Also, Cranberries’ market price is influenced by the government regulation Cranberry Marketing Order 1070, which mandates owners to scrap 10% or 200,000 bbls of harvested crops, thereby reducing income for the same resources used. With this, it is important that NCC manage its resources properly including scheduling of workforce (seasonal & full-time) to reduce the costs like the overtime pay.
With the cost amounting to $112,500 ($450,000/2x0.5) incurred for paying extra premiums to second graded berries, it is important to look at the grading process and assess the need for installing an equipment that can help reduce the said cost.
Alternatives
The following are the alternatives proposed by Mr.Williston:
- To buy and install new dryers
- Convert dry berry holding bins to store water harvested or dry berries
- Install Light Meter System for color grading
First option: To buy and install new dryers
Analyzing the situation at NCC, it is noticeable that the drying process having the lowest capacity of 450 to 600 bbls per hr is the bottleneck. (Please refer to Appendix B for the list of process capacities.). The table below summarizes the outcome of installing one or two dryers as compared to the current system. (Please refer to Appendix C for graph and simulation of inventory per hour interval.)
Second Option: Converting Dry berry holdings
Converting bins will not solve the problem in the bottleneck since it is not part of the process, although NCC can consider the possible benefits in the future as seen in the production trend of cranberries, where there is a big possibility that the volume of harvested cranberries may not increase starting 1972 as stipulated in the Cranberry Marketing Order of 1968.
Third Option: Installation of Light Meter System
Installing the light meter system may seem to be a commendable solution to the inaccurate grading system. But since NCC is a cooperative and is owned by the growers, any surplus or loss income is returned or absorbed by the growers as well. Having the cranberries graded accurately will result to larger surplus, which will be equally distributed in same amounts to growers, whether or not a particular grower produced more premium cranberries than the others. This may cause grower to look for other buyer of cranberries to obtain more premium.
Recommendation
We recommend that only one dryer be installed in the system. This in effect will reduce the operations time from 24-hr operation to 16-hr operation thereby eliminating the overtime cost but introducing a new manning schedule – 7am to 3pm and from 3pm to 11pm. (Please refer to Appendix D for the manning schedule.) Having the work force arrive at 7am during peak season and begin processing as berries start arriving will eliminate the accumulation of inventory in the trucks thus removing the truck’s idle time at the dumping area.
Having a savings of $30,813 per season for the direct labor cost, the $25,000 cost seems to be a worthy investment.(Please see appendix E for the cost computation.)
We do not recommend installing the meter light system but we do recommend improving the color chart that will help the receiver differentiate Class 3 from Class 2B. NCC can introduce a new category for berries, between class 3 and class 2B, with a smaller premium. An incentive program for an accurate grading can also be considered to motivate the receiver. This will surely be cheaper than installing a light meter system.
Implementation Plan
- Conduct meeting with operations team together with the co-op members to discuss the possibility of installing additional dryer in the RP1 plant.
- Ask for quotation from supplier and have the budget approved by the Management. Testing shall also be done before buying to ensure it conforms to standards as set by the plant.
- Installation and testing of new equipment including setting of adjustments.
- Layout the proposed manning schedule before peak season to superintendent, Walliston, to have necessary preparation and adjustment as required.
- Advise growers of the new premium to be introduced (between class 3 and class 2B) and conduct training to chief berry receiver using the improved color chart.
Appendix A
Appendix B
List of Process Capacities
Appendix C
Appendix D
Appendix E
