Kristen's Cookie Company Case Analysis

KRISTEN'S COOKIE COMPANY CASE ANALYSIS

GLOBAL OPERATIONS AND LOGISTICS

GAYATHRI JAYAKUMAR

1/31/2012

TABLE OF CONTENT

Executive summary

1. BUSINESS SCOPE

2. PRODUCTION PROCESS

3. ESTIMATION OF PRICE AND PROFIT

4. PROBLEMS FACED

5. RECOMMENDATIONS

6. CONCLUSION

EXECUTIVE SUMMARY

Students develop entrepreneurial skills from campuses. We have seen small business plans which started as a small idea in the dorm room grow into multibillion corporations. It is amazing to see even with a low startup budget, low time flexibility based on class schedule and assignments and advertisement merely by mouth how businesses flourish.

Kirsten cookies' is a campus based, purely customized cookies business, that is offers freshly baked cookies, within a pick up time of 45minutes and 30 minutes for rush service at a token premium. As in all startups, the company faces bottlenecks and resource limitations and time constraints.

The company produces cookies which would be offered at a price range of $2.2 /unit, and $1.9/half unit of 6 for regular orders. Discounts would be offered for 2 units' orders or more, ranging from 5-8% off orders. Moreover, customers would be at liberty to select a variety of ingredients and customize their orders, via email, telephone or walk-in.

This report analyses the business production process, possible profit margins, identifies the production issues and recommends solutions to the advantage of the company.

1. BUSINESS SCOPE

Two students are planning to start a cookie business with the name Kirsten's Cookie Company in their on-campus apartment to cater to starving students late at night within the campus. The objective is to provide freshly baked cookies which are purely customized to the needs of the buyers.

The company would be open for a period of four hours every night for customers' order processing and pick up, however let us assume that there would be a buffer period of 30 minutes before and after operation hours, for preparation. 30 minutes before the commencement of operations, all items necessary for the day's production are prepared, and a regular dough mix to last for a period of 2 hours is prepared. The 30 minutes after operations would be used to finish any order received late in closing hour.

Most orders are expected to be received via e-mail, phone calls and text messages. Option of walk in orders by customers would also be allowed.

Orders are fulfilled once payment is made either via an online pay platform or by cash/credit card at the point of pick up by customers

2. PRODUCTION PROCESS

Ingredients: Dough, Chocolate chips, M&M's, Chopped Heath bars, Coconut, Walnut and Raisins.

Equipments: 1 Oven, 1 Food Processor (mixing bowl), Cookie trays and Spoons

Cost: Variable cost includes - cost of ingredients ($.60/dozen) cost of packing box ($.10/each) Cost of electricity is taken care of by the landlord of the apartment.

The process is represented pictorially below in Figure 1.

Figure: 1 Process

* A: Washing the bowl

* B1: Add ingredients as per requirement (prepared 30 min before the store opens)

* B2: Mix ingredients (6 minutes)

* C1: Spoon out the cookie dough into the tray( 2 minutes)

* C2: Put the tray inside the oven

* D: Set the thermostat and timer (1 minute)

* F1: Baking (9 minutes)

* F2: Take it out of the oven and Let it cool ( 5 minutes)

* E1 & F3: Take the cookies out of the tray and Pack it for delivery( 2 minutes)

* E2 & G : Delivery and payment ( 1 minute)

Fig: 1

It will take a total of 26 minutes to fill and order of a dozen cookies. This is the time taken to fill the rush hour. This is if we assume each order is for one dozen and we have a minimum of 3 trays. It doesn't take twice as long to produce two batches as it does to produce one batch, because you can start mixing the second batch without having to wait for the whole first-batch process to be completed (you can start washing out the bowl as soon as you finish filling the tray).

It is possible to produce two batches in 36 minutes. The next batch will take an additional ten minutes and so on. This is achieved by utilizing the idle time when the oven is used to bake the first batch of cookies. The timeline depicted below demonstrates this.

Cycle time = 10 Min; Time for first dozen= 26 Min; Capacity= 60/10= 6 Dz/hr

# of Dz in 240 min (4 hours) = (240-26)/10+1= 22.4 Dz, If we have many number of trays.

Time value of money: Assuming all the orders are for one dozen cookies, Kristen is to spend 8 minutes (washing and mixing cookie in the bowl) and Person 2, 4 minutes (preparing the oven and packing and collecting money)

We see that the process