OPM 101 Spring 2019 Team Project – Littlefield Technologies Simulation Requirements and Information Simulation Entry Link: http://op.responsive.net/lt/opm101b/entry.html Students can access the simulation platform using the team ID and password. The simulation can be accessed and managed simultaneously from multiple terminals. The simulation will run 2 rounds (with different settings): warm up round and test round. TIMELINE WARM UP ROUND • The warm up round of the simulation starts at 3:30pm, Apr 12th (Friday), and ends at 3:30 pm, Apr 16th (Tuesday). • 1 simulation day = 20 real life minutes. • The warm up round of the simulation runs a total of 388 simulation days. The teams manage the simulation for 288 simulation days from day 51 to day 338. (288 simulation days = 96 real life hours = 4 real life days). Page 1 of 9 • The purpose of the warm up round is to help the students get familiar with the simulation platform and test different strategies. • There is a 3-point credit associated with the preparation and the warm up round, which is granted based on participation only. The performance of the warm up round will not be graded. By default, all team members will get the 3-point credit, unless a member is reported in the peer evaluation for a lack of participation in the preparation and the warm up round. TEST ROUND • The test round of the simulation starts at 3:00 pm Apr 18th (Thursday) and ends at 3:00 pm on Apr 20th (Saturday). (The system will be reset to the test round and be suspended at day 50 at 2:30pm, Apr 18th.) • 1 simulation day = 10 real life minutes. (Note: this is the only difference between the warm up round and the test round.) • The test round of the simulation also runs a total of 388 simulation days. The teams manage the simulation for 288 simulation days from day 50 to day 338. However, since the test round runs twice as fast as the warm up round, it will only last 48 real life hours = 2 real life days. GRADING AND DELIVERABLES The grade of this team project (total of 20 points) will be distributed based on 1) Participation in preparation and warmup round - 3 points 2) Performance (cash balance at simulation day 388) of the test round - As the simulation ends at 3:00pm on Apr 18th, the performance grade will be assigned based on each team’s cash balance as follows: The team with 1st cash balance rank gets 15 points. The team with cash balance rank 2nd or below gets cash difference between this team and the DOTHING team × 15 𝑝𝑜𝑖𝑛𝑡𝑠 cash different between the 1st rank team and the DONOTHING team Note: If a team’s cash balance is lower than that of the DOTHING team, the performance grade is zero. Page 2 of 9 3) Performance of the simulation questionnaire. - Each team needs to gain the rest credits by answering a questionnaire generated and delivered by the instructor after the test round. - Each team may receive different set of questions with different point values based on the team’s specific performance during the test round of the simulation. - The questionnaire could be completed either by groups (within the same team) or by individuals. - The questionnaire will be sent to each individual’s SacLink email around Apr 20 th Apr 21st. - Completing the questionnaire is OPTIONAL. - Questionnaire submission deadline: 3:00pm, Apr 30th (Tuesday). - Late submission is not accepted. - Submit to Canvas. 4) Each individual is required to complete a peer evaluation after the test round is completed. - The link of the peer evaluation will be available on Canvas when the test round is done. - The outcome of the peer evaluation may be considered for each individual’s final team project grade. For example, if the majority of the members on a team report that an individual does not participate in and/or contribute to the team project, the individual may not get the full participation credit and the performance credit the team earns. - Submission deadline: 3:00pm, May 2nd (Thursday). - A late or failure submission of the peer evaluation from any individual results in a 1point deduction. Page 3 of 9 INFORMATION FOR BOTH ROUNDS • Units of work used in the simulation: Raw material is managed by unit of kit. Customers place orders as bulks with bulk size: 1 order = 60 kits. Some stages process work in the assembly process by lot (batch). There are 3 possible lot sizes: Lot size = 60 kits/lot (lots/order = 1) Lot size = 30 kits/lot (lots/order = 2) Lot size = 20 kits/lot (lots/order = 3) • Decisions and initial value Decisions could be Initial value (These are made in the the values used during the simulation first 50 days of the Where the change Related Course is made on the Lectures simulation platform simulation) Purchasing/selling machines 2 sample preparing, 2 testing, 1 centrifuging Each station Process analysis (Lecture 3) Number of lots/order (options: 1,2,3) Lots/order = 2 (lot size = 30 kits) Customer Orders Batch processing (Lecture 4) Priority rule at testing machine FIFO Station 2 Priority rules (Lecture 16) Material from Suppliers (r,Q) model (Lecture 12) Change reorder point and order quantity Reorder Point = 10 orders = 600 kits Order Quantity = 20 orders = 1200 kits Change maximum WIP limit 100 orders Customer Orders Little’s Law (Lecture 2) Change pricing contract (3 contracts) Contract 1 Customer Orders Little’s Law (Lecture 2) Debt 0 Cash Note: you are expected to change all the decisions listed in the table above except the debt option. Page 4 of 9 • Cash The game starts on day 1 with initial cash of $1,000,000. Annual interest rate = 15%. Your control of the simulation starts at day 51. You will notice the cash balance at the beginning of day 51 is lower than $1,000,000, which implies the initial decisions adopted during the first 50 days are not profitable. You need to immediately make changes when your control begins. Debt is available from day 75. Whenever a debt is issued, a one-time transaction fee, which equals to 2% of the debt amount, will be charged. Annual debt rate = 25%. Debt will appear as negative cash in the game. If you went bankrupt during the test round of the simulation, you are strongly encouraged to issue the debt to get back to the game and keep practicing different strategies. This will help you to answer the questions in the questionnaire no matter what ranking you end up with for the test round. • Contracts Revenue is collected from the customers based on the contract selected in the game. Payment is collected upon completion of the customer order. Three possible contracts in the simulation: Contract Quoted Lead Time Maximum Lead Time Maximum Order Revenue Contract 1 5 days 10 days $750 Contract 2 1.5 days 3 days $1000 Contract 3 0.5 days 1 day $2000 The Lead Time concept included in the contracts is the same as the Flow Time concept in Little’s Law. It is the total amount of time a customer waits for an order to be fulfilled, from the moment an order is accepted till the moment an order is completed. Take Contract 1 as an example: if an order is fulfilled within the quoted lead time of 5 days, the customer will pay $750 for the order. If the order is fulfilled longer than 5 days but less than the maximum lead time of 10 days, the payment will decrease proportionally from $750 to $0. If the order is fulfilled longer than 10 days, the customer will not pay 0 for the order, yet the order still has to be completed. The job shop cannot abandon any accepted customer order. Page 5 of 9 Contract 1 is initially chosen during the first 50 days of the simulation. When contract is changed during the simulation, the new contract only takes effect on the customer orders accepted after the change. The contracts in the game link the profitability and the efficiency of the job shop. To gain the larger profit under Contract 2 and Contract 3, the job shop needs to achieve a higher level of efficiency (shorter flow time). In the questionnaire, you may be asked to explain your choice of contract at different stages of the simulation. • Assembly Process The assembly process contains four steps: Step 1. Sample Preparing (Station 1) Step 2. Testing (Station 2) Step 3. Centrifuging (Station 3) Step 4. Testing (Station 2) Each station has certain number of machines initially. Students can purchase or sell machines at each station. Each station needs to keep at least one machine. Sample preparing 2 Testing (Step 2&Step 4) 2 Centrifuging 1 Machine purchasing price Machine retire price $90,000 $80,000 $100,000 $10,000 $10,000 $10,000 Setup required Setup time per machine Cycle time for each unit per machine Initial lots per order Yes 0.5 hours/lot No 0 hours/lot Yes 0.8 hours/lot 0.04 hours/kit Step 2: 0.03 hours/kit Step 4: 0.03 hours/kit N/A 0.02 hours/kit Initial # of machines Options of lots per order Incorporate variability? 1 order = 2 lots (lot size = 30 kits) 1, 2, 3 N/A 1 order = 2 lots (lot size = 30 kits) 1, 2, 3 Yes No Yes Page 6 of 9 Station 1 and Station 3 conduct sequential batching with a required set up for each lot (batch). Lot size is initially set at 30 kits/lot. Students can increase or decrease the lot size by changing the lots per order (see page 4 of this document). The set up time does not change when the lot size changes. For example, each Sample Preparing (Station 1) machine takes 0.5 hours to set up no matter what lot size is used. Note that the lot size cannot be adjusted separately for Station 1 and 3, i.e., Station 1 and 3 always have to use the same lot size. Station 1 and Station 3 also incorporate variability, i.e., the stage capacity/processing time of these two stations only represents the long-run average performance. Station 2 does not incorporate any variability, i.e., the stage capacity/processing time of station 2 represents station 2’s exact performance at any moment. In the simulation, to determine the optimal number of machines at each station and the optimal lot size for Station 1 and 3, you need to conduct the following quantitative analysis: bottleneck identification, stage capacity calculation with different number of machines and different lot sizes used for Station 1 and 3; utilization calculation for each station (demand information provided on top of next page). Please review Lecture 3 for the multistep process assessment. In the questionnaire, you may be asked to show all the capacity and utilization calculations, and explain your logic of machine purchases. • Raw Material Inventory Management The game starts from day 1 with raw material of 5000 kits. The Littlefield simulation adopts the (r, Q) policy for the raw material inventory management. The students may change the value of the reorder point r and the reorder quantity Q. Initially, the reorder point r is set at 600 kits (10 orders) and the reorder quantity Q is set at 1200 kits (20 orders). Raw material delivery lead time Fixed ordering cost Physical holding cost Purchasing cost L = 0 day K = $75 $0.02 per kit per day $10 per kit L + 1 = 1 day Note: In the simulation, only one order with size Q will be ordered each time whenever the inventory is below the reorder point r. In the situation where multiple batches of inventory need to be ordered, you need to manually change the Q to a large number. Page 7 of 9 In this simulation, the reorder point r and reorder quantity Q decision cannot be made based on intuition. You are required to support your decisions by quantitative analysis. Please review the (r, Q) model in Lecture 12 for the calculation or r and Q. Note that the raw material stock out cost b in this game is not given because it is intangible. In this case, you need to determine your own critical ratio of the raw material to calculate r. In the warm up round, you can test different critical ratios. In the questionnaire, you may be asked to explain your choice of the critical ratio and show your calculation of the r and Q. • Customer Orders (Demand) The marketing department of the company conducted a demand forecasting based on some historical data. (You do not need to do demand forecasting in this simulation. All demand information is given.) Customer orders (demand) follow a Normal Distribution. Through the entire simulation: mean demand = 12 orders/day = 720 kits/day, standard deviation of demand = 3.46 orders/day = 207.6 kits/day. Note that, the demand information only provides the number of orders arrive at the job shop per day. The job shop may NOT accept all of these orders. The number of orders accepted is controlled by the queue size decision below. In the simulation, the job arrivals information you can observe is only the accepted orders. • Queue Size (Maximum WIP Limit) The WIP concept is the same as the Inventory concept in Little’s Law. The Maximum WIP limit is the maximum amount of inventory (accepted customer orders) the job shop could hold. Customer orders will be rejected if the job shop reaches its Maximum WIP Limit. Students may change the Maximum WIP Limit in the simulation. The initial Maximum WIP Limit in the job shop = 100 orders, i.e., the job shop will stop taking customer orders if the total number of jobs (inventory) in the job shop reaches 100 orders (including all orders being processed and all orders waiting). There is no penalty for rejecting customer orders. This Maximum WIP Limit decision is the only lever the students may use to control demand in the simulation. Page 8 of 9 Review Little’s Law in Lecture 2 and think about how you can use this Maximum WIP Limit decision to balance the relation among Inventory, Flow Time (how long customer wait), and Rate (efficiency). In the questionnaire, you may be asked to explain your choice of Maximum WIP Limit at different stages of the simulation and show Little’s Law calculation to support your decisions. • Autopilot Period From day 338 to day 388 (last 50 days), you will lose control of the game (no change can be made). However, during this period, demand will keep coming in, raw materials will still be ordered based on the reorder point and reorder quantity the you set by the end of day 338, and revenue can still be collected from completed orders. By the end of day 388, any leftover raw material will be discarded with zero salvage value. These last 50 days is called an auto-pilot period. Because, you cannot make any change from day 338 to 388, these last 50 simulation days will elapse in a second in the simulation. You need to set a separate inventory strategy for these period. The objective of your strategy is two-fold: 1) ensure profitability of the last 50 days; 2) avoid high level of leftover raw materials when the game ends. The first step is to determine what inventory model to use for the auto-pilot period. In the questionnaire, you may be asked to explain your inventory strategy for the auto-pilot period, and justify that your strategy achieves the two objectives. You may also be asked to show calculations of your specific inventory decisions. Page 9 of 9
