I need help configuring our the operational costs for each distillery in the Brown-Forman Cooperage CASE STUDY!!

Supply-chain cost analysis should be consistent for the evaluation of all options, in cost per day of operations. A high-level value-stream map with analysis, should be presented as part of this solution.

The Brown-Forman Cooperage is located about 250 miles north of Lynchburg TN, in Louisville, KY. It employs about 250 workers who produce charred white-oak barrels for Jack Daniels and other distillers owned by Brown-Forman Inc. The barrel manufacturing process Barrels made at the Brown-Forman Cooperage are hand-crafted, and made without glue or screws. The facility produces about 2000 fine hand-crafted barrels per day for Jack Daniels. Waste/scrap wood and sawdust from the production facility are re-used to help power the facility First, white oak planks are purchased and stored on-site at the Brown-Forman Cooperage. Green wood is aged outdoors until the moisture content of the wood is reduced from about 50% down to approximately 25%, which takes between four to six months. At any one time, approximately 1700 tons of white oak is in inventory as work-in-process (WIP) in the wood yard; this is enough to produce 250,000 barrels, (if all of the wood was ready for production at the same time). Flow-time for the wood from entering the wood yard until moving into the production area is about six months. From the wood yard, planks are moved to the milling area, where some of the planks are joined together to become tops and bottom lids for the barrels, and some of the planks become staves, which are pieces for the sides of the barrels. All planks are planed and sanded: Planks are processed into staves for the barrels sides by going through several wood milling (cutting/shaping) steps, including: 1) Planing/sanding removes the outer layer of wood on the longer and flatter surfaces of each plank. This step processes approximately 60 planks per minute at each of two parallel workstations; two workstations work in parallel (performing the same exact tasks) and are dedicated to this process step. Recall that the net result here should be 120 planks per minute total, if each workstation is capable of 60 planks per minute (math!). Completed planks are used to produce both staves for the barrel sides, as well as for the barrel tops and bottoms. Then, as mentioned above, some planed and sanded planks become staves for the barrel body: 2) Cutting the planks to the proper lengths and widths: when operating at full capacity, this process handles about 45 planks per minute at each workstation; three parallel workstations are dedicated to this process step. 3) Grinding shapes the planks (staves) so that they will fit together properly without gaps that would cause leaks in a completed barrel; about 60 planks per minute are processed at each workstation. Two parallel workstations are dedicated to this process step. 4) The stave fitting machine removes material from each piece such that the staves will be wider in the middle when compared to the ends; this is done so that the barrels will have a rounded shape rather than a cylindrical shape when they are assembled (see diagram below). This process step takes about seven seconds per stave at each workstation. Ten parallel workstations are dedicated to this part of the process. The finished staves are moved from the Milling area to the Raising area, where they are used to make the bodies of the barrels. Approximately 24 to 26 staves (finished planks) are hand-fitted together by a cooper (barrel-making craftsperson) for each barrel that is produced. See details below. For Barrel tops and bottoms (lids) Some planed/sanded planks (back from the first process step) are used to form the lids (tops and bottoms) for the barrels. Each barrel needs two lids: one top and one bottom. The tops and bottoms for the barrels are fabricated by: First, 7 - 9 wooden planks (depending on their widths) are temporarily joined together with foodgrade paraffin wax to form a flat rectangular sub-assembly. This requires about 20 seconds per subassembly at each workstation; four parallel workstations are dedicated to this process step. 2) Next, a worker lifts the sub-assembly onto a rotating cutting/forming machine (called the Rounder machine). This cutting machine transforms the sub-assembly from a rectangular set of planks into a basic wooden disk/lid. This takes about 10 seconds per lid at each Rounder machine; two Rounder workstations work in parallel and are dedicated to this process step. 3) Last, a robotic arm (with vacuum suction) lifts each lid (bottom or top) and spins the lid, rotating the edges of the formed lids into more paraffin wax to seal the edges. At the end of this same step, the robot stacks the lids. From start to finish, this step only takes about 15 seconds per lid for each workstation (robot); two parallel workstations (robots) are dedicated to this process step. Barrel bodies: The finished staves (processed wood planks from above) are moved to the barrel raising process, where they are used to make the bodies of the barrels. On average, approximately 25 staves (finished planks) are hand-fitted together by a cooper (barrel-making craftsperson) for each barrel that is produced. The barrel raising process requires approximately 25 staves (finished planks), which are hand-selected by barrel coopers (the employees who are specially trained to form the barrels by hand). The initial barrel is formed with the hand-selected staves (planks), a temporary bottom barrel ring, and a metal cable that serves as a temporary upper ring for the barrel. At this initial assembly step, each barrel takes about an average of three minutes to assemble at each workstation. Ten workstations are dedicated to this initial barrel-raising step. From here, the barrel sub-assembly moves to a steaming process (25 minutes at 150 degrees F), where the wooden staves are softened with hot steam to allow them to be bent into the final rounded barrel shape. At each steaming workstation, 16 barrels are processed in batches every 30 minutes (including five minutes for loading and unloading the barrels into the steaming process, and 25 minutes of steaming). Seven steaming workstations are in-use so that a total of 112 barrels are processed every 30 minutes. At the next workstation, immediately after steaming, the temporary metal cable is removed from the barrel sub-assembly, and a temporary upper barrel ring is attached. This takes about 30 seconds per barrel at each workstation, and two workstations are dedicated to this task. At this point, the barrel generally has its final shape, but without the top and bottom lids Next, the barrel assembly is moved to a toasting process, (in a special room, a closely guarded secret), where the barrels are carefully heated to bring out sugar and caramel flavors from the wood; these flavors will eventually become part of the flavor profile of the final beverage products at the Jack Daniels Distillery, and other distilleries owned by the Brown-Forman Corporation. Barrels enter and exit the toasting process at about six barrels per minute, or one every 10 seconds. A quick quality check (image below) occurs after toasting, to ensure even and proper coloration of the interior of the wooden barrels: about 7 seconds per barrel. Next (below), the buffalo machine is used to: a) compress the barrel, b) install two more temporary hoops onto the middle of the barrel , and c) to pressure-tighten the fit of the staves; this is all to ensure a tight fit and limit the possibility of leaks once the barrel is complete. This process takes about 40 seconds per barrel at each workstation, and 3 workstations in parallel are dedicated to this process step. At this point, the barrel is made of nothing but the wooden staves, and four temporary metal hoops. Next, the charring process Charring occurs in batches of four barrels each. Each batch requires about 25 seconds for charring, followed by a short water-spray process (10 seconds) that quenches flames from the burning interior of the barrel, plus about 60 seconds total to load and unload each batch of barrels into and out-of the charring process area. Overall, this process produces charred barrels at a rate of about 150 barrels per hour. 3600 seconds / 150 barrels 3600 seconds/38 batches about 95 seconds per batch. ( 25 seconds for charring, 10 seconds for quenching, 60 seconds for loading/unloading the batches). Two large charring workstations (work areas) are dedicated to this process.After charring the barrels, the lids finally join with the barrel bodies. On a special piece of equipment, the barrels now receive their tops and bottoms, and two permanent steel hoops replace the two temporary metal hoops at the top and bottom of each barrel. This takes about 25 seconds per barrel at each workstation; two parallel workstations are dedicated to this process step.At the next workstation, on a second specialized piece of equipment, four more permanent steel bands are installed to replace the two remaining temporary rings in the middle of the completed barrel. This takes approximately 45 additional seconds per barrel at each workstation; three parallel workstations are dedicated to this process step. Each barrel now is nearly complete, with a top, bottom, and six permanent steel rings holding the wooden staves together.At the next work station, a worker uses a laser-guided sighting system to line-up and drill a bung hole into the strongest part of the middle of each barrel. This takes about 15 seconds per barrel. The bung hole is used for filling and emptying each barrel.At this same workstation, the worker hammers a rubber bung/plug into the hole, and fills the barrel with water and air under pressure. This takes another 15 seconds per barrel (for a total of 30 seconds at this workstation). Two parallel workstations are dedicated to this process step. This is the initial step in the final testing process.At the final inspection workstation, the barrel is visually inspected a) to check for leaks (from the pressurized air and water added at the last workstation), as well as b) to check for minor defects that are repairable (at that workstation) and c) major defects that require the barrels to be broken-down and reassembled by the coopers at one of the raising process workstations. The plug/bung is removed, and the worker checks to see if the air-pressure was held in the barrel during the test. The final test takes about 35 seconds per barrel at each workstation; two parallel workstations are dedicated to final inspection.Transportation, Daily Demand, and Supply-Chain Considerations Although the Brown-Forman Cooperage manufacturers 2000 barrels per day for Jack Daniels, it produces more than that on a daily basis, to accommodate three other distilleries owned by BrownForman Corporation. The Brown-Forman Cooperage also supplies new charred-oak barrels for the Woodford Reserve, Old Forester, and Early Times brands. Currently about 3,000 barrels per day are produced at the Brown-Forman Cooperage, in two 7.5-hour shifts, five days per week. About 8 trucks per day at 250 barrels per truck (2000 barrels per day) are transported to the Jack Daniels Distillery in Lynchburg, Tennessee. This delivery schedule matches current customer demand for Jack Daniels; about 2,000 barrels per day are filled at the Jack Daniels Distillery. As mentioned previously, the barrels cannot be made too far in advance of need. The barrels leave the Brown-Forman Cooperage within hours of completion; the barrels are somewhat perishable and they need to be used before the staves dry-out and loosen, at which point the steel bands also will loosen, and the barrels will leak. In addition to 2000 barrels per day being shipped to Jack Daniels, about 200 barrels per day are shipped to Woodford Reserve, 500 barrels per day are shipped to Early Times, and 300 barrels per day are shipped to the Old Forester Distillery. Currently, the Brown-Forman Cooperage supplies barrels to Jack Daniels (in Lynchburg Tennessee), Early Times Distillery and Old Forester Distillery (both across town in Shively, Kentucky) and Woodford Reserve Distillery (Versailles , Kentucky). Another member of the Brown-Forman corporate family, Canadian Mist (Collingwood, Ontario, Canada) currently purchases barrels from another external supplier. However, as suggested by your clients engagement of your consulting services, corporate executives at Brown-Forman are considering a switch: they want to evaluate using the Brown-Forman Cooperage instead of the external supplier to provide barrels for the Canadian Mist Distillery. If the Brown-Forman Cooperage were to provide barrels for the Canadian Mist Distillery, Canadian Mist would require nearly 1000 barrels per day. When added to the current production capability of about 3000 barrels per day, Brown-Forman would need to supply a total of 4000 barrels per day for these five internal customers. Currently, the internal cost of goods sold (COGS) per barrel is $185 each. Estimated holding costs are limited due to the quick turn-around on the barrels and their perishable nature; the estimated holding costs are $0.35 per barrel per day. Estimated supply-chain administrative costs are $100 per truckload of barrels for internal shipments from Brown-Forman Cooperage. Due to truckload (TL) shipping limitations, optimal economic order quantities might not be practical. Please explore that option. Administrative costs associated with the current externally sourced barrel supplier (currently only for Canadian Mist) are about $300 per truckload; this includes costs associated with additional communication, coordination, and information systems integration with the supplier. The purchase price from the external supplier is only $300 per barrel, with freight shipment charges of $1600 per truckload.Administrative costs associated with the current externally sourced barrel supplier (currently only for Canadian Mist) are about $300 per truckload; this includes costs associated with additional communication, coordination, and information systems integration with the supplier. The purchase price from the external supplier is only $300 per barrel, with freight shipment charges of $1600 per truckload. In necessary, feasible capacity expansion options include: 1) Expand capacity of the current Brown-Forman Cooperage facility location in Louisville, KY. At this location, the possible expansion options include: 1a) adding a 3rd shift (additional 7.5 hrs per workday), or 1b) purchasing additional equipment and hiring additional employees for the two shifts that are currently in operation. Adding a third shift at the Louisville cooperage will keep the internal COGS for each barrel the same, at $185.00 per barrel. Adding additional employees and equipment to the two existing shifts would increase COGS per barrel to $210.75. 2) Build a new facility to accommodate all barrel-making demand (4000 barrels per day) required for all five internal customers of Brown-Forman Corporation listed above. Use course-related techniques for determining a new facility site (location decisions). Any new facility location should be located in a city of suitable size (population of at least 300,000), to ensure labor availability, stable utilities and utility rates, etc. All estimated fixed costs for a new facility can be amortized and translated to become part of an estimated COGS of $190.50 per barrel at nearly any new location. All transportation costs from a new location would be based on the current internal Brown-Forman transportation cost model. 3) Status quo: continue to supply the Canadian Mist Distillery with the outsource supplier that is currently being used.