National Cranberry Cooperative Case

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The major trends of the cranberry industry and the problems facing RP#1 There are several major trends that we can observe in the cranberry industry for the period of 1945-1979 (See Table 1 in the Appendix). First, there is a steady production increase in each of the five-year periods: from 615,000 barrels in 1945-1949 to 1,546,120 barrels 30 years later. The production growth was caused by the increasing mechanisation of cranberry industry. For example, water harvesting could result in a yield up to 20% higher than that obtained via dry harvesting. Hence, the average barrels per acre grew from 23.7 in 1945-1949 to 73.7 in 1975-1979. Second, the production growth led to the excess of cranberries produced over those utilized: from 0% of excess in 1945-1949 to 13% in 1965-1969. However, over the period 1969-1979 the overproduction has decreased due to the Agriculture Marketing Agreement Act followed by the Cranberry Marketing Order of 1978. That order limited the production of volume of each grower, thus, making a significant impact on both production excess and the industry’s prices. Before the Cranberry Marketing Order of 1978 the average price level per barrel was volatile and was not reflected in the country’s inflation rate ($11.06 per barrel in 1945-1949 vs $12.00 per barrel in 1970-1974). Third, because the water harvesting methodology was more damaging than the dry one there was a decrease in the proportion of fresh sales from 76% in 1945-1949 to 22% in 1975-1979. Berries should not be damagedto be sold fresh. Receiving plant #1 (RP1) is facing operations management problems. First, overtime costs were out of control. Second, trucks spend too much time building up and waiting to be unloaded. The flow rate of the system

Temporary Holding
Figure 2 The RP1 process flowchart

Bins for dry berries
Destoning 4,500 bbls/hr
Dechaffing 1,500 bbls/hr
Separators 1200 bbls/hr

Dechaffing 3,000 bbls/hr
Dryers 600 bbls/hr

Bins for wet berries

The flow rate (or capacity) of the system is limited by the bottleneck, the Dryers. The average number of barrels per day RP1 received in 1980 was 6041.4 bbls. 58% of fruit delivered was wet. It is expected that in 1981 the percentage of water-harvested berries will increase to 70%. The Dryers have the highest utilisation rate (a bottle neck) in the process: udryers = (6,041.4/12)*70%/600 = 58.7%

udestoning= (6,041.4/12)*30%/4,500 = 3.4%
udry dechaffing= (6,041.4/12)*30%/1,500 = 10.1%
uwet dechaffing= (6,041.4/12)*70%/3,000 = 11.7%
useparators= (6,041.4/12)/1,200 = 42%
Dryers’ capacity is 600 bbls/hr, determining the process capacity 600/0.7 = 857.1 bbls per hour. Processing and waiting time
Assuming that on a peak day the plant receives 20,000 bbls of berries, the processing would be completed in 20,000 / 857.1 = 23.33 hours (23 hours and 20 minutes). Since the plant runs no more than 22 hours a day, there would be a stock of dry berries kept in the bins overnight. Using the Little’s Law formula the average time that the trucks wait to be unloaded is 3 hours. See Table 2 in the Appendix. Assuming that during a normal day the plant receives 10,000 bbls of process berries there will be 833.33 bbls supplied per hour. This supply rate is less than the system’s flow rate 857.1 bbls/h. Therefore, the total processing time is limited by the supply rate rather than the processing capacity and calculated 10,000 / 833.33 = 12 hours. In that case there wouldn’t be any queues. See Table 3 in the Appendix. Investment options

During 20 busy days (from 20 Sep to 9 Oct) RP1 is expected to receive 16,000 bbls daily (see Table 4 in the Appendix). Given that volume, the processing would be completed in 18.67 hours (18 hours and 40 minutes). The average waiting time would be 0.67 hours (40 minutes). With 20 seasonal workers employed for that period the performance indicators of the plant are compared for 3 different options. Option 1 – Convert 4 dry storage bins...
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