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Intermediate Process Analysis

Kristen¶s Cookies

Gantt ChartsResource conflicts

Batch size and setupsEconomies of Scale

Getting more for your cookie,er, money!

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Th e Big Picture

Your operations strategy drives 3major competitive differentiators inyour business model.

± C ost (price) ± Quality (e.g. customization, conformity) ± T iming (e.g. lead time)

Unfortunately, these tend to trade off against each other.

C lever process design is aboutfiguring out ways to avoid thesetradeoffs.

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KR IS TEN¶ S P ROC E SS FL OW DIAG R AM

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GA NTT CH AR T(OR DE R SIZ E = 1 D O Z.)

5 10 15 20 25 30 35 40 45 50 55 60 65

oven

roommate

Kristen

pay

pack

cool

bake

mix/spoon

0

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R ush order flow time?

Min. process cycle time?

Process capacity?

If we start at 8:00 pm and end at Midnight,how many cookies can we make?

C ookie Questions: 1 Dozen

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W hat is the labor content per order?

W hat is the labor utilization if ordersarrive at the same rate they are fulfilled?

How many baking trays do we need?

W here should we add resources?

Add ¶l. C ookie Questions

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GA NTT CH AR T(OR DE R SIZ E = 2 D O Z.)

0 5 10 15 20 25 30 35 40 45 50 55 60 65

oven

roommate

Kristen

pay

pack

cool

bake

mix/spoon

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S uppose the order size increases.

Order Labor Bottle- Process Min R OFTS ize C ontent neck C apacity Proc C T

1 dz. 12 min Oven 6 dz./hr. 10 min 26min

2 dz.

W hat happens to the order lead time?

S hould we give a Price discount?

5

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Suppose we h ave two ovens. . .(N ote: Sometimes we leave W IPs out of Process Diagrams.

Don ¶t do t h is unless you ¶re an expert, t houg h .)

M ix

6 minper order

Cool5 min.

ReceivePayment

1 minper order

Pack2 min/dz

O ven10 min/dz.

O ven10 min/dz

Spoon2 min/dz

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W hat is the value of a second oven for order size = 1 dz.?

W hat is the impact if your roommate isout of town for order size = 1 dz.?

More C ookie Quandaries

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L E SS O NS

1. Flow time and C ycle time:

Implications for customers, managers:

Flow time is more important to:

C ycle time is more important to:

Interrelations h ips:W ill decreasing the minimum process cycle

time necessarily decrease process flowtime?

W ill decreasing the process flowtimenecessarily decrease the minimum processcycle time?

10

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2. OM tension in the case: K risten uses a make-to-order (MTO) customer interface, but whatadvantages would she get from a FGI (make-to-stock²or MT S ²interface)?

W hat disadvantages would result?

11

W hy wouldn¶t you use a MT S operating systemwhen no product customization is allowed?

L E SS O NS (cont.)

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Th e GM ¶s C orner

There is a 3-way tradeoff betweencost, quality, and timing that drivesyour business model.

± Economies of scale reduce resource costs butalso restrict customization

± Having an FGI improves lead time but alsodegrades freshness & customization andincreases holding costs & defects

C lever process design is aboutfiguring out ways to avoid these

tradeoffs.

± One way to do this is to map out your process toidentify & remove resource conflicts, which willimprove both cost and lead-time.