Executive shirt

Executive shirtIntroductionOpportunity in the custom sized dress shirt marketPrice of custom sized shirt 75% more than normal shirtsWaiting time for customers is 6 weeks or longerHigh price and long delivery times are issues.Price premium of $10 in wholesale market and $20 in retail marketCompetitor delivers a custom shirt in 2 weeks and is priced only $10 more than regular jeans at retailProduction Process (Exhibit 3)CuttingMake CollarMake CuffsMake SleevesMake FrontMake BackJoin ShoulderAttach CollarAttach SleeveStitch SleeveSew seamAttach CuffHem BottomInspectIronPackageProduction Process (Exhibit 3)CuttingMake CollarMake CuffsMake SleevesMake FrontMake BackJoin ShoulderAttach CollarAttach SleeveStitch SleeveSew seamAttach CuffHem BottomInspectIronPackage4842642442444444Current Production Process60 layers with 8 shirts in each layer are rolled out for cuttingTotal setup time for cutting: 90 mins + 30 mins = 120 minsAfter cutting, batch of 60 shirts are kept for the next stages.For the post cutting stages, 3 batches of shirts for each worker8 hour regular shift, 5 days a week, 20 days per monthRegular and overtime wages are $6 /hour and $9 /hour

New cutting machine with total cutting time of 2.5 minutes for a batch size of 5 shirts10% higher scrap rate in the new cutting machineTarget: 16000 regular shirts per month and 2000 custom shirts per month

Mikes PlanBatch size of 5 shirts in the new cutting machineOne new worker dedicated to running the new cutting machine for custom shirtsPost cutting stages will remain same with batches of custom shirts will be considered together the batches of regular shirtsReduce the batch size across all stages from 60 shirts to 5 shirtsKeep 6 batches per workerIkes PlanCustom shirt production should be kept separate from the production of standard sized shirtsSeparate cutting, sewing (12 stages), ironing, packaging and inspection stages for customer shirtsOne new worker hired for new cutting machine3 shirts for each worker in the new lineRegular shirt production process unchanged, except that one worker will be less in each stage (except cutting)

Performance MeasuresProcess measures:Cycle timeManufacturing lead timeWIP inventoryProduction capacityCapacity UtilizationDirect labor contentDirect labor utilizationQuality Measures:Scrap rate in the productionFinancial Measures:Direct labor costRegular Production PlanActual Cycle Time(min./shirt)Manufacturing Lead Time(days)WIP Inventory(shirts)Production Capacity(shirts/day)Capacity UtilizationDirect Labor Content(min./shirt)Direct Labor UtilizationDirect Labor Cost($/shirt)Regular Production PlanActual Cycle Time(min./shirt)0.5Manufacturing Lead Time(days)12.25WIP Inventory(shirts)11760Production Capacity(shirts/day)960.0Capacity Utilization83.3%Direct Labor Content(min./shirt)26.51Direct Labor Utilization69.04%Direct Labor Cost($/shirt)3.84Mikes PlanRegular Shirts Customized ShirtsActual Cycle Time(min./shirt)Manufacturing Lead Time(days)WIP Inventory(shirts)Production Capacity(shirts/day)Capacity UtilizationDirect Labor Content(min./shirt)Direct Labor UtilizationDirect Labor Cost($/shirt)Mikes PlanRegular Shirts Customized ShirtsActual Cycle Time(min./shirt)0.50.5Manufacturing Lead Time(days)21.91WIP Inventory(shirts)19201830Production Capacity(shirts/day)960.0960.0Capacity Utilization93.8%93.8%Direct Labor Content(min./shirt)27.0126.01Direct Labor Utilization77.59%77.59%Direct Labor Cost($/shirt)3.483.35Ikes Plan (Regular Shirts)Regular ShirtsActual Cycle Time(min./shirt)Manufacturing Lead Time(days)WIP Inventory(shirts)Production Capacity(shirts/day)Capacity UtilizationDirect Labor Content(min./shirt)Direct Labor UtilizationDirect Labor Cost($/shirt)Ikes Plan (Regular Shirts)Regular ShirtsActual Cycle Time(min./shirt)0.667Manufacturing Lead Time(days)12.583WIP Inventory(shirts)9060Production Capacity(shirts/day)720.0Capacity Utilization111.1%Direct Labor Content(min./shirt)26.51Direct Labor Utilization90.17%Direct Labor Cost($/shirt)3.49Ikes Plan (Customized Shirts)Customized ShirtsActual Cycle Time(min./shirt)Manufacturing Lead Time(days)WIP Inventory(shirts)Production Capacity(shirts/day)Capacity UtilizationDirect Labor Content(min./shirt)Direct Labor UtilizationDirect Labor Cost($/shirt)Ikes Plan (Customized Shirts)Customized ShirtsActual Cycle Time(min./shirt)3.900Manufacturing Lead Time(days)0.528WIP Inventory(shirts)65Production Capacity(shirts/day)123.1Capacity Utilization81.3%Direct Labor Content(min./shirt)26.010Direct Labor Utilization33.87%Direct Labor Cost($/shirt)7.680ObservationsMikes Plan (960 shirts/day) and Ikes plan (123 shirts/day) both satisfy the current requirement of customized shirts (100 shirts/day).Mikes plan satisfies the capacity required for regular shirts but Ikes plan does not.Calculation of scrap cost for the new machineDrastic reduction of MLT in Mikes plan for regular shirtsIndirect material handling cost will increase in Mikes planSignificantly high direct labor cost in Ikes planImbalance of capacity utilization in Ikes planMLT of customized shirts is significantly less in Ikes plan