1 Management simulation game Furniture production

2 Most important parts of the simulation Marketing –based on market research (future market potential). Sales –product mix and determination of price are very important. Planning and production –desks and cabinets, production is planned quarterly.

3 Most important parts -continued Procurement –raw materials are used: metal and synthetics. Human resource management –recruiting and firing employees, –their wages and training. Finance –profit, CF, cost, revenue, turnover

4 Previous development You are at the beginning of the first quarter of the new year (5 th quarter). The development in the previous year is described in the materials. Together with you there are other 4 firms with the same starting position.

5 Previous development - continued Given factors: stock of final products ready to be sold; available production capacity; number of employees; stock of raw materials.

6 Future development So far you dont have any information about the future development; Therefore you should do a market research, –acquire information about the –potential sales, –the development of raw-materials prices for the next four quarters.

7 Market research can give you the following information: Market potential for desks and cabinets in the following quarter for certain price; Prices of raw materials (max 4 quarters in advance); Prices of competitors (in the previous quarter); Sales of competitors (in the previous quarter).

8 Market potential Level of demand under certain price; Excluding the beginning of the simulation, you can acquire only once per quarter and only for one of the future quarters; Price: CZK per product and quarter.

9 Other information prices of raw materials can be acquired for the whole following year –price: CZK per 1 quarter; prices of competitors can be acquired only for the previous quarter –price: CZK; the volume of desks and cabinets sold by competitors can be acquired only for the previous quarter –price: CZK.

10 Sales You can sell only those products, –which were produced or –were not sold in the previous quarter. In case of potential sales higher than your offer, you loose your goodwill, which projects in the simulation into the costs connected with unsatisfied demand –25 CZK per desk and 50 CZK per cabinet.

11 Production You can use 3 machines; All are able to produce desks and cabinets; Production is planned in 250 of machine- hours (see the following table).

12 Production -continued Machine time [hours] DESKSCABINETS Producti on [pcs] Needed workers Producti on [pcs] Needed workers

13 Production cut-backs Can happen in case of: lack of raw materials; insufficient production capacity; lack of workers. When necessary, volume of production is adjusted to the available resources –gradual cutting by 250 hours of machine-time, first cabinets, then desks, etc.

14 Procurement Raw materials are ordered and delivered every quarter; Time-delay between order and delivery is none, JIT; In case of buying at least 100 thous. kg of any raw material in one quarter, the supplier provides 2 % discount; Storage capacity is sufficient; Storage costs are 0,5 CZK.kg -1.

15 Human resource management You can decide about: Wage index - can not be lower than 90; Training - yes/no - 5 % of total wages; Recruiting and firing employees –number of employees is unlimited; –they acquire wages immediately, but work from the next quarter; –if PI is under the industry average – extra costs of 5 thous. CZK per one recruited employee.

16 Personnel index Labour relations criterion; Influenced by five variables: –wage level, –change of the wage level, –firing workers (more than 5 in 1 q.), –training, –influence of competition.

17 Influence of variables on PI FactorInfluence Base index Base value is always 100. Wage index Always compared with the BI. Change of WI Change of the WI projects appropriately into the change of PI. Firing Firing more than 5 employees in 1 quarter causes decline of PI by 10 points. Training T(n-1) T(n) Influence on PI

18 Influence of PI on sick-leave Personnel indexSick-leave < 9025 % <90; 100)15 % <100; 110)5 % >= 1100 %

19 Finance Equity: –cca 7,5 mil. Kč (3 mil. = shares), –changes = only by accumulating profits or covering losses. External capital: –investment credit - on request, interest rate = 3 % per quarter (repayments start one year after acquiring, interests start immediately), –extended credit - given automatically in case of problems with liquidity; only for 1 quarter, interest rate = 10 % per quarter.

20 Bankruptcy In case of insolvency in two following quarters; Significant negative influence on the total evaluation of the company; Production and sales can freely continue – company liquidator

21 GOOD LUCK!!!