Assignment 1

Operations Management I
(Last Date 5 November 2012) Kristens Cookie Company (A1)

Section No. Group No. Total Marks Marks Obtained

1 C2 50

Sr No. 1 2 3 4 5

Name of Students Aniruddh Singh Rathore Himanshu Arora Jeevan James Raghavendra Shenoy Ramya Dadi

Roll No 12110 12122 12123 12141 12144

Executive Summary : Kristien Cookie company is being launched in the college campus to serve the students late at night with tasty and freshly baked cookies .They take customized orders. We have analysed the case subjected to the given constraints to the profitability position of the business. Our report is given below. Ingredients Used : Dough, Chocolate chips, M&M's, Chopped Heath bars, Coconut, Walnut and Raisins. Things Required : 1 Oven, 1 Food Processor( mixing bowl), Cookie trays. Steps involved in the Process 1. 2. 3. 4. 5. 6. 7. 8. 9. Adding the ingredients to the washed bowl Mix ingredients for 3 dozens Spoon out the cookie dough into the tray 1dozen at a time. Put the tray inside the oven Baking the cookies Remove the tray out of the oven Cooling the cookies Packing the cookies 12 per box Delivery and Payment for the order

Process Flow Diagram : In the process flow diagram the cycle time are included based on the below table Process Taking Order Washing and Mixing Spooning Cookies on the tray Placing the tray in the oven Baking the Cookies Removing and Cooling the Cookies Packing the Cookies Payment and Delivery Cycle Time 0mins 6mins 2mins 1min 9mins 5mins 2mins 1min

Capacity 3 dozens

Capacity 1dozen

Capacity 1dozen

Bottle neck Capacity 1dozen

Capacity 1dozen

Capacity 1dozen

Capacity 1dozen/per box

1. How long will it take you to fill an order? The time taken to fill an order depends upon the process flow given above . Since baking is the bottle neck we have to wait for that process to complete once it's done we can start baking the next tray while the first dozen cookies are kept for cooling. Accordingly the process follows for the n number dozens. If we are baking for the first time : Time taken to bake 1dozen is =26mins(6+2+1+9+5+2+1) Since the dough is ready for 3 dozens at a time Additional time taken for baking the next dozen is =10mins(2+5+2+1) From this time taken to fill the n orders = Initial time taken +n*10 mins = 26+n*10 mins

Gantt Chart: To calculate time taken for two dozens 2. How many orders can you fill in a night, assuming you are open four hours each night? As it can be seen from the above solution that the total time taken for n orders is calculated we can derive the number of order that can be handled in a stipulated time frame. In the question it has been mentioned that the orders has to be taken in the night time but in the purview of the present case these two scenarios will be in a similar manner hence there will not be any additional time invested in the process even though orders are taken at night. Given that total time is 4hrs or 240mins.
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Substitute in the above equation T =240 and finding n T=26+n*10 240=26+n*10 Hence n=21 Thus they can fulfil 22 (21+1) orders if they operate for 4 hours in the night. 3. How much of your own and your roommates valuable time will it take to fill each order? To find the time taken by roommate and self individually we have initially made the assumption that the order has been taken only for one dozen cookies. Process Taking Order Washing and Mixing Spooning Cookies on the tray Placing the tray in the oven Baking the Cookies Removing and Cooling the Cookies Packing the Cookies Payment and Delivery From the above table Time invested by self = (6+2) = 8mins Time invested by roommate = (1+2+1)=4 mins 4. Because your baking trays can hold exactly one dozen cookies, you will produce and sell cookies by the dozen. Should you give any discount for people who order two dozen cookies, three dozen cookies or more? If so, how much? Will it take you any longer to fill a two-dozen cookies order than onedozen cookies order? ASSUMPTION:The cost of time per person is assumed to be $10/hr for the calculations. COST: Electricity cost is not accounted as it was paid by the landlord.
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Responsibility Roommate Self Self Roommate Automated Automated Roommate Roommate

Cycle Time 0mins 6mins 2mins 1min 9mins 5mins 2mins 1min

The variable costs here are:Ingredients cost : $0.60/dozen Packing Cost : $0.10/dozen Cost of time : $10/hr per person (assumed) The Ingredients cost and packing cost would remain same for any amount of cookies. Whereas the cost of time of labour differs according to the time spent by the labour. So the time spent by labour is calculated to determine this cost as follows: Wash and Tray Mix filling 1 order 2 orders 3 orders 6 6 6 2*1=2 2*2=4 2*3=6 Prepare Bake 1*1=1 1*2=2 1*3=3 Packing 2*1=2 2*2=4 2*3=6 Payment 1 1 1 Total time taken(mins) 12 17 22

NOTE: - Baking & cooling doesn't involve any labor time so it has not been considered here. Now it can be seen that the total time taken for 1-order, 2-order and 3-order is 12mins, 17 mins and 22 mins respectively. And the cost of time of one person was assumed at $10/hr. So, Cost of time per person according to order can be given as: Type of Order 1-order 2-order 3-order Time 12 mins 17 mins 22 mins Cost $2 $1.42 $1.22

Now as the cost of 2-dozen and 3-dozen order is less than one dozen order. So, we can give a discount of $0.68 and $0.72 to the customers buying 2-dozen and 3-dozen respectively. 5. How many food processor and baking trays will you need? The maximum number of trays that would be used at any one time would give us the number of baking trays required in the process. There are three kinds of activities that require a baking tray: Tray filling, Baking, and Cooling. Also, as there can never be more than one tray in the oven at any given time, nor there is more than one tray kept for cooling. So, it mainly is dependent on tray filling in which we can have any number of trays. A good number would be 5 trays as we can put 3 trays at a time in the wash and mix process. But if we adjust the mixing and filling part of the operation, we would need minimum 3 trays. For the food processor, if we check the process flow diagram, it can be seen that food processor is used only in one stage and has a maximum capacity. So, most of the times it is idle. So, 1 food processor is sufficient.
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6. Are there any changes you can make in you production plans that will allow you to make better cookies or more cookies in less time or at lower cost? For example, is there a bottleneck operation in you production process that you can expand cheaply? What is the effect of adding another oven? How much would you be willing to pay to rent an additional oven? As the oven takes the maximum time in the whole process i.e. 10 mins and some time is wasted in waiting for the ovens baking job, so this is the bottleneck. So, now if we now add another oven, then For n number of 1-dozen orders: Time for one oven :16+10n Time for two ovens :16+7n [As two ovens are now simultaneously used for baking, so the time for baking 1 becomes 5 min with 2 mins for placing in the oven. Here the assumption is made that at all times we have orders in the pipeline so that we can bake in two ovens at the same time.] So, getting two ovens saves 3 minutes per order than the one for one oven. For a 2-dozen or 3-dozen order, it will save more than that. ASSUMING the profit per dozen as $1. The profit per hr can hence be calculated for single oven as (60/10)=$6 and for two ovens as (60/7)=$8.57. Hence the highest price that we can accept is $2.57 by taking $1 as profit. This value can be generalized as 2.57p where p is the profit value. Further Questions: 1. What happens if you are trying to do this by yourself without roommate? Roommate was assigned the duty of filling the tray and heating the oven and this process a combined time of 10 minutes. On the first order washing, mixing , spooning will take exactly 8 minutes. Moreover filling takes 1 minute and heating takes 9 minutes. Therefore the second order Kristine can start the process of washing, mixing and spooning after 1 minute only but will have to wait for a minute extra before she can start baking. This process will turn into a bottle neck. Maximum of only 20 orders can be accepted since the cycle time has increased by 2 minutes. (10 to 20 minutes) 2. Should you offer special rate for rush orders? Suppose you have just put a tray of cookies into the oven and someone call up with a crash priority order for a dozen cookies of a different flavor. Can you fill the priority order while still fulfilling the order for the cookies that are already in the oven? If not, how much of a premium should you charge for filling the rush order? There is no point in filling the priority order if we get a crash order. The cookies that are already in the oven should not be taken out. The baking process is of 9 minutes and the process of washing, mixing and spooning is of eight minutes. So the order will have to wait for eight minutes before placing it in the oven. So the crash order has to wait for only one minute before it sets in the oven.
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3. When should you promise delivery? How can you look quickly at you order board (list of pending orders) and tells a caller when his or her order will be ready? How much of a safety margin for timing should you allow? The finishing time will take 26 minutes more than the standard time. We can promise delivery any time after this time. For rush order the safety margin time will be 8 minutes. If we are getting a order in between the wash process, you need to halt the normal process and start working on rush order. The previous order will not be delayed for more than 8 minutes. Thus the safety margin will be 6+2=8 minutes. 4. What other factors should you consider at this stage of planning your business? Factors that can be considered at this stage of planning the business are s follows: Cost and Quality: Getting cheaper raw materials with good quality so as to maintain the standard promised to the customers. This can also mean a proper channelized system - Procurement department with ensured quality standard can be set. Market: A market research can be initiated that will help me to understand various factors such as my product's USP, the brand awareness, the potential sales, positioning of the product, do I need to advertise for my products etc. Product: As presently I am offering various types of flavour, so after a while can I go for product variations, introduce new SKU's, demarcate clearly between the types of cookies being sold more and the other which are not in demand. Also can look into different shapes and sizes for the cookies. Resource Management: Setting up clear plans and supply-chains for the resources that can include the raw material as well as the man-resource management. In case of expansion do I need to employee more people and make required investments. Services: Services can be provided in two ways: a) During Sales b) Post Sales. Services such as home delivery system and defective cookies replacement can be introduced in order to gain competency. Safety Measures: Use of oven, which how-so-ever safe to use, should be supported by proper first aid kits and also immediate safety measures can be specified n case of accidents or mishap. Rules and Regulations: Since the business has a capability to expand and prosper, I also need to check on the regulations and rules that should be considered so as to maintain smooth operations. Rules and regulations if not considered can create hindrances later on in the business life.

Finance and Taxation: A growing business needs properly maintained records for the transactions and money matters. This will mean that I need to ensure the above and it will also help me take care of the taxations. It will keep an eye on the health of the business. Other Factors: Other factors such as Location, Customer Interface, Development, Packaging etc can also be looked into to make the business and product highly competent and the best present in the market. 5. Your product must be made to order because each order is potentially unique. If you decide to sell standard cookies instead, how should you change the production system? The order-taking process? The Unique Selling Point for the product is the fact that cookies are completely fresh. In case the readily available cookies are introduced, the product-value of these cookies will differ i.e. the cookies that are made on order at hand will have more customer perceived value as compared to the ones that are readily available. The quality of the cookies will have to be maintained in case the production system changes to the "Standard Cookies Production Line". Here the clear advantage of reducing operational costs can be achieved and thus the production cost can be brought down. Also the production line needs to be maintained very efficiently. Bottleneck timing can be reduced by properly examining the process and then coming up with required solution. This though might introduce other costs such as inventory costs (Stores department), extra maintenance costs etc. The order taking process presently is very simple and follows produce to need system. In case the shift in production process takes place as specified, the order taking system can also be changed. Order once taken will now go to the Stores department instead of the Production department as the inventory is being maintained there. The customer waiting time will reduce because of this change in system, customer once orders need not wait for long and can be provided with their order at the earliest. Also in case of home delivery the order time be limited to the time of delivery. This change in system will also ensure that large orders can be taken care of easily without directly affecting the production line always. In case of large orders, a advance payment system can be deployed. Also the order taking system can provide customers with options like different packaging as per occasions, home delivery as gifts etc at marginally added price.

References 1.http://bizcovering.com/small-business/10-important-factors-to-consider-before-startingyour-own-business/ 2. http://en.wikipedia.org/wiki/Flowchart 3. Stevenson, William J. (2009), Operation Management (9th Edition), Tata McGraw Hill Education Private Ltd., New Delhi, ISBN-13 978-0-07-066821-8 ISBN-10 0-07-066821-3 4. http://vidmar.net/weblog/archive/2004/10/19/538.aspx

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