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Case Analysis: Kristen’s Cookies Company

Preliminary Analysis:

Inputs:

Cookie Order

Outputs:

One dozen cookies

Sequence of tasks:

1) Washing & Mixing


2) Spooning
3) Placing in Oven / Setting Timer
4) Baking
5) Cooling
6) Packing Cookies in Boxes
7) Processing Payment(s)

The ability to produce a rush order, in a worker pace line, depends on whether or not we
have cookies in inventory. If we don’t have any cookies in inventory then it would take
26 minutes to produce the first dozen and an additional 10 minutes per order to complete
each additional dozen.

2) How long does it take to produce an order dozen cookies? How many orders can be
filled in a 4 hour night?

• Washing & Mixing = 6 minutes (dozen)


• Spooning = 2 minutes (per tray)
• Placing in Oven / Setting Timer = 1 minute
• Baking = 9 minutes
• Cooling = 5 minutes (activity 2)
• Packing in Box = 2 minutes (activity 2)
• Payment = 1 minute (activity 3)

Total Activity Time: 26 minutes (one dozen, “worker paced line”)

Kristen is responsible for 8 minutes of production related to activity 1= capacity of .


125 batches/minutes x 60 minutes=7.5 dozens/hour
Roommate is responsible for 18 minutes of production related to activities 2 and
3=.55556 batches/minute x 60 minutes – 3.33 dozens/hour

Process Capacity = Capacity of the bottle neck = 1/10 min (10 min includes set the timer
and oven)= .10

Flow rate = Process Capacity = 1/10 min (This number includes time in oven)=.10
Time to finish X batches = Time through an empty process + (X-1)/Flow rate

If total time = 4hr, then

4hrs = 4hrs*60 min/hr = 26 min + (X-1) /(1/10 min)

 240 min = 26 min + (X-1)*10min


 (X-1)*10min = 240min – 26min = 214/10
 X-1 = 21.40
 X = 22.40 orders for one dozen cookies

Therefore, in 4 hrs, Kristen can fulfill 22 orders of 1 dozen cookies

2) How much of your own and your rommate’s valuable time will it take to fill each order?
Kristen is responsible for 8 minutes of production related to activity 1= capacity of .125
batches/minutes x 60 minutes=7.5 dozens/hour
Roommate is responsible for 18 minutes of production related to activities 2 and
3=.55556 batches/minute x 60 minutes =3.33 dozens/hour
3) What is the labor content in an order of one dozen cookies? How much should Kristen
charge for such an order?

Washing & Mixing (Kristen) = 6 minutes (dozen)


Spooning (Kristen) = 2 minutes (per tray)
Placing in Oven / Setting Timer (Roomie) = 1 minute
Packing in Box (Roomie) = 2 minutes
Payment (Roomie) = 1 minute

Labor Content = Sum of Activity Times With Labor

= 6 mins/dozen + 2 mins/dozen + 1 min/dozen + 2 mins/dozen + 1 mins/dozen


= 12 mins / dozen

*Assumption that washing and mixing requires operator presences/intervention.

Since the value of Kristen’s time, nor the hourly cost of her roommate’s time, was given
in the article provided, we can only guess at how much Kristen should ultimately charge
per batch of cookies. However to estimate this amount, Kristen should determine what
she will ultimately charge by computing the Flow Rate, then the Cost of Direct Labor, the
Idle Time, the Labor Content, Variable Costs, add up the Idle Times across all resources,
and then compute the Average Labor Utilization involved in producing each batch of
cookies. Once she has a good understanding of what her labor cost are for each batch, she
can then determine the rate of compensation and add her expected margin on top of that
cost.

Let us assume that hourly rate for both Kristen and her roommate is $10 including profit
margin.

Cost of direct labor = Total wages per unit time / Flow rate per unit time
= 2* ($40/4hrs) / (24.78 batches/4hrs) = $80/24.78 = $3.22/batch

Total variable cost = cost of ingredients + cost of box

= $.60+ $.10 = $.70/ batch

Total cost = $3.22+$0.70 = $3.92/ dozen

4) Can Kristen run this operation by herself? What effect would this have on the capacity
of the system? What happens if all orders are for two dozen cookies?

a. Kristen going it alone:

Yes, Kristen could run the operation by herself, BUT in doing so, the operation’s capacity
would be significantly reduced. So, by inference, if she must operate at a higher capacity for
success, then she would not be able to run the operation by herself. The following paragraph
describes the challenges that Kristen would face from a process flow perspective - if she were
working alone.

b. Affect on capacity of Kristen working solo:

The mixing (6 min) + spooning per dozen (2 minutes) plus setting temperature and time (1
minute) is equal to the baking time (9 minutes) followed by 8 minutes total to cool, box, and
receive payment. While the first dozen is baking (9 minutes), Kristen can prepare a second
dozen. HOWEVER, she must wait 1 minute before the first dozen is completed and has
started the cooling process. Now she loses a minute to set the timer leaving 4 minutes
remaining for cooling prior to boxing. She can start the mixing process (BUT, we assumed
that this is a labor function so really she cannot start mixing until the AFTER the payment is
received. Since the total process time remains at 26 minutes, she can only produce 9 one
dozen orders, as shown by the following calculations:

Capacity for whole process = Number of Resources / Total Activity Time

= 1/26 min / dozen


= .03846 dozen/minute

.03846 dozen/min * 60 min/hr = 2.3076 dozen/hr


2.3076 dozen/hr * 4 hrs = 9.2304 dozen / 4 hrs or 9 one dozen cookie orders.

Note:

If Kristen works by herself, she becomes the bottleneck and System Cycle Time is increased to
12 minutes per dozen, so capacity is decreased to 20 dozen per night.

c. Effect of orders for 2 dozen cookies:


Assuming that the following analysis is against the original business plan of having 2 people
working – Kristen and her roommate - all orders changing to 2 dozen cookies means that the
activity time for orders of 2 dozen cookies (rather than 1 dozen per order) increases to 36
minutes per order.

This increase is mainly due to the idle time associated with waiting for the oven to complete
the baking of the first dozen and subsequent idle time waiting for the second dozen to
complete baking and cooling.

As a result, capacity is reduced to:

Capacity = Number of Resources / Activity Time

= 2/36 min