Key Questions to Answer Before You Launch the Business Q1: How long will it take you to fill a rush order? It depends on the number of dozens that the rush order requires. Assume that the order requires x dozen(s) of orders, then the time of filling that order is (16+10x) minutes (assume that this order requires only one flavor). Firstly we consider the situation of a 1 dozen order. The all steps – washing and mixing ingredients (6min), spooning the cookies (2min), putting the cookies in the oven and setting the oven (1min), cooling down the cookies (5min), packing them (2min), and finally accept the payment (1min) – will take 6+2+1+9+5+2+1=26 minutes. Secondly, Secondly, we consider the situation of a 2dozens order (seen in the Gantt chart followed). When I finished spooning the first dozen of cookies, at the end of min6, my roommate can start his work. And when baking the second dozen, he can start cooling the first dozen and pack them. Assume we accept the payment after the cookies can be delivered, the total time of fill the order will be 36 min. Finally we accept the model and consider the situation of an x dozen(s) order, we can easily conclude that the total time is 16+10x minutes. Gantt chart of filling a order of 2 dozens of cookies(1min for 1 cell)
Q2: How many orders can you fill in a night, assuming you are open four hours each night? When baking the cookies, my roommate will still be free for 2 min during which he can accept more orders. To maximize orders to fill in 4 hours, we assume that there are enough orders and all of the orders require 1 dozen cookies of a same flavor. Set the number of orders we can fill to be N. According to the result gained in Question 1, we can say 16+10N<=4×60, so we can get N(max)=22. Q3: How much of your own and your roommate’s valuable time will it take to fill each order?Assume the order requires 1 dozen. For me, the steps of washing, mixing and spooning are done by myself. So my valuable time for 1 order is 6+2=8(min)For my roommate, the steps of setting the oven, removing cookies from the oven, packing them and accepting the payment are done by him. So his valuable time for 1 order is 1+0+2+1=4(min) Q4: 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 cookie order than a one-dozen cookie order? As the costs of ingredients and boxes of each dozen of cookies are the same no mater you choose to buy 1, 2 or 3 dozens per order, what really differs is the cost of time. From Q3 has we have that for one dozen order, total valuable time is 6 (wash &mix) + 2(tray filling) + 1 (prepare bake) + 2(pack) + 1 (payment) = 12 min. For two dozen order, Total valuable time is 6 (wash &mix) + [2(tray filling) + 1 (prepare bake) + 2(pack)] × 2 + 1 (payment) = 17 min. For three dozen order, Total valuable time is 6 (wash &mix) + [ 2(tray filling) + 1 (prepare bake) + 2(pack)] × 3 + 1 (payment) = 22 min. Assume the cost of our time is X, so the cost per dozen would be: 0.200P ……. 1 dozen order 0.142P……..2 0.142P……..2 dozen order 0.122P……..3 0.122P……..3 dozen order
It’s obvious that the cost of 2 or 3 dozen order is less than the one dozen order. So we should give a discount for people who order more cookies. For 2 dozen order, the discount can be up to 0.068X cheaper per dozen. For 3 dozen order, the discount can be up to 0.078X cheaper per dozen. To decide the price per dozen, we set the value of our labor to be INR.100/hour per person. So the discount should be INR.6.8 for a 2dozen order, and INR.7.8 for a 3-dozen order.
Q5: How many Food processor and baking trays will you need? As the Gantt chart shown, the Food Processo is idle for a long time during the process, so only one Food Processor is needed. Because the electric mixer can only contain 3 dozens of ingredients, during the whole process, 3 trays are needed at least. Q6: 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? According to the Gantt chart, we can see that during the process, the oven almost keep working all the time while the electric mixer has a lot of time being idle. That means some time is wasted in waiting the oven’s baking job and this is obviously a bottle neck. If we rent another oven for one dozen orders:Time of one oven:16+10×nTime of two ovens:16+7×nSo for each order, it saves three minutes than previous. If it’s a two or three dozen order, it will save more than that. Assume our profit per dozen is P and considering the one dozen orders. So the original profit per hour is60/10×P = 6.00PThe two ovens’ cost per dozen is:60/7 × P = 8.57PSo the highest price of renting an oven we can accept is 2.57P per hour, that is, when P is set to INR.10, INR.25.7/h.
Problems for Further Thought Q1: What happens if you are trying to do this by yourself without your roommate? If I’m doing this by myself, the situation will be different. Because all the steps of washing, mixing, spooning, setting the oven, removing cookies, packing the cookies and accepting the payment have to be done by myself, my valuable time of a one dozen cookies becomes 8+4=12(min), which exceeds 10 minutes, the time of one circle of baking one dozen cookies, so I become the bottleneck, instead of the oven. When the order contains 2 dozens of same flavor cookies, because the washing and mixing step of the 2 dozen cookies can be done together, my valuable time for this order becomes 6+2×2+2×1+2×2+1=17min, less than 10×2=20min. If the order requires 3 dozens, my valuable time becomes 22min. And if there are enough orders, the flow can be expressed by the Gantt chart followed:chart of filling enough orders of 1 dozen of cookies(1min for 1 cell)
Q2: 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 out 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? As the Gantt chart above shows, there is no need to stop baking of the previous cookie. The time that rush order will delay is only at most 1 minute. And the previous order can be finished on time. So we don’t need to offer special rates. Q3: When should you promise delivery? How can you look quickly at your order board (list of pending orders) and tell a caller when his or her order will be ready? How much of a safety margin for timing should you allow? We can just look at the order board and see when I will finish my own job and become idle. Then the finishing time will be that time plus 26 minutes. At that time we can promise delivery. The safety margin for timing is 8 minutes in case of a rush order. Assume that you just begin the wash process and then a rush order comes, you have to stop it and do the rush order. The previous order will be delayed for at most 8 minutes to wait for you complete the wash and tray process of the rush order. That time is 6+2 = 8 min.
Q4: What other factors should you consider at this stage of planning your business? The factors that I should consider at the stage of planning my business are: • Cost: how to get cheaper raw materials with good quality? • Market: will this business attractive to my potential customers? How attractive? Why people buy my cookies, or why not? Should I, or how to make some advertisements to attract more customers? • Human capital: do I need to hire some people? • Product: how to design better cookies? • Services: can I provide some other services, for example, deliver cookies to the customers’ dormitory? • Potential accidents: how to handle an accident? For example, if we bake a wrong taste for the consumer, what shall we do then? • Regulations: is there any regulation put on all the things I will be doing? Q5: 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? At the beginning, my products are special because the cookies are completely fresh. If we sell standard cookies, the valueadded products of my company will change. My cookies are special because of the low price and good quality. We can bake the cookies before receiving the order, instead of making the product one by one according to each unique requirement. And the order-taking process also needs to change. The consumers don’t need to telephone in their orders and wait for pickup. They can come to my apartment directly to buy it. If someone needs a large sum of cookies, they need to make the order a little earlier. A deposit is required.
