Business Case: Bayonne Packaging

Business case: Bayonne Packaging

Bayonne Packaging, Inc. is a company dedicated to do tailor-made packaging from scratch for industrial customers. Bayonne it has been a profitable company which board is composed by family members and a local bank. Its specialization is creating innovative packaging solutions for its customers and offering a complete service from design to final delivery.

By 2001 the company had grown approximately 3 times more in sales, but recently the report of net income had reveal serious negative numbers for the first time in a period of ten years. This is because of the decline in the company performance. The president of the company Rand asked Milken, the new VP of Operations, to prepare him a deep analyze of operation area searching the possible solution to this situation focusing in costs, quality and delivery. The questions of the case will be answer base on Milken’s over view of the company’s operation process of October 2011.

Operations concepts through the case

In class we have overview several important concepts that can be related to Bayonne’s case, as a concept that describes a situation/statement used in the case or as possible explanation or solution to them. The ten more significant concepts for this case are the following:

• The Strategy definition is the global picture of the company and it helps define where are the companies now by analyzing where the business is. In the strategy definition companies set the mission, vision and objectives that allow them to grow in an order and plan way. I relate this term because Bayonne does not have a business strategy to grow to. They are a profitable family business that has grown a lot through the years but it seems like the process within the company have not change in order to attend this new demand, especially the operations area. Bayonne needs a Business strategy where operation and other business areas can align their own business plan.
• There are three different Strategy levels, all of them pursue and contribute to the same first strategy which is the corporate strategy and it is for the management action plan. The following level is the Business Strategy and is directed for one business division (for example the Operations Business Plan) and defines how to compete in each business. The last level is the functional Strategy and is oriented on how to use the resources. This term relates to the concept before, it is necessary to establish all the strategy levels inside Bayonne in order to create synergy and avoid working in silos, improving communication and performance.
• The production line in Bayonne is a job shop that functions by the pull philosophies (Just in time). This means the items are moved from one level to the next only when requested or an order is place.
• One of the operational areas that have an opportunity of improvement is the quality control (QC). The QC area it is in charge of the Quality Assurance which is a set of systematic and planned actions that are needed to assure that a final product will satisfy the requirement quality parameters.
• In order to manage the quality, it is necessary define a Quality system that monitors the structure, responsibilities, activities, resources and procedures of the company in order to manufacture the product or service according the specifications. For this to be successful the specifications most match the customer satisfaction.
• To identify where the production process can or is having a delay is necessary to identify the Critical Path Method which is the longest path in the production process. The project length has to be the same length as the longest path. A delay in a critical activity results in a delay in the Project.
• Another concepts affecting the operational performance is the Queuing. The Queuing Theory it is the study of waiting line processes to find the optimum flow rates. The biggest queuing in Bayonne is in die -cut area due to de ganging and juggle of orders.
• The existing problem of the variations between the production orders and sales it is called the Bullwhip effect. This can be cause for several reason but in the case of Bayonne I believe is because they don’t have an updated demand forecast, Price fluctuation (price aggressively) and short gaming.
• Bayonne also has a problem with the Capacity Constraint Resource (CCR). This occurs when a schedule if not done properly and produces a deviation from the planned flow or time. The case of Bayonne is worst because they have a system which is inaccurate because it not feed by the accurate information and the leaders just decide to ignore it, doing each one what they think is correct for their own area or process.
• The last term I have relate to Bayonne is the Bottlenecks. This could be the stage, action, function, situation, etc. that affect or control the quantity produced, but do not interrupt the production flow. Bayonne has to find their bottlenecks and find a rapid solution to improve their indicators.

Company’s situation, key competitive performance dimensions, and problems

Bayonne’s Competitiveness is in its products. Their design is beautiful and great, as well of its classy printing. It also has a good level of stocks with an effective response on any request. Bayonne is also growing by capturing new markets, having costumer they have never have before.

Bayonne’s actual performance is on bad shape. This are reflected in several indicators such as:

• 51% of their orders are late.
• 11.8 % of scrap (defective product)
• 1.5% of costumers rejects  
• -7.2 Net profit before tax (oct-11)

Bayonne has as series of problems within the operation process, this are:

• Ineffective quality control. There are just 2 inspectors per shift that recollect 2 pieces every hour during the production. It is evident that this process is not sufficient because there is a considerable number of products return. This area needs to be more proactive, it has to get involve in the production process in order to detect the problem and actively participate with the area to solve it.
• Lack of capacity to manage the variability on the delivery dates. Consumers move delivery dates because they do not trust the company due to its bad reputation in delivering off time, at the end they need the product before the establish date, etc.
• Ganging and juggling orders due to the standard set up times and rush orders. This causes a retention or queuing of orders for one or two weeks.
• Ineffective Schedule system. Each area programs its own schedule base on their own considerations and they ignore the current computerized scheduling system.
• Inexistence programs for preventive or predictive maintenance. The maintenance department just response to corrective and breakdowns situations, that are when the machinery stops or brakes.
• Working in silos. It is evident that the company works in different direction, each area does as they think is correct and seeks its own interest and objectives no matter what, putting aside the other areas needs and objectives.

Capacity utilization in the work centers

Bayonne has a total of sixteen machines on their production process. Part of analyzing the actual situation on Bayonne is necessary to see their utilization rate. This will let us discover if they are operating over o below capacity, to find bottlenecks or opportunities to optimize the production level.

To get this indicator we dived the number of hours per machine between the work hours. You can see this calculation per machine on the following table: