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PRODUCTION AND

OPERATIONS MANAGEMENT 1

‘A C A S E S T U D Y A N D A N A L Y S IS
K R IS T E N ’S C O O K IE C O M P A N Y

PRODUCTION AND OPERATIONS MANAGEMENT 1


(POM1)
DATED : 19TH NOV, 2009

AIM

SUBMITTED BY :

ADREENA LIKHAN

CHOTON ROY

DARSHAN JYOTI DAS

MANALI BHAGAWATI

MOMI BORAH

NIJARA DAS

ASSAM INSTITUTE OF MANAGEMENT


PRODUCTION AND
OPERATIONS MANAGEMENT 1

INTRODUCTION

Two students are planning to start a cookie business with the name Kirsten's Cookie
Company in their on-campus apartment to cater to starving students late at night within the
campus. The objective is to provide fresh baked cookies which are customised to the needs
of the buyers. The entire process includes -

INGREDIENTS : Dough, Chocolate chips, M&M's, Chopped Heath bars, Coconut,


Walnut and Raisins.

EQUIPMENTS : 1 Oven, 1 Food Processor( mixing bowl), Cookie trays and Spoons.

PRODUCTION PROCESS :
• Add ingredients as per requirement
• Mix ingredients
• Spoon out the cookie dough into the tray
• Put the tray inside the oven
• Let it bake
• Take it out of the oven
• Let it cool
• Take the cookies out of the tray
• Pack it for delivery

COST :
Variable cost includes - cost of ingredients (Rs.60/dozen)
cost of packing box (Rs.10/each)
Cost of electricity is taken care of by the landlord of the apartment

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PROCESS FLOW CHART

DELIVERY

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Material type flow process chart


Activities Distance Time
taken
Bowl Washing
*
Add Ingredients
* -- 6

Mixing Ingredients
*
Ingredients check
*
Dish up cookies 2
*
Take cookies in the -- --
oven *
Put cookies in the -- --
oven *
Set up thermostat & -- 1
timer *
Backing the cookies -- 9
*
Remove from oven --
*
Inspection of --
cookies
*
Keep to cool down -- 5
*
Packaging the -- 2
*
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cookies
Accepting the
payment * -- 1

Delivery
* --

Total 26

ANALYSIS OF THE BUSINESS PROCESS OF KIRSTEN


COOKIES:
Since the business process is Made-to-order type the baking process and style depends
upon the customer preferences. In order to maximize its productivity the process has to be
carried out in most cost effective way consuming less time. Therefore the resources have to
utilize in a effective way. It can be determined by analyzing the baking process used for the
preparation of a single order which is as follows:

Process involved Time taken (min) Cumulative time(min)


Washing and Mixing 6 6

Dish up Cookie Tray 2 8

Oven Set up 1 9

Baking Oven 9 18

Removing the tray 0 18

Cooling 5 23

Packaging 2 25

Collecting Money 1 26

TOTAL TIME TAKEN FOR PREPARATION OF A SINGLE ORDER OF 1 DOZEN IS

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PRODUCTION AND
OPERATIONS MANAGEMENT 1

= 26 MINUTES

The resources required for different orders would be different depending on the type of
orders. Therefore two orders can be prepared simultaneously which would minimize the
time required for the second order. It would no more require twice as much as time as for
the first order. It can be done in the following way:

Time taken for preparation of a single order can be divided into 3 parts:

Pre baking Baking Post baking

8 minutes 10 minutes 8 minutes

Therefore if someone can get the tray ready for the second order while the first order is in
the oven for baking, it would save 8 minutes of time for the subsequent orders. Because
when the first order is already in process in baking, the pre baking session for the second
order will take place for 8 minutes, thus these 8 minutes have been saved. But it has to
undergo both baking and post-baking sessions taking 18 (10+8) minutes.
Therefore total time required for the second order while the first order is in progress

=(18 – 8)

=10 minutes

In fact subsequent orders will take 10 minutes each for preparation. Therefore time taken
for the preparation of ' additional x' orders of 1 dozen would be:
(26 + 10x) minutes

Thus if business is carried out for maximum of 4 hours (i.e. 240 minutes) the maximum no.
of orders Kirsten Cookies can take in 1 day would be:
X = 1 + [(240-26) ÷ 10]

= 1 + 21 (approx.)

= 22 (approx.)

ESTIMATION OF PRICE AND PROFIT


Cost of ingredients (per dozen) = Rs. 60

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Cost of packaging [paper box] (per dozen) = Rs. 10

Labour cost (profit) (per dozen) = Rs. 2

Total price (per dozen) = Rs. 72

Total price in 1 day for maximum 22 orders (72 x 22) = Rs. 1584

Total cost in 1 day for maximum 22 orders (70 x 22) = Rs. 1540

Therefore total Profit in 1 day for maximum 22 orders = Rs. 44

Here it can be stated that price of Rs.72 for 1 dozen cookies would be a bit higher for the
students as customers. So, minimizing the cost and price should be the objective of the
business for a stable growth.

PROBLEMS OF KIRSTEN COOKIES:

1. Capacity constraints: They have only one OVEN, the number of which cannot be
increased as there is not enough space for accommodation as well as their Budget is
limited.

2. Budget: As they are students, their budget is limited. They cannot afford to buy new
equipment for their business and also cannot afford any extra expenditure.

3. Price : As the business is Made-to-order making cookies fresh and hot, they cannot
compromise on the quality and price cannot be increased ABNORMALLY as the
customers are basically students from the campus.

4. Make- to-order: Business is fully dependent on the Cookie’s demand based on


customer preference only. They can produce only when they receive orders.
Moreover items produced cannot be standardized.

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PRODUCTION AND
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5. Time constraints: They have maximum of 4 hours (8pm-12pm) for their


business as they themselves are students and they work only in the night hours.

RECOMMENDATION

Cost Reduction:

• Firstly it would be more feasible to buy Brown Paper Packets which cost only
Rs.2/each, instead of cookie boxes which cost a sum of Rs.10/each. This
would reduce our cost by Rs.8.
• The Brown paper packets should be of a standard size which can carry upto a
dozen cookies each.

Time Reduction:

• The actual dishing up time for the cookie tray was 2 mins, which can be
reduced to 1 min by efficiency of work.
• The packaging time can also be reduced from 2 min to 1 min because it
takes lesser time to pack it in a paper packet rather than a box.

ESTIMATION OF PRICE AND PROFIT AFTER RECOMMENDATION


Cost of ingredients (per dozen) = Rs. 60

Cost of packaging [paper box] (per dozen) = Rs. 2

Labour cost (profit) (per dozen) = Rs. 3

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Total price (per dozen) = Rs. 65

Total price in 1 day for maximum 22 orders (65 x 22) = Rs. 1430

Total cost in 1 day for maximum 22 orders (62 x 22) = Rs. 1364

Therefore total Profit in 1 day for maximum 22 orders = Rs. 66

As they are saving 2 min in both the above process, therefore they are getting a total of 44
min extra in a day for maximum 22 orders.

Therefore they can utilize these 44 extra min in producing 4 more orders. Therefore
maximum number of orders that can be taken in a day becomes = 22+4 = 26 orders

Profit gained in 1 order = Rs. 3


profit gained in 4 order = Rs. 12

Therefore total profit per day for 26 orders = 66 + 12 =Rs. 78.

CONCLUSION

Thus by reducing the material cost and time we can state that this business would be
profitable to carry on. And also they can attract more students to buy their cookies as the
price of cookies will be reduced to Rs.65.

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