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 to increase revenue and decrease costs. They believe a more responsive laboratory will increase revenue and they understand well-balanced inventory policies ought to minimize costs.
Operations Policies at Littlefield
In appreciation of your prior recommendations and contributions, Littlefield has once again retained your services on their 50th day of operations. This time, they would like your help with further lead time improvements and optimizing their inventory policy.
Management has used process time estimates from your first report to calculate a stable capacity configuration. They have purchased the recommended machinery, but are not entirely pleased with the lead time performance. Management trusts you will be able to effectively manage inventory, purchase additional capacity, and switch the scheduling rule to maximize their final cash position on Day 268.
Orders for new raw materials are transmitted electronically to a reliable supplier, which delivers the specified order quantity in exactly four days. Details concerning the supplier’s prices and shipping conditions can be found in, An Overview of Littlefield Labs. The