Littlefield Technologies Simulation Preparation

Your Group Name:

Submission:

The submission is NOT required, yet strongly recommended.

Each team can submit the answers twice to the instructor to gain feedback.
The quality of the submission will NOT be judged.
Submission deadline: 2:45pm, Apr 13th (Wednesday), 2016 .
Submit as hardcopy or to email: yang.li@csus.edu

Discussion questions:
Each bullet point below corresponds to some decision in the simulation. Please discuss with your
team members and try to derive a preliminary answer for each question in Italic.
Process Analysis

Adding machines at different stages

The price for each machine is as follows:
Board stuffing machines cost $90,000
Testers cost $80,000
Tuning machines cost $100,000

Change the lot (batch) size

In the game, you may change the lot size from changing the Number of lots/order.
Number of lots/order
1
2
3
4

Corresponding lot size

60 kits/lot
30 kits/lot
20 kits/lot
15 kits/lot

In order to make the machine purchase and the lot size decisions, you need to calculate the
processing rate for each station for different numbers of machines and different batch sizes.
Station 1. (Board Stuffing)
Initial number of Board Stuffing machines: 2
Initial lot (batch) size: 30 kits/batch

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Each machine at Board stuffing Station does (sequential) batch processing with initial batch
size as 30 kits per batch, set up time for each batch at each machine as 1.2 hours. The set up time
is independent of the batch size. The process time for each kit in a batch at each machine is 0.04
hours/kit.
What is the overall processing rate of Station 1 with lot size 30 kits/batch?
What is the overall processing rate of Station 1 with lot size 60 kits/batch, 20 kits/batch, and 15
kits/batch?

Station 2. (Testing)
Initial number of Testing machines: 1
Initial lot (batch) size: 60 kits/batch
The Testing Station handles both Step 2 and Step 4 in the assemble process. It can be considered
that the Testing Station processes two kinds of product: Step 2 product and Step 4 product, i.e.,
this is a station with product mix. For each completed product, it goes through Step 2 once and
goes through Step 4 once. Step 2 takes 0.01 hours to test a kit. Step 4 also takes 0.01 hours to test
a kit. (There is no set up and batching processing.)
What is the overall processing rate of Station 2?

Station 3. (Tuning)
Initial number of Tuning machines: 1
Each machine at Board stuffing Station also does (sequential) batch processing with initial batch
size as 30 kits per batch, set up time for each batch at each machine as 0.8 hours. The set up time
is independent of the batch size. The process time for each kit in a batch at each machine is 0.05
hours/kit.
What is the overall processing rate of Station 3 with lot size 30 kits/batch?
What is the overall processing rate of Station 3 with lot size 60 kits/batch, 20 kits/batch, and 15
kits/batch?

Station 1 and 2 are doing batching processing with set up, where the batch (lot) size can be
adjusted. Think about the (both positive and negative ) impacts of changing lot sizes?

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Based on your calculation of the processing rate for each Station, try to determine the ideal
number of machines at the Board Stuffing station and the ideal batch size. (Note: demand
information should be used, which is given in this document below. The ideal number of machines
and ideal batch size may be different at different stages of the game.)
What principles should you follow while adding new machines? Is there any constraint on adding
new machines?

Inventory Management

The inventory policy applied in Littlefield simulation is (r,Q) policy. At the beginning of the
simulation (day 50), the reorder point r is set to be 1800 kits (=30 orders) and the order quantity
Q is set as 2400 kits (=40 orders). (1 order = 60 kits)
You need to determine whether these initial numbers are reasonable, which cannot be done by
intuition. Your team needs to do some quantitative analysis using the formula of (r,Q) policy
taught in the OPM101 class(Lecture 16).
Additional information you need to calculate the reorder point r and order quantity Q:
1. Customer orders (demand) follow a Normal Distribution. During day 51 to day 250:
Mean demand = 12 orders/day
Standard deviation of demand =

12

orders/day = 3.46 orders/day

2. Delivery lead time for raw materials: L = 4 days.

3. Fixed ordering cost K = $500
4. The physical holding cost = 0.05/kit/day.
Annual interest rate = 20%
Unit purchasing cost of one kit is $10.
How much is the total holding cost (=physical holding cost + financial holding cost)?

5. In the game, if stock out happens on raw materials, the customers would have to wait
(backorders occur). There is no information given for the backorder cost, in which case, you
need to either estimate the backorder cost, or set a target fill rate by yourself. (Either way, you
should roughly assess the loss in revenue from not having a unit of inventory in stock).
What target fill rate does your team decide to use?
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What are the values of the reorder point r and order quantity Q you would use at different
stages of the game.

Are there any potential constraints in adjusting the reorder point and order quantity based on
your answers above? (Hint: think about how much it may cost)

From day 250 to day 300, the game is in an autopilot mode. You will not be allowed to make
any change in the simulation from day 251 to day 300. However, during these last 50 days,
customer orders will keep occurring. The mean demand from day 251 to day 300 will linearly
decrease from 12 orders per day to 1. The standard deviation of demand is

, when mean

demand = .
Raw kits during the last 50 days will be ordered according to the reorder point r and order
quantity Q set by you by the end of day 250. At the end of the simulation (day 300), any unused
raw kits will be discarded.
Think about whether the raw material management in the last 50 days is still a (r,Q) problem. If
not, what inventory problem is it?

Even though from day 251 to day 300, you will lose control of the system, you may make some
arrangement by the end of day 250. Think about what arrangements could you make? How would
you execute these arrangements on the platform?

Cash Flow Control

Switching pricing contract

Benefit of contract with shorter quoted lead time: more revenue if the lead time is met.
Benefit of contract with longer quoted lead time: more reaction time to customer orders, less
likely to be penalized.

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Think about what prevents you from choosing the lucrative contract (the contract with the highest
revenue).
Under what conditions, the lucrative contract could truly provide high revenue returns?

Order limit
You may set the level of maximum jobs (orders) in the factory.
The initial maximum jobs (orders) in the factory = 100 orders, i.e., the factory will stop taking
customer orders if the total number of jobs in the factory reaches 100 orders (including both the ones
being processed and all the waiting orders).
Think about how this limit would affect your profitability of the factory and when you would consider
adjust it, either up or down, to improve the profitability?

Overall Strategy
In the game, the machine purchase, raw material inventory management, and the pricing contract
selections are all integrated together. Think about how they are linked and try to come up with a general
strategy of managing the job shop over the 200 (day 50 to day 250) simulation days.

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