National Cranberry Case

Question 1:

Inventory build-up analysis with different dryer configurations.

Question 2:

Truck waiting time analysis.

Please, show all the work/calculations that was done to find the answers, share inventory build-up analysis, and provide thorough/long explanations to how you found the answers, so that I can fully understand! Thank you!

I have provided the National Cranberry Case below:

National Cranberry Cooperative On February 14, 1971, Hugo Schaeffer, vice president of operations at the National Cranberry Cooperative (NCC), called his assistant, Mel O'Brien, into his ofce and said: Mel, I spent all day yesterday reviewing last fall's process fruit operations at receiving plant No. 1 [RP1] with Will Walliston, the superintendent, and talking with the co-op members [growers] in that area. It's obvious to me that we haven't solved our problems at that plant, yet. Even though we spent $75,000 last winter for a fifth Kiwanee dumper at RPl, our overtime costs were still out of control this fall, and the growers are still upset that their trucks and drivers had to spend so much time waiting to unload process fruit into the receiving plant. I can't blame them for being upset. They are the owners of this cooperative, and they resent having to lease trucks and hire drivers to get the berries out of the field and then watch them stand idle, waiting to unload. Walliston thinks that the way to avoid these problems next fall is to buy and install two new dryers [$25,000 each], and to convert our dry berry holding bins so that they can be used to store either water-harvested or dry berries [$5,000 per bin]. I want you to go out there and take a hard look at that operation and find out what we need to do to improve operations before the 1971 crop comes in. We're going to have to move quickly if we are going to order new dryers, since the equipment and installation lead times are in excess of six months. By the way, the growers in that region indicated that they plan on about the same size crop this year as last. But it looks like the percentage of water-harvested berries this year will increase to 70% of total process fruit from last year's 58%. NCC and the Cranberry Industry NCC was an organization formed and owned by growers of cranberries to process and market their berries. In recent years 99% of all sales of cranberries were made by the various cooperatives that are active in the cranberry industry. NCC was one of the larger cooperatives and had operations in all the principal growing areas of North America: Massachusetts, New Jersey, Wisconsin, Washington, Oregon, British Columbia, and Nova Scotia. Table A contains industry data for US. production and sales of cranberries. Table A Data on U.S. Cranberry Harvest ProductionfUtilization (in barrels)8 Average Price Acreage Barrels Fresh (all uses, $ per Crop Year Harvested per Acre Production Sales Process barrel)b Five- Year Average 193539 26,022 23.7 615,100 466,844 148,256 11.06 194044 25,434 24.9 634,300 380,965 253,335 1 5.50 194549 26,205 31.3 822,580 381,320 436,060 17.15 195054 24,842 39.8 983,660 439,170 532,070 1 1 .71 195559 21,448 51.2 1,096,160 427,520 543,860 9.79 196064 20,778 62.6 1,300,120 468,340 755,760 10.90 196569 20,988 73.7 1,546,120 327,980 1,169,360 15.88 Annual 1965 20,640 69.6 1 ,436,800 389,600 1,033,200 15.50 1966 20,760 77.0 1 ,598,600 328,000 1 ,249,600 15.60 1967 21 ,220 66.2 1 ,404,300 278,300 1 ,034,900 15.50 1968 21,135 69.4 1,467,800 301,900 1,111,200 16.50 1969 21,185 86.1 1,823,100 342,100 1,417,900 16.30 19700 21,445 95.1 2,038,600 367,000 1,418,600 12.90 Source: Annual reports of Crop Reporting Board, Statistical Fleporting Service, USDA. Note: Data gathered on five statesMassachusetts, New Jersey, Oregon, Washington, and Wisconsin. 9Differences between production and utilization (fresh sales and process) represent economic abandonment. bBeginning in 1949 the series represents equivalent returns at first receiving station, fresh and processing combined. Years prior to 1949 represent season average prices received by growers for all methods of sale, fresh and processing combined. CPreliminary figures for 1970. Some signicant data are observable in Table A. Probably the most important trend was the growing surplus of cranberries produced over those utilized. This surplus was serious enough by 1968 for the growers to resort to the Agriculture Marketing Agreement Act of 1937. Under this act, growers can regulate and control the size of an agricultural crop if the federal government and more than two-thirds of the growers by number and tonnage agree to a plan for crop restriction. In 1968 this act was used to create the Cranberry Marketing Order of 1968, which stipulated that no new acreage was to be developed over the next six years and that each grower would have a maximum allotment at the end of six years equal to the average of the grower's best two years from 1968 through 1973. Eighty-seven percent of all growers voted in favor of the order, making it binding on all cranberry growers. In 1970 the growers resorted to the Agriculture Marketing Agreement Act once again. Under the Cranberry Marketing Order of 1970, the growers and the government agreed that 10% of the 1970 crop should be set aside. The set aside berries (berries that are either destroyed or used in a way that will not influence the market price) amounted to more than 200,000 bbls. (A barrel of cranberries weighs 100 lbs.) Handlers physically set aside 10% of the berries before harvesting, under the supervision of a committee of growers and representatives from the Department of Agriculture. Another important trend was the increasing mechanization of cranberry harvesting. Wafer harvesting, in particular, was developing rapidly in the vicinity of receiving plant No. 1. Under the traditional dry harvesting, berries were handpicked from the bushes. In water harvesting, the bogs were ooded, the berries were mechanically shaken from the bushes, and the berries then were collected easily since they oated to the surface of the water. Water harvesting could result in yields up to 20% greater than those obtained via dry harvesting, but it caused some damage and it shortened the time that harvested fruit could be held prior to either its use or freezing for long-term storage. Water harvesting had developed at a remarkable rate in some areas. Receiving plant No. 1 received 25,000 bbls. of water-harvested fruit in 1968, 125,000 bbls. in 1969, and 350,000 bbls. in 1970. Figure A Daily Deliveries of Both Fresh and Process Berries to RP1 Bbls. Total Barrels 20.000 463,791 1967 533,426 1968 _ _ 678,183 1969 ---------- 10.000 9/5 9/15 9/25 10/5 1 0/15 11/4 Water harvesting was not the preferred harvesting method for fruit that was to be sold fresh, since fresh fruit must be undamaged and have as long a shelf life as possible. It was also necessary to ship fruit that was to be sold fresh to receiving plants in field boxes that contain about 1/ 3 bbl. of berries rather than in bulk (trucks holding up to 400 bbls.) to avoid damage. Fresh fruit was inspected berry by berry prior to packaging. Altogether, fresh fruit production remained a very labor-intensive process. Receiving Plant No. 1 (RP1) RP1 received both fresh fruit and process fruit during a season that usually started early in September and was effectively finished by early December (see Figure A). The fresh fruit operation was completely separate from the process fruit operation and took the fruit from receiving through packaging. This operation involved more than 400 workers during the peak of the season. Most of the workers were women, who inspected berries as they moved by on teon-coated conveyors. Packaged fresh fruit was shipped from RP1 directly to market by truck. No problems had been experienced in fresh fruit processing in the past. The handling of process fruit at RP1 was highly mechanized. The process could be classified into several operations: receiving and testing, dumping, temporary holding, destoning,1 dechaffing,2 drying, separation, and bulking and bagging. The objective of the total process was to gather bulk berries and prepare them for storage and processing into frozen fresh berries, sauce, and juice. Process Fruit Receiving Bulk trucks carrying process berries arrived at RP1 loaded with anywhere from 20 to 400 bbls. These trucks arrived randomly throughout the day as shown in Exhibit 1. The average truck delivery was 75 bbls. When the trucks arrived at RP1 they were weighed and the gross weight and the tare (empty) weight were recorded. Prior to unloading, a sample of about 30 lbs. of fruit was taken from the truck. Later, this sample would be run through a small version of the cleaning and drying process used in the plant. By comparing the before and after weight of this sample, it was possible to estimate the percentage of the truck's net weight made up of clean, dry berries. At the same time, another sample was taken to determine the percentage of unusable berries (poor, smaller, and frosted berries) in the truck. The grower was credited for the estimated weight of the clean, dry, usable berries. In 1970, on the average, the growers were credited for 94% of the scale weight of dry deliveries and 85% of the scale weight of wet deliveries. (See Exhibit 2 for total 1970 deliveries of process berries.) At the time the truck was weighed, the truckload of berries was graded according to color. Using color pictures as a guide, the chief berry receiver classied the berries as Nos. 1, 2A, 2B, or 3, from poorest color (No. 1) to best (No. 3). There was a premium of 50 cents per bbl. paid for No. 3 berries, since color was considered to be a very important attribute of both juice products and whole sauce. Whenever there was any question about whether or not a truckload was No. 2B or No. 3 berries, the chief berry receiver usually chose No. 3. In 1970 the 50-cent premium was paid on about 450,000 bbls. of berries. When these berries were used, however, it was found that only about half of them were No. 3's. To improve this yield, Schaeffer was considering the installation of a light meter system for color grading. This system was projected to cost $10,000 and would require a full-time skilled operator at the same pay grade as the chief berry receiver. Temporary Holding After a truckload of process berries had been weighed, sampled, and color graded, the truck moved to one of the five Kiwanee dumpers. The truck was backed onto the dumper platform which then tilted until the contents of the truck dumped onto one of five rapidly moving belt conveyors. Each of the five conveyors took the berries to the second level of the plant and deposited them on other conveyors capable of running the berries into any one of 27 temporary holding bins. Bins numbered 124 held 250 bbls. of berries each. Bins 25, 26, and 27 held 400 bbls. each. All of the conveyors were controlled from a central control panel. It usually took from 5 to 10 minutes to back a truck onto a Kiwanne dumper, empty its contents, and leave the platform. At times some trucks had to wait up to 3 hours, however, before they could empty their contents. These waits occurred when the holding bins became full and there was no place in the receiving plant to temporarily store berries before further operations. The holding bins emptied onto conveyors on the first level of the plant. Once the bins were opened, the berries owed onto the conveyors and started their way through the destoning, dechaffing, drying (water-harvested berries), milling, and either bulk loading or bagging operations. Destoning, Dechaing, and Drying Holding bins 2527 were for wet (water-harvested) berries only. Holding bins 1724 could be used for either wet or dry berries. Wet berries from these bins were taken directly to one of the three dechaffing units (destoning was unnecessary with water-harvested berries) which could process up to 1,500 bbls. per hour each. After dechaffing, these wet berries were taken to one of the three drying units where they were dried at rates up to 200 bbls. per hour per dryer for berries that were to be loaded into bulk trucks, and approximately 150 bbls. per hour per dryer for berries that were to be bagged. Wet berries that were to be bagged had to be drier than bulked berries, since the bags tended to absorb moisture and would stick together when frozen. Holding bins 116 were for dry berries only. Berries from these bins were routed through one of three destoning units which could process up to 1,500 bbls. of berries per hour before going through the dechaffing units. Frequently, both wet and dry berries were processed at the same time through the system. The wet berries would be processed through the part of the system that included the dryers, while the dry berries were processed through different machines. MillingQuality Grading After destoning, dechaffing, and drying, berries were transported to one of three large take- away conveyors that moved berries from the first level of the receiving building to the third level of the adjoining separator building. Here these same conveyors were called feed conveyors as they were now feeding berries into the jumbo separators (see Figure B). There were nine jumbo separators along each of the three feed conveyors. The jumbo separators identied three classes of berries: first quality berries, potential second quality berries, and unacceptable berries. The separation process was a simple one that was based on the fact that good cranberries will bounce higher than poor cranberries (see Figure C for a drawing of the separation process). The first quality berries went directly onto one of three take-away conveyors on the second level and were transported to the shipping area. The unacceptable berries fell through waste chutes into water-lled waste umes on the first level and were oated off to the disposal area. The potential second quality berries fell into the Bailey mills on the second level of the building. The Bailey mills separated the stream of incoming berries into second quality berries and unacceptable berries. The Bailey mills operated on the same principle as the jumbo separators. Over the years the percentage of second quality berries had consistently been close to 12%. Figure B RPl Separator Building FE E D CONV. CHUTE ...._/II I:- 'l l-I\\ JUMBO SEBAHATOR I TAKE AWAY CONV. II V V WASTE CHUTE \\; r BAILEY MILL WASTE FLUME TAKE AWAY CONV. Each of the three separator lines could process up to 450 bbls. per hour, but the rate of processing declined as the percentage of bad fruit increased. It was estimated that the average effective capacity was probably slightly less than 400 bbls. per hour for each line. Figure C Separator Operation Berrries falling from separator hopper To take-away conveyor h""'-b To Bailey Mills '-'-b Rejects go to waste ume Bulking and Bagging Six conveyors carried berries from the separator building into the shipping buildingthree from the jumbo separators and three from the Bailey mills. Each of those six conveyors could feed berries onto any one of the three main exible conveyors in the shipping area. Each of the three conveyors in the shipping area could be moved to feed berries into any one of four bagging stations, any one of four bulk bin stations, or any one of two bulk truck stations. The berries left RPl in bulk trucks for shipment directly to the nish processing plant, in bins for storage at freezers with bulk storage capability, or for storage in freezers that could handle only bagged berries. These frozen berries were then held for year-round usage by one of the NCC processing plants. Some processing plants could receive only bagged berries, while others could receive either bulk or bagged berries. A maximum of 8,000 bbls. could be bagged (60 lbs. of berries per bag) in a 12-hour period. To attain this output, three five-member teams ran three of the bagging machines and stacked bags in trucks. A fourth bagging machine was kept as a spare in case there was a jam or a breakdown on one of the three operating machines. A study had shown that it cost about $.05 more in direct labor per barrel for bagging than for bulk loading and the cost of bags was $.12 each. In 1970, four commercial freezers were under contract with NCC to accept bagged fruit according to the rate and capacity schedules shown in Table B. Trucks were under contract with NCC to haul berries to the freezers at the freight rates also shown in Table B. They were available 24 hours per day and there was rarely a holdup for want of a truck. Freezers were generally open 24 hours per day, seven days per week. Table B also shows the rate and capacity schedules for those freezers that were equipped to handle bulk berries. Included are NCC's own freezer and the local NCC processing plant which converted the bulk berries to finished products. The local processing plant utilized an average of 700 bbls. daily from bulk bins that could be filled at the rate of about 200 bbls. per hour at each of the four bin stations. Berries could be loaded directly into bulk trucks at two stations, each capable of loading up to 1,000 bbls. per hour. One worker ran both stations. There was normally about a 10-minute delay between the time when one truck was filled and the time when another truck was in position, ready for filling. Table B Freezer Rates and Capacities, 1970 ($ per barrel) Freight Initial Continuing Total Capacity Cost Costa Monthly Cost (bbls.) Bulk Berries Frostwayb .25 .31 .22 280,000 Inland .30 .76 .23 25,000 NCC freezer .23 30,000 NCC process .23 Total 335,000 Bagged Berries Farmers .29 .76 .23 75,000 Northern (sift-day week) .29 .80 .22 0 American (6-day week) .60 .75 .22 0 Freeze-Rite (6-day week) .70 1.24 .34 alnitial cost included in and out handling cost and freezing cost. bThe contract with Frostway included a guarantee that at least 280,000 bbls. would be put in the Frostway freezer. For every bbl. less than 280,000, NCC would pay a penalty of $0.81. ETotal capacity was not a constraining factor. Scheduling the Work Force During the harvest season, September 1 to December 15, the process fruit side of RP1 was operated seven days a week with either a 27-member work force or a 53-member work force, depending on the relative volume of berry receipts. When the volume of berry receipts was expected to be low, the plant operated with 6 workers in receiving (two 3-member teams operating one Kiwanee dumper each), 10 workers in the milling area (one 5-member team per feed conveyor), 8 workers in shipping (one 5-member team on a bagging station, one worker operating the two bulk stations, and 2 workers together operating a bulk bin station), one worker supervising the destoning, dechaffing, and drying operations, and 2 workers (one on each of two shifts) in the control room. Figure D shows the planned daily manning schedule for the low-volume periods which were anticipated before the 1970 harvest season began. During the peak of the season, the 53 workers who operated the process fruit side of RP1 were assigned as follows: 15 workers in receiving (five 3-member teams, each assigned to one dumper), 15 workers in milling (three 5-member teams, each assigned to one of the feed conveyors), 20 workers in shipping (three 5-member teams, each assigned to one bagging station, one worker operating the two bulk stations, and two 2-worker teams, each assigned to one bulk bin station), one worker supervising the destoning, dechaffing, and drying operations, and 2 workers (one on each of two shifts) in the control room. Figure E shows the planned daily work schedule for the high-volume periods anticipated at RP1 before the 1970 harvest season began. There were 27 employees at RP1 who were employed for the entire year; all others were hired for the season only. The 27 nonseasonal employees were all members of the Teamsters Union, as were 15 seasonal workers. Seasonal workers could work only between the dates of August 15 and December 25 by agreement with the union. Most seasonal workers were employed via a state employment agency that set up operations each fall. The employment agency helped in placing seasonal workers in the receiving plant and in harvesting jobs with the local growers. The pay rate for seasonal workers in the process fruit section was $2.25 per hour. They were paid the overtime rate of 1% times their straight-time rate for anything over 40 hours per week. The straight-time pay rate for the full-year employees averaged $3.75 per hour. Figure D Schedule for 27 Workers, Low-Volume Period Receiving Destone, Milling Shipping Control Room (6) Dechaft, and (10) (B) Operator Dry (1 per shift) 7 AM (1) 9 _ 11 1 PM 3 5 _ 7 |:| RegularTime 9 _ |:| Overtime 11 Note: Numbers in parentheses represent workers required for September 119 and October 11 through December 15. Figure E Schedule for 53 Workers, High-Volume Period Receiving Destone, Milling Shipping Control Room (15) Decha, and (15) (20) Operator Dry (1 pershi) 7 AM (1) 7 |:| Regular Time 9 . |:| Overtime 11 Note: Numbers in parentheses represent workers required for September 20 through October 10. The amount of overtime used in a day or week depended on how effectively workers could be scheduled. If it was known, for instance, that the plant would have to run beyond the normal 11 PM. shutdown time, then it would be desirable to have some workers report for work at 6 PM. or later, but it was not always possible to find workers who would do this. There was also the problem of absenteeism, which caused Walliston to carry more employees on the payroll than he really needed. He had to have 20 on the payroll to be reasonably sure he'd have 15 on hand. Higher than expected absenteeism, of course, often resulted in overtime for those who were there. For the 1970 season, the process fruit operation at RP1 utilized about 22,000 man-hours of straight-time direct labor and about 12,000 man-hours of overtime. When it was necessary to work beyond 11 P.M., a crew of only eight or nine workers was required to run the holding bins empty and do bulk loading. Although dry fruit could be held in the bins overnight, it was considered undesirable to hold wet fruit any longer than necessary, so wet fruit was always run out before shutting down. The plant never ran more than 22 hours a day, since at least 2 hours were required for cleaning and maintenance work. (Downtime due to unscheduled maintenance was very small; said Walliston: "W e ran 350,000 bbls. through the wet system in 1970 and we were down a total of less than 8 hours\") Exhibit 1 Log of Total Deliveries on September 23, 1970 Time Color Wet/Dry Weight Time Color Wet/Dry Weight Time Color Wet/Dry Weight W 11540 411 33940 633 D 360 949 W 7280 954 W 12580 413 9980 634 416 10020 636 W 9240 957 D 11040 428 12200 638 W 12700 959 D 7740 961 439 W 28780 12500 8980 640 7520 645 D 1800 962 7000 445 D 7340 446 4140 648 8240 968 448 1 1720 650 w 13820 969 4260 975 1660 451 6520 651 w 11280 655 977 SOOOSOOOOOS 456 D 4980 1480 1280 12640 459 12660 660 500 980 31640 663 29560 982 6420 460 1 1920 664 9720 984 11200 462 8000 996 11920 463 2060 665 6020 666 24640 1000 12320 468 671 1880 1005 W 12640 8860 3940 673 2760 1008 7140 6060 674 9980 1010 7180 677 2980 1011 11220 4660 SOOOOOS 6840 1880 678 7860 1012 7260 681 1 1480 1022 9600 684 12680 1040 11100 4960 698 1043 11080 316 5640 3320 780 2220 1046 w 11020 W 11240 17820 790 1500 1047 9460 35060 336 791 1050 31580 10420 793 12660 1051 5780 809 5620 1056 7420 4500 5500 311 2540 1061 8880 817 11760 1064 5700 17880 B18 W WW WW WW WW WW N W WW N N W W WW N W WW N N W N N N W N N W W N W N W W N W W N W W W N N W W N W W N W WWNW 7720 1068 N W W N W N W W N W WW WW N W WW WW W N W WW WW N W N W N WW WW- - W W W N N W N W WW WW WW WW WW WW WWN 4640 NN W W W W W W W N W W N W W W W W W W W W N W W N N W W W W W W W N W W W N N W WW Ww ww ww ww ww N w ww ww ww 1580 B23 7080 1073 2420 6440 825 20400 1079 9440 7860 838 12200 1081 11620 3720 841 7420 1082 8360 11340 842 3140 1084 10500 1480 343 3740 1085 3240 2840 1090 10280 5280 845 1 1640 846 15240 1091 8140 11180 848 11540 1092 2440 2900 850 31460 095 3720 3580 855 9300 1 103 43180 340 862 4580 1111 13420 3920 874 1 1280 1116 7400 2720 126 7260 1200 376 3480 877 14140 1127 6240 3580 878 26700 1129 3120 8440 379 11820 1132 8340 8500 882 12800 134 6160 7560 887 7980 1 14 9020 9020 4540 895 8900 1 140 1420 9240 9040 897 1140 360 900 7160 1140 7660 2820 904 7680 1140 3960 4100 1350 916 8780 1140 1 1560 922 3660 1140 11860 19340 924 14840 1140 11460 937 9160 11240 20340 1140 604 9600 942 5960 1140 609 13020 945 1280 1140 10480 625 2620 947 10300 1140 1160 630 1 1460 Cranberries Delivered Wet 768,600 Note: All weights are in pounds. The time recorded was Dry 1,065,420 minutes after 12:00 A.M. For example, the recorded time of 411 Color #1 34,460 Color #2 401,080 was equivalent to 6:51 A.M. Color #3 1,398,480 Total pounds 1,834,020 Total number of trucks 243Exhibit 2 Deliveries of Process Berries, 1970 Total Deliveries Day (scale weight in bbls.) Delivered Wet Color No. 1 Color No. 2 Color No. 3 9/ 1 9/ 1 9 44,176 54% 6% 72% 22% 9/20 16,014 31 0 44 56 9/21 17,024 39 0 35 65 9/22 1 6,550 39 0 22 78 9/23 1 8,340 42 0 22 78 9/24 18,879 41 0 21 79 9/25 18,257 36 0 14 86 9/26 17,905 45 0 10 90 9/27 16,281 42 0 18 82 9/28 1 3,343 38 0 1 5 85 9/29 18,717 43 1 11 88 9/30 1 8,063 59 1 9 90 10/1 18,018 69 1 11 88 10/2 15,195 60 2 18 80 10/3 15,816 60 3 12 85 10/4 16,536 57 5 21 74 10/5 17,304 55 2 26 72 10/6 14,793 46 7 32 61 1 0/7 1 3,862 61 3 39 58 10/8 1 1 ,786 56 0 36 64 1 0/9 1 4,91 3 54 0 33 67 10/1012/10 238,413 75 0 22 78 Total barrels 61 0,040 58 1 25 74