The Executive Shirts Company Case Study
Autor: Abhishek Iyer • February 4, 2017 • Case Study • 1,183 Words (5 Pages) • 1,216 Views
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Contents
1. Introduction 2
2. Assumptions 2
3. Question 1 2
4. Question 2 2
4.1 Comparison 3
4.2 Cost Analysis 3
4.3 Recommendations 3
5. Appendix 4
5.1 Exhibit 1 4
5.2 Exhibit 2 5
5.3 Exhibit 3 5
1. Introduction
The Executive Shirts Company (ESC) is a supplier of well-known labels with high-quality, competitive-priced men’s shirts. Concerned with the company’s recent sales drop, general manager Dwilight Collier has decided to expand into the custom-sized shirt market. Collier received proposals from two of his managers, Mike and Ike, for designing the manufacturing process of the custom-sized shirts. This report analyses both the proposals quantitatively and qualitatively, and suggests recommendations for ESC.
2. Assumptions
For the analysis, following were the assumptions that we made:
- We assume 1 month contains 20 working days, each day contains 8 working hours. Overtime are rounded to nearest integer hour, i.e., 52 minutes overtime is taken as 1 hour.
- ESC is currently producing 16,000 standard-sized shirts every month. The initial production of custom-sized shirts should be 2,000 per month.
3. Question 1
Assuming the plans are implemented as described in the case, following are the key metrics for the current production process as well as for Mike’s and Ike’s plans (detailed calculations of each of the metrics are presented in exhibit 1):
Metrics | Current Process | Mike's Plan | Ike's Plan | |
Regular Shirts | Regular & Custom Shirts | Regular Shirts | Custom Shirts | |
Actual Cycle time (min./shirts) | 0.60 | 0.53 | 0.67 | 4.8 |
Manufacturing Lead Time (days) | 14.7 | 2.20 | 12.58 | 0.50 |
WIP Inventory (shirts) | 11,760 | 1,980 | 9,060 | 50 |
Production Capacity (shirts/day) | 960 | 960 | 720 | 123 |
Capacity Utilization | 83.33% | 93.75% | 111.11% | 81.30% |
Direct Labor Content (min./shirt) | 26.51 | 28.90 | 26.51 | 26.01 |
Direct Labor Utilization | 69.04% | 83.36% | 90.17% | 33.87% |
Direct Labor Cost ($/Shirt) | $3.84 | $3.47 | $3.49 | $7.68 |
4. Question 2
Mike’s Plan:
- Assumes the minimum order quantity of 5 custom shirts of a given size
- New cutting machine set up next to existing cutting machine, and will be run be a new operator
- Batches of custom shirts would be sewn with batches of regular shirts
- Reduction of batch size for all shirts from 60 to 5 shirts
Ike’s Plan:
- Custom shirt production should be kept separate from regular shirts with separate assembly line
- 1 worker to be moved from each sewing operation, 1 from inspection, 1 from ironing and 1 from packaging to be moved to new line
4.1 Comparison
Following is the comparison of the two plans, in terms of both regular shirt and custom shirt production:
Metrics | Mike’s Plan | Ike’s Plan |
Actual cycle time (min. / shirt) | The cycle time has reduced from 0.60 to 0.53 min. per shirt for both shirts. Mike’s actual cycle time is better | The cycle time has increased for regular shirts to 0.67 min. per shirt, for custom shirts the cycle time is even higher at 4.8 min. per shirt. |
Manufacturing lead time | The manufacturing lead time in Mike’s plan has reduced substantially from 14.7 days to just 2.2 days. Overall Mike’s plan has a better lead time. | The lead time for regular shirts has decreased to 12.6 days, Ike’s plan for custom sized shirts is just 0.5 days against Collier’s target of 5 days. |
Capacity Utilization | Mike’s plan maximizes to the utilization to 93.75% as opposed to current 83.33%. Overall Mike’s plan has a better capacity utilization. | Ike’s plan require worker to overtime for 1 extra hour for regular shirts, the utilization for custom shirts is 81.30%. |
Direct Labor Cost ($/shirt) | Mike’s plan reduces the direct labor cost for both regular and custom shirts, it is $3.47 as opposed to existing $3.84. Mikes plan has a better direct labor cost. | Ike’s plan reduces the direct labor cost for custom shirts to $3.49, but has a very high labor cost of $7.68 for custom shirts. |
Direct Labor Utilization | The direct labour utilization has increased from 69% to 83%. Mike’s plan has a better overall direct labor utilization. | The direct labour utilization increased significantly to 90% for regular shirts, but is very low for custom shirts 34% |
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