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6) You are also responsible for setting the Re-Order Point (ROP) in LL2. When the inventory level hits a point that
is below the ROP, your factory automatically places an order (of the order quantity you set) to your supplier;
however, it will take 7 days for the kits to be delivered to you. (The supplier lead time may be different from LL1,
but you are not controlling the inventory policy in LL1) Basically, you need to set the ROP such that you have
sufficient inventory on hand to buffer a random demand over a 7-day period. Assume that you use Contract 3
such that if you run out of inventory, you will need to wait for at least 1 day before kits are delivered and your job
will be late for at least one day and you will lose your entire $1,250 potential revenue. You can use your estimated
daily demand mean from (3) multiplying by 7 as the average demand over the 7-day period, and use your daily
demand standard deviation from (3) multiplying by 1 as the standard deviation over a 7-day period. Use a
Newsvendor model to calculate the ROP for this scenario. (You can use $85 as the per unit overstocking cost Co
in this case assuming the inventory unit leftover at the bottom will be held throughout the game.) Note that you
may want to revise this decision as your get more data, especially when you switch to a different contract, which
will give you a different per unit understocking cost Cu.
Game Questions:
Provide a screenshot of your decision history (by clicking on the History icon) for both the 1st and 2nd runs. Justify all
your decisions by considering the following questions:
7) Based on your factory settings, which contract would work the best for you? Have you changed to different
contracts during the game? Whats the rationale behind your decisions on switching between contracts?
(Note that Team donothing will keep using Contract 1 and making some money in a non-aggressive fashion.
What would be your strategy to beat donothing? What would be your strategy to head towards top 3?)
8) Using data after Day 100, does the average daily demand in the peak period match with your original forecast
from (3)? How did you update your forecasts during the game? Did the updated forecasts help you make better
decisions? (Show all updated forecasting calculations.) Did you use different forecasting methods? Whats the
rationale behind your choice of the forecasting method?
9) Compare your forecasting efforts in the 1st run and the 2nd run. Did the general market trends follow what the
experts predicted? Did you use different forecasting methods in the two runs?
10) Based on your updated forecasts, how do you make your decision on buying/selling machines? (Show all
calculations.) How much capacity buffer is sufficient for you based on your choice of contract? Is making this set
of decisions in the 2nd run different from what you did in the 1st run? Why or why not?
11) Based on your updated forecasts, how do you re-set your inventory Order Quantity? (Show calculations for all
changes.)
12) Based on your updated forecasts and your contract, how do you re-set your Reorder Point? (Show calculations for
all changes.)
(Hint: As you get more stabilized data, a better way to forecast the demand for a 7-day period is probably to use
your daily arrival data to generate a new column of data for a relatively stable period that consists of the 7-day
Moving Sum of the original daily data. You can then simply find out the mean and standard deviation for a
weekly demand using the new column.)
13) In both simulation runs, how would the scheduling (prioritizing) rule at Stations 2 affect the performance of your
factory? Whats the rationale behind your decision on the prioritizing rule?
14) Have you considered increasing (or later decreasing) your debt during the lifecycle of LL2? Why?
15) Note that at the end of the game on Day 450, any leftover inventory will be thrown away and therefore become
waste. On the other hand, if you run out of inventory, customers will be turned away and this will become lost
income. How would you deal with this problem before your control over the factory expires (before Day 393)?