Mr. Collier, per your request, I have analyzed Executive Shirt Company’s current production process in addition to evaluating both Mike and Ike’s recommended processes for custom shirt production. Elements considered during this analysis included: Process types, cycle time for the processes, process efficiencies, and costs. Each element is key to identifying the best course of action for Executive Shirt Company, Inc. in regards to the addition of custom shirt production. Process Types
Currently Executive Shirt Company uses a batch shop process, where multiple functional areas perform similar tasks. For example: all of the sewing areas are sewing all components of the shirt. This type of process performs well in this production setting due to the fact that one operation isn’t dependent on another to perform its task (outside of the initial cutting phase). More so, one individual’s sewing performance doesn’t hinder another from sewing their batch of shirts. Mike adopted this process type in his proposal for the addition of custom shirt production; however, Ike took a linier concept (more assembly line focused) for his proposal where operations are performed according to the progressive tasks to construct a shirt. For example: the cuff operation cannot be performed until the sleeve operation is completed. Within Ike’s process, each operation is dependent on the prior to complete its task before the next operation can commence. This causes issues when one operation begins to slow, causing idle time. Cycle Time
It is important to identify the cycle times for each operation in a specific process (see Appendix A-1), given it will allow us to determine the bottleneck – which defines the throughput for the entire process. For the current shirt production process for Executive Shirt Company, we’ve identified cuff making to be the bottleneck – producing 1 cuff every 30
seconds (see Appendix A-1). This means that each operation can only perform its task at the rate of making a cuff.
The same is true when examining Mike’s recommended process. Although Executive Shirt Company will be taking on extra production with custom shirts, Mike’s process integrates the additional shirt production into the current process and utilizes the same number of workers (outside of the cutting process). By doing so, the bottleneck remains the same along with throughput for the entire process.
Ike’s process, however, takes one worker from each operation and shifts their focus to producing custom shirts. Although the bottleneck remains cuff making for the regular shirt production, the throughput time increases an additional 15 seconds (see Appendix A-1). So, by removing a body from each process, it takes longer to produce regular shirts vs. Mike’s process. Additionally, by only having one worker for each operation for custom shirt production the throughput time is greatly elevated. In Ike’s process for custom shirts, the bottleneck shifts to making collars – 1 collar is produced every 3.9 minutes (see Appendix A-1). Efficiencies
When thinking about efficiencies for a production process, we have to look at how much is being produced vs. how much the process could produce and also how labor is being utilized throughout the process. While cycle time gives us a good base understanding for how effective a process is (lower CT shows the process is lean and will become lower as more automation occurs), capacity and direct labor utilization will give us a more definitive look at process efficiency.
For Executive Shirt Company, the current process performs at a capacity utilization of 83% and a direct labor utilization of 67% (see Appendix B-1). This means there is most definitely room for production expansion and that’s what we get with both Mike and Ike’s recommended processes. Mike’s recommendation to take on the extra capacity with only adding one worker (to the cutting operation) is expected to up capacity utilization to 94% while only pushing direct labor utilization to 75%. This means Executive Shirt
Company would be producing at max capacity while only increasing direct labor utilization by roughly 8%. Conversely, Ike’s recommendation over indexes on capacity utilization for regular shirt production and greatly underutilizes both capacity and direct labor for the custom shirt production (see Appendix B-1). Costs
Bridging off of efficiencies we turned our focus to cost; which is highly determinant on efficiencies of a process. The more effective and efficient the production process is the lower the cost should ultimately be. The direct labor costs per shirt in Executive Shirt Company’s current process is $3.84. With the efficiencies Mike’s proposal brings, it directly affects costs – driving the per unit labor cost down to $3.47. So with the increased production and decrease direct labor costs, Mike’s process should produce additional margin.
On the other hand, and although Ike’s process would lower the per unit direct labor costs for the regular shirts (due to decrease workers in this process), the over-indexing production causes overtime work in the regular shirt process and far too little work for those in the custom shirt process (see Appendix B-1). Recommendation
Based on our review of the current process and the proposed processes from Mike and Ike, I would have to recommend implementing Mike’s plan. Mike’s plan gives a good balance of production increase and cost savings due to a more efficient process, which in the long run should prove to be profitable.