Capsim Process Management: Strategic Investment Initiatives For Success

Capsim is a business simulation that allows students to play the role of the management team of a multi-million-dollar company in a competitive marketplace. It offers a range of simulations, including Foundation and Capstone, which are designed to teach students about strategic operational decision-making and enable them to experience the impact of those decisions across various departments of an organization. One of the key aspects of the simulation is Total Quality Management (TQM), which involves a set of initiatives aimed at increasing sales and reducing losses for the company. Students must decide how to allocate their budget across different TQM initiatives, such as CPI Systems, Quality Initiative Training, and UNEP Green Programs, to optimize their manufacturing processes and improve product quality.

Total Quality Management (TQM)

Capsim is a business simulation that allows students to play the roles of the management team of a multi-million-dollar company in a competitive marketplace. It is a popular teaching tool, used by over 900 universities, to provide immersive, hands-on learning experiences in a real-world environment.

TQM is a popular way to deepen the simulation learning experience. It gives instructors the flexibility to fine-tune the module to their needs. Previously, TQM could only be introduced in round four, but now it can be activated to start in any round. This is particularly useful for exposing students to TQM during the practice rounds, which are often limited to just 2-4 rounds.

In the CapsimOps simulation, learners can use TQM to optimize manufacturing processes to improve product quality, impacting their net yield. They can also focus on improving quality across their production lines, which influences their labour costs, material costs, and customer demand.

TQM is a valuable tool for students to learn about the impact of process management initiatives on product quality and business success. By investing in TQM, students can gain a better understanding of how to distinguish their products and make strategic decisions to improve their company's performance in the competitive marketplace.

Customer Buying Criteria

In Capsim, participants run a company in the electronic sensor industry, where each year customers demand smaller sensors with faster performance. This means that participants must invest in process management initiatives that will allow them to produce smaller sensors with faster performance.

Some process management initiatives that participants can invest in include:

• CPI Systems
• Vendor/JIT
• Quality Initiative Training
• Channel Support Systems
• Concurrent Engineering
• UNEP Green Programs
• Benchmarking
• Quality Function Deployment Effort
• CCE/6 Sigma Training
• GEMI TQEM Sustainability Initiatives

These initiatives can help to improve the quality of the production process and the final product, which can increase customer demand and satisfaction.

Additionally, participants can also invest in Total Quality Management (TQM) initiatives, which is a combination of initiatives aimed at increasing sales and reducing losses for the company. TQM can help to improve product quality, reduce material and labor costs, and increase Research and Development (R&D) upgrades.

By investing in process management initiatives that align with customer buying criteria, participants can create products that meet customer demands and expectations, ultimately increasing sales and driving business success.

Production Schedule

The production schedule in Capsim refers to the number of units that will be produced during each round. This is determined by subtracting the inventory on hand from the forecasted sales.

To optimise your production schedule, it is important to understand the concept of capacity. Capacity refers to the number of units you can produce in one shift, and per round, you can produce up to 198% of your first shift capacity. Therefore, you should aim to maximise your production capacity by utilising your resources efficiently.

Additionally, consider the impact of automation on your production schedule. A higher automation rating will lead to lower labour costs but will also result in higher revision time per product. This means that you can produce more units at a lower cost, but it may take longer to revise and improve your products.

Another factor to consider is inventory management. Capsim simulations often deal with high inventory carrying costs, so it is crucial to optimise your inventory levels. This can be done by investing in inventory storage and retrieval tools, computerized systems, and automated inventory control tools (ASRs). By managing your inventory effectively, you can minimise carrying costs and improve your production schedule.

Furthermore, the choice of suppliers can also impact your production schedule. In Capsim, learners have the option to choose local or global suppliers, or a mix of both. This decision will impact labour costs, material costs, net yield, and R&D cycle times. Opting for local suppliers may result in faster delivery times, which can help improve your production schedule and ensure a consistent supply of raw materials.

Finally, it is essential to continuously monitor market demands and customer preferences. By staying attuned to the market, you can adjust your production schedule accordingly and ensure that you are producing the right quantity of products to meet customer demand.

Automation

In the game, automation refers to the level of automation in the production line. A higher automation rating results in lower labour costs but increases the revision time per product. This is an important trade-off to consider when determining the optimal level of automation for your business.

One strategy is to automate low-end and traditional production faster than high-end, performance and size production. This is because higher automation increases the cost of the production line. By focusing on low-end and traditional production, you can keep costs relatively low while still reaping the benefits of automation.

Another factor to consider is the capacity of your production. Automation and capacity go hand in hand, as they both depend on the intended segment of the product. You will need to decide if you want to buy sufficient capacity to produce the product mostly on the first shift or purchase less capacity and run first and second shifts. The same decision applies to automation. If you choose to run two shifts, keep in mind that second-shift labour costs are 50% higher than first-shift costs.

Additionally, it is important to note that capacity and automation purchases take a full year to implement. Therefore, it is recommended to buy capacity and automation for a new product in the same year you start an invention project in R&D. This will ensure that you have the necessary resources to produce the product once it is ready.

In conclusion, automation is an essential aspect of process management in CAPSIM. By considering the trade-offs between labour costs and revision time, and making informed decisions about capacity and shift utilisation, you can optimise your production process and improve your business's performance.

Emergency Loans

Capsim is a business simulation game that allows students to take on the role of the management team of a multi-million-dollar company. One of the challenges that players may encounter in the game is the need for emergency loans, which can have negative consequences for the business.

Causes of Emergency Loans

• Unexpected inventory expansion: A sudden and significant increase in inventory levels can strain cash flow, especially if the additional inventory is not generating enough sales revenue to cover its costs.
• Plant expansion funding: Companies may sometimes invest in expanding their physical plant without securing the necessary funding, leading to a cash shortfall.
• Low sales: If actual sales are lower than forecasted, it can result in a cash crunch, as the company may not have enough cash to cover its expenses.
• Failure to raise funds: In some cases, the finance department may fail to raise the funds needed for significant expenditures, such as capacity and automation purchases.

Impact of Emergency Loans

Taking out emergency loans can have several negative consequences for a company in the Capsim simulation:

• Penalty fees: Emergency loans come with a penalty fee of 7.5% on top of the current debt interest rate, increasing the overall cost of borrowing.
• Stock price decline: Emergency loans can depress stock prices, even if the company is profitable. Shareholders view emergency loans as a sign of poor performance and a liquidity crisis.
• Loss of points: In the Capsim game, the emergency loan category is crucial for earning points. While no emergency loan results in 100 points, loans up to $5 million and $10 million result in significantly lower scores of 50 and 20 points, respectively.

Preventing Emergency Loans

To avoid the need for emergency loans and the associated negative consequences, players in the Capsim simulation should focus on the following strategies:

• Cash forecasting: Accurate cash forecasting is essential to ensure that the company has enough cash on hand to cover its expenses. This includes managing inventory levels, sales forecasts, and funding for plant improvements.
• Working capital policy: Implementing a robust working capital policy can help prevent cash flow issues. This includes optimizing inventory levels, accounts receivable, and accounts payable to ensure a positive cash flow.
• Financial planning: Players should carefully plan their finances, including funding for significant expenditures, to avoid cash shortfalls.
• R&D upgrades: Properly timing R&D upgrades and planning for new product releases can help maintain sales and cash flow.

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