External Environment Analysis of ANZ Banking Group
The most noticeable issue from the farmers’ perspective would be the growing wait time endured to unload berries during the heavy harvest period. Growers noted that at certain periods the wait was up to 3 hrs to unload berries. Many had to lease additional trucks and drivers to support their harvest machines in the fields due to this extended time requirement. The additional trucks and drivers is a large financial burden to the growers. If the grower opts not to hire additional trucks and drivers, they could suffer a loss of time in the fields as the harvest machines have to set idle waiting for the trucks to return.
These wait times are a direct result of plant operating capacity issues, including inconsistent deliveries and truck sizes, the time it takes to route the truck through the weigh station and back it to the dumper, and overall plant logistics. The current grading process of berries present large financial losses to the bottom line, due to its inconsistent and manual measurement process performed by the Chief Berry Inspector.
The case noted that if there was any question in the berry grade, whether it is a No. 2 or No. 3, the chief berry
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The water harvesting will increase berry volume by nearly 20%. Water harvesting also shortens the time that harvested fruit can be held prior to either its use or freezing. The decrease in storage time will force the plant to improve processing efficiency and design a system that involves more continuous flow of berries from receiving to shipping. A major processing bottleneck that was identified in the analysis was the under capacity of the drying process. The current process has 3 dryers that can operate at 200 bbls/hr if the berries are being processed for bulk loading or at 150 bbls/hr for berries that are to be bagged.
Exhibit 2 from the Case documents indicates that peak berry volume is approximately 19,000 bbls per day. In a 12-hour day this converts to a rate of 1,600 bbls/hr on average. This rate breaks down to 1,100 bbls. /hr wet and 500 bbls. /hr dry on average. The dechaffers and destoners both have the capacity to meet the peak volume. The 3 dryers have a processing capacity of 600 bbls. /hr which does not meet the required demand. The drying capacity is not even half of what the plant needs during peak harvest periods. The buildup of berries waiting to be processed at the dryers results in a domino effect.
It causes berries to buildup in storage, which causes shutdowns in receiving. This leads to the unhappy grower waiting in line to unload. This is a major constraint that affects every aspect of the plant. It also increases the amount of time it takes to process the berries, forcing increases in the amount of overtime that is required to process the daily volume of berries. The plant has identified issues with employee absenteeism and increasing overtime. The variation in plant resources causes a demanding culture that has a large affect on employees showing up to work.
The plant has to schedule more employees per shift to make sure enough show up to meet the resource demands. The extra daily employees cause financial restraints and lead to increase overtime paid. In 1970, the operation utilized 22,000 man-hours of straight time and 12,000 man-hours of overtime. The extended overtime, as stated previously, is largely a result of the bottlenecks in the production process. The issues and bottlenecks identified from the analysis do have a heavy burden on the plant and customers.
Short and long terms solutions can be identified and implemented by management to improve the undesired results. Recommendations to resolve the above mentioned issues are presented in the following sections of this report. PRODUCTION & PLANNING ASSUMPTIONS Due to the nature of the NCC process, the following assumptions have been made in order to give an adequate analysis of the production process. First, it is assumed that based on current trends and methods, that the water harvesting technique will be more fully utilized than the dry.
Taking this into account we have assumed a percentage split of 70% of berries being water harvested and the remaining 30 % dry harvested. The increase in volume, when considering the 12% increase in harvest ability due to the water technique, has been left out of the analysis due to it’s negligible increase on production.. Secondly, it is assumed based on the information in the case that total deliveries for the harvesting season will be approximately 610,040 for the total 116 days (September 1st to December 15th). To assess production flow it is assumed that the average truckload will be 75 bbls.
Based on the case data, it is further determined that the maximum capacity moving through the system at peak harvest is calculated to be 19,000 bbls. per day(See Table 1- Projected Daily Production). Considering the 70:30 ratio of wet and dry harvest berries it is calculated that 1,100 bbls. of wet and 500 bbls. of dry harvest berries will move through the production system at maximum harvest. Fluctuations below this number are expected, however this figure is assumed to be the maximum capacity of the system and is thus the point of reference for the following recommendations.
CAPITOL & PROCESS RECOMMENDATIONS After analysis of the current production process and flow of input through the system, general recommendations revolve around equipment replacement and modification, as well as slight alteration in the use of current technology and streamlining the initial receiving process. Any costs involved in the recommendations are justified as required costs to the Coop or are considered to generate a mass saving when total costs and benefits are analyzed. The first recommendation involves one of the two identified bottlenecks.
The first bottleneck occurs in the initial dumping and receiving process. While understandably hard to regulate this aspect of the cooperative’s production process, there are general regulations and possible ordering systems that may increase regularity and flow through the system. The technique of unloading the trucks should be altered from a backing up process to a drive through system (See Figure 1 and Figure 2 – Unloading Diagrams). If modified, a decrease in overall unloading time and wait time could be realized as trucks could pull up, unload, and drive out in a circular system with little interruption.
Similarly, it is recommended that some form of regularity be obtained in regard to the amount of bbls per truckload. It is recognized that strict regulation is not possible in the cooperative environment; therefore, the recommendation would be to offer an incentive for trucks to be as full as possible by adding an “Express Lane” for trucks that are 75 bbls and less. The other 4 dumping stations would be solely devoted to trucks carrying loads of more than 75 bbls (the identified average). By separating the different sized incoming loads, receiving time could be decreased.
A heightened knowledge of expected flow at anyone point can also be obtained through this new receiving process. Finally, in regard to receiving, it is further recommended that an extra dumping bin be added at the initial point of receiving (See Figure 2 – Recommended Unloading Process). This bin would be utilized only when the others reach capacity to maintain a continuous dumping flow and again decrease the possible 3 hour wait time previously experienced. A second recommendation involves the purchase of new equipment, along with modification of existing equipment.
As originally proposed, it is considered a favorable decision to purchase and install the light meter system to enhance and streamline the current color grading process. It is estimated that approximately $112,500 is being spent due to inaccurate grading and over compensation of delivered truckloads. In the current system 50% of the berries are originally graded as No. 3 with an actual 72% of all berries eventually being graded as No. 2. The cost of the new color-grading machine is $10,000 and requires one full time worker to operate.
Based on pay grade and current man power the installation of the new machine would ultimately reduce the loss margin on grading and result in no change to manpower, simply altering the current Chief Berry Inspector position to that of Metering Machine Supervisor. The second identified bottleneck resulted in a less than maximum capacity flow at the drying stage of the wet harvested berries. Given the previously stated assumptions, the capacity of wet berries to be expected on max delivery day is set at 1,100 bbls. per hour over the 12 hour day. Current capacity of bagged berries is set at 500 bbls.
This is not adequate to meet the demand at this point in the production process. It is recommended that three new dryers be purchased at the cost of $25,000 each. The increase in capacity would alleviate the identified bottleneck at this point in the system. While it currently appears that more berries are sent through the drying process to be bulk loaded, future trends are uncertain. The ability of the dryers to be converted to either drying technique is another benefit and incentive to purchase three more dryers to alleviate this bottleneck in the system.
After this point the final stages of production have enough capacity flow to meet overall operating demand as well as achieve supply objectives. It was originally stated that conversion of the holding bins would be beneficial and would give the added ability to store both dry and wet harvested berries in any of the bins. However, on further analysis it does not appear this conversion would enhance production. Based on our maximum capacity assumption of 19,000 bbls. per day (1,600bbls/hour on 12 hour day), the storage of berries in the system at any point can actually be stored and maintained in bins 17-27.
Bins 17-24 already have the ability to hold either wet or dry harvested berries dependant on the needs of the system at the time. To convert the remaining 1-16 bins would simply add cost to equipment modification that may or may not even be utilized. However, it is recommended that the cooperative maintain these bins over the long run for utilization during unusually high harvesting seasons or to be utilized either for storage or for other aspects of production. As discussed in the above sections, the Coop management has expressed concern over the 12,000 hours of overtime for direct labor in 1970.
It is our recommendation that capitol additions and modifications to the system should be completed prior to any shift in manpower allocation. In the short run, it is assumed that the increase in the cooperative’s ability to realize maximum capacity in a shorter period of time will also result in a subsequent decrease in man hours needed, leading to any resulting overtime of the labor force to be eliminated. CONCLUSION Increasingly higher demands by farmers for more efficient cooperatives and advancing technologies have the NCC management striving for a cost effective and continuous flow of product.
With this focus in mind, our analysis was centered on discovering those issues that permitted increased processing time and unnecessary expenditures. Our recommendations confront those issues in an attempt to alleviate all unneeded costs of the plant. The new capitol requirements, including electronic testing equipment, a streamlined delivery and unloading layout, and improved internal flow of berries throughout the processing plant, all aid in resolving the issues listed by the V. P. of Operations for providing a more efficient and effective Coop to its owners, the farmers and growers themselves.