Overview: Executive shirt company produces large volumes of shirts with limited product variety. Its GM, Dwight Collier found an opportunity to expand custom-sized shirt’s market and decided to begin a production line of custom-made shirts at $10 wholesale and $20 retail price premium (per shirt) over ESC’s standardized shirts and also to deliver it within 10 working days after the order was placed.
Current Process: ESC’s Mississippi factory consists of several work areas broadly for Cutting and Assembling shirts. Cutting process includes pattern layout and cutting. A pattern is a template which includes all the components of a shirt. Patterns for up-to 8 shirts can be laid out at same time over each layer of a cloth. Rolling out each layer of cloth (including patterns) on cutting table takes 1.5 mins.
Factory’s current policy is to cut up-to 60 layers of cloth at a time. Once the fabric was laid out, it takes 30 mins for a cutting cycle (to cut all the pieces for the 8 patterns from cloth and remove them from cutting table).
Thus, in Cutting, 1.5*60 (rolling) + 30 (cutting and removing) = 120 mins consumed for cutting 60 (layers) * 8 (patterns) = 480 shirts. Hence, 0.25 min (120/480) of Cutting time is needed for one shirt.
Assembling process includes sewing, inspection, ironing and packing. Sewing process includes 12 operations which uses similar sewing machines. Each bin contains pieces for 60 shirts. 4 material handlers shift bins from one operation to another and 64 workers involved in cutting to packing.
Ideal cycle time: Longest time-consuming process – cuff making which is 0.5 min/shirt.
Actual cycle time: Time taken to produce one unit of product– (20*8*60)/16000 = 0.6 min/shirt
WIP Inventory: Total number of units available in production units- 196(batches)*60(shirt/batch) = 11760 shirts
Production Capacity: No. of units produced using ideal cycle time- 8*60/0.5 = 960 shirts/day
Capacity utilization: Ratio of actual production units to ideal production units- Actual production = 8*60/0.6 = 800. So, capacity utilization = 800/960 = 83.33%
Manufacturing lead time: WIP Inventory/Production capacity = 11760/800 = 14.7 days
Direct Labor content: Direct labor time(min.) required in production of each unit- 0.25*4(total labor mins required in cutting) + 25.51(labor mins required in sewing to packaging) = 26.51 mins/shirt
Direct Labor utilization: Direct labor involved in production of shirts/Total labor minutes available- (26.51*800)/ (8*60*64) = 69 %
Direct Labor Cost: Labor cost incurred in production of one unit of shirt- ($6*64*8)/800 = $3.84/shirt
Analysis of Mike’s Proposal
Actual Cycle time: (20*8*60)/ (16000+2000) = 0.53 min/ shirt, which is greater than ideal cycle time of 0.5 min/shirt, actual cycle time will be 0.53 min/shirt.
WIP Inventory: Total no of units of shirts in inventory- 396*5 = 1980 shirts
Actual Production Capacity: (8*60)/0.5 = 960 shirt/day, Production Capacity Used = (8*60)/0.53 = 900 shirt/day
Capacity Utilization: Production capacity used/Actual Production Capacity-900/960 = 93.75%
Manufacturing Lead Time: WIP Inventory/Production capacity = 1980/900 = 2.2 Days
Direct labor content: Labor in cutting + labor in other operation = 25.51+0.25*4+0.5=27.01 min/shirt
Direct Labor utilization: Direct labor involved in production of shirts/Total labor minutes available- (27.01*900)/ (8*60*65) = 77.91 %
Direct Labor Cost: Labor cost incurred in production of one unit of shirt- ($6*65*8)/900 = $3.47/shirt
Analysis of Ike’s Proposal
Actual Cycle Time
Manufacturing lead time
Direct labor content
Direct labor utilization
Direct labor cost
2.) Comparison of both the proposal is shown in below table, we recommend Dwight Collier to adopt Mike’s plan for custom Shirt Production.