NATIONAL CRANBERRY COOPERATIVE- A CASE STUDY

By Neelesh Khattar,11BM60070

The National Cranberry Cooperative has to change the operational format of receiving plant #1 to meet production requirements during the high volume period of the cranberry harvest while reducing the costs of trucks waiting, overtime and inaccuracy of the grading process. The two types of harvesting techniques are water (wet) and dry which require different procedures to process them. The specific issues that have to be evaluated are the current maximum capacity the plant can handle at this time, the cost of labour (including overtime), the wait time to unload trucks as well as the benefits/cost of capital investments for the fifth Kiwanee dumper that was installed the past winter, installation of 2 new dryers, conversion of the holding bins to wet/dry units as well as a light meter for color grading. Based on the average busy day having 16,700 barrels (bbls) delivered a day, 70% would be wet berries (11,690 bbls) and 30% would be dry berries (5010 bbls). To achieve this operational level the following evaluations were made. The dry berry process starts with the receiving of the berries, the dumping to the Kiwanee dumpers, to the temporary holding, destoning, dechaffing, separation and the bulking and bagging. There is no issue with this process as the maximum output is 600 barrels per hour at the present time. The wet berry process starts with the receiving of the berries, the dumping to the Kiwanee dumpers, to the temporary holding, dechaffing, drying, separation and the bulking and bagging. This process is limited by the capacity of the dryers which are capable of processing 600 barrels per hour and the second limiting factor is the milling process which is shared with the dry processing berries resulting in the capacity being approximately 800 bbls per hour. As the daily requirement during the high volume period is 11,690 barrels it creates a backlog in inventory levels throughout the day and requires the dryer to operate for 20 hours a day during this time. Inventory levels build and with the current configuration of the holding tanks there is not the capacity to keep up with the levels created. With the increase in the wet berry inventory it is necessary to make some changes. The first recommendation is to purchase a light meter system for the plant. The annual loss of $168,750.00 on grading quality errors can be solved easily with the $20,000 capital investment and the additional annual wages of $15,600 which will result in a savings in the first year of over $133,000. The second recommendation is to convert the 16 dry holding bins to handle either wet or dry berries at a capital cost of $120,000. The dryer capacity creates a backlog of wet berry inventories within 3 hours and once the holding tanks are full it is only possible for an average of 8 trucks to unload an

hour based on only 600 barrels moving an hour. This investment will reduce waiting times for trucks during the high volume period (3 weeks in September) from an average of 410 hours a day ($4100 day or $86,000 for 3 weeks) to less than 20 hours a day ($200 day or $4,200 for 3 weeks) wait time which will result in a labour savings of $82,000 the first year. When looking at the usage of overtime it is clear that the volume levels of wet berries during high volume period are not able to be processed in a 12 hour shift. With the daily volume of 11,690 bbls and the dryer capacity only at 600 bbls/hour it is necessary for the plant to operate over 19.5 hours a day. With the current staffing and scheduling the additional 7.5 hours a day would be covered in overtime. On solution to this is to operate the plant during high volume periods with a crew of 89 employees on based on a 20 hour day and 2 shifts per day which will reduce overtime. The cost for this 3 week period with a 53 employee crew will be $44,606 and with a 89 employee crew $37,376 which will save $7,230 a week and $21,690 in the high volume period. Another solution would be to operate on a 16 hour day with 2 shifts. This would require a capital investment to purchase one additional dryer unit at a cost of $40,000 to increase the capacity to 800 bbls per hour. A second dryer unit should not be considered at this time as the milling can only handle a capacity of 1200 bbls/hr which is shared with the dry berry process leaving approximately 800 bbls/hr available for the wet berry process. By operating on a 16 hour day with 2 shifts the weekly wage expense would be reduced 2,457 for a total of $7,371 for the high volume season. The dryer expense would take roughly 5.5 years to recapture the wage reduction costs so it is an option that can be looked at and determined what the life expectancy would be on this asset before the final decision could be made