Team Ecowas Stephanie Alofoje David Boakye-Danquah Doyin Fisayo November 30, 2011 LITTLEFIELD REPORT Final cash

balance: $376,842. The factory assembles digital satellite system receivers from kits of components which are purchased from a single supplier. The assembly process consists of four steps that are carried out at three workstations. At Station 1, components are mounted and soldered onto PC boards (Board Stuffing). At Station 2, the boards are tested. At Station 3, the components are tuned. Finally, in the fourth step, the boards go back to Station 2 for final testing. In the 4th step of the process boards are tested again before final delivery to the customer. Summary of Transactions The first 115 days of the operations the machines on station 1 on any given day had capacity utilization that ranged from about 39% to 100% with mean of 87% and standard deviation of 15%. However, the average number of kits queued was 182 with standard deviation of 193 and coefficient of variation of 0.83. In order to reduce the variability in queuing times in station 1, a new machine was purchased. In order to detect defective boards earlier in the process priority was given to step 2 rather than the First in First out (FIFO) rule. However this immediately declined the cash balance and was quickly reversed to the original scheduling rule. On the 345th day we noticed that average and standard deviation capacity utilization for station one did not deviate much from the observed statistics on the 115th day of the operation. However for station 2 capacity utilization on average was approximately 47% with a standard deviation of 10% with a approximately 8 kits per day were queued at the station. We decided that we could optimize utilization rates by selling a machine. In a desperate attempt to increase the overall profitability of our firm we opted to pursue a more lucrative contract with our customers on the 345th day. Revenue per contract of $1250 with a lead time of 0.5 days despite the opportunity to make more money our operation was not efficient enough at that point to handle demands of

However. Although we were not certain what the actual EOQ would be. Fortunately.000 which severely decreased our cash balance. and assuming holding cost per unit to be constant at $1. like Alex Rogo did in “The Goal”. we concluded that the queues at Station 3 were too long. especially as we were keeping the 60 kit batch. We changed the lots per order in order to try to reduce batch sizes. we thought that if we could figure out how many kits we would need over 1 – 2 weeks. and the maximum was 73. As a result we were severely penalized for late orders and on the 358th day we reverted back to the original contract. With this information. which was highest of all the stations. This led us finalize that it would be a wise investment to add one more machine. Later on when we determined that it would be profitable to purchase the machine. we determined that the average number of kits queued per day was 13. which ended at $376. Furthermore. We made a costly decision to purchase a machine for $100. so we knew that we needed a new strategy. a drastic decrease from our previous reorder level of 6000 units. as we had an amount of raw material that exceeded the demand for our product. Our EOQ was 3306 units. which cost us $90.this customer class. At this point. We then decided to review our calculation of the EOQ to see if we could make money by ordering fewer kits. we estimated annual demand using an average daily demand of about 15 kits. we could reduce the number of orders by switching to Contract 1 and ordering 60 kits per lot. We made the mistake of purchasing and then immediately selling the machine.000. we saw increases in our cash balance. we figured that out before the factory closed and were able to recover some cash. we didn’t know what else to do after that as we continued to lose more money almost immediately. we .842. we assumed that this had to be a bottleneck. Bottleneck Resources We determined that Machine 3 was a bottleneck resource but were unsure whether the changes we made would affect it immediately. Using the same information. Utilization rates were averaged 87% percent over the period with an average number of 290 kits queued daily. On the 358th day the system had accumulated more inventory than anticipated. Despite the investment. it is easy to say that 7200 kits exceeded our need and we should have tapered that down earlier on. We were ordering 7200 kits and then replenishing at 6000 kits. In retrospect. This means that at any point in time our holding costs were ridiculous. so we ordered 56 lots (3360 units) and calculated our reorder level to be at 180 units. Using the daily number of kits queued for Station 2 (a nonbottleneck resource). we realized that we had lost quite a bit of money. we did a better job of estimating it closer to the end of the project. ANALYSIS OF MANAGEMENT STRATEGY EOQ and Reorder Level We could have made a lot more money had we figured out that our reorder level was too high to begin with.

The lesson learnt here is that careful analysis must be done to determine how to increase the capacity of a bottleneck resource. We had some challenges in coming up with the EOQ for the smaller batches. Lots per Order and Contract Options It might have been worthwhile to really experiment with the different lot sizes and how they would affect cash. Our indecision definitely cost us a lot.5 day. with choices for minimum lead times of 0.000 on it. 1 day and 7 days. we believe that we picked the option that was best for minimizing the ordering cost. Conclusion (Stephanie to write up conclusion) . However.spent another $100. given the variable lead times.

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