Process Control at Compaq Computer Corp. (B): Computer Simulations - Promodel

Compaq Computer Corp., like many manufacturers, faces operational choices that strongly influence the cost of capital engaged in inventory, customer response time, and potential product obsolescence. This case describes some key operations strategy choices regarding two types of inventory: operation inventory (e.g., flow) and tactical inventory (e.g., finished goods). Tradeoffs in inventory management and customer response time are explored in the context of a firm that is changing from a push manufacturing to a customer-oriented pull system. Optional computer simulations (B case) visually display the dynamics of push and pull systems, kanban squares, and their effect on inventory requirements and customer response times. The simulations require the ProModel simulation software tool (not included, to be purchased separately) and computer simulation model files (available from the authors' website: http://faculty.insead.edu/stephen-chick/simulations).

The pedagogical objectives of the A case are to convey the importance of manufacturing strategies and inventory management in the value creation processes of a business. A simplified manufacturing model allows the ideas of operational (e.g. flow) inventory and tactical (e.g. finished goods) inventory to be explored. Build-to-forecast and build-to-order approaches can be described, along with the challenges of switching from a push system to a pull manufacturing system can be explored. The case describes tradeoffs in production decisions that relate inventory assets and customer response times. The B case is an optional add-on that describes computer simulation models that visually demonstrate the ideas of push and pull systems, kanban squares, blocking and starving of production in kanban systems, and the effects of manufacturing choices on customer response time.