1
C H A P T E R
Operations and Productivity
DISCUSSION QUESTIONS
1. The text suggests four reasons to study OM. We want to
understand (1) how people organize themselves for productive
2. Possible responses include: Adam Smith (work specialization/
division of labor), Charles Babbage (work specialization/division
of labor), Frederick W. Taylor (scientific management), Walter
3. See references in the answer to Question 2.
LO 1.1: Define operations management
AACSB: Application of knowledge
4. The actual charts will differ, depending on the specific
organization the student chooses to describe. The important
thing is for students to recognize that all organizations require,
5. The answer to this question may be similar to that for Question
4. Here, however, the student should be encouraged to utilize a
LO 1.1: Define operations management
AACSB: Application of knowledge
LO 1.1: Define operations management
AACSB: Application of knowledge
7. The 10 strategic decisions of operations management are
AACSB: Application of knowledge
8. Four areas that are important to improving labor productivity
AACSB: Application of knowledge
9. Productivity is harder to measure when the task becomes
more intellectual. A knowledge society implies that work is
more intellectual and therefore harder to measure. Because the
U.S. and many other countries are increasingly “knowledge”
societies, productivity is harder to measure. Using labor-hours as
a measure of productivity for a postindustrial society versus an
AACSB: Analytical thinking
10. Productivity is difficult to measure because precise units of
11. Mass customization is the flexibility to produce to meet
specific customer demands, without sacrificing the low cost of a
product-oriented process. Rapid product development is a source of
2 CHAPTER 1 OPE R A TI O N S A N D PR O D U C T I VI T Y
12. Labor productivity in the service sector is hard to improve
LO 1.6: Identify the critical variables in enhancing productivity
AACSB: Reflective thinking
13. Taco Bell designed meals that were easy to prepare; with
14. Bureau of Labor Statistics (stats.bls.gov) is a good place to
start. Results will vary for each year, but overall data for the
economy will range from .9% to 4.8%, and mfg. could be as
high as 5% and services between 1% and 2%. The data will vary
ETHICAL DILEMMA
AMERICAN CAR BATTERY INDUSTRY
tainment. Then after a likely conclusion of “Well someone has to
provide batteries,” you can move to the following discussion.
in old batteries, some aggressive digging may uncover an
imaginative recycler who can work out an economical
arrangement for pickup or delivery of your old batteries.
Another option is, of course, to discontinue the sale of
batteries. (This a problem for many small businesses; ethical
decisions and regulation may be such that they often place
For both a small and large retailer, the solution is to find a
END–OF–CHAPTER PROBLEMS
120 boxes
(a) = 3.0 boxes/hour
40 hours
1.1
(d)
0.125 boxes
Percentage change = = 4.167%
3.0
1.2 (a) Labor productivity is 160 valves/80 hours = 2 valves
1.3
57,600
0.15 = , where number of laborers
(160)(12)( ) employed at the plant
L
L=
CHAPTER 1 OPER A TI ON S A N D PR O DU C T I V I T Y 3
Output
Productivity = Input
1.7
Resin
2.22
Capital
11,000
1.8 (a) Labor productivity = 1,000 tires/400 hours = 2.5
1.9
Last Year
This Year
Change
Percent Change
Labor hrs.
1,500 = 4.29
350
1,500 = 4.62
325
0.33
4.29
= 7.7%
Capital invested
1,500 = 0.10
15,000
1,500 = 0.08
18,000
0.02
0.1
−
= –20%
Energy (btu)
1,500 = 0.50
3,000
1,500 = 0.55
2,750
0.05
0.50
= 10%
Productivity of capital did drop; labor productivity increased as did energy, but by less than the anticipated 15%.
1.5
Resource
Last Year
This Year
Change
Percentage Change
Labor
1,000 = 3.33
300
1,000 = 3.64
275
0.31
0.31 = 9.3%
3.33
3,000
2,850
0.33
1.6
Last Year
This Year
Production
1,000
1,000
Labor hr. @ $10
$3,000
$2,750
Resin @ $5
250
225
Capital cost/month
100
110
Energy
1,500
1,425
$4,850
$4,510
4 CHAPTER 1 OPE R A TI O N S A N D PR O D U C T I VI T Y
1.10 Multifactor productivity is:
375 autos/[($20 × 10,000) + ($1,000 × 500) +
1.11 (a) Before: 500/20 = 25 boxes per hour;
1.12 1,500 × 1.25 = 1,875 (new demand)
Outputs = Productivity
Inputs
1,875 = 2.344
Labor-hours
1,875
New process = 800 labor-hours
2.344
800 = 5 workers
160
1,500
Current process = = 2.344
labor-hours
1,500 = labor-hours 640
2.344
640 = 4 workers
160
Add one worker.
1.13 (a) Labor change:
1,500 1,500
= = .293 loaves/$
(640 × $8) 5,120
1,875 = 0.293 loaves/$
(800 × $8)


1,500
Old process = (640 8) + 500 + (1,500 0.35)
1,875
New process = (800 8) + 500 + (1,875 0.35)
1,875
= = 0.248 loaves/$
7,556.25
0.248 – 0.244
Percent change = = 1.6%
0.244
4
1.1
labor-hours labor-hours
6,600 vans
(a) = 0.10
= 66,000
x
x
1.15
There are 300 laborers. So,
1,500
Last year = (350 8) + (15,000 0.0083) + (3,000 0.6)
1.17
=++
1,500
2,800 124.50 1,800
==
1,500 0.317 doz / $
4,724.5
1500
66,000 labor-hours = 220 labor-hours/laborer
300 laborers on average, per month
$ output 52($90) + 80($198)
=8 (45)
$20,520
= = $57.00 per
360
1.16
Labor–hours
labor–hour
After, 650/24 = 27.08
(b) 27.08/25
= 1.083, or an increase of 8.3% in productivity
(c) New labor productivity = 700/24 = 29.167
boxes per hour
=
=
6,600 vans
(b) Now = 0.11, so 60,000 labor-hours
labor-hours
60,000 labor-hours
so, 200 labor-hours/laborer
300 laborers on average, per month
x
x
CHAPTER 1 OPER A TI ON S A N D PR O DU C T I V I T Y 5
1
CASE STUDY
UBER TECHNOLOGIES, INC.
1. The market has decided that Uber and its immediate competi-
tors are adding efficiency to our society. How is Uber providing
that efficiency?
First, some drivers (maybe most) may not require a wage that
equals those fully engaged in the “taxi” business. It truly could
be a supplemental income. . . . “I’m going that way anyhow
so let’s make a few dollars while on the way.” Similarly, the
capital investment cost approaches zero as the car is going that
direction anyhow. These are idle or underutilized resources.
From society’s perspective, Uber and its like competitors are
desirable because both idle or wasted labor and capital resources
are being utilized. At the same time, as a bonus, Uber is reduc-
ing traffic and auto pollution while speeding up the transport of
2. Do you think the Uber model will work in the trucking
industry?
Perhaps a business model similar to Uber’s can be applied to the
trucking industry. An estimated 30% of trucking backhauls are
3. In what other areas/industries might the Uber model be used?
Perhaps the Uber model can be used for package delivery, docu-
ments, and everything from flowers to groceries. Airbnb
VIDEO CASE STUDIES
FRITO-LAY: OPERATIONS MANAGEMENT
IN MANUFACTURING
This case provides a great opportunity for an instructor to stimulate
a class discussion early in the course about the pervasiveness of the
10 decisions of OM with this case alone or in conjunction with the
Hard Rock Cafe case. A 7-minute video filmed specifically for
this case is available from Pearson.
1. From your knowledge of production processes and from the
case and the video, identify how each of the 10 decisions of OM
is applied at Frito-Lay.
◼ Product design: Each of Frito-Lay’s 40-plus products
must be conceived, formulated (designed), tested (market
studies, focus groups, etc.), and evaluated for profitabil-
ity.
◼ Supply-chain management: Frito-Lay, like all other pro-
ducers of food products, must focus on developing and
auditing raw material from the farm to delivery.
◼ Inventory: Freshness and spoilage require constant effort
to drive down inventories.
AACSB: Reflective thinking
2. How would you determine the productivity of the production
processes at Frito-Lay?
6 CHAPTER 1 OPE R A TI O N S A N D PR O D U C T I VI T Y
2
3. How are the 10 decisions of OM different when applied by the
operations manager of a production process such as Frito-Lay
than when applied by a service organization such as Hard Rock
Cafe?
HARD ROCK CAFE: OPERATIONS
MANAGEMENT IN SERVICES
There is a short video (7 minutes) available from Pearson and
filmed specifically for this text that supplements this case.
1. Hard Rock’s 10 decisions: This is early in the course to discuss
these in depth, but still a good time to get the students engaged in
the 10 OM decisions around which the text is structured.
◼ Process: The process can be discussed from many
perspectives: (a) the process of processing a guest, to
their seat, taking the order, order processing, delivery of
the meal, payment, etc., (b) the process of how a meal is
prepared (see, for instance, how one would make a Hard
Rock Hickory BBQ Bacon Cheeseburger (Figure 5.9) or
a Buffalo Chicken Mac & Cheese (Figure 14.9) or use
the Method Analysis tool discussed in Chapter 10, or (c)
some subset of any of these.
◼ Location: Hard Rock Cafes have traditionally been located
in tourist locations, but that is beginning to change.
◼ Layout: Little discussion in the case, but students may be
very aware that a kitchen layout is critical to efficient
food preparation and that a bar is critical in many food
◼ Scheduling: Because most Hard Rock Cafe’s sales are
driven by tourists, the fluctuations in seasonal, daily, and
hourly demands for food are huge. This creates a very
interesting and challenging task for the operations
served cold must be done. Bar equipment and point-of-
sale equipment must also work.
LO 1.1: Define operations management
AACSB: Reflective thinking
2. Productivity of kitchen staff is simply the output (number of
meals) over the input (hours worked). The calculation is how many
meals prepared over how many hours spent preparing them. The
3. Each of the 10 decisions discussed in Question 1 can be
addressed with a tangible product like an automobile.
◼ Product design: The car must be designed, tested, and costed
out. The talents may be those of an engineer or operations
manager rather than a chef, but the task is the same.
◼ Quality: At an auto plant, quality may take the form of
measuring tolerances or wear of bearings, but there is still
a quality issue.
◼ Process: With an auto, the process is more likely to be an
assembly–line process.
◼ Location: Hard Rock Cafe may want to locate at tourist
destinations, but an auto manufacturer may want to go to a
location that will yield low fixed or variable cost.
◼ Layout: An automobile assembly plant is going to be
CHAPTER 1 OPER A TI ON S A N D PR O DU C T I V I T Y 7
ADDITIONAL CASE STUDIES
(available in MyOMLab)
NATIONAL AIR EXPRESS
1. The number of stops per driver is certainly a good place to
2. Customer service should be based on an analysis of customer
requirements. Document requirements in terms of services
LO 1.6: Identify the critical variables in enhancing productivity
AACSB: Analytical thinking
3. Other companies in the industry do an effective job of
AACSB: Analytical thinking
ZYCHOL CHEMICALS CORPORATION
1. The analysis of the productivity data is shown below:
8 CHAPTER 1 OPE R A TI O N S A N D PR O D U C T I VI T Y
Both labor and material productivity increased, but capital equip-
ment productivity did not. The net result is a large negative change
2. An analysis of adjusted results reduces the negative impact on
the capital allocation but there is still a negative growth in multi-
factor productivity. After adjustment for inflation, the material
costs are still higher in 2017. Yet, one must be aware of the extra
volatility of the cost of petroleum-based products. Did the manag-
3. The manager did not reach the goal. An analysis of the
changes in capital costs is warranted. Even after adjusting for