Homework 1 Solutions

ISyE 3104: Introduction to Supply Chain Modeling:
Manufacturing and Warehousing
Instructor : Spyros Reveliotis
Summer 2003
Solutions for Homework #1
ISYE 3104 Summer 2003
Chapter 1
Homework 1 Solution
Operations and Productivity
Define Operations Management in your own words.
Operations management can be defined as the field that deals with the effective
and efficient design and operation of the transformation processes that provide the
various goods and services..
Consider the potential contribution of information sciences to OM. Why is the
management of information of such great importance in the management of
The management of information is of great importance to operations
management because:
(a) without “information” one would have no knowledge of the state of
input resources, process performance, or output goods and/or services;
(b) properly developed information systems can contribute to the overall
integration required to allow a firm to produce on a competitive basis;
(c) “good” decisions require “good” information—the right information, at
the right place, at the right time.
More specifically, 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.
What are the three classic functions of a firm?
The three classic functions are:
(a) Marketing
(b) Operations
(c) Finance/Accounting
What departments might you find in the OM function of a home appliance
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)
ISYE 3104 Summer 2003
Homework 1 Solution
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
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
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.
ISYE 3104 Summer 2003
Homework 1 Solution
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
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%
Labor hr. @$10
Resin @$5
Capital cost/month (1%)
Energy ($0.5/Btu)
Last Year
This Year
[(1,000 / 4,850) – (1,000 / 4,510)]
(1,000 / 4,850)
0.0206 – 0.222
= 0.078 fewer resources 7.8% improvement
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.
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.
C.f. the Supplement to Chapter 10 on how to determine labor standards.
ISYE 3104 Summer 2003
Homework 1 Solution
Chapter 2 Operations Strategy in a Global Environment
1. There are three primary ways to achieve competitive advantage. Provide an
example, not included in the text, 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
2. Based on what you know about the automobile industry, how has the OM
strategy of General Motors and Ford changed in the last 10-15 years?
(a) Design of goods and services:
new products, designed and evaluated with CAD; coordinated with
(b) Quality:
100% to standards; better feedback from customer
(c) Process and capacity planning:
new jigs to improve quality
new robots to reduce labor cost and improve quality
(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:
MRP, JIT 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
3. How does the OM strategy change during a product’s life cycle?
ISYE 3104 Summer 2003
Homework 1 Solution
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 your textbook provides a more detailed list of
4. For what reasons do domestic operations typically become international
Domestic firms become international because the world is changing, making
competitors of not only other local firms, but non U.S. firms as well.
C.f. the relevant slide in (PowerPoint) class presentation on the challenges
and opportunities of globalization.
5. 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 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.
6. What is the role of the World Trade Organization in modern global economy?
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,
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.
ISYE 3104 Summer 2003
Homework 1 Solution
2. (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 could be defined as “lubricating automobiles”
that allows the subsequent development of more focused and efficient
operations (more in Chapter 5).
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
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 investment should be relatively low, and they should expect a
high turnover.
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.
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. Specialization of personnel and facilities should make Minit-Lube more efficient.
ISYE 3104 Summer 2003
Homework 1 Solution
Jobs/tasks accomplished per man hour would be a good place to start.