Harvard Business School

9-696-071
Rev. March 11, 1996
Executive Shirt Co!an"
Case #nal"sis-$he Executive Shirt Co!an" %&rou! 'ro(ect)
'art #
Calculations


Current Process Mike's Plan Ike's Plan
Regular Shirts
Regular & Custom
Shirts
Regular Shirts Custom Shirts
A) Actual Cycle Time
(Min/shirt)
2 minutes per
cuff / 4 workers
= 0.5
2! minutes for
cutting / 4"! shirts
worth = !#2$ %
la&or content of
cuffs at 0.5 CT
'll la&or content /
one less worker for
each categor(
while cutting is still
!#2$)
Cuffs is still the
&ottleneck at 2
la&or content / *
workers = 0.67
mins/shirt
2#$ / $ = !#$ la&or
content for cutting#
+ith e,er(thing
-i,i-e- &( . collar
is new &ottleneck
at 3.90 CT
B) Manufacturing ea!
Time (!ays)
(WIP * Cycle Time) /
Minutes in a working day
./0! 1 !#$ / 4"!
minutes = "#.#5
!#$ 1 2"! / 4"!
=#.06 !ays
32!0! 1 !#004 /
4"! = "#.5$ !ays
3$! 1 *#24 / 4"!
=0.%" !ays
C) &'( 'n)ent*ry
(shirts)
Average WIP * Batc si!e
20 1 0! =""+760
*20 1 $ =
"9$0 shirts
0! 1 $ sum of
a,g# +IP =
9+060 shirts
*! units at sewing
5 $ units &eing cut
5 $ units &eing
finishe- = 50
&'(3gi,en in
case4
,) (r*!ucti*n Ca-acity
(shirts/!ay)
Minutes availa"le / CT
" hours 1 0!
minutes / !#$ =
960 shirts / !ay
" hours 1 0!
mins / !#$ = 960
shirts/!ay
4"! / !#000 =
7#0 shirts/!ay
" 1 0! / *#2 =
"#3 shirts/!ay
.) Ca-acity /tili0ati*n
Actual Produced / Wat
could "e #roduced
!.!!! / 320! 1 2!
-a(s4 = $31
30.!!! 5 2!!!4 /
320! 1 2!4
=93.751
0.!!! / 3/2! 1
2!4 = """.""1
2* 1 2! -a(s =
240! monthl(
pro-uction capacit(
2!!! / 240!
=$".#51
2) ,irect a3*r C*ntent
(min/shirt)
32! 5 *!
minutes /"hr 1 0!
30.!!! / ".!!!4
1 !#2$ = !#2/// 5
32! minutes /
4"! total minutes4
!#$ -irect la&or for
cutting 5 *#2 5 2

Current Process Mike's Plan Ike's Plan
Regular Shirts
Regular & Custom
Shirts
Regular Shirts Custom Shirts
Time s#ent cutting $
%irect la"or &or one sirt
mins4 5 *#2 5 2 5
!#0$ 5 2#$ 5 #/
5 !#00 5 #0$ 5
#$$ 5 !#0$ 5 #"
5 #$$ 5 #/ 5
#$ 5 #2$ 5 #/$
= #5.76
32.!!! / ".!!! 1
!#$4 = !#2/// =
weighte- a,g#
cutting time for
regular an-
custom
2$#/0 6 !#2$ =
2$#$ sum of
stan-ar- station
time
2$#$ 5 !#2///
=#5.79
5 *#2 5 2 5 !#0$
5 2#$ 5 #/ 5
!#00 5 #0$ 5
#$$ 5 !#0$ 5 #"
5 #$$ 5 #/ 5
#$ 5 #2$ 5 #/$
= #5.76
5 !#0$ 5 2#$ 5 #/
5 !#00 5 #0$ 5
#$$ 5 !#0$ 5 #"
5 #$$ 5 #/ 5 #$
5 #2$ 5 #/$
=#5.0"
4) ,irect a3*r
/tili0ati*n
('irts #er day * %irect
la"or content / (%irect
la"or * minutes
availa"le)
3"!! shirts 1
2$#/0 7irect la&or
content4 / 0414"!
= 67.0$1
32!! 1 2$#/24 /
30$ -irect workers
1 4"! minutes
a,aila&le4= 2*.2
/ *.2!!
=7%.391
3"!! per -a( 1
2$#/04 / 304 6 $4
1 4"!4 = 2!.0!" /
2*.$2! = $7.6#1
!! 1 20#! / 30
1 4"!4 = 33.$71
5) ,irect a3*r C*st
(6/shirt)
%irect la"or ('alary *
ours worked) / sirts
#roduced
04 30 1 "4 / "!!
=63.$%
0$ 3 80 1
"hours4 / 2!! =
*2!! / 2!!
= 63.%7
/2! shirts / -a( on
normal salar() 42
1 0 1 " = 82.*$2
"! remaining
shirts 1 !#0/ =
$*#0 minutes
$*#0 / 0! 1 2 =
"#!4
42 1 "#!4 =
*2*#20
9otal) 3*2*#20 5
2*$24 / "!! =3.%3
0 380 1 " hours4 /
!! = 7.6$



Ex!lanation
1. Regular shirt production process without custom shirt fabrication.
a. C"cle tie *or each station + total station tie , - o* .or/ers at station
i. C"cle tie *or s"ste + lon0est station c"cle tie
ii. Cu1s station + S"ste C$ + 2.0 inutes , 3 .or/ers + 0.5 minutes
4. Manu*acturin0 5ead $ie %M5$) + C"cle $ie %C$) 6 7or/s in 'ro0ress %78')
i. C$ + 0.9 inutes
ii. 78' individual shirts + %196 4atches 6 60 shirts , 4atch) + 11,760
iii. M5$ in da"s + %0.9 6 11,760) , 3:0 inutes !er da" + 12.25 days
c. $otal individual shirts as 78' + Su o* avera0e 4atches 6 60 shirts !er 4atch
i. 78' shirts + 196 4atches 6 60 shirts !er 4atch + 11,760 shirts as W!
d. 'roduction ca!acit" o* s"ste at continuous 100; utili<ation %inutes)
i. 'roduction ca!acit" + inutes !er da" , C$ o* s"ste
ii. 'roduction ca!acit" + 3:0 , 0.9 + "60 units per day = continuous 100;
utili<ation
e. 'roduction ca!acit" utili<ation + onthl" !roduction , onthl" !roduction
ca!acit"
i. Current onthl" !roduction is 16,000 %0iven in case)
ii. $otal onthl" ca!acit" + 19,200 %920 !er da" 6 20 da"s !er onth)
iii. 'roduction utili<ation + 16,000 , 19,200 + #$%
*. >irect 5a4or content + su o* tie at all stations ? tie !er shirt *or cuttin0
i. Su o* tie at all stations + 29.91 inutes !er shirt
ii. # sin0le cuttin0 o* : !atterns on 60 la"ers o* cloth !roduces %60 6 :) + 3:0
shirts
iii. $otal cuttin0 tie + %1.9 inutes 6 60 la"ers) ? %@0 inutes cuttin0) + 120
inutes
iv. Cuttin0 tie !er shirt + 120 inutes , 3:0 shirts + 0.29 inutes !er shirt
v. $otal la4or content %tie) !er shirt + 29.91 ? 0.29 + 25.76 minutes per
shirt
0. >irect 5a4or Atili<ation + $otal used la4or tie , $otal la4or tie availa4le
i. $otal la4or tie availa4le + 63 .or/ers 6 3:0 inutes !er da" + @0,720
inutes
ii. $otal tie used + tie !er shirt 6 dail" !roduction %16,000 !er onth , 20
da"s)
iii. $otal tie used + 29.76 inutes 6 :00 shirts !er da" + 20,60: inutes
iv. >irect 5a4or Atili<ation + 20,60: inutes used , @0,720 inutes availa4le
+ 67.0#%
h. $otal >irect 5a4or Cost !er shirt + %- .or/ers 6 : hours !er da" 6 B6 !er
hour) , :00
i. $otal >irect la4or cost + %63 6 : 6 6) , :00 %total dail" !roduction + 16,000 ,
20 da"s)
ii. $otal >irect 5a4or Cost + &$.#' ( shirt

2. )i*e+s plan for production of regular and custom shirts using
e,isting facilities with the addition of a new cutting machine and one
wor*er.
a. S"ste C$ reains unchan0ed + 0.9 %the cu1s station still has the lon0est
station C$)
4. Manu*acturin0 5ead $ie %M5$) + C"cle $ie %C$) 6 7or/s in 'ro0ress %78')
i. C$ + 0.9 inutes
ii. 78' individual shirts + %@96 4atches 6 9 shirts , 4atch) + 1,9:0
iii. M5$ in da"s + %0.9 6 1,9:0) , 3:0 inutes !er da" + 2.06 days
c. $otal individual shirts as 78' + Su o* avera0e 4atches 6 9 shirts !er 4atch
i. 78' shirts + @96 4atches 6 9 shirts !er 4atch + 1,"#0 shirts as W!
d. 'roduction ca!acit" o* s"ste at continuous 100; utili<ation %inutes)
i. 'roduction ca!acit" + inutes !er da" , C$ o* s"ste
ii. 'roduction ca!acit" + 3:0 , 0.9 + 960 units !er da" = continuous 100;
utili<ation
e. 'roduction ca!acit" utili<ation + onthl" !roduction , onthl" !roduction
ca!acit"
i. Current onthl" !roduction is 16,000 re0ular ? 2000 custo shirts %0iven in
case)
ii. $otal onthl" ca!acit" + 1:,000 %900 !er da" 6 20 da"s !er onth)
iii. 'roduction utili<ation + 1:,000 , 19,200 + "$.#%
*. >irect 5a4or content + su o* tie at all stations ? tie !er shirt *or cuttin0
i. Su o* tie at all stations + 29.91 inutes !er shirt
ii. Ce. achine can cut 1 !attern on Dve la"ers in 2.9 inutes
ii.Custo cuttin0 tie + 9 shirts , 2.9 inutes + 0.9 inutes !er custo shirt
iii. $otal cuttin0 tie + 7ei0hted avera0e o* old E ne. achine cuttin0 ties
iii.%16,000 re0 , 1:000 total) 6 0.29 ? %2000 , 1:000) 6 0.9 + 0.27: in,shirt
iv. $otal la4or content %tie) !er shirt + 29.91 ?0.2: + 25.7" minutes per
shirt
0. >irect 5a4or Atili<ation + $otal used la4or tie , $otal la4or tie availa4le
i. $otal la4or tie availa4le + 69 .or/ers 6 3:0 inutes !er da" + @1,200
inutes
ii. $otal tie used + tie !er shirt 6 dail" !roduction %1:000 !er onth , 20
da"s)
iii. $otal tie used + 29.79 inutes 6 900 shirts !er da" + 2@,211 inutes
iv. >irect 5a4or Atili<ation + 2@,211 inutes used , @1,200 inutes availa4le
+ 7'.$"%
h. $otal >irect 5a4or Cost !er shirt + %- .or/ers 6 : hours !er da" 6 B6 !er
hour) , 900
i. $otal >irect la4or cost + %69 6 : 6 6) , 900 %total dail" !roduction + 1:,000 ,
20 da"s)
ii. $otal >irect 5a4or Cost + &$.'7 ( shirt

$. *e+s plan for shifting labor from the regular assembly -oor to
create a separate assembly line dedicated to custom shirts, thus
separating the two streams of production.
(A) Regular Shirt Production:
a. S"ste C$ + 0.67 %the cu1s station still has the lon0est station C$ = 2.0 in
, @ .or/ers )
4. Manu*acturin0 5ead $ie %M5$) + C"cle $ie %C$) 6 7or/s in 'ro0ress %78')
i. C$ + 0.67 inutes
ii. 78' individual shirts + %191 4atches 6 60 shirts , 4atch) + 9,060
iii. M5$ in da"s + %0.67 6 9,060) , 3:0 inutes !er da" + 12.5# days %*or re0ular
shirts)
c. $otal individual shirts as 78' + Su o* avera0e 4atches 6 60 shirts !er 4atch
i. 78' shirts + 191 4atches 6 60 shirts !er 4atch + ",060 shirts as W!
d. 'roduction ca!acit" o* s"ste at continuous 100; utili<ation %inutes)
i. 'roduction ca!acit" + inutes !er da" , C$ o* s"ste
ii. 'roduction ca!acit" + 3:0 , 0.67 + 720 units per day = continuous 100;
utili<ation
e. 'roduction ca!acit" utili<ation + onthl" !roduction , onthl" !roduction
ca!acit"
i. Current onthl" !roduction is 16,000 re0ular shirts %0iven in case)
ii. $otal onthl" ca!acit" + 13,300 %720 !er da" 6 20 da"s !er onth)
iii. 'roduction utili<ation + 16,000 , 13,300 + 111%
*. >irect 5a4or content + su o* tie at all stations ? tie !er shirt *or cuttin0
i. Su o* tie at all stations + 29.91 inutes !er shirt
ii. # sin0le cuttin0 o* : !atterns on 60 la"ers o* cloth !roduces %60 6 :) + 3:0
shirts
iii. $otal cuttin0 tie + %1.9 inutes 6 60 la"ers) ? %@0 inutes cuttin0) + 120
inutes
iv. Cuttin0 tie !er shirt + 120 inutes , 3:0shirts + 0.29 inutes !er shirt
v. $otal la4or content %tie) !er shirt + 29.91 ? 0.29 + 25.76 minutes per
shirt
0. >irect 5a4or Atili<ation + $otal used la4or tie , $otal la4or tie availa4le
i. Ce. direct la4or availa4le + 63 F 19 + 39
ii. $otal la4or tie availa4le + 39 .or/ers 6 3:0 inutes !er da" + 20,60:
inutes
iii. $otal tie used + tie !er shirt 6 dail" !roduction %16000 !er onth , 20
da"s)
iv. $otal tie used + 29.76 inutes 6 :00 shirts !er da" + 2@,211 inutes
v. >irect 5a4or Atili<ation + 20,60: inutes used , 2@,920 inutes availa4le
+ #7.62%
h. $otal >irect 5a4or Cost !er shirt + %- .or/ers 6 : hours !er da" 6 B6 !er
hour) , :00
i. Gvertie is incurred *or all e!lo"ees in order to reach excess o* noral
hour !roduction levels %calculated a4ove = 11; a4ove ca!acit")
ii. Gvertie !roduction + dail" !roduction F dail" ca!acit" + :00 F 720 + :0
shirts
ii.G$ %inutes) + :0 6 C$ + :0 6 0.67 + 9@.60 extra inutes !er .or/er
ii.G$ cost + %9@.60 , 60) 6B6 , hour 6 nu4er o* .or/ers + %9@.60 , 60) 6 6 6 39
ii.G$ cost + B@9@.96
iii. $otal >irect la4or cost + %39 6 : 6 6) ? @9@.96 , :00 %total dail" !roduction +
1:,000 , 20 da"s)
iv. $otal >irect 5a4or Cost + &$.'$ ( regular shirt
(B) Custom shirt production on separate assembly line (1 !or"ers # 1
ne! hire):
a. C"cle tie *or each station + total station tie , - o* .or/ers at station
i. C"cle tie *or s"ste + lon0est station c"cle tie
ii. Cu1s station + S"ste C$ + @.90 inutes , 1 .or/er + $."0 minutes %collar
station)
4. Manu*acturin0 5ead $ie %M5$) + C"cle $ie %C$) 6 7or/s in 'ro0ress %78')
i. C$ + 0.9 inutes
ii. 78' individual shirts + %10 4atches 6 9 shirts , 4atch) + 90 shirts
iii. M5$ in da"s + %@.90 6 90) , 3:0 inutes !er da" + 0.31 da"s
c. $otal individual shirts as 78' + Su o* avera0e 4atches 6 9 shirts !er 4atch
i. 78' shirts + @0 shirts in se.in0 ? 9 shirts in cuttin0 ? 19 shirts in Dnishin0
+ 50 shirts as W! %0iven in case)
d. 'roduction ca!acit" o* s"ste at continuous 100; utili<ation %inutes)
i. 'roduction ca!acit" + inutes !er da" , C$ o* s"ste
ii. 'roduction ca!acit" + 3:0 , @.90 + 12$ units per day = continuous 100;
utili<ation
e. 'roduction ca!acit" utili<ation + onthl" !roduction , onthl" !roduction
ca!acit"
i. Current onthl" !roduction is 2,000 %0iven in case)
ii. $otal onthl" ca!acit" + 2360 %12@ !er da" 6 20 da"s !er onth)
iii. 'roduction utili<ation + 2000 , 2360 + #1.25%
*. >irect 5a4or content + su o* tie at all stations ? tie !er shirt *or cuttin0
i. Su o* tie at all stations + 29.91 inutes !er shirt
ii. # sin0le cuttin0 o* 1 !attern on 9 la"ers o* cloth !roduces 9 shirts
iii. $otal cuttin0 tie + 2.9 inutes
iv. Cuttin0 tie !er shirt + 2.9 inutes , 9 shirts + 0.90 inutes !er shirt
v. $otal la4or content %tie) !er shirt + 29.91 ? 0.90 + 26.01 minutes per
shirt
0. >irect 5a4or Atili<ation + $otal used la4or tie , $otal la4or tie availa4le
i. $otal la4or + 12 se.ers ? @ Dnishers ? 1 cutter + 16
ii. $otal la4or tie availa4le + 16 .or/ers 6 3:0 inutes !er da" + 76:0
inutes
iii. $otal tie used + tie !er shirt 6 dail" !roduction %2000 !er onth , 20 da"s)
iv. $otal tie used + 26.01 inutes 6 100 shirts !er da" + 2601 inutes
v. >irect 5a4or Atili<ation + 2601 inutes used , 76:0 inutes availa4le
+ $$.#7%
h. $otal >irect 5a4or Cost !er shirt + %- .or/ers 6 : hours !er da" 6 B6 !er
hour) , 200
i. $otal >irect la4or cost + %16 6 : 6 6) , 200 %total dail" !roduction + 2000 , 20
da"s)
ii. $otal >irect 5a4or Cost + &7.6# ( custom shirt

'art B
Recoendation to Mana0eent
Asin0 the calculations in Part A it is !ossi4le to evaluate each o* the t.o !ro!osals
in ters o* their cost and eHcienc". Iirstl", to deduce the total cost *or the custo
shirts each onth, the >irect 5a4our Cost *ro each !lan can 4e ulti!lied 4" 2000
%the desired Juantit" !roduced). B" doin0 this .e learn that 8/eKs total cost *or
custo shirts is B7.6: x 2000 + B19,@60, co!ared to Mi/eKs B@.37 x 2000 +
B6,930. $his results in an B:,320 cost di1erence in *avour o* Mi/eKs !lan. 'roduction
o* re0ular shirts on the other hand are chea!er usin0 8/eKs !rocess, that is 8/eKs
la4our costs are B@.3@ x 16,000 %desired Juantit" o* re0ular shirts) + B93,::0
co!ared .ith Mi/eKs la4our costs o* B@.37 x 16,000 + B99,920. $he di1erence
4et.een the t.o is onl" B630, .hich is *airl" insi0niDcant, and leaves the total cost
di1erence 4et.een the t.o !lans at B7,7:0 in *avour o* Mi/e.

$he 0reat dis!arit" in cost 4et.een the t.o is ainl" due to the eHcienc" o* each
!ro!osal. 7hilst Mi/e increases the eHcienc" o* 4oth ca!acit" and la4our utili<ation
in the *actor" %a4sor4in0 excess ca!acit" and increasin0 eHcienc" *ro :@; to
9@.79; as .ell as i!rovin0 la4our eHcienc" 4" 7.@1;), 8/e over-utili<es ca!acit"
in his re0ular shirt !roduction line and severel" under-utili<es ca!acit" in his custo
shirts !roduction line. $he result o* this is that he has to !a" the .or/ers on the
re0ular shirt line overtie .hilst the .or/ers on the custo shirt line are *reJuentl"
starved and sittin0 idle.

Iurtherore, .hen considerin0 the lo0istics o* each !roduction line la"out, Mi/eKs
!ro!osal is *avoura4le over 8/eKs 4ecause it allo.s *or ore Lexi4ilit". 7hilst Mi/e
retains the existin0 M!rocess la"outK in the 4atch sho! !rocess, .here siilar
o!erations are !er*ored in coon *unctional areas, 8/e instead ado!ts a M!roduct
la"outK structure, .here the o!erations are located accordin0 to the !ro0ressive
ste!s involved in a/in0 a shirt. Havin0 onl" one .or/er co!letin0 each
!roduction tas/, as is the case in 8/eKs !lan, eans that i* one .or/er is slo.ed
do.n *or an" reason or needs to ta/e a 4rea/, then there is no one to !ic/ u! the
slac/. #s a result, the .hole !rocess is ne0ativel" a1ected. #n ideal asse4l" line
should allo. .or/ers to trade eleents o* .or/ and it should 4e un!ro4leatic to
add .or/ers to the line to increase eHcienc", ho.ever the strai0ht-line la"out o*
8/eKs !lan does not satis*" these reJuireents.

Based u!on our anal"sis, althou0h 4oth !rocesses do essentiall" satis*" >.i0ht
CollierKs !roduction lead ana0eent tie conditions, .e .ould recoend that
he should trial Mi/eKs !lan. 8* there does indeed !rove to 4e a ar/et *or id !rice
ran0e custo shirts, then i!leentin0 Mi/eKs !ro!osal is the co!an"Ks 4est shot
at a/in0 a lucrative !roDt *ro this