Bayonne Packaging Case Study

MPE-14, NMIMS
Executive Summary

Bayonne Packaging, Inc. is a printer and paper converter company

Industry Vertical – Specialty Packaging

Competitive Strengths: Beautiful product, great designs, classy printing, handling of innovative
and difficult package design and the ability to fold and glue the complex blanks

Specialized in innovative packaging solutions along with full service from design to final delivery

They also work closely with customers to develop the design as per their need

Manufactures customized packaging for industrial customers

Current state (point of Departure) of Bayonne Packaging

Computerized Scheduling system not being followed

X
No maintenance schedule being done
X

X Two extra days at each work center

X The company does not have a method of determining the priority of orders

X Family member Neil Rand running expedites and not caring about the computer scheduling system
Problem Statement – Delivery, Quality leading to Net Loss

51%
of the orders are late for
1.5% -7.2%
Scrap and customer rejects incurred a loss in October
Oct’11 are very high, eliminating 2011 for the first time in past
profitability ten years
Financial Analysis

Customer Rejections
5.00%

4.00%

3.00%

2.00%
1.50%

1.00%
0.50%

0.00%
customer rejections

-1.00%

Oct-09 Oct-11
Financial Analysis

Cost Of Goods Sold & Cost Of Shipped Material

100.00%
90.70%
90.00%

80.00%
72.11%
70.00% 64.90%
60.00% 55.30%
50.00%
This has happened
because the company
40.00% has reduced its profit
30.00% margin in order to
increase its sales volume
20.00%

10.00%

0.00%

Oct-09 Oct-11
Quantifying Operations & Supply Chain Performance
 Percentage of full (i.e. not partial) deliveries that is on time per time period
DEPENDABILITY  Average delay time of an order
 Down time per machine

 % of goods rejected by Quality Control and Customer

QUALITY
 % of goods with missing glue lines or excess glue

 No. of days for production

 The amount of time spent on set up times per order / per period
SPEED  No. of materials flowing through operations per period
 The average critical ratio

 The cumulative volumes in US dollars / The cumulative numbers of shipped orders

COST  The COGS per month as a percentage of net sales

 PBT – Profit before tax

 No. of different orders that can be expedited

FLEXIBILITY  No. of different packages possible to print
 Benchmarking
Capacity Utilization at various work Centers

Sl .No Machine Total Hours Per Number of Combined Theoretical Capacity Utilization
machine Machines Running times running times per work center

1 Composition 255 1 255 347 73.49%

2 Jagenburg Sheeter 279 1 279 347 80.40%

3 Heidelberg Press 348 2 696 694 100.29%

4 Bobst Die-Cut 272 2 544 694 78.39%

5 Int. Roy / Queen F& G 156 3 468 1041 44.96%

6 Int. Staude F&G 179 4 716 1388 51.59%

7 Int. 3A window/ patch 145 2 290 694 41.79%

Heildeberg press is the bottleneck with capacity utilization of 100.29%

Number of working hours in October'11 is 347 hours

Capacity in pieces of the Die-cut center in three cases
Order size (pieces) 30,000 Order size (pieces) 30,000

Time per sheet 0.0075

Time per sheet 0.0075
Time per sheet (1 sheet = 3 piece) 0.0025

Time to process order (30000 piece * Time per piece) 75 Minutes Time per sheet (1 sheet = 3 piece) 0.0025
Set up time 2,5 hrs 150 Minutes
Total minutes per order 225 Minutes gang 2 orders in a batch, number of pieces in batch 60,000

15 hours per day is 900 Minutes

Time to process order (60000 piece * Time per piece) 150 Minutes
Total capacity of Die-cut center 4 Orders
Total capacity of Die-cut center in pieces 120,000 Pieces Set up time 2,5 hrs 150 Minutes

All orders are ganged Total minutes per batch 300 Minutes

Time per sheet 0.0075

15 hours per day is 900 Minutes
Time per sheet (1 sheet = 3 piece) 0.0025
Total minutes per day 900 Minutes Total capacity of Die-cut center 4 Orders
Minutes required for one required set up 150 Minutes
Total capacity of Die-cut center in orders 6 Orders
Remaining available minutes for running orders 750 Minutes
Number of pieces possible per day 300,000 Pieces
Total capacity of Die-cut center in pieces 180,000 Pieces
Number of orders possible per day 10 Orders
Orders in the Royal / Queens work center

Assumptions And Implicit Findings

Number or partialed orders Royal Queen 40 Orders

Number of orders on Royal Queen total 77 Orders

Total set up time Royal Queen in October 231 Hours
Setup time per order 3 Hours

CASE - 1 CASE - 2
40 orders require 40 set ups (no partials) 40 orders require 80 set ups (no partials)

Total number of set ups 40 + 37 77 Setups Total number of set ups 80 + 37 117 Setups

Time per set up 3 Hours Time per set up 3 Hours

Total set up time 231 Hours Total set up time 351 Hours

Total number of working hours for three machines (347 * 3) 1041 Hours Total number of working hours for three machines (347 * 3) 1041 Hours
Time left for folding and gluing (1041 - 231) 810 Hours
Time left for folding and gluing (1041 - 351) 690 Hours
Time required for F&G of one piece 0.0023 Minutes
Time required for F&G of one piece 0.0023 Minutes

Number of pieces to be folded and glued 21,130,43 Pieces

5 Number of pieces to be folded and glued 18,000,000 Pieces
Order size to the Royal / Queen and Staude work centers

Number of Set up per Total set up Speed per machine Speed per work center
Work center
Machines Machine Time (minute/piece) (minute/piece)
Royal / Queen 3 180 540 0.0023 0.00077
Staude 4 40 160 0.015 0.00375
Difference in setup time 380 minutes
in 380 minutes, Staude center can process 101,333 pieces

After both setups; the production breakeven point can be calculated as :

x is minutes of both machines in process
Staude Royal/Queen
101333 + x * 1/0.00375 x*1/0.00077
x= 98 minutes

Breakeven point in time is 98 minutes after Royal/Queen's setup

in 98 minutes, Royal/Queen can process 98/0.00077 pieces.
Breakeven point in pieces is : 127.506 piece
Conclusion

380
minutes
set up time needed to set up the same order
on Royal Queen, the Staude can produce
101.333 pieces

98
minutes
Will take Royal/Queen to catch up after both
machines are operational

127.506
pieces
Above orders should be routed to the Staude
Recommendations Focused on Effectiveness and Efficiency
SHORT TERM
(0–3 MONTHS)
 Increase capacity by allowing for
overtime
 Daily meetings
 Prioritizing orders (e.g. red flags for
rush orders) and weigh the
consequences of rush orders for the
remaining orders, therewith
optimizing the number of rush
orders
 Increase / improve maintenance on
machines in order to increase quality
MID TERM
(3–9 MONTHS)
 Manage variability better by managing of
demand e.g. introducing price reductions
for bulk orders
 Increase capacity by widening the bottle
neck (e.g. extra shift on the Heidelberg
press)
 Introduce pre-Work Order Jacket – a
report that is sent to other departments
when the prior department starts working
on and order. This way, the later
department knows what orders are on the
way in couple of days.
LONG TERM
(9+ MONTHS)
 Increase capacity by investing in
additional equipment
 Introduce a companywide ERP
system in order to schedule
production in reliable, achievable
way that is adhered to by all
departments (including sales). This
should result in fewer rush orders,
fewer partial orders and less
unnecessary set up time.
THANKS