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 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 don’t 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.
