103537257 Kristen s Cookie Company Case Analysis

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Kristens Cookie Company

Case Study and Analysis

Forecasting and Operations ManagementSaint Marys College of California

Executive MBA Program

Jessica Marie www.jessicamariemba.com
http://www.jessicamariemba.com/http://www.jessicamariemba.com/


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Introduction and Preliminary Modeling

Key Questions and Problems for Further ThoughtRecommendations for Improvement

Q & A Session and Discussion

Agenda


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Introduction

Kristens Cookie Company Mission Statement:

Born from a hunger to feed the student body and the craving brain

This presentation will evaluate the preliminary design for the

Companys production process to make policy and pricing decisions,

equipment needed, how many orders can be accepted, and whether

the business can be profitable.


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The

Customer

TheServiceStrategy

ThePeople

TheSystems

The Service Triangle


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Process Flow Chart

Order and

Reply

(Roommate)0 minutes

Wash and

Mix

(kristen)

6 minutes

Spooning

2 minutes

Heat Oven

1 minutes

Baking

(Oven)

9 minutes

Hold

Cooling

5 minutes

Pack/Colle

ct Money

3 minutes


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Key Question 1:

How long will it take to fulfill a rush order?

Activity Resource Cycle Time Start Time Finish Time

Order Entry E-mail 0 minutes 00:00 00:00

Wash/Mix Kristen 6 minutes 00:00 06:00

Spooning Kristen 2 minutes 06:00 08:00

Heat Oven Roommate 1 minute 08:00 09:00

Bake Oven 9 minutes 09:00 18:00

Remove Cookies Roommate 0 minutes 18:00 18:00

Cool Tray 5 minutes 18:00 23:00

Pack/Collect $$ Roommate 3 minutes 23:00 26:00


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Key Question 2

How many orders can you fill in a night, assuming you are

open four hours each night?Task 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36

Order Entry 1

Wash and Mix 1

Spooning

Start Oven 1

Baking Time 1

Remove from Oven 1

Cooling Time 1

Pack and Collect Money 1

Order Entry 2

Wash and Mix 2

Fill Tray 2

Start Oven 2

Baking Time 2

Remove from Oven 2

Cooling Time 2

Pack and Collect Money 2


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Kristens Cookie CompanyGroup 2

Order Size Order Completion Time

1 dozen 26 minutes

2 dozen 36 minutes

3 dozen 46 minutes

4 dozen 56 minutes

5 dozen 66 minutes

6 dozen 76 minutes

7 dozen 86 minutes

8 dozen 96 minutes

9 dozen 106 minutes

10 dozen 116 minutes




14 dozen 156 minutes15 dozen 166 minutes








Operating time = 240 minutes (4 hours)

Solution

22 dozen cookies in 4 hours.

From the table, a formula can begeneralized:

The number of minutes to

produce n one-dozen batches

is given by this expression:

16 + 10n


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Key Question 3

How much of your own and your roommates

valuable time will it take to fill each order?

Activity Cycle Time

Wash, Mix

and Spoon6 + 2 =

Total 8 minutes

Activity Cycle Time

HeatOven,

Remove

Cookies,

Pack and

Collect

Money

1 + 0 + 3 =

Total 4 minutes

Kristen Roommate


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Key Question 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 or more dozen? If so,

how much? Will it take you any longer to fill a two-dozen order

than a one-dozen order?All costs of ingredients and boxes for each dozen are the same. With thatsaid, total valuable time is 6 (wash and mix) + 2 (spooning) + 1 (set timer on

oven) + 2 (packing time) + 1 (process payment) = 12 minutes. For a two

dozen order, total time is 6 + 2 + 1 + 2 x 2 + 1 =17 minutes. For a three

dozen order, total time is 6 + 2 + 1 + 2 x 3 + 1 = 22 minutes.


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Key Question 4 continued

We can also solve this problem by calculating labor costs.

Lets assume $10 per hour

= $0.16667 per minute

# Cookies in

BatchMinutes Cost

Cost per

Dozen

Potential

Discount

1 dozen 12 $2.00 $2.00 0

2 dozen 17 $2.83 $1.41 $0.59

3 dozen 22 $3.66 $1.22 $0.78

Perhaps offering a 10% - 20% discount (or set dollar amount)

on orders of two dozen and above is an option.


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Key Question 4 continued

When applying materials costs with labor costs,

we find that the cost also decreases with larger orders.From both analyses, a discount is advised.

(10% - 20% discount or dollar amount)

$0.60/dozen, ingredients

$0.10/dozen, box

# Cookies in Batch Minutes CostLabor Cost

per Dozen

Material Cost

per DozenTotal

Potential

Discount

1 dozen 12 $2.00 $2.00

$

0.70 $2.70 0

2 dozen 17 $2.83 $1.41$

0.70$2.11 $0.59

3 dozen 22 $3.66 $1.22$

0.70$1.92 $0.08


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Key Question 5

How many electric mixers and baking trays will

you need?

As the charts and tables have shown, the electric mixer is idle for a

long time during the production process, so only one is needed. Because

the mixer can only contain 3 dozens of ingredients, during the whole

process, at least 3 trays are needed.

Note: We have suggested process improvements regarding equipment in

recommendation segment.


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Key Question 6

Are there any changes you can make in your 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

your 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?


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Process Flow Diagram With Two Ovens

Mix & Spoon

Load & Bake

Load & Bake

Cool Pack & Pay

The speed with which you can produce cookies

is dependent upon the cycle time for baking, the bottleneck operation.


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Throughput

Time

6 + 2

= 8 minutes

1 + 9

= 10

minutes

5 minutes 2 + 1

= 3 minutes

Hourly

Capacity

7.5 Dozen 12 Dozen 12 Dozen 20 Dozen

Cycle Time 8 minutes 5 minutes 5 minutes 3 minutes

Increasing capacity of the oven makes it so we can start a new order

every 5 minutes. New capacity is 7.5 dozen/hour (if all orders are one

dozen. 7.5 = 60/8


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Problems for Further Thought: 1

What happens if you are trying to do this by

yourself without your roommate?

We must calculate the amount of time it takes to begin a

new batch of cookies with their selected ingredients, to

the time when the dozen cookies are packed into a box

and paid for.


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Because all the tasks have to be done by Kristen alone, her time for

one dozen cookies becomes 12 minutes (8 + 4), which exceeds theprevious 10 minute cycle time for one dozen cookies. In this case,

Kristen becomes the bottleneck, rather than the baking process.

However, if the order contains two dozens of the same kind of cookie,

the washing and mixing can be done together, so her time for thisorder becomes 17 minutes (6 + 2 x 2 + 2 x 1 + 2 x 2 + 1), which is less

than the previous of 20 minutes. If the order is 3 dozen, it becomes 22

minutes.


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Should you offer special rates for rush orders? Suppose you have just

put a tray of cookies into the oven and someone calls up with a crash

priority order for a dozen cookies of a different flavor. Can you fill thepriority 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?

As we saw in the previous gantt chart, there would be no need to

stop baking of the previous cookie. The time that the rush order

will delay is only at most 1 minute. And the previous order can be

finished on time. There is no need to offer a special rate.


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When should you promise delivery? How can you look quickly at your

order board and tell a caller when his or her order will be ready? How

much of a safety margin for timing should you allow?

Looking at the order board will tell us when we finish and become idle.

The finish time, will be that time, plus 26 minutes it takes to finish a one

dozen order. At that time, they can promise delivery.

We suggest an 8 minute safety margin for rush orders. If we begin a wash

and mix process, then a rush order comes in, we have to stop and process

that order. The previous order would be delayed by a max of 8 minutes to

wash and mix the rush order. Time is 6 + 2 = 8 minutes.


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What other factors should you consider at this

stage of planning your business?Market: Is this attractive to potential customers?

Cost: How can we get cheaper materials with good quality?

Labor: Can I do this alone? Should I hire people?

Product: How can we make the cookies better?

Services: Can I provide other services, such as delivery?

Hazards: How should I handle an accident?

Laws: Am I violating any laws?

Capital: What kind of equipment will I need?

Investment: What kind of initial and/or further investment is required?


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FACTORS TO CONSIDER

Market: Is this attractive to potential customer

COLLEGE NIGHT STUDY


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FACTORS TO CONSIDER

Cost: How can we get cheaper materials with good quality?

Price point: What price point are students willing to pay?

6.00 Per dozen (.50) per cookie

**TEST IT**

Pay: What is Kristen and her roommates time worth?


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FACTORS TO CONSIDER

Labor: Can I do this alone? Should I hire people?

Demand should determine the Labor force and potential

increase in equipment.


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FACTORS TO CONSIDER

Product: How can we make the cookies better?

Services: Can I provide other services, such as delivery?

Hazards: How should I handle an accident?

Laws: Am I violating any laws?


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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? Otherpolicies?

At the beginning, the cookies are unique. If we sell standard

cookies, the value added products of the company change.

- Bake cookies before receiving order.- order-taking process needs to change, as the

customers dont need to call/email and wait for pickup. They can

visit the apartment directly to buy the product.

- If a large sum is needed, customers can make order earlier, and

provide deposit.


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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? Otherpolicies?

- Create your own cookie menu

- Freeze balled cookies.

- Cookies can be ordered by number, and pulled from a freezer- Cookies cooked and served fresh from the menu


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Recommendations for Improvement

Increase Total Production Capacity Per Night

Purchase or rent an additional oven.

- Increase capacity of the bottleneck.

- Increases cookie-making capacity.

Purchase several additional baking trays.

- These items are inexpensive- Buying more ensures they are never a

binding constraint.


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Recommendations for Improvement

continued

Decrease Total Time Spent in Activity

Premixing in advance

- eliminates the mixing step for these popular cookies

- work-in-process inventory would eliminate mixing step

for those cookies and thus increase capacity to 12 dozenper hour.

Require immediate payment

- Payment through PayPal, or similar service to eliminate

the ending collect payment phase.


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Thank you.

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103537257 Kristen s Cookie Company Case Analysis

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