ISyE 3104: Introduction to Supply Chain Modeling:
Manufacturing and Warehousing
Instructor : Spyros Reveliotis
Summer 2006
Solutions for Homework #1
ISYE 3104 Summer 2006
Homework 1 Solution
Problem set:
A.
Answer the following questions:
1.
Consider the potential contribution of information sciences to OM. Why is the
management of information of such great importance in the management of
“production”?
As mentioned in class, any organization tries to cover some societal needs by
providing the market with certain goods and services of the required quality, in a
responsive and cost-effective manner. Hence, in order to achieve its mission, the
organization must be able to interface to the market and observe its developing needs
and trends, but also, it must have good visibility of its own internal operational status
and inventories, as well as the status of its supplying channels, since only then it can
respond to the arising demand in a timely and cost-effective manner. All the above
issues imply the need for good and timely information and its reliable flow among the
market, the organization, and other relevant parties of the supply chain.
Information sciences can assist by providing the technological infrastructure for
the collection, processing and dissemination of this information, but also the
methodological tools that are needed in the relevant decision making.
2.
There are three primary ways to achieve competitive advantage. Provide an
example, not included in the PowerPoint presentation, for each of them.
1. Competing on Differentiation:
i. Companies developing customized manufacturing equipment for other
manufacturing companies
ii. An airplane manufacturer like Boeing or Airbus
iii. Ritz-Carlton
2. Competing on Cost
i. All “white label” items that you can find in a supermarket, i.e., items
that are sold under the name of the store.
ii. PC “clones”, especially in the ‘80’s and early ‘90’s.
iii. Oil companies
3. Competing on Response
i. Street salesmen selling umbrellas or anoraks during a storm
ii. Business traveling services
iii. Medical (emergency) services
3.
Based on what you know about the automobile industry, how has the OM
strategy of General Motors and Ford changed in the last 20 years?
Here are some examples in which the OM strategy has evolved in these two companies:
(a) Design of goods and services:
Adoption of emerging technologies; hence, new products are designed
and evaluated with CAD and coordinated with STEP.
(b) Quality:
100% to standards; better feedback from customer
benchmarking
(c) Process and capacity planning:
new jigs to improve quality
deployment of industrial robots to reduce labor cost and improve quality
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ISYE 3104 Summer 2006
Homework 1 Solution
(d) Location strategy:
Location relative to suppliers is now more important, migration to lowcost labor areas
(e) Layout strategy:
Work cells, flexible assembly lines
(f) Inventory management:
Production planning tools like MRP/ERP systems and JIT concepts are
now regularly employed
(g) Scheduling:
Scheduling to meet requirements of JIT
Expert systems and finite scheduling
(h) Maintenance:
Improved and increased training of maintenance personnel
(i) Supply chain management:
Fewer suppliers who are more heavily integrated into the main
organization’s information system
4. How does the 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 2.5 in the Render and Heizer book provides a more
detailed list of issues.
5. For what reasons do domestic operations typically become international
operations?
C.f. the relevant slide in (PowerPoint) class presentation on the challenges
and opportunities of globalization.
6. Explain and give an example of how product design should be considered when
offering a product in a global market.
Product design is important, as Coke recognizes, because tastes may differ
from country to country. Other examples are 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.
7. What is the role of the World Trade Organization in modern global economy?
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ISYE 3104 Summer 2006
Homework 1 Solution
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).
B.
CASE STUDY ON MINIT-LUBE, INC.
1. What constitutes the mission of Minit-Lube?
To provide fast and economical preventive maintenance and interior auto cleaning,
primarily to vehicles owned by individuals (as opposed to business), in the U.S.
2. How does the Minit-Lube operations strategy provide competitive advantage?
Minit-Lube’s approach to the 10 key issues addressed by Operations Management
(c.f. the introductory slide on OM) includes:
Product Design:
Adoption of a specializing strategy that focuses on the service task of
“lubricating automobiles”, which subsequently allows the 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 define and maintain.
Process Strategy:
Minit-Lube processes are streamlined to the support the provided services,
allowing the employees and the capital investment to focus on doing this
mission well and efficiently, 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. Also, the bay replication introduces some
redundancy that enhances the service availability and responsiveness, since
it is unlikely that all of three bays will experience an outage or long delay at
the same time.
Supply Chain Strategy:
The company specialization allows it to control the complexity of its raw
material inventory, and enables it to seek economies of scale by purchasing
in large quantities and developing strategic partnerships with its suppliers.
Human Resources Strategy:
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ISYE 3104 Summer 2006
Homework 1 Solution
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.
3.
Is it likely that Minit-Lube has increased productivity over its more traditional
competitors? Why? How would we measure productivity in this industry?
Yes. Specialization of personnel and facilities should make Minit-Lube more efficient.
Jobs/tasks accomplished per man-hour would be a good measure of productivity.
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