To the CEO of Hawkeye Electronics,

We are an operations consulting group from the University of Iowa. Recently, we have
simulated and analyzed four different projects to improve the manufacturing process of
electronic chips to be more profitable. We and also have simulated the result when each of the
four projects is paired up in order to maximize the entire profit and improve the utilization rate.
Also we attach some persuasive diagrams and plots to help illustrate our analysis.

The first project is called the Labor Right-Sizing Project, which involved hire or layoff
inspectors. Hawkeye Electronics currently has 3 inspectors during the entire cycle process. Each
new inspector adds $4000 to Hawkeye’s payroll cost annually. Each laid off inspector saves
Hawkeye $4000. Assume the default profit and cost are both 0. If we hold other variables
constant, then lay off 2 inspectors, it saves Hawkeye Electronics $8000 but leads to a tremendous
decrease in the yield of completed cards, and the incremental loss will be $535. However, if we
lay off one inspector, the incremental profit increases to $3999. Keeping adding the number of
inspectors, the incremental profit will gradually decrease because of the increasing cost.
Therefore, we suggest that the profit curve is like the parabola and the summit is $3999 when
inspectors equal to 2.

In this case, compared to the default setting we find the inspection part has a significant
increase in utilization rate from 58.54% to 87.81%, but there is a slight decrease from 70.06% to
67.36% for the oven part. In the meantime, the rate of solder and component placement remains
almost the same. Moreover, the average wait times of oven inflow and outflow remain the same.

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Although the queue before component placement time is 6 seconds longer, we still consider this
simulated project profitable because of its rapidly increasing incremental profit.

For Project 2, we alter the size of the storage bin in order to maximize the net profit. In
the default setting, the output is 39,589 cards, which has an inspection utilization rate of
58.584%. According to the simulation data, the total cost of the new project is increasing steadily
if the size is larger than 3, however, the yield of completed cards increases much faster while the
size is getting larger. If we plot the data, we can see an apparent increasing of profit and a
positive relationship between the size of the bin and the output. At the size 10, we discover that
the project reaches its highest profit of $214 while the yield of completed cards is 43,385.

Furthermore, the utilization data can be another significant piece evidence supporting our
project. According to the table of utilization, we find that the solder, oven and inspection have
significant increases, which are 0.759%, 1.193% and 5.6204%, but there is a slight decrease in
component replacement. Therefore, the result is an incremental profit of $214, which is not as
large as the first project but it is still significant. In conclusion, we consider changing your
project is beneficial to your company in short run by resizing your storage bin.

In the project 3, we are trying to adjust the proportion of defective cards to reach the
optimal level. When the percentage of defect is decreasing, the output rate is increasing which
will increase the profit. However, for each one percent reduction in the defective rate , the
project cost will increase by $600. Hence, after point 2, the steadily increased cost will lead the
total profits to be negative. In conclusion, we can see that the largest net profit for the quality
project is $34.50 when the total yield of completed cards is 40,858 and the percentage defective
is 4%.

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 On the other hand, we can analyze the project form the utilization and average wait time
data. Compared to the default setting, we can see the solder, component replacement, oven and
inspection increase in utilization rates are 0.257%, 0.93%, 2.914% and 1.902%. For the wait
time, the oven inflow, oven outflow and queue before component placement decrease by 0.2,
0.05 and 0.45. Decreasing the wait time can help improve the efficiency of entire cycle. Hence,
from these data, we can determine why the incremental profit increases by $34.50.

For project 4, we adjust the batch size by reducing the minimum number of cards that can
be baked in the oven. In this project, remodeling the batch size will cost $500 for no matter what
size we have after the adjusting. After running the simulation program, we found that when we
reduce the batch size to 4, the output of finished products diminished to 39,588, and when the
batch size is reduced by more than 1, the output rate will stay at the level of 39,589. According to
the data that we collected from the experimental simulation, we can conclude that project 4 is
unfavorable to maximize the net profit because reducing the batch size did not increase the
output of finished goods but cost $500 for applying the program.

When we hold other variables constant, we can conclude that when decreasing batch size
does not improve the output of Hawkeye Electronics. In this case, we found that Hawkeye

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Electronics is holding inventories but not using the lean production method. Hence, increasing
batch size to make the production more flexible is not necessary. While reducing batch costs
$500 it cannot improve the output rate of finished products, we believe that remodeling the oven
by minimizing the number of cards is unfavorable for Hawkeye Electronics and not significant
among all four projects.

Of the four projects, reducing inspectors seems to be the most profit generating, and then
resizing the storage bin, improving defective rate and changing batch size are ranked as the
second, third and fourth. In this case, we encourage Hawkeye Electronics to consider the first
project because it improves the utilization rate of the inspection division and the third project
because it greatly diminishes the wait time and makes the entire cycle more effective and
efficient, and also it generates an incremental profit of $34.50.

Since we can combine two projects together, we can have 6 pairs of projects with the 4
base projects. As long as the project 4 generates negative incremental profits, we will keep
holding 5 as our minimum batch size in oven. While combining the project 4 with the other three
makes no effects on the pairs 1&4, 2&4 and 3&4, they will yield the same simulation results as
the individual projects that we ran before. Despite of other factors and only contrasting with
incremental profits, pairing up the project 1&2 has the highest net income of $4115.50.
Combining 1&3 comes out with $4027.50, and project 1&4 generates $3999. As for the pairs of
2&3, 3&4 and project 2 (2&4), we believe that they are unfavorable because they generate less
incremental profits.

In this case, we should consider other evidence to determine the best two projects that are
suitable for your company. Concerning average wait time, the pair of 1&2 yields a long waiting
time of 9.38 seconds, which can negatively affect actual performance such as the output. On the
other side, waiting times of project 1&4 and 1&3 are acceptable and significant. Comparing
project 1 (1&4) and project combination of 1&3, we found that the pair of 1&3 has slightly
shorter waiting time and higher utilization, which shows that pair of 1&3 generates $28.50 more
incremental profit than project 1 (1&4). As a conclusion, we believe that the combination of
project 1 and 3 are the best choice.

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 According to our simulation of all those four individual projects and 6 combinations of
all those projects, we believe that laying off an additional inspector and improving your working
quality to obtain 4% defective rate will generate more incremental profits while it will cost not
that much. We highly recommend Hawkeye Electronics to consider taking the combination
change because the new project can generate more profit and improve efficiency than the
original plan.

You can contact us with questions or for more detailed information. We will be willing to
help Hawkeye electronics.