EXECUTIVE SHIRT COMPANY

REPORT

Submitted to: Submitted by:

Dr. Shirsendu Satyendra Singh
Nandi
PGP07092
Section B
CASE
SYNOPSIS
The Executive Shirt Company (ESC) is a top apparels company which is looking to expand into
the high potential custom sized dress shirt market. Customers currently had a problem with
this market because of higher prices and long delivery times of up to 6 weeks. If these factors
were addressed, ESC had the opportunity to tap into the highly lucrative market where
customers were willing to pay at least 75% more than standard shirts.
The general manager Collier wants to make alterations to his current process that would
enable him to make both custom sized shirts and standard shirts using his resources to the
maximum extent possible.
Current process
flow:
In the current process flow in ESC, each batch consists of 60 shirts and WIP at each station
was three batches per worker. Collier purchases a new cutting machine which takes only 2.5
minutes for the entire process. But the batch size that this machine can handle is five shirts. Two
managers, Mike and Ike are asked to present their plans as alternatives to the current process
flow.
Mikes plan:
Mike proposes a plan where both custom and standard shirts are processed together. To reduce
the lead time, he proposes to reduce the batch time from sixty to five shirts. He also plans to
increase the WIP to six batches per worker from the current three. The process flow for this plan
is the same as the previous. Only, an extra cutting machine is added for the Cutting process.
Ikes plan:
Ikes proposal is to separate the Custom shirt production from the Standard shirt production line
by introducing a new assembly line. One worker each from all sewing stations, the inspection
station, the ironing station and the packaging station are proposed to be moved to the new
custom line. The plan seeks to implement the assembly line by moving twelve sewing machines
and one ironing machine from the current assembly line. One extra worker is employed to
operate the laser cutting machine. The process flow for the standard shirts is the same as the
current plan with a batch size of 60. The process flow for the Custom shirts is same as well,
except that, processing is done one shirt at a time.
ANALYSIS
Current process flow:
Calculation of cycle time

REGULAR SHITS LABOR NO. OF

OPERATIONS CONTENT(MIN/SHIRT) WORKERS MIN/SHIRT/WORKER
Make Collar 3.9 8 0.4875
Make Cuff 2 4 0.5
Make Sleeves 0.65 2 0.325
Make Front 2.5 6 0.416666667
Make Back 1.7 4 0.425
Join Shoulders 0.66 2 0.33
Attach Collar 1.65 4 0.4125
Attach Sleeves 1.55 4 0.3875
Stitch Sleeves 0.65 2 0.325
Sew Side Seem 1.8 4 0.45
Attach Cuffs 1.55 4 0.3875
Hem Bottom 1.7 4 0.425
Inspect 1.5 4 0.375
Iron 1.95 4 0.4875
Fold, Package 1.75 4 0.4375
TOTAL 25.51 60 6.171666667

Ideal cycle time = 0.5 min/shirt

The actual production rate for regular shirts is 16000 shirts/month. Hence, the number
of shirts produced per minute = 16000/(20*8*60) = 1.67 shirts/min. So, Cycle time =
1/1.67
= 0.6 min/shirt

Since, this cycle time value is higher than the ideal cycle time of 0.5 min/shirt, the
actual cycle time = 0.6 min/shirt

By adding the individual inventories WIP inventory = 196 batches = 196*60 shirts =
11760 shirts

Production capacity = number of shirts produced using ideal cycle time= Number
of minutes available per day/ ideal cycle time = (8*60)/ 0.5 = 960 shirts/day

Actual production capacity being used = (8*60)/0.6 = 800 shirts/day

Capacity Utilization = 800/960 = 83.33%

 Manufacturing Lead Time = WIP inventory/production capacity = 11760/800 = 14.7 days

90+30=120 minutes are taken in the cutting process for 480 shirts. Cutting time per shirt
is (120/480) = 0.25 min/shirt with 4 workers working on it. The time taken for all
other operations is the sum of the times given = 25.51 min/shirt. Direct labour content
= time taken for cutting + time taken for other operations = 0.25*4 + 25.51 = 26.51
min/shirt

Direct labour utilization = time taken to produce shirts/total time available for 64 labourers
= 26.51*800/(64*8*60) = 69.03645833%

Money paid to direct labourers = 64*6$*8 hours = 3072 $/day

Direct labour cost = 3072/800 = 3.84 $/shirt

Excel Calculations

Ideal Cycle Time minutes 0.5

No. of shirts produced per minute shirts 1.666666667 16000/(20*8*60)
Actual Cycle Time minutes 0.6

WIP shirts 11760 198*60

Production Capacity (using ideal cycle

time) shirts/minute 960 (8*60)/0.5
Production Capacity (using actual cycle
time) shirts/minute 800
(8*60)/0.6
Capacity Utilization % 83.33333333
800/960
Lead Time days 14.7
11760/800
Direct Labor Content minutes/shirt 26.51
0.25*4+25.51
Direct Labor Utilization % 69.03645833
(26.51*800)/(64*8*60)
Direct Labor Cost $/shirt 3.84
(8*64*6)/800
Mikes Process:
For calculation of cycle time

REGULAR SHITS LABOR NO. OF

OPERATIONS CONTENT(MIN/SHIRT) WORKERS MIN/SHIRT/WORKER
Make Collar 3.9 8 0.4875
Make Cuff 2 4 0.5
Make Sleeves 0.65 2 0.325
Make Front 2.5 6 0.416666667
Make Back 1.7 4 0.425
Join Shoulders 0.66 2 0.33
Attach Collar 1.65 4 0.4125
Attach Sleeves 1.55 4 0.3875
Stitch Sleeves 0.65 2 0.325
Sew Side Seem 1.8 4 0.45
Attach Cuffs 1.55 4 0.3875
Hem Bottom 1.7 4 0.425
Inspect 1.5 4 0.375
Iron 1.95 4 0.4875
Fold,Package 1.75 4 0.4375
TOTAL 25.51 60 6.171666667

Ideal cycle time = 0.5 min/shirt

The actual production rate for regular shirts is 16000 regular + 2000 customized =
18000 shirts/month. Hence, the number of shirts produced per minute = 18000/(20*8*60)
= 1.88 shirts/min. So, Cycle time = 1/1.88 = 0.533 min/shirt

By adding the individual inventories WIP inventory = 396 batches = 396*5 shirts = 1980
shirts

Production capacity = number of shirts produced using ideal cycle time = Number
of minutes available per day/ ideal cycle time = (8*60)/ 0.5 = 960 shirts/day

Actual production capacity being used = (8*60)/0.533 = 900 shirts/day

Capacity Utilization = 900/960 = 93.75%

Manufacturing Lead Time = WIP inventory/production capacity = 1980/900 = 2.2 days

Cutting time per shirt is 0.25 min/shirt with 4 workers working on it. The time taken

for laser- cutting machine = (2.5 min/5 shirts) = 0.5 min/shirt with 1 worker working
 on it. The time taken for all other operations is the sum of the times = 25.51
min/shirt. Direct labour content = time taken for cutting + time taken for other
operations = 0.25*4 + 0.5*1 + 25.51 = 27.01 min/shirt

Direct labour utilization = time taken to produce shirts/total time available for 65
labourers = 27.01*900/(65*8*60) = 77.9%

Money paid to direct labourers = 65*6$*8 hours = 3120 $/day

Direct labour cost = 3120/900 = 3.47 $/shirt

Excel Calculations

Ideal Cycle Time minutes 0.5

No. of shirts produced per minute shirts 1.875 shirts increased
Actual Cycle Time minutes 0.533333333

WIP shirts 1980 batch size 5

Production Capacity (using ideal cycle

time) shirts/minute 960
Production Capacity (using actual cycle
time) shirts/minute 900

Capacity Utilization % 93.75

Lead Time days 2.2

extra time for new

Direct Labor Content minutes/shirt 27.01
machine
Direct Labor Utilization % 77.91346154

Direct Labor Cost $/shirt 3.466666667

Ikes Process: Regular
For calculating cycle time

REGULAR SHITS LABOR NO. OF

OPERATIONS CONTENT(MIN/SHIRT) WORKERS MIN/SHIRT/WORKER
Make Collar 3.9 7 0.557142857
Make Cuff 2 3 0.666666667
Make Sleeves 0.65 1 0.65
Make Front 2.5 5 0.5
Make Back 1.7 3 0.566666667
Join Shoulders 0.66 1 0.66
Attach Collar 1.65 3 0.55
Attach Sleeves 1.55 3 0.516666667
Stitch Sleeves 0.65 1 0.65
Sew Side Seem 1.8 3 0.6
Attach Cuffs 1.55 3 0.516666667
Hem Bottom 1.7 3 0.566666667
Inspect 1.5 3 0.5
Iron 1.95 3 0.65
Fold, Package 1.75 3 0.583333333
TOTAL 25.51 45 8.733809524

Ideal cycle time = 0.67 min/shirt

The actual production rate for regular shirts is 16000 shirts/month. Hence, the number
of shirts produced per minute = 16000/(20*8*60) = 1.67 shirts/min So, Cycle time =
1/1.67
= 0.6 min/shirt. Since the value of the ideal cycle time is higher, so the actual cycle time =
0.67 min/shirt

By adding the individual inventories WIP inventory = 151 batches = 151*60 shirts =
9060 shirts

Production capacity = number of shirts produced using ideal cycle time = Number
of minutes available per day/ ideal cycle time = (8*60)/ 0.67 = 720 shirts/day

Production capacity as per normal demand = (8*60)/0.6 = 800 shirts/day

Capacity Utilization = 800/720 = 111.11%

This indicates that the workers are working overtime in this case. Total overtime/day =
(8*60)*11.11% = 53.33 mins/day
 Manufacturing Lead Time = WIP inventory/production capacity = 9060/800 = 11.33 days

Cutting time per shirt is 0.25 min/shirt with 4 workers working on it. The time taken for
all other operations is the sum of the times = 25.51 min/shirt. Direct labour content =
time taken for cutting + time taken for other operations = 0.25*4 + 25.51 = 26.51
min/shirt

Direct labour utilization = time taken to produce shirts/total time available for 49 labourers
= 26.51*800/(49*8*60*111.11%) = 81.1%

Money paid to direct labourers = regular working payment + overtime payment =

49*6$*8 hours + 49*9$*(53.33/60 min) = 2743.9 hours

Direct labour cost = 2743.9/800 = 3.43 $/shirt

Excel Calculations

Ideal Cycle Time minutes 0.666666667

No. of shirts produced per minute shirts 1.666666667
Actual Cycle Time minutes 0.666666667
Calculated Cycle time minutes 0.6
WIP shirts 9060

Production Capacity (using normal

demand) shirts/minute 800
Production Capacity (using actual cycle
time) shirts/minute 720

Capacity Utilization % 111.1111111

60*8 and 11.11%
Total Overtime per day
increase minutes 53.28
Lead Time days 11.325

Direct Labor Content minutes/shirt 26.51 no new machine

Direct Labor Utilization % 81.15306122

overtime cost per day 391.608
Direct Labor Cost $/shirt 3.42951
Ikes Process: Custom
For calculating cycle time

REGULAR SHITS LABOR NO. OF

OPERATIONS CONTENT(MIN/SHIRT) WORKERS MIN/SHIRT/WORKER
Make Collar 3.9 1 3.9
Make Cuff 2 1 2
Make Sleeves 0.65 1 0.65
Make Front 2.5 1 2.5
Make Back 1.7 1 1.7
Join Shoulders 0.66 1 0.66
Attach Collar 1.65 1 1.65
Attach Sleeves 1.55 1 1.55
Stitch Sleeves 0.65 1 0.65
Sew Side Seem 1.8 1 1.8
Attach Cuffs 1.55 1 1.55
Hem Bottom 1.7 1 1.7
Inspect 1.5 1 1.5
Iron 1.95 1 1.95
Fold, Package 1.75 1 1.75
TOTAL 25.51 15 25.51

Ideal cycle time = 3.9 min/shirt

The actual production rate for regular shirts is 2000 shirts/month. Hence, the number of
shirts produced per minute = 2000/(20*8*60) = 0.208 shirts/min So, Cycle time =
1/0.208
= 4.8 min/shirt. Since, this cycle time value is higher than the ideal cycle time of 3.9
min/shirt, the actual cycle time = 4.8 min/shirt

15 workers have on an average 3 shirts as inventory and the cutting machine has 5
shirts as inventory at a given time, WIP inventory = 15*3 + 5 = 50 shirts

Production capacity = number of shirts produced using ideal cycle time = Number
of minutes available per day/ ideal cycle time = (8*60)/ 3.9 = 123.1 shirts/day

Actual production capacity being used = (8*60)/4.8 = 100 shirts/day

Capacity Utilization = 100/123.1 = 81.2%

Manufacturing Lead Time = WIP inventory/production capacity = 50/100 = 0.5 days

 The time taken for laser cutting machine = (2.5 min/5 shirts) = 0.5 min/shirt with 1
worker working on it. The time taken for all other operations is the sum of the times
= 25.51 min/shirt. Direct labour content = time taken for cutting + time taken for other
operations
= 0.5*1 + 25.51 = 26.01 min/shirt

Direct labour utilization = time taken to produce shirts/total time available for 16 labourers
= 26.01*100/(16*8*60) = 33.9%

Money paid to direct labourers = 16*6$*8 hours = 768 $/day

Direct labour cost = 768/100 = 7.68 $/shirt

Excel Calculations

Ideal Cycle Time minutes 3.9

No. of shirts produced per minute shirts 0.208333333
Actual Cycle Time minutes 4.8

5 in cutting and 15 worker

WIP shirts 50 each 3

Production Capacity (using ideal cycle

time) shirts/minute 123.0769231
Production Capacity (using actual cycle
time) shirts/minute 100

Capacity Utilization % 81.25

Lead Time days 0.5

Direct Labor Content minutes/shirt 26.01

Direct Labor Utilization % 33.8671875

Direct Labor Cost $/shirt 7.68

FINAL COMPARISON
IKE IKE
CURRENT MIKE REGULAR CUSTOM
Ideal Cycle Time minutes 0.5 0.5 0.67 3.9
No. of shirts produced per
minute shirts 1.67 1.875 1.67 0.208
Actual Cycle Time minutes 0.6 0.53 0.67 4.8

WIP shirts 11760 1980 9060 50

Production Capacity (using

ideal cycle time) shirts/minute 960 960 800 123.07
Production Capacity (using
actual cycle time) shirts/minute 800 900 720 100

Capacity Utilization % 83.33 93.75 111.11 81.25

Total Overtime per day minutes 53.28
Lead Time days 14.7 2.2 11.325 0.5

Direct Labor Content minutes/shirt 26.51 27.01 26.51 26.01

Direct Labor Utilization % 69.03 77.9 81.15 33.87

Overtime cost per day 391.608
Direct Labor Cost $/shirt 3.84 3.47 3.43 7.68
PROFIT ANALYSIS
MIKE MIKE IKE IKE
REGULAR CUSTOM REGULAR CUSTOM
No. of shirts 16000 2000 16000 2000
COST
RM 7 7.7 7 7.7
Labour Cost 4.5 4.5 4.98951 4.5
Indirect Cost 4.5 4.5 4.5 4.5
TOTAL 16 16.7 16.48951 16.7
Price 25 35 25 35
Profit/shirt 9 18.3 8.51049 18.3
Net Profits 144000 36600 136167.84 36600
180600 172767.84

Raw material cost increased by 10% for custom shirts = 1.1*7 = $7.7/shirt

Total overtime cost per day per shirt = Overtime cost per day/Production capacity =
391.608/800 = $0.48951

Total labour cost = 4.5 + 0.48951 = $4.98951

CONCLUSION
Since profitability and manufacturing lead time is better in case of Mikes plan so his
plan recommended. This implies that delivery time is lower and efficient than the industrys
standard.