Kristen's Cookie Company

Kristen's Cookie Company

Kristen's Cookie Company is a good example where the success or failure of the company depends directly on the process planning adopted by the company, i.e., the company can maximize its productivity by utilizing its resources effectively. One major aspect of process analysis is to identify the major bottlenecks in the process and trying to mitigate their effects with least possible level of costs and resources. The following flowchart shows the overall process adopted by the company: (Exhibit 1)

Filling a rush order:

Process Resource(s) Process Time Cumulative Time Consumed

Taking Order E-mail 0 minutes 0 minutes

Washing and Mixing Self 6 minutes 6 minutes

Filling Tray Self 2 minutes 8 minutes

Preparing Oven Roommate 1 minute 9 minutes

Baking Oven 9 minutes 18 minutes

Removing the tray Roommate 0 minutes 18 minutes

Cooling None 5 minutes 23 minutes

Packaging & Collecting Money Roommate 3 minutes 26 minutes

Thus, it requires minimum 26 minutes to fill a rush order.

Production Capacity (4 hours):

Since the resources required for the different processes are not common everywhere, there can be two orders (of one dozen each, for simplicity) being processed simultaneously. Thus, it would not require twice as much time for the second order (of one dozen) to be completed as it requires for the first one (of one dozen). This can be attributed to the fact that one can get the tray ready for the second order while the first one is in the oven for baking. The only bottleneck which creates a time lag is the combined process of getting the oven ready (1 minute) for baking and the process of baking itself (9 minutes). So, we can get two orders of one dozen each ready in 36 minutes. In fact, for X orders of 1 dozen each, the time required is given by:

(16 + 10X) minutes.

Thus, in 4 hours (or 240 minutes), Kristen's Cookie Company can fulfill 22 orders of one dozen each given the fact that it gets the orders independently and it utilizes its resources to the maximum.

Labor Time Requirements:

For Self, total time required is 6 minutes (washing and mixing) + 2 minutes (filling the tray) = 8 minutes.

For Roommate, total time required is 1 minute (preparing the oven) + 3 minutes (packaging and collecting money) = 4 minutes.

The assumption made for calculating the labor times is that all the orders are of one dozen.

Discounts and Economies of Scale:

Since the costs of raw materials and packaging material remains the same irrespective of the fact that we service one dozen orders or multiple dozen orders, the only factor to be taken into account is the money value of time employed by both the people.

As calculated above, the labor time requirements for a one dozen order are as follows:

For self = 8 minutes

Roommate = 4 minutes

Total time = 12 minutes

The following table calculates the labor time requirements for a two dozen order:

Process Resource Process Time Cumulative Labor time (Self) Cumulative Labor Time (Roommate)

Taking Order (1 & 2) E-mail 0 minutes 0 minutes 0 minutes

Washing and Mixing (1 & 2) Self 6 minutes 6 minutes 0 minutes

Filling Tray 1 Self 2 minutes 8 minutes 0 minutes

Filling Tray 2 Self 2 minutes 10 minutes 0 minutes

Preparing Oven 1 Roommate 1 minute 10 minutes 1 minute

Baking 1 Oven 9 minutes 10 minutes 1 minute

Removing Tray 1 Roommate 0 minutes 10 minutes 1 minute

Cooling 1 None 5 minutes 10 minutes 1 minute

Preparing Oven 2 Roommate 1 minute 10 minutes 2 minutes

Baking 2 Oven 9 minutes 10 minutes 2 minutes

Removing tray 2 Roommate 0 minutes 10 minutes 2 minutes

Cooling 2 None 5 minutes 10 minutes 2 minutes

Packaging 1 Roommate 2 minutes 10 minutes 4 minutes

Packaging 2 Roommate 2 minutes 10 minutes 6 minutes

Collecting Money (1 & 2) Roommate 1 minute 10 minutes 7 minutes

As calculated above, the labor time requirements for a two dozen order are as follows:

For self = 10 minutes

Roommate = 7 minutes

Total time = 17 minutes

This shows that the cost of a two dozen order in terms of labor requirements is not twice that of a one dozen order. So, if labor cost is Rs. 20 per hour, we get the