National Cramberry Case

Topics: Cranberry, Disk image, Cost Pages: 7 (1959 words) Published: April 19, 2013

National Cranberry Cooperative

MGT 413 Case Write Up #1

Group 6

Problems facing RP1

The National Cranberry Cooperative faces several challenges with its operations at receiving plant 1 (RP1) in 1970. The primary challenges that RP1 is facing transmits to capacity and efficiency of their cranberry processing. For example, often there are trucks waiting to unload their cranberries because of existing bottlenecks in the processing system. This wait time can reach as long as 3 hours. If there is no processing backup, the trucks can unload within 5 to 10 minutes. The bottlenecks that attribute to the truck backup result from full holding bins or max drier utilization. The reason for the long delays is because RP1 experiences a greater input of cranberries than it can process. Specifically, this backlog of trucks stems from the influx in wet cranberries, which require an additional processing step before bagging and shipping. Recently, RP1 is experiencing a higher percentage of wet berries as a result of its location and the industry trend of harvesting the cranberries wet.

The second key issue at RP1 is the deficiency in quality assurance of cranberry grading. In 1970 alone NCC paid the premium on 450,000 bbls of berries while half of them turned out to be less than grade 3 berries. The imprecision in grading cranberries resulted in a cost overrun of approximately $112,500.

Human Resource Utilization is the last key issue identified for RP1. RP1 has an issue with absenteeism which leads to a greater number of employees on the payroll than necessary for operations. Absenteeism also results in unnecessary overtime pay for those employees that show up, which further increases payroll costs.

Industry trends that may affect cranberry processing

The current industry trend that has the most significant impact on cranberry processing is the wet harvesting method. If the berries are harvested wet they have to undergo two additional processes before they can go to market, dechaffing and drying. While the purchase of additional machines increases costs, the drying process introduces a new capacity constraint due to its processing capacity ranging from 150 to 200 bbls per hour, depending on the method of shipment (bags or bulk).

Sources of variability for NCC

There are four (4) key sources of variability that the NCC is subjected to: quality assurance, ratio of wet harvested to dry harvested berries, resource availability, and government legislation. The variability in Quality Assurance arises because the chief berry receiver grades the berries based on color. When a berry is uncertain between grades of No. 2B and No.3, the chief berry receiver selects No. 3. NCC pays a $0.50 premium for No. 3 berries. Of the 450,000 bbls of berries receiving No. 3 grades, only half turned out to be premium grade.

As the growers of cranberries have a choice on whether to harvest the berries dry or wet, NCC has to be prepared to harvest both styles of berries. The wet processing takes longer and is more expensive, therefore the processing plants have to design their work flow and systems to accommodate the wet berries. A spike in wet growing would have an adverse realized capacity and utilization effect on a plant that is inadequately designed and/or operated for wet berry processing.

The key source of variability relates to the demand for resources and government regulation or legislation. Cranberry processors are reliant on trucks to supply their plants with raw berries for processing and have fixed and variable costs associated with them. If another industry has a need for similarly configured trucks, costs would increase based off limited supply and increased demand. Government legislation and regulation is another area of variability for the NCC. Currently the growers set aside 10% of their harvest to keep market prices stable because there is an...
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