Capacity Management At Littlefield Technologies 1 
Stanford University Graduate School of Business
April 29, 2009
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Managing a Short Product Life Cycle at Littlefield Labs
Background
In early January, Littlefield Labs (LL) opened its first and only highly automated lab to test blood samples. LL receives the samples from local hospitals and clinics and processes the samples using disposable kits.
After 360 days of operation the lab will cease operations, shut down, and dispose of any remaining kit inventories. Neither capacity nor inventory has a salvage value after the lab shuts down. Marketing has sketched the expected demand trend shown in Figure 1.
Figure 1
Although marketing is confident of the rough shape of demand, there is not enough marketing data to predict the actual peak demand at this point. It will depend on how fast demand starts growing after day 60.
Management’s main concern is managing the capacity of the lab in response to the complex demand pattern predicted. Delays resulting from insufficient capacity would undermine LL’s promised lead times and ultimately force LL turn away orders.
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Based on an assignment written by Sunil Kumar and Samuel C. Wood, Stanford University Graduate
School of Business. Copyright 2009. No part of this document may be reproduced without permission from
Responsive Learning Technologies, Inc. info@responsive.net
Operations at Littlefield Labs
Littlefield Labs uses one kit per blood sample and disposes of the kit after the processing of the sample is completed After matching the sample to a kit, LL then processes the sample on a four step process on three machines as shown in Figure 2.
Figure 2
OUT
IN
Step 1
Sample Preparing
$25,000 per machine
Step 2 & 4
Testing
$75,000 per machine
Step 3
Centrifuging
$75,000 per machine
The purchase price of each machine is shown above as well. The retirement price of each machine is $10,000 if the machine is retired before day 360. Although management has not performed any stopwatch studies of the four different
April 29, 2009
*
*
Managing a Short Product Life Cycle at Littlefield Labs
Background
In early January, Littlefield Labs (LL) opened its first and only highly automated lab to test blood samples. LL receives the samples from local hospitals and clinics and processes the samples using disposable kits.
After 360 days of operation the lab will cease operations, shut down, and dispose of any remaining kit inventories. Neither capacity nor inventory has a salvage value after the lab shuts down. Marketing has sketched the expected demand trend shown in Figure 1.
Figure 1
Although marketing is confident of the rough shape of demand, there is not enough marketing data to predict the actual peak demand at this point. It will depend on how fast demand starts growing after day 60.
Management’s main concern is managing the capacity of the lab in response to the complex demand pattern predicted. Delays resulting from insufficient capacity would undermine LL’s promised lead times and ultimately force LL turn away orders.
*
Based on an assignment written by Sunil Kumar and Samuel C. Wood, Stanford University Graduate
School of Business. Copyright 2009. No part of this document may be reproduced without permission from
Responsive Learning Technologies, Inc. info@responsive.net
Operations at Littlefield Labs
Littlefield Labs uses one kit per blood sample and disposes of the kit after the processing of the sample is completed After matching the sample to a kit, LL then processes the sample on a four step process on three machines as shown in Figure 2.
Figure 2
OUT
IN
Step 1
Sample Preparing
$25,000 per machine
Step 2 & 4
Testing
$75,000 per machine
Step 3
Centrifuging
$75,000 per machine
The purchase price of each machine is shown above as well. The retirement price of each machine is $10,000 if the machine is retired before day 360. Although management has not performed any stopwatch studies of the four different