EXECUTIVE SHIRT COMPANY

CASE ANALYSIS
Operations Management

SUBMITTED BY :
GROUP 9
Table of Contents

1. CASE OVERVIEW: ....................................................................................................................... 2

2. PROCESS FLOW DIAGRAM : ....................................................................................................... 2

3. CURRENT PROCESS :................................................................................................................... 3

4. MIKE’S PLAN : ............................................................................................................................ 5

5. IKE’S PLAN :................................................................................................................................ 7

5.1 REGULAR SHIRTS ............................................................................................................................. 7

5.2 CUSTOMIZED SHIRTS ........................................................................................................................ 9

QUES 1 ............................................................................................................................................ 11

QUES 2 ............................................................................................................................................ 12
 1. Case Overview:
The Executive shirt company is an apparels company that, on the back of declining sales, is
looking to enter the customised shirt space. The current issues the customers face in the
customised shirt making process are high prices and very long waiting period (around 6 weeks
as mentioned in the case). The company is looking to address these issues and capitalise on
this highly lucrative segment in the market where customers on an average are willing to pay
up to more than the standard off the shelf shirts.

2. Process Flow Diagram :

 3. Current Process :
The current process is designed and operated with scale in mind (to make large volumes) with
little scope for variety. 60 layers of cloth are cut at the same time with the time taken by the
labourers to lay out each layer being 1.5 minutes. Mike and Ike, two managers are asked for
plans and both of them present their plans as an alternate to the current process.

Regular Shirt Labor Capacity

Number of Minutes/shirt/
S.No Operation Content (processing (m/processing time)
workers(m) worker
time in minutes/shirt) (shirts/worker/day)
Process time = 0.25
Layering
1 Labor content = 0.25* 4 4 0.0625 7680
and Cutting
=1
2 Make Collar 3.9 8 0.4875 984.615
3 Make cuffs 2 4 0.5 960
Make
4 0.65 2 0.325 1476.923
sleeves
5 Make front 2.5 6 0.4167 1152.000
6 Make back 1.7 4 0.425 1129.412
Join
7 0.66 2 0.33 1454.545
shoulders
Attach
8 1.65 4 0.4125 1163.636
collar
Attach
9 1.55 4 0.3875 1238.710
sleeves
Stitch down
10 0.65 2 0.325 1476.923
sleeves
Sew side
11 1.8 4 0.45 1066.667
seam
12 Attach cuffs 1.55 4 0.3875 1238.710
Hem
13 1.7 4 0.425 1129.412
bottom
14 Inspect 1.5 4 0.375 1280.000
15 Iron 1.95 4 0.4875 984.615
Fold,
16 1.75 4 0.4375 1097.143
package
0.25*4 + 25.51
Total = 26.51 64

o Bottleneck : process step with lowest capacity

Make cuffs

o Ideal Process Capacity : capacity of the bottleneck

Process Capacity = 960 shirts/day

o Ideal Cycle Time : 1/process capacity

 Ideal Cycle time = (8 hours * 60 minutes )/960 = 0.5 mins

o Demand Rate = Actual shirts produced per days

16,000 shirts produced per month
Actual shirts produced per day = 16,000 shirts / (20 days)
Actual shirts produced per days = 800 shirts/day = Demand rate

o Flow rate = min{Demand rate, Process Rate}

Flow rate = min{800,960}
Flow rate = 800

o Actual Cycle Time : 1/flow rate

Actual Cycle time = (8 hours * 60 minutes )/800 = 0.6 mins

o Capacity Utilization = Flow rate/Capacity

Capacity Utilization = 800/960 * 100
Capacity Utilization = 83.33%

o WIP Inventory
WIP Inventory =(Total of Average WIP batched at every operation)* 60
WIP Inventory = (16+144+12+12+12)*60
WIP Inventory = 11,760 shirts

o Manufacturing Lead Time : WIP/Production Capacity

Manufacturing Lead Time = 11,760/960
Manufacturing Lead Time = 12.25 days

o Direct Labor Content = Total Labor content from the table

Direct Labor Content = 0.25*4 + 25.51 =
Direct Labor Content = 26.51 labor minutes/shirt

o Direct Labor Utilization = Total time to produce/ Total available time for labors
Direct Labor Utilization = (Number of shirts produced * Direct Labor Content ) /
(Number of workers * 8 hours * 60 minutes)

Direct Labor Utilization = (800 shirts/day * 26.51 minutes/shirt ) / (64 * 8 hours/day *

60 minutes/hours)
Direct Labor Utilization = 69.03%

o Direct Labor Cost = Wages paid to labor / Number of shirts

Direct Labor Cost = (64 labors * 8 hours * $6/hour )/ (800 shirts/day)
Direct Labor Cost = $3.84/shirt
 4. Mike’s Plan :
According to Mike’s plan, only an extra worker is employed in operating the new machine and
the customised shirts are processed together along with the regular shirts in the same process
flow. The batch size is reduced from 60 to 5 shirts. He also proposes to increase the work in
progress inventory from the current 3 batches per worker to 6 batches per worker. Other
than this, the overall flow of the process is similar to the old method.

Regular Shirt Labor Capacity

Number of Minutes/shirt/
S.No Operation Content (processing (m/processing time)
workers(m) worker
time in minutes/shirt) (shirts/worker/day)
Process time = 0.25
Layering
1 Labor content = 0.25* 4 4 0.0625 7680
and Cutting
=1
2 Make Collar 3.9 8 0.4875 984.615
3 Make cuffs 2 4 0.5 960
Make
4 0.65 2 0.325 1476.923
sleeves
5 Make front 2.5 6 0.4167 1152.000
6 Make back 1.7 4 0.425 1129.412
Join
7 0.66 2 0.33 1454.545
shoulders
Attach
8 1.65 4 0.4125 1163.636
collar
Attach
9 1.55 4 0.3875 1238.710
sleeves
Stitch down
10 0.65 2 0.325 1476.923
sleeves
Sew side
11 1.8 4 0.45 1066.667
seam
12 Attach cuffs 1.55 4 0.3875 1238.710
Hem
13 1.7 4 0.425 1129.412
bottom
14 Inspect 1.5 4 0.375 1280.000
15 Iron 1.95 4 0.4875 984.615
Fold,
16 1.75 4 0.4375 1097.143
package
Total 64

o Bottleneck : process step with lowest capacity

Make cuffs

o Ideal Process Capacity : capacity of the bottleneck

Ideal Process Capacity = 960 shirts/day
o Ideal Cycle Time : 1/process capacity
Ideal Cycle time = (8 hours * 60 minutes )/960 = 0.5 mins

o Demand Rate = Actual shirts produced per days

16,000 shirts regular shirts + 2000 customized shirts = 18,0000 shirts produced per
month

Actual shirts produced per day = 18,000 shirts / 20 days

Actual shirts produced per day = 900 shirt/ day = Demand rate

o Flow rate = min{Demand rate, Process Rate}

Flow rate = min{900,960}
Flow rate = 900

o Actual Cycle Time : 1/flow rate

Actual Cycle time = (8 hours * 60 minutes )/900 = 0.533 mins

o Capacity Utilization = Flow rate/Capacity

Capacity Utilization = 900/960 * 100
Capacity Utilization = 93.75%

o WIP Inventory
WIP Inventory =(Total of Average WIP batched at every operation)* 60
WIP Inventory = (36+288+24+24+24)*5
WIP Inventory = 1,980 shirts

o Manufacturing Lead Time : WIP/Production Capacity

Manufacturing Lead Time = 1,980/960
Manufacturing Lead Time = 2.0625 days

o Direct Labor Content = Total Labor content from the table

For 12 of the sewing operations, & 3 operations of inspecting, ironing and packaging ,
Direct Labor Cost= 25.51 min/shirt

Output per day = 18,000/ 20 days = 900 shirts/ day

Out of this, 16,000/20 days = 800 regular shirts/ day as in previous case
ð 100 customized shirts produced per day
Total number of labor available = 64 + 1 additional for new cutting machine
= 65

Time taken for customized shirt = 2.5/5= 0.5 min/ shirts

Time taken for regular shirt = 120/480= 0.25 min/ shirts

Total cutting time = Cutting time for regular + Cutting time for customized shirts
= 0.25 *4 + 0.5 * 1
= 1.5 min/shirts
 Total DLC = Cutting time + sewing & ancillary time
Total DLC = 1.5+ 25.51
Total DLC = 27.01 min/shirts

o Direct Labor Utilization = Total time to produce/ Total available time for labors
Direct Labor Utilization = (Number of shirts produced * Direct Labor Content ) /
(Number of workers * 8 hours * 60 minutes)

Direct Labor Utilization = (900 shirts/day * 27.01 minutes/shirt ) / (64 * 8 hours/day *

60 minutes/hours)
Direct Labor Utilization = 77.91%

o Direct Labor Cost = Wages paid to labor / Number of shirts

Direct Labor Cost = (64 labors * 8 hours * $6/hour )/ (900 shirts/day)
Direct Labor Cost = $3.467/shirt

5. Ike’s Plan :
According to Ike’s plan, the standard and customised shirt making processes are separate.
One worker from each of the sewing, packing, ironing and inspection stations are allotted to
the custom shirt making process. It is also proposed that 12 sewing machines and 1 ironing
machine are moved from the current line. The process for making standard shirts is the same
as that of the original process. For custom shirts, it’s the same except that it is processed one
shirt at a time.

5.1 Regular Shirts

Regular Shirt Labor Capacity
Number of Minutes/shirt/
S.No Operation Content (processing time (m/processing time)
workers(m) worker
in minutes/shirt) (shirts/worker/day)
Layering 0.25 3 0.083
1 5760
and Cutting
2 Make Collar 3.9 7 0.557 861.552
3 Make cuffs 2 3 0.667 720
Make 0.65 1 0.65
4 738.48
sleeves
5 Make front 2.5 5 0.5 960
6 Make back 1.7 3 0.567 847.056
Join 0.66 1 0.66
7 727.296
shoulders
Attach 1.65 3 0.55
8 872.736
collar
 Attach 1.55 3 0.517
9 929.04
sleeves
Stitch down 0.65 1 0.65
10 738.48
sleeves
Sew side 1.8 3 0.6
11 800.016
seam
12 Attach cuffs 1.55 3 0.517 929.04
Hem 1.7 3 0.567
13 847.056
bottom
14 Inspect 1.5 3 0.5 960
15 Iron 1.95 3 0.65 738.48
Fold, 1.75 3 0.583
16 822.864
package

Total 49

o Bottleneck : process step with lowest capacity

Make cuffs

o Ideal Process Capacity : capacity of the bottleneck

Ideal Process Capacity = 720 shirts/day

o Ideal Cycle Time : 1/process capacity

Cycle time = (8 hours * 60 minutes )/720 = 0.667 mins

o Demand Rate = Actual shirts produced per day

16,000 shirts regular shirts per month

Actual shirts produced per day = 16,000 shirts / 20 days

Actual shirts produced per day = 800 shirts/ day = Demand rate

o Flow rate = min{Demand rate, Process Rate}

Flow rate = min{800,720}
Flow rate = 720

o Actual Cycle Time : 1/flow rate

Actual Cycle time = (8 hours * 60 minutes )/720 = 0.667 mins

o Capacity Utilization = Flow rate/Capacity

Capacity Utilization = 720/720 * 100
Capacity Utilization = 100%

However, the workers can work overtime- so,

Capacity Utilization = 800/720*100 = 111.11%

 Therefore, overtime per day can be given by 8*60*0.111 = 53.33 mins per day

o WIP Inventory
WIP Inventory =(Total of Average WIP batched at every operation)* 60
WIP Inventory = (151)*60
WIP Inventory = 9,060 shirts

o Manufacturing Lead Time : WIP/Production Capacity

Manufacturing Lead Time = 9,060/720
Manufacturing Lead Time = 12.58 days

o Direct Labor Content = Total Labor content from the table

25.51(operations) + 4*0.25 (cutting) = 26.51 min/shirt
Total DLC = 26.51 min/shirt

o Direct Labor Utilization = Total time to produce/ Total available time for labors
Direct Labor Utilization = (Number of shirts produced * Direct Labor Content ) /
(Number of workers * 8 hours * 60 minutes)

Direct Labor Utilization = (800 shirts/day * 26.51 minutes/shirt ) / (49 * 8 hours/day *

60 minutes/hours * 111.11%)
Direct Labor Utilization = 81.1%

o Direct Labor Cost = Wages paid to labor / Number of shirts

Wages Paid = Normal Wages + Overtime Wages

Wages Paid = (49*6*8 + 49*9*(53.33/60))*20
Wages Paid = $54,870.8

Direct Labor Cost = ($54,870.8)/ (800 shirts/day)

Direct Labor Cost = $3.43/shirt

5.2 Customized Shirts

Regular Shirt Labor Capacity
Number of Minutes/shirt/
S.No Operation Content (processing (m/processing time)
workers(m) worker
time in minutes/shirt) (shirts/worker/day)
Layering and
1
Cutting 0.25 1 0.25 1920
2 Make Collar 3.9 1 3.9 123.072
3 Make cuffs 2 1 2 240
4 Make sleeves 0.65 1 0.65 738.48
5 Make front 2.5 1 2.5 192
6 Make back 1.7 1 1.7 282.336
 Join
7
shoulders 0.66 1 0.66 727.296
8 Attach collar 1.65 1 1.65 290.928
Attach
9
sleeves 1.55 1 1.55 309.696
Stitch down
10
sleeves 0.65 1 0.65 738.48
Sew side
11
seam 1.8 1 1.8 266.688
12 Attach cuffs 1.55 1 1.55 309.696
13 Hem bottom 1.7 1 1.7 282.336
14 Inspect 1.5 1 1.5 320.016
15 Iron 1.95 1 1.95 246.144
16 Fold,package 1.75 1 1.75 274.272
16

o Bottleneck : process step with lowest capacity

Make collar

o Ideal Process Capacity : capacity of the bottleneck

Ideal Process Capacity = 123.072 shirts/day

o Ideal Cycle Time : 1/process capacity

Cycle time = (8 hours * 60 minutes )/123.072 = 3.9 mins

o Demand Rate = Actual shirts produced per day

2,000 customized shirts per month

Actual shirts produced per day = 2,000 shirts / 20 days

Actual shirts produced per day = 100 shirts/ day = Demand rate

o Flow rate = min{Demand rate, Process Rate}

Flow rate = min{100,123.072}
Flow rate = 100

o Actual Cycle Time : 1/flow rate

Actual Cycle time = (8 hours * 60 minutes )/100 = 4.8 mins

o Capacity Utilization = Flow rate/Capacity

Capacity Utilization = 100/123.072 * 100
Capacity Utilization = 81.25%
 o WIP Inventory
WIP Inventory =(Total of Average WIP batched at every operation)* 60
WIP Inventory = (10)*5
WIP Inventory = 50 shirts

o Manufacturing Lead Time : WIP/Production Capacity

Manufacturing Lead Time = 50/123.072
Manufacturing Lead Time = 0.41 days

o Direct Labor Content = Total Labor content from the table

25.51(operations) + 1*0.5 (cutting) = 26.01 min/shirt
Total DLC = 26.01 min/shirt

o Direct Labor Utilization = Total time to produce/ Total available time for labors
Direct Labor Utilization = (Number of shirts produced * Direct Labor Content ) /
(Number of workers * 8 hours * 60 minutes)

Direct Labor Utilization = (100 shirts/day * 26.01 minutes/shirt ) / (16* 8 hours/day *

60 minutes/hours)
Direct Labor Utilization = 33.9%

o Direct Labor Cost = Wages paid to labor / Number of shirts

Wages Paid = Normal Wages + Overtime Wages

Wages Paid = 16*6*8 + 0
Wages Paid = $ 768 /day

Direct Labor Cost = ($768)/ (100 shirts/day)

Direct Labor Cost = $7.68/shirt

Ques 1

S. Parameter Current Mike’s Plan Ike’s Plan

No Process Regular Custom
Regular & Shirts Shirts
Regular Custom
Shirts Shirts
a Actual Cycle
0.6 0.533 0.667 4.8
Time(min/shirt)
b Manufacturing Lead
12.25 2.0625 12.58 0.41
Time( days)*
 c WIP Inventory
11,760 1,980 9,060 50
(Shirts)
d Production
960 960 720 123.072
Capacity(Shirts/day)
e
Capacity Utilization 83.33% 93.75% 111.11% 81.25%
f Direct Labor
26.51 27.01 26.51 26.01
Content(min/shirt)
g Direct Labor
69.03% 77.91% 81.1% 33.9%
Utilization
h Direct Labor
3.84 3.467 3.43 7.68
Cost($/shirt)

*Assumption : Manufacturing Lead Time is calculated on the basis of Ideal Production Time

Ques 2
I) Profitability Analysis

For Normal shirts For Customized Shirts

Cost comparison Mike's Plan Ike's Plan Mike's Plan Ike's Plan
Raw materials $7 $7 $7.70 $7.70
Direct Labor $3.47 $3.43 $3.47 $7.68
Indirect Labor $1.03 $1.03 $1.03 $1.03
Other Indirect Labor $4.50 $4.50 $4.50 $4.50
Total Manufacturing
$16.00 $15.96 $16.70 $20.91
costs
Retail price $50 $50 $70 $70
Profit/ Shirt $34.00 $34.04 $53.30 $49.09

For customized shirts, a 10% extra cost is levied on raw materials due to additional scrap
produced per layer.
Retail price of customized shirt is $20 more than that of normal shirt $50.
Indirect labor is assumed as constant in all the cases. Indirect labor is calculated in first case
as $4.5- $3.47=$1.03. This is taken as same for all of mike’s and Ike’s plan.

We can see that the profits for Ike’s plan is slightly higher than that of Mike’s plan by $ 0.04.
However for customized shirts, there is a huge difference of $4.21 in favour of Mike’s plan.
For normal shirts 16,000 => Ike’s profit is $640 more.
For customized shirts 2,000 => Mike’s profit is $8420
Mike’s plan has $7780 more profits as compared to Ike’s plan.

II) Utilization of production and labor

Mike has better efficiency in terms of both production utilization and labor utilization overall.
Mike’s plan keeps the same process layout and has more flexibility as it clubs similar processes
into common functional areas.
Ike’s plan adds a new assembly line and adopts a product layout structure, which leads to
repetition of operations. In Ike’s plan, each operation is dependent on only one worker which
may lead to whole process being slower due to slowness of any of the workers working on an
operation. Ideally more than one worker should cater to each set of operations so that can
complement each other with breaks and other contingencies.

Normal shirts Customized shirts

Initial process
Mike’s Plan Ike’s Plan Mike’s Plan Ike’s Plan
Production 83.33% 93.75% 111.11% 93.75% 81.25%
Utilization
Labor 69.03% 77.91% 81.1% 77.91% 33.86%
Utilization
Manufacturing 12.25 2.0625 12.58 days 2.0625 0.41 days
Lead Time days days

Production utilization: Mike’s plan is better for normal as well as customized shirts than
earlier process i.e. increase of 10.42 % (93.75-83.33). Ike’s plan for customized shirt is lower
than earlier process by 2.08%. In terms of normal shirts, production utilization is 111% which
is more than 100%, hence costs would be more in terms of overtime given. Thus, Mike’s plan
has better production utilization overall.

Labor Utilization: Mike’s plan has better utilization as compared to earlier one by 8.88%
(77.91-69.03). Ike’s plan has very dismal under-utilization in terms of customized shirts-
35.17% as compared to previous one. For normal shirts, the utilization increased by 12.07%
(81.1-69.03). However, the dismal under-utilization for customized shirts is too low and is not
compensated by better utilization for normal shirts. Hence, Mike’s plan is better for labor
utilization as well.

Manufacturing Lead time: Lead time for Mike’s plan is 2.0625 days way lower than 12.25
days earlier. It is also lower than 2 weeks of industry standards. For Ike’s plan, customized
shirts have lower lead time of 0.41 days but very high lead time of 12.58 days of normal shirts.
Overall lead time for Ike’s plan is higher than Mike’s plan.

Thus on all the four parameters of profitability, production utilization and labor utilization
and manufacturing lead time, Mike’s plan is better than Ike’s plan. So Dwight Collier should
implement Mike’s plan. Ike’s plan can only be used when the Willingness to pay for
customers is very high.