Assignment 1
Operations Management I
Kristen’s Cookie Company (A1)

Total (50) Marks Weightage 10%
Lead Questions for Assignment 1 1. How long will it take you to fill an order? (8) marks

Operation | Time (mins) | Quunatiy (dozen) | Washing, Mixing etc | 6 | 3 | Spooning | 2 | 1 | Resetting & Baking | 10 | 1 | Cooling | 5 | 1 | Packing | 2 | 1 | Accepting Payment | 1 | - |

For filling in a rush order
Time taken = 6+2+10+5+2+1 = 26 mins

2. How many orders can you fill in a night, assuming you are open four hours each night? ( 7) marks

Time for 1 dozen = 26 mins.
Time for 2 dozen = 6+2+10+10+5+2+1 = 36 mins.
Time for 3 dozen = 6+2+10+10+10+5+2+1 = 46 mins.

Hence, eqn for time reqd = 16+10*n ; where n => no of dozen
Therefore 4*60 = 16+10*n 224 = 10*n n = 22 dozen

3. How much of your own and your roommate’s valuable time will it take to fill each order? ( 5) marks

My time spent = 6+2 = 8 mins.
Roommate time spent = 1+3 = 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 one–dozen cookies order? ( 4) marks
The two cost components in this business, that the team of Kristen and her roommate is going to bear are :
Material(Ingredient and boxes) cost : $0.60/dozen + $0.10/dozen = $0.70/dozen
Labour cost(assuming both of them decide to take $8/hr) : $16/hr
Washing,mixing and spooning takes 8 minutes(6+2)
Setting up the oven takes 1 minute.
Packing and accepting payment takes 3 minutes (2+1)
Total labour time taken for producing 1 dozen cookies = 6+2+1+2+1 = 12 minutes
For producing the 2nd dozen, the additional time would be 2 minutes for spooning,1 minute for setting the oven and 2 minutes for packing,assuming that payment can be accepted in 1 minute for the 2 dozens.
So extra time taken for 2nd dozen = 2+1+2 = 5minutes
Total time taken for 2 dozen cookies = 12+5 =17 minutes
Similary,total time for 3 dozen cookies will be 17+5 = 22 minutes Cookies per hour | Labour time(minutes) | Labour Cost per dozen | Material Cost per dozen | Total Cost per dozen | 1 dozen | 12 | $3.20 | $0.6+$0.1=$.70 | $3.90 | 2 dozen | 17 | $2.27 | $0.70 | $2.97 | 3 dozen | 22 | $1.96 | $0.70 | $2.66 | 4 dozen | 27 | $1.80 | $0.70 | $2.50 |
Since the cost of cookies/dozen is decreasing we can give discount to people.For Example,assuming that the order is for 2 dozens and we are selling the . The maximum discount that we can offer is : 23.8% discount to breakeven. To earn a profit we should give them a discount of arount 10-15%.
The total time that 1 dozen cookie order takes is : 6+2+1+9+5+2+1 = 26 minutes
Total time for 2dozen cookies order = 6+2*2+10*2+5+2*2+1 = 40 minutes(assuming accepting payment takes 1 minute only for the different orders.
Hence it will take us longer to server a 2 dozen cookies order as compared to 1 dozen order.

5. How many food processor and baking trays will you need? (6) marks
The food processor/mixer is producing 3 dozens of cookies everytime but the tray can take only 1 dozen of cookies at a time. We need 3 trays at a time to use all these mixed cookies and reduce the idle time of the food processor/mixer.

But the main issue in this process is Baking which is the bottleneck. Even if we increase the number of trays, the oven is going to take only 1 tray at a time and the baking process will take 9 minutes hence the cycle time will not reduce.So we need to increase the number of ovens to 2 or 3 or replace the smaller oven with a larger one which can take 2 or 3 trays. This will make the mixing process the bottleneck and the baking process will no longer the bottleneck. It will also reduce the cycle time.

Current cycle time : 10 minutes
Cycle time if we increase the number of the trays : 10 minutes(since the oven can take 1 tray of cookies only to bake)
Cycle time if we increase the capacity of oven : 8 minutes(mixing and spooing will become the bottleneck) 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? ( 5) marks
As per the case the cookies are freshly baked and of high quality. We can add some fragnance material to improve the smell of the cookies which will attract more people.
To make the cookies in less time we need to reduce the cycle time by removing the bottlenecks.The bottleneck in this process is loading and baking which takes 10 minutes and hence the cycle time for the process is 10 minutes(assuming we are not preparing the first batch of cookies of the day). To reduce the time we can either replace the current oven with one which can take 2 or more trays of cookies at a time for baking or we can add 1 more oven along with the current one.
For making cookies at lower cost we need to reduce the cost factors which can be either reducing the material cost per dozen of cookies. We can make cookies with lesser materials or smaller cookies to achieve this objective.
The bottleneck in our operation is the baking process and we can expand it by getting 1 more oven on rent.
Current times taken by each operation :
Mixing and spooing : 8 mins/dozen (7.5 dozens per hour)
Loading and Baking : 10 min/dozen (6 dozens per hour)
Cooling : 5 mins/dozen (12 dozens per hour)
Packing and Accepting payment : 3 mins/dozen (20 dozens per hour)
Cycle time = 10 minutes

Time taken by each operation after adding 1 more oven(assuming same capacity):
Mixing and spooing : 8 mins/dozen (7.5 dozens per hour)
Loading and Baking : 10 min/2 dozen (5 dozens/min or 12 dozens per hour)
Cooling : 5 mins/dozen (12 dozens per hour)
Packing and Accepting payment : 3 mins/dozen (20 dozens per hour)
Cycle time = 8 minutes
So adding 1 more oven reduces our cycle time and hence increases our efficiency by 20%

After adding an oven we increased the per hour production by 1.5 dozens(initially we were producing 6 dozen/hr when cycle time was 10 mins, now we are producing 7.5 dozen/hr with a cycle time of 8 minutes).
If we selling each dozen for $12. Our sales increase by $12*1.5 = $18
If we reduce the fixed cost of $0.70/dozen our total profit = $18-($0.70*1.5)=$16.95
So we can rent an additional oven at a price of less than $16.95 per hour depending on what profit we want to earn.

Problems for further thought

1. What happens if you are trying to do this by yourself without roommate? (3) marks 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? (3) marks 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? (3) marks

When we deliver our cookies will depend on the orders we have at hand. Looking at the order board we can decide when our process completes all its existing deliveries and thus by what time we can deliver the cookies. Assuming we are open for only for 4 hours we can take a maximum of 22 orders per day. In case we have already taken 22 orders then we will have to decline any new order, but if we have the capacity then we can deliver an order within 17 minutes (Discounting the one minute it will take to collect the payment, because the order will have been delivered to the customer by then) at the earliest. However, if we are idle at the time of receiving an order then we will take 25 minutes to complete that order.

4. What other factors should you consider at this stage of planning you business? (3) marks

Factors to be considered:

Market Demand: Based on the market demand we can decide whether to procure one additional oven, also if the market demand is significantly more than the capacity we can charge a premium for our cookies.

Cost of Additional Labour: If the demand justifies it, then we can decide to rent/ buy additional equipment but then we will also need additional labour. This cost of additional labour should be low enough to justify the additional investment in man power.

Reduction in fixed costs: We can try to procure the raw material and boxes at lower prices. If the demand is robust and can be reasonably expected to remain so in the future than purchasing ingredients and packing boxes in bulk should get us a bulk discount. However, the storage costs will have to be taken into consideration.

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? (3) marks

If we sell standard cookies instead of made to order cookies then we lose our USP. In that case we have to order either room delivery or compete with standard cookies available in the market on the basis of price. If we have standard cookies then we can bake and store them and the customer need not call or email, they can just come and take their order.
Customer may give a call/ email only if they want delivery to the door.
In case a customer wants a large quantity of cookies, they will have to order in advance because of our limited production capacity. But, in this case we are likely to lose the order as the customer might not want to place an order in advance and might prefer to pick up the cookies from an outside store.

Assignment Front Page
Assignment 1
Operations Management I
(Last Date 5 November 2012)
Kristen’s Cookie Company (A1)

Section No. | 1 | Group No. | E1 | Total Marks | 50 | Marks Obtained | |

Sr No. | Name of Students | Roll No | 1 | RAHUL KUMAR | 12143 | 2 | PRASHANTH M | 12138 | 3 | POOJA JAIN | | 4 | MAINAK SEN | 12126 | 5 | ADITYA GOHIL | 12105 |