TOD221 Operations Management

Case Analysis:- Kristen’s Cookies

Section Number:- 2

Submitted to faculty: Professor Aravind Panicker

Date of Submission: 15th September 2021

Student Details

Roll number Student Name Course

AU1910330 Aastha Galani BBA (hons.)
AU1910216 Khiranshu BBA (hons.)
Bhanushali
AU1910362 Neha Shah BBA (hons.)
AU1910010 Prisha Thakkar BBA (hons.)
AU1910052 Srishti Agarwal BBA (hons.)
2021-2022 (Monsoon Semester)
Introduction
Mission Statement of Kristen’s Cookie Company:
Created to extinguish the fire of student’s hunger.

This analysis provides a detailed evaluation of the company’s preliminary design of its
production process to make key policy and pricing decisions,equipment needed, number
of orders to be accepted and determine whether the business is profitable.

Process Flow Chart

Order and Reply

Cooling
(roommate) Hold
5 mins
0 mins

Pack and Collect

Wash and Mix Baking
money
(Kristen) (Oven)
(roommate)
6 mins 9 mins
3 mins

Spooning Heat Oven

(Kristen) (roommate)
2 mins 1 min
Key Questions

Question 1) How long will it take to fulfill a rush order?

Activity Resource Cycle Time Start Time Finish Time

Order Entry E-mail 0 minutes 00:00 00:00

Wash/Mix Kristen 6 minutes 00:00 06:00

Spooning Kristen 2 minutes 06:00 08:00

Heat Oven Roommate 1 minutes 08:00 09:00

Bake Oven 9 minutes 09:00 18:00

Remove Roommate 0 minutes 18:00 18:00

Cookies

Cool Tray 5 minutes 18:00 23:00

Pack/Collect Roommate 3 minutes 23:00 26:00

It will take 26 minutes to fulfill a rush order.

Question 2) How many orders can you fill in a night, assuming

you are open 4 hours each night?
Order Size Order Completion Time

1 dozen 26 minutes

2 dozen 36 minutes

3 dozen 46 minutes

4 dozen 56 minutes

5 dozen 66 minutes

6 dozen 76 minutes

7 dozen 86 minutes

8 dozen 96 minutes

9 dozen 106 minutes

10 dozen 116 minutes

11 dozen 126 minutes

12 dozen 136 minutes

13 dozen 146 minutes

14 dozen 156 minutes

15 dozen 166 minutes

16 dozen 176 minutes

17 dozen 186 minutes

18 dozen 196 minutes

19 dozen 206 minutes

20 dozen 216 minutes

21 dozen 226 minutes

22 dozen 236 minutes

Operating time = 240 minutes (4 hours)

Solution - 22 dozen cookies in 4 hours
The following formula can be formed
The number of minutes to produce ‘n’ one-dozen batches of cookies can be given by this
equation 16+10n<=4*60, therefore giving us N (max) = 22.

Question 3) How much of your own and your roommate’s

valuable time will it take to fill each order?

Kristen

Activity Cycle time

Wash,mix and spoon 6+2

Total 8 minutes

Roommate

Activity Cycle time

Heat oven,Remove cookies, Pack and collect 1+0+3

money

Total 4 minutes

Question 4) Because your baking trays can hold exactly one

dozen cookies, you will produce and sell cookies by the dozen.
Should you give any discount for the people who order two or
more dozens? If so, how much? Will it take you any longer to fill a
two dozen order than a one dozen order?

Cost of ingredients and boxes for each batch is the same

Assuming labour cost is $10 per hour, it is $0.1667 per minute.

No. of Cookies Time Cost Cost per dozen Potential

Discount
1 dozen 12 minutes $2.00 $2.00 $0.00

2 dozen 17 minutes $2.83 $1.41 $0.59

3 dozen 22 minutes $3.66 $1.22 $0.78

According to the table above, we can offer a discount on orders above 2 dozen.

When we add material cost to labour cost, we find that the cost decreases with larger
orders.
No. of Time Cost Labour Material Total Potential
Cookies cost /dozen cost /dozen Discount

1 dozen 12 minutes $2.00 $2.00 $0.70 $2.70 $0

2 dozen 17 minutes $2.83 $1.41 $0.70 $2.11 $0.59

3 dozen 22 minutes $3.66 $1.22 $0.70 $1.92 $0.78

Ingredients : $0.60 /dozen

Box : $0.10 /dozen

Question 5) How many electric mixers and baking trays will you
need?
Only one electric mixer is needed as it is idle for a long time during the production
process. As the mixer can contain 3 dozens of ingredients, at least 3 trays are needed.

Question 6) Are there any changes you can make in your

production plans that will allow you to make better cookies or
more cookies in less time or at lower cost? For example, is there
a bottleneck operation in your production process that you can
expand quickly? What is the effect of adding one more oven?
How much would you be willing to pay to rent an additional oven?
 Load and Bake

Mix and Spoon Cool Pack and Pay

Load and Bake

The cycle time for the baking (oven is the bottleneck operation) determines the speed
with which you can produce cookies.

Due to the increased capacity of the oven, we can start a new order every 5 minutes. The
new capacity will be 7.5 dozen/hour (if all orders are one dozen. 60/8=7.5)

Throughout time 6+2=8 minutes 1+9=10 minutes 5 minutes 2+1=3 minutes

Hourly Capacity 7.5 dozen 12 dozen 12 dozen 20 dozen

Cycle time 8 minutes 5 minutes 5 minutes 3 minutes

If we charge $5.70 dollars per dozen, the profit will be = 22 orders * $3 * 180 days = $11,880
Therefore, it would be feasible to rent an oven.

Questions for further thought

Question 1) What happens if you are trying to do this by yourself
without your roommate?
To find out the difference in the production when the roommate is present and not present
we need to calculate the time required to start a new batch of cookies with the selected
ingredients, to the time when the dozen cookies are packed and paid for.
As all the work has to be done by Kristen alone, her time for production of a dozen
increases to 12 minutes (8+4), which exceeds the original cycle time by 2 mins. In this
case Kristen becomes the bottleneck instead of the baking process.
However, if the order is of 2 dozen of the same kind of cookie, the washing and mixing
can be done together, so her time for the order totals up to 17 minutes
(6+2*2+2*1+2*2+1), which is less than the previous cycle of 20 minutes. For 3 dozen
the time is 22 minutes.

Question 2) Should you offer special rates for rush orders?

Suppose you have just put a tray of cookies into the oven and
someone calls up with a “cash priority” order for a dozen cookies
of a different flavour. Can you fill the priority order while still
fulfilling the order for the cookies that are already in the oven? If
not, how much of a premium should you charge for filling the rush
order?
No, there is no requirement to charge premiums for the rush order as by the time the
cookies bake, the rush order can be mixed. As soon as the cookies are baked, the rush
order can be put in the oven without having to compromise any orders.

Question 3) When should you promise delivery? How can you

quickly look at the order board and tell a caller when his or her
order is ready? How much of a safety margin for timing should be
allowed?
After looking at the order board we can tell what time we can finish the batch. The finish
time will be the time order is placed plus 26 minutes to finish an order of a dozen
cookies. At that time we can promise delivery.
We can suggest an 8 minute safety margin for rush orders. If a rush order comes in during
the wash and mix process, then we have to stop it and fulfill the rush order. The previous
order will be delayed by a maximum of 8 (6+2) minutes to wash and mix.

Question 4) What other factors should you consider at this stage

of planning your business?
At the first stage of the business itself there would be numerous factors which we will
have to consider such as :
 ● Cost price - we currently have the cost price of materials for one dozen cookies at
0.70. So how to reduce this cost while maintaining the quality of the materials.
● Market - who all would be our potential customers, who we can sell our cookies
and how would we increase the demand with the current market.
● Labour - if in future the demand for Kristen's cookies increases then would we be
able to cater the audience with the current human capital or should we think of
appointing someone for the job.
● Product - how can we make the cookies better or rather maintain the quality but
can produce more. So for that what product should be purchased.
● Services - some customers would ask for services like delivery of the product so
how do we include that while maintaining our profit margins, and what all other
services can we provide to our customers to increase their purchase experience
which more lead them to purchasing more cookies from us in the future.
● Hazards - what safety measures/ precautions should be taken to avoid hazards in
future, and if any takes place how would we handle it.
● Expansion - how we would expand our business in future and what things should
be done in order to increase the business by opening more cookie centers while
maintaining the quality which we currently provide.
● Laws - are we violating any laws, do we need to get our product approved from
the food and beverage authorities, if in future the business does well what all laws
would bind the firm.

Question 5) Your order must be made to order because each

order is potentially unique. If you decide to sell standard cookies
instead, how should you change the production system? The
order-taking process? Other policies?
At the beginning all the cookies made are unique, and if we sell standard cookies the
value added to the company changes. The cookies can be baked prior, we will have to
devise a menu for the available cookies, the customers can visit the apartment and pick
up the order directly. If a larger sum of cookies is required, the customers can place an
order through call and deposit some of the amount.

Conclusion:
Do you think the business is a good idea? If yes, why? If not, why?

After going through the case, analysing its production processes and evaluating it, we
have come to a conclusion that this business is a good idea because it provides freshly
baked cookies that can be customised as per the students’ preferences and at a time when
most bakeries are not open. It does not require capital investment as they already have an
oven and the electricity bills are paid by the landlord. But apart from the basic
requirements the business does have certain production limitations and disadvantages
which needs to be analysed before starting the business.
One oven can only bake 1 dozen cookies at a time. So, the waiting time for the customer
with two dozen cookies increases to 36 minutes for a single customer and during rush
hour it can create longer waiting times for customers with smaller orders if a customer
with bigger order orders first. Even if Kristen tries to rent another oven and it cuts down
the baking time, it might create budget problems for Kristen as there is no guarantee of
fixed income. Determining the price of the cookies also requires analyzing and
determining how much the students will be willing to pay. Considering the fact that
Kristen and her roommate are also students, working every night might create a problem
for their study schedule. The most rush hour might be created during the times of exams
as students tend to study at night time. Kristen and her roommate might find it difficult to
commit to the business and their exams all together.
To tackle the issue of excessive waiting time they can prepare premixes for the dough
and save 6 minutes per order, they can also use online payment methods to save more
time and purchase additional baking trays as well.