Case Study Kristen’s Cookie Company
Kristen’s Cookie Company Key Questions 1) Washing & Mixing | 6 min| Dishing Up | 2 min| Setting the oven| 1 min| Baking| 9 min| Cooling | 5 min| Packing| 2 min| Accept Payment| 1 min| Total| 26 min| 2) The oven holds only one tray (one dozen of cookies) => at full utilization we can cook only 6 dozen of cookies per hour, for example after washing and mixing we have two more minutes to wait before oven will free. 26 + 10(x-1)=240 X=22. 4 22 orders per night 3) My own| Roommate| Washing & Mixing 6 min| Setting the oven 1 min| Dishing Up 2 min| Packing 2 min| | Accepting Payments 1 min| min| 4 min| 4) Our variable costs are only ingredients (. 60 per dozen) and boxes (. 10 per dozen), no fix costs, because we don’t pay for electricity Time consume To produce 1 dozen we need 12 minutes (8+4), two dozen in same time 17 minutes (8. 5 per 1 dozen), 3 dozen 22 minutes (7 min 20 seconds per one dozen) Our working time decrease, when we produce 2 or 3 dozen, => we can give discount The price of discount depends on how much we assess our time 5) Capacity of food processor is 10 dozen per hour, but oven’s capacity is only 6 dozen=> there is no need to buy one more food processor.
We use tray, when we dishing cookies onto tray till packing. It takes 19 minutes. But if we decide to prepare 2 dozen, we need one more tray. 6) According to the answer #2 , we can see that during the process, the oven almost keep working all the time while electric mixer has a lot of time to being idle. That means some time is wasted in waiting the oven’s baking job and this is obviously a bottle neck. If we rent another oven for one dozen orders: time of one oven: 16 + 10X time of two ovens: 16 + 7X so for each order it saves three minutes than previous. If it’s a two or three dozen order, it will save more than that.
Assume our profit per dozen is P and considering the one dozen orders. So the original profit per hour is 60/10xP=6P. the two ovens’ cost per dozen is: 60/7xP=8. 57P. so the highest price of renting an oven we can accept is 2. 57P per hour, that is when P is set to $10, $25. 7 per hour. Problems for further thought: #1: If I decide to do it by myself, it will be different. Because all the steps I have to do by myself and my valuable time of one dozen cookies 8 + 4 = 12 minutes, which exceeds 10 minutes, the time of one circle of baking one dozen cookies, so I become the bottleneck instead of the oven.
But if the order contains two dozen of the same flavor cookies, because of the washing and mixing steps of the two dozen cookies can be done together, my valuable time for this order will be 6+2×2+2×1+2×2+1=17 minutes which is less than 10×2=20 minutes. If the order is for three dozens, my valuable time will be 22 minutes #2: There is no need to stop baking of the previous cookie. The time that rush order will delay is only at most 1 minute. And the previous order can be finished on time. So we do not need to offer a special rates. 3: We can just look at the order board and see when I will finish my own job and become idle. Then the finishing time will be that time plus 26 minutes. At that time we promise delivery. The safety time for timing is 8 minutes. Assume that you just begin the wash process and then a rush order comes, you have to stop it and do the rush order. The previous order will be delayed for at most 8 minutes to wait for you complete the wash and tray process of the rush order that time is 6+2=8 minutes. #4:
The factors that I should consider in order to begin my business are: Cost (how to get cheaper raw materials with a good quality? ) Market (will this business attractive to my potential customers? How attractive? Why people buy my cookies? Why not? Should I or how to do attractive advertisemient for my cookies? ) Human capital (do I need to hire some people? ) Product (how to design better cookies? ) Service (can I provide some other services? ) Potential accidents (how to fix the accident? F. e. in a case of baking the wrong taste of cookies) Regulations (is there any regulations put on all the things I will be doing? #5: At first my cookies are unique because they are completely fresh. If we sell standard cookies, the value added products of my company will change. My cookies are special because of the low price and good quality. We can bake the cookie before the receiving the order, instead of making the product one by one according to each unique order. And the order taking process will also change. The consumers do not need to telephone for their orders and wait for pickup. They can come to my apartment directly to buy it.