Memorandum

To: Dave Rand

From: John Barry [10092975] and Wamiq Bazaz [10098991]
Date: November 8, 2015
Re: Operations of Bayonne Packaging, Inc.
Problem
Despite increasing revenue, Bayonne Inc has seen a consistent decrease in overall profits for the
past two years. This is partly due to tightening margins and increased production volumes which
have driven up costs and decreased both quality and production run times. Late or partial (or late
partial) order delivery as well as low-quality output with glue issues and missing parts are key
issues on the production floor. Additionally, lack of standardized operating procedures for
machine maintenance, record keeping and order prioritization have led to informational
asymmetries, increased costs, and unneeded fire-fighting. Bayonne lacks consistent strategy and
interdepartmental communication which has created a culture of blame and reduced
departmental accountability.
Conclusion and Recommendation
In order to create a culture of collaboration, increase efficiency, and ensure consistent operational
strategy, Bayonne needs to revamp scheduling/prioritization procedures, work process tracking,
and inter-departmental communications. In the short term, this can be accomplished by altering
maintenance practices, creating a standardized rushing system and allowing overtime for highly
utilized machines. In the short term we believe it is possible to realize a profit of $5,315,373 for
fiscal year 2012. However, long-term success will require computerized integration and firmwide adoption of an Enterprise Resource Planning (ERP) system. An ERP offers the most viable
option for fostering long term profitability and efficiency improvements.
Maintenance: To quickly address quality issues, machine maintenance needs to be standardized
and regularly scheduled instead of done at operator discretion or when there is a breakdown. The
fold and glue department specifically is creating the most quality problems and needs weekly
(estimation) comprehensive maintenance inspections and filter changes. We predict this will
reduce quality problems to levels comparable to what was seen in fiscal year 2009 (Figure 2).
Order Sequencing and Rushing: Currently sales simply tries to push all late orders or rush orders
through the system but management lacks a proper system to objectively evaluate them. A
standardized flagging system will evaluate rush requests based on order profit margins, current
orders pending and long-term customer value (Figure 3). Additionally, to reduce production
stress any order with a critical ratio lower than 2 need to be sent to operations for approval and
will be evaluated on the same criteria as a rush. Evaluation criteria will flex depending on the
number of current orders in progress as well as number of pending orders so as to ensure
consistently profitable on time production.

Overtime Flexibility: The Heidelberg Press station in particular needs to have overtime
flexibility to reduce the bottleneck at this station. Increasing scheduled overtime will ensure
machines do not operate over 95% utilization (Figure 4).
In the long-term, ERP technology will establish a reliable method for the firm to iron out kinks in
the current procedures. It will also let management make more informed decisions by reducing
informational asymmetries between business units and production work stations. With on floor
production terminals already installed, much of the hardware required will already be in place.
Collaboration between all departments is crucial for the ERP, and based on his extensive floor
experience and popularity within the company, it is recommended that Neil Rand collaborate
with operations on this project. His role would be to assist in optimizing the ERP as well as
fostering a company culture that encourages its usage.
Evaluation Criteria
Cost: Cost reduction through improved efficiency, scheduling, and process design is vital to the
solution. In October 2011, the company ran a loss of $365,694 before taxes despite increased
sales. Addressing increasing cost base and returning the company to consistently profitable
operations is the crux of the recommendation.
Quality: Quality complaints have led to a 150% increase in customer rejects when comparing
Oct 2011 to fiscal year 2009. The Fold and Glue departments gluing method is unreliable and
causes many of the issues. On an overall, the quality assurance staff found that 5.4% of products
in Oct 2011 were defective. The recommendation should improve on the quality of operational
output and reduce customer rejects which should improve cost base and customer satisfaction.
Delivery: In October, the company was late with its orders over 20% of the time. This has caused
many complications to operations. It will be necessary for the recommendation to propose
solutions that improve department relations, processes, and synchronicity so that orders can be
delivered on time and in full.
Comparison with Alternatives
One alternative is retraining current operations employees to actually use the current terminalbased shop floor production reporting. This will allow for the production metrics to be much
more reliable, and thus, operations will improve. However, adoption of this system is very low
and revamping how the current hardware is used through a customized ERP is a better
alternative.
Another alternative is to acquire new machines for the Fold and Glue department so that they can
work on more orders faster. The issue is, this method is expensive and inefficient and will cause
work process issues around space and human resources required to incorporate the machines into
the operation quickly and successfully.
Implementation Plan
Minimal writing here and most of it in the appendix.
Appendix 1

Assumptions
1. Conservative estimate of 7% revenue growth (Low estimate based on historical growth)
2. % Customer Rejects and % Scrap will approximately return to 2010 levels because of optimal
machine maintenance in the glue department specifically and increased overtime making
constrained work stations less stressed during high periods of high production.
3. Estimate of the total increased overtime
4. Decrease in shipped materials costs is based on prioritization system reducing partial runs and
prioritizing higher margin projects.
5. DL increases as a function of revenue increase.
Appendix 2

Appendix 3

Appendix 4