There is a short-term risk of a potentially harmful epidemic. Littlefield opened a laboratory to provide blood testing services. Littlefield’s advisors expect the demand trend will be stable with variable daily arrivals. Management knows the lab will no longer be required after their testing contract expires on Day 270. Any machinery and inventory remaining after Day 270 will obsolesce and lose all residual value.
Marketing discovered that customers would pay higher prices for shorter lead time turnarounds. Littlefield has been reluctant to quote shorter lead time contracts because recent averages have been running longer than marketing suggests. They are wondering if you might be able to shorten lead times to increase marginal revenue.
Process Description
Littlefield Laboratories is a highly automated, state-of-the-art service provider specializing in individual blood tests. There are several competing companies. Littlefield emphasizes guaranteed lead times in return for premium prices. Rebates are given to recompense customers whose orders are shipped after their quoted lead time. Orders shipped in excess of a maximum lead time are delivered free of charge.
Blood samples arrive from hospitals and clinics as customer orders. Processing each sample requires a sterile, single use test kit. Fresh kits are delivered by a reliable supplier that automatically replenishes the laboratory’s Materials Buffer. Payment is made as each order is placed. Materials have a fixed lead time for delivery. Orders are released as jobs when a customer’s blood sample is paired with a fresh test kit.
Littlefield has a four-step, reentrant process carried out over three stations named for their respective function: Sample Preparing, Testing and Centrifuging. Stations contain a number of robotic machines which perform specific steps. There is no loss nor rework in this process. A graphic representation of their process flow appears in Figure 1.
In the first process step, a blood sample is injected into a test tube at Station 1. Reagents are added to the test tube. In the second step the test tube moves to Station 2 for initial testing. Moving to the third step, test tubes are centrifuged at Station 3 to separate key components. Finally, the fourth step cycles samples back to Station 2 for further testing, measurement, documentation, and electronic transmittal to the customer. There is a pending queue before each station. Process steps are mixed in the queue for Station 2. That queue is sorted First in First out by default but priorities could be changed to favor either Step 2 or Step 4. The total time elapsed between when a customer order arrives and the delivery of lab results is the production lead time used to calculate order revenue.
The processing times (service times per sample) for the stations are as follows:
Sample Preparation (Step 1 at Station 1): 5.3 hours = 0.221 of a day
Initial Testing (Step 2 at Station 2): 0.5 hours = 0.022 of a day
Centrifuging (Step 3 at Station 3) : 1.8 hours = 0.075 of a day
Final Testing (Step 4 at Station 2): 1.4 hours = 0.058 of a day

Littlefield Labs process test kits

Questions, can you explain the following:

1. When should be the last round of inventory?

2. What day should be the final order point?