Little Field

Topics: Linear regression, Regression analysis, Forecasting Pages: 2 (770 words) Published: November 25, 2012
After the initial observations of demand for littlefield labs (day 52), one of the first steps we took was to identify the bottleneck in the production chain. This was determined by looking at the rate of utilization of the three machines and the number of jobs in the queue waiting for these machines. It was quickly determined that the machine 1 was our bottleneck, as it was the only machine with 100% utilization and excess number of jobs in the queue. This meant that machine 1 was not able to keep up with the incoming demand and lacked the proper capacity. We knew that we needed to increase capacity and the decision was made to purchase another machine 1. Following the decision to purchase a machine, our focus shifted to the inventory level and the reorder point. It was obvious that the old reorder point was not going to keep up with the incoming demand level, especially considering the four day lead time. Our initial thinking was to set the reorder point to a level where the inventory would have sufficient level of safety stock to avoid stocking out before the next batch of order came. Also we needed determine the quantity of inventory to order, making sure to take into account the ordering cost of $1000 as well. One of our initial goal for day 52 was to make sure our system was clear of any bottleneck and to have sufficient level of inventory to last us until day 73. This strategy was in part due to the fact that we did not have much time to analyze and properly forecast the future demand (initially meeting took place at midnight due to the long commute), but also to allow us to have more data about the incoming demand. To determine the proper level of order quantity and reorder point, we did a simple forecasting of incoming demand by using a simple linear regression analysis of observed demand for the first 50 days. Using this data we determined that the reorder point must be increased to 45 and the order quantity should be set at 250 kits. When we did meet...
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