CapSim Demonstration Notes

basicgratisMécanique

5 nov. 2013 (il y a 4 années et 3 jours)

159 vue(s)

CapSim Demonstration

Notes


1.

Save MS Excel file

from the
www.capsim.com

page after you have logged in under the links,
<Decisions> and <Capstone>

,
or work directly online


2.

Login
to the Excel file
using login created d
uring registration


a.

File, Save (different save options)

i.

Save “
Save to Official Decisions



b.

Undo

i.

“To
official decisions
” means:
returns to the official decisions that had previously been saved

ii.

“To start of round” means:

resets all decisions made for the
round


c.

Decisions:

i.

R&D


1.

Performance
:

Should be within the fine cut, to appeal to customers, should be near the
ideal spot.

2.

Size
:

Should be within the fine cut, to appeal to customers, should be near the ideal spot.

a.

Positioning Reminder:
Just beyond fine

cut, appeal drops 1%; ½ way between fine
and rough cut appeal drops 50%; Just inside rough cut, appeal drops 99%
.

b.

When you revise, you can see where the new and old products are on the P
erceptual
M
ap
.

c.

Time for revisions:
The length of
time required to re
vise a sensor (change
positioning) varies. Slight revisions complete in 3
-
4 months; more extensive changes
are most of a year. Reported under
Revision Date
.

When you have more than one
product under revision, the overall revision time lengthens.
Pay at
tention to this…you
probably do not want to lock up a product for more than a year because they won’t sell
while under revision.


d.

Cost of Revisions
:
R&D revision costs are driven by the time it takes for them to
complete

a

6
-
month project costs $500K a 12
-
month project costs $1 mill.

Any
revisions costing > $1 mill will spill over a year to complete.

e.

Material Costs for Revisions
:

E
arly in the
S
im (due to technology costs), a product
near the trailing edge cots $1.00; the leading edge a $10.00

f.

Automation

s

effect on revision time:
Products with production lines that have
higher automation require more time to revise than

products with lower automation.

3.

MTBF

(reliability)
:
is
measured in
the number of
hours

the product is expec
ted to
function before it fa
ils.

a.

MTBF 1
,
000 hours below
segment
guideline

will
lose 20% appeal and products
continue to lose 20% appeal for every 1
,
000 hours below, up to 5
,
000 when they
will
not be considered for purchase.

b.

Increasing MTBFs increases
the time to complete the product
(
revision time
)
;
decreasing MTBF decreases material costs.


c.

MTBF Costs
:
Ea
ch hour of reliability adds $0.
0003 X hours per unit in material costs.

An increase of 1000 hours adds about $0.30 per unit

in material costs
.

4.

Age
:

Age profile chart

is where age

is illustrated
.

Positioning

a.

Age
decreases as you
reposition your product; products are only perceived as 0 when
they are new.

b.

Products age over the year. So, if you create a new product that comes out in June. It
is only perceived as 0 years old in June. In Decemb
er, it will be perceived as 6
-
months
old.

5.

Inventing new products
:
inventing a new product takes at least one year to complete
.

a.

The company can manufacture up to 8 products
.

b.

“Killing” a
product
: Once you kill a product you can’t bring it back. So, if y
ou kill a
product, the maximum you can have is 7.

c.

Having between 4
-
6 products is ideal.

d.

Each product has its own plant and equipment, so if you are going to invent a new
product, you have to invest in the plant. You must build the plant one year prior to
when you want to introduce the new product. So, when inventing a new product, you
must visit both the R&D (invent the product in R&D) and production screens (buy
capacity in the production screen).

e.

Steps for inventing a new product

(when you invent a new
product that is similar to
an existing product line, the R&D completion time decreases)
:

i.

Enter a name in an available cell

beginning with the first letter of your company
name
.


ii.

Enter a performance value.

iii.

Enter a size value
.

iv.

Enter an MTBF rating.

v.

Once you
do this, the R&D costs will display.

vi.

The product material cost per unit displays
(function of MTBF & positioning)
.

vii.

All new products require a manufacturing line
, so you will have to visit the
production screen
.

viii.

Go to the production screen and in the new pr
oduct’s column, enter a first
-
shift
capacity (the # of units that an 8
-
hour shift can produce over the course of a year).
Note that you can produce up to twice this amount by running a second shift
, but will
be overtime
.

Overtime costs 50% more than the
first
-
shift labor costs.

ix.

Then, enter an automation rating (higher automation, lower labor costs. However,
higher automation projects take longer to create).

x.

The investment row shows the total cost of buying capacity and automation.

xi.

Your total cost cannot
exceed the dollar amount shown in the “maximum investment”
cell.

If your total cost exceeds the maximum investment, relevant cell

s

text

will turn
red and be crossed out.

f.

Steps for
discontinuing

a new product:

i.

Sell all capacity in the production screen.

ii.

R
emember, when you liquidate, you want to sell all but one unit of capacity so that
the simulation will sell off all inventory at 100% of the price. Then you can see the
last unit of capacity once the inventory is gone.

g.

Material Costs (general):

MTBF and
positioning is what drives material costs.


ii.

Production

1.

Production Schedule

(note these are
in thousands
): How many products you want to
produce to sell this year. Remember to subtract any inventory remaining from last year.
Note that you cannot schedul
e more than twice your first shift capacity. When you revise a
product any remaining inventory will be updated at no cost.

a.

Production scheduled related to
sales forecasts:
Be careful with producing too much
because of inventory carrying costs. Ideally y
ou’d like to have 1 unit left over in each
segment.

b.

Sales forecasts to help with production scheduling:

In general, you can assume (all
else equal) that sales will be the segment growth rate times your # units sold last period.
So, in Traditional, if l
ast year you sold 1,100,000 without stocking out, you can look at
segment growth of 9.2% and multiply the
m

giving you 101,200 addition
al

that you
should produce
. This would lead to
your next year

s starting forecast at 1,201,200. If
you stocked out (0 in
ventory left), calculate what you could have sold by looking at
Courier market share report. Multiple your potential by the growth rate to estimate.

i.

Note:
Keep in mind that products could have sold because competitors stocked out.
Look at Courier Mark
et Share report to see if competitors stocked out. If they did,
you should not assume you will sell this high of an amount next year.

Again, use the
market share report (actual versus potential market share) to estimate what you should
have
sold

if your
competitors did not stock out
.

2.

Capacity (general)
:

First shift capacity (under plant and equipment) is the number of
products that can be produced (w/o a 2
nd

shift) in a year. Assembly lines can produce twice
their first shift with a 2
nd

shift.

a.

2ns shift

costs
: Wages are 50% higher than first shift.

3.

Buy Capacity
: When you want to buy capacity, you add it either gradually or in the round
before you want it (in the case you are inventing new products or producing significantly
more products).

a.

Capacity cos
ts
:

Each new unit of capacity costs $6.00 for floor space plus $4 times the
automation rating (production sheet shows the exact cost). So, at an automation rating
of 5, 1 unit of capacity costs $26 ($6 + ($4 X 5)) = $26

4.

Sell Capacity
: This is used to ra
ise capital when you liquidate, you want to sell all but one
unit of capacity so that the simulation will sell off all inventory at 100% of the price. Then
you can sell the last unit of capacity once the inventory is gone.

a.

Selling Capacity Returns
:

Capac
ity can be sold at the beginning of the year for $0.65
on the dollar of the original investment. If you replace later, it costs the full amount. If
you sell capacity for less than its depreciated value, you lose money (which will reflect
as a write
-
off o
n your income statement). If you sell for more than its depreciated
value, you make a gain which will be a negative write
-
off on your income statement.

5.

New Automation Rating
: Automation deals with how many robots you have versus
people. Having a high au
tomation rating is not always good because if we want to change

products

(revise products a lot) automation will increase the revision time. So, the upshot
is that you will need to consider your strategy and to whom you are trying to appeal when
investing

in automation.

a.

Automation Ratings and Labor Costs:
As automation rating increases, labor costs
decrease. It’s really round specific, but on average you can assume that each unit of
automation = $1.20 in per unit labor costs. So, if your automation rati
ng is 1, then your
per unit labor costs are $12.00. If your automation rating is 10, then your per unit labor
costs are $1.00.


iii.

Marketing

1.

Price
:

The price your products will sell this coming year. Remember that overall,
customer
s

prefer lower prices an
d that price ranges fall
by $0.50 each year.

Price is used in
proforma income statement to calculate revenue
.

2.

Promotions budget (awareness)
:

Money towards advertising a
n
d public relationships
campaigns.
The higher the budget, the higher the awareness.


It’s measured as a
percentage. 100% means every customer knows about your product
. Awareness is
reported in the Courier in each segment’s report.

a.

Each year, 33% of those who were aware of your product forget about it. So, to
calculate your starting awa
reness for the next year, use the following formula
:


L
ast year’s awareness


(33% X last year’s awareness) = starting awareness


b.

Cost of Awareness
:
Promotions budget increases have dimi
ni
shing returns

the first
$1.5 mill buys 36% awareness; spending anot
her $1
.5 mill (for a total of $3.0 mil
l)
buys 50%

the 2
nd

$1.5 mill buys only 14% more awareness.

Once your product
achieves 100% awareness, you can scale back the promo budget to about $1.4 mill to
maintain the 100% awareness.

c.

December Customer Report:
This is related to awareness and tells us what customers
thought about our product. The survey evaluates the product against the buying criteria
for each segment. 0 indicates the product met none of the criteria, a 100 results when
1) the product was pri
ced at the bottom of the expected range; 2) the product was
perfectly positioned (which can only occur once each year b/c of segment drift); 3) had
an MTBF at the top of the range; 4) the product had the ideal age for the segment (can
only happen once per
year b/c products age each month); 5) had 100 awareness; 6) had
100% accessibility.
AR policy
can affect the survey score
(more days to pay back
vendors can lead to them holding back parts/supplies).
Scores of 50 or greater are
good.

i.

Use the survey in com
petitive analyses (e.g., see how customers perceive your
product versus competitors).


3.

Sales budget (accessibility)
:

This is put towards salespeople and distribution channels.

An accessibility of 60% means only 60% of customers have an easy time finding

it, talking
to sal
espeople and taking delivery.

a.

Each year, if you drop your accessibility budget to 0, you lose 33% accessibility each
year. Unlike awareness, accessibility applies to the segment, not the product.

b.

If you
have two or more products in a
segment’s fine cut, the sales budget for each
product contributes to the
overall
segment’s accessibility.

c.

If your product leaves a segment, it leaves the old accessibility behind and inherits the
accessibility in its new segment.

d.

Cost of Accessibility:
10
0% accessibility is difficult and requires at least 2 products in
the segment’s fine cut. Each product experiences diminishing returns at a sales budge
t

of $3.0 mill. Diminishing returns for the overall segment is not reached until the
budgets total $4.5

mill (e.g., two products

with $2.25 mill each). Once
100%
accessibility is reached, you can maintain it at $3.
5

mill a year.

A $2 mill accessibility
expenditure will get you 22% additional accessibility, an additional $2 mill (for a total
of $4 mill) wi
ll get you an additional 13% (for a total of 35%).

4.

Sales forecast
:

Covered in production

notes
.

a.

Computer Prediction:
This

as
sumes your competition does not

update their product
line, which is not a good assumption.

If you enter your sales forecast
(t
he green sales
forecast cell)
as a 0 the Sim will use the computer prediction in the proforma income
statement to calculate sales revenue.
The computer’s prediction
assumes that each
competitor offers only one mediocre product each, which is not good.

It
’s best to use
your forecast so the proforma income statement can reflect a more accurate estimate.

5.

AR lag
:

Indicates the number of days that customers have to pa
y you.

The more generous
the terms (e.g. greater lag), leads to increases in demand.

a.

AR is
re
corded on the proforma balance sheet as an asset.

b.

AR lag impacts sales
: if you offer no credit (0 lag), your product’s appea
l

falls to
60
%; at 30 days, appeal is 9
3
%; at 60 days, appeal is 9
9
.
3
%; at 120 days there is no
increase
. Remember
:
the longer
the lag, the more cash that’s tied up in receivables.

c.

As a general rule, companies fund short
-
term assets like AR and inventory with current
debt offered by banks.

6.

AP lag
:

Indicates the number of days that you have to pay your vendors
/suppliers
. The
more

days (e.g., greater lag), then there is a higher likelihood that vendors will withhold
parts/supplies.

a.

AP is re
corded on the proforma balance sheet as a liability.

b.

AP lag impacts production:

suppliers become concerned as lag grows and begin
withholding m
aterials for products. At 30 days, they withhold 1%; at 60 days, they
withhold 8%; at 90 days they withhold 26%; at 120 days, they withhold 63%; at 150
days they withhold all material. With materials being withheld; workers stand idle and
per
-
unit labor
costs rise.

i.

On the production screen
, the row labeled “production after adj.” reflects the number
of units that can be produced due to the percentage of materials withheld.




iv.

Finance
:
This should be the last screen you go to, to see if you can pay for a
ll of the
changes you’ve made.

1.

Issue Stock
:

As a general rule, stock issues are used to fund long
-
term investments in
capacity and automation.

a.

Stock
is issued to raise capital (e.g., sell a portion of ownership to investors).

b.

Stock issue transactions take

place at the current market price.

c.

There is a 5% brokerage fee for issuing stock.

d.

New issues are limited to 20% of the firm’s outstanding shares in that year.

e.

All stock is common stock.

2.

Retire Stock
:

This involves buying back stock.

a.

You cann
ot

exceed the

lesser of either 1) 5% of your market capitalization (on p. 2 of
the Courier
)
; 2) Your total equity listed on page 3 of the Courier.

b.

You are charged a 1.5% brokerage fee to retire stock.

3.

Stock Price
: Is a function of 1)
book value

(equity / shares outsta
nding; equity = common
stock and retained earnings values on balance sheet)
, 2)
EPS

(net profit / shares
outstanding)
and 3)
a
nnual dividend.

a.

E
mergency
loans
(e
-
loans)
and stock price:
e
-
loans depress stock prices.

4.

E
-
loans:
most often occur b/c of excess

inventory due to inaccurate sales forecasts or
when the finance dept. fails to raise funds needed
for
expenditures like capacity and
automation.

i.

E
-
loans

are paid back with a 7.5% premium above the current debt interest rates.
Modest e
-
loans are no big de
al. Those over $10 mill are problematic.

ii.

E
-
loans are paid back in the year following their issue automatically (
as your
financial situation allows
)
.

iii.

E
-
loans
are reported on the balance sheet under liabilities.

5.

Dividend Distribution (dividend per share)
:

a.

D
ividends should represent the “excess” profits that are not required for growth in
working capital and new plant.


6.

Borrow Current Debt
:
As a general rule, companies fund short
-
term assets like AR and
inventory with current debt offered by banks.

a.

The ba
nk issues current debt in one
-
year notes.

b.

Amount of current debt loans:
Bankers will loan current debt up to about 75% of
your AR (from last year) and 50% of this year’s inventory.


c.

There are no brokerage fees for current debt.

d.

Interest rates are a funct
ion of your debt level

the more debt relative to assets, the
more risk you present and the higher the interest rates.

i.

CapSim examines this in terms of the company’s
leverage

(assets / equity).

A
leverage of 1.0 means no debt
-

every $1 of assets was paid
for with $1 of equity.
Leverage of 2.0 means $2 of assets for every $1 of equity. 3.0 means $3 of assets for
every $1 of equity, and therefore that the remaining $2 came from debt.

The higher
your leverage, the more likely it is that you will not be able
to make the interest
payments and repay the principal. On the other hand, if you have no debt, lenders are
happy to lend money against your assets, even to outsiders.

Typical Range
: In
CapSim, leverage typically ranges between 1.5 and 3.0.

7.

Issue Long
-
te
rm Debt (take out a Bond)
: Bonds are long
-
term debt and, as a general
rule, bond issues are used to fund long
-
term investments in capacity and automation.

a.

All bonds are 10
-
year notes.

b.

Your firm pays a 5% brokerage fee for issuing bonds (the first 3 digits

of the bond, the
series number, reflects the interest rate; the last 4 indicate the year in which the bond is
due; S stands for series).

c.

Bondholders will lend total amounts up to 80% of the value of your plant and
equipment (the production department’s ca
pacity and automation).

d.

Each bond issue pays a coupon (the annual interest payment) to investors.

e.

The bond holder would receive the principal payment at the end of the year when the
bond is due.

f.

When issuing new bonds, the interest rate will be 1.4% over
the current debt interest
rates (so, if your current debt rate is 12.1%, the bond rate would be 13.5%).

8.

Retire Long
-
term Debt (pay Bond back)
:

You can

retire

outstanding bonds before their
due date
. When you do,

a 1.5% brokerage fee applies.

a.

Oldest bonds

retire first.




d.

Capstone
Courier:


i.

Always the results of the
previous
round.

ii.

You will want to print off the Capstone Couriers because they will not stay there round
-
over
-
round

in an easily printable format
.


1.

To view after a round is over, visit the da
shboard, repo
r
ts, and the Courier.