Solution Manual for Operations Management Processes and Supply Chains 10th Edition by Krajewski

Chapter1 Using Operations to Compete DISCUSSION QUESTIONS 1. Answering this question demonstrates that processes underlie all of our jobs. What might be surprising is how many students would put their job in the category of “other,” suggesting that many jobs do not fall neatly into any one functional area. Perhaps many in the “other” category might best be called “operations” on further reflection. ustomers, both internal and e!ternal, are part of each process, and the goal is to manage the processes to add the most "alue for them. #. Ama$on.com offers a "ery broad range of ser"ices and products at competiti"e prices. %ts competiti"e priorities would include fast deli"ery time, on&time deli"ery, customi$ation, "ariety and low&cost operations. As a business, Ama$on.com is actually assembling a customi$ed bas'et of goods that must be deli"ered in a short window of time in a dependable fashion. (ow&cost operations are needed to remain competiti"e. )o remain in business, Ama$on.com needs to maintain high "olumes of traffic. *perations strategy must focus on stoc' a"ailability and quic', economical, and dependable deli"ery. +. )he hospital,s commitment to provide attention to patients arriving to the emergency unit in less than 15 minutes and never to turn away patients who need to be hospitalized implies that the facility must be designed to ha"e e!tra capacity in both beds and emergency room facilities. %t must plan on ha"ing e!tra personnel in the emergency room and also plan on ha"ing additional emergency personnel on call to ta'e care of unprecedented hea"y loads. %n line with the mission statement, ma!imum utili$ation of the facilities -i.e., beds and emergency room personnel. would not be one of the performance objecti"es for the hospital. /. 0ed1! traditionally has competed on the basis of fast, dependable deli"ery. 2efore the boom in %nternet applications, many businesses relied on 0ed1! to get things to other businesses o"ernight. 3ow, this need is beginning to diminish as sophisticated systems are being installed to assist companies in planning operations better. And, the internet based companies are adding more demands for low cost ground deli"eries to specific customer doors. 0ed1!, in order to remain competiti"e with companies such as 4P5, has mo"ed into the door&to&door deli"ery business, perhaps through acquisition. 3onetheless, it will require changes to this company,s competiti"e priorities. 6. )echnology 7anagement. )o identify a mar'et segment, we need to determine answers to questions such as8 Which colleges and departments currently offer the subject9 What do instructors desire in the way of te!tboo' support9 %s there a trend 1&1 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.  PA:) 1  Using Operations to Compete toward )echnology 7anagement courses9 Are there other )echnology 7anagement te!ts9 5ome needs assessment can be accomplished by sur"ey, but the response rate may be low. A high&in"estment strategy would be to as' or hire instructors to re"iew and critique a list of topics, then an outline, then a draft. 1!plicit ser"ices include supplying information about the subject in the form of a te!tboo' and instructor support in the form of ancillary publications. ;. %t is often not a good idea for a company to try to e!cel in all of the competiti"e priorities because it is generally impossible to do so. 7ediocrity is a predictable result. )he choice and the minimum le"el of one or more of the competiti"e priorities are set by the order qualifiers for the particular product or ser"ice. )he choice of the competiti"e priorities that the company should emphasi$e is usually go"erned by the company,s strategy dri"en by its mission statement and the core competencies that the company wants to harness to see' the best competiti"e ad"antage. <. ore processes should lin' to a firm,s core competencies. ore processes are those processes that pro"ide the firm the best competiti"e ad"antage. 1ssential to the definition a firm,s core processes is the concept of “interaction costs.” )hese costs include the time and money that are e!pended whene"er people and companies e!change ser"ices, products, or ideas. %f the transaction costs are higher to retain a process within the firm,s organi$ation than to outsource the process, the process should be outsourced. =. Wendy,s assembles hamburgers to order. When materials are held at the stage just before final assembly, they can be used to complete a wide "ariety of different sandwiches. 2ecause no finished&goods stoc' e!ists, when customers say, “>old the sauce,” there is no delay or waste of materials. 5er"ice cler's speciali$e. *ne cler' ta'es orders and payment. *thers fill portions of the order. *rders are processed in single file. )hroughput is normally restricted by transactions at the cash register. At busy times, throughput is increased by splitting the bottlenec' operation. *ne cler' ta'es customer orders, another recei"es payment. )he Wendy,s operation has some characteristics of assembly. )herefore, the impact of new menu items on the production operations must be carefully considered. ?. @randmother,s hic'en. a. Aathryn 5hoema'er,s strategic plans include the following8 q Product and ser"ice plans8 5hould the new location offer a new mi!9 q ompetiti"e priorities8 %f the product mi! and ser"ice mi! are different at the new location, the thrust could be on low "olumes and high quality. q Buality management8 5hould the goal be reliability or top quality9 q Process strategy8 What processes will be needed to ma'e chic'en dinners in the addition or new facility9 q 3ew technologies8 %s it time to automate9 %s this why there is a problem in ser"ice times9 q apacity8 >ow large should the addition or new facility be9 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 1&# Using Operations to Compete  >AP)1: 1  q (ocation8 5hould we locate in 4niontown or e!pand in 7iddlesburg9 b. Attitudes toward nutrition could change the demand for chic'en. ompetitors such as 2oston 7ar'et may be planning to mo"e to 4niontown or e"en 7iddlesburg. )here may be a trend toward demands for e"er&faster ser"ice, which cannot be supported by the processes specified in the “unique recipe.” )he economy of 4niontown might not be supporti"e of restaurant ser"ices. 5hoema'er should also consider the a"ailability of 'ey resources, such as ser"ers, whole chic'ens, spices, and coo'ing oil. Will 4niontown labor organi$e9 c. )he possible distincti"e competencies at @randmother,s hic'en :estaurant include the “unique recipe,” the homey atmosphere, and friendly, prompt ser"ice. 1C. Wild West, is recogni$able as 45 W15), which was bought out by Bwest in a hostile ta'eo"er in Dune, #CCC. 2ut many other “2aby 2ells” are in a similar position. a. 5trategic plans include reducing o"erhead, reengineering operations, and in"esting in new technologies to meet competition. )he “do&nothing” option of remaining a local monopoly telephone company is not "iable because of competition from cable systems and wireless systems that are capable of business and personal communication. %f the mission is too broad, Wild West should sell its financial ser"ices and commercial real&estate businesses. )hose businesses do not match their distincti"e competencies. b. *ne en"ironmental issue is whether communication, li'e health care, will be "iewed as a “right” and therefore should be free. A significant portion of Wild West,s business is go"erned by regulatory agencies. ustomer ser"ice in their core business is essential to maintaining a fa"orable regulatory en"ironment. *ther business opportunities, such as manufacturing and pro"iding information ser"ices, are prohibited by the same court order that formed the “2aby 2ells” from A)E). c. Wild West,s distincti"e competency is in connecting people -or machines. for the purpose of communication. A wea'ness is high o"erhead inherited from the era of telecommunication monopoly. 11. Although the answers may "ary depending on the “niche” elements of the business, the competiti"e priorities would include on&time deli"ery, low&cost operations, and customi$ation. )he latter competiti"e priority comes from the capability to assemble unique “bas'ets” of food items for each customer. )here may be a need to coordinate a gi"en bas'et between two different stores. apabilities to de"elop would include information systems and Web page design, efficient scheduling of deli"ery truc's -which must first collect the items in the bas'et and then deli"er them to the customer,s door., and an adequate fleet of truc's with dri"ers. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 1&+  PA:) 1  Using Operations to Compete PROBLEMS 1. 2oehring 4ni"ersity a. Falue of output8 students credit&hours G#CC tuition G1CC state support <6 + G;<, 6CC class class student credit&hours +   × × =     Falue of input8 labor H material H o"erhead G#6 G;6CC <6 students G+C, CCC student G+=, +<6 class class   + × +     = 7ultifactor Producti"ity ratio8 Producti"ity *utput G;<, 6CC 1.<; %nput G+=, +<6 = = = ompared to 5ol"ed problem 1, multifactor producti"ity has increased from 1.#6 to 1.<;. b. Falue of output is the same as in part a8 G;<, 6CC class (abor&hours of input8 #C 1; +#C hours wee' wee's class hours class × = Producti"ity ratio8 (abor Producti"ity *utput G;<, 6CC G#1C.?/ hour %nput +#C hours = = = )he G1?# season tic'et price is not used in this calculation. %t is a “red herring.” #. 5uds and Iuds (aundry a. (abor producti"ity Week Number of Workers Input (Labor-hours) Output (Shirts) Output/Input Ratio 1 # #/ ;= #.=+ shirtsJhour # # /; 1+C #.=+ shirtsJhour + + ;# 16# #./6 shirtsJhour / + 61 1#6 #./6 shirtsJhour 6 # /6 1+1 #.?1 shirtsJhour b. *utput per person does not "ary much whether it is 5ud, Iud, or Dud wor'ing. Producti"ity declines when all three are present. Perhaps there isn,t enough wor' to 'eep three persons occupied, or perhaps there is not enough wor' space or equipment to accommodate three wor'ers. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 1&/ Using Operations to Compete  >AP)1: 1  +. ompact disc players Falue of *utput8 G+CC Falue of %nput8 (abor H 7aterials H *"erhead Producti"ity *uput G+CC #.CCC %nput G+C G<C G6C = = = + + 1CK producti"ity impro"ement → × = # CC 11C # #CC . . . @i"en producti"ity= # #C . , and the "alue of output = G+CC, we sol"e for the cost of inputs8 Producti"ity *uput G+CC #.#C %nput %nput = = = %nput G+CC G1+;.+; #.# = = or G1+; )he cost of inputs must decrease by( ) G16C G1+; G1/ − = . a. A G1/ reduction in material costs is G1/ G<C #C.CCK = b. A G1/ reduction in labor costs is G1/ G+C /;.;<K = c. A G1/ reduction in o"erhead is G1/JG6C L #=.CCK /. )he output of a process is "alued at G1CC per unit. )he cost of labor is G6C per hour including benefits. )he accounting department pro"ided the following information about the process for the past four wee's8 Week 1 Week 2 Week 3 Week 4 nits !ro"u#e" 11#/ 1+1C 1C?# ?=1 $ota% &a%ue 11#,/CC 1+1,CCC 1C?,#CC ?=,1CC Labor (') 1#,<+6 1/,=/# 1C,;C+ ?6#; Labor (hrs) #6/.< #?;.= #1#.1 1?C.6 (ateria% (') #1,C/1 #/,6#+ #C,//# 1=,+;/ O)erhea" (') =,??# 1C,/=C =,<+; <,=/= (u%tifa#tor !ro"u#ti)it* #.;+ #.;+ #.<6 #.<6 Labor !ro"u#ti)it* /./1 unitsJhr /./1unitsJhr 6.16 unitsJhr 6.16 unitsJhr a. 4se the multifactor producti"ity ratio to see whether recent process impro"ements had any effect and, if so, when the effect was noticeable. Falue of output 11#/units G1CC G11#, /CC × = Falue of input8 labor H material H o"erhead G1#,<+6 H G#1,C/1 H G=,??# L G/#,<;= Producti"ity ratio8 (abor Producti"ity *utput %nput = Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 1&6  PA:) 1  Using Operations to Compete Wee' 1 Producti"ity *utput G11#, /CC #.;#= %nput G/#, <;= = = = Wee' # Producti"ity *utput G1+1, CCC #.;#= %nput G/?,=/6 = = = Wee' + Producti"ity *utput G1C?, #CC #.</6 %nput G+?, <=1 = = = Wee' / Producti"ity *utput G?=,1CC #.</6 %nput G+6, <+= = = = #.</6 #.;#= 1CCK /./6K #.;#= − × = Impro)e" 4+4,- - noti#eab%e in Week 3 b. >as labor producti"ity changed9 4se the labor producti"ity ratio to support your answer. (abor&hours of input8 (abor G6CJhour (abor costs Wee' 1 L G1#,<+6JG6C L #6/.< Wee' # L G1/,=/#JG6C L #?;.=/ Wee' + L G1C,;C+JG6C L #1#.C; Wee' / L G?,6#;JG6C L 1?C.6# Producti"ity ratio8 (abor Producti"ity *utput %nput = Wee' 1 L (abor Producti"ity *utput 11#/ /./1+CJ hour %nput #6/.< hours = = = Wee' # L (abor Producti"ity *utput 1+1C /./1+J hour %nput #?;.=/ hours = = = Wee' + L (abor Producti"ity *utput 1C?# 6.1/?6J hour %nput #1#.C; hours = = = Wee' / L (abor Producti"ity *utput ?=1 6.1/?1J hour %nput 1?C.6# hours = = = 6.1/?1 /./1+C 1CCK 1;.;=K /./1+C − × = Impro)e" 1.+./- Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 1&; Using Operations to Compete  >AP)1: 1  6. Alyssa,s ustom a'es a. 6 2irthday ca'es ! G6C per ca'e L G#6C # Wedding ca'es ! G16C per ca'e L G+CC + 5pecialty ca'es ! G1CC per ca'e L G+CC )otal monthly re"enue L G=6C 7ultifactor producti"ity ratio L outputJinput 1.#6 L G=6CJ! 5ol"e for ! L G=6CJ1.#6 L G;=C )otal costs L G;=C A"erage cost per ca'e L G;=CJ1C L G;=Jca'e b. (abor producti"ity 2irthday ca'e L G6CJ 1.6 hours L G++.+CJhour Wedding a'e L G16CJ / hours L G+<.6CJhour 5pecialty a'e L G1CCJ1 hours L G1CCJhour c. 2ased on labor producti"ity, Alyssa should try to sell specialty ca'es the most. d. Mes, Alyssa should stop selling birthday ca'es. 2ased on answer a, she loses G;= & G6C L G1= e"ery time she sells a birthday ca'e. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 1&<  PA:) 1  Using Operations to Compete ADVANCED PROBLEMS ;. 2ig 2lac' 2ird ompany )he 2ig 2lac' 2ird ompany problem is based on a product made by :a"en %ndustries. 3one of the numbers are representati"e of actual costs or "olume. a. 7ultifactor Producti"ity Original Situation: Falue of output8 #6CC CCC uniforms G#CC × ( ) = G6CC, Falue of input8 #6CC CCC uniforms G1#C × ( ) = G+CC, Producti"ity ratio8 Producti"ity = = = *uput %nput G6CC, G+CC, . CCC CCC 1;< Overtime Situation: Falue of output8 /CCC CCC uniforms G#CC × ( ) = G=CC, Falue of input8 /CCC CCC uniforms G1// × ( ) = G6<;, Producti"ity ratio8 Producti"ity = = = *uput %nput G=CC, G6<;, . CCC CCC 1+? Producti"ity decreases by8 1.;< 1.+? 1CCK 1;.<<K 1.;< − × = b. (abor Producti"ity Original Situation: Falue of output -from part a. is8 G6CC,CCC (abor&hours of input8 <C /C +C /C /CCC × + × = ( ) ( ) hours hours hours (abor producti"ity = = G6CC, G1#6 CCC /CCC hours hour Overtime Situation: Falue of output -from part a. is8 G=CC,CCC (abor&hours of input8 < C < # + C < # < # C C × + × = ( ) ( ) h o u r s h o u r s h o u r s (abor producti"ity LG=CC,CCC J <#CC hours L G111.11Jhours (abor producti"ity decreases by8 -1#6J111.11. J 1#6 x 100 ! 11.1 c. @ross profits Original Situation: G6CC, G+CC, G#CC, CCC CCC CCC − = Overtime Situation: G=CC, G6<;, G##/, CCC CCC CCC − = Wee'ly profits increased. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 1&= Using Operations to Compete  >AP)1: 1  <. 7ac',s @uitar ompany a. (abor producti"ity L outputJinput Output L 1CC guitars ! =CK completion rate ! priceJguitar L =C guitarsJ month ! G#6CJguitar L G#C,CCC Input (abor L 1CJhours per guitar ! 1CC guitars L 1CCC hours (abor producti"ity is G#C,CCCJ1CCC L G#CJhour 7ultifactor producti"ity ratio L outputJinput Output L 1CC guitars ! =CK completion rate ! priceJguitar L =C guitarsJ month ! G#6CJguitar L G#C,CCC Input (abor L G1CJhour ! 1CJhours per guitar ! 1CC guitars L G1C, CCC 7aterial L G/CJguitar ! 1CC guitars L G/, CCC *"erhead L G/,CCC 7ultifactor producti"ity ratio L G#C, CCCJG1=, CCC L 1.11 b. *ption 1. %ncrease sales price by 1CK Output L 1CC guitars ! =CK completion rate ! -G#6C ! 1.1. L G##,CCC Input (abor is same as in part -a. L G1C,CCC 7aterial is same as in part -a. L G/,CCC *"erhead is same as in part -a. L G/,CCC 7ultifactor producti"ity ratio L G##,CCCJG1=,CCC L 1.## *ption #. %mpro"e Buality Output L 1CC guitars ! ?CK completion rate ! G#6CJguitar L G##,6CC Input (abor is same as in part -a. L G1C,CCC 7aterial is same as in part -a. L G/,CCC *"erhead is same as in part -a. L G/,CCC 7ultifactor producti"ity ratio L G##,6CCJG1=,CCC L 1.#6 *ption +. :educe costs by 1CK Output L same as in part -a. L G#C,CCC Input :educe costs by 1CK yields ?CK of the input costs from part -a.. L G1=,CCC ! C.?C L G1;,#CC 7ultifactor producti"ity ratio L G#C,CCCJG1;,#CC L 1.#+ Iarren should choose *ption # and impro"e quality because it yields the greatest impro"ement in multifactor producti"ity. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 1&?  PA:) 1  Using Operations to Compete =. Producti"ity of Process Alpha and Process 2eta 1!cel used to perform all calculations Process Alpha 2eta )otal Falue of *utput G1<,16C G1;,/6C )otal ost of (abor G#,;CC G+,CCC )otal ost of 7aterials G6,6CC G/,?CC )otal ost of *"erhead G;,CCC G6,CCC (abor Producti"ity G;.6?; G6./=+ unit GJ labor G 7ultifactor Producti"ity G1.#1; G1.#<6 unit GJ total G Process alpha has #CK N-;.6?;&6./=+.J6./=+O higher labor producti"ity. Process beta has 6K N-1.#<6&1.#1;.J1.#1;O higher multifactor producti"ity. While process beta generates more dollars of output per dollar in"ested in input, it doesn,t use labor as efficiently as process alpha. ?. 7orning 2rew offee 5hop 1!cel used to perform all calculations a. urrent labor and multifactor producti"ity urrently :egular offee appuccino Fienna coffee total *utput in dollars G<CC.CC G+CC.CC G;CC.CC G1,;CC.CC (abor cost G+#C.CC 7aterial cost G1<6.CC G<6.CC G1=<.6C G/+<.6C 1quipment cost G1#6.CC *"erhead cost G##6.CC Profit G/?#.6C (abor Producti"ity 6.CCCC 7ultifactor Producti"ity 1.///< Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 1&1C Using Operations to Compete  >AP)1: 1  After adding new product After Adding 3ew Product :egular offee appuccino Fienna coffee 1is'affee total *utput in dollars G<CC.C C G+CC.CC G;CC.C C G+<6.CC G1,?<6.CC (abor cost G+#C.CC 7aterial cost G1<6.C C G<6.CC G1=<.6 C G11#.6C G66C.CC 1quipment cost G#CC.CC *"erhead cost G+6C.CC Profit G666.CC (abor Producti"ity ;.1<1? 7ultifactor Producti"ity 1.+?C= hange in (abor Producti"ity #+./+=K hange in 7ultifactor Producti"ity &+.<#<K b. )he units of 1is'affee that would ha"e to be sold to ensure that the multifactor producti"ity increases from its current le"el may be calculated as follows8 1C# ?/6 . #== =++ . # 1;<C . # ?/6 . 1=== 6 1;CC G . 6 . 1 G 6 . 1+C< -G ///< . 1 6 G 1;CC G ///< . 1 6 . 1 G 6 . 1+C< G C . 6 G 1;CC G ///< . 1 +6C #CC .. 6 . 1 -G . #6 . 1 -G 16C . <6 -G. 1CC . 6 -G. +6C - +#C G . 6 -G . / -G 16C . + -G 1CC . # -G +6C ///< . 1 cos cos cos cos G ≅ = + = + + = + = + + = + + + + + + + + + = + + + = x x x x x x x x x t Overhead t !"uipment t #aterial t $abor in sold Co%%ee input output Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 1&11  PA:) 1  Using Operations to Compete alculation confirmed in 1!cel8 After Adding New Product Regula r Coffee Cappucci no Vienna coffee Eiskaffe e total Output in dollars $700.0 0 $300.00 $00.0 0 $!"0.00 $#$""0.0 0 %a&or cost $3#0.00 'aterial cost $"7!.0 0 $7!.00 $"(7.! 0 $"!3.00 $!)0.!0 E*uip+ent cost $#00.00 O,er-ead cost $3!0.00 Profit $.).!0 %a&or Producti,it/ .!)3( 'ultifactor Producti,it/ "....7 C-ange in %a&or Producti,it/ 3".(7!0 C-ange in 'ultifactor Producti,it/ 0.00"0 CASE: CHAD’S CREATIVE CONCEPTS P 0+ S*nopsis )his case describes a small furniture manufacturing company that has gained a reputation for creati"e designs and quality by focusing on producing custom&designed furniture. As its reputation grew it began to sell some standard furniture pieces to retail outlets. )he o"erall growth in sales "olume and the di"ersification into the production of standard furniture pieces ha"e caused a number of issues to arise concerning both the internal manufacturing operations and its relationship to the other functional areas of the company. 1+ !urpose )his case is designed to be used as either a “cold&call” case for class discussion or an assigned homewor' reading. 7ajor points to be brought out in the discussion include8 1. )he range of decisions that are made in designing and operating processes #. )he impact that these operating decisions ha"e on the organi$ation as a whole, such as on mar'eting and finance +. )he impact that decisions made in other functional areas of the organi$ation ha"e on the operating function P )his case was prepared by Ir. 2roo'e 5aladin, Wa'e 0orest 4ni"ersity, as a basis for classroom discussion. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 1&1# Using Operations to Compete  >AP)1: 1  /. )he need to go beyond the “functional silo” mentality and manage in an integrati"e manner 2+ 0na%*sis Question 1: &hat types o% decisions must Chad 'homas ma(e daily %or his company)s operations to run e%%ectively* Over the long run* )he students should be able to discuss a number of short&term&oriented decisions that are facing had )homas. )hese should include8 a. >ow to set priorities and schedule different orders. had is recei"ing orders for both custom&made, low&"olume furniture pieces and higher&"olume, standard pieces. 5ales ha"e increased, but the amount of equipment and the production capacity of the company ha"e not. Iifferent orders with different manufacturing requirements are now competing for the same producti"e capacity. b. What orders to accept and how long of a lead time to plan for in promising a deli"ery date. c. What type of wor' policies should be maintained for his employees9 Iecisions such as the number and type of employees to employ, the number of hours to wor' per day, and the amount of o"ertime to allow are all wor' policy decisions that impact the a"ailable capacity le"el. d. )he allocation of resources, equipment, labor, and money to each product line. e. )he le"el of in"entory to maintain at "arious stages of the production process for both the custom and standard furniture lines -i.e., raw material, W%P, finished goods.. )hese decisions are lin'ed to the longer&term, total in"entory&in"estment decision. 1!amples of longer&term decisions that face had )homas include8 a. Amount of money to tie up in the total in"entory in"estment. b. )he type of equipment to in"est in to support efficient production. At what point should more speciali$ed equipment be purchased to manufacture high&"olume, standard furniture pieces more efficiently9 c. What should be the o"erall wor'force le"el to maintain, and what should be the proper mi! of s'ills and capabilities9 d. >ow should the facilities be laid out to accommodate the two different product lines9 )his gets the students into a whole range of capacity and equipment allocation decisions including si$e, type, and configuration. %n these decisions it is important that the students see the significance of consistency of both strategic and operating decisions across functional areas. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 1&1+  PA:) 1  Using Operations to Compete Question 2: +ow did sales and mar(eting a%%ect operations when they began to sell standard pieces to retail outlets* 5tandard furniture pieces compete on a different set of competiti"e priorities than custom&designed pieces. )imely deli"ery and low costs are much more important than product fle!ibility. Buality may also be defined differently. )he e!isting facilities are set up to pro"ide fle!ibility with its job&shop orientation and general&purpose equipment. 2y introducing a standard line that should be manufactured on a flow line with some dedicated, more speciali$ed equipment, a conflict has de"eloped, and scheduling problems ha"e resulted. Question 3: +ow has the move to producing standard %urniture pieces a%%ected the %inancial structure o% the company* %n"entory in"estment and operating costs are rising because of the frequent changeo"ers to accommodate the two different product lines and their scheduling conflicts. Profit margins for the standard line are smaller, which puts pressure on manufacturing to increase producti"ity and reduce costs. )here may also be an issue concerning the assignment of o"erhead costs to each product line. 0inally, the potential need to rent warehouse space to store either W%P or finished&goods in"entory cuts into the profit margin for the standard furniture line. Question 4: &hat might Chad 'homas have done di%%erently to help avoid some o% these problems* had needs to address issues relating to functional areas. 7a'e sure the student is able to identify decisions that relate to more than one functional area. 1!amples include the following8 Operations ,unction 1. 7onitoring capacity and utili$ation of facilities #. 0ormulating in"entory policiesQdollars, items, and unit le"els +. 5etting scheduling policies and priorities /. 7aintaining product line quality #ar(eting and Sales 1. Accurately forecasting orders for standard pieces #. Iefining mar'et segments and customer needs +. Ietermining what deli"ery schedules can be promised to customers ,inance 1. Ieciding le"el and type of in"estment #. %n"estigating the effect of capacity in"estment decisions on :*% Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 1&1/ Using Operations to Compete  >AP)1: 1  -istribution.$ogistics 1. 7anaging distribution and pipeline in"entory #. omparing cost and ad"antages of "arious transportation modes +. 7eeting deli"ery lead times )hree possible a"enues that students may focus on are8 )homas might ha"e a. 1stablished a plan for a more controlled growth. Part of this plan would be the de"elopment of the appropriate infrastructure to manage a controlled growth as to what mar'ets to enter, what product lines to de"elop, and how to de"elop the proper manufacturing capabilities. b. 7aintained the company focus on custom&designed furniture only. )his alternati"e presents a whole different set of issues and decisions pertaining to future growth, but it would ha"e a"oided the issues of mi!ed competiti"e priorities and scheduling conflicts. c. :eali$ed the different requirements for each product line and focused the manufacturing facilities into two separate sets of production facilities designed to cater to each product line,s specific needs. 3+ Re#ommen"ations )his case is not designed to be a decision&ma'ing case per se but rather a "ehicle to get students thin'ing about the types and the integrated nature of decisions that operations managers face. )he students may, indeed, ha"e suggestions as to what should be done to help out had )homas. )hese recommendations will more than li'ely follow the alternati"es already discussed. As recommendations are pro"ided by students, ma'e sure you push them to understand the implications of their recommendations with respect to the company as a whole and the other functional areas. 4+ $ea#hin5 Strate5* )his case can be effecti"ely discussed in #C to +C minutes by following the discussion questions pro"ided at the end. )he questions are interconnected and somewhat redundant on purpose to reinforce the interrelatedness of decisions made in "arious functional areas of the company. )he intent is to ha"e the students understand the range of decisions that face managers in the operating function and to reali$e that different types of products competing in different mar'ets place different demands on the operating function. )herefore, producti"e systems will ta'e on a "ariety of configurations. 1!hibit )3.1 lays out a sample table to be written on the board displaying important issues in the class discussion. 1ach column can be used to compare and contrast the differences in the requirements imposed by custom "ersus standard furniture for each area. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 1&16  PA:) 1  Using Operations to Compete EXHIBIT TN.1 Board Plan Important Issues 2ustom 6urniture Stan"ar" 6urniture 7ar'eting Buality le"el and quality control Process equipment Process flow Production scheduling system Purchasing )ype of in"entory and in"entory control system )ype of engineering )ype of labor and super"ision needed WageJreward system (ayout Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 1&1; Using Operations to Compete  >AP)1: 1  CASE: BSB INC!: Pi""a #ars Come to Camp$s P 0+ S*nopsis 252, %nc. presents the situation where launching a pi$$a ser"ice at a food ser"ice operation on a college campus turns out to be "ery successful. As the manager of the food ser"ice operation is contemplating an e!pansion of the ser"ice, an announcement by the uni"ersity that a new food court will soon be opening in the new student union causes some concern. )he new food court will contain, for the first time on campus, other food ser"ice companies, including a new Pi$$a >ut 'ios'. )his causes the manager of 252, %nc. to ree"aluate the competiti"e en"ironment and her own competiti"e priorities. 1+ !urpose 252, %nc. pro"ides the students an opportunity to discuss a number of strategically focused issues to include the following8 1. #ission statements: 7ission statements describe the fundamental purpose for which the organi$ation e!ists. )he uni"ersity decided that a focus on food ser"ice operations was not part of its primary mission, so it contracted the ser"ice out to 252, %nc. 5tudents should be able to describe a mission statement for 252, %nc. )his statement will help in discussing the second major focus of this case. #. Comparison o% competitive priorities: When the pi$$a ser"ice was launched a year ago, the competiti"e priorities were to e!pand the product line to offer pi$$a that could be deli"ered quic'ly at a reasonable price. osts were 'ept low, and turnaround time was short due to the limited combination of toppings a"ailable. With the addition of the food court and Pi$$a >ut on campus, competiti"e priorities may change. Ieli"ery may still be a differentiating competiti"e priority, but product fle!ibility -"ariety. and "olume fle!ibility -large order si$es. may become more important. 252, %nc. may not be able to compete on low cost when compared to Pi$$a >ut,s operations. +. 'he impact changing competitive priorities has on operating decisions: 5tudents need to discuss the potential impact that different competiti"e priorities ha"e on process design and operating systems. %f product fle!ibility and "olume fle!ibility become more important, then there are implications for8 a. 1quipment needsQcon"entional o"en "ersus continuous chain dri"e b. apacity requirementsQorder si$e and deli"ery cycle c. %n"entory issuesQin"entory needed to support product fle!ibility /. /roduct li%e cycles: Iemand for pi$$a on campus has le"eled off. Why9 >as it reached its mature, steady state9 What will be the impact of new competition9 What can be done to reposition pi$$a into a growth stage9 )hese are questions that should be as'ed of students to get them to thin' about pi$$a,s product life cycle. P )his case was prepared by Ir. 2roo'e 5aladin, Wa'e 0orest 4ni"ersity, as a basis for classroom discussion. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 1&1<  PA:) 1  Using Operations to Compete 2+ 0na%*sis A good analysis of the situation can be performed by going through the fi"e questions at the end of the case. )he following is what you can e!pect from a first&year 72A student gi"en the case as a ta'e&home assignment to read and to respond to the questions at the end. Question 1: -oes 0S01 Inc2 en3oy any competitive advantages or distinctive competencies* 252,s competiti"e ad"antage is close pro!imity to the customers. )hough /+ percent of meals are eaten off campus, 6< percent of meals are still eaten at 252,s facilities. 0or pi$$a deli"ery the close pro!imity is critical, as it allows for quic'er deli"ery. %n addition, deli"ery can be done at a lower cost because bi'es can be used. 252,s distincti"e competencies are the location of facilities and mar'et 'now&how. 2eing on campus, 252 can pro"ide deli"ery ser"ice quic'er and at a lower cost. %n addition, by being on campus, 252 is closer to the customer base, which allows Aershaw, the manager, to be more 'nowledgeable of her customer,s needs. 5he employs en"ironmental scanning, such as the customer sur"eys, to 'eep abreast of her mar'et. 4uestion 5: Initially1 how did 6enee 7ershaw choose to compete with her pizza operations* &hat were her competitive priorities* %nitially, Aershaw chose to compete on deli"ery ser"ice and price. 5he used quic' deli"ery as a 'ey selling point. %n addition, without a reasonable price, she could not compete with the off&campus pi$$a companies. %n effect, her order qualifier was price, and her order winner was ser"ice. >er initial competiti"e priorities for pi$$a were deli"ery speed and price. >er on&campus location and limited standard toppings ma'e these priorities possible. 4nfortunately, this policy limits the "ariety of pi$$as a"ailable. )he increased requests for additional topping combinations and the le"eling of sales suggest this policy may be hurting 252. Question 3: &hat impact will the new %ood court have on 7ershaw)s pizza operations* &hat competitive priorities might she choose to %ocus on now* )he new food court introduces new competition that has the same on&campus ad"antage as 252. %n addition, these companies can also pro"ide products at reasonable prices, but unli'e 252, they ha"e brand names. >er direct competitor, Pi$$a >ut, can probably pro"ide a similar price. 7ost li'ely Pi$$a >ut will also ha"e limited "arietiesR howe"er, 252 still maintains its deli"ery ad"antage. )he most li'ely new competiti"e priorities for 252 will be e!panded product "ariety and longer ser"ice hours. )he increased requests for alternate toppings show a customer interest in "ariety, and the e!panded hours will enable 252 to offer ser"ice when the Pi$$a >ut is closed or when students are in their dorm rooms. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 1&1= Using Operations to Compete  >AP)1: 1  Question 4: I% 7ershaw were to change the competitive priorities %or the pizza operation1 what are the gaps between the priorities and capabilities o% her process* +ow might this impact her operating processes and capacity decisions* An increase in product "ariety will affect both ser"ice and cost. Aershaw probably cannot ha"e as many premade pi$$as ready to throw into the o"en. 5he will also need to stoc' additional toppings. %f she wants to maintain ser"ice, she will need to hire additional wor'ers. 5he will ine"itably ha"e some trade&off between ser"ice and price if she adds product "ariety. Aershaw will also need to add capacity. At present, she is near capacity with her pi$$a o"ens. 5he may e"en ha"e to consider a new location, as there seems to be limited space at the grill location. learly she will need to determine the "iability of pi$$a ser"ice before she ta'es this step. Question 5: Can you outline a service strategy %or 7ershaw)s operation on campus* %f she chooses to stay in the pi$$a business, deli"ery will remain important. 0ood, most li'ely pi$$a, deli"ered from off campus, is a significant competitor. )hese competiti"e companies li'ely offer many pi$$a combinations. )herefore, 252 will need to increase "ariety to remain competiti"e. )he 'ey to this strategy is to maintain quality and to inno"ate on product offerings. Aershaw must use her pro!imity to the customer to maintain her competiti"e ad"antage in determining their pi$$a deli"ery needs. )he other strategy would be total price competition. )his would require her to 'eep the limited menu and to push to 'eep costs at a bare minimum. 4nfortunately this means maintaining the same basic strategy she has now. >owe"er, this strategy will most li'ely lead to an ine"itable decline in mar'et share. )his strategy seems best if she decides to e!it the mar'et, but it gi"es her the opportunity to mil' the mar'et before e!iting. %n re"iewing the student responses the instructor should note the following8 1. *n question three, the student o"erloo's the continued importance of con"enient, quic' deli"ery. )he other food ser"ices do not pro"ide this ser"ice. #. 5tudents tend to hedge on question fi"e. )hey should be pressured into putting together a ser"ice strategy as opposed to describing alternati"e choices only. )here are a number of positions Aershaw may ta'e. What is important, howe"er, is to loo' for consistency in the strategies that students pro"ide. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 1&1?  PA:) 1  Using Operations to Compete 3+ $ea#hin5 Strate5* )his case is best assigned as a ta'e&home assignment. >a"e the students focus on responding to the questions at the end of the case. )ell them to pay particular attention to the last question. )he first four questions all lead up to the last one where students should describe a ser"ice strategy for pi$$a operations of 252, %nc. )ell students you want them to settle on a specific strategy they can support. %n class, start with the first question and cycle through to the final question, which describes their ser"ice strategies. %t is helpful to try to get two or three different strategies on the board to compare and contrast approaches. %t is important that students see that there are a number of good alternati"e strategies and not just one best one. A thorough discussion of this case will ta'e /6 minutes to an hour, especially if alternati"e strategies are discussed. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 1&#C