Executive Shirt Company, Inc.

Case write up

Group 3, Section-F
Nishant Gupta (1611412)
Nikita Agrawal (1611411)
Bernard Eugine (1611388)
Kabilan P (1611396)
Pranjal Prateek (1611416)

Executive Shirt Company, Inc.

Group 3

Introduction:
In this case, we have made the following assumptions:

The process flow would be as mentioned in the process flow diagram below.
The material handlers account for indirect labour in the process, as they are not
directly involved in the production, but facilitate it.

The process flow for the production line for standard shirts is as follows:

Case Problem: To study two options given by Mike and Ike, in order to determine the best
way to produce 16,000 standard shirts and 2,000 custom shirts, given the constraint of at most
5 days manufacturing lead time for custom shirts.
Part 1: Calculation of quantities for current production and proposed plans (Refer to
appendix for detailed calculations)
Summary table:

Metrics
Actual Cycle time (min./shirts)
Manufacturing Lead Time in
days (Actual)
WIP Inventory (shirts)
Production Capacity
(shirts/day)
Capacity Utilization
Direct Labour Content

Current
Process
Standard
Shirts
0.50

Standard &
Custom Shirts
0.50

Standard
Shirts
0.67

Custom
Shirts
3.9

12.25

2.06

12.58

0.41

11,760

1,980

9,060

50

960

960

720

123

83.33%
25.76

93.75%
25.79

111.11%
25.76

81.30%
26.01

Mike's Plan

Ike's Plan

Executive Shirt Company, Inc.

(min./shirt)
Direct Labour Utilization
Direct Labour Cost ($/Shirt)

Item
Raw Material
Wholesale
Price
Retail Price

Group 3

67.08%
$3.84

74.39%
$3.47

Cost/Unit
(Standard
Shirt)
$7.00

87.62%
$3.43

33.87%
$7.68

Cost/Unit (Custom
Shirt)
$7.70

$25.00

$35.00

$50.00

$70.00

Cost Analysis

#Units
Raw Material Cost
Direct Labour
Cost
Indirect Labour
Cost
Other Indirect
Cost
Total Cost
Wholesale
Revenue
Retail Revenue
Profits (Selling to
Wholesaler)

Standard

Mike's
Plan

16000
$1,12,000

18000
$1,27,400

Ike's Plan
(Standard
Shirts)
16000
$1,12,000

$61,440

$62,400

$54,872

$15,360

$16,533

$18,600

$16,533

$2,067

$72,000

$81,000

$72,000

$9,000

$1,49,973

$1,62,000

$1,43,405

$26,427

$4,00,000

$4,70,000

$4,00,000

$70,000

$8,00,000

$9,40,000

$8,00,000

$1,40,000

$2,50,027

$3,08,000

$2,56,595

$43,573

Ike's Plan
(Custom Shirts)
2000
$15,400

Part 2: Choice of Plan- Mike vs. Ike

Below we would analyse the differences in the different factors by looking at different
variables to arrive at a decision. For detailed calculations, kindly refer to the appendix.
1. Profitability
The profitability of Mikes proposal is $7832 more than Ike which can be seen from
the cost analysis table. This is a direct result of cost reduction in Mikes method as
compared to Ike as he is using the existing production line and increased capacity
utilization to increase efficiency of the overall process.
2. Resource Utilization
Under Mikes plan, the capacity utilization for standard shirts increased from
83.33% to 93.75%. Further, the utilization for custom shirts was also high at 93.75%.
Additionally, the utilization of labour also improved to 74.39%

Executive Shirt Company, Inc.

Group 3

Under Ikes plan, there is over-utilization of capacity for the standard shirts with
111.11% utilization, while there is under-utilization of capacity for the custom shirts
(81.3%). Further, the labour utilization is very low for custom shirts under this plan
(33.87%). This means that, while we would give over-time to the workers working on
the standard shirt line due to over utilization, we would lose money due to idle time
with the workers working on the custom shirts line.
3. Manufacturing Lead Time
From the table given in the first part, we observe that under Mikes plan, the
manufacturing lead time is 2.06 days for both custom shirts and standard shirts.
However, under Ikes plan, the lead time for standard shirts is 12.58 days, while that
for custom shirts is 0.41 days.
According to Dwight Collier, the custom shirts should have a lead time of less than 5
days. As such, the both the plans satisfy the given constraint. Executive Shirts does
not benefit from a lower lead time as they charge the same premium irrespective of
the time. Hence, the Company should be indifferent between either plans on this
variable.
Conclusion:
For Dwights current production plan (2000 custom shirts and 16000 Standard shirts), Mikes
idea is much better than Ikes as:
1. There is better capacity utilization and labour utilization without the need to pay
over time
2. Higher profitability in Mikes plan, after accounting for all direct and indirect
costs associated with both plans
3. Substantially lower lead time for standard shirts in Mikes plan as compared to
Ikes plan. This is partially offset by higher lead time for custom shirts
Parameter
Profitability (in dollars)
Capacity utilization
Labour Utilization
Manufacturing Lead time (in
days)

Mike
Standard
308000
93.75%
74.39%
2.06

Ike
Custom
93.75%
74.39%
2.06

Standard
300168
111.11%
87.62%
12.58

Custom
81.30%
33.87%
0.41

Executive Shirt Company, Inc.

S.
N
o.

Operati
ons

Standa
rd
shirts
labour
conten
t
(mins/
shirt)

Make
collar

3.9

Make
cuffs

3
4
5
6
7
8
9
10
11
12
13
14
15

Make
sleeves
Make
front
Make
back
Joint
shoulder
s
Attach
collars
Attach
sleeves
Stich
down
sleeves
Sew side
seam
Attach
cuffs
Hem
Bottom
Inspect
Iron
Fold,
Package
Total

0.65
2.5
1.7
0.66
1.65

Appendix
Existing plan:
i
Actual cycle time =
Cycle time of the
Time
No. of
bottleneck process
per
work
Cuff making process
shirt
ers
requires
maximum time in
(min)
making a shirt and so is the
bottleneck. Also the cycle
time of shirt making is
8
0.49
equal to the time for cuff
making.
0.50
Actual cycle time = 0.50
4
(Highe
mins
st)
ii
Production Capacity =
2
0.33
Total Available time/
Actual cycle time
6
0.42
Total Available time =
No. of manhours/day= 8
4
0.43
hours/day = 480 mins
/day
2
0.33
Production Capacity = 480
mins/ 0.5 mins/shirt = 960
shirts/day
4
0.41

1.55

0.65

1.8

1.55

1.7

1.5
1.95

4
4

1.75

25.51
minute
s

Group 3

Type
0.39
of
Operat
0.33
ion

Average
WIP
(number
of 60shirt
0.45 batches)
Cutting
16
Sewing
144
0.39
Inspecti
12
on
0.43
Ironing
12
0.38
Packagi
12
0.49
ng
Total
196
0.44
iii

WIP Inventory = Total

of Average work in
progress across
operations * batch

size
Batch size = 60 shirts/batch
WIP Inventory = 196 batches * 60 shirts/batch = 11760 shirts

Executive Shirt Company, Inc.

Group 3

iv Manufacturing lead time = WIP Inventory/ Production Capacity

=11760 shirts/ 960 shirts per day = 12.25
days
v Capacity Utilisation = Actual Production / Production Capacity
Actual Production = 16000 shirts/ month
Production Capacity = 960 shirts/day =960*20 working days per
month
=19200 shirts/ month
Capacity Utilisation = 16000/ 19200 = 83.33%
vi Direct labor content = Time spent on cutting per shirt + Time spent on
rest of operations (Sewing+ Inspection+ Ironing+ Packaging)
Time spent on cutting per shirt= (90 mins for rolling + 30 mins for
cutting)/60 mins * 8 hours per day= 0.25 mins
Time spent on rest of operations = 3.9 + 2 + 0.65 + 2.5 + 1.7 + 0.66
+ 1.65 + 1.55 + 0.65 + 1.8 + 1.55 + 1.7 + 1.5 + 1.95 + 1.75 = 25.51
mins
viiDirect labor content = 0.25 mins + 25.51 mins = 25.76 mins/shirt
viii
Direct labor cost = No. of direct laborers*Salary*Hours worked/ Actual
production = 64 laborers * $6 per hour * 8 hours per day/ (16000
shirts per month/ 20 working days per month) = $ 3.84/shirt
ix Direct labor Utilisation= Actual Production * Direct labor content/ (No. of
laborers* Labor time) = (16000 shirts per month/20 working days per
month) * 25.76 mins per shirt / 64 workers * 480 mins/day = 67.08%
Mikes Plan:
i Cycle time of the system (CT) = 0.5 mins (since making cuffs is still
the bottleneck in the sequential process)
ii WIP of individual shirts = No. of batches*no. of shirts per batch
= (36+288+24+24+24) *5 = 396*5 =
1980 shirts
iii MLT = CT*WIP = 0.5*1980 = 990 mins
a Now 1 working day = 8 (hours/day) or 480 (mins/day)
b Therefore, MLT in days = 990 (mins)/480 (mins/days) = 2.0625
days
iv Production Capacity of the system at continuous 100% utilization
(shirts/day) = (Total available time in a day/ CT) = 480/0.5 = 960
(shirts/day)
v) Capacity Utilization of the system = (monthly production of
shirts/production capacity at continuous 100% utilization for the
month) = (no. of standard shirts in a month + no. of customized shirts
in a month)/ (960*20) = (16000+2000)/19200 = 0.9375 = 93.75%
vi) Direct Labour Content (min/shirt) = Cutting time per shirt+ Sum of
times taken at all other stations
a New machine can cut 1 pattern of 5 layers in 2.5 minutes; So custom
cutting time = 2.5/5 = 0.5 (min/shirt);

Executive Shirt Company, Inc.

Group 3

b Total cutting time = Weighted Average of new and old cutting

machines = (16000/18000) *0.25+ (2000/18000) *0.5 = 0.278
(min/shirt)
c Therefore, Total labour time per shirt= 0.278+ 3.90+ 2 +0.65 +2.5
+1.7 +0.66 +1.65 +1.55 +0.65 +1.80 +1.55 +1.70 +1.50 +1.95
+1.75 = 25.51+ 0.28= 25.79 (min/shirt)
viiDirect Labour Utilization = Total used labour time/Total time available;
a Total used labour time = no. of shirts produced per day*direct labour
content (min/shirt) = (18000/20) * 25.79 = 23211 (min/day)
b Total time available = no. of workers*working minutes per day =
65*480 = 31200 (min/day);
c Therefore, Direct Labour Utilization = 23211/31200 = 0.7439 =
74.39%
viii
Direct Labour Cost ($/shirt) = Total labour cost per day/no. of shirts
produced per day;
a Total labour cost per day = (salary per hour) *(no. of hours) *(no. of
direct workers) = 6*8*65=$3120
b Direct Labour cost = 3120 /900 = $ 3.47 per shirt

Ikes plan:

Executive Shirt Company, Inc.

S.
N
o.

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15

Operatio
ns

Make
collar
Make
cuffs
Make
sleeves
Make front
Make back
Joint
shoulders
Attach
collars
Attach
sleeves
Stich down
sleeves
sew side
seam
Attach
cuffs
Hem
Bottom
Inspect
Iron
Fold,
Package
Total

Group 3

Custom/
Standar
d shirts
labour
content
(mins/sh
irt)

No. of
worke
rs
(Stand
ard
shirts)

No. of
worke
rs
(Custo
m
shirts)

Time/
shirt
(min)
(Stand
ard)

Time/
shirt
(min)
(Custo
m)

3.9

0.56

3.9
(Max)

0.67
(Max)

0.65

0.65

0.65

2.5
1.7

5
3

1
1

0.50
0.57

2.5
1.7

0.66

0.33

0.66

1.65

0.55

1.65

1.55

0.52

1.55

0.65

0.33

0.65

1.8

0.60

1.8

1.55

0.52

1.55

1.7

0.57

1.7

1.5
1.95

3
3

1
1

0.50
0.65

1.5
1.95

1.75

0.58

1.75

25.51
minutes

Actual cycle time = Cycle time of the bottleneck process

Standard Shirts line: Cuff making process requires maximum time
and so is the bottleneck. Also the cycle time of shirt making is equal to
the time for cuff making.
Actual cycle time = 0.67 min
Custom shirts line: The collar making process requires maximum time
and so is the bottleneck. Also the cycle time of shirt making is equal to
the time for collar making
Actual cycle time= 3.9 min
ii Production Capacity = Total Available time/ Actual cycle time
Total Available time = No. of man-hours/day = 8 hours/day = 480
minutes /day

Executive Shirt Company, Inc.

Group 3

Standard shirts line: Production Capacity = 480 mins/ 0.67 mins/

shirt = 720 shirts/day
Custom shirts line: Production Capacity = 480 mins/ 3.9 mins per
shirt = 123 shirts/day
iii WIP Inventory = Total of Average work in progress across operations *
batch size
Batch size = 60 shirts/batch
Standard shirts line: WIP Inventory = 151 batches * 60 shirts/batch =
9060 shirts
Custom shirts line: WIP Inventory = 50 shirts

Operatio
ns
Cutting
Sewing
Inspection
Ironing
Packaging
Total
v

Average
WIP
(number of
60-shirt
batches)
(Standard)
16
108
9
9
9
151
batches

Average WIP
(number of
shirts)
(Custom)
5
36
3
3
3
51 shirts

iv

Manufacturing lead
time = WIP
Inventory/
Production Capacity
Standard shirts line:
Manufacturing lead time =
9060 shirts/ 720 shirts per
day = 12.58 days
Custom shirts line:
Manufacturing lead time =
50 shirts/ 123.08 shirts
per day = 0.41 days
Capacity Utilisation = Actual

Production / Production Capacity

Standard shirts line: Actual Production = 16000 shirts/ month
Production Capacity = 720 shirts/day =720*20 working days per month
= 14400 shirts/ month
Capacity Utilisation = 16000/ 14400= 111.11%
Custom shirts line: Actual Production = 2000 shirts/ month
Production Capacity = 123.08 shirts/day =123.08*20 working days per
month
= 2460 shirts/ month
Capacity Utilisation= 2000/ 2460= 81.31%
vi Direct labor content = Time spent on cutting per shirt + Time spent on
rest of operations (Sewing+ Inspection+ Ironing+ Packaging)
Standard shirts line: Time spent on cutting per shirt= (90 mins for
rolling + 30 mins for cutting)/60 mins * 8 hours per day= 0.25 mins
Time spent on rest of operations= 3.9 + 2 + 0.65 + 2.5 + 1.7 + 0.66 +
1.65 + 1.55 + 0.65 + 1.8 + 1.55 + 1.7 + 1.5 + 1.95 + 1.75 = 25.51
mins
Direct labor content = 0.25 mins + 25.51 mins = 25.76 mins/shirt
Custom shirts line: Time spent on cutting per shirt= (2.5 mins/5 shirts
for cutting)/60 mins * 8 hours per day = 0.5 mins
Time spent on rest of operations = 25.51 mins
Direct labor content = 0.25 mins + 25.51 mins = 26.01 mins/shirt
vii Direct labor cost = No. of direct laborers*Salary*Hours worked/ Actual
production
Standard shirts line: Normal time production: (720 shirts/day)

Executive Shirt Company, Inc.

Group 3

Direct labor cost = 49 laborers * $6 per hour * 8 hours per day = $ 2352
per day
Overtime production: (80 shirts/day)
Direct labor cost = 80 Shirts * 0.67 mins/shirt /60 hrs* $9/hr *49
laborers = $ 393.96/ day
Total Direct labor cost = ($2352+$393.96)/800 shirts per day=
$3.43/shirt
Custom shirts line: Direct labor cost = 16 workers * $6 per hour * 8
hours per day/ 100 shirts per day = $ 7.68/shirt
viii Direct labor Utilisation = Actual Production * Direct labor content/ No. of
laborers* Labor time
Standard shirts line: 16000 shirts in a month/20 days a month = 800
shirts per day
Direct labor Utilisation = (800 shirts produced per day * 25.76
minutes/shirt) / ((4 workers cutting + 45 workers for other operation) *
480 hours/day) = 800*25.76/ (49*480) = 20,608 / 23,520 = 87.62%
Custom Shirts line: 2000 shirts in a month/ 20 days = 100 shirts a
day
Direct labor Utilisation = 100 shirts per day * 26.01 minutes/shirt/ 16
laborers * 480
= 100*26.01/ (16*480) = 33.87%