Pizza Pazza Case

1. What is the minimum time to fill a rush order, assuming that all steps of the
process are started only after the order is received? Without spending money, how can
you reduce this response time?
The minimum time to fill an order of 2 pizzas is:

2+3+2+1+15+3+2+2=30

Minutes.

Ways to reduce flow time include:

a) Jacqueline can process the payment while the pizzas are baking, which can
save 2 minutes.
b) Jean and Jacqueline can Prep sauce and dough at the same time, saving 2
minutes.
c) Jean and Jacqueline can put the pizzas in the pan together before to save 1
minute.
d) Jean can also help Jacqueline load the pizzas into the boxes, which will save
1 minute.
The process time for a single order could be shaved down to 24 minutes.
2. What is the maximum number of orders that the take-out facility can fill per hour in
steady state? Assume that there are sufficient pizza pans to ensure that no order has
to wait for pans to become available. How does your answer change if the cooling time
is increased from 3 to 5 minutes?

Resourc
e

Unit Load

Resource Capacity
# of
units

Total

Process

Resource

Capacity

Utilizatio
n*

(time/ord
er)

Unit
Capacity
(orders/hou
r)

Jean

2+3+2=
7

60/7 = 8.6

8.6

3.75/8.6
= 47%

Jacqueli
ne

1+2+2=
5

60/5 = 12

12

3.75/12
= 31%

Oven

1+15

60/16 =
3.75

3.75

3.75
order/hr
7.5
pizza/hr

100%

While the first order takes thirty minutes, the second takes thirty plus seven (prep
time delay) plus the baking delay of nine minutes for a finish time at the forty-sixth

minute. The third order will have a prep time delay of seven minutes plus the sixteen
minute bake time of the second order plus two minutes of dead time after prepping
the second and third orders, and waiting for the first to finish (16 minutes (7*2) = 2)
to finish at minute seventy-one. Therefore, in a single hour, only two orders can be
fulfilled. An increase in cooling time doesnt affect the bottleneck (baking time), which
is what adds the most to the process time. An increase in cooling time will merely
increase the finish of the first order from the 3oth minute to the 32 nd minute, and the
finish of the second order from the 46th minute to the 48th minute.
3. Assume that there is one order waiting to be processed, Jean is just about to start
mixing the sauce for a second order and Jacqueline is just about to start loading the
two pizza pans of a third order into the oven. A customer calls in with a new order
for two pizzas and wants to know when she can pick up her order. What due-date
time should Jean promise assuming that they process all orders in the sequence
received?
Jacquelines 1st order = 16 minutes for loading and bake. Within these 16 mins, Jeans
second order would be waiting to be loaded. Then, 16 minutes for the 2 nd order to
bake. While the second order is baking, first order will be billed and Jean would have
processed the third order, which will be waiting again to be loaded. Then, 16 minutes
for 3rd order. Similarly, the 16 minutes for the new order and then adding cooling,
unloading, packing, and billing time.

16+16+16+ 16+3+2+2=71minutes
4. If Jacqueline calls in sick, what is the maximum number of orders that can be filled
per hour?
If Jacqueline is sick, Jean would be in charge of every task. He cant cycle through
preparation work every seven minutes and has to complete the entire process (all
thirty minutes) before starting another order. Because the oven is still the bottleneck,
this change merely increases the wait time from one order to the next from nine
minutes to thirty minutes so instead of completing the second order at the fortysixth minute, the second order will be completed at minute sixty.

Resour
ce

Unit Load

Resource Capacity

(time/order)

Unit
Capacity
(orders/ho
ur)

# of
units

Total

Jean

2+3+2+1+2
+=12

60/12 = 5

Oven

1+15

60/16 =
3.75

3.75

Process

Resource

Capacity

Utilization
*

3.75order/
hr 7.5

pizza/hr

5. Assume Jean and Jacqueline decide to hire two employees to perform their
respective tasks; each paid 8 per hour. What is the contribution margin (revenue variable costs) generated per hour of operation of the process if pizzas sell for 5
each? What is the minimum amount that Jean can charge per pizza, and still make a
profit?
Each employee costs 8 per person totaling 16.00 per hour. They sell 4 pizzas an
hour, 5.00 per pizza, 1.20 ingredients/pizza, 0.20 cents/box, which totals 1.40
for each pizza * 4= 5.60. Total costs equals 21.60 Euros per hour. In order to
make a profit, the minimum amount they can sell each pizza for 5.41. To break
even, 5.40.
6. What is the minimum number of pizza pans needed to ensure that no order has to
wait for a pan?
We need to have enough pans to supply pans for 21 minutes until the other pans free
up. If it takes them 5 minutes before they put the ingredients on the pan, minimum 5
sets of pans = 10 total pans are needed. It takes 21 minutes from when the pan is first
used to it being done with the cooling process and ready to go back to the start where
Jean puts the dough in the pan + spread the sauce.
7. The pizzas have become wildly popular and Jean feels that they can easily sell
thirty pizzas per hour. To increase capacity, he is thinking of renting additional
industrial ovens, which would cost 10 for each hour that an oven is used. Should
Jean rent more ovens, assuming the rest of the process is kept as is? How many?
What would be the contribution margin from each hour of operation of the process
(assume the employees do all the work)?
Assuming no change to the process, the prep time for each order is seven minutes.
This means that the max number of orders that can be prepared while the first
order is in the oven is two. This means that the max number of ovens that would
still be efficient is three. However, buying and using two additional ovens gives a
contribution margin of 0. The max number of orders with three ovens that can be
fulfilled in an hour is five, because the first order will be completed at the 30 th
minute, the second at the 37th minute, and the third at the 44th minute; sixteen
minutes remain, meaning that only two more orders can be produced (16/7). At five
orders, the revenue is 50, with rental costs of 20, variable costs of 2.80 per
order (1.40 per pizza), and employee costs of 16 per hour (assuming Jean and
Jacqueline are paid at the same rate as employees mentioned earlier). This gives a
profit of 0. (See, e.g., Exhibit 7.1)
Yet, with two ovens, the max number of orders that can be processed is four. The
first two orders can be processed simultaneously with a seven minute delay. The

first order takes sixteen minutes to bake, by which point the third order has been
prepared for two minutes (7*2 = 14; 16 14 = 2). Again, there is another two
minute delay between the second order and the fourth order, with two rounds of
preparation at seven minutes each and a bake time of sixteen minutes. The fourth
order is completed at 55 minutes (1st 30, 2nd 37, 3rd 44 + 2 = 46, 4th 51 + 2 =
53). With a two-oven set up, the cost becomes 10 (oven rent) + 16 + (2.80*4) =
37.20, and the total profit is 40 (revenue: 10*4) 37.20, which is 2.80. (See,
e.g., Exhibit 7.2)
Since maximizing profit over product is more desirable to buy one additional oven
with some inefficiency (two minutes wait time between orders one and three and
orders two and four) rather than to purchase two ovens with better, more efficient
production at a steeper cost.
8. Can Jean do better, relative to question 7, by restructuring the process? For
example, can he increase profits by reallocating tasks between the employees?
(Assume all orders are for two pizzas.) What is the contribution margin generated
per hour as a result of the changes? What is the minimum amount that Jean can
charge per pizza, and still make a profit?
With a new process cutting the total time down to twenty-five minutes and with the
addition of another employee, the time to prepare an order before it is loaded into
an oven is cut down to four minutes between Jean and Jacqueline. Therefore, the
amount of ovens that need to be used to max the product is 16 minutes bake time/4
minutes prep = 4. This allows Jean and Jacqueline to produce eight orders an hour if
they work on the prep before the pizzas go in the ovens and hire a third worker to
do the work on the pizzas after they exit the ovens.
Order Number
1st Order
2nd Order
3rd Order
4th Order
5th Order
6th Order
7th Order
8th Order
9th Order

Completion Time
25 mins
= 25 mins + 4 mins
= 29 mins + 4 mins
= 33 mins + 4 mins
= 37 mins + 4 mins
= 41 mins + 4 mins
= 45 mins + 4 mins
= 49 mins + 4 mins
= 53 mins + 4 mins

=
=
=
=
=
=
=
=

29
33
37
41
45
49
53
57

mins
mins
mins
mins
mins
mins
mins
mins

At this level of production, our contribution per order is 7.20 (= 10 2.80) * 8 =

62.80, subtracting costs of 30 (= 3*10, oven rental) and 24 ( = 3*8, labor
cost) gives an overall profit of 8.80. The amount they can charge per pizza and still
make a profit is equal to the excess profit divided by the number of pizzas that
theyre producing in an hour, which is 3.60/16 = .225, subtracted from the
current price of 5 per pizza, for a break-even price of 4.775. To make minimum
profit, they can charge 4.78. (See, e.g., Exhibit 8.1)
9. Over time, Pizza Pazza has also started to accept orders for one pizza. In effect,
half of all orders are for only one pizza and those have been pushed through the

system as emergency orders resulting in only one pizza in the oven. Should Jean
consider a rush charge for such orders?
If half of all orders are for a single pizza only, then the opportunity cost of being
able to fulfill a complete order must be considered. For example, using the set up
that was generated for problem #8, if half of all orders are for a single pizza then
output falls to 12 (8/2 = 4 [orders for one pizza only]*1 = 4 [number of pizzas lost
no longer produced because the order comes in for a single pizza]; 16 4 = 12).
The cost of potentially fulfilling other orders with the lost number of pizzas is 4
pizzas/2 pizzas per order = 2 orders * 7.20 contribution margin per order =
14.40. Dividing this cost among the single pizzas reasonably expected to be sold
per hour gives you an additional 3.60 per pizza. Therefore, single orders should
cost the original 5 per pizza plus 3.60, or 8.60.
10. Realizing the importance of batch economies, should Jean offer a discount to
encourage all orders to be for three pizzas? If so, how much?
If he starts producing three pizzas per process cycle instead of two pizzas, he will
need more ovens and each third pizza will incur wait time before another pizza is
produced at which point both may be loaded into an oven. Each third pizza will be
loaded into an oven every four minutes, meaning that an order for three pizzas will
take twenty-four minutes (streamlined process for a single order of two pizzas) plus
four minutes, or twenty-eight minutes to complete, assuming the process has been
streamlined according to the answer in #8. If not, then completing an order will take
even more time: at seven minutes of prep work for each batch of three and a total
process time of thirty minutes, an order for three pizzas will be completed every
thirty-seven minutes.
This will lead to an inventory build-up at the bottleneck point of the ovens, because
the ovens only have a capacity of two pizzas at a time. Even with three ovens and a
preparation time before entering the oven of four minutes, each additional pizza will
have a delay time of four minutes. Running the calculation for inventory build-up
using the streamlined process generated for problem #8, by the end of an hour
there will be inventory build-up of nine pizzas. (1 leftover pizza from first cycle plus
1 leftover pizza from each subsequent cycle producing batches of 3 = 9 cycles * 1
leftover per cycle = 9 pizzas). This translates to a cost of 9/2 or 4.5 orders * 7.20
contribution per order = 32.40; if orders were for three pizzas a piece, this still
costs 9/3 * 7.20 = 21.60. The amount of pizzas produced will still stay the same,
because the ovens processing rate is constant, which means that not only will an
order for three pizzas take more time away from fulfilling orders for two pizzas (28
minutes versus 24 minutes), but the inventory build-up also adds to the bottom-line
cost.
In short, its not economically feasible to fulfill three-pizza orders as the norm,
because of the oven capacity, which extends the time taken to fulfill an order and
also increases inventory carried if pizzas are prepared as they are ordered. Ideally,
Jean should charge a premium for orders for three pizzas instead of a discount.

11. Assume that deep-dish pizzas sell for 7.50 and require 1.90 worth of
ingredients. Which of
these two products should Jean push to customers that call in and are undecided?

Resourc
e

Unit Load

Resource Capacity
# of
units

Total

Process

Resource

Capacity

Utilizatio
n*

(time/ord
er)

Unit
Capacity
(orders/hou
r)

Jean

2+3+2=
7

60/7 = 8.6

8.6

3.75/8.6
= 47%

Jacqueli
ne

1+2+2=
5

60/5 = 12

12

3.75/12
= 31%

Oven

1+29

60/30 = 2

2
orders/hr

100%

4
pizzas/hr

In this scenario, because the bake time is extended to thirty minutes and the prep
time is increased to ten minutes, each order now takes thirty minutes plus fourteen
plus three which is forty-seven minutes. Once Jean is finished prepping one order,
he can immediately move onto the next, which gives a delay of ten minutes
between orders in prep time. However, since bake time takes thirty minutes, the
next order has to wait twenty minutes before it can be baked, meaning that it wont
be finished until minute sixty-seven. Therefore, since only one pizza can be
completed per hour, the contribution margin per pizza is 15 4.20 ([1.90 materials
+ .20 boxes] * 2) = 10.80. Whereas with thin-crust pizza Jean can produce two
orders an hour for a profit of 10 per order 2.80 cost ([1.20 materials + .20
boxes] * 2) = 7.20*2 orders = 14.40.
12. What is the profit rate if orders for thin-crust and deep-dish are in a ratio of (a)
3:1 (b) 1:1 (c)
1:3?
A ratio of 3:1 would give you a process time of 71 + 10 + 17 minutes wait time +
30 minutes bake time + 7 minute process time = 135 minutes. The total profit will
be 7.20*3 (contribution margin for thin-crust) + 10.80 (contribution margin for
deep-dish) = 32.40/135 = .24 per minute or 14.40 an hour (the same as the
profit from two thin-crusts, which is the average production per hour).

A ratio of 1:1 would give you a process time of 30 minutes + 10 minutes prep time
+ 14 minutes additional bake time + 6 minute wait time = 60 minutes for a profit of
7.20 + 10.80 = 18 an hour.
A ratio of 1:3 would give you a process time of 30 minutes + 10 minutes prep first
deep dish + 6 minutes wait + 14 minutes additional bake time + 10 minutes prep
second deep dish + 26 minute wait (30 + 6 10) + 10 minutes prep third deep dish
+ 46 minute wait (26 + 30 10) = 152 minutes total prep for a profit of 7.20 +
10.80*3 = 39.60/152 = .261 per minute or 15.63 an hour.

Oven1
Pizza 1
Pizza 2

Minutes:

Oven2
Pizza 3
Pizza 4

7Minutes (7)

1min- 7min
Jean
Pre OvenProcess

Oven3
Pizza 5
Pizza 6

7 Minutes (14)

Jean
Pre OvenProcess

7Minutes (30)

Oven1
Pizza 7
Pizza 8

7 Minutes (21)

7 Minutes (37)

Pack& Sell

Oven2
Pizza 9
Pizza 10

7 Minutes (28)

7 Minutes (44)

Pack& Sell

38min- 44min

16 Minutes (44)

7 Minutes (35)

7 Minutes (51)

Pack& Sell

45min- 51min

16 Minutes (51)

Jacquelin
Load& Bake

Jacquelin
Load& Bake

Jean
Pre OvenProcess

16 Minutes (37)

Jacquelin
Load& Bake

Jean
Pre OvenProcess

16 Minutes (30)

Jacquelin
Load& Bake

Jean
Pre OvenProcess

16 Minutes (23)

Exhibit 7.1: StandardProcesswith3Ovens

8min- 23min
24min- 30min
31min- 37min
Jacquelin
Load& Bake
Pack& Sell

Pack& Sell

52min- 58min

Exhibit 7.1

Oven1
Pizza 1
Pizza 2

Minutes:

Oven2
Pizza 3
Pizza 4

7 Minutes (7)

1min- 7min
Jean
Pre OvenProcess

Oven1
Pizza 5
Pizza 6

7 Minutes (14)

Jean
Pre OvenProcess

7 Minutes (30)

Pack& Sell

Oven2
Pizza 7
Pizza 8

7 Minutes (21)

Oven1
Pizza 9
Pizza 10

7 Minutes (28)

Jean
Pre OvenProcess

Wait
Time2
Min(23)

16 Minutes (30)

7 Minutes (35)

Jean
Pre OvenProcess

Wait
Time2
Min(30)

16 Minutes (39)

Wait Time4
Min(39)

16 Minutes (46)

16 Minutes (55)

Jacquelin

7 Minutes (53)

Pack& Sell

47min- 53min

Load& Bake

7 Minutes (46)

Pack& Sell

40min- 46min

Jacquelin
Load& Bake

Jacquelin
Load& Bake

7 Minutes (37)

Pack& Sell

Exhibit 7.2: StandardProcesswith2Ovens

24min- 30min
31min- 37min 38min- 39min

Jacquelin
Load& Bake

Jean
Pre OvenProcess

16 Minutes (23)

8min- 23min
Jacquelin
Load& Bake

7 Minutes (62)

Pack& Sell

54min- 60min

Exhibit 7.2

Pizza 2

Pizza 1

Oven 1

Minutes:

Jean & Jacquelin

Pizza 4

Pizza 3
Jean & Jacquelin

16 Minutes (20)

Pizza 6

Pizza 5

Jacquelin

Jean & Jacquelin

16 Minutes (24)

Load & Bake

Pizza 8

Pizza 7

Pizza 10

Pizza 9

Oven 1

4 Minutes (16)

Oven 4 Pre Oven Process

4 Minutes (12)

Oven 3 Pre Oven Process

4 Minutes (8)

Oven 2 Pre Oven Process

4 Minutes (4)

Load & Bake

Jacquelin

Jean & Jacquelin

Pre Oven Process

6 min - 20 min

1 min - 5 min

Pizza 12

Pizza 11

Oven 2

4 Minutes (20)

Pre Oven Process

Jean & Jacquelin

16 Minutes (28)

Load & Bake

Jacquelin

5 Minutes (25)

Pack & Sell

New Worker

Pizza 14

Pizza 13

Oven 3

4 Minutes (24)

Pre Oven Process

Jean & Jacquelin

16 Minutes (32)

Load & Bake

Jacquelin

5 Minutes (29)

Pack& Sell

New Worker

26 min - 29 min

Pizza 16

Pizza 15

Oven 4

4 Minutes (28)

Pre Oven Process

Jean & Jacquelin

16 Minutes (36)

Load & Bake

Jacquelin

5 Minutes (33)

Pack& Sell

New Worker

30 min - 33 min

Pizza 18

Pizza 17

Oven 1

4 Minutes (32)

Pre Oven Process

Jean & Jacquelin

16 Minutes (40)

Load & Bake

Jacquelin

5 Minutes (37)

Pack& Sell

New Worker

34 min - 37 min

Exhibit 8.1: Efcient Processw/ 4 Ovensand Additional Worker

21 min - 25 min

4 Minutes (37)

Pre Oven Process

Jean & Jacquelin

16 Minutes (44)

Load & Bake

Jacquelin

5 Minutes (41)

Pack& Sell

New Worker

38 min - 41 min

16 Minutes (48)

Load & Bake

Jacquelin

5 Minutes (45)

Pack& Sell

New Worker

42 min - 45 min

16 Minutes (52)

Load & Bake

Jacquelin

5 Minutes (49)

Pack& Sell

New Worker

46 mn - 49 min

5 Minutes (53)

Pack& Sell

New Worker

50 min - 53 min

5 Minutes (57)

Pack& Sell

New Worker

54 min - 57 min

Exhibit 8.1