National Cranberry Cooperative Essay
National Cranberry Cooperative
Fill in your name in the header. Please read the Course Syllabus for guidelines on collaboration in assignments: Below, write your answers to Guiding Questions 1-4. The case is due at the beginning of class on January 29 (Wednesday). Please submit only one document per group. We will discuss the answers in class. You may want to print out your answers and charts for your reference during the class discussion. Some additional information about National Cranberry follows. Not necessarily all of this information is relevant to your answers. You may assume that: On an average “busy” day 18,000 bbl arrive over the 12-hr period (7 am to 7 pm). This is based on a typical busy day in September. The process is approximately a “continuous flow” type.
Wet berries are 75% of all berries.
Holding bins 17-24 are dedicated to wet berries.
Capacity of the dumpers is 3,000 bbl / hr (it takes on average 7.5 minutes to dump a truck, a truck holds on average 75 bbl so, from Little’s Law, each dumper will take 600 bbl/hr). Drivers are paid $10/hr. Rates for other employees are given in the case. If you need to make additional assumptions to answer a question, clearly state them, logically defend them, and then proceed to answer the question accordingly. Questions
1.Analyze the current process. Using the process flow map (given below) of the current process at Receiving Plant No. 1 (RP1), mark the capacity and utilization of each of the resources. Show the flows of wet and dry berries separately. On an average busy day, 18,000 bbl arrive over the 12-hr period. Thus, we can say that 1,500 bbl arrive every hour. Since 75% of the berries are wet berries, 1,125 bbl of wet berries and 375 bbl of dry berries arrive every hour. These berries are dumped into 5 Kiwanee Dumpers that take 600 bbls per hour each. And then, dry berries and wet berries are divided. Dry berries go into bins 1 to 16 and wet berries go into bins 17-27. Since bins 1 to 24 have capacity of 250 bbls/hr and bins 25 to 27 have 400 bbls/hr, bins 1 to 16 have capacity of 4,000 bbls/hr total, while bins 17-27 have capacity of 3,200 bbls/hr total. Dry berries are sent to 3 destoners, each of which has a capacity of 1,500 bbls/hr.
There is only one dechaffer for dry berries, and therefore has a capacity of 1,500 bbls/hr. However, the other two dechaffers are assigned to wet berries. Since each dechaffer has a capacity of 1,500 bbls/hr, two dechaffers have a capacity of 3,000 bbls/hr for wet berries. Then, these wet berries go into the dryer, which as a capacity of 600 bbls/hr total. After these processes, the berries arrive at separators, which has a maximum capacity of 1,200 bbls/hr. We assumed that all the processes start at 7 a.m. and identified that the dryers for the wet berries are the bottleneck because dryers have the lowest capacity. (Please note that the filled process flow map is given below) 2.On a busy day, what is RP1’s current maximum throughput rate? As we show in the process flow map below:
Demand rate = 1,500 bbl / hr (375 for dry berries and 1,125 for wet berries) Capacity rate = 975 bbl / hr (375 for dry berries and 600 for wet berries, because the bottleneck, which is dryer of capacity 600 bbl / hr, determines the capacity of a linear process) That is, Demand rate > Capacity rate, and in this scenario throughput rate = Capacity rate = 975 bbl / hr 3.Assuming that all of the operations at RP1 start 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. For trucks:
4.What are the possible capital investments considered by NCC? Quantify the costs and benefits of three of them: the fifth Kiwanee dumper purchased in 1980, and two other investments. What recommendations would you make to Mr. Schaeffer? Please be ready to discuss in class other factors that might influence your recommendations to NCC. Two other possible capital investments considered by NCC would be the installing a light meter system for color grading and hiring a full-time skilled operator at the same pay grade as the chief berry receiver, and adding more dryers that cost $60,000 each. First of all, purchasing a light meter and hiring an operator would reduce large amount of unnecessary cost incurred from cranberries that are misidentified by the chief berry receiver. The case reports that half of 450,000 bbls of berries were misidentified as No.3. Since $1.50 was paid for every No.3 berries, we can say that $337,500 was overpaid. Assuming that the cost of this system is about $40,000 and the cost of full-time skilled operator is about $34,944 (as a straight-time pay rate for the full-year employee) per year, we can calculate the return on investment in the light meter system. The return would be 4.503 ($337,500/$74,944).
Even though, the operator gets paid more than the amount above, the return on the investment would still be positive. Secondly, purchasing one additional dryer would cost $60,000. Then, the process capacity would increase to 800 bbls/hr. The dry berries (375bbls/hr) and the wet berries (800bbls/hr) would now sum up to 1175 bbls/hr, which will increase the utilization rate of separators to 97.91%. The resulting increase in flow rate could reduce the overtime labor as much as $78,000 (assuming 12,000 over time hours of all workers * $6.5/hr) and the return on the investment would be 0.3 (18,000/60,000). Thirdly, purchasing the fifth Kiwanee Dumper had increased the capacity by 600 bbls/hr. However, the fact that throughput rate is 975 bbls/hr, and the hourly incoming berries are about 1500 bbls/hr, we do not think that the fifth dumper was necessary because with four dumpers we would have a capacity of 2400 bbls/hr, which is enough as of current state. In other words, since the bottleneck of the process is the dryer rather than the dumper, we would have saved $200,000 if we did not buy the fifth dumper.
Last thing to note is that none of the utilization rate got higher after purchasing the fifth dumper. Since the first two investments listed above have positive returns, we definitely think Mr. Schaeffer should invest in purchasing a light meter and an additional dryer. Even though purchasing additional dryer does not return greater than purchasing a light meter, purchasing additional dryer still returns positive value and therefore, should choose to invest on these three options to manage the extra capital that NCC would spend. However, Mr.Schaeffer could have been better off with not purchasing the fifth dumper because dumper’s capacity was already large enough that the efficiency remained the same with purchasing the fifth dumper. (For the values such as total over time hours and etc, we assumed based on the data given in the case at the last section called Scheduling the Work Force)