Caso Executive Shirt Company

Camiseta ejecutivo de la compañía de análisis de casos

Question # 1

Actual Cycle Time (min/shirt) Tiempo de Ciclo Real (min/camisa)Manufacturing Lead Time (days) Tiempo de Manufactura ( dias ):

WIP inventory (shirts) WIP inventario ( camisas )Production Capacity (Shirts/day) Cap. De produccion Teorica (camisas/dia)

Current Production(Shirts/day) Cap. De Produción Actual ( camisas/dia)Capacity utilization % Utilización de la CapacidadDirect Labor Content (min/shirt) Contenido de MOD (min/camisa)

Actual Labor Time (min) Horas de Trabajo MOD Totales (min)

Available Labor Time (min) Tiempo Disponible para labores (min)Direct Labor Utilization % Ut. MODDirect Labor Cost ($/Shirt) Costo MOD ( $/camisa)Camisas en sobretiempo Camisas en sobretiempo / diaTotal Overtime (hrs dia necesarias) Total Hrs Extras (hrs/dia)Total $/OvertimTotal Labor ($) Total labor ($)

* Supone dia de 8 hrs de trabajo, u 8 horas adicionales de sobretiempo si fuera necesario

1600014400160080

Pregunta 1. Calcular las siguientes cantidades para el proceso de producción actual, así como de Mike y los planes de Ike, asumiendo los planes se implementan como se describe en el caso.

El procesamiento por lotes actual Las ventas para el Shirt Company Ejecutivo están constituidos por sólo unos pocos estilos y colores básicos. De ahí que la compañía tiene un número limitado de variedades para producir. Por lo tanto, tiene grandes cantidades de cada tipo de camisa (tamaño y color).

Sólo tiene una máquina de corte, que es controlado por ordenador y puede reducir hasta 60 capas de tela al mismo tiempo. También hasta 8 patrones se pueden cortar simultáneamente. El proceso de corte de la máquina en 30 minutos, independientemente del número de patrones y el número de capas. Sin embargo, el tiempo de puesta a punto es muy importante. Se tarda 1,5 minutos para desplegar una capa de tela y así por 60 capas, sino que toma 90 minutos el tiempo de instalación. La máquina está siendo operada por 4 operarios y la empresa está utilizando su capacidad máxima, es decir, 60 niveles y los patrones de ocho a la vez. Por lo tanto, Número total de camisas de corte en una carrera = 60 * 8 = 480. Tiempo total / carrera = tiempo de instalación + ejecución = 90 + 30 = 120 minutos camisas Regulares.

Contenido de trabajo (minutos por camiseta) para el corte = 120/480 = 0.25 min por camiseta Número de trabajadores = 4

Camiseta ejecutivo de la compañía de análisis de casos

Katia tamayoProceso Actual Plan de Mike

Calculo Camisas Regulares Camisas Regulares y a la Medidacuello de botella 0.50 0.5WIP / Capacidad de Producción 12.25 2.06

Corte + Otras Operaciones 11,760 1,980(minutos laborables) / cuello botella 960 960Prod. Mes / dias laborales mes 800 900Cap. actual/Cap. Teorica 83.33% 93.75%

26.51 26.01

(Prod. Actual mes) x (Contenido MOD) 21,208 23,409

(Hrs lab / dia) x ( 60 min) x Total personas30,720 31,200

Horas laborables Actuales / Horas dispon (min) 69% 75.03%Costo Total MOD / Prod actual dia 3.84 3.47

0.00 0

3.84 3.4714.7

* Supone dia de 8 hrs de trabajo, u 8 horas adicionales de sobretiempo si fuera necesario80

∑ de min incurridos por act. / camiseta





E18

8 horas x 60 min = 480 minutos el dia

F18

8 horas x 60 min = 480 minutos el dia

E21

4 per x (0,25min) + 25,51 min otras operaciones

F21

25,79

Plan Ike`s Plan Ike`sShirts Regular Shirts Customs Shirts Regular Shirts Customs

0.667 3.9 0.666666666666667 3.98.96 0.41 12.58 0.41

8,604 50 9060 50960 123 720 123800 100 800 100

83.33% 81.30% 111.11% 81.30%26.51 26.34 25.76 26.01

21,208 2,634 20608 2601

23,520 7,68023520 7680

90.17% 34.30% 87.62% 33.87%2.94 7.68 3.33 7.68

Otr

as O

pera

cion

es M

OD

80 00.888888888888889 5.15 0

810.94 7.68 9.14 8.34

Contenido de MOD





ACTUALIDADDATOS

Maquina corte manual 120 min / corrida

Camisas / corrida 480

Procesos # Trab. # Maq. WIP ( # Lotes de 60 camisas)CORTE 4 1 16COSTURA 48 48 144INSPECCION 4 12PLANCHADO 4 4 12

EMPAQUE 4 12

Capacidad actual / mes 16000 camisasDias laborables / mes 20 dias

Capacidad actual / dia 800 camisas/dia

Operación

Corte 0.25 4 0.06

Hacer Cuello 3.90 8 0.49

Hacer puños 2.00 4 0.50

Hacer Mangas 0.65 2 0.33

Hacer frente 2.50 6 0.42

Hacer espalda 1.70 4 0.43

Unir hombros 0.66 2 0.33

Pegar Cuello 1.65 4 0.41

Pegar managas 1.55 4 0.39

Puntear mangas 0.65 2 0.33

Coser costura lateral 1.80 4 0.45

Puegar Puños 1.55 4 0.39

Hacer dobladillo 1.70 4 0.43

Inspeccionar 1.50 4 0.38

Planchar 1.95 4 0.49

Doblar y empacar 1.75 4 0.44

64

Contenido de MOD Cuello de Botella

Corte convencional 1.00

Otras Operaciones 25.51

26.51

0.25

Contenido para Camisas regulares (minutos /

camisa)

# Trabajadores

El tiempo empleado por camisa (minutos)

PROPUESTA MIKE ( Camisas regulares y a la medida )

Maquina corte manual 120


WIP (Camisas) Procesos # Trab.960 CORTE 5

8640 COSTURA 48720 INSPECCION 4720 PLANCHADO 4

720 EMPAQUE 4

11760

Cap. Camisas Reg/mes 16000Cap. Camisas medida/mes 2000

Total cap prod/mes 18000

Dias laborables / mes 20Capacidad actual / dia 900

Operación

3.75 6 192 Corte convencional 0.25

29.25 6 384 Corte a medida 0.50

30.00 6 192

Otr

as O

pera

cion

es

Hacer Cuello 3.90

19.50 6 96 Hacer puños 2.00

25.00 6 288 Hacer Mangas 0.65

25.50 6 192 Hacer frente 2.50

19.80 6 96 Hacer espalda 1.70

24.75 6 192 Unir hombros 0.66

23.25 6 192 Pegar Cuello 1.65

19.50 6 96 Pegar managas 1.55

27.00 6 192 Puntear mangas 0.65

23.25 6 192 Coser costura lateral 1.80

25.50 6 192 Puegar Puños 1.55

22.50 6 192 Hacer dobladillo 1.70

29.25 6 192 Inspeccionar 1.50

26.25 6 192 Planchar 1.95

3072 Doblar y empacar 1.75

30.000.50 Contenido de MOD


Corte automatico -0.50


26.01

El tiempo empleado por lote

Costo MOD$/hr

Costo Total MOD$/dia


camisa)

R23

El valor por hr por persona es usd$ 6

min / corrida Maq. Autom 2.5 min / corrida

Camisas / corrida 5

# Maq. WIP ( # Lotes de 5 camisas) WIP (Camisas)2 36 180

48 288 144024 120

4 24 120

24 120

1980

camisascamisas

Camisas

diascamisas/dia

4 0.06 3.75 6 1921 0.50 30 6 488 0.49 29.25 6 384

Otr

as O

pera

cion

es

4 0.50 30.00 6 1922 0.33 19.50 6 966 0.42 25.00 6 2884 0.43 25.50 6 1922 0.33 19.80 6 964 0.41 24.75 6 1924 0.39 23.25 6 1922 0.33 19.50 6 964 0.45 27.00 6 1924 0.39 23.25 6 1924 0.43 25.50 6 1924 0.38 22.50 6 1924 0.49 29.25 6 192

4 0.44 26.25 6 192

65 3120

Cuello de Botella 30.00 Contenido de MOD

0.50

# Trabajadores



Costo MOD$/hr


AB23


Otr

as O

pera

cion

es

Contenido de MOD

PROPUESTA IKE ( Camisas regulares y a la medida )

Maquina corte manual 120 min / corrida


Procesos # Trab. # Maq. WIP ( # Lotes de 60 camisas)CORTE 4 1 16COSTURA 36 36 108INSPECCION 3 9PLANCHADO 3 3 9

EMPAQUE 3 9

Cap. Camisas Reg/mes 16000 camisasCap. Camisas medida/mes 2000 camisas 11%

Total cap prod/mes 18000 Camisas

Dias laborables / mes 20 diasCap. Regular actual / dia 800 camisas/diaCap. A Medida actual / dia 100 camisas/dia

CAMISAS REGULAR

Operación

Corte convencional 0.25 4 0.06
















49



Corte automatico 0.00


26.51

CAMISAS A MEDIDA

Operación

Corte a medida 0.83 1 0.83


camisa)

# Trabajadores



camisa)

# Trabajadores


0.00
















16



Corte automatico 0.00Otras Operaciones 25.51

26.34

Maq. Autom 2.5 min / corrida

Camisas / corrida 3

WIP (Tradic.) WIP ( Medida)960 5

6480 36540 3540 3

540 39060 50

3.75 6 1926 0

33.43 6 33640.00 6 14439.00 6 4830.00 6 24034.00 6 14439.60 6 4833.00 6 144 0.1666666731.00 6 14439.00 6 4836.00 6 14431.00 6 14434.00 6 14430.00 6 14439.00 6 144

35.00 6 144

2352

40.000.67

2.5 6 48


Costo MOD$/hr



Costo MOD$/hr


AL23


AL50


0 6 011.70 6 486.00 6 481.95 6 487.50 6 485.10 6 481.98 6 484.95 6 484.65 6 481.95 6 485.40 6 484.65 6 485.10 6 484.50 6 485.85 6 485.25 6 48

768

11.703.90

MATERIA PRIMA CORTE

TELAS

DISPOSICION DE CAPAS CORTE

Tiempo Actividad: 1.5 min/Tela Tiempo Actividad:

Cap. Proceso : 40 Telas/hra Cap. Proceso :

Cap. Proceso : ### Cap. Proceso :

WIP 1 WIP 2

1 60 20 40 40 0 40 40

2 60 80 40 40 40 40 0 40 40 40

3 60 100 60 40 40 40 0 40 40 40

4 60 120 80 40 40 40 0 40 40 40

5 60 140 100 40 40 40 0 40 40 40

6 60 160 120 40 40 40 0 40 40 40

7 60 180 140 40 40 40 0 40 40 40

8 60 200 160 40 40 40 0 40 40 40

9 0 160 120 40 40 40 0 40 40 40

10 0 120 80 40 40 40 0 40 40 40

11 0 80 40 40 40 40 0 40 40 40

12 0 40 0 40 40 40 0 40 40 40

13 0 0 0 0 0 0 0 0 0 0

14 0 0 0 0 0 0 0 0 0 0

Hora

Inputs(Telas

)

Inputs + WIP(Telas)

Outputs

(Telas)

Inputs(Telas/

hra)

Inputs + WIP2

(Telas)

Output(Telas/

hra)

Inputs(Telas/

hra)

Inputs + WIP3

(Telas)

CORTE

CORTE TRASLADO

0.5 min/ Tela # Recursos 4

120 Telas/hra Cap. Proceso : ###

### Cap. Proceso Total: ###

WIP 3 WIP 4

0 40 320 320 80 240

0 40 320 320 400 80 240

0 40 320 320 400 80 240

0 40 320 320 400 80 240

0 40 320 320 400 80 240

0 40 320 320 400 80 240

0 40 320 320 400 80 240

0 40 320 320 400 80 240

0 40 320 320 400 80 240

0 40 320 320 400 80 240

0 40 320 320 400 80 240

0 40 320 320 400 80 240

0 0 0 0 80 0 80

0 0 0 0 0 0 0

TOTAL Camisetas/

horaOutput(Telas/

hra)

Inputs(Camisas/

hra)

Inputs + WIP3

(Telas)

Output(Camisas/

hra)

M5

30 min cada 60 telas

R5

30 min cada 60 telas

(2011-05-01 21:03:10)

Harvard Business School

9-696-071

Rev. March 11, 1996

Executive Shirt Company

Case Analysis-The Executive Shirt Company (Group Project)

Part A

Calculations

Mike's Plan Ike's Plan

396 * 5 =


Current Process

Regular Shirts

Regular & Custom Shirts

Regular Shirts

Custom Shirts

A) Actual Cycle Time (Min/shirt)

2 minutes per cuff / 4 workers =

0.5

120 minutes for cutting / 480 shirts worth =

0.25 < labor content of

cuffs at 0.5 CT

All labor content / one less

worker for each

category while

cutting is still 0.25:

2.5 / 5 = 0.5 labor

content for cutting.

Cuffs is still the

bottleneck at 2 labor content / 3 workers =

0.67 mins/shirt

With everything divided by 1, collar is

new bottleneck at 3.90 CT

B) Manufacturing Lead Time (days)

11,760 * 0.5 / 480

minutes = 12.25

0.5 * 1980 / 480 = 2.06

days

(9060 * 0.66) / 480 = 12.58

days

(50 * 3.9) / 480 = 0.41

days

(WIP * Cycle Time) / Minutes in a working day

C) WIP Inventory (shirts)

196 * 60 = 11,760

60 * 151 sum of avg.

WIP =

30 units at sewing + 5 units being cut + 15

units being finished = 50 WIP (given in

case)

Average WIP * Batch size

1980 shirts

9,060 shirts

D) Production Capacity (shirts/day)

8 hours * 60 minutes /

0.5 = 8 hours * 60 mins / 0.5 =

960 shirts/day

480 / 0.666 =

8 * 60 / 3.9 =

Minutes available / CT

960 shirts /

day720

shirts/day123

shirts/day

E) Capacity Utilization

10,000 / (960 * 20 days) =

83%

(16,000 + 2000) / (960

* 20) = 93.75%

16,000 / (720 * 20) = 111.11%

123 * 20 days = 2460

monthly production capacity

Actual Produced / What could be produced

2000 / 2460 = 81.25%

F) Direct Labor Content (min/shirt)

(90 + 30 minutes /8hr * 60

mins) + 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

(16,000 / 18,000) *

0.25 = 0.2777 + (2,000 / 18,000 * 0.5) =

0.2777 = weighted

avg. cutting time for

regular and custom

(120 minutes / 480 total

minutes) + 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

0.5 direct labor for cutting + 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

= 25.01

Time spent cutting + Direct labor for one shirt

25.76 - 0.25 = 25.51 sum of

standard station time

25.51 + 0.2777 =

25.79

G) Direct Labor Utilization

(800 shirts * 25.76 Direct

labor content) / 64*480 = 67.08%

(900 * 25.79) / (65

direct workers *

480 minutes available)=

23,211 / 31,200 = 74.39%

(800 per day * 25.76) / (64 - 15) *

480) = 20,608 / 23,520 = 87.62%

100 * 26.01 / (16 *

480) = 33.87%

(Shirts per day * Direct labor content / (Direct labor * minutes available)

H) Direct Labor Cost

64 (6 * 8) / 800 = $3.84

65 ( $6 * 8hours) /

900 = 31200 / 900

= $3.47

720 shirts / day on normal

salary: 49 * 6 * 8 = $2,352

16 ($6 * 8 hours) / 100

= 7.68

($/shirt)

Explanation

64 (6 * 8) / 800 = $3.84

65 ( $6 * 8hours) /

900 = 31200 / 900

= $3.47

16 ($6 * 8 hours) / 100

= 7.68

80 remaining

shirts * 0.67 = 53.6

minutes

Direct labor (Salary * hours worked) / shirts produced

53.6 / 60 * 9 = 8.04

49 * 8.04 = 393.96

Total: (393.96 +

2352) / 800 = 3.43

1. Regular shirt production process without custom shirt fabrication.

a. Cycle time for each station = total station time / # of workers at station

i. Cycle time for system = longest station cycle time

ii. Cuffs station = System CT = 2.0 minutes / 4 workers = 0.5 minutes

b. Manufacturing Lead Time (MLT) = Cycle Time (CT) * Works in Progress (WIP)

i. CT = 0.5 minutes

ii. WIP individual shirts = (196 batches * 60 shirts / batch) = 11,760

iii. MLT in days = (0.5 * 11,760) / 480 minutes per day = 12.25 days

c. Total individual shirts as WIP = Sum of average batches * 60 shirts per batch

i. WIP shirts = 196 batches * 60 shirts per batch = 11,760 shirts as WIP

d. Production capacity of system at continuous 100% utilization (minutes)

i. Production capacity = minutes per day / CT of system

ii. Production capacity = 480 / 0.5 = 960 units per day @ continuous 100% utilization

e. Production capacity utilization = monthly production / monthly production capacity

i. Current monthly production is 16,000 (given in case)

ii. Total monthly capacity = 19,200 (920 per day * 20 days per month)

iii. Production utilization = 16,000 / 19,200 = 83%

f. Direct Labor content = sum of time at all stations + time per shirt for cutting

i. Sum of time at all stations = 25.51 minutes per shirt

ii. A single cutting of 8 patterns on 60 layers of cloth produces (60 * 8) = 480 shirts

iii. Total cutting time = (1.5 minutes * 60 layers) + (30 minutes cutting) = 120 minutes

iv. Cutting time per shirt = 120 minutes / 480 shirts = 0.25 minutes per shirt

v. Total labor content (time) per shirt = 25.51 + 0.25 = 25.76 minutes per shirt

g. Direct Labor Utilization = Total used labor time / Total labor time available

i. Total labor time available = 64 workers * 480 minutes per day = 30,720 minutes

ii. Total time used = time per shirt * daily production (16,000 per month / 20 days)

iii. Total time used = 25.76 minutes * 800 shirts per day = 20,608 minutes

iv. Direct Labor Utilization = 20,608 minutes used / 30,720 minutes available = 67.08%

h. Total Direct Labor Cost per shirt = (# workers * 8 hours per day * $6 per hour) / 800

i. Total Direct labor cost = (64 * 8 * 6) / 800 (total daily production = 16,000 / 20 days)

ii. Total Direct Labor Cost = $3.84 / shirt

ii.Custom cutting time = 5 shirts / 2.5 minutes = 0.5 minutes per custom shirt

iii.(16,000 reg / 18000 total) * 0.25 + (2000 / 18000) * 0.5 = 0.278 min/shirt

2. Mike’s plan for production of regular and custom shirts using existing facilities with the addition of a new cutting machine and one worker.

a. System CT remains unchanged = 0.5 (the cuffs station still has the longest station CT)


i. CT = 0.5 minutes


iii. MLT in days = (0.5 * 1,980) / 480 minutes per day = 2.06 days







i. Current monthly production is 16,000 regular + 2000 custom shirts (given in case)


iii. Production utilization = 18,000 / 19,200 = 93.8%



ii. New machine can cut 1 pattern on five layers in 2.5 minutes

iii. Total cutting time = Weighted average of old & new machine cutting times

iv. Total labor content (time) per shirt = 25.51 +0.28 = 25.79 minutes per shirt


i. Total labor time available = 65 workers * 480 minutes per day = 31,200 minutes

ii. Total time used = time per shirt * daily production (18000 per month / 20 days)

iii. Total time used = 25.79 minutes * 900 shirts per day = 23,211 minutes

iv. Direct Labor Utilization = 23,211 minutes used / 31,200 minutes available = 74.39%


i. Total Direct labor cost = (65 * 8 * 6) / 900 (total daily production = 18,000 / 20 days)

ii. Total Direct Labor Cost = $3.47 / shirt

3. Ike’s plan for shifting labor from the regular assembly floor to create a separate assembly line dedicated to custom shirts, thus separating the two streams of production.

(A) Regular Shirt Production:

a. System CT = 0.67 (the cuffs station still has the longest station CT @ 2.0 min / 3 workers )


i. CT = 0.67 minutes


iii. MLT in days = (0.67 * 9,060) / 480 minutes per day = 12.58 days (for regular shirts)







i. Current monthly production is 16,000 regular shirts (given in case)


iii. Production utilization = 16,000 / 14,400 = 111%

ii.OT (minutes) = 80 * CT = 80 * 0.67 = 53.60 extra minutes per worker

ii.OT cost = (53.60 / 60) *$6 / hour * number of workers = (53.60 / 60) * 6 * 49

ii.OT cost = $393.96



ii. A single cutting of 8 patterns on 60 layers of cloth produces (60 * 8) = 480 shirts

iii. Total cutting time = (1.5 minutes * 60 layers) + (30 minutes cutting) = 120 minutes

iv. Cutting time per shirt = 120 minutes / 480shirts = 0.25 minutes per shirt



i. New direct labor available = 64 – 15 = 49

ii. Total labor time available = 49 workers * 480 minutes per day = 20,608 minutes

iii. Total time used = time per shirt * daily production (16000 per month / 20 days)

iv. Total time used = 25.76 minutes * 800 shirts per day = 23,211 minutes

v. Direct Labor Utilization = 20,608 minutes used / 23,520 minutes available = 87.62%


i. Overtime is incurred for all employees in order to reach excess of normal hour production levels (calculated above @ 11% above capacity)

ii. Overtime production = daily production – daily capacity = 800 – 720 = 80 shirts

iii. Total Direct labor cost = (49 * 8 * 6) + 393.96 / 800 (total daily production = 18,000 / 20 days)

iv. Total Direct Labor Cost = $3.43 / regular shirt

(B) Custom shirt production on separate assembly line (15 workers + 1 new hire):

a. Cycle time for each station = total station time / # of workers at station

i. Cycle time for system = longest station cycle time

ii. Cuffs station = System CT = 3.90 minutes / 1 worker = 3.90 minutes (collar station)


i. CT = 0.5 minutes

ii. WIP individual shirts = (10 batches * 5 shirts / batch) = 50 shirts

iii. MLT in days = (3.90 * 50) / 480 minutes per day = 0.41 days


i. WIP shirts = 30 shirts in sewing + 5 shirts in cutting + 15 shirts in finishing = 50 shirts as WIP (given in case)





i. Current monthly production is 2,000 (given in case)

ii. Total monthly capacity = 2460 (123 per day * 20 days per month)

iii. Production utilization = 2000 / 2460 = 81.25%



ii. A single cutting of 1 pattern on 5 layers of cloth produces 5 shirts

iii. Total cutting time = 2.5 minutes

iv. Cutting time per shirt = 2.5 minutes / 5 shirts = 0.50 minutes per shirt



i. Total labor = 12 sewers + 3 finishers + 1 cutter = 16

ii. Total labor time available = 16 workers * 480 minutes per day = 7680 minutes

iii. Total time used = time per shirt * daily production (2000 per month / 20 days)

iv. Total time used = 26.01 minutes * 100 shirts per day = 2601 minutes

Part B

Recommendation to Management

The great disparity in cost between the two is mainly due to the efficiency of each proposal. Whilst Mike increases the efficiency of both capacity and labour utilization in the factory (absorbing excess capacity and increasing efficiency from 83% to 93.75% as well as improving labour efficiency by 7.31%), Ike over-utilizes capacity in his regular shirt production line and severely under-utilizes capacity in his custom shirts production line. The result of this is that he has to pay the workers on the regular shirt line overtime whilst the workers on the custom shirt line are frequently starved and sitting idle.

Furthermore, when considering the logistics of each production line layout, Mike’s proposal is favourable over Ike’s because it allows for more flexibility. Whilst Mike retains the existing ‘process layout’ in the batch shop process, where similar operations are performed in common functional areas, Ike instead adopts a ‘product layout’ structure, where the operations are located according to the progressive steps involved in making a shirt. Having only one worker completing each production task, as is the case in Ike’s plan, means that if one worker is slowed down for any reason or needs to take a break, then there is no one to pick up the slack. As a result, the whole process is negatively affected. An ideal assembly line should allow workers to trade elements of work and it should be unproblematic to add workers to the line to increase efficiency, however the straight-line layout of Ike’s plan does not satisfy these requirements.

Based upon our analysis, although both processes do essentially satisfy Dwight Collier’s production lead management time conditions, we would recommend that he should trial Mike’s plan. If there does indeed prove to be a market for mid price range custom shirts, then implementing Mike’s proposal is the company’s best shot at making a lucrative profit from this initiative.

v. Direct Labor Utilization = 2601 minutes used / 7680 minutes available = 33.87%


i. Total Direct labor cost = (16 * 8 * 6) / 200 (total daily production = 2000 / 20 days)

ii. Total Direct Labor Cost = $7.68 / custom shirt

Using the calculations in Part A it is possible to evaluate each of the two proposals in terms of their cost and efficiency. Firstly, to deduce the total cost for the custom shirts each month, the Direct Labour Cost from each plan can be multiplied by 2000 (the desired quantity produced). By doing this we learn that Ike’s total cost for custom shirts is $7.68 x 2000 = $15,360, compared to Mike’s $3.47 x 2000 = $6,940. This results in an $8,420 cost difference in favour of Mike’s plan. Production of regular shirts on the other hand are cheaper using Ike’s process, that is Ike’s labour costs are $3.43 x 16,000 (desired quantity of regular shirts) = $54,880 compared with Mike’s labour costs of $3.47 x 16,000 = $55,520. The difference between the two is only $640, which is fairly insignificant, and leaves the total cost difference between the two plans at $7,780 in favour of Mike.

Mike’s plan for production of regular and custom shirts using existing facilities with the addition of a new cutting machine and one worker.

a. System CT remains unchanged = 0.5 (the cuffs station still has the longest station CT)

Ike’s plan for shifting labor from the regular assembly floor to create a separate assembly line dedicated to custom shirts, thus separating the two streams of production.

a. System CT = 0.67 (the cuffs station still has the longest station CT @ 2.0 min / 3 workers )

i. Overtime is incurred for all employees in order to reach excess of normal hour production levels (calculated above @ 11% above capacity)

iii. Total Direct labor cost = (49 * 8 * 6) + 393.96 / 800 (total daily production = 18,000 / 20 days)

Custom shirt production on separate assembly line (15 workers + 1 new hire):

i. WIP shirts = 30 shirts in sewing + 5 shirts in cutting + 15 shirts in finishing = 50 shirts as WIP (given in case)



Based upon our analysis, although both processes do essentially satisfy Dwight Collier’s production lead management time conditions, we would recommend that he should trial Mike’s plan. If there does indeed prove to be a market for mid price range custom shirts, then implementing Mike’s proposal is the company’s best shot at making a lucrative profit from this initiative.

it is possible to evaluate each of the two proposals in terms of their cost and efficiency. Firstly, to deduce the total cost for the custom shirts each month, the Direct Labour Cost from each plan can be multiplied by 2000 (the desired quantity produced). By doing this we learn that Ike’s total cost for custom shirts is $7.68 x 2000 = $15,360, compared to Mike’s $3.47 x 2000 = $6,940. This results in an $8,420 cost difference in favour of Mike’s plan. Production of regular shirts on the other hand are cheaper using Ike’s process, that is Ike’s labour costs are $3.43 x 16,000 (desired quantity of regular shirts) = $54,880 compared with Mike’s labour costs of $3.47 x 16,000 = $55,520. The difference between the two is only $640, which is fairly insignificant, and leaves the total cost difference between the two plans at $7,780 in favour of Mike.

Caso Executive Shirt Company

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