Question 1:

Proce Process Name ss No. 0 1 2 3 4 5 6 7 Cutting Make Collar Make Cuffs Make Sleeves Make Front Make Back Join Shoulders Attach Collar

Process Time (min)

Proces Process Name s No. 8 Attach Sleeves Stitch down Sleeves Sew side seam Attach cuffs Hem bottom Inspect Iron Fold, Package

Process Time (min) 23.25 19.50 27.00 23.25 25.50 22.50 29.25 26.25

29.25 30.00 19.50 25.00 25.50 19.80 24.75 9 10 11 12 13 14 15

Actual Cycle Time: The cycle time for the process will be the cycle time for the bottleneck stage. In case of existing process and Mikes plan, the bottleneck process is Operation 2 (Cuff Making stage, as given in Exhibit 3) with cycle time of 0.5 minutes. In case of Ikes plan, one worker is removed from each stage of regular shirt production. In this case also, Operation 2 will be bottleneck. Operation 2 takes 2 min per shirt, therefore for a batch of 60 shirts the time taken will be 120 minutes. However, 3 workers are working in parallel, thus a batch will be produced every 40 minutes. Therefore the cycle time will be 0.67 minutes (40/60). For custom shirts in case of Ikes plan, since one worker is working on each stage, the bottleneck process will be operation 1 (as given in Exhibit 3) and the cycle time will be 3.9 minutes. Manufacturing Lead Time: We have assumed that the processes are carried out in series. Therefore the lead time for each batch will be the summation of the

time taken at each stage. As shown in the Table 1, the lead time for one batch of 60 shirts in case of current process will be 590 minutes. In case of Mikes plan, the lead time for one batch of 5 shirts will be 68.4 minutes. In Ikes plan for regular shirt, the lead time will be 644 minutes for a batch size of 60 shirts and for the custom shirts will have a lead time of 130.05 minutes for a batch of 5 shirts. WIP Inventory: As given in Exhibit 3, total average number of batches in WIP for the current case is 196. Thus the total number of shirts in WIP will be 196*60 or 11,760 shirts. In case of Mikes plan, the total average number of batches in WIP is 396. The batch size in case of Mikes plan is 5 shirts. Therefore, the total number of shirts in WIP will be 396*5 or 1,980 shirts. In case of Ikes plan, total average number of batches in WIP for regular shirts is 151. The batch size is 60 and therefore, the total number of shirts in WIP is 151*60 or 9,060 shirts. It is also mentioned in the case that for custom shirts, the WIP is 50 shirts. Production Capacity: From the cycle time and time available for operation of each process plan, the production capacity can be easily calculated. The total time for which the plant is operated everyday is 8 hours or 480 minutes. In case of current process and Mikes plan, the cycle time is 0.5 minutes, thus the production capacity is 480/0.5 or 960 shirts per day. Similarly, for Ikes plan, the production capacity for the regular shirts will be 480/0.67 or 720 shirts per day. In case of custom shirts the production capacity will be 480/3.9 or 123 shirts per day. Capacity Utilization = (Actual Output)/(Production Capacity) Current Process: Total production capacity = 960 shirts/day Actual Production = 16000 shirts per month / 20 days = 800 shirts per day Capacity Utilization = 800/960 = 83.33 % Mikes Plan: Total production capacity = 960 shirts/day Actual Production = (16000 shirts per month + 2000 customized shirts) per 20 days = 900 shirts per day Capacity Utilization = 900/960 = 93.75 %

Ikes Plan for Regular Shirts: Total production capacity = 720 shirts/day Actual Production = 16000 shirts per month / 20 days = 800 shirts per day Capacity Utilization = 800/720 = 111.11 % Ikes Plan for Custom Shirts: Total production capacity = 123.07 shirts/day Actual Production = 2000 shirts per month / 20 days = 100 shirts per day Capacity Utilization = 100/123.07 = 81.25% Direct Labor Content = [(Labor Time for operation 1-12) + (Cutting Time * no. of lab or dep loy ed) ]/ (no. of shirts) Current Process: Direct Labor Content (Min. per shirt) = 25.51 + 4 * 120 / (8 * 60) = 26.51 Min. per shirt Mikes Plan: Direct Labor Content (Min. per shirt) = 25.51 + (1*16000/18000 + 0.5 * 2000/ 18000) = 26.45 Min. per shirt Ikes Plan for Regular Shirts: Direct Labor Content (Min. per shirt) = 25.51 + 4 * 120 / (8 * 60) = 26.51 Min. per shirt Ikes Plan for Custom Shirts: Direct Labor Content (Min. per shirt) = 25.51 + 2.5 / 5 = 26.01 min per shirt

Direct Labor Utilization = (Direct Labor content *Actual Output)/(Total no. of workers * time per day) Current Process: Direct Labor Utilization = (26.51 * 800) / (64 * 8 * 60) = 69 % Mikes Plan: Direct Labor Utilization = (26.45 * 900) / (65 * 8 * 60) = 76.3 % Ikes Plan for Regular Shirts: Direct Labor Utilization = (26.01 * 100) / (16 * (80/9 )* 60) = 81.15 % Ikes Plan for Custom Shirts: Direct Labor Utilization = (26.01 * 100) / (16 * 8 * 60) = 33.87 % Direct Labor Cost = (Total workers * total time per day * labor cost)/ (Actual Output) Current Process: Direct Labor Cost ($ per shirt)= (64 * 8 *$6)/ 800 = $ 3.84 per shirt Mikes Plan: Direct Labor Cost ($ per shirt)= (65 * 8 *$6)/ 900 = $ 3.47 per shirt Ikes Plan for Regular Shirts: Direct Labor Cost ($ per shirt)= ((49 * 8 *$6)+(49 * (8/9) * $9))/ 800 = $ 3.43 per shirt Ikes Plan for Custom Shirts: Direct Labor Cost ($ per shirt)= (16 * 8 *$6)/ 100 = $ 7.68 per shirt

Answer 2

Study show that the current utilization of the plant machinery is only 83.33% and direct labour utilization is 69.03%. So there is a big scope of improvement in the utilization of both resources. Mike has done this analysis. He has proposed the better utilization of the existing resources with the minimal changes. The plan suggests merging of two products in the same line. Now since the company is trying to introduce the new product in the market, which is an experiment for the initial period. Making both the products in the same line will avoiding extra cost of the rearrangement and hence if the product does not do well in the market company will not incur many losses. Mikes option has reduced the batch size to a very low value (5) as compared to earlier lot size (60). So from the calculation it is clear that the total manufacturing lead time for this option is much lower (69 mins) than the other two. This is valid for both types of shirts -the current regular shirts & the new customised shirts. This is very helpful for the overall strategy of the company to provide custom made shirts in least possible time so as to capture more customers. The direct labour cost of manufacturing from this option is much lower for custom made shirt ($3.47) as compared to the Ikes option ($7.69). This again go with the overall strategy of the company to produce the shirts at lower cost so as to maximize profit. Here, since the utilization of the resources is done in a more effective way, the Direct labour cost for regular shirts have also come down from $3.84 to $ 3.46. This is going to earn more profit for the company in the regular business also. The reduction of lot size has also reduced the work in progress to a great extent. This will help the company to reduce their fixed inventory cost. The option also has the operational ease, where no separate flow of material is to be defined for the custom made shirts. This problem is very much prevalent in Ikes option. He is proposing a new line for which a separate flow of raw material and finished goods is to be defined. His option will also have a high rearrangement cost of equipments. Also a separate space is required for the relocation of the machinery which can be better used for other purposes. Ikes option has a very big problem to use overtime to complete the target production of 800 regular shirts per day. This will lead to a increased production cost of the regular shirts and hence to the regular profit of the business. The option proposed by Ike is best in case the customised shirts business picks up. The company will have a ready set of equipments which at present are underutilized but can be properly utilised once the market picks up. The ramping-up of the production will be much easier in this case.

In Mikes option, since the batches of 60 which were there in the regular production of the company are broken in smaller batches of 5, this has lead to the requirement of high buffer after the cutting process. This may require additional investment. So it seems that for the present given conditions Mikes option can work better, but if company foresee a good market success in near future company can also think of going with the Ikes option.