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Technologies
Littlefield Technologies is a job shop that assembles Digital Satellite System receivers.
These receivers are assembled from kits of electronic components procured from a
single supplier. The assembly process consists of four steps carried out at 3 stations
called board stuffing, testing and tuning. The first step consists of mounting the
components onto PC Boards and soldering them. This is done at the board stuffing
station. The digital components are then briefly tested at the testing station in step 2. In
the third step, key components are tuned at the tuning station. Finally, the boards are
exhaustively “final tested” in step 4 at the testing station before delivery to the
customer. Every receiver passes final test.
In early January, Littlefield Technologies retooled its factory to produce a newly updated
model of DSS receiver. This new model replaced an earlier version, which had a history
of consistent sales. The factory began production by investing most of its cash into
capacity and inventory. Specifically, on Day 0, the factory began operations with three
stuffers, two testers, and one tuner, and a raw materials inventory of 9600 kits. This left
the factory with zero cash on hand. Customer demand continues to be random, but the
long‐run average demand will not change over the product’s 486‐day lifetime. At the
end of this lifetime, demand will end abruptly and factory operations will be terminated.
At this point, all capacity and remaining inventory will be useless, and thus have no
value.
Management is currently quoting 7‐day lead times, but management would like to
charge the higher prices that customers would pay for dramatically shorter lead times.
In addition, because the factory is essentially bootstrapping itself financially,
management is worried about the possibility of bankruptcy. To minimize this threat,
management policy dictates that new equipment cannot be purchased if the remaining
cash balance would be insufficient to purchase at least one order quantity’s worth of
raw materials.
Operations Policies at Littlefield
All the stations consist of automated machines which perform the operations. You may
purchase additional machines during the assignment. Board Stuffing machines cost
$90,000, testers cost $80,000, and tuning machines cost $100,000. You can also sell any
machine at a retirement price of $10,000, provided there is at least one other machine
left at that station. The operators are paid a fixed salary, and increasing the number of
machines at a station does not require any increase in the number of operators.
Orders arrive randomly at the factory. Each order is for 60 receivers. When an order
arrives it is matched up with 60 raw kits and becomes a manufacturing lot. If an order
arrives and there are less than 60 raw kits in the materials buffer, the order waits in the
customer order queue pending arrival of raw kits. In addition, orders are not accepted if
the total number of orders in the system (waiting for kits or in process) exceeds 100.
Processing a lot on each machine entails performing a setup on the machine, processing
each kit in the lot (one at a time), and then sending the completed lot on to the next
station. Examination of the production process shows some variability in the processing
time at some stations. Once all the receivers in an order are completed, the order is
shipped immediately. A job is not shipped to its customer until all of the lots in the job
are completed. Currently, the factory releases orders into the factory in processing lots
of 60 receivers. However, you may split the incoming orders into smaller processing lots
as they are released into the factory. Specifically, you may choose to release each order
of 1 lot of 60 receivers, 2 lots of 30 receivers, 3 lots of 20 receivers, 5 lots of 12
receivers, or 10 lots of 6 receivers.
Kits are purchased in multiples of 60 because orders arrive in batches of 60. A reliable
supplier delivers exactly the order quantity of batches, four days after the order is
placed and paid for. Raw kits are purchased from a single supplier and cost $10 per kit
($600 per order). There is also a fixed cost of $1000 per shipment of raw kits,
independent of the shipment size. The supplier requires four days to ship any quantity
of raw kits. LT uses a Reorder Point / Order Quantity raw material purchase policy. That
is, an order for new raw kits is placed with the supplier when the following three criteria
are met: (1) the inventory of raw kits is less than the material reorder point, (2) there
are no orders for raw kits currently outstanding, and (3) the factory has sufficient cash
to purchase the specified order quantity. No order is placed if any of these three criteria
are not met. Management considers physical cost of holding inventory negligible
compared to the financial costs. The current reorder point and reorder quantity can be
changed by clicking on “Edit Data” on the Materials Buffer icon.
You are also allowed to change the scheduling rule at the tester. Littlefield’s operators
have been following a first‐in‐first‐out (fifo) policy, but they will give priority status to
either the shorter initial tests (pri2) or the longer final tests (pri4). They just need to be
told which step is more important.
The current pricing contract is as follows. A customer order filled within the quoted lead
time of, for example, 24 hours earns $1000. If an order is still in the factory 24 hours
after it arrived (and it was quoted with the 24 hour lead time contract), then a lateness
penalty is incurred. Specifically, the total revenue for an order linearly decreases from
$1000 for a 24‐hour lead time to $0 for the maximum lead time of 72 hours. Orders that
take longer than 72 hours to fill generate no revenue at all.
Customers are willing to pay a premium for fast lead times, and you now have three
pricing contracts to choose from:
• price = $750; quoted lead time = 7 days; maximum lead time = 14 days. (This is
the contract that the factory starts with).
• price = $1000; quoted lead time = 1 day; maximum lead time = 2 days.
• price = $1250; quoted lead time = 0.5 days; maximum lead time = 1 day.
A contract is assigned to an order as soon as it arrives at the factory, and that contract
cannot be changed subsequently for that order. Contracts for future orders can be
selected by clicking on “Edit Data” on the Customer Order icon.
Once the market has matured on day 150, a bank is extending a line of credit to
Littlefield Technologies at 20% annual interest compounded daily. In addition, a
processing fee of 5% is incurred right after the loan is received. You can borrow and
repay loans beginning on day 150 by clicking on “Cash” on the menu bar below the
factory schematic, and then clicking on the appropriate button on the bottom of the
resulting window.
The revenue earned from filled orders increases the cash balance. The balance earns
interest (compounded every simulated day) at a compounded rate of 10% per year.
There are no taxes. All fixed overhead over which you have no control, such as salaries,
rent, utilities, etc. are ignored. To reduce the chance of bankruptcy, you are not allowed
to purchase a machine if the resulting cash balance would be too low to purchase an
order of raw materials at the current order quantity.
The winning team is the team with the most cash at the end of the game. You can
compare the cash status of your team to other teams by clicking on the “Overall
Standing” button on the bottom of the web page.
Assignment
The factory has been running for 50 simulated days, and management has recalled the
high‐powered operations team (that’s you!) to manage the capacity, scheduling,
purchasing, lot sizing, and contract quotations to maximize the cash generated by the
factory over its lifetime. Management is not providing any operating budget beyond the
cash generated by the factory itself. You will have control of the factory from day 50 to
day 386. At 0.5 real hours per simulated day, this translates to 7 real days. At day 386,
you lose control of the factory, and the simulation will quickly run another 100 days of
simulation. When you lose control of the factory, management expects you to leave the
factory parameters set to maximize the factory’s cash position when the factory shuts
down on day 486. After the simulation ends on day 486, you can check the status of
your factory, but the factory will no longer be running. Team scores and ranking are
based “cash balance,” which Littlefield Technologies defines as cash on hand minus
debt.
Your team should turn in one summary of what actions you took during the one week
you had access to the factory, why you took those actions, and in retrospect whether
you think you did the right thing. Show analysis to justify your conclusions. Your team’s
grade will be partially based on your performance (about 30 percent), but mainly based
on your summary (about 70 percent). The summary cannot exceed 3 pages in length,
and no appendices are allowed.
Accessing your factory
After the simulation begins, you will access your factory from the entry webpage by
entering your team name and password at op2.responsive.net/lt/ebs/entry.html. Opening
that link will give the login window shown at the top of the following page.
You must have both the Java plug‐in and JavaScript enabled in your browser and should
enable pop ups for the Littlefield web site. If you are using a computer with the
Windows operating system, use Internet Explorer as your browser.
Once the simulator is running you will have the opportunity to download various sets of
data by pressing a “download” button below different online plots. Depending on your
version of Excel and your operating system, you may need to save the downloaded data
to a file and then select Excel as the program to open that file.
Using the Simulator
This web‐based simulator runs continuously. That is, if you view the site at 10 am, and
then view it again at 11 am on the same day, you will notice some simulated time has
elapsed. You have no control over the simulator’s clock. You may need to wait several
simulated days to see the effects of your actions. Constant monitoring is not necessary
to success.
You may access your factory at any time of day. When the assignment ends, your
factory will quickly run the final simulated days and return to a suspended state. You
may check the ending status of your factory and download historic data after the
simulation ends but your factory will no longer be active.
Your factory’s web page shows a schematic diagram of the job shop floor as illustrated
at the beginning of this document. Clicking icons in the schematic will reveal menus that
control your factory and provide historic data. For example, clicking on a station icon
will reveal a menu that gives data about that station, as well as buttons for additional
menus that allow machine purchases or viewing a plot of the station’s historic utilization
rates. The specific information available at each icon is listed on the last page of this
document.
Your factory’s status is automatically updated upon login. To update the factory status
at other times, click the update button on the bottom of the web page. In light of the
slow speed of the simulator, there will be no point to frequent updates.
You should download factory data sets for in‐depth spreadsheet analysis. Below each
plot you will find a “download” button. Clicking this button will initiate a download of
the tab‐delimited text file containing the plotted data. Save this file to your desktop or
other useful location, and open the file with a spreadsheet application like Excel.
Data points are recorded at the start of each day. In the Materials Buffer plot, fractional
days are also included to show the exact time new materials orders arrive and the exact
time inventory reaches zero.
You may notice a few days where zero jobs exit the factory. On such days, the daily
average lead time and daily average revenues are meaningless. A value of zero will
appear in those plots on those days.
Icons on the Littlefield Technologies web page
ICON INFORMATION AVAILABLE
Order Queue:
• Number of new customer orders by day
• Average number of orders waiting for kits by day
• Current pricing contract for arriving orders
• Lot size
Materials Buffer:
• Kit inventory in the buffer at the end of each day, whenever
inventory hits zero, and whenever a new inventory shipment
arrives.
• Inventory costs
• Reorder Point and Order Quantity
• Time until the next shipment arrives
Station Queues:
• Average number of receivers in process that are waiting while
machines in the station are busy, by day
Stations:
• Number of machines at each station
• Scheduling Policy used (for tester only)
• Historical utilization of the station by day (i.e., the average
fraction of time a machine was busy at that station during that
day)
Completed Jobs:
• Numbers of orders completed by day (by pricing contract)
• Average order lead time by day (by pricing contract)
• Average revenue per order by day (by pricing contract)
Sources and uses of cash may be obtained by clicking the cash button in the factory
control bar. Sources of cash are revenue, machine scrap value, and interest. Uses of
cash are raw materials inventory and capacity purchases. Clicking the history button will
reveal team actions. Clicking the update button will refresh your screen. Clicking the quit
button will exit the factory. Clicking the overall standing button will show your team’s
relative rank.