Bayonne Packaging Inc. Spreadsheet Supplement Harvard Case Solution & Analysis

Bayonne Packaging Inc.

Introduction

Bayonne Packaging, Inc. is a printer and paper converter which produces customized packaging for industrial customers. Bayonne specializes in creating innovative packaging solutions for its customers along with full service from design to final delivery. They also work closely with customers to develop the design as per their need and get it approved from them.

Problem Statement

The company has expanded to a large extent and the amount of revenue has trebled however, the reported net income of the company is negative for the first time in a period of ten years. It is due to the declined performance of the company as the company’s costs, quality and delivery timings are not up to the mark.

Goal of Analysis

The newly hired VP of Operations has the task of finding out and solving the operational problems that are resulting in cost overruns, quality problems, and late deliveries.

Key Facts

The quality control and sales department along with the various work centers in the plant reported different challenges in the current production system.

Financial Analysis

The results of October, in which losses have been reported when compared to the data of 2009, indicated that the cost of goods sold has increased from 72.1% of net sales to 90.7% of net sales in the current period. This has happened because the company has reduced its profit margin in order to increase its sales volume. The same fact is also visible from the cost of shipped material, which increased from 55.3% of net sales to 64.9% of net sales.

Along with that, the amount of customer rejection was the highest in this time period. Possibly all of the rejections do not relate to that specific term because the revenue is recorded when products are shipped while the rejections occur and are recorded at a later date. Hence some of the rejected material might relate to the month of September rather than October.  The customer rejections accounted for 1.5% of the net sales in October 2011 as compared to 0.5% of 2009.

A combined effect of these entire factors was that the company faced losses in the month of October 2011. Bayonne was operating under greatest stress in this month which can be seen from the fact that sales volume was the highest however, the percentage of missed deadlines increased to 20% and even more.

Operational Analysis

There are different factors in the operational process of packaging which result in quality issues and delayed shipments. The finished product is a component of different processes. The process flow starts with quoting a price to the customer for the product, and then the designing phase starts which is carried on further to other places.

Composition, Sheeting, Printing, and Die-Cut

Strengths: The scheduling is done for the next day in advance. No delays occur because of stocking as the company’s supply chain is very strong and the lead time is just one or two days to restock the material as per the need. Printing is scheduled and adjusted according to the due dates, rush orders or expedited orders.

Weakness: The bottleneck occurs at the die-cut stage as the waiting time is too much because of the strategy of ganging used at this stage. This is the major cause of the delay. To reduce the costs and run time, as much as one or two weeks are wasted at this stage because the orders are awaited so that more orders can pile up in the department for ganging purpose. The major weakness observed at this stage is that the schedules are not followed. Sometimes, the errors in the scheduling send the wrong data to the departments which have created a perception among the departments that they looking on the data, which is just a waste of time.

Lack of integration in the departments caused different problems because shop floor control was not given any consideration and there was no effort made to scrutinize the problems in the information system that Bayonne used to schedule the order.

Fold and Glue

Strengths: Different types of machines are used for different workload which include; Queens, Royal, Staudes and 3A. Different machines can be used according to the situation. The high-speed machines were complex to set-up, the slow-speed machines were; easier to set-up, best used for low-volume jobs, whereas 3A machines were window/patch machines. This part of the process has a good maintenance team and an excess supply of spare parts. This is done so that, the work does not stop because of the break down at any time.

Weakness: A lot of orders arrive late or are just one or two days from the due date. Thus, the material has to be prepared in a rush, according to the urgency of the order, regardless of the schedule. The ripple effect of the previous delays, results in increased cost at this stage, increased pressure, resulting in faulty products and even less time for the next step of the process that is adding a finishing touch.

Along with that, the machinery used for gluing purpose does not have a proper maintenance. When the newly hired manager inspected the machinery, he observed that the tiny glue orifice in the brass nozzle was open, with some hardened residue around it. This might have been the reason of uneven distribution of glue.................

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by Roy D. Shapiro, Paul E. Morrison Published: April 13, 2012. Prod. #: 4423-XLS-ENG

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