The Executive Shirts Company Case Study[pic 1]Contents1. Introduction 22. Assumptions 23. Question 1 24. Question 2 24.1 Comparison 34.2 Cost Analysis 34.3 Recommendations 35. Appendix 45.1 Exhibit 1 45.2 Exhibit 2 55.3 Exhibit 3 51. IntroductionThe 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. AssumptionsFor 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 1Assuming 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):MetricsCurrent Process Mikes PlanIkes PlanRegular ShirtsRegular & Custom ShirtsRegular ShirtsCustom ShirtsActual Cycle time (min./shirts)0.600.530.674.8Manufacturing Lead Time (days)14.72.2012.580.50WIP Inventory (shirts)11,7601,9809,06050Production Capacity (shirts/day)960960720123Capacity Utilization83.33%93.75%111.11%81.30%Direct Labor Content (min./shirt)26.5128.9026.5126.01Direct Labor Utilization69.04%83.36%90.17%33.87%Direct Labor Cost ($/Shirt)$3.84 $3.47 $3.49 $7.68 4. Question 2Mike’s Plan: Assumes the minimum order quantity of 5 custom shirts of a given sizeNew cutting machine set up next to existing cutting machine, and will be run be a new operatorBatches of custom shirts would be sewn with batches of regular shirtsReduction of batch size for all shirts from 60 to 5 shirtsIke’s Plan:Custom shirt production should be kept separate from regular shirts with separate assembly line1 worker to be moved from each sewing operation, 1 from inspection, 1 from ironing and 1 from packaging to be moved to new line4.1 ComparisonFollowing is the comparison of the two plans, in terms of both regular shirt and custom shirt production:MetricsMike’s PlanIke’s PlanActual cycle time (min. / shirt)The cycle time has reduced from 0.60 to 0.53 min. per shirt for both shirts.Mike’s actual cycle time is betterThe cycle time has increased for regular shirts to 0.67 min. per shirt, for custom shirts the cycle time is even higher at 4.8 min. per shirt.Manufacturing lead timeThe manufacturing lead time in Mike’s plan has reduced substantially from 14.7 days to just 2.2 days. Overall Mike’s plan has a better lead time.The lead time for regular shirts has decreased to 12.6 days, Ike’s plan for custom sized shirts is just 0.5 days against Collier’s target of 5 days.Capacity UtilizationMike’s plan maximizes to the utilization to 93.75% as opposed to current 83.33%. Overall Mike’s plan has a better capacity utilization.Ike’s plan require worker to overtime for 1 extra hour for regular shirts, the utilization for custom shirts is 81.30%.Direct Labor Cost ($/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 UtilizationThe 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%
Our main concern at this time is the cost. Mike’s plan costs about half of Ike’s. We have two of the three options you need to choose from, so any savings you are saving is yours.
All in all, the current implementation costs are about half of Ike’s. To be sure, we do not include any costs under the cost assumption described before. However, the cost assumption does not apply for current and future employee orders only, meaning any extra charges for non-standard shirts would be offset if these items were to remain in service for longer than a year. In fact, those orders will be placed back in service if their order is changed before that time. Therefore, our current plan will cost a profit to your account over a