Executive Shirt Company Case Solution

EXECUTIVE SUMMARY

Executive Shirt Company (ESC) is currently following a certain process that it had been using for a long time to produce regular shirts. The company's manager has recently decided to add a new product to his company which is custom shirts believing that this will attract more profits to the company. To achieve this, the manager ordered a new cutting machine, asked two of his assistants to come up with different plans to implement the new product line and set only two constraints: 1. The Company should produce 16,000 regular shirts and 2,000 custom shirts per month and 2. The lead time for the custom shirt should not exceed 5 working days.

This document is intended to analyze the two different plans developed by the manager's assistants Mike and Ike. In analyzing these plans, the focus will be on the following criteria:

1. Producing the required number of shirts.

2. Fulfilling the 5 days lead time condition for the custom shirt.

3. Cost impact by each of the two plans.

4. The efficiency of the process (i.e. which process better utilizes the machines and the labor in the company).

The analysis will proceed as follows:

1. Basic findings

2. Analysis of the current process implemented in the company for regular shirts.

3. Analysis of each of the two proposed plans, discussing the pros and cons of each plan.

4. Comparison of the two proposed plans with reference to the standard process

5. Conclusion and recommendations.

BASIC FINDINGS:

A general analysis to the standard process revealed the following:

1. The manufacturing lead time is very long

2. The current labor utilization is low

3. The company is working with 83% of its capacity

4. The inventory is very high

Main reasons for the above facts were:

1. Work was done in batches (not shirt by shirt)

2. Batch size was large (60 shirts per batch)

3. The cutting process produces 480 shirts every 2 hours (i.e. 8 batches at the same time)

4. The operation time of the cutting machine is large.

Mike tackled both the batch size and the labor utilization problems by reducing the batch size to 5 shirts per batch and by trying to maximize the use of each labor. Ike, on the other hand, focused on maximizing the labor utilization in the regular shirt production line. His idea was to spare a worker for every stage in the custom shirt production line on the expense of reducing the number of workers in the regular shirt line.

As a result of these two approaches, Mike's plan proved to be more effective in terms of maximizing the labor utilization with minimal impact on cost while meeting the imposed constraints. Ike's plan, however, could also meet the requirements, but failed to do so without requiring overtime hours which had a direct impact on the overall cost of production. It also failed to reduce the inventory significantly unlike Mike's plan.

In the following few sections a deeper analysis is introduced to elaborate more about each process and about the reason of choosing Mike's plan as our preferred plan based on the criteria mentioned in the previous section.

ANALYSIS OF CURRENT PROCESS

In order to analyze the current production of regular shirts we first need to clearly define the process through a flow diagram.

EXHIBIT 1 PROCESS WORKFLOW (CURRENT SITUATION)

After looking clearly at the flow diagram we can then start measuring the performance of the process. It's given that the sales for the Executive Shirt Company are constituted of only a few basic styles and colors. Therefore, the company has a limited number of varieties to produce, and it has large batches of each kind of shirt (size and color).This entails that there is low management complexity. Executive Shirt Company used Assembly line production. Furthermore, it has only one cutting machine, which is computer-controlled and can cut up to 60 layers of cloth at the same time and up to 8 patterns can be simultaneously cut.

The cutting process by the machine assuming that the batches are processed sequentially takes 30 minutes irrelevant of the number of patterns and number of layers. Nevertheless, the set up time is quite significant since 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. Thus we can conclude that in one run the total number of shirts cut is 480 ( 60*8) and the total time taken by one run is equal to the setup time and runtime of machine added together which is 120 minute. Furthermore, the labor content of cutting process in minute per shirt is 0.25 per worker.

Measurements of Performance regular shirt

Actual cycle time (min/shirt)* 0.6

Manufacturing lead time (days) 14.7

WIP inventory (shirts) 11760

Production Capacity (shirts/day)** 960

Capacity Utilization 83.33%

Direct Labour content (min/shirt) 26.5

Direct Labour utilization 69%

Direct Labour cost ($/shirt) 3.84

* Assume 8 hour work day, or 8 hours plus overtime if necessary

** Assume 8 hours work day

Exhibit 2 Performance Measurements (current solution)

To calculate the cycle time we first have to look at the cycle time of each operation. We can get the cycle time of each operation by dividing the time taken to complete one batch by the number of batches simultaneously worked upon in each operation .This will give us the cycle time in minutes per shirt. After that we can identify the process with