National Cranberry Case Report

Operations Management - I

Team Name: D4

Authors:

Section: D

August 2019
To: Hugo Schaeffer, Vice President, National Cranberry Cooperative
From: D4
RE: RP#1 processing

National Cranberry Cooperative (NCC) is currently operating its Receiving Plant 1 (RP#1)
inefficiently. This has led to high waiting time for trucks arriving with cranberries and
unhappiness between the drivers. Subsequently, an analysis of processing fruit operations was
done to identify the key bottlenecks in the plant. Furthermore, the four different options were
explored independently to arrive at the conclusion. Based on the identified issues, it is
recommended to increase the bottleneck capacity (drying unit of wet berries) by installing a new
dryer. This will help in reducing the overtime and waiting time for trucks. Furthermore,
installing a light meter system for color grading to increase the process accuracy is also
recommended as it will lead to significant cost savings.

Cranberry Industry and NCC

Cranberries production has shown an increasing trend with a CAGR of 7.2% in the last 5 years.
NCC is one of the largest cooperatives to process and market cranberries produced by its
growers. Based on the evaluation of options in the last fall out, it is evident that there are issues
at the industry level as well as firm level. The most important trend is the surplus production
over those utilized. In addition, RP#1 has limited processing capacity.

As per the recent industry trends, water harvesting method has become prevalent as it results in
up to 20% greater yield than those obtained in dry harvesting. However, RP#1 has limited
processing capacity of wet berries which has led to longer waiting times for trucks during peak
season. Further, there is an operational inefficiency in color grading leading to high costs and
inaccuracy.

Recommendation 1: Installation of a new dryer to reduce truck waiting time and overtime
As per the process flow diagram (Fig ), the bottleneck process is drying unit of wet cranberries
having a capacity of 600 bbls per hour. This leads to an average waiting time of 0.7 hours and
plant running for 22 hours. With a new dryer, the bottleneck rate becomes 800 bbls reducing the
average waiting time to almost zero and plant running for 17 hours reducing overtime. There is a
one-time investment of $25,000 for the new dryer. The daily overtime cost during peak season
reduces from $2300 to $1143. In addition, the lease cost significantly reduces from $16,400 to
$600. Hence, the investment is new dryer is a good opportunity.

Recommendation 2: Purchase a light meter system for increasing color grading accuracy
In the previous year, $0.5 premium was paid for 450,000 bbls of grade 3 berries. However, only
half of them were grade 3 leading to unnecessary costs. In order to tackle this, a new light meter
system is recommended to be purchased. This will cost $10,000 for the machine and $16,875 for
the labour. Furthermore, this will lead to an annual savings of $85,625.
Supporting Analysis
Your analysis should address the issues below.

(Note: You may make use of the following information and assumptions about National
Cranberry:
 On an average “busy” day there are 17,280 bbl arrive over the 12-hr period (7 am to 7
pm). This is based on a “typical” busy day in September.
 All operations at RP#1 start at 7am.
 Wet berries are 75% of all berries.
 Holding bins 17-24 are dedicated to wet berries.
 Capacity of the dumpers is 3,000 bbl / hr (it takes on average 7.5 minutes to dump a
truck, a truck holds on average 75 bbl so, from Little's Law, each of the five dumpers will
take 600 bbl/hr).
 Leasing a truck and driver costs $100/hr. Rates for RP#1 employees are given in the
case.)

Causes of Delay
Present a process flow diagram for for RP#1, labeled with relevant capacities and utilizations on
a busy day in September 1996. Indicate different processing flows for wet and dry berries.
Clearly identify the bottleneck.

Describe the situation during a typical busy day by constructing an inventory build-up diagram
for bins and trucks. Your diagram should include build-up and draw-down rates, inventory
levels, and times.

Analysis of Investments
Provide an economic analysis of at least three of the following four candidate investments:

 Kiwanee Dumper #5 purchased in 1995.

 1 or 2 new dryers.
 bin conversions.
 light meter system for color grading.

Conclusions
Describe the main insights from this case by identifying the flows, variability and buffers in the
National Cranberry system and their relevance to the problems at RP#1 and your
recommendations to address them.