Starting Up a Cookie Company
Starting up a cookie company on-campus You and your roommate are preparing to start a company producing cookies in your oncampus apartment. By starting up this business, you want to provide fresh cookies to starving fellow students late at night. However, you still have to figure out some aspects of the business model such as the price to charge, whether you will be able to make profit and how many orders you can accept. The business concept You have an extraordinary idea: to bake fresh cookies on delivery, using a customer chosen combination of ingredients.
The cookies can be picked up at your apartment within one hour. Several factors will enable you to be different from your competitors such as store-bought cookies. First, the cookies will be fresh since they will only be produced after the order is received. 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 telephone in their orders and specify which of these ingredients they want in their cookies.
Consequently, you will have the freshest, most exotic cookies anywhere, available to your fellow students next to campus. 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 the cookies, take the tray of cookies out of the oven, let the cookies cool and finally, take them of the tray and pack them in a box. You and your roommate already own all the necessary capital equipment: a food processor, cookie trays and spoons. Your apartment is equipped with a small oven that is able to hold one tray at a time.
Your landlord pays your electricity. As such, the variable costs are merely the cost of the ingredients (estimated to be 1 Euro/dozen), the cost of the box in which the cookies are packed (0,30 Euro/box, each box holds a dozen cookies), and your time (what value do you place on your time? ) A more detailed description of the production process is described below. The first step of the whole process is to take the order. Your roommate has figured out how to do this quickly and This case is an adapted version of the Kristen Cookie case, Harvard Business Review. ith 100% accuracy: by using electronic mail to accept orders and to inform customers when the order will be ready. Since this process runs automatically, it does not take any of your time. Therefore, this step will be ignored in further analysis of the process. 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. The mixing bowls hold ingredients for up to three dozen cookies.
You then dish up the cookies, one dozen at a time onto a cookie try. These activities take about six minutes for the washing and mixing steps, regardless of how many cookies (i. e. , one or more dozens). However, dishing up the cookies onto the tray takes two minutes per tray per dozen. The next step, performed by your roommate, is to put the cookies in the oven and set the thermostat and timer, which takes about one minute. The cookies bake for the next nine minutes. So the total baking time is 10 minutes, during which your roommate is busy setting the oven during the first minute.
Since the oven only holds one tray, a second dozen takes an additional 10 minutes to bake. 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. Removing the cookies from the oven takes only a negligible amount of time, since it must be done promptly. Furthermore, it takes two minutes to pack each dozen and about one minute to accept payment for the order.
As experienced bakers know, the description above contains some simplifications. For example, the first batch of cookies for the night requires preheating the oven. However, such complexities will be put aside for now. Please begin your analysis by developing a process flow diagram of the cookiemaking process. Question before starting up your business To launch your business, you need to set prices and rules for accepting orders. Some issues will only be resolved after you get started and try out different ways of producing the cookies.
Before you start, however, you at least want a preliminary plan, which as much a This case is an adapted version of the Kristen Cookie case, Harvard Business Review. possible specifies, so that you can do a careful calculation of how much time you will have to devote to this business each night, and how much money you can expect to make. 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, you will have to answer the following operational questions: How long will it take you to fill a rush order? -How many orders can you fill in a night, assuming you are open four hours each night? -How much of your own and your roommate’s valuable time will it take to fill each order? -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? If so, how much? Will it take you any longer to fill a twodozen cookie order than a one-dozen cookie order? How many food processors and baking trays will you need? -Are there any changes you can make in your production plans that will also allow you to make better cookies or more cookies in less time or at lower cost? For example, is there 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? This case is an adapted version of the Kristen Cookie case, Harvard Business Review.
