203513943 Littlefield Game Play

Group 7B

OM  –  II  II Assignment LITTLEFIELD TECHNOLOGIES A report submitted to

Prof. Subhamoy Ganguly

On

23/01/2014 By

Group 7B Aparna Sagar/ Mayank Sengar/ Preeti Kumari/ Rajeev Ranjan/ Vaibhav Arora

Indian Institute of Management Udaipur

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Group 7B

Littlefield Technologies  – Our Gameplay

Initial Game Strategy: The team met, the day before the game was about to start, to prepare a strategy

based on the learning that we had while playing the demo version of the game. We had realized that the machines in Station 1 and Station 3 were operating at full capacity (i.e.100% utilization) when the demand was high. As a result, inventories were queuing up right before these two stations. We thought of buying both the machines but due to cash constraints we could afford to buy only one. We decided that our first move would be to buy a Station 1 machine. We decided that we would look at the lead time and then decide which one of the three contracts we should opt for. We also discussed the safety stock level that should be kept and the amount of quantity to be ordered (i.e. reorder quantity). Since the lead time of supplier was 4 days we decided that based on the average number of jobs we would keep the safety stock value. The Strategy and the Steps Carried out: Step 1:  On Day 61 we bought the machine of Station 1 with $90,000. We saw that we were getting a

lead time of about 2.3 days hence we chose Contract 1, in which we would receive $750 for completing the orders in minimum 7 days and maximum 14 days. We also saw that we were getting an average of 15 jobs per day i.e. we had to supply (15 X 60 =) 900 quantities per days. Hence team came to a conclusion that the re-order point be kept (900X4=) 3600. We had 7620 amount of inventory so we kept the re-order quantity at 3000 so that the inventory level comes down. After taking this step, we saw that the lead time had come down to 1.98 days on Day 65 so we change the customer contract to Contract 2, in which we would get $1000 by completing the contract in minimum 1 day and maximum 2 days. Step 2: On Day 75 we saw that the lead time was around 0.4 days due to the fall in average job from 15

to 8, hence we changed the customer contract to Contract 3, in which we would get $1250 by completing the order in minimum 0.5 days and maximum 1 day. We also changed the re-order point to 1800 as the average job arrival per day had decreased. The capacity utilization of Station 3 was high but we did not have sufficient cash to buy the machine of Station 3. On Day 81 cash in hand was $1, 24,000 so we bought the Station 3 machine. At that time most of our stocked inventory had replenished so we increased the re-order quantity to 4200. Step 3: On Day 108 we saw that between the Day 81 and Day 108 there were several occasions when

we had not been able to deliver the quantities in the promised time and so the revenues received in this period was much less than what we should have received. On several other occasions our inventory had completely replenished and we had not able to deliver the ordered quantity to the customers due to which we got zero revenues. The lead time had escalated to around 1.8 days due the increase in the average job arrivals to 14. Hence we changed the customer contract to Contract 2 i.e $ 1000 per job 1|Page

Group 7B contract with maximum delivery time of two days. We also changed the lots per size from 60 X 1 to 30 X 2 to find out how that affects the production line. We also changed the re-order point to 3000 and the re-order quantity to 7200 as the average job arrival had increased. We regret not monitoring the game in that period. Due to our negligence we suffered losses. Step 4: On day 109 we changed the reorder point from 3000 to 3600 as number of job arrivals had

increased and we did not sufficient inventory in stock. At that time our objective was to increase the inventory level so that we can fulfill the demand of customer. Also at that time we did not have sufficient cash to purchase more inventories. On day 108 had $ 6000 cash in hand. So by changing reorder point to 3600, we were accumulating inventory to meet the unexpected demand of the customer. Also we changed the customer contract to Contract 1 so that we do not lose further revenue due to not being able to deliver in time. We found that there was large job queue at Station 3, so we changed the scheduling policy from FIFO to Priority 4 to give priority to step four so that we can decrease the job waiting from the station 3. Step 5: On day 111 changed reorder quantity from 7200 to 2400 due to unavailability of cash to

purchase high quantity. On Day 112 we have only $3000 cash in hand. Due to lack of fund we were not able to keep enough inventories. We had zero inventories at that time and we were not able to fulfill the customer’s demand. On Day 113 we saw that we have had $14,000 in hand so we increased the re order

quantity to 7200. The lead time was 1.8 days so we changed the customer contract to Contract 2. We couldn’t understand the change that was happening due to lost per order so we changed it back to the initial 60 X 1. We also found that the change in scheduling rule resulted in the increase in the lead time so we changed it back to FIFO. On day 114 we saw that the lead time was 1.77 days still we changed the customer contract to Contract 3 in anticipating that the demand will fall and that we would be able to fulfill the demand. Step 6: By now we had some what realized what was happening in the game and the various setting that

we had done had streamlined. The customer orders had fallen just like we had anticipated and we were able to deliver the products in time. Thereafter all we did was, monitor the job arrivals and change the re-order point and re-order quantity. On Day 124 we saw that the queue before Station 2 was on a rise, the capacity utilization of Station 3 was moderate and utilization of Station 1 was high. This made us realize that more number of jobs was coming from Station 1 so we changed the scheduling rule at Station 2 to Priority 2. On Day 245 we saw that the capacity utilization of Station 1 was 100% and the lead time was increasing so we bought another machine of Station 1. Step 7: All we had to do now in change the re-order quantity and the re-order point based on the job

arrivals. On Day 386 we thought that the game has ended (as we had forgotten that after the end of Day 386 the game would be simulated for another 100 days) so we sold all the machines that we had purchased while playing the game. This was a big mistake and it brought us down from rank 6 to rank 14.

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Group 7B

Our Learning: 1. Reorder Quantity:  We learnt the concept of economic order of quantity when demand is

random or unpredictable. Through EOQ we can meet the demand as well as can prevent overstocking. We also realized that due to lack of funds can be a major issue in a real life scenario and to avoid such a situation a proper planning is required. We also applied newsvendor model to calculate the reorder quantity in order to maximize the expected profit. 2. Reorder Point : This game also taught us at what level of inventory we should order for next

delivery of raw materials. We had adjusted this several times based on the average number of job arrivals and inventories in stock. We also learnt that we must keep some safety stock to meet the unpredictable demand in future. Inventory that remains after meeting the demand in duration of lead times is known as safety stock. 3. Machine in various stations:  As the retirement price of machine was very less than purchase

price so we had to make wise decision whether to purchase it or not. We came know the concept of utilization and were able to identify the bottleneck in the whole process. Machine having utilization above 100 % was the bottleneck in the process so we bought those machines which were bottleneck in the process. As the utilization went above 100%, jobs started queuing up and increasing the lead time. So we should effectively plan to avoid queuing up. 4. Sequencing of queue:   According to the length of queue at various stations we learnt to use

scheduling policy to give priority to step four or two or follow FIFO order to accomplish maximum number of jobs. 5.  Customer Contracts: As we have three contracts and each contract had different rules and

agreement we had to choose which contract to go for. Larger the revenue, shorter was the delivery time and larger the penalties of not being able to deliver in time. It taught us to manage the lead time. To manage the lead time we had to manage all things like capacity, inventory, lot size and other parameters. Our Experience: It was a great experience playing the game. We got a feel of how difficult the job of a

production manager is. On one side we have the uncertain demand which if not forecasted well can result in high inventory level or falling short of delivering the orders in time. And on the other hand there is a decision to be made as to how much to order and what level to keep the safety stock at. In this particular game there were no inventory holding cost nor was there a change in the lead time of the supplier (which was fixated at 4 days). If these two situations were incorporated into the game, like it was in the Beer Game, the complexity of the game would have multi-folded. But that is how the actual scenario would be like. Through this game we got an idea of the following concepts: process analysis, capacity management, demand forecasting, production control, queuing and lead time management. All in all this was a great learning experience for all of us.

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