Epsilon Procurement With No Current Order
Inventory Costs With Multiple Sub-Assembly Component Suppliers
Missing SAC Supplier Input Box on Procurement Webscreen
Procurement and Transportation Costs For Sub-Assembly Components
Product Quality Perceptions and Sub-Assembly Component Failures
Raw Materials, Set-Top Box Configurations, and Product Quality
Raw Materials Transportation Costs
Sub-Assembly Component Delayed Surface Delivery
Sub-Assembly Component Inventory When Switching Suppliers
“What does delivery reliability of 80% mean for surface transportation?”
Delivery reliability for surface transportation refers to the average performance for that vendor. "80%" doesn’t mean that exactly 80% of surface shipments arrive on-time (to be used in the current round). "80%" means that an average of 80% of surface shipments arrive on-time and that the actual performance in any round varies around that average delivery performance level. Surface deliveries that don’t arrive during the current round are delayed and arrive in time for the following round, possibly leading to the need for emergency shipments to cover the delayed shipments.
“We didn't order any epsilon in the last simulation round but our financial reports include an in-bound epsilon shipment. What's going on?”
Epsilon sub-assembly components are delivered one simulation round after ordering, not within the current simulation round. This in-bound epsilon shipment recorded at the bottom of your firm's Balance Sheet was from your procurement order executed two round's ago. In the next simulation round, your in-bound epsilon procurement orders (reported at the bottom of your firm's Balance Sheet) will be zero, based on your procurement decisions in the last simulation round.
“When purchasing sub-assembly components from multiple suppliers, how are costs calculated when the sub-assembly components are applied to products during the manufacturing process?”
Two separate figures are tracked for each sub-assembly component (Gamma, Delta, and Epsilon): physical units and the Ldollar value associated with those physical units. Throughout the inventory pipeline, physical units are withdrawn from the existing inventory pool using average costs of the units in inventory at the moment of withdrawal. Thus, there's no problem in accounting for "mixed" sub-assembly components (i.e., sub-assembly components from different suppliers at different costs). However, note that an averaging algorithm is being used not FIFO (first-in-first-out) or LIFO (last-in-last out) in calculating the costs of sub-assembly components withdrawn from your firm's inventory.
"There seems to be no input box for one SAC for one of the suppliers on our procurement webscreen. What's going on?"
Sometimes, spot-market sub-assembly component suppliers are unable to accept orders from new customers. However, orders continue to be accepted from current customers. Sub-assembly component supplier availability varies through time, so a currently-unavailable sub-assembly component supplier may become available again in the future.
“Do the costs for sub-assembly components include transportation costs?”
No, the costs of sub-assembly components do not include transportation costs. Transportation costs are additional and recorded separately, under Transportation Costs on the Corporate P&L Statement.
“Do sub-assembly component failures have anything to do with product quality perceptions?”
The answer, in short, is "yes." The perceptions that customers hold about product quality are presumably influenced by a product's configuration and by a product's intrinsic reliability (non-failure, uptime percentage, etc.). A product's configuration represents its principal benefit to customers. Configuration is why customers purchase a particular set-top box product. A product whose configuration closely matches customers' requirements should generally be perceived as a high quality product. Failures of sub-assembly components is a secondary factor influencing product quality perception. Sub-assembly component failure rates presumably influence product quality perceptions negatively, with higher failure rates been associated with lower product quality perception.
A product's configuration represents its principal benefit to customers. Configuration is why customers purchase a particular set-top box product. A product whose configuration closely matches customers' requirements should generally be perceived as a high quality product.
Failures of sub-assembly components is a secondary factor influencing product quality perception. Sub-assembly component failure rates presumably influence product quality perceptions negatively, with higher failure rates been associated with lower product quality perception.
“Who pays for the in-bound transportation costs associated with raw materials? These transportation costs don't seem to be included anywhere in our financial reports.”
In-bound transportation costs for raw materials are paid by the raw materials suppliers.
“One of our sub-assembly component suppliers only delivered 42% of a sub-assembly component this round. The other 58% was delayed. This seems like very poor performance. Why did this very high level of delayed shipments occur?”
Surface transportation of in-bound sub-assembly components is subject to various possible delays. While the typical ranges are plus or minus 10% (or so) from the published statistics in the LINKS participant’s manual, more extreme performance levels are possible. If you want to be certain of immediate delivery (i.e., for use in the next LINKS round), you can always, of course, use air rather than surface transportation. But, as you might expect, there are higher costs associated with air compared to surface transportation of sub-assembly components. Variability in surface transportation performance is one of the many elements of supply chain variability that must be managed, in real supply chains and in the set-top box industry.
“What happens to existing SAC (sub-assembly component) inventory if we change suppliers?”
SAC inventory is interchangeable, so nothing happens to existing SAC inventory when you change suppliers.