Executive

Part A
Calculations
A) Actual Cycle Time

(Min/shirt)
B) Manufacturing Lead Time

(days)
(WIP * Cycle Time) / Minutes in
a working day
C) WIP Inventory (shirts)
Average WIP * Batch size
D) Production Capacity
(shirts/day)
Minutes available / CT
E) Capacity Utilization
Actual Produced / What could be
produced
F) Direct Labor Content

(min/shirt)
Time spent cutting + Direct
labor for one shirt
Current Process
Mike's Plan
Regular Shirts
Regular & Custom

Shirts
Ike's Plan
Regular Shirts
Custom Shirts
All labor content / one

less worker for each
2.5 / 5 = 0.5 labor
category
while cutting is
120 minutes for cutting /
content for cutting.
still 0.25:
2 minutes per cuff / 4 480 shirts worth = 0.25
With everything divided
workers = 0.5
< labor content of cuffs
Cuffs is still the
by 1, collar is new
at 0.5 CT
bottleneck at 2 labor
bottleneck at3.90 CT
content / 3 workers
= 0.67 mins/shirt
11,760 * 0.5 / 480

minutes = 12.25
196 * 60 =11,760
0.5 * 1980 / 480 =2.06

days
(9060 * 0.66) / 480

= 12.58 days
396 * 5 =
60 * 151 sum of avg.

WIP =
1980 shirts
8 hours * 60 minutes /
8 hours * 60 mins / 0.5
0.5 =
= 960 shirts/day
960 shirts / day
10,000 / (960 * 20 days) (16,000 + 2000) / (960 *

= 83%
20) =93.75%
9,060 shirts
(50 * 3.9) / 480 =0.41

days
30 units at sewing + 5
units being cut + 15
units being finished = 50
WIP(given in case)
480 / 0.666 =
8 * 60 / 3.9 =
720 shirts/day
123 shirts/day
16,000 / (720 * 20)

= 111.11%
123 * 20 days = 2460

monthly production
capacity
2000 / 2460 =81.25%
(16,000 / 18,000) * 0.25

= 0.2777 + (2,000 /
18,000
* 0.5) = 0.2777 (120 minutes / 480 total 0.5 direct labor for
(90 + 30 minutes /8hr *
=
weighted
avg. cutting minutes) + 3.9 + 2 + cutting + 3.9 + 2 + 0.65
60 mins) + 3.9 + 2 +
0.65 + 2.5 + 1.7 + 0.66 time for regular and 0.65 + 2.5 + 1.7 + 0.66 + 2.5 + 1.7 + 0.66 +
custom
+ 1.65 + 1.55 + 0.65 +
+ 1.65 + 1.55 + 0.65 + 1.65 + 1.55 + 0.65 + 1.8
1.8 + 1.55 + 1.7 + 1.5 + 25.76 - 0.25 = 25.51 1.8 + 1.55 + 1.7 + 1.5 + + 1.55 + 1.7 + 1.5 +
1.95 + 1.75 = 25.76 sum of standard station 1.95 + 1.75 = 25.76
1.95 + 1.75 =25.01
time
25.51 + 0.2777 =25.79
G) Direct Labor Utilization
(800 shirts * 25.76

(Shirts per day * Direct labor
Direct labor content) /
content / (Direct labor * minutes
64*480 = 67.08%
available)
(900 * 25.79) / (65

direct workers * 480
minutes available)=
23,211 / 31,200
=74.39%
(800 per day * 25.76) /

(64 - 15) * 480) =
100 * 26.01 / (16 * 480)
20,608 / 23,520
= 33.87%
= 87.62%
Current Process
Mike's Plan
Regular Shirts
Regular & Custom

Shirts
Ike's Plan
Regular Shirts
Custom Shirts
720 shirts / day on

normal salary: 49 * 6 *
8 = $2,352
H) Direct Labor Cost
($/shirt)
Direct labor (Salary * hours
worked) / shirts produced
80 remaining shirts *
0.67 = 53.6 minutes
65 ( $6 * 8hours) / 900
64 (6 * 8) / 800 =$3.84
= 31200 / 900 = $3.47
53.6 / 60 * 9 = 8.04
49 * 8.04 = 393.96
Total: (393.96 + 2352) /
800 =3.43
Explanation
1.
Regular shirt production process without custom shirt fabrication.
a.
Cycle time for each station = total station time / # of workers at station
i.
Cycle time for system = longest station cycle time
ii.
Cuffs station = System CT = 2.0 minutes / 4 workers = 0.5 minutes
b.
Manufacturing Lead Time (MLT) = Cycle Time (CT) * Works in Progress (WIP)
i.
CT = 0.5 minutes
ii.
WIP individual shirts = (196 batches * 60 shirts / batch) = 11,760
iii.
MLT in days = (0.5 * 11,760) / 480 minutes per day = 12.25 days
c.
Total individual shirts as WIP = Sum of average batches * 60 shirts per batch
i.
WIP shirts = 196 batches * 60 shirts per batch = 11,760 shirts as WIP
d.
Production capacity of system at continuous 100% utilization (minutes)
i.
Production capacity = minutes per day / CT of system
ii.
Production capacity = 480 / 0.5 = 960 units per day @ continuous 100% utilization
e.
Production capacity utilization = monthly production / monthly production capacity
i.
Current monthly production is 16,000 (given in case)
ii.
Total monthly capacity = 19,200 (920 per day * 20 days per month)
iii.
Production utilization = 16,000 / 19,200 = 83%
f.
Direct Labor content = sum of time at all stations + time per shirt for cutting
i.
Sum of time at all stations = 25.51 minutes per shirt
ii.
A single cutting of 8 patterns on 60 layers of cloth produces (60 * 8) = 480 shirts
iii.
Total cutting time = (1.5 minutes * 60 layers) + (30 minutes cutting) = 120 minutes
iv.
Cutting time per shirt = 120 minutes / 480 shirts = 0.25 minutes per shirt
16 ($6 * 8 hours) / 100

= 7.68
v.
Total labor content (time) per shirt = 25.51 + 0.25 = 25.76 minutes per shirt
g.
Direct Labor Utilization = Total used labor time / Total labor time available
i.
Total labor time available = 64 workers * 480 minutes per day = 30,720 minutes
ii.
Total time used = time per shirt * daily production (16,000 per month / 20 days)
iii.
Total time used = 25.76 minutes * 800 shirts per day = 20,608 minutes
iv.
Direct Labor Utilization = 20,608 minutes used / 30,720 minutes available = 67.08%
h.
Total Direct Labor Cost per shirt = (# workers * 8 hours per day * $6 per hour) / 800
i.
Total Direct labor cost = (64 * 8 * 6) / 800 (total daily production = 16,000 / 20 days)
ii.
Total Direct Labor Cost = $3.84 / shirt
2.
Mikes plan for production of regular and custom shirts using existing facilities with the addition
of a new cutting machine and one worker.
a.
System CT remains unchanged = 0.5 (the cuffs station still has the longest station CT)
b.
i.
CT = 0.5 minutes
ii.
iii.
MLT in days = (0.5 * 1,980) / 480 minutes per day = 2.06 days
c.
i.
d.
i.
ii.
e.
i.
Current monthly production is 16,000 regular + 2000 custom shirts (given in case)
ii.
iii.
Production utilization = 18,000 / 19,200 = 93.8%
f.
i.
ii.
New machine can cut 1 pattern on five layers in 2.5 minutes
ii.Custom cutting time = 5 shirts / 2.5 minutes = 0.5 minutes per custom shirt
iii.
Total cutting time = Weighted average of old & new machine cutting times
iii.(16,000 reg / 18000 total) * 0.25 + (2000 / 18000) * 0.5 = 0.278 min/shirt
iv.
Total labor content (time) per shirt = 25.51 +0.28 = 25.79 minutes per shirt
g.
i.
ii.
Total time used = time per shirt * daily production (18000 per month / 20 days)
iii.
iv.
h.
i.
Total Direct labor cost = (65 * 8 * 6) / 900 (total daily production = 18,000 / 20 days)
ii.
Total Direct Labor Cost = $3.47 / shirt
3.
Ikes plan for shifting labor from the regular assembly floor to create a separate assembly line
dedicated to custom shirts, thus separating the two streams of production.
(A) Regular Shirt Production:
a.
System CT = 0.67 (the cuffs station still has the longest station CT @ 2.0 min / 3 workers )
b.
i.
CT = 0.67 minutes
ii.
iii.
MLT in days = (0.67 * 9,060) / 480 minutes per day = 12.58 days (for regular shirts)
c.
i.
d.
i.
ii.
e.
i.
Current monthly production is 16,000 regular shirts (given in case)
ii.
iii.
Production utilization = 16,000 / 14,400 = 111%
f.
i.
ii.
A single cutting of 8 patterns on 60 layers of cloth produces (60 * 8) = 480 shirts
iii.
Total cutting time = (1.5 minutes * 60 layers) + (30 minutes cutting) = 120 minutes
iv.
Cutting time per shirt = 120 minutes / 480shirts = 0.25 minutes per shirt
v.
g.
i.
New direct labor available = 64 15 = 49
ii.
iii.
iv.
v.
h.
i.
Overtime is incurred for all employees in order to reach excess of normal hour production levels
(calculated above @ 11% above capacity)
ii.
Overtime production = daily production daily capacity = 800 720 = 80 shirts
ii.OT (minutes) = 80 * CT = 80 * 0.67 = 53.60 extra minutes per worker

ii.OT cost = (53.60 / 60) *$6 / hour * number of workers = (53.60 / 60) * 6 * 49
ii.OT cost = $393.96
iii.
Total Direct labor cost = (49 * 8 * 6) + 393.96 / 800 (total daily production = 18,000 / 20 days)
iv.
Total Direct Labor Cost = $3.43 / regular shirt
(B) Custom shirt production on separate assembly line (15 workers + 1 new hire):
a.
Cycle time for each station = total station time / # of workers at station
i.
Cycle time for system = longest station cycle time
ii.
Cuffs station = System CT = 3.90 minutes / 1 worker = 3.90 minutes (collar station)
b.
i.
CT = 0.5 minutes
ii.
WIP individual shirts = (10 batches * 5 shirts / batch) = 50 shirts
iii.
MLT in days = (3.90 * 50) / 480 minutes per day = 0.41 days
c.
i.
WIP shirts = 30 shirts in sewing + 5 shirts in cutting + 15 shirts in finishing = 50 shirts as
WIP (given in case)

d.
i.
ii.
e.
i.
Current monthly production is 2,000 (given in case)
ii.
Total monthly capacity = 2460 (123 per day * 20 days per month)
iii.
Production utilization = 2000 / 2460 = 81.25%
f.
i.
ii.
A single cutting of 1 pattern on 5 layers of cloth produces 5 shirts
iii.
Total cutting time = 2.5 minutes
iv.
Cutting time per shirt = 2.5 minutes / 5 shirts = 0.50 minutes per shirt
v.
g.
i.
Total labor = 12 sewers + 3 finishers + 1 cutter = 16
ii.
Total labor time available = 16 workers * 480 minutes per day = 7680 minutes
iii.
iv.
Total time used = 26.01 minutes * 100 shirts per day = 2601 minutes
v.
Direct Labor Utilization = 2601 minutes used / 7680 minutes available = 33.87%
h.
i.
Total Direct labor cost = (16 * 8 * 6) / 200 (total daily production = 2000 / 20 days)
ii.
Total Direct Labor Cost = $7.68 / custom shirt
Part B
Recommendation to Management
Using the calculations in Part A it is possible to evaluate each of the two proposals in terms of their cost
and efficiency. Firstly, to deduce the total cost for the custom shirts each month, the Direct Labour Cost
from each plan can be multiplied by 2000 (the desired quantity produced). By doing this we learn that Ikes
total cost for custom shirts is $7.68 x 2000 = $15,360, compared to Mikes $3.47 x 2000 = $6,940. This
results in an $8,420 cost difference in favour of Mikes plan. Production of regular shirts on the other hand
are cheaper using Ikes process, that is Ikes labour costs are $3.43 x 16,000 (desired quantity of regular
shirts) = $54,880 compared with Mikes labour costs of $3.47 x 16,000 = $55,520. The difference between
the two is only $640, which is fairly insignificant, and leaves the total cost difference between the two
plans at $7,780 in favour of Mike.
The great disparity in cost between the two is mainly due to the efficiency of each proposal. Whilst Mike
increases the efficiency of both capacity and labour utilization in the factory (absorbing excess capacity
and increasing efficiency from 83% to 93.75% as well as improving labour efficiency by 7.31%), Ike overutilizes capacity in his regular shirt production line and severely under-utilizes capacity in his custom shirts
production line. The result of this is that he has to pay the workers on the regular shirt line overtime whilst
the workers on the custom shirt line are frequently starved and sitting idle.
Furthermore, when considering the logistics of each production line layout, Mikes proposal is favourable
over Ikes because it allows for more flexibility. Whilst Mike retains the existing process layout in the
batch shop process, where similar operations are performed in common functional areas, Ike instead adopts
a product layout structure, where the operations are located according to the progressive steps involved in
making a shirt. Having only one worker completing each production task, as is the case in Ikes plan,
means that if one worker is slowed down for any reason or needs to take a break, then there is no one to
pick up the slack. As a result, the whole process is negatively affected. An ideal assembly line should allow
workers to trade elements of work and it should be unproblematic to add workers to the line to increase
efficiency, however the straight-line layout of Ikes plan does not satisfy these requirements.
Based upon our analysis, although both processes do essentially satisfy Dwight Colliers production lead
management time conditions, we would recommend that he should trial Mikes plan. If there does indeed
prove to be a market for mid price range custom shirts, then implementing Mikes proposal is the
companys best shot at making a lucrative profit from this initiative.

Executive

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Part A

A) Actual Cycle Time

B) Manufacturing Lead Time

F) Direct Labor Content

Regular & Custom

All labor content / one

11,760 * 0.5 / 480

0.5 * 1980 / 480 =2.06

(9060 * 0.66) / 480

60 * 151 sum of avg.

10,000 / (960 * 20 days) (16,000 + 2000) / (960 *

(50 * 3.9) / 480 =0.41

16,000 / (720 * 20)

123 * 20 days = 2460

(16,000 / 18,000) * 0.25

G) Direct Labor Utilization

(800 shirts * 25.76

(900 * 25.79) / (65

(800 per day * 25.76) /

Regular & Custom

720 shirts / day on

Regular shirt production process without custom shirt fabrication.

Cycle time for system = longest station cycle time

Cuffs station = System CT = 2.0 minutes / 4 workers = 0.5 minutes

WIP individual shirts = (196 batches * 60 shirts / batch) = 11,760

Production capacity of system at continuous 100% utilization (minutes)

Production capacity = minutes per day / CT of system

Production capacity utilization = monthly production / monthly production capacity

Current monthly production is 16,000 (given in case)

Production utilization = 16,000 / 19,200 = 83%

Sum of time at all stations = 25.51 minutes per shirt

A single cutting of 8 patterns on 60 layers of cloth produces (60 * 8) = 480 shirts

16 ($6 * 8 hours) / 100

Total Direct Labor Cost = $3.84 / shirt

WIP individual shirts = (396 batches * 5 shirts / batch) = 1,980

Production capacity of system at continuous 100% utilization (minutes)

Production capacity = minutes per day / CT of system

Production capacity utilization = monthly production / monthly production capacity

Production utilization = 18,000 / 19,200 = 93.8%

Sum of time at all stations = 25.51 minutes per shirt

New machine can cut 1 pattern on five layers in 2.5 minutes

Total Direct Labor Cost = $3.47 / shirt

WIP individual shirts = (151 batches * 60 shirts / batch) = 9,060

Production capacity of system at continuous 100% utilization (minutes)

Production capacity = minutes per day / CT of system

Production capacity utilization = monthly production / monthly production capacity

Current monthly production is 16,000 regular shirts (given in case)

Production utilization = 16,000 / 14,400 = 111%

Sum of time at all stations = 25.51 minutes per shirt

A single cutting of 8 patterns on 60 layers of cloth produces (60 * 8) = 480 shirts

New direct labor available = 64 15 = 49

Overtime production = daily production daily capacity = 800 720 = 80 shirts

ii.OT (minutes) = 80 * CT = 80 * 0.67 = 53.60 extra minutes per worker

Total Direct Labor Cost = $3.43 / regular shirt

Cycle time for system = longest station cycle time

WIP individual shirts = (10 batches * 5 shirts / batch) = 50 shirts

WIP shirts = 30 shirts in sewing + 5 shirts in cutting + 15 shirts in finishing = 50 shirts as

WIP (given in case)

Production capacity of system at continuous 100% utilization (minutes)

Production capacity = minutes per day / CT of system

Production capacity utilization = monthly production / monthly production capacity

Current monthly production is 2,000 (given in case)

Production utilization = 2000 / 2460 = 81.25%

Sum of time at all stations = 25.51 minutes per shirt