National Cranberry Cooperative
Analyze and calculate as many costs as you can
There are a number of costs that can be calculated and evaluated in the case study.
Overtime costs
There is a high percentage of overtime hours. This can be calculated as follows:
12,000 / 34,000 x 100%
= 35.3% of the total hours
For instance, in 1980, there are 12,000 overtime hours. The estimated costs are as follows:
The maximum cost incurred is $9.75 x 12,000 = $117,000 for the full year employees
The minimum cost incurred is $6 x 12,000 = $72,000 for the seasonal personnel
Premium costs for the grading system
The grading system encompasses numbers 1, 2A, 2B and 3. There is an unnecessary $0.75 premium costs for number 3. For this number, there are 450,000 barrels but 50% was only for that quality:
Therefore, the costs:
(450,000 x 0.75) x 50%
= $168,750 (Harvard Business School, 2011).
Identify the bottlenecks and why they exist (based purely on numbers)
National Cranberry Cooperatives needs to find a method to improve efficiencies in the production of cranberries during the peaks in production. Devoid of this, a bottleneck will take place and bring about delays and increased overtime expenses. With regard to the case study, bottlenecks take place when trucks are waiting to unload, dryers for wet cranberries and also bin space for wet cranberries. All through the peak season from September to December, quantities of cranberries received are much greater than in the off-season, causing difficulties and problems to the RP1 operational system. Trucks' wait- time for unloading process fruit is significantly lengthy and extensive. In addition, the...
An additional problem is with the categorization of the color of the berries; the system of identification and segregation is inaccurate and flawed generating sunk costs (Harvard Business School, 2011).
This is based on the following numbers.
1. Wet holding bins (17-27) are full:
The capacity is 3,200 barrels (bbls) per hours and thereafter backs up into Kiwanee dumpers
An example is from the year 1980 where the bins fill to capacity upon receiving 3,200 barrels whereas the dumpers become full at 3,000 barrels.
2. The waiting time for trucks
The arrival rate for wet berries is:
(19,000 / 11) x 70%
= 1,209 bbls per hour
The process rate for the wet berries (on the drying unit) is 600 bbl per hour
Therefore, there is an excess inventory of = 1,209 bbls -- 600 bbls
= 609 bbls
The wet bins, which are 25 -27 have a capacity of 1,200 (400 bbl per bin)
The wet or dry berry bins, which are 17 -24 have a capacity of 2,000 (250 bbls per bin)
Therefore, the wet berry bins will be filled after a period (explained as follows):
= (2,000 + 1,200) / 609
= 3,200 / 609
= 5.25 hours
= 7 pm + 5 hrs 15 minutes
= 12:15 P.M
3. Full dryers for wet cranberries
The current capacity is 600 bbls per hour. However, the estimated flow is over 900 bbls per hour.
Therefore, the bottleneck can be perceived in the dryer capacity, which is 600 barrels per hour
The wet berries are 70%, which is equal to 70% x 19,000 = 13,300 barrels
Therefore, in one day, the number of hours required is
=…
