OPERATIONS regular), 0.5 minutes/shirt (for mike’s process), 3.9 minutes/shirt

 

 

 

 

 

OPERATIONS MANAGEMENT

Group – G

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Section – B

Case Submission: Executive Shirt Company Inc.

 

 

 

 

Submitted by:

Sravani Cherukupalli (1701075)

Piyush Chimankar (1701076)

John Bhaaswanth D (1701085)

Keerthana Babu (1701087)

Nisha P (1701095)

Nitin Jaganath R (1701096)

 

Q1) Current Production Process 

The production type for Executive shirt company Inc is make to order. The flow unit for analysis of current process is one batch consisting of 60 shirts of 8 patterns.

Calculations:  Actual Cycle time –The total time taken for the process to get complete that is given by Total labor time available / Total shirts produced

For Regular- (20*8*60)/16000 = 0.6 minutes per shirt, For mike’s- (20*8*60)/18000 = 0.533 min per shirt, For Ike’s Custom process- (20*8*60)/2000 = 4.8 min per shirt, For Ike’s regular process – 0.67 min per shirt

WIP Inventory – WIP is company’s partially completed goods waiting to get completed given by addition of average number of 60- shirt batches* number of shirts

For Regular – 196 batches * 60 shirts/batch = 11760 shirts, For mike’s-  396 batches * 5 shirts/batch = 1980 shirts, For Ike’s Custom process- 15*3 + 5 = 50 units, for Ike’s regular – 151 batches * 60 shirts/batch = 9060 shirts

Ideal Cycle time – It is the time required for the bottle neck in the process. In our case we can see that from exhibit- 3 the bottle neck is the process of making cuffs which takes 2/4= 0.5 minutes/shirt (For regular), 0.5 minutes/shirt (for mike’s process), 3.9 minutes/shirt (for Ike’s custom process), 0.67 (For Ike’s Regular).

 Production Capacity: It is the capacity of bottle neck is given by time available in minutes/ Ideal Cycle time.

For Regular- (8*60) / 0.5 = 960 shirts per day, For mike’s- (8*60) / 0.5 = 960 shirts per day, For Ike’s Custom process- (8*60) /3.9 = 123.1 shirts per day, For Ike’s regular process-(8*60) / 0.67 = 720 shirts per day

Actual Production capacity – Number of shirts which are actually being produced and it is given by time available in minutes/ actual cycle time. For regular-(8*60)/0.6 = 800 shirts per day, For mike’s- (8*60)/0.533 = 900 shirts per day, For Ike’s Custom process-(8*60)/4.8 = 100 shirts per day, For Ike’s Regular- (8*60)/0.6 = 800 shirts/day.

Capacity Utilization – It is the actual capacity which is being utilized and it is given by Production capacity/ actual production capacity. For regular- 800/960 = 83.33%, For mike’s-900/960 = 93.75%, For Ike’s Custom process- 100/123.1 = 81.21%, For Ike’s regular process – 800/720 = 111.11%

Manufacturing lead time -It is the time taken since the order is initiated and completed

For regular- WIP inventory/production capacity = 11760/800 = 14.7 days, For Mike’s – 1980/900 = 2.2 days, For Ike’s regular- 9060/800 = 11.33 days, For Ike’s customized- 50/100 =0.5 days

Direct labor content – cutting time + time for other operations is (((90+30)/480) *4) +25.51 = 26.51 min per shirt, For Mike’s- (90+30)/480 *4 + (0.5*1) +25.51 = 27.01 min per shirt, For Ike’s regular- (90+30)/480 *4 +25.51 = 26.51 min per shirt, For Ike’s custom- (0.5*1) +25.51 = 26.01 min per shirt

Direct labor utilization: total time taken / total time available. For regular- (26.51*800) / (64*8*60) = 69%, For Mike’s- (27.01*900) / (65*8*60) = 77.9%, For Ike’s regular- (26.51*900) / (49*8*60*111.11) = 81.1%, For Ike’s custom- (26.01*100) / (16*8*60) = 33.9%

Direct labor cost =-For regular-(64*6*8) = 3072/800 shirts = 3.84 $ per shirt: For Mike’s- (65*6*8) = 3120/900 shirts = 3.47 $ per shirt, For Ike’s regular- (49*6*8) +(49*9*53.33/60) = 2743.9/800 shirts = 3.43 $ per shirt: For Ike’s custom- (16*6*8) = 768/100 shirts = 7.68 per (16 *6*8) = 768/100 shirts = 7.68 $ per shirt

 

Current ProcessRegular shirts

Mike’s Plan
Regular & Custom shirts

                 Ike’s Plan
Regular                      Custom
Shirts                            Shirts

Actual Cycle time (min/shirt)

0.6

0.533

0.674

4.8

Manufacturing lead time (days)

14.7

2.2

11.33

0.5

WIP Inventory (shirts)

11760

1980

9060

50

Production Capacity (shirts/day)

960

960

720

123.1

Capacity utilization

83.33%

93.75%

111.11%

81.21%

Direct Labor Content (min./shirt)

56.51

27.01

26.51

26.01

Direct Labor Utilization

69

77.9

81.1

33.9

Direct Labor Cost ($/shirt)

3.84

3.47

3.43

7.68

 

Q2) Comparison between Mike’s plan & Ike’s plan

Based on the calculations, we can see that overtime is not required for Mike’s plan. However, an overtime of 53.3 min/day (0.11*60*8). So, the total labor cost/regular shirt will be calculated as follows.

Overtime wages = (53.33* $9 / 60) = $8 /worker/day

Overtime wage/shirt = 8 * 49 / 800 = $ 0.5/shirt?

Total Labour cost = 4.5 + overtime cost = 4.5 + 0.5 = $5/shirt

Also, from the case we can see that the raw material cost for customized shirts are 10% higher. After plugging in the calculated values and other values given from Exhibit 4, the below table can be derived.

Mike’s plan

Ike’s plan

Regular

Custom

Regular

 

Custom

 Number of shirts (per month)

16000

2000

16000

 

2000

Raw material cost

7

7.7

7

 

7.7

Total labour cost

4.5

4.5

5

 

4.5

Indirect cost

4.5

4.5

4.5

 

4.5

Total manufacturing cost

16

16.7

16.5

 

16.7

Wholesale price

25

35

25

 

35

Profit

144000

36600

136000

 

36600

 

 

 

 

 

 

 

 

Conclusion:

Based on the above table, we can see that the profit for Mike’s plan is higher by $8000 ($144000+$36600-$136000-$36600). Also, the manufacturing lead time for Mike’s process is efficient when compared to the industry average of six weeks. Therefore, we recommend to go with Mike’s plan.

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