11bm60008 sec b national cranberry cooperative
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National Cranberry Cooperative - A Case Study
Production and Operation Management Assignment
Submitted by:
Kunal Verma (11BM60008) VGSOM
Vinod Gupta School of Management National Cranberry Cooperative IIT Kharagpur
About this Document
Purpose The purpose of this document is to provide the solution to the National Cranberry Cooperative Case problem.
Intended Audience This document will help: Students and instructors to provide the various details regarding the National Cranberry Cooperative Case for Production and Operations Management Assignment.
Vinod Gupta School of Management National Cranberry Cooperative IIT Kharagpur
Introduction - Process Analysis
We start by making a process flow diagram for the flow of berries at RP1 from the moment berries arrive at the RP1 in trucks to the moment they leave in RP1 after being bag packed, bulk loaded into trucks or loaded into bulk tins.
Fig 1: Process Flow Diagram
Vinod Gupta School of Management National Cranberry Cooperative IIT Kharagpur
Assumptions and Data:
The capacities of the various processes are based on the assumptions or data as shown below:
Dumping Capacity
Number of Kiwanee Dumpers = 5
Average time taken by truck to load the berries onto Kiwanee Dumpers = 7.5 minutes
(Maximum being 10 and minimum being 5 minutes)
Average weight of berries in a truck = 75 bbls.
Dumping Capacity = 5 * 75 * 60 / 7.5 = 3000 bbls/hr.
Holding Bin Capacities
Bin No. 1-16 can hold dry berries only up to 250 bbls per bin.
Total capacity of bin numbered 1-16 = 250*16 = 4000 bbls
Bin No. 17-24 can hold dry/wet berries up to 250 bbls per bin
Total capacity of bin numbered 17-24 = 250*8 = 2000 bbls.
Bin No. 25-27 can hold wet berries up to 400 bbls per bin
Total capacity of bin numbered 25-27 = 400*3 = 1200 bbls.
De-stoning Capacity
No. of de-stoning units = 3
Capacity of each unit = 1500 bbls/hr
Total de-stoning capacity = 4500 bbls/hr
Vinod Gupta School of Management National Cranberry Cooperative IIT Kharagpur
De-chaffing Capacity
No. of de-chaffing units = 3
Capacity of each unit = 1500 bbls/hr
Total de-chaffing capacity = 4500 bbls/hr
Jumbo Separator and Bailey Mill Lines
No. of separator units = 3
Average capacity of each unit = 400 bbls/hr
Total separator capacity = 1200 bbls/hr
Bagging Station Capacity
Maximum output per day = 8000
Working hours = 12hrs.
Capacity = 8000/12 = 667 bbls per day
Bulk Bin Loading Capacity
No. of loaders for bulk bin loading = 4
Capacity of each loader = 200 bbls/day
Total bulk bin loading capacity = 4 * 200 = 800 bbls per day.
Bulk Truck Loading Capacity
No. of loaders of bulk trucks = 2
Capacity of each loader =1000 bbls/hr
Total Capacity Bulk Truck loading Capacity = 2000 bbls/hr
Vinod Gupta School of Management National Cranberry Cooperative IIT Kharagpur
Installing a Light Grading System
As given, out of a total of 4, 50,000 bbls of berries graded as top quality only half were top quality and deserved the 50 cent per bbl premium. The light grading system which would accurately grade the berries would save 4, 50,000*0.5/2 = $1,12,500 per season at one time investment of $10,000 and recurring cost of hiring a skilled operator at $10,000 (Assumed)...This would lead to a substantial saving. But another fact needs to be considered that this is a cooperative organization. Although installing a light grading system would lead to increase in the margins of the receiving plant 1 but would be loss for the cooperative as a whole as money instead of being paid to farmers would go to worker who is hired. But status quo can also not be maintained as it leads to wrong distribution of benefits to farmers with a lower quality crop. An alternate solution can to be stricter in the manual grading process and increasing the variety of shade cards so that berries can be rightly classified. One more category in between 2A and 3 can also made having a lesser premium than quality 3. But the various other implications of this step should be taken into account like increased final processing cost and resentment from the farmers.
Decreasing the truck waiting time
Assume work day has 11 hours We know 70% of the total berries received are wet. Total wet berries per hour = 1200bbls (20000/11)*0.7 3 dryers can handle 600 bbls/hr
On an average day if 10000 bbls are received per day number of wet berries received would be 7000 so number of dryer hours required are 7000/600 = 11.7 hrs
Actual no. of dryer hours available are 8 so 11.7-8 = 3.7 hours of overtime should be paid to workers.
On a peak day if 20000 bbls are received per day number of wet berries received would be 14000 so number of dryer hours required are 14000/600 = 23 hrs
Actual no. of dryer hours available is 8 so 23-8 = 15 hours of overtime should be paid to workers.
We also know dumpers operate at 1209 bbls per hour (19000*0.7/11)
Inventory build up rate is 1209-600 = 609 bbls per hour We have total capacity of 3200 bbls Hence the total area where inventory is kept is full in 5.25 hours (3200/609)
Queue of trucks start forming after 5.25 hours of operation
Vinod Gupta School of Management National Cranberry Cooperative IIT Kharagpur
At the end of 11 hours we have 6699 bbls of berries to be stored (609*11) out of which 3499 are waiting in trucks and 3200 are in inventory area.
We also know one truck has 75bbls of berries so we have total 47 trucks (3499/75) in waiting which will take 5.83 hours (3499/609) to clear.
Total time spent by truck drivers to unload is 270 hours (5.8*47)
Labor overtime cost is 3.7*27*1.5*13for 10k bbls
Labor overtime cost for 20k bbls is 14.2*27*1.5*13+14.2*26*1.5*8
This can be summarized as
10000 bbls 20000bbls
Dryer hours 11.7 23
Plant operating hours 8 8
Truck hours waiting 0 270
Truck waiting cost(in $) 0 27000
Labor waiting time 3.7 14.2
Labor waiting cost(in $) 1948.05 11906.7
Table 1
Now let us analyse various options that we have
Solution 1 - Increase number of dryers by 1
New dryer capacity is 800 bbls/hr
Labor overtime cost is 0.75*27*1.5*13= 394.875 Labor overtime cost for 20k bbls is 9.5*27*1.5*13+9.5*26*1.5*8=7965.75
Vinod Gupta School of Management National Cranberry Cooperative IIT Kharagpur
This can be summarized as
10000 bbls 20000bbls
Dryer hours 8.75 17.5
Plant operating hours 8 8
Truck hours waiting 0 54
Truck waiting cost(in $) 0 5400
Labor waiting time 0.75 9.5
Labor waiting cost(in $) 394.875 7965.75
Cost of additional dryer 60000 60000
Table 2
Total savings (1948.05+11906.7)-(394.875+7965.75) = 5494.125 We have return on investment 5494/60000*100 =9.2%
Solution 2 - Increase number of dryers by 2
New dyer capacity is 1000 bbls/hr
Labor overtime cost is 0 in case of 10k bbls Labor overtime cost for 20k bbls is 6*27*1.5*13+6*26*1.5*8=2187.9 in case of 20k bbls
This can be summarized as
10000 bbls 20000bbls
Dryer hours 7 14
Plant operating hours 8 8
Vinod Gupta School of Management National Cranberry Cooperative IIT Kharagpur
Truck hours waiting 0 0
Truck waiting cost(in $) 0 0
Labor waiting time 0 6
Labor waiting cost(in $) 0 11666.85
Cost of 2 additional dryer 120000 120000
Table 3
Total savings (1948.05+11906.7)-(2187.9) = 11666.85
Return on Investment 11666.85*100/120000 =9.75
Option 2: Converting Dry bin into bins that can be used for both dry and wet bins
10000 bbls 20000bbls
Bins used for dry berries 7 14
Plant operating hours 8 8
Truck hours waiting 0 0
Truck waiting cost(in $) 0 0
Labor waiting time 0 6
Labor waiting cost(in $) 0 11666.85
Cost of 2 additional dryer 120000 120000
Vinod Gupta School of Management National Cranberry Cooperative IIT Kharagpur