Summary of decisions:
Our first course of action at the start of the game was to increase our inventory and buy more machines. We first increased our inventory reorder point to 10,800 units and changed the order quantity amount to 1800 units. In order to process this increase in units, we bought 2 machines for station 1, 3 machines for station 2, and 2 machine for station 3. Seeing that the machines could process a lot more inventory faster than we expected, we decided to change our reorder points and order quantities, to 6000 units and 24,000 units, respectively. After letting our system adjust to the changes, we moved to contract 2 when the lead time was decreased to about 1 day. From there we let the simulation run for another six days before lead times went down to less than 1, at which time we switched to contract 3. We made no further changes after switching to contract 3.
Part 1: Reasoning for Decisions
Our decisions were somewhat limited to our EOQ model’s completion and our risk adversity. In the last simulation we relied much more heavily on our EOQ model and planned out purchases of machinery with the raise in demand. However, it was because we did not create a safety margin for production which came from our over estimating our carrying costs. We knew that the initial status quo was limited by the inventory quantity. But we did not know if it was the reason for the full utilization of the machinery. Thus we decided to change the most pressing variable, inventory, and see where it went from there. But we knew that this time we needed to act faster than before to acquire new machinery. However, our risk adversity limited us again when it came to switching to contract 3 right away. We knew that with contract 3, the time window for profits was only 12 hours. So we overestimated the impact that a spike in demand would create and...