Your experience:

Youve been contacted by a luxury chocolate cake producer.

Dear SpongeBob,

It was great to speak with you this morning over the phone, and Im looking forward to hearing what you can figure out for us! Heres the information you requested:

The process works as follows:

1. Eggs are cracked and separated. This operator is great! She can do 24 eggs in 2 minutes.
2. Egg whites are beaten until soft peaks form while dry ingredients are mixed in another mixer simultaneously. There are 36 eggs in each batch. It usually takes 5-7 minutes for the egg whites to form soft peaks and about 4 minutes for the dry ingredients to be sufficiently mixed.
3. Incorporate wet and dry ingredients. This usually takes 9 minutes per batch.
4. Pour batter into cake tins. It is known that we get somewhere 38 cakes per batch 30% of the time and 43 cakes per batch 70% of the time. Pouring takes 12 minutes per batch. Theres usually 2% of the batter remaining in the mixing bowl that gets thrown away.
5. Bake at 375F. I mentioned the amount and bake time in the video.
6. 2 people work together to remove cakes from the tins. Since the cakes can stick to the tin, these operators work really quickly. We usually lose 8-10 cakes per round. It takes the team of 2 about 10 minutes to remove all of the freshly baked cakes from their tin.
7. Cakes are sliced in half with a thin wire for 2 perfect halves (everytime). Theres never any back up here so Im not even sure what the production time is.
8. Spoon apricot jam onto base of cakes. I think this operator can do 4 cakes per minute.
9. Place top on base and cover entirely with jam. This is done in sets of 11. Each set takes about 4 minutes.
10. Cover cakes with dark chocolate sauce. This is also done in sets of 11 and each set takes about 5 minutes.
11. Let cool for an hour and a half.
12. Cakes are then packed by 4 people. Each packer takes a different amount of time to do a cake:
13. Cakes are now sent out to their destination!

Packer	Average Time Per Cake
1	12 minutes
2	16 minutes
3	13 minutes
4	10 minutes

Thanks again for your willingness to help us out here! Im looking forward to hearing from you soon.

Sandy Cheeks

Instructions: Using the above information,

1. Draw a diagram of the process. Be sure to include key capacity information. (Week 8)
2. Identify the bottleneck step of the process. What is the capacity at this step? What is the minimum number of (total) operators that should work this step so that it is no longer the bottleneck? (Week 8)
3. Sams Club just called. Theyre requesting a rush order of 350 cakes. How quickly can the luxury chocolate cake producer get this sent out? (Assume 0 cakes in stock). Does your answer here make sense given the actual flow of the process? Explain why or why not. (Week 9)
4. Use the data provided in the excel sheet. Calculate the BEP for each of the time periods provided. From this, suggest how many cakes they should plan to produce going forward in order to break-even. How many cakes should they produce in order to profit $10,000 in 2019-Q3? (Assume the same values as 2019-Q2). (Week 10)

References:

Definition: A capacity analysis is used in order to determine key information about the capabilities in a system.

This class we will focus on the maximum capability of a system given the current settings, and how to change the settings in order to reach a specified capacity (or most efficient). Next class, we will focus on how much time a process requires in order to complete a specified quantity.

Steps:

1. Draw a picture of the process. In what instances does the process need to be sequential or parallel?
2. Place provided information on the drawing. For each piece of information specific to a process, place it under that process. For each percent yield, place it on the arrow following the process which it is associated with.
3. Identify the most appropriate capacity unit. Capacity units should always be written as final product unit/time period. Where the final product unit is based on the actual product, and the time period should be the most common-sense unit for the process, such as day, hour, minute, second, etc.
4. Work backwards to determine the process capacity at each step in the process.
5. The capacity of the entire production is based on the lowest single capacity (bottleneck).

It is vital to always work backwards to complete this work in order to account for all percent yields in the process.

The following is a general guide for how to handle percent yields. I strongly suggest ALWAYS thinking through your answers to ensure that they make sense. Percent yields are very tricky.

95%

A

B

99%

C

96%

To find the true capacity of C: Lets say process C has a capacity of 12 units/hr and 95% yield. The true capacity of C is 12 unitshr*.95=11.4unitshr. This means that since only 95% of the output of station C is accepted, process C is only producing 11.4 usable units/hour.

To find the true capacity of B: Lets say process B has a capacity of 8 units/hr and 99% yield. The true capacity of B is 8 unitshr*.99*.95=7.524unitshr. This means that since only 99% of the output of station B is accepted, and then only 95% of the output at station C is accepted, process B is only producing 7.524 usable units/hour.

Note: you must account for all percent yields between the process of interest and the end of the line in order to compare the unit at the same point in time, i.e. the end of the process. You need to be comparing apples to apples.

To find the true capacity of A: Lets say process A has a capacity of 18 units/hr and 96% yield. The true capacity of A is 18 unitshr*.96*.99*.95=16.25unitshr.

To find the most efficient operation, solve x=Next worst capacityBottleneck capacity. This is going to set the number of machines for the bottleneck step in the process such that the bottleneck capacity is approximately equal to the next worst capacity.

HOW-TO COMPLETE A HOW LONG CAPACITY ANALYSIS

This class, we will focus on how much time a process requires to complete a specified quantity.

You will begin by following the exact same procedure that you learned last class (steps 1 through 4).

Steps:

1. Draw a picture of the process. In what instances does the process need to be sequential or parallel?
2. Place provided information on the drawing. For each piece of information specific to a process, place it under that process. For each percent yield, place it on the arrow following the process which it is associated with.
3. Identify the most appropriate capacity unit. Capacity units should always be written as final product unit/time period. Where the final product unit is based on the actual product, and the time period should be the most common-sense unit for the process, such as day, hour, minute, second, etc.
4. Work backwards to determine the process capacity at each step in the process.
5. Once you have found the capacity at each step, in the capacity unit of units/time, you can easily find the time it will take by taking the reciprocal of the capacity, then multiplying by the desired number of units. In other words, you will be computing (requirements/achievables) = (how much you need)/(how much you can produce). See below for a quick example.
6. For instances where the process is sequential only, add together the times for each step. For instances where the process is in parallel, add sequential steps, then choose the line with the highest time (bottleneck). Add this to the other sequential only parts of the process to find the total production time.

Step 5 example: If the process capacity is 100 units/hr and you need 425 units, then the time needed would be 1 hr100 units*425 units=4.25 hrs.

It is vital to always work backwards to complete this work in order to account for all percent yields in the process.

In some cases, one step in the process will work with different products which require different attention, resulting in different capacities. In this case, you must calculate a weighted average capacity unit at step 4. An example is below.

A trash can production facility has multiple steps to producing a trash can with multiple sizes ran on the same line. One of the steps in the process sees approximately 75% 10gal trash cans which can form up to 5 cans/min and 25% 16gal trash cans which can form up to 2 cans/min.

The weighted average capacity at this forming station would be .75*5 cansmin+.25*2 cansmin=4.25 cans/min.

Now, lets say we need to produce 800 cans for a company at the same 75/25 split that the company typically runs. This would require 1 min4.25 cans*800 cans=188.24 mins of runtime at the forming station.

HOW-TO CONDUCT A BREAK-EVEN POINT ANALYSIS

Definitions:

• Total costs instances where money is being spent, this includes two types of costs:
  • Fixed costs (FC) constant whatever the quantity of goods, includes rent, should be expressed in $
  • Variable costs (VC) varies depending on the quantity of goods produced, it should be expressed in $/unit
• Revenue (R) the amount of money paid to manufacturer per product, should be expressed in $/unit
• Profit = Revenue Total costs
  • The amount of money the manufacturer is making based on the specified level of production

Steps:

1. Draw a process flow diagram and include all relevant information from the case study. For some cases, the problem may be too simple or not process-oriented and a process flow diagram will be unnecessary and/or impossible.
2. Determine capacities for each step in the process.
3. Identify costs and revenues for each step in the process.
4. Establish total cost functions (TC_a) for each step in the process. The subscript a should be used to identify the step in the process. For example, for printing, the total cost function would be denoted by TC_p.

TCa=FC+ VCx

Where x is the number of goods produced. In many cases, we will be solving for x.

5. Set up the profit equation to address the question you are trying to solve. For example,
   1. If you are trying to find the break-even point (BEP), this occurs when profit is 0.

Profit=R-TC=0

2. If you are trying to find where the company makes a profit, this occurs when profit is >0.

Profit=R-TC>0

3. If you are trying to find where the company takes a loss, this occurs when profit is

Profit=R-TC

4. If you are trying to find when one operation (a) is better than a different operation (b), that is Profit(a) > Profit(b), then

Profita=Ra-TCa>Rb-TCb=Profit(b)

5. If you are trying to find the optimal business strategy, you must take the derivative of the equation when Profit = 0, then solve for x.

Hint: Watch your units very carefully from start to finish. ALWAYS include your units in your final answer.

Unit Storage Costs $/cake Rent $/month Utilities $/month Ingredients $/cake Selling Price $/cake Direct Labor $/cake Salaried Labor $/year 2016-01 2016-02 2016-Q3 2016-Q4 2017-Q1 2017-02 2017-Q3 2017-04 2018-01 2018-02 2018-03 2018-Q4 2019-01 2019-02 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 2400 2436 2472.54 2509.63 2547.27 2585.48 2624.26 2663.62 2703.57 2744.12 2785.28 2827.06 2869.47 2912.51 1236 1073 1092 1304 1264 1269 1035 1076 1470 1020 1050 1393 1156 1293 4.62 4.76 4.9 5.05 5.2 5.36 5.52 5.69 5.86 6.04 6.22 6.41 6.6 6.8 70 70 70 75 75 75 75 75 75 80 80 80 80 80 23.21 23.21 23.21 23.21 23.21 24.14 24.14 24.14 24.14 25.11 25.11 25.11 25.11 26.11 265000 265000 265000 265000 265000 275600 275600 275600 275600 286624 286624 286624 286624 298089 Unit Storage Costs $/cake Rent $/month Utilities $/month Ingredients $/cake Selling Price $/cake Direct Labor $/cake Salaried Labor $/year 2016-01 2016-02 2016-Q3 2016-Q4 2017-Q1 2017-02 2017-Q3 2017-04 2018-01 2018-02 2018-03 2018-Q4 2019-01 2019-02 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 2400 2436 2472.54 2509.63 2547.27 2585.48 2624.26 2663.62 2703.57 2744.12 2785.28 2827.06 2869.47 2912.51 1236 1073 1092 1304 1264 1269 1035 1076 1470 1020 1050 1393 1156 1293 4.62 4.76 4.9 5.05 5.2 5.36 5.52 5.69 5.86 6.04 6.22 6.41 6.6 6.8 70 70 70 75 75 75 75 75 75 80 80 80 80 80 23.21 23.21 23.21 23.21 23.21 24.14 24.14 24.14 24.14 25.11 25.11 25.11 25.11 26.11 265000 265000 265000 265000 265000 275600 275600 275600 275600 286624 286624 286624 286624 298089