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Case Analysis: Executive Shirt Company, Inc.

Operations Management - I PGP1 Section B Group 4

Group Members
AMARENDRA SAHOO PGP2011533 BHAWNA GOKANI PGP2011595 CHATARKAR ANURAG MAHADE PGP2011600 C.LALRUATSANGA 2011FPM06 RUPSA CHAKRAVARTY PGP2011837 SAARANG K. MEHTA PGP2011841 UTKARSH SINGH PGP2011923

Case Analysis: Executive Shirt Company, Inc.

Summary: Mr. Dwight Collier, Gen. Manager of Executive Shirt Company (ESC) is planning to introduce customized shirts in his current production facility since they can fetch 75% more price as compared to regular shirts. Currently, ESC is manufacturing 16,000 shirts per month and they plan to manufacture 2,000 customized shirts per month without hampering the current production. The company has 5 departments, namely, Cutting: 1 Machine, 4 Workers Sewing: 48 Machines, 48 Workers Inspection: 4 workers Ironing: 4 Machines, 4 Workers Packaging: 4 workers Indirect Workers (material handlers) : 4 Workers

Mr. Collier introduced a change in the manufacturing process by introducing a Laser Cutting Machine for customized shirt. He requested two of his managers, Mike and Ike to devise a production plan to maximize the profit from both the products. The highlights of their plans are Mikes Plan: To go with one production line manufacturing both the products simultaneously (other than the cutting process) o Eight Batches of regular shirts with 5 shirts each o One batch of 5 custom shirts Ikes Plan: To go for a separate production line for regular and customized shirt o Eight Batches of regular shirts with 6o shirts each o One batch of 5 custom shirts

Fig 1. Process Flow Diagram- Current Production Process

Current Production Process


Time required for producing one unit from laying and cutting operation=120/60*8=0.25 min Table 1.1. Current Production Plan

Operation

Regular Shirt Labour Content 3.90 2.00 0.65 2.50 1.70 0.66 1.65 1.55 0.65 1.80 1.55 1.70 1.50 1.95 1.75

Number of workers 8 4 2 6 4 2 4 4 2 4 4 4 4 4 4

Time required for producing one unit (in min.) .4875 .5 .325 .41 .42 .33 .41 .39 .32 .45 .39 .42 .38 .49 .42

Make Collar Make Cuffs Make Sleeves Make Front Make Back Join Shoulder Attach collar Attach sleeves Stitch Down sleeves Sew Side seam Attach cuffs Hem Button Inspect Iron Fold Package

From the table it is clear that cuff making is the slowest process and hence the cycle time of Regular Shirt making is equal to the time of cuff making=0.5 min.

Table 1.2. Current Production Plan Quantity Actual Cycle Time (min/shirt) Production Capacity (shirts/day) WIP Inventory Total Inventory Bottle neck time Bottle neck time Obtained Value Bottle Neck = 30 min per batch 0.5 per shirt

Bottle Neck = 30 min per batch

480/0.5 =960 units

Cutting + Other operations WIP/production Capacity 800/960

10800+960 =11760

Manufacturing Lead Time(days) Capacity Utilisation

Input to Output

11760/960 =12.25

Actual Production : Production Capacity

83.33%

Direct Labour Utilisation(min/shirt)

Direct Labour per unit

Cutting + Other operations

25.51+4(0.25)= 26.51

Direct Labour Cost ($/shirt) Direct Labour Utilisation

Total labour cost per unit of production

Labour cost =64 * 8 * 6

3072/800=$ 3.84/shirt

Labour utilized/ Labour Available

(800 * 26.51)/(8*60*64)

69.03%

Fig 2: Process Flow Diagram- Mikes Plan

Mikes Production Plan


Time required for producing one unit from laying and cutting operation=120/60*8=0.25 min whereas the cycle time of laser cutting machine is 2.5/5=0.5 Table 2.1. Mikes Production Plan

Operation

Regular Shirt Labour Content 3.90 2.00 0.65 2.50 1.70 0.66 1.65 1.55 0.65 1.80 1.55 1.70 1.50 1.95 1.75

Number of workers 8 4 2 6 4 2 4 4 2 4 4 4 4 4 4

Time required for producing one unit (in min.) .4875 .5 .325 .41 .42 .33 .41 .39 .32 .45 .39 .42 .38 .49 .42

Make Collar Make Cuffs Make Sleeves Make Front Make Back Join Shoulder Attach collar Attach sleeves Stitch Down sleeves Sew Side seam Attach cuffs Hem Button Inspect Iron Fold Package

From the table it is clear that cuff making is the slowest process and hence the cycle time of Mikes Shirt making process is equal to the time of cuff making=0.5 min.

Table 2.2. Mikes Production Plan

Quantity
Actual Cycle Time (min/shirt) Production Capacity (shirts/day) WIP Inventory Total Inventory Bottle neck time Bottle neck time

Obtained Value(Regular and Custom Shirts)


Bottle Neck = 30 min per batch 0.5 per shirt

Bottle Neck =40 min per batch

480/0.5=960 units

Cutting + Other operations WIP/production Capacity 900/960

1800+180 =1980

Manufacturing Lead Time(days) Capacity Utilisation

Input to Output

1980/960=12.58

Actual Production : Production Capacity

93.75%

Direct Labour Utilisation(min/shirt)

Direct Labour per unit

Cutting + Other operations

25.51+0.5=26.01

Direct Labour Cost ($/shirt) Direct Labour Utilisation

Total labour cost per unit of production

Labour cost =65* 8 * 6

3120/900=3.47

Labour utilised : Labour Available

Labour Utilised = 900 * 26.01

75.02%

Fig 3: Process Flow Diagram- Ikes Plan Regular Shirt

Custom Shirt

Ikes Production Plan


Table 3.1. Ikes Production Plan

A. Regular Shirt Production


Operation Make Collar Make Cuffs Make Sleeves Make Front Make Back Join Shoulder Attach collar Attach sleeves Stitch Down sleeves Sew Side seam Attach cuffs Hem Button Inspect Iron Fold Package Regular Shirt Labour Content 3.90 2.00 0.65 2.50 1.70 0.66 1.65 1.55 0.65 1.80 1.55 1.70 1.50 1.95 1.75 Number of workers 7 3 1 5 3 1 3 3 1 3 3 3 3 3 3 Time required/lbr/shrt (in min) .56 .67 .65 .5 .57 .66 .55 .52 .65 .6 .52 .57 .5 .65 .59

Table 3.2. Ikes Production Plan

B. Customized Shirt
Operation Make Collar Make Cuffs Make Sleeves Make Front Make Back Join Shoulder Attach collar Attach sleeves Stitch Down sleeves Sew Side seam Attach cuffs Hem Button Inspect Iron Fold Package CUSTOM Shirt Labour Content 3.90 2.00 0.65 2.50 1.70 0.66 1.65 1.55 0.65 1.80 1.55 1.70 1.50 1.95 1.75 Number of workers 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Time required/lbr/shrt (in min) 3.90 2.00 0.65 2.50 1.70 0.66 1.65 1.55 0.65 1.80 1.55 1.70 1.50 1.95 1.75

Table 3.3. Ikes Production Plan Quantity Actual Cycle Time (min/shirt) Production Capacity (shirts/day) WIP Inventory Total Inventory Bottle neck time Bottle neck time Obtained Value(Custom Shirts) Bottle Neck = 3.9 min per shirt 3.9 per shirt

Bottle Neck =3.9 min per shirt

480/3.9 =123 units

Cutting + Other operations WIP/production Capacity 100/123

45+5 =50

Manufacturing Lead Time(days) Capacity Utilisation

Input to Output

50/123 =0.41

Actual Production : Production Capacity

81.3%

Direct Labour Utilisation(min/shirt)

Direct Labour per unit

Cutting + Other operations

25.51+0.5 =26.01

Direct Labour Cost ($/shirt) Direct Labour Utilisation

Total labour cost per unit of production

Labour cost =16* 8 * 6

768/100=7.68

Labour utilised : Labour Available

Labour Utilised = 100 * 26.01

33.86%

Table 4: Comparison of Mikes and Ikes Production Plan


Quantity Current Process Regular Shirts Actual Cycle Time(min./ shirt) 0.5 Mikes plan Regular & Custom shirts 0.5 Ikes plan Regular Shirts 0.67 Ikes plan Custom Shirts 3.9

Manufacturing Lead Time ( days)

12.25

2.06

12.58

0.41

WIP Inventory (shirts)

11760

1980

9060

50

Production capacity ( shirts/ day) Capacity Utilization

960

960

720

123

83.33%

93.75%

111.11%

81.3%

Direct Labour content (min/shirt) Direct Labour utilization

26.51

26.01

26.51

26.01

69.03%

75.02%

90.17%

33.8%

Direct labour Cost ( $/ shirt )

3.84

3.47

3.43

7.68

Table 5: Cost Comparison of Mikes and Ikes Plan A. For Normal Shirts Mikes plan Raw materials Direct labor Indirect labor Other Indirect Cost Total manufacturing Cost Retail price Profit/shirt $7.00 $3.46 $.66 $4.50 $15.62 $50 $34.38 Ikes plan $7 $3.32 $.66 $4.50 $15.48 $50 $34.52

B. For Customized Shirt Mikes plan Raw materials Direct labor Indirect labor Other Indirect Cost Total manufacturing Cost Retail price Profit/shirt $7.7 $3.46 $.66 $4.50 $16.32 $87.5 $71.18 Ikes plan $7.7 $7.68 $.66 $4.50 $20.54 $87.5 $66.96

Conclusion: From Table 5: Cost Comparison of Mikes and Ikes Plan, we can see that the total profit
per shirt from Mikes plan is greater $4.08. Thus, Mikes plan is better.