Kirsten's Cookie Company

2 Kristen’s Cookie Company

ContentsCase Summary..........................................................................................................................................3

1. How long will it take for you to fill a rush order?..................................................................................5

2. How many orders can you fill in a night, assuming you are open for four hours each night?..............5

3. How much of your own and your roommate's valuable time will it take to fill each order?................7

4. Because your baking trays can hold exactly one dozen cookies, you will produce and sell cookies by the dozen. Should you give any discount for people who order two dozen cookies, three dozen cookies, or more? If so, how much? Will it take any longer to fill a two-dozen cookie order than a one-dozen cookie order?......................................................................................................................8

5. How many food processors and baking trays will you need?.............................................................12

6. Are there any changes you can make in your production plans that will allow you to make better cookies or more cookies in less time or at lower cost? For example, is there a bottleneck operation in your production process that you can expand cheaply? What is the effect of adding another oven? How much would you be willing to pay for an additional oven?............................................................13


Case SummaryThis case is about the Kristen’s cookie company, which is a new firm started in a college apartment. The business plan is to sell freshly baked cookies to fellow students, using the oven they have in their apartment. The objective of the solution is improve upon the process flow and hence maximizing the cookie production.

It is also assumed that

Each order consists of only one dozen for simplicity.

Each person would be doing only that job which has been assigned to him.

Ignoring maintenance and opportunity costs

They would work for 4 hours a day

Cost of ingredients = Rs 70 per dozenCost of box (holds 1 dozen cookies) = Rs 10 per dozenLabor Cost = Rs 30 per hour per person


Flow Diagram

Cookie Company

Above is the process flow diagram for all the activities involved in cookie production process.

Inside each activity symbol are written the resource being used, the capacity of that particular

activity and the cycle time.

Order Entry

Wash Bowl & Mix IngredientsResource: SelfCapacity: 3 DozensCycle time: 6 minutes

Fill TrayResource: RoommateCapacity: 1 DozenCycle time: 2 minutes

Start OvenResource: Roommate, OvenCapacity: 1 DozenCycle time: 1 minute

BakingDone by: OvenCapacity: 1 DozenCycle time: 9 minute

Remove from OvenResource: RoommateCapacity: 1 DozenCycle time: 0 minute

CoolResource: NoneCapacity: 1 DozenCycle time: 5 minute

Pack, Collect MoneyDone by: RoommateCapacity: 1 DozenCycle time: 3 minute

Order Entry

Washing + MixingDone by: SelfCapacity: 3 DozensCycle time: 6 minutes

Filling the TrayDone by: RoommateCapacity: 1 DozenCycle time: 2 minutes

Start OvenDone by: RoommateCapacity: 1 DozenCycle time: 1 minute

Remove from OvenDone by: RoommateCapacity: 1 DozenCycle time: 0 minute

CoolDone by: NoneCapacity: 1 DozenCycle time: 5 minute

Wash Bowl and Mix ingredients WIPTake Order Fill the tray

Baking in ovenCoolingPackingAccepting the payment

WIP


Process Flow diagram

1. How long will it take for you to fill a rush order?

We will need to do the following (assumed that one order is for one dozen):

Process Activity Resource Cycle Time

Order Entry E-mail 0 minutesWash Bowl, Mix Self 6 minutes

Fill Tray Self 2 minutes

Prepare Oven Roommate 1 minute

Bake Oven 9 minutes

Remove Roommate 0 minutes

Cool None 5 minutes

Pack, Collect Money Roommate 3 minutes

Total 26 Minutes

Therefore, the minimum time required to fill a rush order is 26 minutes.

2. How many orders can you fill in a night, assuming you are open for four hours each night?Let us assume that there are three orders (dozens) at a time with three different ingredient mixes. As soon as the tray is filled we can start washing and mixing the ingredients for the next dozen. So the cycle time is less than the throughput time. Tabulating the time required to prepare three batches


Activity Resource Cycle Time Start Time Finish Time

Order Entry E-mail 0 minutes 0:00 0:00

Wash Bowl, Mix 1 Self 6 minutes 0:00 0:06

Fill Tray 1 Self 2 minutes 0:06 0:08

Prepare Oven 1 Roommate 1 minute 0:08 0:09

Bake 1 Oven 9 minutes 0:09 0:18



Remove 1 Roommate 0 minutes 0:18 0:18


Cool 1 None 5 minutes 0:18 0:23


Pack 1 Roommate 2 minutes 0:23 0:25

Collect Money 1 Roommate 1 minute 0:25 0:26













From the table we can observe that the cycle time is 10 minutes because

Time required in making cookies: 1 dozen in 26 minutes

2 dozens in 36 minutes

3 dozens in 46 minutes and so on…

In general, time required to make n one-dozen orders is given by the below expression:

16+10n (We add the extra 16 minutes for the first batch to come out)


Now, if the shop operates for only 4 hours every day,

16 + 10n = 240

n = (240 – 16)/10 = 22.4 Orders

Therefore, n = 22 orders (dozens) per day.

3. How much of your own and your roommate's valuable time will it take to fill each order?

Assuming all orders are for one dozen cookies,

For Self

For Roommate

Activity Cycle Time

Prepare Oven 1 minute

Remove 0 minutes

Pack, Collect Money 3 minutes

Total 4 minutes

Total

Activity Cycle Time

Wash Bowl, Mix 6 minutes

Fill Tray 2 minutes

Total 8 minutes

Self 8 minutes

Roommate 4 minutes

Total Labor Minutes 12 minutes


4. Because your baking trays can hold exactly one dozen cookies, you will produce and sell cookies by the dozen. Should you give any discount for people who order two dozen cookies, three dozen cookies, or more? If so, how much? Will it take any longer to fill a two-dozen cookie order than a one-dozen cookie order?

Discounts on selling price are given if we get reduction in cost due to the increase in sale if

people order in more than a dozen. The reduction in cost can occur only with labor because

the cost of other components will increase with increase in scale.

One Dozen

Activity Time

Activity Resource Cycle Time

Order Entry E-mail 0 minutes

Wash Bowl, Mix Self 6 minutes

Fill Tray Self 2 minutes

Prepare Oven Roommate 1 minute

Bake Oven 9 minutes

Remove Roommate 0 minutes

Cool None 5 minutes

Pack, Collect Money Roommate 3 minutes

Total labor Hours

Self 8

Roommate 4

Total Labor Minutes 12


Two Dozen

Activity Time


Order Entry E-mail 0 minutes 0:00 0:00

















Total Labor Hours

Self 10

Roommate 7


Three Dozen

Activity Time



Order Entry E-mail 0 minutes 0:00 0:00Wash Bowl, Mix 1 Self 6 minutes 0:00 0:06

Fill Tray 1 Self 2 minutes 0:06 0:08Prepare Oven 1 Roommate 1 minute 0:08 0:09

Bake 1 Oven 9 minutes 0:09 0:18Wash Bowl, Mix 2 Self 6 minutes 0:10 0:16

Fill Tray 2 Self 2 minutes 0:16 0:18Remove 1 Roommate 0 minutes 0:18 0:18

Prepare Oven 2 Roommate 1 minute 0:18 0:19Cool 1 None 5 minutes 0:18 0:23Bake 2 Oven 9 minutes 0:19 0:28Pack 1 Roommate 2 minutes 0:23 0:25

Collect Money 1 Roommate 1 minute 0:25 0:26Wash Bowl, Mix 3 Self 6 minutes 0:20 0:26

Fill Tray 3 Self 2 minutes 0:26 0:28Remove 2 Roommate 0 minutes 0:28 0:28

Prepare Oven 3 Roommate 1 minute 0:28 0:29Cool 2 None 5 minutes 0:28 0:33Bake 3 Oven 9 minutes 0:29 0:38Pack 2 Roommate 2 minutes 0:33 0:35

Collect Money 2 Roommate 1 minute 0:35 0:36Remove 3 Roommate 0 minutes 0:38 0:38

Cool 3 None 5 minutes 0:38 0:43Pack 3 Roommate 2 minutes 0:43 0:45


Total Labor Hours

Self 12

Roommate 10


The time taken for the three possible batch sizes is:

Time taken/dozen Self Room Mate Total

1 dozen 8 minutes 4 minutes 12 minutes


2 dozens 10 minutes 7 minutes 17 minutes

3 dozens 12 minutes 10 minutes 22 minutes

Generalizing this for n one-dozen orders:

Total = 7 + 5n

Assuming labor’s worth of Rs.30 per hour. Our cost structure would be:

Dozens Var. Cost Labor Cost Total Cost Total Cost/dozen

Cost Decrease

1 Rs. 70.00 Rs. 6.00 Rs. 76.00 Rs. 76.00 NA

2 Rs. 70.00 Rs. 8.50 Rs. 148.50 Rs. 74.25 2.3%

3 Rs. 70.00 Rs. 11.00 Rs. 221.00 Rs. 73.66 3.07%

From the above results, we can see that increase in order size results in reduction in total

cost.

Taking selling price as Rs 91 (assuming a profit of 20%):

The feasible discounts on multiple orders are:

2-dozen order – 2.1%

3-dozen order – 2.8%

5. How many food processors and baking trays will you need?

The maximum number of trays will be used if we produced three-dozen orders continuously,

a scenario depicted in this chart.

Stage Time Dozens per Hour(1 Oven)

Wash Bowl, Mix, Fill Tray 12 min. for 3 15 per hour


(yourself) dozenPrepare Oven & Bake

(oven)30 min. per 3

dozen6 per hour

Prepare Oven, Pack, Collect Money

(roommate)

10 min. per 3 dozen*

18 per hour

From the above table, we can see that the oven is the bottleneck in the process. So any

increase in the number of food processor will not increase the productivity of the process.

There are only 3 types of activities that require a tray:

1. Filling the ingredient mix to the tray,

2. Baking (including preparing the oven)

3. Cooling.

We are using at most three trays in the filling activity at any given time (and in fact this is only

because this particular plan calls for filling three trays in rapid succession, after which two of

them sit waiting for an opportunity to get into the oven). There is never more than one tray in

the oven at any given time, nor is there ever any more than one tray cooling. So we could

certainly get by with five trays, and maybe four or even three if we adjust the mixing and

filling part of the operation.

6. Are there any changes you can make in your production plans that will allow you to make better cookies or more cookies in less time or at lower cost? For example, is there a bottleneck operation in your production process that you can expand cheaply? What is the effect of adding another oven? How much would you be willing to pay for an additional oven?


The bottleneck is the oven, which means there is no point in looking at expanding the

capacity of any other resource unless the operation's baking capacity is expanded first.

If we had two ovens, we could make cookies faster. But how much faster?

This gets complicated, but we can think about it by looking at the capacities of the various

stages in our process.

OrdersMinutes

1 2 3 4 5 6 7 8 910

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

29

30

31

32

33

34

35

36

37

38

39

40

41

42

43

44

45

46

3 diff orders & 1 oven

Order 1

Order

2 Order

3

3 diff orders

together & 1 oven

Order 1

Order

2 Order

3

3 same orders & 1 oven

Order 1

Order

2 Order

3

3 diff orders & 2 ovens

Order 1

Order

2 Order

3

3 diff orders

together & 2 ovens

Order 1

Order

2


Order 3

3 same orders & 2 ovens

Order 1

Order

2 Order

3

2 same & 1 diff

order & 2 ovens

Order 1

Order

2 Order

3

3 diff orders & 3 ovens

Order 1

Order

2 Order

3

3 same orders & 3 ovens

Order 1

Order

2 Order

3


From the above table, it can be seen that there are 10 combinations possible:-

Thus we can see that even with 2 ovens, the process in the oven will still be the bottleneck

but this will reduce the cycle time of production upto 3 dozens.

It can also be observed that 3 ovens do not make any difference in the total time taken unless

the orders are same, which is an unrealistic assumption. For all other cases 2 ovens and 3

ovens deliver the same results.

If we see the utilization of 2 ovens, we can observe that we gain 2 minutes per 2 orders. As

the maximum number of orders that we can accept is 22 (calculated earlier), we will get 22

minutes extra every day and as we can produce 1 dozen cookie every 10 min , we can

produce 2 dozens in 22 minutes. According to the earlier assumption with 20% margin, our

profit per dozen is 15 Rs .So per day it will translate into a profit of 30 Rs which is equivalent

to 900 Rs per month. Considering extra costs of maintenance or holidays, we can assume a

margin of 20% and will be left with Rs.780. So we can lease an extra oven for any amount less

than Rs.780/month.

3 diff orders & 1 oven 46 Minutes

3 diff orders together & 1 oven 46 Minutes

3 same orders & 1 oven 46 Minutes

3 diff orders & 2 ovens 44 Minutes

3 diff orders together & 2 ovens 43 Minutes

3 same orders & 2 ovens 36 Minutes

2 same & 1 diff order & 2 ovens 36 Minutes

3 diff orders & 3 ovens 44 Minutes

3 same orders & 3 ovens 30 Minutes

Documents

Kirsten's Cookie Company