MBA 513 Operations Management Case C: Executive Shirt Company, Inc.

by Teams 5&6

Team 5: Huanle Dai Hao Wu Liunai Yu Xin Zhang Yunping Yao

Team 6: Kai Chen Xuewen Ding

Sep 3rd, 2011

Calculations and Analysis In order to do comparison and make choice between current production process and plans presented by two managers, Mike and Ike, we need to come up with data that could be strongly supportive for our analysis. Therefore, the first step we took was to figure out each plans cycle time, manufacturing lead time, production capacity, labor utilization and other indexes which are involved in the table attached in the last page of the case (See Table 1). To get the bottleneck of standard-sized shirt production process, we divided Regular Shirts Labor Content (minutes pre shirt) by Number of Workers of each post-cutting operation as Table 2 demonstrates. On the other hand, we determined the cycle time for cutting operation to be 120min/480shirts=0.25min/shirt. Accordingly, the bottleneck for the whole process is cutting cuffs of 0.5min/shirt. However, given the situation that ESC is producing 16,000 per month (or 800 per day) during working hour of 8 hours a day, the actual cycle time of the factory should be calculated as (480min/day)/(800shirts/day) which is equal to 0.6mintus/shirt. In the other word, the factory is operating under its full capacity. Subsequently, based on the formula (MLT = cycle time WIP) and average WIP presented in Exhibit 3 of the case, manufacturing lead time of the process could be summed up (14.7 days). Production capacity is determined by total working hours and the bottleneck of process, in this case, it is 960shirts/day ((480min)/(0.5min/shirt)=960shirts). As a result, capacity utilization is then 83.3%. We add the content labor of cutting operation, in this case, which is 1min/shirt and the total content labor of post-cutting operations of 25.51minuts per shirt which is stated by the second table of Exhibit 3 in the case to get the total content labor (26.51min/shirt) demanded to produce the regular shirts. Combing content labor with other factors including number of shirts produced per day, number of workers and their working hours and wage per day, we could draw the results of direct labor utilization and direct labor cost, which is 69% and $3.48/shirt, respectively. Another issue that should be considered in the analysis is the case mentions that the material costs for custom shirts would be about 10% higher than regular shirts.

Generally, the other figures in Table 1 for Mikes and Ikes plan could be calculated by following the same methodology as regular shirts, but several conditions would change. For example, in Mikes plan, the batch size would be reduced to 5 shirts from 60 shirts and one more workers would be hired to cut custom shirts. Besides, we assume the number of layers on cutting machine is 5 regardless of what production line. Then for this reason, the labor content for the new cutting machine is 2.5min/5shirts+25.51min/shirt=26.01 min/shirt. The labor content for cutting regular shirts
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would

be

(1.5min 5+30min)

4workers/40shirts=3.75min/shirt

and

the

total

labor

content

is

3.75min/5shirts+25.51min/shirt=29.26 min/shirt. Hence the average content labor for Mikes plan can be calculated as: (29.26min 800shirts+26.01min 100shirts)/900shirts 28.90min/shirt. For Ikes plan, the significant difference compared to Mikes is the original production line would be divided into two, so regular and custom shirts would be produced independently. The 100 custom shirts would be manufactured a new production line. In addition, according to Exhibit 6 of the case, a total of 15 workers and 13 machines would be moved to the custom shirt production from the regular shirt line and also as Mikes plan, one new worker would be hired to operate the new cutting machine. The bottleneck would change for both regular and custom production in Ikes plans (See Table 3). Constrained by its bottleneck of 0.67min/shirt, the capacity of the regular shirt line would turn out to be 716shirts/day and the remaining 84 shirts would take 840.67minutes=56.3 minutes, leading to an overtime of one hour.

At last, we determined the cost of each plan on the foundation of Exhibit 4 of the case, giving the cost structure for regular shirt currently (See Table 4). The first issue that should be considered in the analysis is the case mentions that the material costs for custom shirts would be about 10% higher than regular shirts.

Compare We should compare the two plans based on the ESCs business objectives required by the general manager, Collier. One is the manufacturing lead time (MLT) for the custom shirts should be less than 5 business days. The other is the plans should allow 800 shirts per day for the regular shirts and 100 shirts per day for the custom shirts without expensing large capital expenditures.

These two plans have their own advantages and disadvantages. First of all, they both have met the criterion that MLT is less than 5 business day for custom shirts. But Ikes MLT for custom shirts is 0.5 day, which is shorter than Mikes 2.2days. From this perspective, Ikes plan is better since shorter MLT allows the company to quickly respond to the market needs. Also it allows receiving customer feedback at a shorter time so that ESC enables to improve its product quality timely and thus maintain the customer loyalty and reliability. However, the regular-shirt production of Mikes plan perform better than Ikes, which takes only 2.2 days compared with 12.6 days for Ikes. In addition, Mikes plan doesnt need overtime while Ikes plan requires 1 hour overtime to produce the regular shirts. Overtime in the Ikes plan
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may cause labor dissatisfaction. Moreover, both the capacity and labor utilization of Mikes plan are higher than the Ikes. To some extent, it shows that machine and workers in the Mikes plan is more efficient and effective than that in the Ikes plan. The production line in Mikes plan is more balanced than that in Ikes. Thus workers will not be idle for a long time and hence increase the production efficiency and workers satisfaction. Finally, the direct labor cost for the Mikes plan is $3.47/shirt, lower than both the current production and Ikes plan. It directly helps to save the cost.

Improvements Thus both plans need to be improved. On one hand, the capacity utilization of Mikes plan still can be improved in order to achieve a full (or 100%) capacity. Our recommendation is to lay off one worker in the operation of attach sleeves or attach cuffs. Accordingly, the cycle time (bottleneck) becomes 0.52min/shirt; and then the new production capacity reduces to 480 shirts/0.52min/shirt=923 shirts and thereby the new capacity utilization is 900/923=98%, which is quite close to the full capacity. On the other hand, the process cycle time for Ikes custom shirts is imbalanced, which has caused longer idle time, MLT and higher labor cost. Thus we should rebalance the line by combing some processes into one station and reducing the number of workers moving from the regular-shirt operations (see table4&5). We divide the whole process into seven stations and transfer only one worker to each station. Consequently, the customs cycle time becomes 3.95min/shirt and only 7 workers need to be transferred from the regular line. Therefore, the other 8 workers can be reassigned to the regular line and then the cycle time for regular shirts also will go down, thereby reducing the MLT.

Recommendation Therefore, our recommendation is to take and combine each plans advantages to form a new production proposal. We can use improved Ikes plan to produce the custom shirts, which just takes 0.5 day and thereby enable the company to be responsive to the customer needs. Meanwhile, for the regular-shirt line, we should design an appropriate batch size in order to achieve a smaller amount of WIP and shorter MLT. As mentioned above, the regular line has to cut and produce 800 shirts in 480min per day. Assuming we cut L layers per batch, we get time for cutting operation is 1.5min L + 30min and the cutting machine needs to run 800shirts 8L shirts times. Accordingly, we can get the equation as follows: (1.5min L + 30minutes) 800shirts/day = 480min 8L shirts

By solving this, we get the favorable batch size of 10 layers or 80 shirts.

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By above analysis, we can conclude that ESC is a production line, not a job shop since both the regular and custom lines perform in sequential operations established in a factory where materials are put through a refining process to produce an end-product. For example, the raw material, fabric, must go through totally 16 operations, such cutting, sewing, inspection, ironing and packaging in order to become clothes. No special skills or processes need to be added during this production flows. According to our recommendation and proposal, ESC is a hybrid because the custom line is a continuous flow process since this is no minimal order size for custom and the customers can order 1 shirt at a time. Thus the company is able to quickly satisfy the customer needs and improved product quality via just-in-time production approach. Simultaneously the regular line is also producing in batches with the favorable size of 10 layers or 80 shirts

Appendix

Table 1

Current Process Regular Shirts a) Actual Cycle Time (min./shirt)* cycle time (bottleneck) b) Manufacturing Lead Time (days) c) WIP Inventory (shirts) d) Production Capacity (shirts/day)** e) Capacity Utilization f) Direct Labor Content (min./shirt) g) Direct Labor Utilization h) Direct Labor Cost ($/shirt) 8hr 60min/800shirts=0.6* 0.5 0.611,760/480=14.7 (16+144+12+12+12)60=11,760 (480min)/(0.5min/shirt)=960 800/960 = 83.3% 25.51+1=26.51 (80026.51)/(64480)=69% 64workers8hrs$6/800shirts=3.84

Mike's Plan Regular & Custom Shirts 8hr 60min/900shirts=0.53* 0.5 0.531980/480=2.2 (36+288+24+24+24)5=1980 (480min)/(0.5min/shirt)=960 900/960=93.75% 28.90*** (90028.90)/(65480)=83.4% 65workers8hrs$6/900shirts=3.47

Ike's Plan Regular Shirts 9hr 60min/800shirts=0.68** 0.67 0.679060/480=12.6 (16+108+9+9+9)60=9060 (480min)/(0.67min/shirt)=716 800/716=112% 25.51+1=26.51 (80026.51)/(49540)=80.2% 49workers($68+$91)/800shirts=3.49** Custom Shirts 8hr60min/100shirts=4.8* 3.9 4.850/480=0.5 15workers3shirts+5shirts=50shirts (480min)/(3.9min/shirt)=123 100/123=81.3% 25.51+0.25=25.76 (10025.76)/(16480)=33.5% 16workers8hrs$6/100shirts=7.68

* Assume 8-hour work day ** Assume 9-hour work day

***We assume the number of layers on cutting operation is 5

Table 2 Process cycle time for current production

Regular shirts labor Operation content(minutes/shirt) 1.make collar 2.make cuffs 3.make sleeves 4.make front 5.make back 6.join shoulders 7.attatch collar 8.attatch sleeves 9.stitch down sleeves 10.sew side seam 11.attatch cuffs 12.hem bottom 13.inspect 14.iron 15.fold,package Total 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 25.51 8 4 2 6 4 2 4 4 2 4 4 4 4 4 4 0.49 0.50 0.33 0.42 0.43 0.33 0.41 0.39 0.33 0.45 0.39 0.43 0.38 0.49 0.44 Number of workers Process cycle time

Table 3 Process cycle time or Ikes plan

Regular Regular shirts labor content(mintues/shirt) 1.make collar 2.make cuffs 3.make sleeves 4.make front 5.make back 6.join shoulders 7.attatch collar 8.attatch sleeves 9.stitch down sleeves 10.sew side seam 11.attatch cuffs 12.hem bottom 13.inspect 14.iron 15.fold,package 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 Number workers 7 3 1 5 3 1 3 3 1 3 3 3 3 3 3 0.56 0.67 0.65 0.50 0.57 0.66 0.55 0.52 0.65 0.60 0.52 0.57 0.50 0.65 0.58 of cycle time

Custom Number workers 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 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 of cycle time

Table 4: Rebalance the Ike's custom-shirt line

Rebalance the Ike's cutom-shirt line Station Operations

Regular shirts labor

Station time

#of workers

process time

cycle

content(mintues/shirt)

1 2

1.make collar

3.9

3.9

3.9

4.make front 3.make sleeves 6.join shoulders

2.5 0.65 0.66

3.81

3.81

2.make cuffs 8.attatch sleeves

2 1.55

3.55

3.55

5.make back 7.attatch collar

1.7 1.65 3.35 1

3.35

12.hem bottom 10.sew side seam

1.7 1.8 3.5 1

3.5

11.attatch cuffs

1.55

15.fold,package 9.stitch down sleeves

1.75 0.65 3.95 1

3.95

14.iron 13.inspect

1.95 1.5 3.45 1

3.45

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Table 5: Revised regular line

#of workers 7 4 2 5 4 2 3 3 2 4 3 3 3 4 4

process cycle time 0.56 0.50 0.33 0.50 0.43 0.33 0.55 0.52 0.33 0.45 0.52 0.57 0.50 0.49 0.44

Table6: current process of regular-shirt line

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Table 7: process for the Improved Ikes custom-shirt line Table 8: process for improved Regular-shirt line

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