SOLUTION AND ANSWER GUIDE
OPERATIONS AND SUPPLY CHAIN MANAGEMENT
3RD EDITION
CHAPTER NO. 01: OPERATIONS MANAGEMENT AND VALUE CHAINS
TABLE OF CONTENTS
• Review Questions
• Discussion Questions and Experiential Activities
• Cases
• Teaching Note: Walker Digital Music Services
• Teaching Note: Mickey Mouse: To Talk or Not?
• Teaching Note: Zappos, A Subsidiary of Amazon
• Teaching Note: Diamond Global Supply Chain—Hudson Jewelers
REVIEW QUESTIONS
1. Explain the concept and importance of operations management.
Solution
Creating and delivering goods and services to customers depends on an
effective system of linked facilities and processes, and the ability to manage
them effectively around the world. Operations management (OM) is the science
and art of ensuring that goods and services are created and delivered
successfully to customers. OM includes the design of goods, services, and the
processes that create them; the day-to-day management of those processes;
and the continual improvement of these goods, services, and processes. Three
issues are at the core of operations management: efficiency, cost, and quality.
2. Describe how operations management is used in work throughout business
organizations.
Solution
Many people who are considered “operations managers” have titles such as chief
operating officer, hotel or restaurant manager, vice president of manufacturing,
customer service manager, plant manager, field service manager, or supply
chain manager. The concepts and methods of OM can be used in any job,
, regardless of the functional area of business or industry, to better create value for
internal customers (within the organization) and for external customers (outside
the organization). OM principles are used in accounting, human resources
management, legal work, financial activities, marketing, environmental
management, and every type of service activity.
3. What are Industry 4.0 and Service 4.0? Give an example in manufacturing and
health care or other service industries.
Solution
Industry 4.0 is the information-intensive transformation of manufacturing in a
connected environment of big data, people, processes, services, systems, and
IoT-enabled industrial assets. In manufacturing, autonomous robots can quickly
pick products at a warehouse to reduce costs and optimize floor space. Other
manufacturing examples are 3D printing, computer-aided design software and
three-dimensional displays of the part or product, and a multitude of welding,
materials moving, and assembly robots tied to an automated or semi-automated
control system. Smart appliances tied electronically to home comfort systems,
automated truck routing and dispatching systems are other examples.
Service 4.0 is applying digitization to services that create higher productivity,
innovation, and value chain advantages in service industries. Service 4.0 devices
include cell phones, automated banking machines, CT and MRI scanners,
electronic hotel keys and security systems, home security systems, surgical
robots assistants, online banking, digital health care systems, electronic
restaurant menus, and so on.
4. State three of the key activities that operations managers perform and briefly
explain them.
Solution
Students should describe three of the following in their own words.
• Forecasting: Predict the future demand for raw materials, finished goods, and
services.
, • Supply chain management: manage the flow of materials, information,
people, and money from suppliers to customers.
• Facility layout and design: determine the best configuration of machines,
storage, offices, and departments to provide the highest levels of efficiency
and customer satisfaction.
• Technology selection: use technology to improve productivity and respond
faster to customers.
• Quality management: ensure that goods, services, and processes will meet
customer expectations and requirements.
• Purchasing: coordinate the acquisition of materials, supplies, and services.
• Resource and capacity management: ensure that the right amount of
resources (labor, equipment, materials, and information) is available when
needed.
• Process design: select the right equipment, information, and work methods to
produce high-quality goods and services efficiently.
• Job design: decide the best way to assign people to work tasks and job
responsibilities.
• Service encounter design: determine the best types of interactions between
service providers and customers, and how to recover from service upsets.
• Scheduling: determine when resources such as employees and equipment
should be assigned to work.
• Sustainability: decide the best way to manage the risks associated with
products and operations to preserve resources for future generations.
5. Define a good and a service.
Solution
Companies design, produce, and deliver a wide variety of goods and services
that consumers purchase. A good is a physical product that you can see, touch,
, or possibly consume. A service is any primary or complementary activity that
does not directly produce a physical product. See the key terms below for the
difference between durable and nondurable goods.
6. Explain how goods differ from services.
Solution
See Section 1-3:
• Goods are tangible, services are intangible.
• Customers participate in many service processes, activities, and transactions.
• Service demand is normally more difficult to predict than for goods due to
weather, human behavior, etc.
• Services cannot be stored as inventory. Service capacity is the substitute for
goods inventory.
• Services require service management skills whereas the production of
physical goods requires only backroom skills (not front room, high customer
contact skills).
• Service facilities are typically close to the customer. Convenience has value.
• Patents do not protect services.
7. Define the concept of value.
Solution
See Section 1-4. The underlying purpose of every organization is to provide
value to its customers and stakeholders. The decision to purchase a good or
service or a customer benefit package is based on an assessment by the
customer of the perceived benefits in relation to its price. The customer’s
cumulative judgment of the perceived benefits leads to either satisfaction or
dissatisfaction. One of the simplest functional forms of value is:
Value = Perceived benefits/Price (cost) to the customer
OPERATIONS AND SUPPLY CHAIN MANAGEMENT
3RD EDITION
CHAPTER NO. 01: OPERATIONS MANAGEMENT AND VALUE CHAINS
TABLE OF CONTENTS
• Review Questions
• Discussion Questions and Experiential Activities
• Cases
• Teaching Note: Walker Digital Music Services
• Teaching Note: Mickey Mouse: To Talk or Not?
• Teaching Note: Zappos, A Subsidiary of Amazon
• Teaching Note: Diamond Global Supply Chain—Hudson Jewelers
REVIEW QUESTIONS
1. Explain the concept and importance of operations management.
Solution
Creating and delivering goods and services to customers depends on an
effective system of linked facilities and processes, and the ability to manage
them effectively around the world. Operations management (OM) is the science
and art of ensuring that goods and services are created and delivered
successfully to customers. OM includes the design of goods, services, and the
processes that create them; the day-to-day management of those processes;
and the continual improvement of these goods, services, and processes. Three
issues are at the core of operations management: efficiency, cost, and quality.
2. Describe how operations management is used in work throughout business
organizations.
Solution
Many people who are considered “operations managers” have titles such as chief
operating officer, hotel or restaurant manager, vice president of manufacturing,
customer service manager, plant manager, field service manager, or supply
chain manager. The concepts and methods of OM can be used in any job,
, regardless of the functional area of business or industry, to better create value for
internal customers (within the organization) and for external customers (outside
the organization). OM principles are used in accounting, human resources
management, legal work, financial activities, marketing, environmental
management, and every type of service activity.
3. What are Industry 4.0 and Service 4.0? Give an example in manufacturing and
health care or other service industries.
Solution
Industry 4.0 is the information-intensive transformation of manufacturing in a
connected environment of big data, people, processes, services, systems, and
IoT-enabled industrial assets. In manufacturing, autonomous robots can quickly
pick products at a warehouse to reduce costs and optimize floor space. Other
manufacturing examples are 3D printing, computer-aided design software and
three-dimensional displays of the part or product, and a multitude of welding,
materials moving, and assembly robots tied to an automated or semi-automated
control system. Smart appliances tied electronically to home comfort systems,
automated truck routing and dispatching systems are other examples.
Service 4.0 is applying digitization to services that create higher productivity,
innovation, and value chain advantages in service industries. Service 4.0 devices
include cell phones, automated banking machines, CT and MRI scanners,
electronic hotel keys and security systems, home security systems, surgical
robots assistants, online banking, digital health care systems, electronic
restaurant menus, and so on.
4. State three of the key activities that operations managers perform and briefly
explain them.
Solution
Students should describe three of the following in their own words.
• Forecasting: Predict the future demand for raw materials, finished goods, and
services.
, • Supply chain management: manage the flow of materials, information,
people, and money from suppliers to customers.
• Facility layout and design: determine the best configuration of machines,
storage, offices, and departments to provide the highest levels of efficiency
and customer satisfaction.
• Technology selection: use technology to improve productivity and respond
faster to customers.
• Quality management: ensure that goods, services, and processes will meet
customer expectations and requirements.
• Purchasing: coordinate the acquisition of materials, supplies, and services.
• Resource and capacity management: ensure that the right amount of
resources (labor, equipment, materials, and information) is available when
needed.
• Process design: select the right equipment, information, and work methods to
produce high-quality goods and services efficiently.
• Job design: decide the best way to assign people to work tasks and job
responsibilities.
• Service encounter design: determine the best types of interactions between
service providers and customers, and how to recover from service upsets.
• Scheduling: determine when resources such as employees and equipment
should be assigned to work.
• Sustainability: decide the best way to manage the risks associated with
products and operations to preserve resources for future generations.
5. Define a good and a service.
Solution
Companies design, produce, and deliver a wide variety of goods and services
that consumers purchase. A good is a physical product that you can see, touch,
, or possibly consume. A service is any primary or complementary activity that
does not directly produce a physical product. See the key terms below for the
difference between durable and nondurable goods.
6. Explain how goods differ from services.
Solution
See Section 1-3:
• Goods are tangible, services are intangible.
• Customers participate in many service processes, activities, and transactions.
• Service demand is normally more difficult to predict than for goods due to
weather, human behavior, etc.
• Services cannot be stored as inventory. Service capacity is the substitute for
goods inventory.
• Services require service management skills whereas the production of
physical goods requires only backroom skills (not front room, high customer
contact skills).
• Service facilities are typically close to the customer. Convenience has value.
• Patents do not protect services.
7. Define the concept of value.
Solution
See Section 1-4. The underlying purpose of every organization is to provide
value to its customers and stakeholders. The decision to purchase a good or
service or a customer benefit package is based on an assessment by the
customer of the perceived benefits in relation to its price. The customer’s
cumulative judgment of the perceived benefits leads to either satisfaction or
dissatisfaction. One of the simplest functional forms of value is:
Value = Perceived benefits/Price (cost) to the customer
