Indiana University Bloomington Kristen’s Cookie Company Paper

You and your roommate are preparing to start Kristen’s Cookie Company in your on-campus apartment.

The company will provide fresh-baked cookies to starving students in the evenings. You need to
evaluate the preliminary design for the company’s production process to figure out how many dozen
you can produce in one night and how effectively your time, and that of your room mate, will be
utilized.
BUSINESS CONCEPT
Your idea is to bake fresh cookies to order, using any combination of ingredients that they buyer wants.
The cookies will be ready for pickup at your apartment within an hour. Cookies will be produced and
sold by the dozen.
Several factors will set you apart from competing products such as store-bought cookies. First, your
cookies will be completely fresh. You will not bake any cookies before receiving the order; therefore, the
buyer will be getting cookies that are literally hot out of the oven. Second,
you will have a variety of
ingredients available to add to the basic dough, including chocolate chips, M&M’s, chopped Heath bars,
coconut, walnuts, and raisins.
Buyers will email in their orders and specify which of these ingredients they want in their cookies. You
guarantee completely fresh cookies. In short, you will have the freshest, most exotic cookies anywhere,
available right on campus. You will produce and sell cookies by the dozen (i.e., customers must order
one dozen, two dozen, etc.).
THE PRODUCTION PROCESS
Baking cookies is simple: mix all the ingredients in a food processor; spoon out the cookie dough onto a
tray; put the cookies into the oven; bake them; take the tray of cookies out of the oven; let the cookies
cool; and, finally, take the cookies off the tray and carefully pack them in a box. You and your roommate
already own all the necessary capital equipment: one food processor/blender, cookie trays, and spoons.
Your apartment has a small oven that will hold one tray at a time. A detailed examination of the
production process, which specifies how long each of the steps will take, follows.
The first step is to take an order, which your roommate has figured out how to do quickly and with 100
percent accuracy. (Actually, you and your roommate devised a method using the campus electronic mail
system to accept orders and to inform customers when their orders will be ready for pickup. Because
this runs automatically on your personal computer, it does not take any of your time.) Therefore, this
step will be ignored in further analysis.
You and your roommate have timed the necessary physical operations. The first physical production
step is to wash out the mixing bowl from the previous batch, add all of the ingredients, and mix them in
your food processor (in this analysis, these activities—wash, add, mix—are considered to be one,
combined step). The mixing bowl can hold ingredients for up to 3 dozen cookies. These activities take a
total of six minutes for the wash—add—mix combined steps, regardless of how many cookies are being
made in the batch. That is, to mix enough dough and ingredients for two or three dozen cookies takes
the same six minutes as one dozen cookies. You then spoon the dough, one dozen at a time, onto a
cookie tray. Spooning the dough onto the tray takes two minutes per tray (dozen).

The next step, performed by your roommate, is to remove a tray of baked cookies, put a new tray in the
oven, and set the thermostat and timer; these steps take a total of one minute. The cookies bake for the
next nine minutes. So total time per tray in the oven is 10 minutes, during the first minute of which your
roommate is swapping the trays and setting the timer. Because the oven holds only one tray, a second
dozen takes an additional 10 minutes at the oven.
Your roommate also performs the last steps of the process by first removing the cookies from the oven
and putting them aside to cool for 5 minutes, then carefully packing them in a box and accepting
payment. It takes two minutes to pack each dozen and about one minute to accept payment for an
order, which could be for multiple dozens.
That is the process for producing cookies by the dozen in Kristen’s Cookie Company. (As experienced
bakers know, a few simplifications were made in the actual cookie production process. For example, the
first batch of cookies for the night requires preheating the oven. However, such complexities will be put
aside for this analysis.)
Begin your analysis by developing a process flow diagram of the cookie-making
process. Show this flow chart in your submission ahead of question 1.
KEY QUESTIONS TO ANSWER BEFORE YOU LAUNCH THE BUSINESS
To launch the business, you need to set prices and rules for accepting orders. (In this analysis, we will
not consider the issue of setting prices.) Some issues will be resolved only after you get started and try
out different ways of producing the cookies. Before you start, however, you at least want a preliminary
plan, with as much as possible specified, so that you can do a careful calculation of how much time you
will have to devote to this business each night, how many cookies you can make, and equipment
requirements. For example, when you conduct a market survey to determine the likely demand, you will
want to specify exactly what your order policies will be. Therefore, answering the following operational
questions should help you:
1 How long will it take you to produce an order for one dozen cookies from beginning to end?
2 How many dozen cookies can you produce in a night, assuming you are open four hours each
night (
show your calculations
)?
3 How much of your own and your roommate’s valuable time will it take to produce each
dozen?
4 Because your baking trays can hold exactly one dozen cookies, you will produce and sell
cookies by the dozen. Should you give any discount for people who order two dozen cookies, three dozen cookies, or more? Why or why not? Should you allow for “rush orders” (meaning,
allowing a customer to jump to the head of the “line”)? If you do, should you charge a
premium?
5 What is the minimum number of food processors/blenders and baking trays that you would
need to maximize output with the one oven that you have given the four operating hours per
night stated in #2? (Explain your reasoning and/or show your calculations.)
6 Suppose that demand for your cookies exceeds your capacity, what would you have to do to
increase the number of cookies that you can produce in the four hours of operation each night?
Be as specific as possible. Show a revised flow chart and/or calculations as you think
appropriate.