Chapter 01 - Introduction
1-1
CHAPTER 1
INTRODUCTION
Discussion Questions
1. Using Exhibit 1.3 as a model, describe the source-make-deliver-return relationships in the
following systems:
a. An airline
Source: Aircraft manufacturer, in-flight food, repair parts, computer systems
Make: Aircraft and flight crew scheduling, ground services provided at airports, aircraft
maintenance and repair
Deliver: Outbound and arriving passenger service, baggage handling
Return: Resolve any post-service issues such as lost or damaged luggage
b. An automobile manufacturer
Source: Suppliers of components and raw materials
Make: Manufacturing of vehicles and components or subassemblies to be sold as spare
parts
Deliver: Delivery to and sales from dealerships, delivery of spare parts to the wholesale
system
Return: Warranty and recall repairs, trade-ins
c. A hospital
Source: Medical supplies, cleaning services, disposal services, food services, qualified
personnel
Make: Inpatient rooms, outpatient clinics, emergency room, operating rooms
Deliver: Scheduling patients, providing treatment, ambulance service, family counseling
Return: Billing errors, follow up visits
d. An insurance company
Source: Supplies needed for the office, underwriters, legal authority to operate
Make: Establish policy guidelines and pricing, field agent/representative and facility
network, develop Internet service capabilities, establish preferred vehicle repair service
network
Deliver: Meet with and advise clients, write policies, process and pay claims
Return: refund of overpayments
2. Define the service package of your college or university. What is its strongest element? What is
its weakest one?
The categories with examples are:
Supporting facility - location, buildings, labs, parking
Facilitating goods – class schedules, computers, books, chalk
Explicit services – classes with qualified instructors, placement offices
Implicit services – status and reputation (e.g., Ivy League schools)

Chapter 01 - Introduction
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At Indiana University and the University of Southern California, among their strongest
elements are their business schools and their Operations Management programs (of course).
Both also have very dedicated alumni networks. A weak element of Indiana University is its
weak football program; for USC, weak elements are on-campus parking and housing.
3. What service industry has impressed you the most with its innovativeness?
Our vote goes to cruise lines which have introduced such onboard innovations as wave
machines for belly boarding and rock climbing walls, as well as all sorts of other amenities to
keep cruisers involved. The industry is doing record business as well.
Some of the standout companies in less innovative industries are Bank of America (has a
formalized research program to try out new customer services/amenities such as video screens
in next to teller lines), Intuit (e.g., putting Quicken money management software online), Ikea,
JetBlue Airlines, and Progressive Insurance (discussed later in the book).
4. What is product-service bundling and what are the benefits to customers?
Product-service bundling is adding Value-added services to a firm’s product offerings to create
more value for the customer. This provides benefits in two areas. First, this differentiates the
organization from the competition. Secondly, these services tie customers to the organization
in a positive way. Alternatively, bundling can also involve adding products to a service, for
example, adding the sale of convenience items and snacks at a hotel.
5. What is the difference between a service and a good?
A service is an intangible process (you can’t hold it in your hands), while a good is the physical
output of a process.
6. Look at the job postings at http://www.apics.org and evaluate the opportunities for an OSM
major with several years of experience.
There are pages and pages of these in the APICS Career Center. Here are some examples:
Global Active Ingredient Supply Planner
FMC Corporation
US - PA - Philadelphia
This is your opportunity to join the Agricultural Products Group (APG) and work on the team
responsible for global active ingredient planning. You'll serve as a central Supply Planner
working in tandem ...
Sep-20-2011
Purchasing Manager (Buyer)
Texas Dow Employees Credit Union (TDECU)
US - TX - Lake Jackson - Nearest Metro area - South Houston

Chapter 01 - Introduction
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Education Accredited university degree in Business or Marketing with certification in
Purchasing, Inventory Management, or Logistics. Accredited Purchasing Practitioner (APP) or
Certified Purchasing ...
Sep-20-2011
Product Line Manager
Cintas Corporation
US - OH - Mason
High School diploma or GED required, 4 year degree preferred Knowledge of and experience
using Internet and Microsoft Office (Word, Excel, PowerPoint, and Email) 3 years management
experience preferred ...
Sep-20-2011
Director Purchasing
Legendary Baking
US - CO - Denver
CERTIFICATIONS & LICENSES • Valid Driver’s License and car insurance. • Certified Purchasing
Manager certification (C.P.M.) preferred. • Certified Food Purchasing Manager ...
Sep-19-2011
Process Improvement Manager
ARAMARK Corporation
US - TX - Houston
Bachelor's Degree required. Technical Engineering discipline within Industrial, Mechanical,
Chemical, or Food Operations strongly preferred. • Minimum 5 years Lean manufacturing
experience coupled ...
Sep-19-2011
7. Recent outsourcing of parts and services that had previously been produced internally is
addressed by which current issue facing operations and supply management today?
The coordination of relationships between mutually supportive but separate organizations.
8. What factors account for the resurgence of interest in OSCM today?
With companies facing competition on a global scale, and ever-advancing manufacturing and
information technologies, firms realize the competitive advantage their OSCM functions can
provide if properly managed. Many have found that the same old way of doing business
leaves them unable to compete successfully. The 2011 tsunami in Japan has also brought to
the forefront how important supply chains are, as well as the negative economic impact that
disruptions in the supply chain can cause.
9. As the field of OSCM has advanced, new concepts have been applied to help companies
compete in a number of ways, including the advertisement of the firm’s products or services.
One recent concept to gain the attention of companies is promoting sustainability. Discuss

Chapter 01 - Introduction
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how you have seen the idea of sustainability used by companies to advertise their goods or
services.
There of course will be a number of examples that students will bring up, though they may
need some prodding to jog their memories. Some examples to start with might be IBM’s “I’m
an IBMer” campaign where they advertise how they are “building a smarter planet.” Bottled
water manufacturers have reduced the amount of plastic used in many of their products, thus
saving production and distribution costs, but also allowing them to advertise how the new
bottles are better for the environment because they result in less waste.
10. Some people tend to use the terms effectiveness and efficiency interchangeably, though
we’ve seen they are different concepts. But is there any relationship at all between them?
Can a firm be effective but inefficient? Very efficient but essentially ineffective? Both?
Neither?
Firms can be anywhere on these two dimensions. It is possible for a firm to be the best at what
they do in serving their market, but be very wasteful in doing so. Alternatively, a firm could
squeeze every last dollar out of their processes but fail to deliver what the market expects and
desires. Of course, the best firms will provide the goods and services that the market desires,
exactly as the market desires, and do so at a minimum cost. Firms that are both inefficient and
ineffective do not survive for long in any market.
11. Two of the efficiency ratios mentioned in the chapter are the receivable turnover ratio and the
inventory turnover ratio. While they are two completely separate measures, they are very
similar in one way. What is the common thread between these two?
(There are a number of answers that students may come up with, from simplistic to more
thoughtful. Following is one of the latter.) Both are measuring the average amount of a
valuable asset that is not generating value for the company. Accounts receivable are an asset,
but they do not create value for the firm until the money is received. Reducing the average
amount of accounts receivable frees up that money for use by the company on a recurring
basis. Inventory is another asset, but while inventory is being held by the company it is not
making any money for the firm. Reducing inventory allows the firm to invest the money that
would otherwise be spent on the inventory.

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Solution Manual for Operations and Supply Chain Management, 14th Edition

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