Kristen's Cookie Company Kristen's Cookie Company is a good example where the success or failure of the company depends

directly on the process planning adopted by the company, i.e., the company can maximize its productivity by utilizing its resources effectively. One major aspect of process analysis is to identify the major bottlenecks in the process and trying to mitigate their effects with least possible level of costs and resources. The following flowchart shows the overall process adopted by the company: (Exhibit 1) Filling a rush order: Process Resource(s) Process Time Cumulative Time Consumed Taking Order E-mail 0 minutes 0 minutes Washing and Mixing Self 6 minutes 6 minutes Filling Tray Self 2 minutes 8 minutes Preparing Oven Roommate 1 minute 9 minutes Baking Oven 9 minutes 18 minutes Removing the tray Roommate 0 minutes 18 minutes Cooling None 5 minutes 23 minutes Packaging & Collecting Money Roommate 3 minutes 26 minutes Thus, it requires minimum 26 minutes to fill a rush order. Production Capacity (4 hours): Since the resources required for the different processes are not common everywhere, there can be two orders (of one dozen each, for simplicity) being processed simultaneously. Thus, it would not require twice as much time for the second order (of one dozen) to be completed as it requires for the first one (of one dozen). This can be attributed to the fact that one can get the tray ready for the second order while the first one is in the oven for baking. The only bottleneck which creates a time lag is the combined process of getting the oven ready (1 minute) for baking and the process of baking itself (9 minutes). So, we can get two orders of one dozen each ready in 36 minutes. In fact, for X orders of 1 dozen each, the time required is given by: (16 + 10X) minutes. Thus, in 4 hours (or 240 minutes), Kristen's Cookie Company can fulfill 22 orders of one dozen each given the fact that it gets the orders independently and it utilizes its resources to the maximum. Labor Time Requirements: For Self, total time required is 6 minutes (washing and mixing) + 2 minutes (filling the tray) = 8 minutes. For Roommate, total time required is 1 minute (preparing the oven) + 3 minutes (packaging and collecting money) = 4 minutes. The assumption made for calculating the labor times is that all the orders are of one dozen. Discounts and Economies of Scale: Since the costs of raw materials and packaging material remains the same irrespective of the fact that we service one dozen orders or multiple dozen orders, the only factor to be taken into account is the money value of time employed by both the people. As calculated above, the labor time requirements for a one dozen order are as follows: For self = 8 minutes Roommate = 4 minutes Total time = 12 minutes The following table calculates the labor time requirements for a two dozen order: Process Resource Process Time Cumulative Labor time (Self) Cumulative Labor Time (Roommate) Taking Order (1 & 2) E-mail 0 minutes 0 minutes 0 minutes Washing and Mixing (1 & 2) Self 6 minutes 6 minutes 0 minutes Filling Tray 1 Self 2 minutes 8 minutes 0 minutes Filling Tray 2 Self 2 minutes 10 minutes 0 minutes Preparing Oven 1 Roommate 1 minute 10 minutes 1 minute Baking 1 Oven 9 minutes 10 minutes 1 minute Removing Tray 1 Roommate 0 minutes 10 minutes 1 minute Cooling 1 None 5 minutes 10 minutes 1 minute Preparing Oven 2 Roommate 1 minute 10 minutes 2 minutes Baking 2 Oven 9 minutes 10 minutes 2 minutes Removing tray 2 Roommate 0 minutes 10 minutes 2 minutes Cooling 2 None 5 minutes 10 minutes 2 minutes Packaging 1 Roommate 2 minutes 10 minutes 4 minutes Packaging 2 Roommate 2 minutes 10 minutes 6 minutes Collecting Money (1 & 2) Roommate 1 minute 10 minutes 7 minutes As calculated above, the labor time requirements for a two dozen order are as follows: For self = 10 minutes Roommate = 7 minutes Total time = 17 minutes This shows that the cost of a two dozen order in terms of labor requirements is not twice that of a one dozen order. So, if labor cost is Rs. 20 per hour, we get the following costs distribution: Order size Labor Time Cost Cost per Dozen 1 dozen 12 Rs. 4.00 Rs. 4.00

2 dozen 17 Rs. 5.66 Rs. 2.83 Thus, cost per dozen of labor is decreasing. This can be applied to orders of more than two dozens as well. Hence, Kristen's Cookie Company can give discounts to customers giving orders of more than one dozen because of the economies of scale as shown above. Material Requirements: The processor is required for mixing the ingredients for the cookies and is idle for most of the time. The oven required for the purpose of baking is the major bottleneck and there is no requirement for more than one processor. Hence, spending money on more than one processor would not be advisable for Kristen's Cookie Company. The baking trays are required for three activities, namely, filling it and keeping it ready for baking, baking it in the oven, and cooling it after baking is done. Since the baking and cooling processes will be going on for at most one tray at a given time and the mixing process gets material ready for at most three trays of one dozen each, five trays would be sufficient, though, even three trays would serve the purpose if mixing and filling activities are done properly. Hence, it is advisable for Kristen's Cookie Company to go for at least three baking trays to maximize its productivity. Cost-Benefit Analysis: The cost benefit analysis can be done by considering all the bottlenecks in the process of making cookies and trying to mitigate their effects by incurring costs and looking at the benefits made through it. The only bottleneck is the baking process (preparing the oven and baking) which requires 10 minutes for one dozen of cookies. Thus, the company can bake maximum 6 dozens of cookies in an hour. Even if the company buys one more oven, it can bake a maximum of 12 dozens of cookies in an hour which again turns out to be the limiting factor. Also, the benefits obtained by purchasing one more oven need to compared to the costs involved in purchasing the oven, the kind of orders the company gets per day (the no. of one dozen and two dozen orders), etc. Only then can a decision be taken regarding the plan to purchase more ovens. The Road Ahead? The case should be looked at from some more angles for better analysis of the company's risks. For example, in absence of a roommate, since there isn't any overlapping of labor requirements, the calculations made above would remain the same. The only effect would be the challenge faced by the extreme nature of the work. In case of special or urgent requirements, there is a possibility of fulfilling the order without any delay to other orders because the company is taking ample time for completion of orders (1 hour), provided that they are one dozen others. In all other cases, the company can get the urgent order ready while some other order is in the oven and get the urgent one in after that. They should charge a premium as well for faster processing of urgent orders. In case the company is not taking any urgent orders, it should carry on with the one hour delivery time limit because there is a safety margin in it for one, two or even three dozen orders. But if the company processes the urgent orders first, there should be a mechanism to check that the other orders are not delayed. This can be done by analyzing the order board and calculating the amount of time it would require for the order to be ready. For this the formula (16 + 10X) should be applied. In this way, Kristen's Cookie Company can take advantage of the opportunities and satisfy all its customers with timely delivery of cookies.