Littlefield Technologies is a low volume, high margin manufacturer and distributor of digital satellite system receivers. Littlefield Technologies seeks to minimize production costs and sell at the highest price the market will allow, with the end result of maximizing profit, or value for shareholders. .
In order to be successful they needed to maximize utilization of every stage of the process from inventory control to shipping. With the negotiated contracts available in order to maximize profits Littlefield has little room for inefficiencies and must meet all delivery requirements. At the time of change over, Littlefield was not maximizing the capacity of the plant. It was not effectively processing items through station 2 and was exceeding the utilization of all stations in the production process. In addition, it did not have a delivery agreement with suppliers that would maximize raw product inflows at the least cost. Finally it did not have a contract negotiated with customers that maximized the price the market was willing to bear given taking into account the order lead time the customers required.
Capacity Management.
In order to determine the number of machines to purchase for each station we started by pulling all historical data for the plant to analyze the potential bottlenecks. We analyzed the utilization and capacity of each station and determined the current number of machines was inadequate and would not meet demand even if inventory levels were under control.
We started with only adding one additional machine to station 1 which had a large backlog, had the highest utilization, and was the starting point for the production process. Soon after we noted the backlog of the equipment in all other stations began to exceed station 1 so one machine was purchased for station 2 and one machine was purchased for station 3. This effectively decreased the queue at each station and materials started moving through the factory more efficiently.
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