Chapter 6 Solution

Solutions Manual for Operations Management: Creating Value Along the Supply Chain, Canadian Edition 6- 1
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CHAPTER 6 – PROCESSES AND TECHNOLOGY
ANSWERS TO QUESTIONS, PROBLEMS, AND CASE PROBLEMS
Answers to Questions
6-1. In creating a process strategy, a firm must define its goals for capital intensity (mix of
capital and labour), process flexibility (ease of adjusting to changes in demand, technology,
products or services, and resources), vertical integration (extent to which it produces the
inputs and controls the output of each stage of production), and customer involvement (the
role of the customer in the production process).
Student responses will vary. The following questions will start students thinking:
(1) capital intensity—does the project involve use of computers, overheads, special
presentation requirements, new books, or software?
(2) process flexibility—can the project be approached from different angles or must
everyone follow the same procedure?
(3) vertical integration—does data need to be collected as well as analyzed?
(4) customer involvement—does the professor meet with the project team to go over their
progress?
6-2. Six factors affecting the make-or-buy decision are:

(1) Cost—Would it be cheaper to make the item or buy it, to perform the service in-house
or subcontract it out?
(2) Capacity—Companies that are operating at less than full capacity usually opt to make
components rather than buy them.
(3) Quality—The capability to consistently provide quality parts is certainly an important
consideration, whether the components are made in-house or come from a supplier.
(4) Speed—Sometimes components are purchased because a supplier can provide goods in
shorter periods of time than the manufacturer.
(5) Reliability—Suppliers need to be reliable both in terms of the quality and timing of
parts that are supplied.
(6) Expertise—Companies that are especially good at making or designing certain items
may want to keep control over their production and produce their components in-house.
The sourcing continuum ranges from vertical integration, to joint ventures with suppliers,
to strategic alliances, to single contracts. Vertical integration involves making all of the
items for a product in-house, from the raw material to finished product. With joint
ventures, such as Ford-Mazda, a company owns equity in the supplier’s business. Strategic
alliances involve long-term relationships with trusted suppliers. Single contracts view each
purchasing decision as separate from the next.
6-3. Projects involve large sums of money and last a considerable length of time. They
represent one-of-a-kind production for an individual customer. Cutting edge technology,
project teams, and close customer contact make project work exciting. But projects can
also be risky with their large investment in resources, huge swings in resource
requirements, limited learning curves, and dependence on a small customer base.
Batch production is used to process many different jobs through the production system at
Copyright © 2014 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited.
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the same time in groups (or batches). Products are made to customer order, volume (in
terms of customer order size) is low, and demand fluctuates. To allow for a variety of items
to be produced, the equipment tends to be general purpose and the workers highly skilled.
Batch production is flexible but not very efficient.
Mass production is used to produce large volumes of a standard product for a “mass”
market. Product demand is stable and product volume is high. Because of the stability and
size of demand, the production system can afford to dedicate equipment to the production
of a particular product. Thus, this type of system tends to be capital intensive, with
specialized equipment and limited labour skills. Mass production is efficient but not very
flexible.
Continuous production is used for very high volume commodity products that are very
standardized. The system is highly automated (the worker’s role is to monitor the
equipment) and is typically in operation continuously 24 hours a day. The output is also
continuous, not discrete—meaning individual units are measured, rather than counted.
Refined oil, treated water, paints, chemicals, and foodstuffs are produced by continuous
production. Continuous production is highly efficient but very expensive and inflexible.
6-4. Equipment costs, facilities cost, material cost, labour cost. Break-even analysis is
especially useful when evaluating different degrees of automation in process selection.
More automated processes have higher fixed costs, but lower variable costs. The selection
of the “best” process depends on the anticipated volume of demand for the product, and the
trade-offs between fixed and variable costs.
6-5. a. An assembly chart is a schematic diagram that shows the relationship of each
component part to its parent assembly, the grouping of parts that make up a
subassembly, and the overall sequence of assembly.
b. An operations chart adds a series of operations to every item listed in the assembly
chart that describe how each item is to be fabricated.
c. A process flow chart classifies processes into the broad categories of operations,
inspection, transportation, storage, or delay. The time required to perform each process
and the distance between processes may also be included. With this data, the chart can
be used to improve the efficiency of operations.
6-6. The output of process planning is a “work package” of several reports (i.e., routing sheets,
operation sheets, etc.) that prescribe how and where to manufacture an item. For mass
production and continuous production, a process plan may be developed only once when
the assembly line is set up or the process plant built. For batch production, a process plan
must be developed for every job that enters the shop or part that is produced. For projects,
process plans are usually associated with each activity in the project network.
6-7. Process innovation involves redesigning a critical business process from scratch. The
initial step is to establish the goals and specifications for process performance. Data from
the existing process is used as a baseline to which benchmarking data on best industry
practices, customer requirements data, and strategic directives are compared. If redesign is
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necessary, a project team is chartered. The team creates a high level process map by
focusing on the performance goal (stated in customer terms) and working backwards
through the desired output, subprocesses, and initial input requirements. After the general
concept of redesign is agreed upon, a detailed process map is prepared for each subprocess
or block in the high level map. The detailed map includes key performance measures and
guidelines for the allocation of resources and work methods. After the detailed map has
been validated, a pilot study is conducted and the process modified if necessary. A
successful pilot study leads to full scale implementation. The process innovation project is
complete when the new process consistently reaches its objective.
6-8. a. Z belongs below the line because it is constructed of straight, not curved, lines.
b. S and S come next, for six and seven (O T T F F are the first letters in one, two, three,
four, and five.) Acting under the same mind set as part a, most people will say E E
because these letters are composed of four straight lines and O T T F F had no straight
lines, two and three straight lines respectively.
c. The dots can be connected if you do not feel compelled to stop at all the dots, or
complete a closed figure. Here is the arrangement:
d. There is three mistakes in this sentence.
6-9. Factors often overlooked in the financial analysis of technology include:

(1) The add-ons to purchase price, such as the cost of special tools and fixtures,
installation, and engineering or programming adjustments (i.e., debugging).
(2) Operating expenses other than direct labour, such as indirect labour (e.g., for
programming, setups, material handling, training, etc.), power and utilities, supplies,
tooling, property taxes and insurance, and maintenance.
(3) Annual savings from a reduction in the amount of material or machine time used, a
reduction in rework costs, or reduced safety costs.
(4) Revenue enhancements such as expanded capacity, improvements in product quality,
price reductions due to decreased costs, and more rapid, flexible or dependable delivery.
(5) The opportunity cost of not investing in new equipment when upcoming technology
will make the equipment obsolete.
(6) The synergistic benefits of a well-designed technology plan.
6-10. E-manufacturing (eM) involves the automated production and management of products,
processes, and manufacture through information technology. For products, eM includes
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CAD, CAE, group technology, product life cycle management, collaborative product
commerce, product definition, and product data management. For processes, eM involves
CAD/CAM and CAPP systems, STEP protocol, sourcing and eprocurement. For
manufacture, technologies such as CNC machines, flexible manufacturing system, robots,
automated material handling systems and process control systems are coordinated and
controlled electronically in cells and centres within individual plants, as well as among
multiple factories and suppliers around the world. The IT systems that support these
endeavours include B2C and B2B e-commerce, bar codes, RFID, EDI and XML.
Collaboration occurs through the Internet, company intranets, extranets and satellites. ERP,
SCM, and CRM systems provide the framework upon which these interactions are
managed. Advances in DSS, ES, and AI support managerial decision making.
Collaborative manufacturing involves sharing real-time data with trading partners and
customers, and making collaborative decisions about production based on that data.
6-11. Student answers will vary. Some common resources for outsourcing information are
Business Week, Fortune, and The Outsourcing Institute. Several additional weblinks are
provided on the student companion website.
6-12. A flowchart for the process of drawing a flowchart.
6-13. Student answers will vary.
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Answers to Problems
(Answers may vary due to rounding)
6-1. Students will come up with a variety of answers for this question. See if they can relate
their ideas for improvement directly to the process flow chart. In many cases, the flow
charts do not show everything the student knows about the process. A process flowchart
worksheet is posted on the text website.
6-2. An Operations Chart for Making Pancakes
Operation Equipment/
No. Description Tools Time
1 Heat electric skillet to 375  electric skillet 5 mins.
Gather tools and pancake mixing bowl, spoon, 2 mins.
2
mix measuring cup, spatula
Read instructions and choose Pancake mix box 2 mins.
3
no. of pancakes to make
Gather ingredients: milk, — 2 mins.
4
eggs, oil
Combine pancake mix, milk, Bowl, spoon, 5 mins.
5 oil, and eggs. Stir until large measuring cup
lumps disappear
Pour 1/4 cup batter onto hot Measuring cup, skillet 1/2 min.
6
skillet
7 Cook Skillet 1 1/2 mins.
Turn pancake when bubbles Spatula 1/2 min.
8
begin to form on surface
9 Cook Skillet 1 1/2 mins.
Remove and Spatula, plate 1 min.
10
Serve
Repeat from step 6 until — —
11
batter is gone
Unplug skillet and allow to Skillet 15 mins.
12
cool
c f 5, 000
6-3.
cv $5 CD
p $15 CD
cf 5, 000 5, 000
v   500
p  cv 15  5 10
Mikey needs 500 CDs or $7,500 in sales to break even.
c f $9, 000
6-4. a.
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cv $2 CD
p $15 CD
9, 000
v 692.31
15  2
b. 5, 000  5 x 9, 000  2 x

3x 4, 000
x 1,333 CDs
If the sales volume is expected to exceed 1,333 units, choose the classier studio.
Otherwise, choose the first studio.
c f $25, 000
6-5.
cv $10 doll
p $50 doll
25, 000 25, 000
v  625 dolls
50  10 40
c f $5, 000
6-6. a.
cv $15 doll
p $50/doll
5,000 5,000
v = =
50 – 15 35
= 142.85 or 143 dolls
25, 000 25, 000

  142.85 or 143 dolls
50  15 35
b. 25, 000  10 x 5, 000  15 x

20, 000 5x
4, 000  x
If demand is expected to be less than 4,000 dolls, choose the new process.
c f $15, 400
6-7. a.
cv $0.25 shirt
p $1.10 shirt
15, 400 15, 400
v  18,117.65 or 18,118
1.10  0.25 0.85
David needs to press 18,118 shirts to break even.
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b. At 50 shirts a day, it would take David 18,118 50 362.36 or 363 days to break even.
At 200 shirts a day, David would break even in 18,118 200 90.59 or 91 days.
c f 15, 400
c.
cv 0.25
p 0.99
15, 400 15, 400
v  20,810.81 shirts
0.99  0.25 0.74
20,811
83.24 days
250
At 250 shirts a day, David would break even in 84 days. He should purchase the press
and lower his price.
Make Buy
c f $200 c f $75
6-8. cv $0.30 slice% cv $1.125 slice
200  0.30 x 75  1.125 x

125 0.825x
151.51 x
If more than 151 students want pizza for lunch, the cafeteria should make its own.
Otherwise, they should buy from Pizza Den.
6-9. Supplier vs. Process A

$20 x $8, 000  $10 x
$10 x $8, 000
x 800
Process A vs. Process B
$8, 000  $10 x $20, 000  $4 x
$10 x $12, 000  $4 x
$6 x $12, 000
x 2, 000
Use the supplier when demand is less than 800 keyboards.
Use process B when demand is over 2,000 keyboards.
Use Process A otherwise.
6-10. Subcontracting vs. Small Facility

$60 x $200, 000  $40 x
$20 x $200, 000
x 10, 000
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Small Facility vs. Larger Facility

$200, 000  $40 x $600, 000  $20 x
$40 x $400, 000  $20 x
$20 x $400, 000
x 20, 000
Subcontract if demand is less than 10,000 items.
Use the larger facility when over 20,000 item are needed.
Otherwise, use the smaller facility.
6-11. Occasional vs. Frequent

0.50 x 55   x  70  0.33
0.50 x 31.90  0.33 x
0.17 x 31.90
x 187.65 min
Switch to frequent-user plan when airtime exceeds 187 min a month.
Frequent vs. Executive

55   x  70  0.33 75   x  100  0.25
31.90  0.33x 50  0.25 x
0.08 x 18.10
x 226.25 min
Switch to executive user plan when airtime exceeds 226 min a month.
25,000  40  300  25, 000  12,000 $37, 000

6-12. a. Make:
50  300  $15, 000*
Buy:
Buy the part.
$50  100   45  300  100  5, 000  9, 000 $14,000*

b.
Buy from the New Supplier.
25,000  40  2, 000  $105,000

c. Make:
50  2, 000  100, 000
Old:
5, 000  45  2000  100  $90,500*
New:
Same decision: Buy from the New Supplier.
25,000  40  5, 000  $225,000*
Make:
50  5, 000  250,000
Old:
50  100   45  5, 000  100  $225,500
New:
Decision changes: Make.
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d. Make vs. New Supplier

25, 000  40 x 5, 000  45  x  100 
25, 000  40 x 5, 000  45 x  4,500
25, 000  40 x 500  45 x
24,500 5x
4,900  x
Old vs. New Supplier
50 x 5, 000  45  x  100 
50 x 5, 000  45 x  4500
5 x 500
x 100
If demand for component 100, choose old supplier.
If demand for component  100 but  4,900, choose new supplier.
If demand for component 4,900, make it.
6-13. Provider 1 vs. Provider 3

300 200  10x
100 10x
10 x
Provider 2 vs. Provider 3
100  30 x 200  10 x
20 x 100
x 5
Choose provider 1 if more than 10 claims are made per month, provider 2 if fewer than 5
claims are made per month, and provider 3 otherwise.
6-14. Old System vs. System 1

10, 000  25 x 40, 000  10 x
15 x 30, 000
x 2, 000
System 1 vs. System 2
40, 000  10 x 100, 000  5 x
5 x 60, 000
x 12, 000
Purchase system 1 when demand exceeds 2,000; Purchase system 2 when demand exceeds
12,000.
6-15. Labour vs. Automated

10, 000  14 x 50, 000  8 x
6 x 40, 000
x 6, 666.66
Labour vs. Fully Automated
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10, 000  14 x 300, 000  2 x

12 x 290, 000
x 24,166.66
Automated vs. Fully Automated
50, 000  8 x 300, 000  2 x
6 x 250, 000
x 41, 666.66
Choose a labour-intensive process if demand is 6,666 or less.
Choose an automated process if demand is between 6,666 and 41,666.
Choose a fully automated process if demand is greater than or equal to 41,666.
6-16. B. B. Lean vs. Sea’s End

400  6 x 460  4 x
2 x 60
x 30
Spoogle’s vs. Sea’s End
500  3 x 460  4 x
40 x
If the number of items to be ordered is 30 or less, choose B. B. Lean. If the number of
items is between 30 and 40, choose Sea’s End. If the number of items is 40 or greater,
choose Spoogle’s.
6-17. Arrange the alternatives from the lowest fixed cost to the highest fixed cost.
Monitor A vs. Monitor B
$700, 000  $250 x $1, 000, 000  $125 x
$125 x $300, 000
x 2400 units
Monitor B vs. Monitor C
$1, 000, 000  $125 x $1,500, 000  $100 x
$25 x $500, 000
x 20, 000 units
Recommendation: If the demand for monitors is less than 2400 units, choose monitor A. If
demand is greater than 20,000 units, choose monitor C. Otherwise, choose B.
6-18. This problem involves some thought before running the numbers. Examining the variable
costs, making the pies will be preferable at high levels of demand, and buying from the
local bakery will be preferable at very low levels of demand. The regional bakery falls in
between the two. To find the exact quantities where each alternative is preferred, the
regional bakery needs to be compared to both the local and in-house bakeries. The
minimum purchase for the regional bakery does not come into play until the regional and
local bakeries are compared.
Regional bakery vs. In-house
$3x $80  $1x
$2 x $80
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x 40 pies
We know that the regional bakery will always be preferred to the local bakery above 25
pies, so we simply equate the cost of the local bakery with the regional bakery cost of 25
pies.
Local bakery vs. Regional bakery
$4 x $3  25 
x 18.75 or 19 pies
Recommendation: Make the pies in-house if demand is more than 40 pies. Buy the pies
from the local bakery if the demand is less than 19 pies. Otherwise, purchase the pies from
the regional bakery. A graph of the problem appears below:
6-19. Almost Free vs. Best Movies

$40  $5 x $65  $4 x
x 25
Best Movies vs. Choice Cinema
$65  $4 x $100  $3x
x 35
Recommendation: Choose Almost Free Flicks if Keisha orders less than 25 movies.
Choose Choice Cinema is Keisha orders more than 35 movies. Otherwise, choose Best
Movies.
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6-20.
6-21.
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Answers to Case Problem 6.1: A Manager’s Woes
Current Process Flow Chart:
Date: 9/25/2011 Location: Zelmart

Analyst: K. Peschken Process: Electronics check-out
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Revised Process Flow Chart:
Date: 9/25/2011 Location: Zelmart

Analyst: K. Peschken Process: Revised electronics check-out
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Answers to Case Problem 6.2: Wrong Meds, Again!
1. A process map of the medication list with possible failure points follows:
2. Often, managers will blame individuals for process errors, even though the same errors are
made with new or different staff. While individuals can and do make mistakes, a properly
designed process can eliminate many opportunities for error and should make it easier to
do the job correctly. This view is reflected in a recent article appearing in Pharmacy
Times0: “When analyzing medication errors, the trend in the past has been to place possible
negligence on the health care provider. Yet, today we realize that many medication errors
result from inadequate systems leading to serious mistakes by providers. Errors can occur
during any stage of the medication process. Rather than upholding a punitive approach,
0
Greta Pelegrin, “Medication Errors in Hospitals: An Analysis,” Pharmacy Times, Oct. 2004, p. 38.
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however, now the focus is to concentrate on “prevention” and to devise strategies to

minimize errors and adverse medication events. Although providers are still held to a high
standard and must be responsible for the decisions they make, placing blame on an
individual seldom leads to positive outcomes.”
3. The case does not explicitly state how data is stored and transmitted, so student
assumptions will vary. In general, the hospital is the most sophisticated, followed by the
ambulance service, then the nursing home. This case is based on an actual situation with
the following scenario:
The nursing home records data manually on medications given each day on a printout
provided by an outside pharmacy. The pharmacy can make daily deliveries if needed, but
generally fills prescriptions for a month’s worth of meds at a time. The electronic file of
each patient’s medication list is updated at irregular intervals. All transmittals of patient
records are either faxed or hand delivered to physicians by patient families. Electronic
transmittal is problematic because of the manual recording of data.
The ambulance has audio contact with the local hospital but no Internet access. Data is
recorded manually, relayed by phone, and in some cases recorded in a PDA type of device
to be uploaded at a later time to a central system.
The emergency room maintains both a paper and electronic copy of patient information.
Patient information is entered by the admitting clerk and the nurses at the nurse’s station.
On the hospital floor, all data is recorded and transmitted electronically on PCs rolled into
each patient room. The information is uploaded to the central data base nightly.
It would be easier if all parties used a common electronic mode of communication, or if
compatible systems could be used. For example, bar codes on patient wrist bands and
medication are common. Perhaps a computer chip (RFID-type tag) could be used to record
information about the patient and the dispensing of medication. The hospital and
ambulance service could read the tag and obtain up-to-date information. While this
solution would be ideal, it is expensive and could still result in technology glitches. Other
suggestions include: involvement of a pharmacist and patient (or patient’s POA) in
verifying medication; clear dating of data entry; standardized formats for data entry and
transmission of data; automatic check on data entry and dosages by weight of patient or
patient diagnosis; more rapid updating of system data; verification of data readiness before
releasing patient from emergency room to hospital room.
4. Melanie’s reaction is quite common – take care of the incident and the problem is solved.
But the root cause of the problem remains and errors will continue in the future if the
process is not changed. Melanie seems unduly defensive and dismissive (perhaps she is
worried about a lawsuit). Again, this is an industry wide problem. Hospitals nationwide are
exploring and developing systems for the purpose of reducing medication administration
errors. The Institute for Clinical Systems Improvement (www.icsi.org) recommends the
following, none of which can take place in a punitive or dismissive environment:
a. become familiar with the actual errors—how, when, and why they were committed;
b. establish a “non-punitive” approach to encourage the reporting of errors or “near-miss
errors”;
c. identify areas of concentrated errors;
d. standardize steps in the identification of errors; and
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e. select the proper technology to correct these errors.
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Answers to Case Problem 6.3: The DPA Protocol

Answers will vary.

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Solutions Manual for Operations Management: Creating Value Along the Supply Chain, Canadian Edition 6- 1

CHAPTER 6 – PROCESSES AND TECHNOLOGY

ANSWERS TO QUESTIONS, PROBLEMS, AND CASE PROBLEMS

6-2. Six factors affecting the make-or-buy decision are:

d. There is three mistakes in this sentence.

6-9. Factors often overlooked in the financial analysis of technology include:

6-12. A flowchart for the process of drawing a flowchart.

6-13. Student answers will vary.

6-2. An Operations Chart for Making Pancakes

Mikey needs 500 CDs or $7,500 in sales to break even.

b. 5, 000  5 x 9, 000  2 x

= 142.85 or 143 dolls

25, 000 25, 000

b. 25, 000  10 x 5, 000  15 x

6-8. cv $0.30 slice% cv $1.125 slice

200  0.30 x 75  1.125 x

6-9. Supplier vs. Process A

6-10. Subcontracting vs. Small Facility

Small Facility vs. Larger Facility

6-11. Occasional vs. Frequent

Frequent vs. Executive

25,000  40  300  25, 000  12,000 $37, 000

$50  100   45  300  100  5, 000  9, 000 $14,000*

25,000  40  2, 000  $105,000

d. Make vs. New Supplier

6-13. Provider 1 vs. Provider 3

6-14. Old System vs. System 1

6-15. Labour vs. Automated

10, 000  14 x 300, 000  2 x

6-16. B. B. Lean vs. Sea’s End

6-19. Almost Free vs. Best Movies

Answers to Case Problem 6.1: A Manager’s Woes

Current Process Flow Chart:

Date: 9/25/2011 Location: Zelmart

Revised Process Flow Chart:

Date: 9/25/2011 Location: Zelmart

Answers to Case Problem 6.2: Wrong Meds, Again!

however, now the focus is to concentrate on “prevention” and to devise strategies to

e. select the proper technology to correct these errors.

Answers to Case Problem 6.3: The DPA Protocol

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