Solution Manual for Managing Supply Chain and Operations: An Integrative Approach, 2nd Edition

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Managing SupplyChain and OperationsAn Integrative ApproachSecond EditionS. Thomas FosterScott SampsonCindy WallinScott WebbSolution Manual forManaging Supply Chain andOperationsMahesh Srinivasan

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Chapter 1 Solutions ManualIntegrative Learning ExercisesDuring this first exercise, students discuss how SC&O is relevant to their areas of study,such as finance, marketing, or the like. The purpose of this exercise is to help the studentsunderstand how SC&O is relevant to their careers. Let the students spend 5–10 minutes ingroups to discuss this and then open up class discussion.Integrative Experiential ExercisesIn this exercise, students go into a company and identify a couple of key processes. Theydiscuss process design and process control. They also find out how the companies areimproving processes. Usually, the assigned teams make about a 10-minute PowerPointpresentations with their findings.Discussion Questions1.How is operations management different from supply chain management?Supply chain management is cooperation between different firms to create value forcustomers. Operations management is the administration of transformationprocesses that create value for customers by meeting their needs or enabling themto meet their own needs.2.Why have organizations combined supply chain and operations managementinto SC &O?Combining the terms “supply chain” and “operations” emphasizes the linkagesbetween firms that tie the operations of those different firms together with the goalof satisfying customers. The move to SC&O management from just operationsmanagement externalizes the view of a productive firm in a way that is healthy forthe world, individual firms, and their global competitiveness.3.Identify some of the strategic factors associated with the decision to bringmanufacturing back on-shore (e.g., nearshoring).Nearshoringis the act of moving production from far away to a closer location. Forexample, when Apple announced the production of Mac computers in the UnitedStates instead of China, it was nearshoring. The strategic factors associated with thedecision to bring manufacturing back on-shore can be separated into twocategories: those related to the physical environment and those related to the taskenvironment. Important strategic aspects of the physical environment includeaccess to physical resources and suppliers, as well as sustainability initiatives andcosts. Strategic aspects of the task environment include economic structures, skillsof the employees, compensation structure, technologies, and government agencies.Another concept similar to or related to nearshoring, is nearsourcing which occurswhen production of a product is moved from a supplier that is far away to one that

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2Foster/Sampson/Wallin/Webb•Managing Supply Chain and Operationsis closer. For example, when one American firm moved its production from asupplier in Malaysia to a supplier in Mexico, it was nearsourcing. Again, this decisionto nearsource is associated with similar strategic factors as discussed above.4.What is meant by a process? Why do business students need to understandprocesses?Processes are the means by which all work is performed. Business students mustunderstand processes because all managers are responsible for the management ofprocesses.5.What are the phases involved with process design? How can process design beexpedited?The phases of process design are concept design, preliminary design,implementation, and post-design review. This process is expedited throughconcurrent engineering.6.What is process improvement, and how is it related to customer needs?Process improvement is a proactive effort to enhance process performance.Specifically, it means to enhance the ability of the process to provide products orservices that are aligned more closely with customer needs.7.What is meant by globalization? Why is this concept of importance to SC&Omanagers?Globalization is the establishment of production and marketing facilities in foreigncountries. This concept is important for SC&O managers given the global nature ofsupply chains in most industries. SC&O managers must recognize that throughglobalizing, processes are disrupted as there are significant changes to the physicalenvironment, the task environment, and the social environment in which theyoperate.8.Briefly list and define three mechanisms that firms use in globalizing theiroperations.Firms license their products overseas which gives them market penetration withoutspending money to globalize. Firms enter into joint ventures and find partners tohelp them navigate difficult foreign markets. Firms can also globalize which involvesinvesting in international operations.9.What is meant by the statement “companies no longer compete againstoneanother; supply chains compete against supply chains”?Why is this statementimportant to understand?

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Chapter 1Introduction to Supply Chain and Operations Management3This statement means that a supply chain must compete with supply chains of otherfirms that follow their own supply paths. The supply chain that performs the mostefficiently wins the customer. This is important to understand because the each stepof the chain must be managed to deliver the most value to the customer.A firm’sperformance is no better than the weakest link in its supply chain.10.How do value chain activities differ from support activities?What are a firm’score activities?Value chain activities are the core activities that a firm performs. These coreactivities are process steps that enhance products in a way that makes them morevaluable to customers because the products are better suited to meet customerneeds. The core activities are inbound logistics, production, and outbound logistics.11.Identify the three primary flows found in a supply chain. Why is it importantfor an SC&O manager to understand these flows?The three primary flows of a supply chainare (1)product flows, (2)monetary flows,and (3)information flows. These flows are important to understand because theydirectly affect the ability of a supply chain to compete in providing value to endcustomers.12.In what fundamental way do information flows differ from monetary andproduct flows in a supply chain?Information flows are fundamentally different from monetary and product flowsbecause they are bidirectional, meaning that information flows move both upstreamand downstream in the normal conduct of supply chain commerce.13.What makes service supply chains more complex to manage than productsupply chains?Service supply chain management is often even more complex than manufacturingmanagement because the customers are also the suppliers. The fact that thecustomer is also the suppliermakes services supply chains especially bidirectional,meaning that product resources flow from customers to producers and then back tothose same customers.14.Briefly describe two basic feedback loops found in operations management.The first feedback loop occurs when information is gathered about processes inorder to monitor and to improve their efficacy. We term this monitoring activity asthe control process. Control activities may take the form of process control, costcontrol, labor control, inventory control, or quality control. The second feedbackloop is where information is gathered from customers, either by the firm or a thirdparty.

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4Foster/Sampson/Wallin/Webb•Managing Supply Chain and Operations15.Why are many colleges and universities seeing an increase in the number ofstudents who are interested in studying SC&O management?The increase in the number of students interested in supply chain management isdue to recent upswings in job openings, comfortable salaries, and prospects foradvancement. Also a program of study in supply chain management providesstudents with core skills that research shows are important for any career. Theseinclude critical thinking, knowledge application and analysis, business ethics andsocial responsibility, and data literacy which are much desired and sought after.Case: Williamston ManufacturingAnswerThe decision to manufacture in low-wage countries is really a question of trade-offs andaccess to manufacturing expertise. Although the low wages paid to workers help to reducemanufacturing costs, other costs often offset those gains, and the total cost of ownershipmust be considered. There is also increased risk of supply as the length of the supply chaingrows, and there are currently potential risks regarding the protection of intellectualproperty.Shipping is a primary offsetting cost to savings in wages. As the length of the supplychain physically grows, and distance from the end consumer increase, so do shipping costs.“Shipping costs have been rising, containers are expensive and staff have to be maintainedin both countries to manage the operation.”Another cost trade-off concerns the potential level of automation in themanufacturing process. The more a process can be automated, the less advantage is gainedin moving the production further from the end consumer. Often there is a larger costsavings by maintaining local manufacturing and production and increasing the level ofautomation in the manufacturing process.Manufacturing overseas also affectsa firm’sability to react rapidly to changingcustomer needs and preferences.“It is also difficult to react quickly if the market changes.”One reason for the difficulty is that the physical length of the supply chain increases theminimum amount of inventory needed to maintain customer service levels. In the case ofPeerless AV mentioned in the article: “Typically there would be 30 daysor so of inventoryat each stage of the supply chain: the stock held by the suppliers to the Chinese factory, thatfactory's inventory, the content of a shipping container on its way to America, and so on. Adesign change could take at least six months to implement. Now the company can get aprototype to a customer in a couple of weeks.”Another factor affecting the decision to move manufacturing is access to therequired manufacturing expertise. Often manufacturing in China, for example, is notcheaper, but manufacturing expertise is concentrated in some regions that simplifies thesupply chain and reduces complexity in procurement. This strategy targets an establishedarea of suppliers and producers who work in tandem to reduce manufacturing coststhrough collaboration and physical proximity.

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Chapter 1Introduction to Supply Chain and Operations Management5A further consideration in overseas manufacturing is the protection of intellectualproperty. Although this situation is improving in China, there is still a risk of losing controlover sensitive information that could cost a company its strategic advantage in the world’smarkets. This has significantly affected many companies whose products have been reverseengineered and sold throughout the world.Finally, the decision of where to manufacture is also a question of supply chainexposure to disruption from natural disasters and unstable political systems. Often there isadvantage to spreading out production across multiple locations to ensure alternate supplysources when disruptions occur at a primary source.This ensures a firm’s ability to supplytheir customers continuously.

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Chapter 2 Solutions ManualIntegrative Learning ExerciseThis chapter focuses on strategy. As a result, this exercise is designed to get the students tothink about SC&O strategy. They are to go to the popular press to research a company andfind out about its strategic planning and mission. The exercise should be used to spark adiscussion on issues such as core competence, the voice of the customer and market, andhow SC&O managers have to make choices to allocate resources.Integrative Experiential ExerciseThis activity involves visiting a company to review its strategy process and content. Thestudents should report on whether the company uses a cost, differentiation, or focusstrategy. They should then discuss order winners and qualifiers. This will allow you to starta discussion on winners, qualifiers, and strategy.Discussion Questions1.What is the purpose of strategy?Strategy is a long-term plan that defines how the company will win customers,create game winning capabilities, fit into the competitive environment, and developrelationships. Strategy includes long-term planning that is performed at the highestorganizational levelsto meets the organization’s long-term goals and objectives. Thepurpose of strategy is to provide a roadmap for growth, provide a basis for aligningoperational subplans and create and sustain a competitive advantage for thecompany.2.What are the steps of strategic planning?All planning starts with a forecast and requires an understanding of the economicenvironment. Mission and vision also help to inform strategic decision making.Management use the forecast, mission, and vision, coupled with customer researchand market analysis, to set strategic plans. A key decision in developing a strategicplan is to decide whether a company will use a cost strategytofind ways to reducecosts, use a focus strategyto service only select customers and provide these nichecustomers with a narrow range of unique products or services, or use adifferentiation strategythat seeks to provide distinctive products or services thatcompetitors cannot compete with. From the strategic plan, operational subplans areestablished in the areas of finance, operations, supply chain management,information systems, human resources, and marketing.3.Why is it important for strategic planning to consider the lifetime value of thecustomer?Switching costs and differentiation can enhance the likelihood of capturing thelifetime value of a customer. SC&O strategists must address (1) the willingness of

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2Foster/Sampson/Wallin/Webb•Managing Supply Chain and Operationsconsumers to switch to or from their product and (2) how differentiated consumersperceive their product or service to be from the competitor’s products or services.4.Why are customers important to the strategic planning process?Strategists must understand key customers’ needs in order for a firm to survive andprosper. Customers are the judge and jury in competitive advantage. No matter howmany of your shareholders, your competitors, or the media praise your company,your customer decides your long-term success. Some companies also run the risk ofadopting a strategy that attracts the wrong types of customers and thus hurts theirexisting loyal clientele.5.Why should strategic planners not treat all customers the same?SC&O managers understand that customers are not all equally valuable. Somecustomers simply are not worth the cost or effort to serve. The 80/20 rule, alsocalled thePareto’s Law, suggests that 20 percent of customers account for 80percent of revenues. The key for strategy makers is to identify the very bestcustomers and to provide outstanding service to those top customers.6.What is the difference between a company’s core competency and a skill thatthe company is really good at doing?Core competencies are those capabilities that tie most closely to their customervalues and that provide companies with a unique competitive advantage. Skills thata company are really good at doing may be of no value to their customers or may notrepresent a unique competitive advantage.7.How does a firm know which capabilities they should create and foster?Companies should focus on those capabilities that tie most closely to their customervalues and that provide companies with a unique competitive advantage.8.What is the five forces model and why is it important to strategic planning?This model helps companies understand how all competitors and supply chainmembers influence their ability to compete. There are five considerations in thismodel:Threat of new competitorsThreat of substitutesBargaining power of customersBargaining power of suppliersRivalry within the industry9.How do relationships create sustained, competitive advantage for firms?Relationships can be leveraged to reduce costs, appropriate value from a partnerwith complementary core competencies, and create synergistic value.

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Chapter 2Supply Chain and Operations Strategy310.How are complementary relationships different from synergisticrelationships?Complementary relationships occur when companies that clearly understand theircore competencies need another firm’s competencies in order to maintain world-class service. Generally, these companies understand that they hold a competitiveadvantage in one area but do not have expertise in another. A synergisticrelationship is a relationship between two companies that are committed to worktogether in a way that the result is greater than the sum of the individual parts.11.How does aligning strategic, functional, and operational plans help strategicexecution?Strategies form the rationale for tactics and operations because they drive whatmiddle tier management must accomplish to win and keep customers. For example,once a company determines that it is going to be a low price competitor, its tacticsare also going to focus on cost reduction and efficiency and its day-to-dayoperations are going to focus on efficiency. Strategy sets the stage for tactics andoperations.12.How do firms ensure that execution of strategic plans is effective?When supply chain managers select the correct functional strategies to complementtheir needs, strategies are supported, and execution becomes easier.13.How does aligning strategic levels help make strategy execution moreeffective?Aligning strategic levels ensures that functional and operational plans work on atactical level to achieve the overall strategic goals of the firm.14.What role do functional strategies have in strategy execution?Functional strategies or operational subplans are one to two year goals that help thefirm “win a battle, but not necessarily win the war.”They are where “the rubbermeets the road” in terms of strategy implementation.15.How can firms achieve SC&O sustainability?Firms can achieve SC&O sustainability by implementing quality-basedenvironmental management systems, sometimes referred to as sustainabilitymanagement, engaging in life cycle costing, implementing supplier sustainabilityscorecards, managing their reverse logistics processes, and finally by managingtheir customer’s preferences regarding sustainability.

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4Foster/Sampson/Wallin/Webb•Managing Supply Chain and OperationsCase: ZaraQuestions1.What is Zara’s competitive advantage?Zara’s competitive advantage is its ability to get new designs intoits shops in fiveweeks, compared to the six to nine months that is common in the industry.2.How has Zara aligned its processes with its marketing requirements?Zara has aligned its manufacturing to make small batches quickly and hasstructured its distribution for rapid deliveries—by truck or air—to all of theirstores. It also produces much of its own product in its own production facilities, andit imports the rest, often partly finished or undyed, allowing it to react quickly tochanges.3.What problems do you see looming for Zara?The major issue that Zara could face in the near future is the invasion of its space bya competitor who can react equally fast to changing trends and market conditions.Zara also faces competition from local competitors who offer similar clothing on asmaller scale. This question provides an opportunity for students to apply the fiveforces.4.What opportunities has the company created through excellent SC&Omanagement?Zara has created the opportunity to react quickly to changes in fashion, allowingthem to maintain their front position as a fashion leader. They have also been ableto reduce costs by avoiding overproduction of unsuccessful merchandise.

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Chapter 3 Solutions ManualIntegrative Learning ExerciseThis exercise is designed to get students to go through the steps of designing or redesigninga product. Instructors can have a competition to see who has the best new product.Integrative Experiential ExerciseThis exercise is designed to get the students into a firm to examine the design of theirprocesses. They should categorize and map these processes.Discussion Questions1.What is meant bydesign? How is it different fromcontinuous design?Design is a process of applying imagination to invent new products and services.Innovative designs may come in differing ways. Continuous design involvesdesigning products that are enhancements to existing products.2.Discuss some well designed products. What positive attributes do theyhave from a design perspective?Examples will vary. A good product design will first identify a need that will improvethe life of the customer and then design a product to fit that need. It makes use ofconcepts such as failure modes and effects analysis and incorporates features forproduct traceability. Some other positive attributes that a well-designed productshould have from a design perspective is designing the product for manufacture,maintainability, and reliability. From the perspective of the firm, a good productdesign will be one that strengthens the firm’s bottom-line, increases market share,absorbs productive capacity, and is in tune with technological advances and changesin materials. Many firms are also incorporating elements of sustainability and greendesign concepts because customers care about them.3.What questions must be answered when designing products?What are the functions the customer wants? What are the capabilities of currentproducts? What are the limitations of the materials we have selected for theproduct? Are there better materials available? How much will the product cost tomake? How do we price the product to make it successful in the marketplace?4.Briefly define the product life cycle and identify the life phases the productexperiences.The product life cycle is a graphical representation of the life phases a productexperiences. First, the product is launched. When it is new to the market, demandfor the product grows. As the product matures, demand levels out and eventually,the product declines in demand.

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2Foster/Sampson/Wallin/Webb•Managing Supply Chain and Operations5.What is meant by a complementary product? How can complementaryproducts affect a productline’slife?Complementary products are goods that use similar technologies that can coexist ina family of products. These products extend the life of a product line by offering newfeatures or improvements to prior versions of the product. The example of ATVs andsnowmobiles in the chapter is instructive as these products allow productioncapacity to be used in a counter-seasonal fashion.6.Identify five reasons why firms perform R & D.a.Strengthen the bottom line. R&D provides a lifeblood of new products thatproduce income.b.Absorb productive capacity. R&D provides new products that allow us to use ourproductive capacity.c.Emerging customer needs. You may need to identify a solution to a problem thatmakes customers’ lives better.d.Increase market share. New product ideas are necessary to maintain or toincrease market share.e.Regulatory mandates. There may be changes in the legal environment that makenew product development important. An example is when the federalgovernment increased the minimum mileage standards for automobiles.f.Technological advances. There may be new technologies that arise that need tobe utilized. For example, when 4G technology supplanted 3G, the need for more4G-compatible devises rose.g.Changes in materials. New materials, like new technologies, change the wayproducts are designed and manufactured. For example, new carbon fibers arereplacing plastics in many products because they are lighter and stronger. R&Dhelps companies use such changes to the companies’ advantage.7.What is the major difference between basic research and applied research?Basic research is theoretical exploration that is generally not profit motivated.Applied research is practical exploration that often has a profit motive.8.How is market pull R&D different from technological push R&D?Market pull (continuous development) is taking existing products and enhancingthem to reinvigorate the product life cycle or to create new complementaryproducts. Thus market pull R&D ideas tend to be more incremental. Technologicalpush (discontinuous development) occurs when a new product is sent to marketwithout a clear idea of how it would be used by the customer. Tech push oftenrequires the read-fire-aim approach to be used. This is because if there is not anexisting market for a product, then the marketing approach for the new product willhave to be fine-tuned. This will then result in more focused continuous productenhancements as the product is redesigned.

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Chapter 3Product and Process Design and Mapping39.What is meant byextended process? How does the extended process differfrom the traditional operations management view of a process?The extended process is the chain of activities from raw materials to final customer.The traditional operations management view of a process is a means of makingsomething that is of value to a customer. The extended process recognizes therealities of supply chain management and the need for firms to collaborate toprovide customer value.10.Under what circumstances would a process layout be preferred to a productlayout?You will most likely use a process layout when your focus is on variety and productflexibility more than cost or productivity.11.How does batch production differ from a job shop?Batch production facilities produce products in bunches. Because they allowproduction in higher quantities, batches are lower cost and more productive thanjob shops.12.What is the purpose of process mapping?Process mapping is used for understanding current processes and designing newprocesses.13.Briefly discuss the circumstances for which a fixed-position layout might beemployed.There are two circumstances where some firms use fixed-position layouts. Boeinguses fixed-position layout (or hangar built) in building aircraft because theirproducts are so large. It is easier to use a fixed position. Also, Volvo has used fixedposition in building cars. They can then claim that their cars are handmade from theground up.14.Under what circumstances might you employ a Muther’sgrid, rather than aload-distance model in designing functional layouts?While load-distance models are widely used in laying out job shops, their chieflimitation is that they focus on cost and distance only. Sometimes, there arebehavioral reasons for locating that must be considered. In these cases, you woulduse a Muther’sgrid.15.What is the failure modes and effects analysis (FMEA) process? To what areascan the process be applied?Failure modes and effects analysis (FMEA) systematically considers eachcomponent of a system, identifying, analyzing, and documenting the possible failuremodes within a system and the effects of each failure on the system. It is a method ofanalysis beginning at the lowest level of detail to which the system is designed and

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4Foster/Sampson/Wallin/Webb•Managing Supply Chain and Operationsworks upward. The FMEA process results in a detailed description of how failuresinfluence system performance and personnel safety. FMEA answers the question,"How do the systems or components fail?" There are five basic areas where FMEAcan be applied: (1) concept, (2) process, (3) design, (4) service, and (5) equipment.ProblemsProcess DesignBreak-Even Analysis1.Using the equation 3.3: R * Q = Fc+ Vc* Q$25*Q = $2 million + $10*QQ = 2 million/(25–10) =133,333.33 units until we break even on the investment.2.Using the equation 3.3: R * Q = Fc+ Vc* Qa.$30*Q = $6,750,000 + 10*QQ = 6,750,000/(30–10) =337,500 unitsb.$30*Q = $5,000,000 + 14*QQ = 5,000,000/(30–14) =312,500 unitsc.(375,000–337,500) * (30–10) = $750,000(375,000–312,500) * (30–14) = $1,000,000Given 375,000 units are produced,Machine Bwill contribute the most profit.3.Using the equation 3.3: R * Q = Fc+ Vc* Q$40*Q = $15 million + $8.75*QQ = 15 million/31.25 =480,000 units until we break even on the investment.Process MappingLine Balancing4.Using the takt time formula (3-6) we calculate the following:60 minutes/12 output per hour =5 minute cycle timeEligible TasksChosenTask(LOT)WorkstationTaskTime (minutes)SlackTime (minutes)AA135–3 = 2BB245–4 = 1CDCD3225–2–2 = 1EE435–3 = 2ABDCE

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Chapter 3Product and Process Design and Mapping55.Using the formulas and equations 3.6, 3.7, 3.8, and 3.9 we calculate the following:A(90)B(25)C(60)D(75)F(35)E(15)a.Takt Time = 60 seconds * 60 minutes/30 =120 second cycle timeb.Sum of task times = 90 + 25 + 60 + 75 + 15 + 35 = 300Minimum Number of Workstations = 300/120 = 2.5~3 workstationsc.Eligible TasksChosen Task(LOT)WorkstationTaskTime (seconds)SlackTime (seconds)ABAB19025120–115 = 5C DD27545CEFCEF3601535120–(60 + 15 +35) = 10d.Efficiency = 300/(3 * 120) =0.83or in other words, 83 percent of the time work isbeing performed.e.Balance Delay = 60/(3 * 120) = 0.17which means 17 percent of the time theresources are not being utilized.6.Using the formulas and equations 3.6, 3.7, 3.8, and 3.9 we calculate the following:A(35)B(40)C(25)D(15)G(35)E(60)F(30)H(45)I(15)a.Takt Time = 60 * 60/40 =90 second cycle timeb.300/90 = 3.33~ 4 workstationsc.Eligible TasksChosen Task(LOT)WorkstationTaskTime (seconds)SlackTime (seconds)AB CAB1354015CD GDCGD225351515EFEF360300HIHI4451530d.Efficiency = 300/(4 * 90) = 0.83or in other words, 83 percent of the time work isbeing performed.

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