DepartmentRady School of Management
Course CodeMGT 181
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Stanford University Graduate School of Business September 2007
Written by Sunil Kumar and Samuel C. Wood, both Assistant Professors at the Stanford University Graduate
School of Business. Copyright 1998. No part of this document may be reproduced without permission from
Responsive Learning Technologies, Inc., at email@example.com.
Littlefield Technologies: Overview
Littlefield Technologies is a job shop which assembles Digital Satellite System receivers.
These receivers are assembled from kits of electronic components procured from a single
supplier. The assembly process consists of four steps carried out at 3 stations called board
stuffing, testing and tuning. The first step consists of mounting the components onto PC
Boards and soldering them. This is done at the board stuffing station. The digital compo-
nents are then briefly tested at the testing station in step 2. In the third step, key compo-
nents are tuned at the tuning station. Finally, the boards are exhaustively “final tested” in
step 4 at the testing station before delivery to the customer. Every receiver passes final
All the stations consist of automated machines which perform the operations. You may
purchase additional machines during the assignment. Board Stuffing machines cost
$90,000, testers cost $80,000, and tuning machines cost $100,000. You can also sell any
machine at a retirement price of $10,000, provided 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.
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Littlefield Technologies: Overview 2
Orders arrive randomly at the factory. Each order is for 60 receivers. When an order
arrives it is matched up with 60 raw kits and becomes a manufacturing lot. If an order
arrives and there are less than 60 raw kits in the materials buffer, the order waits in the cus-
tomer order queue pending arrival of raw kits. In addition, orders are not accepted if the
total number of orders in the system (waiting for kits or in process) exceeds 100. If it is
allowed in the assignment, the 60 kits may be sub-divided into several manufacturing lots
just prior to entering the factory. Processing a lot on each machine entails performing a
setup on the machine, processing each kit in the lot (one at a time), and then sending the
completed lot on to the next station. Once all the receivers in an order are completed, the
order is shipped immediately. A job is not shipped to its customer until all of the lots in the
job are completed.
Raw kits are purchased from a single supplier and cost $10 per kit ($600 per order). There
is also a fixed cost of $1000 per shipment of raw kits, independent of the shipment size.
The supplier requires four days to ship any quantity of raw kits. An order for new raw kits
is placed with the supplier when the following three criteria are met: (1) the inventory of
raw kits is less than the material reorder point, (2) there are no orders for raw kits currently
outstanding, and (3) the factory has sufficient cash to purchase the specified order quan-
tity. If it is allowed in the assignment, you may set the reorder point and order quantity
independently to any multiple of 60 kits, as long as that multiple is greater than zero.
The current pricing contract is as follows. An order does not leave the factory until all 60
kits in the order are completed. A customer order filled within the quoted lead time of 24
hours earns $1000. If an order is still in the factory 24 hours after it arrived, then a lateness
penalty is incurred. Specifically, the total revenue for an order linearly decreases from
$1000 for a 24-hour lead time to $0 for the maximum lead time of 72 hours. Orders that
take longer than 72 hours to fill generate no revenue at all. If it is allowed in the assign-
ment, you may select from a menu of other contracts for future orders. More lucrative con-
tracts will have shorter quoted lead times and shorter maximum lead times.
You will have some cash on hand when the assignment begins. This amount is depleted by
buying machines as well as by buying raw kits from the supplier. The revenue earned from
filled orders increases the cash balance. The balance earns interest (compounded every
simulated day) at a compounded rate of 10% per year. There are no taxes. All fixed over-
head 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 result-
ing cash balance would be too low to purchase an order of raw materials at the current
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. There
should be four students per 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.
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