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PRODUCTION AND OPERATIONS MANAGEMENT 1
‘A C A S E S T U D Y A N D A N A L Y S IS K R IS T E N ’S C O O K IE C O M P A N Y
PRODUCTION AND OPERATIONS MANAGEMENT 1 (POM1) DATED : 19TH NOV, 2009
AIM
SUBMITTED BY
:
ADREENA LIKHAN CHOTON ROY DARSHAN JYOTI DAS MANALI BHAGAWATI MOMI BORAH NIJARA DAS
ASSAM INSTITUTE OF MANAGEMENT
PRODUCTION AND OPERATIONS MANAGEMENT 1
INTRODUCTION Two students are planning to start a cookie business with the name Kirsten's Cookie Company in their on-campus apartment to cater to starving students late at night within the campus. The objective is to provide fresh baked cookies which are customised to the needs of the buyers. The entire process includes INGREDIENTS : Dough, Chocolate chips, M&M's, Chopped Heath bars, Coconut, Walnut and Raisins. EQUIPMENTS : 1 Oven, 1 Food Processor( mixing bowl), Cookie trays and Spoons. PRODUCTION PROCESS : • Add ingredients as per requirement • Mix ingredients • Spoon out the cookie dough into the tray • Put the tray inside the oven • Let it bake • Take it out of the oven • Let it cool • Take the cookies out of the tray • Pack it for delivery COST : Variable cost includes - cost of ingredients (Rs.60/dozen) cost of packing box (Rs.10/each) Cost of electricity is taken care of by the landlord of the apartment
ASSAM INSTITUTE OF MANAGEMENT
PRODUCTION AND OPERATIONS MANAGEMENT 1
PROCESS FLOW CHART
DELIVERY
ASSAM INSTITUTE OF MANAGEMENT
PRODUCTION AND OPERATIONS MANAGEMENT 1
Material type flow process chart Activities
Distance
Bowl Washing
* * *
Add Ingredients Mixing Ingredients
--
Time taken
6
Ingredients check Dish up cookies Take cookies in the oven Put cookies in the oven Set up thermostat & timer Backing the cookies Remove from oven Inspection of cookies
* * * * * * *
--
--
--
--
--
1
--
9
---
*
Keep to cool down Packaging the
2
* *
--
5
--
2
ASSAM INSTITUTE OF MANAGEMENT
PRODUCTION AND OPERATIONS MANAGEMENT 1
cookies Accepting the payment Delivery
*
--
*
1
--
Total
26
ANALYSIS OF THE BUSINESS PROCESS OF KIRSTEN COOKIES: Since the business process is Made-to-order type the baking process and style depends upon the customer preferences. In order to maximize its productivity the process has to be carried out in most cost effective way consuming less time. Therefore the resources have to utilize in a effective way. It can be determined by analyzing the baking process used for the preparation of a single order which is as follows: Process involved
Time taken (min)
Cumulative time(min)
Washing and Mixing
6
6
Dish up Cookie Tray
2
8
Oven Set up
1
9
Baking Oven
9
18
Removing the tray
0
18
Cooling
5
23
Packaging
2
25
Collecting Money
1
26
TOTAL TIME TAKEN FOR PREPARATION OF A SINGLE ORDER OF 1 DOZEN IS ASSAM INSTITUTE OF MANAGEMENT
PRODUCTION AND OPERATIONS MANAGEMENT 1
= 26 MINUTES
The resources required for different orders would be different depending on the type of orders. Therefore two orders can be prepared simultaneously which would minimize the time required for the second order. It would no more require twice as much as time as for the first order. It can be done in the following way: Time taken for preparation of a single order can be divided into 3 parts:
Pre baking 8 minutes
Baking 10 minutes
Post baking 8 minutes
Therefore if someone can get the tray ready for the second order while the first order is in the oven for baking, it would save 8 minutes of time for the subsequent orders. Because when the first order is already in process in baking, the pre baking session for the second order will take place for 8 minutes, thus these 8 minutes have been saved. But it has to undergo both baking and post-baking sessions taking 18 (10+8) minutes. Therefore total time required for the second order while the first order is in progress =(18 – 8) =10 minutes
In fact subsequent orders will take 10 minutes each for preparation. Therefore time taken for the preparation of ' additional x' orders of 1 dozen would be: (26 + 10x) minutes
Thus if business is carried out for maximum of 4 hours (i.e. 240 minutes) the maximum no. of orders Kirsten Cookies can take in 1 day would be: X = 1 + [(240-26) ÷ 10] = 1 + 21 (approx.) = 22 (approx.)
ESTIMATION OF PRICE AND PROFIT Cost of ingredients
(per dozen) = Rs. 60
ASSAM INSTITUTE OF MANAGEMENT
PRODUCTION AND OPERATIONS MANAGEMENT 1
Cost of packaging [paper box]
(per dozen) = Rs. 10
Labour cost (profit)
(per dozen) = Rs. 2
Total price
(per dozen) = Rs. 72
Total price in 1 day for maximum 22 orders (72 x 22)
= Rs. 1584
Total cost in 1 day for maximum 22 orders
= Rs. 1540
(70 x 22)
Therefore total Profit in 1 day for maximum 22 orders
= Rs. 44
Here it can be stated that price of Rs.72 for 1 dozen cookies would be a bit higher for the students as customers. So, minimizing the cost and price should be the objective of the business for a stable growth.
PROBLEMS OF KIRSTEN COOKIES: 1.
Capacity constraints: They have only one OVEN, the number of which cannot be increased as there is not enough space for accommodation as well as their Budget is limited.
2.
Budget: As they are students, their budget is limited. They cannot afford to buy new equipment for their business and also cannot afford any extra expenditure.
3.
Price : As the business is Made-to-order making cookies fresh and hot, they cannot compromise on the quality and price cannot be increased ABNORMALLY as the customers are basically students from the campus.
4.
Make- to-order: Business is fully dependent on the Cookie’s demand based on customer preference only. They can produce only when they receive orders. Moreover items produced cannot be standardized.
ASSAM INSTITUTE OF MANAGEMENT
PRODUCTION AND OPERATIONS MANAGEMENT 1
5.
Time constraints: They have maximum of 4 hours (8pm-12pm) for their business as they themselves are students and they work only in the night hours.
RECOMMENDATION Cost Reduction: • Firstly it would be more feasible to buy Brown Paper Packets which cost only Rs.2/each, instead of cookie boxes which cost a sum of Rs.10/each. This would reduce our cost by Rs.8. • The Brown paper packets should be of a standard size which can carry upto a dozen cookies each.
Time Reduction: The actual dishing up time for the cookie tray was 2 mins, which can be reduced to 1 min by efficiency of work. • The packaging time can also be reduced from 2 min to 1 min because it takes lesser time to pack it in a paper packet rather than a box. •
ESTIMATION OF PRICE AND PROFIT AFTER RECOMMENDATION Cost of ingredients
(per dozen) = Rs. 60
Cost of packaging [paper box]
(per dozen) = Rs. 2
Labour cost (profit)
(per dozen) = Rs. 3
ASSAM INSTITUTE OF MANAGEMENT
PRODUCTION AND OPERATIONS MANAGEMENT 1
Total price
(per dozen) = Rs. 65
Total price in 1 day for maximum 22 orders (65 x 22)
= Rs. 1430
Total cost in 1 day for maximum 22 orders
= Rs. 1364
(62 x 22)
Therefore total Profit in 1 day for maximum 22 orders
= Rs.
66
As they are saving 2 min in both the above process, therefore they are getting a total of 44 min extra in a day for maximum 22 orders. Therefore they can utilize these 44 extra min in producing 4 more orders. Therefore maximum number of orders that can be taken in a day becomes = 22+4 = 26 orders Profit gained in 1 order = Rs. 3 profit gained in 4 order = Rs. 12 Therefore total profit per day for 26 orders = 66 + 12 =Rs. 78.
CONCLUSION Thus by reducing the material cost and time we can state that this business would be profitable to carry on. And also they can attract more students to buy their cookies as the price of cookies will be reduced to Rs.65.
