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Running head: BAYONNE CASE-STUDY 1

Consideration of Bayonne Packaging, Inc. case study:

Recommendations for CEO

Gulmira Turginbayeva 1813743

University Canada West

Professor: Dr. Belay Gaga

OPMT 620: Operations Management

October 27, 2019


BAYONNE CASE STUDY 2

Introduction

Bayonne Packaging, Inc. is a company, which produces the “special” types of packaging

for the industrial customers. The examples could be wraps for gifts food, candies, and beverages,

software, materials for advertisement, and others. Additionally, the services include the

development of the design for packages and the delivery of the ready production to the customer.

Mr. Rand found the corporation in 1964, and his son continued to run the company. Bayonne

went through such historical events, like the boost in consumption during 1980s and 90s of the

last century, which allowed it to triple their sales; and the tremendous change in business moving

to the Internet, which forced Bayonne to move to other markets and to prove its competitiveness

by high quality and complicated works. In October 2012, the company had borne losses despite

the increased volume of sales. Moreover, the amount of net loss was unusually high in

company’s history. That was a reason for a management of the company to hire a new Vice-

President of Operations, J. Milliken. The task for newly appointed VP was to show the CEO the

reasons of the issues like increased costs, lowered quality, problems with the delivery, and,

consequently, solve them.

On the first day, he met with Quality Control Manager; Vice President Sales; Composition,

Sheeting, Printing, and Die-Cut departments Manager; Fold & Glue Department; and Scheduling

Department. Briefly, he found out the following:

- On the view of the QC Manager, the main problems were in the Fold & Glue sector due

to either excessive use of glue or its absence at all. The specification of the order, its

quality procedure check, any other special details are in the Work Order Jacket, which is

moving between departments. Two QC supervisors are checking the process, and they
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took the final control in shipping based on the Work Order Jacket. However, the last

might not always be present at the shipping if the order is partial;

- VP Sales informed that the biggest issue is with the delivery department, which is often

delaying the shipping of the orders to customers, causing loss in clients’ quantity and bad

customer service evaluation. Another concern is with the boxes having too much of glue

or insufficient amount;

- Composition, Sheeting, Printing, and Die-Cut departments’ manager told that if he would

not have the possibility to gang orders, then his department would run out of time and

would delay the products. Additionally, he noticed that the computerized scheduling

system is not working properly and constantly generating wrong data;

- Fold & Glue department manager told that his area is experiencing problems major

because orders, which come into to them are already out of time. Therefore, they have to

deal with those delayed and then go back to the previous orders. They are not able to

gang orders, and the process of glue maintenance is being uneasy for them;

- Finally, he met with the employee from scheduling department, who told that the main

task of this sector is to deliver products on time. They feel uncomfortable to tell Sales

department about possible delays due to the conflicts possibilities, which could lead to

more issues arisen. This department was not using the computer system, too due to

inaccuracy of the information.

These meetings and discussions allowed him to have a picture of the operations process in the

company and identify problem areas, as well as to give the recommendations to CEO. The

further discussions will give the view on the reasons, which could lead to the company’s failures

in operation processes, and will provide the possible solutions.


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1. Analyzing the income statement (IS), Milliken had on his hands; we can clearly observe that

gross sales in October were the highest since last period, which suppose to mean that the net

profit would be the highest too. However, this month company was borne a net loss for $365,694

(-7,2%), which had never happened before in the past ten years. As we can see from the IS the

percentage of following points was high in comparison with previous periods: - customer rejects

is double high than the one in September; - cost of goods sold for every item included in it; - and

selling & administrative expenses. For example, the most remarkable difference can serve scrap

and direct labor amounts, which were 11,8% & 10,4%, respectively, in comparison to 8,8% and

8.9% in August. Selling and Administrative expenses went up for 4,3% in comparison with the

ones in September. All of the above can mean that, first, company set the prices that do not cover

its direct and overhead expenses (Bragg, 2018); and, second, it should make the company

monitor the production and quality process much stricter. For instance, scrap percentage can go

down by the proper quality control procedure or appropriate scheduling system can eliminate the

overtime for employees, which will lead to diminishing expenses. Despite the increase in the

volume of sales, profit margin plays an essential role too (Shapiro & Morrison, 2012). Therefore,

management should consider increasing the prices to avoid critical situation in the company and

minimize the expenses.

2. Milliken as VP of Operations has no influence over the Sales & Marketing department.

Therefore, it is hard to say the utilization of this department’ resources. As for the Composition,

Sheeting, Die-Cut departments, we can clearly observe that sometimes their waiting time for the

die-cut process may take one or two weeks, which can lead to employees downtime and to the

company losses. From the other side, the other departments, as Fold & Glue and Scheduling

were suffering from overload due to the orders came late. Improper maintenance caused the
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inaccurate work of the glue machines in F&G department. In addition, simple calculations of

Milliken revealed that each work center had two extra days to run the order, which has to be on

the count too. However, none of the departments considered this fact. Additionally, workers did

not distribute orders all machines evenly. Some of the machines overloaded, some almost not

used. Here the absence of the computing system plays role because due to the lack of the

technique spreading the orders, employees had to make it by their own, which can lead to biases.

Having the data on the supposed running times, VP Operations could see which of the machines

are working slowly and judge the capacity utilization on this basis.

3. While having a tour in the factory, Milliken several times faced the fact that computerized

scheduling system is not working properly. Therefore, employees who tried to use it and found

out that it gives inaccurate data, stopped rely on it and did everything manually (Shapiro &

Morrison, 2012). The informal system in the factory works the following way – the compositions,

sheeting, and die-cut departments manager is waiting for the similar orders to combine them

together and die-cut at the same time. Sometimes, the waiting time would take one week or even

two and many orders that could be already finished, were just waiting for the same ones. Then

the numerous outdated orders go to the Fold & Glue department, where the machines technically

were unable to process them all. This leads to the problems with boxes and, consequently, to

customer rejects. Although, this system might be efficient enough for the Die-cut department, it

was creating the problem for the Fold & Glue and then to the Scheduling departments. As a

result, this unofficial communication system was one of the main reasons of company’s financial

and customer service failures.

Fixing the computer system would allow Bayonne’s employees to rely on the exact scheduling

time and to avoid personal assumptions and delays, it will lead to a better time management and
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minimize errors. The other important point in the proper computer system is that it can allocate

orders to the appropriate machines, i.e. Queen, Staude or Royal, and the process will not depend

on the employees’ subjective decision. Technology is an inevitable and an essential component

of the operations process (Greasley, 2008). Therefore, one of the first tasks for a new VP

Operations should be fixing the computer system.

4. Based on North American Industry Classification System (2017) we can determine that the

type of industry for Bayonne Packaging, Inc is manufacturing. However, we know that this

corporation deals with the provision of services like making design of the products and the

delivery of ready merchandise to clients. Therefore, Bayonne is combining the production of

goods and services, which makes the operation process complicated. Nevertheless, Bayonne

Corporation already has some competitive advantages, like beautiful products, the design,

delivery services, and classy printing; it has to improve the current status quo.

In general, high product quality, the speed of service delivery, customer service, and

flexibility is the main competitive priorities for manufacturing and service industries. However,

for the manufacturing the following criteria could become critical: - adaptation of the intelligent

manufacturing control; - improvement of the equipment reliability and maintenance practices; -

product qualities must be enhanced; - product realization techniques; - and multidisciplinary

work force (National Research Council, 1991). All of the above will decrease cycle times,

increase the productivity, reduce costs, and will create a competitive advantage. In addition,

there is always a trade-off between competitive priorities like delivery, cost, quality. If the

company focuses only at one competitive advantage like price, the others will suffer, for instance,

quality. From the other side, trying to be the best in all of the aspects of competition might lead

to be not good at any. Greasley (2008) proposes two approaches in dealing with this kind of
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trade-offs. First is to manage contradictions between competitive priorities in the boundaries of

the operation system. The second one is that it needs to follow a way for improvement and make

the operation system less constrained. Therefore, Bayonne must consider one of these two

approaches while getting the competitive advantage over its rivals. Moreover, it is important for

this company to understand the main keys of the competitive excellence: - the creation of unique

market position; - remember “what not to do” in the trade-offs; - and have activities that best

support the company’s strategy (Caldwell & Anderson, 2017). All of these implications taking

place will allow the company have a beneficial position in the market.

5. If we take the definition of the quality in all three categories – product-based, manufacturing-

based, and user-based, we can observe that Bayonne’s process does not answer any of these three

directions (Heizer, Render, Munson, & Griffin, 2017). The products do not have the appropriate

quality even from employees’ point of view; the manufacturing process is missing its points at

every stage, and, finally, clients do not accept the products and choose other suppliers. If quality

management works better, it will allow minimizing expenses due to less percentage of redoing

orders, no scraps, and not spending time for implementing warranty obligations because of the

products’ low quality (Heizer et al., 2017). The company took a lofty task to boost sales, but as

practice showed, it could not bear the emerged responsibilities and consequences. The other

reason for poor performance is the absence of the control over the operations process. The

previous VP Operations did not have a full understanding of the situation in the factory, which is

why he was unable to see and solve the problems, and give the priority to orders and tasks.

Another aspect of improper operations process is the lack or inaccurate work of the technologies.

The computer scheduling system was not working causing the misunderstanding between

departments, delays, and disorganized work process.


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The work between departments was not organized properly causing departments’ managers

blaming each other and complaining on other’s mistakes without noticing own drawbacks. For

example, Sales manager told that the problem was in the late delivery. However, from his side

there was no cooperation with scheduling sector on their availability. If Sales employees were

aware of the critical situation in the scheduling, they would not give their clients promises they

could not keep. Die-cut department should have been coordinated its work with Fold & Glue

area, which would eliminate the issues with the glue use on the boxes. The F&D department has

to monitor better its maintenance procedures to avoid broken parts and not allow glue dried out.

Finally, an experienced worker in the Scheduling department and a family member Neil Rand

had to pay attention to the broken computer system and inform the management about it.

6. Short-term recommendations: The main recommendation to CEO for the short-run would be

dealing with the orders’ prioritization and enhance the machines maintenance quality. The first

will allow company to deal with urgent orders on a first turn, and with others on a planned time.

The machines maintenance will increase the capacity of outputs, thus increase the quality of the

merchandize and decrease the number of rejects, scraps, and other expenses (Heizer et al., 2017).

Both of these items will lead to the better customer service. Another important short-term goal to

be reached is the Work Order Jacket, which has to be available on every step for appropriate

processing party. Also, CEO should consider the possibility of cutting expenses, which are on

the Cost of Goods Sold account; this will lead to a better profit margin.

Medium-term recommendations: On the medium-term basis, the Sales & Marketing department

has to confirm the orders delivery with the consequent departments to avoid delays and fallen

promises (Rangarajan, Sharma, Paesbrugghe, & Boute, 2018). Also the communication flow

should be fixed, and every operations department should be notified on the orders the company
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has. This can be done though meetings, or other type of intra-company communication channels.

The other priority is the fixing of the computer scheduling system, which will solve time and

machines use issues.

Long-term recommendations: On the regular basis, it is highly recommended to conduct SWOT

analysis to see strong and weak sides of the company rom inside and outside. For instance, it

would allow to monitor the expenses rise not to cross the break-even point, or be aware of the

new products and competitors coming into the market. It will be helpful to increase the

employees’ engagement, teamwork, and collaboration between departments. Human resources

management is an important part of the operations process and the smooth work between team

members will lead to better outcomes of the whole company. Also the Quality circle team can

serve an alternative for the corporation to eliminate main drawbacks of the current system and

maintain an additional quality check. In addition, it would be very helpful for the company to

implement Just-in-Time techniques, which can bring astonishing results and give the company

great competitive advantage. JIT system will eliminate problems with inventory and put supply

chain system in order (Heizer et al., 2017).

To summarize, Bayonne Packaging, Inc. is a pretty successful company in its market, having

competitive advantages but consistently saving its position in the area. Last time due to the poor

operations system management, the company was borne the net loss and deteriorated the

customer service. In order for the company to gain back its place in the market, attract more

clients, save current customers, and make profit, it has to follow some recommendations in the

short and long-term periods. These advices include maintenance of the technological systems,

time-management, orders priority setting, SWOT analysis, HR management and many others.
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References

Bragg, S. (2018). Overhead definition. Accounting tools. Retrieved on October 26, 2019 from

www.accountingtools.com

Caldwell, C., & Anderson, V. A. (2017). Competitive Advantage : Strategies, Management and

Performance. Hauppauge, New York: Nova Science Publishers, Inc.

Greasley, A. (2008). Operations Management. Los Angeles: SAGE Publications Ltd.

Heizer, J., Render, B., Munson, C., & Griffin, P. (2017). Operations management: sustainability

and supply chain management. 3rd Canadian edition. Pearson Canada Inc.: North York,

Ontario

U.C. Executive office of the President Office of Management and Budget (2017). North

American industry classification system. United States Census Bureau. Retrieved on

October 26, 2019 from www.census.gov

National Research Council (U.S.) (1991). The Competitive edge : research priorities for U.S.

manufacturing. Washington, D.C.: National Academies Press.

Rangarajan, D., Sharma, A., Paesbrugghe, B., & Boute, R. (2018). Aligning sales and operations

management: an agenda for inquiry. Journal of personal selling & sales

management, 38(2), 220–240. Doi: 10.1080/08853134.2018.1450148

Shapiro, R., & Morrison, P. (2012). Bayonne Packaging, Inc. Harvard business school. Retrieved

on October 16, 2019 from www.myucwest.ca