Executive Shirt Company Case Analysis Group 4

For this case, as we have enough buffer and WIP for each activity, we can exclude setup and
shutdown times from production process calculations. Following are the calculations for the
production process quantities for Current process.

a) Actual Cycle Time: Looking at each of the activities in the process, we find that
making cuff (sewing) takes maximum time per shirt and hence is the bottleneck
activity for the process. Bottleneck capacity is 2 min/4 shirts or 0.5 min/shirt. Hence,
the cycle time for the process is 0.5min/shirt.
b) Manufacturing Lead Time: Time taken for a shirt to flow through the production
process, 11760 (calculated below)/960=12.25 days lead time for full capacity
For 800 shirts, 11760/800=14.7 days
c) WIP inventory: This is the total number of unfinished shirts in the process present at
a given instant in the process. We have calculated by adding average WIP for each
activity and multiplying with the number of shirts in a batch. Hence WIP=
196*60=11760 shirts.
d) Production capacity (shirts/day): Taking 8hr work day, total working min is
8*60=480. Hence capacity will be Actual running time/actual cycle time,
480/0.5=960 shirts/day
e) Capacity Utilization: This is given as number of actual shirts produced per day as a %
of maximum possible production capacity, 800/960=83.3%
f) Direct Labor Content(min/shirt): This is given as sum of time at all stations + time
for cutting per shirt, 25.51+(0.25X4(laborers working simultaneously on the cutting
machine)) = 26.51
g) Direct Labor Utilization: This is given as the actual amount of time labor works as a
% of the total amount of time for which the labor is paid.
For factory running at max capacity of 960 shirts/day:
(26.51*960)/(8*60*64)=0.8284 or 82.84%
For factory running at required capacity 800 shirts/day
(26.51*800)/(8*60*64)= 0.6903 or 69.03%
h) Direct Labor Cost: The cost it takes to make a single shirt.
(Number of laborers*number of hr worked/day *Cost of labor/hr)/number of shirts
produced/day
= (64*8*6)/800=$3.84/shirt
for full capacity (64*8*6)/960=$3.2/shirt

MIKEs Plan

Mikes solution included a new low ply laser cutting machine used for custom shirt
cutting operated by 1 new dedicated worker.
Custom as well as regular shirts would be sewn in batches of 5 shirts each
Number of buffer inventory at each station is increased from 3 to 6 batches/worker

a) Actual cycle time: The new activity in this plan is cutting using new machine whose
process speed is given as 2.5min/5shirt or 0.5min/shirt. Therefore, in this production
process will also be same as previous process 0.5min/shirt.
 b) Manufacturing lead time:
For maximum capacity:
WIP inventory/prod capacity=1980/960=2.0625 shirts/day
For Required capacity:
WIP inventory/prod capacity=1980/900=2.2 shirts/day
c) WIP Inventory: Avg WIP*number of shirts in the new batch
= (36+288+24*3)*5=1980 shirts
d) Production Capacity (shirts/day): This will remain unchanged
e) Capacity Utilization: (Current capacity/max capacity)*100= (900/960)*100=93.75%
f) Direct Labor content(min/shirt):
Cutting time can be calculated using weighted average =
((800*0.25*4)+(100*0.5))/900=0.94min/shirt.
Direct Labor Utilization= 25.51
Direct labor content is 25.91+0.94=26.45 min/shirt
g) Direct Labor Utilization: utilized laborers/max laborers=
(26.45*900)/(8*60*65)=0.7629 or 76.29%
h) Direct Labor Cost($/shirt): Total labor cost / total shirts= (65*6*8)/900=$3.47/shirt

IKEs Plan
Two different assembly lines are used viz. regular and custom shirts.
15 Workers for new line are taken from existing line
Regular Process
a) Actual Cycle time(min/shirt): This is given by 2min/3 shirts = 0.667 min/shirt
b) Manufacturing lead time:
WIP/Max capacity=9060/719=12.60 days
WIP/actual production = 9060 (from below)/800=11.325 days (actual)
c) WIP inventory: (16+108+9*3)*60=9060 shirts
d) Production Capacity (shirts/day): (8*60)/0.667= 719.67, hence 719
Overtime would be required for the remaining 81 shirts, 0.667*81=54.027min=55
min(approx.)
e) Capacity Utilization: actual prod./prod. Cap. = 800/(719)=1.1126 or 111.26%
overutilization of the line
f) Direct Labor content(min/shirt): 1 min + 25.51=26.51 min/shirt
g) Direct Labor Utilization: (Direct labor content * number of shirts produced)/(regular
+ over time) = (26.51*800)/[(480+55)*49]=0.8090 or 80.9 %
h) Direct Labor Cost($/shirt): [(6*8+55/(60*9))*49]/800=$3.445/shirt

Custom Process

a) Actual Cycle time(min/shirt): same as slowest process=3.9 min (collar making)

b) Manufacturing lead time:
max production
50/123= 0.406 days
Actual production
50/100=0.5 days
c) WIP inventory: 5+3*15 = 50 shirts
d) Production Capacity (shirts/day): (8*60)/3.9=123.07 hence 123 shirts/day
 e) Capacity Utilization: Actual prod. /prod. Cap= 100/123=0.8130 or 81.3%
f) Direct Labor content(min/shirt): 0.5 (cutting)+ 25.51=26.01 min/shirt
g) Direct Labor Utilization: (26.01*100)/(8*60*16)=0.3387 or 33.87%
h) Direct Labor Cost($/shirt): (16*6*8)/100=$7.68/shirt

The findings have been summarized in the following table:

Comparing MIKE and IKEs Plans

Direct labor cost for Mikes plan is ($3.47) while for Ike it is ($3.445) for regular and
($7.68) for custom. Due to separation of assembly line, Ike has managed to reduce
the labor cost of regular shirt by some amount but costs for the custom shirt has
increased considerably. Hence, Mikes plan is better considering direct labor cost
factor.
WIP inventory for Mike is (1980) and for Ike regular is (9060) while for custom is (50).
In case of Mikes plan, the inventory is much lesser thereby, it is a more efficient
process and inventory costs would be lower.
As WIP has also been significantly reduced, the manufacturing lead time has been
reduced and hence one can roll out a shirt much faster than before
In case of Ikes plan, the regular production line is being over-utilized and he will
have to pay overtime costs to the workers.
While Mikes plan has a higher labor utilization than the existing regular process,
Ikes plan has a very poor utilization for custom line.
Mikes plan will have even higher utilization than the current process

As overall production costs are higher in Ikes case than Mikes and the overall capacity
utilization is more in Mikes case. Therefore Mikes plan should be adopted for
implementation in the production process.
 Exhibit 1

Current Production Process

Stitch
Attach
Layering Sleeves
Down
Sleeves

Attach Sew Side

Cutting
Collar Seam

Make Join Attach

Collars Shoulders Cuffs

Fold
Make Nake Hem
Cuffs Back Bottom And
Pack

Make Make
Inspect Iron
Sleeves Front
 Exhibit 2

Custom Shirt Line

PACKAGE
SEW IRON
CUT INSPECT
 Exhibit 3

New Production Process

Layering
Sew Side
& Seam
Stitch
Cutting Down
Sleeves

Make Attach Attach

Collars Sleeves Cuffs

Make Attach Hem

Cuffs Collar Bottom

Make Join
Inspect
Sleeves Shoulders

Make Make Fold &

Iron
Front Back Package
 By:
Abhishek Ozarde
Arshdeep Singh
Jayesh Borana
Prashant Kataria
Rahul Lakra