CF04: 4680 Operations Management

Jack Meredith, 3109 Worrell, ph. 336.758.4467, fax 758.4514

email: jack.meredith@mba.wfu.edu
Texts:
Meredith and Shafer: Operations Management for MBAs, 2nd ed., Wiley, 2002.
Case/Readings Packet: To be distributed.
Purpose: The focus of this course is on managing operations to provide a competitive advantage through the timely
provision of affordable, quality goods and services in all of society's organizations. Another purpose is to communicate the
interrelationships between operations and the other functional areas of the organization. Thus, the course covers such issues
as fast response, strategy, capacity planning, process design, productivity, supply chains, and scheduling, among others.
These are issues that everyone in an organizationnot just operationsmust deal with: making efficient use of your
available resources, making sure you have adequate capacity when called upon, being productive with the people you have,
organizing your work flow to be effective and cost-efficient, and assuring that you are adding value to your organization.
Pedagogy: I have divided the 225 minutes we will have for each class session into three segments, with a short break
between each segment. We will generally spend the first segment reviewing homework: the assigned text chapter(s),
questions, and problems, and the assigned topical articles. The second segment will be divided between team decisions for a
service-operations gaming exercise, a discussion of the assigned reading, and a brief lecture on upcoming material for the
following session. The readings will include important practical and tangential issues regarding the concepts we are
studying. Please note that the point of these readings is NOT to inform you about current events but rather to evaluate
interesting applications of a concept under new or unusual conditions. The third segment of class will be devoted to
discussing the case for that session. Again, I employ cases to give practice in applying operations concepts, NOT to inform
about current situations and companies. I try to identify the best cases over the years, usually from Harvard, that cover the
practice of that concept. It is highly unlikely that the best case will be a recent one; cases that do a superb job of explicating
and demonstrating a concept come along rarely and when they do, they become what Harvard identifies years later as
classics.
Grading: Late work is not accepted; if you miss a class (I understand that this may occasionally be necessary), please be
sure to get the material we covered from a classmate. If your team has some responsibility for that class, try to get your
input to them early enough to use it. The elements of your final grade are described below. If you wish an early report of
your course grade, or the grade on your final exam, please leave a stamped, self-addressed envelope or postcard with me the
last day of class.
-Contribution: This factor comes into play when a student is on the margin between two grades. It is based on each
individuals overall contribution to the class learning: preparation on the class materials, quality of comments, thoroughness
of the homework, and so on. Be aware that not all discussion is equally valuable; excessive talking may be more
detrimental than helpful. In general, valuable comments exhibit the following characteristics:
1. Preparation: If cold- or warm-called, were you prepared? Was your comment memorable or mediocre?
2. Topical: Was your comment pertinent and relevant to the point; did it advance or instead side-track class discussion?
3. Understandable: Was your comment clear, concise, succinct, and use terminology that we all know?
4. Depth: Was your comment more than just a summary of the material? Was it thought through or a spur-of-the-moment
whim? Was it based on the data in the class materials? Was it logical? Were you able to defend it if challenged?
5. Insightful: Was the comment original, interesting? Did it raise an issue we hadnt thought about? Did it identify an
exception, inconsistency, or contradiction in our thinking?
-Group Case Work (25%): Case questions from the syllabus will be assigned to teams a week ahead of time for each case.
Although only one or two questions will be assigned to each team, all teams should be well-prepared to address all the
assigned case questions. I will announce the team speakers at the end of the first class segment. Although no written
material will be collected from the teams, it will be useful for the teams speaker to have a written outline of points and
some analysis/diagrams to project on the screen with the help of another team member. After the 6 (!) minute presentation,
the question (and the teams answer), will be opened to the class for further discussion and critique. (Because we will have
7 teams presenting, I need to carefully limit the time any one group takes.) A debrief and summary of relevant issues will
wrap up the case. The whole team will receive the same grade on the question.
-Hospital Game Simulation (25%): Teams will run a service operations simulation called The Hospital Game (HG). This
simulation takes place in a foreign country under unfamiliar cultural and economic conditions. The grade for this portion of
1

the class will be based equally on: how well you were able to do in the exercise, the quality of the presentation itself, and
your critical analysis of the other teams results. We will do a one-period dry run of the simulation to give you a feel for
the nature of the game. Read the handout before class and come prepared to make decisions for period 11 in the first
session. We will review your results in the second session and then you will have to immediately make decisions for real
(for period 11, again). Future in-class time to review results and make new decisions will be more limited. Again, the team
members will all receive the same grade on the simulation.
-Final Exam (50%): The exam will be closed everything (notes, materials, computer, etc.) but critical formulas will be
supplied. Bring paper, pen/pencil, and, if you wish, something to help you with arithmetic such as a calculator. The exam
will NOT cover the Hospital Game but it will cover everything else.
Schedule:
Sess.
No.

Due
Date

Readings

Case

HG
Due

9/18p 1: Nature of Operations

As Jobs Move East...

THE HOSPITAL GAME
Invisible Supplier has Penneys...
Deep Change: How Operational..
Fast Heat: How Korea...

Gt. Nuclear Fizzle

Per. 11T

9/25a

Savings Tip: Dont Do IT Yourself

Taco Bell
Beyond Products: Services-Based Stgy

Per. 11

10/2p 3:Quality Management

Pg 116-19 Qual. Fnct. Depl.

Car Retailing: Break Down

Zero Defections: Quality Comes...

Altoona

Per. 12

10/9a

Walk Onto the Shop Floor

Simple & Effective Cell. Approach

Sealol

Per. 13

10/16p 6: Capacity/Location

A Long March
Ntl. Cranberry
TimeNext Source of Comp. Adv.
Power of Virtual...Interview with Dell...

Per. 14

10/30p 7: Scheduling
11: Just-in-Time

Read a PlantFast
Manzana
JIT Manufacturing is Working Overtime
Does Manufacturing Need a JIT Revol.?

Per. 15

11/6a

Why the Supply Chain Broke Down

Beer Game
Floating on Air
ERP is Dead! Long live ERP!
Why Companies Flunk Supply-Chain 101
The Icarus Paradox: How...

Per. 16

11/13p

Chpt: Topic

2: Stgy/Competitiveness
Pg 111-14 Agg. Proj. Plan

5: Transform. Sys. Design

8: Supply Chain Mgt.

8S: Beer Game
10: Mtl. Reqmts. Plnng.

HG PRESENTATIONS AND FINAL EXAMINATION

Assignment for Session 1

Chapter 1: The Nature of Operations
1. Are there other ways to add value besides alter, transport, store, and inspect?
2. How might the texts definition of a facilitating good alter the way we perceive a product? A service?
3. Expand questions (pg. 17) 2,5
As Jobs Move East...
1. Will jobs simply keep moving to the cheapest labor markets? What are the limits? Who will buy the goods if no one has
jobs?
Invisible Supplier has Penneys Shirts all Buttoned Up
1. How far should Penney let TAL go in providing their vertical integration (design, marketing, manufacture)? In breadth of
products? What are the risks to Penney?
2. Air freight is expensive for resupply from abroad. What might TAL suspect about their future use of air freight?
Deep Change: How Operational Innovation Can Transform Your Company
1. In the sidebar A Powerful Weapon, faster cycle time is offered as an operational benefit. Could it also offer
marketplace or strategic benefits? If so, what would they be?
2. Why doesnt the VP of Manufacturing (or Operations) take responsibility for operational innovation?
3. Why are top execs more interested in financial deals than operational innovation?
4. Would this article be better titled Disruptive Operational Innovation? Why/why not?
5. Why do competitors have so much trouble imitating other successful operational innovators?
6. In the last paragraph, Hammer states that Operational innovation... is the only lasting basis for superior performance.
Why? Couldnt other things provide a lasting basis?
Fast Heat: How Korea Won the Microwave War
1. The article points out that the U.S. got into the microwave market "late" (p. 85, 92). But Raytheon and Litton invented
the microwave so what is the message?
2. Page 86, right middle: "America was wealthy because it made things." As the US shifts to a service economy will it get
poorer relative to the rest of the world? Is the quote wrong? Does only making "things" bring wealth?
3. How could Amperex go bankrupt selling in the US when Samsung made money on the plant by moving it to Korea and
selling to the US?
4. This is a case study in how to hollow out any company (if GE can be beat, anyone can). What defense do firms need-will nothing work?
The Great Nuclear Fizzle
1. In 1960, did it make sense for B&W to get into this new market?
2. At the time of the case, how did B&W win orders?
3. What initially won nuclear orders?
4. What in your estimate would it take to keep winning nuclear orders?
5. What must NOT happen to stay a player in the nuclear market?
6. In the section Lure of Unspoiled Labor, will automation substitute for skilled labor or demand more of it?

Assignment for Session 2

Chapter 2: Business Strategy and Global Competitiveness (plus the handout)
1. Expand questions 4,6,7,10(see Fig. 2.14),13.
Pgs. 111-114
1. Pg. 130: Expand question 12.
Savings Tip: Dont Do it Yourself
1. How does this 2003 article tie to todays outsourcing furor?
2. What should a company do to make outsourcing work well for them?
Beyond Products: Services Based Strategy
1. Describe the process required to determine what activities to keep and develop as core capabilities, as well as those
needed to maintain supremacy, and those to outsource. (Note the definition of Technology in the sidebar: The systematic
application of knowledge to useful purposes.)
2. How do you decide where to draw the line between being hollowed out and making a smart outsourcing move. How
can you protect yourself in this process?
3. What is Quinns argument for the point that products seldom provide a sustainable competitive edge but services do? Is
it an issue of products vs. services or something else?

Taco Bell
1. Use Exhibits 1 and 6, plus the info on page 7 and elsewhere in the case to approximate TBs annual income statements
(in both $M and % of sales) in 1983 and 1990 in terms of each cost category.
2. Estimate the potential capacity increase that K-Minus allowed. Compare it to the company store sales volume increase in
Exh.1 between 1988 and 1990.
3. Compare the stated capacity increase from SOS with the time reduction it gavewhy the difference? Compare the
capacity increase due to SOS to the per company store sales volume increases (Exh. 1 and 2) between 1988 and 1990.
4. Estimate the impact that delayering and pay changes for RMs, DMs, and AMs between 1988 and 1990 had on TBs
overall corporate profits.
5. Identify the factors and programs that contributed to the success of TBs strategy. What was the overall key to their
success?
6. Identify the pros and cons of top-down versus bottom-up change in an organization. Which did TB use here? Which
advantages and disadvantages occurred? Were any lost or avoidedhow?
7. Which elements of TBs strategy would be relatively easy for competitors to copy? Which would be difficult? In lay
terms, was TBs financial strategy a cost strategy, a profit strategy, or what?

Assignment for Session 3

Chapter 3: Quality Management
1. Expand questions 1,4,6,8.
2. Exercises 3,5,6,7,9.
Pgs. 116-119
1. Pg. 130: Expand question 8.
Car Retailing: Break Down
1. How did quality impact response time and customization?
Zero Defections: Quality Comes to Services
1. How do you decide which customers you do NOT want?
2. Compare your firm to those in the Reducing Defections 5% chart to find which profit increase applies to you.
3. Where do the increasing profits of repeat customers come from?
4. Why dont company executives, owners, managers ever try to use their own products, services, branches, etc. to see what
the customer has to put up with?
Altoona (NB: Assume it is now March 1983)
1. Compare the two dirt charts in Exh. 4A and 4B, noting the differences. Does either one, or both, exhibit a process in
control? What else can you infer from the charts?
2. Compare the two pocking charts in Exh. 4A and 4B, noting the differences. Does either one, or both, exhibit a process in
control? What else can you infer from the charts? Compare to the comments in the case.
3. Analyze the coating room yield problem due to dirt. Analyze the pocking problem.
4. Based on Exhibit 5, what is the overall yield of the entire process (beware the footnote in the exhibit)? If the defects
could be reduced by half, how much would it be worth to the company?
5. If the production process for the 8 and 5 disks has a balanced flow, what would be the minimum throughput time for a
disk? Whats the theoretical monthly capacity of the process?
6. What difficulties are keeping yields down?
7. Are any managerial policies driving the yield problem?
8. Assuming that the new production facility has been postponed indefinitely, make recommendations to Grenier about what
should be done to meet demand. Include a plan of action.

Assignment for Session 4

Chapter 5: Transformation System Design
1. What does the simple 2X2 customization-volume matrix attachment (handout) show? Contrast it with Fig. 5.9 in the
text. Why are there not the voids shown in the product-process handout?
2. Contrast the Matrix of Service Processes (handout) with Figure 5.9.
3. Expand questions 6,7,9
4. Exercises 1,2a,3,5,6.
Walk Onto the Shop Floor
1. So how did Delphi accomplish this major improvement? Why didnt they do it before?
Simple and Effective Cellular Approach
1. This firm was driven by their perceived need to reduce throughput times. Whats the message here?
4

2. In moving to cellular manufacturing (CM), they canceled capital spending for automation, robotic deburring, shop floor
scheduling systems, FMSs, and then turned off and sold their shop floor computer. Does this mean that technology isnt
really needed to increase competitiveness?
3. Principle #2 for capital investments (p. 122) does not identify faster throughput as a reason to invest. Is this wrong? An
oversight?
4. After changing to CM, defect rates initially increased (Fig. 5, pg. 123) instead of decreasing. Is this phenomenon true of
other changes?
EG&G Sealol (assume in The Inventory Option the 522,000 hours is their annual production)
1. Bluestones comments about not making parts to order in The Inventory Option (pg. 6) refer only to standard machine
parts. Using his data determine for yourself the likely percentage increase in plant capacity. Recalculate based on Clarks
setup time data (bottom of page 7). What level of inventory investment does this imply?
2. Assume in The Subcontracting Option that indirect labor is 50% of direct in-house labor and that the average in-house
part costs $200. Calculate the typical margin of subcontracted parts using the data supplied. Calculate the total annual lost
contribution (in $) due to subcontracting. What percentage of probable sales is this? Of profits?
3. Using Clarks data on The Group Technology Option at the bottom of page 7 and top of page 8, calculate the capacity
increase due to reduced rework and idle time. Assume it takes 100 hours for the 40 parts and divide the time between
activities. Then take the GT reductions and determine the percentage capacity increase. Given this option, what should
happen to setup time? What effect would this have on the percentage capacity increase?
4. Exhibit 7 shows a portion of the production process. Operation No. 05 is a lathe operation involving turning and cutoff.
It takes 5 hr. to set up the lathe and .014 hr. to run each of the 80 pieces in the lot. Determine the total time to process this
lot through all the operations in the current job shop. Is Bluestones estimate of about 50% setup time correct?
5. In a GT cell, each operation in Exh. 7 would be done at a separate workcenter with a machine already set up to process
the lot. What would be the total time to process the lot through all the 8 operations, assuming one fully cross trained worker
in the cell? Assuming one worker per operation? Rebalance the line and find the new total time.
6. In Exhibit 5, assume the 12 jobs are representative of all the parts made in the shop. (NB: Job 9 should end in 8.) How
many cells would you suggest forming (assuming multiple machines of each type) to process these parts? Allocate the 12
jobs among the cells and use Exh. 6 to determine the maximum individual setup time for Lathe #1 between any two jobs in
each cell. What % reduction does this give in the maximum setup time for Lathe #1 in each cell? Might it be possible to
sequence the jobs in a cell to avoid even these maximum setup times? How?
7. Detail the major pros and cons of the inventory option, the subcontracting option, and the group technology option. What
should Robinson do about the three options in the short term? in the long term?

Assignment for Session 5

Chapter 6: Capacity and Location Planning
1. Expand questions 4,5
2. Exercises 1,3,10,11.
Learning Curve (handout)
Read, solve the problems in item 3 using the tables in your text on pages 218-218, and check your answers. Then solve
Problems 6 and 7 on page 226.
A Long March
1. How feasible are build-to-order cars? Whats the problem?
Time-- The Next Source of Competitive Advantage
1. In the 4th paragraph, in what way is time the equivalent of money, productivity, quality, even innovation?
2. Given the two categories of manufacturing costs noted in the 13 th paragraph of the From Low Wages to Variety Wars
section, how can you decide whether it would be best to change your current variety or change your current volume?
3. The third paragraph before the Time-Based Sales and Distribution section notes that flexible factories are ten times
faster and yield 20% reductions in cost. How does this compare to the rule that an X% reduction in throughput-time results
in an X/2% reduction in unit cost?
4. How did Toyota Motor Mfg. cut the sales and distribution time from 26 days to less than a week?
5. Based on the last two pages of the article, what other areas of the firm are probably ripe for JIT, or fast response, besides
the factory?
Power of Virtual Integration: Interview with Dell...
1. Identify the major components of Dells direct model.
2. How does information substitute for inventory?
3. How has Dell avoided the consumer commodity end of the business?
5

4. Is Dell organized by product or process, or both, or something else? What clues does the interview give?
5. If a customer calls and Dell doesnt have the product configuration desired in stock, how do you think they steer the
customer toward a comparable product they do have?
6. How does improving quality improve speed (in the Using Information... sidebar)?
National Cranberry Cooperative (Abridged) (assume in this case it generally takes 10 minutes for a truck to make a dump;
express all capacity flows in bbls/hr; do calculations for 1981 assuming 18,000 bbls. a day, arrivals similar to Exh. 1, and 70%
wet.)

1. What are NCCs main problems? Plot the trends in acreage harvested, barrels/acre, production, price/barrel, and fresh
sales, process, and economic abandonment (surplus) over the years shown in Table A and comment.
2. What is a cooperative? Why does it matter in addressing the issues in this case? Calculate the payback period on the
light-meter proposal, making any necessary assumptions. Should NCC invest in this? What other alternatives might there
be?
3. Develop a process flow chart in bbls/hr and identify the bottlenecks. Determine the output capacity increase from buying
the 5th Kiwanee dumper.
4. Calculate the maximum wet and dry storage capacity in bbls; based solely on these figures and NCCs current policy of
filling the bins first before staffing Destone, Dechaff, and Dry (DDD), what time should they start staffing DDD? Given
their reality, what time would you recommend?
5. Use Exh. 1 as typical of their deliveries in the high-volume period and calculate when to start staffing DDD, again
assuming their current policy of filling the bins before staffing DDD. Use Fig. A 1979 data to verify or contradict their
high-volume schedule; what date would you recommend starting their high-volume schedule?
6. Calculate the capacity capability at DDD to determine if the overtime shown in Fig. E will be sufficient for 1981. Should
NCC employ additional shifts or use some overtime at these operations?
7. If we start a day drying immediately, how long does it take before the storage bins fill up and trucks have to start
waiting? How many trucks will have to wait? How long will it take before the last truck will be unloaded? Estimate the
daily cost of waiting trucks assuming $4/hr for drivers pay.
8. Assume we start a day drying immediately but berries start backing up from downstream bottlenecks. For maximum
capacity operation but with no new dryers how many dry storage bins should be converted to wet/dry storage? Will this
solve the problem? Similarly, if dryers are an option, how many new dryers should be installed and how many bins
converted? Compare the cost of these two alternatives.

Assignment for Session 6

Chapter 7: Schedule Management
1. On page 250, second full paragraph: why might it be more likely that an early reservation would be cancelled? A more
recent one?
2. Expand questions 4,5,8.
3. Exercises 2,4,5(use a spreadsheet, bring in your answers and well compare them to see whos best), and 7.
Chapter 11: Just-in-Time Systems
1. Expand questions 3,4,6.
Read a PlantFast
1. Compare this method to earlier methods that asked the rater to count the % of visible machines that were actually
producing, the fraction of production set aside for quality problems, the units produced each hour, etc. Which do you think
is more accurate?
2. What is the authors philosophy about evaluating a plant?
3. Why is there more difficulty in calculating the COS figure?
JIT Manufacturing is Working Overtime
1. What are some disadvantages of implementing JIT?
Does Manufacturing Need a JIT Revolution?
1. What are the problems with JIT, according to Zipkin?
2. Do JIT and the other TLAs (SCM, TQM, MRP, ERP, etc.) offer special profit opportunities (pg. 8 right, paragraphs 2
and 3) for accommodating firms?
Manzana Insurance
1. Plot and analyze the trends in revenue sources in Exhibit 5. Whats happening? Do the same with the three major cost
categories, by percent of total revenue. Whats happening?
2. Calculate the minimum production lead time for a RUN from Exhibit 4 based on the mean time. Do the same for a
generic Request. How does the RUN time compare to the 1991 TAT in Exh. 6? With the TAT in Exh. 3. Identify reasons
for the difference. Where are the Requests spending their time? Why?
6

3. On average, how many Requests arrive each day? From the writeup and Exh. 3, describe two possible ways their process
might be handling these daily Requests. (Hint: Consider batches versus smooth flows.) For each possible process, and
considering only generic Requests, how should the lead time (TAT) be calculated? Compare your procedure for
calculating the TAT with that in Exh. 3 and comment on Exh. 3s procedure. Exh. 3 is based on the 95% SCTs in Exh. 4;
why do you think management went to using a two-sigma value instead of the mean?
4. Use the data for 1991 in Exh. 7, the per-Request data in Exh. 4, and the flowchart in Exh. 2 to create a process flow
diagram showing daily (7.5 hours) Total Requests flowing through the system, their time requirements at each department
and team of 2, the utilization rates for each dept. and team, and the renewal loss rates for each team. Whats happening
here?
5. Who are Manzanas customers and what factors motivate them to select one Insurers policy over another? From Exhibit
6, plot the renewal loss rates processed (but as a % of RERUN requests) versus the TATs and interpret the results. For each
of the four types of requests, calculate the per policy net revenue to Manzana. Assuming process time is the scarce
resource, calculate the net revenue per hour of mean process time, by request type. What should Manzana be focusing on
to improve their revenues?
6. List the problems, identifying which are operational and which are policy-based, afflicting Manzana. Show the
interdependencies between these problems that explain how Manzana got into this mess.
7. Draw up a plan of action of both operational and policy changes for Bill to recommend to John. Include a time-plan with
the recommendations.

Assignment for Session 7

Chapter 8: Supply Chain Management
1. Expand questions 1,5,8,10.
Chapter 8S: The Beer Game
(Be ready to win!)
Chapter 10: Material Requirements Planning
1. Expand questions 2,5,6.
2. Exercises 1,5,6.
Why the Supply Chain Broke Down
1. Why dont they know who owns the inventory?
Floating on Air
1. How can vertical integration be a success in these days of supply chains, core capabilities, and outsourcing?
ERP is Dead!
1. What are the real pros and cons of ERP?
Why Companies Flunk Supply-Chain 101
1. Why has supply chain management (SCM) become so popular lately? Why have companies given up on technology,
labor downsizing, marketing?
2. Contrast the impact of the statistics in paragraph 5 (The exemplars) on food retailers (margins of 1-2%) vs
manufacturers (margins of 5-15%).
3. Might smart SCM relate to operational innovation? How so?
4. How can one key to profitable SCM be to start being consistent about SCM policies while another is to be inconsistent
with your supply chains?
The Icarus Paradox: How Exceptional Companies Bring About Their Own Downfall
1. What do you think might be the danger in many of the messages and topics in this course: focus, core capabilities, etc.?
2. Explain Figure 3, going beyond the simple message of too much of a good thing leads to its evil twin.
Specifically, consider the two axes and the trends shown in each quadrant.
3. How do you monitor for excesses that previously led to success but may now lead to failure? How do you decide when
policies have gone too far? And what should take their place if they have?