Greaves Brewery enjoyed an excellent reputation as a maker of beer that had won both local drinkers and tourists who chanced to try out its bottled product during their trips. Located in Trinidad, a southern Caribbean island, Greaves Brewery was established in 1924 by John Greaves, its founder. Through the years, Greaves Brewery had steadily grown and eventually began to tap the export markets, as well. The company reaped its highest level of sales in February 1991. The increased demand for Greaves beer called for prompt action for the company to improve its production operations to keep up with the favorable development. Issues of the Case
In the course of finalizing the design for an additional bottling line for Greaves Brewery, the company’s chief engineer, Lesley Simpson, had to decide on issues pertaining to how the bottled beer in cases should be placed on the pallets. The company was currently using manual labor for this part of the production line. Meanwhile, there is the available option to set up an automated system for it. Considerations and Alternative Courses of Action The company sales were expected to peak during the carnival season in February, the Easter celebrations in April, the Independence Day at the end of August and the Christmas season in December.
To produce more of its products during the peak times of the year, the company resorted to employing more workers and scheduling additional production shifts. Finding people for the third shift and supervising them is not easy to accomplish. The 1,000-bottle-per-minute operation is known to eliminate the need for the third shift; such operation would need just one shift and a few overtime hours every now and then. A Comparison Between Greaves Brewery’s Current and New Bottling Lines Particulars Current New Capacity per minute 400 bottles 1,000 No.
of daily shifts 2 to 3 1 Weekly shifts 5-7 days 5 Time utility of line operations 85 to 100% 100% Meanwhile, the following compares the two different makes of the automatic palletizing equipment that the company is considering to set up to do away with the hand loading operation: Particulars Perrin Clark No. of cases handles per minute 45 45 No. of layers to be stacked 5-7 5-7 Equipment cost $324,000 $408,000 The company would have to decide to purchase either the Perrin or the Clark palletizing equipment to go with the increased bottling capacity of its plant.
Recommendation Based on the foregoing, it is recommended that the company set up its new bottling line and the Perrin equipment to go with it. The costs showed that the alternative equipment, Clark, had turned out to be way more expensive than Perrin even if it did not offer any improved performance or any additional advantages. Thus, the improved productivity that resulted from two factors – namely, the setting up of the Perrin equipment and the increased bottling capacity of the plant – were shown to generate net benefits for the company’s operations.
Case Questions 1. What operations have an impact on the palletizing decision? Discuss. The operations immediately prior to palletizing process have an impact on the decision regarding it. In particular, the bottling and the case packing operations are the segments of the entire operations of the company that have the most influence on the decisions pertaining to palletizing. The number of bottles and the number of cases packed up for palletizing would determine the most economical procedure for it.
The lesser the breakdown caused by defective equipments, the more wisely the operation personnel’s time was used for the daily operations, and the faster the palletizing is accomplished, the better for the company which in 1991 has having difficulty in controlling its costs while coping with the increased demand for its products. 2. What criteria should be used to make the decision? The criteria to be used to make the decision regarding palletizing should be cost-effectiveness, labor utilization, productivity, increased production volumes, improved quality of packed beer in bottles and ultimately, higher profitability for the company.
These are the things that should be borne in mind while making decisions regarding the company’s operations. 3. As Leslie Simpson, what is your analysis of the palletizing decision? What would you recommend? The palletizing decision would definitely be a move forward in the company’s bid to continually grow both in the local and export markets. I would recommend that the company go for the Perrin equipment since I consider it more cost-efficient. Choosing Clark might mean having the equipment useable still for a longer period of time as compared to Perrin.
However, there might be plenty of changes – additional expansion phases or even new varieties of the company’s beer products – within the upcoming years. Purchasing the more expensive, albeit more durable, equipment might not be the wise move. Meanwhile, Perrin is in itself a good choice. Choosing it, then, has benefits that make its cost justifiable and obviously easier to recover as compared to Clark. 4. If Greaves elects to purchase from Clark or Perrin, what contractual terms should be sought?
Upon purchase of a palletizing equipment from Clark or Perrin, Greaves should elect to maximize the terms that either company can offer in terms of price, payment scheme, free servicing of the unit, equipment warranty and insurance coverage. Greaves should seek to enjoy as much free services as offered by either Clark or Perrin so as to recover its additional investment in its plant within a shorter period of time. Work Cited Leenders, M. R. & Erskine, J. A. “Greaves Brewery. ” Cases in Operations Management. Ivey Management Services, 1991.