Executive Shirt Company, Inc.

is well-known for its high-quality, competitively-priced men’s

shirts. But a recent dip in the sales has led the company to think on alternatives. Based on the
current market trend the General Manager Dwight Collier has decided to go for custom-seized
shirts along with the current production of standard-sized shirts.

Considering that the decision is taken prudently, we now shift our focus to the company’s
production process. The company has been using a batch process to produce standard-sized
shirts.

1. Following are the details of the company’s current batch processing.

Only a few basic styles and colors constitute the major portion of sales, hence the company has
a limited number of varieties to produce. So, it has large batches of each kind of shirt (size and
color).

It has only one cutting machine, which is computer-controlled and can cut up to 60 layers of
cloth at the same time. Also up to 8 patterns can be cut simultaneously. The cutting process by
the machine takes 30 minutes irrespective of the number of patterns and number of layers.
But, the set up time is quite significant. It takes 1.5 minutes to roll out a layer of cloth and so for
60 layers; it takes 90 minutes setup time. The machine is being operated by 4 operators and the
company is using its maximum capacity, i.e. 60 layers and 8 patterns at a time. So,

Total number of shirts cut in one run = 60*8 = 480

Total time taken by one run = setup time + runtime = 90 + 30 = 120 minutes

Regular shirts labor content (minutes per shirt) for cutting = 120 / 480 = 0.25 min / shirt

Number of workers = 4

Now, tabulating this data with other the data from other production activities, we get

Time Time
Number taken per taken per
Regular Shirts Labor of shirt batch
Operation Content (minutes per shirt) workers (minutes) (minutes)
1. Cutting 0.25 4 0.06 3.75
2. Make collar 3.9 8 0.49 29.25
3. Make cuffs 2 4 0.50 30
4. Make sleeves 0.65 2 0.33 19.5
5. Make front 2.5 6 0.42 25
6. Make back 1.7 4 0.43 25.5
7. Join shoulders 0.66 2 0.33 19.8
 8. Attach collar 1.65 4 0.41 24.75
9. Attach sleeves 1.55 4 0.39 23.25
10. Stitch down sleeves 0.65 2 0.33 19.5
11. Sew side seam 1.8 4 0.45 27
12. Attach cuffs 1.55 4 0.39 23.25
13. Hem bottom 1.7 4 0.43 25.5
14. Inspect 1.5 4 0.38 22.5
15. Iron 1.95 4 0.49 29.25
15. Fold, package 1.75 4 0.44 26.25
Total 25.76 64 6.27 374.05

Thus, the direct labor content (min. /shirt) = 25.76

Thus we see that the maximum time taken by a process in 30 min / labor / batch, which forms
the bottleneck and represents the cycle time. The cycle time / shirt = 30 / 60 = 0.5 min / shirt.

The work-in-process inventory = Total number of batches in all operations * Batch size

= (16 + 144 + 12 + 12 + 12) * 60

= 196 * 60 = 11760 shirts

Now we can apply Little’s Law to calculate the throughput time which is equal to the
manufacturing lead time in this case.

By Little’s Law,

Throughput time = Work-in-process / Throughput rate = Work-in-process * Cycle time

= 11760 * 0.5

= 5880 minutes

Since production goes on for 8 hrs per day, manufacturing lead time = 5880 / (8 * 60)

= 12.25 days

Total number of shirts produced per month is 16,000. The company works for 20 days a month.

So, the output per day = 16000 / 20 = 800 shirts.

In, 8 hours a day, the company can produce 60 * 8 * (1/0.5) = 960 shirts, which is the current
production capacity. But it needs to produce only 800 shirts.
So, the capacity utilization = (800 / 960) * 100 = 83.33%

The actual labor utilized = Number of shirts produced * Direct labor content

= 800 * 25.76

= 20608 minutes

The available labor for utilization = Total number of workers * Hours per day * 60

= 64 * 8 * 60

= 30720 minutes

Therefore, the direct labor utilization = (20608 / 30720) * 100 = 67.08%

Total number of workers ∗ Hours per day ∗ Hourly wages

Direct labor cost ($/shirt) =
Number of shirts produced

= (64 * 8 * 6) / 800 = 3.84

2. We now proceed to compute the operations metrics for Mike’s plan.

In this plan, the new “low-ply” laser cutting machine would take 2.5 minutes to produce 5
shirts. One additional worker needs to be hired to operate this machine.

Therefore, the regular shirts labor content = 2.5 / 5 = 0.5 minutes.

The time taken per shirt = 0.5 minutes

Since this is the same as the maximum time taken for a single sewing process causing the
bottleneck (make cuffs), the cycle time / shirt will remain equal to 0.5 minutes

Here the time taken is 2.5 min / labor / batch, which forms the bottleneck and represents the
cycle time. The cycle time / shirt = 2.5 / 5 = 0.5 min / shirt.

We now proceed to compute the operations metrics for the current process.

The work-in-process inventory = Total number of batches in all operations * Batch size

= (36 + 288 + 24 + 24 + 24) * 5

= 396 * 5 = 1980 shirts

Now we can apply Little’s Law to calculate the throughput time which is equal to the
manufacturing lead time in this case.
By Little’s Law,

Throughput time = Work-in-process / Throughput rate = Work-in-process * Cycle time

= 1980 * 0.5

= 990 minutes

Since production goes on for 8 hrs per day, manufacturing lead time = 990 / (8 * 60)

= 2.06 days

Total number of shirts produced per month is 16000 + 2000 = 18000. The company works for 20
days a month.

So, the output per day = 18000 / 20 = 900 shirts.

In, 8 hours a day, the company can produce 60 * 8 * (1/0.5) = 960 shirts, which is the current
production capacity. But it needs to produce only 900 shirts.

So, the capacity utilization = (900 / 960) * 100 = 93.75%

For calculating the direct labor content, we have to find out the direct labor content values for
sewing and cutting separately.

For sewing operations, the DLC = 25.51 minutes/shirt

For the cutting operation, since both the new and old machines are used, the weighted average
of the individual DLCs are considered

DLC for cutting = (No of custom-made shirts * Time taken for each custom-made shirt +

No of regular shirts * Time taken for each regular shirt) / Total no of shirts

= (100 * 0.5 + 800 * 0.25) / 900 = 0.28 minutes

Therefore, total direct labor content = 25.51 + 0.28 = 25.79 minutes

The actual labor utilized = Number of shirts produced * Direct labor content

= 900 * 25.79

= 23211 minutes

The available labor for utilization = Total number of workers * Hours per day * 60

= 65 * 8 * 60
 = 31200 minutes

Therefore, the direct labor utilization = (23211 / 31200) * 100 = 74.39%

Total number of workers ∗ Hours per day ∗ Hourly wages

Direct labor cost ($/shirt) =
Number of shirts produced

= (65 * 8 * 6) / 900 = 3.47

3. Let us now evaluate Ike’s plan.

For the regular shirts, the direct labor content will be the same as in the current process as
here the new cutting machine is kept separate from the regular shirt manufacturing process.
Therefore, the direct labor content = 25.76 minutes/shirt for regular shirts
Here, however the number of workers in each process is reduced by one. Therefore, the cycle
time may change.

Time Time
Number taken per taken per
Regular Shirts Labor of shirt batch
Operation Content (minutes per shirt) workers (minutes) (minutes)
1. Cutting 0.25 4 0.06 3.75
2. Make collar 3.9 7 0.56 33.43
3. Make cuffs 2 3 0.67 40
4. Make sleeves 0.65 1 0.65 39
5. Make front 2.5 5 0.5 30
6. Make back 1.7 3 0.57 34
7. Join shoulders 0.66 1 0.66 39.6
8. Attach collar 1.65 3 0.55 33
9. Attach sleeves 1.55 3 0.52 31
10. Stitch down sleeves 0.65 1 0.65 39
11. Sew side seam 1.8 3 0.6 36
12. Attach cuffs 1.55 3 0.52 31
13. Hem bottom 1.7 3 0.57 34
14. Inspect 1.5 3 0.5 30
15. Iron 1.95 3 0.65 39
15. Fold, package 1.75 3 0.58 35
Total 25.76 49 8.23 492.78

Therefore, the maximum cycle time = 0.67 minutes

Similar to the previous plans, the work-in-process inventory = (16 + 108 + 9 + 9 + 9) * 60

= 9060 shirts
Similar to the other plans, we can calculate the manufacturing lead time

= (9060 * 0.67) / (8 * 60) = 12. 58 days

Production capacity = 480 minutes / 0.67 minutes/shirt = 720 shirts

Actual production of regular shirts = 800

Therefore, capacity utilization = (800 / 720) * 100 = 111.11%

Direct labor utilization = (800 * 25.76) / (49 * 8 * 60) = 20608 / 23520 = 0.8762

For calculating the direct labor cost, since there is overutilization of capacity, we need to
consider the overtime cost also.

Overtime = 1.1111 * 8 – 8 = 0.8888 hours/day

Normal time = 8 hours/day

Therefore, total labor cost per day = 0.8888 * 9 + 8 * 6

The direct labor cost/shirt = (0.8888 * 9 + 8 * 6) / 800 = $ 3.43

For the custom-made shirts, the work-in-process inventory

= Inventory in cutting + inventory in processing

= 5 + 15 * 3 = 50 shirts

Since a single shirt is processed at a time by a single worker, the cycle time is the maximum of
all the individual regular shirt labor content = 3.9 minutes / shirt

Manufacturing lead time = (50 * 3.9) / (8 * 60) = 0.41 days

Production capacity = (8 * 60) / 3.9 = 123 shirts / day

Capacity utilization = (100 / 123) * 100 = 81.3%

Direct labor content = Labor content for cutting + labor content for processing

= 0.5 + 25.51 = 26.01 minutes/shirt

Direct labor utilization = (100 * 26.01) / (16 * 8 * 60) = 2601 / 7680 = 0.3387

Direct labor cost / shirt = (16 * 8 * 6) / 100 = $7.68

The final outcomes of the analysis are shown in the table below.

Current Process Mike's Plan Ike's Plan

Regular Shirts Regular & Custom Regular Custom
Shirts Shirts shirts
Actual Cycle Time 0.5 0.5 0.67 3.9
(min./shirt)
Manufacturing Lead 12.25 2.06 12.58 0.41
Time (days)
WIP Inventory 11760 1980 9060 50
(shirts)
Production Capacity 960 960 720 123
(shirts/day)
Capacity 83.33 93.75 111.11 81.25
Utilization(%)
Direct Labor 25.76 25.79 25.76 26.01
Content(min/shirt)
Direct Labor 67.08 74.39 87.62 33.87
Utilization(%)
Direct Labor Cost 3.84 3.47 3.43 7.68
($/shirt)