SOLUTIONS MANUAL
OPERATIONS MANAGEMENT: SUSTAINABILITY AND SUPPLY CHAIN MANAGEMENT
5TH CANADIAN EDITION
CHAPTER NO. 01: OPERATIONS AND PRODUCTIVITY
DISCUSSION QUESTIONS
1. The text suggests four reasons to study OM. We want to
or agricultural society is very different. For example, decades spent
understand (1) how people organize themselves for productive
developing a marvellous new drug or winning a very difficult legal
enterprise, (2) how goods and services are produced, (3) what
case on intellectual property rights may be significant for post-
operations managers do, and (4) how this costly part of our economy
industrial societies, but not show much in the way of productivity
and most enterprises functions.
improvement measured in labour-hours.
2. Possible responses include: Adam Smith (work specialization/
division of labour), Charles Babbage (work specialization/division of
labour), Frederick W. Taylor (scientific management), Walter Shewart 10. Productivity is difficult to measure because precise units of
(statistical sampling and quality control), Henry Ford (moving measure may be lacking, quality may not be consistent, and
assembly line), Charles Sorensen (moving assembly line), Frank and exogenous variables may change.
Lillian Gilbreth (motion study), Eli Whitney (standardization). 11. Mass customization is the flexibility to produce in order to
3. See references in the answer to Question 2. meet specific customer demands, without sacrificing the low cost
of a product-oriented process. Rapid product development is a
4. The actual charts will differ, depending on the specific
source of competitive advantage. Both rely on agility within the
organization the student chooses to describe. The important thing
organization.
is for students to recognize that all organizations require, to a
greater or lesser extent, (a) the three primary functions of 12. Labour productivity in the service sector is hard to improve
operations, finance/accounting, and marketing; and (b) that the because (1) many services are labour intensive and (2) they are
emphasis or detailed breakdown of these functions is dependent individually (personally) processed (the customer is paying for
on the specific competitive strategy employed by the firm. that service—the haircut), (3) it may be an intellectual task
performed by professionals, (4) it is often difficult to mechanize
5. The answer to this question may be similar to that for Question 4.
and automate, and (5) it is often difficult to evaluate for quality.
Here, however, the student should be encouraged to utilize a more
detailed knowledge of a past employer and indicate on the chart 13. Taco Bell designed meals that were easy to prepare; with
additional information such as the number of persons employed to actual cooking and food preparation done elsewhere; automation to
perform the various functions and, perhaps, the position of the save preparation time; reduced floor space; and manager training to
functional areas within the overall organization hierarchy. increase span of control.
6. The basic functions of a firm are marketing, accounting/ ETHICAL DILEMMA
finance, and operations. An interesting class discussion: “Do all
firms/organizations (private, government, not-for-profit) perform With most of the ethical dilemmas in the text, the instructor
these three functions?” The authors’ hypothesis is yes, they do. should generate plenty of discussion. The authors are hesitant to
endorse a particular correct answer, and students may well be on
7. The 10 decisions of operations management are product
both sides of this dilemma.
design, quality, process, location, layout, human resources,
Many students will be inclined to accept the child labour laws
supply-chain management, inventory, scheduling (aggregate and
of their home country. For instance, Americans accept teenagers
short term), and maintenance. We find this structure an excellent
working. But Germans (and others) are more likely to expect
way to help students organize and learn the material.
teenagers to be home studying or in an apprentice program; they
8. Four areas that are important to improving labour productivity frown upon teenagers working. Students raised in more affluent
are: (1) basic education (basic reading and math skills), (2) diet of environments may not understand children working. However,
the labour force, (3) social overhead that makes labour available those who had to scrape by in their youth or had parents that did
(water, sanitation, transportation, etc.), and (4) maintaining and may be more sympathetic to 10-year-olds working.
expanding the skills necessary for changing technology and From an economic and self-preservation perspective many
knowledge, as well as for teamwork and motivation. 10-year-olds do work and need to work. There are still a lot of
9. Productivity is harder to measure when the task becomes poor people in the world. Such a decision may endorse the moral
more intellectual. A knowledge society implies that work is more philosophy perspective defined as a utilitarianism decision.
intellectual and therefore harder to measure. Because Canada (and
many other countries) are increasingly “knowledge” societies,
productivity is harder to measure. Using labour-hours as a
measure of productivity for a postindustrial society vs. an industrial
,A utilitarianism decision defines acceptable actions as those that Resource Last Year This Year Change Percent Change
1.5
maximize total utility, that is, the greatest good for the greatest
number of people. 1,000 1,000 0.31
Labour = 3.33 = 3.64 0.31 = 9.3%
From a Canadian corporate management perspective, 300 2.75 3.33
companies cannot tolerate the publicity that goes with hiring 10-
year-olds. These companies need to have standards that prohibit 1,000 1,000 2.22
Resin = 20 = 22.22 2.22 = 11.1%
such actions by their subcontractors. The moral philosophy per- 50 45 20
spective might call this the virtue ethics position—the decision
1,000 1,000 −0.01
that a mature person with a good moral character would deem Capital = 0.1 = 0.09 –0.01 = 10.0%
correct. 10,000 11,000 0.1
END-OF-CHAPTER PROBLEMS Energy
1,000
= 0.33
1,000
= 0.35
0.02
= 6.1%
3,000 2.850 0.02 0.33
120 boxes
1.1 (a) = 3.0 boxes/hour
40 hours
1.6 Last Year This Year
125 boxes Production 1,000 1,000
(b) = 3.125 boxes/hour
40 hours Labour hr. @ $10 $3,000 $2,750
Resin @ $5 250 225
(c) Change in productivity = 0.125 boxes/hour
Capital cost/month 100 110
0.125 boxes Energy 1,500 1,425
(d) Percentage change = = 4.166%
3.0 $4,850 $4,510
1.2 (a) Labour productivity is 160 valves/80 hours = 2 valves
per hour. [(1,000/4,850) − (1,000/4,510)]
=
(1,000/4,850)
(b) New labour productivity = 180 valves / 80 hours = 2.25
valves per hour
0.206–0.222 –0.016
(c) Percentage change in productivity = .25 valves / 2 = = 0.078 fewer resources
0.206 0.206
valves = 12.5% ⇒ 7.8% improvement*
57,600 * with rounding to 3 decimal places.
1.3 0.15 = , where L = number of labourers
(160)(12)( L ) Output
employed at the plant 1.7 Productivity =
Input
57,600
So L = = 200 labourers employed 65 65
(160)(12)(0.15) (a) Labour productivity = =
(520 × 13) $6,760
= 0.0096 rugs per labour $
Units produced 100 pkgs
1.4 (a) = = 20 pkgs/hour
65
Input 5 (b) Multifactor
productivity (520 × $13) + (100 × $5) + (20 × $50)
133 pkgs
(b) = 26.6 pkgs per hour
5 65
= = 0.00787 rugs per $
6.6 $8, 260
(c) Increase in productivity
= = 33.0%
20 1.8 (a) Labour productivity = 1,000 tires/400 hours = 2.5
tires/hour.
(b) Multifactor productivity is 1,000 tires/ (400 × $12.50 +
20,000 × $1 + $5,000 + $10,000) = 1,000 tires/$40,000
= 0.025 tires/dollar.
(c) Multifactor productivity changes from 1,000/40,000 to
1,000/39,000, or from 0.025 to 0.02564; the ratio is
1.0256, so the change is a 2.56 % increase.
,1.9 Last Year This Year Change Percent Change
1,500 1,500 0.33
Labour hrs. = 4.29 = 4.62 = 7.7%
350 325 4.29
Capital invested 1,500 1,500 −0.02
= –20%
= 0.10 = 0.08
15,000 18,000 0.1
Energy (BTU) 1,500 1,500 0.05
= 10%
= 0.50 = 0.55
3,000 2,750 0.50
Productivity of capital did drop; labour productivity increased as did energy, but by less than the anticipated 15%.
Note: Rounding is used in the calculations. (b) Investment change:
1.10 Multifactor productivity is: 1,500 1,500
= = 0.293 loaves/$
(640 × $8) 5,120
375 autos/[($20 × 10,000) + ($1,000 × 500) + ($3 ×
100,000)] = 375/(200,000 + 500,000 + 300,000) = 1,875 1,875
= = 0.359 loaves/$
375/1,000,000 = 0.000375 autos per dollar of inputs (640 × 8) + (100) 5,220
1.11 (a) Before: 500/20 = 25 boxes per hour; .293 − .293
(c) Percent change : = 0 (labour)
After, 650/24 = 27.08 .293
.359 − .293
(b) 27.08/25 Percent change : = 0 .225
.293
= 1.083, or an increase of 8.3% in productivity
= 22.5% (investment)
(c) New labour productivity = = 29.167 Note: Rounding is used in the calculations.
boxes per hour
1,500
1.12 1,500 × 1.25 =
1,875 (new demand) 1.14 Old process =
(640 × 8) + 500 + (1,500 × 0.35)
Outputs 1,500
= Productivity = = 0.244
Inputs 6,145
1,875 1,875
= 2.344 New process =
labour-hours (800 × 8) + 500 + (1,875 × 0.35)
1,875 1,875
New process = ≅ 800 labour-hours = = 0.248
2.344 7,556.25
800
= 5 workers 0.248-0.244
160 Percent change = = 1.6%
0.244
1,500
Current process = = 2.344
labour-hours 6,600 vans
1.15 (a) = 0.10
1,500 x labour-hours
= labour-hours ≅ 640 x = 66,000 labour-hours
2.344
640
= 4 workers There are 300 labourers. So,
160
66,000 labour-hours
Add one worker. = 220 labour-hours/labourer
300 labourers on average, per month
1.13 (a) Labour change:
1,500 1,500 6,600 vans
= = 0.293 loaves/$ (b) Now = 0.11, so x = 60,000 labour-hour
(640 × $8) 5,120 x labour-hours
60,000 labour-hours
1,875 so, = 200 labour-hours/labourer
= 0.293 loaves/$ 300 labourers
(800 × $8) on average, per month
$ output 52($90) + 80($198)
1.16 =
Labour-hour 8(45)
20,520
= = $57.00 per labour-hour
360
, 1,500 Quality: The case mentions the quality survey as an overt
1.17 Last year =
(350 × 8) + (15,000 × 0.0083) + (3,000 × 0.6) quality measure, but quality can be discussed from a variety
of perspectives—hiring the right people, food ingredients,
1,500
= good suppliers, speed of service, friendliness, etc.
2,800 + 124.50 + 1,800
1,500 Process: The process can be discussed from many perspectives:
= = 0.317 doz / $ (a) the process of processing a guest: to their seat, taking the
4,724.5
order, order processing, delivery of the meal, payment, etc., (b)
1500 the process of how a meal is prepared (see, for instance, the
This year =
(325 × 8) + (18,000 × 0.0083) + (2,750 × 0.6) example box in Chapter 2 on Chef Natsu Takahashi), or (c)
= 0.341 doz / $ some subset of any of these.
0.341 − 0.317 Location: Hard Rock Cafes have traditionally been located in
Percentage change =
0.317 tourist locations, but that is beginning to change.
= 0.076, or 7.6% increase Layout: Little discussion in the case, but students may be very
CASE STUDY aware that a kitchen layout is critical to efficient food
preparation and that a bar is critical in many food
UBER TECHNOLOGIES, INC. establishments for profitability. The retail shop in relation to
First, some drivers (maybe most) may not require a wage that the restaurant and its layout is a critical ingredient for
equals those fully engaged in the “taxi” business. It truly could be profitability at Hard Rock.
a supplemental income … “I’m going that way anyhow so let’s
make a few dollars while on the way.” Similarly, the capital Human resources: Jim Knight, VP for Human Resources at
investment cost approaches zero as the car is going that direction Hard Rock, seeks people who are passionate about music, love
anyhow. These are idle or underutilized resources. to serve, can tell a story. This OM decision is a critical
ingredient for success of a Hard Rock Cafe and an integral part
From society’s perspective, Uber and its competitors are desirable
of the Hard Rock dining experience.
because both idle or wasted labour and capital resources are being
utilized. At the same time, as a bonus, Uber is reducing traffic and Supply chain management: Although not discussed in the
auto pollution while speeding up the transport of individuals and case, students should appreciate the importance of the supply
local commerce. chain in any food service operation. Some items like leather
As a competitor for the traditional taxi service, Uber seems to be jackets have a nine month lead time. Contracts for meat and
an enhancement in efficiency. poultry are signed eight months in advance.
For those faculty who want to spend some time on the larger Inventory: Hard Rock, like any restaurant, has a critical inventory
productivity message, this case provides such an opportunity. issue that requires that food be turned over rapidly and that food
Uber, as Joseph Schumpeter would suggest, has developed a in inventory be maintained at the appropriate and often critical
disruptive technology (creative destruction, in a Schumpeterian temperatures. But the interesting thing about Hard Rock’s
translation). Innovations such as this are exactly how economic inventory is that they maintain $40 million of memorabilia with
efficiency is enhanced. The traditional taxi services, with some all sorts of special care, tracking, and storage issues.
imagination, could have developed and adopted this technology,
Scheduling: Because most Hard Rock Cafe’s sales are driven
but most were ensconced in their own regulatory cocoon. As is
by tourists, the fluctuations in seasonal, daily, and hourly
often the case, it takes an outsider such as Uber to be creative by
demands for food are huge. This creates a very interesting and
putting unused resources to use and providing society greater
challenging task for the operations managers at Hard Rock.
efficiency. (Not mentioned in the case, linear programming is actually
used in some cafes to schedule the wait staff.)
VIDEO CASE STUDIES
Maintenance/reliability: The Hard Rock Cafe doors must open
1 HARD ROCK CAFE: OPERATIONS every day for business. Whatever it takes to provide a reliable
MANAGE IN SERVICES kitchen with hot food served hot and cold food served cold
must be done. Bar equipment and point-of-sale equipment
This case provides a great opportunity for an instructor to stimulate a
must also work.
class discussion early in the course about the pervasiveness of the 10
decisions of OM with this case alone or in conjunction with the Hard 2. Productivity of kitchen staff is simply the output (number
Rock Cafe case. A short video accompanies the case. of meals) over the input (hours worked). The calculation is how
many meals prepared over how many hours spent preparing
1. Hard Rock’s 10 Decisions: This is early in the course to discuss them. The same kind of calculation can be done for the wait
these in depth, but still a good time to get the students engaged in the staff. In fact, Hard Rock managers begin with productivity
10 OM decisions around which the text is structured. standards and staff to achieve those levels. (You may want to
Product design: Hard Rock’s tangible product is food and like revisit this issue when you get to Chapter 10 and Supplement 10
any tangible product it must be designed, tested, and “costed on labour standards and discuss how labour can be allocated on
out.” The intangible product includes the music, memorabilia, a per-item basis with more precision.)
and service.
OPERATIONS MANAGEMENT: SUSTAINABILITY AND SUPPLY CHAIN MANAGEMENT
5TH CANADIAN EDITION
CHAPTER NO. 01: OPERATIONS AND PRODUCTIVITY
DISCUSSION QUESTIONS
1. The text suggests four reasons to study OM. We want to
or agricultural society is very different. For example, decades spent
understand (1) how people organize themselves for productive
developing a marvellous new drug or winning a very difficult legal
enterprise, (2) how goods and services are produced, (3) what
case on intellectual property rights may be significant for post-
operations managers do, and (4) how this costly part of our economy
industrial societies, but not show much in the way of productivity
and most enterprises functions.
improvement measured in labour-hours.
2. Possible responses include: Adam Smith (work specialization/
division of labour), Charles Babbage (work specialization/division of
labour), Frederick W. Taylor (scientific management), Walter Shewart 10. Productivity is difficult to measure because precise units of
(statistical sampling and quality control), Henry Ford (moving measure may be lacking, quality may not be consistent, and
assembly line), Charles Sorensen (moving assembly line), Frank and exogenous variables may change.
Lillian Gilbreth (motion study), Eli Whitney (standardization). 11. Mass customization is the flexibility to produce in order to
3. See references in the answer to Question 2. meet specific customer demands, without sacrificing the low cost
of a product-oriented process. Rapid product development is a
4. The actual charts will differ, depending on the specific
source of competitive advantage. Both rely on agility within the
organization the student chooses to describe. The important thing
organization.
is for students to recognize that all organizations require, to a
greater or lesser extent, (a) the three primary functions of 12. Labour productivity in the service sector is hard to improve
operations, finance/accounting, and marketing; and (b) that the because (1) many services are labour intensive and (2) they are
emphasis or detailed breakdown of these functions is dependent individually (personally) processed (the customer is paying for
on the specific competitive strategy employed by the firm. that service—the haircut), (3) it may be an intellectual task
performed by professionals, (4) it is often difficult to mechanize
5. The answer to this question may be similar to that for Question 4.
and automate, and (5) it is often difficult to evaluate for quality.
Here, however, the student should be encouraged to utilize a more
detailed knowledge of a past employer and indicate on the chart 13. Taco Bell designed meals that were easy to prepare; with
additional information such as the number of persons employed to actual cooking and food preparation done elsewhere; automation to
perform the various functions and, perhaps, the position of the save preparation time; reduced floor space; and manager training to
functional areas within the overall organization hierarchy. increase span of control.
6. The basic functions of a firm are marketing, accounting/ ETHICAL DILEMMA
finance, and operations. An interesting class discussion: “Do all
firms/organizations (private, government, not-for-profit) perform With most of the ethical dilemmas in the text, the instructor
these three functions?” The authors’ hypothesis is yes, they do. should generate plenty of discussion. The authors are hesitant to
endorse a particular correct answer, and students may well be on
7. The 10 decisions of operations management are product
both sides of this dilemma.
design, quality, process, location, layout, human resources,
Many students will be inclined to accept the child labour laws
supply-chain management, inventory, scheduling (aggregate and
of their home country. For instance, Americans accept teenagers
short term), and maintenance. We find this structure an excellent
working. But Germans (and others) are more likely to expect
way to help students organize and learn the material.
teenagers to be home studying or in an apprentice program; they
8. Four areas that are important to improving labour productivity frown upon teenagers working. Students raised in more affluent
are: (1) basic education (basic reading and math skills), (2) diet of environments may not understand children working. However,
the labour force, (3) social overhead that makes labour available those who had to scrape by in their youth or had parents that did
(water, sanitation, transportation, etc.), and (4) maintaining and may be more sympathetic to 10-year-olds working.
expanding the skills necessary for changing technology and From an economic and self-preservation perspective many
knowledge, as well as for teamwork and motivation. 10-year-olds do work and need to work. There are still a lot of
9. Productivity is harder to measure when the task becomes poor people in the world. Such a decision may endorse the moral
more intellectual. A knowledge society implies that work is more philosophy perspective defined as a utilitarianism decision.
intellectual and therefore harder to measure. Because Canada (and
many other countries) are increasingly “knowledge” societies,
productivity is harder to measure. Using labour-hours as a
measure of productivity for a postindustrial society vs. an industrial
,A utilitarianism decision defines acceptable actions as those that Resource Last Year This Year Change Percent Change
1.5
maximize total utility, that is, the greatest good for the greatest
number of people. 1,000 1,000 0.31
Labour = 3.33 = 3.64 0.31 = 9.3%
From a Canadian corporate management perspective, 300 2.75 3.33
companies cannot tolerate the publicity that goes with hiring 10-
year-olds. These companies need to have standards that prohibit 1,000 1,000 2.22
Resin = 20 = 22.22 2.22 = 11.1%
such actions by their subcontractors. The moral philosophy per- 50 45 20
spective might call this the virtue ethics position—the decision
1,000 1,000 −0.01
that a mature person with a good moral character would deem Capital = 0.1 = 0.09 –0.01 = 10.0%
correct. 10,000 11,000 0.1
END-OF-CHAPTER PROBLEMS Energy
1,000
= 0.33
1,000
= 0.35
0.02
= 6.1%
3,000 2.850 0.02 0.33
120 boxes
1.1 (a) = 3.0 boxes/hour
40 hours
1.6 Last Year This Year
125 boxes Production 1,000 1,000
(b) = 3.125 boxes/hour
40 hours Labour hr. @ $10 $3,000 $2,750
Resin @ $5 250 225
(c) Change in productivity = 0.125 boxes/hour
Capital cost/month 100 110
0.125 boxes Energy 1,500 1,425
(d) Percentage change = = 4.166%
3.0 $4,850 $4,510
1.2 (a) Labour productivity is 160 valves/80 hours = 2 valves
per hour. [(1,000/4,850) − (1,000/4,510)]
=
(1,000/4,850)
(b) New labour productivity = 180 valves / 80 hours = 2.25
valves per hour
0.206–0.222 –0.016
(c) Percentage change in productivity = .25 valves / 2 = = 0.078 fewer resources
0.206 0.206
valves = 12.5% ⇒ 7.8% improvement*
57,600 * with rounding to 3 decimal places.
1.3 0.15 = , where L = number of labourers
(160)(12)( L ) Output
employed at the plant 1.7 Productivity =
Input
57,600
So L = = 200 labourers employed 65 65
(160)(12)(0.15) (a) Labour productivity = =
(520 × 13) $6,760
= 0.0096 rugs per labour $
Units produced 100 pkgs
1.4 (a) = = 20 pkgs/hour
65
Input 5 (b) Multifactor
productivity (520 × $13) + (100 × $5) + (20 × $50)
133 pkgs
(b) = 26.6 pkgs per hour
5 65
= = 0.00787 rugs per $
6.6 $8, 260
(c) Increase in productivity
= = 33.0%
20 1.8 (a) Labour productivity = 1,000 tires/400 hours = 2.5
tires/hour.
(b) Multifactor productivity is 1,000 tires/ (400 × $12.50 +
20,000 × $1 + $5,000 + $10,000) = 1,000 tires/$40,000
= 0.025 tires/dollar.
(c) Multifactor productivity changes from 1,000/40,000 to
1,000/39,000, or from 0.025 to 0.02564; the ratio is
1.0256, so the change is a 2.56 % increase.
,1.9 Last Year This Year Change Percent Change
1,500 1,500 0.33
Labour hrs. = 4.29 = 4.62 = 7.7%
350 325 4.29
Capital invested 1,500 1,500 −0.02
= –20%
= 0.10 = 0.08
15,000 18,000 0.1
Energy (BTU) 1,500 1,500 0.05
= 10%
= 0.50 = 0.55
3,000 2,750 0.50
Productivity of capital did drop; labour productivity increased as did energy, but by less than the anticipated 15%.
Note: Rounding is used in the calculations. (b) Investment change:
1.10 Multifactor productivity is: 1,500 1,500
= = 0.293 loaves/$
(640 × $8) 5,120
375 autos/[($20 × 10,000) + ($1,000 × 500) + ($3 ×
100,000)] = 375/(200,000 + 500,000 + 300,000) = 1,875 1,875
= = 0.359 loaves/$
375/1,000,000 = 0.000375 autos per dollar of inputs (640 × 8) + (100) 5,220
1.11 (a) Before: 500/20 = 25 boxes per hour; .293 − .293
(c) Percent change : = 0 (labour)
After, 650/24 = 27.08 .293
.359 − .293
(b) 27.08/25 Percent change : = 0 .225
.293
= 1.083, or an increase of 8.3% in productivity
= 22.5% (investment)
(c) New labour productivity = = 29.167 Note: Rounding is used in the calculations.
boxes per hour
1,500
1.12 1,500 × 1.25 =
1,875 (new demand) 1.14 Old process =
(640 × 8) + 500 + (1,500 × 0.35)
Outputs 1,500
= Productivity = = 0.244
Inputs 6,145
1,875 1,875
= 2.344 New process =
labour-hours (800 × 8) + 500 + (1,875 × 0.35)
1,875 1,875
New process = ≅ 800 labour-hours = = 0.248
2.344 7,556.25
800
= 5 workers 0.248-0.244
160 Percent change = = 1.6%
0.244
1,500
Current process = = 2.344
labour-hours 6,600 vans
1.15 (a) = 0.10
1,500 x labour-hours
= labour-hours ≅ 640 x = 66,000 labour-hours
2.344
640
= 4 workers There are 300 labourers. So,
160
66,000 labour-hours
Add one worker. = 220 labour-hours/labourer
300 labourers on average, per month
1.13 (a) Labour change:
1,500 1,500 6,600 vans
= = 0.293 loaves/$ (b) Now = 0.11, so x = 60,000 labour-hour
(640 × $8) 5,120 x labour-hours
60,000 labour-hours
1,875 so, = 200 labour-hours/labourer
= 0.293 loaves/$ 300 labourers
(800 × $8) on average, per month
$ output 52($90) + 80($198)
1.16 =
Labour-hour 8(45)
20,520
= = $57.00 per labour-hour
360
, 1,500 Quality: The case mentions the quality survey as an overt
1.17 Last year =
(350 × 8) + (15,000 × 0.0083) + (3,000 × 0.6) quality measure, but quality can be discussed from a variety
of perspectives—hiring the right people, food ingredients,
1,500
= good suppliers, speed of service, friendliness, etc.
2,800 + 124.50 + 1,800
1,500 Process: The process can be discussed from many perspectives:
= = 0.317 doz / $ (a) the process of processing a guest: to their seat, taking the
4,724.5
order, order processing, delivery of the meal, payment, etc., (b)
1500 the process of how a meal is prepared (see, for instance, the
This year =
(325 × 8) + (18,000 × 0.0083) + (2,750 × 0.6) example box in Chapter 2 on Chef Natsu Takahashi), or (c)
= 0.341 doz / $ some subset of any of these.
0.341 − 0.317 Location: Hard Rock Cafes have traditionally been located in
Percentage change =
0.317 tourist locations, but that is beginning to change.
= 0.076, or 7.6% increase Layout: Little discussion in the case, but students may be very
CASE STUDY aware that a kitchen layout is critical to efficient food
preparation and that a bar is critical in many food
UBER TECHNOLOGIES, INC. establishments for profitability. The retail shop in relation to
First, some drivers (maybe most) may not require a wage that the restaurant and its layout is a critical ingredient for
equals those fully engaged in the “taxi” business. It truly could be profitability at Hard Rock.
a supplemental income … “I’m going that way anyhow so let’s
make a few dollars while on the way.” Similarly, the capital Human resources: Jim Knight, VP for Human Resources at
investment cost approaches zero as the car is going that direction Hard Rock, seeks people who are passionate about music, love
anyhow. These are idle or underutilized resources. to serve, can tell a story. This OM decision is a critical
ingredient for success of a Hard Rock Cafe and an integral part
From society’s perspective, Uber and its competitors are desirable
of the Hard Rock dining experience.
because both idle or wasted labour and capital resources are being
utilized. At the same time, as a bonus, Uber is reducing traffic and Supply chain management: Although not discussed in the
auto pollution while speeding up the transport of individuals and case, students should appreciate the importance of the supply
local commerce. chain in any food service operation. Some items like leather
As a competitor for the traditional taxi service, Uber seems to be jackets have a nine month lead time. Contracts for meat and
an enhancement in efficiency. poultry are signed eight months in advance.
For those faculty who want to spend some time on the larger Inventory: Hard Rock, like any restaurant, has a critical inventory
productivity message, this case provides such an opportunity. issue that requires that food be turned over rapidly and that food
Uber, as Joseph Schumpeter would suggest, has developed a in inventory be maintained at the appropriate and often critical
disruptive technology (creative destruction, in a Schumpeterian temperatures. But the interesting thing about Hard Rock’s
translation). Innovations such as this are exactly how economic inventory is that they maintain $40 million of memorabilia with
efficiency is enhanced. The traditional taxi services, with some all sorts of special care, tracking, and storage issues.
imagination, could have developed and adopted this technology,
Scheduling: Because most Hard Rock Cafe’s sales are driven
but most were ensconced in their own regulatory cocoon. As is
by tourists, the fluctuations in seasonal, daily, and hourly
often the case, it takes an outsider such as Uber to be creative by
demands for food are huge. This creates a very interesting and
putting unused resources to use and providing society greater
challenging task for the operations managers at Hard Rock.
efficiency. (Not mentioned in the case, linear programming is actually
used in some cafes to schedule the wait staff.)
VIDEO CASE STUDIES
Maintenance/reliability: The Hard Rock Cafe doors must open
1 HARD ROCK CAFE: OPERATIONS every day for business. Whatever it takes to provide a reliable
MANAGE IN SERVICES kitchen with hot food served hot and cold food served cold
must be done. Bar equipment and point-of-sale equipment
This case provides a great opportunity for an instructor to stimulate a
must also work.
class discussion early in the course about the pervasiveness of the 10
decisions of OM with this case alone or in conjunction with the Hard 2. Productivity of kitchen staff is simply the output (number
Rock Cafe case. A short video accompanies the case. of meals) over the input (hours worked). The calculation is how
many meals prepared over how many hours spent preparing
1. Hard Rock’s 10 Decisions: This is early in the course to discuss them. The same kind of calculation can be done for the wait
these in depth, but still a good time to get the students engaged in the staff. In fact, Hard Rock managers begin with productivity
10 OM decisions around which the text is structured. standards and staff to achieve those levels. (You may want to
Product design: Hard Rock’s tangible product is food and like revisit this issue when you get to Chapter 10 and Supplement 10
any tangible product it must be designed, tested, and “costed on labour standards and discuss how labour can be allocated on
out.” The intangible product includes the music, memorabilia, a per-item basis with more precision.)
and service.
