Professional Documents
Culture Documents
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
Executive
Shirt
Company,
Inc.
1
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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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 Executive Shirt Company, Inc. 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 $/shirt
For calculating the cycle time, we will refer to the previous table 1, since the workforce is same. Ideal cycle time = 0.5 min/shirt The actual production rate for regular shirts is 16000 regular + 2000 customized = 18000 shirts/month. Hence, the number of shirts produced per minute can be calculated as: 18000/(20*8*60) = 1.88 shirts/min (assuming 8 hour work day) Cycle time = 1/1.88 = 0.533 min/shirt Since, this cycle time value is higher, the actual cycle time = 0.533 min/shirt From Exhibit 5, we can calculate the WIP inventory by adding the individual inventories. WIP inventory = 396 batches = 396*5 shirts = 1980 shirts Production capacity = number of shirts produced using ideal cycle time = Number of minutes available per day/ ideal cycle time = (8*60)/ 0.5 = 960 shirts/day Actual production capacity being used = (8*60)/0.533 = 900 shirts/day Capacity Utilization = 900/960 = 93.75% Manufacturing Lead Time = WIP inventory/production capacity = 1980/900 = 2.2 days For calculating Direct Labour Utilization, we have to consider the time taken by all workers for the operations and the time taken on the laser-cutting machine. For computer Executive Shirt Company, Inc. 4
controlled cutting operation, cutting time per shirt is 0.25 min/shirt with 4 workers working on it. The time taken for laser-cutting machine = (2.5 min/5 shirts) = 0.5 min/shirt with 1 worker working on it. The time taken for all other operations is the sum of the times given in exhibit 3 = 25.51 min/shirt Direct labour content = time taken for cutting + time taken for other operations = 0.25*4 + 0.5*1 + 25.51 = 27.01 min/shirt Direct labour utilization = time taken to produce shirts/total time available for 65 labourers = 27.01*900/(65*8*60) = 77.9% Money paid to direct labourers = 65*6$*8 hours = 3120 $/day Direct labour cost = 3120/900 = 3.47 $/shirt
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:
Operation
Make
collar
Make
cuffs
Make
sleeves
Make
front
Make
back
Join
shoulders
Attach
collar
Attach
sleeves
Stitch
down
sleeves
Sew
side
seam
Attach
cuffs
Hem
bottom
Inspect
Iron
Fold,
Package
Regular
Shirts
Labor(minutes
Number
of
Minutes/per
per
shirt)
workers
shirt/worker
3.9
7
0.56
2
3
0.67
0.65
1
0.65
2.5
5
0.50
1.7
3
0.57
0.66
1
0.66
1.65
3
0.55
1.55
3
0.52
0.65
1
0.65
1.8
3
0.60
1.55
3
0.52
1.7
3
0.57
1.5
3
0.50
1.95
3
0.65
1.75
3
0.58
Hence, Ideal cycle time = 0.67 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 Executive Shirt Company, Inc. 5
Since, the value of the ideal cycle time is higher, so the actual cycle time = 0.67 min/shirt From Exhibit 6, we can calculate the WIP inventory by adding the individual inventories. WIP inventory = 151 batches = 151*60 shirts = 9060 shirts Production capacity = number of shirts produced using ideal cycle time = Number of minutes available per day/ ideal cycle time = (8*60)/ 0.67 = 720 shirts/day Production capacity as per normal demand = (8*60)/0.6 = 800 shirts/day Capacity Utilization = 800/720 = 111.11% This indicates that the workers are working overtime in this case. Total overtime/day = (8*60)*11.11% = 53.33 mins/day Manufacturing Lead Time = WIP inventory/production capacity = 9060/800 = 11.33 days For calculating Direct Labour Utilization, we have to consider the time taken by all workers 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. 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 49 labourers = 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 $/shirt Executive Shirt Company, Inc. 6
Hence, Ideal cycle time = 3.9 min/shirt The actual production rate for regular shirts is 2000 shirts/month. Hence, the number of shirts produced per minute can be calculated as: 2000/(20*8*60) = 0.208 shirts/min (assuming 8 hour work day) Cycle time = 1/0.208 = 4.8 min/shirt Since, this cycle time value is higher than the ideal cycle time of 3.9 min/shirt, the actual cycle time = 4.8 min/shirt As given, 15 workers have on an average 3 shirts as inventory and the cutting machine has 5 shirts as inventory at a given time, so we can calculate the WIP inventory by adding the individual inventories. WIP inventory = 15*3 + 5 = 50 shirts Production capacity = number of shirts produced using ideal cycle time = Number of minutes available per day/ ideal cycle time = (8*60)/ 3.9 = 123.1 shirts/day Actual production capacity being used = (8*60)/4.8 = 100 shirts/day Executive Shirt Company, Inc. 7
Capacity Utilization = 100/123.1 = 81.2% Manufacturing Lead Time = WIP inventory/production capacity = 50/100 = 0.5 days For calculating Direct Labour Utilization, we have to consider the time taken by all workers for the operations. The time taken for laser-cutting machine = (2.5 min/5 shirts) = 0.5 min/shirt with 1 worker working on it. The time taken for all other operations is the sum of the times given in exhibit 3 = 25.51 min/shirt Direct labour content = time taken for cutting + time taken for other operations = 0.5*1 + 25.51 = 26.01 min/shirt Direct labour utilization = time taken to produce shirts/total time available for 16 labourers = 26.01*100/(16*8*60) = 33.9% Money paid to direct labourers = 16*6$*8 hours = 768 $/day Direct labour cost = 768/100 = 7.68 $/shirt 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) Executive Shirt Company, Inc. 8
*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.