Lead Time Management at Littlefield Labs Essay

648 Words Nov 8th, 2014 3 Pages
Lead Time Management at Littlefield Labs
Background
Littlefield Laboratories has opened a new blood testing lab. This laboratory uses the same process as the lab encountered in your prior assignment, Capacity Management at Littlefield Labs—neither the process sequence nor the process time distributions have changed. The lab began operations with a raw materials inventory of 160 kits and $1,000,000 cash. Customer demand continues to be random, but the expected daily demand will not change during the lab’s life span. Expert advisors know that demand will end abruptly on Day 268 and the lab will no longer be necessary. Any remaining machinery or inventory will be useless after Day 268, and thus have no residual value.
Management would like
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There is no holding cost associated with inventory—other than the opportunity cost of its purchase price. Research has shown that customers will pay premium prices for faster lead times, and management has prepared three pricing contracts.
1) quoted lead time = 7 days; maximum lead time = 14 days; price = $750
2) quoted lead time = 24 hours; maximum lead time = 72 hours; price = $1000
3) quoted lead time = 12 hours; maximum lead time = 24 hours; price = $1250
During the first 50 days, management has only accepted jobs under Contract 1. They doubt you will ever be able to deliver 100% on time for the most lucrative contract but believe it might be worth pursuing.
Late penalties for all three contracts follow the pattern described in, An Overview of Littlefield Labs. Contracts are assigned to each order upon arrival. The assigned contract for that order may not be subsequently changed. A contract may be assigned to future orders by clicking the Edit Data button on the Customer Order pop-up window and selecting from the resulting menu.
Littlefield’s laboratory simulation will run at the rate of 4032 simulated days per real day for one real hour. On simulated Day 218, you will relinquish control of Littlefield’s lab and the simulator will run its final 50 simulated days at an accelerated rate. Management expects that you will leave all laboratory parameters set to values that maximize their

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