1. © Léger et al. 2010. ERPsim is proprietary technology developed by researchers at HEC Montréal, École Polytechnique de Montréal and Western Michigan Univ. ERPsim is owned by Polyvalor and Valorisation Gestion and commericialized by Baton Simulations. More info at erpsim.hec.ca Version : August 2010 Manufacturing game Part 1 – Chapter 1 & 5 About the business environment

2. © Léger et al. 2010. ERPsim is proprietary technology developed by researchers at HEC Montréal, École Polytechnique de Montréal and Western Michigan Univ. ERPsim is owned by Polyvalor and Valorisation Gestion and commericialized by Baton Simulations. More info at erpsim.hec.ca Version : August 2010 Muesli Cereals

3. © Léger et al. 2010. ERPsim is proprietary technology developed by researchers at HEC Montréal, École Polytechnique de Montréal and Western Michigan Univ. ERPsim is owned by Polyvalor and Valorisation Gestion and commericialized by Baton Simulations. More info at erpsim.hec.ca Version : August 2010 Product size 0.5 KG 1.0 KG

4. © Léger et al. 2010. ERPsim is proprietary technology developed by researchers at HEC Montréal, École Polytechnique de Montréal and Western Michigan Univ. ERPsim is owned by Polyvalor and Valorisation Gestion and commericialized by Baton Simulations. More info at erpsim.hec.ca Version : August 2010 Your 6 products 40% wheat 40% oat 20% nut 1 box 1 bag 35% wheat 35% oat 10% raisin 10% nut 5% strawberry 5% blueberry 1 box 1 bag 50% wheat 50% oat 1 box 1 bag 40% wheat 40% oat 20% raisin 1 box 1 bag 40% wheat 40% oat 20% strawberry 1 box 1 bag 40% wheat 40% oat 20% blueberry 1 box 1 bag

5. © Léger et al. 2010. ERPsim is proprietary technology developed by researchers at HEC Montréal, École Polytechnique de Montréal and Western Michigan Univ. ERPsim is owned by Polyvalor and Valorisation Gestion and commericialized by Baton Simulations. More info at erpsim.hec.ca Version : August 2010 Muesli Manufacturing Association Label Regulation

6. © Léger et al. 2010. ERPsim is proprietary technology developed by researchers at HEC Montréal, École Polytechnique de Montréal and Western Michigan Univ. ERPsim is owned by Polyvalor and Valorisation Gestion and commericialized by Baton Simulations. More info at erpsim.hec.ca Version : August 2010 Operations in the cash-to- cash cycle

7. © Léger et al. 2010. ERPsim is proprietary technology developed by researchers at HEC Montréal, École Polytechnique de Montréal and Western Michigan Univ. ERPsim is owned by Polyvalor and Valorisation Gestion and commericialized by Baton Simulations. More info at erpsim.hec.ca Version : August 2010 Input Cost at low seasonal price

8. © Léger et al. 2010. ERPsim is proprietary technology developed by researchers at HEC Montréal, École Polytechnique de Montréal and Western Michigan Univ. ERPsim is owned by Polyvalor and Valorisation Gestion and commericialized by Baton Simulations. More info at erpsim.hec.ca Version : August 2010 Number of stores by geographical area

9. © Léger et al. 2010. ERPsim is proprietary technology developed by researchers at HEC Montréal, École Polytechnique de Montréal and Western Michigan Univ. ERPsim is owned by Polyvalor and Valorisation Gestion and commericialized by Baton Simulations. More info at erpsim.hec.ca Version : August 2010 DC10 Hypermarkets Buy only large boxes (1 kg) Payment delay of 30 days More sensitive to price Less sensistive to advertising No partial orders - Must be able to obtain the full order in order to buy from a particular plant. Buy about 3 different products © HEC Montréal 2009 / Page 9

10. © Léger et al. 2010. ERPsim is proprietary technology developed by researchers at HEC Montréal, École Polytechnique de Montréal and Western Michigan Univ. ERPsim is owned by Polyvalor and Valorisation Gestion and commericialized by Baton Simulations. More info at erpsim.hec.ca Version : August 2010 DC12 Grocery chains Buy small boxes (0.5 kg) and large boxes (1 kg) Variable payment delay between 15 to 20 days Buy about 4 different products – seek to buy those from a unique vendor © HEC Montréal 2009 / Page 10

11. © Léger et al. 2010. ERPsim is proprietary technology developed by researchers at HEC Montréal, École Polytechnique de Montréal and Western Michigan Univ. ERPsim is owned by Polyvalor and Valorisation Gestion and commericialized by Baton Simulations. More info at erpsim.hec.ca Version : August 2010 DC14 Independent grocers Only buy small boxes (0.5 kg) Less price sensitive Sensitive to advertising Variable payment delay between 5 to 30 days Buy about 2 different products © HEC Montréal 2009 / Page 11

12. © Léger et al. 2010. ERPsim is proprietary technology developed by researchers at HEC Montréal, École Polytechnique de Montréal and Western Michigan Univ. ERPsim is owned by Polyvalor and Valorisation Gestion and commericialized by Baton Simulations. More info at erpsim.hec.ca Version : August 2010 Number of retailers per Länders

13. © Léger et al. 2010. ERPsim is proprietary technology developed by researchers at HEC Montréal, École Polytechnique de Montréal and Western Michigan Univ. ERPsim is owned by Polyvalor and Valorisation Gestion and commericialized by Baton Simulations. More info at erpsim.hec.ca Version : August 2010 Risk premium on credit ratings

14. © Léger et al. 2010. ERPsim is proprietary technology developed by researchers at HEC Montréal, École Polytechnique de Montréal and Western Michigan Univ. ERPsim is owned by Polyvalor and Valorisation Gestion and commericialized by Baton Simulations. More info at erpsim.hec.ca Version : August 2010 Setup Time Reduction (exp.) Production Capacity Improvement (cap.) 21,000 + (0.004 * Investment) (400 boxes/day for each 100k) Production improvements

15. © Léger et al. 2010. ERPsim is proprietary technology developed by researchers at HEC Montréal, École Polytechnique de Montréal and Western Michigan Univ. ERPsim is owned by Polyvalor and Valorisation Gestion and commericialized by Baton Simulations. More info at erpsim.hec.ca Version : August 2010 Warehousing cost automatically charged Each team has 3 warehouse storage areas: Finished product - space for 250,000 boxes Raw materials - space for 250,000 kg Packaging - space for 1,000,000 boxes and space for 1,000,000 bags Additional warehouse space can be rented: 100,000 boxes (or part thereof), @ € 200/day (less than € 0.01 per box per day) 100,000 kg (or part thereof), @ € 350/day (more expensive because it's raw food product) 100,000 boxes AND/OR bags (or part thereof), @ € 50 day © HEC Montréal 2009 / Page 15

16. © Léger et al. 2010. ERPsim is proprietary technology developed by researchers at HEC Montréal, École Polytechnique de Montréal and Western Michigan Univ. ERPsim is owned by Polyvalor and Valorisation Gestion and commericialized by Baton Simulations. More info at erpsim.hec.ca Version : August 2010 Fixed costs per week

17. © Léger et al. 2010. ERPsim is proprietary technology developed by researchers at HEC Montréal, École Polytechnique de Montréal and Western Michigan Univ. ERPsim is owned by Polyvalor and Valorisation Gestion and commericialized by Baton Simulations. More info at erpsim.hec.ca Version : August 2010 Manufacturing game Part 2 – Chapter 5 Business decisions

18. © Léger et al. 2010. ERPsim is proprietary technology developed by researchers at HEC Montréal, École Polytechnique de Montréal and Western Michigan Univ. ERPsim is owned by Polyvalor and Valorisation Gestion and commericialized by Baton Simulations. More info at erpsim.hec.ca Version : August 2010 Notes About Customer Demand Retailers order according to the needs of their customers Customers have different preferences, each having a “preferred” recipe; these preferences are generated when the game starts and will not change Products closer to one’s preferred recipe have an edge Price matters, remember that there are other things to eat for breakfast (or lunch, or dinner) Advertising can be persuasive, it can turn your recipe into the “preferred product” There is uncertainty in demand

19. © Léger et al. 2010. ERPsim is proprietary technology developed by researchers at HEC Montréal, École Polytechnique de Montréal and Western Michigan Univ. ERPsim is owned by Polyvalor and Valorisation Gestion and commericialized by Baton Simulations. More info at erpsim.hec.ca Version : August 2010 New product development

20. © Léger et al. 2010. ERPsim is proprietary technology developed by researchers at HEC Montréal, École Polytechnique de Montréal and Western Michigan Univ. ERPsim is owned by Polyvalor and Valorisation Gestion and commericialized by Baton Simulations. More info at erpsim.hec.ca Version : August 2010 Muesli Manufacturing Association Label Regulation

21. © Léger et al. 2010. ERPsim is proprietary technology developed by researchers at HEC Montréal, École Polytechnique de Montréal and Western Michigan Univ. ERPsim is owned by Polyvalor and Valorisation Gestion and commericialized by Baton Simulations. More info at erpsim.hec.ca Version : August 2010 Lot size decision (MM02)

22. © Léger et al. 2010. ERPsim is proprietary technology developed by researchers at HEC Montréal, École Polytechnique de Montréal and Western Michigan Univ. ERPsim is owned by Polyvalor and Valorisation Gestion and commericialized by Baton Simulations. More info at erpsim.hec.ca Version : August 2010 Production execution decision

23. © Léger et al. 2010. ERPsim is proprietary technology developed by researchers at HEC Montréal, École Polytechnique de Montréal and Western Michigan Univ. ERPsim is owned by Polyvalor and Valorisation Gestion and commericialized by Baton Simulations. More info at erpsim.hec.ca Version : August 2010 Production improvement decision

24. © Léger et al. 2010. ERPsim is proprietary technology developed by researchers at HEC Montréal, École Polytechnique de Montréal and Western Michigan Univ. ERPsim is owned by Polyvalor and Valorisation Gestion and commericialized by Baton Simulations. More info at erpsim.hec.ca Version : August 2010 Setup Time Reduction (exp.) Production Capacity Improvement (cap.) 21,000 + (0.004 * Investment) (400 boxes/day for each 100k) Production improvements

25. © Léger et al. 2010. ERPsim is proprietary technology developed by researchers at HEC Montréal, École Polytechnique de Montréal and Western Michigan Univ. ERPsim is owned by Polyvalor and Valorisation Gestion and commericialized by Baton Simulations. More info at erpsim.hec.ca Version : August 2010 Pricing decision

26. © Léger et al. 2010. ERPsim is proprietary technology developed by researchers at HEC Montréal, École Polytechnique de Montréal and Western Michigan Univ. ERPsim is owned by Polyvalor and Valorisation Gestion and commericialized by Baton Simulations. More info at erpsim.hec.ca Version : August 2010 Marketing decision

27. © Léger et al. 2010. ERPsim is proprietary technology developed by researchers at HEC Montréal, École Polytechnique de Montréal and Western Michigan Univ. ERPsim is owned by Polyvalor and Valorisation Gestion and commericialized by Baton Simulations. More info at erpsim.hec.ca Version : August 2010 Requesting a Loan Increase (between rounds) Financing decision (1/2)

28. © Léger et al. 2010. ERPsim is proprietary technology developed by researchers at HEC Montréal, École Polytechnique de Montréal and Western Michigan Univ. ERPsim is owned by Polyvalor and Valorisation Gestion and commericialized by Baton Simulations. More info at erpsim.hec.ca Version : August 2010 Financing Decision (2/2) Paying Down Your Loan

29. © Léger et al. 2010. ERPsim is proprietary technology developed by researchers at HEC Montréal, École Polytechnique de Montréal and Western Michigan Univ. ERPsim is owned by Polyvalor and Valorisation Gestion and commericialized by Baton Simulations. More info at erpsim.hec.ca Version : August 2010 Liquidity and cash management You will start with 3 million euros in cash Common uses for cash include: Operating Expenses (labor, overhead, interest, storage, etc.) Purchasing raw materials Marketing Paying down bank loan to save on future interest payments Reducing production setup time (expense) Increasing production capacity (capital) If you run out of cash, your bank loan will be extended, but you credit rating will go down and your interest payments will go up

30. © Léger et al. 2010. ERPsim is proprietary technology developed by researchers at HEC Montréal, École Polytechnique de Montréal and Western Michigan Univ. ERPsim is owned by Polyvalor and Valorisation Gestion and commericialized by Baton Simulations. More info at erpsim.hec.ca Version : August 2010 Advice Avoid unplanned stockouts Consumer Buying Decision = Availability + Content + Price + Marketing If a product is not selling: insufficient demand, too much competition, unattractive price Production capacity is 21,000+ boxes per day, minus setup time… You don’t want to have your production lines running idle (~16k EUR per day in fixed costs)… … so, it might be a good idea to set a target sales volume between 15,000 – 25,000 boxes per day (and adjust based on current inventory & desired velocity) The online news feed and quarterly reports are useful for predicting trends and analyzing competition (link to live feed provided by instructor) There are a couple of ways to identify market segments that are not being served

31. © Léger et al. 2010. ERPsim is proprietary technology developed by researchers at HEC Montréal, École Polytechnique de Montréal and Western Michigan Univ. ERPsim is owned by Polyvalor and Valorisation Gestion and commericialized by Baton Simulations. More info at erpsim.hec.ca Version : August 2010 Review of the major rules You may not change the recipe of a product if you are still carrying inventory Customers do not change throughout the game, hence you may learn from their past behaviour The company displaying the highest shareholder’s equity / retained earnings / net profit at the end of the simulation wins the game You must behave ethically at all times At the end of the game, raw material and finished goods inventory will be valued at cost

32. © Léger et al. 2010. ERPsim is proprietary technology developed by researchers at HEC Montréal, École Polytechnique de Montréal and Western Michigan Univ. ERPsim is owned by Polyvalor and Valorisation Gestion and commericialized by Baton Simulations. More info at erpsim.hec.ca Version : August 2010 Elements of a winning strategy Use the ERP system efficiently Do not run out of stock Delays, production capacities and liquidity constraints are important elements of the game Exploration and exploitation Team organization and communication are more important than you think

33. © Léger et al. 2010. ERPsim is proprietary technology developed by researchers at HEC Montréal, École Polytechnique de Montréal and Western Michigan Univ. ERPsim is owned by Polyvalor and Valorisation Gestion and commericialized by Baton Simulations. More info at erpsim.hec.ca Version : August 2010 Have Fun! You are using a real ERP system to operate a company in a simulated business environment Winning is great, but ultimately, this experience is about learning … and we learn more from our mistakes than we do from our successes … so don’t be afraid to make mistakes … and learn from them.

34. © Léger et al. 2010. ERPsim is proprietary technology developed by researchers at HEC Montréal, École Polytechnique de Montréal and Western Michigan Univ. ERPsim is owned by Polyvalor and Valorisation Gestion and commericialized by Baton Simulations. More info at erpsim.hec.ca Version : August 2010 Extended Game - Practice Client 420 – Switch Team Letters Same logins, initial password Make some decisions BOM Changes Production Improvements ??? Ready, Set, …

35. © Léger et al. 2010. ERPsim is proprietary technology developed by researchers at HEC Montréal, École Polytechnique de Montréal and Western Michigan Univ. ERPsim is owned by Polyvalor and Valorisation Gestion and commericialized by Baton Simulations. More info at erpsim.hec.ca Version : August 2010 Revisiting Business Intelligence

36. © Léger et al. 2010. ERPsim is proprietary technology developed by researchers at HEC Montréal, École Polytechnique de Montréal and Western Michigan Univ. ERPsim is owned by Polyvalor and Valorisation Gestion and commericialized by Baton Simulations. More info at erpsim.hec.ca Version : August 2010 BI Revisited Now what sort of questions might we want to ask? Sales? Production? Inventory?

37. © Léger et al. 2010. ERPsim is proprietary technology developed by researchers at HEC Montréal, École Polytechnique de Montréal and Western Michigan Univ. ERPsim is owned by Polyvalor and Valorisation Gestion and commericialized by Baton Simulations. More info at erpsim.hec.ca Version : August 2010 Plant A: An overview 37

38. © Léger et al. 2010. ERPsim is proprietary technology developed by researchers at HEC Montréal, École Polytechnique de Montréal and Western Michigan Univ. ERPsim is owned by Polyvalor and Valorisation Gestion and commericialized by Baton Simulations. More info at erpsim.hec.ca Version : August 2010 Plant B : an overview

39. © Léger et al. 2010. ERPsim is proprietary technology developed by researchers at HEC Montréal, École Polytechnique de Montréal and Western Michigan Univ. ERPsim is owned by Polyvalor and Valorisation Gestion and commericialized by Baton Simulations. More info at erpsim.hec.ca Version : August 2010 Plant C an overview 39

40. © Léger et al. 2010. ERPsim is proprietary technology developed by researchers at HEC Montréal, École Polytechnique de Montréal and Western Michigan Univ. ERPsim is owned by Polyvalor and Valorisation Gestion and commericialized by Baton Simulations. More info at erpsim.hec.ca Version : August 2010 Trying to maintain stock for all products 40

41. © Léger et al. 2010. ERPsim is proprietary technology developed by researchers at HEC Montréal, École Polytechnique de Montréal and Western Michigan Univ. ERPsim is owned by Polyvalor and Valorisation Gestion and commericialized by Baton Simulations. More info at erpsim.hec.ca Version : August 2010 Large variations in sales per day 41

42. © Léger et al. 2010. ERPsim is proprietary technology developed by researchers at HEC Montréal, École Polytechnique de Montréal and Western Michigan Univ. ERPsim is owned by Polyvalor and Valorisation Gestion and commericialized by Baton Simulations. More info at erpsim.hec.ca Version : August 2010 Small production runs 42

43. © Léger et al. 2010. ERPsim is proprietary technology developed by researchers at HEC Montréal, École Polytechnique de Montréal and Western Michigan Univ. ERPsim is owned by Polyvalor and Valorisation Gestion and commericialized by Baton Simulations. More info at erpsim.hec.ca Version : August 2010 Long production runs 43

44. © Léger et al. 2010. ERPsim is proprietary technology developed by researchers at HEC Montréal, École Polytechnique de Montréal and Western Michigan Univ. ERPsim is owned by Polyvalor and Valorisation Gestion and commericialized by Baton Simulations. More info at erpsim.hec.ca Version : August 2010 What’s Next? Competition Tomorrow Client 425 Before Tomorrow: Make decisions? Set up reporting? 8:00 – Implement “decisions” 8:30 – Execute Round 1 Continue w/ 30 min blocks of analysis/execution