National Cranberry Cooperative

The National Cranberry Cooperative is an organization formed and owned by growers of cranberries to process and market their berries. In 1996 the Vice President of Operations, Hugo Schaeffer, was reviewing the previous year’s processes in regards to fruit operations at receiving plant 1 (RP1). Schaeffer believes they were incurring high overtimes costs, despite the purchase of a new dumper which cost the company $75,000. Delivery trucks still have to wait to unload their fruit at the receiving plant. In our report we will analyze the business processes of RP1, explore alternatives, and make recommendations with justification based on facts and statistics. After meticulous reading and analysis, we have distinguished three main issues hindering the company from performing at its optimum levels. Firstly, we have noticed that while there is a stable demand for cranberries, the production for the cranberries is not stable. The proportion of water harvest cranberries is increasing rapidly and will likely stabilize around 70%. Secondly, the plant is incurring high overtime costs. Lastly, delivery trucks are experiencing long waiting hours to unload their product for the growers/owners of the cooperative. In order to begin, we have made the following assumptions: Approximately 18,000 bbls per day (busy day) are distributed over 12 hours. o (75bbls x 243 trucks =18,225 bbls) Approximately 10,000 bbls per day (average day) o (MISSING) Trucks arriving will carry an average of 75 bbls and thus the boundary conditions will not be considered separately. Trucks arrive at a constant rate. Destining starts only at 11AM, and thus no operations will start until 11AM. (12 hour work day) Case # 2 All the holding bins capable of handling Wet/Dry bins are being used for wet cranberries since dry cranberries are not facing bottleneck situations. (Bins 1-16 Dry, Bins 17-27 Wet) The 70/30 split up of wet-dry trucks have been assumed to hold true for an hourly basis. Waiting time excludes the 5-10 minutes unloading time taken by the trucks. The bottleneck is only for the wet trucks, since the bottleneck operation is the drying operation. The issues listed above are causing problems and we need to identify the bottlenecks in the process flow. Looking at the process we identify the bottleneck being at the Drying Unit. On a busy day RP1 will process approximately 18,000 bbl per day spread of the 12 hour work day. Assuming that 70% are wet, RP1 must process 1050 wet bbl/ hour (18,000 x .70/12 = 1050). The capacity of the drying units is 600 bbl/ hour which is much lower than the required capacity of 1050 wet bbl/ hour. Overtime for each member on an average day is roughly 3.67 hours because 11.67 hours are needed for the drying process where employees only work an 8-hour day. On a busy day the overtime for each employee needed raises to 13 hours because with the extra inflow of berries the process will take 21 hours where an average workday still remains to be 8 hours for employees. We feel that one of the main reasons for spike in overtime costs is the lack of drying capacity that RP1 operates with. Another explanation we have found for the bottleneck and increased costs is the increasing in percentage of wet berries. In addition we have addressed a significant problem being the waiting time for trucks, as we will justify below. (See Table 1) Inventory Build Up Rate = Arrival Rate – Processing Rate o 1050 bbls – 600 bbls = 450 bbls/hr Bin Capacity (Bins 17-24 capacity = 250 bbls, Bins 25-27 capacity = 400 bbls, Bins 17-27 combined capacity = 3200 bbls) End of the day bbls in inventory is 5400bbls Total waiting time for trucks is 125.48 hours (see Table 1) Dechaffing process rate: 1,500 bbls/hour * 3 machines = 4,500 bbls/hour Drying process rate: 200 bbls/hour * 3 machines = 600 bbls/hour Separation process rate: 400 bbls/hour * 3 machines = 1,200 bbls/hour Bagging process rate: 666.67 bbls/hour Based on the above assumptions and calculations provided in Table 1, we concluded that the drying process in the bottleneck for this plant. Therefore, the drying process would need to be improved, or, the bins need to be converted to handle higher capacity to prevent the inventory building up higher than the actual capacity of the factory. In this case, the two constraints that were to be adjusted were the number of drying machines, and the capacity or number of bins. We took into consideration the number of machines and capacity of bins to come up with our recommendation. As suggested by superintendent Williston the issues could be address by increasing the number of drying machines or converting some of the dry cranberry bins, so they can be used for wet berries also. 1. Install two new dryers, and convert 6 dry bins to hold mixed berries. Cost of converting 6 dry bins to mixed bins = 6 * $5,000 = $30,000. Capacity of 6 dry bins from bins 1-16 to hold mixed berries: 6 * 250 = 1,500 bbls, so the total capacity increases by 1,500 bbls to 4,700 bbls/day. The cost of adding two new dryers: 2 * $25,000 = $50,000. Increased process rate of: 2 * 200 = 400 bbls/hour, so the total drying process rate increases from 600 bbls/hour to 1,000 bbls/hour. This would allow 200 bbl/hr to be processed concurrently. With these rates, on a peak delivery day wet berries would accumulate at (1210-1000 = 210 bbl/hr) and dry berries would accumulate at (520-200 = 320 bbl/hr). After 11 hrs of delivery, the accumulation would be 2310 bbl of wet and 3520 bbl of dry cranberries, all within the holding bin capacity. Therefore, no trucks would have to wait to unload. The inventory would then be processed based on utilizing the 1200 bbl/hr Separating capacity to process the wet and dry berry inventories in proportion to finishing both at the same time (710 bbl/hr dry and 490 bbl/hr wet). This would allow the entire days input to be processed by 16 hrs from the first delivery vice 22.2 hrs in the case without purchase of the additional 2 Dryers. In this case milling area will become the bottleneck which can process 1200 bbl per hour of both wet and dry. Thus, the effective processing rate will be =1200*0.7=840 bbl per hour. Overtime for each member on average day: On an average day a total of 10,000 bbl is received out of which 7000 bbl is wet. At an average processing rate of 840 bbl /hr it will take 8.33 hours to process. Assuming normal working day of 8 hours, there is an overtime of 0.33 hours for each member of the crew on each average working day. Additional saving is just 0.42 hours. On peak day: On a peak day a total of 18,000 bbl is received out of which 12600 bbl is wet. At an average processing rate of 840 bbl /hr it will take 15.00 hours to process. Thus, there is an overtime of 7.00 hours. An additional saving of 0.75 hours Total investment cost = $30,000 + $50,000 = $80,000. Appendixes Process Diagram of Cranberries in National Cranberry Cooperative 4500 bbls Dechafn Trucks Arriving (75 bbls per 1 Weighed, Sampled and Color Drying 600 bbls Bulk Trucks 2 Dechaf Dumping 5-10 mins per truck 5 Jumbo Separator 1200 bbls (400 bbls * 3 Bins for Temporary Holding Bins Destonin 4500 bbls 24 bins – 250 bbls 3 bins – 400 bbls Shipping Building Four Bagging Bailey Mill Four Bulk Bin Bulk Discarded Waste This process will be for the Dry Harvested Cranberries which we have not Table 1 Item Units Total Barrels expected to arrive Capacity of Wet Holding Bins Capacity of Wet/Dry Holding Bins Total Capacity of Wet Holding Bins bbls/da y Arrival rate Barrels per truck Bottleneck Throughpu t 18000 bbl 1200 bbl 2000 bbl 3200 bbl/hr 1500 bbl/truc k bbl/hr Details 75 600 The Capacity of the Bins which hold only Wet Cranberries(400*3) The Capacity of the Bins which hold Wet and Dry Cranberries(250*8) Total capacity of the holding bins for wet cranberries only which determine how many trucks can be processed (1200+2000) Total arrivals per hour (18000bbl/ 12 hours) The average number of barrels that the trucks carry into the receiving plant The Drying process which processes the barrels at the rate of 600 or 450 bbls/hour will be the bottle neck Rate at which the trucks carrying 75 barrels arrive ( (18000/75) / 12 ) 70% of the trucks arriving carry Wet Cranberries Truck arrival rate trucks/ hr 20 Wet truck arrival rate trucks/ hr 14 Dry truck arrival rate trucks/ hr 6 30% of the trucks arriving carry Dry Cranberries Number of hours to fill wet capacity hours 7.11 Destoning does not start till 11:00AM. Hence, the trucks will fill the bins until 11:00AM. Number of wet trucks no wait Wet trucks that have to wait Total number of 56 trucks - till 11AM Total waiting time Total number of wet trucks Total number of dry trucks Truck processing rate Inter Arrival Time of trucks carrying Wet Cranberries Time to process 75 Barrels required to allow unloading Total Barrels being processed due to bottleneck Time from trucks 100 trucks 68 Trucks 56 hours 125.48 trucks 168 The number of trucks required to fill the wet bins to full capacity. 14 trucks per hour * (12 hours to fill wet capacity) Total number of trucks carrying Wet Cranberries (240 trucks * 70%) trucks 72 Total number of trucks carrying Dry Cranberries(240*30%) The drying being the bottleneck, once the bins get filled, the processing time for the trucks will depend on the time that the drying machine takes to process the cranberries which is (60*75/600) = 7.5 mins trucks/ 8 Since the processing time is hr 7.5 mins, the rate of processing the trucks arriving is 60/7.5 mins which is 8 trucks per hour minutes 4.3 Since 14 trucks arrive every hour, a truck arrives every 4.3 minutes. minutes 7.5 75 (barrels/truck) / rate (barrels/hour) * 60 bbls/hr The capacity of the drying process as given in the case time 600 2:11PM 7:00 AM + 7.11 hours which trucks have to start waiting Ave waiting time for wet trucks after 2:11 minutes 4.28 Total waiting time / number of wet trucks that have to wait