Kristen’s Cookie Company

Case Study and Analysis

Forecasting and Operations Management
Saint Mary’s College of California
Executive MBA Program

Jessica Marie – www.jessicamariemba.com

Kristen’s Cookie Company

Agenda
Introduction and Preliminary Modeling
Key Questions and Problems for Further Thought
Recommendations for Improvement
Q & A Session and Discussion
Kristen’s Cookie Company

Introduction
Kristen’s Cookie Company Mission Statement:
Born from a hunger to feed the student body and the craving brain…

This presentation will evaluate the preliminary design for the

Company’s production process to make policy and pricing decisions,
equipment needed, how many orders can be accepted, and whether
the business can be profitable.
Kristen’s Cookie Company

The Service Triangle

The
Service
Strategy

The
Customer

The The
Systems People
Kristen’s Cookie Company

Process Flow Chart

Order and
Reply Cooling
(Roommate) Hold
5 minutes
0 minutes

Wash and
Baking Pack/Colle
Mix
(kristen)
ct Money
6 minutes (Oven) 3 minutes
9
minute
s
Spooning Heat Oven
2 1 minutes
minutes
Kristen’s Cookie Company

Key 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 minute 08:00 09:00
Bake Oven 9 minutes 09:00 18:00
Remove Cookies Roommate 0 minutes 18:00 18:00
Cool Tray 5 minutes 18:00 23:00
Pack/Collect $$ Roommate 3 minutes 23:00 26:00
 Kristen’s Cookie Company

Key Question 2
How many orders can you fill in a night, assuming you are
open four hours each night?
Task 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36

Order Entry 1

Wash and Mix 1

Spooning

Start Oven 1

Baking Time 1

Remove from Oven 1

Cooling Time 1

Pack and Collect Money 1

Order Entry 2

Wash and Mix 2

Fill Tray 2

Start Oven 2

Baking Time 2

Remove from Oven 2

Cooling Time 2

Pack and Collect Money 2

Kristen’s Cookie Company
Group 2

Order Size Order Completion Time

1 dozen 26 minutes • Operating time = 240 minutes (4 hours)
2 dozen 36 minutes
3 dozen 46 minutes
4 dozen 56 minutes • Solution
5 dozen 66 minutes • 22 dozen cookies in 4 hours.
6 dozen 76 minutes
7 dozen 86 minutes • From the table, a formula can be
8 dozen 96 minutes generalized:
9 dozen 106 minutes
10 dozen 116 minutes
The number of minutes to
11 dozen 126 minutes produce n one-dozen batches
12 dozen 136 minutes is given by this expression:
13 dozen 146 minutes
14 dozen 156 minutes
16 + 10n<=4x60, so we get
15 dozen 166 minutes N(max) = 22.
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
Kristen’s Cookie Company

Key Question 3
How much of your own and your roommate’s
valuable time will it take to fill each order?

Kristen Roommate

Activity Cycle Time Activity Cycle Time

Heat
Wash, Mix Oven,
and 6+2=
Remove
Spoon Cookies, 1+0+3=
Pack and
Total 8 minutes Collect
Money

Total 4 minutes
Kristen’s Cookie Company

Key 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 or more dozen? If so,
how much? Will it take you any longer to fill a two-dozen order
than a one-dozen order?

All costs of ingredients and boxes for each dozen are the same. With that
said, total valuable time is 6 (wash and mix) + 2 (spooning) + 1 (set timer on
oven) + 2 (packing time) + 1 (process payment) = 12 minutes. For a two
dozen order, total time is 6 + 2 + 1 + 2 x 2 + 1 = 17 minutes. For a three
dozen order, total time is 6 + 2 + 1 + 2 x 3 + 1 = 22 minutes.
Kristen’s Cookie Company

Key Question 4 continued…

We can also solve this problem by calculating labor costs.

# Cookies in Minutes Cost Cost per Potential

Let’s assume $10 per hour
Batch Dozen
= $0.16667 per minute
Discount
1 dozen 12 $2.00 $2.00 0
2 dozen 17 $2.83 $1.41 $0.59
3 dozen 22 $3.66 $1.22 $0.78

Perhaps offering a 10% - 20% discount (or set dollar amount)

on orders of two dozen and above is an option.
Kristen’s Cookie Company

Key Question 4 continued…

When applying materials costs with labor costs,
we find that the cost also decreases with larger orders.
From both analyses, a discount is advised.
(10% - 20% discount or dollar amount)
Labor Cost Material Cost Potential
# Cookies in Batch Minutes Cost per per Dozen Total
Dozen Discount
$
1 dozen 12 $2.00 $2.00 0.70 $2.70 0
$
2 dozen 17 $2.83 $1.41
0.70
$2.11 $0.59
$
3 dozen 22 $3.66 $1.22 0.70 $1.92 $0.08

$0.60/dozen, ingredients
$0.10/dozen, box
Kristen’s Cookie Company

Key Question 5
How many electric mixers and baking trays will
you need?

As the charts and tables have shown, the electric mixer is idle for a
long time during the production process, so only one is needed. Because
the mixer can only contain 3 dozens of ingredients, during the whole
process, at least 3 trays are needed.

Note: We have suggested process improvements regarding equipment in

recommendation segment.
Kristen’s Cookie Company

Key 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?
Kristen’s Cookie Company

Process Flow Diagram With Two Ovens

Load & Bake

Mix & Spoon Cool Pack & Pay

Load & Bake

The speed with which you can produce cookies

is dependent upon the cycle time for baking, the bottleneck operation.
Kristen’s Cookie Company

Increasing capacity of the oven makes it so we can start a new order

every 5 minutes. New capacity is 7.5 dozen/hour (if all orders are one
dozen. 7.5 = 60/8

Throughput 6+2 1+9 5 minutes 2+1

Time = 8 minutes = 10 = 3 minutes
minutes

Hourly 7.5 Dozen 12 Dozen 12 Dozen 20 Dozen

Capacity

Cycle Time 8 minutes 5 minutes 5 minutes 3 minutes

Kristen’s Cookie Company

Problems for Further Thought: 1

What happens if you are trying to do this by
yourself without your roommate?

We must calculate the amount of time it takes to begin a

new batch of cookies with their selected ingredients, to
the time when the dozen cookies are packed into a box
and paid for.
Kristen’s Cookie Company

Problems for Further Thought: 1

Because all the tasks have to be done by Kristen alone, her time for
one dozen cookies becomes 12 minutes (8 + 4), which exceeds the
previous 10 minute cycle time for one dozen cookies. In this case,
Kristen becomes the bottleneck, rather than the baking process.

However, if the order contains two dozens of the same kind of cookie,
the washing and mixing can be done together, so her time for this
order becomes 17 minutes (6 + 2 x 2 + 2 x 1 + 2 x 2 + 1), which is less
than the previous of 20 minutes. If the order is 3 dozen, it becomes 22
minutes.
Kristen’s Cookie Company

Problems for Further Thought: 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?

As we saw in the previous gantt chart, there would be no need to

stop baking of the previous cookie. The time that the rush order
will delay is only at most 1 minute. And the previous order can be
finished on time. There is no need to offer a special rate.
Kristen’s Cookie Company

Problems for Further Thought: 3

When should you promise delivery? How can you look quickly at your
order board and tell a caller when his or her order will be ready? How
much of a safety margin for timing should you allow?

Looking at the order board will tell us when we finish and become idle.
The finish time, will be that time, plus 26 minutes it takes to finish a one
dozen order. At that time, they can promise delivery.

We suggest an 8 minute safety margin for rush orders. If we begin a wash

and mix process, then a rush order comes in, we have to stop and process
that order. The previous order would be delayed by a max of 8 minutes to
wash and mix the rush order. Time is 6 + 2 = 8 minutes.
Kristen’s Cookie Company

Problems for Further Thought: 4

What other factors should you consider at this
stage of planning your business?
Market: Is this attractive to potential customers?
Cost: How can we get cheaper materials with good quality?
Labor: Can I do this alone? Should I hire people?
Product: How can we make the cookies better?
Services: Can I provide other services, such as delivery?
Hazards: How should I handle an accident?
Laws: Am I violating any laws?
Capital: What kind of equipment will I need?
Investment: What kind of initial and/or further
investment is required?
Kristen’s Cookie Company

Problems for Further Thought: 4

FACTORS TO CONSIDER

Market: Is this attractive to potential customer

COLLEGE NIGHT STUDY

Kristen’s Cookie Company

Problems for Further Thought: 4

FACTORS TO CONSIDER

Cost: How can we get cheaper materials with good quality?

Price point: What price point are students willing to pay?

6.00 Per dozen (.50) per
cookie
**TEST IT**

Pay: What is Kristen and her roommate’s time worth?

Kristen’s Cookie Company

Problems for Further Thought: 4

FACTORS TO CONSIDER

Labor: Can I do this alone? Should I hire people?

Demand should determine the Labor force and potential

increase in equipment.
Kristen’s Cookie Company

Problems for Further Thought: 4

FACTORS TO CONSIDER

Product: How can we make the cookies better?

Services: Can I provide other services, such as delivery?
Hazards: How should I handle an accident?
Laws: Am I violating any laws?
Kristen’s Cookie Company

Problems for Further Thought: 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?

At the beginning, the cookies are unique. If we sell standard

cookies, the value added products of the company change.
- Bake cookies before receiving order.
- order-taking process needs to change, as the
customers don’t need to call/email and wait for pickup. They can
visit the apartment directly to buy the product.
- If a large sum is needed, customers can make order earlier, and
provide deposit.
Kristen’s Cookie Company

Problems for Further Thought: 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?

- Create your own cookie menu

- Freeze balled cookies.
- Cookies can be ordered by number, and pulled from a freezer
- Cookies cooked and served fresh from the menu
Kristen’s Cookie Company

Recommendations for Improvement

Increase Total Production Capacity Per Night

• Purchase or rent an additional oven.

- Increase capacity of the bottleneck.
- Increases cookie-making capacity.

• Purchase several additional baking trays.

- These items are inexpensive
- Buying more ensures they are never a
binding constraint.
Kristen’s Cookie Company

Recommendations for Improvement

continued…
Decrease Total Time Spent in Activity

• Premixing in advance
- eliminates the mixing step for these popular cookies
- work-in-process inventory would eliminate mixing step
for those cookies and thus increase capacity to 12 dozen
per hour.

• Require immediate payment

- Payment through PayPal, or similar service to eliminate
the ending “collect payment” phase.
Kristen’s Cookie Company

Thank you.