BAYONNE PACKAGING, INC.

CASE STUDY

NEIL KIZHAKAYIL GEORGE

GADE SUDHAKAR REDDY
KALIRAJ

ITM EEC
 Our understanding of the case
•The prognosis looks very bleak. If it continues with its current way of operations the
company will cease to exist in the very near future.
Some Observations on the Sales Angle:
•From the Oct’11 actual shipment information the company is shipping 51% of its
orders late. Which is 51% of the customers are not being delivered on time leading to
either loss of customers or you have to discount the product further to get new
business from the existing customers leading to a loss of revenue.
•With 50% of its customers already unhappy, the sales team is going after new
products and areas and discounting products further which will further lead to more
unhappy customers and with a already bad name for Bayonne packing in the industry
for not delivering on time. The company's core strengths of beautiful product, great
designs and classy printing are being negated by late delivery.
Some Observations on the Financial Angle:
•Scarp is very high 11.6% ( income statement for Oct’11).
•Customer rejects of 1.5% is high ( income statement for Oct’11)
•Increase in selling and admin expenses is 4.3% over the Sep’11, which is also high.
•Scarp of USD 597,671 + Customer rejects USD 75,455 + USD 37562 ( 4.5% increase
in admin/ selling expenses ) = Total USD 710,688 ( 365,694 ) = profit of USD 344,994.
 Our understanding of the case
Some observations on the Operational Angle:

• Computerized Scheduling system not being followed.

• No maintenance schedule being done.
• Two extra days at each work center.
• Family member Neil Rand running expedites and not caring about
the computer scheduling system.
•Information not punched in by operators in the terminals.

Be it the customer angle, the Financial angle or the Operational

Angle, the company is plagued by problems and its very existence is
being threatened.
What is Bayonne Industry and what
is it key competitive properties

• Packaging Industry
• Sector: 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.
 What is industry’s main problem?
In the order of sequence the industry’s main problems
are:

1.On time delivery:

51% of the orders are late for Oct’11.

2. Costs:
Scrap and customer rejects are very high, eliminating
profitability.

3. Quality:
Glue lines being missed and boxes opening up at
customers end leading to rejects.
 Capacity Utilization at various work Centers
Number of working hours in October'11 347

Capacity
Total Hours Number Combined Theoretical Utilization
Per of Running running per work
Sl .No Machine machine Machines times times 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%
Conclusion: Heildeberg press is the botleneck with capacity utilization of 100.29%
 Number of Setup Time Speed per machine Speed per work centre (minute /
Work centre machines per machine Total Setup time (minute / piece) piece )
Int. Royal / Queen 3 180 540 0.0023 0.000767
Int. Staudes 4 40 160 0.015 0.003750
Diff. in Setup time     380    
In 380 minutes Int. Staudes
can process     101333   
           
Once the Int. Royal / Queen
are step up:          

Let x be the minutes of

both machines in process:          
           
Int. Staudes: Int. Royal / Queen
101333+ x*1/0.003750 x*1/ 0.000767  
   
101333 266.67"x" 1037.11 "x"  
   
  "x" 97.70minutes
   
Break even point is 97.70 Minutes after Intl. Royal / Queen Step up.  
   
In 97.70 Minutes Royal Queen can process 127435" 97.70/ 0.000767"
Breakeven point in pieces   127435   
           
Conclusion:  
In 380 minutes setup time tequired by Int royal / queen ,Staudes can  
process 101,333 pieces. After both machines are operational  
Royal / Queen can catch up in 97.70 minutes  
   
Hence orders under 125,435 should be routed through Staudes.  
 What Should John Milliken recommend to Dave Rand
Short term / long term recommendations to Dave Rand from our team at ITM EEC

If this company has to survive the following recommendations are from my side in
terms of priority:

1.On Time Delivery:

Has to improve to 95% from the present level of 49%. For this the
following actions are to be performed:
•Run an additional shift on the Hildeberg press and Bobst Diecut
•Computerized scheduling system to be followed and operators are
to be told to input all data into the system.
•WIP 48 hrs to be immediately removed. ( 5 work centersx2 =10
days can be saved ).
•Expediting by Neil Rand to be stopped immediately.
•Partials to be reduced by 50% in the next three months and
eliminated in 6 months.
 What Should John Milliken recommend to Dave Rand
Short term / long term recommendations to David Rand from our
team at, ITM EEC

If this company has to survive the following recommendations

are from my side in terms of priority:

2. Cost:

Scrap is very high, at 11.6% and hence it is recommended that in

the short term the Royal / Queen and Stauedes have to be
maintained well and in the long term Dave Rand has to look at
better machines with lower maintenance down time and lowest
scrap ratio.

Selling and Admin accounts to be scrutinized and to be brought

down to 10.4% (2010 level ) from 16.5% in Oct’11.
 What Should John Milliken recommend to Dave Rand
Short term / long term recommendations to David Rand from our team, ITM
EEC

If this company has to survive the following recommendations are from my

side in terms of priority:

3. Quality:

•Neil Rand skills to be utilized on F&G section only. One quality inspector for
key area of Fold and Glue and Finishing area only. This will eliminate the
returns of 1.% and 6% of scrap.

•Maintenance schedule for glue guns to be started immediately.

•Only a copy of the work order jacket to be sent to production office in case of
partials.
 Conclusion

The very survival of Bayonne Packaging is at stake

and if John Milliken does not give the right
recommendations to Dave Rand this company
which is already loosing money will cease to exist as
it has lost goodwill among its customers, faces
quality issues and is loosing money as well.

I do sincerely hope that our recommendations will

help Bayonne Packaging turn the corner and
become an industry leader.