2010

Kristens Cookie Company

Kristens Cookie Company

Contents
Case Summary ........................................................................................................................................... 3 1. How long will it take for you to fill a rush order? .................................................................................. 5 2. How many orders can you fill in a night, assuming you are open for four hours each night? .............. 5 3. How much of your own and your roommate's valuable time will it take to fill each order? ................ 7 4. Because your baking trays can hold exactly one dozen cookies, you will produce and sell cookies by the dozen. Should you give any discount for people who order two dozen cookies, three dozen cookies, or more? If so, how much? Will it take any longer to fill a two-dozen cookie order than a one-dozen cookie order? ....................................................................................................................... 8 5. How many food processors and baking trays will you need? ............................................................. 12 6. Are there any changes you can make in your production plans that will allow you to make better cookies or more cookies in less time or at lower cost? For example, is there a bottleneck operation in your production process that you can expand cheaply? What is the effect of adding another oven? How much would you be willing to pay for an additional oven? ............................................................ 13

Kristens Cookie Company

Case Summary
This case is about the Kristens cookie company, which is a new firm started in a college apartment. The business plan is to sell freshly baked cookies to fellow students, using the oven they have in their apartment. The objective of the solution is improve upon the process flow and hence maximizing the cookie production. It is also assumed that Each order consists of only one dozen for simplicity. Each person would be doing only that job which has been assigned to him. Ignoring maintenance and opportunity costs They would work for 4 hours a day

Cost of ingredients Cost of box (holds 1 dozen cookies) Labor Cost

= Rs 70 per dozen = Rs 10 per dozen = Rs 30 per hour per person

Kristens Cookie Company

Flow Diagram
Wash Bowl & Mix Ingredients Washing + Mixing Resource: Self Done by: Self Cookie Company Capacity: 33Dozens Capacity: Dozens Cycle time: 6 minutes Cycle time: 6 minutes

Filling the Tray Fill Tray Resource: Done by: Roommate Roommate Capacity: 11Dozen Capacity: Dozen Cycle Cycletime: time: 22minutes minutes

Order Order Entry Entry

StartOven Oven Start Resource: Done by: Roommate Roommate, Oven Capacity: 11Dozen Capacity: Dozen Cycle Cycletime: time: 11minute minute

Pack, Collect Money Done by: Roommate Capacity: 1 Dozen Cycle time: 3 minute

Baking Done by: Capacity: Cycle time:

Oven 1 Dozen 9 minute

Cool Cool Resource: Done by: Capacity: Capacity: Cycle Cycletime: time:

None None 11Dozen Dozen 55minute minute

Remove Oven Remove from from Oven Resource: Roommate Done by: Roommate Capacity: 11Dozen Capacity: Dozen Cycle 00minute Cycletime: time: minute

Above is the process flow diagram for all the activities involved in cookie production process. Inside each activity symbol are written the resource being used, the capacity of that particular activity and the cycle time.

Kristens Cookie Company

Process Flow diagram

Take Order

Wash Bowl and Mix ingredients

WIP

Fill the tray

WIP

Accepting the payment

Packing

Cooling

Baking in oven

1. How long will it take for you to fill a rush order?

We will need to do the following (assumed that one order is for one dozen):
Process Activity Order Entry Wash Bowl, Mix Fill Tray Prepare Oven Bake Remove Cool Pack, Collect Money Total Resource E-mail Self Self Roommate Oven Roommate None Roommate Cycle Time 0 minutes 6 minutes 2 minutes 1 minute 9 minutes 0 minutes 5 minutes 3 minutes 26 Minutes

Therefore, the minimum time required to fill a rush order is 26 minutes.

2. How many orders can you fill in a night, assuming you are open for four hours each night?
Let us assume that there are three orders (dozens) at a time with three different ingredient mixes. As soon as the tray is filled we can start washing and mixing the ingredients for the next dozen. So the cycle time is less than the throughput time. Tabulating the time required to prepare three batches

Kristens Cookie Company

Activity Order Entry Wash Bowl, Mix 1 Fill Tray 1 Prepare Oven 1 Bake 1 Wash Bowl, Mix 2 Fill Tray 2 Remove 1 Prepare Oven 2 Cool 1 Bake 2 Pack 1 Collect Money 1 Wash Bowl, Mix 3 Fill Tray 3 Remove 2 Prepare Oven 3 Cool 2 Bake 3 Pack 2 Collect Money 2 Remove 3 Cool 3 Pack 3 Collect Money 3

Resource E-mail Self Self Roommate Oven Self Self Roommate Roommate None Oven Roommate Roommate Self Self Roommate Roommate None Oven Roommate Roommate Roommate None Roommate Roommate

Cycle Time 0 minutes 6 minutes 2 minutes 1 minute 9 minutes 6 minutes 2 minutes 0 minutes 1 minute 5 minutes 9 minutes 2 minutes 1 minute 6 minutes 2 minutes 0 minutes 1 minute 5 minutes 9 minutes 2 minutes 1 minute 0 minutes 5 minutes 2 minutes 1 minute

Start Time 0:00 0:00 0:06 0:08 0:09 0:10 0:16 0:18 0:18 0:18 0:19 0:23 0:25 0:20 0:26 0:28 0:28 0:28 0:29 0:33 0:35 0:38 0:38 0:43 0:45

Finish Time 0:00 0:06 0:08 0:09 0:18 0:16 0:18 0:18 0:19 0:23 0:28 0:25 0:26 0:26 0:28 0:28 0:29 0:33 0:38 0:35 0:36 0:38 0:43 0:45 0:46

From the table we can observe that the cycle time is 10 minutes because Time required in making cookies: 1 dozen in 26 minutes 2 dozens in 36 minutes 3 dozens in 46 minutes and so on In general, time required to make n one-dozen orders is given by the below expression: 16+10n (We add the extra 16 minutes for the first batch to come out) Now, if the shop operates for only 4 hours every day,

Kristens Cookie Company

16 + 10n = 240 n = (240 16)/10 = 22.4 Orders Therefore, n = 22 orders (dozens) per day.

3. How much of your own and your roommate's valuable time will it take to fill each order?
Assuming all orders are for one dozen cookies, For Self
Activity Wash Bowl, Mix Fill Tray Total Cycle Time 6 minutes 2 minutes 8 minutes

For Roommate
Activity Prepare Oven Remove Pack, Collect Money Total Cycle Time 1 minute 0 minutes 3 minutes 4 minutes

Total

Self Roommate Total Labor Minutes

8 minutes 4 minutes 12 minutes

Kristens Cookie Company

4. Because your baking trays can hold exactly one dozen cookies, you will produce and sell cookies by the dozen. Should you give any discount for people who order two dozen cookies, three dozen cookies, or more? If so, how much? Will it take any longer to fill a two-dozen cookie order than a onedozen cookie order?
Discounts on selling price are given if we get reduction in cost due to the increase in sale if people order in more than a dozen. The reduction in cost can occur only with labor because the cost of other components will increase with increase in scale.

One Dozen Activity Time Activity Order Entry Wash Bowl, Mix Fill Tray Prepare Oven Bake Remove Cool Pack, Collect Money Resource E-mail Self Self Roommate Oven Roommate None Roommate Cycle Time 0 minutes 6 minutes 2 minutes 1 minute 9 minutes 0 minutes 5 minutes 3 minutes

Total labor Hours Self Roommate Total Labor Minutes 8 4 12

Kristens Cookie Company

Two Dozen Activity Time Activity Order Entry Wash Bowl, Mix 1 Fill Tray 1 Prepare Oven 1 Bake 1 Wash Bowl, Mix 2 Fill Tray 2 Remove 1 Prepare Oven 2 Cool 1 Bake 2 Pack 1 Collect Money 1 Remove 2 Cool 2 Pack 2 Collect Money 2 Resource E-mail Self Self Roommate Oven Self Self Roommate Roommate None Oven Roommate Roommate Roommate None Roommate Roommate Cycle Time 0 minutes 6 minutes 2 minutes 1 minute 9 minutes 6 minutes 2 minutes 0 minutes 1 minute 5 minutes 9 minutes 2 minutes 1 minute 0 minutes 5 minutes 2 minutes 1 minute Start Time 0:00 0:00 0:06 0:08 0:09 0:10 0:16 0:18 0:18 0:18 0:19 0:23 0:25 0:28 0:28 0:33 0:35 Finish Time 0:00 0:06 0:08 0:09 0:18 0:16 0:18 0:18 0:19 0:23 0:28 0:25 0:26 0:28 0:33 0:35 0:36

Total Labor Hours Self Roommate Total Labor Minutes 10 7 17

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Kristens Cookie Company

Three Dozen Activity Time Activity Order Entry Wash Bowl, Mix 1 Fill Tray 1 Prepare Oven 1 Bake 1 Wash Bowl, Mix 2 Fill Tray 2 Remove 1 Prepare Oven 2 Cool 1 Bake 2 Pack 1 Collect Money 1 Wash Bowl, Mix 3 Fill Tray 3 Remove 2 Prepare Oven 3 Cool 2 Bake 3 Pack 2 Collect Money 2 Remove 3 Cool 3 Pack 3 Collect Money 3 Resource E-mail Self Self Roommate Oven Self Self Roommate Roommate None Oven Roommate Roommate Self Self Roommate Roommate None Oven Roommate Roommate Roommate None Roommate Roommate Cycle Time 0 minutes 6 minutes 2 minutes 1 minute 9 minutes 6 minutes 2 minutes 0 minutes 1 minute 5 minutes 9 minutes 2 minutes 1 minute 6 minutes 2 minutes 0 minutes 1 minute 5 minutes 9 minutes 2 minutes 1 minute 0 minutes 5 minutes 2 minutes 1 minute Start Time 0:00 0:00 0:06 0:08 0:09 0:10 0:16 0:18 0:18 0:18 0:19 0:23 0:25 0:20 0:26 0:28 0:28 0:28 0:29 0:33 0:35 0:38 0:38 0:43 0:45 Finish Time 0:00 0:06 0:08 0:09 0:18 0:16 0:18 0:18 0:19 0:23 0:28 0:25 0:26 0:26 0:28 0:28 0:29 0:33 0:38 0:35 0:36 0:38 0:43 0:45 0:46

Total Labor Hours Self Roommate Total Labor Minutes 12 10 22

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Kristens Cookie Company

The time taken for the three possible batch sizes is: Time taken/dozen 1 dozen 2 dozens 3 dozens Self 8 minutes 10 minutes 12 minutes Room Mate 4 minutes 7 minutes 10 minutes Total 12 minutes 17 minutes 22 minutes

Generalizing this for n one-dozen orders: Total = 7 + 5n Assuming labors worth of Rs.30 per hour. Our cost structure would be:

Dozens 1 2 3

Var. Cost Rs. 70.00 Rs. 70.00 Rs. 70.00

Labor Cost Rs. 6.00 Rs. 8.50 Rs. 11.00

Total Cost Rs. 76.00 Rs. 148.50 Rs. 221.00

Total Cost/dozen Rs. 76.00 Rs. 74.25 Rs. 73.66

Cost Decrease
NA

2.3% 3.07%

From the above results, we can see that increase in order size results in reduction in total cost. Taking selling price as Rs 91 (assuming a profit of 20%): The feasible discounts on multiple orders are: 2-dozen order 2.1% 3-dozen order 2.8%

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Kristens Cookie Company

5. How many food processors and baking trays will you need?
The maximum number of trays will be used if we produced three-dozen orders continuously, a scenario depicted in this chart. Stage Wash Bowl, Mix, Fill Tray (yourself) Prepare Oven & Bake (oven) Prepare Oven, Pack, Collect Money (roommate) Time 12 min. for 3 dozen 30 min. per 3 dozen 10 min. per 3 dozen* Dozens per Hour (1 Oven) 15 per hour 6 per hour 18 per hour

From the above table, we can see that the oven is the bottleneck in the process. So any increase in the number of food processor will not increase the productivity of the process. There are only 3 types of activities that require a tray: 1. Filling the ingredient mix to the tray, 2. Baking (including preparing the oven) 3. Cooling. We are using at most three trays in the filling activity at any given time (and in fact this is only because this particular plan calls for filling three trays in rapid succession, after which two of them sit waiting for an opportunity to get into the oven). There is never more than one tray in the oven at any given time, nor is there ever any more than one tray cooling. So we could certainly get by with five trays, and maybe four or even three if we adjust the mixing and filling part of the operation.

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Kristens Cookie Company

6. Are there any changes you can make in your production plans that will allow you to make better cookies or more cookies in less time or at lower cost? For example, is there a bottleneck operation in your production process that you can expand cheaply? What is the effect of adding another oven? How much would you be willing to pay for an additional oven?
The bottleneck is the oven, which means there is no point in looking at expanding the capacity of any other resource unless the operation's baking capacity is expanded first. If we had two ovens, we could make cookies faster. But how much faster? This gets complicated, but we can think about it by looking at the capacities of the various stages in our process.

Orders

3 diff orders & 1 oven

Minut es Order 1 Order 2 Order 3 Order 1 Order 2 Order 3 Order 1 Order 2 Order 3 Order 1 Order 2 Order 3 Order 1 Order 2

1 2 3 4 5 6 7 8 9

1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 3 3 3 3 3 3 3 3 3 3 4 4 4 4 4 4 4 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6

3 diff orders together & 1 oven

3 same orders & 1 oven

3 diff orders & 2 ovens

3 diff orders together & 2 ovens

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Kristens Cookie Company

Order 3 Order 1 Order 2 Order 3 Order 1 Order 2 Order 3 Order 1 Order 2 Order 3 Order 1 Order 2 Order 3

3 same orders & 2 ovens

2 same & 1 diff order & 2 ovens

3 diff orders & 3 ovens

3 same orders & 3 ovens

From the above table, it can be seen that there are 10 combinations possible:3 diff orders & 1 oven 3 diff orders together & 1 oven 3 same orders & 1 oven 3 diff orders & 2 ovens 3 diff orders together & 2 ovens 3 same orders & 2 ovens 2 same & 1 diff order & 2 ovens 3 diff orders & 3 ovens 3 same orders & 3 ovens 46 Minutes 46 Minutes 46 Minutes 44 Minutes 43 Minutes 36 Minutes 36 Minutes 44 Minutes 30 Minutes

Thus we can see that even with 2 ovens, the process in the oven will still be the bottleneck but this will reduce the cycle time of production upto 3 dozens. It can also be observed that 3 ovens do not make any difference in the total time taken unless the orders are same, which is an unrealistic assumption. For all other cases 2 ovens and 3 ovens deliver the same results.

If we see the utilization of 2 ovens, we can observe that we gain 2 minutes per 2 orders. As the maximum number of orders that we can accept is 22 (calculated earlier), we will get 22 minutes extra every day and as we can produce 1 dozen cookie every 10 min , we can produce 2 dozens in 22 minutes. According to the earlier assumption with 20% margin, our profit per dozen is 15 Rs .So per day it will translate into a profit of 30 Rs which is equivalent to 900 Rs per month. Considering extra costs of maintenance or holidays, we can assume a margin of 20% and will be left with Rs.780. So we can lease an extra oven for any amount less than Rs.780/month.