Littlefield: Business Strategy: Pre-Start Strategy

Pre Start Strategy

Prior to the start of the Littlefield simulation we developed a strategy based off the first 50 days of data. We made projections of the following elements of data to primarily set up our monitoring framework and to make our decisions – job arrivals rate, inventory levels (reorder point and reorder quantity with supplier’s lead time), overall lead time and machine utilization. In addition we included the interest rate earned on cash as an additional criterion and adopted an opportunistic contract switching approach into our decision framework to maximize the revenue.

In looking at the utilization of the three machines it became apparent that Machine #1 was a bottleneck as it operated at or close to 100% utilization (Exhibit 1) with a maximum capacity of 5 kits per day. Furthermore, in analyzing the data we noted that there was spare capacity on Machines 2 & 3 so we prioritized any work from Machine #1 as the two other machines were not the constraint initially. We concluded from this that we would initially purchase an additional Machine #1 while maintaining the same number of the other two machines. We also decided that the priority should be shifted from FIFO to step 2. With both Machines 2 & 3 able to handle surges in demand, the prioritization on the constraint, Machine #1, was

In hindsight it would have been more advantageous towards the beginning of the simulation to purchase an additional Machine 2 which was the second constraint after we solved the issue with Machine 1. An early purchase of Machine 2 would have allowed us to maximize the amount of time using Contract 2 and 3. As it was, our average revenue (excluding the first 50 days) was $820. Selling the machines close to day 220 would have netted revenue at which time we could have been conservative and switched to Contract 2 or 1 for the remaining 50 days (Exhibit