Chapter 1

Identify up to four phenomena that foster specialization and worldwide supply chains.

(1) a more technologically oriented society, (2) specialized expert knowledge, (3) instant communication, and (4) cheaper transportation

A grocery chain is considering the installation of a set of 4 self-checkout lanes. The new self-checkout lane setup will replace 2 old cashier lanes that were staffed by a cashier and bagger on each lane. One cashier mans all 4 self-checkouts (answering questions, checking for un-scanned items, taking coupons, etc). Checkout on the new lanes takes 2 minutes (customers bag their own orders) while checkout with the old lanes took only 45 seconds. In addition the electricity costs for both setups are $0.05 per checkout while bagging (material) costs are $0.10 per checkout with the old system and $0.15 for the new system. The new lanes also require $100 in capital costs. Assume that the lanes are always in use for 8 hours per day (1 shift) and that a worker makes $10/hour. (a) How many checkouts did the old system provide in a shift? (b) How many checkouts does the new system provide? (c) What is the multifactor productivity for each system?

(a) (2 lanes)(8 hours)(3600 seconds/hour)(1 checkout/45 seconds) = 1280 checkouts (b) (4 lanes)(8 hours)(60 minutes/hour)(1 checkout/2 min) = 960 checkouts (c) Cost for the old system = (4 workers)(8 hours)($10/hour) + ($0.10)(1280) + ($0.05)(1280) = $512. Cost for the new system = (1 worker)(8 hours)($10/hour) + ($0.15)(960) + ($0.05)(960) + $100 = $372. Multifactor productivity for old system = 1280 checkouts / $512 = 2.5 checkouts/$. Multifactor productivity for new system = 960 checkouts / $372 = 2.6 checkouts/$.

A swimming pool company has 100,000 labor hours available per summer and with a labor productivity of 5 pools per 6,000 hours. a. How many pools can the company install this summer? b. Suppose the multifactor productivity was one pool per $25,000. How much should the company expect to spend this summer constructing the pools?

(a) 100,000 hours ∗ 5 pools/6000 hours = 83.33 or 83 pools (b) 83 pools ∗ $25,000/pool = $2,075,000

An industrial plant needs to make 100,000 parts per month to meet demand. Each month contains 20 working days, each of which allows for 3 separate 8 hour shifts. (a) If a worker can produce 10 parts/hour, how many workers are needed on each shift? (b) If each shift has 100 workers, what is the productivity of an individual worker? (c) If material costs are $10/part, capital costs are $100,000 and labor costs are $10/hour, what is the multifactor productivity of the plant from part (a)?

(a) 100,000 parts × (1 hour / 10 parts) × (1 shift / 8 hours) × (1 worker/60 shifts) = 20.83 = 21 workers (b) 100,000 parts / [(60 shifts/worker) × (100 workers) × (8 hours/shift)] = 2.08 parts/hour (c) 100,000 parts / [($10/part) × (100,000 parts) + $100,000 + (21 workers) × (60 shifts/worker) × (8 hours/shift) × ($10/hour)] = .083 parts/$1

A local university is considering changes to its class structure in an effort to increase professor productivity. The old schedule had each professor teaching 5 classes per week, with each class meeting an hour per day on Monday, Wednesday, and Friday. Each class contained 20 students. The new schedule has each professor teaching only 3 classes, but each class meets daily (Mon.-Fri.) for an hour. New classes contain 50 students. a. Calculate the labor productivity for the initial situation (students/hour). b. Calculate the labor productivity for the schedule change (students/hour). c. Are there any ethical considerations that should be accounted for? d. Suppose that each teacher also is required to have 2 hours of Office Hours each day he/she taught class. Is the schedule change a productivity increase?

(a) Professors teach 100 students in 15 hours or 6.67 students/hour. (b) Professors teach 150 students in 15 hours or 10 students/hour. (c) Responses should focus on honoring stakeholder commitment and can include students per professor ratio, class sizes, quality of education, etc. (d) Initial productivity is 100 students in 21 hours or 4.76 students/hour. New productivity is 150 students in 25 hours or 6 students/hour, an increase or 1.24 students/hour.

Gibson Products produces cast bronze valves for use in offshore oil platforms. Currently, Gibson produces 1600 valves per day. The 20 workers at Gibson work from 7 a.m. until 4 p.m., with 30 minutes off for lunch and a 15 minute break during the morning work session and another at the afternoon work session. Gibson is in a competitive industry, and needs to increase productivity to stay competitive. They feel that a 20 percent increase is needed. Gibson's management believes that the 20 percent increase will not be possible without a change in working conditions, so they change work hours. The new schedule calls on workers to work from 7:30 a.m. until 4:30 p.m., during which workers can take one hour off at any time of their choosing. Obviously, the number of paid hours is the same as before, but production increases, perhaps because workers are given a bit more control over their workday. After this change, valve production increased to 1800 units per day. a. Calculate labor productivity for the initial situation b. Calculate labor productivity for the hypothetical 20 percent increase c. What is the productivity after the change in work rules? d. Write a short paragraph analyzing these results.

(a) Workers are active for eight hours per day; labor productivity is 10 valves/hour (b) If Productivity rises by 20 percent, to 12 valves/hour; output would be 12 × 8 × 20 = 1920 (c) New productivity is 1800 / (20 × 8) = 11.25 valves/hour (d) Gibson did not gain the desired 20 percent increase in productivity, but they did gain over 11 percent, without extra equipment or energy, and without increasing the labor cost.

The local fast food store experienced the following number of customers on the night shift: Hour----------------Customers 12 AM 23 1 AM 20 2 AM 15 3 AM 5 4 AM 2 5 AM 1 If the store was staffed by two workers, what was the average productivity per worker, in customers/hour?

5.5 customers/hour

What is a knowledge society?

A knowledge society is one in which much of the labor force has migrated from manual work to work based on knowledge.

A foundry produces circular utility access hatches (manhole covers). Currently, 120 covers are produced in a 10-hour shift. If labor productivity can be increased by 20%, it would then be:

A) 14.4 covers/hr.

Walter Shewhart, in the ________, provided the foundations for ________ in operations management.

A) 1920s; statistical sampling

The Dulac Box plant produces 500 cypress packing boxes in two 10-hour shifts. What is the productivity of the plant?

A) 25 boxes/hr.

The Dulac Box plant produces 500 cypress packing boxes in two 10-hour shifts. Due to higher demand, they have decided to operate three 8-hour shifts instead. They are now able to produce 600 boxes per day. What has happened to productivity?

A) It has not changed.

Which is NOT true regarding differences between goods and services?

A) Tangible goods are generally produced and consumed simultaneously; services are not.

Which of the following statements is TRUE?

A) The person most responsible for initiating the use of interchangeable parts in manufacturing was Eli Whitney.

Which of the following would NOT be an operations function in a commercial bank?

A) auditing

Which of the following is the best example of a pure service?

A) counseling

All of the following decisions fall within the scope of operations management EXCEPT for:

A) creating the company income statement.

Which of the following tasks within an airline company are related to operations?

A) crew scheduling

The largest contributor to productivity increases is ________, estimated to be responsible for ________ of the annual increase.

A) management; over one-half

Which of the following attributes is most typical of a service?

A) production and consumption occur simultaneously

Identify the 10 strategic OM decisions.

Answer: Design of goods and services, managing quality, process strategy, location strategies, layout strategies, human resources, supply chain management, inventory management, scheduling, and maintenance.

Identify two operations-related tasks carried out by Hard Rock Café. Match each to its related area of the 10 strategic operations management decisions.

Answer: Providing custom meals: design of goods and services; designing, testing, and costing meals: design of goods and services; acquiring, receiving, and storing supplies: supply chain management; recruiting and training employees: human resources and job design; preparing employee schedules: scheduling; designing efficient restaurant layouts: layout strategy.

The Dulac Box plant works two 8-hour shifts each day. In the past, 500 cypress packing boxes were produced by the end of each day. The use of new technology has enabled them to increase productivity by 30%. Productivity is now approximately:

B) 40.6 boxes/hr.

A cleaning company uses $10 of chemicals, $40 of labor, and $5 of misc. expenses for each house it cleans. After some quality complaints, the company has decided to increase its use of chemicals by 50%. By what percentage has multifactor productivity fallen?

B) 8.3%

The "Father of Scientific Management" is:

B) Frederick W. Taylor.

Which of the following pioneers was NOT making a professional impact during the Scientific Management Era?

B) W. Edwards Deming

Which of the following nets the largest productivity improvement?

B) decrease input 15%

Which of the following is NOT a typical service attribute?

B) easy to store

Which of the following fosters specialization and worldwide supply chains?

B) instant communication

Three commonly used productivity variables are:

B) labor, capital, and management.

The factor responsible for the largest portion of productivity increase in the United States is:

B) management.

Which of the following is NOT a strategic operations management decision?

B) price

Productivity measurement is complicated by:

B) the fact that precise units of measure are often unavailable.

Why are operations managers faced with ethical and social challenges?

Businesses have diverse stakeholders, which include customers, distributors, suppliers, owners, lenders, employees, and the community. These stakeholders hold conflicting perspectives.

A foundry produces circular utility access hatches (manhole covers). If 120 covers are produced in a 10-hour shift, the productivity of the line is:

C) 12 covers/hr.

Gibson Valves produces cast bronze valves on an assembly line, currently producing 1600 valves each 8-hour shift. If the productivity is increased by 10%, it would then be:

C) 220 valves/hr.

Gibson Valves produces cast bronze valves on an assembly line, currently producing 1600 valves per shift. If the production is increased to 2000 valves per shift, labor productivity will increase by:

C) 25%.

Who was the person most responsible for popularizing interchangeable parts in manufacturing?

C) Eli Whitney

Which of the following statements about challenges in operations management is FALSE?

C) Sustainable production is giving way to a low-cost focus.

Henry Ford is noted for his contributions to:

C) assembly line operations.

Which productivity variable has the greatest potential to increase productivity?

C) management

Which of the following is one of the 10 strategic operations management decisions?

C) process and capacity design

The service sector has lower productivity improvements than the manufacturing sector because:

C) services usually are labor-intensive.

What is a global network of organizations and activities that supply a firm with goods and services?

C) supply chain

An operations manager is NOT likely to be involved in:

C) the identification of customers' wants and needs.

Henry Ford and ________ are credited with the development of the moving assembly line.

Charles Sorensen

Illiteracy and poor diets have been known to cost countries up to what percent of their productivity?

D) 20%

Gibson Valves produces cast bronze valves on an assembly line. If 1600 valves are produced in an 8-hour shift, the productivity of the line is:

D) 200 valves/hr.

A cleaning company uses 10 lbs each of chemicals A, B and C for each house it cleans. After some quality complaints, the company has decided to increase its use of chemical A by an additional 10 lbs for each house. By what % has productivity (houses per pound of chemical) fallen?

D) 25%

The service sector makes up approximately what percentage of all jobs in the United States?

D) 86%

Which of the following is a similarity between goods and services?

D) Both have quality standards.

Which is NOT true regarding differences between goods and services?

D) Goods tend to have higher customer interaction than services.

Which of the following are among the 10 strategic operations management decisions? I. design of goods and services II. managing quality III. layout strategy IV. marketing V. pricing of goods and services

D) I, II, III

Who among the following is associated with contributions to quality control in operations management?

D) W. Edwards Deming

Productivity can be improved by:

D) decreasing inputs while holding outputs steady.

Which of the following services is LEAST likely to be unique, i.e., customized to a particular individual's needs?

D) elementary education

The marketing function's main concern is with:

D) generating the demand for the organization's products or services.

Which of the following is NOT among the ethical and social challenges facing operations managers?

D) increasing executive pay

Which of the following are the primary functions of all organizations?

D) marketing, production/operations, and finance/accounting

Which of the following is NOT one of the 10 strategic operations management decisions?

D) mass customization

The total of all outputs produced by the transformation process divided by the total of the inputs is:

D) multifactor productivity.

Eli Whitney, in the ________, provided the foundations for ________ in operations management.

D) nineteenth century; interchangeable parts

What are the five elements in the management process?

D) plan, organize, staff, lead, and control

An operations task performed at Hard Rock Café is:

D) preparing employee schedules.

Which of the following is NOT an element of the management process?

D) pricing

Walter Shewhart is listed among the important people of operations management because of his contributions to:

D) statistical quality control.

Operations management is applicable:

D) to all firms, whether manufacturing or service.

Reasons to study operations management include:

E) A and D

Which of the following influences layout design?

E) All of the above influence layout decisions.

Productivity tends to be more difficult to improve in the service sector because the work is:

E) All of the above make service productivity more difficult.

Current challenges in operations management include all of the following EXCEPT:

E) None of the above are exceptions, i.e., all are current challenges.

Which of the following is NOT true when explaining why productivity tends to be lower in the service sector than in the manufacturing sector?

E) Service operations are typically capital intensive.

At Hard Rock Café, tasks that reflect operations or operations management include:

E) all of the above

The field of operations management is shaped by advances in which of the following fields?

E) all of the above

A business's stakeholders, whose conflicting perspectives cause ethical and social dilemmas, include:

E) all of the above.

Reasons to study operations management include learning about:

E) all of the above.

The 10 strategic operations management decisions include:

E) all of the above.

A small metal shop operates 10 hours each day, producing 100 parts/hour. If productivity were increased 20%, how many hours would the plant have to work to produce 1000 parts?

E) between 8 and 9 hours

What term is given to those individuals with a vested interest in an organization, including customers, distributors, suppliers, owners, lenders, employees, and community members?

E) stakeholders

________ is the operations management challenge that moves more decision making to the individual worker.

Empowered employees

"Considers inventory ordering and holding decisions" is within the strategic operations management decision area of managing quality.

False

A knowledge society is one that has migrated from work based on knowledge to one based on manual work.

False

Because Hard Rock Cafés are themed restaurants, operations managers focus their layout design efforts on attractiveness while paying little attention to efficiency.

False

Customer interaction is often high for manufacturing processes, but low for services.

False

Henry Ford is known as the Father of Scientific Management.

False

In order to have a career in operations management, one must have a degree in statistics or quantitative methods.

False

Manufacturing now constitutes the largest economic sector in postindustrial societies.

False

Productivity is the total value of all inputs to the transformation process divided by the total value of the outputs produced.

False

Shewhart's contributions to operations management came during the Scientific Management Era.

False

Identify the items that Fredrick W. Taylor believed management should be more responsible for.

He believed that management should be more responsible for matching employees to the right job, providing the proper training, providing proper work methods and tools, and establishing legitimate incentives for work to be accomplished.

The Dulac Box plant produces wooden packing boxes to be used in the local seafood industry. Current operations allow the company to make 500 boxes per day, in two 8-hour shifts (250 boxes per shift). The company has introduced some moderate changes in equipment, and conducted appropriate job training, so that production levels have risen to 300 boxes per shift. Labor costs average $10 per hour for each of the 5 full-time workers on each shift. Capital costs were previously $3,000 per day, and rose to $3,200 per day with the equipment modifications. Energy costs were unchanged by the modifications, at $400 per day. What is the firm's multifactor productivity before and after the changes?

MFP before: 500 boxes / ($10 × 5 × 16 + $3000 + $400) = 500 / 4200 = 0.119 boxes/dollar MFP after: 600 boxes / ($10 × 5 × 16 + $3200 + $400) = 600 / 4400 = 0.136 boxes/dollar

Operations managers should be well versed in what disciplines in order to make good decisions?

Management science, information technology, and often one of the biological or physical sciences.

What are some of the ethical and social challenges faced by operations managers?

Managers are challenged to develop and produce safe, high-quality green products; train, retain, and motivate employees in a safe workplace; and honor stakeholder commitments.

Brandon Production is a small firm focused on the assembly and sale of custom computers. The firm is facing stiff competition from low-priced alternatives, and is looking at various solutions to remain competitive and profitable. Current financials for the firm are shown in the table below. In the first option, marketing will increase sales by 50%. The next option is Vendor (Supplier) changes, which would result in a decrease of 10% in the cost of inputs. Finally there is an OM option, which would reduce production costs by 25%. Which of the options would you recommend to the firm if it can only pursue one option? In addition, comment on the feasibility of each option. Business Function Current Value Cost of Inputs $50,000 Production Costs $25,000 Revenue $80,000

Marketing would increase sales to $120,000 ($80,000 ∗ 1.5) but increase cost of inputs and production costs to $112,500 (($50,000 + $25,000) ∗ 1.5). This would net an additional $2500 of profit ($120,000 - $112,500 - current profit of $5000). Vendor (Supplier) Changes would decrease cost of inputs to $45,000 ($50,000 ∗ .9), resulting in $5,000 of additional profit (savings) ($50,000 - $45,000). Finally, the OM option would save $6250 ($25,000 - $25,000 ∗ .75), resulting in an additional $6250 of profit. Thus the OM option is the most profitable. Comments on feasibility should center on the near impossibility of increasing revenue by 50%, while noting the other two options are difficult but not impossible.

________ is the ability of the organization to be flexible enough to cater to the individual whims of consumers.

Mass customization

________ is the total of all outputs produced by the transformation process divided by the total of the inputs.

Multifactor productivity

________ is the set of activities that creates value in the form of goods and services by transforming inputs into outputs.

Operations management

Define operations management. Will your definition accommodate both manufacturing and service operations?

Operations management can be defined as the management of all activities directly related to the creation of goods and/or services through the transformation of inputs into outputs. Yes.

Why are organizations becoming more global?

Organizations are becoming more global with the decline in the costs of communication and transportation. Additionally, resources in the form of capital, materials, talent, and labor are also now global.

Why are organizations changing from batch (large) shipments to just-in-time (JIT) shipments?

Organizations are switching to JIT shipments because inventory requires a large financial investment, and it impedes the responsiveness to changes in the marketplace.

How do services differ from goods? Identify five ways.

Pick from the following: a service is usually intangible; it is often produced and consumed simultaneously; it is often unique; it involves high customer interaction; product definition is inconsistent; it is often knowledge-based; it is frequently dispersed; quality may be hard to evaluate; and reselling is unusual.

Martin Manufacturing has implemented several programs to improve its productivity. They have asked you to evaluate the firm's productivity by comparing this year's performance with last year's. The following data are available:

Productivity improved in all three categories this year; utilities showed the greatest increase, and labor the least.

As the administrative manager in a law office, you have been asked to develop a system for evaluating the productivity of the 15 lawyers in the office. What difficulties are you going to have in doing this, and how are you going to overcome them?

Productivity measures for a law office are difficult. Simple criteria, like number of cases processed, fail to consider complexity of the case. Even counting wins is difficult, as many cases are settled with some sort of compromise. External elements such as the quality of the opposing counsel and the tenacity of the opposition also make counting look rather silly.

Identify three or more operations-related tasks carried out by Hard Rock Café.

Providing custom meals; designing, testing, and costing meals; acquiring, receiving , and storing supplies; recruiting and training employees; preparing employee schedules; designing efficient restaurant layouts.

A firm cleans chemical tank cars in the Bay St. Louis area. With standard equipment, the firm typically cleaned 70 chemical tank cars per month. They utilized 10 gallons of solvent, and two employees worked 20 days per month, 8 hours a day. The company decided to switch to a larger cleaning machine. Last April, they cleaned 60 tank cars in only 15 days. They utilized 12 gallons of solvent, and the two employees worked 6 hours a day. (a) What was their raw material and their labor productivity with the standard equipment? (b) What is their raw material and their labor productivity with the larger machine? (c) What is the change in each productivity measure?

Resource (a) Standard Equipment (b) Larger Machine (c) Percent Change Solvent a= 7 b= 5 c= -28.57% Labor a= 0.22 b= .33 c= 50%

Felicien grows mirlitons (that's Cajun for Chayote squash) in his 100 by 100 foot garden. He then sells the crop at the local farmers' market. Two summers ago, he was able to produce and sell 1200 pounds of mirlitons. Last summer, he tried a new fertilizer that promised a 50% increase in yield. He harvested 1900 pounds. Did the fertilizer live up to its promise?

Since the productivity gain was 58.3%, not 50%, the fertilizer was at least as good as advertised.

Mark's Ceramics spent $4000 on a new kiln last year in the belief that it would cut annual energy usage 25% over the old kiln. This kiln is an oven that turns "greenware" into finished pottery. Mark is concerned that the new kiln requires extra labor hours for its operation. Mark wants to check the energy savings of the new oven, and also to look over other measures of their productivity to see if the change really was beneficial. Mark has the following data to work with:

The energy modifications did not generate the expected energy savings; also, labor and capital productivity decreased.

Identify the three productivity variables used in the text.

The three common variables are labor, capital, and management.

All organizations, including service firms such as banks and hospitals, have a production function.

True

Although the number of people employed in manufacturing in the United States has decreased since 1950, each person is now producing almost 20 times more than in 1950.

True

An accounting firm that provides tax services for a company would be considered to be part of that company's supply chain.

True

An example of a "hidden" production function is the transfer of funds between accounts at a bank.

True

Competition in the 21st century is no longer between companies; it is between supply chains.

True

Ethical and social dilemmas arise because stakeholders of a business have conflicting perspectives.

True

One reason to study operations management is to learn how people organize themselves for productive enterprise.

True

Operations management is the set of activities that creates value in the form of goods and services by transforming inputs into outputs.

True

Productivity is generally more difficult to improve in the service sector than in the manufacturing sector.

True

Some of the operations-related activities of Hard Rock Café include designing meals and analyzing them for ingredient cost and labor requirements.

True

The operations manager performs the management activities of planning, organizing, staffing, leading, and controlling of the OM function.

True

Susan has a part-time business producing seasonal plywood yard ornaments for resale at local craft fairs and bazaars. She currently works 8 hours per day to produce 16 ornaments. a. What is her productivity? b. She thinks that by redesigning the ornaments and switching from use of a wood glue to a hot-glue gun she can increase her total production to 20 ornaments per day. What is her new productivity? c. What is her percentage increase in productivity?

a. 16 ornaments/8 hours = 2 ornaments/hour b. 20 ornaments/8 hours = 2.5 ornaments/hour c. Change in productivity = 0.5 ornaments/hour; percent change = 0.5/2 = 25%

Marketing, production/operations, and ________ are the three functions that all organizations must perform to create goods and services.

finance/accounting

Productivity is the ratio of ________ to ________. Using this relationship, productivity can be improved by ________ or ________.

outputs; inputs; reducing inputs while holding outputs constant; increasing outputs while holding inputs constant.

When a tangible component is not included in a service, such as with counseling, it is called a(n) ________.

pure service

A(n) ________ is a global network of organizations and activities that supply a firm with goods and services.

supply chain

Competition in the 21st century is no longer between companies; it is between ________.

supply chains

Starbucks stopped requiring signatures on credit-card purchases under $25 in an attempt to reduce ________.

transaction time (or service time)