CASE STUDY: KRISTEN COOKIE COMPANY
Introduction:
Kristen’s Cookie Company is a cookie company that Kristen and her roommate wish to start at
their apartment. For this case study it is considered that I am Kristen, and an analysis is done
accordingly. The case study is a good example to analyze a company in its nascent stages of setting up
the company. The company intends to tap into the market of college students that need a late-night
snack. We intend to have an edge on the competition by providing the freshest and most exotic cookies
available near campus.
The initial capital investment for the company constitutes the following components:
- A high capacity professional-grade electric motor
- Cookie trays
- Spoons
- Small oven in the apartment
Beyond the fixed costs, the only costs incurred are for the materials being the variable costs:
- $0.60/dozen (cost of ingredients)
- $0.10 per box (cost of packing box)
A concise flow of the production process is listed below with the process flow diagram in Figure 1.
1) Receive orders
2) Bake cookies as per order
3) Box them
4) Handover to customers
Order Wash and
Spooning
Received mix
Placing
Remove and
Baking cookies in
cool cookies
oven
Pack and
deliver
Figure 1: Process Flow Diagram
Key Questions to Answer Before You Launch the Business
A market survey and preliminary plan need to be formulated to aid with the operations of the
company. Below are key questions along with the answers that form the bedrock for the launch of the
business
1) How long will it take you to fill a rush order?
Below is a list of the activities and their corresponding cycle times
Activity Equipment / Person Cycle Time (minutes)
Order Received Via Email 0
Wash and mix Kristen 6
Spooning Kristen 2
Placing cookies in oven Roommate 1
Baking Oven 9
Remove and cool cookies Roommate 5
Pack and deliver 3
TOTAL 26
The total time to get through the process of registering the order and delivering a dozen cookies
is 26 minutes.
2) How many orders can you fill in a night, assuming you are open 4 hours per night?
The first dozen takes 26 minutes to fulfill the order. Now for 4 hours:
Total minutes per shift is 4 x 60 = 240 minutes
Total minutes usable to make cookies is 26 x 9 = 234 minutes
We can make 9 batches of cookies per 4-hour shift.
3) How much of your own and your roommate’s valuable time will it take to fill each order?
From the table above we can determine the time used per person in the process of producing a
dozen cookies.
My time used = 8 minutes
Roommate’s valuable time used = 6 minutes
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 2 dozen cookies, 3
dozen cookies, or more? If so, how much? Will it take you any longer to fill a 2-dozen cookie
order than a one dozen cookie order?
I will give a discount of about 15% for every extra dozen cookie if the customer buys the extra
dozen within the same type of cookies. This would be a translation of the reduced costs in
producing the same cookies and premixing the same dough without wastage. Otherwise, I
would give a 5% discount for an extra dozen cookies if it is from another flavor.
A 2-dozen order would take longer time to fill as the presence of a single oven and tray limits
production to 1-dozen at a time.
5) How many electric mixers and baking trays will you need?
A single electric mixer would be adequate for the team to make the dough. It can be reused and
washed per need without additional capital investment. In the case of baking trays, having
about 3 trays to start with would help. They would ease the process of preparation of
consequent orders of cookies.
6) Are there any changes you can make in your production plans that will allow you to make
better cookies or more cookies in less time or at a lower cost? For example, is there a
bottleneck operation in your production process that you can expand cheaply? What is the
effect of adding another oven? How much would you be willing to pay to rent an additional
oven?
I would propose making the dough in advance and placing it in the refrigerator. This helps
accelerating the preparation time, reducing delays in the preparation process. This would also
reduce the cost by the ability to reuse excess dough later in the day or the next day.
I would not add another oven until I have adequate forecast of the demand for the cookies. An
investment on an oven would not necessarily yield profits.
Conclusion
- I would build forecast models for the demand before starting the business. I would suggest
operating a biweekly shift to determine the demand for the cookies among students to
determine their interest in the cookies.
- I will start with just 3 types of cookie flavors to not waste my time and money on raw materials
without substantiating the market needs.
- I would also conduct a survey among the students in the dorm to estimate the needs of the
customers to be better prepared for the demand.
- I will not invest in any capital equipment until solid sales forecast leans into the purchase.
- Any tampering with the existing process would need more labor or investment in equipment
that we cannot afford for a small business out of a dorm room
