ncc_awasthi_11bm60071
TRANSCRIPT
VGSOM IIT KHARAGPUR
National Cranberry Cooperative
Case Analysis
Abhishek Awasthi
11BM60071 Section A
1/30/2012
National Cranberry Cooperative is facing problem of overtime and waiting time by its growers while unloading cranberries to Receiving Point 1.
PROCESS DIAGRAM – NATIONAL CRANBERRIES CO-OPERATIVE
Assumptions: We have assumed that:
We have not considered per hour operating cost of plant
Overtime for both regular and part time worker has been taken to be $ 12 per hour.
In calculating the payback time, the same cost saving will occur every day.
It is given in case that wet berries will make 70 % of total berries and that normal running hours for plant is 11 (12-1) hours. There is a cost associated with trucks waiting to be unloaded and it is $100 per hour. Throughput: Normal Day: 10000 bbls. Per day
Peak Day: 22000 bbls. Per day
Receiving Weighing Sampling Colour Sampling Dumping
Dry Dry Dry/Wet
Destoning Dechaffing Drying Milling
1
2
3 Waste, 5%
Bagging
Bulk Bin
Bulk Truck Another Plant
Freezer
Finish Processing
Case 1: 10000 bbl/day
Now, assuming this is not a peak season, we have considered only 27 workers. Since plant is working
suboptimal level during overtime , only two-third of the work force will be working on wet berries
drying process.
=2/3 work force
= 20*(2/3)
= 12
Savings per day = 12 * 12= 144
Savings for season = 144* 90 = 12960
If we add another dryer, to save overtime cost, cost will be = 40000
Analysis
Considering the cost of depreciation and cost of investment in dryer(8-10%) it will not be
economical to buy another dryer.
Berries 10,000 bbls./day
WB 7,000 bbls./day
DB 3,000 bbls./day
Total Time 11 hours
WB Feed 636 bbls./hr
DB Feed 273 bbls./hr
Minimum processing rate for WB is at dryer, which is 600 bbls./hr
Inventory build up rate for WB 36 bbls./hr
WB holding bins capacity 3,200 bbls.
No. of hours required to fill the bins 88 hours
Which means in normal days
trucks don't need to wait,
hence no waiting cost
Total accumulation of WB after 11 hours 400 bbls.
Overtime 0.7 hours
Case 2: 22000 bbls./day
Berries 22,000 bbls./day
WB 15,400 bbls./day
DB 6,600 bbls./day
Total Time 11 hours
WB Feed 1,400 bbls./hr
DB Feed 600 bbls./hr
Minimum processing rate for WB is at dryer, which is 600 bbls./hr
Inventory build up rate for WB 800 bbls./hr
WB holding bins capacity 3,200 bbls.
No. of hours required to fill the bins 4 hours
This means after 4 hours there will be a long queue of trucks to unload berries.
Total accumulation of WB after 11 hours 8,800 bbls.
Daily Overtime 14.7 hours
Assumming 15 days peak time i.e. 15 days overtime
Overtime rate per hour 12 $
Number of employees working overtime 18 men
Daily cost of overtime 3,168 $
Total cost of overtime 47,520 $
WB waiting in truck 5,600 bbls.
Average truck capacity 75 bbls.
Number of trucks waiting 75 Trucks
Time to clear truck queue 9 hours
Total time spent in waiting by trucks 697 hours
Cost of truck hiring per hour 100 $
Total waiting cost of trucks 69,689 $
Total additional cost 117,209 $
Adding 1 Dryer:
Berries 22,000 bbls./day
WB 15,400 bbls./day
DB 6,600 bbls./day
Total Time 11 hours
WB Feed 1,400 bbls./hr
DB Feed 600 bbls./hr
Minimum processing rate for WB is at dryer, which is 800 bbls./hr
Inventory build up rate for WB 600 bbls./hr
WB holding bins capacity 3,200 bbls.
No. of hours required to fill the bins 5 hours
Total accumulation of WB after 11 hours 6,600 bbls.
Daily Overtime 8.3 hours
Overtime rate per hour 12 $
Number of employees working overtime 18 men
Daily cost of overtime 1,782 $
Total cost of overtime 26,730 $
WB waiting in truck 3,400 bbls.
Average truck capacity 75 bbls.
Number of trucks waiting 45 Trucks
Time to clear truck queue 4 hours
Total time spent in waiting by trucks 193 hours
Cost of truck hiring per hour 100 $
Total waiting cost of trucks 19,267 $
Total additional cost 45,997 $
Cost of additional dryer = 60,000 $
Total saving in cost = 117,209-45,997 = 71,212 $
Hence cost saved by adding 1 dryer is 71,212 $ by investing 60,000 i.e. ROI of 119 %.
Adding 2 dryers:
Berries 22,000 bbls./day
WB 15,400 bbls./day
DB 6,600 bbls./day
Total Time 11 hours
WB Feed 1,400 bbls./hr
DB Feed 600 bbls./hr
Minimum processing rate for WB is at dryer, which is 1,000 bbls./hr
Inventory build up rate for WB 400 bbls./hr
WB holding bins capacity 3,200 bbls.
No. of hours required to fill the bins 8 hours
Total accumulation of WB after 11 hours 4,400 bbls.
Daily Overtime 4.4 hours
Overtime rate per hour 12 $
Number of employees working overtime 18 men
Daily cost of overtime 950 $
Total cost of overtime 14,256 $
WB waiting in truck 1,200 bbls.
Average truck capacity 75 bbls.
Number of trucks waiting 16 Trucks
Time to clear truck queue 1 hours
Total time spent in waiting by trucks 19 hours
Cost of truck hiring per hour 100 $
Total waiting cost of trucks 1,920 $
Total additional cost 16,176 $
Cost of additional 2 dryers = 60,000*2=120,000 $
Total saving in overtime = 47,520 – 14,256 = 33,264
Total saving in cost = 117,209-16,176 = 101,033 $
Hence cost saved by adding 2 dryers is 101,033 $ by investing120,000 $ i.e. ROI of 84 %.
Adding 1 Dryer and converting 4 holding bins
Berries 22,000 bbls./day
WB 15,400 bbls./day
DB 6,600 bbls./day
Total Time 11 hours
WB Feed 1,400 bbls./hr
DB Feed 600 bbls./hr
Minimum processing rate for WB is at dryer, which is 800 bbls./hr
Inventory build up rate for WB 600 bbls./hr
WB holding bins capacity 4,200 bbls.
No. of hours required to fill the bins 7 hours
Total accumulation of WB after 11 hours 6,600 bbls.
Daily Overtime 8.3 hours
Overtime rate per hour 12 $
Number of employees working overtime 18 men
Daily cost of overtime 1,782 $
Total cost of overtime 26,730 $
WB waiting in truck 2,400 bbls.
Average truck capacity 75 bbls.
Number of trucks waiting 32 Trucks
Time to clear truck queue 3 hours
Total time spent in waiting by trucks 96 hours
Cost of truck hiring per hour 100 $
Total waiting cost of trucks 9,600 $
Total additional cost 36,330 $
Cost of adding 1 dryer and converting 4 holding bins= 60,000 + 10,000*4= 100,000 $
Total saving in cost = 117,209-36,330 = 80,879 $
ROI = 67 %
Best Option:
By going through and evaluating all the options, best option to be adopted is to add 2 dryers where
we can save 33,264 $ in overtime and reduce waiting money loss of growers by 67,769 $.
Note: Complete analysis is done using MS Excel and it can be found at :
http://bit.ly/NCC-Simulation-Awasthi