Managing Reponsiveness with Perishable Supplies at Littlefield Labs
Introduction
Littlefield Laboratories is a state-of-the-art highly automated lab that tests blood samples. Samples are tested using a test kit that is disposed after testing one sample. These kits are procured from a single supplier and stored in the materials buffer. The testing process con- sists of four steps carried out at 3 stations called sample preparing, testing and centri- fuging. The blood samples arrive from hospitals and clinics as customer orders. The first step consists of matching each sample with one test kit from the buffer (the combination is referred to as a job), filling test tubes with blood and preparing for the testing process. This is done at the sample preparing station. The job then moves to the testing station where basic tests are conducted on the blood sample in step 2. In the third step, the sample is centrifuged to extract plasma and blood cells. Finally, the job moves back to the testing station for additional testing in step 4. All samples go through additional testing and then the results are sent to the customer.
All the stations consist of automated machines that perform the operations. You may pur- chase additional machines during the assignment. You can purchase one of any type of machine for $80,000. You can also sell any machine at a retirement price of $10,000, pro- vided there is at least one other machine left at that station. The operators are paid a fixed salary, and increasing the number of machines at a station does not require any increase in the number of operators.
Based on a note written by Sunil Kumar and Samuel C. Wood, Stanford University Graduate School of Business. Copyright 2009. No part of this document may be reproduced without permission from Responsive Learning Technologies, Inc., at info@responsive.net.
You may also change the way the queue of jobs at the Tester is sequenced. Specifically, you can choose between (1) first-in-first-out (FIFO); (2) priority to all jobs waiting for step 2; or (3) priority to all jobs waiting for step 4.
Customer orders arrive randomly at the lab. Each order is for one sample. Customer orders are only accepted when the total number of orders in the lab is less than 100.
Test kits are purchased from a single supplier every seven days and cost $600 per kit. The test kits have a shelf life of 1 week. One week after a shipment of kits is received any kits remaining in inventory are disposed and more kits are ordered. The number of kits ordered is the order-up-to level plus the number of backlogged customer orders, if any, waiting for kits. If the lab has sufficient cash to pay for the order, the new kits arrive immediately. Otherwise no kits are ordered at all and there will be no kits in stock for the next seven days. You may change the order-up-to level at any time.
The current pricing contract is as follows. Results sent within the quoted lead time of 1 week earns $750. If an order is still in the lab 1 week after it arrived, then a lateness pen- alty is incurred. Specifically, the total revenue for an order linearly decreases from $750 for a 1-week lead time to $0 for the maximum lead time of 2 weeks. Orders that take longer than 2 weeks to fill generate no revenue at all even though they must be completed.
Customers are willing to pay a premium for a contract with shorter lead times. Specifi- cally, customers will pay $1000 for completed orders if the lab will commit to a quoted lead time of 1 day, with the payment decreasing linearly to zero at 3 days. Customers will also pay $1250 for a promised lead time of 0.5 days, decreasing to $0 at 0.75 days. You may change between contracts at any time but once a contract is assigned to particular customer order, that order’s contract cannot be changed.
You will have some cash on hand when the assignment begins. This amount is depleted by buying machines and by buying test kits from the supplier. The revenue earned from filled orders increases the cash balance. The balance earns interest (compounded every simu- lated day) at a compounded rate of 10% per year. There are no taxes. All fixed overhead over which you have no control, such as salaries, rent, utilities, etc. are ignored. To reduce the chance of bankruptcy, you are not allowed to purchase a machine if the resulting cash balance would be too low to purchase an order of kits equal to the order-up-to level.
The winning team is the team with the most cash at the end of the game. You can compare the cash status of your team to other teams by clicking on the “Overall Standing” button on the bottom of the web page.
Registering your team
Before the first assignment begins, you will need to create and register your team. Come up with a team name consisting only of lower-case letters (no punctuation) and a team password. Your instructor will give you the address for the registration web page. The web page is shown at the top of the next page.
On the registration page, you will first have to enter the code given in class. Once you have entered the code, you will be asked for the team name and the password that you came up with. Finally, you will be asked for the names of each of the team members. After you submit this information from the web page, your team will be registered. Later, if you
decide to change you team name, password, or members before the assignment begins, you can simply return to the registration page, enter the same team name and password you entered the first time, and then make your changes. To completely remove your team, delete all of the team members’ names and save the resulting team. You will not be able to make any changes to your team after the assignment begins.
Accessing your laboratory
When the assignment begins, you can access your lab from the entry web page using the team name and password that you previously registered. Your instructor will give you the address for the entry web page. The entry web page is shown below.
If you are using Windows, then MS Internet Explorer is the recommended browser. You should also have java and javascript enabled and window blocking for the lab web site dis- abled. These are the defaults on most PC’s, so you will only need to worry about your set- tings if things don’t appear to be working right.
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