2000 HERSHEY CHALLENGE #2
Develop low cost methods for direct Packing of 32 oz. moulded chocolate bars for shipping as individual packages.Background Information:
Develop low cost methods for direct Packing of 32 oz. moulded chocolate bars for shipping as individual packages.Background Information:
Hershey Direct is Hershey Food's Mail Order Catalog operation located
at 200 East, HersheyPark Drive. Hershey Direct sells and ships more than
six million dollars worth of product annually from its Valentine's, Easter,
and Christmas catalogs combined.
In 1999, Hershey Direct has created a fun and exciting new Internet
site that displays many Hershey gifts that are for sale. The site is very
user friendly, and it makes it very easy to shop for these gifts without
leaving the home or office. With a couple clicks of the mouse, you can
have a wonderful gift delivered to you as early as the next day.
Hershey Direct produces chocolate moulds on which a customer can have a hand written, personalized message written with chocolate paste by a Hershey Direct "mould writer." These personalized moulds make great gifts for the holidays or any special occasion! After the personalization of each mould, each mould is wrapped in a liner and placed in a maroon Hershey gift box. Each mould fits almost perfectly in these maroon gift boxes, so there is no wasted space. When the moulds are ready to be prepared for shipment, they are sent to the mould-packing department already in their maroon Hershey gift boxes.
To insure that our customers receive their moulds without being damaged, we require each single mould (while in its maroon gift box) to be wrapped in 6 feet of bubble and packaged into a shipping box, then sealed with tape in order to ship. The packer must manually assemble each shipping box for every mould before the mould is packed. To assemble each shipping box, the packer uses sealing tape that is fed from an electric tape dispenser. Bubble wrap comes in 250 feet rolls. For every mould, the packer must manually cut six feet of bubble wrap from these large rolls.
Many of our shipments include multiple moulds which take more packaging materials and labor. For example, if a customer orders nine moulds, each mould is still wrapped in six feet of bubble and packed into its own shipping box and sealed with tape. Then the nine moulds are packed together into a larger shipping box which also gets sealed with tape. The large shipping box also must be manually assembled before the moulds are packed. Nine moulds fit perfectly in the larger shipping boxes, so, if an order has less than nine moulds, additional bubble is needed to fill the empty space for protection.
The process of packing moulds is costly for Hershey Direct due to the extensive manual labor and materials needed. It is time consuming for packers to assemble, tape, and cut bubble for every mould. As Hershey Direct grows their business to much higher production volumes, more efficient methods are needed to increase production levels and lower materials and labor costs.
1. Research various potential alternatives for packing Hershey Direct 32 oz. chocolate bars (moulds).
2. Develop cost effective methods that Hershey Direct could use to reduce costs for labor and materials. Estimate a cost to implement each methods.
*The web site address for Hershey Gifts is http://www.hersheygifts.com
*The forecast for 1999 is 90,000 moulds.
*For 1999, 60% of production will be single moulded orders (60% x 90,000 = 54,000). It takes about 30 seconds to pack a single mould. Projected labor costs for single mould orders for 1999 is $3,150 (54,000 x .5 minutes = 450 labor hrs x $7.00/hr) . Forty percent of production will be multiple orders (40% x 90,000 = 36,000). It takes 4.75 minutes to pack a multiple order. Projected labor costs for multiple mould orders for 1999 is $19,950 (36,000 x 4.75 minutes = 2850 labor hrs. x $7.00/hr ).
*Packing employees earn an average of $7.00/hr. Since the average packaging time for a single order is 30 seconds this equals $.06 per single ($7 /60 x 0.5). Multiple orders take an average of 4.75 minutes (30 seconds x 9 + 15 seconds = 4.75 minutes) which equates to $.554 per multiple order.
*The dimensions of the maroon Hershey boxes are 9¾" x 9¾" x 1". These boxes reflect the tradition of Hershey quality and must remain as part of any proposed solution to this challenge. They cost $0.53 each.
*Each mould is shipped in six-sided shipping boxes with dimensions of 11¼" x 11½" x 4 ¼".
*The dimensions for the larger shipping boxes for multiple-mould orders are 20" x 15" x 13".
*Single orders include 1 shipping box ($.34), the maroon Hershey gift box ($.53), 6 Feet of Bubble ($.24), and sealing tape ($.01). Total cost of materials is $1.12.
*Multiple-mould orders include 1 large shipping box($.74) which can hold up to 9 smaller shipping boxes at $3.06 (9 x $.34). Cost for bubble is $2.16 (9 x $.24). Cost for sealing tape for all 9 shipping boxes is 9 x $.01 = $.09. Cost for sealing for large shipping box is $.02. Cost of the maroon gift boxes is $4.77. Average total cost for all materials for 1 multi-mould order is $10.84.
If you are selected to give an oral presentation for this problem, the presentation will be held at Hershey Entertainment and Resorts Corporation in Hershey, PA. You will be given directions and notified of the exact date and time later.