Important Capsim NOTEs PDF

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Summary

Notes I took for CAPSIM... CAPSIM was hard for me but I recommend YouTubing EVERYTHING...

Description

CAPSIM NOTEs Reposition a product: D 

Research current customer buying criteria in the Fast Track

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Display the R&D worksheet

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Adjust Performance, Size, MTBF

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Observe impacts upon Age, material cost, and completion dates

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Save the decisions

KEY Points: -

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If a product is moved outside of the Rough Cut circles, it will have 0 sales;

customers will not want that product. Every year, the market segments are gradually drifting down and to the right across the perceptual map as customer demands continue to evolve. Notice the age at revision. This is how old your product will be when the age cuts in half on the revision date. The cost of an R&D project is based on how long the project will take the company to complete. If the project took until December 31st of this year it would cost the company 1 million dollars. A six month project would cost 500 thousand. A three month project would cost 250 thousand. etc… Products with lower MTBF’s, slower performances and larger sizes are cheaper to produce. This revision would cause Able’s material cost to decrease. By improving performance and decreasing size, the material cost for product Able will increase.

Marketing a product: B -

Be sure to review the market segment pages in your reports (5-6) before making decisions for marketing in the actual simulation.

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Research the competitive environment in the Fast Track Display the Marketing worksheet

Enter decisions for Price, Promotion and Sales Budgets Observe the decision impact upon the computer's forecast Develop a worst case estimate for demand Enter your worst case estimate for in the sales forecast Save the decisions    

The benchmark prediction has no knowledge of what your competitors are doing in your simulation. Think of your sales forecast as what you are guaranteeing you will sell for a product this year. We encourage you to be a little conservative with this projection. Your sales forecast and your price determine your gross revenue projections for this year. The segment pages in your reports (pages 5&6) and the market share report from last year (page 7) have all of the information you require to develop your own sales forecast.

Scheduling production: E -

Be sure to review the production analysis on page 4 of your reports before making decisions in the production department during the real simulation. This is also a great place to keep an eye on what your competitors are doing. How much production you can schedule for a product depends on your production capacity. You can schedule up to double your first shift capacity for each product since you have two shifts of workers. Workers on second shift are paid time and a half for labor. It is okay to produce more units than you are forecasting to sell. The number of units you produce for a product should represent your best case scenario. An extra month or two worth of sales is a reasonable best case scenario.

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THINGS TO REMEMBER:

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The production after adjustment is what you will actually produce based on your production schedule. Your company’s A/P policy will determine the size of the adjustment. The longer you make your suppliers wait for payment, the greater this adjustment will become. Inventory on hand plus Production after adjustment = The maximum number of units you can sell for a product this year. Contribution margin is the percentage of what is left over for the company after making the sale. In general, you need a 30% contribution margin or higher in order to make a nice profit. Remember to keep an eye on your contribution margins as you change your prices in marketing.

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It may take some time and investment before you are able to achieve a 30% contribution margin or higher for a product. At the very least, you want to make sure that your contribution margin is greater than 20% or the product may start losing money.

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Estimate a best case for demand for each product this year Display the Production worksheet Observe existing inventory Schedule production to meet best case demand less existing inventory Save the decisions

Modifying plant and equipment: C -

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There are two forms of production equipment in the simulation: Capacity and Automation. Capacity determines quantity: As you just learned, you can schedule up to double your first shift capacity for your production schedule. Remember to keep an eye on your second shift percentage as you are scheduling production. If you are running a high percentage on second shift then you are getting close to not being able to supply your demand. This is your best indicator that it is time to start thinking about buying more capacity. Entering a positive number on the buy/sell capacity line will purchase more first shift capacity for a product. Entering a negative number will sell capacity. Automation ratings are used to determine labor costs. Automation ratings can be anywhere from 1.0 to 10.0. The higher the automation rating; the lower the labor cost. It takes one year to add more capacity or automation to a product line. Selling capacity happens right away and has changed your first shift capacity for this year. The company will receive 65% of the original purchase price when you sell capacity.

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Estimate peak demand for each product for this year and next year Examine unit costs and margins Display the Production worksheet Increase or decrease capacity as required Increase automation as required

Observe the net cost of the investment Display the Finance worksheet Fund the investment with a mix of stock issues, bond issues, and depreciation Save the decisions

Raising money and paying debt: F -

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You can issue stock. You can borrow current debt. And you can issue long term debt. Remember to keep an eye on your projected end of the year cash position when working on the actual simulation. Ending the year with a negative cash position will result in a high interest emergency loan being issued to bring your cash back up to zero. You can also edit A/R or A/P lag in the Finance department (below). Be sure to read more about the impacts of changing your A/R and A/P lag before changing these numbers in the actual simulation. Pay attention to this year’s projected closing cash position. This number is driven by the decisions you enter in the spreadsheet. You can retire stock or bonds as you see fit. Note: These activities are typically only done when the company has excess retained earnings left over at the end of the year. You also have the option to issue dividends. These are entered by how much you want to give to your shareholders per share that has been sold.

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THINGS TO REMEMBER:

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Proformas are essentially if-then statements: If your decisions came true then this is what everything will look like at the end of the year. Be sure to keep an eye on how your finance decisions are impacting your proforma balance sheet, income statement, cash flow statement, ratios, and balanced scorecard.

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Examine the proforma Income Statement Examine the proforma Balance Sheet Display the Finance worksheet Issue or repurchase stock as required Issue or repay bonds as required

Issue short term debt as required Issue a dividend as required Save the decisions

Inventing a new product: 

Research the opportunity in the segment in the Fast Track

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Select appropriate product attributes - Performance, Size, MTBF

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Display the R&D worksheet.

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Enter the product attributes

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Note the R&D completion date Display the Production worksheet Order capacity and automation (optionally, wait a year) Display the Finance worksheet Fund the plant with stock and bond issues Save the decisions...