National Cranberry Cooperative Case

Jason Zhu,Gao Chao,Anthony Leung

Wednesday, September 16th,
2020 OM4600-0-F20, Professor. Erfan Rezvan

Background:

The National Cranberry Cooperative (NCC) was an organization formed and owned by
cranberry growers aimed to process and market their berries. Hailed as one of the larger
cooperatives, the NCC had operations in all the principal growing areas of North
America. The NCC utilizes Receiving Plant No.1 (RP1) to gather bulk “dry” and “wet”
berries and prepare them for storage and process them into processed fruit products such
as frozen fresh berries, sauce, and juice. This highly mechanized process is classified into
serval operations which include: receiving and testing, dumping, temporary holding,
destoning, dechaffing, drying, separation, and bulking and bagging.

The Case:

Hugo Schaeffer, the vice president of operations at the National Cranberry Cooperative
identified the following main problems to his assistant Mel O’Brien,

1) Despite spending $200,000 last winter for a fifth Kiwanee dumper at RP1, the
overtime costs were still out of control last fall.
2) Prolonged and inconsistent waiting time for the fruit unloading process into the
receiving plant, is causing upset amongst the growers since their leased trucks
with hired drivers are sitting idle, waiting to unload for an unknown period of
time.

Mr. Schaeffer has thus tasked Mel O’Brien to examine the RP1 operation and investigate
what they would need to do to improve operations before the 1996 crop comes in. Mr.
Schaeffer noted that an action must be determined immediately since the process of
ordering new equipment will cause six months of excess lead times in purchasing and
installation. Additionally, the percentage of water-harvested berries for this year is
forecasted to increase to 70% of total process fruit from last year’s 58%, creating a need
for change in the way they schedule their daily operations.

Receiving Plant No. 1 Process Analysis:

The following flow diagram details the process of the fruit operation at NCC:
Capacity Calculation & Bottleneck Identification:
 Through using the table displayed above, we are able to identify the drying process as the
bottleneck of the whole process, with the lowest capacity of 600bbls/hr.

Peak Days Waiting time Calculation:

In calculating the magnitude of the process problems, we have made the following
assumptions:

1. · Approximately 18,000 bbls per day (peak days), 15,000 bbls per
day (normal days) are distributed over 12 hours.
2. · 70% of these berries are wet harvested and 30% are dry

Based on the assumptions shown above we can derive that 12,600 bbls of berries per day
(1,050 bbls per hour) are wet harvested and 5,400 bbls of berries per day (450 bbls per
hour) are dry harvested.

Since flow rate can be understood as the minimum of demand and process capacity we
can calculate the flow rate by using 1,050bbls per hour as the demand and 600bbls/ hr
for its lowest capacity which will lead us to 600 bbls/hour as the flow rate. Next to
determine the cycle time we can use the formula 1/ Flow rate= cycle time which would
yield us 1/600 hour/bbls as the cycle time.

The time which it will take to finish the processing of 12,600 bbls of wet harvested
berries can be calculated by using the formula “Time through an empty process+
(Units/Flow rate)” which leads us to 21 hours since 4*(1/600)+12,600*(1/600)=21. Thus,
on peak days it would take 21 hours to produce 18,000 bbls berries. With the arrival of
trucks scheduled at 7:00 a.m, the process will continue until 4:00 a.m. the next day.
Peak Days Unloading and Waiting Time For Trucks:

With the flow rate in mind, we can next calculate the inventory accumulation rate which
can be understood as “demand - process capacity” which will lead us to the equation
1050 bbls per hour - 600 bbls per hour giving us 450 bbls/hours for the inventory
accumulation rate. Since the holding bins for wet harvested berries have the maximum
capacity of 3,200 bbls, we can deduce the amount of waiting time required for the trucks
by dividing the maximum capacity (3,200 bbls) by the inventory accumulation rate (450
bbls/ hour). This would lead us to the understanding that the waiting time for the trucks
would be approximately 7 hours, which means it will wait till 2:00 PM.

To discover how long the last truck will wait till and its unloading time, we can first
calculate the whole amount of berries that are inventory accumulated. 450 bbls/hours *12
= 5,400 bbls. Using this information, we can compute for the number of berries waiting
in trucks by subtracting the maximum capacity of 3,200 bbls from the total amount of
berries that are inventory accumulated (5,400 bbls), which would give us 5,400-
3,200=2,200 bbls as the number of berries that are waiting in trucks. With the flow rate of
600 bbls/hour, the time it takes to free up 2,200 bbls of berries would be 3.67 hours
(2,200/600=3.67). Therefore, the last truck would arrive at 7:00 p.m. wait 3.67
hours, and unload at 10:40 p.m.

Normal days Waiting Time Calculation:

We first establish the understanding that there will be 10,500 bbls of berries per day (875
bbls per hour) scheduled for wet harvesting and 4,500 of berries per day (375 bbls per
hour) scheduled for dry harvesting on normal days.

Similar to the previous calculation for peak days, we can understand the flow rate for
normal days as the minimum of demand and process capacity. We can calculate the flow
rate by using 875 bbls per hour as the demand and 600 bbls/ hr for its lowest capacity
which will lead us to 600 bbls/hour as the flow rate. Next to determine the cycle time we
can use the formula 1/ Flow rate= cycle time, which would yield us 1/600 hour/bbls as
the cycle time.

The time which it will take to finish the processing of 10,500 bbls of wet harvested
berries can be calculated by using the formula “Time through an empty process+
(Units/Flow rate)” which leads us to 17.5 hours since 4*(1/600)+10,500*(1/600)=17.5.
Thus, on normal days it would take 17.5 hours to produce 18,000 bbls berries. With the
arrival of trucks scheduled at 7:00 a.m, the process will continue until 12:30 a.m. the
next day.

Normal Days Unloading and Waiting Time For Trucks:

With the flow rate in mind, we can next calculate the inventory accumulation rate which
can be understood as “demand - process capacity” which will lead us to the equation 875
bbls per hour - 600 bbls per hour giving us 275 bbls/hours for the inventory
accumulation rate. Since the holding bins for wet harvested berries have the maximum
capacity of 3,200 bbls, we can calculate the amount of waiting time required for the
 trucks by dividing the maximum capacity (3,200 bbls) by the inventory accumulation rate
(275 bbls/ hour). This would lead us to the understanding that the waiting time for
the trucks would be approximately 11.63 hours, which means it will wait till 6:38
PM.

Next, we can calculate the whole amount of berries that are inventory accumulated by
using the equation 275 bbls/hours *12 giving us a total of 3,300 bbls. With this
information in mind, we can compute for the number of berries waiting in trucks by
subtracting the maximum capacity of 3,200 bbls from the total amount of berries that are
inventory accumulated (3,300 bbls), which would give us 3,300-3,200 =100 bbls as the
number of berries that are waiting in trucks. With the flow rate of 600 bbls/hour, the time
it takes to free up 100 bbls of berries would be 10 minutes (100/600=1/6). Therefore,
the last truck would arrive at 7:00 p.m. wait 10 minutes, and unload at 7:10 p.m.

Peak Days Labor Cost Calculation:

In a given peak day, there will be a total of 53 employees at work, with 27 non-seasonal
workers and 26 seasonal workers who can work only between the dates of August 15 and
December 25 by agreement with the Teamsters union. On peak days, the total time spent
working is 21 hours per day. Workers are paid an overtime rate of 1-1/2 times their
straight-time rate for anything over 40 hours per week which means 5.71 hours per day
for seven days. With this information in mind we can calculate the labor cost per day by
computing the following equation:

● 5.71*13*27+5.71*8*26+15.29*1.5*13*27+15.29*1.5*8*26=$16,011.36

The labor cost per day would thus be $16,011.36.

Truck waiting cost on Peak Days:

On a given peak day, there are 240 trucks arriving per day. In other words, there will be
20 trucks arriving per hour, making it 1 truck arriving every 3 minutes. Each truck is able
to contain and transport 52.5 bbls full of wet harvested berries(70% of the 75 bbls ). The
flow rate of this operation can be understood as 600 bbls per hour(10 bbls/minute). Since
the trucks are scheduled to start waiting from 2:00 PM, we can next discover the total
number of trucks waiting by computing the following equation:

● (7-2)*20 = 100

This gives us the knowledge that there will be 100 trucks waiting starting from 2:00 PM.
To calculator the total waiting time for the trucks

The total waiting time for the trucks can be calculated with the use of excel by summing
up [5.25+(5.25-3) * (all the individual number of trucks waiting -1)]. This would give us
11662.5 minutes, which is also 194.375 hours. Since the waiting cost for the trucks is set
to $100 per hour, the truck waiting cost on a normal day would thus be $19,437.5 per
day.
Normal Days Labor Cost Calculation:

In a given normal day, there will be a total of 54 employees at work, with 27 non-
seasonal workers and 27 seasonal workers. On normal days, the total time spent working
is 17.5 hours per day. Workers are paid an overtime rate of 1-1/2 times their straight-time
rate for anything over 40 hours per week which means 5.71 hours per day for seven days.
With this information in mind we can calculate the labor cost per day by computing the
following equation:

● 5.71*13*27+11.79*1.5*13*27=$8,210.89

The labor cost per day on a normal day would thus be $8,210.89 per day.

Truck waiting Cost on Normal Days:

On a given normal day, there are 200 trucks arriving per day. In other words, there will
be 16.67 trucks arriving per hour, making it 1 truck arriving every 3.6 minutes. Just like
on peak days, each truck is able to contain and transport 52.5 bbls full of wet harvested
berries (70% of the 75 bbls ). The flow rate of this operation can be understood as 600
bbls per hour (10 bbls/minute). Since the trucks are scheduled to start waiting from 6:38
PM, we can next discover the total number of trucks waiting by computing the following
equation:

● (7-6.63)*60*3.6=6 trucks

The total waiting time for the trucks can be calculated with the use of excel by summing
up [5.25+(5.25-3.6) * (all the number of trucks waiting -1)]. This would give us 56.25
minutes, which is also 0.9375 hours. Since the waiting cost for the trucks is set to $100
per hour, the truck waiting cost on a normal day would thus be $93.75 per day.

Option 1:

The following analysis will assume that the NCC is able to add one dryer.

Analysis:

With the added dryer, the processing capacity would now be 800 bbls/hr (600+200=800).
With this new piece of information in mind, we can now calculate the inventory
accumulation rate on peak days: 1050-800 = 250, which would give us 250bbls/hr. The
total inventory accumulation can be calculated simply by taking 250 multiplied by 12
which would give us 3000 bbls. Since this amount is less than the 3200 bbls inventory
capacity, we can reason that there will no longer be trucks waiting anymore.
 With an additional dryer, the new total operating hours on normal days is none 13.13 hrs
(4/800+10500/800 = 13.13). With this in mind, we can calculate the cost of workers on a
normal day, which can be computed by the following equation:

● 5.71*13*27+7.42*1.5*13*27=$5910.84
With the new labor cost, we are none able to calculate the amount of money saved by
computing the following equation:
● original worker cost + original trucks waiting cost - worker cost -waiting
cost
● 8210.89+93.75-5910.84 -0 =$2393.8 per day
By simply adding one more dryer, we are able to save $2393.8 per normal day, giving us
a 4% return on investment( 2393.8/60000=4%.) After 25 days the ROI would exceed
100%(25*4%=100%), making this option one of the most efficient and advantageous
options available.

With the new additional dryer, the total operating hours on peak days would be
15.755hrs(4/800+12600/800=15.755). With the new operating hours in mind, we can
compute for the cost of labor on peak days with the following issues:
● 5.71*13*27+5.71*8*26+(15.755-5.71)*1.5*13*27+(15.755-
5.71)*1.5*8*26=$11614.62

With the new labor cost, we are none able to calculate the amount of money saved by
computing the following equation:
● 16011.36+19437.5-11614.62=$23834.24;

By simply adding one dryer, we are able to save $23834.24 per peak day. The return on
investment per peak day would thus be 39.4% per peak day( 23834.24/60000=39.4%).

Option 2:

The following analysis will assume that the NCC is able to convert some of the holding
bins 1-16.

Analysis:

On peak days, there are 2,200 bbls of wet harvested berries waiting in the trucks. To
reduce the waiting time, holding bins 1-16 can be converted to hold the wet harvested
berries. The number of bins that are required to reduce the waiting time of the trucks can
be calculated with the following equation:
 ● 2,200/250=8.8=9
This means by simply converting nine bins we could reduce the waiting time of trucks.

The cost per bin is $10,000. With a conversion of 9 bins, the total cost would be $90,000.
It is important to note, however, the conversion of bins does not reduce the processing
time.
With 9 bins converted, we can save $19,437.5 per peak day, and $93.75 per normal day.
Giving us a return on investment of 21.6%(19,437.5/90,000=21.6) per peak day and
1.04%(93.75/90,000) per normal day.

Short-term Suggestion:

By comparing both options, we recommend the NCC to consider purchasing an

additional dryer. The additional dryer is able to yield a more desirable and even return on
investment on both peak days and normal days. The additional dryer is also able to
greatly reduce the waiting time for trucks and the general processing time, allowing them
to solve the bottleneck problem. We advise the NCC to take immediate action for the
purchasing of an additional dryer since purchasing and installation lead times are in
excess of six months.

Long-term Suggestion:

Our long term suggestion for the NCC is to consider the possibility of increasing the
number of seasonal workers. Through our calculations and analysis, we have identified
the salary for non-seasonal workers to be a rather high expenditure. The increase in
seasonal workers will help greatly reduce the general workflow and non-seasonal
worker’s overtime hours and pay.