ISyE 3104: Introduction to Supply Chain Modeling:
Manufacturing and Warehousing
Instructor : Spyros Reveliotis
Spring 2003
Solutions for Homework #1
Chapter 1
Operations and Productivity
DISCUSSION QUESTIONS
1.
Operations management is the field that deals with the effective and efficient design
and operation of the transformation processes that provide the various goods and
services.
2.
In a general sense, the production planning problem can be described as the company
effort to produce the right product in the right quantities in an efficient manner. It
should be obvious then, that in order to address the first issue, i.e., produce the right
products in the right quantity, the companies need to have information about the
market behavior, i.e., the expected demand and any further developing trends.
Similarly, in order to meet this expected demand efficiently, the companies need to
have a clear understanding of – i.e., detailed information about - their current
operational status – i.e., existing stock, production capacity, already initiated
production, expected supplier deliveries, etc. – since only then they can make the
right decisions regarding how to adjust the existing status in a way that will allow
them to meet the expected demand in a cost-effective and timely fashion.
8.
The three classic functions are:
(a) Marketing
(b) Operations
(c) Finance/Accounting
9.
One would expect to find departments in a home appliance manufacturer for most, if
not all, of the activities suggested by the 10 decisions in Table 1.2 and the
organization chat in Figure 1.2.
Research and Development (R&D)
Conducts product research, product development, and product engineering.
A firm might also conduct product testing at the consumer level.
Industrial Engineering (IE)
Determines the most efficient use of productive resources; may also develop
product costing.
Methods Engineering
Industrial engineers working toward improving procedures in the workplace.
Facilities Planning, Construction
Plans, constructs, maintains, and repairs facilities.
Quality Assurance/ Quality Control (QA & QC)
Reviews designs, products, and processes to ensure quality objectives are
met.
Production Planning and Inventory Control (PIC)
Schedules the manufacturing processes; manages inventory.
Manufacturing Systems
Applies the methodology, models, and the procedures of mathematics or
management information systems to manufacturing operations. This
function might assume more importance in the home appliance market as
manufacturers from outside the U.S. provide increased competition.
Process Engineering
Design, develops, and evaluates production tools, equipment, and processes.
Product Engineering
Fine-tunes the product design to enhance production efficiency
Maintenance
Focuses on designing systems and procedures and develops personnel who
will create and maintain a reliable system.
Supply Chain Management
Determines the best sources for a given set of specifications, delivery, and
price. Because the “home appliance” is a basic consumer good and
competition occurs on parameters other than price, one might also find that
the organization’s competitive strategy dictates that the operations function
include the additional department.
After Sale Service
Responsible for the overall management and provision of on-site and carryin customer service. In attempting to identify the departments of a “typical”
manufacturer, one should recognize that the operations (not necessarily the
department assignments) noted above are common to some degree among
all manufacturers. The question is really to what degree, and the decision as
to what degree is often based on competitive strategy in the marketplace
rather than any “necessity” of prescribed organizational structure.
END-OF-CHAPTER PROBLEMS
1.3
Resource
Labor
Resin
Capital
Energy
1.4
Last Year
1000/300 = 3.33
1000/50 = 20
1000/10000 = 0.1
1000/3000 = 0.33
This Year
1000/275 = 3.64
1000/45 = 22.22
1000/11000 = 0.09
1000/2850 = 0.35
Change
0.31
2.22
-0.01
0.02
Percent Change
0.31/3.33 = 9.3%
2.22/20 = 11.1%
-0.01/0.1 = -10.0%
0.02/0.33 = 6.1%
Production
Labor hr. @$10
Resin @$5
Capital cost/month (1%)
Energy ($0.5/Btu)
Productivity Change =
Last Year
1,000
$3,000
250
100
1,500
$4,850
This Year
1,000
$2,750
225
110
1,425
$4,510
[(1,000 / 4,510) – (1,000 / 4,850)]
(1,000 / 4,850)
= 7.5% improvement
CASE STUDY
NATIONAL AIR EXPRESS
1.
The number of stops per driver is certainly still a good productivity measure, since
it gives a good idea regarding the “amount of service” provided by the company
on a daily basis. Another issue that could be tracked regarding the company’s
productivity might be area covered per driver per day since this measure would
provide additional information regarding the company’s capability to serve a more
geographically dispersed area and its effectiveness with respect to the relevant
route planning problems.
2.
Since most call-in pickups are around 5.00 p.m., by offering some incentive, i.e.
discounted rates, to customers that call in earlier parts of the day, could help
smoothen the experienced (service) demand, and reduce the congestion currently
experienced by the company. An additional de-congesting measure could be to
preprocess most of the involved paperwork so that the expected service time at the
customer site is minimized.
3.
C.f. the Supplement to Chapter 10 on how to determine labor standards.
Chapter 2 Operations Strategy for Competitive Advantage
DISCUSSION QUESTIONS
4. Here are some of the typical practices on which modern automotive industries base
their competitiveness:
(a) Design of goods and services:
new products, designed and evaluated with CAD; coordinated with
STEP
(b) Quality:
100% conformance to standards; better feedback from customer
benchmarking
(c) Process and capacity planning:
new jigs to improve quality
(d)
(e)
(f)
(g)
(h)
(i)
new robots to reduce labor cost and improve quality
Location strategy:
Location relative to suppliers is now more important, migration to lowcost labor areas
Layout strategy:
Work cells, flexible assembly lines
Inventory management:
MRP, JIT are now regularly employed
Scheduling:
Scheduling to meet requirements of JIT
Expert systems and finite scheduling
Maintenance:
Improved and increased training of maintenance personnel
Supply chain management:
Fewer suppliers who are more heavily integrated into the main
organization’s information system
6. How does on OM strategy change during a product’s life cycle?
During the introduction stage, the emphasis is on developing a product that is well
accepted by the market, hence, issues such as product design and development are
critical. During the growth stage, the emphasis shifts on establishing and maintaining a
production process that is reliable and responsive to the developing demand as well as
any further signals obtained from the market regarding the desired product quality. At
this stage also the major competitors will emerge, and therefore, the company must
develop responding strategies to that will allow it to preserve, and if possible, increase
its market share. During the product maturity phase, the market has stabilized in terms
of product features, key competitors and market shares, in fact some overcapacity
might have also been established, and therefore, the key concern for the companies is to
preserve their market share by offering a reliable product at competitive prices. Hence,
maintaining a stable and efficient production process is very important. Finally, in the
decline stage, pruning the line to eliminate items not returning good margin becomes
important. Figure 2.4 in your textbook provides a more detailed list of issues.
CASE STUDIES
MINIT-LUBE, INC.
1. (a) What constitutes the mission of Minit-Lube?
To provide economical preventive maintenance and interior auto cleaning,
primarily to vehicles owned by individuals (as opposed to business), in the U.S.
(b) How does the Minit-Lube Strategy provide competitive advantage?
Minit-Lube’s approach to these 10 decisions includes:
Product Design:
A narrow product strategy that could be defined as “lubricating
automobiles” that allows the subsequent development of more focused and
efficient operations.
Quality Strategy:
Because of limited task variety, high repetition, good training, and good
manuals, quality should be relatively easy to maintain.
Process Strategy:
The process strategy allows employees and capital investment to focus on
doing this mission well, rather than trying to be a “general purpose” garage
or gas station.
Location Strategy:
Facilities are usually located near residential areas.
Layout Strategy:
The three bays are designed specifically for lubrication and vacuuming tasks
to minimize wasted movement on the part of the employees and to
contribute to the speedier service.
Supply Chain Strategy:
Purchasing is facilitated by negotiation of large purchases and custom
packaging.
Human Resources Strategy:
Human resources strategy focuses on hiring a few employees with limited
skills and training them in a limited number of tasks during the performance
of which they can be closely supervised.
Inventory:
Inventory investment should be relatively low, and they should expect a
high turnover.
Scheduling:
Scheduling is quite straightforward with similar times for most cars. Once
volume and fluctuation in volume are determined, scheduling should be very
direct—assisting both staffing and customer relations.
Maintenance:
There is relative little equipment to be maintained, therefore little preventive
maintenance required. With three bays and three systems, there is backup
available in the case of failure.
MOTOROLA’S GLOBAL STRATEGY
Motorola’s strategy is based on Japanese-style techniques and continuous improvement of
quality.
DISCUSSION QUESTIONS FOR CASE
1. What are the components of Motorola’s international strategy?
Definitely, Motorola managed to attract and maintain its market share through the
quality of its products, in terms of, both, conformance to specifications and the
supported functionality. In fact, aware of the increasing significance of time-based
competition, Motorola tries systematically to streamline its product design
processes so that their cycle time is reduced by a “tenfold every five years”. The
achievement of these quality and responsiveness standards has been facilitated by
focusing the product operations to a smaller set of products, walking away from the
prior more diversified practices. Finally, Motorola tried to deal with the Japanese
threat by changing its past perspective, going global, and learning, thus, from its
competitors.
2. Describe how Motorola might have arrived at its current strategy as a result of a
SWOT analysis.
A SWOT analysis is an assessment of a firm’s strengths, weaknesses, opportunities,
and threats. A good SWOT analysis should provide the basis for strategy
development that allows a firm to exploit strengths and opportunities, neutralize
weaknesses, and minimize threats. Clearly Motorola identified the Japanese as a
threat in the early 1980’s, but also saw an opportunity in the world marketplace.
Motorola at the time was weak in the areas of costs and quality, but exceptional
leadership and R&D were able to neutralize the weaknesses and turn the company
around.
3. Discuss Motorola’s primary business strategy.
Motorola’s primary business strategy is one of differentiation. The company has
committed to distinguishing its products from those of competitors on the basis of
quality. In fact, the company currently has a perfection rate of 99.9997 percent, but
has set an even loftier goal for the future.
Chapter 3
Operations in a Global Environment
DISCUSSION QUESTIONS
1. An international strategy uses exports and licenses to penetrate the global arenas. A
multidomestic strategy uses subsidiaries, franchises, and joint ventures. A global
strategy views the world as a single marketplace, with standardized goods and services
worldwide. The focus is usually on cost reduction. A transnational is a truly
internationalized firm whose country identity is not as important as its worldwide
networks. Transnational strategies exploit economics of scale and responsiveness.
3. C.f. the relevant slide in (PowerPoint) class presentation on the challenges and
opportunities of globalization.
6. Product design is important, as Coke recognizes, because tastes may differ from country
to country. Other examples is the customization of the computer software to take into
consideration the language differences at different countries, the design of the controls
and the entire interior for cars produced for the Commonwealth countries where the
steering wheel must be on the right side, etc.
9. A multinational is a firm with extensive international business involvement. Three
examples are Microsoft, General Electric, and IBM.
10. The World Trade Organization tries to lower trade barriers and ensure that international
agreements and codes of conduct (including ethical standards) are uniformly applied
around the world. “Its main function is to ensure that trade flows as smoothly,
predictably, and freely as possible.” (From the WTO web page, www.wto.org).
CASE STUDY
INTERNATIONAL OPERATIONS AT GENERAL MOTORS
1. GM’s international strategy has been rather typical. First, it exports, then builds
local subsidiaries (i.e., Germany and Argentina), then joint ventures (the NUMMI
plant with Toyota in Fremont, California), but is now moving toward a global
strategy. The global strategy will provide a standardized (if not identical) product
with economies of scale. GM hopes this approach will allow it to succeed in
emerging markets.
2. This strategy is appropriate in those industries where the demand for local
customization or responsiveness to local tastes is overwhelmed by economies of
scale. A global strategy such as this is not appropriate in other industries where
local and changing tastes dominate (i.e., food, cosmetics, some clothes, etc.). GM’s
global strategy with very similar products may be weak in its ability to respond to
local conditions and cultures.
3. The case demonstrates the advantages of a low-cost strategy as opposed to a
strategy of differentiation or responsiveness. The issues present in the case are:
product design (standard modules), process selection (replicating a repetitive
process), location (low cost locations that minimize transportation cost and
overcome local trade barriers), layout (balanced assembly line), supply chain
management (delivery directly to the assembly line, cutting down on warehousing),
and inventory (reduced inventory via less warehousing and JIT deliveries).