Chapter 01 - Operations and Supply Chain Management
1-1
CHAPTER 1
OPERATIONS AND SUPPLY CHAIN MANAGEMENT
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 - Operations and Supply Chain Management
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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.indeed.com and evaluate the opportunities for an
OSM major with several years of experience.
There are pages and pages of these when you do a search on operations supply chain
management. 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 ...
Purchasing Manager (Buyer)
Texas Dow Employees Credit Union (TDECU)
US - TX - Lake Jackson - Nearest Metro area - South Houston

Chapter 01 - Operations and Supply Chain Management
1-3
Education Accredited university degree in Business or Marketing with certification in
Purchasing, Inventory Management, or Logistics. Accredited Purchasing Practitioner (APP) or
Certified Purchasing ...
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 ...
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 ...
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 ...
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.
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
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

Chapter 01 - Operations and Supply Chain Management
1-4
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.

Chapter 01 - Operations and Supply Chain Management
1-5
Objective Questions
1. What are the three elements that require integration to be successful in operations and
supply chain management? (Appendix E)
Strategy, Processes, and Analytics
2. Operations and supply chain management is concerned with the design and management of
the entire system that has what function?
Produces a product or delivers a service
3. Match the following OSCM job titles with the appropriate duties and responsibilities.
C Plant manager
A: Plans and coordinates staff activities such as new product
development and new facility location
D Supply chain manager
B: Oversees the movement of goods throughout the supply
chain
A Project manager
C: Oversees the workforce and resources required to produce
the firm’s products
E
Business process
improvement analyst
D: Negotiates contracts with vendors and coordinates the flow
of material inputs to the production process
B Logistics manager
E: Applies the tools of lean production to reduce cycle time
and eliminate waste in a process
4. What high-level position manager is responsible for working with the CEO and company
president to determine the company’s competitive strategy?
Chief Operating Officer
5. Order the following major concepts that have helped define the OSCM field on a time line.
Use 1 for the earliest to be introduced, and 5 for the most recent.
3 Supply chain management
1 Manufacturing strategy developed
5 Business analytics
2 Total quality management
4 Electronic commerce

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Chapter 01 - Operations and Supply Chain Management
1-6
6. Which major OSCM concept can be described as an integrated set of activities designed to
achieve high-volume production using minimal inventories of parts that arrive at workstations
exactly when they are needed?
Just-in-time (JIT) production
7. Operations and supply chain ___________________________ leverages the vast amount of
data in enterprise resource planning systems to make decisions related to managing
resources.
analytics
8. A process is ________________ if it operates at the lowest possible cost.
Efficient
9. A customer picks a product over a similar product due to the ________________ value of the
product.
Value

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Chapter 01 - Operations and Supply Chain Management
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Analytics Exercise: Comparing Companies Using Wall Street Efficiency Measures
Each student is asked to pick an industry and compare three companies within that industry based on
Efficiency Ratios The following is typical of what you might obtain:
BP Shell ExxonMobil
Management Efficiency
Days sales outstanding 29.47 42.70 34.40
Days inventory 28.85 26.51 31.51
Payables period 61.31 53.23 68.69
Cash conversion cycle -2.99 15.98 -2.87
Receivables turnover 12.39 8.55 10.64
Inventory turnover 12.65 13.77 11.58
Asset turnover 1.04 0.93 0.78
Students are then asked to identify which company appears to have the most productive employees.
With this data we see that ExxonMobil does very well in that its cash conversion cycle is -2.87 days.
This is amazing! The Inventory Turnover is highest for Shell indicating that the company is the most
efficient from an operations and supply chain processes view. BP has the highest Asset Turnover,
which relates to the use of its facility and equipment assets.
Overall, these are all three very strong companies relative to there operations and supply chain
processes.
Of course, the data generated by each student will be different and an interesting interchange can be
developed with students each presenting what they found from their research. It is very interesting to
do comparisons across industries; retailers versus oil companies, and computer makes versus software
companies, for example.

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Chapter 02 - Strategy and Sustainability
2-1
CHAPTER 2
STRATEGY AND SUSTAINABILITY
Discussion Questions
1. What are the major priorities associated with operations and supply chain strategy? How has
their relationship to each other changed over the years?
The four major imperatives are cost, quality, delivery, and flexibility. In the sixties, these four
imperatives were viewed from a tradeoff’s perspective. For example, this meant that improving
quality would result in higher cost, and in many cases that was true. However, advances in
manufacturing and information technologies since then have reduced the size of those tradeoffs,
allowing firms to improve on several or all these imperatives simultaneously, gaining greater
competitive advantage than was possible 50 years ago. The problem now becomes one of
prioritizing and managing towards orderly improvement.
2. Why does the proper operations and supply chain strategy keep changing for companies that are
world-class competitors?
The top three priorities have generally remained the same over time: make it good, make it fast,
and deliver it on time. Others have changed. Part of this may be explained by realizing that world
class organizations have achieved excellence in these three areas and are, therefore, focusing
attention on some of the more minor areas to gain competitive advantage. The changes in the
minor priorities may result from recognizing opportunities or from changes in customer desires or
expectations.
3. What do the expressions order winners and order qualifiers mean? What was the order winner(s)
for your last purchase of a product or service?
Order winners are dimensions that differentiate the product or service or services of one firm from
another. Order qualifiers are dimensions that are used to screen a product or service as a
candidate for purchase. Order qualifiers get a company’s “foot in the door.” Order winners are
what make the sale. Obviously, answers will vary for the order winners from your last purchase.
4. Pick a company that you are familiar with and describe its operations strategy and how it relates
to winning customers. Describe specific activities used by the company that support the strategy.
Student answers will vary widely based on their experiences and views. It might be helpful for a
classroom exercise to assign certain companies to several students/teams and compare their
answers in class.
5. At times in the past, the dollar showed relative weakness with respect to foreign currencies, such
as the yen, mark, and pound. This stimulated exports. Why would long-term reliance on a lower
valued dollar be at best a short-term solution to the competitiveness problem?

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Chapter 02 - Strategy and Sustainability
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This approach is dependent on economic policies of other nations. This is a fragile dependency. A
long-term approach is to increase manufacturing and service industry productivity in order to
regain competitive advantage. At a national level, solutions appear to lie in reversing attitudes.
At a firm level, competitive weapons are consistent quality, high performance, dependable
delivery, competitive pricing, and design flexibility.
6. Identify an operations and supply chain - related disruption that recently impacted a company.
What could the company have done to have minimized the impact of this type of disruption prior
to it occurring?
The March 2011 tsunami that struck Japan was geographically concentrated but had global
impact on multiple firms, many of which had no physical presence at all in the affected area.
Examples include firms that had sole source agreements with suppliers in the affected area. The
tsunami left these companies scrambling to find new suppliers to feed into their supply chains.
These firms could have reduced the impact of the tsunami by having a few high-quality,
dependable suppliers located in different geographical regions. There are many other examples
that could be taken from this one event. A simple Internet search will provide plenty of material
for discussion.
7. What do we mean when we say productivity is a relative measure?
For productivity to be meaningful, it must be compared with something else. The comparisons
can be either intra-company as in the case of year-to-year comparisons of the same measure, or
intercompany as in the case of benchmarking. Intercompany comparisons of single factor
productivity measures can be somewhat tenuous due to differences in accounting practices
(especially when comparing with foreign competitors) and the balance of labor to capital
resources. Total factor productivity measures are somewhat more robust for comparison
purposes.
8. What is meant by triple-bottom-line strategy? Give an example of a company that has adopted
this type of strategy.
A triple-bottom-line strategy places emphasis on a company’s environmental and social
responsibilities as well as the traditional bottom line of economic prosperity. It recognizes that
the long-term health of the firm is interdependent with the health of the environment and the
betterment of society. There are many examples – an interesting one is Ben & Jerry’s, famous for
their all-natural ice cream. Do a search “Ben & Jerry’s Corporate Social Responsibility” to find
their current statements related to this.
9. Find examples where companies have used features related to environmental sustainability to
win new customers.
Car companies use environmental concerns in marketing ads. The development of hybrid and
flex-fuel cars is one way they have operationalized those concerns. Consumer goods companies
display the “made with recycled material” logo on the packaging. Bottled water manufacturers
are using, and advertising bottles made with less plastic.

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Chapter 02 - Strategy and Sustainability
2-3
Objective Questions
1. How often should a company develop and refine the operations and supply chain strategy.
At least yearly
2. What is the term used to describe product attributes that attract certain customers and can be
used to form the competitive position of a firm?
Competitive dimensions
3. What are the two main competitive dimensions related to product delivery?
Delivery speed and delivery reliability
4. What are the two characteristics of a product or service that define quality?
Design quality and process quality
5. What is the diagram that shows how a company’s strategy is delivered by a set of supporting
activities?
activity-system map
6. In implementing supply chain strategy, a firm must minimize its total cost without compromising
the needs of what group of people?
Customers
7. What is defined as the likelihood of disruption that would impact the ability of a company to
continuously supply products or services?
Supply chain risk
8. What are risks caused by natural or manmade disasters, and therefore impossible to reliably
predict, called?
Disruption risks
9. Match the following common risks with the appropriate mitigation strategy.

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Chapter 02 - Strategy and Sustainability
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E Country risks A: Detailed tracking, alternate suppliers
D Regulatory risk B: Careful selection and monitoring suppliers
A Logistics failure C: Contingency planning, insurance
C Natural disaster D: Good legal advice, compliance
B Major quality failure E: Currency hedging, local sourcing
10. What is the term used to describe the assessment of the probability of a negative event against
the aggregate severity of the related loss?
Risk mapping
11. As Operations Manager, you are concerned about being able to meet sales requirements in the
coming months. You have just been given the following production report.
JAN FEB MAR APR
Units Produced 2300 1800 2800 3000
Hours per Machine 325 200 400 320
Number of Machines 3 5 4 4
Find the average monthly productivity (units per machine hour).
To answer this we need to realize that the measure of hours given is per machine, so we have to
multiply that by the number of machines in each period to get the total machine hours in each
period. Those figures are used in the calculations below.
Average productivity: (2300/975 + 1800/1000 + 2800/1600 + 3000/1280)/4
Average productivity (2.36+1.80+1.75+2.34)/4= 2.06 units per machine hour
12. Sailmaster makes high-performance sails for competitive windsurfers. Below is information
about the inputs and outputs for one model, the Windy 2000.
Units sold 1,217

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Chapter 02 - Strategy and Sustainability
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Sale price each $1,700
Total labor hours 46,672
Wage rate $12/hour
Total materials $60,000
Total energy $4,000
Calculate the productivity in sales revenue/labor expense.
We have to do some interim calculations here. Sales revenue is calculated by multiplying
units sold by the unit sales price. Labor expense is calculated by multiplying labor hours by
the wage rate.
(1217*1700) / (46672*12) = 3.69
13. Live Trap Corporation received the data below for its rodent cage production unit. Find the total
productivity?
Output Input
50,000 cages Production time 620 labor hours
Sales price: $3.50 per unit Wages $7.50 per hour
Raw materials (total cost) $30,000
Component parts (total cost) $15,350
Total productivity could be expressed two ways here based on how you express output: in
units sold, or dollars of sales.
Units sold:
50,000 / ((620 * $7.50) + 30,000 + 15,350) = 1.00 units sold per dollar input
Dollars of sales:
(50000*3.5) / ((620 * $7.50) + 30,000 + 15,350) = 3.5 dollars in sales per dollar input
14. Two types of cars (Deluxe and Limited) were produced by a car manufacturer last year.
Quantities sold, price per unit, and labor hours follow. What is the labor productivity for each
car? Explain the problem(s) associated with the labor productivity.
QUANTITY $/UNIT
Deluxe car 4,000 units sold $8,000/car
Limited car 6,000 units sold $9,500/car
Labor, Deluxe 20,000 hours $12/hour
Labor, Limited 30,000 hours $14/hour
Labor Productivity – units/hour

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Chapter 02 - Strategy and Sustainability
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Model Output
in Units
Input
in Labor Hours
Productivity
(Output/Input)
Deluxe Car 4,000 20,000 0.20 units/hour
Limited Car 6,000 30,000 0.20 units/hour
Labor Productivity – dollars
Model Output
in Dollars
Input
in Dollars
Productivity
(Output/Input)
Deluxe Car 4,000($8,000)=
$32,000,000
20,000($12.00)=
$240,000
133.33
Limited Car 6,000($9,500)=
$57,000,000
30,000($14.00)=
$420,000
135.71
The labor productivity measure is a conventional measure of productivity. However, as a partial
measure, it may not provide all of the necessary information that is needed. For example, increases in
productivity could result from decreases in quality, and/or increases in material cost.
15. A U.S. manufacturing company operating a subsidiary in an LDC (less-developed country) shows
the following results:
U.S. LDC
Sales (units) 100,000 20,000
Labor (hours) 20,000 15,000
Raw materials (currency) $20,000 FC 20,000
Capital equipment (hours) 60,000 5,000
a. Calculate partial labor and capital productivity figures for the parent and subsidiary. Do
the results seem misleading?
Labor Productivity
Country Output
in Units
Input
in Hours
Productivity
(Output/Input)
U.S. 100,000 20,000 5.00 units/hour
LDC 20,000 15,000 1.33 units/hour
Capital Equipment Productivity
Country Output
in Units
Input
in Hours
Productivity
(Output/Input)
U.S. 100,000 60,000 1.67 units/hour
LDC 20,000 5,000 4.00 units/hour

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Chapter 02 - Strategy and Sustainability
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Yes. You might expect the capital equipment productivity measure to be higher in the U.S.
than in a LDC. Also, the measures seem contradictory. Each plant appears to be far more
productive than the other on one measure, but much worse on the other.
b. Compute the multifactor productivity figures for labor and capital together. Do the
results make more sense?
Multifactor – Labor and Capital Equipment
Country Output
in Units
Input
in Hours
Productivity
(Output/Input)
U.S. 100,000 20,000 + 60,000=
80,000
1.25 units/hour
LDC 20,000 15,000 + 5,000=
20,000
1.00 units/hour
Yes, labor and equipment can be substituted for each other. Therefore, this multifactor
measure is a better indicator of productivity in this instance.
c. Calculate raw material productivity figures (units/$ where $1 = FC 10). Explain why these
figures might be greater in the subsidiary.
Raw Material Productivity
Country Output
in Units
Input
in Dollars
Productivity
(Output/Input)
U.S. 100,000 $20,000 5.00 units/$
LDC 20,000 FC 20,000/$10 =
$2,000
10.00 units/$
The raw material productivity measures might be greater in the LDC due to a reduced cost
paid for raw materials, which is typical of LDC’s, especially if there are local sources for the
raw materials.
16. Various financial data for the past two years follow. Calculate the total productivity measure and
the partial measures for labor, capital, and raw materials for this company for both years. What
do these measures tell you about this company?
Last Year This Year
Output: Sales $200,000 $220,000
Input: Labor 30,000 40,000
Raw materials 35,000 45,000
Energy 5,000 6,000

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Chapter 02 - Strategy and Sustainability
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Capital 50,000 50,000
Other 2,000 3,000
Total Productivity
Year Output
in Dollars
Input
in Dollars
Productivity
(Output/Input)
Last Year $200,000 $30,000 + 35,000 +
5,000 + 50,000 + 2,000
= $122,000
1.64
This Year $220,000 $40,000 + 45,000 +
6,000 + 50,000 +3,000
= $144,000
1.53
Partial Measure – Labor
Year Output
in Dollars
Input
in Dollars
Productivity
(Output/Input)
Last Year $200,000 $30,000 6.67
This Year $220,000 $40,000 5.50
Partial Measure – Raw Materials
Year Output
in Dollars
Input
in Dollars
Productivity
(Output/Input)
Last Year $200,000 $35,000 5.71
This Year $220,000 $45,000 4.89
Partial Measure – Capital
Year Output
in Dollars
Input
in Dollars
Productivity
(Output/Input)
Last Year $200,000 $50,000 4.00
This Year $220,000 $50,000 4.40
The overall productivity measure is declining, which indicates a possible problem. The partial
measures can be used to indicate cause of the declining productivity. In this case, it is a
combination of declines in both labor and raw material productivity, which were somewhat
offset by an increase in the capital productivity. Further investigation should be undertaken
to explain the drops in both labor and raw material productivity. An increase in the cost of

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