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

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Solutions Manual
Operations & Supply Chain
Management for the 21st
Century
First Edition

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

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

3. Compare two restaurants:
Taco Bell Hyde Park Steakhouse
Competitive Priorities: Cost: 40 points
Delivery: 30 points
Quality: 15
Flexibility: 15
People go to Taco Bell because
of their low cost and fast
delivery. Quality is important
in the sense that the food must
be edible and not have any
health problems, but not much
more is expected. Flexibility is
limited to different
combinations of the same 8 –
10 ingredients.
Cost: 10
Delivery: 15
Quality: 40
Flexibility: 35
The most important thing is
high quality and high choice.
Customers are willing to pay
more money and wait a bit
longer for a meal (but not spend
too much money or wait too
long.)
Facilities: Very functional, limited space
for dining, designed for
productivity
Very nicely decorated, much
more “elbow room”, designed
for customer comfort while
productivity is a secondary
concern. For example, having
the bar in the front and kitchen
in the back is definitely NOT
the first choice of the waitstaff.
This is done to appeal to
customers and to get them to
spend more money.
Workforce: Very general and low skilled. More specialized and higher
skilled – particularly in the
kitchen.
Quality Systems: Quality starts with
conformance. Strict,
standardized systems used to
train all workers the same way
to get the most out of low-cost,
low skilled workers.
Quality starts with the highly
skilled workforce. More
individualized training. Cooks
go to specialized culinary
schools.
Technology: Very specialized. Example:
cash registers with pictures and
buttons for value meals to
increase low skilled cashiers’
accuracy and speed.
Very general purpose, primarily
used to improve customer
experience.

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

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Chapter 2: Quality Management
End of Chapter Problems
1. Zeta Automotive Limited
Information Provided:
Upper Tolerance Limit = 75
Lower Tolerance Limit = 70
Mean = 72
For Six Sigma Quality, the distance from the mean to upper and lower tolerance limits
should be 6 standard deviations (σ).
Using Upper Tolerance Limits:
6 * σ = (75 – 72) = 3
σ = 0.5
Using Lower Tolerance Limits:
6 * σ = (72 - 70) = 2
σ = 0.33
To ensure Six Sigma quality, the standard deviation should be lowered such that the distance
from the mean to both Upper and Lower Control Limits are at-least 6 σ. Therefore σ should
be lower to 0.33.
2. Internet Book Retailer
Information Provided:
Upper Tolerance Limit (UTL) = 36 hours
Lower Tolerance Limit (LTL) = 24 hours
Mean = 30 hours
Standard Deviation = 4 hours
a. The current process sigma level can be calculated by applying equation 1 (page 52)
Using UTL
Process Sigma = 4
3036 − = 1.5
Using LTL
Process Sigma = 4
2430 − = 1.5
Therefore it can be concluded that the Internet Book Retailer is currently operating at
1.5 σ level.
b. For Six Sigma Quality, the distance from the mean to upper and lower tolerance
limits should be 6 standard deviations (σ).

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Using Upper Tolerance Limits:
6 * σ = (36 – 30) = 6
σ = 1
Using Lower Tolerance Limits:
6 * σ = (30 - 24) = 6
σ = 1
To ensure Six Sigma quality, therefore σ should be lower to 1.
3. Pizza Delivery Company
Information Provided:
Upper Tolerance Limit (UTL) = 60 minutes
Lower Tolerance Limit (LTL) = 0 minutes
Mean = 40 minutes
Standard Deviation = 10 minutes
a. The current process sigma level can be calculated by applying equation 1 (page 52)
Using UTL
Process Sigma = 10
4060 − = 2
Using LTL
Process Sigma = 10
040 − = 4
Since the company promises to deliver pizza within an hour, UTL calculation is
more relevant. Therefore we can conclude that the company is operating at a 2 σ
level.
b. For Six Sigma Quality, the distance from the mean to upper and lower tolerance
limits should be 6 standard deviations (σ). As mentioned in the previous question,
the use of UTL is more appropriate. Therefore
Using Upper Tolerance Limits:
6 * σ = (60 – 40) = 20
σ = 3.33 minutes
To ensure Six Sigma quality, therefore σ should be lower to 3.33 minutes.
4. Customer Service Center
Information Provided:
Upper Tolerance Limit (UTL) = 90 seconds
Lower Tolerance Limit (LTL) = 30 seconds
Table 2.5 lists waiting times for 50 customers. We can use this information to calculate
mean and standard deviation:

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Mean = 60.32 seconds
Standard Deviation = 6.51 seconds.
Current process sigma level can be calculated using the above information:
Using UTL
Process Sigma = 51.6
32.6090 − = 4.56
Using LTL
Process Sigma = 51.6
3032.60 − = 4.66
We can conclude that the customer service center is not able to provide a six-sigma quality
at this point. Their current process sigma level is 4.56 considering UTL and is 4.66
considering LTL.
5. Coffee Temperature
Information Provided:
Upper Tolerance Limit (UTL) = 180 degrees
Lower Tolerance Limit (LTL) = 160 degrees
Table 2.6 lists waiting times for 40 cups. We can use this information to calculate mean and
standard deviation:
Mean = 170.53 seconds
Standard Deviation = 6.29 seconds.
Current process sigma level can be calculated using the above information:
Using UTL
Process Sigma = 29.6
53.170180 − = 1.51
Using LTL
Process Sigma = 29.6
16073.170 − = 1.67
We can conclude that the Café is not able to provide a six-sigma quality at this point. Their
current process sigma level is 1.51 considering UTL and 1.67 considering LTL.

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6. Video Game Console
Information Provided:
There are 10 production steps.
Each step is operating at 5-sigma level.
Therefore we can conclude that the distances from mean to UTL and LTL are at-least 5
standard deviations.
Hence we can calculate the percentage of defective products made by each production step
by calculating the area of the normal distribution curve above UTL and lower than LTL
(hint: similar calculations are shown in Solved Example 1 on page 52).
Percentage defective product considering UTL = 1 – NORMSDIST(5) = 0.0000002866
Percentage defective product considering LTL = NORMSDIST(-5) = 0.0000002866
Total percentage defective product = 0.0000002866 + 0.0000002866 = 0.0000005732
Therefore total percentage good product = 1 – 0.0000005732 = 0.9999994268
Since each production steps are independent of each other, the total percent of good product
at the end of 10 production steps will be =
(0.9999994268) 10 = 0.999994268
7. Electronic Product
Information Provided:
There are 12 production steps.
For the first 6 steps:
First 6 steps are operating at 5 sigma level
Hence we can calculate the percentage of defective products made by each production step
by calculating the area of the normal distribution curve above UTL and lower than LTL
(hint: similar calculations are shown in Solved Example 1 on page 52).
Percentage defective product considering UTL = 1 – NORMSDIST(5) = 0.0000002866
Percentage defective product considering LTL = NORMSDIST(-5) = 0.0000002866
Total percentage defective product = 0.0000002866 + 0.0000002866 = 0.0000005732
Therefore total percentage good product = 1 – 0.0000005732 = 0.9999994268
For the last 6 steps:
The last 6 steps are operating at 5.5 sigma level

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Percentage defective product considering UTL = 1 – NORMSDIST(5.5) = 0.000000019
Percentage defective product considering LTL = NORMSDIST(-5.5) = 0.000000019
Total percentage defective product = 0.000000038
Therefore total percentage good product = 1 – 0.000000038 = 0.999999962
Since each production steps are independent of each other, the total percent of good product
at the end of 12 production steps will be =
(0.9999994268) 6 * (0.999999962) 6 = 0.999996
8. Quick Service Restaurant
Current Process
There are 4 production steps.
Each step is operating at 4-sigma level.
Hence we can calculate the percentage of defective products made by each production step
by calculating the area of the normal distribution curve above UTL and lower than LTL
(hint: similar calculations are shown in Solved Example 1 on page 52).
Percentage defective product considering UTL = 1 – NORMSDIST(4) = 0.00003167
Percentage defective product considering LTL = NORMSDIST(-4) = 0.00003167
Total percentage defective product = 0.00003167 + 0.00003167 = 0.00006334
Since each production steps are independent of each other, the total percent of good product
at the end of 4 production steps will be = 1 – 0.00006334
(1 - 0.00006334) 4 = 0.99746664
New Process
There are 8 production steps.
Each step is operating at 5.5 sigma level.
Percentage defective product considering UTL = 1 – NORMSDIST(5.5) = 0.000000019
Percentage defective product considering LTL = NORMSDIST(-5.5) = 0.000000019
Total percentage defective product = 0.000000038
Therefore total percentage good product = 1 – 0.000000038 = 0.999999962

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(0.999999962) 8 = 0.999999696
Therefore by new process will slightly increase the percentage of error-free products
(0.999999696 - 0.99746664 = 0.000253032).
9. Manufacturing Facility
Sigma level for first step: 4.5
Therefore the percentage of good products made by this step = 0.9999932 (refer to earlier
example on how to calculate percentage of good products)
Sigma level for second step: 5
Therefore the percentage of good products = 0.9999994268
Sigma level for steps 3 and 4: 5.5
Therefore the percentage of good products = 0.999999962
Therefore percentage of good products after all four steps =
0.9999932 * 0.9999994268 * (0.999999962) 2 = 0.999992551
10. Quick Service Restaurant (Part 2)
New Process
There are 3 production steps each with same sigma level producing X% good products at
each step.
According to the information provided, the new process has the same overall sigma level as
the original process with 4 steps. Therefore the new process and the old process should have
same number of good products.
Therefore
X * X * X = 0.99746664
Or X = 0.99915
In other words, the area under the normal distribution from LTL to UTL is 0.99915.
Therefore area outside the tolerance limits (or % defective products at each step) = 0.000845

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

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

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company in 2007, and in 2009 Google announced that they were shutting the service down.
(Source: http://google.about.com/od/blogs/ig/Google-Graveyard-/Dodgeball.htm)
2. Examples of products in different stages of the lifecycle in various industries:
Industry Introduction Growth Maturity Decline
Pharmaceutical Bio-
technology
based
medicines
Lifestyle
drugs (e.g
Viagra)
Aspirin
Computer Cloud
computing
Palmtop (or
mini)
Laptop PC
Desktop PC Mainframe
PC
Automobile Plug-in
hybrid
automobiles
Hybrid
automobiles
Minivans Station
wagons
Hotel High-Tech
Limited
Service
Hotels
Boutique
Hotels
Large
Convention
Hotels
Bed and
Breakfast
Inn
Healthcare Ayurvadic
medicine
Health
tourism
Large
general
purpose
hospitals
Midwife
administered
birthing
centers
Entertainment Adventure
tourism
Internet-
based TV
and movie
rental
TV VCR
3. Continuous innovation allows improved performance without changing consumption
or customer behavior. Examples include Kellogg’s adding to it’s Eggo® line with
Nutri Grain® Strawberry Filled waffles.
Radical innovation as either a service or product significantly changes both behavior and
consumption. An example is a customer purchasing & printing airline boarding passes on
line.
The goal of blue ocean strategy is to make the competition irrelevant by establishing a new
product, service, or experience within an uncontested market. Examples include American
Girl which started as a Wisconsin doll manufacturer and has expanded into an entire
vacation experience for girls and their families.

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