Executive Shirt Company

OPERATIONS!MANAGEMENT!-!1!ASSIGNMENT!
EXECUTIVE!SHIRT!COMPANY!
PGP!!1;!Section!!B!
Group!!11!
Overview:!
The! Executive! Shirt! Company! (ESC)! is! a! top! apparels! company! which! is! looking! to! expand!
into!the!high!potential!custom-sized!dress!shirt!market.!Customers!currently!had!a!problem!
with!this!market!because!of!higher!prices!and!long!delivery!times!of!up!to!6!weeks.!If!these!
factors! were! addressed,! ESC! had! the! opportunity! to! tap! into! the! highly! lucrative! market!
where!customers!were!willing!to!pay!at!least!75%!more!than!standard!shirts.!
Identified(objective:!
The! general! manager! Collier! wants! to! make! alterations! to! his! current! process! that! would!
enable!him!to!make!both!custom-sized!shirts!and!standard!shirts!using!his!resources!to!the!
maximum!extent!possible.!!
Current'process'flow:'
The!current!process!flow!in!ESC!is!as!shown!in!Figure!1.!Each!batch!consists!of!60!shirts!and!
Work-In-Process! at! each! station! was! three! batches! per! worker.! Collier! purchases! a! new!
cutting!machine!which!takes!only!2.5!minutes!for!the!entire!process.!But!the!batch!size!that!
this! machine! can! handle! is! five! shirts.! Two! managers,! Mike! and! Ike! are! asked! to! present!
their!plans!as!alternatives!to!the!current!process!flow.!!
Mikes'plan:'
Mike! proposes! a! plan! where! both! custom! and! standard! shirts! are! processed! together.! To!
reduce!the!lead!time,!he!proposes!to!reduce!the!batch!time!from!sixty!to!five!shirts.!He!also!
plans!to!increase!the!Work-In-Process!to!six!batches!per!worker!from!the!current!three.!The!
process! flow! for! this! plan! is! the! same! as! the! previous.! Only,! an! extra! cutting! machine! is!
added!for!the!Cutting!process.!
Ikes'plan:'
Ikes!proposal!is!to!separate!the!Custom!shirt!production!from!the!Standard!shirt!production!
line! by! introducing! a! new! assembly! line.! One! worker! each! from! all! sewing! stations,! the!
inspection!station,!the!ironing!station!and!the!packaging!station!are!proposed!to!be!moved!
to!the!new!custom!line.!The!plan!seeks!to!implement!the!assembly!line!by!moving!twelve!
sewing!machines!and!one!ironing!machine!from!the!current!assembly!line.!One!extra!worker!
! ! 1!
!! Executive!Shirt!Company,!Inc.!
!
is!employed!to!operate!the!laser!cutting!machine.!The!process!flow!for!the!standard!shirts!is!
the!same!as!the!current!plan!with!a!batch!size!of!60.!The!process!flow!for!the!Custom!shirts!
is!same!as!well,!except!that,!processing!is!done!one!shirt!at!a!time.!!
An!analysis!based!on!the!proposed!alternatives!from!Mike!and!Ike!will!help!in!making!the!
ideal!choice!that!will!maximize!the!inherent!potential!of!the!custom-shirts!business.!
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Fig!1!!Process!flow!diagram!
!
!
!
!
! ! 2!
!
Analysis(of(current(process:!
For! calculating! the! cycle! time,! we! will! divide! the! time! required! for! each! operation! by! the!
number!of!workers!required!for!that!operation.!The!tabulated!results!are!as!follows:!
!
Regular!Shirts!
Number!of! minutes/per!
Operation! Labour(minutes!
workers! shirt/worker!
per!shirt)!
Make!collar! 3.9! 8! 0.49!
Make!cuffs! 2! 4! 0.50!
Make!sleeves! 0.65! 2! 0.33!
Make!front! 2.5! 6! 0.42!
Make!back! 1.7! 4! 0.43!
Join!shoulders! 0.66! 2! 0.33!
Attach!collar! 1.65! 4! 0.41!
Attach!sleeves! 1.55! 4! 0.39!
Stitch!down!sleeves! 0.65! 2! 0.33!
Sew!side!seam! 1.8! 4! 0.45!
Attach!cuffs! 1.55! 4! 0.39!
Hem!bottom! 1.7! 4! 0.43!
Inspect! 1.5! 4! 0.38!
Iron! 1.95! 4! 0.49!
Fold,!Package! 1.75! 4! 0.44!
!
Hence,!Ideal!cycle!time!=!0.5!min/shirt!
!
The!actual!production!rate!for!regular!shirts!is!16000!shirts/month.!Hence,!the!number!of!
shirts!produced!per!minute!can!be!calculated!as:!
16000/(20*8*60)!=!1.67!shirts/min!(assuming!8!hour!work!day)!
Cycle!time!=!1/1.67!=!0.6!min/shirt!
!
Since,! this! cycle! time! value! is! higher! than! the! ideal! cycle! time! of! 0.5! min/shirt,! the! actual!
cycle!time!=!0.6!min/shirt!
!
From!Exhibit!3,!we!can!calculate!the!WIP!inventory!by!adding!the!individual!inventories.!
! ! WIP!inventory!=!196!batches!=!196*60!shirts!=!11760!shirts!
!
Production!capacity!=!number!of!shirts!produced!using!ideal!cycle!time!!
=!Number!of!minutes!available!per!day/!ideal!cycle!time!
=!(8*60)/!0.5!
=!960!shirts/day!
!
Actual!production!capacity!being!used!=!(8*60)/0.6!=!800!shirts/day!
!
Capacity!Utilization!=!800/960!=!83.33%!
!
Manufacturing!Lead!Time!=!WIP!inventory/production!capacity!
! ! 3!
!
! ! ! ! =!11760/800!=!14.7!days!
!
For!calculating!Direct!Labour!Utilization,!we!have!to!consider!the!time!taken!by!all!workers!
for! the! operations.! For! cutting! operation,! 90+30=120! minutes! are! taken! in! the! cutting!
process! for! 480! shirts.! Cutting! time! per! shirt! is! (120/480)=0.25! min/shirt! with! 4! workers!
working!on!it.!The!time!taken!for!all!other!operations!is!the!sum!of!the!times!given!in!exhibit!
3!=!25.51!min/shirt!
!
Direct!labour!content!=!time!taken!for!cutting!+!time!taken!for!other!operations!
! ! ! !!=!0.25*4!+!25.51!=!26.51!min/shirt!
!
Direct!labour!utilization!=!time!taken!to!produce!shirts/total!time!available!for!64!labourers!
=!26.51*800/(64*8*60)!=!69%!
!
Money!paid!to!direct!labourers!=!64*6$*8!hours!=!3072!$/day!
Direct!labour!cost!=!3072/800!=!3.84!$/shirt!
!
!
Analysis$of$Mikes$process:!
For!calculating!the!cycle!time,!we!will!refer!to!the!previous!table!1,!since!the!workforce!is!
same.!Ideal!cycle!time!=!0.5!min/shirt!
!
The! actual! production! rate! for! regular! shirts! is! 16000! regular! +! 2000! customized! =! 18000!
shirts/month.!Hence,!the!number!of!shirts!produced!per!minute!can!be!calculated!as:!
!
Since,!this!cycle!time!value!is!higher,!the!actual!cycle!time!=!0.533!min/shirt!
!
!
=!(8*60)/!0.5!
=!960!shirts/day!
!
!
!
! ! ! ! =!1980/900!=!2.2!days!
!
for! the! operations! and! the! time! taken! on! the! laser-cutting! machine.! For! computer!
! ! 4!
!
controlled!cutting!operation,!cutting!time!per!shirt!is!0.25!min/shirt!with!4!workers!working!
on!it.!!
The!time!taken!for!laser-cutting!machine!=!(2.5!min/5!shirts)!=!0.5!min/shirt!with!1!worker!
working!on!it.!
The! time! taken! for! all! other! operations! is! the! sum! of! the! times! given! in! exhibit! 3! =! 25.51!
min/shirt!
!
! ! ! !!=!0.25*4!+!0.5*1!+!25.51!=!27.01!min/shirt!
!
=!27.01*900/(65*8*60)!=!77.9%!
!
!
!
Analysis!of#Ikes#regular#shirt#process:!
!
Regular!Shirts!
Labor(minutes! Number!of! Minutes/per!
Operation! per!shirt)! workers! shirt/worker!
Make!collar! 3.9! 7! 0.56!
Make!cuffs! 2! 3! 0.67!
Make!sleeves! 0.65! 1! 0.65!
Make!front! 2.5! 5! 0.50!
Make!back! 1.7! 3! 0.57!
Sew!side!seam! 1.8! 3! 0.60!
Attach!cuffs! 1.55! 3! 0.52!
Hem!bottom! 1.7! 3! 0.57!
Inspect! 1.5! 3! 0.50!
Iron! 1.95! 3! 0.65!
Fold,!Package! 1.75! 3! 0.58!
!
!
The!actual!production!rate!for!regular!shirts!is!16000!shirts/month.!Hence,!the!number!of!
! ! 5!
!
!
Since,!the!value!of!the!ideal!cycle!time!is!higher,!so!the!actual!cycle!time!=!0.67!min/shirt!
!
!
=!(8*60)/!0.67!
=!720!shirts/day!
!
Production!capacity!as!per!normal!demand!=!(8*60)/0.6!=!800!shirts/day!
!
This!indicates!that!the!workers!are!working!overtime!in!this!case.!
Total!overtime/day!=!(8*60)*11.11%!=!53.33!mins/day!
!
! ! ! ! =!9060/800!=!11.33!days!
!
for! the! operations! and! the! time! taken! on! the! laser-cutting! machine.! For! computer!
controlled!cutting!operation,!cutting!time!per!shirt!is!0.25!min/shirt!with!4!workers!working!
on!it.!!
min/shirt!
!
! ! ! !!=!0.25*4!+!25.51!=!26.51!min/shirt!
!
=!26.51*800/(49*8*60*111.11%)!=!81.1%!
!
Money!paid!to!direct!labourers!=!regular!working!payment!+!overtime!payment!=!49*6$*8!
hours!+!49*9$*(53.33/60!min)!!=!2743.9!hours!
!
Direct!labour!cost!=!2743.9/800!=!3.43!$/shirt!
!
!
!
!
!
!
!
!
!
!
! ! 6!
!
Analysis(of(Ikes(customized(shirt(process:!
!
Regular!Shirts!
Labor(minutes! Number!of! minutes/per!
Operation! per!shirt)! workers! shirt/worker!
Make!collar! 3.9! 1! 3.9!
Make!cuffs! 2! 1! 2!
Make!sleeves! 0.65! 1! 0.65!
Make!front! 2.5! 1! 2.5!
Make!back! 1.7! 1! 1.7!
Sew!side!seam! 1.8! 1! 1.8!
Attach!cuffs! 1.55! 1! 1.55!
Hem!bottom! 1.7! 1! 1.7!
Inspect! 1.5! 1! 1.5!
Iron! 1.95! 1! 1.95!
Fold,!Package! 1.75! 1! 1.75!
!
!
The! actual! production! rate! for! regular! shirts! is! 2000! shirts/month.! Hence,! the! number! of!
!
Since,! this! cycle! time! value! is! higher! than! the! ideal! cycle! time! of! 3.9! min/shirt,! the! actual!
cycle!time!=!4.8!min/shirt!
!
As!given,!15!workers!have!on!an!average!3!shirts!as!inventory!and!the!cutting!machine!has!5!
shirts! as! inventory! at! a! given! time,! so! we! can! calculate! the! WIP! inventory! by! adding! the!
individual!inventories.!
!
! ! WIP!inventory!=!15*3!+!5!=!50!shirts!
!
=!(8*60)/!3.9!
=!123.1!shirts/day!
!
!
! ! 7!
!
Capacity!Utilization!=!100/123.1!=!81.2%!
!
! ! ! !!!!!!!!=!50/100!=!0.5!days!
!
for!the!operations.!!
The!time!taken!for!laser-cutting!machine!=!(2.5!min/5!shirts)!=!0.5!min/shirt!with!1!worker!
working!on!it.!
min/shirt!
!
! ! ! !!=!0.5*1!+!25.51!=!26.01!min/shirt!
!
=!26.01*100/(16*8*60)!=!33.9%!
!
!
Results!for!all!processes!are!tabulated!as!follows:!
!
Current! Mikes!Plan! Ikes!Plan!
Process! Regular!&!
! Regular! Custom!
! custom!
Shirts! Shirts!
Regular!Shirts! Shirts!
Actual!Cycle!Time!
0.6! 0.533! 0.67! 4.8!
(min./shirt)!
Manufacturing!Lead!
14.7! 2.19! 12.64! 0.5!
Time!(days)!
WIP!Inventory!(Shirts)!
11760! 1980! 9060! 50!
!
Production!Capacity!
960! 960! 720! 123.1!
(Shirts/day)!
Capacity!Utilization!
83.33%! 93.75%! 111%! 81.2%!
!
Direct!Labour!Content!
26.51! 27.01! 26.51! 26.01!
(Min./shirt)!
Direct!Labour!
Utilization! 69.0%! 77.9%! 80.74%! 33.9%!
!
Direct!Labour!Cost!
$3.84! $3.47! $3.26! $7.68!
($/shirt)!
!
!
!
! ! 8!
!
Comparison*between*Mikes*plan*and*Ikes*plan!
The!profits!for!shirts!manufactured!in!a!month!are!compared!for!both!the!plans.!
The!results!are!tabulated!as!follows:!
!
Mike's!plan! Ike's!plan!
! Regular! Customized! Regular! Customized!
Shirts! shirts! Shirts! shirts!
!
Number!of!shirts!
(manufactured!per!
month)! 16000! 2000! 16000! 2000!
Cost!per!shirt! ! ! ! !
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#! 180600! 172600!
!
*Raw!material!costs!are!10%!more!expensive!for!customized!shirts!
**!Calculating!overtime!costs:!!
! Overtime!=!53.33!minutes/worker/day!
! Overtime!wages!=!Overtime!*!Overtime!wages!per!hour!
!!!!=!(53.33*!$9!/!60)!=!$8!per!worker!per!day!
! Overtime!wage!per!shirt!=!Overtime!wages!*!No.!of!workers!/!Shirts!per!day!
!!!!!=!8!*!49!/!800!=!$!0.5!per!shirt!
!! Total!Labour!cost!=!4.5!+!overtime!cost!=!4.5!+!0.5!=!$5!per!shirt!
#!
Profit!=!((Wholesale!price!!Total!Manufacturing!Cost)*Number!of!regular!shirts)!+!
!!!((Wholesale!price!!Total!Manufacturing!Cost)*Number!of!regular!shirts)!
!
!
!
Conclusion:!
From!the!above!detailed!analysis,!it!is!clear!that!Mikes!process!is!superior!to!Ikes!process!in!
terms!of!profitability!and!manufacturing!lead-time.!!
!
The! effective! lower! MLT! of! Mikes! process! implies! that! the! delivery! efficiency! is! greater.!
Customer! waiting! time! for! Customized! shirts! is! greatly! reduced! compared! to! industry!
standard! of! six! weeks.! Executive! Shirts! Company,! Inc.! will! therefore! be! in! a! position! to!
leverage!this!factor!and!become!a!leader!in!the!market!for!Custom-sized!shirts.!!
! ! 9!
!

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;$$/19!"#334! (&)&$+,-! 5<!5%:! (&)&$+,-! 5$%$19!:+<&! (&)*&$+,-!

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