understand that maintaining a good reputation is not an easy task.
Before the company visits, we think that transportation and distribution is just a minor factor to the factory. However, Yakult brought out some factors that change our mind. Although they act as a manufacture, they also need to concern on the transportation issues, such as the temperature control (Below 10℃) as they need to distribute the product to various retailers.
To conclude, the companies provide good opportunities for us to analysis the supply chain in manufacturer's perspectives.
