OPERATIONS

 MANAGEMENT  -­‐  1  ASSIGNMENT  

EXECUTIVE  SHIRT  COMPANY  

PGP  –  1;  Section  –  B  

Group  –  11  

Overview:  

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.  

Identified  objective:  

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:  

The   current   process   flow   in   ESC   is   as   shown   in   Figure   1.   Each   batch   consists   of   60   shirts   and  
Work-­‐In-­‐Process   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.    

Mike’s  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  Work-­‐In-­‐Process  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.  

Ike’s  plan:  

Ike’s  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  

    1  
    Executive  Shirt  Company,  Inc.  
 
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.    

An  analysis  based  on  the  proposed  alternatives  from  Mike  and  Ike  will  help  in  making  the  
ideal  choice  that  will  maximize  the  inherent  potential  of  the  custom-­‐shirts  business.  

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Fig  1  –  Process  flow  diagram  

 
 
 
 

    2  
    Executive  Shirt  Company,  Inc.  
 
Analysis  of  current  process:  

For   calculating   the   cycle   time,   we   will   divide   the   time   required   for   each   operation   by   the  
number  of  workers  required  for  that  operation.  The  tabulated  results  are  as  follows:  
 
Regular  Shirts  
Number  of   minutes/per  
Operation   Labour(minutes  
workers   shirt/worker  
per  shirt)  
Make  collar   3.9   8   0.49  
Make  cuffs   2   4   0.50  
Make  sleeves   0.65   2   0.33  
Make  front   2.5   6   0.42  
Make  back   1.7   4   0.43  
Join  shoulders   0.66   2   0.33  
Attach  collar   1.65   4   0.41  
Attach  sleeves   1.55   4   0.39  
Stitch  down  sleeves   0.65   2   0.33  
Sew  side  seam   1.8   4   0.45  
Attach  cuffs   1.55   4   0.39  
Hem  bottom   1.7   4   0.43  
Inspect   1.5   4   0.38  
Iron   1.95   4   0.49  
Fold,  Package   1.75   4   0.44  
 
Hence,  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  can  be  calculated  as:  
16000/(20*8*60)  =  1.67  shirts/min  (assuming  8  hour  work  day)  
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  
 
From  Exhibit  3,  we  can  calculate  the  WIP  inventory  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  
    3  
    Executive  Shirt  Company,  Inc.  
 
         =  11760/800  =  14.7  days  
 
For  calculating  Direct  Labour  Utilization,  we  have  to  consider  the  time  taken  by  all  workers  
for   the   operations.   For   cutting   operation,   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  in  exhibit  
3  =  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%  
 
Money  paid  to  direct  labourers  =  64*6$*8  hours  =  3072  $/day  
Direct  labour  cost  =  3072/800  =  3.84  $/shirt  
 
 
Analysis  of  Mike’s  process:  

For  calculating  the  cycle  time,  we  will  refer  to  the  previous  table  1,  since  the  workforce  is  
same.  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  can  be  calculated  as:  
18000/(20*8*60)  =  1.88  shirts/min  (assuming  8  hour  work  day)  
Cycle  time  =  1/1.88  =  0.533  min/shirt  
 
Since,  this  cycle  time  value  is  higher,  the  actual  cycle  time  =  0.533  min/shirt  
 
From  Exhibit  5,  we  can  calculate  the  WIP  inventory  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  
 
For  calculating  Direct  Labour  Utilization,  we  have  to  consider  the  time  taken  by  all  workers  
for   the   operations   and   the   time   taken   on   the   laser-­‐cutting   machine.   For   computer  
    4  
    Executive  Shirt  Company,  Inc.  
 
controlled   cutting   operation,   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   given   in   exhibit   3   =   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  
 
 
Analysis  of  Ike’s  regular  shirt  process:  

For   calculating   the   cycle   time,   we   will   divide   the   time   required   for   each   operation   by   the  
number  of  workers  required  for  that  operation.  The  tabulated  results  are  as  follows:  
 
Regular  Shirts  
Labor(minutes   Number  of   Minutes/per  
Operation   per  shirt)   workers   shirt/worker  
Make  collar   3.9   7   0.56  
Make  cuffs   2   3   0.67  
Make  sleeves   0.65   1   0.65  
Make  front   2.5   5   0.50  
Make  back   1.7   3   0.57  
Join  shoulders   0.66   1   0.66  
Attach  collar   1.65   3   0.55  
Attach  sleeves   1.55   3   0.52  
Stitch  down  sleeves   0.65   1   0.65  
Sew  side  seam   1.8   3   0.60  
Attach  cuffs   1.55   3   0.52  
Hem  bottom   1.7   3   0.57  
Inspect   1.5   3   0.50  
Iron   1.95   3   0.65  
Fold,  Package   1.75   3   0.58  
 
Hence,  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  can  be  calculated  as:  
16000/(20*8*60)  =  1.67  shirts/min  (assuming  8  hour  work  day)  
Cycle  time  =  1/1.67  =  0.6  min/shirt  

    5  
    Executive  Shirt  Company,  Inc.  
 
  
Since,  the  value  of  the  ideal  cycle  time  is  higher,  so  the  actual  cycle  time  =  0.67  min/shirt  
 
From  Exhibit  6,  we  can  calculate  the  WIP  inventory  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  
 
For  calculating  Direct  Labour  Utilization,  we  have  to  consider  the  time  taken  by  all  workers  
for   the   operations   and   the   time   taken   on   the   laser-­‐cutting   machine.   For   computer  
controlled   cutting   operation,   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   given   in   exhibit   3   =   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  
 
 
 
 
 
 
 
 
 
 

    6  
    Executive  Shirt  Company,  Inc.  
 
Analysis  of  Ike’s  customized  shirt  process:  

For   calculating   the   cycle   time,   we   will   divide   the   time   required   for   each   operation   by   the  
number  of  workers  required  for  that  operation.  The  tabulated  results  are  as  follows:  
 
Regular  Shirts  
Labor(minutes   Number  of   minutes/per  
Operation   per  shirt)   workers   shirt/worker  
Make  collar   3.9   1   3.9  
Make  cuffs   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  down  sleeves   0.65   1   0.65  
Sew  side  seam   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  
 
Hence,  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  can  be  calculated  as:  
2000/(20*8*60)  =  0.208  shirts/min  (assuming  8  hour  work  day)  
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  
 
As  given,  15  workers  have  on  an  average  3  shirts  as  inventory  and  the  cutting  machine  has  5  
shirts   as   inventory   at   a   given   time,   so   we   can   calculate   the   WIP   inventory   by   adding   the  
individual  inventories.  
 
    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  
 

    7  
    Executive  Shirt  Company,  Inc.  
 
Capacity  Utilization  =  100/123.1  =  81.2%  
 
Manufacturing  Lead  Time  =  WIP  inventory/production  capacity  
                     =  50/100  =  0.5  days  
 
For  calculating  Direct  Labour  Utilization,  we  have  to  consider  the  time  taken  by  all  workers  
for  the  operations.    
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   given   in   exhibit   3   =   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  
 
Results  for  all  processes  are  tabulated  as  follows:  
 
Current   Mike’s  Plan   Ike’s  Plan  
Process   Regular  &  
  Regular   Custom  
  custom  
Shirts   Shirts  
Regular  Shirts   Shirts  
Actual  Cycle  Time  
0.6   0.533   0.67   4.8  
(min./shirt)  
Manufacturing  Lead  
14.7   2.19   12.64   0.5  
Time  (days)  
WIP  Inventory  (Shirts)  
11760   1980   9060   50  
 
Production  Capacity  
960   960   720   123.1  
(Shirts/day)  
Capacity  Utilization  
83.33%   93.75%   111%   81.2%  
 
Direct  Labour  Content  
26.51   27.01   26.51   26.01  
(Min./shirt)  
Direct  Labour  
Utilization   69.0%   77.9%   80.74%   33.9%  
 
Direct  Labour  Cost  
$3.84   $3.47   $3.26   $7.68  
($/shirt)  
 
 
 

    8  
    Executive  Shirt  Company,  Inc.  
 
Comparison  between  Mike’s  plan  and  Ike’s  plan  

The  profits  for  shirts  manufactured  in  a  month  are  compared  for  both  the  plans.  
The  results  are  tabulated  as  follows:  
 
Mike's  plan   Ike's  plan  
  Regular   Customized   Regular   Customized  
Shirts   shirts   Shirts   shirts  
Number    of  shirts  
(manufactured  per  
month)   16000   2000   16000   2000  
Cost  per  shirt          
Raw  material  cost   7   7.7*   7   7.7*  
Total  labour  cost   4.5   4.5   5**   4.5  
Indirect  cost   4.5   4.5   4.5   4.5  
Total  manufacturing  
cost   16   16.7   16.5   16.7  
Wholesale  price   25   35   25   35  
Profit#   180600   172600  
 
*Raw  material  costs  are  10%  more  expensive  for  customized  shirts  
**  Calculating  overtime  costs:    
  Overtime  =  53.33  minutes/worker/day  
  Overtime  wages  =  Overtime  *  Overtime  wages  per  hour  
       =  (53.33*  $9  /  60)  =  $8  per  worker  per  day  
  Overtime  wage  per  shirt  =  Overtime  wages  *  No.  of  workers  /  Shirts  per  day  
         =  8  *  49  /  800  =  $  0.5  per  shirt  
    Total  Labour  cost  =  4.5  +  overtime  cost  =  4.5  +  0.5  =  $5  per  shirt  
#  
Profit  =  ((Wholesale  price  –  Total  Manufacturing  Cost)*Number  of  regular  shirts)  +  
     ((Wholesale  price  –  Total  Manufacturing  Cost)*Number  of  regular  shirts)  
 
 
 
Conclusion:  

From  the  above  detailed  analysis,  it  is  clear  that  Mike’s  process  is  superior  to  Ike’s  process  in  
terms  of  profitability  and  manufacturing  lead-­‐time.    
 
The   effective   lower   MLT   of   Mike’s   process   implies   that   the   delivery   efficiency   is   greater.  
Customer   waiting   time   for   Customized   shirts   is   greatly   reduced   compared   to   industry  
standard   of   six   weeks.   Executive   Shirts   Company,   Inc.   will   therefore   be   in   a   position   to  
leverage  this  factor  and  become  a  leader  in  the  market  for  Custom-­‐sized  shirts.    

    9  
    Executive  Shirt  Company,  Inc.