Executive Shirt Company, Inc. is well-known for its high-quality, competitively-priced mens shirts.

But a recent dip in the sales has led the company to think on alternatives. Based on the current market trend the General Manager Dwight Collier has decided to go for custom-seized shirts along with the current production of standard-sized shirts. Considering that the decision is taken prudently, we now shift our focus to the companys production process. The company has been using a batch process to produce standard-sized shirts. 1. Following are the details of the companys current batch processing. Only a few basic styles and colors constitute the major portion of sales, hence the company has a limited number of varieties to produce. So, it has large batches of each kind of shirt (size and color). It has only one cutting machine, which is computer-controlled and can cut up to 60 layers of cloth at the same time. Also up to 8 patterns can be cut simultaneously. The cutting process by the machine takes 30 minutes irrespective of the number of patterns and number of layers. But, the set up time is quite significant. It takes 1.5 minutes to roll out a layer of cloth and so for 60 layers; it takes 90 minutes setup time. The machine is being operated by 4 operators and the company is using its maximum capacity, i.e. 60 layers and 8 patterns at a time. So, Total number of shirts cut in one run = 60*8 = 480 Total time taken by one run = setup time + runtime = 90 + 30 = 120 minutes Regular shirts labor content (minutes per shirt) for cutting = 120 / 480 = 0.25 min / shirt Number of workers = 4 Now, tabulating this data with other the data from other production activities, we get
Number of workers 4 8 4 2 6 4 2 Time taken per shirt (minutes) 0.06 0.49 0.50 0.33 0.42 0.43 0.33 Time taken per batch (minutes) 3.75 29.25 30 19.5 25 25.5 19.8

Operation 1. Cutting 2. Make collar 3. Make cuffs 4. Make sleeves 5. Make front 6. Make back 7. Join shoulders

Regular Shirts Labor Content (minutes per shirt) 0.25 3.9 2 0.65 2.5 1.7 0.66

8. Attach collar 9. Attach sleeves 10. Stitch down sleeves 11. Sew side seam 12. Attach cuffs 13. Hem bottom 14. Inspect 15. Iron 15. Fold, package Total

1.65 1.55 0.65 1.8 1.55 1.7 1.5 1.95 1.75 25.76

4 4 2 4 4 4 4 4 4 64

0.41 0.39 0.33 0.45 0.39 0.43 0.38 0.49 0.44 6.27

24.75 23.25 19.5 27 23.25 25.5 22.5 29.25 26.25 374.05

Thus, the direct labor content (min. /shirt) = 25.76 Thus we see that the maximum time taken by a process in 30 min / labor / batch, which forms the bottleneck and represents the cycle time. The cycle time / shirt = 30 / 60 = 0.5 min / shirt. The work-in-process inventory = Total number of batches in all operations * Batch size = (16 + 144 + 12 + 12 + 12) * 60 = 196 * 60 = 11760 shirts Now we can apply Littles Law to calculate the throughput time which is equal to the manufacturing lead time in this case. By Littles Law, Throughput time = Work-in-process / Throughput rate = Work-in-process * Cycle time = 11760 * 0.5 = 5880 minutes Since production goes on for 8 hrs per day, manufacturing lead time = 5880 / (8 * 60) = 12.25 days Total number of shirts produced per month is 16,000. The company works for 20 days a month. So, the output per day = 16000 / 20 = 800 shirts. In, 8 hours a day, the company can produce 60 * 8 * (1/0.5) = 960 shirts, which is the current production capacity. But it needs to produce only 800 shirts.

So, the capacity utilization = (800 / 960) * 100 = 83.33% The actual labor utilized = Number of shirts produced * Direct labor content = 800 * 25.76 = 20608 minutes The available labor for utilization = Total number of workers * Hours per day * 60 = 64 * 8 * 60 = 30720 minutes Therefore, the direct labor utilization = (20608 / 30720) * 100 = 67.08% Direct labor cost ($/shirt) = = (64 * 8 * 6) / 800 = 3.84 2. We now proceed to compute the operations metrics for Mikes plan. In this plan, the new low-ply laser cutting machine would take 2.5 minutes to produce 5 shirts. One additional worker needs to be hired to operate this machine. Therefore, the regular shirts labor content = 2.5 / 5 = 0.5 minutes. The time taken per shirt = 0.5 minutes Since this is the same as the maximum time taken for a single sewing process causing the bottleneck (make cuffs), the cycle time / shirt will remain equal to 0.5 minutes Here the time taken is 2.5 min / labor / batch, which forms the bottleneck and represents the cycle time. The cycle time / shirt = 2.5 / 5 = 0.5 min / shirt. We now proceed to compute the operations metrics for the current process. The work-in-process inventory = Total number of batches in all operations * Batch size = (36 + 288 + 24 + 24 + 24) * 5 = 396 * 5 = 1980 shirts Now we can apply Littles Law to calculate the throughput time which is equal to the manufacturing lead time in this case.

By Littles Law, Throughput time = Work-in-process / Throughput rate = Work-in-process * Cycle time = 1980 * 0.5 = 990 minutes Since production goes on for 8 hrs per day, manufacturing lead time = 990 / (8 * 60) = 2.06 days Total number of shirts produced per month is 16000 + 2000 = 18000. The company works for 20 days a month. So, the output per day = 18000 / 20 = 900 shirts. In, 8 hours a day, the company can produce 60 * 8 * (1/0.5) = 960 shirts, which is the current production capacity. But it needs to produce only 900 shirts. So, the capacity utilization = (900 / 960) * 100 = 93.75% For calculating the direct labor content, we have to find out the direct labor content values for sewing and cutting separately. For sewing operations, the DLC = 25.51 minutes/shirt For the cutting operation, since both the new and old machines are used, the weighted average of the individual DLCs are considered DLC for cutting = (No of custom-made shirts * Time taken for each custom-made shirt + No of regular shirts * Time taken for each regular shirt) / Total no of shirts = (100 * 0.5 + 800 * 0.25) / 900 = 0.28 minutes Therefore, total direct labor content = 25.51 + 0.28 = 25.79 minutes The actual labor utilized = Number of shirts produced * Direct labor content = 900 * 25.79 = 23211 minutes The available labor for utilization = Total number of workers * Hours per day * 60 = 65 * 8 * 60

= 31200 minutes Therefore, the direct labor utilization = (23211 / 31200) * 100 = 74.39% Direct labor cost ($/shirt) = = (65 * 8 * 6) / 900 = 3.47 3. Let us now evaluate Ikes plan. For the regular shirts, the direct labor content will be the same as in the current process as here the new cutting machine is kept separate from the regular shirt manufacturing process. Therefore, the direct labor content = 25.76 minutes/shirt for regular shirts Here, however the number of workers in each process is reduced by one. Therefore, the cycle time may change.
Number of workers 4 7 3 1 5 3 1 3 3 1 3 3 3 3 3 3 49 Time taken per shirt (minutes) 0.06 0.56 0.67 0.65 0.5 0.57 0.66 0.55 0.52 0.65 0.6 0.52 0.57 0.5 0.65 0.58 8.23 Time taken per batch (minutes) 3.75 33.43 40 39 30 34 39.6 33 31 39 36 31 34 30 39 35 492.78

Operation 1. Cutting 2. Make collar 3. Make cuffs 4. Make sleeves 5. Make front 6. Make back 7. Join shoulders 8. Attach collar 9. Attach sleeves 10. Stitch down sleeves 11. Sew side seam 12. Attach cuffs 13. Hem bottom 14. Inspect 15. Iron 15. Fold, package Total

Regular Shirts Labor Content (minutes per shirt) 0.25 3.9 2 0.65 2.5 1.7 0.66 1.65 1.55 0.65 1.8 1.55 1.7 1.5 1.95 1.75 25.76

Therefore, the maximum cycle time = 0.67 minutes Similar to the previous plans, the work-in-process inventory = (16 + 108 + 9 + 9 + 9) * 60 = 9060 shirts

Similar to the other plans, we can calculate the manufacturing lead time = (9060 * 0.67) / (8 * 60) = 12. 58 days Production capacity = 480 minutes / 0.67 minutes/shirt = 720 shirts Actual production of regular shirts = 800 Therefore, capacity utilization = (800 / 720) * 100 = 111.11% Direct labor utilization = (800 * 25.76) / (49 * 8 * 60) = 20608 / 23520 = 0.8762 For calculating the direct labor cost, since there is overutilization of capacity, we need to consider the overtime cost also. Overtime = 1.1111 * 8 8 = 0.8888 hours/day Normal time = 8 hours/day Therefore, total labor cost per day = 0.8888 * 9 + 8 * 6 The direct labor cost/shirt = (0.8888 * 9 + 8 * 6) / 800 = $ 3.43 For the custom-made shirts, the work-in-process inventory = Inventory in cutting + inventory in processing = 5 + 15 * 3 = 50 shirts Since a single shirt is processed at a time by a single worker, the cycle time is the maximum of all the individual regular shirt labor content = 3.9 minutes / shirt Manufacturing lead time = (50 * 3.9) / (8 * 60) = 0.41 days Production capacity = (8 * 60) / 3.9 = 123 shirts / day Capacity utilization = (100 / 123) * 100 = 81.3% Direct labor content = Labor content for cutting + labor content for processing = 0.5 + 25.51 = 26.01 minutes/shirt Direct labor utilization = (100 * 26.01) / (16 * 8 * 60) = 2601 / 7680 = 0.3387 Direct labor cost / shirt = (16 * 8 * 6) / 100 = $7.68

The final outcomes of the analysis are shown in the table below.

Current Process Regular Shirts Actual Cycle Time (min./shirt) Manufacturing Lead Time (days) WIP Inventory (shirts) Production Capacity (shirts/day) Capacity Utilization(%) Direct Labor Content(min/shirt) Direct Labor Utilization(%) Direct Labor Cost ($/shirt) 0.5 12.25 11760 960 83.33 25.76 67.08 3.84

Mike's Plan Ike's Plan Regular & Custom Regular Shirts Shirts 0.5 0.67 2.06 1980 960 93.75 25.79 74.39 3.47 12.58 9060 720 111.11 25.76 87.62 3.43

Custom shirts 3.9 0.41 50 123 81.25 26.01 33.87 7.68