The second time through playing the Littlefield game was much more planned and the attention we gave the game much more deliberate. From the very get go we knew that our output was lower than demand.
Stage 1- We knew that the hang up was at both station 1 and station 3. The problem for us was deciding which we would purchase first, an addtional machine at station 1 or station 3. We chose station 3. Looking back I feel like this first move may have been our first mistake. In hindsight I probably would have bought an extra machine at station 1 first for the following reasons, 1) It was $10,000 cheaper, 2) utilization was slightly higher there and 3) it only makes sense because all orders have to start at station 1 so what's the use of increasing capacity at station 3 when we aren't producing enough kits further up the line.
Stage 2- Within a cycle or two of spending lots of money on kits and then making lots of money selling the kits under contract 1 we realized that contract 1 made very little money and that we would have to rely solely on contract 3 if we wanted to start tasking control of the game and maximizing or profitability. With this realization came the strategy to risk running out of inventory for the sake of getting another machine at station 3 so that we could produce a finished product in less than half a day and switch our contract over to contract 3. We set our reorder point on kits to 0 and calculated that we would have just enough to buy another machine at station 3 and just enough inventory left to get back into a rythm of buying more kits and making more money. Stage 2 was very successful and was a huge turning point for making money and making it quickly.
Stage 3- While the first two stages focused on doing what was best for us and making the most money we could in the least amount of time stage 3 was about planning how to keep our lead and our strategy working against the other two teams. One of the easy things to see within the game is when teams buy kits and buy machines. We had a good idea of how many machines and kits the other two teams had throughout the game. Our strategy was to stay within the same working capital as the other two teams so that we all looked like we had a shot of winning the game. But behind the scenes start stashing inventory away in small increments so that the other teams couldn't get a good sense of how we were using our money and that we had $100,000 to $200,000 worth of kits stashed away for a rainy day. The problem we encountered in stage 3 is that all of our numbers were shown to the other groups during class just 4 days into the ten-day game. Our whole strategy here was to keep our reorder point and amount of kits hidden. Soon after our numbers were revealed we saw that the other two teams started increasing the amount of kits they were ordering.
Stage 4- We realized on day 125 out of 390 days that we could plan how and when we would purchase kits for the rest of the entire game and then sit back the entire last week and wait for the results. Stage 4 had our team running hundreds of numbers and equations to find the average amount of kits moved per day, the average amount of money we made on contract 3, how many days we could run before reordering etc..... These numbers gave us a pretty precise schedule for ordering kits, keeping up inventory levels, slowly increasing our inventory levels and allowed us to purchase all the inventory we wold need for the rest fo the netire game by day 275. Satge 4 was probably our most successful stage in the game because we had good and meaningful numbers to work with that helped us to calculate within 3,000 kits exactly how much we would use over 265 days. The order points and order levels were accurate enough that we could set back for the entire last half of the game and still feel confident in a victory.
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Final Insights: we could have ended even stronger
Despite our success, we did not reach perfection in terms of the maximum revenue per order. Purchasing a fifth machine on Station 1 would have brought a higher personal and customer satisfaction. However, our calculations show that we did not lost a significant amount of money, considering that the “awesome” team gained about $60 dollars more per order (with a 5th machine)than our team did, which totals to about $120,000 more revenue by the end of the game. Anyways, the cost of purchasing a fifth machine would have brought the actual profit down to about $20,000- $30,000.
Another thing that we’ve learned during this game is that releasing orders in multiple lots works especially when you have one or more extra machines ready to make up for the setup time. It worked for the “awesome” team, since they had a fifth machine, but would have not worked as well for us with four machines – see the victishonor’s experience with splitting orders.
The actual gap between us and the other two teams could have been a few tens of thousands higher, considering the interest we did not make on the money we invested in inventory. However, these three items of our team’s final insights reflect the competitive advantage our Littlefield factory gained during phase two of the game.
I too thought it was a pretty tough call to decide which machine to purchase first. A comparison of the utilization of the machines revealed that machine 1 and 3 were neck to neck. I don't necessarily think it was a mistake purchasing machine 3 first because if we had purchased machine 1 then the utilization on machine 3 would have eventually sky rocketed causing a bottleneck at the final step. To me it was a catch 22 situation :)
How did you find your reorder point and order quantity?
Hah. I purchased both machines simultaneously, since just purchasing one machine would mean that the machine you just bought is a dead weight until the other machine comes online; a dead weight denying you 10% interest.
Pushed lead times right down to 0.47 days. Hello contract 3! :D
@ Jefferey
the reorder amount should be EOQ with demand being your average demand, and the interest rate being 10%
The reorder point should be the expected demand during the lead time (It helps to have a history of the lowest on-hand inventory, then subtract this from your current reorder point)
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