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Instructor’s Manual/Solutions Manual – OSCM2e – Collier/Evans – C1 Operations
Management and Value Chains
The first chapter introduces students to the basic concepts of operations management and value
chains in both goods-producing and service-providing organizations. We explain the importance
of OM, what operations managers do, the differences between goods and services, the concept
of value, customer benefit packages, differences between value and supply chains, value chain
frameworks, historical developments of OM, and current challenges.
Questions are provided in two categories:
1. Review questions
The chapter has three cases:
1. Mickey Mouse: To Talk or Not? is the first case study. It focuses on service operations,
2. Zappos: A Subsidiary of Amazon allows students to consider what operations and logistic
3.The integrative case study, Hudson Jewelers, with case assignment questions in all chapters,
requires the student to characterize the jewelry store in terms of one of three value chain
KEY TERMS
Biztainment is the practice of adding entertainment content to a bundle of goods and services
in order to gain competitive advantage.
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Distribution centers (DCs) are warehouses that act as intermediaries between factories and
customers, shipping directly to customers or to retail stores where products are made available
to customers.
Economic sustainability is an organization’s commitment to address current business needs
and economic vitality, and to have the agility and strategic management to prepare successfully
for future business, markets, and operating environments.
Environmental sustainability is an organization’s commitment to the long term quality of our
environment.
A nondurable good is one that is no longer useful once it’s used, or lasts for less than three
years.
Operations management (OM) is the science and art of ensuring that goods and services are
created and delivered successfully to customers.
Peripheral goods or services are those that are not essential to the primary good or service but
enhance it.
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Service management integrates marketing, human resources, and operations functions to plan,
create, and deliver goods and services, and their associated service encounters.
Sustainability refers to an organization’s ability to strategically address current business needs
and successfully develop a long-term strategy that embraces opportunities and manages risk
for all products, systems, supply chains, and processes to preserve resources for future
generations.
Value is the perception of the benefits associated with a good, service, or bundle of goods and
services in relation to what buyers are willing to pay for them.
REVIEW QUESTIONS
1. Explain the concept and importance of operations management.
Creating and delivering goods and services to customers depends on an effective system of
linked facilities and processes, and the ability to manage them effectively around the world.
2. Describe how operations management is used in work throughout business organizations.
Many people who are considered “operations managers” have titles such as chief
3. State three of the key activities that operations managers perform and briefly explain them.
Students should describe three of the following in their own words.
• Forecasting: Predict the future demand for raw materials, finished goods, and services.
• Supply chain management: manage the flow of materials, information, people, and
money from suppliers to customers.
• Facility layout and design: determine the best configuration of machines, storage,
offices, and departments to provide the highest levels of efficiency and customer
satisfaction.
4. Define a good and a service.
Companies design, produce, and deliver a wide variety of goods and services that
5. Explain how goods differ from services.
• Goods are tangible, services are intangible.
• Customers participate in many service processes, activities, and transactions.
6. Define the concept of value.
The underlying purpose of every organization is to provide value to its customers and
7. How can an organization increase value to its customers?
To increase value, an organization must
(a) increase perceived benefits while holding price or cost constant;
8. Describe a customer benefit package.
“Bundling” goods, services, and digital content in a certain way to provide value to
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9. What is a peripheral good or service? Provide some examples.
10. Define “biztainment” and provide an example.
Biztainment is the practice of adding entertainment content to a bundle of goods and
services in order to gain competitive advantage. Student will find examples everywhere.
• Manufacturing—old and new factory tours, showrooms, customer training and education
11. Explain the difference between value chains and supply chains.
Many organizations use the terms “value chain” and “supply chain” interchangeably;
however, a value chain is broader in scope than a supply chain and is easier to apply to
service-providing organizations as well as to goods producing firms. A value chain is a
12. Define and explain the three major types of processes in business?
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These are:
1. Value-creation processes, focused on producing or delivering an organization’s primary
goods or services that create value for customers, such as filling and shipping a customer’s
order, assembling a dishwasher, or providing a home mortgage.
13. What is a distribution center?
A distribution centers (DC) is a warehouse that acts as an intermediary between factories
14. Contrast the three different frameworks for describing value chains.
1. An input-output framework: Inputs are transformed into value-added goods and
services through processes that are supported by such resources as equipment and
facilities, labor, money, and information.
15. Define sustainability and explain its three dimensions.
Sustainability refers to an organization’s ability to strategically address current business
Environmental Sustainability
• Waste management: Reduce waste and manage recycling efforts
• Energy optimization: Reduce consumption during peak energy demand times
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Social Sustainability
• Product safety: Ensure consumer safety in using goods and services
Economic Sustainability
• Performance excellence: Build a high-performing organization with a capable
leadership and workforce
Emergency preparedness: Have plans in place for business, environmental, and
16. What percent of U.S. economy jobs are in the service sector?
According to Exhibit 1.13 all of goods producing (manufacturing, agriculture, forestry,
fishing, hunting) are about 20% of U.S. jobs while the U.S. service sector represents 80%
of all jobs. Does this surprise your students? Ask them, what are some service sector
industries? Where does their family and friends work?
Service industries include transportation, local, state and federal governments; education,
17. Describe the importance of data and business analytics in operations and supply chain
management?
In OM, data are used to evaluate operations performance, quality, order accuracy,
customer satisfaction, delivery, cost, environmental compliance, and many other areas of
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18. Summarize the historical development of OM.
Exhibit 1.11 offers a chronology of major themes that have changed the scope and
19. Select one of the following challenges facing OM: customers, technology, workforce,
globalization, sustainability, or optimizing supply chains, and explain its short- and long-
term impact.
Sustainability, for example, requires both short- and long-term thinking and practices.
DISCUSSION QUESTIONS AND EXPERIENTAL ACTIVITIES
20. Describe a customer experience you have personally encountered where the good or
service or both were unsatisfactory (e.g., defective product, errors, mistakes, poor service,
service upsets, etc.). How might the organization have handled it better, and how could
operations management have helped?
The objective of this type of question is for the student to describe what they know and
you, the instructor; help put it into an OM context or framework. This question is also
21. Search recent articles in your local newspaper and business magazines such as Fortune,
Business Week, Fast Company, and so on and identify OM concepts and issues that are
discussed. How do these fit into the classification in the box “What Do Operations
Managers Do?” in this chapter?
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The objective of this question is simply to show how OM ties to company success and begin
22. Interview a manager at a local company about the work he or she performs. Identify (a)
the aspects of the job that relate to OM (like the OM activities in the box on page 3,
“What Do Operations Managers Do?”) and (b) examples of value-creation, support, and
general management processes.
Some of the key activities that operations managers perform include
• Forecasting: Predict the future demand for raw materials, finished goods, and
services.
• Supply Chain Management: Manage the flow of materials, information, people,
and money from suppliers to customers.
Try to help students identify value-creation, support, and general management processes
in their example(s). The Human Resource Management functions, for example, are good
situations to discuss support services. Primary processes, for example, are key
manufacturing and engineering design activities. CFOs and CIOs, for example, are
examples of general management processes that integrate and oversee things.
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23. Evaluate how the activities described in the box “What Do Operations Managers Do?” can
be applied to a student organization or fraternity to improve its effectiveness.
Students should be able to discuss how many of the following activities can be applied.
• Forecasting: Predict the future demand for raw materials, finished goods, and
services.
• Supply chain management: manage the flow of materials, information, people, and
money from suppliers to customers.
24. Interview a working friend or family member as to how they use operations management
principles in their job and write a short paper summarizing your findings (maximum two
pages).
Student responses range from family members that work in manufacturing and logistics to
financial and health care organizations. A good place to begin is with the box “What Do
OM Managers Do?” plus many of the other concepts in Chapter 1. For example, a family
25. Explain how the seven differences between goods and services would be applied to a major
airline service. Provide airline examples that illustrate each difference.
1. Goods are tangible, whereas services are intangible. Fuel, airline cabin food, paper
tickets, pillows, magazines, sodas and coffee, and so on are the only physical goods. Ask
2. Customers participate in many service processes, activities, and transactions. Oh! Yes.
At boarding, while in flight, leaving the plane, at the baggage terminal, and so on. Many
services require that the customer be present either physically, on a telephone, or online
3. The demand for services is more difficult to predict than the demand for goods. Airline
routes are complicated with weather, other carrier schedules and reschedules, takeoff
and landing delays, etc. making demand highly variable with no way to “store in
4. Services cannot be stored as physical inventory. Service capacity is the substitute for
physical inventory such as the number of pilots, flight attendants, fuel trucks, seats, etc.
In goods-producing firms, inventory can be used to decouple customer demand from the
5. Service management skills are paramount to a successful service encounter. Flight
attendants, for example, must deal with many complex situations that require “service
management” skills. Employees who interact with customers require service
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6. Service facilities typically need to be in close proximity to the customer. Airport
location is critical to minimize total distance travelled by all customers. When customers
7. Patents do not protect services. Any airline could copy Southwest Airlines boarding
process and patent law would not protect SW process. A patent on a physical good or
26. Explain why a bank teller, nurse, or flight attendant must have service management skills.
How do the required skills differ for someone working in a factory? What are the
implications for hiring criteria and training?
Service-providers need technical/operations skills plus human interaction and marketing
27. Do you think you will be working in manufacturing or services when you graduate? What
do you think will be the role of manufacturing in the U.S. economy in the future?
This question is designed to get students to explore job opportunities and industries in
both goods-producing and service-providing industries. Use the Exhibit 1.11 of “where
are the jobs in the USA?” to enhance this discussion. The location of your institution may
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28. Choose one of the following services and explain, using specific examples, how each of the
ways that services differ from manufactured goods apply.
a. a family practice medical office
b. a fire department
c. a restaurant
d. an automobile repair shop
Generic differences between goods and services include:
• Goods are tangible while services are intangible.
• Customers participate in many service processes, activities, and transactions.
Services especially in the “front office” (at points of contact with the customer) require
different skills than producing physical goods, and therefore, it is difficult for firms to do
29. Explain how the customer benefit package is enhanced from the customer’s viewpoint by
adding digital content to a physical good such as an automobile, cell phone, or appliance?
How is value increased?
Adding digital content to physical goods is known as the Internet of Things (IoT). A search
of “Internet of Things” reveals over 270 million hits so students have plenty of information
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30. Draw the customer benefit package (CBP) for one of the items in the following list and
explain how your CBP provides value to the customer. Make a list of a few example
processes that you think would be necessary to create and deliver “each good or service”
in the CBP you selected and briefly describe issues that must be considered in designing
these processes.
• a trip to Disney World
• a new personal computer
31. Why is process thinking important in operations management? Thinking of yourself as an
“operations manager” for your education, how could process thinking improve your
performance as a student?
Process thinking is important since processes describe “how work gets done and
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32. One of our former students, who had worked for Taco Bell, related a story of how his
particular store developed a “60–second, 10-pack club” as an improvement initiative and
training tool. The goal was to make a 10-pack of tacos in a minute or less, each made and
wrapped correctly, and the total within one ounce of the correct weight. Employees
received recognition and free meals for a day. Employees strove to become a part of this
club, and more importantly, service times dropped dramatically. Techniques similar to
those used to improve the taco-making process were used to improve other products.
Explain how this anecdote relates to process thinking. What would the employees have to
do to become a part of the club?
At a business like Taco Bell, consistency in food quality and service are vital to customer
satisfaction. By focusing on a goal such as this, employees were forced to think in terms
of the process in order to shave off time and meet the weight requirement. This led to not
33. Review one of the operations and supply chain management professional websites and
report what you find.
This question gives students a chance to explore certification programs, job opportunities,
34. Select an organization you are familiar with and draw and describe its value chain using
one of the three value chain frameworks (i.e., the input-output, pre- and post-services or
the hierarchical model) described in this chapter.
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35. Search the Web for either (a) an organization that has defined its sustainability strategy
and policy, and give examples of how they are implementing it, or (b) an organization that
has received negative or controversial media coverage for its ethical or sustainability
practices. Write a paper describing what you found (maximum of two typed pages).
Almost all organizations are now on the sustainability bandwagon so students will find a
rich discussion of sustainability focused on everything ranging from setting carbon
36. Describe new ways for how your college or university can apply the sustainability
practices in Exhibit 1.13. Summarize your results in a short paper.
Students must take the topics below and apply them to their college or university.
Exhibit 1.13 Examples of Sustainability Practices
Environmental Sustainability
Waste management: Reduce waste and manage recycling efforts
Energy optimization: Reduce consumption during peak energy demand times
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37. Discuss how the three perspectives of sustainability influence (or perhaps, should
influence) your personal purchasing decisions. For example, do you consider whether
apparel is made in safe and ethical factories? Should companies exploit their
sustainability efforts for marketing purposes? Why or why not?
Environmental responsibility is often conveyed in packaging (for example, “made from
100% recycled materials…”). However, social responsibility is not that easy to identify. As
38. Research and write a short paper describing how business analytics has been applied to
problems and decisions in operations management. Use the information in the box
“What do Operations Managers Do?” to help your search process.
There are many examples for students to write a paper on such as
• sports analytics (Moneyball, etc.)
• credit card approval
• yield management decisions