National Cranberry Case Report

To: Hugo Schaeffer

From: <<team>>
RE: RP#1 processing

Memo

The farmers are expected to produce similar amount of berries as produced in 1970 but the
percentage of wet harvested berries will increase to 70% from 58%. This results in more the
plant machines being utilized for the wet berries processing.
Assuming that 17,280 bbls of berries are delivered for processing in a day. Hence, considering
the capacity for each process unit, we identified the bottleneck to be the Wet Berries Drying
process (approx. 550 bbls/hour as against required 1008 bbls/hour). The net wait time for trucks
was about 126 hours resulting in a total cost to consider by the company of $294968.4 (including
labor costs for a 20-day high demand period). We have analyzed the impact of adding one and
two new dryers to the existing system. On adding only one new dryer, the wet berries drying
process still remains to be the bottleneck. But the waiting time for trucks reduces to zero, hence
total cost to consider by the company is $62519.2 (including labor costs & new dryer cost). On
adding two additional dryers to the system, we discovered that although the waiting time for
trucks is zero, the total cost to consider for the company increases to $83392.28 (about 30%
increase from adding only 1 new dryer). Hence, from these observations we advise you to invest
only on a single new dryer for RP#1.
Supporting Analysis

Assumptions :-
 On an average “busy” day there are 17,280 bbl arrive over the 12-hr period (7 am to 7
pm). This is based on a “typical” busy day in September.
 All operations at RP#1 start at 7am.
 Holding bins 17-24 are dedicated to wet berries.
 Leasing a truck and driver costs $100/hr. Rates for RP#1 employees are given in the case.
 Further, for your analysis, you can end the process with separators and assume that
berries go to bulk and bagging which has sufficient capacity.)

Causes of Delay

Present a process flow diagram for RP#1, labeled with relevant capacities and utilizations on a
busy day in September 1970. Indicate different processing flows for wet and dry berries. Clearly
identify the bottleneck.

The Bottleneck is the Drying Process

 Storage bins Destoning Drying
Receiving Kiwanee Dry Wet Dry Wet Dechaffing Wet Dry Milling
process dumpers (bagging)
Process time 0 7.5 - -
No. of parallel 5 3 - 3 3 - 3
processes
Capacity / PP infinity 4000 3200 1500 - 1500 183.3333 - 400
(bbls. / h)
Total Capacity 3000 - 4500 - 4500 550 - 1200
1970 Incoming qty 1440 1440 - 604.8 1440 835.2 604.8 1440
Implied 48.0% 13.4% 32.0% 151.9% 120.0%
Utilization
Cost
1971 Incoming qty 1440 1440 432 1440 1008 432 1440
with 0 Implied 48.00% 9.60% 32.00% 183.27% 120.00%
additiona Utilization
l dryers Cost
1971 Incoming qty 1440 1440 432 1440 1008 432 1440
with 1 Implied 48.00% 9.60% 32.00% 137.45% 120.00%
additiona Utilization
l dryers Cost
1971 Incoming qty 1440 1440 432 1440 1008 432 1440
with 2 Implied 48.00% 9.60% 32.00% 109.96% 120.00%
additiona Utilization
l dryers Cost

*Note : highlighted values are the bottleneck for that particular case.
Describe the situation during a typical busy day by constructing an inventory build-up diagram
for bins and trucks. Your diagram should include build-up and draw-down rates, inventory
levels, and times.

Time Slots wet arrival wet wet buildup dry arrival dry dry
rate bottleneck rate bottlenec buildup
rate k rate
7-8 1008 550 458 432 650 0
8-9 1008 550 916 432 650 0
9-10 1008 550 1374 432 650 0
10-11 1008 550 1832 432 650 0
11-12 1008 550 2290 432 650 0
12-13 1008 550 2748 432 650 0
13-14 1008 550 3206 432 650 0
14-15 1008 550 3664 432 650 0
15-16 1008 550 4122 432 650 0
16-17 1008 550 4580 432 650 0
17-18 1008 550 5038 432 650 0
18-19 1008 550 5496 432 650 0
19-20 550 4946 650 0
20-21 550 4396 650 0
21-22 550 3846 650 0
22-23 550 3296 650 0
23-0 550 2746 650 0
0-1 550 2196 650 0
1-2 550 1646 650 0
2-3 550 1096 650 0
3-4 550 546 650 0
4-5 550 0 650 0
5-6
6-7

*Note: The plant can run for a maximum of 22 hours. To get 0 inventory at the end of 22 hours
of operations, we calculated that the limiting flow rate for dryer capacity is 550 bbls./hour, which
is what we’ve assumed in our calculations. Any lower, and the factory will not be able to
complete the processing of the material brought in.
We also checked whether a drying rate of 550 bbls/ hour would be sufficient to service the
maximum rate of bagging (of 8000/12 hours), and it does (along with the 432 bbls/hour of dry
berries).
 Buildup of berries
6000

5000

4000

3000

2000

1000

0
7-8 8-9 9-10 10- 11- 12- 13- 14- 15- 16- 17- 18- 19- 20- 21- 22- 23-0 0-1 1-2 2-3 3-4 4-5 5-6 6-7
-1000 11 12 13 14 15 16 17 18 19 20 21 22 23

wet buildup

Analysis of Investments

1. Costs in original layout

a. $ 294,968.40 for 20 days of high demand. This includes:
i. $ 250,512.00 for transport charges as paid by farmers to truckers.
ii. 14 hours of overtime per worker on average, resulting in a labour cost of
$44,456.40

2. Add 1 new dryer.

a. $ 62519.20. This includes:
i. Cost of new dryer - $ 25,000
ii. Wait time for trucks is reduced to zero, hence there will be no charges for
farmers.
iii. Labour costs of $37,519.20 are incurred on this calculation. 8 hours of
overtime will be required
3. Add 2 new dryers.
a. $ 83,392.20
i. The bottleneck is changed to the milling process in this case, whose capacity
is 1200 bbls./hour
ii. The plant needs to be in operation for 14.4 hours to meet the bottleneck rate,
so the overtime is 6.4 hours.
iii. Cost of 2 new dryers - $ 50,000
iv. Labour cost: $ 33,392.20
Conclusions

National Cranberry Cooperative is a cooperative between cranberry farmers to process all their
produce commonly. The case mentions the problems that they are currently facing. On thorough
analysis, we found out that the bottleneck was the drying process for the wet berries. The head of
the cooperative is considering the option of adding either one or two drivers in order to increase
the capacity of the processing system. We analyzed both these cases and found out that adding
drying machines does indeed increase the capacity of the system. In the case where the company
adds one dryer to its Arsenal, taking the total count of dryers to 24, this leads to a 78 % reduction
in cost. However, addition of the 2nd drying machine least only a 71% decrease in cost. The
Processing system of the National cranberry cooperative incorporates into its very design, the
concept of buffers. It has temporary storage tanks right at the beginning of its process with
capacities in excess of 3000 bbls, which enables them to have a smooth flow of cranberries
throughout the day.

Sources of Variability :
 Trucks arrived at random throughout the day.
 Bulk trucks were loaded with anywhere between 20 to 400 bbls.
 Employee Absenteeism
 Ratio of bagging to bulking quantities
 Colour Grading of Berries