Operations And Supply Chain Management For The 21st Century, 1st Edition Solution Manual

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Solutions ManualOperations & Supply ChainManagement for the 21stCenturyFirst Edition

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Chapter 1: Operations and Supply Chain StrategyEnd of Chapter Questions1.Examples of structural and infrastructural decisions a Days Inn would need tomake.Structural Decisions:Capacity: This deals with how many rooms to have in each hotel, the relative size ofeach room, and how closely to try to match capacity to demand. In general, aDays Inn is likely to try to keep much less capacity cushion than a FourSeasons since the cost of not serving a customer (i.e. having no rooms left) ismuch less than at a Four Seasons.Facilities: The Days Inn needs to design each hotel to include a mix of rooms andpublic facilities (i.e. the lobby, breakfast area, gift shop etc.). A lower costhotel like a Days Inn is much more likely to have very limited and veryfunctional public spaces. In contrast, the Four Seasons will have verygenerous, expensively furnished lobby space and areas such as a restaurant(usually more than one), a gift/apparel shop and perhaps a spa. In all cases theDays Inn will either not have the same type of facility or will have a muchmore utilitarian version.Infrastructural Decisions:Workforce: This is one of the biggest differences between a Days Inn and a FourSeasons. The Days Inn will hire relatively few, general purpose workers.Usually one person will man the front desk and be responsible for checkingcustomers in/out, answering the phone, giving directions to customers andfixing any problems. Often customers will have to wait when the desk clerk isbusy. In comparison, the Four Seasons will have multiple people at the frontdesk and more excess capacity. There will be a dedicated concierge to answerquestions about where to eat dinner, see shows, sightsee, etc. The FourSeasons will employ many more specialists, but these people will be lessutilized on average so that there is more cushion.Quality Systems: While both hotels care about quality, the approaches used willdiffer substantially. Days Inn will be concerned primarily with conformancequality. The quality system will be designed to periodically assess keymeasures but will not include high cost recovery mechanisms. In comparison,Four Seasons will take extra steps. For example, most high quality hotelsemploy an engineer or maintenance chief who is on call 24 hours a day. Ifthere is a major problem such as a broken toilet in a customer’s room, the hotelwill get that fixed within an hour. In contrast, the Days Inn might just movethe customer to another room and not rent the room with the broken toilet untila plumber can get there during normal business hours. This approach is lowercost but substantially less convenient for customers.

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2.Examples of structural and infrastructural decisions that a manufacturer of lowcost computers would make.Structural Decisions:Facilities: These are likely to be in low-cost, developing countries such as China orMexico. The cost savings is traded off against a longer lead time to delivercomputers to different countries. Dell builds its manufacturing plants in themarkets it plans to sell computers in since it wants to be close to customers inorder to minimize delivery lead time.Vertical Integration: Typically the low cost manufacturer will seek to find the lowestcost supplier regardless of location and will change fairly often if a lower priceis found. Dell typically will maintain a longer relationship with most suppliersand will highly value the reliability of delivery time instead of simply lookingat the cost of parts.Infrastructural Decisions:Production Planning/Scheduling: This is one of the biggest differences. The low costmanufacturer operates a push system where it will plan large quantities of eachcomputer model well in advance to a forecast. These computers will bemanufactured and sent to a distribution center or retailer for sale. When theforecast is too high, the manufacturer will have to sell computers at a discountto get rid of models that are old or obsolete. When the forecast is too low,sales will be hurt because customers will be unable to get what they want. Incontrast, Dell builds computers to order. It still needs to forecast the numberof components (i.e. hard drives, RAM chips, CDs etc.) but it waits to get firmcustomer orders before assembling each computer. Dell uses quite a bit ofyield or revenue management to encourage customers to change their orders.For example, it Dell is running low on 320 GB hard drives, it might offer anonline discount where a customer can get a 500 GB hard drive for the sameprice.Dell Competitive Priorities: While price and cost is certainly important to Dell, theability to offer flexibility is probably more important. After all, Dell allows you todesign the computer you want. Delivery is important, but the goal is not necessarilyto be ultra-fast but instead to be reliable. A customer must already be willing to wait3-5 days to get their computer as opposed to going to a store like Best Buy andgetting one immediately. The important thing for Dell is getting the computer to thecustomer within a “reasonable” time frame – if the 3-5 day quote for delivery slips to9 days that is quite bad!

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3.Compare two restaurants:Taco BellHyde Park SteakhouseCompetitive Priorities:Cost: 40 pointsDelivery: 30 pointsQuality: 15Flexibility: 15People go to Taco Bell becauseof their low cost and fastdelivery. Quality is importantin the sense that the food mustbe edible and not have anyhealth problems, but not muchmore is expected. Flexibility islimited to differentcombinations of the same 8 –10 ingredients.Cost: 10Delivery: 15Quality: 40Flexibility: 35The most important thing ishigh quality and high choice.Customers are willing to paymore money and wait a bitlonger for a meal (but not spendtoomuch money or waittoolong.)Facilities:Very functional, limited spacefor dining, designed forproductivityVery nicely decorated, muchmore “elbow room”, designedfor customer comfort whileproductivity is a secondaryconcern. For example, havingthe bar in the front and kitchenin the back is definitely NOTthe first choice of the waitstaff.This is done to appeal tocustomers and to get them tospend more money.Workforce:Very general and low skilled.More specialized and higherskilled – particularly in thekitchen.Quality Systems:Quality starts withconformance. Strict,standardized systems used totrain all workers the same wayto get the most out of low-cost,low skilled workers.Quality starts with the highlyskilled workforce. Moreindividualized training. Cooksgo to specialized culinaryschools.Technology:Very specialized. Example:cash registers with pictures andbuttons for value meals toincrease low skilled cashiers’accuracy and speed.Very general purpose, primarilyused to improve customerexperience.

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End of Chapter Case QuestionsNatural Designs, Inc.1.What types of decisions must Jim McMaster make on a daily basis for Natural Designs torun smoothly? What kind of decisions must he make on a long-term basis?a.Structural decisions tend to be long-term.i.Capacity—Purchase additional equipment for customizing bird feeders (paintingand carving)? Outsource production of custom bird feeders during busy times(fall and spring, in the case)?ii.Technology—Automate the customization process using an industrial robot,especially carving?iii.Facilities—Build new facility?iv.Vertical integration/sourcing—Buy a stake in a company that manufactures birdfeeders?b.Infrastructural decisions tend to be shorter-term.i.Workforce—Increase full-time staff? Use temporary labor during busy season?ii.Production planning and scheduling (This is a bit beyond students’ knowledgebase at this point.)iii.Quality systems—Survey customers itself (instead of relying on anecdotalevidence from retailers)? Hire a product inspector?iv.Organization—Create employee problem-solving teams?2.Describe the operations strategy for Natural Designs. Has this strategy changed as a resultof the custom bird feeder operation? If yes, how?a.This is somewhat quality based. Because McMaster was a science teacher and birdingexpert, customers can expect his feeders to have the right features. As they are made in asmall domestic facility, customers can expect good levels of quality. However, becausethe processes do not appear to be highly automated, product consistency may not beparamount.b.With the carved and custom-painted products, the strategy has shifted toward productflexibility.3.What might have been done differently to facilitate the offering of custom bird feeders?a.These could have been subcontracted to a company that can do custom carving andpainting (or one company for each operation). Carving, in particular, is probably not acapability that the company has historically been good at.b.They could have offered fewer colors or quoted longer lead time.4.How should McMaster analyze the alternative expansion options? Which would yourecommend: a second facility or a move to a single larger facility?a.Note: Some good opportunities present to discuss operations’ alignment with otherfunctional strategies.b.McMaster needs to think about how much demand will grow in the future and howcertain he is about his estimate (Marketing–Operations interface).c.How much does he have to invest (Finance–Operations interface)?d.Is there another market, such as west coast or east coast, to which he would like to becloser (Marketing–Operations interface)?e.Can he, and does he, want to handle the management complexities that two locationscreate (HR–Operations interface)?

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Chapter 2: Quality ManagementEnd of Chapter Problems1.Zeta Automotive LimitedInformation Provided:Upper Tolerance Limit = 75Lower Tolerance Limit = 70Mean = 72For Six Sigma Quality, the distance from the mean to upper and lower tolerance limitsshould be 6 standard deviations (σ).Using Upper Tolerance Limits:6 *σ= (75 – 72) = 3σ= 0.5Using Lower Tolerance Limits:6 *σ= (72 - 70) = 2σ= 0.33To ensure Six Sigma quality, the standard deviation should be lowered such that the distancefrom the mean to both Upper and Lower Control Limits are at-least 6σ. Thereforeσshouldbe lower to 0.33.2.Internet Book RetailerInformation Provided:Upper Tolerance Limit (UTL) = 36 hoursLower Tolerance Limit (LTL) = 24 hoursMean = 30 hoursStandard Deviation = 4 hoursa.The current process sigma level can be calculated by applying equation 1 (page 52)Using UTLProcess Sigma =43036−= 1.5Using LTLProcess Sigma =42430−= 1.5Therefore it can be concluded that the Internet Book Retailer is currently operating at1.5σlevel.b.For Six Sigma Quality, the distance from the mean to upper and lower tolerancelimits should be 6 standard deviations (σ).

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Using Upper Tolerance Limits:6 *σ= (36 – 30) = 6σ= 1Using Lower Tolerance Limits:6 *σ= (30 - 24) = 6σ= 1To ensure Six Sigma quality, thereforeσshould be lower to 1.3.Pizza Delivery CompanyInformation Provided:Upper Tolerance Limit (UTL) = 60 minutesLower Tolerance Limit (LTL) = 0 minutesMean = 40 minutesStandard Deviation = 10 minutesa.The current process sigma level can be calculated by applying equation 1 (page 52)Using UTLProcess Sigma =104060−= 2Using LTLProcess Sigma =10040−= 4Since the company promises to deliver pizza within an hour, UTL calculation ismore relevant. Therefore we can conclude that the company is operating at a 2σlevel.b.For Six Sigma Quality, the distance from the mean to upper and lower tolerancelimits should be 6 standard deviations (σ). As mentioned in the previous question,the use of UTL is more appropriate. ThereforeUsing Upper Tolerance Limits:6 *σ= (60 – 40) = 20σ= 3.33 minutesTo ensure Six Sigma quality, thereforeσshould be lower to 3.33 minutes.4.Customer Service CenterInformation Provided:Upper Tolerance Limit (UTL) = 90 secondsLower Tolerance Limit (LTL) = 30 secondsTable 2.5 lists waiting times for 50 customers. We can use this information to calculatemean and standard deviation:

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Mean = 60.32 secondsStandard Deviation = 6.51 seconds.Current process sigma level can be calculated using the above information:Using UTLProcess Sigma =51.632.6090−= 4.56Using LTLProcess Sigma =51.63032.60−= 4.66We can conclude that the customer service center is not able to provide a six-sigma qualityat this point. Their current process sigma level is 4.56 considering UTL and is 4.66considering LTL.5.Coffee TemperatureInformation Provided:Upper Tolerance Limit (UTL) = 180 degreesLower Tolerance Limit (LTL) = 160 degreesTable 2.6 lists waiting times for 40 cups. We can use this information to calculate mean andstandard deviation:Mean = 170.53 secondsStandard Deviation = 6.29 seconds.Current process sigma level can be calculated using the above information:Using UTLProcess Sigma =29.653.170180−= 1.51Using LTLProcess Sigma =29.616073.170−= 1.67We can conclude that the Café is not able to provide a six-sigma quality at this point. Theircurrent process sigma level is 1.51 considering UTL and 1.67 considering LTL.

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6.Video Game ConsoleInformation Provided:There are 10 production steps.Each step is operating at 5-sigma level.Therefore we can conclude that the distances from mean to UTL and LTL are at-least 5standard deviations.Hence we can calculate the percentage of defective products made byeach production stepby calculating the area of the normal distribution curve above UTL and lower than LTL(hint: similar calculations are shown in Solved Example 1 on page 52).Percentage defective product considering UTL = 1 – NORMSDIST(5) = 0.0000002866Percentage defective product considering LTL = NORMSDIST(-5) = 0.0000002866Total percentage defective product = 0.0000002866 + 0.0000002866 = 0.0000005732Therefore total percentage good product = 1 – 0.0000005732 = 0.9999994268Since each production steps are independent of each other, the total percent of good productat the end of 10 production steps will be =(0.9999994268)10= 0.9999942687.Electronic ProductInformation Provided:There are 12 production steps.For the first 6 steps:First 6 steps are operating at 5 sigma levelHence we can calculate the percentage of defective products made byeach production stepby calculating the area of the normal distribution curve above UTL and lower than LTL(hint: similar calculations are shown in Solved Example 1 on page 52).Percentage defective product considering UTL = 1 – NORMSDIST(5) = 0.0000002866Percentage defective product considering LTL = NORMSDIST(-5) = 0.0000002866Total percentage defective product = 0.0000002866 + 0.0000002866 = 0.0000005732Therefore total percentage good product = 1 – 0.0000005732 = 0.9999994268For the last 6 steps:The last 6 steps are operating at 5.5 sigma level

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Percentage defective product considering UTL = 1 – NORMSDIST(5.5) = 0.000000019Percentage defective product considering LTL = NORMSDIST(-5.5) = 0.000000019Total percentage defective product = 0.000000038Therefore total percentage good product = 1 – 0.000000038 = 0.999999962Since each production steps are independent of each other, the total percent of good productat the end of 12 production steps will be =(0.9999994268)6* (0.999999962)6= 0.9999968.Quick Service RestaurantCurrent ProcessThere are 4 production steps.Each step is operating at 4-sigma level.Hence we can calculate the percentage of defective products made byeach production stepby calculating the area of the normal distribution curve above UTL and lower than LTL(hint: similar calculations are shown in Solved Example 1 on page 52).Percentage defective product considering UTL = 1 – NORMSDIST(4) = 0.00003167Percentage defective product considering LTL = NORMSDIST(-4) = 0.00003167Total percentage defective product = 0.00003167 + 0.00003167 = 0.00006334Since each production steps are independent of each other, the total percent of good productat the end of 4 production steps will be = 1 – 0.00006334(1 - 0.00006334)4= 0.99746664New ProcessThere are 8 production steps.Each step is operating at 5.5 sigma level.Percentage defective product considering UTL = 1 – NORMSDIST(5.5) = 0.000000019Percentage defective product considering LTL = NORMSDIST(-5.5) = 0.000000019Total percentage defective product = 0.000000038Therefore total percentage good product = 1 – 0.000000038 = 0.999999962

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(0.999999962)8= 0.999999696Therefore by new process will slightly increase the percentage of error-free products(0.999999696 - 0.99746664 = 0.000253032).9.Manufacturing FacilitySigma level for first step: 4.5Therefore the percentage of good products made by this step = 0.9999932 (refer to earlierexample on how to calculate percentage of good products)Sigma level for second step: 5Therefore the percentage of good products = 0.9999994268Sigma level for steps 3 and 4: 5.5Therefore the percentage of good products = 0.999999962Therefore percentage of good products after all four steps =0.9999932 * 0.9999994268 * (0.999999962)2= 0.99999255110.Quick Service Restaurant (Part 2)New ProcessThere are 3 production steps each with same sigma level producing X% good products ateach step.According to the information provided, the new process has the same overall sigma level asthe original process with 4 steps. Therefore the new process and the old process should havesame number of good products.ThereforeX * X * X = 0.99746664Or X = 0.99915In other words, the area under the normal distribution from LTL to UTL is 0.99915.Therefore area outside the tolerance limits (or % defective products at each step) = 0.000845

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Assuming that the area is equally distributed beyond UTL or LTL, area of each tail is:0.000423A NORMSINV function can be used to find the sigma level corresponding to LTLNORMSINV(0.000423) = -3.33Similarly we can find sigma level corresponding UTL as1 – NORMSINV(0.000423) = +3.33End of Chapter Case QuestionsThe Case of the Complaining Customer1.Why is Mr. Shelton upset? What should be done to address his complaint?Mr. Shelton is upset because the dry-cleaner lost his laundry. However, he is also justifiablyupset about the way his complaint was mishandled.As Shelton is a regular customer (along with his wife), his business is very valuable. It isworth meeting his demands to keep his business. For example, if Presto makes $12 on theShelton’s business per week, it would only take 1 year to recoup the $600 that Mr. Shelton isrequesting. Additionally, word of mouth and reputation are important, as the chapterdemonstrates. This is another reason to placate Mr. Shelton.2.Based on the information presented in the case, develop a comprehensive qualityimprovement plan for Presto Cleaner.The Six Sigma DMAIC protocol forms the basis of a good improvement plant.Define: The current process for checking in, tracking, and checking out laundry cannotguarantee that the right laundry is returned to customers when they arrive for pickup. Theresolution process when laundry is lost is inadequate.Measure: Currently, Presto does not know how often or how much laundry is being lost. Itdoes not know the dollar value of the lost laundry or the impact on customer retention. Italso needs to know the amount of time it takes to resolve lost-item issues.Analyze: Presto should map the processes involved in checking in, tracking, andchecking out laundry, as well as the process for locating lost items and returning them tocustomers. Looking at the process of managing lost laundry, it appears that there are parts ofthe process that are candidates for improvement. This types of mapping often makes clearmany gaps that must be closed. For example, there is no process for identifying customerswho have items missing when items that may be theirs come into the store (per item 2 inHoffner’s memo). Per item 5 in the memo, there appears to be no process by which storesreceiving lost items can notify other stores (which might be looking for the items).Improve: Opportunities for process improvements are apparent from thecorrespondence in the case. For example, currently all correspondence between the plant,stores, and headquarters must be in writing. This requirement should probably be eliminated.Other procedures should probably be added. For example, having a clerk simply comparethe number of items on a return ticket to the number of items in a bundle would alert staff tosome problems before bundles are returned to customers. Process analysis should bring to

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light many improvement opportunities. These can be evaluated on the basis of cost,feasibility, and the portion of the problem that they will solve.Control: Process for employee training, written manuals, and other controls will needto be put into place to ensure that the new procedures are institutionalized.

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Chapter 3: New Product DevelopmentEnd of Chapter Questions1.Examples ofsuccessfulnew products and reasons.Goods:Nintendo Wii video game console.This platform and its innovate games such as Wii Fit,Wii Sports have changed the way a player interacts with a video game system.iPhone: iPhone has combined the functionalities of a traditional mobile phone with manynew applications using a very user-friendly interface.Services:Netflix: NetFlix has 10 million subscribers who can select from 100,000 movies or TVtitles. Subscribers get DVDs by mail and can also instantly watch movies over the internet.Facebook:With 132 million users in February 2009 (this number is growing very rapidly)Facebook has been THE social networking website of choice. It offers many innovativeservices such as giving user the ability to give thumbs up or thumbs down to anadvertisement and the ability to add third-party applications (e.g. for book reviews, videouploads).Below are examples offailednew products and reasonsGoods:McDonald’s Arch Deluxe Burger: While many customers thought that the burger itselfwas tasty, this product was not consistent with the needs of McDonald’s customers.Therefore the product could not generate enough sustained demand.New Coke: This product tried to replace a product which was already very popular and likedby the customers.Services:Webvan: The company promised to deliver groceries to users home. Users went to Webvanwebsite and not only placed the order for specific items but also specified a narrow deliverywindow. This service was offered in three cities but the costs of delivery promise were toohigh to cover with the slow growth in market share.Google Dodgeball: In 2005, Google purchased the social networking phone application,Dodgeball. It let you find friends of friends, find friends within a 10 block radius, get alertswhen "crushes" were nearby, and locate restaurants. While Dodgeball.com was innovativefor the time, Google didn't seem to dedicate a lot of resources toward expanding coverageareas or features. It was only available in select cities, while competing Twitter grew inpopularity and was available everywhere. The original Dodgeball.com founders left the

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company in 2007, and in 2009 Google announced that they were shutting the service down.(Source:http://google.about.com/od/blogs/ig/Google-Graveyard-/Dodgeball.htm)2.Examples of products in different stages of the lifecycle in various industries:IndustryIntroductionGrowthMaturityDeclinePharmaceuticalBio-technologybasedmedicinesLifestyledrugs (e.gViagra)AspirinComputerCloudcomputingPalmtop (ormini)Laptop PCDesktop PCMainframePCAutomobilePlug-inhybridautomobilesHybridautomobilesMinivansStationwagonsHotelHigh-TechLimitedServiceHotelsBoutiqueHotelsLargeConventionHotelsBed andBreakfastInnHealthcareAyurvadicmedicineHealthtourismLargegeneralpurposehospitalsMidwifeadministeredbirthingcentersEntertainmentAdventuretourismInternet-based TVand movierentalTVVCR3.Continuous innovation allows improved performance without changing consumptionor customer behavior. Examples include Kellogg’s adding to it’s Eggo® line withNutri Grain® Strawberry Filled waffles.Radical innovation as either a service or product significantly changes both behavior andconsumption. An example is a customer purchasing & printing airline boarding passes online.The goal of blue ocean strategy is to make the competition irrelevant by establishing a newproduct, service, or experience within an uncontested market. Examples include AmericanGirl which started as a Wisconsin doll manufacturer and has expanded into an entirevacation experience for girls and their families.

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