EXECUTIVE SHIRT COMPANY

CASE STUDY ANALYSIS BY LG-4

By LG-4
Piyush Mathankar – 200301016
Rahul Choudhury – 200301017
Sarveshwar Anand – 200301018
Simranjeet Singh – 200301020
Suman Sarangi - 200301021
EXECUTIVE SHIRT COMPANY – An overview of the Challenge

Mr. Collier, GM of Executive Shirt Company (ESC), wanted to expand his business line from producing
standard sized shirts to customized shirts. With the current production cycle, the customized shirts took
6 weeks to get delivered to the customers from the date of ordering by customer.

He asks two of his subordinates, Mike and Ike to come up with an effective plan to get the maximum
utilization of his existing resources (both machines and labour) to manufacture standard sized shirts and
customized shirts.

CURRENT MANUFACTURING PROCESS AT ESC

Each batch comprised of 60 layers of cloth that can be cut simultaneously.

Rolling out and laying 60 layers of cloth took a total of 90 minutes.

Another 30 minutes to cut all the pieces from the patterns.

Hence total time taken = 120minutes (90+30) for a batch of 60 shirts.

After the laying and cutting, sewing, inspection, ironing and packaging took place as enlisted below
(From Exhibit 3)

TABLE 1
Type of Number of labor Number of machine Avg WIP (Number of 60-
Operation (A) (B) shirt batch)
(C )
Cutting 4 1 16
Sewing 48 48 144
Inspection 4 12
Ironing 4 4 12
Packaging 4 12
The total WIP inventory for 60-shirts batch (sum of Column C) = 196 batches = 196*60 shirts

= 11760 shirts

Throughput - rate (Production of shirts/day) = 16000/20 = 800 shirts/day

Throughput rate (shirts/min – given 8hrs a day working) = 800/ (8*60) = 1.67 shirts/min

Cycle time = 1/throughput rate = 1/1.67 = 0.6 shirts/min

Manufacturing Lead time (in days) = WIP inventory / throughput-rate (in days) = 11760/800

= 14.7 days

For calculating the cycle time of each activity as enlisted below, formula to be used is as follows:
Cycle time/shirt/worker = Regular shirt labor content/no of workers

TABLE 2 Regular shirt labor Number of labors Cycle Time

content (mins per (B) (mins/shirt/worker)
shirt) (A) (C )
1 Make collar 3.9 8 0.49
2 Make Cuff 2 4 0.50
3 Make sleeves 0.65 2 0.33
4 Make front 2.5 6 0.42
5 Make back 1.7 4 0.43
6 Join shoulders 0.66 2 0.33
7 Attach Collars 1.65 4 0.41
8 Attach Sleeves 1.55 4 0.39
9 Stitch down 0.65 2 0.33
sleeves
10 Sew side seam 1.8 4 0.45
11 Attach cuffs 1.55 4 0.39
12 Hem bottom 1.7 4 0.43
13 Inspect 1.5 4 0.38
14 Iron 1.95 4 0.49
15 Fold, package 1.75 4 0.44

Here, making cuff (listed at sl.no. 2 of Table 2) has the maximum cycle time= 0.5 min/shirt.

Production capacity = Time through the day / cycle time = (8*60/0.5) = 960 shirts/day

But actual production capacity used (based on cycle time obtained at C) =8*60/0.6 = 800 shirts/day

Capacity utilization = 800/960 = 83.33%

Now calculating Direct Labour content = Labour content Cutting Time + labour content for other
operations (as listed in col A in Table2)

Labour content for other operations = sum of Col A in Table 2 = 25.1 min/shirt

To calculate cutting time,

Total time to cut 480 shirts (60*8) = 90 +30 mins = 120

Cutting time = 120/480 = 0.25 min/shirt/worker

Labour content for cutting operation = 0.25*4 (since 4 workers are involved) = 1min/shirt

Direct Labour content = 25.51 + 0.25*4 =26.51 mins/shirt

Direct Labour utilization = time taken to produce 800 shirts/total time taken by 64 labourers
 =( 26.51*800)/(64*8*60)

= 69%

Direct Labour cost = money paid to 64 workers/total production = (64*6*8)/800 = 3.84$/shirt

(6$ is the hourly wage rate of the worker, they work for 8 hours in a day; production is 800 shirts/day)

Tabulating all the calculated values for the Current process at ESC:

TABLE 3
Throughput (shirts/day) 800
Actual Cycle Time (mins/shirt) 0.6
Manufacturing lead time (days) 14.7
WIP Inventory (shirts) 11760
Production Capacity (shirts/day) 960
Capacity Utilization 83.33%
Direct Labor Content (mins/shirt) 26.51
Direct Labor Utilization 69%
Direct Labor Cost ($/Shirt) 3.84

MIKE’S PROPOSAL

Mike proposed a plan where both standard sized shirts and customized shirts could be produced
together. To reduce the lead time (as advised by Collier), he suggested a smaller batch size of 5 shirts
instead of 60. He proposed to add a new machine for Customized shirts cutting and also added buffer
inventory with 6 batches/worker. Initially 2000 customized shirts shall be manufactured along with
16000 standard shirts.

Since the workforce employed is same as the current process, as seen from Table 2, the ideal cycle time
is (bottleneck activity – making cuffs) = 0.5mins/shirt.

The actual production rate of 16000+2000 = 18000 shirts = 18000/(20*8*60) = 1.875 shirts/min

Throughput rate, Actual = 1.875 shirts/min

Cycle time, actual = 1/1.875 mins/shirt = 0.533 mins/shirt

TABLE 4
Type of Number of Number of machine Avg WIP (Number of 5-shirt
Operation labor batch)
Cutting 5 2 36
Sewing 48 48 288
Inspection 4 24
 Ironing 4 4 24
Packaging 4 24
The total WIP inventory (sum of col. C in Table 4) = 396*5 shirts = 1980 shirts

Actual Production capacity = (8*60)/0.533 = 900 shirts/day (Throughput rate)

Production capacity, total = (8*60/0.5) = 960 shirts/day

Capacity Utilisation = 900/960= 93.75%

Manufacturing Lead time = WIP inventory / throughput-rate (in days) = 1980/900 = 2.2 days

Direct Labour Content = Labour content in cutting + labour content in other operations

Here labour content in other operations is same as calculated from Table 2 = 25.51 mins/shirt

Labour content in cutting = 4 labours to cut using old machine + 1 labour to cut using new machine

The new machine can cut 5 shirts in 2.5 minutes, with 1 worker.

Labour content in cutting = 4*0.25 + (2.5/5)*1 = 1.5mins/shirt

Therefore Direct Labour content = 25.51 + 1.5 = 27.01 mins/shirt

Direct labour utilization = time taken to produce 900 shirts/total time taken by (64+1) labourers

= 27.01*900/(65*8*60)= 77.9%

Direct labour cost = money paid to 65 workers/total production = 65*6*8/900 = 3.47$

Tabulating the values obtained

TABLE 5
Throughput (shirts/day) 900
Actual Cycle Time (mins/shirt) 0.533
Manufacturing lead time (days) 2.2
WIP Inventory (shirts) 1980
Production Capacity (shirts/day) 960
Capacity Utilization 93.75%
Direct Labor Content (mins/shirt) 27.01
Direct Labor Utilization 77.9%
Direct Labor Cost ($/Shirt) 3.47

IKE’S PROPOSAL

Ike proposed that a separate new assembly line may be set up to cater to the customized shirts. Because
there was some additional capacity in the factory, he proposed the movement of 1 worker each from
the existing workforce from all the sewing operations, inspection, ironing and packaging. The table is as
follows:

Now, to manufacture 2000 customized shirts per month, throughput rate = 2000/(8*60*20)=
0.208shirts/min

Cycle time = 1/0.208 = 4.8 mins/shirt

The new line for Sewing of Customized shirts is as follows:

TABLE 6

Customised shirt Number of labors Cycle Time (mins/shirt/worker)

labor content (mins
per shirt)
Make collar 3.9 1 3.9
Make Cuff 2 1 2
Make sleeves 0.65 1 0.65
Make front 2.5 1 2.5
Make back 1.7 1 1.7
Join shoulders 0.66 1 0.66
Attach Collars 1.65 1 1.65
Attach Sleeves 1.55 1 1.55
Stitch down sleeves 0.65 1 0.65
Sew side seam 1.8 1 1.8
Attach cuffs 1.55 1 1.55
Hem bottom 1.7 1 1.7
Inspect 1.5 1 1.5
Iron 1.95 1 1.95
Fold, package 1.75 1 1.75
The cycle time for making collar is highest i.e. 3.9 mins/shirt.

Given in the case, 15 workers work on an average of 3 shirts (post cutting) and for the cutting operation,
5 layers of cloth is being cut by 1 worker.

So total WIP inventory = 15*3 + 5*1 = 50 shirts

Throughput rate or Production capacity = (8*60)/3.9 shirts/day = 123.1 shirts/day

Actual Production capacity = (8*60)/4.8 = 100 shirts/day

Capacity Utilisation = 100/123= 81.3%

Manufacturing Lead time = WIP inventory / throughput-rate (in days) = 50/123 = 0.41 days

Direct Labour Content = Labour content in cutting + labour content in other operations
 =0.5*1 + 25.51 = 26.01 mins/shirt

Direct labour utilization = time taken to produce 100 shirts/total time taken by (1+15) labourers

= 26.01*100/(16*8*60)= 33.86%

Direct labour cost = money paid to 16 workers/total production = 16*6*8/100 = 7.68$

For the manufacturing of 16000 standard shirts, the table is as follows:

TABLE 7
Type of Operation Number of labor Number of Avg WIP (Number of 60-shirt
machine batch)
Cutting 4 1 16
Sewing 36 36 108
Inspection 3 9
Ironing 3 3 9
Packaging 3 9
WIP inventory: =151*60 = 9060 shirts

TABLE 8
Type of Operation Regular shirt Number of labors Cycle Time
after Cutting labor content (mins/shirt/worker)
(mins per shirt)

Make collar 3.9 7 0.56

Make Cuff 2 3 0.67
Make sleeves 0.65 1 0.65
Make front 2.5 5 0.50
Make back 1.7 3 0.57
Join shoulders 0.66 1 0.66
Attach Collars 1.65 3 0.55
Attach Sleeves 1.55 3 0.52
Stitch down sleeves 0.65 1 0.65
Sew side seam 1.8 3 0.60
Attach cuffs 1.55 3 0.52
Hem bottom 1.7 3 0.57
Inspect 1.5 3 0.50
Iron 1.95 3 0.65
Fold, package 1.75 3 0.58

The cycle time for making cuffs is highest i.e. 0.67 mins/shirt.

Throughput rate or Production capacity = (8*60)/0.67 shirts/day = 720 shirts/day

Actual Production capacity = (8*60)/0.60 = 800 shirts/day

Capacity Utilisation = 800/720= 111.1%

Manufacturing Lead time = WIP inventory / throughput-rate (in days) = 9060/720 = 12.58 days

Direct Labour Content = Labour content in cutting + labour content in other operations

=same as the current process = 26.51 mins/shirt

Direct labour utilization = time taken to produce 800 shirts/total time taken by 48 labourers (out of 64
workers, 16 have been shifted to the new assembly line)

= 26.51*800/(48*8*60) = 92.05%

Direct labour cost = money paid to 48 workers/total production = 48*6*8/800 = 2.88$

Tabulating the calculated values for Regular and Customised shirts as per Ike’s proposal

Ike's Proposal
TABLE 9 Regular Customised
Actual Cycle time 0.67 3.9
Throughput (shirts/day) 800 100
Ideal Cycle Time (mins/shirt) 0.6 4.8
Manufacturing lead time (days) 12.58 0.41
WIP Inventory (shirts) 9060 50
Production Capacity (shirts/day) 720 123
Capacity Utilization 111.11% 81.25%
Direct Labor Content (mins/shirt) 26.51 26.01
Direct Labor Utilization 82.84% 33.87%
Direct Labor Cost ($/Shirt) 3.20 7.68
CASE ANALYSIS AND RECOMMENDATIONS

Solution to Question 1:

Comparing all the parameters of the process adopted by Mike, Ike and current:

TABLE 10
Current Process Mike's Ike's
Regular only Reg + Regular Customised
Customised
Throughput (shirts/day) 800 900 800 100
Actual Cycle Time (mins/shirt) 0.6 0.533 0.6 4.8
Manufacturing lead time (days) 14.7 2.2 12.58 0.41
WIP Inventory (shirts) 11760 1980 9060 50
Production Capacity (shirts/day) 960 960 720 123
Capacity Utilization 83.33% 93.81% 111.11% 81.25%
Direct Labor Content (mins/shirt) 26.51 27.01 26.51 26.01
Direct Labor Utlization 69.03% 77.96% 82.84% 33.87%
Direct Labor Cost ($/Shirt) 3.84 3.46 3.2 7.68

Solution for Question 2:

To select between the two processes proposed by Mike and Ike, we need to work on the costs which has
been worked out as follows:

Collier estimated that material costs for customised shirts would be 10% higher. It can be summarized as
follows:

TABLE 11
Mike Ike
Regular Customised Regular Customised
No. of Shirts 16000 2000 16000 2000
Raw material/shirt 7 7.7 7 7.7
Direct Labour Costs 3.46 3.46 3.20 7.68

From the above Table 11, Mike’s proposal is more profitable as compared to Ike’s.

From Table 10, we may see that the capacity utilization in Ike’s proposal is very high which implies that
Ike is over-utilizing the capacity in the regular shirt line production and underutilizing the capacity in the
Customised shirt line. This implies that overtime shall be paid to workers for regular shirt line which will
in turn increase the costs. Mike on the other hand has increased the capacity as well as labour utilization
efficiently.

Hence it is clear that Mike’s proposal is better, and Collier should consider selecting Mike’s proposal.