Executive OM – II

Shirt ASSIGNMENT
Company ANKUR GUPTA
CASE PGP/05/056
ANALYSIS
 PROBLEM STATEMENT

Executive Shirt Company, Inc. is well-known for its high-quality,

competitively-priced men’s shirts. But a recent dip in the sales has
led the company to think on alternatives.
Customers currently had a problem with this market because of
higher prices and long delivery times of up to 6 weeks. If these
factors were addressed ESC had the opportunity to tap into highly
lucrative market where customers are willing to pay at least 75%
more than standard shirts.
Based on the current market trend the General Manager Dwight
Collier has decided to go for custom-sized shirts along with the
current production of standard-sized shirts.
PROCESS
CALCULATIONS
 PROCESS
CALCULATIONS
Total number of shirts cut in one run = 60*8 = 480
Total time taken by one run = setup time + runtime = 90 + 30 = 120 minutes
Regular shirts labor content (minutes per shirt) for cutting = 120 / 480 =
0.25 min / shirt
Number of workers = 4

Thus, the direct labour content (min. /shirt) = 25.76

Thus we see that the maximum time taken by a process in 30 min /
labour / batch, which forms the bottleneck and represents the cycle time.
The cycle time / shirt = 30 / 60 = 0.5 min / shirt.
The work-in-process inventory = Total number of batches in all
operations * Batch size
= (16 + 144 + 12 + 12 + 12) * 60
= 196 * 60 = 11760 shirts
In, 8 hours a day, the company can produce 60 * 8 * (1/0.5) = 960 shirts,
which is the current production capacity. But it needs to produce only
800 shirts.
 PROCESS
CALCULATIONS
Manufacturing lead time = 11760/800

= 14.7 days

Total number of shirts produced per month is 16,000. The company works for 20 days a month.

So, the output per day = 16000 / 20 = 800 shirts.

So, the capacity utilization = (800 / 960) * 100 = 83.33%

The actual labour utilized = Number of shirts produced * Direct labour content

= 800 * 26.51

= 20608 minutes

The available labour for utilization = Total number of workers * Hours per day * 60

= 64 * 8 * 60

= 30720 minutes

Therefore, the direct labour utilization = (21208 / 30720) * 100 = 69%

Direct labour cost ($/shirt) = (Total No. of workers * Hours per day * Hourly wages)/No. of shirts
produced

= (64 * 8 * 6) / 800 = 3.84 $/shirt

 MIKE’S PLAN

Mike proposes a plan where both custom and standard shirts are processed together. To reduce the
lead time, he proposes to reduce the batch from sixty to five shirts. He also plans to increase the WIP
to six batches per worker from the current three. The process flow for this plan is same only an extra
cutting machine is added for the cutting process.

In this plan, the new “low-ply” laser cutting machine would take 2.5 minutes to produce 5 shirts. One
additional worker needs to be hired to operate this machine.

Therefore, the regular shirts labour content = 2.5 / 5 = 0.5 minutes.

The time taken per shirt = 0.5 minutes

Since this is the same as the maximum time taken for a single sewing process causing the bottleneck
(make cuffs), the cycle time / shirt will remain equal to 0.5 minutes

Here the time taken is 2.5 min / labour / batch, which forms the bottleneck and represents the cycle
time. The cycle time / shirt = 2.5 / 5 = 0.5 min / shirt.

We now proceed to compute the operations metrics for the current process.

The work-in-process inventory = Total number of batches in all operations * Batch size

= (36 + 288 + 24 + 24 + 24) * 5

= 396 * 5 = 1980 shirts

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MIKE’S PLAN

Throughput time = Work-in-process / Throughput rate = Work-in-process * Cycle time

= 1980 * 0.533

= 1055.34 minutes

Since production goes on for 8 hrs per day, manufacturing lead time = 1055.34 / (8 * 60)

= 2.1986 days

Total number of shirts produced per month is 16000 + 2000 = 18000. The company works for 20
days a month.

So, the output per day = 18000 / 20 = 900 shirts.

In, 8 hours a day, the company can produce 60 * 8 * (1/0.5) = 960 shirts, which is the current
production capacity. But it needs to produce only 900 shirts.

So, the capacity utilization = (900 / 960) * 100 = 93.75%

For calculating the direct labour content, we have to find out the direct labour content values for
sewing and cutting separately.

the DLC = 25.51+(0.25*4)+(0.5*1) minutes/shirt = 27.01 minute/shirt

Ike’s plan
Remove 15 workers from regular shirt production and create a separate
assembly line
 Ike’s plan
Therefore, the maximum cycle time = 0.67 minutes
the work-in-process inventory = (16 + 108 + 9 + 9 + 9) * 60
= 9060 shirts

Production capacity = 480 minutes / 0.67 minutes/shirt = 720 shirts

Actual production of regular shirts = 800
Therefore, capacity utilization = (800 / 720) * 100 = 111.11%
MLT = 9060/800
= 11.33 days

DLC = 0.25*4 + 25.51

= 26.51 min/shirt
Direct Labor Utilization = 26.51*800/(49*8*60*1.11)= 81.23 %

Money paid = 49*6$*8 + 49*9$*53.33/60 = 2743.9 hours

Direct labor cost = 2743.9/800 = 3.43$/shirt
Cost comparison

Cost comparison from

both tables show that
profit from Mike’s plan is
$4.08 per shirt more than
Ike’s plan
Thank you
Thank
You