Chapter 1 Review & Discussion Questions

Chapter 1 Question 3
Using Exhibit 1.3 as a model, describe the source-make-deliver-return relationships in the following systems:
a. An airline
b. An automobile manufacturer
c. A hospital
d. An insurance company

a. Planning – How many new airplanes will be needed to replace old ones or to add to the current fleet. With the planning,
you need to coordinate which suppliers can take such a large time consuming order.
Source – Selecting of the suppliers (example Boeing, Lockheed and Martin), not only do you need to plan to order, but
where they will be delivered and when.
Make – Scheduling of flight crew, calculations of fuel and filling of airplane, the planning of flight destinations and times,
fills the plan with everything that is needed.
Deliver – Plane taking off with the passenger and delivering them to their destination.
Return – Customer service handling of any misfortune.
b. Planning – How many automobile will be the goal of the year.
Source - Which supplier can bring in which good and when they can bring in the materials.
Make – Making of the automobiles and scheduling the workers.
Deliver – Delivering the finished good to the buyers and how the will be delivered.
Return - Where to return defected cars and parts and how they will be handled.
c. Planning – How many doctors and nurses will be needed to be on hand.
Source – Which suppliers are needed and what to order.
Make – Making sure everything is running smoothly and is top notch.
Deliver – Making sure that everyone has what they need to do their job.
Return – Handling patients after the treatments or surgery.
d. Planning - What plans to offer.
Source – If anything goes wrong, where can the customers go to take care of it.
Make – Making sure the people are getting taken care of.
Deliver- Delivering the funds to the right people.
Return- Making sure the customers is happy with the work if not how you can handle it.

Chapter 1 Question 4
Define the service package of your college or university. What is its strongest element? Its weakest one?
I believe that Texas State has explicit services. Explicit services because by coming to class you are provided the availability,
consistency and easy access to the teaching of a subject. The strongest feature would have to be the easy access because every
class you may be taking will be held on the Texas State University campus and you have access to anyone. The weakest feature
is their class availability because not all classes are offered every semester, nor is there a guaranteed spot for you because each
class has a specific number of students it can have at one time. A class may also not be offered at the specific time of day that
you need it to be offered, or it may be offered only at the Round Rock campus.

Chapter 1 Question 5
What service industry has impressed you the most with its innovativeness?
In recent years, the automobile repair industry has impressed me the most with their innovativeness, from offering
complimentary shuttle service, free rental cars, and live repair status with photos available online. All of these things help
make it a less stressful experience.

Chapter 1 Question 6
What is product-service bundling, and what are the benefits to customers?
Product-service bundling is when a firm builds service activities into its product offerings to create additional value for the
customer. Some of the benefits to customers would be that it is a one-stop shop in a sense. If something happens to one of a
company’s products, the customer is able to contact the company for help repairing it rather than trying to find another well
qualified company to make the correct repairs. Customers are also able to get the same, or similar, high quality service that a
service only company would provide but with the added bonus of a good quality product. An example would be a car dealer
that offers free maintenance and roadside assistance with the purchase of a new car. This adds value to the company's product
making it more desirable to customers.
Chapter 1 Question 7
What is the difference between a service and a good?
A service is an intangible process that cannot be weighed or measured. A good is a tangible output of a process that has
physical dimensions. Unlike a good, a service is something that requires some interaction with the customer. Goods can be
produced to meet very tight specification daily with almost zero variability, whereas services are more heterogeneous
meaning that they can vary daily. Services are also perishable and often time sensitive. And services often are defined and
evaluated as a package of features that affect the five senses.

Chapter 1 Question 8
Recent outsourcing of parts and services that had previously been produced internally is addressed by which current issue
facing operation management today?
Managing relationships between organizations currently addresses this issue, while focusing on coordinating the relationship
between mutually supportive but separate organizations, and the ability to maintain proper communication will play a vital
role in the success of a company's outsourcing efforts.

Business Textbook Supply Chain

As the market for hardbound textbooks began to shift toward more “on demand” personalized textbooks, Dave Eisenhart,
senior editor of the business textbook division for Mountain Publishing, started to wonder how this shift would change, if any,
the operational activities of the supply chain for traditional hardbound textbooks.

Chapter 1 Case Question 1

Draw a diagram that illustrates the textbook supply chain from the publisher’s point of view.
Inputs - professors, text
editors, graphic designers, Manufacturing Process Outputs - Finished Books
commercial printers

Chapter 1 Case Question 2

Who are the various customers for textbooks? What do these customers want in terms of goods and services related to
textbooks? From the publisher’s point of view, who is the critical customer?
The various customers for textbooks include professors, retailers and student. Professors want a detailed and accurate
textbook that can be customized for their classes. While students wish to have an affordable textbook that can be delivered
quickly and in many different formats (such as e-book, loose-leaf, and hardbound textbook). From the publisher’s point of
view, the critical customer is the professor because they are customers who select to use the textbooks for their classrooms.

Chapter 1 Case Question 3

Who are the major players in the supply chain? What operational roles do they play in terms of creating value for the critical
customers?
The major players in the supply chain include the authors, graphic designers and artists, and text editors. All together these
players create value for customers by creating an accurate and comprehensive textbook that can be customized and delivered
in a variety of formats.

Chapter 1 Case Question 4

Given the anticipated changes on the market and in product and process technologies, how do you envision each supply chain
player’s role changing in the future?
As the market changes, supply chain player’s role will also change. Commercial printers will decrease as the number of
electronic books purchased rises. Books may also be printed on an order basis due to more professors customizing the
textbooks.

Chapter 1 Case Question 5

What advice would you give to Dave Eisenhart regarding long-term operational changes the firm should consider?
I believe that Dave Eisenhart should look towards decreasing the size and inventory of his warehouses and look towards
printing books on an order basis while gearing to sell a great number of electronic books.

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Chapter 2 Review & Discussion Questions
Chapter 2 Question 1
Can a factory be fast, dependable, and flexible; produce high-quality products; and still provide poor service from a customer’s
perspective?
Yes, a factor can be fast, dependable, flexible, and good products and still provide poor service. The qualities of good customer
service are quality, price, speed, reliability, flexibility, and support. Therefore a company can have a terrible support service,
be unreliable, or have an inconsistent price with their product which would result in poor customer service. JC Penny
department store comes to mind. They still provide a decent product yet there has been tremendous backlash regarding their
pricing.
Chapter 2 Question 2
Why should a service organization worry about being world-class if it does not compete outside its own national border? What
impact does the Internet have on this?
Just because one product does not directly compete with others on a global scale, does not necessarily guarantee there is no
competition. Especially today, there is really no choice but to compete with other companies around the world. It is through
the Internet that most competition is done on a global scale today. It is now possible for a customer to buy a product in one
country and have it shipped to another at a reasonable fee.
Chapter 2 Question 3
What are the major priorities associated with operations and supply chain strategy? How has their relationship to one another
changed over the years?
The major priorities associated with operations and supply chain strategies are quality, price, delivery speed, reliability,
flexibility, and support. Previously these priorities were only achieved at the cost of another priority, while current trends
push to achieve these simultaneously to provide customers with best experience possible.
Chapter 2 Question 4
Find examples where companies have used features related to environmental sustainability to “win” new customers.
Several companies including Apple, Subaru and Chegg have all pushed their environmentally sustainable image as a way of
luring new customers. These companies use features like increased recyclability of products, cars with lower CO2 emissions
and planting trees for every book order.
Chapter 2 Question 5
For each priority in question 3, describe the unique characteristics of the market niche with which it is most compatible.
Cost: common commodity market places a large emphasis on low cost items like groceries
Delivery: quick delivery is important in service industries like fast food
Quality: high quality has become expected in all markets, especially those with high cost like electronics
Flexibility: flexibility is especially important in markets with infrequent purchases and high prices like cars and houses
Chapter 2 Question 11
What do we mean when we say productivity is a “relative” measure?
Productivity is a relative measure because to be meaningful it needs to be compared with something else; therefore it is
relative to whatever it is being compared with.

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Chapter 2 Problem 1
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 March April
Units Produced 2300 1800 2800 3000
Hours per Machine 325 200 400 320
Number of Machines 3 5 4 4
Find the average monthly productivity (Units per machine hour).
January Monthly Productivity =Units Produced/ (Hours per Machine * Number of Machines)
= 2300/ (325*3)
= 2.3590

February Monthly Productivity =Units Produced/ (Hours per Machine * Number of Machines)
= 1800/ (200*5)
= 1.8

March Monthly Productivity =Units Produced/ (Hours per Machine * Number of Machines)
= 2800/ (400*4)
= 1.75

April Monthly Productivity =Units Produced/ (Hours per Machine * Number of Machines)
= 3000/ (320*4)
= 2.344

Average Monthly Productivity = (Jan+Feb+March+April) / 4

= (2.3590 + 1.8 + 1.75 + 2.344) / 4
= 2.0633 Units / Machine Hour

Chapter 2 Problem 2
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.
Productivity = (Units Sold * Sale Price Each) / (Total Labor Hours * Wage Rate)
= (1,217*$1,700) / (46,672 * $12)
= 3.6940 Sales Revenue/Labor Expense
Chapter 2 Problem 3
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/Unit Wages $7.50/Hour
Raw Materials $30,000
Component Parts $15,350
Input= production time * wage + raw material cost + component parts cost
Input=620*7.5+30000+15350=50,000

Output= production number * product cost

Output= 50000*3.5=$175000

Productivity = outputs / inputs

Productivity= 175000/50000=3.5
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Chapter 2 Problem 4
Two types of cars (Deluxe and Limited) were produced by a car manufacturer last year. Quantities sold, price/unit, and labor
hours follow. What is the labor productivity for each car? Explain the problems 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
Productivity = Output/Input
Deluxe: 4,000/20,000 =.2 Units/Hour
Limited: 6,000/30,000 =.2 Units/Hour

Labor Productivity=Output/Input
Deluxe= (4,000 x $8,000) / (20,000 hours x $12/hour) = 133.3333
Limited= (6,000 x $9500) / (30,000 hours x $14/hour) = 135.7143

The problem presented is the productivity calculated in units per hour is the same for both models of cars. While easy
to understand, it does not give a clear picture for the situation. The productivity calculated in unit-less terms shows
the variation between the two models but can be a little more difficult to decipher, but it includes important factors
like cost. Labor productivity only includes labor as an input, therefore ignoring all other inputs.

Chapter 2 Problem 6
Various financial data for the past two years follow. Calculate the total productivity and the partial measures for labor, capital,
and raw materials for this company for both years. What do these measures tell you about the 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
Partial measure for Labor productivity
Labor productivity= sales output/ labor input
Last year: 200000/30000=6.6667
This year: 220000/40000=5.5000

Partial measure for Raw Materials

Raw materials= sales output/ raw materials input
Last Year: 200,000 / 35,000 = 5.7143
This Year: 220,000/ 45,000 = 4.8889

Partial measure for Capital

Capital= sales output/ capital input
Last Year: 200,000/50,000=4.0000
This Year: 220,000/50,000=4.4000

Total productivity
Productivity = Total output/ total input
Last Year = 200,000 / (30,000 + 35,000 + 5,000 + 50,000 + 2,000)
= 200,000 / 122,000
= 1.6393
This Year =220,000 / (40,000 + 45,000 + 6,000 + 50,000 + 3,000)
= 220,000 / 144,000
=1.5278
These measures tell you how efficiently the companies are utilizing their inputs in production. These numbers are very useful
when trying to compare one company against another and as a way of identify key areas for improvement.
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Chapter 2 Case Study
The Tao of Timbuk2
Timbuk2 is company that manufactures custom messenger bags. Originally based in San Francisco, CA the case discusses its
original line of production which occurred in San Francisco and its decision to expand in China. As demand grew, decisions
were made to build a larger factory in China including innovated machines that would be cost efficient for the company.
Chapter 2 Case Question 1
Consider the two categories of products that Timbuk2 makes & sells. For the custom messenger bag, what are the key
competitive dimensions that are driving sales? Are the competitive priorities different for the new laptop bags sourced in
China?
Custom messenger bags competitive dimensions:
 High quality
 Quick delivery speed
 High delivery reliability
 High flexibility
Yes, their new competitive priorities are slightly different with the new laptop bags sourced in China because they emphasized
price as an additional competitive dimension.
Chapter 2 Case Question 2
Compare the assembly line in China to that in San Francisco along the following dimensions: 1 volume/rate of production, 2
required skills of the workers, 3 level of automation, 4 amounts of raw materials & finished goods inventory.
San Francisco China
Volume Low High
Skill High Medium
Automation Low Medium
Inventory Medium/low Medium/low

Chapter 2 Case Question 3

Draw two diagrams, one depicting the supply chain for their products sourced in China & the other depicting bags produced in
San Francisco. Show all the major steps, including raw material, Manufacturing, finished goods, distribution inventory &
transportation. Other than manufacturing cost, what other costs should Timbuk2 consider when making the sourcing
decision?
San Francisco RM> Manufacturing > Finished good > stored inventory > transported to customer
China RM > Manufacturing > Finished good > shipped to warehouse >stored inventory>transported to customer
In addition to cost, Timbuk2 should look at the time it takes to manufacture when determining where to source the
bags.

Chapter 3 Review & Discussion Questions

Chapter 3 Question 1
Examine Exhibit 3.3 and suggest which model you might use for (a) bathing suit demand, (b) demand for new houses, (c)
electrical power usage, (d) new plant expansion plans.
a. Seasonal Model
b. Linear Regression
c. Linear Regression
d. Exponential Smoothing
Chapter 3 Question 5
From the choice of simple moving average, weighted moving average, exponential smoothing, and linear regression analysis,
which forecasting technique would you consider the most accurate? Why?
Exponential smoothing because not as much data is needed in order to create a forecast, and it has a smoothing constant alpha
that does the work of determining the level of smoothing and the speed of reaction to differences between forecasts and actual
occurrences for you.
Chapter 3 Question 9
Discuss the basic differences between the mean absolute deviation and mean absolute percent error.
Mean absolute deviation (MAD) is the average of the absolute value of the actual forecast error. It measures the dispersion of
some observable value from some expected value and is computed using differences between the actual demand and the
forecasted demand without regard to sign. While the mean absolute percentage error (MAPE) is the average error measured
as a percentage of average demand. MAPE measures the error relative to the average demand.

5
Chapter 3 Problems
Chapter 3 Problem 1
Given the following history, use a three-quarter moving average to forecast the demand for the third quarter of this year.
Note, the 1st quarter is Jan, Feb, and Mar; 2nd quarter Apr, May, Jun; 3rd quarter Jul, Aug, Sep; and 4th quarter Oct, Nov, Dec.
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Last Year 100 125 135 175 185 200 150 140 130 200 225 250
This Year 125 135 135 190 200 190

F= (At-1 + At-2 + At-3 + At-n) /n

F= (200+225+250+125+135+135+190+200+190)/3
F= 1650/3
F= 550.0000

Chapter 3 Problem 2
Here are the data for the past 21 months for actual sales of a particular product:
Last Year This Year
January 300 275
February 400 375
March 425 350
April 450 425
May 400 400
June 460 350
July 400 350
August 300 275
September 375 350
October 500
November 550
December 500

Develop a forecast for the fourth quarter using a three-quarter, weighted moving average. Weight the most recent quarter .5,
the second most recent .25, and the third .25. Do the problem using quarters, as opposed to forecasting separate months.
4th Quarter Forecast
F= w1At-1 + w2At-2 + w3At-3 + wnAt-n
F = [0.5*(350+275+350)] + [0.25*(350+400+425)] + [0.25*(350+375+275)]
F = (0.5 * 975) + (0.25*1,175) + (0.25*1,000)
F = 487.5 + 293.75 + 250
F = 1,031.25

Chapter 3 Problem 3
The following table contains the number of complaints received in a department store for the first six months of operation:
Month Complaints Month Complaints
January 36 April 90
February 45 May 108
March 81 June 144

If a three-month moving average is used to smooth this series, what would have been the forecast for May?
F= (At-1 + At-2 + At-3 + At-n)/n
May= (45 + 81 + 90)/3
May= 216/3
May= 72.0000

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Chapter 3 Problem 4
The following tabulations are actual sales of units for six months and a starting forecast in January.
a. Calculate forecasts for the remaining five months using simple exponential smoothing with α=0.2.
b. Calculate MAD for the forecasts.

Month Actual a) Forecast F=Ft-1 + α(At-1 - Ft-1) ∑𝑛 |𝐴 −𝐹𝑡 |

b) MAD = 𝑡==1 𝑛 𝑡
January 100 80 100-80= 20
February 94 F. Feb.=80+[0.2× (100-80)= 84 94-84= 10
March 106 F. Mar.=84+[0.2× (94-84)= 86 106-86= 20
April 80 F. Apr.=86+[0.2× (106-86)= 90 80-90= 10
May 68 F. May=90+[0.2× (80-90)= 88 68-88= 20
June 94 F. Jun.=88+[0.2× (68-88)= 84 94-84= 10
AVERAGE (20+10+20+10+20+10)
= 15
6

Chapter 3 Problem 6
Actual demand for a product for the past three months was
Three months ago 400 units
Two months ago 350 units
Last month 325 units
a. Using a simple three-month moving average, make a forecast for this month.
b. If 300 units were actually demanded this month, what would your forecast be for next month?
c. Using simple exponential smoothing, what would your forecast be for this month if the exponentially
smoothed forecast for three months ago was 450 units and the smoothing constant was 0.20?

a. F= (At-1 + At-2 + At-3 + At-n) /n

F= (400+350+325) /3
F= 1075/3
F=358.3333 units

b. F= (At-1 + At-2 + At-3 + At-n) /n

F= (350+325+300) /3
F= 975/3
F= 325.0000 units
c. F= Ft-1 + α(At-1 - Ft-1)
2 months ago forecast
F= 450 + 0.20(400-450)
F= 450 – 10
F= 440 units

Last month forecast

F= 440 + 0.20(350-440)
F= 440 – 18
F= 422 units

This month forecast

F= 422 + 0.20(325-422)
F= 422 – 19.4
F= 402.6 units

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Chapter 3 Problem 9
Not all the items in your office supply store are evenly distributed as far as demand is concerned, so you
decide to forecast demand to help plan your stock. Past data for legal-sized yellow tablets for the month of
August are
Week 1 300 Week 3 600
Week 2 400 Week 4 700

a. Using a three-week moving average, what would you forecast the next week to be?
b. Using exponential smoothing with α= 0.20, if the exponential forecast for week 3 was estimated as the
average of the first two weeks [(300+400)/2=350], what would you forecast week 5 to be?
a. F= (At-1 + At-2 + At-3 + At-n) /n
F= (400+600+700) /3
F= 1700/3
F= 566.6667 units
b. F= Ft-1 + α(At-1 - Ft-1)
Week 4 forecast
F= 350 + 0.20(600-350)
F= 350 + 50
F= 400 units

Week 5 forecast
F= 400 + 0.20(700-400)
F= 400 + 60
F= 460 units-400)] = 460

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Chapter 3 Problem 10
Assume that your stock of sales merchandise is maintained based on the forecast demand. If the distributor’s
sales personnel call in the first day of each month, compute your forecast sales by each of the three methods
requested here.
Actual
June 140
July 180
August 170
a. Using a simple three-month moving average, what is the forecast for September?
b. Using a weighted moving average, what is the forecast for September with weighs of .20, .30, and .50 for
June, July, and august respectively?
c. Using single exponential smoothing and assuming that the forecast for June had been 130, forecast sales for
September with a smoothing constant alpha of .30.
a. F= (At-1 + At-2 + At-3 + At-n) /n
F= (140+180+170) /3
F= 490/3
F= 163.3333 units
b. F= w1At-1 + w2At-2 + w3At-3 + wnAt-n
F= (0.20 x 140) + (0.30 x 180) + (0.50 x 170)
F= 28.0000 + 54.0000 + 85.0000
F= 167.0000 units
c. F= Ft-1 + α(At-1 - Ft-1)

July forecast
F= 130 + 0.30(140-130)
F= 130 + 3
F= 133.0000 units

August forecast
F= 133 + 0.30(180-133)
F= 133 + 14.1
F= 147.1000 units

September forecast
F= 147.1000 + 0.30(170-147.1000)
F= 147.1000 + 6.8700
F= 153.9700 units

Chapter 3 Case Study

From Bean to Cup: Starbucks Global Supply Chain Challenge
In 1971 Starbucks Corporation began in Seattle. Since then, Starbucks has become the largest coffeehouse
company in the world. With 17,000 stores and over 200 million customers a month, forecasting demand for
all of their products is a challenging and important task.
With the exponential growth of Starbucks, the company has many challenges facing operations and supply
chain management. In order to make sure each store is well stocked and maintained Starbucks must keep an
exceptional amount of forecasting. To make forecasting even more difficult, Starbucks sells a multitude of
different products including specialty drinks, food, mugs, and even ice cream. It is very likely that Starbucks
employs several different forecasting models to cover all of their products. For example, they are most likely
to use a trend and seasonal model for their seasonal retail items and drinks, while they may use a simple
moving average for their more traditional items.