Kristen's Cookie

Jimin Zhang

SCM470 Section004

Individual Case

2/5/2015

Kristen’s Cookie Company

My roommate and I are going to start a business – Kristen’s Cookie Company. The goal of our cookie company is to provide the freshest cookie to on-campus students. As for our specialties, we guarantee that the cookies are absolutely fresh baked. In addition, we offer various integrates for our customers to choose so that they can design their own cookies based on their special tastes.

        Before launching our company, we conduct a rule for ordering and pricing; we also calculated different processing time required for different order size. First, for our rule of ordering. Customers must order at least one dozen of cookies at one time. If a customer places an order of more than one dozen of cookies, we will offer certain discounts. In addition, customers must complete the online order form to process the order, including order size, detailed requirement, contact information, and the time they want to pick up. For giving convenience to our job, we strongly suggest customers to submit the order form ahead of time, so that we can plan for the perfect schedule, and customers could get the freshest cookies when they pick them up. According to the process flow chart (please see last page), generally, if every step in the process goes well, the whole process for making one dozen of cookies will cost us 26 minutes. Assuming we open four hours per night, since the bake time is 10 minutes per dozen, in other word, 6 dozen per hour. Then for four hour capacity, we can produce 24 dozen in total. However, since we still waste time on washing and spooning, 16 minutes for preparing and cleaning should be taken away from the whole four hours. Overall, we have 240-16=224 minutes for processing, which means we can make 224/10=22.4 dozen of cookies per night.

Then, for the pricing setup, one dozen of cookies will cost $15. However, if you spend more than $30 at a time, we will offer a $5 off in total; if you spend more than $45 at a time, we will offer an $8 off in total; if you spend $60 or more, and we will offer a $10 off in total. We hope the discounts we offered can promote consumption and boost sales. Thus, if we sell 23 dozen of cookies per night, the maximum revenue is $345. Additionally, the variable cost for one dozen of cookies is $0.7, and we assume the labor cost for both of us is $20 per hour, so the total cost for one night will be 0.7*23+20*4=$96. In this way, the profit will be around $249 per night.

However, the limited equipment and time for baking cookies are the biggest problem for our business. For the better development in the future, in advance we have so much more customer that we cannot handle, we decide to rent for another oven, and we need another electric mixer and several more baking trays. On the premise of ensuring quality of cookies, the lead time will be shortened by adding another oven. And we will be willing to pay $300-400 to rent another oven for one month. In this way, if the two ovens work simultaneously, and if we keep baking and selling cookies for the whole four hours per night, our profit will be almost doubled, and the waiting time for customers will be shorter at the same time.