What action did your team take during days 50 to 218?
We decided to increase the capacity of the factory so that we could eventually switch to contract #3, which gives the most possible revenues. Thus, we had to increase the capacity, change the ROP, change Reorder quantity to EOQ and finally calculate the final reorder quantity so we could have very little inventory left at the end of the game.
CONTRACT: We chose to use contract 2 for a little while so that the factory can get rid of the queues with the extra machines we purchased. When the queues were gone, we switched to contract # 3. This contract was the most beneficial, as we could get $1,308,000 (=$500 per job*12 jobs/ day* 218 days) in extra revenues comparing to contract #1 if we would have switched since the very beginning.
CAPACITY: We made several errors in calculating capacity. It seemed that if we increase the capacity, more orders could be processed. However, extra capacity did not help cut off the lead time. Thus, we bought several machines we did not really need. We realized this mistake quite fast, but we left the machines, as selling them for the scrap value did not make much sense.
We calculated the capacity in the following way:
Contract #3 requires to process 12 jobs per day, thus we thought we need about double that capacity to process the incoming orders in half a day. Thus, we made the following purchases:
Machine #2: +1 (12*2 jobs/day / 12.6 jobs/ day= 1.91 -> we need 2 machines #2)
Machine #3: +1 (12*2jobs/day / 11.8 jobs/day= 2.03 -> we need 2 machines #3)
Machine #1: +1 (12*2jobs/day / 4.5 jobs/day= 5.33 -> we need 6 machines #1, but for contract #2 that is in force at the moment 4 machines are enough to process the orders and get rid of the queues.)
We should have stopped here. But we did not. Thinking that the additional machines will ensure high...