Case: Bayonne Packaging 6851k

Bayonne Packaging Case Study MPE-14, NMIMS

Executive Summary Bayonne Packaging, Inc. is a printer and paper converter company Industry Vertical – Specialty Packaging Competitive Strengths: Beautiful product, great designs, classy printing, handling of innovative and difficult package design and the ability to fold and glue the complex blanks Specialized in innovative packaging solutions along with full service from design to final delivery They also work closely with customers to develop the design as per their need Manufactures customized packaging for industrial customers

Current state (point of Departure) of Bayonne Packaging

X

Computerized Scheduling system not being followed

X

No maintenance schedule being done

X

Two extra days at each work center

X

The company does not have a method of determining the priority of orders

X

Family member Neil Rand running expedites and not caring about the computer scheduling system

Problem Statement – Delivery, Quality leading to Net Loss

51%

of the orders are late for Oct’11

1.5 %

Scrap and customer rejects are very high, eliminating profitability

7.2

incurred a loss in October 2011 for the first time in past ten years

Financial Analysis Customer Rejections 5.00% 4.00% 3.00% 2.00% 1.00% 0.00%

1.50% 0.50% customer rejections

-1.00% Oct-09

Oct-11

Financial Analysis Cost Of Goods Sold & Cost Of Shipped Material 100.00%

90.70%

90.00% 80.00%

72.11%

70.00%

64.90%

60.00%

55.30%

50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Oct-09

Oct-11

This has happened because the company has reduced its profit margin in order to increase its sales volume

Quantifying Operations & Supply Chain Performance  Percentage of full (i.e. not partial) deliveries that is on time per time DEPENDABILITY

period  Average delay time of an order

QUALITY

SPEED

 Down time per machine  % of goods rejected by Quality Control and Customer  % of goods with missing glue lines or excess glue  No. of days for production  The amount of time spent on set up times per order / per period  No. of materials flowing through operations per period  The average critical ratio  The cumulative volumes in US dollars / The cumulative numbers of shipped

COST

orders  The COGS per month as a percentage of net sales  PBT – Profit before tax

FLEXIBILITY

 No. of different orders that can be expedited  No. of different packages possible to print  Benchmarking

Capacity Utilization at various work Centers Total Hours Per Number of machine Machines

Combined Running times

Theoretical running times

Capacity Utilization per work center

Sl .No

Machine

1

Composition

255

1

255

347

73.49%

2

Jagenburg Sheeter

279

1

279

347

80.40%

3

Heidelberg Press

348

2

696

694

100.29%

4

Bobst Die-Cut

272

2

544

694

78.39%

5

Int. Roy / Queen F& G

156

3

468

1041

44.96%

6

Int. Staude F&G

179

4

716

1388

51.59%

7

Int. 3A window/ patch

145

2

290

694

41.79%

Heildeberg press is the bottleneck with capacity utilization of 100.29%

umber of working hours in October'11 is 347 hours

Capacity in pieces of the Die-cut center in three cases Order size (pieces)

30,00 0

Order size (pieces)

30,00 0

Time per sheet

0.007 5

Time per sheet

0.007 5

Time per sheet (1 sheet = 3 piece)

0.002 5

Time per sheet (1 sheet = 3 piece)

0.002 5

gang 2 orders in a batch, number of pieces in batch

60,00 0

Time to process order (30000 piece * Time per piece)

75 Minutes

Set up time 2,5 hrs

150 Minutes

Total minutes per order

225 Minutes

15 hours per day is All orders are ganged Total capacity of Die-cut center

900 Minutes

Total capacity of Die-cut center in Time per sheet pieces Time per sheet (1 sheet = 3 piece)

Time to process order (60000 piece * Time per piece)

150 Minutes

Set up time 2,5 hrs

150 Minutes

Total minutes per batch

300 Minutes

15 hours per day is

900 Minutes

Total capacity of Die-cut center

4 Orders

Total capacity of Die-cut center in orders

6 Orders

4 Orders 0.007 5

120,000 Pieces

0.002 5

Total minutes per day

900 Minutes

Minutes required for one required set up

150 Minutes

Orders in the Royal / Queens work center Number or partialed orders Royal Queen

Assumptions And Implicit Findings 40

Orders

77

Orders

231

Hours

3

Hours

Number of orders on Royal Queen total Total set up time Royal Queen in October Setup time per order

CASE - 1

CASE - 2

40 orders require 40 set ups (no partials)

40 orders require 80 set ups (no partials)

Total number of set ups 40 + 37

77

Setups

Total number of set ups 80 + 37

117

Setups

Time per set up

3

Hours

Time per set up

3

Hours

Total set up time

231

Hours

Total set up time

351

Hours

Total number of working hours for three machines (347 * 3)

1041

Hours

1041

Hours

Time left for folding and gluing (1041 - 231)

810

Hours

Total number of working hours for three machines (347 * 3) Time left for folding and gluing (1041 - 351)

690

Hours

Time required for F&G of one piece

0.0023

Minute s

Time required for F&G of one piece

0.0023

Minutes

Number of pieces to be folded and glued

21,130, 435

Pieces

Number of pieces to be folded and glued

18,000,0 00

Pieces

Order size to the Royal / Queen and Staude work centers Number of Machines

Set up per Machine

Total set up Time

Speed per machine (minute/piece)

Speed per work center (minute/piece)

Royal / Queen

3

180

540

0.0023

0.00077

Staude

4

40

160

0.015

0.00375

Work center

Difference in setup time

380 minutes

in 380 minutes, Staude center can process

101,333 pieces After both setups; the production breakeven point can be calculated as : x is minutes of both machines in process Staude Royal/Queen 101333 + x * 1/0.00375 x*1/0.00077 x= 98 minutes Breakeven point in time is 98 minutes after Royal/Queen's setup in 98 minutes, Royal/Queen can process 98/0.00077 pieces. Breakeven point in pieces is : 127.506 piece

Conclusion

380 minutes

98

set up time needed to set up the same order on Royal Queen, the Staude can produce 101.333 pieces

Will take Royal/Queen to catch up after both machines are operational

minutes

127.506

Above orders should be routed to the Staude

pieces

Recommendations Focused on Effectiveness and Efficiency SHORT TERM (0–3 MONTHS)

 Increase capacity by allowing for overtime  Daily meetings  Prioritizing orders (e.g. red flags for rush orders) and weigh the consequences of rush orders for the remaining orders, therewith optimizing the number of rush orders  Increase / improve maintenance on machines in order to increase quality

MID TERM (3–9 MONTHS)

 Manage variability better by managing of demand e.g. introducing price reductions for bulk orders  Increase capacity by widening the bottle neck (e.g. extra shift on the Heidelberg press)  Introduce pre-Work Order Jacket – a report that is sent to other departments when the prior department starts working on and order. This way, the later department knows what orders are on the way in couple of days.

LONG TERM (9+ MONTHS)

 Increase capacity by investing in additional equipment  Introduce a companywide ERP system in order to schedule production in reliable, achievable way that is adhered to by all departments (including sales). This should result in fewer rush orders, fewer partial orders and less unnecessary set up time.

THANKS