National Cranberry Cooperative

1. Analyze the current process.

Please see the Excel file.

2. On a busy day, what is RP#1s current maximum throughput rate?

The separator line could process up to 450 bbls/hr. Instead of 400 bbls/hr.
The other bottleneck for this question is dryer process.
So the maximum throughput rate should be:
600+450=1050 bbls/hr.

3. Assuming that processing starts at 7 am on a busy day, present the situation

during such a day, by constructing an inventory build-up diagram for bins and trucks.
Demand rate=18000 bbls/12hr.=1500bbls/hr.
7:00 p.m. Trucks stop coming

TOTAL INVENTORY = (450*12) bbls =5400 bbls

EMPTY=5400/600=9 hr. 9+7:00P.M. =4:00A.M.
BIN INVENTORY=3200 bbls
(12-7)= 5 (450/75)=6 5*6=30trucks
TRUCK INVENTORY=30*75=2250 bbls

4. What are the possible capital investments considered by NCC?

One of the possible capital investments considered by NCC was to buy some new
equipment. NCCs overtime costs were out of control and the growers were upset
that their trucks and drivers had to spend so much time waiting to unload
process fruit into the receiving plant. Will Walliston, the superintendent, thought that
the way to avoid these problems was to increase their capacity by buying new
equipment. However, in order to buy new equipment it was very important to move
quickly since the purchasing and installation lead times are in excess of six months.
Another possible capital investment considered was the installation of a light meter
system for color grading. Using color pictures as a guide, the truckload of berries
were graded according to color and classified as Nos. 1, 2A, 2B or 3, from poorest
color (No. 1) to best (No.3). There was a premium of $1.50 per bbl. Paid for No. 3
berries. Whenever there was any question about whether or not a truckload is No. 2B
or No.3 berries, the chief berry receiver usually chose No.3. When these berries were
used, however, it was found that only about half of them were No.3s. To improve this
yield, Schaeffer was considering the installation of a light meter system. This system
was projected to cost $40,000 and would require a full-time skilled operator at the
same pay grade as the chief berry receiver.
With an increasing percentage of wet berries coming to the plant, superintendent
Walliston considered converting some of holding bins 1-16 so they could be used
for wet berries also. He was also considering buying a few new dryers as capital
investment but wondered what the benefits might be of adding more dryers and
whether those benefits would warrant the cost.

5. Costs and Benefits of Adding the 5th Kiwanee Dumpster

Costs
* Initial cash investment of $75,000
* Use of space
Benefits
* Reduce truck wait time
* Decrease bottle neck
* Decrease overtime costs
* Increase capacity for storing cranberries

6. Cost
* $10,000 cost to upgrade dry to wet/dry
* Will have to buy new dryers to account for increase in wet berries processed through
dechaffing
* Wet berries have to also be dried. This adds an hour to the total processing time
as it takes one hour to dry 200 bbls per dryer. However, since there are only 2 steps
to each process (dry: dechaff, destine; wet: dechaff, dry) there really is no time added
to the whole process
* Increase in wet fruit means that 8 to 9 workers have to stay overtime more often
because wet fruit cannot sit overnight.
Benefit
* Gain 250 bbls of berries each
* Allow you to switch off between wet and dry berries depending on what you have
more of. This kind of flexibility can be a huge tool during times of unexpectedly high dry
or wet berry amounts
* With wet berries coming in at an increasing rate, it is best to increase the wet bbls
holding capacity.
* NCC already has 2 wet dechaffers to only 1 dry dechaffer. Each dechaffer can
process 1500 bbls/hr. They already have too many wet dechaffers so increasing the
amount of wet/dry bins will better utilize their current dechaffing equipment.
* Greatly decreases truck-loading traffic. Wet berries cannot be temporarily held in
Kiwanee dumpers like dry berries can. Wet berry holders would increase the amount of
wet berries that can be loaded in at a time. Since truck drivers are paid $18/hr., they
would be paid less to just sit and wait in line.

National Cranberry is a cooperative of berry growers around North America that share
common production facilities and for the last several years have been experiencing
capacity bottlenecks among other issues. After initial analysis, two main factors that
contributed to a decrease in production were found. The first issue in the business
is that the supply trucks and drivers delivering the harvest were not properly organized
and there was not enough space and organization to allow for smooth offloading of
several trucks a day. The second major issue is the rampant absenteeism and need
for overtime work based on shortage of workers. This has driven the cost of
running the business up and drastically reducing profitability. A lesser but still
important problem at the plant was the grading system of berries which has been
inconsistent and has cost the cooperative money as No.2A or No.2B fruit was
categorized as No.3 when it should not have. This case will analyze several
alternatives in numeric terms to develop the best possible strategy for the National
Cranberry Cooperative.
Since National Cranberry is a cooperative of farmers and growers, any surplus
profitability or loss should get funneled back to the farmers who are members of the
cooperative. So when calculating what is best, the factors that need to be looked at not
only what is good for the production plant but also for the growers themselves who buy
into the combined resources of the cooperative.

Although it was determined in the winter of 1980 that another Kiwanee dumper would
fix the issue of truck wait times and overtime costs, this was obviously not the case. It
is apparent that the bottle neck in operations is not in the unloading of the raw
materials but in further production processes down the line. As stated in the case,
the trucks that show up on an average day can be dumped within five to ten minutes
which allows for approximately 96 trucks to dump in a 12 hour window. (12Hours x
60mins) /(5mins+10mins/2)= 720/7.5 = 96 x 5 Kiwanee dumpers = 480 Truck Loads
Per Day. On a fairly business day that was illustrated in the Exhibit 1 there were
approximately 184 deliveries which is much less than maximum capacity.
Nevertheless, some trucks had to wait for up to 3 hours to dump their loads which was
solely attributed to the holding bins which could only hold 7200bbls total of both dry and
wet berries. Additionally, out of the 27 holding bins, only 11 were actually set up to hold
wet berries which made the constrain even more difficult. Once that section of the plant
was full there was very little that crews in receiving could do to alleviate the problem. In
the next section of the production process, dechaffing was possible at a rate of
4500bbl/hour which over a 12 hour period would be more than enough capacity even
on the heaviest barrel deliveries days.

Where the bottlenecks really start to become apparent is in the drying stage of
the wet berries where only 3 drying stations existed and in a combined effort
could only dry at 600bbl/hour. In the harvest of 1980, there was 58% of the total
capacity coming in as wet berries which was already over the capacity based on a 12
hour day. In 1981, the harvest in set to bring in 70% of the berries as wet berries
which would further slow the overall process.

Assuming that the Kiwanee dumpers, dechaffing and de-stoning machinery were all
working to their full capacity of 4500bbl/hour, the increase to 70% wet berries would
overload the driers within the first few hours of production. If the RP1 was to add
one new drier that would operate at an additional 200bbl/hour drying ability to
the current 600bbl/hour it would alleviate most of the trucking wait times.

If one dryer is added, then the dryer capacity increases to 800bbl/hour,

subsequently the separator capacity will need to be relocated to wet berries
leaving a capacity of 400bbl/hour for dry berries. Thus, on an 18,000bbl day, wet
berries build up at a rate of 250bbl/hour (it is the difference between unloaded
berries for an amount of 1050 and 800 bbl) ending in 2500bbl by 7pm and cleared
out by 10:45pm. The dry berries build up in excess of 50bbl/hour during the day ending
in 600bbl at 7pm leaving them cleared by 8:45pm. Doing this would allow for nearly no
truck waiting times.

Additionally, during peak times it would be advised that the crew start at 7:00am
instead of the usual 11am with the arrival of the first deliveries to further reduce
the stress on the dechaffing/de-stoning/drying machines. This is especially good
since all the Kiwanee dumpers and holding tanks are already being brought up to their
full capacity by 8:30am while the dryers stay stand idle until 11am.
Furthermore, converting of 2 bins to a wet berry holding for $15,000 will be beneficial to
the business. This would lessen truck wait times with wet berries and cut down on
receiving crew hours while not affecting the later processing times.

Next, the cooperative needs to identify the best route to its staffing issues. During slow
periods of the year, the cooperative can be more flexible with its scheduling but on its
peak season days, longer shifts need to be established. Creating two strong shifts with
employees that are more dependable and work more efficiently will be more beneficial
and more cost affective than bringing in a third 8 hour shift. The best option would be to
institute 12 hour, 4 day work weeks with 2 hours of overtime per day. Essentially
making a 48 hour work week with a combined 8 hours of overtime pay per worker. This
would be much more cost effective than starting a new shift where employees get paid
a full shift even if they are not needed.

Finally, there is a major issue with grade of berries which is costing the cooperative
money they dont need to initially spend. Although the point of the cooperative is to
distribute back to the farmers what is left in unused funds, it does not essentially need
to be returned at the point of receiving product. When the berry receivers grade truck
loads of berries they use a color guide which they visually categorize products into
three main categories: 2A, 2B or 3. Although the receiver usually can do a good job of
stating which category is appropriate, half of the berries that were categories as No.3
were in fact a lesser grade and thus not paying out dividends for the cooperative at the
store level. The benefit of having a mechanized system to automatically state what type
of berry will out weight the $20,000 cost of only a couple years. This is also important
because the cooperative can hold onto that money for a longer period of time before
potentially dispersing profits at the end of the year.

In conclusion, it is recommended that the National Cranberry Cooperative budget

for at least one dryer, one light meter system and converting two bins for wet/dry
capabilities. Additionally, it is advised that shifting changes be made to create
two 12 hour shifts instead of three 8 hour shifts. The company will be able to
separate its best employees from the less reliable while saving money in overall
employee costs. Although it is proposed National Cranberry Cooperative spend in
excess of $100,000 in the near future, the total cost of ownership to the facility will
dramatically be reduced by the end of 1981.

National cranberrycooperative
Introduction
This case analysis looks at the two primary problems at the receiving plant no.1 (RP 1)
faced by nationalcranberry cooperative during the cranberry harvesting period, viz. 1) too much
waiting period for trucksbefore they unload berries at the RP1 and 2) too much overtime
costs. There is also a secondary problemregarding grading of process berries. Half of
the berries graded as top quality are actually not top quality anddo not deserve extra
premiums paid on the top quality berries.

Problems and Challenges faced by RP1

 While there is a stable demand for the cranberries, the production for the cranberries is not
stable.The proportion of water harvested cranberries is increasing and likely to stabilize
at around 70%.
The plant is incurring high overtime cost
Long waiting hours to unload the crop for growers/owners of the cooperative

Process Analysis
We start by making a process flow diagram for the flow of berries at RP1 from the
moment berries arrive atthe RP1 in trucks to the moment they leave RP1 after being
bagged, bulk loaded into trucks or loaded intobulk bins
Q1. How might transport vehicles be utilized more effectively? Shouldcrews
be scheduled differently on peak days?

Be sure to substantiate allcalculations.

Start the plant operations at 7:00 AM instead of 11:00 AM.

On Peak days, the employees should come in at 7:00 AM and work eight-hour shifts.

RP1 will not only limit overtime costs, but will also be able to finish the days processes without
Anybacklog and without nearing the 22-hour maximum operating time.

Reduces the total waiting time for all trucks from 511 hours to 127 hours

From the table above, it can be calculated that:

On a peak day, 18,000 barrels of berries are to be processed and out of which 70% of the berries
arewet. Total number of wet berries on a given peak day
18000 x 70% wet = 12600 bbl/day.
The arrival of berries is evenly distributed over a 12 hour period starting at 7 am.
The delivery load varies from truck to truck @ an average of 75 barrels per truck.On a peak day, RPI
process about 18000 bbl per day spread over 12 hours. Assuming 70% wet, RPI mustprocess 1050
wet bbl/hour.18000*0.7/12=1050 wet bbl per hour.

Calculations for Plant Operations Starting at 11:00 AM

Looking at the process we know that there is a bottleneck at drying unit. The capacity
of the drying unit is 600bbl /hr which is much lower than the required 1050 wet bbl/day. The trucks
start arriving at 7:00 AM andstore the wet berries in storage bins (17

24, 25, 26, and 27). The total capacity of these bins is 3x400 + 8 *250 = 3200 bbls. The trucks
start waiting at 10.03 AM (3200 / 1050) (i.e. 3 hours after the receiving
unitstarts operating)

Inventory buildup rate = arrival rateprocessing rate = 1050 bbl 600 bbl = 450 bbl / hour.

Total inventory buildup = Inventory buildup between 7 and 11 AM + Inventory buildup after it 11AM
Total inventory buildup = 4200 + 8 * 450= 7800

Total wait of the truck is calculated as follows:

At the end of the day (12 hours), there will be 7800 left in the inventory.
Out of this 3200 will be in the bins and 4600 will be waiting in the truck. It will take 4600/600 = 7.67
hours to clear them, So after 2.40 AM the next morning there wont be any trucks waiting.
Truck waiting = 7.67 + (12 3)= 16.67 hours

Waiting time for all tracks adds to= 16.67 hours x (4600/2) / 75= 511 hour

Overtime Calculations:
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 600 bbl /hr it will take 21.0 hours to process. Thus, there is
an overtime of 13 hours. In order to reduce the truck waiting time and overtime costs, the
transportation schedule or receiving schedule needs to be utilized effectively. So the Plant operations
time should start at 7:00 AM instead of11:00 AM

Calculations for Plant Operations Starting at 7:00 AM

In this scenario, the Inventory buildup rate is arrival rate processing rate = 1050 bbl 600 bbl = 450
bbl.
At this rate the wet bins will be filled in 3200/450 = 7.11 hours. So the truck will start waiting at 2:06 PM.
Total wait of the truck is calculated as follows:

At the end of the day (12 hours) there will be 450*12=5400 bbl in inventory. Out of this, 3200 bbl will be
in bins and rest 2200 bbl will be in trucks. It will take 2200/600=3.67 hours to empty the waiting trucks.
Thus, inventory will start building from 7.11 hours to 15.67 hours.
So at 10:40 PM there wont be any trucks waiting.

Truck waiting = 15.67 7= 8.67 hours.

Waiting time for all tracks adds to= 8.67 hrs x (2200/2)/75 = 127 hours

Overtime Calculations:
Even though the plant operation is moved to 7 AM, the over time is still at 13 hours. On
a peak day a total of18,000 bbl is received out of which 12600 bbl is wet. At an average processing
rate of 600 bbl /hr it will take21.0 hours to process. Thus, there is an overtime of 13 hours.
Q2: Would the installation of a berry grader positively impact
the farmers income or the cooperatives?

The installation of a berry grader positively impacts the cooperatives income, while negativelyimpacting
the farmers income
Currently, the cooperative is overpaying the farmers by $112,500 per year due to the fact that half of
the No. 3 berries should actually be graded No. 2B
The installation of a berry grader would positively impact the cooperatives income,
while negatively impacting the farmers income. With the current system, 450,000 bbls of berries
are paid a premium of 50 cents per bbl, yet when the berries are used only about half of them are
actually considered No. 3s (berries with the best color). So basically, the cooperative is
paying a premium on 225,000 bbls more than it shouldbe, and that worked out to about
$112,500 in 1970. It would cost the cooperative $10,000 to install a berry grader, plus the cost of
another full-time skilled operator, but it would still impact their income greatly. The
farmers would probably prefer that the cooperative continue to grade the color using pictures as a
guide, because they are being paid a 50 cent premium on about half of their No. 3 berries that should
actually beconsidered No. 2B

Calculations for savings by installing berry graders

450,000 bbls divided by 50% equals 225,000 bbls.

225,000 bbls at 50 cent each is equal to $112,500 per year

Fixed cost: $10,000 for installation of berry grader

Even though this is a substantial saving, another fact needs to be considered that this
is a cooperative organization. Installing a light grading system would lead to increase in
the margins of the receiving plant 1but would be a loss for the cooperative as a whole
as money, instead of being paid to the farmers would goto the worker who is hired. But
status quo can also not be maintained as it leads to wrong distribution of benefits to
farmers with a lower quality crop. An alternate solution can be to have strict control in
the manual grading process and increase the variety of shade cards so that berries can
be rightly classified. One more category in between 2A and 3 can also be made having
a lesser premium than quality 3. But the various other implications of this step should
be taken into account like increased final processing cost and resentment from the farmers
Q3: What is the purpose of the storage bins? Why do storage bins needto
be converted? How many should be converted?

The storage bins are used to hold berries between receiving and destoning and dechaffing.

There will be more water-harvested berries in the next year, so some of the dry barrels need to
beconverted to wet barrels.

A total of 19 (out of 27) wet barrels are needed, since there are currently only 11 barrels that can be
used for water-harvested berries that means that 8 of them will need to be converted. The purpose
of the storage bins is to hold the berries between receiving and destining and
dechaffing. Some of the storage bins are for dry berries, a handful of storage bins can be used for
either wet or dry berries, and a few of the holding bins are for wet berries only. Currently,
only 11 bins could be used for wet berries, but the percentage of wet berries will increase from
58% to 70% in the next year. This increase is why some of the dry berry holding bins need to be
converted to be able to hold dry or water-harvested berries. It will cost$5,000 per bin to convert. Since
only 41% of the barrels can currently be used for water-harvested berries, a certain number will need
to be converted to be able to handle the increase in water-harvest berries in the next
year. There are a total of 27 holding barrels, so at least 70% of them must be able to
hold water-harvested berries, or a total of 19 of the 27 barrels. That means that 8 of the dry
holding barrels need to be converted to wet or dry barrels. At a cost of $5,000 per barrel, that will cost
the cooperative $40,000, but it will be worth it to be able to handle all of the deliveries and cut down on
idle time in the following year

Calculations for converting storage bins to store more wet berries

16 dry barrels, 8 wet/dry barrels, 3 wet barrels

11 out of 27 barrels means that currently 41% can handle wet berries
70% of the 27 total barrels is 19 barrels total that have to hold wet berries
19 barrels (wet barrels needed) minus 11 wet barrels already in use equals 8 to be
converted

Q4: W h a t i s t h e i m p a c t o f i n s t a l l i n g o n e n e w d r y e r ? 2 n e w d r y e r s ?

Install more drying capacity: Add 1 more dryer

On a peak day a total of 18,000 bbl is received out of which 12600 bbl is wet. At an averageprocessing
rate of 800 bbl /hr it will take 15.75 hours to process. Thus, there is an overtime of 7.75hours (a
saving of 5.25 hours)
Waiting time for trucks: Inventory buildup rate = arrival rate processing rate = 1050 bbl 800 bbl
=250 bbl at this rate the wet bins will be filled in 3200/250 = 12.8 hours which is more
than 12 hours;hence there will be no waiting line for the trucks

Install more drying capacity: Add 2 more dryer

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

Given the additional savings from the second dryer are not enough and adding just one dryer solves
theproblem of waiting line, it is recommended to go ahead with just one dryer