(Solution Manual) Operations Management Creating Value Along the Supply Chain, Canadian Edition

Russell,Taylor,Bayley,Castillo, 2

Business

Solution Manual

2nd Edition

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Solution Manual for Operations Management Creating Value Along the Supply Chain, Canadian Edition, The downloadable file consists of 553 pages, and the total size of the file is 8.21 MB. Purchase now only for highly discounted price.

Author(s): Russell, Taylor, Bayley, Castillo

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Solutions Manual for Operations Management: Creating Value Along the Supply Chain , Second Canadian Edition 1 - 1 –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– Copyright © 2020 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited. CHAPTER 1 – INTRODUCTION TO OPERATIONS AND SUPPLY CHAIN MANAGEMENT ANSWERS TO QUESTIONS, PROBLEMS, AND CASE PROBLEMS Answers to Questions 1-1. The operations function involves organizing work, selecting processes, arranging layouts, locating facilities, designing jobs, measuring performance, controlling quality, scheduling work, managing inventory, and planning production. Operations interacts with marketing in product development, forecasting, production planning, and custom er service. Operations and finance interact in capital budgeting, cost analysis, production and inventory planning, and expansion and technology plans. Operations and human resources work together recruiting, training and evaluating workers, designing jobs and working with unions. IT and operations work together daily on e -commerce, enterprise resource planning and supply chain management systems. 1-2. a. Operations at a bank involves transferring funds, processing funds, providing cheque s, cashing cheque s, preparing monthly statements, reconciling statements, approving loans, loaning money, keeping track of loan payments, approving credit cards, and more. b. Operations at a retail store involves purchasing goods, stocking goods, selling goods, keeping track of inventory, scheduling workers, laying out the store, locating the store, forecasting demand, and more. c. Operations at a hospital involves p reparing the rooms, scheduling doctors, nurses and other workers, processing paperwork, ordering supplies, caring for patients, maintaining the facility, laying out the facility, ensuring quality and more. d. Operations at a cable TV company involves taki ng orders, installing equipment, maintaining equipment, keeping the shows on the air, scheduling work, processing statements and payments, and more. 1-3. Inventions during the industrial revolution brought workers together under one roof in a factory set ting where division of labour and interchangeable parts encouraged the formation of separate worker and management jobs. Ideas from the scientific management era made work more efficient. Human relations theorists emphasized the importance of the human ele ment in operations management. The management science era saw many advances in quantitative techniques and their application. The quality revolution focused management on meeting customer expectations and emphasized quality over quantity. The Internet brought numerous opportunities to do work faster and better. It also opened doors to new markets worldwide. Today’s successful companies compete worldwide for both market access and production resources. 1-4. Productivity is the ratio of output to input. Output can be expressed as units produced, customers served, calls answered, or sales dollars. In puts include labour, materials, capital, or square footage. Single -factor productivity measures the ratio of an output to a single input. Multi -factor p roductivity relates output to a combination of inputs that are all Solutions Manual for Operations Management: Creating Value Along the Supply Chain , Second Canadian Edition 1 - 2 –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– Copyright © 2020 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited. expressed in the same units (e.g., labour cost + materials cost). Total factor productivity computes the total quantity of goods and serviced produced with all of the inputs used to produce d them. 1-5. Student answers will vary. The information can be accessed directly from the Internet . 1-6. Student answers will vary. 1-7. Students can begin this assignment by accessing Fortune’s homepage and referring to the Fortune 500 or Global 500 by industry. The leaders in each industry are listed and there is usually some discussion of industry concerns. Individual data on companies c an be found at Hoover’s website ( www.hoovers.com ). 1-8. Student answers will vary. 1-9. Student answers will vary. 1-10. Student answers will vary. The information can be accessed directly from the Internet . 1-11. The WTO is an international organization that works to establish and enforce rules of trade between nations. WTO agreements are ratified by the governing bodies of the nations involved . WTO’s dispute settlement process in terprets agreements and rules on violations, thereby avoiding political or military conflict. The group promotes free trade and more recently, has helped developing nations enter the trade arena on more equitable grounds. Currently, there are 164 member nations. Membership is achieved by meeting certain environmental, human rights, and trade criteria, agreeing to abide by the rules of the organization, and being approved by two -thirds of the existing membership. See www.wto.org 1-12. Student answers will vary. Access www.worldbusinessculture.com 1-13. Student answers will vary. Access www.transparency.org 1-14. Student answers will vary. Access http://laws -lois.justice.gc.ca/eng/acts/C -45.2/ for basic information. 1-15. Students will find a variety of answers for this question. In general, it is easy to find mission or vision statements, but more difficult to find evidence of the mission or vision being applied. 1-16. Strategy formulation consists of four basic steps: (1) defining a primary task —what is the purpose of the firm? What the firm is in the business of doing? (2) assessing core competencies —what does a firm do better than anyone else? (3) dete rmining order winners and order qualifiers —what wins orders in the marketplace? What qualifies a product or service to be considered for purchase? (4) positioning the firm —what one or two important things should the firm choose to concentrate on? How shoul d the firm compete in the Solutions Manual for Operations Management: Creating Value Along the Supply Chain , Second Canadian Edition 1 - 3 –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– Copyright © 2020 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited. marketplace? Student answers will vary. Most start -ups try too much too soon. It’s difficult to stick with what you do best. 1-17. Core competencies are the essential capabilities that create a firm’s sustainable competitive advantage. They have usually been built up over time and cannot be easily imitated. For example, First National Bank, one of our local banks, is known as a risk taker. Its core competence is its ability to size up the potential of investment opportunities. Through its familiarity with local businesses and its experience in loan making, the bank has developed the ability to predict which loans are worth taking extra risks. Walmart , a successful retail store, is known for having a wide assortment of items at competitive prices. The store carries clothing, fresh food, toys, books, and sports equipment, and offers services such as photo printing and pharmacy . They specialize in low pri ces by managing their supply chain operations and inventory carefully . Toyota emphasizes superior quality at a price below its competitors with its Lexus line of automobiles. To establish a special reputation for quality over the lifetime of the car, the company set up separate sales and service facilities. When it is time for servicing, Lexus owners can have their vehicle picked up and delivered to their home or place of business. The car returns the same day, washed and vacuumed, often with a gift ce rtificate inside for a night on the town complements of the dealer. 1-18. While the answers to this question vary considerably, most students feel competent in the technical areas of their major, but uncomfortable with their communication skills (both ora l and written) and their ability to make decisions. This opens the way for more project - oriented assignments from the instructor. The question also helps students prepare for the inevitable interview question —what are your strengths and weaknesses? 1-19. Order qualifiers are characteristics of a product or service that qualify it to be considered for purchase by a customer. An order winner is the characteristic of a product or service that wins orders in the marketplace —the final factor in the purchasing d ecision. When buying a simple product like coffee, students might use order qualifiers to narrow down options (e.g. eliminating choices that are too expensive), the using an order winner to make the decision (e.g. choosing the option that is closest, or w ith the shortest line). 1-20. a. Most companies approach quality in a defensive or reactive mode; quality is confined to minimizing defect rates or conforming to design specifications. To compete on quality , companies must view quality as an opportunity t o please the customer, not just as a way to avoid problems or to reduce rework costs. The manufacturer of Rolex watches competes on quality. b. Companies that compete on cost relentlessly pursue the elimination of all waste. The entire cost structure is e xamined for reduction potential, not just direct labour costs. High volume production and automation may or may not provide the most cost - effective alternative. Wal -Mart competes on cost. c. Flexibility includes the ability to produce a wide variety of pr oducts, to introduce new products and to modify existing products quickly, and, in general, to respond to customer needs. Steelcase Canada competes on flexibility. Solutions Manual for Operations Management: Creating Value Along the Supply Chain , Second Canadian Edition 1 - 4 –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– Copyright © 2020 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited. d. Competing on speed requires a new type of organization characterized by fast moves, fast adaptations, and tight linkages. Citicorp competes on speed. e. Competing on innovation requires taking risks and challenging the status quo. Companies must also be prepared accept failure as part of the learning process . Google, Apple, and 3M compete on innovation, as does SpaceX. f. Competing on service requires closeness to the customer, availability of resources, attention to detail, and flexible operations. Ritz -Carlton competes on service. 1-21. Operations can play two important roles in corporate strategy: (1) it can provide support for the strategy of a firm (help with order qualifiers), and (2) it can serve as a firm’s distinctive competence (win orders). 1-22. Strategic decisions in operation s and supply chain management involve products and services, processes and technology, capacity and facilities, human resources, quality, sourcing, and operating systems. 1-23. Policy deployment tries to focus everyone in an organization on common goals a nd priorities by translating corporate strategy into measurable objectives down through the various functions and levels of the organization. As a result, everyone in the organization should understand the strategic plan, be able to derive several goals fr om the plan, and determine how each goal ties into their own daily activities. 1-24. The balanced scorecard examines a firm’s performance in four critical areas – its finances, customers, processes , and capacity for learning and growing. Although operatio nal excellence is important in all four areas, the tools in operations are most closely associated with process. 1-25. Student answers will vary. 1-26. Student answers will vary. The balanced scorecard worksheet in Table 1.3 is helpful. Finances might re fer to future income, customers to potential employers who are interested in both grades and experience, processes to how students will raise their grades and gain experience, and learning and growing to developing skills in several areas. Solutions Manual for Operations Management: Creating Value Along the Supply Chain , Second Canadian Edition 1 - 5 –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– Copyright © 2020 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited. Answer s to Problems (Answers may vary due to rounding) 1-1. The Kingston store is the most productive. Store Hamilton Kingston London Waterloo Sales volume $40,000 $12,000 $60,000 $25,000 Labour hours 250 60 500 200 Productivity $160 $200 $120 $125 1-2. a. London is the most productive ($8.33) . b. Based on productivity, the Kingston store should be closed. Other factors to consider include total revenue, potential for growth, and options for reducing costs. Hamilton Kingston London Waterloo Sales volume $40,000 $12,000 $60,000 $25,000 Labour hours 250 60 500 200 Labour cost/hr $12.75 $12.50 $12.00 $11.50 Rent $1,800 $2,000 $1,200 $800 Productivity $8.02 $4.36 $8.33 $8.07 1-3. By number, Jim was more productive last year. By weight, Jim was more productive this year. Last yr This yr Hours fishing 4 6 Bass caught 12 15 Average weight 20 25 Bass/hr 3 2.5 Avg Weight /hr 60 62.5 1-4. Productivity could be measured by total account dollars per hour worked, new account dollars per hour worked , or existing account dollars per hour worked. Boisvert is the most productive based on total output. Albert and Duong have the most new accounts, and thus the greater potential returns in the future. However, Duong cannot work many more hours a week and Boisvert is only working half time. Boisvert has the potential to sell more if he works more hours. Agents Albert Boisvert Cressey Duong New accounts $100,000 $40,000 $80,000 $200,000 Existing accounts $40,000 $40,000 $150,000 $100,000 Labour hours 40 20 60 80 Total $/hr $3,500.00 $4,000.00 $3,833.33 $3,750.00 $ New accts/hr $2,500.00 $2,000.00 $1,333.33 $2,500.00 $ Existing accts/hr $1,000.00 $2,000.00 $2,500.00 $1,250.00 Solutions Manual for Operations Management: Creating Value Along the Supply Chain , Second Canadian Edition 1 - 6 –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– Copyright © 2020 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited. 1-5. Japan is the most productive. Labour Hours Units of Output Productivity Canada 79.2 87.1 1.10 Germany 89.6 103.6 1.16 Japan 86.3 117.6 1.36 1-6. Omar should probably close the plant in Guadalajara because its multifactor productivity is the lowest, its labour productivity is the second lowest, and its output is the least of the four plants. Units (in 000’s) Montreal Frankfurt Guadalajara Bejiing Finished goods 10,000 12,000 5,000 8,000 Work -in-process 1,000 2,200 3,000 6,000 Costs (in 000’s) Labo ur costs $3,500 $4,200 $2,500 $800 Material costs $3,500 $3,000 $2,000 $2,500 Energy costs $1,000 $1,500 $1,200 $800 Transportation costs $250 $2,500 $2,000 $5,000 Overhead costs $1,200 $3,000 $2,500 $500 Labour productivity 3.14 3.38 3.20 17.50 Total productivity 1.16 1.00 0.78 1.46 1-7. Hill is the most productive in terms of rushing yards and touchdowns per carry. However, Peressini has highest number of rushing yards and touchdowns. Using “carries” as the input variable skews the results. Productivity is not always the best measure of perfor mance. Candidates Hill Lévesque Peressini Rushing yards 2,110 3,623 6,925 # Carries 105 875 1,186 # Touchdowns 15 20 70 Yards/carry 20.10 4.14 5.84 Touchdowns/carry 0.14 0.02 0.06 1-8. Productivity decreases from week to week. Installation 1 2 3 Square Feet 11,025 12,915 22,500 # workers 4 3 5 # hours 3 5 6 Solutions Manual for Operations Management: Creating Value Along the Supply Chain , Second Canadian Edition 1 - 7 –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– Copyright © 2020 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited. Square Feet/hr 918.75 861 750 1-9. Cent re 1 2 3 3c. Pieces processed 1,000 2,000 3,000 5,000 Workers/hr 10 5 2 2 Hourly wage rate $20.50 $25 $27 $27 Overhead/hr $10 $25 $50 $80 Multifactor productivity 4.65 13.33 28.85 37.31 a. Work center # 3 is the most productive. b. With a 10% raise in center 1, productivity goes down to 4.25 pieces per dollar spent. c. With new equipment in center 3, productivity goes up to 37 pieces. Install the new equipment. 1-10. Material productivity is stable over the 4 weeks. Labour productivity increases in week 2 and decreases in weeks 3 and 4. Week 1 2 3 4 Units of output 2,000 4,000 5,000 7,000 # workers 4 4 5 6 Hours per week 40 48 56 70 Labour cost per hour $20 $20 $20 $20 Material ( kgs.) 128 256 324 450 Material cost per kg $8 $8 $8 $8 Labour productivity [units/hr] 12.50 20.83 17.86 16.67 Labour productivity [units/$] 0.63 1.04 0.89 0.83 Material productivity [units/kg] 15.63 15.63 15.43 15.56 Material productivity [units/$] 1.95 1.95 1.93 1.94 Multifactor productivity [units/$] 0.47 0.68 0.61 0.58 1-11. Johan is the most productive. Jake Jasbir Jennifer Johan # ads sold 100 50 200 35 # hours spent 40 15 85 10 Output/hr 2.50 3.33 2.35 3.50 1-12. Choose Cold Case. Alaskan Seal Brr Frost Cold Case Deep Freeze Purchase cost $3,270 $4,000 $4,452 $5,450 Daily energy consumption 3.61 3.88 6.68 29.07 Solutions Manual for Operations Management: Creating Value Along the Supply Chain , Second Canadian Edition 1 - 8 –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– Copyright © 2020 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited. (kwh) Cost per kwh $0.10 $0.10 $0.10 $0.10 Daily energy cost $0.36 $0.39 $0.67 $2.91 Daily purchase cost $2.99 $3.65 $4.07 $4.98 Total cost $3.35 $4.04 $4.73 $7.88 Volume (cu ft) 25 35 49 72 Productivity (cu ft/$) 7.47 8.66 10.35 9.14 Cost/cu ft $0.13 $0.12 $0.10 $0.11 1-13. Sweet Tooth should switch to the new process. Current process New process Chocolate powder(kg) 100 200 Cocoa beans(kg) 1000 1800 Hours of processing 10 15 Cost of processing $25 $25 Cost of cocoa beans $6.80 $6.80 Labour productivity (kg/$) 0.4 0.53 Multi factor productivity (kg/$) 0.014 0.016 1-14. Pairs of jeans 60 Workers 3 Machines 3 Hours/day 8 Labour hours / day 24 Raw material cost/ pair $10 Labour cost / hour $20 Energy cost/ hour of machine time $1 Machine cost/ hour $10 Total energy cost $24 Total labour cost $480 Total machine cost $240 Total material cost $600 Total cost of producing 60 pairs of jeans $1344 Labour productivity (jeans/hr) 2.5 Unit cost ($/jeans) 22.4 Multi -factor productivity 0.044643 Solutions Manual for Operations Management: Creating Value Along the Supply Chain , Second Canadian Edition 1 - 9 –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– Copyright © 2020 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited. The multi -factor productivity here shows the number of jeans that can be produced for every $1 input through labour, raw material, machine, and energy combined . 1-15. productivity per hour hourly compensation cost ($) productivity (output per dollar) Turkey 42 6.09 6.896552 Mexico 21 3.91 5.370844 India 9 1.69 5.325444 Taiwan 52 9.82 5.295316 Philippine s 10 2.06 4.854369 Hungary 34 8.6 3.953488 China 15 4.11 3.649635 Singapore 66 26.75 2.46729 Brazil 18 7.98 2.255639 Norway 96 48.62 1.974496 United Kingdom 54 28.41 1.900739 Unites States 72 39.03 1.844735 Canada 55 30.08 1.828457 Japan 47 26.46 1.776266 France 67 37.72 1.776246 Italy 53 32.49 1.631271 Germany 70 43.18 1.621121 South Korea 37 22.98 1.610096 Sweden 65 41.68 1.559501 Switzerland 65 60.36 1.076872 Turkey, Mexico, India, Taiwan, and Phillipines are the most productive, while Italy, Germany, South Korea, Sweden, and Switzerland are the least productive. Solutions Manual for Operations Management: Creating Value Along the Supply Chain , Second Canadian Edition 1 - 10 –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– Copyright © 2020 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited. Answers to Case Problem 1.1: Visualize This 1. It is difficult to follow the four steps of strategy formulation for this case. Students will be able to easily identify VT’s core competency but will struggle with its primary task, and without a product, it’s impossible to determine an order winner an d order qualifiers. “Developing the next generation of visualization tools” is probably not a marketable task. Students will come up with a variety of ideas from their Internet search. 2. Student answers will vary depending on how the primary task is deri ved in question 1. 3. That’s the crux of the problem for this case. Isaac needs to find a way to keep his business going to obtain the capital to pursue his dream. Great for class discussion. 4. (1) and (3) are more in keeping with VT’s earlier projects but require more hardware and do not promise future business. (2) is the most time -consuming, least challenging, but most sustainable. (4) and (5) are the most lucrative but do not advance VT’s knowledge of the field. 5. The selection of projects should reinforce the strategy determined by the student. This case is based on an actual situation. The company chose projects (1) and (3). The museum job consumed so much time and resources that the company had to turn down the bank training job. Without a “product” and no immediate repeat business, the company folded and the owner went back to academe. A student took on project (5) and became quite successful . Solutions Manual for Operations Management: Creating Value Along the Supply Chain , Second Canadian Edition 1 - 11 –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– Copyright © 2020 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited. Answers to Case Problem 1.2: Whither an MBA at Brandon ? 1. The board of Regents should look a t the proposal carefully and identify first what they are trying to achieve with this new program. If the program fits within their mission, and if they have the resources to pursue it, they need to assess the likelihood of their success or failure. It doe sn’t appear that the board has sufficient information or insight to make the decision. A lot of questions remain. The focus of the program (i.e., interdisciplinary, problem solving, etc.) doesn’t seem like much of a focus at all. The desire to “try anythin g” to get more students is troublesome. A new program that Brandon can’t support would damage their reputation. Brandon needs to gather more information before a decision can be made. 2. Brandon should go through the process of identifying its primary tas k. This would include the type of students it wishes to serve and their future role in society (i.e., community, regional, provincial, national, global). A clear assessment of Brandon ’s core competence is also needed. What special resources does the university have? What is it best known for? How does it compare to other institutions of similar size and mission? After those issues have been settled, the university needs to find out what its customers (i.e., students) look for when deciding where to go to school. What are some basic requirements that Brandon should meet (i.e., order qualifiers)? What factor prompts the final determination of which school to attend (i.e., order winner)? If, as is hinted in the case, the ability to find employment upon graduation is important to prospective students, then the university should gather information from potential employe rs about their needs. It may very well be that an MBA program is needed in the area, but this needs to be determined from data. Only after the determination has been made, that the area needs another MBA program, should Brandon explore the possibility of p roviding it. If the university concludes that it has the skills and resources necessary to pursue the task, then it should try to position itself properly in the market and find a special niche for its particular MBA program. Solutions Manual for Operations Management: Creating Value Along the Supply Chain , Second Canadian Edition 1 - 12 –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– Copyright © 2020 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited. Answers to Case Problem 1.3: Weighing Options at the Weight Club A Balanced Scorecard for the Weight Club : Dimension Objectives Key Performance Indicator Goal Revenue Generate revenue for first-class facility % increase in revenue 30% Growth Attract new customers % increase in customers 25% Quality Meet or exceed customer needs % customers satisfied 100% Retention Build sustainable customer base % membership renewals 75% Fitness Increase participation in exercise classes # exercise classes/week 12 Increase use of personal trainers # client hours/week 100 Client services Enhance client experience % participation in customer orientation 75% # massage appointments/week 200 Facilitate use of services Time required for check -in 1 min Hours of child care/week 90% Equipment maintenance Maintain equipment in top working condition % fully operational 95% % on regular maintenance schedule 60% Program development Develop professional staff % new classes 25 # innovative suggestions 30 Facility development Provide first -class facilities and equipment % equipment new or updated 100% Months until facility expanded/ renovated 6 Organizational development Develop management and administrative skills # persons on Board of Directors 6 # full -time managers 3 Solutions Manual for Operations Management: Creating Value Along the Supply Chain , Canadian Edition S1 - 1 ––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– Copyright © 2020 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited. CHAPTER 1 SUPPLEMENT OPERATIONAL DECISION -MAKING TOOLS: DECISION ANALYSIS ANSWERS TO PROBLEMS AND CASE PROBLEMS Answers to Problems (Answers may vary due to rounding) S1-1. a. Minimin: South Korea 15.2 China 17.6 Taiwan 14.9 Poland 13.8 Mexico 12.5 minimum  Select Mexico b. Minimax: South Korea 21.7 China 19.0 minimum  Taiwan 19.2 Poland 22.5 Mexico 25.0 Select China c. Hurwicz ( )0.40 := South Korea: ( ) ( ) 15.2 0.40 21.7 0.60 19.10 += China: ( ) ( ) 17.6 0.40 19.0 0.60 18.44 += Taiwan: ( ) ( ) 14.9 0.40 19.2 0.60 17.48 minimum + =  Poland: ( ) ( ) 13.8 0.40 22.5 0.60 19.02 += Mexico: ( ) ( ) 12.5 0.40 25.0 0.60 20.0 += Select Taiwan d. Equal likelihood: South Korea: 21.7∗1 3+19.1∗1 3+15.2∗1 3=18.67 China: 19.0∗1 3+18.5∗1 3+17.6∗1 3=18.37 Taiwan: 19.2∗1 3+17.1∗1 3+14.9∗1 3=17.07  minimum Poland: 22.5∗1 3+16.8∗1 3+13.8∗1 3=17.7 Mexico: 25∗1 3+21.2∗1 3+12.5∗1 3=19.57 Select Taiwan S1-2. ( ) () () () EV South Korea 21.7 .30 19.1 .40 15.2 .30 18.71 = + + = Solutions Manual for Operations Management: Creating Value Along the Supply Chain , Canadian Edition S1 - 2 ––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– Copyright © 2020 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited. ( ) () () () EV China 19.0 .30 18.5 .40 17.6 .30 18.38 = + + = ( ) () () () EV Taiwan 19.2 .30 17.1 .40 14.9 .30 17.07 minimu m = + + =  ( ) () () () EV Poland 22.5 .30 16.8 .40 13.8 .30 17.61 = + + = ( ) () () () EV Mexico 25.0 .30 21.2 .40 12.5 .30 19.73 = + + = Select Taiwan Expected value given perfect () () () information 19 .30 16.8 .40 12.5 .30 16.17 = + + = EVPI 16.17 17.07 $ 0.9 million = − = − The EVPI is the maximum amount the cost of the facility could be reduced (.9 million) if perfect information can be obtained. S1-3. a. Maximax criteria: Office building 4.5 maximum Parking lot 2.4 Warehouse 1.7 Shopping mall 3.6 Condominiums 3.2 Select office building b. Maximin criteria: Office building 0.5 Parking lot 1.5 maximum Warehouse 1.0 Shopping mall 0.7 Condominiums 0.6 Select parking lot c. Equal likelihood: Office building: 0.5∗1 3+1.7∗1 3+4.5∗1 3=2.23 maximum Parking lot: 1.5∗1 3+1.9∗1 3+2.4∗1 3=1.93 Warehouse: 1.7∗1 3+1.4∗1 3+1.0∗1 3=1.37 Shopping mall: 0.7∗1 3+2.4∗1 3+3.6∗1 3=2.23 maximum Condominiums: 3.2∗1 3+1.5∗1 3+0.6∗1 3=1.77 Select office building or sh opping mall d. Hurwicz criteria ( )0.3 := Office building: () () 4.5 0.3 0.5 0.7 1.70 += Parking lot: () () 2.4 0.3 1.5 0.7 1.77 maximum + =  Warehouse: () () 1.7 0.3 1.0 0.7 1.21 += Shopping mall: () () 3.6 0.3 0.7 0.7 1.57 += Solutions Manual for Operations Management: Creating Value Along the Supply Chain , Canadian Edition S1 - 3 ––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– Copyright © 2020 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited. Condominiums: () () 3.2 0.3 0.6 0.7 1.38 += Select parking lot S1-4. a. ( )() () () EV Office building .5 .50 1.7 .40 4.5 .10 1.38 = + + = ( ) () () () EV Parking lot 1.5 .50 1.9 .40 2.4 .10 1.75 = + + = ( ) () () () EV Warehouse 1.7 .50 1.4 .40 1.0 .10 1.51 = + + = ( ) () () () EV Shopping mall 0.7 .50 2.4 .40 3.6 .10 1.67 = + + = EV (Condominiums)= 3.2(.50)+1.5(.40)+.6(.10) = 2.26 maximum Select Condominium project b. Expected Value with Perfect Info: 3.2(.50)+2.4(.40)+4.5(.10) = 3.01 EVPI = Expected value given perfect information –expected value without perfect information = 3.01 –2.26 = $0.75 million S1-5. a. Maximax: Risk fund, maximax payoff $167,000 = b. Maximin: Savings bond maximin payoff $30,000 = c. Equal likelihood: Bond fund, maximum payoff $35,000 = d. Best decision, given probabilities: Bond fund, maximum payoff $35,000 = e. expected value given perfect information = 10000*(0.1*5+0.2*4+0.4*4.2+0.2*9.3+0.1*16.7) = 65100 . The maximum amount she should pay to analyst = 6510 0 – 35000 = 30100 S1-6. a. Maximax: Pass for a gain of 20 yd b. Maximin: Option for a loss of 1 yd c. Equal likelihood: Option for a gain of 7 yds. d. Plays ranked best to worst: Play EV Pass 6.4 Option 5.3 Toss sweep 4.8 Off tackle 3.2 Screen 2.3 Draw 1.6 With a 60% chance of a blitz they should run the option, with an expected value of 11.5 yd. In 70% of cases (when Laurier uses Blitz or Nickel), Guelph will make the first down. If the only thing Guelph cares about is securing the first down, they could also run the Toss Sweep (also a Solutions Manual for Operations Management: Creating Value Along the Supply Chain , Canadian Edition S1 - 4 ––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– Copyright © 2020 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited. 70% chance of getting the first down). S1-7. a. Product Expected Value Widget () () () 160,000 0.2 90,000 0.5 50,000 0.3 $62,000 + − = Hummer () () () 70,000 0.2 40,000 0.5 20,000 0.3 $40,000 + + = Nimnot () () () 45,000 0.2 35,000 0.5 30,000 0.3 $35,500 + + = The best option is to introduce the widget. b. EV given perfect information: () () () 160,000 0.2 90,000 0.5 30,000 0.3 $86,000. + + = EV without perfect information: Widget at $62,000. Value of perfect information: $86,000 $62,000 $24,000 −= The company would consider this a maximum; since perfect information is rare, it would probably pay less than $24,000. c. Maximax: Introduce widget, maximax payoff $160,000 = Maximin: Introduce nimnot, maximin payoff $30,000. = Minimax regret: Maximum regret for Widget = 30,000 – (−50000 ) =$80,000  min Maximum regret for Hummer = 160 ,000 – 70000 =$90,000 Maximum regret for Nimnot = 160 ,000 – 45000 =$115 ,000 Introduce widget, Minimax regret $80,000 = Equal likelihood: Introduce widget, maximum payoff =$66,667 S1-8. a. Maximax: Major physical revision, maximum payoff = $972,000 b. Maximin: Paperback, maximum payoff = $68,000 c. Equal likelihood: Major content revision, maximum payoff = $423,667 d. Hurwicz: Major content revision, maximum payoff = $273,900 S1-9. Publication Decision Expected Value Paperback $216,290 Similar revision 386,340 Major content revision 468,780 Major physical revision 405,970 Best decision = major content revision Overall “best” decision appears to be a “major content revision” Solutions Manual for Operations Management: Creating Value Along the Supply Chain , Canadian Edition S1 - 5 ––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– Copyright © 2020 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited. EVPI = (.23)(68,000) + (.46)(515,000) + (.31)(972,000) − 468,780 = $85,080 This is the maximum amount Wiley would pay an “expert” for additional information about the future competitive market. S1-10. a. Maximax: Singapore, maximum payoff = $71 million b. Maximin: Kaohsiung, maximum payoff = -$15 million c. Equal likelihood: Kaohsiung, maximum payoff = $28.33 million d. Hurwicz: Singapore, maximum payoff = $37.8 million e. Minimax regret: Singapore, minimum regret = $9 million S1-11. Expected value Port Expected Value Hong Kong $22.99 Singapore 34.52 Shanghai 24.54 Busan 28.30 Kaohsiung 33.66 a. Best decision = Singapore b. Singapore appears to be the best “overall” decision. S1-12. Expected value Lease Decision Expected Value 1 – year $65,980 2 – year 103,010 3 – year 133,810 4 – year 154,300 5 – year 114,210 The 4 year lease is the best decision using EV. S1-13. EVPI = (.17)(1,228,000) + (.34)(516,000) + (.49)( 16000 ) − 154,300 = $237,740 This is the maximum amount the restaurant owner would pay an energy “expert” for additional information about future energy prices. S1-14. a. Maximax: Food court, maximum payoff = $87,000 b. Maximin: Child care center, maximum payoff = $17,000 Solutions Manual for Operations Management: Creating Value Along the Supply Chain , Canadian Edition S1 - 6 ––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– Copyright © 2020 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited. c. Hurwicz: Lockers and showers, maximum payoff = $32,250 d. Equal likelihood: Lockers and showers, maximum payoff = $35,333 S1-15. Service Facility Expected Value Child care center $30,560 Swimming pool 7,610 Lockers and showers 44,150 Food court 15,440 Spa 20,580 Best decision = Lockers and showers S1-16. a. Payoff table using 12 kg in 5th row Demand (kg) EV 10 0.10 10.5 0.20 11 0.30 11.5 0.30 12 0.10 Stock ( kg) 10 5.00 5.00 5.00 5.00 5.00 5.00 10.5 4.63 5.25 5.25 5.25 5.25 5.19 11 4.25 4.88 5.50 5.50 5.50 5.25 11.5 3.88 4.50 5.13 5.75 5.75 5.13 12 3.50 4.13 4.75 5.38 6.00 4.81 Payoff table using 22kg in 5th row (as written in 2nd Canadian edition of text) Demand (kg) EV 10 0.10 10.5 0.20 11 0.30 11.5 0.30 22 0.1 0 Stock ( kg) 10 5.00 5.00 5.00 5.00 5.0 5.00 10.5 4.63 5.25 5.25 5.25 5.2 5.19 11 4.25 4.88 5.50 5.50 5.5 5.25 11.5 3.88 4.50 5.13 5.75 5.7 5.13 22 -4.00 -3.38 -2.75 -2.13 11. 0 -1.44 Order 11 kg of apples for a profit of $ 5.25. b. Maximax: Stock 22 kg for a maximax profit of $ 11. (or stock 12 kg for a maximax profit of $6.00) Maximin: Stock 10 kg for a maximin profit of $ 5.00. Solutions Manual for Operations Management: Creating Value Along the Supply Chain , Canadian Edition S1 - 7 ––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– Copyright © 2020 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited. S1-17. a. Payoff table: Demand Stock (boxes) 25 0.10 26 0.15 27 0.30 28 0.20 29 0.15 30 0.10 25 50 50 50 50 50 50 26 49 52 52 52 52 52 27 48 51 54 54 54 54 28 47 50 53 56 56 56 29 46 49 52 55 58 58 30 45 48 51 54 57 60 () () ( ) () () ( ) () EV 25 50 0.1 50 0.15 50 0.3 50 0.2 50 0.15 50 0.1 = + + + + + $50.00= () () ( ) () () ( ) () EV 26 49 0.1 52 0.15 52 0.3 52 0.2 52 0.15 52 0.1 = + + + + + $51.70= () () ( ) () () ( ) () EV 27 48 0.1 51 0.15 54 0.3 54 0.2 54 0.15 54 0.1 = + + + + + $52.95= () () ( ) () () ( ) () EV 28 47 0.1 50 0.15 53 0.3 56 0.2 56 0.15 56 0.1 = + + + + + $53.30= () () ( ) () () ( ) () EV 29 46 0.1 49 0.15 52 0.3 55 0.2 58 0.15 58 0.1 = + + + + + $53.05= () () ( ) () () ( ) () EV 30 45 0.1 48 0.15 51 0.3 54 0.2 57 0.15 60 0.1 = + + + + + $52.35= Best decision: Stock 28 boxes, for a profit of $53.30. b. Expected value with perfect information : EVwPI = 50(0.10)+52(0.15)+54(0.30)+56(0.20)+58(0.15)+60(0.10) = 54.9 EVPI $54.90 $53.30 $1.60 =−= S1-18. a. Stock 25, maximum of minimum payoffs $50 = b. Stock 30, maximum of maximum payoffs $60 = c. () () 25 : 50 .4 50 .6 50; += () () 26 : 52 .4 49 .6 50.2; += () () 27 : 54 .4 48 .6 50.4; += () () 28 : 56 .4 47 .6 50.6; += () () 29 : 58 .4 46 .6 50.8; += () () 30 : 60 .4 45 .6 51; += stock 30 boxes. d. Stock 28 or 29 boxes; minimum regret $4. = S1-19. ( ) () () EV press 40,000 .4 8,000 .6 $11,200; = − = ( ) () () EV lathe 20,000 .4 4,000 .6 $10,400; = + = ( ) () () EV grinder 12,000 .4 10,000 .6 $10,800; = + = purchase press. Solutions Manual for Operations Management: Creating Value Along the Supply Chain , Canadian Edition S1 - 8 ––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– Copyright © 2020 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited. S1-20. Solutions Manual for Operations Management: Creating Value Along the Supply Chain , Canadian Edition S1 - 9 ––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– Copyright © 2020 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited. S1-21. They should go for the two point play. 3.81M=0.02*1.5M +0.98*(9.2 M*p+1.5 M*(1-p)) p=0.3061 If Tech’s probability of winning in overtime is 30.61%, they are indifferent between the one and two point play. S1-22. a. Maximax = Real Estate b. Maximin = Nursing c. Equal Likelihood: select Real Estate Graphic design = $170,000 Nursing = $187,500 Real Estate = $202,500 Medical Technology = $195,000 Culinary technology = $170,000 Computer information technology = $186,250 d. Hurwicz (alpha = 0.25): select Nursing Graphic design = $141,250 Solutions Manual for Operations Management: Creating Value Along the Supply Chain , Canadian Edition S1 - 10 ––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– Copyright © 2020 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited. Nursing = $161,250 Real Estate = $158,750 Medical Technology = $157,500 Culinary technology = $136,250 Computer information technology = $158,750 S1-23. EV(Graphic design) = $164,250 EV(Nursing) = $183,500 EV(Real Estate) = $174,400 EV(Medical Technology) = $187,500 EV(Culinary technology) = $149,250 EV(Computer information technology) = $174,750 S1-24. a. Minimin= Philippines b. Minimax = Mexico c. Equal likelihood: China = $4.3 India = $4.13 Philippines =$ 4.03 SELECT Brazil = $4.57 Mexico = $4.87 d. minimax regret= Philippines, minimum regret = $70000 : S1-25. a. EV(China)= $5 .328 EV(India) = $ 5 .375 EV(Philippines) = $5 .218 EV(Brazil)= $ 5 .178 SELECT EV(Mexico) = $ 5 .202 b. EVwPI= 1.7*(0.09) + 3.8*(0.27) + 5.4*(0.64) = $4.635 EVPI= 5 .178-4.635= $ 0.543 The maximum they should pay to the analyst is $54300 (original data in $100,000s). S1-26. a. Maximax = Hong Kong b. Maximin = Pusan c. Equal likelihood: Solutions Manual for Operations Management: Creating Value Along the Supply Chain , Canadian Edition S1 - 11 ––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– Copyright © 2020 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited. Shanghai = $0.44 billion Singapore = $0.37 billion Pusan = $0.43 billion Kaoshiung = $0.41 billion Hong Kong = $0.47 billion d. Hurwicz (alpha = .55): Shanghai = $0. 47 billion Singapore = $0. 41 billion Pusan = $0. 46 billion Kaoshiung = $0. 51 billion Hong Kong = $0. 77 billion S1-27. EV(Shanghai) = $0.608 billion EV(Singapore) = $0.606 billion EV(Pusan) = $0. 502 billion EV(Kaoshiung) = $0.487 billion EV(Hong Kong) = $0.724 billion S1-28. ( ) () () () () () () () EV snow shoveler $30 .12 60 .19 90 .24 120 .22 150 .13 180 .08 210 .02 = + + + + + + $101.10= The cost of the snow blower ($575) is much more than the annual cost of the snow shovel ling service , thus on the basis of one year the snow blower should not be purchased . However, the snow blower could be used for an extended period of time such that after approximately 6 years the cost of the snow blower would be recouped. Thus, the decision hinges on whether or not the decision maker thinks 6 years is too long to wait t o recoup the cost of the snow blower. Solutions Manual for Operations Management: Creating Value Along the Supply Chain , Canadian Edition S1 - 12 ––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– Copyright © 2020 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited. S1-29. Since cost of installation ($900,000) is greater than expected value of not installing ($552,000), do not install an emergency power generator $552,000 %10 %90 $90,000,000 $2,000,000 %4 %96 $5,520,000 $552,000 $0 $900,000 Solutions Manual for Operations Management: Creating Value Along the Supply Chain , Canadian Edition S1 - 13 ––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– Copyright © 2020 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited. S1-30. Select strategy 3; Change oil regularly; EV = $98.80 0.08 0.04 0.04 0.92 0.92 0.96 0.96 0.70 0.30 0.20 0.80 0.70 0.30 0.20 0.80 $0 $500 $1600 $250 $0 $1600 $0 $500 $1600 $250 $0 $128 $830 $50 $112.4 $64 $830 $50 $81.2 $0 $40 $34.8 $54.8 $136 $98.8 $152.4 $128 $98.8 0.08 $1600