Emerson Network Power Confidential LittlefieldLittlefield

2 AgendaAgenda Scope of The Game Current State Process Order Rates

Emerson Network Power Confidential 3 ScopeScope maximizing revenue by in an Dish Manufacturing Factory optimizing by optimizing batching, raw material, and overcoming bottlenecks through either batching or investment in new equipment.

Emerson Network Power Confidential 4 Game Basics We are to adjust key parameters to optimize throughput and maximize profit Each Hour reflects an actual day of production –We can modify each hour if we want We assume plant responsibility for ordering, acceptance of orders, batch size, investment decisions We operate 7/24 We will start our management tenure on day 51 and operate for 266 days. The last 100 days will run based on the last settings This game will run for 9 days Elapsed time

Emerson Network Power Confidential 5 Current State Labor Cost is not a factor Our manufacturing Process if broken down into 4 distinct processes –Board Stuffing (let’s call it surface mount) –Initial Test –Tuning –Final Test Waiting Queue Size is not an Issue Initial Material Ordered was for 7,500 kits

Emerson Network Power Confidential 6 Board Stuffing Longest Single step in process regardless of batch size No Variability –HERBIE!!!! –A Surface Mount Machine Additional Machine costs $90,000 No Lead Time noted… –Scrap $ = $10,000K –Initial number of Machines 3

Emerson Network Power Confidential 7 Initial Test Short Cycle No Variability, until we get fully operational!!!!!! As it shares the same equipment as Step 4 Final Test –Additional Machine costs $80,000 No Lead Time noted… –Scrap $ = $10,000K –Initial number of Machines

Emerson Network Power Confidential 8 TuningTuning Can be incredibly short Variability Strikes!!!!!!!!!!!!! Equipment –Additional Machine costs $100,000 No Lead Time noted… –Scrap $ = $10,000K –Initial number of Machines

Emerson Network Power Confidential 9 Final Test Shortest Cycle No Variability, until we get fully operational!!!!!! –As it shares the resource with Initial Test Equipment –A Test Machine Additional Machine costs $80,000 No Lead Time noted… –Scrap $ = $100,000K –Initial number of Machines 1 Same Machine as Initial Test!!!!!!!!!!!!!!!!!!!!! 9.68

Emerson Network Power Confidential 10 Order Acceptance We can accept orders but each batch must be for multiples of 60 –If we receive and order for more than this, we do not have material or capacity, then it will not be accepted can not a Lead Times –Current Quoted as 7 Days When accepting Orders –We can accept them at one of three levels

Emerson Network Power Confidential 11 MaterialMaterial Initial on Hand Material –7,200 Units –Material Cost Per unit $10 –All Orders must be placed in Multiples of 60 –Lead time is 4 Days –Unsure of Initial Inventory when we start game Holding Period Costs –If not leveraged, 10% annualized

Emerson Network Power Confidential 12 InvestmentInvestment AT day 150, we can obtain financing –20% annual

Emerson Network Power Confidential 13 Day of Take Over The LT factory began production by investing most of its cash into capacity and inventory. Specifically, on day 0, the factory began operations with three stuffers, one tester, and one tuner, and a raw materials inventory of 7200 kits. This left the factory with zero cash on hand. Management is currently quoting 7-day lead times, but management would like to charge the higher prices that customers would pay for dramatically shorter lead times. In addition, because the factory is essentially bootstrapping itself financially, management is worriedabout running out of cash.

Emerson Network Power Confidential 14 Ordering Queue What is the Current Batch Size What should our contact price be after reviewing other data

Emerson Network Power Confidential 15 Materials Buffer Current Inventory Levels Reorder point And QTY to order

Emerson Network Power Confidential 16 Key Items to look at while we determine what our Bottlenecks and Variances for Future Investment Are our bottlenecks where we think they are?

Emerson Network Power Confidential 17 Work/Process Centers Most important short term, if we can’t buy any new machines is Testing Priority

Emerson Network Power Confidential 18 How are we doing? Should we alter the pricing? Are we confident?

Emerson Network Power Confidential 19 Action Plan Assess Current Position If things are not terrible would recommend batch sizes of 20 Leave Orders at 7 days for time being EOQ is hard to use as holding –2500 Kit at a time –$26K Cash Needed Prioritization of the new Assets