ISyE 3104: Introduction to Supply Chain Modeling: Manufacturing and Warehousing Instructor : Spyros Reveliotis Summer 2006 Solutions

for Homework #1

ISYE 3104 Summer 2006 Problem set: A. 1. Answer the following questions:

Homework 1 Solution

Consider the potential contribution of information sciences to OM. Why is the management of information of such great importance in the management of production? As mentioned in class, any organization tries to cover some societal needs by providing the market with certain goods and services of the required quality, in a responsive and cost-effective manner. Hence, in order to achieve its mission, the organization must be able to interface to the market and observe its developing needs and trends, but also, it must have good visibility of its own internal operational status and inventories, as well as the status of its supplying channels, since only then it can respond to the arising demand in a timely and cost-effective manner. All the above issues imply the need for good and timely information and its reliable flow among the market, the organization, and other relevant parties of the supply chain. Information sciences can assist by providing the technological infrastructure for the collection, processing and dissemination of this information, but also the methodological tools that are needed in the relevant decision making. There are three primary ways to achieve competitive advantage. Provide an example, not included in the PowerPoint presentation, for each of them. 1. Competing on Differentiation: i. Companies developing customized manufacturing equipment for other manufacturing companies ii. An airplane manufacturer like Boeing or Airbus iii. Ritz-Carlton 2. Competing on Cost i. All white label items that you can find in a supermarket, i.e., items that are sold under the name of the store. ii. PC clones, especially in the 80s and early 90s. iii. Oil companies 3. Competing on Response i. Street salesmen selling umbrellas or anoraks during a storm ii. Business traveling services iii. Medical (emergency) services Based on what you know about the automobile industry, how has the OM strategy of General Motors and Ford changed in the last 20 years?

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Here are some examples in which the OM strategy has evolved in these two companies: (a) Design of goods and services: Adoption of emerging technologies; hence, new products are designed and evaluated with CAD and coordinated with STEP. (b) Quality: 100% to standards; better feedback from customer benchmarking (c) Process and capacity planning: new jigs to improve quality deployment of industrial robots to reduce labor cost and improve quality 2

ISYE 3104 Summer 2006

Homework 1 Solution

(d) Location strategy: Location relative to suppliers is now more important, migration to lowcost labor areas (e) Layout strategy: Work cells, flexible assembly lines (f) Inventory management: Production planning tools like MRP/ERP systems and JIT concepts 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 organizations information system 4. How does the OM strategy change during a products 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 2.5 in the Render and Heizer book provides a more detailed list of issues. 5. For what reasons do domestic operations typically become international operations? C.f. the relevant slide in (PowerPoint) class presentation on the challenges and opportunities of globalization. 6. Explain and give an example of how product design should be considered when offering a product in a global market. Product design is important, as Coke recognizes, because tastes may differ from country to country. Other examples are 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. 7. What is the role of the World Trade Organization in modern global economy?

ISYE 3104 Summer 2006

Homework 1 Solution

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, www.wto.org). B. 1. CASE STUDY ON MINIT-LUBE, INC. What constitutes the mission of Minit-Lube? To provide fast and economical preventive maintenance and interior auto cleaning, primarily to vehicles owned by individuals (as opposed to business), in the U.S.

2. How does the Minit-Lube operations strategy provide competitive advantage? Minit-Lubes approach to the 10 key issues addressed by Operations Management (c.f. the introductory slide on OM) includes: Product Design: Adoption of a specializing strategy that focuses on the service task of lubricating automobiles, which subsequently allows the 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 define and maintain. Process Strategy: Minit-Lube processes are streamlined to the support the provided services, allowing the employees and the capital investment to focus on doing this mission well and efficiently, 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. Also, the bay replication introduces some redundancy that enhances the service availability and responsiveness, since it is unlikely that all of three bays will experience an outage or long delay at the same time. Supply Chain Strategy: The company specialization allows it to control the complexity of its raw material inventory, and enables it to seek economies of scale by purchasing in large quantities and developing strategic partnerships with its suppliers. Human Resources Strategy:

ISYE 3104 Summer 2006

Homework 1 Solution

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 directassisting 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. 3. Is it likely that Minit-Lube has increased productivity over its more traditional competitors? Why? How would we measure productivity in this industry? Yes. Specialization of personnel and facilities should make Minit-Lube more efficient. Jobs/tasks accomplished per man-hour would be a good measure of productivity.