National Cranberry Case Report

Operations Management - I

Team Name: E-8

Authors:

Manoj Joseph
M Roshan
Pandit Apurv Unmesh
Priya Ketan Changani
Radhika Iyer
Vikash Kumar

Section: E

August 2019

1
To: Hugo Schaeffer
From: E-8
RE: RP#1 processing

Memo

National Cranberry Cooperative is formed and owned by farmers of cranberries to process and
market berries. The strategic objective of the cooperation is to maximize profit for the farmers.
The current operation at Receiving Plant No1 has an inventory built up because the process flow
is bottlenecked by the capacity of drying units which is at maximum of 600 bbls/hr and the
intake of water harvested berries is at 1080bbls/hour. This causes inventory built up and the
trucks needs to be waited and stand idle waiting for unloading. The trucks are leased by farmers
and the cost of idle time for trucks is beared by farmers .Current process analysis shows that 73
trucks are waiting in queue at the end of a day which causes a total of /day for the
farmers.
So, the current operations do not support the strategic objective of the cooperative. To reduce the
waiting time of trucks the cooperation has made some investments.
Installation of #5 dumper did not produce any economic benefit but incurred a cost of $75000
because the complete supply could have been managed with even 3 dumpers. If 2 new dryers are
installed it will incur a cost of $50,00. Since the inventory buildup rate does not exceed installed
capacity, hence truck do not have to wait for unloading procedure. Thus, farmers have a benefit
of $56,900 per day due to lack of truck waiting time.Installing a light meter system for color
grading produces an economic benefit of of $102,500 over the season.
As the water harvested berries is going to increase by 70% this year, a modification of current
process flow needs to be done. Installing two new dryers will increase capacity of the drying
process and will improve the water harvested handling capacity of the plant. This increased
capacity will restore raw material as buffer. Trucks will no longer have to wait for unloading and
hence it will provide economic benefit to the farmers at the National Cranberry Cooperative.

2
 Supporting Analysis
Analysis of processes at Receiving Plant 1(RP1) presented here is for a busy day. All capacities
are in barrels/hour (bbls/hr). The dryers used for drying wet berries after de-chaffing are
estimating to be operating at 180 bbls/hr (Exhibit 1).

Causes of Delay

Figure 1: Process flow diagram for Receiving Plant 1

The process flow diagram of RP1 is presented in figure 1. The bottleneck in this process is the
drying units – have the lowest capacity of 540 bbls/hr. Hence the flow rate for this process is at
540 bbls/hr. The capacities of each of the processes and its utilization are indicated in the process
flow chart.

Situation on a typical day

Assuming the day starts with empty bins, from 7:00 AM to 11:00 AM (processing line starting
time) inventory builds up at the input rate of 1080 bbls/hr in wet bins and 360 bbls/hr in dry bins
as seen in figure 2. From 11:00 AM onwards, the wet berries inventory would be consumed at
the rate at which the drier operates. Since the rate of input is higher than the rate of consumption,
the inventory keeps building up at 540 bbls/hr (1080 – 540(drier)) until the input stops. Once the
unloading stops, from 7:00 PM, the inventories start reducing at the rate of 540 bbls/hr and will
continue to reduce until the wet berries bin is empty. In this case, theoretically this can never
happen because the backlog built up can only be processed by 11:00 AM on the next day and
there would be trucks already lined up for that day.

Practically, the maximum capacity of the wet bins would be attained at 10:00 AM and unloading
of trucks will come to a stop as indicated in the figure 3. Once the processing begins at

3
11:00AM, wet berries can be unloaded at the rate at which they get consumed. 540 bbls/hr
translates to 7.2 trucks/hr and hence, the truck build-up rate will be 7.2 trucks/hr (14.2-7.2).
Since unloading happens till 7:00 PM, truck will keep building up at this rate. Also, the wet bins
will maintain inventory of 3200 bbls until 7:00 PM. After this, the wet berries will get consumed
at 540 bbls/hr and will get emptied by 00:55 AM.  At the end of the day, there are 73 trucks still
waiting in queue.

Figure 2: Inventory buildup diagram for current operations at RP1

 The flow rate of dry berries is limited to the difference between the capacities of milling and the
driers. Thus, once the processing starts, the inventory of dry berries starts reducing at 288 bbls/hr
(360 - (1188 - 540)) and will be emptied by 4:00 PM. The maximum inventory capacity for dry
berries is never attained, and hence, there is no waiting time for the trucks carrying dry berries.

4
Figure 3: Truck buildup diagram for current operations at RP1

Assuming the day starts with empty bins, from 7:00 AM to 8:00 AM (processing line starting
time) inventory builds up at the input rate of 1080 bbls/hr in wet bins and 360 bbls/hr in dry bins.
From 8:00 AM onwards, the wet berries inventory would be consumed at the rate at which the
drier operates. The inventory keeps builds up at the rate of 180 bbls/hr until the input stops. At
7:00 PM once the unloading is stopped, the inventories would reduce at the rate of 900 bbls/hr
and will continue until the wet berries bin is empty. In this case, due to installation of two new
driers, even though the inventory builds up, it never exceeds the maximum capacity and hence
there is no waiting time for the trucks. The wet berries are completely processed by 11:00 pm.
 
The inventory for dry berries builds up at the rate of 72 bbls per hour once the processing starts
after 8:00 AM. From 7:00 PM onwards, it starts reducing at 288 bbls/hr and is emptied by 11:00
PM. Similar to wet berries, the maximum inventory capacity for dry berries is never attained, and
they are completely processed by 11:00 PM. Hence, there is no waiting time for the trucks
carrying dry berries.

Analysis of Investments

1. Kiwanee Dumper #5

Capacity of each dumper 60/7.5 = 8 trucks per hr

8 trucks per hour 8*75 = 600 bbls/hr
Capacity of RP1 for receiving berries before installation of
600*4 = 2,400 bbls/hr
dumper #5
Supply of berries on the average busy day in peak season 1,440 bbls/hr = 19.2 trucks/hr

The complete supply could have been managed with even 3 dumpers.
Addition of dumper #5 did not produce any economic benefit but incurred a cost of $75,000.

5
Therefore, the net economic impact of the installation of Kiwanee Dumper #5 is a loss of
$75,000.
2. Two new dryers
Separating lines used for milling are the bottleneck with a capacity of 1188 bbls/hour. Wet
berries are processed at a capacity of 900 bbls/hour (5*180 bbls/hr). Inventory buildup does not
exceed installed capacity in temporary storage for wet or dry berries. Hence, trucks do not have
to wait for unloading produce.
RP1 begins operations at 07:00 AM. Receiving operations end at 07:00 PM and processing
operations at 10:00 PM. Payroll expenses are estimated to be $17565 per week (Exhibit 3).
Farmers do not incur any cost as trucks do not have to wait to unload produce at RP1.

Economic benefit of the revised operation plan:

Cost of installing two dryers = $50,000
Benefit due to reduced operating expenses = $1217 per day = $25,557 over the 21-day peak
period
The benefit to farmers due to lack of trucks waiting = $56,900 per day

3. Light meter system for color grading

The light meter system is expected to produce an economic benefit of $102,500 over the season.
Cost of installing light meter system for color grading $10,000
Loss due to incorrect grading of berries 0.5*225,000 = $ 112,500
Pay grade of operator of light meter system Pay grade of chief berry receiver
Economic benefit for this season of installing light meter 112,500 – 10,000 = $102,500
system

Conclusions
Operations at Receiving Plant 1 of National Cranberry Cooperative two distinct forms – in the
high-volume period wherein the plant operates with 53-member workforce and during the low-
volume period wherein the plant operates with a 27-member workforce. The plant has to deal
with significant variability in receipts of berries with an average of 17280 barrels per day in peak
season tailing off to about 2000 barrels per day on a low-volume day. The plant also has to deal
with significant variability in the nature of berries received at the plant. The proportion of water-
harvested berries surged 25,000 barrels in 1968 to 350,000 barrels in 1970.

The plant employs inventory of raw material and time (overtime operations) to deal with surges
in demand. Capacity has been installed in the form of temporary berry holding bins to maintain
smooth flow trucks bringing berries to the plant. The plant also employs a flexible work-
scheduling with a larger workforce handling the processes during peak season. Overtime is
employed as necessary to keep up with demand.

The current process flow in RP1 has become bottlenecked by the capacity of the dryers, which at
a maximum of 600 bbls/hr is far below the intake of water-harvested berries at 1080 bbls/hr. The
raw material inventory (raw material holding bins) hence becomes rapidly overwhelmed
necessitating that trucks are bringing raw materials to wait for delivery. The processes also need
to run for longer as the capacity is lower.

6
The process flow at RP1 needs to be modified to address the issues brought about by the recent
increase in the proportion of water-harvested berries. Increasing the capacity of the drying
process by installing two new dryers will improve the capacity of the plant to handle water-
harvested berries. The bottleneck will shift to the resources handling the milling process.
Increased process capacity will restore raw material inventory as an effective buffer and will
reduce the need to use time as a buffer. Trucks will no longer have to wait to deliver berries as
spare capacity exists at all points of time in the raw material inventory. Hence, installing two
new dryers will deliver significant economic benefit to the farmers at the National Cranberry
Cooperative.

7
 Exhibits

Exhibit 1: Capacity of various processes at RP1

Given
Rate of input 17280 in 12 hrs 1440 bbls/hr
Rate of Wet berries input 75% of Total 1080 bbls/hr
Rate of Dry berries input 25% of Total 360 bbls/hr
Bins 17-24 @ 250bbls
Capacity of Holding bins (wet) Bins 25-27 @ 400bbls 3200 bbls
Capacity of Holding bins (dry) Bins 1-16 @ 250 bbls 4000 bbls
Capacity of Milling (3 units) Slightly lesser than 400 bbls/hr/unit 1188 bbls/hr
Effective capacity of Driers
Total Expected Volume to process 700000 bbls
Volume sent to Local processing 700 bbl/day, 106 days
plant 74200 bbls
Limit on the volume through this
Volume to be sent as bulk channel 335000 bbls
Volume to be sent as bagged Remaining volume 290800 bbls
Effective capacity can be approximated as a proportion of volumes to be
sent as bulk & bagged. Also, since the dry berries don’t need to be dried, it
would reduce the operating hours of driers at 150 bbls/hr capacity. Hence 180
the effective capacity will be slightly higher. The details of berries sent bbls/hr/drier
directly via trucks to finish processing plants are not known and are ignored
for this calculation.

Str-time
Type of No. of Hours per Hours per Pay Rate Overtime Weekly
workers workers day week ($) Rate ($) Pay ($)
Process: Fruit Receiving
Regular 6 17 119 3.75 3.75 2678
Seasonal 9 17 119 2.25 3.375 3210
Process: Processing and Shipping
Regular 21 22 154 3.75 3.75 12128
Seasonal 17 22 154 2.25 3.375 8071
Total weekly payroll expenses 26087
Exhibit 2: Payroll expenses under current operations plan

Exhibit 3: Payroll expenses under revised operations plan

8
 Str-time
Type of No. of Hours per Hours per Pay Rate Overtime Weekly
workers workers day week ($) Rate ($) Pay ($)
Process: Fruit Receiving
Regular 6 12 84 3.75 3.75 1890
Seasonal 9 12 84 2.25 3.375 2147
Process: Processing and Shipping
Regular 21 15 105 3.75 3.75 8269
Seasonal 17 15 105 2.25 3.375 5259
Total weekly payroll expenses 17565