Executive Shirt Company.doc

OPERATIONS MANAGEMENT EXECUTIVE SHIRT COMPANY CASE

PGP1 – Section A Group 13 Manohar Vankadara Darshan Karkera Sukvinder Singh Sunil Kumar A Touseefullah Siddiqui

Q.1) Compute the following quantities for the current production process as well as for Mike’s and Ike’s plans, assuming the plans are implemented as described in the case. Solution: Current batch processing Sales for the Executive Shirt Company are constituted of only a few basic styles and colours. Hence the company has a limited number of varieties to produce. So, it has large batches of each kind of shirt (size and color). It has only one cutting machine, which is computer-controlled and can cut up to 60 layers of cloth at the same time. Also up to 8 patterns can be cut simultaneously. The cutting process by the machine takes 30 minutes irrespective of the number of patterns and number of layers. But, the set up time is quite significant. It takes 1.5 minutes to roll out a layer of cloth and so for 60 layers; it takes 90 minutes setup time. The machine is being operated by 4 operators and the company is using its maximum capacity, i.e. 60 layers and 8 patterns at a time. So, 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 per shirt Number of workers = 4

Operation 1. Cutting 2. Make collar 3. Make cuffs 4. Make sleeves 5. Make front 6. Make back 7. Join shoulders 8. Attach collar 9. Attach sleeves 10. Stitch down sleeves 11. Sew side seam 12. Attach cuffs 13. Hem bottom

Regular Shirts Labor Content (minutes per shirt) 0.25 3.9 2 0.65 2.5 1.7 0.66 1.65 1.55

Number of worker s 4 8 4 2 6 4 2 4 4

Time taken per shirt (minutes ) 0.06 0.49 0.50 0.33 0.42 0.43 0.33 0.41 0.39

Time taken per batch (minutes) 3.75 29.25 30 19.5 25 25.5 19.8 24.75 23.25

0.65 1.8 1.55 1.7

2 4 4 4

0.33 0.45 0.39 0.43

19.5 27 23.25 25.5

14. Inspect 15. Iron

1.5 1.95

4 4

0.38 0.49

22.5 29.25

15. Fold, package

1.75

4

0.44

26.25

25.76

64

6.27

374.05

Total

Thus, the direct labor content (min. /shirt) = 25.76 Thus we see that the maximum time taken by a process in 30 min / labor / 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 Now we can apply Little’s Law to calculate the throughput time which is equal to the manufacturing lead time in this case. By Little’s Law, Throughput time = Work-in-process / Throughput rate = Work-in-process * Cycle time = 11760 * 0.5 = 5880 minutes Since production goes on for 8 hrs per day, manufacturing lead time = 5880 / (8 * 60) = 12.25 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. 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. So, the capacity utilization = (800 / 960) * 100 = 83.33% The actual labor utilized = Number of shirts produced * Direct labor content = 800 * 25.76

= 20608 minutes The available labor for utilization = Total number of workers * Hours per day * 60 = 64 * 8 * 60 = 30720 minutes Therefore, the direct labor utilization = (20608 / 30720) * 100 = 67.08%

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

Mike’s Plan 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 labor 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 / labor / 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 Now we can apply Little’s Law to calculate the throughput time which is equal to the manufacturing lead time in this case. By Little’s Law, Throughput time = Work-in-process / Throughput rate = Work-inprocess * Cycle time = 1980 * 0.5

= 990 minutes Since production goes on for 8 hrs per day, manufacturing lead time = 990 / (8 * 60) = 2.06 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 labor content, we have to find out the direct labor content values for sewing and cutting separately. For sewing operations, the DLC = 25.51 minutes/shirt For the cutting operation, since both the new and old machines are used, the weighted average of the individual DLCs are considered DLC for cutting = (No of custom-made shirts * Time taken for each custom-made shirt + No of regular shirts * Time taken for each regular shirt) / Total no of shirts = (100 * 0.5 + 800 * 0.25) / 900 = 0.28 minutes Therefore, total direct labor content = 25.51 + 0.28 = 25.79 minutes The actual labor utilized = Number of shirts produced * Direct labor content = 900 * 25.79 = 23211 minutes The available labor for utilization = Total number of workers * Hours per day * 60 = 65 * 8 * 60 = 31200 minutes Therefore, the direct labor utilization = (23211 / 31200) * 100 = 74.39%

Direct labor cost ($/shirt) =

= (65 * 8 * 6) / 900 = 3.47

Ike’s Plan For the regular shirts, the direct labor content will be the same as in the current process as here the new cutting machine is kept separate from the regular shirt manufacturing process. Therefore, the direct labor content = 25.76 minutes/shirt for regular shirts Here, however the number of workers in each process is reduced by one. Therefore, the cycle time may change.

Operation 1. Cutting 2. Make collar 3. Make cuffs 4. Make sleeves 5. Make front 6. Make back 7. Join shoulders 8. Attach collar 9. Attach sleeves 10. Stitch down sleeves 11. Sew side seam 12. Attach cuffs 13. Hem bottom 14. Inspect 15. Iron 15. Fold, package Total

Regular Shirts Labor Content (minutes per shirt) 0.25

Numbe r of worker s 4

Time taken per shirt (minute s) 0.06

3.9 2 0.65 2.5 1.7 0.66 1.65 1.55

7 3 1 5 3 1 3 3

0.56 0.67 0.65 0.5 0.57 0.66 0.55 0.52

Time taken per batch (minutes ) 3.75 33.4 3 40 39 30 34 39.6 33 31

0.65 1.8 1.55 1.7 1.5 1.95 1.75 25.76

1 3 3 3 3 3 3 49

0.65 0.6 0.52 0.57 0.5 0.65 0.58 8.23

39 36 31 34 30 39 35 492.78

Therefore, the maximum cycle time = 0.67 minutes Similar to the previous plans, the work-in-process inventory = (16 + 108 + 9 + 9 + 9) * 60 = 9060 shirts

Similar to the other plans, we can calculate the manufacturing lead time = (9060 * 0.67) / (8 * 60) = 12. 58 days Production capacity = 480 minutes / 0.67 minutes/shirt = 720 shirts Actual production of regular shirts = 800 Therefore, capacity utilization = (800 / 720) * 100 = 111.11% Direct labor utilization = (800 * 25.76) / (49 * 8 * 60) = 20608 / 23520 = 0.8762 For calculating the direct labor cost, since there is overutilization of capacity, we need to consider the overtime cost also. Overtime = 1.1111 * 8 – 8 = 0.8888 hours/day Normal time = 8 hours/day Therefore, total labor cost per day = 0.8888 * 9 + 8 * 6 The direct labor cost/shirt = (0.8888 * 9 + 8 * 6) / 800 = $ 3.43 For the custom-made shirts, the work-in-process inventory = Inventory in cutting + inventory in processing = 5 + 15 * 3 = 50 shirts Since a single shirt is processed at a time by a single worker, the cycle time is the maximum of all the individual regular shirt labor content = 3.9 minutes / shirt Manufacturing lead time = (50 * 3.9) / (8 * 60) = 0.41 days Production capacity = (8 * 60) / 3.9 = 123 shirts / day Capacity utilization = (100 / 123) * 100 = 81.3% Direct labor content = Labor content for cutting + labor content for processing = 0.5 + 25.51 = 26.01 minutes/shirt Direct labor utilization = (100 * 26.01) / (16 * 8 * 60) = 2601 / 7680 = 0.3387 Direct labor cost / shirt = (16 * 8 * 6) / 100 = $7.68 The final outcomes of the analysis are shown in the table below. Current Process Regular Shirts

Mike's Plan Regular Custom Shirts

Ike's Plan & Regular Shirts

Custom shirts

Actual Cycle Time (min./shirt) Manufacturing Lead Time (days) WIP Inventory (shirts) Production Capacity (shirts/day) Capacity Utilization(%) Direct Labor Content(min/shirt ) Direct Labor Utilization(%) Direct Labor Cost ($/shirt)

0.5

0.5

0.67

3.9

12.25

2.06

12.58

0.41

11760

1980

9060

50

960

960

720

123

83.33

93.75

111.11

81.25

25.76

25.79

25.76

26.01

67.08

74.39

87.62

33.87

3.84

3.47

3.43

7.68

Q.2) Compare the two plans, in terms of both regular shirt production and custom-shirt production. Based on your analysis, what is your recommendation for Dwight Collier? Mike’s process of production has the following properties: It uses a uniform production method for both regular as well as custom-shirt production. Cycle time of production remains same as initial value of 0.5. Manufacturing Lead time has reduced to 142 Min. as the batch size has been reduced to 5 from 60. Capacity utilization has increased from 83.33% to 93.75%. Direct labor utilization has increased and the cost has reduced to $3.47 per shirt. Ike’s process of production has the following properties: For the regular shirt production, cycle time has increased and also the lead time. Capacity utilization has increased beyond 100% as a result of which workers now have to work overtime. Direct labor utilization has also increased and the cost of production per shirt has gone down. For the custom shirt production, cycle time has increased; direct labor utilization has reduced drastically. Cost of production of these shirts has more than doubled, when compared to regular shirt cost. Despite all these, Ike’s production process has reduced the Lead time for custom shirts. With the knowledge about these variables, we can infer the following: Mike’s solution provides a cost effective way of producing custom-shirts which are also delivered in a reasonable time frame. Due to small batch size of 5, work in

progress inventory has reduced from the standard value. This shows that the time spend by raw material in the production process has also reduced. His process of production is efficient as it allows better direct labor utilization. Capacity utilization has also increased and hence the efficiency of production process has also increased. Mike’s solution has one drawback that it treats the production of regular and custom-shirts as same. This results in slow delivery of these shirts when compared to Ike’s way of production. Ike’s solution segregates the production process for regular and custom-shirts. Due to this there is no mix between these two. Custom-shirt production process has been decoupled from the regular process production. This leads to less complexity. There might be a possibility that skill set required to produce custom shirt might be high when compared to standard shirt production. Workers with higher skill set can work on separate production line. Low lead time allows the company to cater to the customers at earliest time possible. This leads to more customer satisfaction. But the costs of production of these shirts have doubled. This method would be feasible only when customers are impatient to get the shirt produced in least time possible and they are willing to pay more prices. Considering all the constraints and choices available, Mike’s production method can be used when the customer are averse to paying double the standard amount for custom shirt. Lead time is also high, so the customer will have to wait for a longer time. Ike’s production method can be used when customers are impatient and are willing to pay double the original price.