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

Operations Management, 5/C/e1-2
short term (1–12 weeks or so ahead). Design involves decisions that relate to goods and service
design, capacity, acquisition of equipment, arrangement of departments, and location of facilities.
Planning/control activities involve management of personnel, quality control/assurance,
inventory planning and control, production planning, and scheduling.
7. Important differences between producing goods and performing services are:
(1) Customer contact, use of inventories, and demand variability
(2) Uniformity of input
(3) Labour content of jobs
(4) Uniformity of output
(5) Measurement of productivity
(6) Quality Assurance
8. Answers might vary for each student. Teaching; personal services such as haircut, lawn mowing,
maid service, and car wash. The customer or something belonging to the customer is being
transformed.
9. From Figure 1-6:
• dealing with labour difficulties, solving personnel problems, solving management
problems, solving technical problems
• making OM decisions, including general management decisions (planning, organizing,
controlling, and directing)
• innovating, personal initiatives, improving productivity
• representing operations in upper management
10. a. Industrial Revolution began in the 1770s in England, and spread to the rest of Europe and
North America in the late eighteenth century and the early nineteenth century. A number of
inventions such as the steam engine, the spinning jenny, and the power loom helped to bring
about this change. Later machines made of iron were built. Two concepts assisted in large-
scale production: division of labour and interchangeable parts. Despite the major changes that
were taking place, management theory and practice had not progressed much from early days.
What was needed was a systematic approach to management.
b. Frederick W. Taylor spearheaded the scientific management more than a century ago. The
science of management was based on observation, measurement, analysis, improvement of
work methods, and economic incentives. He also published a book titled The Principles of
Scientific Management in 1911. Other pioneers who contributed to scientific management
include Frank Gilbreth, often referred to as the father of time and motion study, and his wife
Lillian Gilbreth, and Henry Gantt.
c. An interchangeable part is a part made to such precision that all units of the part would fit any
particular product it is made for. It meant that individual parts would not have to be custom-
made (they were standardized). The standardized parts could also be used for replacement
parts. The result was a tremendous decrease in assembly time and cost.

Chapter 1 1-3
d. Division of labour is breaking up a production process into a series of tasks, each performed
by a different worker. It enabled a worker to learn the job and become proficient at it more
quickly, and avoid the delays of having a single worker shifting from one activity to another.
11. a. Service involves a high degree of customer contact and are much more sensitive to demand
variability. Services often require a higher labour content and the output is variable. Quality
assurance is more challenging in services because performance and consumption occur at the
same time. The service sector accounts for more than 78 percent of jobs in Canada and this
continues to increase. Some examples include government services, finance and insurance,
healthcare, education, professional and technical services.
b. Manufacturing is important because it produces the goods that we use, and many service jobs
are dependent on manufacturing because they support manufacturing. It allows a separation
between production and consumption permitting a fair degree of latitude in selecting work
methods, assigning jobs, scheduling work, and exercising control over operations. Since high
mechanization generates products with low variability, manufacturing tends to be smooth and
efficient. Manufacturing produces food and beverage, textile and clothing, petroleum,
chemicals, machinery, computer and electronic products, electrical equipment, and
transportation equipment.
12. A model is an abstraction of reality, a simplified representation of something. Models can be
mathematical, schematic, or statistical. Models ignore the unimportant details so that attention
can be concentrated on the most important aspects, thus increasing the opportunity to understand
a problem and its solution. Models allow experiments that could be very costly to do in real life.
13. From Table 1-6: e.g., Frederick W. Taylor, Frank Gilbreth, Henry Gantt, Henry Ford, F.W.
Harris, W. Shewhart, W. Edwards Deming, Joseph Orlicky, and Taiichi Ohno.
14. Answers might vary for each student.
a. Pros (for owning a car): convenience, flexibility
Cons (for owning a car): costs (initial, insurance, maintenance & repairs, gas), parking
b. Pros (for buying now): availability
Cons (for buying now): technology change, reduced cost in future
c. Pros (for new car): reliability, warrantee
Cons (for new car): more expensive, higher insurance, higher depreciation
d. Pros (for speaking up in class): develop favourable image with instructor, feel more confident
Cons (for speaking up in class): risk of being wrong, appearance of showing off
15. Craft production: involves skilled workers producing high variety of customized goods at low
quantity, utilizing general-purpose equipment. The main advantage is the flexibility to produce a
wide variety of goods providing many choices for customers. The main disadvantage is its
inability to produce at low cost. Examples: custom tailor, machine shop, print shop, and
landscaping.
Mass production: involves low-skilled workers producing a few standardized goods at high
quantity, utilizing specialized equipment. The main advantage is low cost, efficient production.
The main disadvantage is that it does not allow easy changes in quantity of output, the product, or
the process. Examples: paper, sugar or salt or crude oil refining, and soft drink-bottling.

Operations Management, 5/C/e1-4
Lean production (or just-in-time): involves highly skilled workers producing a high variety of
goods at high quantity, using flexible equipment. It requires high level of employee involvement
and teamwork. It combines the advantages of both mass production (high quantity, low cost) and
craft production (variety, flexibility). Examples: automobiles, computers, and appliances.
16. Compared to workers in mass production, much more is expected of workers in lean production
systems. They must be able to function in teams, and play active roles in operating and improving
the system. This can lead to pressure and anxiety. Moreover, a flatter organizational structure
means career paths are not as steep in lean production organizations. Unions often oppose
conversion to a lean system because they view the added responsibility and multiple tasks as an
expansion of job requirements without comparable increases in pay. In addition, workers
sometimes complain that the company is the primary beneficiary of employee-generated
improvements.
17. Answers might vary for each student. Use of modern technology like computers, cell phones, and
microwaves has had positive effects on people’s lives. Instant communication and easy access to
information are some of the advantages. However, there are some downsides. As a result of
technology, many of us are less active, thus have gained weight and are less healthy. Another
downside is the automation of jobs that were previously done by manual labour, e.g., robots for
welding car bodies.
18. Long-term trends in OM include increasing use of Internet & e-commerce, other technologies,
globalization, supply chain management, and sustainability. Personally, it is likely that the use
of Internet for purchasing has increased, more machines and computers are being used in one’s
daily life, more international purchases is being made, more use of package delivery services,
such as Purolator, FedEx, and UPS, is being made, and there is more recycling at work and at
home.
19.
Many examples are possible. These may include
• cheating in an exam
• copying someone else’s homework assignment
• lying in the resume
20. Value added is defined as the difference between the cost of inputs and the value or price of
output. In nonprofit organizations, the value of outputs is their value to society; the greater the
value added, the greater the efficiency of these operations. In for-profit organizations, the value of
outputs is measured by the prices that customers are willing to pay for those goods or services. As
the inputs are transformed to outputs, value is added to products in a number of different ways.
For example, value can be added by changing the product structurally (physical change) or
transporting it (it may have more value somewhere else).
21. A supply chain is the sequence of organizations involved in producing and delivering a product. .
Supply chain management is the coordination and collaboration of members of a supply chain.

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

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Operations Management, 5/C/e1-6
2. Jobs that involve creativity are usually not well-defined. Consider, for example, teaching. There
is no unique process for teaching a topic. However, there are some common steps that should be
followed. Students should have the right background, the topic should be divided in easy-to-learn
segments, qualified instructors are employed, and students are tested frequently. This is a process
and can be managed. OM doesn’t usually involve the technical aspects of work.
1. Answers to the Experiential Learning ExercisesQuality in a fast restaurant refers to
quality of food and quality of service. Quality of food pertains to the quality of raw material and
cooking process. These are usually determined by tasting the food. Quality of service refers to
both the servers and the environment of the restaurant. Are the employees wearing clean
uniforms? Are they polite? Is the restaurant clean? Also, a broad definition of quality includes
whatever customers expect, which includes a short wait time.
2. Other than food, packaging material, condiments, napkins, and cleaning products should be
stocked.
3. Employee scheduling is very important in a service, because the customers expect a short wait
time and food is not usually made before customer orders.
4. Capacity (size) of a restaurant should match its peak demand (the busiest time and day). If the
restaurant is too small, it will lose a lot of customers and revenue, whereas if it is too large, then
its lease cost and property tax will be too high. In either case, its profit will be less than what it
could have been.
Answers to the Internet Exercises
1. Supply Chain Management Association has recently been formed by merger of Purchasing
Management Association of Canada (PMAC) and Supply Chain & Logistics Association Canada
(SCL). PMAC’s members are organizational buyers or purchasing agents/managers. SCL’s
members are transportation coordinators and others interested in logistics. SCMA provides a
certification program, an annual conference and some regional (“institute”) meetings, research
reports, job listing, news and events announcements, Internet links, etc.
Canadian Institute of Traffic and Transportation (CITT)’s members are transport professionals.
CITT provides a certification program, an annual conference, career center, news and events, etc.
Canadian Supply Chain Sector Council is a Federal-government initiative to find solutions to
human resource challenges in supply chains. They provide job descriptions and occupational
standards, job fairs and conferences, accreditation of programs and courses, and labour market
information to all the stakeholders.
American Production and Inventory Control Society (now called The Association for Operations
Management)’s members are primarily professionals in Operations Management. Note that
APICS has regional branches in Canada. APICS provides certification programs, an annual
conference, an online bookstore, job listing, news and events announcements, research reports,
APICS magazine, and Industry Internet links.
American Society for Quality (ASQ)’s members are primarily professionals in quality
management and engineering. Note that ASQ has regional branches in Canada. ASQ provides
certification programs, an online bookstore, job listing, news and events announcements, and
several magazines and journals.

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

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

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

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6. Briefly, strategic planning starts with top management soliciting the performance of current
strategy from department managers, and commissioning a market research study of the industry
and where it is headed in the next one to five years. Then, the management team may form/adjust
the organization’s mission and vision, based on the organization’s values, determine a set of
goals, and brainstorm and evaluate alternative ways (strategies) to achieve them. Finally, the
chosen strategy is implemented by determining a set of action plans at the operating department
level.
7. An operations strategy comprises a set of well-coordinated policies, objectives, and action plans,
directly affecting the operations function, which is aimed at securing a long-term sustainable
advantage over the competition.
8. The nine strategic decision categories are: Facility, capacity, vertical integration/outsourcing,
supplier relationship/partnership, product mix and new products, process types & technology,
human resources, quality, and operations infrastructure and systems.
9. The formulation of an operations strategy involves the following steps: (a) determine the
operations requirements of the business strategy, (b) categorize customers and their competitive
priorities, (c) group product lines into types, (d) assess the strengths & weaknesses of the current
operations strategy and products, (e) assess the degree of focus in each plant, and (f) Determine
the objectives, policies, and action programs in the nine strategic decision categories for product
lines and assign them to plants.
10. Answers might vary for each student.
Example of a policy for waiting staff: Respond to every customer request with “my pleasure”.
Example of an Action plan: hire a design artist, buy a camera and plate making machine (in order
to reduce graphics production lead time from 10 days to 1 day)
11. Time-based strategies are approaches that focus on reducing the time needed to conduct the
various activities in product design, production, and distribution. The rationale is that by reducing
time, costs are reduced, productivity is increased, product innovations appear on the market
earlier, and customer service is improved along with gaining a competitive edge. At the same
time, quality also tends to be higher. Examples include just-in-time (“made for you”) production
by McDonald’s and cellular layout by Standard Aero.
12. Answers might vary for each student. Boeing is forecasting that demand for medium-to-long
range flights between medium-size cities will increase, whereas Airbus is forecasting that
demand for very long-range flights between major cities in Asia and North America, will
increase. For more info., see e.g., http://www.smarttravelasia.com/AirbusVsBoeing.htm.
13. Productivity is a measure of productive use of resources, usually expressed as the ratio of output
to input. Productivity is important because it is related to profitability and standard of living.
14. Factors affecting productivity—method and management, equipment and technology, and labour.
An example of a method and management improving productivity is JIT (lean) production. An
example of an equipment and technology improving productivity are computers and Internet. An
example of labour improving productivity are trained and knowledgeable workers.
15. The Japanese automakers, such as Toyota, Honda, and Nissan, are using more productive work
methods, such as lean production, than the Big 3 North American automakers (GM, Ford,

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

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

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

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Operations Management, 5/C/e2-6
Solutions to Problems
1. 300 SBC = 42.857 SBC/Worker last week
7 Workers
240 SBC = 48 SBC/Worker this week
5 Workers
Productivity was higher this week.
2.
Week Crew Size Square
Metres
Installed
Labour
Productivity
m2/person
1 4 960 240
2 3 702 234
3 4 968 242
4 2 500 250
5 3 696 232
6 2 500 250
Even-sized crews are more productive than odd size crews, and a crew of 2 has the highest
productivity.
3.
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
Units =(2)*$140 kg =(4)*$6 =(6)*480 =(7)*1.5 Total MFP
Week Output Sales Material Material Workers Labour Overhead Cost (3)  (9)
1 300 $42,000 45 $270 6 $2,880 $4,320 $7,470 5.62
2 338 $47,320 46 $276 7 $3,360 $5,040 $8,676 5.45
3 322 $45,080 46 $276 7 $3,360 $5,040 $8,676 5.20
4 354 $49,560 48 $288 8 $3,840 $5,760 $9,888 5.01
Multifactor productivity is dropping steadily from a high of 5.62 to a low of 5.01 ($ output per $ input).
4. a. Before: 80 ÷ 4 = 20 carts per worker per hour.
After: 84 ÷ 3 = 28 carts per worker per hour.
b. Before: Costs $10 × 4 = $40 + $40 = $80; hence MFP = 80 ÷ $80 = 1 cart/$1 Cost
After: $10 × 3 = $30 + $50 = $80; hence 84 ÷ $80 = 1.05 carts/$1 Cost
c. Labour productivity increased by [(28-20)/20] = 0.4 or 40%
Multifactor productivity increased by [(1.05-1)/1] = 0.05 or 5%

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Chapter 2 2-7
Multifactor productivity is more appropriate because of change in machines and their cost.
5. Without scrap, the output can be 91.1 units per hour1.91
10.1
82 =
−
The increase in productivity would be 91.1 - 82 = 9.1 units per hour.
This would amount to an increase of (9.1 / 82) = 0.111 or 11.1%.
6. Current week’s labour productivity =.hr/units4
.hrs40
units160 =
Previous week’s labour productivity =./83.3
.63
381 hrunits
hrs
units =4 3 83 043
3 83
Current Week's Productivity Previous Week's Productivity
Productivity Growth Previous Week's Productivity
units hr. units hr.
Productivity Growth units hr.
( / ) ( . / ) .
. /
−
=
−
= = +
Thus, there was an increase of 4.3% in labour productivity.
7. Let N = no. of workers per shift
Before
Labour productivity = 300 backplanes / 3(7)N = 14.2857/N backplanes per worker per shift
After
Labour productivity = 500 backplanes / 2(5)N = 50/N backplanes per worker per shift
Growth in labour productivity = (50/N – 14.2857/N) / 14.2857N = 2.5 or 250%
8. a. Labour productivity
Before: 7/3 = 2.3333 titles per worker per day.
After: 12/3 = 4 titles per worker per day.
Growth = (4 – 2.3333) / 2.3333 = .714 or 71.4%.
b. Multifactor productivity
Before: = 7 / ($480 + $300) = .008974 titles per $ cost.
After: = 12 / ($480 + $600) = .011111 titles per $ cost.
Growth = (.011111 - .008974) / .008974 = .238 or 23.8%.
c. Multifactor productivity is more appropriate because growth is higher since the overhead
costs have increased.
9. a. Before:
Labour productivity = 1 / (20/60) = 3 coils per worker per hour.

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Operations Management, 5th Canadian Edition Solution Manual

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