Solution Manual for Operations and Supply Chain Management 16th Edition By F. Robert Jacobs( Complete and 100% Verified )

OPERATIONS AND SUPPLY CHAIN MANAGEMENT 16TH EDITION BY F. ROBERT JACOBS 1 | P a g e SOLUTION MANUAL FOR OPERATIONS AND SUPPLY CHAIN MANAGEMENT 16TH EDITION BY F. ROBERT JACOBS Chapter 1-22 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 OPERATIONS AND SUPPLY CHAIN MANAGEMENT 16TH EDITION BY F. ROBERT JACOBS 2 | P a g e 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) 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 and evaluate the opportunities for an OSM major with several years of experience. OPERATIONS AND SUPPLY CHAIN MANAGEMENT 16TH EDITION BY F. ROBERT JACOBS 3 | P a g e 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 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 OPERATIONS AND SUPPLY CHAIN MANAGEMENT 16TH EDITION BY F. ROBERT JACOBS 4 | P a g e 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 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. OPERATIONS AND SUPPLY CHAIN MANAGEMENT 16TH EDITION BY F. ROBERT JACOBS 5 | P a g e 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 OPERATIONS AND SUPPLY CHAIN MANAGEMENT 16TH EDITION BY F. ROBERT JACOBS 6 | P a g e 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 OPERATIONS AND SUPPLY CHAIN MANAGEMENT 16TH EDITION BY F. ROBERT JACOBS 7 | P a g e 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 Dayssales 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. OPERATIONS AND SUPPLY CHAIN MANAGEMENT 16TH EDITION BY F. ROBERT JACOBS 8 | P a g e OPERATIONS AND SUPPLY CHAIN MANAGEMENT 16TH EDITION BY F. ROBERT JACOBS 9 | P a g e 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? OPERATIONS AND SUPPLY CHAIN MANAGEMENT 16TH EDITION BY F. ROBERT JACOBS 10 | P a g e 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 flexfuel 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. OPERATIONS AND SUPPLY CHAIN MANAGEMENT 16TH EDITION BY F. ROBERT JACOBS 11 | P a g e 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. 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 OPERATIONS AND SUPPLY CHAIN MANAGEMENT 16TH EDITION BY F. ROBERT JACOBS 12 | P a g e 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 Hours per Machine 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 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 OPERATIONS AND SUPPLY CHAIN MANAGEMENT 16TH EDITION BY F. ROBERT JACOBS 13 | P a g e 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 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)= 30,000($14.00)= 135.71 OPERATIONS AND SUPPLY CHAIN MANAGEMENT 16TH EDITION BY F. ROBERT JACOBS 14 | P a g e $57,000,000 $420,000 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) $20,000 FC 20,000 Capital equipment (hours) 60,000 5,000 a. Calculate partial labor and capital productivity figures for the parent and subsidiary. Do the results seem misleading? Labor Productivity Country Output in Units Input in Hours Productivity (Output/Input) U.S. 100,000 20,000 5.00 units/hour LDC 20,000 15,000 1.33 units/hour Capital Equipment Productivity Country Output in Units Input in Hours Productivity (Output/Input) U.S. 100,000 60,000 1.67 units/hour LDC 20,000 5,000 4.00 units/hour Yes. You might expect the capital equipment productivity measure to be higher in the U.S. than in a LDC. Also, the measures seem contradictory. Each plant appears to be far more productive than the other on one measure, but much worse on the other. b. Compute the multifactor productivity figures for labor and capital together. Do the results make more sense? Multifactor – Labor and Capital Equipment Country Output in Units Input in Hours Productivity (Output/Input) OPERATIONS AND SUPPLY CHAIN MANAGEMENT 16TH EDITION BY F. ROBERT JACOBS 15 | P a g e U.S. 100,000 20,000 + 60,000= 80,000 1.25 units/hour LDC 20,000 15,000 + 5,000= 20,000 1.00 units/hour Yes, labor and equipment can be substituted for each other. Therefore, this multifactor measure is a better indicator of productivity in this instance. c. Calculate raw material productivity figures (units/$ 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 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 Partial Measure – Labor 1-16 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 both measures, without an accompanying increase in the selling price might explain these measures. 17. An electronics company makes communications devices for military contracts. The company just completed two contracts. The navy contract was for 2,300 devices and took 25 workers two weeks (40 hours per week) to complete. The army contract was for 5,500 devices that were produced by 35 workers in three weeks. On which contract were the workers more productive? Contract Output Input Productivity This Year $220,000 $40,000 + 45,000 + 6,000 + 50,000 +3,000 = $144,000 1.53 The workers were more productive on the Army contract. 1-17 18. A retail store had sales of $45,000 in April and $56,000 in May. The store employs eight full-time workers who work a 40-hour week. In April the store also had seven part-time workers at 10 hours per week, and in May the store had nine part-timers at 15 hours per week (assume four weeks in each month). Using sales dollars as the measure of output, what is the percentage change in productivity from April to May? Month Output in Dollars Input in Hours Productivity (Output/Input) Percentage Change April $45,000 (8(40)+7(10))*4 = 1560 28.85 May $56,.77 (30.77-28.85)/28.85 = 6.66% 19. A parcel delivery company delivered 103,000 packages last year, when its average employment was 84 drivers. This year the firm handled 112,000 deliveries with 96 drivers. What was the percentage change in productivity over the two years? Year Output in Packages Input in Drivers Productivity (Output/Input) Percentage Change Last 103,.2 This 112,.7 (1166.7 -1226.2)/1226.2 = - 4.85% 20. A fast-food restaurant serves hamburgers, cheeseburgers, and chicken sandwiches. The restaurant counts a cheeseburger as equivalent to 1.25 hamburgers and chicken sandwiches as 0.8 hamburger. Current employment is five full-time employees who each work a 40-hour week. If the restaurant sold 700 hamburgers, 900 cheeseburgers, and 500 chicken sandwiches in one week, what is its productivity? What would its productivity have been if it had sold the same number of sandwiches (2,100), but the mix was 700 of each type? Part Output in Hamburger Equivalents Input in Hours Productivity (Output/Input) in Units in Hours (Output/Input) Navy 2300 25(2)40 = 2000 1.15 Army 5500 35(3)40 = 4200 1.31 1-18 700 Hamburgers 900 Cheeseburgers (1.25) 500 Chicken Sandwiches (.80) .125 700 Hamburgers 700 Cheeseburgers (1.25) 700 Chicken Sandwiches (.80) .675 21. Shell Oil Company’s motto ―People, Planet and Profit‖ is a real-world implementation of what OSCM concept? Triple bottom line 22. A firm’s strategy should describe how it intends to create and sustain value for what entities? its current shareholders 23. What is the term used to describe individuals or organizations that are influenced by the actions of a firm? Stakeholders 1-19 Timbuk2 You can have a lot of fun with this case. Start off by logging on to the Timbk2 website and explore what is going on there. If you have a little money in a teaching account you might order a custom bag and give it away or raffle it off in class, this will really get their attention. You make a big deal of it all when the back comes in and you give it to the lucky student. This also helps to reinforce the topic with the students. 1. Consider the two categories of products that Timbk2 makes and sells. For the custom messenger bag, what are the key competitive dimensions that are driving sales? Are their competitive priorities different for the new laptop bags sourced in China? This is one of the “other dimensions” and in this case it is the customization of the bag. Other than being able to get the colors they prefer; the customer also gets pockets that meet the unique needs the customer has in mind. They can be successful with standardizing the laptop bags since the purpose here is well defined. 2. Compare the assembly line in China to that in San Francisco along the following dimensions: (1) volume or rate of production, (2) required skill of the workers, (3) level of automation, and (4) amount of raw materials and finished goods inventory. Dimension China San Francisco Volume/rate of production Required skill of workers Level of automation Raw materials and finished good inventory High Low High Low raw materials, but may have finished goods Low High Low High raw materials, virtually no finished goods 1-20 Raw Materials Inventory Bag Fabrication and Assembly (China) Raw Materials (China) Transport to USA Raw Materials Inventory Raw Materials (China) Bag Fabrication and Assembly (USA) 3. Draw two diagrams, one depicting the supply chain for those products sourced in China and the other depicting the bags produced in San Francisco. Show all the major steps including raw material, manufacturing, finished goods, distribution inventory, and transportation. Other than manufacturing cost, what other costs should Timbuk2 consider when making the sourcing decision? Bag Fabrication and Assembly in China Bag Fabrication and Assembly in USA The big cost other than manufacturing is the cost to transport material to the USA versus the cost of transporting the completed bags to the USA. Here we assume that the material would be sourced in China. This is probably not a bad assumption. Transport to USA Finished Bags Inventory (USA) 1-21 CHAPTER 3 DESIGN OF PRODUCTS AND SERVICES Discussion Questions 1. Describe the generic product development process described in this chapter. How does this process change for technology push products? Products that are developed using the “technology push” would be more narrowly focused in phase 0 and phase 1 of Marketing. The focus would be narrower because you would only look at market segments that could benefit from the application of your technology. The rest of the generic process may be somewhat less complex as well since the technology of the product currently exists in your manufacturing facilities 2. How does the QFD approach help? What are some limitations of this approach? QFD helps to get the voice of the customer into the design process using interfunctional teams. The limitations of QFD relate to the culture of the organization. In the United States, we tend to be vertically oriented and try to promote breakthrough. This can work against interfunctional teamwork, which is needed for QFD success. If a breakthrough culture can be maintained with a continuous improvement mentality through interfunctional teams, this would lead to tremendous improvements in productivity. 3. Discuss the product design philosophy behind industrial design and design for manufacture and assembly. Which one do you think is more important in a customer-focused product development? Industrial design is concerned with designing a product from the end-user’s point of view, such as aesthetics and user-friendliness of the product. Design for manufacturability, on the other hand, makes the product design less complicated and easier to manufacture. Very often it results in fewer parts, smaller size, increased reliability, and lower cost. Both philosophies are equally important for a customer-focused product development. In order to attract customers, the product must be aesthetically pleasing and user-friendly (industrial design). However, to sustain customer interests, it should also have a lower cost and higher reliability (design for manufacturability). 4. Discuss design-based incrementalism, which is frequent product redesign throughout the product’s life. What are the pros and cons of this idea? Pro: enhanced function, higher quality, and lower cost through continuously advancing technology. Con: time and money spent on frequent product and process redesigns, low priority given in servicing the existing and older products. Consumer reaction to frequent changes may be negative. 1-22 5. Do the concepts of complexity and divergence apply to an online sales company such as Dell Computer? Due to the size of Dell and the number of market segments they serve, these concepts certainly apply. Consider as one example the technical support process for an existing customer. Service can vary from very simple like an individual customer needing a particular driver for her new computer to very complex in troubleshooting a network load problem in a server farm for an Internet service provider. In the first example there is a straightforward solution to the problem in emailing the customer a copy of the driver. In the latter, the service process may be quite divergent, with the process being adapted based on the symptoms of the problem and the skill of the customer’s technical workforce. For a pure sales company like Amazon, the complexity and divergence would be much less. 6. What factors must be traded off in the product development process before introducing a new product? The factors that need careful attention for new products are product performance, development speed, product cost, and development program expense. We can identify six pairs of trade-offs. These include all possible pairs among the four factors noted above. 7. Coca-Cola is a well-established consumer products company with a strong position in the global market. The sales of their core soda products have remained relatively stable for decades, yet the company has continued to grow and has remained extremely profitable. Discuss Coca-Cola’s history considering the statement that “generating a steady stream of new products to market is extremely important to competitiveness.” Does Coca-Cola’s success disprove that statement? Is the company an exception to the rule or an example of its application? By growing into a global company, one could argue they have been introducing new products into markets they never served before, even though the products are not new to the company. They have also grown by acquisition of other drink companies and introduction of new drink products outside of their core soda business. As the products are not subject to great innovation or technological advances, Coca-Cola has needed to expand their product lines and global reach to continue to grow. 1-23 Objective Questions 1. Which phase of the generic development process involves construction and evaluation of multiple preproduction versions of the product? Testing and refinement 2. A process that emphasizes cross-functional integration and concurrent development of a product and its associated processes is known as . Concurrent engineering 3. Match the following product types to the appropriate product development description. B Technology-push products A: Entail unusually large uncertainties about the technology or market. The development process takes steps to address those uncertainties. E Platform products B: A firm with a new proprietary technology seeks out a market where that technology can be applied. D Process-intensive products C: Uses a repeated prototyping cycle. Results from one cycle are used to modify priorities in the ensuing cycle. A High-risk products D: The production process has an impact on the product properties. Therefore, product design and process design cannot be separated. C Quick-build products E: Products are designed and built around a preexisting technological subsystem. 4. Designing products for aesthetics and with the user in mind is generally called what? Industrial design 5. The first step in developing a house of quality is to develop a list of . customer requirements for the product 6. The purpose of value analysis/value engineering is to . simplify products and processes 7. What is it about service processes that makes their design and operation so different from manufacturing processes? Direct customer involvement in the process 8. What are the three general factors that determine the fit of a new or revised service process? Service experience fit, operational fit, and financial impact. 1-24 9. Measures of product development success can be organized in what three categories? Time to market, productivity, quality. 1-25 10. Tuff Wheels Kiddy Dozer a. Base case Project Schedule Year 1 Year 2 Year 3 Year 4 Kiddy Dozer Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Development 333. 3 333. 3 333. 3 Pilot Testing 100 100 Ramp-up 200 200 Marketing and Support 37.5 37.5 37.5 37.5 37.5 37.5 37.5 37.5 37.5 37.5 37.5 37.5 37.5 Production Volume 15 15 Unit Production Cost 100 100 Production Costs 150 0 150 0 150 0 150 0 150 0 150 0 150 0 150 0 150 0 150 0 150 0 150 0 Sales Volume 15 15 Unit Price 170 170 Sales Revenue 255 0 255 0 255 0 255 0 255 0 255 0 255 0 255 0 255 0 255 0 255 0 255 0 Period Cash Flow - 3 101 3 101 3 101 3 101 3 101 3 101 3 101 3 101 3 101 3 101 3 101 3 PV Year 1 r = 752 738 Project NPV 8336 b. The results are shown below for both scenarios. If sales are only 50,000 then the project is still worthwhile since the NPV decrease to $6,626,570. If Tuff Wheels has under estimated the sales and it ends up being 70,000 per year then NPV will increase from $8,503,000 base case to $10,046,063 with the higher sales rate. Sales Revised to 50,000 per Year Project Schedule Year 1 Year 2 Year 3 Year 4 Kiddy Dozer Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Development 333. 3 333. 3 333. 3 Pilot Testing 100 100 Ramp-up 200 200 Marketing and Support 37.5 37.5 37.5 37.5 37.5 37.5 37.5 37.5 37.5 37.5 37.5 37.5 37.5 Production Volume 12.5 12.5 12.5 12.5 12.5 12.5 12.5 12.5 12.5 12.5 12.5 12.5 Unit Production Cost 100 100 Production Costs 125 0 125 0 125 0 125 0 125 0 125 0 125 0 125 0 125 0 125 0 125 0 125 0 Sales Volume 13 13 Unit Price 170 170 1-26 Sales Revenue 212 5 212 5 212 5 212 5 212 5 212 5 212 5 212 5 212 5 212 5 212 5 212 5 Period Cash Flow - 838 PV Year 1 r = 622 610 Project NPV 6627 Sales Revised to 70,000 per Year Project Schedule Year 1 Year 2 Year 3 Year 4 Kiddy Dozer Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Development 333.3 333.3 333.3 Pilot Testing 100 100 Ramp-up 200 200 Marketing and Support 37.5 37.5 37.5 37.5 37.5 37.5 37.5 37.5 37.5 37.5 37.5 37.5 37.5 Production Volume 17.5 17.5 17.5 17.5 17.5 17.5 17.5 17.5 17.5 17.5 17.5 17.5 Unit Production Cost 100 100 Production Costs Sales Volume 17.5 17.5 17.5 17.5 17.5 17.5 17.5 17.5 17.5 17.5 17.5 17.5 Unit Price 170 170 Sales Revenue Period Cash Flow - PV Year 1 r = Project NPV 10046 c. The impact of changing the interest rate is shown below. There is still a positive NPV but it shrinks the interest rate increases. This would be expected since a higher the interest rate reduces the present value of future cash flows. Base Case 8% $8,336,316 9% $8,100,970 10% $7,872,845 11% $7,651,694 1-27 11. Perot Corporation Patay2 Chip. a. In the base case the Patay2 Chip Project has a very good NPV of $9,961,481, see below. Project Schedule Year 1 Year 2 Year 3 Year 4 Patay2 Chip 1st half 2nd half 1st half 2nd half 1st half 2nd half 1st half 2nd half Development Cost 5,000 5,000 5,000 5,000 Pilot Testing Cost 2,500 2,500 Debug Cost 1,500 1,500 Ramp-up Cost 3,000 Advance Marketing Cost 5,000 Ongoing Marketing and Support Production Volume Unit Production Cost Production Costs 81,875 81,875 40,875 40,875 Sales Volume Unit Price Sales Revenue 102,500 102,500 48,750 48,750 Period Cash Flow -5,000 -5,000 -9,000 -17,000 20,125 20,125 7,375 7,375 PV Year 1 r = 12 -4,762 -4,535 -7,775 -13,986 15,768 15,018 5,241 4,992 Project NPV 9,961.481 b. Additional 10 million for higher price is clearly worthwhile as it raises the NPV from $9.961 million to $15.861 million. See results below. Project Schedule Year 1 Year 2 Year 3 Year 4 Patay2 Chip 1st half 2nd half 1st half 2nd half 1st half 2nd half 1st half 2nd half Development Cost 7,500 7,500 7,500 7,500 Pilot Testing Cost 2,500 2,500 Debug Cost 1,500 1,500 Ramp-up Cost 3,000 Advance Marketing Cost 5,000 Ongoing Marketing and Support Production Volume Unit Production Cost Production Costs 81,875 81,875 40,875 40,875 Sales Volume Unit Price Sales Revenue 108,750 108,750 52,500 52,500 Period Cash Flow -7,500 -7,500 -11,500 -19,500 26,375 26,375 11,125 11,125 PV Year 1 r = 12 -7,143 -6,803 -9,934 -16,043 20,666 19,681 7,906 7,530 Project NPV 15,860.693 1-28 c. Reduced sales estimates have a significant impact on the NPV. It reduces the NPV all the way down to $9,056. The success of the Patay2 Chip is very dependent on the sales estimates. It would be wise for Perot to make sure that there is sufficient demand for Patay2 Chips. Project Schedule Year 1 Year 2 Year 3 Year 4 Patay2 Chip 1st half 2nd half 1st half 2nd half 1st half 2nd half 1st half 2nd half Development Cost 5,000 5,000 5,000 5,000 Pilot Testing Cost 2,500 2,500 Debug Cost 1,500 1,500 Ramp-up Cost 3,000 Advance Marketing Cost 5,000 Ongoing Marketing and Support Production Volume Unit Production Cost Production Costs 65,500 65,500 27,250 27,250 Sales Volume Unit Price Sales Revenue 82,000 82,000 32,500 32,500 Period Cash Flow -5,000 -5,000 -9,000 -17,000 16,000 16,000 4,750 4,750 PV Year 1 r = 12 -4,762 -4,535 -7,775 -13,986 12,536 11,939 3,376 3,215 Project NPV 9,056 12. Answers will vary based upon the product selected and the student. Issues that should be considered in the design and manufacture of a product include design process (traditional vs. concurrent engineering), customer needs and expectations, legal considerations (EPA, OSHA, etc.), service life, reliability, appearance, standardization, any industry standards that should be considered (e.g., television set and the type of signal received from stations), method of shipment, material cost and availability, stage of the product life cycle, design for manufacturability, design for assembly, packaging, environmental, unit cost, pricing, availability of purchased material, availability of capacity, availability of subcontractors, setup cost, manufacturing time, volume, and expected product life. 1-29 Grounds maintenance Fair handicapping system Helpful service attendants Tournament Activities (per text) 13. Answers may vary. Following is just one possible result. 1-30 CASE: IKEA: Design and Pricing Questions: 1. What are IKEA’s competitive priorities? Probably the key priority is maximizing value to the customer in each product offered through their stores. Low cost is certainly a major priority as well. 2. Describe IKEA’s process for developing a new product. This is described in the case: (1) Pick a price, (2) Choose a manufacturer, (3) Design the product, (5) Ship it. The key here is to recognize that they pick a price point early in the product development process and then work with a manufacturer to ensure they can meet this price point. This is a very innovative approach to product design. 3. What are additional features of the IKEA concept (beyond their design process) that contribute to creating exceptional value for the customer? Customer can easily view the product in a setting like theirs (i.e. apartments) in the IKEA store. Also, the product can be easily brought home by the customer eliminating delivery and setup charges. This creates more value in the product by eliminating these costs. 4. What would be important criteria for selecting a site for an IKEA store? Need to be in a high-density area where many people live in smaller apartments where space is a premium. The IKEA products really appeal to young, affluent customers. CASE: Comparison of Competing Products We have had success using this as an in-class exercise and putting the students in small teams. The teams can select the products (two are suggested) themselves or the professor can assign products to the teams. Encourage students to go to the product’s websites so they can look up some detailed information about the products for their comparisons. After spending some time comparing the products based on the attributes they selected, have them rank the attributes based on how important they perceive they are to customers, and then evaluate each product relative to each attribute. The teams should then make their selection for the best product and develop suggestions for product improvements. The teams can them report out to the rest of the class what they found in their analysis. 1-31 CHAPTER 4 PROJECT MANAGEMENT Discussion Questions 1. What was the most complex project that you have been involved in? Give examples of the following as they pertain to the project: the work breakdown structure, tasks, subtasks, and work package. Were you on the critical path? Did it have a good project manager? Obviously, the answer will vary. Remember that the project could be in a non-profit environment as well. School plays (especially musicals) are a good example, because there are many major tasks that need to be broken down and scheduled in parallel, but all must be completed by the time opening night comes. This would include selecting the play and obtaining the rights, auditions, rehearsals of the actors, rehearsals of the musicians, construction of the sets, setting the lighting, printing tickets and programs, staffing the theater, advertising and fund raising. 2. Discuss the graphic presentations in Exhibit 4.4. Are there any other graphic outputs you would like to see if you were project manager? The various graphs and charts presented are typical of the graphical techniques for presenting the necessary data. Most are adaptable to computer programming. The major requirements in the graphics package include planned activities related to time, a milestone chart to show major achievements, a breakdown to show how funds were spent plus a plot of actual completion versus planned. 3. Why is it important to use expected value management (EVM) in the overall management of projects? Compare to the use of baseline and current schedules only. Using schedules only captures the time aspect of project management. Costs and revenues are also critical to efficient project management and the overall success of any project. A project may be ahead of schedule but at an unacceptable cost. 1-32 4. Consider the EVM charts in Exhibit 4.5. Are there any other measures you might want to use in the management of a project? What are some controllable variables that may affect the costs being tracked? Students will likely have multiple answers to these questions. One might be quality defects and their costs in rework or scrap. Utilization figures for workers and expensive resources might also be useful. 5. What are some reasons project scheduling is not done well? Several problems with project scheduling are discussed at the end of the chapter. The uncertainties inherent in the activities comprising the network of any project make it necessary to update the schedule on a regular basis. Maintaining accurate time and cost estimates is often difficult and frustrating. Managing this evolving process requires a discipline that is not always available. 6. Which characteristics must a project have for critical path scheduling to be applicable? What types of projects have been subjected to critical path analysis? Project characteristics necessary for critical path scheduling to be applicable are: a. Defined project beginning and ending b. Well-defined jobs whose completion marks the end of the project. c. The jobs of tasks are independent in that they may be started, stopped, and conducted separately within a given sequence. d. The jobs or tasks are ordered in that they must follow each other in a given sequence. e. An activity once started can continue without interruption until it is completed. A wide variety of projects have used critical path analysis. Some industries that more commonly use this approach include aerospace, construction, and computer software. 7. What are the underlying assumptions of minimum-cost scheduling? Are they equally realistic? The underlying assumptions of minimum cost scheduling are that it costs money to expedite a project activity and it costs money to sustain or lengthen the completion time of the project. While both assumptions are generally realistic, it often happens that there are little or no out-ofpocket costs associated with sustaining a project. Personnel are often shifted between projects, and in the short run there may be no incentive to compete a project in “normal time.” 8. “Project control should always focus on the critical path.” Comment. In many project situations, it is not the activities on the critical path which cause problems, but rather noncritical activities, which, for various reasons, become critical. In the context of PERT, it may turn out that the activities on the critical path have small variances associated with them and can be treated as near certain. At the same time, activities off the critical path may have extremely large variances and, in fact, if not closely monitored, may delay the project. Thus, while project control must keep track of critical path activities, it may be more useful to focus on those activities which are not on the critical path but, for one reason or another, have a high degree of uncertainty associated with them. 1-33 Along these lines, some authors have suggested that the critical path approach should be replaced by a critical activity approach in which simulation is used to estimate which activities are likely to become sources of project delay. These activities, rather than critical path, would become the focus of managerial control. Additionally, the critical path focuses on the time or schedule aspects of the projects. Certain activities could be "critical" because of cost or quality considerations. 9. Why would subcontractors for a government project want their activities on the critical path? Under what conditions would they try to avoid being on the critical path? A subcontractor might want his activities on the critical path in situations where cost incentives are provided for early project completion. Since the critical path ultimately determines project length, it stands to reason that activities on the path would be the ones that would draw additional funds to expedite completion. A subcontractor might want his activities off the critical path because of some error on his part or because he doesn’t want to be bothered by the close monitoring of progress which often goes with critical path activities. 10. What do you think might be some barriers to the successful, effective use of the project management software packages discussed in the chapter? Students will have varying answers here, but we would expect them to include training and hiring personnel with the right technical aptitude as well as the cost of buying and upgrading such systems. 1-34 Objective Questions 1. What are the three types of projects based on the amount of change involved? Derivative, breakthrough, platform. 2. What are the four major categories of projects based on the type of change involved? Product change, process change, research & development, and alliance & partnership. 3. Match the following characteristics with their relevant project team organizational structures. B The project is housed within a functional division of the firm. A: Pure project C A project manager leads personnel from different functional areas. B: Functional project A Personnel work on a dedicated project team. C: Matrix project C A team member reports to two bosses. A Team pride, motivation, and commitment are high. B Team members can work on several projects. C Duplication of resources is minimized. 4. What is the term for a group of project activities that are assigned to a single organizational unit? Work package 1-35 5. Your project to obtain charitable donations is now 30 days into a planned 40-day project. The project is divided into 3 activities. The first activity is designed to solicit individual donations. It is scheduled to run the first 25 days of the project and to bring in $25,000. Even though we are 30 days into the project, we still see that we have only 90 percent of this activity complete. The second activity relates to company donations and is scheduled to run for 30 days starting on day 5 and extending through day 35. We estimate that even though we should have (25/30) 83 percent of this activity complete, it is only 50 percent complete. This part of the project was scheduled to bring in $150,000 in donations. The final activity is for matching funds. This activity is scheduled to run the last 10 days of the project and has not started. It is scheduled to bring in an additional $50,000. So far $175,000 has been brought in on the project. Calculate the schedule variance, schedule performance index, and cost (value in this case) performance index. How is the project going? Hint: Note that this problem is different since revenue rather than cost is the relevant measure. Use care in how the measures are interpreted. Solution: Activity Expected Revenue Planned Duration Planned Start Date Planned Comp. Date Expected % Complete Actual % Complete Actual Rev. to Date 1. Solicit $25,% 90% 2. Donations $150,.3% 50% 3. Matching Funds $50,% 0% Total $225,000 $175,000 BCWS Activity 1 100% of $25,000 = 25,000 Activity 2 83.3% of $150,000 = 125,000 Activity 3 0 % of 50,000 = 0 $150,000 BCWP Activity 1 90% of 25,000 = 22,500 Activity 2 50% of 150,000 = 75,000 Activity 3 0% of $50,000 = 0 97,500 Scheduled Variance = 97,500 - 149,500 = -52,000 Scheduled Performance Index = 97,500/150,000 = .650 Cost Variance = 97,500 - 175,000 = -77,500 Cost Performance = 97,500/175,000 = .557 Because we are working with revenues instead of costs, we have to invert the evaluation rules listed in the text. Our performance measures here are actually good. Although we are behind schedule on completing tasks 1 and 2, we have brought in more money than expected for the amount of work we have completed. 6. A project to build a new bridge seems to be going very well since the project is well ahead of schedule and costs seem to be running very low. A major milestone has been reached where the first two activities have 1-36 been totally completed and the third activity is 60 percent complete. The planners were only expecting to be 50 percent through the third activity at this time. The first activity involves prepping the site for the bridge. It was expected that this would cost $1,420,000 and it was done for only $1,300,000. The second activity was the pouring of concrete for the bridge. This was expected to cost $10,500,000 but was actually done for $9,000,000. The third and final activity is the actual construction of the bridge superstructure. This was expected to cost a total of $8,500,000. To date they have spent $5,000,000 on the superstructure. Calculate the schedule variance, schedule performance index, and cost index for the project to date. How is the project going? Solution: Activity Expected Cost Expected % Complete Actual % Complete Actual Cost to Date 1. Site preparation $1,420,000 100% 100% $1,300,000 2. Pour concrete $10,500,000 100% 100% $9,000,000 3. Construction $8,500,000 50% 60% $5,000,000 Total $20,420,000 $15,300,000 BCWS Activity 1 100% of $1,420,000 = $1,420,000 Activity 2 100% of $10,500,000 = $10,500,000 Activity 3 50 % of $8,500,000 = $4,250,000 $16,170,000 BCWP Activity 1 100% of $1,420,000 = $1,420,000 Activity 2 100% of $10,500,000 = $10,500,000 Activity 3 60 % of $8,500,000 = $5,100,000 $17,020,000 Scheduled Variance = 17,020,000-16,170,000 = 850,000 Scheduled Performance Index = 17,020,000/16,170,000 = 1.053 Cost Performance = 17,020,000/15,300,000 = 1.11 Ahead of schedule and under budget. 7. The following activities are part of a project to be scheduled using CPM: 1-37 18 C (7) D (2) F (3) 19 0 6 19 26 A (6) G (7) 0 6 19 26 6 9 15 19 B (3) E (4) a. Draw the network. b. What is the critical path? A-C-D-E-G, also shown in the network above as the bold path. c. How many weeks will it take to complete the project? 6+7+2+4+7 = 26 weeks d. How much slack does activity B have? Activity B has 6 weeks of slack – the difference between its early and late start times. 8. Schedule the following activities using CPM: 1-38 1 5 5 7 7 9 9 11 B (4) D (2) F (2) G (2) 1 5 5 7 8 10 10 12 12 15 0 1 H (3) A (1) 12 15 0 1 1 4 7 12 C (3) E (5) 4 7 7 12 a. Draw the network path. b. What is the critical path? A-B-D-E-H, also shown in the network above as the bold path. c. How many weeks will it take to complete the project? 15 weeks, 1+4+2+5+3 d. Which activities have slack, and how much? C, 3 weeks; F, 1 week; and G, 1 week. 1-39 3 5 5 11 B (2) E (6) 7 9 9 15 0 3 3 7 7 A (3) C (4) F (6) G (2) I (3) 0 3 3 7 7 3 7 7 10 D (4) H (3) 3 7 12 15 9. The R&D department is planning to bid on a large project for the development of a new communications system for commercial planes. The accompanying table shows the activities, times, and sequences required: a. Draw the network diagram. Note that G has both D and F as immediate predecessors. However, D is redundant because F also has D as an immediate predecessor. b. What is the critical path? A-C-F-G-I, and A-D-F-G-I at 18 weeks. c. Suppose you want to shorten the completion time as much as possible, and you have the option of shortening any or all of B, C, D, and G each one week. Which would you shorten? 1-40 B is not on a critical path and has slack of 4; therefore, do not shorten as it will not change the project completion time. Shorten C, D, and G one week each. C and D are on parallel critical paths, reducing them both will only reduce project completion time by 1 week. d. What is the new critical path and earliest completion time? A-C-F-G-I; and A-D-F-G-I remain the critical paths. Project completion time is reduced from 18 to 16 weeks. 10. The following represents a project that should be scheduled using CPM: a. Draw the network. TIMES (DAYS) ACTIVITY IMMEDIATE PREDECESSORS a m b ET A — 1 3 5 3 0.4444 B — 1 2 3 2 0.1111 C A 1 2 3 2 0.1111 D A 2 3 4 3 0.1111 E B 3 4 11 5 1.7778 F C, D 3 4 5 4 0.1111 G D, E 1 4 6 3.833 0.6944 H F, G 2 4 5 3.833 0.2500 1-41 2.833 b. What is the critical path? B-E-G-H c. What is the expected project completion time? 2.00+5.00+3.833+3.833 = 14.67 d. What is the probability of completing this project within 16 days? Variance of project completion time is found by adding the variances of activities on the critical path. .1111 + 1.7778 + .6944 + .2500 = 2.833 (16  14.67) Z  = .79 P(T<16) = P(Z<.79) = .7852 (From Excel’s NORMSDIST() function) 5 7 F (4) 12 15 5 7 H (3.83) 9 11 12 15 G(3.83) 10 12 7 12 E (5) 7 12 1 5 0 1 C (2) A (3) 1 5 0 1 1 4 D (3) 4 7 1 4 B (2) 4 7 11. There is an 82 percent chance the project below can be completed in X weeks or less. What is X? 1-42 2.694 Activity Most optimistic Most likely Most pessimistic Expected Time Variance A B C D E 2 3 1 6 4 5 3 3 8 7 11 3 5 10 10 5.5 3 3 8 7 2.25 0 .444 .444 1 First find the value of Z that results in a probability of .82. Using Excel’s NORMSINV(.82) = .915. Then find the critical path (ABD) and the variance on the critical path: 2.25+ 0 + .444 = 2.694. Finally, use equation 5.3 to solve for D. Paths ABD 16.5 .915  D 16.5 D = 18 ACE 15.5 12. The following table represents a plan for a project: 1-43 a. Construct the appropriate network diagram. Job No. a m b ET  2 1 2 3 4 3.00 .111 2 1 2 3 2.00 .111 3 4 5 12 6.00 1.78 4 3 4 11 5.00 1.78 5 1 3 5 3.00 .444 6 1 2 3 2.00 .111 7 1 8 9 7.00 1.78 8 2 4 6 4.00 .444 9 2 4 12 5.00 2.78 10 3 4 5 4.00 .111 11 5 7 8 6.83 .25 1-44 30  26.83 5.47 b. Indicate the critical path. 1-3-6-8-9-11 c. What is the expected completion time for the project? 3.00+6.00+2.00+4.00+5.00+6.83 = 26.83 d. You can accomplish any one of the following at an additional cost of $1,500: (1)Reduce job 5 by two days. (2) Reduce job 3 by two days. (3) Reduce job 7 by two days. If you save $1,000 for each day that the earliest completion time is reduced, which action, if any, would you choose? None of these. Job 5 is not on the critical path; therefore, reducing its time by two days will not reduce project completion time. If you reduce job 3 by two days, then path 1-4-7-10-11 becomes critical and the project length is 25.83 days. You’ve saved $1,000 but paid $1,500. Task 7 is not on the critical path, so reducing it alone will not shorten the project. You could reduce both 3 and 7 to reduce the project length by two days, but would only save $2,000 while spending $3,000. e. What is the possibility that the project will take more than 30 days to complete? First, you need to compute the variance of the C.P.: .111+1.78+.111+.444+2.78+.25 = 5.47. Then use equation 5.3 to find the correct Z and look its value up in Appendix E. Z  1.355 P  .91 3 5 5 8 2 (2) 5 (3) 11 15 6 8 8 11 8 (4) 15 20 11 15 0 3 3 9 9 11 9 (5) 20 26.83 1 (3) 3 (6) 6 (2) 15 20 11 (6.83) 0 3 3 9 9 11 20 26.83 3 8 8 15 15 19 4 (5) 7 (7) 10 (4) 4 9 9 16 16 20 1-45 0 4 4 8 8 1 (4) 3 (4) 6 (6) 9 (5) 10 (7) 0 4 4 8 8 4 7 7 9 4 (3) 7 (2) 9 12 12 14 13. A construction project is broken down into the following 10 activities: a. Draw the network diagram. 4 6 8 13 13 16 2 (2) 5 (5) 8 (3) 19 b. Find the critical path. 1-3-6-9-10, length = 26 weeks c. If activities 1 and 10 cannot be shortened, but activities 2 and 9 can be shortened to a minimum of one week each at a cost of $10,000 per week, which activities would you shorten to cut the project by four weeks? The most logical option would be to cut activity 3 by 3 weeks, and then reduce activity 6 or 9 by one week. This is the lowest cost option, and does not create an additional critical path. Another option would be to reduce activities 6 and 9 by a total of 3 weeks, and then 1-46 7 12 14 20 B (5) C (6)