WMBA 6040 Bayonnes Organizational Performance Analysis
WMBA 6040 Bayonnes Organizational Performance Analysis
- Using a formal systems diagramming approach, analyze Bayonne’s organizational performance and develop a robust effect-cause-effect tree diagram using the 5-Whys tool, as done previously in the course.
- Create a robust causal loop diagram that incorporates appropriate causal loop logic in the analysis, and which also identifies common system archetype patterns within the diagram. This diagram should describe fundamental system behaviors and outcomes. The diagram itself should be one page and can be hand-drawn or drawn with software. Tables are not appropriate; it must be in the form of a diagram.
- Write a summary description, including specific recommendations, that links directly to both your 5-why and associated CLD analysis (which includes embedded archetype relationships) for improving the packaging company’s operations and the organization as a whole. (1-2 single spaced pages). WMBA 6040 Bayonnes Organizational Performance Analysis
4420 APRIL 13, 2012 ROY D. SHAPIRO PAUL E. MORRISON Bayonne Packaging, Inc. Cold grey light came through the window of John Milliken’s cubicle in the Production office of Bayonne Packaging at 6:30 AM on Monday, January 2, 2012. The new VP of Operations, Milliken had arrived a half-hour before the first shift started on his first day of work at Bayonne to review reports that had been prepared for him, and to begin his tour of the factory and interviews with key Manufacturing and other personnel. When he had been hired mid-December, the president, Dave Rand, had asked him to analyze Bayonne’s operations swiftly and present his recommendations by the end of the week. Company and Industry Background Bayonne Packaging, Inc., was a $43 million company located in Bayonne, N.J., a sub-chapter S corporation founded 48 years earlier by Rand’s father. The board was composed of family members, a local banker, and outside counsel. Bayonne was a “specialty packaging” paper converter that produced customized, complex-design packaging that was used by industrial customers for promotional materials, software, luxury beverages, and gift food and candy. Except for a few lowvolume operations such as laminating and gold- or silver-foil finishing, Bayonne provided all the necessary services from design assistance through final delivery of the package. Bayonne’s sales force worked closely with customers to develop the artwork and package design, culminating in a proof for customer approval. Bayonne then created the printing plates and die, sheeted the paper from roll stock, printed the artwork on 4- and 6-color presses, die-cut the printed sheets into “blanks,”1 and folded and glued the blanks into the final product, which was typically finished at this point and ready to be shipped to the customer or a contents fulfillment house. In some cases Bayonne provided additional finishing work if needed such as attaching string-and-button fasteners, Velcro dots, or other attachments. 1 “Blanks” are die-cut paper shapes ready to be folded and glued into the final product. To create blanks from printed sheets, the die-cutter sliced through the paper to cut out the shape, and made other, more shallow impressions to create the creases for folding. ________________________________________________________________________________________________________________ HBS Professor Roy D. Shapiro and Boston University Professor Paul E. Morrison prepared this case solely as a basis for class discussion and not as an endorsement, a source of primary data, or an illustration of effective or ineffective management. This case, though based on real events, is fictionalized, and any resemblance to actual persons or entities is coincidental. There are occasional references to actual companies in the narration. Copyright © 2012 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School. WMBA 6040 Bayonnes Organizational Performance Analysis
This document is authorized for use only by Stephanie Parker in MGMT-6645-2/WMBA-6040-2/WMBA-6040B-2/MMSL-6645-2-Improving Business Performance2021 Spring Sem 01/11-05/02PT2 at Laureate Education – Walden University, 2021. 4420 | Bayonne Packaging, Inc. The paper packaging industry grew rapidly in the 1980s and early 1990s as consumer goods companies sought to make a greater impact with their promotional materials or moved their promotional budget from print media and broadcast forms to the package itself at the point of purchase. In addition, the explosive growth of software packaging, which featured expensively printed large “boxes,” provided additional customer market segments that were often willing to spend freely to make a quick impact in a crowded marketplace. Bayonne had grown from just over $10 million in sales in 1982 to $32 million in 2001. The company then faced new challenges with the bursting of the dot-com bubble and the subsequent migration of software sales and distribution from CDs to the Internet. Bayonne survived by diversifying into new markets where the company could apply its great strength in innovative and difficult package design and the ability to fold and glue the complex blanks. President Rand had asked Milliken to focus on three problem areas: cost, quality, and delivery. At the end of November 2011 Rand had fired the previous long-serving VP Operations. Rand told Milliken, “Our sales are up—we have to run two shifts now. But we ran a loss for the first time last year since 2001. [See Exhibit 1 for income statements.] We’re getting more and more complaints about quality, and, what might be even worse for our customers, we’re delivering late more often. I understand we’re a job shop and there’s usually a tradeoff between keeping your costs down, getting good quality, and hitting your delivery promises—but lately it seems we can’t even hit two out of the three. What started to go so wrong for us? Your predecessor couldn’t explain it to me, and his ‘plan’ of ‘We’ll just have to try harder’ told me he had no idea what to do. I hope you can do better.” Touring the Factory in January 2012 John Milliken graduated in 2001 from Rensselaer Polytechnic Institute with a BS in Mechanical Engineering. For the past five years he had been the Operations Manager of a small packaging firm serving the northern New Jersey pharmaceuticals industry, so he came to Bayonne familiar with the general manufacturing processes Bayonne used to design and deliver customized small-unit packaging. During the hiring process he met most of the management at Bayonne and also the factory supervisors on both shifts, and had asked for several reports to be prepared for him when he came to work in January. Digging into the pile, Milliken focused on October 2011 since that was Bayonne’s highest-volume month and, as October 31 closes the fiscal year, it would show him complete and audited 12-month financial statements for the company. He reviewed the Income Statement, keeping in mind Bayonne’s practice—a common one—of recognizing revenue when it billed the customer, and it billed when it shipped product. WMBA 6040 Bayonnes Organizational Performance Analysis
Milliken then turned to a production report that listed standard setup and run times, as well as scheduled production and standard hours for October in key work centers (Exhibit 2). A second report showed “good pieces in/out” for the month (Exhibit 3). The last report presented the daily and cumulative dollar volumes shipped in October, net of customer returns (Exhibit 4). He also had his own chart showing the usual flow of orders through the plant’s departments (Exhibit 5). Quality Control Milliken left his office and crossed the factory floor to the Quality Control office to find QC Manager Fran Schuler inside. They chatted about the procedures for the start of each shift, then Milliken asked where the main problems arose. Schuler told him that quality problems were concentrated in Fold & Glue with either missing glued lines or excess glue. Schuler showed him a report from October, their worst month of fiscal 2011, indicating that 6% of products were found defective due to glue problems and were scrapped, with a further 1% of shipped product rejected by the customer due to glue problems. There were also 2 BRIEFCASES | HARVARD BUSINESS SCHOOL This document is authorized for use only by Stephanie Parker in MGMT-6645-2/WMBA-6040-2/WMBA-6040B-2/MMSL-6645-2-Improving Business Performance2021 Spring Sem 01/11-05/02PT2 at Laureate Education – Walden University, 2021. Bayonne Packaging, Inc. | 4420 some problems in Finishing—a much lower volume department—primarily due to orders shipping with some or all pieces missing an attachment like a button or zipper. If the customer returned these they could usually be reworked rather than scrapped. “What’s your staffing, and your procedures for preventing or finding defects?” asked Milliken. “The supervisor signs off on the first good piece the operator runs,” said Schuler. “That goes in the Work Order Jacket.” The Work Order Jacket traveled with the job; it listed the routing, the standard setup and run times, any special instructions, and ship-to information. It also held the customer’s signed proof along with samples signed by operators, supervisors, and QC at each operation. Schuler told him that QC had one inspector on each shift covering the Composition, Sheet, Print, and Die-cut departments, and a second for Fold & Glue, Finishing, and the shipping dock. The inspectors went from machine to machine checking two pieces every hour during the production run, and performed a final inspection of material before it shipped out. Schuler said, “In Shipping we check the product against the proof in the Work Order Jacket, and against any special instructions like special packing or ship-to. Usually it takes about 15 minutes to do an order. Of course we might not have the Work Order Jacket at that point if it’s been partialed since the jacket gets filed up in the Production office after the first shipment.” If an order was running late it was sometimes possible to rush a “partial” quantity of the whole order to satisfy part of the customer need, with the rest of the order completed and shipped later. Sales Management Milliken next spoke with VP Sales Alex Wascov and asked him about his biggest concerns. “WMBA 6040 Bayonnes Organizational Performance Analysis
Ontime delivery,” said Wascov. “We’re selling a piece of an expensive promotional campaign. The customer has bought ads, Internet, direct marketing mailings, point-of-purchase display units and coupons, commission payments to the retail channel so they’ll push the product, people handing out samples on the street—you name it. It’s all scheduled to hit, to have impact, on a specific date. If our product isn’t there, the customer goes nuts. We have orders as small as 1,000 pieces, but we sell some of those for a high price per piece—they’re just as important to the customer. In October, since you ask, we were late more than 20% of the time. Two years ago I hit the roof if it was 5% in a month. The factory doesn’t agree with me on this, they take a bow for being “on time” if they get a partial out. But that’s nowhere near good enough for the customer. You try getting the customer to give us a second look if we’ve been late once. I’m telling you, it’s getting worse not better, year after year.” Milliken nodded. “The second biggest problem is the boxes popping open with not enough glue or no glue at all. Sometimes there’s too much glue laid on so it bleeds out, it looks bad or you can’t open it because it’s stuck so bad. Don’t get me wrong—we have a beautiful product, great designs, classy printing. But the glue problems are real, or sometimes the product is just missing some Finishing piece. Delivery is the big issue, though.” Milliken asked why customers sometimes wanted to “move up” or expedite a due date to receive product sooner than they had originally been promised, assuming schedule was part of a coordinated marketing project. Wascov said that, first, some customers had learned or heard that Bayonne ontime delivery was not to be trusted. Second, the customer may have originally wanted the material sooner but someone had settled for the standard date, and then later come back to get what they really wanted. Third, some other component of the marketing project might become available earlier than anticipated, giving the customer hope that all of the pieces, including Bayonne’s, could come together sooner. Fourth, sometimes the customer was putting together the project for some other company that wanted more lead-time—for example, it was not uncommon for retail channels to demand that promotional materials be staged sooner than originally promised. HARVARD BUSINESS SCHOOL | BRIEFCASES 3 This document is authorized for use only by Stephanie Parker in MGMT-6645-2/WMBA-6040-2/WMBA-6040B-2/MMSL-6645-2-Improving Business Performance2021 Spring Sem 01/11-05/02PT2 at Laureate Education – Walden University, 2021. 4420 | Bayonne Packaging, Inc. Hoping to switch away from this litany of woe, Milliken asked, “Other than the problems, how is Bayonne doing?” Wascov looked immediately happier. WMBA 6040 Bayonnes Organizational Performance Analysis
“Great!” he said. “We’re grabbing into new markets, getting aggressive about taking customers we’ve never had before. This year for the first time we’ve had some big, solid hits, like up to two-hundred thousand piece orders in candies, pretty much a whole new product for us. Same thing with those little corporate gift sets. I told my sales people to do what it takes, price aggressively to the market, and boy they surely did. Dave Rand complains about the margins, but he doesn’t complain about getting the volume. The designers had to learn a few new tricks, and the Fold and Glue operators too, plus we got into some FDA requirements about coatings, adhesives, and liners, but amount of business we’re pulling in is great. If we could just get a track record for delivering on time we can win a lot more customers too, especially with the kinds of products we haven’t touched before, just over the river. You know how much promotional material money there is in Manhattan?!” Composition, Sheeting, Printing, and Die-Cut By mid-afternoon Milliken had worked his way through most of Bayonne’s factory work centers. First he toured the Composition Department, where both printing and package designs were developed and finalized, printing plates made, and die-cutting dies ordered. From there Milliken passed through the Sheet Department, where the Jagenburg sheeter turned roll stock into sheets of paper stacked on skids to be printed. In the Print Department he watched 4- and 6-color Heidelberg presses print the sheets. He finished this part of his tour in the Die-Cut Department, where Bobst diecutters cut the printed sheets into blanks—the flat cut-out shapes of printed paper ready to be folded and glued into finished product. He was led through these areas by Sean Quinn, the manager for these departments. Quinn had a supervisor within each department on both shifts reporting to him. Watching the assistant sheeter operator expertly maneuver the clamp truck to fetch and stack up rolls of paper, Milliken asked Quinn how they scheduled the sheeter and the Heidelberg printers, and how often a lack of stock caused delays. Quinn told him that he scheduled the sheeter by what needed to be printed in the following day or two. They rarely stocked out of because they kept enough variety on hand, and their supplier, International Paper, could restock from their warehouse in Montvale, New Jersey, within a day or two in almost all cases. Quinn scheduled printing by due dates, which were either the standard ones originally promised to the customer (typically three weeks from signed proof, depending on the number of operations and the size of the order), rush orders sold from the start with shorter-than-standard lead times or, about twice a day, dates expedited after the order was placed. In Quinn’s office looking out a window at pallets of printed sheets waiting to be die-cut into blanks, Milliken asked how the Bobst die-cutters were scheduled. “As much as we can by having the same die,” Quinn said. WMBA 6040 Bayonnes Organizational Performance Analysis
“We sell enough of the same package designs so we can gang orders.2 Jerry, the cost estimator, knows that when Order Entry routes the orders they give us 30 minutes as a standard setup time—they know it really takes two or three hours if you have to change over a Bobst die, but they figure on me ganging. I juggle the orders I have in the department and that generally allows me to gang six or eight orders on a setup. If I didn’t gang, I couldn’t get enough run time to stay on schedule.” Milliken asked how long Quinn usually held an order waiting for more to come in to the department for ganging. Quinn said it was usually about a week, sometimes as much as two. 2 Orders were “ganged” when they were similar enough in some setup characteristic so that several orders could be run sequentially after a single setup. In die-cutting, if several orders had the same paper thickness, blank shape, and crease lines, they could normally all use the same die and be run on a single setup. 4 BRIEFCASES | HARVARD BUSINESS SCHOOL This document is authorized for use only by Stephanie Parker in MGMT-6645-2/WMBA-6040-2/WMBA-6040B-2/MMSL-6645-2-Improving Business Performance2021 Spring Sem 01/11-05/02PT2 at Laureate Education – Walden University, 2021. Bayonne Packaging, Inc. | 4420 While he talked, Quinn illustrated his scheduling by pointing to a board where small magnetic clips each held a piece of paper with a Work Order number and its die number. Most were placed neatly in columns under the two Bobst machine numbers, lined up in the order to be run. Pushed off to one side of the board was a jumble of clips with orders that had not yet been scheduled to run. Milliken studied the jumble for a moment. Each order appeared to have a different die number. Milliken asked Quinn about the schedule that was generated twice weekly by the computerized scheduling system. “It’s useless,” Quinn said bluntly. Milliken asked him why. Quinn said, “The biggest reason being, between rush orders and ganging the orders to keep the machines running, I couldn’t afford time-wise to do what the printout says. Apart from that, what the schedule tells you is, excuse me, garbage. It says you have an order when you’ve never seen it, or that you still have an order that you know you finished and got out of here. That doesn’t have to happen too many times before you just don’t worry about the printout.” Fold & Glue Milliken’s next stop was the Fold & Glue Department, where the die-cut blanks were turned into finished product. The department had four kinds of machines: Two International Queens and one International Royal, which were high-speed machines but complex to setup; four International Staudes, which were slow machines but easier to setup, best used for low-volume jobs; and two International 3A machines which were “window/patch” machines, using rotating cylinders which attached clear plastic “windows” and also tear-strips on envelope-style products. Milliken asked department manager Rick Gomes about his problems. Gomes told him, “The department runs pretty good, but we get a lot of problems that are not our fault. Sean Quinn sends me a lot of orders that are one or two days from the due date, or even late already. So we have to run them as soon as possible, but there’s already orders ahead of them here lined up. So I can’t gang orders like he can. With those, and the rush orders too, I have to break into runs, get the order done, and then go back to the first order I broke into—so that makes for partials.” “What about the glue problems?” asked Milliken. “Getting the hot melt glue guns synchronized to the belts and swords3 is the tough thing about a setup,” said Gomes. “If you do the setup quick and dirty, it runs slow—but I can’t run slow with our volume. Usually we get it alright, but sometimes not. Let me show you here on this Queen.” Milliken was familiar with fold & glue machines, but he stood with Gomes looking at the 35′ straight-line machine and nodded while Gomes talked over the noise. “The feed takes the blank from the stack here we get from Die-cut, lays it down flat, then the fingers grab and move it. At the first glue gun a line of glue gets laid down, then the swords pick up the tabs, fold them over and lay them down. They go between the top and bottom belts, which squeeze the fold while the glue sets, for the first fold. On this order, that happens again at the second guns. Getting it running at 22,000 to 27,000-an-hour like this with the swords, belts and guns synched, not too little, not to…
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