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Operations Management, 5th Canadian Edition Solution Manual

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    Chapter 1 1 - 1 CHAPTER 1 INTRODUCTION TO OPERATIONS MANAGEMENT Teaching Notes The initial meeting with the class (the first chapter) is primarily to overview t he course (text) , and to introduce the instructor and his/her interest in Operations Management . The course outline (syllabus), the objectives of the course and topics, chapters, and pages of text covered in the course, as well as problems/cases to be done in class, videos to watch, Excel worksheets to use, etc. are announced to the class. Many students may know little about OM and the types of jobs available. This point can be address ed in order to gen erate enthusiasm for the course . The Learning Objectives at the beginning of the chapter indicate the h ighlights of the chapter . Answers to Discussion and Review Questions 1. Operat ions management is the management of activities and resources that create goods and/or provide services. 2. Production /operations planner / scheduler / controller , d emand planner (forecaster) , q uality specialist , l ogistics coordinator , p urchasing agent / buyer , supply chain manager, m aterials planner , i nventory clerk /manager, production/operations manager. 3. a. B ecause a large % of a company’s expenses occur in the operations, e.g., purchasing materials and workforce salaries, more efficient operations can result in large increases in profits. b. A large number of management jobs are in OM . c. A ctivities in all other areas of any organization are all interrelated with OM . 4 . The three major functions of organizations are operations, finance, and marketing. Operations is concerned with the creation of goods and services identified by marketing , finance is concerned with provision of funds necessary for operation and investment of extra funds, and marketing is concerned with promoting and/or selling goods or services. 5 . The operations function consists of all activities that are directly related to producing goods or providing services. It is the core of most organizations. It add s value during the transformation process (the difference between the cost of inputs and price of outputs). An operations manager manages the transformation function. He/she is responsible for planning and use of resources (lab o ur, machines, and materials). Not all jobs which are primarily OM are called as such. The kinds of jobs that operations managers oversee vary tremendously from organization to organization largely because of the different goods or services involved. For example, a store/restaurant manager is in effect an operations manager. See Figure 1 - 6 for examples of typical activities performed by operations managers. 6. Design decisions are usually strategic and long term (1 – 5 years or so ahead), whereas planning and control decisions are shorter term. In particular, planning decisions are tactical and medium term (1 – 12 months or so ahead), and control decisions (including scheduling and execution ) are

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    Operations Management, 5 /C/ e 1 - 2 short term (1 – 12 weeks or so ahead). D esign involves decisions that relate to goods and service design, capacity, acquisition of equipment, arrangement of departments , and location of facilities. Planning/control activities involve management of personnel, quality control/assurance, inventory planning and control, production planning , and scheduling. 7 . I mportant differences between producing goods and performing services are: (1) Customer contact, use of inve ntories, and demand variability (2) Uniformity of input (3) Labour content of jobs (4) Uniformity of output (5) Measurement of productivity (6) Quality Assurance 8. Answers might vary for each student . Teaching ; personal services such as haircut , lawn mowing, maid service, and car wash. The customer or something belonging to the customer is being transformed. 9. From Figure 1 - 6 : • d ealing with labour difficulties, s olving personnel problems , s olving management problems , solving technical problems • making OM decisions , including general management decisions (planning, organizing, controlling, and directing) • innovating, personal i nitiative s , improving p roductivity • representing operations in upper management 10 . a. Industrial Revolution began in the 1770s in England, and spread to the rest of Europe and North America in the late eighteenth century and the early nineteenth century. A number of inventions such as the steam engine, the spinning j enny, and the power loom helped to bring about this change. Later machines made of iron were built. Two concepts assisted in large - scale production: division of labour and interchangeable parts. Despite the major changes that were taking place, management theory and practice had not progressed much from early days. What was needed was a systematic approach to management. b. Frederick W. Taylor spearheaded the scientific management more than a century ago . The science of management was based on observation, measurement, analysis, improvement of work methods, and economic incentives. He also published a book titled The Principles of Scientific Management in 1911. Other p ioneers who contributed to scientific management include Frank Gilbreth, often referred to as the father of time and motion study, and his wife Lillian Gilbreth, and Henry Gantt. c. An interchangeable part is a p art made to such precision that all units of the part would fit any particular product it is made for . It meant that individual parts would not have to be custom - made (they were standardized). The standardized parts could also be used for replacement parts. The result was a tremendous decrease in assembly time and cost.

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    Chapter 1 1 - 3 d. Division of labour is b reaking up a production process into a series of tasks, each performed by a different worker. It enabled a worker to learn the job and become proficient at it more quickly, and avoid the delays of having a single worker shifting from one activity to another. 11 . a. Service involve s a high degree of customer contact and are much more sensitive to demand variability. Services often require a higher labour content and the output is variable. Quality assurance is more challenging in services because performance and consumption occur at the same time. T he service sect or accounts for more than 7 8 percent of jobs in Canada and th is c ontinues to increase. Some examples include government services, finance and insurance, healthcare, education, professional and technical services. b. Manufacturing is important because it produces the goods that we use , and many service jobs are dependent on manufacturing because they support manufacturing. It allows a separation between production and consumption permitting a fair degree of latitude in selecting work methods, assigning jobs, scheduling work, and exercising control over operations. Since high mechanization generates products with low variability, manufacturing tends to be smooth and efficient. Manufacturing produces food and beverage, textile and clothing, petroleum, chemicals, machinery, computer and electronic products, electrical equipment, and transportation equipment. 12. A model is an abstraction of reality, a simplified representation of something. Models can be mathematical, schematic, or statistical. Models ignore the unimportant details so that attention can be concentrated on the most important aspects, thus increasing the opportunity to understand a problem and its solution. Models allow experiments that could be very costly to do in real life. 13. F rom Table 1 - 6: e.g., Frederick W. Taylor, Frank Gilbreth, Henry Gantt, Henry Ford, F.W. Harris, W. Shewhart, W. Edwards Deming, Joseph Orlicky, and Taiichi Ohno . 14 . Answers might vary for each student. a . Pros (for owning a car) : convenience, flexibility Cons (for owning a car) : costs (i nitial , insurance, maintenance & repairs, gas), parking b. Pros (for buying now): availability Cons (for buying now): technology change, reduced cost in future c. Pros (for new car): reliability , warrantee Cons (for new car): more expensive , higher insurance, higher depreciation d. Pros (for speaking up in class): develop favourable image with instructor, feel more confident Cons (for speaking up in class ): risk of being wrong, appearance of showing off 15 . Craft production : involves skilled workers producing high variety of customized goods at low quantity , utilizing general - purpose equipment. The main advantage is the flexibility to produce a wide variety of goods p roviding many choices for customers. The main disadvantage is its inability to produce at low cost. Examples : custom tailor, machine shop, print shop, and landscaping . Mass production : involves low - skilled workers producing a few standardized goods at high quantity , utilizing specialized equipment. The main advantage is low cost, efficient production. The main disadvantage is that it does not allow easy changes in quantity of output, the product , or the process. Examples : paper, sugar or salt or crude oil refining, and soft drink - bottling .

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    Operations Management, 5 /C/ e 1 - 4 Lean p roduction (or just - in - time) : involves highly skilled workers producing a high variety of goods at high quantity, using flexible equipment . It requires high level of employee involvement and teamwork. It combines the advantages of both mass production (high quantity , low cost) and craft production (variety, flexibility). Examples : automobiles, computers, and appliances . 1 6 . Compared to workers in mass production , much more is expected of workers in lean production systems. They must be able to function in teams, and play active roles in operating and improving the system. This can lead to pressure and anxiety. Moreover, a flatter organizational structure means career paths are not as steep in lean production organizations. Unions often oppose conversion to a lean system because they view the added responsibility and multiple tasks as an expansion of job requirements without comparable increases in pay. In addition, workers sometimes complain that the company is the primary beneficiary of employee - generated improvements. 17 . Answers might vary for each student. Use of modern technology like computers, cell phones, and microwaves ha s had positive effects on people’s lives. Instant communication and easy access to information are some of the advantages. However, there are some downsides. As a result of technology , many of us are less active, thus have gained weight and are less healthy . Another downside is the automation of jobs that were previously done by manual labour , e.g., robots for welding car bodies . 1 8 . Long - term trends in OM include increasing use of Internet & e - commerce , other technolog ies, globalization , supply chain management , and sustainability . Personally, it is likely that the use of Internet for purchasing has increased, more machines and computers are being used in one’s daily li f e, more international purchases is being made, more use of package delivery services, such as Purolator, FedEx, and UPS, is being made , and there is more recycling at work and at home . 1 9 . Many examples are possible. These may include • cheating in an exam • copying someone else’s homework assignment • lying in the resume 20. Value added is defined as the difference between the cost of inputs and the value or price of output. In nonprofit organizations, the value of outputs is their value to society; the greater the value added, the greater the efficiency of these operations. In for - profit organizations, the value of outputs is measured by the prices that customers are willing to pay for those goods or services. A s the inputs are transformed to outputs, value is added to products in a number of different ways. For example, value can be added by changing the product structurally (physical change) or transporting it (it may have more value somewhere else). 21 . A supply chain is the sequence of organizations involved in producing and delivering a product . . Supply chain management is the coordination and collaboration of members of a supply chain.

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    Chapter 1 1 - 5 22. Sustainability refers to reduced use of resources and reduced harm to the environment so that future human existence is not threatened. Sustainability is important because life depends on clean air, water, and soil , and concern about global warming and pollution is having an increasing effect on how businesses operate. Governments are imposing stricter environmental regulations. Furthermore, businesses are coming under increasing customer pressure to reduce their carbon footprint. Activities that are most affected are product design, purchasing and supply chain management, production process, and disaster preparation and response. Answers to Taking Stock Questions1. Trade - offs is the comparison of the consequences of a decision. It is important to consider all the consequences of a decision in order to make a measured decision which will have the best net result. Forgetting one advantage or disadvantage may result in a wrong decision. 2. An organization, by definition, is a group of individuals who work together to achieve a goal, make goods, or provide services. If functional areas do not collaborate, the organization is like an out - of - tune engine or unsynchronized orchestra, clearly not as effective and efficient as it could be. For example, if marketing and operations don’t communicate well, either there will be lost sales or unwanted goods. 3. Technology has affected Operations in terms of computer usage (Internet, office and manufacturing software , e.g., CAD, ERP ), machines (automation , e.g., CNC ), and new materials (e.g., recycled plastic) . 4. Because they will be deprived of education. It is well - known that level of education is a major determinant of life - long income. Answers to Critical Thinking Exercise s 1. Manufactur ers h ave the luxury of making the product s earlier than the time the customer needs them . Therefore, quality and timing problems can be fixed. Also, production can be evenly distributed over the work day ( e.g., 8 - hour a day shift as opposed to operat ing in the evenings or nights for services ). Service providers have to present their staff and their facility in an attractive way because the customer will be able to see them. Importance of servers implies more time spent on recruiting, training, evaluating, and motivating. Services should be prepared for a wider variety of inputs (customers) and outputs. For example, an airline should be prepared to deal with problem passengers. Defining a service and measuring it are generally more difficult. Hence, improv ing productivity and quality are generally more difficult.

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    Operations Management, 5 /C/ e 1 - 6 2. J obs that involve creativity are usually not well - defined. Consider, for example, teaching. T here is no unique process for teaching a topic . However, there are some common steps that should be followed. Students should have the right background, the topic should be divided in easy - to - learn segments, qualified instructors are employed, and students are tested frequently . This is a process and can be managed. OM doesn’t usually involve the technical aspects of work. 1. Answers to the Experiential Learning Exercises Quality in a fast restaurant refers to quality of food and quality of service. Quality of food pertains to the quality of raw material and cooking process. T hese are usually determined by tasting the f ood. Quality of service refers to both the servers and the environment of the restaurant. Are the employees wearing clean uniforms? Are they polite? Is the restaurant clean? Also, a broad definition of quality includes whatever customers expect, which includes a short wait time. 2. Other than food, packaging material, condiments, napkins, and cleaning products should be stocked. 3. Employee scheduling is very important in a service, because the customers expect a short wait time and food is not usually made before customer orders. 4. Capacity (size) of a restaurant should match its peak demand (the busiest time and day). If the restaurant is too small, it will lose a lot of customers and revenue, whereas if it is too large, then its lease cost and property tax will be too high. In either case, its profit will be less than what it could have been. Answers to the Internet Exercise s 1. Supply Chain Management Association has recently been formed by merger of P urchasing Management Association of Canada (PMAC) and Supply Chain & Logistics Association Canada (SCL). PMAC ’ s members a re organizational buyers or purchasing agents /managers . SCL’s members are transportation coordinators and others interested in logistics. SCMA provide s a certification program, an annual conference and some regional (“institute”) meetings, research reports, job listing, news and events announcements, Internet links, etc. Canadian Institute of Traffic and Transportation (CITT)’s members are transport professionals. CITT provides a certification program, an annual conference, career center, news and events, etc. Canadian Supply Chain Sector Council is a Federal - government initiative to find solutions to human resource challenges in supply chains. They provide job descriptions and occupational standards , job fairs and conferences , accreditation of programs and courses, and labour market information to all the stakeholders . American Production and Inventory Control Society (now called The Association for Operations Management) ’s members are primarily professional s in Operations Management. Note that APICS has regional branches in Canada. APICS provide s certification program s , an annual conference, an online bookstore, job listing, news and events announcements, research reports, APICS magazine, and In dustry In ternet links. American Society for Quality (ASQ) ’s members are primarily professionals in quality management and engineering. Note that ASQ has regional branches in Canada. ASQ provides certification programs, an online bookstore, job listing, news and events announcements, and several magazine s and journals.

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    Chapter 1 1 - 7 Project Management Institute (PMI) ’s members are primarily professional s . PMI provides a certification program, an online bookstore, job listing, news and events announcements, and few magazine s and a journal . 2. a. Inputs are coal, iron ore, and scrap metal. There are two different processes to make steel slabs. One requires converting the coal into coke, melting the iron ore in a blast furnace using the coke , and making liquid iron into liquid steel in a basic oxygen furnace using some scrap steel. The other process is using the electric arc furnace to melt scrap steel. Both processes then test the liquid steel in their ladle metallurgy facility, and then use continuous casting to make steel slabs which are stored. When needed, slabs are reheated and rolled thin ner in the roughing mill, and then rolled into rolled sheets in the finishing mill. These hot rolled sheets are stored. Later most are further processed in the cold roll mill into galvanized and tin - coated sheets. Also, some tubes are made. A process flow diagram for Dofasco is given in Chapter 6 ’s Internet Exercises . The outputs are steel slabs, hot - rolled steel, cold - rolled steel and tubes. b. The quality is controlled in the metallurgy facilities. c. The inventories include iron ore, coal, scrap steel , slabs, hot rolled, and cold rolled steel. Answers to Lynn Mini - c ase 1. a. Demand for her services ( number and size of yards ) need to be forecasted . b. Inventories probably include m ower parts, fuel, lubricants, fertilizer, chemicals, tools, etc.; replenishment decisions. c. She must schedule jobs (l awns ) and her staff ; Weather, ill ness, rush orders, emergencies, breakdowns can force rescheduling . d. Quality assurance (of worked lawn, staff, equipment, etc.) is v ery important. Repeat business would be greatly affected and new business depends on word of mouth and reputation. e. Oil change, blade sharpening, motor tune - up, blade and filter clean - up, etc. 2. a. Pros (for working for herself): being one’s own boss (control) . Cons (for working for herself): uncertainty of income, more time consuming , harder , b. Pros ( for expanding business): possibility of more profit Cons (for expanding business): more investment, more workload, more employee problems c. Pros (for launching a web site): more customers (it is a form of advertising) Cons (for launching a web site): initial & on - going costs, time for updating the information 3. Yes, because Lynn promised the student a bonus of $25 for a good idea and this idea appears to be good. 4. Using eco - friendly pesticides, weed - killers, and fertilizers; finding a use for the cut grass (e.g., animal feed); buying more efficient, less polluting lawn mowers , etc .

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    Operations Management, 5 /C/ e 1 - 8 Answers to Sobeys Mini - case 1. Inputs: groceries, staff, building, fixtures (shelves, stands, displays, etc.), tills Transformation process: making the groceries available to customers (purchasing, transportation, receiving, and stocking shelves, etc.) Output: satisfied, loyal customers Feedback/control: inventory control, quality control, customer service 2. a. F orecasting : to plan the store size, workforce level, and purchase quantities & inventory levels b. Product design & selection : to determine the merchandise mix to carry for the particular market c. Capacity planning : to determine the store’s right size (floor size) and store hours d. Layout design : to determine a good floor plan (directing customers through the store) e. L ocation : to determine the right location in the city (most important for a service) f . Quality: a system to assure and control quality in groceries (e.g., keeping meat, dairy, etc . fresh and at the right temperature), and in customer service g. I nventory : to avoid stock - outs and excess inventory levels f. Staff scheduling : to achieve minimal customer waiting and minimal employee idle time

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    Chapter 2 2 - 1 CHAPTER 2 COMPETITIVENESS, STRATEG IC PLANNING, AND PRODUCTIVITY Teaching Notes The topics covered in this chapter can be used to get your course off to an interesting start. Most of the students already know some of the concepts in this chapter (from other courses or general business knowledge): (a) the competitive attributes of goods and services such as price, quality, and timeliness, (b) plans and strategies, and (c) productivity. The three apparently disjoint ed topics can be related through the following argument : companies must be productive in order to be competitive and that to be competitive they must have a mission and some well - thought - out approach or plan or strategy on how to achieve this position. Concepts new to students will be (a) value or best buy, order qualifies and winners (b) operations strategy and (c) measuring productivity. New chapter opener (Porter Airlines), t he mini - cases at the end of chapter, and videos such as McDonalds ’ “Made for You” (available from McGraw Hill Ryerson) , can be used to illustrate strategy and competitiveness. Answers to Discussion and Review Questions 1. The four key purchasing criteria are price, quality, variety, and timeliness. Every purchase is different. For example, one may buy a very inexpensive Durabrand electric bread knife, but more expensive and better quality (according to consumer ratings) Hamilton Beach mixer. Some consumers look for special colours and models, and are willing to pay more for them. Everyone prefers to have the items they need available without delay , but some wi ll wait a little in order to get a better price. For example, books are cheaper if purchased directly from Amazon.ca, but one has to wait 1 - 2 weeks. The example might vary for each student. 2. O rganizations compete with cost , quality, flexibility, and delivery . WestJet competes based on cost. Cadillac competes based on quality. Dell competes based on flexibility (customization) . Dominos Pizza competes based on delivery ( within 30 minutes or free). 3. Characteristics such as price, quality, and time liness can be order qualifiers or order winners. Order qualifiers are the minimum level of characteristics (standards) required to be considered as a qualified supplier. Order winners are those purchasing criteria that cause the selling organization to be perceived as better than the competition. For example, for auto manufacturers operating just - in - time, on - time delivery and quality of parts of a supplier are order qualifies and cost is order winner. 4. Competitive advantage can be developed over time by focusing on a limited range of goods or services, and/or on a technology. Using teamwork and rewards, an organization can develop its capabilities (also called core competencies). Companies should use past experience and expertise in design, operations/manufacturing, or marketing, and leverage them to introduce new goods and services 5. Strategic planning is the managerial process that determines a strategy for the organization and implement s it through allocation of resources and action plans . Without a mission and a strategy, the organization is aimless and cannot compete.

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    Operations Management, 5/C/e 2 - 2 6. Briefly, strategic planning starts with top management soliciting the performance of current strategy from department managers, and commissioning a market research study of the industry and where it is headed in the next one to five years. Then, the management team may form/adjust the organization’s mission and vision, based on the organization’s values, determine a set of goals, and brainstorm and evaluate alternative ways (strategies) to achieve them. Finally, the chosen strategy is implemented by determining a set of action plans at the operating department level. 7 . An o perations strategy comprises a set of well - coordinated policies, objectives, and action plans, directly affecting the operations function, which is aimed at securing a long - term sustainable advantage over the competition. 8 . The nine strategic decision categories are: Facility, capacity, vertical integration /outsourcing , supplier relations hip/partnership , product mix and new products , process types & techn ology, human resources, quality, and operations infrastructure and systems . 9 . The formulation of an operations strategy involves the following steps: (a) determine the operations requirements of the business strategy, ( b ) categorize customers and their competitive priorities , ( c ) group product lines into types, (d) assess the strengths & weaknesses of the current operations strategy and products, (e) assess the degree of focus in each plant, and (f) Determine the objectives, policies, and action programs in the nine strategic decision categories for product lines and assign them to plants. 10. Answers might vary for each student. Example of a policy for waiting staff : Respond to every customer request with “my pleasure” . Example of an Action plan: hire a design artist, buy a camera and plate making machine ( in order to reduce graphics production lead time from 10 days to 1 day ) 11 . Time - based strategies are approaches that focus on reducing the time needed to conduct the various activities in product design , production , and distribution . The rationale is that by reducing time, costs are reduced , productivity is increased , product innovations appear on the market earlier, and customer service is improved along with gaining a competitive edge . At the same time, quality also tends to be higher. Examples include just - in - time ( “made for you” ) production by McDonald’s and cellular layout by Standard Aero. 12. Answers might vary for each student. Boeing is forecasting that demand for medium - to - long range flights between medium - size cities will increase, whereas Airbus is forecasting that demand for very long - range flights between major cities in Asia and North America, will increase. For more info., see e.g., http://www.smarttravelasia.com/AirbusVsBoeing.htm. 13 . Productivity is a measure of productive use of resources, usually expressed as the ratio of output to input. Productivity is important because it is related to profitability and standard of living . 14 . Factors affecting productivity — method and management , equipment and technology, and labour . An example of a method and management improving productivity is JIT (lean) production. An example of an equipment and technology improving productivity are computers and Internet. An example of labour improving productivity are trained and knowledgeable workers . 1 5 . T he Japanese automakers , such as Toyota, Honda, and Nissan, are using more productive work methods , such as lean production, than the Big 3 North American automakers (GM, Ford,

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    Chapter 2 2 - 3 Chrysler) . Also, they have better relations with their suppliers and workers. Finally, they use their plant s at higher capacity (close to 100% vs. less than 90% ). 16. Answers might vary for each student. “If productivity increases, fewer workers will be needed” is not necessarily true. For example, output can increase or other types of products can be introduced . Even when costs, e.g., labour, is reduced, the displaced workers can move to other industries such as services. 17. Efficiency is a narrower concept that pertains to getting the most out of a fixed set of resources; productivity is a broader concept that pertains to better use of overall resources. For example, an efficiency perspective on mowing a lawn if given a hand mower would focus on the best way to use the hand mower; a productivity perspective would include the possibility of using a power mower. 18. The main reason that productivity measurement in health care is difficult is that measuring output is difficult because it is partly intangible , involves intellectual activities, or the output has a high degree of variability . One measure of output is quality - adjusted life years or life expectancy after a patient has been diagnosed for a disease and then is treated or operated on. For example, consider diabetes. Life expectancy depends on how early the patient goes to his/her doctor and on performing some of the treatment personally (e.g., injecting insulin). If diagnosis is not done early enough or is not managed well , diabetes can become serious and lead to other serious health problems . In this case, the extent of deterioration in health due to diabetes may be hard to measure . The involvement of patient and deterioration in health due to diabetes makes measuring the productivity in diabetes healthcare difficult. A nswers to Taking Stock Questions 1. Top and senior management should be involved in formulating o rganizational strategy. However, the opinions of middle and lower management people in operations function should also be sought . 2. Answers might vary for each student. Competitive trade - offs that may arise in a fast - food restaurant include: • product variety vs. customer service (speed): too many products will reduce the production speed • cost (staff wages) vs. customer service (speed): too few staff will increase wait times 3. a. Technology improve s competitiveness by • reducing product cost/price ( due to more efficient /automated processing ) • increasing quality (e.g., automated quality control ) • enabling faster delivery (e.g., faster order processing , better communication , easier coordination of supply chain , automatic billing ; due to EDI and an ERP software ) • improving customer service (e.g., a Web site) • enabling better decisions (e.g., using MIS, analytics, GIS) b. Technology improves productivity due to most of the reasons in part a, especially by making production of goods and service s more efficient (reducing costs, increasing speed). This involves using machines and c omputers in production of goods and service s . 4. Make ethics part of values and culture of the organization. Be an ethical organization. Obey the law and spirit of the law. Articulate ethical values in the strategy. Emphasize principles, rather than rules. Emphasize individual ethical behavior. Encourage employees to challenge ethical

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    Operations Management, 5/C/e 2 - 4 issues. Have a process to resolve ethical issues. Make ethics training part of employee training. Be transparent to stakeholders. For more detail, see http://www.scu.edu/ethics/practicing/focusareas/business/strategic - plan.html . A nswer to Critical Thinking Exercise The automated processing would give a much higher labor productivity ratio than the manual processing because it requires less workers . Use multi - factor productivity for a more meaningful measure. Answer s to Experiential Learning Exercises 1. Answers vary. You can use Loblaw case at the end of chapter. Purchasing criteria used by consumers include price, quality , variety, and timeliness , and competitive priorities used by stores include cost, quality, flexibility, and delivery. For example, Loblaw emphasize s cost Sobeys emphasizes quality and customer service , Canadian Tire has a deep assortment of automotive parts and supplies, and Walmart has almost perfect availability (0% stock - out) as well as low cost and high variety. . 2. A goal should be something major and would take a year or more to accomplish it. Answers vary. For example, “my goal is to graduate with a good GPA”. The strategy in this case could be “don’t get a full - time job, but get family support ; don’t party too much, but study hard”. 3. Answers vary. It may be easier to answer this question if a company featured in the chapter (e.g., WestJet, McDonald’s , Porter Airlines ) is used. For example, a goal of McDonald’s i s “Made for You” or assemble - to - order while still achieving the 90 seconds service delivery standard. The strategy used was just - in - time system (see the JIT in McDonald’s video). Information on private companies is hard to obtain. A nswer s to Internet Exercise s 1. Answers vary. For Canadian Pacific (CP), from http://www.cpr.ca/en/invest - in - cp/financial - reports/FinancialReports/Attachments/200/cp - ar - 2011.pdf , P age 3 under “Strategy” , Our vision is to become the safest and most fluid railway in North America. Our objective is to create long - term value for our customers, shareholders and employees by disciplined execution of our Integrated Operating Plan (“IOP”); by executing on our Multi - Year Plan which enhances and supports our IOP; and by aligning all parts of the organization around our five core beliefs : ▫ Service: Reliable and consistent service is our product. We are committed to executing our IOP in order to meet and exceed the needs of our customers in a cost - effective manner. ▫ Safety: There is no job at CP that is so important that we can’t take the time to do it safely. Our comprehensive safety framework safeguards our employees, the communities we operate through, the environment and our customers’ freight enabling us to provide an effective transportation solution. ▫ Productivity and Efficiency: Based on a culture of continuous improvement and accountability, we are always looking for better, less costly, more reliable ways to operate our business. ▫ People: We pride ourselves in our well trained and knowledgeable team of railroaders. We are committed to executing the IOP and collaboratively working with our customers. ▫ Growth: We invest in our franchise to enhance productivity and service, which allows us to capitalize on growth opportunities with new and existing customers at low incremental cost.

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    Chapter 2 2 - 5 CP doesn’t have a Mission statement. CP’s vision on p. 3 of 2011 Annual Report is to become the safest and quickest railway in North America. Markets are described separately on p. 4: (a) bulk material to Asia, e.g., for Teck, Canpotex, grains), energy (B akken, O il S ands, etc.), and others (intermodal, automobiles, forest products). CP’s objective (long - term goal) is creation of long - term value by execution of its Integrated Operating Plan (strategy). Components of the strategy (called core beliefs) , expanded from p. 4, are (a) reliable cost - effective service (scheduled , rightly - located assets, network optimization, fast switching) (b) safety (workers, communities) (c) productivity (C.I., long trains, fuel efficiency, consolidating locomotive repair facilities) (d) people ( trained, involved, and measured workers) (e) capital investment (lines, terminals, locomotives, IT) 2. Flexibility (custom made - to - order and JIT ) bags . 3. a. McDonald’s competitive priority is q uick service . b. Goal Strategy & Actions Order - to - delivery = 90 sec JIT (made for you) Universal holding cabinets, Fast (11 sec) toaster Kitchen video system Software for forecasting 4. a. Jiffy Lube and other fast oil - change services were created in the 1980s to fill the gap left by clos ure of full - service gas stations (with service bays). b. Jiffy Lube’s competitive priority is fast (timely) service, without appointment. 5. a . Canada Post is in financial trouble because the number of letter mail has been decreasing due to e - mail communication and texting. This has reduced its revenues. Also, its operating cost is high due to public policy obligation to service rural and northern communities. b. Yes, cost. It is cheaper than a courier. c. • No more door - to - door deliveries. Instead, people pick up their mail/package from a community mailbox. • Instead of standalone new post offices, postal service will be offered by franchises (i.e., stores such as Shoppers Drug Mart) • Faster sorting machines and consolidation of sorting facilities • Workforce will be reduced through attribution and burden of pension plan will be reduced.

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    Operations Management, 5/C/e 2 - 6 Solutions to Problems 1. 300 SBC = 42.857 SBC/Worker last week 7 Workers 240 SBC = 4 8 SBC/Worker this week 5 Workers P roductivity was higher this week. 2. Week Crew Size Square Metres Installed Labour Productivity m 2/ person 1 4 960 240 2 3 702 234 3 4 968 242 4 2 500 250 5 3 696 232 6 2 500 250 E ven - sized crews are more productive than odd size crew s , and a crew of 2 has the highest productivity. 3. (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) Units =(2)*$140 kg =(4)*$6 =(6)*480 =(7)*1.5 Total MFP Week Output Sales Material Material Workers Labour Overhead Cost (3)  (9) 1 300 $42,000 45 $270 6 $2,880 $4,320 $7,470 5.62 2 338 $ 47,320 46 $ 276 7 $3,360 $5,040 $ 8,676 5.45 3 322 $ 45,080 46 $ 276 7 $3,360 $5,040 $ 8,676 5.20 4 354 $ 49,560 48 $ 288 8 $3,840 $5,760 $ 9,888 5.01 Multifactor productivity is dropping steadily from a high of 5.62 to a low of 5.01 ( $ output per $ input ) . 4. a. Before: 80 ÷ 4 = 20 carts per worker per hour. After: 84 ÷ 3 = 28 carts per worker per hour. b. Before: Costs $10 × 4 = $40 + $40 = $80; hence MFP = 80 ÷ $8 0 = 1 cart/$1 Cost After: $10 × 3 = $30 + $50 = $80; hence 84 ÷ $8 0 = 1.05 carts/$1 Cost c. Labour productivity increased by [(2 8 - 20) / 20 ] = 0.4 or 40 % Multifact or productivity increased by [(1 .05 - 1) / 1 ] = 0.05 or 5%

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    Chapter 2 2 - 7 Multifactor productivity is more appropriate because of change in machine s and their cost. 5. W ithout scrap , the output can be 91 .1 units per hour 1 . 91 10 . 1 82 = − The inc rease in productivity would be 91.1 - 82 = 9.1 units per hour. This w ould amount to an increase of (9.1 / 8 2) = 0.111 or 11 .1 %. 6. Current week’s labour productivity = . hr / units 4 . hrs 40 units 160 = Previous week’s labour productivity = . / 83 . 3 . 6 3 38 1 hr units hrs units = 4 3 83 043 3 83 Current Week's Productivity Previous Week's Productivity Productivity Growth Previous Week's Productivity units hr. units hr. Productivity Growth units hr. ( / ) ( . / ) . . / − = − = = + Thus, there was an increase of 4.3% in labour productivity. 7. Let N = no. of workers per shift Before Labour productivity = 3 00 backplanes / 3(7)N = 14.2857 /N backplanes per worker per shift After Labour productivity = 500 backplanes / 2(5 )N = 50/N backplanes per worker per shift Growth in labour productivity = (50/N – 14.2857/N) / 14.2857N = 2.5 or 250% 8. a. Labour productivity Before : 7/3 = 2 .33 33 titles per worker per day. After : 12/3 = 4 titles per worker per day. Growth = (4 – 2.33 3 3 ) / 2.33 3 3 = . 714 or 71.4 %. b. Multifactor productivity Before : = 7 / ($480 + $300) = .008974 titles per $ cost. After : = 12 / ($480 + $600) = .01 1111 titles per $ cost. Growth = (.011111 - .008974) / .008974 = . 238 or 23 . 8 %. c. Multifactor productivity is more appropriate because growth is higher since the overhead costs have increased . 9. a. Before: Labour productivity = 1 / (20/60) = 3 coils per worker per hour.

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