Chapter
1 Using Operations to Create Value
DISCUSSION QUESTIONS
1. Answering this question demonstrates that processes underlie all of our jobs. What might
be surprising is how many students would put their job in the category of “other,”
suggesting that many jobs do not fall neatly into any one functional area. Perhaps many
in the “other” category might best be called “operations” on further reflection.
Customers, both internal and external, are part of each process, and the goal is to manage
the processes to add the most value for them.
2. Amazon.com offers a very broad range of services and products at competitive prices. Its
competitive priorities would include fast delivery time, on-time delivery, customization,
variety and low-cost operations. As a business, Amazon.com is actually assembling a
customized basket of goods that must be delivered in a short window of time in a
dependable fashion. Low-cost operations are needed to remain competitive. To remain in
business, Amazon.com needs to maintain high volumes of traffic. Operations strategy
must focus on stock availability and quick, economical, and dependable delivery.
3. The hospital’s commitment to provide attention to patients arriving to the emergency
unit in less than 15 minutes and never to turn away patients who need to be hospitalized
implies that the facility must be designed to have extra capacity in both beds and
emergency room facilities. It must plan on having extra personnel in the emergency
room and also plan on having additional emergency personnel on call to take care of
unprecedented heavy loads. In line with the mission statement, maximum utilization of
the facilities (i.e., beds and emergency room personnel) would not be one of the
performance objectives for the hospital.
4. FedEx traditionally has competed on the basis of fast, dependable delivery. Before the
boom in Internet applications, many businesses relied on FedEx to get things to other
businesses overnight. Now, this need is beginning to diminish as sophisticated systems
are being installed to assist companies in planning operations better. And, the internet
based companies are adding more demands for low cost ground deliveries to specific
customer doors. FedEx, in order to remain competitive with companies such as UPS, has
moved into the door-to-door delivery business, perhaps through acquisition.
Nonetheless, it will require changes to this company’s competitive priorities.
5. Technology Management. To identify a market segment, we need to determine
answers to questions such as: Which colleges and departments currently offer the
subject? What do instructors desire in the way of textbook support? Is there a trend
toward Technology Management courses? Are there other Technology Management
1-1
Copyright © 2016 Pearson Education, Inc.
,1-2 Using Operations to Create Value
texts? Some needs assessment can be accomplished by survey, but the response rate
may be low. A high-investment strategy would be to ask or hire instructors to
review and critique a list of topics, then an outline, then a draft. Explicit services
include supplying information about the subject in the form of a textbook and
instructor support in the form of ancillary publications.
6. It is often not a good idea for a company to try to excel in all of the competitive
priorities because it is generally impossible to do so. Mediocrity is a predictable
result. The choice and the minimum level of one or more of the competitive
priorities are set by the order qualifiers for the particular product or service. The
choice of the competitive priorities that the company should emphasize is usually
governed by the company’s strategy driven by its mission statement and the core
competencies that the company wants to harness to seek the best competitive
advantage.
7. Core processes should link to a firm’s core competencies. Core processes are those
processes that provide the firm the best competitive advantage. Essential to the
definition a firm’s core processes is the concept of “interaction costs.” These costs
include the time and money that are expended whenever people and companies
exchange services, products, or ideas. If the transaction costs are higher to retain a
process within the firm’s organization than to outsource the process, the process
should be outsourced.
8. Wendy’s assembles hamburgers to order. When materials are held at the stage just
before final assembly, they can be used to complete a wide variety of different
sandwiches. Because no finished-goods stock exists, when customers say, “Hold the
sauce,” there is no delay or waste of materials. Service clerks specialize. One clerk
takes orders and payment. Others fill portions of the order. Orders are processed in
single file. Throughput is normally restricted by transactions at the cash register. At
busy times, throughput is increased by splitting the bottleneck operation. One clerk
takes customer orders, another receives payment. The Wendy’s operation has some
characteristics of assembly. Therefore, the impact of new menu items on the
production operations must be carefully considered.
9. Grandmother’s Chicken.
a. Kathryn Shoemaker’s strategic plans include the following:
q Product and service plans: Should the new location offer a new mix?
q Competitive priorities: If the product mix and service mix are different at the new
location, the thrust could be on low volumes and high quality.
q Quality management: Should the goal be reliability or top quality?
q Process strategy: What processes will be needed to make chicken dinners in the
addition or new facility?
q New technologies: Is it time to automate? Is this why there is a problem in service
times?
q Capacity: How large should the addition or new facility be?
q Location: Should we locate in Uniontown or expand in Middlesburg?
Copyright © 2016 Pearson Education, Inc.
, Using Operations to Create Value l CHAPTER 1 l 1-3
b. Attitudes toward nutrition could change the demand for chicken. Competitors such
as Boston Market may be planning to move to Uniontown or even Middlesburg.
There may be a trend toward demands for ever-faster service, which cannot be
supported by the processes specified in the “unique recipe.” The economy of
Uniontown might not be supportive of restaurant services. Shoemaker should also
consider the availability of key resources, such as servers, whole chickens, spices,
and cooking oil. Will Uniontown labor organize?
c. The possible distinctive competencies at Grandmother’s Chicken Restaurant include
the “unique recipe,” the homey atmosphere, and friendly, prompt service.
10. Wild West, is recognizable as US WEST, which was bought out by Qwest in a
hostile takeover in June, 2000. But many other “Baby Bells” are in a similar
position.
a. Strategic plans include reducing overhead, reengineering operations, and investing in
new technologies to meet competition. The “do-nothing” option of remaining a local
monopoly telephone company is not viable because of competition from cable
systems and wireless systems that are capable of business and personal
communication. If the mission is too broad, Wild West should sell its financial
services and commercial real-estate businesses. Those businesses do not match their
distinctive competencies.
b. One environmental issue is whether communication, like health care, will be viewed
as a “right” and therefore should be free. A significant portion of Wild West’s
business is governed by regulatory agencies. Customer service in their core business
is essential to maintaining a favorable regulatory environment. Other business
opportunities, such as manufacturing and providing information services, are
prohibited by the same court order that formed the “Baby Bells” from AT&T.
c. Wild West’s distinctive competency is in connecting people (or machines) for the
purpose of communication. A weakness is high overhead inherited from the era of
telecommunication monopoly.
11. Although the answers may vary depending on the “niche” elements of the business, the
competitive priorities would include on-time delivery, low-cost operations, and
customization. The latter competitive priority comes from the capability to assemble
unique “baskets” of food items for each customer. There may be a need to coordinate a
given basket between two different stores. Capabilities to develop would include
information systems and Web page design, efficient scheduling of delivery trucks
(which must first collect the items in the basket and then deliver them to the customer’s
door), and an adequate fleet of trucks with drivers.
Copyright © 2016 Pearson Education, Inc.
1 Using Operations to Create Value
DISCUSSION QUESTIONS
1. Answering this question demonstrates that processes underlie all of our jobs. What might
be surprising is how many students would put their job in the category of “other,”
suggesting that many jobs do not fall neatly into any one functional area. Perhaps many
in the “other” category might best be called “operations” on further reflection.
Customers, both internal and external, are part of each process, and the goal is to manage
the processes to add the most value for them.
2. Amazon.com offers a very broad range of services and products at competitive prices. Its
competitive priorities would include fast delivery time, on-time delivery, customization,
variety and low-cost operations. As a business, Amazon.com is actually assembling a
customized basket of goods that must be delivered in a short window of time in a
dependable fashion. Low-cost operations are needed to remain competitive. To remain in
business, Amazon.com needs to maintain high volumes of traffic. Operations strategy
must focus on stock availability and quick, economical, and dependable delivery.
3. The hospital’s commitment to provide attention to patients arriving to the emergency
unit in less than 15 minutes and never to turn away patients who need to be hospitalized
implies that the facility must be designed to have extra capacity in both beds and
emergency room facilities. It must plan on having extra personnel in the emergency
room and also plan on having additional emergency personnel on call to take care of
unprecedented heavy loads. In line with the mission statement, maximum utilization of
the facilities (i.e., beds and emergency room personnel) would not be one of the
performance objectives for the hospital.
4. FedEx traditionally has competed on the basis of fast, dependable delivery. Before the
boom in Internet applications, many businesses relied on FedEx to get things to other
businesses overnight. Now, this need is beginning to diminish as sophisticated systems
are being installed to assist companies in planning operations better. And, the internet
based companies are adding more demands for low cost ground deliveries to specific
customer doors. FedEx, in order to remain competitive with companies such as UPS, has
moved into the door-to-door delivery business, perhaps through acquisition.
Nonetheless, it will require changes to this company’s competitive priorities.
5. Technology Management. To identify a market segment, we need to determine
answers to questions such as: Which colleges and departments currently offer the
subject? What do instructors desire in the way of textbook support? Is there a trend
toward Technology Management courses? Are there other Technology Management
1-1
Copyright © 2016 Pearson Education, Inc.
,1-2 Using Operations to Create Value
texts? Some needs assessment can be accomplished by survey, but the response rate
may be low. A high-investment strategy would be to ask or hire instructors to
review and critique a list of topics, then an outline, then a draft. Explicit services
include supplying information about the subject in the form of a textbook and
instructor support in the form of ancillary publications.
6. It is often not a good idea for a company to try to excel in all of the competitive
priorities because it is generally impossible to do so. Mediocrity is a predictable
result. The choice and the minimum level of one or more of the competitive
priorities are set by the order qualifiers for the particular product or service. The
choice of the competitive priorities that the company should emphasize is usually
governed by the company’s strategy driven by its mission statement and the core
competencies that the company wants to harness to seek the best competitive
advantage.
7. Core processes should link to a firm’s core competencies. Core processes are those
processes that provide the firm the best competitive advantage. Essential to the
definition a firm’s core processes is the concept of “interaction costs.” These costs
include the time and money that are expended whenever people and companies
exchange services, products, or ideas. If the transaction costs are higher to retain a
process within the firm’s organization than to outsource the process, the process
should be outsourced.
8. Wendy’s assembles hamburgers to order. When materials are held at the stage just
before final assembly, they can be used to complete a wide variety of different
sandwiches. Because no finished-goods stock exists, when customers say, “Hold the
sauce,” there is no delay or waste of materials. Service clerks specialize. One clerk
takes orders and payment. Others fill portions of the order. Orders are processed in
single file. Throughput is normally restricted by transactions at the cash register. At
busy times, throughput is increased by splitting the bottleneck operation. One clerk
takes customer orders, another receives payment. The Wendy’s operation has some
characteristics of assembly. Therefore, the impact of new menu items on the
production operations must be carefully considered.
9. Grandmother’s Chicken.
a. Kathryn Shoemaker’s strategic plans include the following:
q Product and service plans: Should the new location offer a new mix?
q Competitive priorities: If the product mix and service mix are different at the new
location, the thrust could be on low volumes and high quality.
q Quality management: Should the goal be reliability or top quality?
q Process strategy: What processes will be needed to make chicken dinners in the
addition or new facility?
q New technologies: Is it time to automate? Is this why there is a problem in service
times?
q Capacity: How large should the addition or new facility be?
q Location: Should we locate in Uniontown or expand in Middlesburg?
Copyright © 2016 Pearson Education, Inc.
, Using Operations to Create Value l CHAPTER 1 l 1-3
b. Attitudes toward nutrition could change the demand for chicken. Competitors such
as Boston Market may be planning to move to Uniontown or even Middlesburg.
There may be a trend toward demands for ever-faster service, which cannot be
supported by the processes specified in the “unique recipe.” The economy of
Uniontown might not be supportive of restaurant services. Shoemaker should also
consider the availability of key resources, such as servers, whole chickens, spices,
and cooking oil. Will Uniontown labor organize?
c. The possible distinctive competencies at Grandmother’s Chicken Restaurant include
the “unique recipe,” the homey atmosphere, and friendly, prompt service.
10. Wild West, is recognizable as US WEST, which was bought out by Qwest in a
hostile takeover in June, 2000. But many other “Baby Bells” are in a similar
position.
a. Strategic plans include reducing overhead, reengineering operations, and investing in
new technologies to meet competition. The “do-nothing” option of remaining a local
monopoly telephone company is not viable because of competition from cable
systems and wireless systems that are capable of business and personal
communication. If the mission is too broad, Wild West should sell its financial
services and commercial real-estate businesses. Those businesses do not match their
distinctive competencies.
b. One environmental issue is whether communication, like health care, will be viewed
as a “right” and therefore should be free. A significant portion of Wild West’s
business is governed by regulatory agencies. Customer service in their core business
is essential to maintaining a favorable regulatory environment. Other business
opportunities, such as manufacturing and providing information services, are
prohibited by the same court order that formed the “Baby Bells” from AT&T.
c. Wild West’s distinctive competency is in connecting people (or machines) for the
purpose of communication. A weakness is high overhead inherited from the era of
telecommunication monopoly.
11. Although the answers may vary depending on the “niche” elements of the business, the
competitive priorities would include on-time delivery, low-cost operations, and
customization. The latter competitive priority comes from the capability to assemble
unique “baskets” of food items for each customer. There may be a need to coordinate a
given basket between two different stores. Capabilities to develop would include
information systems and Web page design, efficient scheduling of delivery trucks
(which must first collect the items in the basket and then deliver them to the customer’s
door), and an adequate fleet of trucks with drivers.
Copyright © 2016 Pearson Education, Inc.
