Process flow case of

Kristen's Cookie Company

Prepared For
ISLAM, KINGSHUK JUBAER

Faculty, Executive MBA

Program

AMERICAN INTERNATIONAL UNIVERSITY

BANGLADESH

Course Title: COMPETITIVE ADVANTAGE FROM

OPERATIONS (Sec: A)

Submitted By:
Masrur Jahan 12-95758-2
Maruf Jahan 12-95757-2

Date of Submission: 15th SEPT, 2013.

AMERICAN INTERNATIONAL UNIVERSITY

BANGLADESH Executive MBA Program

1. How long will it take you to fill out a rush order?

Filling a rush order:

Process Resource(s) Process/cycle Cumulative Time

Time Consumed
Taking Order E-mail 0 minutes 0 minutes
Washing and Mixing Self 6 minutes 6 minutes
Filling Tray Self 2 minutes 8 minutes
Preparing Oven Roommate 1 minute 9 minutes
Baking Oven 9 minutes 18 minutes
Removing the tray Roommate 0 minutes 18 minutes
Cooling None 5 minutes 23 minutes
Packaging & Collecting
Money Roommate 3 minutes 26 minutes

Thus, it requires minimum 26 minutes to fill a rush order.

2. How many orders can you fill in a night, assuming you are open four hours each night?

Since the resources required for the different processes are not common everywhere, there can be two
orders (of one dozen each, for simplicity) being processed simultaneously. Thus, it would not require
twice as much time for the second order (of one dozen) to be completed as it requires for the first one
(of one dozen). This can be attributed to the fact that one can get the tray ready for the second order
while the first one is in the oven for baking. The only bottleneck which creates a time lag is the
combined process of getting the oven ready (1 minute) for baking and the process of baking itself (9
minutes). So, we can get two orders of one dozen each ready in 36 minutes. In fact, for X orders of 1
dozen each, the time required is given by:
(16 + 10X) minutes.
Thus, in 4 hours (or 240 minutes), Kristen's Cookie Company can fulfill 22 orders of one dozen each
given the fact that it gets the orders independently and it utilizes its resources to the maximum.
3. How much of your own and your roommate’s valuable time will it take to fill each order?

For Self, total time required is 6 minutes (washing and mixing) + 2 minutes (filling the tray) = 8
minutes. For Roommate, total time required is 1 minute (preparing the oven) + 3 minutes (packaging
and collecting money) = 4 minutes.
The assumption made for calculating the labor times is that all the orders are of one dozen.

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 any longer to fill a two‐dozen order than a one‐dozen
cookie order?

Since the costs of raw materials and packaging material remains the same irrespective of the fact
that we service one dozen orders or multiple dozen orders, the only factor to be taken into account is
the money value of time employed by both the people.

Activity Resource Cycle Time

Order Entry E-mail 0 minute
Wash Bowl, Mix Self 6 minute
Fill Tray Self 2 minute
Prepare Oven Roommate 1 minute
Bake Oven 9 minute
Remove Roommate 0 minute
Cool None 5 minute
Pack, Collect Money Roommate 3 minutes

As calculated above, the labor time requirements for a one dozen order are as
follows:
For self = 8 minutes
Roommate = 4 minutes
Total time = 12 minutes
The following table calculates the labor time requirements for a two dozen order:

Process Cumulative Cumulative Labor

Process Resource Time Labor time (Self) Time (Roommate)
Taking Order (1 & 2) E-mail 0 minutes 0 minutes 0 minutes
Washing and Mixing (1 & 2) Self 6 minutes 6 minutes 0 minutes
Filling Tray 1 Self 2 minutes 8 minutes 0 minutes
Filling Tray 2 Self 2 minutes 10 minutes 0 minutes
Preparing Oven 1 Roommate 1 minute 10 minutes 1 minute
Baking 1 Oven 9 minutes 10 minutes 1 minute
Removing Tray 1 Roommate 0 minutes 10 minutes 1 minute
Cooling 1 None 5 minutes 10 minutes 1 minute
Preparing Oven 2 Roommate 1 minute 10 minutes 2 minutes
Baking 2 Oven 9 minutes 10 minutes 2 minutes
Removing tray 2 Roommate 0 minutes 10 minutes 2 minutes
Cooling 2 None 5 minutes 10 minutes 2 minutes
Packaging 1 Roommate 2 minutes 10 minutes 4 minutes
Packaging 2 Roommate 2 minutes 10 minutes 6 minutes
Collecting Money (1 & 2) Roommate 1 minutes 10 minutes 7 minutes

As calculated above, the labor time requirements for a two dozen order are as
follows: For self = 10 minutes
Roommate = 7 minutes
Total time = 17 minutes

This shows that the cost of a two dozen order in terms of labor requirements is not twice that of a one
dozen order. So, if labor cost is Rs. 20 per hour, we get the following costs distribution:

Order size Labor Time Cost Cost per Dozen

1 dozen 12 Rs. 4.00 Rs. 4.00
2 dozen 17 Rs. 5.66 Rs. 2.83

Thus, cost per dozen of labor is decreasing. This can be applied to orders of more than two dozen as
well. Hence, Kristen's Cookie Company can give discounts to customers giving orders of more than
one dozen because of the economies of scale as shown above.
5. How many food processors and baking trays will you need?

The processor is required for mixing the ingredients for the cookies and is idle for most of the time.
The oven required for the purpose of baking is the major bottleneck and there is no requirement for
more than one processor. Hence, spending money on more than one processor would not be advisable
for Kristen's Cookie Company.

The baking trays are required for three activities, namely, filling it and keeping it ready for baking,
baking it in the oven, and cooling it after baking is done. Since the baking and cooling processes will
be going on for at most one tray at a given time and the mixing process gets material ready for at most
three trays of one dozen each, five trays would be sufficient, though, even three trays would serve the
purpose if mixing and filling activities are done properly. Hence, it is advisable for Kristen's Cookie
Company to go for at least three baking trays to maximize its productivity.

6. Are there any changes you can make in your production plans that will allow you to make
better cookie in less time or at lower cost? For example, is there a bottleneck operation in your
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?

The cost benefit analysis can be done by considering all the bottlenecks in the process of making
cookies and trying to mitigate their effects by incurring costs and looking at the benefits made through
it. The only bottleneck is the baking process (preparing the oven and baking) which requires 10
minutes for one dozen of cookies. Thus, the company can bake maximum 6 dozens of cookies in an
hour. Even if the company buys one more oven, it can bake a maximum of 12 dozens of cookies in an
hour which again turns out to be the limiting factor. Also, the benefits obtained by purchasing one
more oven need to compared to the costs involved in purchasing the oven, the kind of orders the
company gets per day
(the no. of one dozen and two dozen orders), etc. Only then can a decision be taken regarding the
plan to purchase more ovens.

The case should be looked at from some more angles for better analysis of the company's risks. For
example, in absence of a roommate, since there isn't any overlapping of labor requirements, the
calculations made above would remain the same. The only effect would be the challenge faced by
the extreme nature of the work.
In case of special or urgent requirements, there is a possibility of fulfilling the order without any delay
to other orders because the company is taking ample time for completion of orders (1 hour), provided
that they are one dozen others. In all other cases, the company can get the urgent order ready while
some other order is in the oven and get the urgent one in after that. They should charge a premium as
well for faster processing of urgent orders.
In case the company is not taking any urgent orders, it should carry on with the one hour delivery time
limit because there is a safety margin in it for one, two or even three dozen orders. But if the
company processes the urgent orders first, there should be a mechanism to check that the other
orders are not delayed. This can be done by analyzing the order board and calculating the amount of
time it would require for the order to be ready. For this the formula (16 + 10X) should be applied.
In this way, Kristen's Cookie Company can take advantage of the opportunities and satisfy all
its customers with timely delivery of cookies.