Kristen's Cookie Company

Topics: Cost-benefit analysis, Baking, Cost Pages: 5 (1375 words) Published: October 9, 2006
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:
ProcessResource(s)Process TimeCumulative Time Consumed
Taking OrderE-mail0 minutes0 minutes
Washing and MixingSelf6 minutes6 minutes
Filling TraySelf2 minutes8 minutes
Preparing OvenRoommate1 minute9 minutes
BakingOven9 minutes18 minutes
Removing the trayRoommate0 minutes18 minutes
CoolingNone5 minutes23 minutes
Packaging & Collecting MoneyRoommate3 minutes26 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: ProcessResourceProcess TimeCumulative Labor time (Self)Cumulative Labor Time (Roommate) Taking Order (1 & 2)E-mail0 minutes0 minutes0 minutes

Washing and Mixing (1 & 2)Self6 minutes6 minutes0 minutes Filling Tray 1Self2 minutes8 minutes0 minutes
Filling Tray 2Self2 minutes10 minutes0 minutes
Preparing Oven 1Roommate1 minute10 minutes1 minute
Baking 1Oven9 minutes10 minutes1 minute
Removing Tray 1Roommate0 minutes10 minutes1 minute
Cooling 1None5 minutes10 minutes1 minute
Preparing Oven 2Roommate1 minute10 minutes2 minutes
Baking 2Oven9 minutes10 minutes2 minutes
Removing tray 2Roommate0 minutes10 minutes2 minutes
Cooling 2None5 minutes10 minutes2 minutes
Packaging 1Roommate2 minutes10 minutes4 minutes
Packaging 2Roommate2 minutes10 minutes6 minutes
Collecting Money (1 & 2)Roommate1 minute10 minutes7 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
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