Kristen´s Cookie Company

Case 1

ADRIANA ROMO – A01451220

MARIANA LEAL – A01350156
LUIS FELIPE CISNEROS - A00998501
ABRAHAM ZLOTNIK - A01451214

October 5th, 2021

KRISTEN’S COOKIE COMPANY
Kristen and her roommate have planned the Kristen’s Cookie Company as an on-campus
joint venture to create and operate a successful business in a college campus dorm,
potentially growing soon.

They propose to offer made-to-order fresh cookies after standard business operating hours
to feed freshly baked cookies to hungry college students late at night, making customized
cookies using different ingredients per students’ demands.

To have a competitive edge over other cookie-makers, they have decided to bake the
cookies only after receiving the order so that the customers can have freshly baked hot
cookies.

As far as customization is concerned, buyers will have to specify each ingredient in their
email. By doing so, students wouldn’t be going anywhere else as they would enjoy all the
exotic and freshly baked cookies right on the campus, banishing the late-night cookie
cravings.

The Cookie Company will use the campus email system for accepting the orders and
informing the buyers when the cookies are ready to be picked. The roommates have
thoroughly conducted the plan of how they will proceed with the initial production. They
have also divided the team to carry out different activities ranging from taking orders,
baking them, and finally accepting payments. Now the production process needs to be
evaluated to come up with a business policy.

Process times and movements

1. Take order = no time (0 minutes)
2. Wash mixer from previous batch + Add ingredients and turn mixer on = 6 minutes
3. Spoon the cookies (1 dozen = 12 cookies) on the tray = 2 minutes
4. Set the mixer timer (1minute) + put the cookies (1 dozen) in the mixer to bake
(9minutes) = 10 minutes per dozen
5. Remove the cookies from the mixer (5 minutes to cool down) + pack them in the
box (2 minutes) = 7 minutes per dozen per box
6. Accept payment = 1 minute
7. Oven operates 60 minutes (1hour) to give 6 dozen cookies assuming 10 minutes
for one dozen order sizes.
8. Cycle times :
 ● Mixing and spooning = 8 minutes
● Load and Bake = 10 minutes
● Cool = 5 minutes
● Pack and Payment = 3 minutes

1. How long will it take you to fill a rush order?

26 minutes
2. How many orders can you fill in a night, assuming you are open four hours each
night?
21 orders in 4 hours, one every 10 minutes after 30 minutes (26 minutes) to get the
first batch out.
3. How much of your own and your roommate's valuable time will it take to fill each
order?
At least 12 minutes of labor per batch taking out the waiting times for baking and
cooling.
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 people who order
two dozen cookies, three dozen cookies, or more? If so, how much? Will it take you
any longer to fill a two-dozen cookie order than a one-dozen cookie order
People who order two or three dozen cookies of the same kind will save 6 minutes
of labor each for the time saved for washing and mixing. If running at full capacity,
they will still have to wait for their turn in the oven, so it doesn’t really make it faster
or cheaper for bigger orders, just creates dead labor time.
A discount on this matter is not recommended.
5. How many electric mixers and baking trays will you need?
With the current process, just one and one.
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 processes that you can expand
cheaply? What is the effect of adding another over? How much would you be
willing to pay to rent an additional oven?
There are several ways to improve efficiency and production output if the demand
requires it, and the prices allow. The main bottleneck of the operation is the oven. It
limits the production capacity while allowing dead labor time. If there are orders for
more than 21 dozen per night, it would be necessary to add another one, but it is
not a cheap improvement. An easy way to improve efficiency is having one mixer
and tray per cookie kind. That way, they wouldn’t have to be washed between
batches and just once a day, reducing a fraction of the 6 minute washing and mixing
time per batch.
• Ingredients $0.60/dozen
 • Box for a dozen $0.10
• Electric mixer can hold and mix ingredients for 3 dozen cookies
• 6 minutes washing and mixing
• 2 minutes per tray spooning mix
• 10 minute baking time per tray (1 minute setting, 9 minutes baking)
• 5 minutes taking out cookies and cooling
• 2 minutes to pack each dozen in a box
• 1 minute to take payment
• $12 per hour of labor

# 21 batches per day

$ 0.7 Cost per batch
$ 14.7 cost per day
$ 5.3 price per batch
$ 111.3 max sales per day
$ 4.6 unit profit
$ 96.6 daily profit
% 6.57 profit margin
# 2 partners
$ 48.3 daily profit per partner

At a Price of $5.30 per dozen, the profit is enough to pay for the 2 people 4 hour shift for
$12 an hour (not considering other possible costs or taxes).
If demand requires it, getting another oven could be very useful. It would double the
profits, and at the same price per badge, if both partners agree to not take a profit for 3
days, they could easily afford a $500 oven.
# 42 batches per day
$ 0.7 Cost per batch
$ 29.4 cost per day
$ 5.3 price per batch
$ 222.6 max sales per day
$ 4.6 unit profit
$ 193.2 daily profit
% 6.57 profit margin
# 2 partners
$ 96.6 daily profit per partner
$ 500 cost of oven
# 3 days of amortization
$ 166.6667 daily cost of oven
% 0.862664 profit margin lost
$ 26.53333 adjusted daily profit
$ 13.26667 adjusted daily profit per partner
PROBLEMS FOR FURTHER THOUGHT
1. What happens if you are trying to do this by yourself, without your roommate?
To optimize times, regardless of the production capacity of the oven, there are many
activities that are being done simultaneously while the cookies are being cooked in the
oven during 9 min.
My roommate is doing some activities that in total take 9 minutes to be performed,
therefore, the production time would double if she wasn´t helping; so the number of orders
per night would reduce to half (10 in 4 hours).
2. Should you offer special rats for rush orders? If you cannot fill the priority order
while still fulfilling the order of the cookies already in the oven, how much of a
premium should you charge for filling the rush order?
Yes, definitely rush orders should be charged at a higher price because if cookies are already
in the oven and you would just start to prepare mix the ingredients and spoon the cookies
on the tray, that will take you 8 minutes, so you will have the oven running with no cookies
while the rush order is being prepared. Therefore, if it will make you lose 1/3 of the total
production time, then a 30% should be charged additionally.

3. When should you promise delivery? How can you look quickly at your order board
(list of pending orders) and tell a caller when his or her order will be ready? How
much of a safety margin for timing should you allow?
I should promise delivery after calculating my maximum capacity of production considering
the risk involved in the production in case something goes wrong.
In order to look quickly at the order board when the caller asks about their order I should
set an estimated time to every dozen Cookies requested considering every step of the
process from the beginning of the request to the order. The maximum safety margin for
timing I should allow is at least 10% of the normal time to react to any problem.

4. What other factors should you consider at this stage of planning your business?
A very important factor you should consider at this stage of planning a business is a
reaction plan to satisfy the customer needs if there is a problem which would affect our
production and getting to know how to mitigate it with a quick response
5. Your product 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?
To sell standard cookies, there must be an instruction of the ingredients, materials,
equipment, and the process itself with the specifications in order to obtain the same
quality of the cookies. Standardize the procedure is the only way to obtain the same
results when producing similar cookies. The instruction also needs to specify what’s
steps should you take from the very beginning when the order is requested until is
delivered.