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A K a r s r e N ' s o o r t e C o r ' a p A N( y ) C
spoons.Your apartmenthas a small oven that will hold one tray at a trme. Your landlordpaysfor all the electnctty.The vanablecosts, therelbre, are merely the cost of the mgredients (estrmated to be $0.60/dozen), the cost of the box rn whtch the cookres are packed ($0.10 per box: each box holds a dozen cookres),and your trme (what value do you placeon your trme?). whlch spectA detailedexamlnattonof the productlonprocess, ties how long each of the steps will take, follows. The first step rs to take an order, whrch your roommate has figured out how to do qurckly and wrth 100 percent accuracy.(Actually, you and your roommate devrsed a method ustng the camPus electronrc mail system to accept orders and to rnform customers when thetr orders will be ready for prckup. Becausethts runs automatlcallyon your personal computer, lt does not take any of your tlme.) Therefore, thls stepwill be rgnoredrn further analysrs. physlcal operaYou and your roorffnate have ttmed the necessary trons.The first physrcalproducttonstepts to wash out the mrxrngbowl tiom the prevrousbatch, add all of the rngredients,and mtx them rn your food processor.The mrxrng bowls hold rngredientsfor up to 3 dozen cookres.You then dish up the cookres,one dozen at a ttme, onto a cookre tray. These acttvthes take stx mlnutes for the washrng of and mrxrng steps,regardless how many cookresare berngmade ln for the batch.That rs,to mrx enoughdough and rngredients two dozen cookrestakes the same srx mrnutesas one dozen cooktes.However, dishng up the cooktesonto the tray takestwo mlnutesper tray. The next step, perfbrmed by your roommate, Is to put the cookresrn the oven and set the thermostatand ttmer, whlch takes about one mlnute. The cooktes bake for the next ntne mtnutes.So total bakrngtrme ls l0 mrnutes,durlng the first mtnute of whrch your roommate rs busy settrng the oven. Becausethe oven holds only one tray, a second dozen takes an additronal l0 mrnutes to bake.

You and your roommate are prepanng to start Krtsten's Cookre The company will proapartment. Company rn your on-campus vrde liesh cookres to starvlng studentslate at nlght. You need to evaluate the prelimrnary desrgn tbr the comPany's productlon process to figure out many vartables, rncluding what prlces to charge,whether you will be able to make a protit, and how tnany orders to accept. tlusrnr:ssCor,rcupl Your rdears to bake fresh cookresto order, ustng any combrnatton that the buyer wants.The cookreswill be ready for of rngredients prckupat your apartment wlthln an hour. Several factors will set you apart from compettng products such cookres. First,your cookteswill be completelyfresh. as store-bought You will not bake any cookresbefore recetvtng the order; therefore, the buyer will be gettlng cookres that are literally hot out of the oven. Second, like Steve's lce Cream,Tyou will have a vanety of rngredients availableto add to the basrcdough,rncludingchocolate chrps,M&M's, choppedHeath bars, coconut,walnuts,and rarstns. Buyers will telephonern therr orders and specify whtch of these rngredients they want rn therr cookres.You guaranteecompletely most exottc cookln freshcookres. short,you will havethe freshest, resanywhere,availablerrght on campus. Tnr Pnotucrron PRocnss tn Bakrng cookresrs srmple:mrx all the rngredients a food processor; spoon out the cookre dough onto a tray; put the cooktestnto the oven; bake them; take the tray of cookresout of the oven; let the cookrescool; and, finally, take the cookres offthe tray and carefully pack them rn a box. You and your roommate already own all the caprtal equlpment: one food processor,cookte trays, and necessary

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Your roommate also performs the last steps of the process by first removlng the cookles from the oven and putttng them astde to cool for 5 mrnutes, then carefully packrng them tn a box and acceptlngpayment.Removtng the cooktes from the oven takesonly a negligible amountof trme, but rt must be done promptly.It takes two mrnutesto pack each dozen and about one mlnute to accept paymentfor the order. That rs the process for producrng cooktes by the dozen rn Knsten's Cookre Company. As expenencedbakers know, a few srmplificatlonswere made tn the actual cookre productlonprocess. For example,the first batch of cooktes for the ntght requlresprewill be put asrdefor heatrngthe oven. However, such complexttres flow diagramof by now. Begrn your analysrs developrnga process process. the cookre-maktng 'rtr Krv Qrrr:s'r'ror,lsAlswl;n Bnl'tlnr:Ytttt Lntlnt:ttt'tts Bustlcss you need to set prtcesand rules for acceptTo launch the bustness, will be resolvedonly after you get started rng orders.Some rssues and try out different ways of producrngthe cooktes.Before you start,however,you at least want a prelimtnary plan, wlth as much of aspossiblespecified,so that you can do a carefulcalculatron how each nrght,and trme you will have to devoteto thts bustness much how much money you can expectto make. For example,when you conduct a market survey to determtnethe likely demand,you will want to specify exactly what your order policreswill be. Therefore, answeflngthe followrng operatlonalquestlonsshouldhelp you: l 2 3 4 How long will rt take you to fill a rush order? you are How many oiders can you fill rn a ntght, assumtng open four hourseach nrght? How much of your own and your roommate's valuable trme will lt take to fill each order? Becauseyour bakrng trays can hold exactly one dozen cookres, you will produce and sell cooktes by the dozen. Should you glve any discount for people who order two

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dozen cookres, three dozen cookres, or more? If so, how much? Will lt take you any longer to fill a two-dozen cookreorder than a one-dozencookreorder? How many food processorsand baklng trays will you need? Are there any changes you can make ln your productron plans that will allow you to make better cooktesor more cookres rn less trme or at lower cost? For example, ls there a bottleneck operatlon rn your productron processthat you can expand cheaply? What ls the effect of adding another oven? How much would you be willing to pay to rent an additronaloven?

PnoBLEMS oR FunrHe F R
T H O U G H T I 2 What happensif you are tryrng to do thrs by yourself wrthout a roommate? Should you offer specralratesfor rush orders?Supposeyou have lust put a tray of cookres rnto the oven and someone calls up wrth a "crash pnonty" order for a dozen cookres of a ditl'erent llavor. Can you fill the pnonty order while still fulfilling the order for the cookres that are already rn the oven'JIf not, how much of a premrum should you charge for filling the rush order') When should you promrse delivery') How can you look qurckly at your order board (list ofpending orders)and tell a caller when hrs or her order will be ready? How much of a safety margrnfor trmrng shouldyou allow? What other factors should you conslder at thls stage of plannrngyour busrness? Your product must be made to order becauseeach order rs potentrally unrque. If you declde to sell standard cookres rnstead, how should you change the productron system? The order-takrng process?

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BustNEss ScHooL PusLtsNG CoRPourtoN. AL RtcHrsRE5RVED. Cooxrr CoMp Ny (A), Csr 9-686-091, wRrnN By RoctR BoHN.CoryruGHr @1986 cY rHE H^RvaRD KRtsrEN's

SrlEcrED BtgLlocRAPHY
Anuprndar,R., S. Chopral S. D. Deshmukh; J. A. van Mieghem; and E. Zcmel. Managng Busmess Prucess Fkrys. 2nd ed. Upper Saddle River, NJ: Prenttce Hall. 2005. Gray. A. 8., and J. Leonard. "Pmcqs Fundamenlals"' Harvard Bustness Schml 9-696-023. Jeston, J., and J. Nelis. Busmess Process Management: Pracncal Gurdelittes to Successlul Implementanon. Burlington, MA: ButteNorth-Hernemmn. 2006.

FoorNorES
I Ofien thc tetm clcle nme rs used to man throughput hme. lt ts tmportant to carefully detemtne how (he tem ls betng used tn the conterl of the prcess bern8 studied2 J.D.C.Lrrrfe,"APrmffortheQueurngFormula:L=ltW,"OperauonsResearch9,no.3(1961),pp.383-8T.Specralthanksto J. F Muth, lndiana Untversrty. 3 Thrs example rs srmilar to one grven by A. E. Gmy rn "Capactty Analysrs: Sample Problems," Hmard Busmss Schml 9-69GO58. 4 B. Andersen, "Prmess Cycle Time Reductron," Qualirv Prcgress,luly I999, p. 120. For some additronal guldelines for tmpmvtng process, also see Chapter I 7. 5 The authors are rndebredto D. Clay Whybark of the Untvemrty of North Carolina for conlributtng Problems l-4 and Problem 9. 6 The rdea for thrs problem came from an exercrse developed by Dr EIi Goldratt trtled "The Grcat Manufactunng Crapshmt." 7 Steve's lce Crcam was shned ln lhe Boston area by a young entrepreneur to provrde make-to-order tce cream, uslng mlx-tns.