$7.$ What recommendations, both short and long term, would you make to Mr$.$ Schaeffer to overcome the problems identified? Argue why your recommendations help. $(15$ points$)$

Answer:

$-$ Short term

Advice $1$: Optimize holding bins

To reduce truck and driver wait times, we'll optimize holding bins. Currently, we have:

$1$~$16$ Dry Berries Bins: $250$ bbls $*16=4,000$ bbls

$17$~$24$ Dry and Wet Berries Bins: $250$ bbls $*8=2,000$ bbls

$25$~$27$ Wet Berries Bins: $400$ bbls $*3=1,200$ bbls

$11$ bins for wet berries $(17$~$27),41\%(11/27)$ of total capacity. With an expected $70\%$

of water$-$harvested berries, NNC needs to convert $8$ more bins to wet bins at $$10,000$

per bin, and the total cost is $$80,000.$

The minimum of holding bins increase to $70\%$: $70\%*27=18\mathrm{.}9($equal to $19$ bins$)$

We need to convert $8$ bins $(19-11=8)$ to hold wet berries.

The total cost of converting the bins is $8*$ $$10,000$ per bin$=$ $ $80,000$

Advice $2$: Installing one additional dryer

By installing one additional dryer can improve efficiency. The cost of the new dryer is

$$60,000.$ On peak days, NCC receives a total of $16,379\mathrm{.}8$ bbls $(327,596/20),$ with

$11,465\mathrm{.}86$ bbls are wet berries $(70\%*16,379\mathrm{.}8).$

Adding the dryer increases processing capacity from $600$ to $800$ bbls$/$ hr$.$

It will take $14\mathrm{.}3$ hours $(11,465\mathrm{.}86$ bbls$/800$ bbls$)$ to process, and the overtime is $6\mathrm{.}3$

$(14\mathrm{.}3-8)$ hours.

Original overtime calculation: $11,465\mathrm{.}86$ bbls$/600$ bbls$=19\mathrm{.}11$ hours

Original overtime is total $11\mathrm{.}11$ hours $(19\mathrm{.}11-8)$

After adding a new dryer: save $4\mathrm{.}81$ hours $(11\mathrm{.}11-6\mathrm{.}3$ new overtime$)$

Inventory rate: $(11,465\mathrm{.}86($bbls$/$ day$)/12\mathrm{.}15)-$ new drying capacity $($bottleneck$)=$

$943\mathrm{.}69$ bbls$/$ hr$-800$ bbls$/$ hr $($bottleneck$)=143\mathrm{.}69$ bbls$/$ hr

Bins of wet berries $(17-27$ bins$)$ are total $3,200$ bbls $(250*8+400*3=3200$ bbls$)$

$3,200/143\mathrm{.}69=22\mathrm{.}27$ hours, more than $12$ hours so there will be no waiting line for

the trucks.

$-$ Long term: Installing a color grading machine

Currently, NCC pays an extra $$1\mathrm{.}5$ premium on $450,000$ bbls$.$

The overpaid amount can be calculated as follows:

Overpaid amount $=(450,000*1\mathrm{.}5)/2($assuming half is not graded as $3$ but is

included in $3)=$ $$337,500($the cost incurred when the machine is not efficient$)$

The cost to install one machine is $$40,000,$ and it includes the full$-$time operator's

salary. The cost of a full$-$time operator can be calculated as follows:

$1($operator$)*12$ hours$*$ $$13($average pay rate for an full$-$year employee$)*30$ days$/$

month$*12$ months$/$ year $=$ $$56,160$

Therefore, the total cost of this improvement in the first year is $$40,000($installation

of the color grading machine$)+$ $$56,160($cost of a full$-$time operator$)=$ $$96,160.$

In the first year, NCC will save $$337,500-$ $$96,160=$ $$241,340.$