Little Field Round 2

Initial Analysis After plotting the demand, we could tell that we were dealing with an uncertain demand, which had an average of 12 orders per day with a standard deviation of 3 orders. The current capacities of machine 1 and 3 were at 13 jobs per day and the capacity of machine 2 was 25 jobs per day. This was calculated by dividing the average demand by the average utilization of each machine, additionally, our average lead-time was 1 day with a standard deviation of .72. This meant that our factory was able to meet the majority of demand since our overall flow rate was equal to demand plus its standard deviation (FR=min of 13 capacity and 12 demand) as well as meet the specified conditions of contract 1. Additionally, this information showed that we currently had two bottlenecks in machines 1 and 3, which meant that when we decided to buy more machines we would need to have enough to increase the capacities of machine 1 and 3 at the same time or else our overall flow rate would not change. Our first step was to calculate the correct EOQ and ROP quantities so that we could begin to maximize our profits and be able to advance to the next contract as soon as possible. Our ROP quantity was then changed to 60 jobs (12 demand*4 days of supplier lead time+1.65 95% Z score*3.412 standard deviation of demand*square root 4 days of supplier lead time). Our EOQ was 38 (square root of 2*1000 setup cost*12 demand/600 cost per unit * .02373 10% interest compounded daily). After changing EOQ and ROP we determined we needed to hit a cash savings of $212,800 to afford to buy 2 machines for station 1 and 2 and be able to re-stock our inventory (2,280 EOQ * $10 per kit)+ $90,000 for machine 1 + $100,000 for machine 2). To do this we calculated daily profit to determine how long it would take us to reach our goal. We knew that the factory re-ordered every 4 days at a EOQ of 2,280, which costs us $22,800 every 4 days (22800 * 10), however, on average we are only getting 12 new