Harvard Business School

9-696-071
Rev. March 11, 1996
Executive Shirt Company
Case Analysis-The Executive Shirt Company (Group Project)
Part A
Calculations

Current Process Mike's Plan Ike's Plan

Regular &
Regular Shirts Regular Shirts Custom Shirts
Custom Shirts
All labor
content / one
less worker for 2.5 / 5 = 0.5
120 minutes for each category labor content
cutting / 480 while cutting is for cutting.
2 minutes per
A) Actual Cycle shirts worth = still 0.25: With everything
cuff / 4 workers
Time (Min/shirt) 0.25 < labor Cuffs is still the divided by 1,
= 0.5
content of cuffs bottleneck at 2 collar is new
at 0.5 CT labor content / bottleneck
3 workers at 3.90 CT
= 0.67
mins/shirt
B) Manufacturing
Lead Time (days) 11,760 * 0.5 / 0.5 * 1980 / (9060 * 0.66) /
(50 * 3.9) / 480
(WIP * Cycle Time) / 480 minutes 480 = 2.06 480 = 12.58
= 0.41 days
Minutes in a working = 12.25 days days
day
30 units at
sewing + 5
C) WIP Inventory
60 * 151 sum of units being cut
(shirts) 196 * 60 396 * 5 = + 15 units
avg. WIP =
Average WIP * Batch = 11,760 1980 shirts being finished
9,060 shirts = 50
size
WIP(given in
case)
D) Production 8 hours * 60 8 hours * 60 480 / 0.666 = 8 * 60 / 3.9 =
Capacity minutes / 0.5 = mins / 0.5
 Current Process Mike's Plan Ike's Plan
Regular &
Regular Shirts Regular Shirts Custom Shirts
Custom Shirts
(shirts/day)
960 shirts / = 960
Minutes available / 720 shirts/day123 shirts/day
day shirts/day
CT
123 * 20 days =
E) Capacity
2460 monthly
Utilization 10,000 / (960 * (16,000 +
16,000 / (720 * production
20 days) 2000) / (960 *
Actual Produced / 20) = 111.11% capacity
What could be = 83% 20) = 93.75%
2000 / 2460
produced
= 81.25%
(16,000 /
18,000) * 0.25
= 0.2777 +
(90 + 30 (120 minutes /
(2,000 / 18,000 0.5 direct labor
minutes /8hr * 480 total
* 0.5) = 0.2777 for cutting +
60 mins) + 3.9 minutes) + 3.9
F) Direct Labor = weighted 3.9 + 2 + 0.65
+ 2 + 0.65 + + 2 + 0.65 +
Content (min/shirt) 2.5 + 1.7 + avg. cutting + 2.5 + 1.7 +
2.5 + 1.7 +
time for regular 0.66 + 1.65 +
Time spent cutting + 0.66 + 1.65 + and custom 0.66 + 1.65 +
1.55 + 0.65 +
Direct labor for one 1.55 + 0.65 + 1.55 + 0.65 +
1.8 + 1.55 +
shirt 1.8 + 1.55 + 25.76 - 0.25 = 1.8 + 1.55 +
1.7 + 1.5 +
1.7 + 1.5 + 25.51 sum of 1.7 + 1.5 +
1.95 + 1.75
1.95 + 1.75 standard 1.95 + 1.75
= 25.01
= 25.76 station time = 25.76
25.51 + 0.2777
= 25.79

G) Direct Labor (900 * 25.79) /

Utilization (800 shirts * (65 direct (800 per day *
25.76 Direct workers * 480 25.76) / (64 - 100 * 26.01 /
(Shirts per day * labor content) / minutes 15) * 480) = (16 * 480)
Direct labor content / 64*480 available)= 20,608 / 23,520 = 33.87%
(Direct labor * = 67.08% 23,211 / 31,200 = 87.62%
minutes available) = 74.39%
H) Direct Labor 64 (6 * 8) / 800 65 ( $6 * 720 shirts / day 16 ($6 * 8
Cost = $3.84 8hours) / 900 = on normal hours) / 100
31200 / 900 salary: 49 * 6 * = 7.68
($/shirt)
= $3.47 8 = $2,352
Direct labor (Salary *
80 remaining
hours worked) / shirts
shirts * 0.67 =
produced
53.6 minutes
 Current Process Mike's Plan Ike's Plan
Regular &
Regular Shirts Regular Shirts Custom Shirts
Custom Shirts
53.6 / 60 * 9 =
8.04
49 * 8.04 =
393.96
Total: (393.96 +
2352) / 800
= 3.43

Explanation
1. Regular shirt production process without custom shirt fabrication.
a. Cycle time for each station = total station time / # of workers at station
i. Cycle time for system = longest station cycle time
ii. Cuffs station = System CT = 2.0 minutes / 4 workers = 0.5 minutes
b. Manufacturing Lead Time (MLT) = Cycle Time (CT) * Works in Progress (WIP)
i. CT = 0.5 minutes
ii. WIP individual shirts = (196 batches * 60 shirts / batch) = 11,760
iii. MLT in days = (0.5 * 11,760) / 480 minutes per day = 12.25 days
c. Total individual shirts as WIP = Sum of average batches * 60 shirts per batch
i. WIP shirts = 196 batches * 60 shirts per batch = 11,760 shirts as WIP
d. Production capacity of system at continuous 100% utilization (minutes)
i. Production capacity = minutes per day / CT of system
ii. Production capacity = 480 / 0.5 = 960 units per day @ continuous 100%
utilization
e. Production capacity utilization = monthly production / monthly production
capacity
i. Current monthly production is 16,000 (given in case)
ii. Total monthly capacity = 19,200 (920 per day * 20 days per month)
iii. Production utilization = 16,000 / 19,200 = 83%
f. Direct Labor content = sum of time at all stations + time per shirt for cutting
i. Sum of time at all stations = 25.51 minutes per shirt
ii. A single cutting of 8 patterns on 60 layers of cloth produces (60 * 8) = 480
shirts
iii. Total cutting time = (1.5 minutes * 60 layers) + (30 minutes cutting) = 120
minutes
iv. Cutting time per shirt = 120 minutes / 480 shirts = 0.25 minutes per shirt
v. Total labor content (time) per shirt = 25.51 + 0.25 = 25.76 minutes per
shirt
g. Direct Labor Utilization = Total used labor time / Total labor time available
i. Total labor time available = 64 workers * 480 minutes per day = 30,720
minutes
ii. Total time used = time per shirt * daily production (16,000 per month / 20
days)
iii. Total time used = 25.76 minutes * 800 shirts per day = 20,608 minutes
iv. Direct Labor Utilization = 20,608 minutes used / 30,720 minutes available
= 67.08%
h. Total Direct Labor Cost per shirt = (# workers * 8 hours per day * $6 per
hour) / 800
i. Total Direct labor cost = (64 * 8 * 6) / 800 (total daily production = 16,000 /
20 days)
ii. Total Direct Labor Cost = $3.84 / shirt

2. Mike’s plan for production of regular and custom shirts using

existing facilities with the addition of a new cutting machine and one
worker.
a. System CT remains unchanged = 0.5 (the cuffs station still has the longest
station CT)
b. Manufacturing Lead Time (MLT) = Cycle Time (CT) * Works in Progress (WIP)
i. CT = 0.5 minutes
ii. WIP individual shirts = (396 batches * 5 shirts / batch) = 1,980
iii. MLT in days = (0.5 * 1,980) / 480 minutes per day = 2.06 days
c. Total individual shirts as WIP = Sum of average batches * 5 shirts per batch
i. WIP shirts = 396 batches * 5 shirts per batch = 1,980 shirts as WIP
d. Production capacity of system at continuous 100% utilization (minutes)
i. Production capacity = minutes per day / CT of system
ii. Production capacity = 480 / 0.5 = 960 units per day @ continuous 100%
utilization
e. Production capacity utilization = monthly production / monthly production
capacity
i. Current monthly production is 16,000 regular + 2000 custom shirts (given in
case)
ii. Total monthly capacity = 18,000 (900 per day * 20 days per month)
iii. Production utilization = 18,000 / 19,200 = 93.8%
f. Direct Labor content = sum of time at all stations + time per shirt for cutting
i. Sum of time at all stations = 25.51 minutes per shirt
ii. New machine can cut 1 pattern on five layers in 2.5 minutes
ii.Custom cutting time = 5 shirts / 2.5 minutes = 0.5 minutes per custom shirt
iii. Total cutting time = Weighted average of old & new machine cutting times
iii.(16,000 reg / 18000 total) * 0.25 + (2000 / 18000) * 0.5 = 0.278 min/shirt
iv. Total labor content (time) per shirt = 25.51 +0.28 = 25.79 minutes per
shirt
g. Direct Labor Utilization = Total used labor time / Total labor time available
i. Total labor time available = 65 workers * 480 minutes per day = 31,200
minutes
ii. Total time used = time per shirt * daily production (18000 per month / 20
days)
iii. Total time used = 25.79 minutes * 900 shirts per day = 23,211 minutes
iv. Direct Labor Utilization = 23,211 minutes used / 31,200 minutes available
= 74.39%
h. Total Direct Labor Cost per shirt = (# workers * 8 hours per day * $6 per
hour) / 900
i. Total Direct labor cost = (65 * 8 * 6) / 900 (total daily production = 18,000 /
20 days)
ii. Total Direct Labor Cost = $3.47 / shirt
3. Ike’s plan for shifting labor from the regular assembly floor to
create a separate assembly line dedicated to custom shirts, thus
separating the two streams of production.
(A) Regular Shirt Production:
a. System CT = 0.67 (the cuffs station still has the longest station CT @ 2.0 min
/ 3 workers )
b. Manufacturing Lead Time (MLT) = Cycle Time (CT) * Works in Progress (WIP)
i. CT = 0.67 minutes
ii. WIP individual shirts = (151 batches * 60 shirts / batch) = 9,060
iii. MLT in days = (0.67 * 9,060) / 480 minutes per day = 12.58 days (for regular
shirts)
c. Total individual shirts as WIP = Sum of average batches * 60 shirts per batch
i. WIP shirts = 151 batches * 60 shirts per batch = 9,060 shirts as WIP
d. Production capacity of system at continuous 100% utilization (minutes)
i. Production capacity = minutes per day / CT of system
ii. Production capacity = 480 / 0.67 = 720 units per day @ continuous 100%
utilization
e. Production capacity utilization = monthly production / monthly production
capacity
i. Current monthly production is 16,000 regular shirts (given in case)
ii. Total monthly capacity = 14,400 (720 per day * 20 days per month)
iii. Production utilization = 16,000 / 14,400 = 111%
f. Direct Labor content = sum of time at all stations + time per shirt for cutting
i. Sum of time at all stations = 25.51 minutes per shirt
ii. A single cutting of 8 patterns on 60 layers of cloth produces (60 * 8) = 480
shirts
iii. Total cutting time = (1.5 minutes * 60 layers) + (30 minutes cutting) = 120
minutes
iv. Cutting time per shirt = 120 minutes / 480shirts = 0.25 minutes per shirt
v. Total labor content (time) per shirt = 25.51 + 0.25 = 25.76 minutes per
shirt
g. Direct Labor Utilization = Total used labor time / Total labor time available
i. New direct labor available = 64 – 15 = 49
ii. Total labor time available = 49 workers * 480 minutes per day = 20,608
minutes
iii. Total time used = time per shirt * daily production (16000 per month / 20
days)
iv. Total time used = 25.76 minutes * 800 shirts per day = 23,211 minutes
v. Direct Labor Utilization = 20,608 minutes used / 23,520 minutes available
= 87.62%
h. Total Direct Labor Cost per shirt = (# workers * 8 hours per day * $6 per
hour) / 800
i. Overtime is incurred for all employees in order to reach excess of normal
hour production levels (calculated above @ 11% above capacity)
ii. Overtime production = daily production – daily capacity = 800 – 720 = 80
shirts
ii.OT (minutes) = 80 * CT = 80 * 0.67 = 53.60 extra minutes per worker
ii.OT cost = (53.60 / 60) *$6 / hour * number of workers = (53.60 / 60) * 6 * 49
ii.OT cost = $393.96
iii. Total Direct labor cost = (49 * 8 * 6) + 393.96 / 800 (total daily production =
18,000 / 20 days)
iv. Total Direct Labor Cost = $3.43 / regular shirt
(B) Custom shirt production on separate assembly line (15 workers + 1
new hire):
a. Cycle time for each station = total station time / # of workers at station
i. Cycle time for system = longest station cycle time
ii. Cuffs station = System CT = 3.90 minutes / 1 worker = 3.90 minutes (collar
station)
b. Manufacturing Lead Time (MLT) = Cycle Time (CT) * Works in Progress (WIP)
i. CT = 0.5 minutes
ii. WIP individual shirts = (10 batches * 5 shirts / batch) = 50 shirts
iii. MLT in days = (3.90 * 50) / 480 minutes per day = 0.41 days
c. Total individual shirts as WIP = Sum of average batches * 5 shirts per batch
i. WIP shirts = 30 shirts in sewing + 5 shirts in cutting + 15 shirts in finishing
= 50 shirts as WIP (given in case)
d. Production capacity of system at continuous 100% utilization (minutes)
i. Production capacity = minutes per day / CT of system
ii. Production capacity = 480 / 3.90 = 123 units per day @ continuous 100%
utilization
e. Production capacity utilization = monthly production / monthly production
capacity
i. Current monthly production is 2,000 (given in case)
ii. Total monthly capacity = 2460 (123 per day * 20 days per month)
iii. Production utilization = 2000 / 2460 = 81.25%
f. Direct Labor content = sum of time at all stations + time per shirt for cutting
i. Sum of time at all stations = 25.51 minutes per shirt
ii. A single cutting of 1 pattern on 5 layers of cloth produces 5 shirts
iii. Total cutting time = 2.5 minutes
iv. Cutting time per shirt = 2.5 minutes / 5 shirts = 0.50 minutes per shirt
v. Total labor content (time) per shirt = 25.51 + 0.50 = 26.01 minutes per
shirt
g. Direct Labor Utilization = Total used labor time / Total labor time available
i. Total labor = 12 sewers + 3 finishers + 1 cutter = 16
ii. Total labor time available = 16 workers * 480 minutes per day = 7680
minutes
iii. Total time used = time per shirt * daily production (2000 per month / 20 days)
iv. Total time used = 26.01 minutes * 100 shirts per day = 2601 minutes
v. Direct Labor Utilization = 2601 minutes used / 7680 minutes available
= 33.87%
h. Total Direct Labor Cost per shirt = (# workers * 8 hours per day * $6 per
hour) / 200
i. Total Direct labor cost = (16 * 8 * 6) / 200 (total daily production = 2000 / 20
days)
ii. Total Direct Labor Cost = $7.68 / custom shirt

Part B
Recommendation to Management
Using the calculations in Part A it is possible to evaluate each of the two proposals
in terms of their cost and efficiency. Firstly, to deduce the total cost for the custom
shirts each month, the Direct Labour Cost from each plan can be multiplied by 2000
(the desired quantity produced). By doing this we learn that Ike’s total cost for
custom shirts is $7.68 x 2000 = $15,360, compared to Mike’s $3.47 x 2000 =
$6,940. This results in an $8,420 cost difference in favour of Mike’s plan. Production
of regular shirts on the other hand are cheaper using Ike’s process, that is Ike’s
labour costs are $3.43 x 16,000 (desired quantity of regular shirts) = $54,880
compared with Mike’s labour costs of $3.47 x 16,000 = $55,520. The difference
between the two is only $640, which is fairly insignificant, and leaves the total cost
difference between the two plans at $7,780 in favour of Mike.

The great disparity in cost between the two is mainly due to the efficiency of each
proposal. Whilst Mike increases the efficiency of both capacity and labour utilization
in the factory (absorbing excess capacity and increasing efficiency from 83% to
93.75% as well as improving labour efficiency by 7.31%), Ike over-utilizes capacity
in his regular shirt production line and severely under-utilizes capacity in his custom
shirts production line. The result of this is that he has to pay the workers on the
regular shirt line overtime whilst the workers on the custom shirt line are frequently
starved and sitting idle.

Furthermore, when considering the logistics of each production line layout, Mike’s
proposal is favourable over Ike’s because it allows for more flexibility. Whilst Mike
retains the existing ‘process layout’ in the batch shop process, where similar
operations are performed in common functional areas, Ike instead adopts a ‘product
layout’ structure, where the operations are located according to the progressive
steps involved in making a shirt. Having only one worker completing each
production task, as is the case in Ike’s plan, means that if one worker is slowed
down for any reason or needs to take a break, then there is no one to pick up the
slack. As a result, the whole process is negatively affected. An ideal assembly line
should allow workers to trade elements of work and it should be unproblematic to
add workers to the line to increase efficiency, however the straight-line layout of
Ike’s plan does not satisfy these requirements.

Based upon our analysis, although both processes do essentially satisfy Dwight
Collier’s production lead management time conditions, we would recommend that
he should trial Mike’s plan. If there does indeed prove to be a market for mid price
range custom shirts, then implementing Mike’s proposal is the company’s best shot
at making a lucrative profit from this initiative