Kristens Cookie Company 2/8/12

MGT 6400 Management of Business Processes and Operations Dr. Grady S. York

Yellow Team: Jeanie Neumeyer Paul Thompson Krystle Grogan Mia Hughes Fallan Faulkner Amie Sistad

Table of Contents
Section 1 Introduction................................................................................................................................. 3 Process Issue / Problem / Constraint Identification ................................................................ 4 Recommendations for Improvement ........................................................................................ 5 Section 2 Appendix A: Current Process Flowchart .............................................................................. A1 Appendix B: Recipe for Smaller Chocolate Chip Cookies................................................... B1 Appendix C: Product Process Matrix.C1

Introduction Two students are contemplating running a cookie baking business under the name Kristens Cookie Company. The business will be run out of their on-campus apartment and cater to hungry, latenight cravings from students searching for warm, fresh cookies. The objective is to provide fresh baked cookies, which are customized to their individual taste preferences. We need to evaluate the preliminary design for the companys production process to determine if the process is efficient. Evaluating the process will also allow us to determine the appropriate retail price of the cookies, profitability, and capacity for fulfillment of orders. Kristens Cookie Company uses a variety of ingredients including dough, chocolate chips, chopped heath bars, coconut, walnuts, and raisins. The apartment is furnished with one oven, one food processor, cookie trays and spoons. The landlord pays the utility bills including electricity; therefore the variable costs are solely the ingredients and packaging. The context of the cookie production process is fairly simple and includes taking the order, mixing the ingredients, baking the cookies, allowing the cookies to cool, packaging the cookies, and then accepting the payment. There are some key factors that the company must excel in, in order to be successful with its current college student demographic. This demographic prefers fresh baked cookies with fresh ingredients, and customization is also important to this target market. Therefore, Kristens Cookie Company allows the customer to select the ingredients for their specific order of cookies. Equipment is a major factor for success. In order to have high quality cookies, the oven must work properly, and heat evenly. In addition, the oven must have the capacity necessary for the students to fulfill every order received. The food processor must be in good working condition, and there must be enough cookie trays and spoons to mix and bake all of the ingredients. The ordering and processing system is also a key success factor for Kristens Cookie Company. If the computer system fails, orders will not be received properly causing the whole process to shut down. There are a number of constraints that will affect the success of this particular business. The first major constraint is oven capacity. Kristens oven has the ability to bake one batch (1 dozen) of cookies at a time resulting in a bottleneck in the production process. Due to lack of capital and approval from the landlord, the company cannot purchase a second oven for the apartment to address this constraint. Another constraint is the limited amount of equipment, which includes one oven, one food processor, and limited mixing bowls, spoons, and trays. A further constraint is the inability to produce stock inventory to fulfill orders due to the companys mission and objectives. Kristens Cookies provides custom, made-to-order cookies within one hour of ordering, so pre-baking cookies to fill orders, which would save time, is not an option for this business model. Lastly, time is a constraint due the students daytime class schedule, which limits the hours of operation to 7pm 11pm. Kristen and her roommate should also take into consideration the lines that might form while waiting for the fresh cookies. This could upset neighbors and possibly the landlord. While there are several constraints, there are many opportunities for this young company to be successful. Some opportunities include the means to create a better design process to increase sales and profitability, while decreasing labor and manufacturing time. By creating a more efficient process, Kristens Cookie Company can fulfill more orders and satisfy more customers. Kristens Cookie Company provides a unique experience for customers by allowing them to customize their cookie order. This is an untapped market and the demand is there. It is possible for this company to be a big hit on campus!

Process Issue/Constraint Identification The most critical issue facing Kristens Cookie Company is the limited baking capacity of the oven. The most obvious bottleneck is the ten minutes of total baking time that includes putting each tray in the oven and waiting for the cookies to bake. It may be difficult to fulfill orders in a timely manner due to this huge limitation. It is possible to lose customers to competitors or have a customer choose a substitute product if he or she does not want to wait for fresh baked cookies; especially if there several orders already in process. Only having one oven with such a limited capacity inhibits the companys flexibility and ability to produce as many orders as possible. Kristens Cookie Company must ensure that the oven is never idle to achieve maximum efficiency. Before it receives any customer orders, each night they must make sure the oven is in working order and functioning properly because it is the companys most important piece of capital equipment and the only means the roommates have to bake cookies. In addition to the oven limitation, the current process has Kristens workload as double that of her roommate. This uneven workload is not an efficient use of the students time during business hours and is likely to decrease the number of orders they fulfill on any given night. The uneven workload also creates an opportunity for Kristen to get burned out and possibly resent her roommate for not doing her fair share. When it is time for the roommates to determine how much they will be paid for their time, an uneven workload can complicate the working relationship if Kristen insists on being paid more than her roommate. The two of them live together, so they must get along and be in agreement if the business is going to thrive. Balancing the workload will not decrease the process time, but it will allow the two of them to get more done in the time they have. In addition to the above-mentioned problem, Kristens Cookie Company may currently have too many mix-in options to offer customers. Washing the equipment and mixing the cookie ingredients currently utilizes six minutes of time no matter if they are mixing one, two, or three dozen at once. Providing six different mix-in ingredient choices allows for 64 different cookie combinations, based on our non-repetition calculations. Thus requiring more time to wash and mix ingredients for new orders that will come in throughout the night. Decreasing the number of mix-in variables from six to three will decrease time and costs in the long run allowing for eight possible cookie combinations. They also have the choice of a plain cookie with no mix-ins. We used a combination without repetition to get these figures. Currently, Kristens Cookie Company uses a job-shop process to produce their cookies. Every cookie order is made-to-order to provide custom, one-of-a-kind cookies, baked fresh within the hour of ordering. There is a lot of flexibility for the customer because there are six mix-in ingredients to choose from, but this will cause problems for Kristens Cookie Company if every order varies completely, because valuable time is always spent preparing a new custom product. The students must find a way to better match their process with the variety and volume of product they plan to sell. Lastly, a problem exists with how the orders are received. The students are currently using the schools electronic mail (email) system. This does not seem like the most effective or efficient way to receive orders. Unless one of them remains in front of the computer and monitors the email account all night (which uses valuable time), they will not know when orders have been submitted. Even if the account is checked every five to ten minutes that is time that could be used elsewhere in the process. Kristens Cookie Company risks missing an order and causing delays in delivery if an order is inadvertently skipped over. This would make customers unhappy and cost the students business. In order for the company to be successful, it must maintain a reputation for producing quality service as well as products. There is some risk involved with using the email system, and the students should look to improve this.

Bottleneck impacts:

Quality: Only one batch of cookies can be baked at once. If a customer orders more than one batch, he or she will have to wait longer to receive the completed order due to the oven constraint. The customer may have expectations that will not be met due to the increased wait time for his or her cookies. Also, the students only have use of this one oven. Should it stop functioning properly, the quality of its product could be damaged, or worse, the entire business could be jeopardized.

Flexibility: There is a high degree of flexibility for the customer due to the options available in choosing ingredients for his or her specific cookie order. If every order varies from the prior order, efficiency is lost due to having to mix a new custom batch for every order. As relates to the oven, Kristens Cookie Companys flexibility is hampered when a customer wants more than one dozen because the wait time is increased by ten minutes for every additional dozen. If a customer wants a rush order, he or she will not be happy to find out that there are already many orders waiting in line. Delivery: Storage capacity and workspace problems may occur when cookies are mixed and ready to bake but have to wait for the previous batch to finish cooking. Therefore, the refrigerator and countertop space is occupied, possibly affecting the rate of delivery to the customer. Also affecting timely deliveries is the constraint on the oven. Again, if a customer wants a rush order, it may not be possible due to the limitation of one oven. Costs: Costs will be incurred if the company loses business due to the inability to meet customer expectations on quality or timely deliveries. They will simply choose a substitute product on campus.

Recommendations for Improvement We recommend that Kristens Cookie Company change its product by reducing the size of the cookies. This will result in a reduction in the amount of baking time required per batch. The smaller sized cookie will require eight minutes of baking time instead of ten. The recipe shown in Appendix B confirms the time it will take to bake a mini cookie. A reduction in cookie size will not change the order size. One order will still equal one tray of cookies. By decreasing the baking time per batch, a little more efficiency is gained with the bottleneck. Also, there will be more time available to fulfill a greater number of orders during operating hours. This adds a lot of value to the process. In addition, reducing the cookie size will decrease the cooling time from five minutes to two minutes, resulting in quicker product delivery to the customer. This change will provide a higher quality product and add more efficiency to the process cycle. It would greatly increase the companys production and make the process more efficient if the workload were more balanced. The current process puts more strain on Kristen and wastes useful time that she could utilize to wash bowls and mix ingredients for the next order. Kristens current active time is 8 minutes while her roommate is only active for 4 minutes. If Kristens roommate dished the cookies onto the tray, which takes 2 minutes, the two of them would have an even workload at 6 minutes of active time. This minor change would give Kristen the opportunity to start working on the next order immediately, and allow her roommate to take on more responsibility. In addition to improving the process, this also allows the relationship between the two roommates to stay intact. By balancing the workload, the two can ward off any future tensions that could arise from uneven workloads. In order for the business to be successful, they must limit any opportunities for problems to arise and harm the working relationship.

Another recommendation is the consideration of limiting the number of available mix-in ingredient options. Kristens Cookie Company currently functions in a job shop process, but has a product volume and variety more suitable to a batch process. By reducing the number of options, the process and volume of product are better aligned. The likelihood of needing to produce a new product for each order greatly increases when there are six ingredients to choose from in multiple combinations. Reducing the mix-in choices to three from six will save valuable time and reduce costs significantly. By offering fewer products, the company can get a feel for which product is their most popular and predict the demand on any given night. Kristen and her roommate can prepare dough in advance and have it placed on trays ready to bake for their most popular cookie. When an order for that specific cookie is received, this batch can easily be placed into the oven as soon as it is received. This will save time on washing the bowls and mixing ingredients because it can already be done before the first order is received. To address the oven constraint, the roommates must be sure to have a pan of cookie dough ready to go into the oven as soon as another comes out. The oven should never be idle. The best optimization will be gained if the company can incentivize customers to order 3 dozens of cookies at a time to ensure that cookie dough is not wasted. The problem with this option is that it will take even longer to fulfill one order and all subsequent orders will have to wait longer to bake. Another way to combat this problem is to contract with a neighbor to use his or her oven for a small fee per batch. This will at least allow for two orders to be baking at the same time or shorten the time it takes for one order to be ready if more than one dozen is ordered. Kristens Cookie Company gains some added capacity and flexibility with this recommendation. Of course, it will add time to the process to walk over to the neighbors apartment to put the cookies in the oven, but that extra time will add more value for the increased oven capacity. While it does not save a large amount of time, the company should consider setting the thermostat to preheat the oven before they begin any of the other steps in the process. Having the oven ready to go when the first batch of cookies is on the pan will ensure that the oven has had enough time to heat to the appropriate temperature and that the cookies will baked thoroughly and evenly. This can be monumental in guaranteeing the customers expectations are met and that a quality product is provided. In addition, machines break down, so by pre-heating the oven at the beginning of the process, Kristens Cookie Company can test its equipment and verify that it will be able to fulfill its orders before any ingredients are ever mixed or they confirm the customers order. Kristens Cookie Company must make sure that its process is as efficient as possible. Lastly, the company must consider its method for receiving orders. It is currently using a cost effective method in the schools free email system, but they may want to take it a step further to ensure that all orders are received in a timely manner and none are inadvertently skipped over. The email system should send a text notification to Kristens and her roommates cell phone containing the order information. Once they have received the text notification, they can then pre-heat the oven (for the first order of every night), ensure they have the requested product ingredients, and confirm the order with the customer before they begin mixing the ingredients. Best Alternative In order for Kristens Cookie Company to be successful, it needs to implement a combination of the above-mentioned recommendations. The most important improvement is to reduce the size of the cookies, which will require less baking time per batch of cookies and improves the current bottleneck. A shortened amount of baking time will allow more orders to be fulfilled during operating hours by cutting a total of 5 minutes out of the entire process. In addition, the reduction in cooking time and cooling time will allow the customer to retrieve his or her order more swiftly. If the roommates were able to contract with a neighbor to use his or her oven, the process would be improved even more. With Kristens workload being cut by 2 minutes, she would immediately be able to start working on the next order and have it ready to go into the neighbors oven before first order was complete. While evening the workload does not take any time off of the process, it does make the process more efficient.

Contracting with a neighbor would greatly increase the number of orders Kristens Cookie Company could fulfill in a given night. The secondary improvement is the decrease in the number of ingredient options available to customers from six ingredients to three ingredients. This improvement will allow the company to predict with better accuracy the type of product and the volume it expects to produce and sell. If it can reduce the large number of possible ingredient combinations, the company increases the ability to fulfill every order and reduces the likelihood of wasted ingredients. This will also reduce costs significantly. The mix-in ingredients can be expensive depending on the time of the year, so a decrease in the variety offered to customers will lessen the costs Kristens Cookie Company will incur. Conclusion We believe the students have a viable prospect in this cookie baking business. With a few improvements to the current process as they have mapped it out, Kristens Cookie Company stands to increase both its efficiency and its chances of serving more customers on campus. By properly matching the process to the volume and variety of product offerings (please see the product process matrix in appendix C1), Kristen and her roommate will be more prepared to do what they have set out to do, and they will be more successful than if they tried to stay in a job-shop process while offering more variety and volume than that process allows. We hope that the improvements we have made will help Kristen and her roommate be successful entrepreneurs and cater to the needs of the many starving students on campus. We look forward to hearing great reports of their accomplishments.

Process Flow Map