Chapter 01 - Introduction to Managing Operations Across the Supply Chain
1-1
Chapter 1
Introduction to Managing Operations Across the Supply Chain
Suggested Answers to Discussion Questions
1. Review Fortune magazine’s “Most Admired” American companies for 1959, 1979,
1999, and the most current year. (The issue normally appears in August each year.)
Which companies have remained on the top throughout this period? Which ones have
disappeared? What do you think led to the survival or demise of these companies?
The companies that have stayed on top throughout this period are General Electric, Southwest,
Berkshire Hathaway, and Proctor and Gamble. UPS and Coca Cola were some of the
companies that disappeared. The companies that were able to stay at the top of the list were the
ones able to deal with major changes in the industry easily. In order to stay afloat in harder
times, they were managed by people who understood operations management; they had a
winning value proposition that was continually revitalized by the introduction of new products
and services. The companies that did not stay at the top unable to make the necessary changes
so easily; perhaps their operations management was not at the caliber of the other companies
able to stay at the top of the list.
2. Select two products that you have recently purchased; one should be a service and the
other a manufactured good. Think about the process that you used to make the decision
to purchase each item. What product characteristics were most important to you? What
operational activities determine these characteristics?

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Student answers to this question will vary. The following is an example from one student:
“Two products I have recently purchased were a sweater and a haircut. The process I used to
make the decision to purchase the sweater was trying on the sweater in different colors,
contemplating the purchase at home, waiting for sweater to go on sale, and then purchasing it.
The process I used to make the decision about where to get my haircut included researching
pictures of how I wanted my hair to look, asking advice about where to go from friends,
researching online for reviews about stylists, and getting my haircut by that stylist. I wanted to
make sure both products were going to satisfy me enough so that I wouldn’t regret either
purchase. I had to be comfortable with both my sweater and my new hair style, luckily I was! I
also wanted both my sweater and my hair style to last for a while to make them worth the cost.
The operational activities that determine these characteristics are the manufacturing, shipping
and selling the sweater in stores. If the sweater was poorly made and didn’t fit correctly, I
would not have purchased it. If it was not available (on the shelf) I could not have purchased it.
The operational activities that determine the characteristics of my hairstyle are the stylist
arriving to work on time for my appointment, washing, cutting and blow drying my hair in a
way that I was expecting (having sufficient capacity so that I did not have to wait too long).
Since my hair was cut and styled the way I requested, I will be returning to that hair stylist.
3. What are the primary operations management decisions in each of the following
corporations?

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Again, student answers will vary but may include the following elements.
a. Marriott Hotels and Resorts: How to greet and treat customers during their stay, what
services to supply to customers, how to check customers in so that they are not waiting for long
periods of time to get to their rooms, how to deal with unhappy customers in order to keep
them coming back, how to measure customer satisfaction.
b. A private golf and tennis club: How to serve customers while playing tennis/golf so they
continue to spend their money and play at this private course, what services to offer in order to
keep customers happy. How to best manage the facilities and train employees.
c. Ben & Jerry’s: What flavors to make, how much of each flavor to make, how to keep up
with demand, what suppliers to use, how to measure customer satisfaction.
d. ExxonMobil Corporation: How to manage exploration, extraction and refinement
operations effectively and efficiently. What services are to be delivered, how to keep retail
customers happy, how to deliver goods.
4. Consider the following processes that you frequently encounter as a college student.
Describe each process and its input, activities, and outputs. What is being converted or
transformed in each process? Who are the customers, suppliers, and stakeholders for
each process?

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a. Enrolling in classes: Classes must be scheduled so that students can enroll in them, students
communicate with advisor about necessary classes, students sign onto website and find suitable
classes that fit together into schedule for each semester. The inputs of this process are the
student’s and administrators’ time and problem solving effort. The activities are decision
making, communicating, and scheduling so that everyone has a chance to take the classes they
want each semester. The output is the student’s schedule and enrollment into classes. The
student’s schedule is being transformed. The customer is the student, the stakeholders are the
professors who get paid to teach the courses and the businesses that would like to hire students
once they complete their courses. The supplier is the university.
b. Taking a class: The process and activities of taking a class entail making it to class on time
every session, studying before class to be able to follow along and participate, arriving with the
correct materials in order to take notes and complete activities in class, and completing
homework before it is due. The inputs are the knowledge of the professor and information
contained in course materials, along with the student’s hard work, studying, participating, and
physically going to class. The outputs are friends and education. The student is being
transformed. The customer is the student. Or one might consider the business who would like
to hire the student to be the customer. The supplier is the university.

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c. Buying a ticket for a play, concert, or basketball game: The process and activities of
buying a ticket entail making a decision to buy the ticket, saving up the money, either ordering
the ticket online or physically going to a ticket booth and purchasing the ticket. The inputs are
time and money. The outputs are the experience of seeing a great play, concert, or basketball
game and memories. The ownership of the ticket is being converted. The customer is the ticket
purchaser; the stakeholder is the owner of the basketball team, or the director of the play, or the
manager of the band. If no one purchases tickets, those stakeholders may no longer have jobs.
The supplier is the team, the actors, or the band.
5. Recall the last time you went to a fast-food restaurant such as McDonald’s. Describe all
of the goods and services that make up your total product experience.
The goods that made up my experience were the actual food and drink that I purchased. The
services were being greeted when I walked up to the counter, ordering my food, receiving my
food in a timely manner along with my order being correct. The service of a clean restaurant
also added to my total product experience.
6. The following firms have long been seen as having strong competitive advantages.
Read about one of these companies. Also draw from your experience as a customer to
identify that company’s competitive advantage. Discuss how operations management
relates to the company’s competitive advantage.
Student answers will vary. An example for Coca-Cola is:

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Chapter 01 - Introduction to Managing Operations Across the Supply Chain
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Coca-Cola’s success comes from its secret formula for its main product, Coca-Cola. It has been
able to keep its formula a secret for so long that major competitors like Pepsi are having a hard
to following in its footsteps. In order to stay at the top, Coca-Cola has recently been
restructuring its supply chain so that they can keep their products in high demand. This new
supply chain system will enable Coca-Cola products to keep shelves at stores like Wal-Mart
and Meijer filled so that customers do not have to settle on other brands. Along with
restructuring supply chain comes restructuring operations management. If the wrong distributer
or bottler is employed or not enough products are produced, Coca-Cola’s profits and demand
could suffer.
7. Why should a firm consider the position of stakeholders when evaluating operational
alternatives? Consider the role of government and its impact. (Hint: Consider working
conditions and pollution.)
A firm should consider the position of stakeholders because they could have a big effect on the
company along with the company’s profits. If a highly polluting firm does not make changes to
make stakeholders happy (like environmentalists), then those stakeholders may alert the
government through the EPA. The EPA could then research and investigate the company and if
they found anything against the law, the EPA could bring that firm to court. This would effect
its abilities to get stockholders, to keep its customers, run the business, and therefore to make a
profit.

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Chapter 01 - Introduction to Managing Operations Across the Supply Chain
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8. Most people have worked as “operations managers” at some time. Describe a job or
experience that you had that involved the management of a process.
Student answers will vary. A good example offered by an undergraduate is:
“When I was a manager at a restaurant, it involved the management of a process. Every night I
had to make sure that there were tables available for customers that had made reservations, and
that no one was waiting too long for their tables, food, drinks, or bills. I had to put bigger tables
in certain sections where I knew the more experienced wait staff would make the customers’
experience more enjoyable. I also had to go around to each table to make sure meals were
satisfactory and did anything to make the customer’s experience at the restaurant pleasant
enough to assure customer patronage.”
Business Textbook Supply Chain Case – Teaching Notes
I like to start my class with this case, because the product is familiar to students. Many of them
are in the process of acquiring their books for the semester or term, so the idea of value and
cost are fresh in their minds. Also, the technologies and markets involved are not terribly
complex, yet there is a lot change going on that makes the discussion relevant and current. The
overall goal of the case is to set the stage for a discussion of all the topics related to supply
chain operations management.

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Chapter 01 - Introduction to Managing Operations Across the Supply Chain
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Synopsis:
The case gives students an opportunity to step through a “value chain analysis” for a product
and industry with which they have some familiarity. The steps of the analysis include:
1. Identify key players (critical customers)
2. Chart physical and information flows
3. Describe value proposition offered by each player
4. Describe primary value add for each player (who is responsible for key value
elements?)
5. Identify market and technology dynamics
6. Ideas?? Considering the relationships and dynamics in the chain, how might we
improve the value propositions?
By analyzing these issues from the perspective of a book publisher, students can gain an
appreciation for the different types of value created in supply chain operations, as well as the
role that partnerships play in developing and delivering products. In addition, this particular
industry situation provides a great example of the dynamics that govern supply chain
operations management. Changing technologies and markets make it important for operations
managers to continuously evaluate the value propositions that their companies offer, and how
changing conditions may render them obsolete.

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Chapter 01 - Introduction to Managing Operations Across the Supply Chain
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Case Questions:
The case questions guide the student through the value chain analysis identified above.
1. Draw a diagram that illustrates the textbook supply chain from the publishers' point of view.
2. Who are the various customers for textbooks? What do these customers want in terms of
goods and services related to textbooks? From the publisher's point of view, who is the critical
customer?
3. Who are the major players in the supply chain? What operational roles do they play in
terms of creating value for the critical customers?
4. Given the anticipated changes in the market and in product and process technologies, how
do you envision each supply chain player's role changing in the future?
5. What advice would you give to Dave Eisenhart regarding long-term operational changes the
firm should consider?
Case Analysis:
1. Draw a diagram that illustrates the textbook supply chain from the publishers' point of
view.
The diagram below identifies most of the major players in the traditional textbook supply
chain. Students will quickly identify other channels of as well, such as on-line
retailers. I encourage them to concentrate first in thinking about the traditional channel that
has hard bound books stored in inventory at several stages throughout the chain. You can ask
the question of why inventory exists? Why do publishers revise books every 3 years? Or other
questions just to get them thinking.

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Chapter 01 - Introduction to Managing Operations Across the Supply Chain
1-10Textbook supply chain from publisher’s perspective
RetailDistPublisher
Printer
/ Binder
Other
Supplier
Ink
Supplier
Paper
Supplier
Student
Professor
Material flows
Information, currency flows (orders, payments)
Sales Rep
order
Authors
Designers
Editors
Carrier
2. Who are the various customers for textbooks? What do these customers want in terms of
goods and services related to textbooks? From the publisher's point of view, who is the critical
customer?

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Chapter 01 - Introduction to Managing Operations Across the Supply Chain
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I usually draw a table such as the one below. Ask the students to identify which value
characteristics are most important and which are nice but not necessary. Using the idea of
“order winners and qualifiers” is also useful here. Compare and contrast what the different
customers want and identify conflicts. Ask how a publisher might make tradeoffs among these
book characteristics in designing a new book.
Customer What he/she cares about
Student Price!!!, weight of the book, durability,
ease of use (e.g., easy to read),
Professor (critical customer because he/she
makes the purchase decision)
Content fits course design, ease of use
(course prep materials), currency of
content, Price??,
Retail bookstore owner Durability!! (wants to re-sell the book as
many times as possible), size (smaller is
better to take less shelf space),
3. Who are the major players in the supply chain? What operational roles do they play in
terms of creating value for the critical customers?
Talk through the various roles, including:
Retailer – storage and transfer of ownership
Distributor/carrier – storage, transportation, availability
Publisher/Authors – design, development
Printer/suppliers – material transformations
4. Given the anticipated changes in the market and in product and process technologies, how
do you envision each supply chain player's role changing in the future?

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Chapter 01 - Introduction to Managing Operations Across the Supply Chain
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Market changes: Constantly evolving business content
More short courses, on-line courses, and other courses that do not need
an entire textbook
More case teaching
Desire to combine content from multiple sources
Technology changes: Print on demand technologies (make smaller print batches economical,
even lot sizes of 1), in future each book will be printed on demand at the retail site
“Custom published books” – combine materials from various sources
e-books
Self publishing – will authors need publishers in the future?Example: Educational Texts
Readability (visual quality)
Time
Hard bound text
Mainstream user requirements
Print on demand text
Electronic text
Today

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Chapter 01 - Introduction to Managing Operations Across the Supply Chain
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If e-books ever become mainstream, then the value provided by the printer, distributor, and
retailer will be minimized.
5. What advice would you give to Dave Eisenhart regarding long-term operational changes
the firm should consider?
Some issues the publisher might consider:
- forward integrate into retail and of e-books?
- Think about value that the publisher creates for the author and how to protect against
the threat of self publishing (key value provide might be marketing and sales functions,
integration of authors’ ideas with other key knowledge sources, etc.)
- Purchase or partner with competitors to gain access to wider scope of content – for
example, McGraw Hill/Irwin has a deal with Harvard to include cases in their
book/coursepacks
I wrap up the discussion by pointing out the strategic and dynamic nature of managing
operations spread across a supply chain. A sharp operations manager must stay abreast of:
- changing market conditions and customer desires
- competitor moves
- changes in technology and capabilities of key partners and suppliers
Overall, he/she must have a keen understanding of how his/her firm creates value today,
and how that might be different tomorrow.

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Chapter 02 - Operations and Supply Chain Strategy
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From Chapter 2
Operations and Supply Chain Strategy
Suggested Answers to Discussion Questions
1. Why should the firm never outsource its core capabilities? What happens if the firm is
approached by a supplier who is willing to supply goods and services based on these core
capabilities at a significantly lower price? What should the firm do?
Its core capabilities are the source of the ability of the firm to compete. If you outsource them,
then you run the risk of “teaching” someone (i.e., your supplier) about what you do and what
makes you successful. If they can learn from you, then they can become a strong competitor of
yours.
If you are approached by a firm that is willing to supply goods and services based on your core
capabilities, then you really have two options before you. The first is to see if they are really
able to do a better job of executing these core capabilities than you are. If that is the case, then
you have two options before you: (1) learn from them or (2) get out of the market – they are
better than you. The second, assuming that they are not able to do a better job of competing on
your core capabilities, is to turn down their offer. They are obviously willing to take a short term
loss in exchange for a long term win (gained when they learn about your core capabilities).
2. Apply the corporate/SBU/functional planning hierarchy introduced in this chapter to
your university/college or business. What would be the equivalent to corporate planning?
SBU planning? Functional Planning?

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Chapter 02 - Operations and Supply Chain Strategy
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In a university, you would find the following relationship
Strategic Planning Hierarchy University Equivalent
Corporate University
SBU College
Functional Department
3. How would you define capabilities within a school or business?
Again, the capabilities are those specific skills or processes that an organization develops to
solve or address specific types of problems. Consequently, using this approach, the capabilities
of an organization such a school or business can be found in its faculty (their strengths, and
research focus), the pedagogy by which material is taught, and the focus of the school (finance,
supply chain, operations management).
4. When can a consumer be a critical consumer? In other words, when does it make sense
to focus on consumers such as retail stores, distributors, or buyers, rather than on the end
consumer?
A consumer such as a retail store, distributor or buyer becomes a critical customer when the
consumer busy based on factors such as ability. For example, consider snack foods. Few
consumers really have strong brand preferences; they tend to buy what is available.
Consequently, the firm has to target the person or function that has the greatest impact on
availability. In this case, it would tend to be the retail store, distributor or buyer. By the way,
this is the strategy that Frito-Lay has pursued and it has been highly successful.
5. A critical concept introduced in this chapter was that of the value proposition. Explore
two competing products (e.g., RIM’s Blackberry and Apple’s Iphone). Identify the
underlying value propositions present in these products and how this proposition is evident
in the resulting products.

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