Assignment 1 Week 1 Home Style Cookies a Case Study 644 GM Dr Rahul D Parikh

Home-style Cookies: A Case Study

Home-style Cookies: A Case Study: Rahul Parikh BUS644: Operations Management (MAI1215B) Dr. Michael Snell April 15, 2012.

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Home-style Cookies Home-style Cookies: A Case Study: Cookie production process: The Baking Company, run by two brothers, employing fewer than 200 people, is located in a small town in New York State. The company, home-style cookies, makes a high quality of soft cookies, having no additives or preservatives, as per the orders received from the distributors. The cookie production process is called a batch processing system, in which company uses two continuous band ovens, to bake the cookies. Manufacturers, of anything from cakes to computer chips, have numerous ways of organizing production, and one of these methods is called batch production or batch processing system, in which, instead of manufacturing things singly, or by continuous production, items are manufactured in batches. A specific process for each item takes place at the same time on a batch of items, and that batch does not move onto the next stage of production or inspection until the whole batch is done (www.wisegeek.com). According to the text; “batch processing is used when a moderate value of goods or services is desired and it can handle a moderate variety of products and services” (Stevenson, 2009, p. 239). The batch processing technique includes mixing, cutting and baking, for non filled cookies, but filled cookies, requires an additional step for filling, and folding. As soon as management receives orders from distributors, production is scheduled, and process of making cookies begins. Every day, list of the cookies to be made is given at the start of the shift, to the person in charge of mixing, who checks the master list, indicating the ingredients needed for each type of cookie, and enters that information into the computer. The computer determines the amount of each ingredient needed, according to the quantity of cookies ordered. The ingredients are automatically sent to giant mixing machines, where they are mixed with proper amounts of eggs, water, and flavorings. Properly mixed ingredients are poured into a cutting machine, where it is cut diagonally into individual cookies. The cookies

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Home-style Cookies are cut diagonally rather than straight because this strategy requires less space, which in turn result is a higher level of productivity. Once they are cut they are dropped onto a conveyor belt, and transported to one of two ovens, for baking. Baked cookies that emerge from the ovens are fed onto spiral cooling racks. As the cookies come off the cooling racks, workers place them manually into boxes, taking care to remove any broken or deformed cookies in the process. The boxes are then wrapped, sealed, and labeled automatically (Stevenson, 2009). Measures to increase productivity, and faster output rate: According to Mankiw (1998, p.11), Productivity is defined as “the quantity of goods and services produced from each hour of a worker's time.” Productivity is an overall measure of the ability to produce a good or service, more specifically, productivity is the measure of how specified resources are managed to accomplish timely objectives as stated in terms of quantity and quality, thus productivity may also be defined as an index that measures output (goods and services) relative to the input (labor, materials, energy, etc.), used to produce the output (www.enotes.com). Home-style cookie has adopted two ways, to become more efficient in increasing productivity: 1) to cut the cookies diagonally, rather than round; and 2) increase in the length of each oven by 25 feet. The diagonal-cut cookies require less space, as they are able to fit more in the oven at one time, resulting in higher level of productivity. Increase in the length of oven helps the company to produce more cookies at a time, and thus results in a faster output rate, and increased productivity. Decision for not automating the packing as an obligation to community, and employees: I think that the company is making the right decision, by employing 30 women to do the boxes manually, and not automating the packing of cookies. Although automating the packing process might save some money, and increase efficiency, but owners have resisted making this change because they feel an obligation to the community, to employ women for

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Home-style Cookies manual packing, as if their labor costs are not high, thus company is showing loyalty to one’s community, and loyalty to their employees. In some respects, the company has a moral obligation towards the community, to help employ some of its locals. By giving jobs to the local people of the community, company is spending money to stimulate the local economy, and ensures that the community prospers, which is one of their prime obligations towards community. As an obligation to its employees, company is telling indirectly to the employees that they appreciate their services, and value their work. This makes the company look good in the community, by showing that it has a diverse workforce, as well as they are giving back to the community, and obligating it. In some respects, the company is obligating the community by employing locals, in the same way as GM, and Ford, employs residents of the local towns. Also, women workers on the line are responsible for removing defective cookies, which can be used in the oatmeal cookies, which in turn reduce the cost of ingredients, and save on waste disposal costs, which is an additional obligation to the community. The Baking Company is located in a small town, and employs fewer than 200 local people, so I do believe that size of the town is a factor in not automating the packing of cookies, because if the company were located in a large city, than the company might decide to utilize the automated packaging system, as the company may not feel as much a part of the community, and would probably not feel obligated to hire local women to prosper the community. Secondly in large city, they may not feel the closeness that they feel in small towns, and also may not feel morally obligated towards the upliftment of the community, and therefore may not feel as obligated to their community and employees. This is most likely to be a truth for a small town, having a specific type of industry, where local town people can work. In large city, the company would be packaging cookies for a much larger population, so they might deem it better to do automated packaging, for the sake of production rate, and cutting cost.

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Home-style Cookies I believe that size of company is a factor, because a small business might be more reluctant to utilize automated packaging, whereas larger company might deem it necessary to utilize automated packaging, in order to keep up with their costs, and productivity. Large companies might produce millions of cookies a day; hence it would not be prudent for them to hire more local women or men to have manual packing of cookies. Also small companies do not have the same influence in larger cities. Benefits to carry minimal amounts of inventories: The company’s inventory management is impeccable. The factors that cause the company to carry minimal amounts of certain inventories are the fact that the cookies have a short shelf life, due to the fact that nothing added to preserve its shelf life. Due to this fact, cookies are produced as ordered by distributors; for example, if there is a large amount of cookies ordered, more products or inventories are ordered, and more cookies are produced and vise versa. Since cookies are loaded on trucks immediately, the product is not left hanging around in storage. Since cookies are perishable goods, and if they are not consumed in a certain amount of time, they might lose their freshness, and become unsellable, thus become a sunk cost for the company. The company carries minimal amounts of certain inventories like individual cookie boxes, shipping boxes, labels, and cellophane for wrapping. For example: Labels are reordered frequently, in small batches, because FDA label requirements are subject to change, and the company does not want to get stuck with labels it can't use, and thus increase its sunk cost (Stevenson, 2009). Their silos are also filled every few weeks to make sure that ingredients may not get spoiled. The cookies are also baked in sequence so they do not have to clean the machines every time a different cookie is made. They also have minimal amounts of scrap. For example, if a batch

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Home-style Cookies is mixed improperly, it is sold for dog food. Broken cookies are used in the oatmeal cookies (Stevenson, 2009). The benefit of this policy is that the company is not wasteful. While it holds true that there are no preservatives added to the cookies, to reserve its shelf life, the company should not face the issue of cookies going bad because they make cookies at the rate that they are ordered. This eliminates or minimizes the chances of cookies going to waste, and the company losing money. Secondly, this policy reduces the cost of ingredients, and saves on waste disposal costs. As the company becomes more efficient at managing its inventory, it will decrease the amount of sunk costs it incurs, and will be able to budget, and allocate its resources better, to further increase productivity. Consumer’s consideration in judging the quality of cookies: As a consumer the things that I consider in judging the quality of cookies that I buy at a supermarket is taste, flavor, price, popularity, brand, availability, and ingredients. I normally don’t like to buy cookies that are low fat because in my opinion, they taste nasty. I have had several bad experiences with low fat foods. Price helps in judging the quality because in my experience those foods that are really cheap tend to taste worse. I’m a firm believer in the saying, “you get what you pay for,” therefore if you pay a small amount for the food, the quality is worse. While I believe this, I also try to stick to a price that is reasonable. I definitely judge on taste, and flavor, when I try a product. If the package says the cookie is soft and chewy, then I expect it to be soft and chewy. I would want the cookie to be as fresh tasting as possible, and just be accurate in its item description.

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Home-style Cookies Advantages and limitations of not using preservatives in cookies: The company markets its cookies as "good food" with no additives or preservatives (Stevenson, 2009). The advantages that stem from the company’s not using preservatives in cookies are the idea that the cookies are more natural, soft, less sweet, and healthier, which appeals to a health-conscious segment of the market. The limitation is that the cookies have short shelf life. Company’s strategy: The company’s strategy is to produce preservative-free, healthy, soft, great tasting, and high quality of the cookies, which enables the company to develop a strong market niche for its product for health-conscious segment of the market. The fact that the company makes the cookies upon demand, speaks for itself; the cookies are specially ordered, and made upon request, and therefore are fresh and personalized. The batch processing system ensures that cookies are not being wasted, are made on a needed basis, and there is a high level of productivity. Company’s strategy to keep local employs, rather than utilizing automated packaging, obligates their community as well as employees, and thereby helps them to build consumer’s loyalty. Company is efficient in utilizing their resources, and reducing overhead For example: recycling the heat from the ovens. It is clear that by decreasing overhead, effectively managing their inventory, and by sticking to what they do best, they have a great recipe for success, and in a long run, their strategy will grant them a long term success.

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Home-style Cookies References: Anonymous, (n.d.), Productivity Concepts and Measures; Retrieved April 15, 2012, from http://www.enotes.com/productivity-concepts-measures-reference/productivityconcepts-measures Anonymous, (n.d.), What is Batch Production? Retrieved April 15, 2012, from http://www.wisegeek.com/what-is-batch-production.htm Mankiw, N.G., (1998), Principals of Microeconomics; Business and Economics; Retrieved April 13, 2012, from http://books.google.com/books?id=xoztFMavGCcC&printsec=frontcover&source=gb s_ge_summary_r&cad=0#v=onepage&q&f=false Stevenson, W.J. (2009). Operations management (10th ed). New York: McGraw Hill/Irwin. ISBN: 9780077284091.

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