OPERATIONS AND SUPPLY CHAIN

MANAGEMENT
ASSIGNMENT - 1

Submitted To: Prof. Pintoo Shome

Submitted By:
Ansuhkha Chauhan – C012 – 80012100054
Nikhiel Anand – C029 - 80012100006
Nishaad Gupta – C030 – 80012100640
Shreya Attri – C041 - 80012100331
Shubham Meghe – C043 – 80012100053
Tejal Mathur – C050 - 80012100361
 Flow Chart of the entire Kristen Cookie business

PART A
Question 1: How long will it take you to fill a rush order?
Answer:
With reference to the above flow chart, the time taken to fill the rush order is as follows –
Given,
Washing and Mixing = 6 minutes
Spooning = 2 minutes
Baking = 10 minutes
Cooling = 5 minutes
Packing = 2 minutes
Payment = 1 minutes

Thus, total time taken = 6 + 2 + 10 + 5 + 2 +1 = 26 minutes

Question 2 : How many orders can you fill in a night, assuming you are open four hours cach
night?
Answer:
As stated in the question, with the assumption that the two partners are going to work at nights for 4
hours the number of orders that can be fulfilled is as follows -

Total Time Available = 4 hours

Total time available to work= 4*60 = 240 minutes

Assuming we have enough number of tray available and 1 oven -

From the above calculation we know the Throughput Time to manufacture one dozen cookies is 26
minutes. Time taken for manufacturing subsequent dozens of cookies would be as per the constraint
which according to the flow chart is 10 minutes of the baking process.

Hence, the number of dozens that can be manufactured in 240 minutes after the first dozen is
manufactured is -
(240-26)/10 = 21.4 dozens; where 10 minutes of baking time acts as a constraint.

Thus, in 4 hours-
21.4 dozens+ 1 dozen (1st dozen) = 22.4 dozen ~ 22 dozen
(Subsequently, after the first hour every hour 6 dozen cookies will be manufactured 60/10 = 6dozens
per hour)

Question 3 : How much of your own and your roommate's valuable time will it take to fill each
order?
Answer:
The time taken by Kristen in the process = 6 + 2= 8 minutes
Where,
6 minutes - Washing and Mixing
2 minutes - Spooning

The time taken by Roommate = 1 + 0 + 2 + 1 = 4 minutes

Where,
1 minute - Setting up the oven
0 minute - To remove the tray from oven
2 minutes- Packing
1 minute- Payment

Therefore, time taken by Kristen to fulfil an order = 8 minutes and the time taken by the
roommate to fulfil an order is 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 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?
Answer:
Assuming that both Kristie and her roommate can work for 4 hours a day, they can make 22 dozen of
cookie at the most. If the cookies not identical in nature, giving a discount would be profitable to
them.
Provided that the customers place orders of similar cookies in bulk quantities, it will help both to curb
on the labor time.
It is stated that Kristie can mix 3 dozen in 6 mins. Whether she has to mix 1, 2 and 3 dozen it will take
her 6 mins. Similarly for payments, it will take them 1 min irrespective of the quantity of the order.
Hence, up to 3 dozen washing, mixing and payment will take 6+1=7 mins. Spooning, Loading and
Packing depends on the quantity of order = 2+1+2 = 5 mins per dozen.
Hence, for 2 dozen similar cookie, they will take = 7 + (5*2) = 17 mins. For 3 dozen = 7 + (5*3) = 22
mins.
We can clearly see that they will save on the labor time. Hence, they can provide discounts to people
who places similar order.
Assuming that the valuation of time is at = 0.3$/min
Then the total cost per dozen = 0.6$ (ingredients) + 0.1$ (packing) + 0.3$/min (valuation of the time)
For separate cookie order the cost will be,
1 dozen = 0.6 + 0.1 + (0.3*12) = 4.3
2 dozen = 0.6*2 + 0.1*2 + 0.3*24 = 8.6
3 dozen = 0.6*3 + 0.1*3 + 0.3*36 = 12.9
The pricing should be above these levels so as to cover the cost and to earn a profit. Assuming that
they strive for 20% profit on the cost. Then the price would be 5.16, 10.32 and 15.48 respectively.
Profit is 0.86, 1.72 and 2.58 for 1, 2 and 3 dozen respectively.
For similar cookies the cost will be,
2 dozen = 0.6*2 + 0.1*2 + 0.3*17 = 6.5
3 dozen = 0.6*3 + 0.1*3 + 0.3*22 = 8.7
The following scenarios have been considered in relation to similar cookies being baked in 2 dozen
and 3 dozen:
Case 1: If they do not provide any discounts, the profit would be (10.32 – 6.5) = 3.82 for 2 dozen and
(15.48-8.7) = 6.78 for 3 dozen.
Case 2: Considering that they would opt for continuing with 20% profit on cost. Then the price
charged would be (6.5 + 20%) = 7.8 and (8.7 + 20%) = 10.44 for 2 and 3 dozen. Profit = (7.8-6.5) =
1.3 and (10.44 - 8.7) = 1.74.
Case 3: Assuming that they decide to provide discount at the rate of 15 %, the price charged will be
(10.32 – 15%) = 8.772 and (15.48 – 15%) = 13.158. Profit = (8.772-6.5) = 2.272 and (13.158 – 8.7) =
4.458 for 2 dozen and 3 dozen.
The profit that Kristie and her roommate will receive will be greater than the 20% profit on cost.
The constraint i.e., the number of ovens is one. Hence, for every dozen of similar cookie the time
taken will be 10 mins, but for the labor time will be significantly reduced from 36 mins and 24 mins
to 22 mins and 17 mins respectively.

Question 5 : How many electric mixers and baking trays will you need?
Answer:
With the current business model, one electric mixer is sufficient as it can mix 3 dozen at a time which
helps to serve the demand of for the cookies in the college. However, depending on the demand and
growth of business an additional investment of another mixer can be made either on rental basis or
buying the asset for the business.
In order to accommodate the 3-dozen cookie batter that is produced/ mixed, we would need a
minimum of 3 baking trays. To explain the breakdown of the 3 baking trays, one will be used in the
spooning stage, one tray will be in oven and one tray would be in the cooling stage ready to get
packed. This would ease the flow of the cookies and not halt the process of production at any point of
time.

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 cheaply? What is the
effect of adding another oven? How much would you be willing to pay to rent an additional
oven?
Answer:
Continuous improvement is always required in a business in order to make the business function
efficiently. The improvements help to reduce the overall time taken in the manufacturing process,
produce additional units within the time given and also at times helps improve the quality of the
products.
In the Kristen Cookie case, there are multiple changes that can be made in the production plans in
order to make better cookies or more cookies in lesser amount of time and at lesser cost. Currently,
the bottleneck in the business is the stage of baking in the over which takes of total of 1+9 = 10
minutes. With the current process intact the amount of time taken to produce one dozen of cookies is
26 minutes in the very first dozen and subsequently for the next dozens it takes 10 minutes per
dozen. In order to reduce the time an addition of an oven could help reduce the time taken to produce
the finished cookies and at the same time increase the number of dozens that could be made in the 4
hours of work time as stated in the case.
Calculating the time taken to bake the cookies from the above questions, the total number of dozens
that can be made in 4 hrs is 22 dozen. With the addition of an oven, the bottleneck time is no longer
the baking process but the washing and mixing and the spooning process become the constraint.
With this as the constraint, the number of dozens that can be prepared in the four hours of working is
as follows –
Total time available to work= 4*60 = 240 minutes
Assuming we have enough number of tray available and 2 ovens-
We know,
Throughput time= 26 minutes
So,
Time taken for 1st dozen to complete the cycle= (240-26)/8 = 26.75 dozens

where 8 minutes of washing, mixing and spooning time acts as a constraint.

Thus, in 4 hours-
26.75 dozens+ 1 dozen (1st dozen) = 27.75 dozens ~ 27 dozen

Therefore, with the addition of an oven, the number of dozens of cookies that can be made is 5 dozen.
The other change in process that can be implemented include prepayment for the cookies at the time
of order could reduce the overall throughput time by 1 minute.
The cost that we as a business would be ready to pay for the additional oven cannot be more than
our earning or profit that we make from the additional dozens of cookies manufactured. In the given
scenario, the cost of the oven that the company would be ready to pay as rent should not be more than
the profits made on selling the additional 5 dozen (27-22).
To determine the acceptable rent for the additional oven, the SP of one dozen of cookies is to be
determined. As stated in the case, the cost of making the oven would include the cost of ingredients,
cost of the boxes in which they are packed and labour cost involved in this process.
Given,
Cost of ingredients = $0.60/ dozen
Cost of Boxes = $0.10/box
Cost of Labour = As per industry standards in the baking industry, the cost of labour per hour ranges
$10 - $30 per hour. Taking into consideration, the business is on small scale in a college, the cost per
hour is assumed to be $15 per hour. The average number of dozen cookies made in 4 hours is 22
dozen that is approximately 4.4 dozen per hour. The number of cookies in 4.4 dozens is 12*4 +
0.4*12 = 48 + 4.8 = 52.8 ~ 52 pieces. Therefore, the cost per piece of cookies is $15/52cookies =
$0.29. The cost of labour per dozen 0.29*12 = 3.48
Therefore, total cost in manufacturing is 0.6 + 0.1 + 3.48 = $4.18.
Along with a profit margin, the selling price of cookie (per dozen) = $4.5 per dozen
With the costs derived above, the revenue before introducing an oven is 22*4.5 = $99.
After introducing an additional oven, the cost of the product = 27*4.5 = 121.5
Additional Revenue earned = $121.5 – $99 = $22.5
Therefore, if the cost of the renting/ purchasing the additional oven is less than $22.5, the
business would be ready to install an oven.

Part B
Question 1 : What happens if you are trying to do this by yourself without your roommate?
Answer:
Case 1: (Assumed that we have enough trays).
When I was conducting this business with my roommate, the most time I would have spent on
the first order of 1 dozen freshly baked cookies would have been 8 minutes (6 mins of washing and
mixing, 2mins of spooning). However, if I try to run the business on my own, this time will be raised
to 12 minutes because 4 minutes will be added to the initial 8 minutes (1 minute for the baking
process, 2 minutes for packaging, and 1 minute for payment).
When my roommate is doing the task of cooling, packaging, and payment. Meanwhile, I’ll be
receiving the next order and will be able to continue washing & mixing and spooning the dough onto
the tray. But when I’m working on my own, I won’t be able to concentrate on my next order since I
will be preoccupied with taking out cookies and cooling them and packing them into boxes. As a
result, there will be pending sales, and my orders may be cancelled. As a result, my customers can get
dissatisfied and look for substitute product.
Case 2: (Assumed we only have one tray to carry out the process).
In this case the time required for the production of first dozen of cookies when we are
working alone would be 26 minutes. Whereas for the consecutive dozen the time required would be
20 minutes per dozen.
If I try to work on two orders at the same time and begin working on my second order before
the first batch cookies are ready to be packed and shipped, the cookies will not be as hot as the
customers would want. The business is having the added advantage as it is giving the freshly baked
cookies and if I’m not able to keep this promise I might lose my customer base. So having a
roommate is always an added advantage rather than working alone as it will decrease the throughput
time.
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 "crash priority" order for a dozen cookies of
a different flavor. 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?
Answer:
The answer the following question can be viewed by two different lenses: The rational
approach/quantitative thinking or the qualitative way of analysing things.
1. Scenario 1: A new business may have earned a regular customer who orders periodically
with a clearly estimable average order size. This means there is a degree of certainty the
customer offers to the business in terms of revenue, even if the order size is not very large.

If it is customers order versus a rush order the trade off is losing a potential customer as well
as an order that can be charged at a premium rate vs the possibility losing an existing
customer and getting bad publicity. In this case it may be wiser to play safe and handle
existing situation without cancelling existing order.

2. Scenario 2: However, in case the order in the oven belongs to a sporadic/new customer vs
another customer (existing/new) then charging premium can be considered

3. Scenario 3: Another combination of events may see no conflict in preparing both existing
order and rush order. For instance, if we only have a single dozen order in the oven, then the
10 minutes can be utilised to wash the mixer and mix the new order (upto 3 dozens) and
spoon at least 1 batch of the rush order and prepare it for

4. Calculating Premium: The premium rate must cover the cost of batch discarded to
prioritise rush order. Discount rates are not applicable on rush orders

Premium = Cost price of ingredients and raw materials + Cost of time

Cost of ingredients = $0.6
Total time lost = Washing, mixing, spooning, and preheating previous batch= 9 minutes
Cost of labour (assumed) = $15 an hour (in 1 minute $15/60= $0.25 in 1 minute)
In those 9 minutes cost of labour= $2.25
Initial SP of cookies= $10 (Assume)
Premium = $10 + $0.6 +$2.25 =$13.25

Question 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?
Answer:
The total process from mixing and spooning to collection of receipts takes a total of 26 minutes. This
means that a dozen orders will be completed in 26 minutes. And so ideally the delivery time can be 26
minutes but however, there should always be a safety margin should be added to the processing time.
Safety precaution is very important as the customer will be happy if he receives an order before time,
but he will be dissatisfied if the order is delayed even by a minute.
Safety Margin for this case will be 6 minutes (washing & mixing) + 2 minutes (spooning) = 8
minutes
If there is any mishap, this process has to be repeated and cannot be avoided.
So, the delivery time promised for the 1st dozen will be 26 minutes (time for the entire process) + 8
minutes (safety margin) = 34 minutes
To answer the caller when his or her order will be ready, there can be different cases and a fixed
process in place:
1. When there is no pre-existing order

We will be able to promise delivery in 34 minutes (time taken to finish the process+ safety margin)
2. When there is order for 1 dozen already in pipeline (assuming we have enough trays)

This will depend on the stage when the caller calls. For Ex- if the caller calls at the 8th minute, we will
be able to commit only after putting the cookies in the oven.
So, it will take take the same amount of time as it did when there were no pre-existing order, as when
the 1st order will be baking, Kristen can start with the 2nd order( mixing, washing and spooning). So
the customer can get the order in 34 minutes itself.
3. When there is order for 2 dozens already in pipeline (assuming we have enough trays)

If the caller calls when the 2nd order has been spooned and ready for baking, then it will take the same
time as the above cases, i.e 34 minutes, but if the caller calls when the 1st order is ready to bake and
2nd order has to be started, it will take an additional of 10 minutes along with the previous order.
Hence, after the first the 1st order every order takes 10 minutes more for consecutive orders so we can
say that 26 minutes + 10minutes*No. of orders (left to be baked and new) + 8 minutes (safety
margin)
Margin of safety won’t change for the number of orders. That means if there are 2 consecutive orders
the total time will be 26 minutes + 10 minutes + 8 minutes (margin of safety)

Question 4 : What other factors should you consider at this stage of planning your business?
Answer:
The factors that would be considered at this stage of planning of the Kristen Cookie business are –
 Purchasing and Supplier Selection – Procurement of Raw materials is an important part of
the business as the cost of the product highly depends on the raw material cost. The cost
cannot be too high as the overall cost of the product would increase. Hence, choosing the
right supplier is an important factor.

 JIT ((Inventory Control) - Our business model states that we produce the cookies on
demand basis. A proper mechanism of inventory of the basic raw materials should be
maintained in order to meet the demands of the customers. In this case a JIT inventory system
would be ideal as the business is done on a small scale and the money would not be locked in
the business in case certain ingredients are not used.
  Resource Planning/ Material Requirements Planning – Based on the order received from
the client, a proper resource planning or material requirement planning system must be in
place. This would help the business meet the orders in time without any delay in the delivery
of the cookies.

 Demand Forecasting – Demand forecasting would help the business plan to estimate the
amount of raw material that would be required, the labour time consumed, etc. This would
help the partners inform the suppliers about the potential requirement allowing all parties to
get the desired product on time. It would also allow the partners to determine the selling price
of the product during the peak and non-peak season.

 Capacity Planning - Capacity planning would help determine the expenditure the partners
would have to incur while starting their business. Depending on the demand for the product,
the capacity should be planned accordingly. This would allow the business to not spend
additionally or conservatively as in a long run, the decision could affect the business
negatively if planned incorrectly.

 Creating awareness and promoting the of the product within the college – Marketing the
product in the college campus is an important aspect. The students/ potential customers
should be aware of the business. Hence, marketing and promotion are important factors that
are to be taken into consideration.

 Risk Management – The risk management in case of any production failure, in case of lack
of availability of raw materials, payment related issues, etc have to be managed. This is an
important factor to be considered as if the risk management is not done properly, then the
business will not survive for a long time.

 Quality Control – While manufacturing there can be issues while the product is at the
spooning stage, or is in the oven or even at the packing stage. The consumers would come
back to the business only when the product delivered is of the highest quality. Hence, quality
control also is an important factor to be discussed and determined while starting a business.

Question 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?
Answer:
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?
The case given is made to order cookies as it depends on the customers. But if the cookies are
standardized, having only one common flavor cookie, the production process can be changed in order
to cater to huge customer base.
CASE 1:
Adding a Storage system after the cooling process.
ASSUMPTIONS:
The cookies made now are semi baked and stored in the storage system.

In this case, a storage system is installed after the cooling process to store the semi-baked cookies.
The storage system is expected to stay heated for one hour. This would increase the time taken for one
order but will cater to increased customers.

CASE 2:
In addition to case 1, payment system is made online.

In this case, mode of payment is changed, keeping all processes as same. The payment is made online
so that reduces the time taken by physically attending to the customers for payments. Now, once the
order is stored and packed it can be set aside for the customer to take it.

CASE 3:
In addition to case 2, a third party is added for the delivery process.

In this case, we are still dealing with the semi-baked cookies and online payment method. The cookie
store can involve third party services like Zomato, swiggy for delivery of cookies. This will help them
to cater to huge customer base and does not involve additional time for delivery of cookies. The time
taken for payment and delivery is negligible for the cookie store and renders to better quality and
servicing of the product.