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MGMT 6220- Case Study #1, Kristens Cookie Company

1. If the rush order is placed without any cookie dough being mixed yet, then it will take Kristen and her roommate 26 minutes to complete the order. It will take Kristen a total of 8 min to wash out the mixing bowl, add ingredients, mix them in the food processor and then dish up the cookies onto a baking tray. Her roommate then places the cookies into the oven and bakes them totaling 10 min. The cookies are then removed to cool for 5 min, packed in a box in 2 min, and then payment is accepted by the customer taking only 1 min. The entire process takes 26 min to complete. If the rush order is placed after cookie dough production has started, then the rush order can be completed in 18 min (as long as the rush order has the same ingredients as the cookie dough that was previously mixed). Once the prior dozen cookies are placed into the oven, Kristen can dish up the rush order cookies onto the baking try. When the previous dozen cookies are removed from the oven to cool, the rush order cookies are placed immediately into the oven. The rush order can be made in 18 min because the 8 min of prebaking activities (wash out mixing bowl, add ingredients, mix them in food processor, dish up cookies onto tray) have already been completed while the prior dozen cookies are in the oven. 2. Kristen and her roommate are able to produce 22 dozen cookies over a 4 hour night. As stated above, the first dozen cookies will take 26 min to complete. However, once the first dozen cookies are placed in the oven, Kristen can dish out the next dozen cookies onto a baking tray ahead of time. Once the first dozen cookies are taken out of the oven by the roommate to cool for

5 min, the roommate can then grab the second tray of cookie dough and place them in the oven to cook. While the second dozen cookies are in the oven, the roommate can then bag the first dozen and make the sale. Additionally, while the second dozen cookies are in the oven, Kristen can dish up the third dozen of cookies onto the baking tray so they will be ready to be placed in the oven (once free). Once the third dozen cookies have been placed in the oven, Kristen can mix up a new batch of cookie dough and place them onto a baking tray. By completing the pre and post baking activities while cookies are in the oven, the roommates are able to cut the production time down to 10 min (after the first dozen). After the production process starts, they can produce cookies based on the bottleneck of the oven time (10 min). Therefore, over a 240 min period, they can make 22 dozen cookies. The first batch takes 26 min, each additional batch will take 10 min. Therefore, they can successfully bake 22 dozen cookies in a 4 hr period. 3. If the order is placed for 1 dozen cookies, it will take up 8 min of Kristens time and 4 min of her roommates time (Im not including waiting time for the baking or the cooling process towards each employees work time). Kristen will spend 8 min on the prebaking process (6 min to wash bowl, add ingredients and mix, 2 min to dish up cookie dough onto baking tray). Her roommate will spend 1 min setting the oven, 2 min packing the finished cookies into a box, and 1 min to accept payment. 4. Based on my response to question #2, Kristen and her roommate are able to expedite the cookie making process once the first dozen cookies are removed from the oven. The first dozen cookies take 26 min to complete, but each dozen after that only takes 10 min. Because the roommates are able to reduce their cooking time after the initial dozen are removed from the

oven, they could consider giving a discount to customers who order 2 dozen cookies (order must be for 2 dozen cookies with the same ingredients). An order of 2 dozen cookies (with the same ingredients) does not cost the roommates twice as much in labor time as an order of 1 dozen cookies, so a discount can be applied. The roommates do not receive any discount on ingredients when buying in bulk, so the discount to the customer must only be based on labor time. The same can be said for orders of 3 dozen cookies as long as all 3 dozen have the same ingredients. Kristen can give a discount for orders of 2-3 dozen cookies with the same ingredients. However, there will be no additional discount given for orders of 4 dozen or more cookies as Kristen will need to take additional labor time to mix a new batch of cookie dough. It will take Kristen and her roommate longer to fill a two dozen cookie order than a 1 dozen order. The oven used for baking the cookies can only cook 1 dozen cookies at a time. Therefore, the second dozen cookies will always have to wait for the prior dozen to finish baking in the oven (bottleneck) before they can be cooked. Because of the limited capacity of the oven, it will always take them longer to bake 2 dozen cookies than 1 dozen. 5. Kristen and her roommate will need 1 food processer and at least 3 cookie trays to properly run the cookie business. Because their food processor can make enough cookie dough for 3 dozen cookies at once, while the oven can only bake 1 dozen at a time, there is no need for more than 1 food processer. The roommates will need 3 trays because while 1 tray is in the oven cooking and the other tray is cooling, Kristen can scoop the cookie dough onto a third baking tray to await placement into the oven (to save time). 6. When considering changes to Kristens cookie operation, I would first look at the current bottleneck of the operation, which is the baking process in the oven. Currently, because the

single oven cooks 1 dozen cookies in 10 min, it has an hourly capacity of 6 dozen cookies per hour. My initial response would be for Kristen and her roommate to add another oven to the production process. If they do add another oven so that they could cook 2 dozen cookies at once, then it would add 4 min onto their 26 min baking process (for the initial 1 dozen cookies produced). Two min of the extra time would be for Kristen to dish up the second dozen cookies onto a baking tray, the other two min of extra time would be for the roommate to pack an additional dozen cookies into a box. However, even with the addition of the extra oven, during the baking process, Kristen still has enough time to wash out the bowl, add ingredients, mix them, and dish up 2 dozen cookies onto 2 baking trays (as long as both dozen cookies have the same ingredients!) all within the 10 min the prior cookies are baking in the oven (It is noted that the roommates would now need at least 4 baking trays once the 2nd oven is added). The bottleneck would still be the baking process even with the second oven. Additionally, the roommate can complete the post baking process of cooling, packing 2 dozen cookies in box (4 min) and then accept the payment all within the 10 min of baking time. There should be barely enough time for the roommates to complete this increased production process. Kristens cookie company would be able to produce 2 dozen cookies in the following timeframe of 240 min.

Cookies Produced

2 dozen

4 dozen

6 dozen

8 dozen

10 dozen

44 dozen

Time

30 min

40 min

50min

60 min

70 min

240 min

After the new oven is purchased, Kristens cookie company should be able to produce 44 dozen cookies in a 4 hr shift. This doubles the cookie output of the 1 oven system. When considering the amount the roommates would pay to rent an additional oven, I will assume they are charging $5 per 1 dozen cookies.

Old System (1 oven): $5 * 22 dozen= $110 in revenue- (cost $0.7 per dozen) $15.4= $94.6 New System (2 ovens): $5 * 44 dozen= $220 in revenue- (cost $0.7 per dozen) $30.8= $189.2 (Not including unknown labor costs) The roommates have increased their profit by $94.6 by adding the additional oven. However, they both will be working extremely hard to keep up with the new production schedule. They must stay on the exact schedule to keep up with the increase in production. Therefore, I wouldnt advise the roommates to rent an additional oven for anything more than half of the increase in profit. Using this example, I would not pay more than $47.30 to rent an additional oven per night.

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