Draw a flow chart of the cookie-making process

2. How long will it take to fill a rush order of 1-dozen cookie?

It will take 26 minutes to fill a rush order of 1-dozen cookie. (I revise my chart to 4 cycle orders)

3. What is the cycle time?

How many orders can you fill in a night (4-hour period)? Does your answer depend on the size of the
order, 1-dozen, 2-dozen, or 3-dozen?
1-dozen orders: The cycle time is 10 minutes.

The first order of 1-dozen cookies will take 26 minutes, and each 10 minutes for another 1-dozen cookie
order.
(4*60-26)/10=21.4 plus the first order, we can make 22 orders of 1-dozen cookie fill in a night.

2-dozen orders: The cycle time is 20 minutes. The first order of 2-dozen cookies will take 36 minutes, and
each 20 minutes for another 2-dozen cookie order.
(4*60-36)/20=10.2 and plus the first order, we can make 11 orders of 2-dozen cookie fill in a night.

3-dozen orders: The cycle time is 30 minutes. The first order of 3-dozen cookies will take 46 minutes, and
each 30 minutes for another 3-dozen cookie order.
(4*60-46)/30=6.47 and plus the first order, we can make 7 orders of 3-dozen cookie fill in a night.

4. What is the difference in labor (both you and your roommate’s time) per dozen among 1-dozen, 2-
dozen, and 3-dozen orders?
1-dozen orders: Me: Wash and Mixing 6 minutes + fill the tray 2 minutes = 8 minutes +my roommate:
Setting timer and putting in the oven 1 minute +Packing and collecting money 3 minutes = 4 minutes, and
12 minutes in total. 12mins/per dozen
2-dozen orders- Me: Wash and Mixing 6 minutes + fill the tray 4 minutes = 10 minutes +My roommate:
Setting timer and putting in the oven 2 minutes (2 times) +Packing and collecting money 5
minutes(packing 2 times) = 7 minutes, and 17 minutes in total. 8.5mins/per dozen

3-dozen orders- Me: Wash and Mixing 6 minutes + fill the tray 6 minutes = 12 minutes +My roommate:
Setting timer and putting in the oven 3 minutes (3 times) +Packing and collecting money 7
minutes(packing 3 times) = 10 minutes, and 22 minutes in total. 7.3mins/per dozen
5. Based PURELY on your answer to question 4, will you offer any discount for 2-dozen and 3-dozen
orders? Why?

I will offer a discount. Because we can use our time more effective for 2-dozen and 3-dozen

orders.

6. How many electric mixers and baking trays will you need? Why?

I will need one electric mixer and 3 baking trays. Because the most dozens of an order are 3

dozens, we only need 3 trays. And the electric mixers can already mix 3 dozens at one time.

7. How can you tell that the oven and the baking activity is the bottle neck? What is the effect of

adding another oven in term of cycle time and capacity? How much in general would you be

willing to pay to rent an additional oven? Resource | 1- dozen | 2- dozen | 3-dozen | Me | 7.5 | 12 |

15 | Roommate | 15 | 17.4 | 18 | Oven | 6 | 6 | 6 |

Because the oven and the baking activity take the longest time lowest

capacity, it is bottleneck. (I add a chart to figure out which is activity is the

bottle neck of 1-dozen order) Resource | 1- dozen | 2- dozen | 3-dozen | Me | 7.5

| 12 | 15 | Roommate | 15 | 17.4 | 18 | Oven | 12 | 12 | 12 |

The above chart shows the new capacity if we add one oven. (I also add a

chart to figure out which is activity is the bottle neck of 2-dozen orders)

I will be willing to pay if the number of 2-dozen and 3-dozen orders are more

than 1-dozen order.

The capacity of the system is based on the output of the bottleneck. The

bottleneck is the oven, which can process 60min/10min = 6 dozen orders per

hour. This assumes one-dozen order sizes

The throughput time is the sum of the processing times for each of the steps.

This equals 8+10+5+2+1=26 minutes

In a four-hour shift you can produce the hourly capacity for each hour. This

means that you can produce 4*6=24 dozen in the four hours. However, you

have a startup time of 8 minutes and a cleanup time of 8 minutes that must

be taken away from the four hours. Thus, you have 60min*4hours= 240

minutes – 16 minutes = 224 minutes (3.73 hours) of available processing time.

This means that you can produce 3.73*6 = 22.4 dozen per hour. Rounding

down is fine here.

You are working 6+2 minutes for each dozen. Over the hour, you do this 6

times so you are working 48 minutes. Your utilization would be 48/60=80%.

Your roommate is working 1+2+1 = 4 minutes per dozen. So, 4*6=24 minutes

per hour. Your roommate’s utilization would be 24/60=40%.

Assuming 6 dozen per hour you can gross 6*5=$30. The material expense is

6*(.1+.6)=$4.20. This leaves $25.80 for you and your roommate.

You can do this alone. This would mean that you would have to take over your

roommates responsibilities of 4 minutes per dozen. Your new total time would

be 12 minutes per order. However, this would mean that you are now the
bottleneck of the operation. The new capacity based on your new time is

60/12 = 5 dozen cookies per hour.

1 min per dozen-

60 dozen per hour

2 min per dozen-

30 dozen per hour

5 min per dozen-

12 dozen per hour

10 min per dozen-

6 dozen per hour

6 + 2 min per dozen-

7.5 dozen per hour

Several features can be extracted from the process flow diagram: 1)

Assuming there are no cookies in the oven, a “rush order” will take
8+10+5+3= 26 minutes. 2) The company’s bottleneck is the load & bake
process with an hourly capacity of 6 dozen.

3) Since the company’s hourly capacity is 6 dozen per hour, the cycle time,
i.e. the elapsed time between the completions of successive orders (dozen),
is equal to 10 minutes.

4) Assuming that KCC is open for four hours (240 minutes) each night, the
nightly capacity can be computed by looking at the completion time between
completed orders: 26, 36, 46, 56, 66, 76, 86, 96, 106, 116, 126,…216, 226, 236.
In the first hour, 4 dozen orders are filled. In hours 2-4, 6 dozen orders are
processed per hour. Therefore, the nightly capacity for a 4 hour shift is
4+(3*6)=22 dozen.

5) Kristen’s utilization is 8 minutes/10 minute cycle time= 80%. Therefore,

Kristen has 20% idle time. The roommate’s utilization is (1+3)/10 minute cycle
time= 40% and a corresponding 60% idle time.

6) With the assumptions of a pay schedule for Kristen and her roommate of
$12.00 per hour and no payment for idle time, the nightly labor cost is:

($12.00 * 4 *.8) + ($12.00 * 4 * .4) = $57.60

7) The materials cost per dozen is $0.60 for ingredients + $0.10 for the
box=$0.70/dozen.

8) Since the nightly capacity = 22 dozen, the total nightly cost is (22*$0.70) +
$57.60 = $73.00. Therefore, the minimum break-even cost/dozen = $3.32
(assuming 22 orders). This leaves Kristen the opportunity to set a price above
that breakeven point to create profit.

Order Acceptance and Process Alternatives

The order acceptance rule is a major factor in how the business will run. It
determines much of the processes and is really the first step in designing the
flow. There are four basic alternatives for how to accept orders:

1. Take advance orders only and stop accepting orders at a predetermined

time.

2. Take advance orders first, then accept rush orders if time and ingredients
allow.

3. Take advance orders, but reserve a specific number of spots per night for
rush orders with a premium charge assigned.

4. Take orders anytime and fill them as ingredients allow, which necessitates
refusing orders beyond capacity.

Each of these options also relies on capacity, personnel and equipment. No

one decision can be made without regards to each of these other categories.
Kristen also needs to decide if cookie orders can be of any size or if a
standard order size will aid the process flow. Another concern of Kristen’s
has been whether she may be forced (just another comment-I might have
missed this-was she concerned about being forced to do business alone or
did she just want to explore that possibility?) to run the business alone at
times.

The Gantt chart shown in Table 2 shows the configuration of Kristen working
with her roommate. Table 3 shows the change in cycle time and hourly
capacity if Kristen chooses to work alone. The bottleneck now becomes
Kristen herself. Cycle time increases to 12 minutes and hourly capacity
decreases from 6 to 5.
Analysis of Order Acceptance and Process Alternatives: * Adherence to Core
Competency * * Larger order sizes will increase delivery times, which could
delay delivery time past the one hour guaranteed time, damaging the core
competence of quick delivery

* Prudent Capacity Management * * KCC will need to ? Is something missing

here? * Maximization of Profits/ Low Costs * * Charging a premium for rush
orders can boost revenue * * KCC will lose some revenue from decreased
capacity if Kristen works alone * Efficient Constraint Management * * Order
sizes larger than one dozen will put even greater pressure on the oven as a
constraint * Customer Satisfaction * KCC will need to refuse orders that
exceed current capacity, which will damage customer goodwill and lose
future customers. * KCC is able to fill many more one dozen cookie orders
than larger order sizes, which decreases the likelihood of needing to refuse
an order

Capacity and Equipment Alternatives

Capacity is a crucial factor in this entire analysis. The amount of product that
Kristin and her roommate can produce in the allotted four hour time slot
without compromising quality or cost and profits is the ultimate number
game. Capacity is dependent on time, but also on equipment used. There are
several alternatives to be considered in terms of capacity and equipment
combinations:

1. Use existing equipment

2. Rent or purchase additional oven

3. Rent kitchen space

4. Purchase other additional equipment

Table 4 addresses the potential maximum capacity for each of these
scenarios. Using the existing oven and mixer would provide Kristen with the
22 dozen maximum capacity as discussed earlier.

Kristen also has the option to rent a larger or additional oven. While there is
an obvious capital expenditure to achieve this additional oven space, there is
the prospect of producing more batches of cookies each night. In a single
oven operation, the bottleneck process is the load and bake with a 10 minute
cycle time. Leasing a second oven removes the bottleneck from the load and
bake process and shifts it to the mix and spoon process and brings maximum
capacity to 56 dozen cookies (Table 5).

Renting kitchen space would provide not only more oven space, but more
space for additional equipment such as mixers, trays and perhaps refrigerator
or freezer space to make cookie dough ahead of time or store more
ingredients. While this may be an appealing route at first glance, it also would
require more capital expenditure both up front and long term in investments
and rent, but also would require the hiring of additional staff to maintain
efficient workflow and optimization of equipment.

Although adding a second oven would obviously increase capacity, it did not
double the hourly capacity. The new bottleneck capacity becomes 7.5 dozen
per hour with six additional orders per night (Table 5). An increase in
utilization of the roommate for the second or larger oven loading with result in
a nightly pay increase of $4.80, as well as an increase in supply costs. The
cost of leasing a second oven should not exceed the six additional orders per
night plus increased cost of labor and supply. This same logic applies to
renting an additional kitchen instead of just an oven, but on a larger scale.
Kristen currently possesses the mixer, trays and spoons required to start this
business. The question is what combination of mixers and trays would
provide her and her roommate with an efficient process flow without holding
inventory between stations or creating a bottleneck within the labor design.

Using a Gantt Chart (Table 6), the scenario of having one mixer and two trays
is examined.

Analysis of Capacity and Equipment Alternatives: * Adherence to Core

Competency * * KCC will be better able to customize the cookies with a
limited capacity and volume * * A larger volume and capacity may not
necessarily affect the freshness or quality of the cookies * Prudent Capacity
Management * * At this point in KCC’s business cycle, investment in
additional equipment would outpace the company’s growth. Although supply
is currently constrained, demand is unknown * Maximization of Profits/ Low
Costs * * By using existing equipment for the time being, KCC minimizes
capital expenditures and costs * Efficient Constraint Management * * With
both Kristen and her roommate working, investment in any other equipment
than the oven bottleneck would be wasteful and not increase capacity *
Customer Satisfaction * By increasing capacity, less orders will need to be
refused, increasing customer satisfaction
Recommendations and Justification for Decision
Kristen and her roommate are attempting to create a new business with the
potential to expand in both their future careers as students and even after
graduation. The possibilities in terms of how and where they run this business
are numerous. Since this is a new venture, Kristen must be well prepared and
have a solid plan that includes a process flow that is perfected down to the
minute due to the number of current constraints. With this in mind, and after
extensive analysis, it is recommended that all orders be standardized to one
dozen, with rush deliveries limited to the first batch of the night while using
existing equipment available. Kristen should continue to maintain her
working relationship with her roommate in order to run the business out of
their apartment using one oven, one mixer and two baking trays. This gives
the duo a maximum capacity of 22 dozen cookies in a four hour time period.

This entire business model relies on efficient order placement systems as

well as labor efficiency. Demand management and tight production schedules
must coexist in harmony in order for this business to thrive. Limiting orders to
one dozen and allowing for advanced reservations would create a moderated
work flow and allow for the Kristin and her roommate to plan ahead and know
the upcoming schedule. Order size limitation also reduces the likelihood of
needing to refuse orders, which would be bad for customer satisfaction. This
is also why rush deliveries should be limited to the first batch of the night.
Standardization of this process creates consistency that the business and the
customer can rely on and does not jeopardize quality and service.

This is only a starting point for Kristen and her roommate. It is important to
determine if there is in fact a demand for her product and services. If they
find that the demand is high, there is room for growth in some of the other
options presented in this analysis. Kristen can also explore the options of pre-
made dough and extra staff to increase capacity and delivery speeds.
However, if the investment in extra space and equipment is made
prematurely before a solid customer base is built, Kristen may not be able to
maintain her quality, low costs and flexibility which are all important in her
core competencies considerations.