OPERATIONS MANAGEMENT ‐ 1 ASSIGNMENT
EXECUTIVE SHIRT COMPANY
PGP – 1; Section – B
Group – 11
Overview:
The Executive Shirt Company (ESC) is a top apparels company which is looking to expand
into the high potential custom‐sized dress shirt market. Customers currently had a problem
with this market because of higher prices and long delivery times of up to 6 weeks. If these
factors were addressed, ESC had the opportunity to tap into the highly lucrative market
where customers were willing to pay at least 75% more than standard shirts.
Identified objective:
The general manager Collier wants to make alterations to his current process that would
enable him to make both custom‐sized shirts and standard shirts using his resources to the
maximum extent possible.
Current process flow:
The current process flow in ESC is as shown in Figure 1. Each batch consists of 60 shirts and
Work‐In‐Process at each station was three batches per worker. Collier purchases a new
cutting machine which takes only 2.5 minutes for the entire process. But the batch size that
this machine can handle is five shirts. Two managers, Mike and Ike are asked to present
their plans as alternatives to the current process flow.
Mike’s plan:
Mike proposes a plan where both custom and standard shirts are processed together. To
reduce the lead time, he proposes to reduce the batch time from sixty to five shirts. He also
plans to increase the Work‐In‐Process to six batches per worker from the current three. The
process flow for this plan is the same as the previous. Only, an extra cutting machine is
added for the Cutting process.
Ike’s plan:
Ike’s proposal is to separate the Custom shirt production from the Standard shirt production
line by introducing a new assembly line. One worker each from all sewing stations, the
inspection station, the ironing station and the packaging station are proposed to be moved
to the new custom line. The plan seeks to implement the assembly line by moving twelve
sewing machines and one ironing machine from the current assembly line. One extra worker
Executive Shirt Company, Inc.
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is employed to operate the laser cutting machine. The process flow for the standard shirts is
the same as the current plan with a batch size of 60. The process flow for the Custom shirts
is same as well, except that, processing is done one shirt at a time.
An analysis based on the proposed alternatives from Mike and Ike will help in making the
ideal choice that will maximize the inherent potential of the custom‐shirts business.
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Fig 1 – Process flow diagram
Executive Shirt Company, Inc.
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Analysis of current process:
For calculating the cycle time, we will divide the time required for each operation by the
number of workers required for that operation. The tabulated results are as follows:
Operation
Make collar
Make cuffs
Make sleeves
Make front
Make back
Join shoulders
Attach collar
Attach sleeves
Stitch down sleeves
Sew side seam
Attach cuffs
Hem bottom
Inspect
Iron
Fold, Package
Regular Shirts
Labour(minutes
per shirt)
3.9
2
0.65
2.5
1.7
0.66
1.65
1.55
0.65
1.8
1.55
1.7
1.5
1.95
1.75
Number of
workers
minutes/per
shirt/worker
8
4
2
6
4
2
4
4
2
4
4
4
4
4
4
0.49
0.50
0.33
0.42
0.43
0.33
0.41
0.39
0.33
0.45
0.39
0.43
0.38
0.49
0.44
Hence, Ideal cycle time = 0.5 min/shirt
The actual production rate for regular shirts is 16000 shirts/month. Hence, the number of
shirts produced per minute can be calculated as:
16000/(20*8*60) = 1.67 shirts/min (assuming 8 hour work day)
Cycle time = 1/1.67 = 0.6 min/shirt
Since, this cycle time value is higher than the ideal cycle time of 0.5 min/shirt, the actual
cycle time = 0.6 min/shirt
From Exhibit 3, we can calculate the WIP inventory by adding the individual inventories.
WIP inventory = 196 batches = 196*60 shirts = 11760 shirts
Production capacity = number of shirts produced using ideal cycle time
= Number of minutes available per day/ ideal cycle time
= (8*60)/ 0.5
= 960 shirts/day
Actual production capacity being used = (8*60)/0.6 = 800 shirts/day
Capacity Utilization = 800/960 = 83.33%
Manufacturing Lead Time = WIP inventory/production capacity
Executive Shirt Company, Inc.
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= 11760/800 = 14.7 days
For calculating Direct Labour Utilization, we have to consider the time taken by all workers
for the operations. For cutting operation, 90+30=120 minutes are taken in the cutting
process for 480 shirts. Cutting time per shirt is (120/480)=0.25 min/shirt with 4 workers
working on it. The time taken for all other operations is the sum of the times given in exhibit
3 = 25.51 min/shirt
Direct labour content = time taken for cutting + time taken for other operations
= 0.25*4 + 25.51 = 26.51 min/shirt
Direct labour utilization = time taken to produce shirts/total time available for 64 labourers
= 26.51*800/(64*8*60) = 69%
Money paid to direct labourers = 64*6$*8 hours = 3072 $/day
Direct labour cost = 3072/800 = 3.84 $/shirt
Analysis of Mike’s process:
For calculating the cycle time, we will refer to the previous table 1, since the workforce is
same. Ideal cycle time = 0.5 min/shirt
The actual production rate for regular shirts is 16000 regular + 2000 customized = 18000
shirts/month. Hence, the number of shirts produced per minute can be calculated as:
18000/(20*8*60) = 1.88 shirts/min (assuming 8 hour work day)
Cycle time = 1/1.88 = 0.533 min/shirt
Since, this cycle time value is higher, the actual cycle time = 0.533 min/shirt
From Exhibit 5, we can calculate the WIP inventory by adding the individual inventories.
WIP inventory = 396 batches = 396*5 shirts = 1980 shirts
Production capacity = number of shirts produced using ideal cycle time
= Number of minutes available per day/ ideal cycle time
= (8*60)/ 0.5
= 960 shirts/day
Actual production capacity being used = (8*60)/0.533 = 900 shirts/day
Capacity Utilization = 900/960 = 93.75%
Manufacturing Lead Time = WIP inventory/production capacity
= 1980/900 = 2.2 days
For calculating Direct Labour Utilization, we have to consider the time taken by all workers
for the operations and the time taken on the laser‐cutting machine. For computer
Executive Shirt Company, Inc.
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controlled cutting operation, cutting time per shirt is 0.25 min/shirt with 4 workers working
on it.
The time taken for laser‐cutting machine = (2.5 min/5 shirts) = 0.5 min/shirt with 1 worker
working on it.
The time taken for all other operations is the sum of the times given in exhibit 3 = 25.51
min/shirt
Direct labour content = time taken for cutting + time taken for other operations
= 0.25*4 + 0.5*1 + 25.51 = 27.01 min/shirt
Direct labour utilization = time taken to produce shirts/total time available for 65 labourers
= 27.01*900/(65*8*60) = 77.9%
Money paid to direct labourers = 65*6$*8 hours = 3120 $/day
Direct labour cost = 3120/900 = 3.47 $/shirt
Analysis of Ike’s regular shirt process:
For calculating the cycle time, we will divide the time required for each operation by the
number of workers required for that operation. The tabulated results are as follows:
Operation
Make collar
Make cuffs
Make sleeves
Make front
Make back
Join shoulders
Attach collar
Attach sleeves
Stitch down sleeves
Sew side seam
Attach cuffs
Hem bottom
Inspect
Iron
Fold, Package
Regular Shirts
Labor(minutes
per shirt)
Number of
workers
3.9
2
0.65
2.5
1.7
0.66
1.65
1.55
0.65
1.8
1.55
1.7
1.5
1.95
1.75
7
3
1
5
3
1
3
3
1
3
3
3
3
3
3
Minutes/per
shirt/worker
0.56
0.67
0.65
0.50
0.57
0.66
0.55
0.52
0.65
0.60
0.52
0.57
0.50
0.65
0.58
Hence, Ideal cycle time = 0.67 min/shirt
The actual production rate for regular shirts is 16000 shirts/month. Hence, the number of
shirts produced per minute can be calculated as:
16000/(20*8*60) = 1.67 shirts/min (assuming 8 hour work day)
Cycle time = 1/1.67 = 0.6 min/shirt
Executive Shirt Company, Inc.
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Since, the value of the ideal cycle time is higher, so the actual cycle time = 0.67 min/shirt
From Exhibit 6, we can calculate the WIP inventory by adding the individual inventories.
WIP inventory = 151 batches = 151*60 shirts = 9060 shirts
Production capacity = number of shirts produced using ideal cycle time
= Number of minutes available per day/ ideal cycle time
= (8*60)/ 0.67
= 720 shirts/day
Production capacity as per normal demand = (8*60)/0.6 = 800 shirts/day
Capacity Utilization = 800/720 = 111.11%
This indicates that the workers are working overtime in this case.
Total overtime/day = (8*60)*11.11% = 53.33 mins/day
Manufacturing Lead Time = WIP inventory/production capacity
= 9060/800 = 11.33 days
For calculating Direct Labour Utilization, we have to consider the time taken by all workers
for the operations and the time taken on the laser‐cutting machine. For computer
controlled cutting operation, cutting time per shirt is 0.25 min/shirt with 4 workers working
on it.
The time taken for all other operations is the sum of the times given in exhibit 3 = 25.51
min/shirt
Direct labour content = time taken for cutting + time taken for other operations
= 0.25*4 + 25.51 = 26.51 min/shirt
Direct labour utilization = time taken to produce shirts/total time available for 49 labourers
= 26.51*800/(49*8*60*111.11%) = 81.1%
Money paid to direct labourers = regular working payment + overtime payment = 49*6$*8
hours + 49*9$*(53.33/60 min) = 2743.9 hours
Direct labour cost = 2743.9/800 = 3.43 $/shirt
Executive Shirt Company, Inc.
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Analysis of Ike’s customized shirt process:
For calculating the cycle time, we will divide the time required for each operation by the
number of workers required for that operation. The tabulated results are as follows:
Operation
Make collar
Make cuffs
Make sleeves
Make front
Make back
Join shoulders
Attach collar
Attach sleeves
Stitch down sleeves
Sew side seam
Attach cuffs
Hem bottom
Inspect
Iron
Fold, Package
Regular Shirts
Labor(minutes
per shirt)
Number of
workers
3.9
2
0.65
2.5
1.7
0.66
1.65
1.55
0.65
1.8
1.55
1.7
1.5
1.95
1.75
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
minutes/per
shirt/worker
3.9
2
0.65
2.5
1.7
0.66
1.65
1.55
0.65
1.8
1.55
1.7
1.5
1.95
1.75
Hence, Ideal cycle time = 3.9 min/shirt
The actual production rate for regular shirts is 2000 shirts/month. Hence, the number of
shirts produced per minute can be calculated as:
2000/(20*8*60) = 0.208 shirts/min (assuming 8 hour work day)
Cycle time = 1/0.208 = 4.8 min/shirt
Since, this cycle time value is higher than the ideal cycle time of 3.9 min/shirt, the actual
cycle time = 4.8 min/shirt
As given, 15 workers have on an average 3 shirts as inventory and the cutting machine has 5
shirts as inventory at a given time, so we can calculate the WIP inventory by adding the
individual inventories.
WIP inventory = 15*3 + 5 = 50 shirts
Production capacity = number of shirts produced using ideal cycle time
= Number of minutes available per day/ ideal cycle time
= (8*60)/ 3.9
= 123.1 shirts/day
Actual production capacity being used = (8*60)/4.8 = 100 shirts/day
Executive Shirt Company, Inc.
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Capacity Utilization = 100/123.1 = 81.2%
Manufacturing Lead Time = WIP inventory/production capacity
= 50/100 = 0.5 days
For calculating Direct Labour Utilization, we have to consider the time taken by all workers
for the operations.
The time taken for laser‐cutting machine = (2.5 min/5 shirts) = 0.5 min/shirt with 1 worker
working on it.
The time taken for all other operations is the sum of the times given in exhibit 3 = 25.51
min/shirt
Direct labour content = time taken for cutting + time taken for other operations
= 0.5*1 + 25.51 = 26.01 min/shirt
Direct labour utilization = time taken to produce shirts/total time available for 16 labourers
= 26.01*100/(16*8*60) = 33.9%
Money paid to direct labourers = 16*6$*8 hours = 768 $/day
Direct labour cost = 768/100 = 7.68 $/shirt
Results for all processes are tabulated as follows:
Current
Process
Actual Cycle Time
(min./shirt)
Manufacturing Lead
Time (days)
WIP Inventory (Shirts)
Production Capacity
(Shirts/day)
Capacity Utilization
Direct Labour Content
(Min./shirt)
Direct Labour
Utilization
Direct Labour Cost
($/shirt)
Regular Shirts
Mike’s Plan
Regular &
custom
Shirts
0.6
0.533
0.67
4.8
14.7
2.19
12.64
0.5
11760
1980
9060
50
960
960
720
123.1
83.33%
93.75%
111%
81.2%
26.51
27.01
26.51
26.01
69.0%
77.9%
80.74%
33.9%
$3.84
$3.47
$3.26
$7.68
Executive Shirt Company, Inc.
Ike’s Plan
Regular
Shirts
Custom
Shirts
8
Comparison between Mike’s plan and Ike’s plan
The profits for shirts manufactured in a month are compared for both the plans.
The results are tabulated as follows:
Regular
Shirts
Number of shirts
(manufactured per
month)
Cost per shirt
Raw material cost
Total labour cost
Indirect cost
Total manufacturing
cost
Wholesale price
Profit#
Mike's plan
Customized
shirts
Ike's plan
Regular
Customized
Shirts
shirts
16000
2000
16000
2000
7
4.5
4.5
7.7*
4.5
4.5
7
5**
4.5
7.7*
4.5
4.5
16
25
16.7
35
16.5
25
16.7
35
180600
172600
*Raw material costs are 10% more expensive for customized shirts
** Calculating overtime costs:
Overtime = 53.33 minutes/worker/day
Overtime wages = Overtime * Overtime wages per hour
= (53.33* $9 / 60) = $8 per worker per day
Overtime wage per shirt = Overtime wages * No. of workers / Shirts per day
= 8 * 49 / 800 = $ 0.5 per shirt
Total Labour cost = 4.5 + overtime cost = 4.5 + 0.5 = $5 per shirt
#
Profit = ((Wholesale price – Total Manufacturing Cost)*Number of regular shirts) +
((Wholesale price – Total Manufacturing Cost)*Number of regular shirts)
Conclusion:
From the above detailed analysis, it is clear that Mike’s process is superior to Ike’s process in
terms of profitability and manufacturing lead‐time.
The effective lower MLT of Mike’s process implies that the delivery efficiency is greater.
Customer waiting time for Customized shirts is greatly reduced compared to industry
standard of six weeks. Executive Shirts Company, Inc. will therefore be in a position to
leverage this factor and become a leader in the market for Custom‐sized shirts.
Executive Shirt Company, Inc.
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