Little field
BOSTON
COLLEGE
CARROLL SCHOOL OF MANAGEMENT
OPERATIONS AND STRATEGIC MANAGEMENT
Capacity Management at Littlefield Technologies:
DSS Manufacturing Issues During Spring 2006
Professor Field’s Version
Background
In early January 2006, Littlefield Technologies (LT) opened its first and only factory to produce its newly developed Digital Satellite System (DSS) receivers. Littlefield Technologies mainly sells to retailers and small manufacturers using the DSS’s in more complex products. Littlefield Technologies charges a premium and competes by promising to ship a receiver within 24 hours of receiving the order, or the customer will receive a rebate based on the delay.
The product lifetime of many high-tech electronic products is short, and the DSS receiver is no exception. LT managers have decided that, after 268 days of operation, the plant will cease producing the DSS receiver, retool the factory, and sell any remaining inventories.
As this is a short life-cycle product, managers expect that demand during the 268 day period will grow as customers discover the product, eventually level out, and then decline. In the initial months, demand is expected to grow at a roughly linear rate. Demand is then expected to stabilize. Eventually, demand should begin to decline at a roughly linear rate. Although orders arrive randomly to LT, management expects that, on average, demand will follow the trends outlined above.
Management’s main concern is managing the capacity of the factory in response to the complex demand pattern. Delays resulting from insufficient capacity undermine LT’s promised lead times and ultimately force LT to turn away orders. In particular, if an order’s lead time exceeds the quoted lead time, then the revenue for that order decreases linearly, from $1000 for the quoted lead time (24 hours) to $0 for the maximum lead time (72 hours).
Assignment
It is now mid-February 2006, and LT has started to notice that a few of
COLLEGE
CARROLL SCHOOL OF MANAGEMENT
OPERATIONS AND STRATEGIC MANAGEMENT
Capacity Management at Littlefield Technologies:
DSS Manufacturing Issues During Spring 2006
Professor Field’s Version
Background
In early January 2006, Littlefield Technologies (LT) opened its first and only factory to produce its newly developed Digital Satellite System (DSS) receivers. Littlefield Technologies mainly sells to retailers and small manufacturers using the DSS’s in more complex products. Littlefield Technologies charges a premium and competes by promising to ship a receiver within 24 hours of receiving the order, or the customer will receive a rebate based on the delay.
The product lifetime of many high-tech electronic products is short, and the DSS receiver is no exception. LT managers have decided that, after 268 days of operation, the plant will cease producing the DSS receiver, retool the factory, and sell any remaining inventories.
As this is a short life-cycle product, managers expect that demand during the 268 day period will grow as customers discover the product, eventually level out, and then decline. In the initial months, demand is expected to grow at a roughly linear rate. Demand is then expected to stabilize. Eventually, demand should begin to decline at a roughly linear rate. Although orders arrive randomly to LT, management expects that, on average, demand will follow the trends outlined above.
Management’s main concern is managing the capacity of the factory in response to the complex demand pattern. Delays resulting from insufficient capacity undermine LT’s promised lead times and ultimately force LT to turn away orders. In particular, if an order’s lead time exceeds the quoted lead time, then the revenue for that order decreases linearly, from $1000 for the quoted lead time (24 hours) to $0 for the maximum lead time (72 hours).
Assignment
It is now mid-February 2006, and LT has started to notice that a few of