Littlefield Simulation

LITTLEFIELD SIMULATION
Action Plan
Authors: Aradhita Rampal (……)
Ben Garrett (………)
Dinu Lazarenco (……..)
Lucky Talwar (20200458)
Subhadhra Goyal (………)
Valentina Correa ( )
Supply Chain Operations Prof. Eamonn Ambrose
Round 1
The group had the following discussion during the start of round 1:
Initially, when the factory came alive, we thought of watching the factory run for a couple of hours
to understand the changes in queues and utilization of machines. In order to decide whether to
purchase a machine or not, we discussed the following:
We first analysed what is the current capacity and machine utilization at each step. For current
capacity of the factory, we compared the average number of jobs received and jobs completed.
According to the data for the first 50 days, the average number of arrived jobs were 12.22 while the
average number of completed jobs were 12.06. Along with this, we analysed the average lead time
of jobs, and found it to be 1.3 days. At this stage, we were on contract 1, which had a minimum lead
time of 7 days and we were able to achieve a lead time of 1.3 days which was significantly lower.
Thus, the factory was able to meet the demand and there was no requirement for an additional
machine at any of the stages.
After this, at day 50 we derived the average utilisation of machines at each stage and found the
same to be, 0.8973 at machine 1, 0.4792 at machine 2 and 0.9052 at machine 3. With this, we saw
that machine 2 is underutilised at less than 50% and thought of selling one of the machine 2 and
decided when to do so. At 196th day we sold one of the machines to boost the utilisation.
After selling the machines, we let the factory run for a few days while we monitor the progress. At
260th day, the utilisation of machine 2 was good at around 90% and the average lead time was
running around 1.26 days. Which meant that our decision to sell the machine had no negative effect
on the functioning of the factory in terms of capacity.
At 261st day we thought of changing the contract from 1 to 2 wherein the minimum lead time would
be 1 day and maximum lead time was 2 days. So, in order to meet this lead time, we thought of
changing the priority to pri4.
From 265th day till 295th day, we monitored the factory and analysed the lead time to be 1.4874,
which meant that we were not able to meet the designated minimum lead time of 1 day, we thought
of changing back the priority to FIFO to understand how that should impact the average lead time.
But again, despite this change the lead time was over our designated lead time, so at 342nd day,
because we were not able to meet the lead time associated with contract 2, we thought of shifting
back to contract 1.
Round 2
Reorder Point
Our reorder point is currently 4200 kits – this amount can enable the completion of 70 jobs. The
average number of jobs accepted per day is, 11.69, rounded off to 12.
Average number of days before we run out of raw materials = 70/12 = 5.84 days Current lead time =
4 days
This is 1.84 days greater than the lead time of 4 days. Therefore, we do not need to change our
reorder point. Order Quantity
The current cost to hold and maintain inventory is $0, therefore, in this case we must only consider
the order cost per shipment. The considered cost of each shipment is currently $1000, after noting
this, we have decided to change the current order quantity from 7200 kits to 144000 kits (see
Appendix 1).
Revenue
Revenue = the number of completed job * revenue of per job (influenced by lead time)
In order to minimize lead time and maximize production, we need to reduce the queue and increase
but not exceed the utilization of each station.
Station 1: (Based on experience from Round 1)
Queue: 136 kits/day, Utilization: 0.856
Station 2: (Based on experience from Round 1) Before we sell one machine (50-195)
Queue: 9 kits/day, Utilization: 0.465,
Lead time: 0.979, Completed job: 11.74
After we sell one machine (196-261)
After we change FIFO to pri4 and change contract from 1 to 2 (262-296)

After we change back to FIFO but still use contract 2 (297-342)
After we change back to contract 1 (342- end)
Station 3: (Based on experience from Round 1)
Solution 1: Changing the Contract
Lead time was little less than 1 before we sold one of the machines at station 2, after selling the
machine the lead time increased to 1.245. So even if we buy a new machine at station 2 to increase
or bring back the earlier level of production, we will not change contract 1 to contract 2.
Solution 2: Changing of Lot Size
Utilization could be increased by a smaller lot size; because the shorter time to complete one order
could reduce the waiting time of the next station. Since each lot incurs a setup time, we could use 2
lots of 30 or 3 lots of 20, but not 5 lots of 12 as it would split the order into too many.
Solution 3: Buy or Sell machine
The utilization of each station would reach 1 in plenty of days, which means utilization exceeds
capacity, so we will not sell any machine. The longest queue is at station 3. So, we buy one machine
3 to reduce queue.
If we want to buy machine 3, we need to make sure that we have enough cash to purchase raw
material after buying machine.
Cost of order = 1000 + 10 * 14400 (considering our shift of order quantity) = 145000 When our cash
balance > 145000 + 100000 = 245000, we can buy a machine at station 3. When can we buy machine
at station 3: profit > 245000
750 * 11 (taking floor of average number of job arrivals, i.e. 11.69) * days – 145000 * ((11 * days *
60)/14400)) > 245000
So, we can buy a machine on 153th day. Solution 4: Consider taking a Loan
After we buy machine 3, the longest queue will be at station 1, so we consider buying a new machine
1. There are two buying choice for us:
1. Waiting for our cash balance reach the buying standard.
2. Making a loan to buy machine 1 immediately but then we would have to consider the cost of
taking a loan
Appendix 1
Inventory = (1000 + 10*order quantity) * n
n = orders made
11.69 jobs are accepted each day, this is rounded to 12 jobs per day => 720 kits accepted per day.
We need (order quantity/720) days to re-order inventory stock to ensure that the factory does not
run out of raw materials.
We will need to order n = [rounded (total number of days*720/order quantity)] to run the simulation
before the factory is shut.
Taking this into account:
Inventory = (1000 + 10*order quantity) * [rounded (total number of days * 720/order quantity)]
Example 1 – Current Scenario
Order quantity = 7200 => reorder every 10 days.
Inventory = (1000 + 10 * 7200) * [rounded (486 * 720/7200)]
= (73000) * (49) = 3577000
Total cash per order = 3577000 Example 2
Order quantity = 7200*2 => 14400
Inventory = (1000 + 10 * 14400) * [rounded (486 * 720/14400)]
= (145000) * (24) = 3480000
Total cash per order = 3480000 Example 3
Order quantity = 3600
Inventory = (1000 + 10 * 3600) * [rounded (486*720/3600)]
= (37000) * (97) = 3589000
Total cash per order = 3589000
Conclusion: It is recommended that we change our order quantity from 7200 kits to 14400 kits.

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What is the current reorder point and order quantity?

What is the current reorder point and order quantity?

What solutions did the group propose to improve production?

What solutions did the group propose to improve production?

Authors: Aradhita Rampal (……)

Ben Garrett (………)

Dinu Lazarenco (……..)

Lucky Talwar (20200458)

Subhadhra Goyal (………)

Station 1: (Based on experience from Round 1)

Queue: 136 kits/day, Utilization: 0.856

Queue: 9 kits/day, Utilization: 0.465,

Lead time: 0.979, Completed job: 11.74

After we sell one machine (196-261)

Queue: 271 kits/day, Utilization: 0.9

Lead time: 1.245, Completed job: 11.70

After we change FIFO to pri4 and change contract from 1 to 2 (262-296)

Lead time: 1.465, Completed job: 11.56

After we change back to FIFO but still use contract 2 (297-342)

Queue: 328 kits/day, Utilization: 0.952

Lead time: 1.487, Completed job: 11.69

After we change back to contract 1 (342- end)

Queue: 224 kits/day, Utilization: 0.898

Lead time: 1.245, Completed job: 11.36

Station 3: (Based on experience from Round 1)

Queue: 280 kits/day, Utilization: 0.884

Solution 1: Changing the Contract

Solution 2: Changing of Lot Size

Solution 3: Buy or Sell machine

1. Waiting for our cash balance reach the buying standard.

Taking this into account:

Order quantity = 7200 => reorder every 10 days.

Inventory = (1000 + 10 * 7200) * [rounded (486 * 720/7200)]

= (73000) * (49) = 3577000

Total cash per order = 3577000 Example 2

Order quantity = 7200*2 => 14400

Inventory = (1000 + 10 * 14400) * [rounded (486 * 720/14400)]

= (145000) * (24) = 3480000

Total cash per order = 3480000 Example 3

Order quantity = 3600

Inventory = (1000 + 10 * 3600) * [rounded (486*720/3600)]

= (37000) * (97) = 3589000

Total cash per order = 3589000

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