Executive Shirt Company, Inc. is well-known for its high-quality, competitively-priced men’s
shirts. But a recent dip in the sales has led the company to think on alternatives. Based on the
current market trend the General Manager Dwight Collier has decided to go for custom-seized
shirts along with the current production of standard-sized shirts.
Considering that the decision is taken prudently, we now shift our focus to the company’s
production process. The company has been using a batch process to produce standard-sized
shirts.
1. Following are the details of the company’s current batch processing.
Only a few basic styles and colors constitute the major portion of sales, hence the company has
a limited number of varieties to produce. So, it has large batches of each kind of shirt (size and
color).
It has only one cutting machine, which is computer-controlled and can cut up to 60 layers of
cloth at the same time. Also up to 8 patterns can be cut simultaneously. The cutting process by
the machine takes 30 minutes irrespective of the number of patterns and number of layers.
But, the set up time is quite significant. It takes 1.5 minutes to roll out a layer of cloth and so for
60 layers; it takes 90 minutes setup time. The machine is being operated by 4 operators and the
company is using its maximum capacity, i.e. 60 layers and 8 patterns at a time. So,
Total number of shirts cut in one run = 60*8 = 480
Total time taken by one run = setup time + runtime = 90 + 30 = 120 minutes
Regular shirts labor content (minutes per shirt) for cutting = 120 / 480 = 0.25 min / shirt
Number of workers = 4
Now, tabulating this data with other the data from other production activities, we get
Operation
1. Cutting
2. Make collar
3. Make cuffs
4. Make sleeves
5. Make front
6. Make back
7. Join shoulders
Regular Shirts Labor
Content (minutes per shirt)
0.25
3.9
2
0.65
2.5
1.7
0.66
Number
of
workers
4
8
4
2
6
4
2
Time
taken per
shirt
(minutes)
0.06
0.49
0.50
0.33
0.42
0.43
0.33
Time
taken per
batch
(minutes)
3.75
29.25
30
19.5
25
25.5
19.8
8. Attach collar
9. Attach sleeves
10. Stitch down sleeves
11. Sew side seam
12. Attach cuffs
13. Hem bottom
14. Inspect
15. Iron
15. Fold, package
Total
1.65
1.55
0.65
1.8
1.55
1.7
1.5
1.95
1.75
4
4
2
4
4
4
4
4
4
0.41
0.39
0.33
0.45
0.39
0.43
0.38
0.49
0.44
24.75
23.25
19.5
27
23.25
25.5
22.5
29.25
26.25
25.76
64
6.27
374.05
Thus, the direct labor content (min. /shirt) = 25.76
Thus we see that the maximum time taken by a process in 30 min / labor / batch, which forms
the bottleneck and represents the cycle time. The cycle time / shirt = 30 / 60 = 0.5 min / shirt.
The work-in-process inventory = Total number of batches in all operations * Batch size
= (16 + 144 + 12 + 12 + 12) * 60
= 196 * 60 = 11760 shirts
Now we can apply Little’s Law to calculate the throughput time which is equal to the
manufacturing lead time in this case.
By Little’s Law,
Throughput time = Work-in-process / Throughput rate = Work-in-process * Cycle time
= 11760 * 0.5
= 5880 minutes
Since production goes on for 8 hrs per day, manufacturing lead time = 5880 / (8 * 60)
= 12.25 days
Total number of shirts produced per month is 16,000. The company works for 20 days a month.
So, the output per day = 16000 / 20 = 800 shirts.
In, 8 hours a day, the company can produce 60 * 8 * (1/0.5) = 960 shirts, which is the current
production capacity. But it needs to produce only 800 shirts.
So, the capacity utilization = (800 / 960) * 100 = 83.33%
The actual labor utilized = Number of shirts produced * Direct labor content
= 800 * 25.76
= 20608 minutes
The available labor for utilization = Total number of workers * Hours per day * 60
= 64 * 8 * 60
= 30720 minutes
Therefore, the direct labor utilization = (20608 / 30720) * 100 = 67.08%
Direct labor cost ($/shirt) =
Total number of workers ∗ Hours per day ∗ Hourly wages
Number of shirts produced
= (64 * 8 * 6) / 800 = 3.84
2. We now proceed to compute the operations metrics for Mike’s plan.
In this plan, the new “low-ply” laser cutting machine would take 2.5 minutes to produce 5
shirts. One additional worker needs to be hired to operate this machine.
Therefore, the regular shirts labor content = 2.5 / 5 = 0.5 minutes.
The time taken per shirt = 0.5 minutes
Since this is the same as the maximum time taken for a single sewing process causing the
bottleneck (make cuffs), the cycle time / shirt will remain equal to 0.5 minutes
Here the time taken is 2.5 min / labor / batch, which forms the bottleneck and represents the
cycle time. The cycle time / shirt = 2.5 / 5 = 0.5 min / shirt.
We now proceed to compute the operations metrics for the current process.
The work-in-process inventory = Total number of batches in all operations * Batch size
= (36 + 288 + 24 + 24 + 24) * 5
= 396 * 5 = 1980 shirts
Now we can apply Little’s Law to calculate the throughput time which is equal to the
manufacturing lead time in this case.
By Little’s Law,
Throughput time = Work-in-process / Throughput rate = Work-in-process * Cycle time
= 1980 * 0.5
= 990 minutes
Since production goes on for 8 hrs per day, manufacturing lead time = 990 / (8 * 60)
= 2.06 days
Total number of shirts produced per month is 16000 + 2000 = 18000. The company works for 20
days a month.
So, the output per day = 18000 / 20 = 900 shirts.
In, 8 hours a day, the company can produce 60 * 8 * (1/0.5) = 960 shirts, which is the current
production capacity. But it needs to produce only 900 shirts.
So, the capacity utilization = (900 / 960) * 100 = 93.75%
For calculating the direct labor content, we have to find out the direct labor content values for
sewing and cutting separately.
For sewing operations, the DLC = 25.51 minutes/shirt
For the cutting operation, since both the new and old machines are used, the weighted average
of the individual DLCs are considered
DLC for cutting = (No of custom-made shirts * Time taken for each custom-made shirt +
No of regular shirts * Time taken for each regular shirt) / Total no of shirts
= (100 * 0.5 + 800 * 0.25) / 900 = 0.28 minutes
Therefore, total direct labor content = 25.51 + 0.28 = 25.79 minutes
The actual labor utilized = Number of shirts produced * Direct labor content
= 900 * 25.79
= 23211 minutes
The available labor for utilization = Total number of workers * Hours per day * 60
= 65 * 8 * 60
= 31200 minutes
Therefore, the direct labor utilization = (23211 / 31200) * 100 = 74.39%
Direct labor cost ($/shirt) =
Total number of workers ∗ Hours per day ∗ Hourly wages
Number of shirts produced
= (65 * 8 * 6) / 900 = 3.47
3. Let us now evaluate Ike’s plan.
For the regular shirts, the direct labor content will be the same as in the current process as
here the new cutting machine is kept separate from the regular shirt manufacturing process.
Therefore, the direct labor content = 25.76 minutes/shirt for regular shirts
Here, however the number of workers in each process is reduced by one. Therefore, the cycle
time may change.
Operation
1. Cutting
2. Make collar
3. Make cuffs
4. Make sleeves
5. Make front
6. Make back
7. Join shoulders
8. Attach collar
9. Attach sleeves
10. Stitch down sleeves
11. Sew side seam
12. Attach cuffs
13. Hem bottom
14. Inspect
15. Iron
15. Fold, package
Total
Regular Shirts Labor
Content (minutes per shirt)
0.25
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
25.76
Number
of
workers
4
7
3
1
5
3
1
3
3
1
3
3
3
3
3
3
49
Time
taken per
shirt
(minutes)
0.06
0.56
0.67
0.65
0.5
0.57
0.66
0.55
0.52
0.65
0.6
0.52
0.57
0.5
0.65
0.58
8.23
Time
taken per
batch
(minutes)
3.75
33.43
40
39
30
34
39.6
33
31
39
36
31
34
30
39
35
492.78
Therefore, the maximum cycle time = 0.67 minutes
Similar to the previous plans, the work-in-process inventory = (16 + 108 + 9 + 9 + 9) * 60
= 9060 shirts
Similar to the other plans, we can calculate the manufacturing lead time
= (9060 * 0.67) / (8 * 60) = 12. 58 days
Production capacity = 480 minutes / 0.67 minutes/shirt = 720 shirts
Actual production of regular shirts = 800
Therefore, capacity utilization = (800 / 720) * 100 = 111.11%
Direct labor utilization = (800 * 25.76) / (49 * 8 * 60) = 20608 / 23520 = 0.8762
For calculating the direct labor cost, since there is overutilization of capacity, we need to
consider the overtime cost also.
Overtime = 1.1111 * 8 – 8 = 0.8888 hours/day
Normal time = 8 hours/day
Therefore, total labor cost per day = 0.8888 * 9 + 8 * 6
The direct labor cost/shirt = (0.8888 * 9 + 8 * 6) / 800 = $ 3.43
For the custom-made shirts, the work-in-process inventory
= Inventory in cutting + inventory in processing
= 5 + 15 * 3 = 50 shirts
Since a single shirt is processed at a time by a single worker, the cycle time is the maximum of
all the individual regular shirt labor content = 3.9 minutes / shirt
Manufacturing lead time = (50 * 3.9) / (8 * 60) = 0.41 days
Production capacity = (8 * 60) / 3.9 = 123 shirts / day
Capacity utilization = (100 / 123) * 100 = 81.3%
Direct labor content = Labor content for cutting + labor content for processing
= 0.5 + 25.51 = 26.01 minutes/shirt
Direct labor utilization = (100 * 26.01) / (16 * 8 * 60) = 2601 / 7680 = 0.3387
Direct labor cost / shirt = (16 * 8 * 6) / 100 = $7.68
The final outcomes of the analysis are shown in the table below.
Current Process
Regular Shirts
Actual Cycle Time
(min./shirt)
Manufacturing Lead
Time (days)
WIP
Inventory
(shirts)
Production Capacity
(shirts/day)
Capacity
Utilization(%)
Direct
Labor
Content(min/shirt)
Direct
Labor
Utilization(%)
Direct Labor Cost
($/shirt)
0.5
Mike's Plan
Ike's Plan
Regular & Custom Regular
Shirts
Shirts
0.5
0.67
Custom
shirts
3.9
12.25
2.06
12.58
0.41
11760
1980
9060
50
960
960
720
123
83.33
93.75
111.11
81.25
25.76
25.79
25.76
26.01
67.08
74.39
87.62
33.87
3.84
3.47
3.43
7.68