INDIAN INSTITUTE OF MANAGEMENT, INDORE

Operations Management - I Assignment 1 National Cranberry Cooperative

Course Instructor: Prof. A H Kalro

Date of Submission: 16th August, 2009 Submitted by Group 11, Section C Jigar Jain Manish Verma Parul Gupta Angad Kikla Hara Prasad Pradhan

ASSUMPTIONS: 1) There is a cost associated with trucks waiting to be unloaded and it is $5 per hour. 2) When required, for overtime we have considered full-year employees working.

Case A: 10000 bbls of Berries

Average Daily Arrival = 10000 Wet Berries ( @ 70% ) = 7000 Dry Berries = 3000 Dryer Speed = 3*200 = 600 per hour Wet Berries: Arrival Rate of wet berries per hour = 7000/11 = 636.36 bbls/hr Rate of accumulation of wet berries = 636 - 600 = 36 bbls
3200

Inventory

396

11 11.67

Time

Dry Berries: Entering Rate = 3000/11 = 272.72 bbls/hr If wet berries are consumed at rate of 600 bbls/hr then (1200-600)bbls/hr of capacity in miller is free Hence there is no Requirement of any additional Capacity. ANALYSIS ON DRYERS TO BE PROCURED Time taken for manufacturing wet berries = 600/hour Total time taken to manufacture wet berries = 7000/600 = 11.67 hrs 4 DRYERS (Speed = 4*200 = 800 bbls/hr) Total time for dryers = 7,000/800 = 8.75 hrs Milling: total time = 10,000/1200 = 8.33 hrs Assuming that workers are paid = 1.5 * 6.5 $/hr = 9.75 $/hr Reduction of 2.92 hrs/day, results in = 28.47 $/day Payback time = 40,000/ (28.47 * 30) = 46.83 months 5 DRYERS (Speed = 5*200 = 1000 bbls/hr) Total time for dryers = 7,000/1,000 = 7

Milling: total time = 8.33 hours Reduction of 3.34 hrs/day, results in = 32.56 $/day Payback time = 80,000/ (32.56 * 30) = 81.98 months Therefore, the optimum strategy will be to procure one new dryer. NUMBER DRYERS 3 4 5 OF DRYING TIME 11.67 8.75 7 MILLING TIME 8.33 8.33 8.33 REDUCTION FROM 3 DRYERS 0 2.92 3.34 PAY BACK MONTHS 46.8 81.9 IN

SAVING OF TRUCK WAITING TIME (with 1 extra dryer): Truck waiting time for 3 dryers: 0 hr Truck waiting time for 4 dryers: 0 hr BIN CONVERSION REQUIREMENT: No dry bins need to be converted to dry/wet bins SCHEDULING OF WORKFORCE AND ANOTHER SHIFT: Here the overtime is so minimal, that addition of another shift is not required.

Case B: 15000 bbls of Berries

Average Daily Arrival = 15000 Wet Berries ( @ 70% )= 10500 Dry Berries = 4500 Dryer Speed = 3*200 = 600 per hour Wet Berries: Arrival rate per hour = 10500/11 = 955 bbls/hr Therefore, rate of accumulation = 955-600 = 355 bbls/hr

Inventory

3900 3200

9.03

11

12.67

17.5

Time

Dry berries are entering at rate = 4500/11 = 409bbls/hr Since 600 bbls/hr of mining is free, there is no accumulation of dry berries in holding tanks. ANALYSIS ON DRYERS TO BE PROCURED Time taken for manufacturing wet berries = 600/hour Total time taken to manufacture wet berries = 10500/600 = 17.5 hrs 4 DRYERS (Speed = 4*200 = 800 bbls/hr) Total time for dryers = 10500/800 = 13.125 hrs Milling: total time = 15000/1200 = 12.5 hrs Assuming that workers are paid = 1.5 * 6.5 $/hr = 9.75 $/hr Reduction of 4.375 hrs/day, results in = 42.66 $/day Payback time = 40,000/ (42.66 * 30) = 31.25 months 5 DRYERS (Speed = 5*200 = 1000 bbls/hr) Total time for dryers = 10500/1000 = 10.5 Milling: total time = 12.5 hours Reduction of 5 hrs/day, results in = 48.75 $/day Payback time = 80,000/ (48.75 * 30) = 54.7 months

Therefore, the optimum strategy will be to procure one new dryer. NUMBER DRYERS 3 4 5 OF DRYING TIME 17.5 13.125 10.5 MILLING TIME 12.5 12.5 12.5 REDUCTION FROM 3 DRYERS 0 4.375 5 PAYBACK MONTHS 31.25 54.7 IN

SAVING OF TRUCK WAITING TIME (with 1 extra dryer): Truck waiting time for 3 dryers: 17.08 hr Truck waiting time for 4 dryers: 0 hr BIN CONVERSION REQUIREMENT: No dry bins need to be converted to dry/wet bins SCHEDULING OF WORKFORCE AND ANOTHER SHIFT: Here the overtime is very high (5.125 hrs), we should calculate the overhead in both case (overtime and extra shift). In case of overtime, per worker spending = 5.125 * 6.5 * 1.5 = $49.97 (per worker per day) In case of more shift, per worker spending = 8 * 6.5 = $52 (per worker per day) So it would be better to have overtime instead of adding one extra shift.

Case C: 20000 bbls of Berries

Average Daily Arrival = 20000 Wet Berries ( @ 70% )= 14000 Dry Berries = 6000 Dryer Speed = 3*200 = 600 per hour Wet Berries: Incoming rate of Wet berries = 14000/11 = 1272 bbls/hr Accumulation rate = 1272-600 = 672 bbls/hr

7400

Inventory

3200

4.76

11

Time

18

23.3

Dry berries are entering at rate = 6000/11 = 545.45 bbls/hr Since 600 bbls/hr of mining is free, there is no accumulation of dry berries in holding tanks. ANALYSIS ON DRYERS TO BE PROCURED Time taken for manufacturing wet berries = 600/hour Total time taken to manufacture wet berries = 14000/600 = 23.33 hrs 4 DRYERS (Speed = 4*200 = 800 bbls/hr) Total time for dryers = 14000/800 = 17.5 hrs Milling: total time = 20000/1200 = 16.66 hrs Assuming that workers are paid = 1.5 * 6.5 $/hr = 9.75 $/hr Reduction of 5.83 hrs/day, results in = 56.84 $/day Payback time = 40,000/ (56.84 * 30) = 23.5 months 5 DRYERS (Speed = 5*200 = 1000 bbls/hr) Total time for dryers = 14000/1000 = 14 Milling: total time = 16.66 hours Reduction of 6.67 hrs/day, results in = 65.03 $/day Payback time = 80,000/ (65.03 * 30) = 41.25 months

Therefore, the optimum strategy will be to procure one new dryer. NUMBER DRYERS 3 4 5 OF DRYING TIME 22.3 17.5 14 MILLING TIME 16.7 16.67 16.67 REDUCTION FROM 3 DRYERS 0 5.8 6.63 PAYBACK MONTHS 23.5 41.25 IN

SAVING OF TRUCK WAITING TIME (with 1 extra dryer): Truck waiting time for 3 dryers: 370.72 hr Truck waiting time for 4 dryers: 89.24 hr BIN CONVERSION REQUIREMENT: Some dry bins need to be converted to dry/wet bins Cost of truck waiting: = waiting hour * hourly rate * total number of daye = 89.24 * 5 * 90 = $40158 By converting 1 bin, waiting time = 68.17 hr Cost of truck waiting = $30677 Saving = (40158 - 30677) - 7500 (Cost of conversion) = $1981 Similarly, by converting 2 bins, Saving = $640 Addition of 3rd bin is not cost effective. So we should go with converting 2 dry bins to dry/wet bins. SCHEDULING OF WORKFORCE AND ANOTHER SHIFT: Here the overtime is very high (9.5 hrs), so it will be nice idea to add another shift of 8 hours, and the rest 1.5 hrs should be allowed for overtime.