The NCC’s receiving plant started to see the problems aused by their limited plant capacity in 1995 where they spent $200000 to solve their problems yet they had to pay huge overtime costs to handle the large intake of cranberries. The overtime costs went out of control due to longer shifts for their resources to process the huge volume of cran berries. The key problem was the waiting time for the trucks at the dumping point to unload the trucks. The farmers used to lease the trucks at $100 per hour and had to pay for the idle time of their drivers.
The growers were very upset with this inefficiency and delay. The NCC could not afford this problem as long as he growers were the owners of cooperative and the source of business to it. The root cause of the problems that RPI faces is that there is no temporary space to store cranberries apart from holding bins. The waiting time for trucks builds up inventory at this point and the first activity that is dumping has to wait till the bins get empty. After Destoning and Dechaffing the drying activity and separators act as a bottleneck for the whole process.
The holding bins are designed primarily to handle the dry berries in the existing infrastructure but recently the proportion of wet berries has increased and ence there is a shortage. In order to handle these problems the Vice President of operations at NCC calls a meeting with his assistant and Superintendent of plant. The superintendent points out that the solution to these problems is to increase capacity by buying new eq uipments that would warrant a hefty investment.
The Vice President then asks his assistant to explore viable options and devise solutions before the next peak season comes as there is an increase in the production of cranberries as per the latest trends with a significant rise in proportion of water harvested berries. . Draw the process flow diagram of the process fruit operation at Receiving Plant #1 . (10 points) What is your analysis of the process fruit operation at Receiving Plant #1 to shed light on the problems identified in (1 (1 5 points) According to our analysis of the given case study, there are 3 problem areas.
The below arguments are based on data from 1 995 and are based on the existing process at RPI 1) Waiting time In 8 minutes, 75 barrels per hour of cranberries are being accumulated by one truck, so in one hour, total cranberries accumulated are 562. 5/hr. In Total here are 5 dumpers, so the total capacity of all the dumpers in one hour is barrels. As mentioned in the case, For first 4 hours there is no processing activity, so initially 2812. 5*4 = 1 1 250 barrels will accumulated initially. Now as per the data given (for 1 995), on average, 58 percent will be wet berries and rest will be dry berries.
Accumulated cranberries initially(4 hrs) Wet cranberries (58 %) Dry cranberries (42%) 1 1 520 barrels 6525 4725 Capacity of Bins 1200 (bins bins)) Total ” 2450 barrels can be stored (16*250), 3 dual Total-4750 Shortage 6525-2450 = 4075 barrels As shown in the table, there will be a shortage of bins for holding the cranberries which are accumulated initially for wet berries by 4075 barrels. This increases the waiting time of trucks. 2) Regardless of the first issue, for wet berries there is a processing bottleneck at the drying activity as shown below. So in below calculation we are assuming that input is 2450 barrels in 4 hours or 612. barrels/hr. As calculated, the capacity for Dechaffing stage for the wet berries is 3000 and that for the Drying phase is 600 barrels/hr. So drying phase is the bottleneck nd inventory is build up at the rate of 12. 5 barrels/hr. 3) The last bottleneck for the whole process is separator stage which takes input from both drying Stage (wet berries are processed through this stage) as well as the Dechaffing stage for the dry berries. The calculations are shown below.
- For dry berries, there are 1 181. 25 barrels per hour coming into the Destoning of dry barrels. (4725 barrels in 4 hours so 1181. 5/hour)
- Combined Input to the separator activity is 1181. 25 + 600 = 1781. 25 barrels/hour
- But the capacity of the separator is only 1 200 barrels/hour.
So there is again an inventory build-up of 581. 25 barrels/hour. These bottlenecks in the process further aggravate the waiting time of trucks at the dumpers. The new dumper that was installed although increases the storage at the dumper section, does not account for the increase in demand for wet berries and the bottlenecks that it has induced in the existing process.
What recommendations, both short and long term, would you make to Mr.
Schaeffer to overcome the problems identified in (1)? (1 5 points) The short term recommendation that we propose for above problems is focused on educing the waiting time of trucks at the dumping site. The problem that the RPI plant may be facing at the dumping site is of unloading the trucks on the bins. We know that since the proportion of wet berries increased and the bins to hold Wet berries are less and hence the maximum trucks that may be waiting to unload the berries are mostly that contains wet berries since the dry berries can be easily handled. The bottleneck is in the wet berries processing and particularly at dryers.
We cannot purchase and install dryers in short term so the solution we think is viable at this moment is to convert ome of the bins to handle wet berries and that would decrease the unloading and waiting time at the dumping site. The overtime costs can be handled in long term by installing dyer to increase the capacity of drying stage. We propose to convert 8 drying bins into dual to handle wet berries that would increase the capacity by 1840 barrels because even if we use all dual bins for wet berries we can hold maximum of 3200 barrels of wet berries at a time.
Because in 1996 we are expecting that we may need to hold 5040 barrels of wet berries, at any particular time, as the proportion wet berries ould be 70% of total. Therefore, keeping the proportion the percentage of wet berries in the 7200 barrels of capacity is 70% which is 5040 barrels at any particular when all the bins are full. The following calculations will explain the effect of increasing the wet berries holding capacity by converting 8 bins to dual bins capable of handling wet and dry berries. At present: Total no. of bins for dry berries = 16 and total capacity @250 barrels each – 4000 barrels. Total no. f dual bins = 8 and total capacity @250 barrels each = 2000 barrels. Total no. f bins for wet berries = 3 and capacity @400 each – 1200 barrels. Total capacity = 7200 barrels. Total capacity to handle wet berries if we use dual for wet berries 3200 barrels maximum. After conversion: Assumption we will use 7 of the Old dual bins will be used for wet berries only. Total no. of bins for handling dry berries = 8 and capacity @250 barrels – 2000 Total no. of bins for wet berries =18(7 old dual bins and 8 new dual bins) = 4950 barrels Total no. of bins for dual use 21 and capacity = 250 barrels Total capacity = 7200 barrels.
Total capacity to handle wet berries ” 5040 approx. Potential increase in handling wet berries = 1 800 barrels approx which can accommodate 24 trucks of wet berries as each truck contain 75 barrels on average. The above solution has taken into account the worst case where the bins are full because of bottleneck that cannot be solved in short term. This would help in decreasing the waiting time at the cost of $80000 for conversion of bins. In this way we are also not compromising on the dry berries handling capacity of plant where in case the proportion of dry berries increases so it would be able to handle that as well.
The detailed calculations are in Appendix A and B. In long term, we need to purchase and install one dryer to increase the capacity of bottleneck process. The new dryer will increase the capacity of drying to 800 barrels/hr from 600 barrels/hr of 3 dryers @ 200 barrels/hr each. This is the process which slows down the whole process involving wet berries. Here We are considering the peak input on any particular day through the peak season to illustrate the advantage of applying the dryer.
The processing time would reduce to —–hrs in the worst case which can be ompleted in two shifts of 8 hrs each. The peak input that may arrive at any particular is based on the average of last 3 years of peak input of process fruit. We are calculating the percentage of process fruit on the basis of Table A and the peak input on the basis of Figure A. Expected Peak input of process fruit on any particular day = Assuming that the bins are full when processing starts, the worst case where the bottleneck has completely filled the buffer.
Note: The detailed calculations are in appendix and E. Before new dryer The total time to process this 16566. 1 barrels at RPI 9. 4 hrs which is more than 16 hrs so the processing requires more than 2 shifts and leads to overtime expenses. After new dryer The total time to process the peak input of 16566. 1 barrels at RPI 14. 49 hrs Earlier the time was more than 16 hrs which required overtime for workers whereas after installation of new dryer the process requires less than 16 hrs. This would decrease the overtime costs in long term.
The costs to implement these recommendations is $140,000 which is 360000 less than what they spent in 1995 for no use, the cost of an extra dryer is saved in long term. A sustainable long term solution could require an addition of the light meter system for color grading process. Apart from eliminating the human error and individual working rate Of the chief berry receiver we will reduce the grading time and cut the cost factor considerably due to the mechanization of the whole process. We know that Cranberry’ had to pay a premium of $1. 5 per barrel in 1 995 for a mammoth 450,000 barrels of No. berries, in actual only 225,000 barrels turned out to be the optimum ones. Implementing the light meter system would also require a full time operator to be appointed at the ame salary as the chief berry receiver. Let us calculate the one time investment cost of the system along with the compensation to the full time worker: – We are also looking at dividing the total process into two shifts of 8 hours each (7AM-3PM & 3PM-11 PM) in the long term when the influx has risen sufficiently enough and peak days would require the system firing on all cylinders.
Let us say we hire 2 full time operators for the light meter system who will work in interchanging shifts. The cost of setting up the project is approximated at $40,000. We will also have to consider the salary ompensation of the two operators; Major requirement is during the 3 months (Sept-Dec) which is approx 90 days. Full time worker salary model = $13/hour Total payment to be done for 2 operators= 2*(8 hours * $13 * 90 days) = $1 8,720 so, We See that total cost rendered to us is $58,720 for the light meter System installation and labor charges related to it.
Now, let us consider the 1 995 data and formulate the total expenditure providing we are using the light meter system. (450,000 barrels * $1. 5) / 2 = $337,500 Su btracting the cost of the light meter project = 337500-58720 The money we could have saved = $278,780. It is clear that a huge amount of expenditure is slashed if we install the light meter system.
The money Cranberry saves here can be used further to install dryers when needed or purchasing holding bins to increase the capacity and efficiency of its overall system. Risks that may be involved in the proposed recommendations 1. Adding a light meter might induce additional processing delays, and may incur maintenance costs. Including a dryer might also increase maintenance cost of the same. If demand for wet berries increases unprecedentedly in the following years, it could lead to installing new equipments again.