BAYONNE PACKAGING, INC. CASE 1 OPERATIONS MANAGEMENT
teached by Manuel Baganha and Virginia Ulfig
This case is based only on data available on “Bayonne Packaging, Inc.” by Roy D. Shapiro and Paul E. Morrison
BAYONNE PACKAGING INC.
Bayonne is a “specialty packaging” paper converter that produces customized, complex design packaging used by industrial companies in promotional materials, software, luxury beverages, gift food and candy. The company is located in New Jersey, USA and is worth 43 million dollars. In spite the company’s sales growth in the last few years, it is now struggling with lower profit margins and it even had a loss in October 2011, the first since 2001, due to performance complications. This loss is a result of three main related aspects: quality, delivery and cost. In order to understand the sources of these problems this report will analyze October 2011, the worst month of the 2011 fiscal year, in order to provide insights about what can be done to turn around the situation. Currently, the company’s capacity isn’t matching its demand requirements. Heidelberg presses are using 100% capacity (consult Exhibit 1 to get every activity capacity utilization), making Printing activity the bottleneck. Bottleneck slows down the subsequent activities because it can only produce 9.326.913 pieces per month, limiting the inputs available for the Die-Cut center. As the company faces an increasing demand and an expansion of its business the capacity constraint is a challenge. It’s already difficult for Bayonne to fulfill all the orders it receives. In order to improve the company’ situation we need, in the short-term, to be more efficient using our current resources and, in the midterm, to increase the productive capacity to allow growth. Efficiency can be attained by improving quality and production time. The main problems with quality are coming from the Fold & Glue department, where glued lines are either missing or in excess. In the analysis of the quality the yields of every process in the production were calculated and it’s possible to see that both Fold & Glue machines are performing below average, specially the Royal/Queen with a yield of 90% (see Exhibit 2). When pieces leave Royal/Queen only 87% of the initial input matches Bayonne’s quality standards. The reasons for the lack of quality begin with bad maintenance. Operators are supposed to check the oil in the beginning and
Bayonne Packaging Inc.
clean machines in the end of their shifts but there isn’t a functional mechanism of control to check if they really do it right. Additionally the supervisor, Gomes, chooses to wait for the pieces to break to call maintenance instead of checking the machines regularly. That results in the machines working with material in poor conditions (filters are an example in the case), which affects quality. Maintenance routines need to be installed and should be more preventive and less reactive. Besides maintenance, the fact that orders already arrive late to the Fold & Glue department, mostly because of ganged orders, makes the operators’ job harder. According to Gomes, setups in the machines aren’t easy to get right and working under schedule pressure has a negative influence on performance. This problem comes from the informal scheduling system and lack of communication between departments. If the schedules were correctly updated and synchronized it would be possible to adapt the grouped orders to achieve both goals simultaneously, save setup time in the Die-Cut center, increasing its capacity (see Exhibit 3) and respect Fold & Glue deadlines. Instead, what’s happening is that supervisors are independently figuring out which orders to gang and to prioritize. Update the manual and informal registration...
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