B's Wax Candle Company

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					T   H   E   A   M   O   S   T   U   C   K   S   C   H   O   O   L         D   A   R   T   M   O   U   T   H   C   O   L   L   E   G   E




                    B’s Wax Candle Company*
                    (The Master Scheduling Game)


                    You are the president of B’s Wax Candle Company, a small firm that produces candles for sale to
                    distributors, designers and a regional restaurant chain. Since your company is small, you personally
                    make out the firm’s master schedule each month and, from it, derive a detailed production schedule.

                    PRODUCT BACKGROUND

                              Candles made from beeswax are an upscale, specialty product; they have desired
                    advantages over ordinary paraffin candles. The beeswax burns at a temperature hot enough that the
                    wax evaporates, making these candles dripless. They also do not give off smoke while burning, and
                    solid beeswax candles, particularly, are very slow burning. Candles may be made of solid beeswax
                    (dipped) or of sheets of honeycomb beeswax (rolled).
                              B’s Wax Candle Company makes only rolled beeswax candles. Its raw materials’ supplier
                    delivers pre-colored sheets of honeycomb beeswax. The craft of rolling beeswax candles has long
                    been a cottage industry. The candle-maker lays a length of wicking along one edge of the beeswax
                    sheet, and begins rolling at that edge. When the entire sheet has been rolled into a cylindrical candle,
                    the finishing edge is pressed firmly against the candle to stick to it.

                    COMPANY BACKGROUND

                             B’s Wax has automated this process. The company has one machine for rolling candles,
                    wryly dubbed by workers the “rapid” wick wrapper. A machine operator feeds each sheet of beeswax
                    into the machine, and removes the completed candle. The machine also heat seals the finishing edge
                    to insure that it will not pull away from the candle. After this heat sealing procedure the machine
                    must cool down for 3 minutes before the next sheet of beeswax may be inserted. The finished candles
                    are perfectly matched in size and shape, and of a more consistent quality than when handmade.
                             The rapid wick wrapper is run by one operator on each of three shifts. Company policy is to
                    run the machine three shifts a day, five days a week. If there is insufficient business to keep the
                    machine busy, the workforce is idle; B’s Wax has made a definite commitment never to fire or lay off
                    a worker. In addition, workers are never required to work on weekends.




                    *
                     This case was prepared by Susan M. Pyke and Professor David F. Pyke and is adapted from “The
                    Master Scheduling Game” by J. G. Miller.
              TH E AM O S TU C K SC H O O L                    DA R T M O U T H COLLEGE                                    2




         Thus, the capacity of the machine (assuming           R-CANDLES
four-week months) is 4 weeks x 5 days x 24 hours = 480
hours per month. Since the hourly wage is $5 per hour,                    As with Tapers, there is only one product type in
this commits the company to a fixed labor cost of $5 x 480     the Restaurant candle category. These R-candles are one-
= $2,400 per month.                                            half the height of tapers, but much larger in circumfrence.
         Once the machine is set up to make a particular       Their dimensions are specifically determined by the size
kind of candle, it can produce them at the rate of 5 candles   and shape of the container they are placed in for use on
per hour, regardless of candle type. The process is quite      the dining tables of a regional restaurant chain. Thus, R-
stable. The material content of each candle is roughly the     candles are manufactured to order for this company, and
same; the candles vary mainly in shape, slightly in size.      sold to it for $7 per candle.
Therefore, for scheduling purposes we can assume that                     This customer usually places “blanket” orders
the cost of the material in each candle, regardless of type,   three times a year. When it places these orders, it
is $4. Raw materials are never a problem, and can be           specifies the delivery of certain quantities in each of the
obtained overnight.                                            next four periods. The customer has already ordered 2,400
         B’s Wax has divided its product line into three       units with delivery of 600 at the end of periods 0, 1, 2 and
categories: Taper candles, R-candles (for restaurant use)      3. The company is expected to specify the quantities it
and Designer candles.                                          requires for periods 4, 5, 6 and 7 by the beginning of
                                                               period 4. The delivery schedule containing the orders for
TAPERS                                                         months 8-12 is expected to arrive before the beginning of
                                                               period 8. The customer has estimated its average monthly
          Tapers are the most popular candle item sold at      needs over the year to be 600 per month, although their
the retail level. The company has decided to produce           estimates are often considerably in error.
Tapers to stock because they are sold to a large number of                This large customer is important to the company.
distributors who require immediate shipment at the end of      B’s Wax feels that if it ever refuses to accept an order from
each month. Tapers sell for $8 per candle. If Tapers are       the restaurant chain it will lose this customer for at least 4
not in stock when demanded, the distributors buy from          months. Under the terms of their sales contract, B’s Wax
other sources; the company’s penalty is a lost sale.           has agreed to pay this customer $1 for every unit not
Historically, the demand for Tapers has averaged 700 per       shipped on time (by the end of the month) for each month
month. However, sales are usually somewhat seasonal            that a unit’s shipment is delinquent.             Delinquent
(distributors place larger orders in the summer months in      shipments must be made up.
preparation for the year-end holiday season). The                         It takes 30 hours to set up the wick wrapper to
following demand for these items has been forecasted:          make R-candles.

  Month         Demand*         Month         Demand           DESIGNERS

     1             500             7            900                     Designer candles are made only to customer
     2             500             8            900            order because of their low volume and specialized nature.
     3             600             9            800            Three kinds of Designer candles are ordered: Antique,
     4             700            10            700            Contemporary and Geometric. Antique candles are thin,
     5             800            11            600            wrapped very tight, to fit into tin candleholders of the kind
     6             900            12            500            used in 17th and 18th century America. Contemporary are
                                                               very tall column candles. Geometric are shorter, square
*In other words, the company anticipates demand for 500        pillar candles made in a mold fitted to the rapid wick
Tapers at the end of month 1.                                  wrapper. These three kinds of candles are sold to interior
                                                               decorators and design firms for $10 per candle.
         It takes 40 hours to set up the wick wrapper to                When a distributor places an order, it specifies
make Tapers. B’s Wax has found that its forecasts are          the quantity and the period during which it wants the
accurate to within ± 200 units per month.                      candles delivered. B’s Wax determines if it can fit these
                                                               orders into its schedule, and either accepts or rejects the
                                                               order.
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          If B’s Wax accepts an order for delivery at the       (because of uncertainty) the farther into the future that it
end of a certain period and fails to meet all or part of this   is projected, it is reformulated each mo nth.
commitment, it pays a penalty of $2 per unit for each                     Note that the master schedule specifies two
period delivery is delayed. This penalty is incurred in         things that are important in the “action” bucket (the next
each period until the delinquent order is filled.               period for which definite, irrevocable commitments must
          It takes 40 hours to set up the wick wrapper to       be made). The first is the number of hours (setup + run)
make one of the three types of Designer candles. Exhibit        that are allocated to each product to be produced. These
1, B’s Wax’s open order file, shows the orders it has           can be calculated by adding the setup time to the number
already promised to deliver in future periods. The              of units to be produced divided by 5. The total of all of
company has tried to forecast the demand for the different      these times in a month cannot exceed 480 hours.
types of designer candles, but has given it up in                         The second important piece of data is the
frustration.                                                    sequence in which products are to be produced on the
                                                                machines. This is important because at the end of a month
                        EXHIBIT 1                               the machine will be set up for the last product produced.
                B’s Wax Open Order File*                        If a continuation of this product run in the next month is
                     (end of period 0)                          desired, no new setup will be required.

 Month                Product Type               Quantity
                                                                GAME INSTRUCTIONS
    1          R-candles                            600
               Contemporary                        1,000                 You will be asked to play the role of the president
               Antique                              200         of B’s Wax Candle Company in class. You should arrive
             (past due from previous period)                    in class with a master schedule for the company (use
    2          R-candles                            600         Exhibit 3). It is up to you to decide how far into the future
               Antique                              400         to plan, but you mu st be sure to have at least the next
               Geometric                            200         action bucket filled in as specified. (Don’t forget that you
                                                                are already 200 units past due on Antiques and the
    3         R-candles                             600         machine is currently set up to run them. Also you have
                                                                1000 Tapers in inventory.) In class, the game will proceed
*All orders are to be delivered at the end of the month         as follows:
indicated, after all production for the month has been
completed, and before the new month’s production is             1.       Each month you will get a report on the previous
started.                                                                 month’s demand for Tapers. This piece of
                                                                         information will allow you to compute your actual
MASTER SCHEDULING                                                        Tapers inventory.

           Master scheduling at B’s Wax is done once each       2.       Each month you will be supplied with new order
month--after production for the month is completed and                   requests for Designers. Every four months you
shipped and new orders from customers arrive, and before                 will be supplied with new order requests for R-
production in the next month begins. The master                          Candles.
scheduling effort results in two internal documents. The
first is a P&L statement for the month. Exhibit 2 shows         3.       You should examine the order requests and
that this document accounts for sales and production                     decide whether to accept or reject them. Those
costs, including penalty charges and inventory carrying                  you accept should be added to your open order
costs. The inventory carrying cost for any type of                       file. You are irrevocably committed to the orders
product is $0.10 per unit per month left in inventory after              you accept.
shipments for the month have taken place.
           The second document the company produces is          4.       You should make out a new master schedule,
a master schedule, as shown in Exhibit 3. This shows                     specifying at least what is to be produced in the
what B’s Wax wants its factory to produce in each month                  next “action bucket.”
in the future. Since the master schedule loses validity
             TH E AM O S TU C K SC H O O L                      DA R T M O U T H COLLEGE                                 4



5.     Each month you must fill out your firm’s decision                charge on ending inventory. Shortage costs,
       form (See Exhibit 4). The computer program will                  however, will be assessed.
       report your aggregate revenues and costs.                        You should also give some thought to what
                                                               information you will want to record as the game proceeds.
6.     We don’t know how many Periods (months) we              For example, you will at least want to establish your own
       will play. So, play as if the game will continue        open order file, and maintain a detailed inventory file. The
       indefinitely.                                           game program will report only summary information,
                                                               whereas you may want to have access to details in your
7.     At the end, the cumulative profit figure will           decision-making.
       include $4 scrap value for each unit of ending
       inventory. There will be no inventory carrying




                                                             EXHIBIT 2

                                                P&L Statement                (Period 0)
         (1)           (2)             (3)         (4)        (5)               (6)          (7)      (8)            (9)
                                   Begin                                                          Ending        Carrying/
                                   Inv                                                            Inv           Penalty
     Item         Price            (Short)       Prod'n       Available    Demand     Sales       (Short)       Cost
     T                $        8             550          950        1,500        500    $ 4,000          1,000    $     100
     R                         7               -          600          600        600       4,200             -            -
     C                        10               -            -            -          -           -             -            -
     A                        10               -          200          200        400       2,000         (200)          400
     G                        10               -            -            -          -           -             -            -
     Total                                              1,750                            $ 10,200                  $     500



     Sales (total of column 7)                                  $ 10,200
     Costs:
      Labor                                                          2,400
      Materials (total of column 4x$4)                               7,000
      Inventory/short (total of column 9)                              500
     Total Cost                                                 $    9,900

     Contribution to Profit                                      $    300

     Cumulative Contribution                                     $    300 (add to next period's contribution)
           TH E AM O S TU C K SC H O O L             DA R T M O U T H COLLEGE            5




                                       EXHIBIT 3
                                Master Schedule (Period 0)

Month      Type   Qty.   Type      Qty.    Type      Qty.    Type   Qty.   Type   Qty.


   0        T     950     R        600       A       200
460 hrs.    40    190     30       120       40       40

   1        R     600     A        200       C       1000
470 hrs.    30    120     40        40       40      200

   2        R     600     A        400       G       200      T     300
450 hrs.    30    120     40        80       40       40      40     60
   3        R     600     T        500
290 hrs.    30    120     40       100
            TH E AM O S TU C K SC H O O L                     DA R T M O U T H COLLEGE                                6


                                                 Exhibit 4                                           FIRM #
                                           PRODUCTION DECISION FORM
                       (Be sure to put quantity of each type, and which is set up first and last.)
                        In month 2 and beyond, circle the Index of the Orders to be accepted.

Month/Hrs Type    Qty      Type      Qty     Type      Qty     Type      Qty     Type      Qty       First     Last
         0 T                R                 C                 A                 G                  Setup    Setup
                                                                                                                A
        1    T               R                 C                 A                 G

   Orders    1    2          3         4        5       6         7

        2    T               R                 C                 A                 G

   Orders    1     2         3         4        5       6         7

        3    T               R                 C                 A                 G

   Orders    1     2         3         4        5       6         7

        4    T               R                 C                 A                 G

   Orders    1     2         3         4        5       6         7

        5    T               R                 C                 A                 G

   Orders    1     2         3         4        5       6         7

        6    T               R                 C                 A                 G

   Orders    1     2         3         4        5       6         7

        7    T               R                 C                 A                 G

   Orders    1     2         3         4        5       6         7

        8    T               R                 C                 A                 G

   Orders    1     2         3         4        5       6         7

        9    T               R                 C                 A                 G

   Orders    1     2         3         4        5       6         7

       10    T               R                 C                 A                 G

   Orders    1     2         3         4        5       6         7

       11    T               R                 C                 A                 G

   Orders    1     2         3         4        5       6         7

       12    T               R                 C                 A                 G
TH E AM O S TU C K SC H O O L   DA R T M O U T H COLLEGE   7