Running Head: KRISTEN’S COOKIE COMPANY 1

Kristen’s Cookie Company: An Effective Production Process

ABSTRACT

This paper will explore the Kristen’s Cookies business concept and evaluate if the company current status is profitability. We will review the ability to take orders, pricing the product, developing policies.

Kristen’s Cookie Company is a business idea thought up by two roommates who are trying to tap into a market which caters to starving college students in the late night hours. The proposed idea is to offer freshly baked made-to-order cookies late at night for students within an hour. Although, the concept is good, the purpose of this analysis is to determine the components that can make or break this company’s success. The ultimate goal of the company is to comprise a price that is affordable, yet profitable to the two owners. The key points that need to be evaluated would be the production process along with fees for the services, will they be able to profit based of the cost put into the business, ordering capacity based off the equipment currently owned and times of operations, the amount materials that should be in the inventory, and man-power. The students already own key equipment like the mixers, cookie pans that hold a dozen cookies, and the oven, so no investment is needed in this area. Expenses like electricity are covered by the landlord, so this is another item not necessary for the operational budget to start. The input to consider would be the man-power, ingredients which cost sixty per dozen, and ten cent per box. The value of time which is estimated to be four hours per night limited to 1 dozen at a time, guarantee 100% accuracy with the electronic system that take customer orders.

Analysis The Kristen’s Cookie Company (KCC) business concepts has some areas that reflect some strengths, weaknesses, opportunities, and threats that must be carefully considered, if the business is to move forward. KCC strengths are friendly customer service, customers get to directly deal with the owners, which gives one on one interaction; therefore, the management staff is knowledgeable. Advantages over competitors are freshly baked cookies, uniquely created by the customer in a warm, friendly environment. Thirdly, offering the opportunity for customers to customize their cookies providing them with the choices of adding things like chocolate chips, M&M’s, chopped Heath bars, coconut, walnuts, and raisins is also a strength. Another advantage was the company offering a service guarantee, which is a marketing tool designed to provide peace of mind for customers unsure about trying the service is a great (Jacobs & Chase, 2011). Guarantying fresh cookies within an hour to each customer was great, if the business could keep it that promise. Lastly, the students own the capital equipment to start the business and the utilities are paid by the landlord so this is an expense that does not have to affect their operational budget.
Apparent weaknesses of the business to start are it is a start-up company owned by two college students, so they are faced with budget limitation. Budget limitations would further hinder the ability to purchase new equipment along with extra expenditures, which threatens their ability to grow as the demand grows. Secondly, the company only has one oven with no room for to add another one due to the constraints of the apartment space. Thirdly, since the owners are college students too they are faced with time constraints because they are limited to working only 4 hours at night. Lastly, the company has to consider seasonal slowdowns, like spring break, winter break and other holiday breaks.

The first threat of any business is competition; if another college student with a better location layout could output more cookies with a better team that could take from their profits. It would also be fierce competition if the campus cafeteria decided to offer late night baked goods. Although, customizing orders is strength, it also can be a threat for company because developing a price for the service has to be balanced out with the raw materials needed to make the cookies. Their target market is college students, so charging too much would cause fewer customers; however, they can’t comprise the quality of the product either. This leads to their brand is being built off the made-to-order fresh cookies only, in any business it is risky when you are dependent on one source. Therefore, if they do not have an order then they do not produce anything, which is means the company is idle, because they do not have a standard cookie for sell. The company is operating out of a confined space, so sanitation would be issue if there were no sanitizing protocols in place. Lastly, if the company cannot keep up with the demand it creates an unsatisfied customer.

Growth by word-of-mouth, once students get the opportunity to partake in the service the quality of the product spreads across campus, which in turns increases demand. The on-campus is easy to get to so a student does not have to leave campus. Since the cookies are already being offered as customized, it could be taken a step further to cater to dieters, gluten-free, and diabetics. In addition, to the students looking at the cultural aspect of the student body. For instance, if there were a 55% make-up of Jewish students it would be wise to address their food by using ingredients that caters to their belief. Although, the cafeteria on campus could be a threat it also could be an opportunity to partner with them and sell the product in the cafeteria eventually targeting local grocery stores.

Now, we will take a closer look at the production process of the product, which is displayed in figure 1, our Production Process Flow diagram. The first step of this production process is to wash the mixing bowl out from previous batch then pouring in the ingredients and mixing them all together, which is done by one of the owners. It has been determined that this mixture is enough to prepare 3 dozen cookies, which will a total of 6 minutes along with scooping the dough on the tray takes 2 minutes totaling about 8 minutes (Jacobs & Chase, 2011). Once, this step has been accomplished then other roommate handles setting the oven which has been estimated to be 1 minute setup time, then 9 minutes to bake. Once done there is an additional 5 minutes needed for cooling then 2 minutes to package them; the last step of accepting a payment and giving it to the customer takes an estimated one minute (Jacobs & Chase, 2011). The throughput rate of this production is 26 minutes, which is displayed in the process flow chart, see figure 1. Therefore, it is going to take 26 minutes to fill a rush order for 1 dozen cookies. Now, the problem here is that the tray only holds 1 dozen at a time and the oven only holding 1 tray at a time. The oven is the bottleneck of this process. The output is based on the capacity of the oven which is creating a bottleneck due to the oven being less than the demand placed on it (Jacobs & Chase, 2011). The oven is outputting 6 dozen orders per hour based on 60 minutes divided by 10 minutes baking time at full capacity utilization; as we can see, if you refer to the Gantt chart to see the capacity of the company’s resources. The oven is the key piece of equipment that determines the whole success of the entire process, because no matter what other step is taking place prior to the bake time, nothing can happen until the oven is available each 10 minutes. Therefore, to determine how many orders can be filled in 4 hour night, we take 6 dozen by 4 hours which gives us 24 dozen in four hours. However, the entire process is complete in 26 minutes and while the first batch is baking the second batch is getting prepared and the second dozen is completed in 10 minutes, for four hours you have 26 minutes, 36 minutes, 46 minutes, 56 minutes and so on and so you then have 60 minutes by 4 hours equal 240 minutes minus 8 minutes equals 232 minutes of time for processing, which gives about 22 dozen.
Let’s examine valuable time that each roommates puts in this entire cycle time to produce cookie orders. The parts of the process that require both roommates is washing the bowl, mixing and placing the ingredients in the food processor, scooping up the dough on the tray, setting the oven, taking them out of the oven, packaging the cookie, and finally taking payment. This all sums up to be a combination of 12 minutes of input by both roommates, which is displayed by figure 2. Over the entire night the process is completed 6 times assuming only one order is placed per hour, so a total of 48 minutes for one roommate that takes 8 minutes for their step indicated 80% utilization. The other roommate’s utilization would be 40% because their spending 4 minutes per dozen 6 times.
Now, let’s look at if the company can afford to give discounts to customers who are 2 or 3 dozen cookies. First we must consider the costs of producing the cookies. The cost of raw materials is the same, no matter what amount of cookies the company bakes. Therefore, the only variable that would change would be the amount of time dedicated to the order, noted in figure 3. If we assume that the hourly rate of pay is $10.00 and as noted in figure 3, 1 dozen takes 12 minutes, cost $1.66, then cost per dozen is $1.66, 2 dozen takes 17 minutes, cost $2.83, cost per dozen is $1.42, 3 dozen takes 22 minutes, cost $3.66, then cost per dozen is $1.22. In our first step, we know that the first mix produces 3 dozen so we know there is no increase in work time. Therefore, the company can afford to give a discount in relation to cost because it doesn’t cost more to produce two or three dozen.

The amount of equipment needed is based off capacity, demand, and utilization. The maximum production is at most 3 dozen per mixture per order. Trays which hold one dozen should be purchased in the amount that can fully utilize at any one time. In examining the events that require trays, it would be scooping dough, baking, and cooling which requires the trays in rapid succession. Since the oven has a constraint on capacity there is only one tray in the oven will one is cooling and one is waiting for entry. Therefore, increasing the number of trays would be inexpensive and adding 4 or 5 more to the count would not hurt the budget. This would give the ability to prevent the trays becoming bottleneck in the even the bottleneck oven was eliminated. The first step is when the food processor is used and it is a nonbottleneck at this time, so purchasing another food processor would be an waste of money and it would not eliminate the productivity issue that exist.
Discussion
The obvious issue here is the bottleneck oven which has a constrained capacity, so increasing in other resources would be wasteful spending, because it would not improve the production. Increasing the number of ovens would be a logically step; however, there is a space constraint, so then that further makes the company examine if the demand is producing enough revenue to expand space and equipment.
Suggestions would be first to change the production approach to become more efficient and to maximize sales by working with a multiple approach and make orders simultaneously. This would in turn maximize the time required for the next order and not double the time from the first order. One roommate would do the first and second step on two orders while the first order was baking, this would create a bottleneck and waiting period because the trays with the cookie dough would have to wait until the first order was finished baking. However, this would save 8 minutes on the second go round because two orders were simultaneously prepared. They could also mix more than one batch at the same if the add-in are the same; however, they still face the same production problem with the bottleneck oven. Now looking at efficiency, which needs improvement as well because you have one roommate working 80% of the time and idle 20% and the other one is working 60% of time and idle 40%. The duties need to be more effectively divided so that there is no idle time unless it is a planned break. Now, what the owners could look at is replacing the current oven to one that holds 3 trays since the space will not accommodate adding more ovens. If they were to purchase an oven that holds more than 3 trays then it creates a bottleneck with trays and food processor.
The main problems that the owners face are the limits on expansion and the price that can be charged on college students who don’t have a lot of money.

References

Jacobs, F. R., & Chase, R. B. (2011). Operations and supply chain management, (13th ed.)
New York, NY: McGraw-Hill/Irwin.