Executive shirts company case. Problem Statement: There are two alternative plans in order to introduce customized shirt manufacturing in the factory.

by mayankm12 (student)

University Degree Business and Administrative studies

Problem Statement: There are two alternative plans in order to introduce customized shirt manufacturing in the factory. In the first plan, we are looking at the option where existing line is used with addition one new machine. In the second plan we will look at the option of introducing a new line dedicated to manufacturing the customized shirts with resources drawn from main line. The main line will work with reduced resources.

Metric Definitions (& associated assumptions):

Bottleneck Time (Actual Cycle Time): This is the maximum cycle time in the entire process.
Production Capacity: Production capacity is the total manufacturing capacity of the machinery of the plant in the time the labor is normally available.
WIP (Work in Progress) Inventory: This includes the entire set of unfinished items on which the workers are working.
Manufacturing Lead Time: Time to get all the WIP shirts to a finished state so that a new order can be fully manufactured.
Current Running Capacity: The number of shirts that are being manufactured with current machinery and labor.
Direct Labor Content: Total time spent on each shirt by all labourers excluding the 4 material handlers.
Direct Labor Cost: Total cost of all labor that are directly involved in the manufacturing process (we are excluding the material handlers and supervisors).
Direct Labor Utilization: This is the proportion of time that labor available is utilized in the production process.

Scenario One: Current State Of Production

The bottleneck in current production scenario is the make cuffs process which is 0.5 minute per shirt (from the table 1)

Since, the process takes 0.5 0minute per shirt, therefore the production capacity for 8hrs per day = (8*60)/0.5 = 960 shirts per day

But its given 16000 regular shirts are made every month, therefore current production capacity per day = 16000/20 = 800 shirts per day

Hence, Capacity Utilisation for production = 800/960 = 83.33%

From Exhibit 3, Work in progress Inventory = Total Inventory * batch size

= (16+144+12+12+12)*60 = 11760 shirts

Manufacturing lead time = (WIP Inventory * Cycle time) / No. of hours in a day

= (11760*0.5)/(8*60) = 12.25 ...

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From Exhibit 3, Work in progress Inventory = Total Inventory * batch size

= (16+144+12+12+12)*60 = 11760 shirts

Manufacturing lead time = (WIP Inventory * Cycle time) / No. of hours in a day

= (11760*0.5)/(8*60) = 12.25 days

Table 1: Current Production scenario

No. of Direct labour = 4+48+4+4+4 = 64

Direct labour content = sum of regular shirt content = 26.51

Actual direct labour = direct labour content * Actual production capacity= 26.51 * 800 = 21208 mins

Available direct labour = No. of direct labour * no. of hours * no. of minutes = 64*8*60 = 30720 mins

Therefore, Direct labour Utilisation = 21208/30720 = 69%

Direct Labour cost = (No. of direct labours * no. of hours * cost of each labour per hour) / current production capacity

= 64 * 8* 6 / 800 = $ 3.84 per shirt

Scenario Two: Mike’s Plan

An assumption made in this case is that the functioning of the old machine cutter has not changed, and still cuts 8 shirts and is fed 60 layers of cloth, and that the final pieces are segregated into batches of 5. For all post cutting activities, times are identical. There are two bottlenecks in the process – the cuff making process and the operation of the new cutting machine.

Production capacity is identical = (8*60)/0.5 = 960 shirts/day

WIP Inventory = (36+288+24+24+24)*5 = 1980 shirts

Manufacturing lead time = 1980*0.5/(8*60) = 2.0625 day

Current running capacity = 800(regular shirts) + 100(custom shirts)

Capacity utilization = 900/960 = 93.75%

Direct Labour Content:

Regular shirts = 25.51 + 0.25*4(4 labourers work simultaneously on the cutting) = 26.51

Custom shirts = 25.51 + 0.5 = 26.01

Weighted average direct labour content = (800*26.51 + 100*26.01)/900 = 26.45

Direct labour cost = 65*8*6/900= $3.467

Direct labour utilization = 900*26.45/(65*8*60)= 76.31%

Scenario Three: Ike’s Plan

An assumption made in this case is that the functioning of the old machine cutter has not changed, and still cuts 8 shirts and is fed 60 layers of cloth. The numbers of workers are reduced by one in each step and leads to an increase in the bottleneck time. For all post cutting activities, times are identical. The bottleneck in the process is the cuff making process.

In the line for customized shirts, there is one cutting machine and the batch size produced is 5 as it cuts 5 layers of only one design but it takes lesser time. Then onwards the batch moves to the stitching line where one worker works at a time on the shirt. Each worker has 3 shirts in processing and thus there are 45 shirts on the line at any point in time. The end processes are same and the bottleneck in this case is collar making process which has the highest cycle time.

Lowest production rate is 1.5 cuffs/ minute; therefore cycle time is 0.67 minutes.

WIP inventory(shirts) 9060 (151 bins (given)* 60 shirts in each.

(reverse of the cycle time)

For Regular Shirts:

For Customized Shirts:

Lowest production rate is stitching operation [email protected] minutes for the entire operation. Therefore Bottleneck time is 3.9 minute. Therefore Actual cycle time is (in minutes) 3.9.

Answer to Question 1:

Answer to Question 2: Our detailed analysis brings us to the table above and as we can see, Ike’s plan, with a direct labor cost of $7.68, is clearly cost prohibitive (despite cost reduction of $0.41 per standard or regular shirt). Mike’s plan on the other hand reduces direct labor costs by $0.37. With an increase in throughput from 800 to 900 shirts per day, this clearly indicates greater viability as well as profitability were Mike’s plan actually implemented.

Our unequivocal recommendation to Mr. Collier is to go ahead with the Mike’s plan of adding a cutting machine to the existing line and working on customized shirts in the existing production line.