W20383

PARCEL GUARD: KEEPING UP WITH DEMAND

Ali Abdel-Razek wrote this case under the supervision of David Wood solely to provide material for class discussion. The authors do
not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names
and other identifying information to protect confidentiality.

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On May 6, 2019, production of Parcel Guard had just started at the latest Danby Products Ltd. (Danby) facility,
near Toronto, Canada. Although Julia Martinelli, vice-president of operations at Danby, was excited to see
the new product being built, she also knew that demand would soon exceed capacity. Parcel Guard was one
of the most anticipated new products Danby had produced in years, and if sales estimates were reliable,
Martinelli needed to start thinking about how she could adjust capacity to keep up with future orders.

DANBY PRODUCTS LTD. (DANBY)

Danby was founded more than 65 years ago in Montreal, Quebec. From the beginning, Danby was dedicated
to providing innovative compact appliances for the home.1 Over the years, Danby had become an
international success story, with sales in Canada, the United States, Mexico, and the United Kingdom. Most
of Danby’s refrigerators, freezers, microwaves, air conditioners, and other appliances were developed in
Canada and produced through one of a number of supply partnerships overseas. With more than 2.5 million
products sold every year, Danby was a leader in the compact appliances business.2

PARCEL GUARD

Parcel Guard was developed in late 2018 due to the growing demand for the home delivery of packages.
The global courier, express, and parcel market was forecasted to grow from US$94 billion in 2017 to
CA$126 billion in 2022.3 Much of this growth was fuelled by online retailers shipping parcels directly to
consumers. Online retail sales globally had already grown from $1.3 trillion in 2014 to $2.3 trillion in 2017
and were expected to double again by 2021.4 The aim of Parcel Guard was to address concerns plaguing

1
“Why Danby,” Danby, accessed August 16, 2019, www.danby.com/why-danby/.
2
Vanessa Lu, “Known as ‘Compact Kings,’ Canada’s Danby Products Specializes in Making Small Appliances,” The Star,
October 5, 2012, accessed August 16, 2019, www.thestar.com/business/2012/10/05/known_as_compact_kings_canadas_
danby_products_specializes_in_making_small_appliances.html.
3
All currency amounts are in CA$ unless otherwise specified; US$1 = CA$1.32 on March 31, 2017; Global Courier, Express,
and Parcel Market 2018–2022APAC Region Dominates the Global MarketTechnavio, Businesswire, accessed September
4, 2019, www.businesswire.com/news/home/20180731005633/en/Global-Courier-Express-Parcel-Market-2018-2022-APAC.
4
Aaron Orendorff, “Global Ecommerce Statistics and Trends to Launch Your Business beyond Borders,” Shopifyplus,
February 14, 2019, accessed September 4, 2019, www.shopify.com/enterprise/global-ecommerce-statistics.

This document is authorized for use only in Prof. Bhawana Rathore & Prof. Sourabh Kumar's IIM SAMBALPUR/TERM-2/Operation Management-I at Indian Institute of Management -
Sambalpur from Oct 2023 to Jan 2024.
 Page 2 9B20D005

the industry; Parcel Guard protected against issues such as weather damage, missed deliveries, damaged
packages, and stolen parcels. The Wi-Fi-connected device fit most packages and included a motion-
activated camera, microphone, and built-in alarm and was assembled with industrial-grade plastic to protect
against the elements (see Exhibit 1). The Parcel Guard application allowed owners to track the status of
packages and check the video feed, thus providing peace of mind.5

Parcel Guard had received positive reviews from USA Today, TechCrunch, Twice, the Canadian
Broadcasting Corporation, and the Global Television Network, and was voted by consumers as product of
the year in 2019 for home innovation. Retailers, home delivery services, and consumers were all eager for
the arrival of Parcel Guard.

PRODUCTION

Danby elected to produce Parcel Guard in Canada, in partnership with a local supplier. Given the relatively
simple assembly process and size of the product, it was determined that making the product locally would
enable Danby to respond faster to changes in demand while keeping costs under control.

The new production facility for Parcel Guard was located inside the facility of the supplier of the cabinet,
doors, and base for Parcel Guard. Located just east of Toronto, the supplier’s facility was able to set aside
enough space to meet the current demand and future growth. Fourteen people worked in the assembly
facility for Danby: one supervisor, one material handler, and six people who worked on each of the two
assembly lines (see Exhibit 2).

The first operator on each line assembled the cabinet and fused the parts of the cabinet together using an
ultrasonic welder. One operator could assemble and weld nine cabinets per hour. The second operator
assembled the door for Parcel Guard. The door featured a complicated design, and a skilled operator could
complete one door sub-assembly in 6.4 minutes. The third operator installed the wiring harness and door
sub-assembly. Installing both the wiring harness and door sub-assembly took 8.1 minutes. The fourth
operator completed the wiring by connecting the power supply to the lock mechanism, siren, load cells, and
main control panel. One operator could install the various electrical components and complete the wiring
for 8.5 units in one hour. The fifth operator was responsible for the final inspection as well as testing the
electrical functions of Parcel Guard. The inspection took no more than 90 seconds, and the electrical test
was automated through a dedicated software program designed to put Parcel Guard through a number of
authentication procedures. The electrical test took a total of 15 minutes, including the labour to initiate the
test procedure and read the results. The technician could test three Parcel Guards at one time. The sixth and
final operation was packaging. One operator took a total of five minutes to package one unit; it then took
four minutes to stack six packaged Parcel Guards onto a pallet and prepare the pallet for shipping.

INCREASING CAPACITY

Martinelli was happy with how production staff was performing but knew that it would not be long before
she would be expected to increase capacity. In anticipation of the growth in demand, Martinelli had looked
at a number of options. The first option was to add two new workstations to each of the assembly lines and
rebalance the assigned work. Martinelli’s industrial engineers had proposed a line balance for eight
operators, with an average cycle time of 5.1 minutes (see Exhibit 3). In addition to the added labour, Danby
would also need to invest $14,000 in assembly equipment per line.

5
“Protect Your Packages and Your Home,” Danby Parcel Guard, accessed September 3, 2019, www.danbyparcelguard.com/.

This document is authorized for use only in Prof. Bhawana Rathore & Prof. Sourabh Kumar's IIM SAMBALPUR/TERM-2/Operation Management-I at Indian Institute of Management -
Sambalpur from Oct 2023 to Jan 2024.
 Page 3 9B20D005

The engineering team had also suggested the addition of a third line. The third line would be identical to
the two existing production lines and would be located in the same facility, just east of Toronto. Although
the new line would not require any additional supervision, one more material handler was required, in
addition to the six line workers. The material handler received $20 per hour plus benefits—the same rate
as the operators who performed the electrical testing and $2 per hour more than all other production
workers. In addition, Danby would need to invest $77,000 in machinery and equipment.

Martinelli had also considered the option to add a second and even a third shift. Each shift would require a
team leader who could also perform the role of the material handler. In this case, the team leader would be
paid $24 per hour, and all workers would receive a $0.50 premium per hour for the second shift and a $1
per hour premium for the third shift. In Martinelli’s experience, the second and third shifts were not as
efficient as the first shift, and output would have to be adjusted to 90 per cent of the first shift’s hourly
output. In addition, if a third shift was considered, the hours for each shift would have to be adjusted. In a
two-shift operation, each shift would be scheduled for 8.5 hours, with two paid 15-minute breaks and a 30-
minute unpaid lunch. However, under a three-shift scenario, each shift would be scheduled for eight hours,
with two paid 15-minute breaks and a 30-minute unpaid lunch.

Finally, Martinelli had also wondered if the production line was the most appropriate approach for building
Parcel Guard. Martinelli had experience with work cells and understood the value of having one operator
perform all tasks to complete one Parcel Guard. Martinelli would need to pay the workers $19 per hour—
a small premium to account for their additional skills and flexibility. Each work cell would cost $26,000 to
build, and one work cell would be shared by three workers.

CONCLUSION

Martinelli was excited to see the new Parcel Guard product finally making it through production. She knew
how important this launch would be to Danby, and she had little time to come up with a plan to increase
production. The forecast called for an initial demand of 600 units per week. By the end of the month, the
demand was forecasted to hit 1,000 units per week, and by the middle of summer, demand was expected to
exceed 1,600 units per week. Martinelli was not sure if demand would continue to increase, or if part of the
initial demand was to provide inventory for the distribution chain. Regardless, Martinelli knew that she
would need a plan by the end of the week if any new equipment were to be ordered in time to meet the
initial increase in demand.

This document is authorized for use only in Prof. Bhawana Rathore & Prof. Sourabh Kumar's IIM SAMBALPUR/TERM-2/Operation Management-I at Indian Institute of Management -
Sambalpur from Oct 2023 to Jan 2024.
 Page 4 9B20D005

EXHIBIT 1: DANBY PRODUCTS LTD. PARCEL GUARD

Note: IP = Internet protocol; app = application.

Source: Company documents.

This document is authorized for use only in Prof. Bhawana Rathore & Prof. Sourabh Kumar's IIM SAMBALPUR/TERM-2/Operation Management-I at Indian Institute of Management -
Sambalpur from Oct 2023 to Jan 2024.
 Page 5 9B20D005

EXHIBIT 2: PARCEL GUARD PRODUCTION LINE

Source: Company documents.

EXHIBIT 3: EIGHT-PERSON PRODUCTION LINE BALANCE

Cycle time
Operator Process
(mins.)
1 Cabinet sub-assembly 5.1
2 Cabinet welding 5.3
3 Door sub-assembly 5.9
4 Wiring harness 4.2
5 Door installation 4.4
6 Electrical assembly & inspection 4.8
7 Testing 5.0
8 Packaging 5.7
Average 5.1
Total 40.4

Source: Company documents.

This document is authorized for use only in Prof. Bhawana Rathore & Prof. Sourabh Kumar's IIM SAMBALPUR/TERM-2/Operation Management-I at Indian Institute of Management -
Sambalpur from Oct 2023 to Jan 2024.