Talent DryCleaners Case

Talent Drycleaners 1

Nova Southeastern University H. Wayne Huizenga School of Business & Entrepreneurship

Assignment for Course: OPS 5095 Submitted to: Ronald Mesia Marjorie Submitted by: Joseph

Date of Submission: September 2, 2012 Title of Assignment: Talent Dry Cleaner – Case Study CERTIFICATION OF AUTHORSHIP: I certify that I am the author of this paper and that any assistance I received in its preparation is fully acknowledged and disclosed in the paper. I have also cited any sources from which I used data, ideas or words, either quoted directly or paraphrased. I also certify that this paper was prepared by me specifically for this course. Student's Signature: ____Marjorie Joseph______________

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Talent Drycleaners 2 Talent Drycleaners: Making Things Better, faster and Cheaper Executive Summary Patrick Eze the owner of Talent Drycleaners has many years of experience in the dry cleaning business. Eze’s goal is to deliver quality service, efficient delivery time, high level of responsiveness, and a variety of service with affordable prices. Eze also wants to expand his business however he lacks funds and therefore through this paper I will focus on the flow process and capacity utilization of Talent Drycleaners. Finally various operations management theories like theory of constraints and Plan-Do-Check-Act (PDCA) cycle which is used to improve process, efficiency, quality and cost. Problem statement Although Patrick Eze has many years of experience in the dry cleaning business, however he does-not have operations management knowledge. There are constraints in the process which have become bottle-necks for the entire operations. The time required to accept orders is high and in case of multiple customer flow the waiting time is very high. The profit margin is low and so expansion plans do not have adequate amount of capital to expand the business. Background With over 25 years of experience Patrick Eze knows all about the cleaning business. With a specialty in removing stains, he incorporated stain clinic in the title of his business. His motto was “If there is any stain I cannot remove, it means there is no one in this country who can” (Ojadi, 2012). Patrick wanted to deliver his services in a personalized way. Talent dry cleaners started its operations in January of 2004 with six employees, including the owner. Talent started in a small apartment which was partitioned into two sections. The smaller section was used as a reception area to greet customers. The business relied heavily on referrals for growing their client base. At the beginning, the company would distribute marketing items

Talent Drycleaners 3 such as caps and t-shirts throughout the community to spread the news about Talent Drycleaners but the lack of funds enabled him to continue to market the business. Clients revealed to Patrick that most of them were relocating to a newly developing local government area. At the same time he noticed a flood of other dry-cleaning businesses starting to open up in Anthony village. In Lagos state, the relative humidity ranged from 30 to 60 percent throughout the year. In Nigeria, the dry-cleaning business competition was localized. Competitors ranged from local laundryman and home or personal laundry with limited capability to handle specialized needs such as beaded clothes (which required the removal of beads before cleaning). The key competing variables included quality of service, delivery time, high level of responsiveness, variety of service and price (Ojadi, 2012). Analysis Talent Dry cleaners are operating in a highly competitive market and the customers are highly cost conscious. In such a scenario the business is viable under economies of scale therefore, Talent Drycleaners need to expand. However, expansion plans require funds which are difficult under the present scenario. To increase the profit margins Eze has to improve the capacity utilization and productivity of his present operations. Also quality aspects and delivery time would give him competitive edge in the market. Process Constraints The process constrains are identified below: Spotting process has two separate operations for dry-cleaning and laundry. Maximum processing time per item and the peak flow is getting controlled by this activity .It is the theoretical bottle neck having throughput of 50 items per day. Finishing process requires about 28-30 minutes in average so per resource the rate is around 14-15 items per day; assuming that there is eight minutes of ironing time and one ironing

Talent Drycleaners 4 table so the maximum output would be 60 items in an eight hour operation. So it is the hidden constraints and will arise once the spotting process constraints are elevated. Process Flow Diagram

Maximum Optimized Throughput The spotting activity is the primary constraint. The constrain should be elevated by adding one resource for spotting or training the inspection staff for spotting activity also. The next constrain will be at the finishing task. The finishing task requires additional ironing table for increasing the 60 item per day capacity to 100- 110 items per day. So with the removal of constrains at spotting and finishing tasks the process throughput would be around 95-100 items per day.

Talent Drycleaners 5 The spotting activity is the primary constraint. The constrain should be elevated by adding one resource for spotting or training the inspection staff for spotting activity also. The next constrain will be at the finishing task. The finishing task requires additional ironing table for increasing the 60 item per day capacity to 100- 110 items per day. So with the removal of constrains at spotting and finishing tasks the process throughput would be around 95-100 items per day. Turn-Around Time Turnaround time has been fixed at 3-4 days because of following reasons. •

Drying process needs 6 hours. So delivery can happen only on the next day.

•

Because of large batch size of dry cleaning activity, it may get postponed to next day for full load operation.

•

Ironing table is a problem and may not be available on peak load days.

Turn-around Time Improvements The turn-around time can be reduced to 2 days with natural drying option, however less than that would require dryers. To reduce the turn-around time the work in process inventory at spotting and iron table needs to be reduced with additional resource and iron table. Drycleaners having smaller batch size facility should be preferred for future units. Profit margins For 50 items per day the contribution margin per shirt is N 45. If we exclude the fixed cost we get (45*50*24- 33000) = N 21000. Twenty four working days has been considered for calculation. In similar way for additional 20 percent throughput i.e. at seventy items per day the extra profit would be 45*20*24 = N 21600 and for 80 percent capacity utilization it would be 45*30*24= N 32400. Throughput

Profit

Talent Drycleaners 6 50 items per day 70 items per day 80 items per day

Margin N 21000 N 42600 N 53400

Recommendations An organization’s service facility reflects its values and is instrumental in implementing its strategy. Patrick’s facility whether big or small should communicate a message to his customers and employees that it is modern, pleasant, safe and convenient. Servicescape creates a package, similar to the packaging of a product that conveys an image suggesting relative quality (Fitzsimmons, 2011). Lekki-Epe axis and its numerous emerging housing estates started to develop and most of his clientele were relocating to that area. This will be a good way for Patrick to open a location in that area with a new feel and look to attract a new target market. The other aspect related to customer service would be the processing time of clothing collection at reception. This process has a long wait time in case of multiple customers and therefore multiple collection counters should be operated in peak hours and also the process time should be reduce to less than ten minutes. Talent Drycleaners should focus on elevating the constraints at spotting and final packing units. This would help improve the process time and throughput of the process resulting in higher income and profit margins. Talent should use Deming’s Quality Improvement wheel: Plan-Do-Check-Act (PDCA) cycle; to eliminate constraints and variability in the system. The other aspect which would provide Talent the competitive edge is the quality and the turn-around time. Talent Dry cleaners should adopt it as a continuous improvement process as mentioned in Deming’s 14 point program.

Talent Drycleaners 7

What to prioritize Eze should prioritize on higher capacity utilization because that would help him generate more funds for expansion. If Eze does not prioritize expansion he could face capacity constraints and may end up with higher operational cost over time and needing additional resources.

Talent Drycleaners 8 References

Fitzsimmons, James & Mona (2011). Service Management Operations, Strategy, Information Technology. Process Improvement chapter 8 pg. 182. McGraw-Hill: New York Google images. (2012). PCDA Cycle. Retrieved on August 14, 2012 from www.google.com/images Ojadi, Frank, (2012). Talent Drycleaners: Making Things Better, Faster, and Cheaper Case study LBS. Pan American University