ISyE 3104: Introduction to Supply Chain Modeling:



ISyE 3104: Introduction to Supply Chain Modeling:

Manufacturing and Warehousing

Instructor : Spyros Reveliotis

Spring 2003

Solutions for Homework #1

Chapter 1 Operations and Productivity

DISCUSSION QUESTIONS

1. Operations management is the field that deals with the effective and efficient design and operation of the transformation processes that provide the various goods and services.

2. In a general sense, the production planning problem can be described as the company effort to produce the right product in the right quantities in an efficient manner. It should be obvious then, that in order to address the first issue, i.e., produce the right products in the right quantity, the companies need to have information about the market behavior, i.e., the expected demand and any further developing trends. Similarly, in order to meet this expected demand efficiently, the companies need to have a clear understanding of – i.e., detailed information about - their current operational status – i.e., existing stock, production capacity, already initiated production, expected supplier deliveries, etc. – since only then they can make the right decisions regarding how to adjust the existing status in a way that will allow them to meet the expected demand in a cost-effective and timely fashion.

8. The three classic functions are:

(a) Marketing

(b) Operations

(c) Finance/Accounting

9. One would expect to find departments in a home appliance manufacturer for most, if not all, of the activities suggested by the 10 decisions in Table 1.2 and the organization chat in Figure 1.2.

Research and Development (R&D)

• Conducts product research, product development, and product engineering. A firm might also conduct product testing at the consumer level.

Industrial Engineering (IE)

• Determines the most efficient use of productive resources; may also develop product costing.

Methods Engineering

• Industrial engineers working toward improving procedures in the workplace.

Facilities Planning, Construction

• Plans, constructs, maintains, and repairs facilities.

Quality Assurance/ Quality Control (QA & QC)

• Reviews designs, products, and processes to ensure quality objectives are met.

Production Planning and Inventory Control (PIC)

• Schedules the manufacturing processes; manages inventory.

Manufacturing Systems

• Applies the methodology, models, and the procedures of mathematics or management information systems to manufacturing operations. This function might assume more importance in the home appliance market as manufacturers from outside the U.S. provide increased competition.

Process Engineering

• Design, develops, and evaluates production tools, equipment, and processes.

Product Engineering

• Fine-tunes the product design to enhance production efficiency

Maintenance

• Focuses on designing systems and procedures and develops personnel who will create and maintain a reliable system.

Supply Chain Management

• Determines the best sources for a given set of specifications, delivery, and price. Because the “home appliance” is a basic consumer good and competition occurs on parameters other than price, one might also find that the organization’s competitive strategy dictates that the operations function include the additional department.

After Sale Service

• Responsible for the overall management and provision of on-site and carry-in customer service. In attempting to identify the departments of a “typical” manufacturer, one should recognize that the operations (not necessarily the department assignments) noted above are common to some degree among all manufacturers. The question is really to what degree, and the decision as to what degree is often based on competitive strategy in the marketplace rather than any “necessity” of prescribed organizational structure.

END-OF-CHAPTER PROBLEMS

1.3

|Resource |Last Year |This Year |Change |Percent Change |

|Labor |1000/300 = 3.33 |1000/275 = 3.64 |0.31 |0.31/3.33 = 9.3% |

|Resin |1000/50 = 20 |1000/45 = 22.22 |2.22 |2.22/20 = 11.1% |

|Capital |1000/10000 = 0.1 |1000/11000 = 0.09 |-0.01 |-0.01/0.1 = -10.0% |

|Energy |1000/3000 = 0.33 |1000/2850 = 0.35 |0.02 |0.02/0.33 = 6.1% |

1.4

| |Last Year | |This Year |

|Production | 1,000 | | 1,000 |

| | | | |

|Labor hr. @$10 | $3,000 | | $2,750 |

|Resin @$5 | 250 | | 225 |

|Capital cost/month (1%) | 100 | | 110 |

|Energy ($0.5/Btu) | 1,500 | | 1,425 |

| | $4,850 | | $4,510 |

|Productivity Change = |[(1,000 / 4,510) – (1,000 / 4,850)] |= 7.5% improvement |

| |(1,000 / 4,850) | |

CASE STUDY

NATIONAL AIR EXPRESS

1. The number of stops per driver is certainly still a good productivity measure, since it gives a good idea regarding the “amount of service” provided by the company on a daily basis. Another issue that could be tracked regarding the company’s productivity might be area covered per driver per day since this measure would provide additional information regarding the company’s capability to serve a more geographically dispersed area and its effectiveness with respect to the relevant route planning problems.

2. Since most call-in pickups are around 5.00 p.m., by offering some incentive, i.e. discounted rates, to customers that call in earlier parts of the day, could help smoothen the experienced (service) demand, and reduce the congestion currently experienced by the company. An additional de-congesting measure could be to preprocess most of the involved paperwork so that the expected service time at the customer site is minimized.

3. C.f. the Supplement to Chapter 10 on how to determine labor standards.

Chapter 2 Operations Strategy for Competitive Advantage

DISCUSSION QUESTIONS

4. Here are some of the typical practices on which modern automotive industries base their competitiveness:

(a) Design of goods and services:

• new products, designed and evaluated with CAD; coordinated with STEP

b) Quality:

• 100% conformance to standards; better feedback from customer

• benchmarking

c) Process and capacity planning:

• new jigs to improve quality

• new robots to reduce labor cost and improve quality

d) Location strategy:

• Location relative to suppliers is now more important, migration to low-cost labor areas

e) Layout strategy:

• Work cells, flexible assembly lines

f) Inventory management:

• MRP, JIT are now regularly employed

g) Scheduling:

• Scheduling to meet requirements of JIT

• Expert systems and finite scheduling

h) Maintenance:

• Improved and increased training of maintenance personnel

i) Supply chain management:

• Fewer suppliers who are more heavily integrated into the main organization’s information system

6. How does on OM strategy change during a product’s life cycle?

During the introduction stage, the emphasis is on developing a product that is well accepted by the market, hence, issues such as product design and development are critical. During the growth stage, the emphasis shifts on establishing and maintaining a production process that is reliable and responsive to the developing demand as well as any further signals obtained from the market regarding the desired product quality. At this stage also the major competitors will emerge, and therefore, the company must develop responding strategies to that will allow it to preserve, and if possible, increase its market share. During the product maturity phase, the market has stabilized in terms of product features, key competitors and market shares, in fact some overcapacity might have also been established, and therefore, the key concern for the companies is to preserve their market share by offering a reliable product at competitive prices. Hence, maintaining a stable and efficient production process is very important. Finally, in the decline stage, pruning the line to eliminate items not returning good margin becomes important. Figure 2.4 in your textbook provides a more detailed list of issues.

CASE STUDIES

MINIT-LUBE, INC.

1. (a) What constitutes the mission of Minit-Lube?

To provide economical preventive maintenance and interior auto cleaning, primarily to vehicles owned by individuals (as opposed to business), in the U.S.

b) How does the Minit-Lube Strategy provide competitive advantage?

Minit-Lube’s approach to these 10 decisions includes:

Product Design:

• A narrow product strategy that could be defined as “lubricating automobiles” that allows the subsequent development of more focused and efficient operations.

Quality Strategy:

• Because of limited task variety, high repetition, good training, and good manuals, quality should be relatively easy to maintain.

Process Strategy:

• The process strategy allows employees and capital investment to focus on doing this mission well, rather than trying to be a “general purpose” garage or gas station.

Location Strategy:

• Facilities are usually located near residential areas.

Layout Strategy:

• The three bays are designed specifically for lubrication and vacuuming tasks to minimize wasted movement on the part of the employees and to contribute to the speedier service.

Supply Chain Strategy:

• Purchasing is facilitated by negotiation of large purchases and custom packaging.

Human Resources Strategy:

• Human resources strategy focuses on hiring a few employees with limited skills and training them in a limited number of tasks during the performance of which they can be closely supervised.

Inventory:

• Inventory investment should be relatively low, and they should expect a high turnover.

Scheduling:

• Scheduling is quite straightforward with similar times for most cars. Once volume and fluctuation in volume are determined, scheduling should be very direct—assisting both staffing and customer relations.

Maintenance:

• There is relative little equipment to be maintained, therefore little preventive maintenance required. With three bays and three systems, there is backup available in the case of failure.

MOTOROLA’S GLOBAL STRATEGY

Motorola’s strategy is based on Japanese-style techniques and continuous improvement of quality.

DISCUSSION QUESTIONS FOR CASE

1. What are the components of Motorola’s international strategy?

Definitely, Motorola managed to attract and maintain its market share through the quality of its products, in terms of, both, conformance to specifications and the supported functionality. In fact, aware of the increasing significance of time-based competition, Motorola tries systematically to streamline its product design processes so that their cycle time is reduced by a “tenfold every five years”. The achievement of these quality and responsiveness standards has been facilitated by focusing the product operations to a smaller set of products, walking away from the prior more diversified practices. Finally, Motorola tried to deal with the Japanese threat by changing its past perspective, going global, and learning, thus, from its competitors.

2. Describe how Motorola might have arrived at its current strategy as a result of a SWOT analysis.

A SWOT analysis is an assessment of a firm’s strengths, weaknesses, opportunities, and threats. A good SWOT analysis should provide the basis for strategy development that allows a firm to exploit strengths and opportunities, neutralize weaknesses, and minimize threats. Clearly Motorola identified the Japanese as a threat in the early 1980’s, but also saw an opportunity in the world marketplace. Motorola at the time was weak in the areas of costs and quality, but exceptional leadership and R&D were able to neutralize the weaknesses and turn the company around.

3. Discuss Motorola’s primary business strategy.

Motorola’s primary business strategy is one of differentiation. The company has committed to distinguishing its products from those of competitors on the basis of quality. In fact, the company currently has a perfection rate of 99.9997 percent, but has set an even loftier goal for the future.

Chapter 3 Operations in a Global Environment

DISCUSSION QUESTIONS

1. An international strategy uses exports and licenses to penetrate the global arenas. A multidomestic strategy uses subsidiaries, franchises, and joint ventures. A global strategy views the world as a single marketplace, with standardized goods and services worldwide. The focus is usually on cost reduction. A transnational is a truly internationalized firm whose country identity is not as important as its worldwide networks. Transnational strategies exploit economics of scale and responsiveness.

3. C.f. the relevant slide in (PowerPoint) class presentation on the challenges and opportunities of globalization.

6. Product design is important, as Coke recognizes, because tastes may differ from country to country. Other examples is the customization of the computer software to take into consideration the language differences at different countries, the design of the controls and the entire interior for cars produced for the Commonwealth countries where the steering wheel must be on the right side, etc.

9. A multinational is a firm with extensive international business involvement. Three examples are Microsoft, General Electric, and IBM.

10. The World Trade Organization tries to lower trade barriers and ensure that international agreements and codes of conduct (including ethical standards) are uniformly applied around the world. “Its main function is to ensure that trade flows as smoothly, predictably, and freely as possible.” (From the WTO web page, ).

CASE STUDY

INTERNATIONAL OPERATIONS AT GENERAL MOTORS

1. GM’s international strategy has been rather typical. First, it exports, then builds local subsidiaries (i.e., Germany and Argentina), then joint ventures (the NUMMI plant with Toyota in Fremont, California), but is now moving toward a global strategy. The global strategy will provide a standardized (if not identical) product with economies of scale. GM hopes this approach will allow it to succeed in emerging markets.

2. This strategy is appropriate in those industries where the demand for local customization or responsiveness to local tastes is overwhelmed by economies of scale. A global strategy such as this is not appropriate in other industries where local and changing tastes dominate (i.e., food, cosmetics, some clothes, etc.). GM’s global strategy with very similar products may be weak in its ability to respond to local conditions and cultures.

3. The case demonstrates the advantages of a low-cost strategy as opposed to a strategy of differentiation or responsiveness. The issues present in the case are: product design (standard modules), process selection (replicating a repetitive process), location (low cost locations that minimize transportation cost and overcome local trade barriers), layout (balanced assembly line), supply chain management (delivery directly to the assembly line, cutting down on warehousing), and inventory (reduced inventory via less warehousing and JIT deliveries).[pic][pic][pic]

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