ISyE 3104 Introduction to Supply Chain Modeling Manufacturing and Warehousing Instructor Spyros Reveliotis Summer 2003 Solutions for Homework

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ISyE 3104 Introduction to Supply Chain Modeling Manufacturing and Warehousing Instructor Spyros Reveliotis Summer 2003 Solutions for Homework Powered By Docstoc
					ISyE 3104: Introduction to Supply Chain Modeling:
        Manufacturing and Warehousing
          Instructor : Spyros Reveliotis
                  Summer 2003

           Solutions for Homework #1
ISYE 3104 Summer 2003                                                  Homework 1 Solution

Chapter 1             Operations and Productivity

1.   Define Operations Management in your own words.
          Operations management can be defined as the field that deals with the effective
     and efficient design and operation of the transformation processes that provide the
     various goods and services..

2.   Consider the potential contribution of information sciences to OM. Why is the
     management of information of such great importance in the management of
         The management of information is of great importance to operations
     management because:
             (a) without ―information‖ one would have no knowledge of the state of
                 input resources, process performance, or output goods and/or services;
             (b) properly developed information systems can contribute to the overall
                 integration required to allow a firm to produce on a competitive basis;
             (c) ―good‖ decisions require ―good‖ information—the right information, at
                 the right place, at the right time.

           More specifically, the production planning problem can be described as the
     company effort to produce the right product in the right quantities in an efficient
     manner. It should be obvious then, that in order to address the first issue, i.e., produce
     the right products in the right quantity, the companies need to have information about
     the market behavior, i.e., the expected demand and any further developing trends.
           Similarly, in order to meet this expected demand efficiently, the companies need
     to have a clear understanding of – i.e., detailed information about - their current
     operational status – i.e., existing stock, production capacity, already initiated
     production, expected supplier deliveries, etc. – since only then they can make the
     right decisions regarding how to adjust the existing status in a way that will allow
     them to meet the expected demand in a cost-effective and timely fashion.

3.   What are the three classic functions of a firm?
      The three classic functions are:
             (a) Marketing
             (b) Operations
             (c) Finance/Accounting

4.   What departments might you find in the OM function of a home appliance
             One would expect to find departments in a home appliance manufacturer for
     most, if not all, of the activities suggested by the 10 decisions in Table 1.2 and the
     organization chat in Figure 1.2.

      Research and Development (R&D)
             Conducts product research, product development, and product engineering.
             A firm might also conduct product testing at the consumer level.

      Industrial Engineering (IE)

ISYE 3104 Summer 2003                                                 Homework 1 Solution
             Determines the most efficient use of productive resources; may also develop
             product costing.

      Methods Engineering
            Industrial engineers working toward improving procedures in the workplace.

      Facilities Planning, Construction
              Plans, constructs, maintains, and repairs facilities.

      Quality Assurance/ Quality Control (QA & QC)
             Reviews designs, products, and processes to ensure quality objectives are
      Production Planning and Inventory Control (PIC)
             Schedules the manufacturing processes; manages inventory.

      Manufacturing Systems
             Applies the methodology, models, and the procedures of mathematics or
             management information systems to manufacturing operations. This
             function might assume more importance in the home appliance market as
             manufacturers from outside the U.S. provide increased competition.
      Process Engineering
             Design, develops, and evaluates production tools, equipment, and processes.

      Product Engineering
            Fine-tunes the product design to enhance production efficiency

            Focuses on designing systems and procedures and develops personnel who
            will create and maintain a reliable system.

      Supply Chain Management
             Determines the best sources for a given set of specifications, delivery, and
             price. Because the ―home appliance‖ is a basic consumer good and
             competition occurs on parameters other than price, one might also find that
             the organization‘s competitive strategy dictates that the operations function
             include the additional department.

      After Sale Service
             Responsible for the overall management and provision of on-site and carry-
             in customer service. In attempting to identify the departments of a ―typical‖
             manufacturer, one should recognize that the operations (not necessarily the
             department assignments) noted above are common to some degree among
             all manufacturers. The question is really to what degree, and the decision as
             to what degree is often based on competitive strategy in the marketplace
             rather than any ―necessity‖ of prescribed organizational structure.

ISYE 3104 Summer 2003                                                  Homework 1 Solution

       Resource        Last Year           This Year          Change      Percent Change
       Labor        1000/300 = 3.33    1000/275 = 3.64          0.31    0.31/3.33 = 9.3%
       Resin        1000/50 = 20       1000/45 = 22.22          2.22    2.22/20 = 11.1%
       Capital      1000/10000 = 0.1   1000/11000 = 0.09       -0.01    -0.01/0.1 = -10.0%
       Energy       1000/3000 = 0.33   1000/2850 = 0.35         0.02    0.02/0.33 = 6.1%

                                    Last Year             This Year
       Production                     1,000                   1,000

       Labor hr. @$10                  $3,000               $2,750
       Resin @$5                          250                  225
       Capital cost/month (1%)            100                  110
       Energy ($0.5/Btu)                1,500                1,425
                                       $4,850               $4,510

       [(1,000 / 4,850) – (1,000 / 4,510)]       0.0206 – 0.222
                 (1,000 / 4,850)                      0.206

                                             =             = 0.078 fewer resources 7.8% improvement



      1.   The number of stops per driver is certainly still a good productivity measure, since
           it gives a good idea regarding the ―amount of service‖ provided by the company
           on a daily basis. Another issue that could be tracked regarding the company‘s
           productivity might be area covered per driver per day since this measure would
           provide additional information regarding the company‘s capability to serve a more
           geographically dispersed area and its effectiveness with respect to the relevant
           route planning problems.

      2.   Since most call-in pickups are around 5.00 p.m., by offering some incentive, i.e.
           discounted rates, to customers that call in earlier parts of the day, could help
           smoothen the experienced (service) demand, and reduce the congestion currently
           experienced by the company. An additional de-congesting measure could be to
           preprocess most of the involved paperwork so that the expected service time at the
           customer site is minimized.

      3.   C.f. the Supplement to Chapter 10 on how to determine labor standards.

ISYE 3104 Summer 2003                                               Homework 1 Solution

Chapter 2 Operations Strategy in a Global Environment

   1. There are three primary ways to achieve competitive advantage. Provide an
      example, not included in the text, for each of them.
         1. Competing on Differentiation:
                 i. Companies developing customized manufacturing equipment for
                    other manufacturing companies
                ii. An airplane manufacturer like Boeing or Airbus
               iii. Ritz-Carlton
         2. Competing on Cost
                 i. All ―white label‖ items that you can find in a supermarket, i.e., items
                    that are sold under the name of the store.
                ii. PC ―clones‖, especially in the ‗80‘s and early ‗90‘s.
               iii. Oil companies
         3. Competing on Response
                 i. Street salesmen selling umbrellas or anoraks during a storm
                ii. Business traveling services
               iii. Medical (emergency) services

   2. Based on what you know about the automobile industry, how has the OM
      strategy of General Motors and Ford changed in the last 10-15 years?
      (a) Design of goods and services:
                 new products, designed and evaluated with CAD; coordinated with
      (b) Quality:
                 100% to standards; better feedback from customer
      (c) Process and capacity planning:
                 new jigs to improve quality
                 new robots to reduce labor cost and improve quality
      (d) Location strategy:
                 Location relative to suppliers is now more important, migration to low-
                 cost labor areas
      (e) Layout strategy:
                 Work cells, flexible assembly lines
      (f) Inventory management:
                 MRP, JIT are now regularly employed
      (g) Scheduling:
                 Scheduling to meet requirements of JIT
                 Expert systems and finite scheduling
      (h) Maintenance:
                 Improved and increased training of maintenance personnel
      (i) Supply chain management:
                 Fewer suppliers who are more heavily integrated into the main
                 organization‘s information system

   3. How does the OM strategy change during a product’s life cycle?

ISYE 3104 Summer 2003                                               Homework 1 Solution
               During the introduction stage, the emphasis is on developing a product that
       is well accepted by the market, hence, issues such as product design and
       development are critical. During the growth stage, the emphasis shifts on
       establishing and maintaining a production process that is reliable and responsive to
       the developing demand as well as any further signals obtained from the market
       regarding the desired product quality. At this stage also the major competitors will
       emerge, and therefore, the company must develop responding strategies to that will
       allow it to preserve, and if possible, increase its market share. During the product
       maturity phase, the market has stabilized in terms of product features, key
       competitors and market shares, in fact some overcapacity might have also been
       established, and therefore, the key concern for the companies is to preserve their
       market share by offering a reliable product at competitive prices. Hence,
       maintaining a stable and efficient production process is very important. Finally, in
       the decline stage, pruning the line to eliminate items not returning good margin
       becomes important. Figure 2.5 in your textbook provides a more detailed list of

    4. For what reasons do domestic operations typically become international
              Domestic firms become international because the world is changing, making
       competitors of not only other local firms, but non U.S. firms as well.

              C.f. the relevant slide in (PowerPoint) class presentation on the challenges
       and opportunities of globalization.

    5. Explain and give an example of how product design should be considered when
       offering a product in a global market.
              Product design is important, as Coke recognizes, because tastes may differ
       from country to country. Other examples is the customization of the computer
       software to take into consideration the language differences at different countries,
       the design of the controls and the entire interior for cars produced for the
       Commonwealth countries where the steering wheel must be on the right side, etc.

    6. What is the role of the World Trade Organization in modern global economy?
               The World Trade Organization tries to lower trade barriers and ensure that
       international agreements and codes of conduct (including ethical standards) are
       uniformly applied around the world. ―Its main function is to ensure that trade flows
       as smoothly, predictably, and freely as possible.‖ (From the WTO web page,



1. (a) What constitutes the mission of Minit-Lube?
       To provide economical preventive maintenance and interior auto cleaning, primarily
       to vehicles owned by individuals (as opposed to business), in the U.S.

ISYE 3104 Summer 2003                                                  Homework 1 Solution
2. (b) How does the Minit-Lube Strategy provide competitive advantage?

       Minit-Lube‘s approach to these 10 decisions includes:

       Product Design:
             A narrow product strategy could be defined as ―lubricating automobiles‖
             that allows the subsequent development of more focused and efficient
             operations (more in Chapter 5).

       Quality Strategy:
              Because of limited task variety, high repetition, good training, and good
              manuals, quality should be relatively easy to maintain.

       Process Strategy:
              The process strategy allows employees and capital investment to focus on
              doing this mission well, rather than trying to be a ―general purpose‖ garage
              or gas station.

       Location Strategy:
              Facilities are usually located near residential areas.

       Layout Strategy:
              The three bays are designed specifically for lubrication and vacuuming tasks
              to minimize wasted movement on the part of the employees and to
              contribute to the speedier service.

       Supply Chain Strategy:
              Purchasing is facilitated by negotiation of large purchases and custom

       Human Resources Strategy:
            Human resources strategy focuses on hiring a few employees with limited
            skills and training them in a limited number of tasks during the performance
            of which they can be closely supervised.

              Inventory investment should be relatively low, and they should expect a
              high turnover.

             Scheduling is quite straightforward with similar times for most cars. Once
             volume and fluctuation in volume are determined, scheduling should be very
             direct—assisting both staffing and customer relations.

             There is relative little equipment to be maintained, therefore little preventive
             maintenance required. With three bays and three systems, there is backup
             available in the case of failure.

3. Specialization of personnel and facilities should make Minit-Lube more efficient.

ISYE 3104 Summer 2003                                             Homework 1 Solution
   Jobs/tasks accomplished per man hour would be a good place to start.


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