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SAMPLE1 ug - Stanford University Graduate School of...

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Stanford University Graduate School of Business January 2008 This note is based on a note written by Samuel C. Wood and Sunil Kumar, Stanford University Graduate School of Business. Copyright 2007. Contact [email protected] for permission to reproduce. Capacity Management at Littlefield Labs Background In early January, Littlefield Laboratories (LL) opened its first and only lab for blood test- ing purposes. LL charges a premium and competes by promising to ship the results of a sample within 24 hours of receiving the order, or the customer will receive a rebate based on the delay. In the initial months, demand is expected to grow at a roughly linear rate, stabilizing after about 5 months. After another month, demand should begin to decline at a roughly linear rate. Although orders arrive randomly to LL, management expects that, on average, demand will follow the trends outlined above. Management's main concern is managing the capacity of the lab in response to the com- plex demand pattern predicted. Delays resulting from insufficient capacity would under-
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SAMPLE1 ug - Stanford University Graduate School of...

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