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Please download 5 files

This course is “Operations Management For Competitive Advantage”. Please answer the following questions and strictly follow the requirements of “Guidelines for weekly Journals” in the PDF file.

Be sure to read the documents in PDF 1 and PDF 2 before answering

200-250 words for each question

The most important grading requirement is: 10 pts

Easy to read entries reflect readings or research done well, are comprehensive, use personal examples and references when used, and relate directly to questions.

Week 10: The next competitive advantage

Please read the “1” pdf and answer the following questions

·

CSR and competitive advantages

Please research the following questions and provide evidence to support your answers. (PDF 1 page 15)

1. Explain the poverty tax. Do we have it in the U.S.? How can we get rid of it with the lessons we learned in OM?

2. What are the operational challenges for companies like Warby Parker and Toms Shoes in their charity efforts? How would you identify the needs then deliver products to meet these needs?

3. Do you have an idea of doing good while doing well? How can you make it feasible?

Reference video given by professor

Warby Parker co-founders on their business vision

Algramo

Carbon Neutral FlockDirect

Please answer by reading the course description and zip file

· Inventyory

The culminating assessment is your instrument for gathering evidence that students have achieved the course purpose… It should be culminating in the sense that it provides an opportunity for students to “put it all together.” Ideally, it should reflect an authentic practice of the discipline.*

4. What is your culminating experience for this course? Did you learn something new? And useful? And how would this course help you in your future endeavors?

Please answer based on the zip file and the following course description

Introduction of this course:

Course description

This course focuses on managing the activities involved directly in the creation of products and services such as design, production, and distribution of goods and services from raw materials, suppliers, plants, and retail channels to returns processing and customer service. It provides managers with the skills and tools to analyze, optimize, and improve production processes for competitive advantage. Key topics include value creation, product and service design, manufacturing processes, quality management, capacity planning, inventories, order fulfillment, reverse logistics, sustainability, and corporate social responsibility.

Operations management oversees the entire range of activities for efficient and effective delivery of an organization’s products or services to its customers. It uses resources available to managers to build an integrative process to unite all the people, money, materials, information, and technology involved. It also looks for ethical and innovative ways to solve problems firms encounter in the making goods or rendering services. Through an introduction to the history of production and service management, this course exposes the students to a business environment where all the operational functions are geared toward achieving excellence, adding value, and satisfying customers. Theories, concepts and applications of operations management are introduced to help understand some of the complicated issues faced by today’s managers. Real-life cases and exercises are used to engage the students in active learning and to give them a realistic, hands-on experience.

Course/Learning objectives

· Understand the analytical tools and the main concepts of operations management—including fundamental theories, performance measures, production processes, quality management, resource management—and how they can be applied in general management in an ethical, socially responsible, and environmentally sustainable manner to improve the productivity of an enterprise. (Evidence: Present and explain key concepts effectively with tools and examples.)

· Apply the main principles of operations management to improve strategic actions to achieve competitive advantages and meet the organization’s triple bottom line objectives (environmental, social, and economic sustainability). (Evidence: Document and analyze a case study, complete a project applying lessons learned, or participate in a meaningful professional discourse.)

Corporate Social Responsibility
CSR is a management concept that many companies
adopt to integrate social and environmental concerns
in their business operations and interactions with
their stakeholders.

Corporate Social Responsibility
Many companies practice a multifaceted version of
CSR that ranges from pure philanthropy to
environmental sustainability to the active pursuit of
shared value (creating economic value in ways that
also create value for society). Their activities include:
 Focusing on philanthropy and giving back to non-

profits and community organizations
 Reducing resource use, waste, or emissions to

lower costs and improve operational effectiveness
 Developing or redesigning new products and

services that benefit the society.
 Transforming existing or creating new business

processes and models using CSR principles

CSR Examples
 Reducing the supply chain impact on carbon footprint
 Reducing resource consumption in factory and office
 Conducting business (e.g. meeting, travel) in an environmentally

responsible manner
 Eco-designing products that use recycled or repurposed materials

and can be decomposed or disassembled in the end of the useful
product life

 Establishing an ethics charter against corruption and having a good
governance system

 Developing an ethical supply chain to fight against child labor or
unfair wages in every supply chain partner

 Integrating inclusion and diversity in HR
 Establishing prevention/health and well-being programs at work in

the company
 Raising consumer awareness about responsible consumption
 Allowing/encouraging employees to share their knowledge, skills,

and time for non-profit and community organizations
 Supporting and participating in humanitarian programs

Social Enterprises
Social enterprises are organizations that address a
basic unmet need or solve a social or environmental
problem through a market-driven approach.
 More companies are paying attention to social inequality

and create/join programs that advocate for social

justice.

 Many entrepreneurs build companies to promote social

justice.

Social
Enterprises

• A new breed of
companies were
created with
social justice in
mind.

• Many existing
companies have
joined forces to
fight inequality
in society.

Certified B Corporations

Certified B Corporations
are a new kind of business
that balances purpose and
profit. They are legally
required to consider the
impact of their decisions
on their workers,
customers, suppliers,
community, and the
environment.

Warby Parker

A Social Entrepreneur saw opportunities to cut the
middleman in prescription eyeglasses then passed
the benefits to those in need.

Warby Parker’s New Supply Chain

Poverty Tax

Poverty Tax or Ghetto Tax: poor people pay higher
prices per unit because they buy small packages in
neighborhoods that lack competition. They also pay
more for financial services, appliances, and groceries.

http://sdg.shanda960.com/article/5705

Algramo’s Streamlined Supply Chain

TOMS Shoes

Toms’ business model is
known as the “one for one
concept” model, which is
referring to the company’s
promise to deliver a pair of
free shoes to a child in
need for every sale of their
retail product.

Starbucks
Buys
Fairtrade
Coffee

Starbucks is committed to buying 100%
ethically sourced coffee. They share
research and resources through their
Farmer Support Centers located in coffee-
producing countries around the world to
improve productivity and sustainability.

IKEA Builds Better Shelter

Spotify

Neil Young urges Spotify
workers to quit their jobs
before the company ‘eats
up your soul,’ and says CEO
Daniel Ek ‘is your big
problem — not Joe Rogan.’

Discussion Questions

Please research the following questions and
provide evidence to support your answers.
Everyone: Explain the poverty tax. Do we have it in the
U.S.? How can we get rid of it with the lessons we
learned in OM?
Everyone: What are the operational challenges for
companies like Warby Parker and Toms Shoes in their
charity efforts? How would you identify the needs then
deliver products to meet these needs?
Everyone: Do you have an idea of doing good while
doing well? How can you make it feasible?

Group Discussion
Be sure your group is ready to lead and/or
discuss the following question in class, with
research or facts-based evidence.
There are many admirable companies actively
engaged in CSR. Find one good example and
analyze their efforts from an OM perspective.
Discuss how their work can be replicated by other
businesses. Be sure to cover as many areas as we
have discussed in the course.

Finally…
We have come a long way to this point!
And we have learned a thing or two about
operations management:
 Basic tools in the toolbox:
 How value is created in the circular economy:
 Design of products and services:
 How things are made:
 What is quality and how to manage it:
 Managing the supply side, capacity/inventory:
 CSR and sustainability:
 Anything else:

Competitive Priorities

• Speed/Lead Time
Ex: I have the fastest delivery time

• Flexibility
Ex: I let you customize colors, sizes,
functions, quantities, deliveries

• Quality
Ex: I have the freshest ingredients

• Costs
Ex: I have the lowest prices

Customers choose your products/services because of
one (or more) of these reasons:

And Values Are Important!

Management
According to

Drucker
 The primary goal of a

manager is “make
people productive.”

 Managers should,
above all else, be
leaders.

 Effective leadership is
not about making
speeches or being liked;
leadership is defined by
results not attributes.

Organize resources in preparation of future
challenges.

”Effective leadership is putting first things
first. Effective management is discipline,
carrying it out.“ Stephen R. Covey, author of
“The 7 Habits of Highly Effective People”

“They never have enough time for us to do it
right, but they always find the time for us to
do it over.”

If it’s worth doing it, it’s worth doing it right
the first time!

Productivity and Effectiveness

Some Advice

West Point: “Yes, sir.” “No, sir.” “No
excuse, sir.”

“A” managers hire “A” employees;
“B” managers hire “C” employees.

The best way to breed faster
rabbits is to introduce a fox.

Go west, young man!

Read the Practice of Management
every few years!

Don’t Be a
Paycheck Player!

From the movie Jerry Maguire:
All right, I’ll tell you why you don’t
have your ten million dollars. Right
now, you are a paycheck player. You
play with your head, not your heart.
In your personal life, heart. But when
you get on the field it’s all about
what you didn’t get. Who’s to blame.
Who under-threw the pass. Who’s
got the contract you don’t. Who’s
not giving you your love. You know
what, that is not what inspires
people. That is not what inspires
people! Shut up! Play the game, play
it from your heart.

Discussion Questions
The culminating assessment is your instrument for
gathering evidence that students have achieved
the course purpose… It should be culminating in
the sense that it provides an opportunity for
students to “put it all together.” Ideally, it should
reflect an authentic practice of the discipline.*
Everyone: What is your culminating experience for
this course? Did you learn something new? And
useful? And how would this course help you in
your future endeavors?

* Center for Teaching and Learning, BYU.

courseware collection/1G OM Intro Line of Visibility (2)

Operations Management
We use resources efficiently by designing and 

managing processes to provide quality goods and 
services to customers for our long‐term success.

Operations Management
We use resources efficiently by designing and managing 
processes to provide quality goods and services to 
customers for our long‐term success.

Resources:
Efficiency:
Processes:
Quality:
Good and Services:
Long‐term:

Visible vs. Invisible
Operations management is often invisible and 
unappreciated. There is usually a BIG problem 
when it’s visible! 
During World War II, US naval submarines 
accounted for 2% of total fleet, but sank 50% 
of enemy ships!

What you see vs. What you don’t see
What you don’t see is oftentimes more important 
than you do see.

Line of Visibility
In service, the customer is usually involved in service 
production. The provider does something while the 
customer does something else in a service setting.  
The guiding principles for service delivery are:

 Hide what providers do. (line of 
interaction, line of visibility)
 Make customers do more at no cost.
 Make customers do more voluntarily and 
happily and enjoy the process…at no cost!

Restaurant Service

Bank Operations

Express Mail Delivery

Service Blueprint at Blockbuster

Customer
Enters Store

No Video
Found

Customer
Leaves Store

Payment
Transaction
Completed

Customer
Receives
Video

Customer
Selects
Video

Customer
Reviews
Selections

Customer
Receives
Request

Clerk
Receives
Payment

Clerk
Retrieves
Video

Credit
Transaction

Change
Made

Line of Visibility

Returns Video

Returns
Change

Returns
Credit
Card

The Last Blockbuster Store

Exposed Line of Visibility
Some companies do let customers see part of their 
operations… Why?

Good OM Examples
If customer can and are willing to do it for free, why 
hire people to do it?

• IKEA self service, self assembly
• Costco/Walmart self check out
• Please return shopping carts! (Aldi)
• Where have all the bag boys/girls gone?
• Online reservations
• Build A Bear!

Line of Interaction
(Customer Contact)

Service delivery involves an interaction 
between the provider and the customer via 
face‐to‐face,  phone, e‐mail or other means. 
Every time a customer comes in contact with
the service provider is a moment of truth. 
The moment of truth determines customer 
perception of the service and the many 
moments of truth in a service interaction will 
together constitute the line of interaction.

Discussion Questions
• Why would some organizations choose to expose 

activities that are usually hidden behind the line 
of visibility? 

• In your work, or in a scenario you are familiar 
with, describe the activities in front of the line of 
visibility and those behind it. 

• Covid cases are surging. Describe the operations 
involved in testing people. Draw a line of visibility 
and describe activities visible and invisible.

courseware collection/2G Foundation Management (1)

Management Fundamentals

 Industrial revolution and the use of 
machines

 Scientific Management: Fred Taylor 
applying scientific principles to 
management

 Henry Ford
 The famous Hawthorne study 
 Peter Drucker
 Michael Porter

Fred Taylor: Scientific Management
1. Study the one best way of 

doing things from the master.
2. Recruit/select the right 

people.
3. Train them the one best way.
4. Share efficiency gains 

between management and 
workers.

There is only one way of doing 
everything. (e.g. McDonald’s 
story, Formula 1 pit stop)

The One Best Way

The One Best Way

Each sport seems to need the right people to master. Some
are more obvious while others are less so (physically).

At Dingtaifung…

One Thing and One Thing Only

Netflix Movie: The Founder

Multimixer Efficient Processes

Ketchup Dispenser Standardization

Further Readings on Management
 Please read/watch the Industrial Revolution stories 

www.history.com/topics/industrial‐revolution/industrial‐revolution

 Please read history of the organization of work: 
www.britannica.com/topic/history‐of‐work‐organization‐
648000/State‐organized‐farming

 Please read Henry Ford: https://historycooperative.org/fast‐
moving‐henry‐fords‐contributions‐america/

 Please read about the Hawthorne Study: 
https://en.wikipedia.org/wiki/Hawthorne_effect

 Please read Drucker’s main ideas: 
https://en.wikipedia.org/wiki/Peter_Drucker

 Please read Porter’s main ideas: 
https://en.wikipedia.org/wiki/Porter%27s_generic_strategies

Industry 4.0

1. 1st Industrial revolution: power of steam
2. 2nd IR: power of electricity, oil (internal 

combustion engine)
3. 3rd IR: power of computers
4. 4th IR: power of robots, artificial 

intelligence, and IoT

Broken Window Theory
 Consider a building with a few broken 

windows. If the windows are not repaired, 
the tendency is for vandals to break a few 
more windows. Eventually, they may even 
break into the building, and if it’s 
unoccupied, perhaps become squatters or 
light fires inside. 

 Police focus on broken windows rather than 
capital crimes. An ounce of prevention goes a 
long way.

Broken Window Theory
Fact:
There will never be enough police.

Challenge:
What should the police do to ensure
security?

Solution:
Prevention. Dummies. Fighting crime in one
area with dominant force and high visibility
then move on to another area.

Discussion Questions
Please answer the following questions: 
Everyone: Explain Scientific Management with 
3 examples at work or in your personal life.
Everyone: How would Industry 4.0 change your 
profession (or your personal life)? List and 
explain 3 major impacts.
Everyone: How can you apply the broken 
window theory in your work/life?

courseware collection/2G Foundation OM Tools (2)

Personal Productivity: Mise En Place

 Borrowed from French, mise en place literally
means “setting in place.“ It’s a (kitchen) method of a
culinary process in which ingredients are prepared
and organized before cooking .

 Dan Charnas, author of “Work Clean”: It’s not just
about organizing space, it’s actually about how you
relate to space, how you relate to time, how you
relate to motions within that space, how you relate
to managing resources, how you relate to managing
people, how you relate to managing your personal
energies, all of that.

 Is it a productivity booster? How does it relate to
the Japanese lean philosophy?

Mise En Place (Put in Place)

”Effective leadership is putting first
things first. Effective management is
discipline, carrying it out.“ Stephen R.
Covey, author of “The 7 Habits of Highly
Effective People”

“They never have enough time for us to
do it right, but they always find the time
for us to do it over.”

If it’s worth doing it, it’s worth doing it
right the first time!

What else do you know about work

First Things First

• The Pareto Principle is named after Italian economist
and sociologist Vilfredo Pareto who is known for his
theory on mass and elite interaction as well as for his
application of mathematics to economic analysis.

• Pareto observed in Italy an uneven distribution of
wealth among people, that approximately 80% of the
land was owned by 20% of the population.

• Later, when Joseph Juran applied the Pareto Principle
to management, he specified that 80% of
consequences often came from 20% of the causes.
Managers need to pay attention to the 20% causes to
reap the most benefits of their efforts.

Pareto Analysis (80/20 Rule)

A Pareto chart is used to graphically summarize and
display the relative importance of the differences
between groups of data.

Pareto Chart

• Microsoft noted that by fixing the top 20% of the
most-reported bugs, 80% of the related errors and
crashes in a given system would be eliminated.

• In baseball, 15% of all the players produced 85% of
the total wins.

• In healthcare, 80% of healthcare costs are attributed
to 20% of the populace: the chronically ill.

• Adweek found that 70% of in-app purchase revenue
comes from just 10% of players (known as ‘whales’),
who also account for 59% of total revenue.

• Most people wear 20% of their clothes 80% of the
time.

Pareto Examples

Pareto Example 1

Pareto Example 2

Fix these!

Pareto Example 3

Fix these!

What is the 2×2 Matrix?

The 2×2 Matrix is a visual tool that managers use
to help them make decisions. It’s a 2×2 matrix
with opposing characteristics on each end of the
spectrum. The manager then sorts their ideas and
insights according to where they fall in the matrix.

This common analytical tool has many variations,
including the Eisenhower Matrix, the BCG Growth
Share Matrix, and the SWOT Matrix that we will
discuss here.

Eisenhower Matrix
The Eisenhower Matrix is named after
Dwight D. Eisenhower, an American
army general and the 34th President of
the United States from 1953 to 1961. Because he
made tough decisions for the many tasks that
needed his attention, he invented this method to
help us prioritize by urgency and importance.
He was famously quoted as saying “What is
important is seldom urgent and what is urgent is
seldom important.”

11

The Eisenhower Decision Matrix
1. “Important” and “Urgent” tasks. Highest priority and

should be your primary focus to complete ASAP.
2. “Important”, but “Not Urgent” tasks. Long-term goals

and tasks that are important and should be scheduled
in your calendar after you’ve finished everything from
the “Do” quadrant.

3. “Not Important”,
but “Urgent” tasks.
These tasks are the
ones you can
delegate to others.

4. “Not Important”
and “Not Urgent”
tasks. Delete them!

The
Eisenhower

Decision
Matrix

Examples

The BCG Growth Share Matrix
The growth share matrix was created in
1968 by BCG’s founder, Bruce
Henderson. It is a portfolio management
framework that helps companies decide
how to prioritize their different
businesses. Each business is assigned to
one of these four categories,
representing a certain degree of
profitability: question marks, stars, dogs,
and cash cows.

The BCG Matrix

• Low Growth, High Share.
Companies should milk these
“cash cows” for cash to reinvest.
• High Growth, High Share.

Companies should significantly
invest in these “stars” as they have
high future potential.
• High Growth, Low Share.

Companies should invest in or
discard these “question marks,”
depending on their chances of
becoming stars.
• Low Share, Low Growth.

Companies should liquidate,
divest, or reposition these “pets.”

The BCG
Growth
Share
Matrix

SWOT Analysis

SWOT analysis (or SWOT
matrix) is a strategic
planning technique used
to help a person or
organization identify
strengths, weaknesses,
opportunities, and
threats related to
business competition or
project planning. It is
useful in determining
the abilities and
disadvantages of a
business from an
internal and
external
perspective.

SWOT Analysis
Strengths: characteristics of the business or
project that give it an advantage over others.
One should ask if the strengths are sustainable.
Weaknesses: characteristics of the business
that place the business or project at a
disadvantage relative to others. One asks if
they can be improved?
Opportunities: elements in the environment
that the business or project could exploit to
its advantage, now and future.
Threats: elements in the environment that
could cause trouble for the business or
project, real and potential.

Facebook SWOT Analysis

Discussion Questions

Please research and answer the following
questions:
Everyone: Choose one of the 3 Pareto examples
to develop an action plan.

Everyone: New car dealerships usually have
revenues from 4 sources: new car sales, used
car sales, parts and services, and warranties and
financing. Research and analyze it using the
BCG matrix.

courseware collection/2G OM Foundation Science Statistics Economics (1)

Why is Science Important?
 We manage by science

and facts; not by
opinions or emotions.

 Science helps us
analyze and evaluate
complex situations.

 Science helps us
develop possible
solutions.

 We need science ever
more now that we have
BIG data!

Science
 Causal relationships (A causes B to

happen) vs. correlation
 Primary data vs. secondary or

tertiary data
 Can you trust the Internet?

Pseudoscience and urban myths…

Science: Casual Relationship?

 Causal relationships means A causes B to
happen while A correlates with B means
they happen at the same time.

 Prove that milk does a body good.
 Prove that kids who learn to play music

perform better in school.
 Prove that we shouldn’t buy cars made

Friday afternoon (because workers are not
paying attention; they are planning for the
party ahead).

Causation or Correlation?

playing
music

good
SAT/GPA

What we think
happened…

rich
family

playing
music

good
SAT/GPA

What actually
happened…

Science: Data and Source

 Primary data (data you collect for the
purpose of your study) vs. secondary or
tertiary data (data collected by someone
else for other reasons)
 Which data type above is more reliable?
 What are the benefits and costs using primary data vs.

secondary data?

 Can you trust the Internet? Pseudoscience
and urban myths…
 Your examples of the above?

Understanding Science

 What is science? Making assumptions or
hypothesis, carrying out observations and
experiments, drawing conclusions and
generalization.

 Knowing statistics is necessary to learn
about science, and to apply scientific
(management) principles!

Science: Hypothesis Testing
 Parking meter experimentation (are parking

meters accurate in measuring time?) A girl went
shopping with her dad and they dropped a
quarter for 20 minutes of parking in Sacramento.
When they returned after 19 minutes, they
found a parking ticket. How would they prove
that they were not violating the parking
regulations?

 How do you prove prayers work?
 Are happy workers more productive?
 Are there differences between men and women?

Are women genetically disadvantaged for
science and engineering?

 Are Volvos safer than others?

Hypothesis Testing

Statistics
 Statistics is the study of the collection,

analysis, interpretation, presentation, and
organization of data. (If you have forgotten
what you learned, I strongly suggest you go
over this Wikipedia page again:
https://en.wikipedia.org/wiki/Statistics)

 Managers need to know statistics, not
necessarily how to do it but to understand
and reason with data, present arguments with
data, understand material presented in
publications.

Statistical Literacy
Please think about the following questions:
 The meanings of mean, median, standard

deviation, random sample/variable, normal
distribution, t-test, confidence level/interval.

 In math, 3 is always greater than 2.8. Is it also
true in statistics?

 How many college students in the U.S. (out of
20 million) do we need to survey to learn about
their Internet shopping preferences?

 If a professor says to you that students sitting in
the front of the room are better students. How
do you know it’s true?

Normal Distribution
Do you remember this chart?

Foundation: Micro Economics

 Production function: a set of
ingredients/production factors and their
relationships that make things happen

 Economies of scale (quantity/Costco): the more
you buy, the more you save

 Economies of scope (variety and coverage/Direct
TV, Macy’s): candy shop in mall, battery shop

 Utilities: satisfaction or values associated with
product attributes. Types of utilities: place, time,
form, possession, transaction

Production Function

 Production function: a set of
ingredients/production factors and their
relationships that make things happen

 Example: baking a loaf of bread needs
 Flour, water, yeast, sugar, salt, time

 Example: making cars needs
 Capital (money), labor, technology, know-how

 Example: making $$ driving Uber needs
 A 4-door car, driver’s license, clean records, time

Economies of Scale

 Economies of scale (quantity/Costco): the more
you buy, the more you save

 Example: the most popular item at Costco is 30-
roll Charmin and 36-roll Kirkland toilet papers
(they don’t sell 4-roll packs)

 Example: buying a dozen of donuts is always
cheaper than buying individual ones…and you
usually get 13 for the dozen! (baker’s dozen)

 Do you know why economies of scale happen?

Economies of Scope

 Economies of scope (variety and coverage/Direct
TV, Macy’s): candy shop in mall, battery shop

 A business is viable because it offers enough
variety (Macy’s department store) or enough
coverage (UPS delivers worldwide)

 Example: Amazon started as a bookstore online
 Example: Sirius Satellite Radio is available

anywhere in North America, and offers a wide
variety of radio stations

Utilities

 Place utilities: Casino ATMs w/ higher fees,
expensive bottled water at Disneyland

 Time utilities: long stem roses on Valentine’s Day,
Halloween costume on Nov. 1

 Form utilities: Gogurt, baby carrots, Tyleno in
liquid gel/chewable form

 Possession utilities: rental car, apartment
 Transaction utilities: Black Friday, Kohl’s

couponing, limited time offerings

Please see notes in the next slide for more details.

Utilities Notes
 Place utilities refers to different prices charged at different places you

purchase the item. (books in campus bookstores are usually more
expensive.)

 Time utilities refers to items you paid different prices for because they
were purchased in different times. (Christmas trees on Dec. 26 are half off,
Vegas hotel rates on weekend are more expensive.)

 Form utilities refers to different prices for the different shapes/forms of
the same product. Target charges you $10 fee if you want your bikes
assembled or you will get a box with semi-assembled parts. One also pays
extras for pre-cooked bacons and salads in a bag. The difference in price
for baby carrots and regular carrots can only be explained by form utilities.

 Possession utilities say that you have to own it to enjoy it. Examples
would be that you pay to own/spend the night at a hotel.

 Transaction utilities are values associated with shopping. Examples are
Kohl’s forever % off and heavy discounts to make shoppers feel as if they
got a bargain. Buy One Get One free is also another way to increase
transaction utilities.

Click the Bottom Link to Listen
to This Podcast

https://www.marketplace.org/2016/05/25/kids-won-t-eat-their-apples-
try-slicing-them/
(What would Sid do if the link doesn’t work?)

Can You
Identify
These
Utilities?

Can You
Identify

These
Utilities?

Can You Identify These Utilities?

Other Micro Economics Topics

 Demand is willingness to pay: affected by tastes and
needs/wants, income or wealth, substitute goods,
complementary goods (examples?)

 Price elasticity or sensitivity of demand, elasticity of
supply (water is inelastic while beer is elastic)

 Substitute vs. complementary goods: when Coke Zero
is not available, Diet Coke, regular Coke, or Diet Pepsi
could be substitutes. Shoe stores sell socks because
they are complementary.

 Barriers to entry and exit: how easy it is to get into the
market or get out of a market/contract? (cell phone
contracts, storage rental, apartment move-in special)

Discussion Questions

Please research the following questions and
provide evidence to support your answers.
Everyone: Think about the questions in the
slides (data and source, hypothesis testing,
statistical literacy), choose one to answer.
Everyone: Please identify and explain the
utilities in the four slides starting with sliced
apples.

courseware collection/3G Global manufacturing (1)

Deindustrialization in
Developed Economies

Social, economical, environmental impacts? Quality of 
life, future upwards mobility, U.S. competitiveness?

Who is Manufacturing Things?

Source: World Bank World Development Indicators, 2011

Deindustrialization in the developed world and the 
rise of manufacturing in the developing world

Changes in 
Worldwide 
Manufacturing 
Employment 
Share 
1970‐2015

Evolving Manufacturing in the U.S.
 As economy develops, manufacturing that is 

polluting the environment, uses a lot of manual 
labor, and adds little value will move to less 
developed countries while services at higher 
levels will increase. 

 Some time in the 1980s, the service sector in the 
U.S. started to outpace the manufacturing sector

 What are some of these manufacturing 
industries that have disappeared or are 
disappearing in the U.S.? Are there growing 
sectors in manufacturing?

Changes in the U.S. Manufacturing
 Durable goods manufacturing increased by $9.2 

billion between 1997 and 2018, a less than 1% 
increase. 

 Nondurable goods manufacturing increased by 
$155 billion or 17%. Food and beverage and 
tobacco product grew by $60 billion (28%),
petroleum and coal products grew by $58 billion 
(77%), and chemical manufacturing grew by 
$101 billion (36%).

 The number of computer and electronic product 
manufacturing jobs is down by 759,900 jobs ( 
41%). Apparel and leather manufacturing jobs 
are down 380,000 (66%).

Changes in Manufacturing Jobs 2010-17

Renewed Manufacturing in the U.S.
 Latest resurgence of manufacturing in the U.S. or 

re‐shoring or near‐shoring
 The rise of flexible production systems, 

automation/robotics, business process 
outsourcing & downsizing has changed the 
landscape of manufacturing

 Arrival of Industry 4.0: new phase in the 
Industrial Revolution that focuses heavily on 
interconnectivity, automation, machine learning, 
and real‐time data

 The Pandemic has companies rethink about the 
long and sometimes risky supply chains they run.

Industry 4.0

Growth of Industrial Robots

All data circa 2016

Industrial Robots by Countries

Robots by Industries

Discussion Questions
Please research the following questions and 
provide evidence to support your answers. 
Everyone: What are the reasons deindustrialization 
happens in developed economies? Please look at both 
macro‐ and micro‐economic levels when answering.
Everyone: Do you think Made in America still matters? 
Would you buy American‐made products when possible? 
Even when it’s more expensive than other comparable 
products of similar quality? What kind of products would 
you buy American and what products you would not?

Group Discussion
Be sure your group is ready to lead and/or discuss 
the following question in class, with research or 
facts‐based evidence. 
Do you think there will be a wave of renewed
manufacturing in the U.S. that would 1) revive and
grow manufacturing activities in the U.S., and/or 2)
generate more jobs in manufacturing, both blue 
and white‐collar?

courseware collection/3G Outsourcing and Made in USA (1)

Outsourced!
 When someone else can do it better and cheaper 
and faster than you can do it yourself, why do it 
yourself? Example: Let’s eat out!

 Outsourcing also enables companies to focus on 
things they do the best (core competencies or 
competitive advantages) and outsource non‐core 
competencies.

Theory of the
Firm

 Peter Drucker and Tom 
Peters challenged companies 
to “do what you do best and 
outsource the rest.” 

 Ronald Coase: minimize total 
cost of ownership or 
transaction costs in “The 
Nature of the Firm.”

 Example: Why do you buy a 
copier at office? Because the 
alternative to walking over to 
the nearest UPS store to 
make a copy then back is 
more expensive than making 
copies in house.

Top Outsourced
Industries/Functions

Why some industries outsource more than others?

Top Reasons to Outsource

Pros and Cons of Outsourcing

• Lower costs
• Better market access
• Broader supplier selection

• Reputational risks 
• Loss of control in quality and priority
• Longer and uncertain lead times 
• Challenges in (inter‐cultural) communication 
• Supply chain disruption risks
• Foreign exchange rate fluctuations
• Political and environmental risks

Changing Faces of Manufacturing
• From vertically integrated manufacturing to 
specialized manufacturing

• From in‐sourcing to outsourcing or offshoring
that exports jobs to developing countries

• The U.S. became a country with “cheap” labor
• Development in technologies (robots, 
automation, CAD/CAM, 3D printing, etc.) and 
new product designs are bringing manufacturing 
back to the U.S. (re‐shoring)

• Demand for responsive global supply chain 
becomes inevitable

• A contract manufacturer is a firm that specializes in 
certain types of goods‐producing activities, such as 
customized design, manufacturing, assembly, and 
packaging, and works under contract for end users.  

• Benefits of using contract manufacturing:
⁻ Access to advanced manufacturing technologies
⁻ Faster product time‐to‐market
⁻ Customization of goods in regional markets
⁻ Lower total costs resulting from economies of scale

• Who handles activities between the company and 
contract manufacturers? Yes, SCM! 

More Contract Manufacturing

Origin of
Manufacturing

Outsourcing
(in the U.S.)

 The US manufacturing took off after World 
War II as the only industrialized power left 
untouched. Defense capacity was 
transformed back to civilian use.

 Used Mexico’s cheap labor and proximity to 
the US…Twin Factories (Maquiladoras) 
developed in automotive, aviation and 
aerospace, medical device, apparel and 
textile, and consumer products.

 “Border Industrialization Program” (BIP)
 Trade agreements: NAFTA, CAFTA, USMCA

Rise of Japan
and the Four
Dragons
• U.S.: continued engagement after 
World War II in Japan, Korea, 
Vietnam. (1949 PRC established)
• Japan: post‐war development,  
keiretsu 系列, けいれつ
• Taiwan: KMT Nationalist 
modernization and export‐led 
development since the 50s

• HK: textile, light industries, 
electronics since the 60s

• Singapore: Lee Kuan Yew* 
• Korea: Park Chung‐Hee, Chaebols재벌

Nation Building: Singapore
Lee Kuan Yew
 Efficient and transparent legal system
 Clean but authoritative bureaucratic system
 One of the most diverse countries on earth
 Critical roles in transportation and trade
 Affordable, high‐quality education (54% college)
 Per capita GDP: $60K

Rise of East Asian Economies
 Japan: industrial strengths, post‐war economic 

recovery (Nakajima Ki‐84, Mitsubishi Zero)
 Trade frictions between Japan and the U.S. in 

the 80s (suppliers moved to other places)
 Strategy: government export‐led growth policy
 Structure: free/capitalist markets, state‐

controlled resources, protectionism…
 Entrepreneurship, innovations
 Confucianism: education, relationship (guanxi), 

collectivism?
 Ethnic superiority?
 Use of chopsticks? 

Rising Global Exports

Improved Transportation
 Development of aircraft: Boeing, Douglas, and 

Lockheed
 Development of civil aviation
 Development of containers
 Development of ocean liners

Improved Transportation
 Boeing 747, DC‐10
 Hakone Maru (NYK, Mitsui, K‐Line or ONE now)

Declining Costs of Transportation

Concerns
of East
Asian
Economies

Made in USA
U.S. content must be disclosed on automobiles and 
textile, wool, and fur products. Manufacturers and 
marketers who choose to make claims about the 
amount of U.S. content in their products must comply 
with the FTC’s Made in USA policy.
• Definition: The product must be “all or virtually all” 

made in the U.S. (meaning all significant parts and 
processing are made in the U.S.)

• Derivatives: Designed, assembled, invented, hand‐
crafted, printed in USA…

Country of Origin
When determining origin, CBP takes into account
one or more of the following factors:
 the character/name/use of the article and that 

of it individual parts
 the nature of the article’s manufacturing 

process, the value added by the manufacturing 
process (as well as the cost of production)

 the amount of capital investment, or labor 
required 

 whether the essential character is established 
by the manufacturing process or by the 
essential character of the imported parts or 
materials

Substantially Transformed or Not
 The value added rule (minimum % domestic vs. 

maximum % foreign)
 Change of tariff classification (not just name)
 Specific manufacturing or processing 

operations (not just screwdriver assembly)

Is iPhone
American?

Discussion Questions
Please research the following questions and 
provide evidence to support your answers. 
Everyone: Summarize at least three factors that 
make one industry/firm more likely to outsource 
than others. Back up your position with 
facts/examples.
Everyone: Is iPhone American? On what base do you 
say so? Please reference course materials and 
legitimate evidence to support your claim.

Group Discussion
Be sure your group is ready to lead and/or 
discuss the following question in class, with 
research or facts‐based evidence. 
With abundant and inexpensive labor, and 
proximity to the U.S., why hasn’t Mexico 
developed into a more advanced economies with 
industries like semiconductors, computers, cell 
phones, consumer products, and automotives, like 
its Asian counterparts, despite the fact the U.S. 
outsourced to Mexico first in the 1960s and now 
has more than 40 million Spanish speakers?

courseware collection/4G Time based competition (2)

Time-Based Competition

Speed is King!
Jong-yong Yun, CEO, Samsung:
“Speed is the key to all
perishable commodities from
sashimi to mobile phones.
Even expensive fish become
cheap in a day or two. For both
the sashimi shop and the
digital industry, inventory is
detrimental and speed is
everything.”

• Lean thinking refers to approaches that focus on the
elimination of waste in all forms, and smooth,
efficient flow of materials and information
throughout the value chain to obtain faster
customer response, higher quality, and lower costs.

• Manufacturing and service operations that apply
these principles are often called lean operating
systems, initially developed and implemented by the
Toyota Motor Corporation.

Lean Philosophy

1. Eliminate Waste: Eliminate any activities that do not
add value in an organization. Includes overproduction,
waiting time, transportation, processing, inventory.

2. Increase Speed and Response: Better process designs
allow efficient responses to customers’ needs.

3. Improve Quality: Poor quality reduces yields, requiring
extra inventory, processing time, and space for scrap
and rework. Do it right the first time.

4. Reduce Cost: Simplifying processes and improving
efficiency translates to reduced costs.

Lean Operating Systems

Time in JIT
(Just in Time)
Just-in-time, or JIT, is an
inventory management
method in which goods are
received from suppliers only
as they are needed. The main
objective of this method is to
reduce inventory holding costs
and increase inventory
turnover.

• Quantity
• Quality
• Timed arrivals

Time-Based
Business Models

• Time utilities: Everything is the
same except it’s faster!

• McDonald’s
• FedEx
• Zara, H&M
• Southwest Airlines
• MBA derivatives
• Instant meals
• Hong Kong tailors

Time-Based Competition

Organizations can improve the time it takes
to get things done in every aspect of their
operations.

 Business model innovations
 Business Process Reengineering (BPR)
 See Now, Buy Now: planning, design,

development, sell-in, production, distribution
 New product development
 Quick Response Manufacturing (QRM)
 Order fulfillment: pick, pack, ship
 Inventory velocity
 Cash conversion cycle (CCC)

Business Model Innovations

EV and Its (Supply Chain) Impacts

Business Process Reengineering
Business process re-engineering is the radical
redesign of business processes to achieve dramatic
improvements in critical aspects like quality, output,
cost, service, and speed. Business process
reengineering (BPR) aims at cutting down enterprise
costs and process redundancies on a very huge scale.

Southwest
Airlines

SWA managed to unload all the
landed passengers with their
luggage, cleaning, refueling,
restocking, and boarding new
passengers together with their
luggage and cargo in 10 MINUTES!

End-to-End Fashion Cycle

SHEIN
 China’s most mysterious billion-dollar company and

TikTok’s most-hyped fashion brand.
 The largest online-only fashion company in the world.
 The brand undercuts rivals on price and often adds

thousands of new styles to its website daily.
 It uses aggressive social media marketing to win over

young shoppers.

COVID-19 Vaccine Development
 Coordination and funding
 mRNA technology
 Phases of clinical trials overlapped
 Manufacturing underway during clinical trials
 Bureaucratic clearance

Custom On-Demand Production

17© 2018 John Wu

Silver Crystal

Product customization at point of sale!

The goal is offering guests a great experience but
delivering it in a shorter window of time.
Revenues = # of tables X check size X # of turns

Turning Tables Faster

Inventory velocity is the speed at which the
inventory is cycled in a given period or how fast
inventory is turned over.

Inventory Velocity

Inventory velocity is
measured by inventory
turnover or number of
days inventory is held.

Inventory
Velocity

Inventory Velocity

Inventory Velocity

Inventory Velocity at Apple

Inventory Velocity at Amazon

Cash
Conversion
Cycle
In most businesses, cash is
tied up in stale inventory
and short-term customer
credits, therefore reducing
cash conversion cycles
(CCC) is the best method
for liquidating working
capital. The CCC represents
the number of days it takes
a company to turn
inventory into cash, and
the longer the CCC, the
greater a company’s
working capital
requirement.

Cash Conversion Cycle

In most businesses, cash is
tied up in stale inventory
and short-term customer
credits, therefore reducing
cash conversion cycles
(CCC) is the best method
for liquidating working
capital. The CCC represents
the number of days it takes
a company to turn
inventory into cash, and
the longer the CCC, the
greater a company’s
working capital
requirement.

China Speed
The blistering pace of
expansion by China’s
economy in the past decades
has impressed the world as
“China speed,” which is
about the breakneck pace of
GDP growth, and the sheer
velocity of building roads,
bridges and skyscrapers. It’s
also about how swiftly an
economy of China’s size
embraces new development
technologies.

China EV Growth

Interstate Highway Mileage
U.S. vs. China, 1959-2017

Tesla Giga Shanghai

Tesla Giga Shanghai
May 2018: Tesla (Shanghai) formally established

July 2018: Tesla CEO Elon Musk signed an agreement
with the Shanghai regional government

October 2018: 50-year lease of land signed

December 2018: site grading on the Gigafactory began

August 2019: General Assembly Building completed and
manufacturing line equipment installed

October 2019: Model 3 initial production began

December 2019: First assembled Model 3s delivered

Discussion Questions
Please research the following questions and provide
evidence to support your answers.
Everyone: Why can’t I get my driver’s license the same
day I pass the test? Discuss the barriers and how these
barriers might be overcome.
Everyone: Select one to discuss how it can improve
inventory velocity: Tiffany, Restoration Hardware, Amazon.
Everyone: What can be learned from COVID-19 vaccine
development?
Everyone: Does “China Speed” have any drawbacks?
What strategy/practice could be used to counter a
country/company that possesses “China speed?”

Group Discussion
Be sure your group is ready to lead and/or
discuss the following question in class, with
research or facts-based evidence.
It seems like time-based competition is all good,
that businesses focus on time and everything else
would fall into place. What are some perils of such
strategy? Can you think of a few examples where
being faster may not be desirable? What would be
the advantages for being fast, and what would be
the advantages for being slow? What would you
do in your line of business?

courseware collection/5G Circular economy Goods Services CBP (3)

Evolution of Economy

From linear to reuse to circular economy.

Circular Economy

From linear to circular economy.

Examples of Circular Economy

Circular Economy Opportunities
 Ranpak:

 Waste management, recycler, refurbishment:

An Economy of Goods and Services
 Good: Physical product that a person can see, 

touch, or consume
 Durable good: Product that does not quickly wear 

out and lasts at least three years
 Non‐durable good: Perishable and lasts for less than 

three years

 Service: Primary or complementary activity that 
does not directly produce a physical product

 Combinations of goods and services
 Many goods are sold with service components
 Many services are sold with a tangible item

Similarities and Differences
Between Goods and Services
 Similarities between goods and services
 Provides value and satisfaction to customers who 

purchase and use them
 Can be standardized or customized to individual 

wants and needs

 Differences between goods and services
 Goods are tangible while services are intangible 
 Customers participate in many service delivery 

processes and activities, but not in goods production
 Goods can be stored while services cannot be stored 

as physical inventory
 Demand for services is more difficult to predict than 

the demand for goods

Gradient of Goods and Services

Examples of Goods and Services
Can you tell whether the following are goods or services?
 Can it be prepared ahead of time?
 Can it be stored?
 Does it require customer participation?

Delivering
Goods

 Customers go to 
Goods

 Goods go to 
customers 

 Customers and 
Goods meet halfway

Delivering
Services
 Customers go to 

Services
 Services go to 

customers 
 Customers and 

Services meet 
halfway

Goods Can/Should Be
Turned Into Services

Benefits: To avoid price 
comparison, to turn one‐time 
transactions into longer term 
relationships, to add value to 
goods sold.
How: By bundling goods 
and/or service components 
(installation, repair, warranty, 
tech support, subscription).  

Subscription Models
Instead of customer‐initiated purchases, the 
subscription model sends products/services to 
customers at pre‐schedule times until it’s cancelled. 
Examples include newspapers, Cable TV, streaming, 
gym membership, meal deliveries, wine clubs, etc. 

Benefits:
Customer loyalty 
Upsell opportunities
Predictability (inventory, capacity, cash flow)

Customer Benefits Package
A CBP is a combination of goods and services that adds 
value to the primary product acquired by the 
customer. For example: McDonald’s CBP.

Customer Benefits Package
Pizza is a good, not a service, right? The CBP 
looks at the offering and determines what 
customers actually buy.

What do you buy
a Rolex for?

Do you buy a Rolex to tell time?

Why do you think your husband 
bought you the largest diamond 
ring among your friends?

Examples of CBP
Examples of supply chain elements in this e‐commerce 
era. Please listen to the following broadcast: 

https://www.cnet.com/news/walmart‐plus‐targets‐amazon‐prime‐with‐cheaper‐98‐
membership‐fee/

OM Elements in CBP
What operations elements are or should be in the CBP, 
especially in this e‐commerce era? 

Discussion Questions
Please research the following questions and 
provide evidence to support your answers. 
Everyone: Think of three goods and services you purchased in 
the past few months: 1 mostly goods, 1 mostly services, and 1 
about equal part of both. Which one is more profitable for the 
seller and why? What are their CBPs? Can they be turned into 
subscriptions? Why or why not?
Everyone: Do you know how active it is for people to buy/sell 
used goods online on eBay, Craigslist, Offerup, Facebook and in 
physical stores like Goodwill and Re‐store? What are some 
business opportunities there?
Everyone: Explain and list all the benefits in the CBP related to 
selling groceries in store and online with same day delivery. 

Group
Discussion

Be sure your group is ready to lead and/or discuss 
the following question in class, with research or 
facts‐based evidence. 
What’s the business model of Dollar Shave Club? 
Why did DSC become popular? Is it easier to run 
operationally? What can DSC do to incorporate 
the circular economy concept in their operations?

courseware collection/5G Porter value chain (3)

What is Value?

Value =
Performance

Cost

Performance = f (Quality, Speed, Flexibility)

Think: How do you increase value of your offerings?

The Value Chain
$, Info

Materials,
Info

Primary and Support Activities
Support
activities:
corporate
functions that
add values in
an indirect
manner.

Primary
activities:
corporate
functions that
add values
directly to
final products
or services.

Manage Supply AND Demand Chains

Supply side:
raw materials,
inbound logistics
and production
processes

Demand side:
outbound
logistics,
marketing and
sales.

suppliers customers

Ancillary to Porter’s Value Chain
 Local optimization yields to global

optimization (inventory minimization
might not lead to low total costs)

 Coordination, speed, information and
resource sharing are important

 Each activity must add value to the final
product or service

 Each participating player of the supply
chain has its own value chain

 If it doesn’t add value, don’t do it!

Broken Oreos…

Think: Everyone wants to buy Oreos in perfect shapes.
Who wants to buy broken Oreos during manufacturing
and shipping? Do you throw them away?

What a Great (Expired) Deal!
https://dailytable.org/

This organization offers customers foods that are near or past the best before date.

Discussion Questions
Please research the following questions and
provide evidence to support your answers.
Everyone: Is Daily Table a sustainable business
model? Why or why not? How does it relate to the
circular economy we talked about?

https://www.npr.org/sections/thesalt/2015/0
6/04/411777947/trader-joes-ex-president-
opens-store-with-aging-food-and-cheap-
meals

Group Discussion
Be sure your group is ready to lead and/or
discuss the following question in class, with
research or facts-based evidence.
Use the organization one of you works at (if
none, then use an organization that you are
familiar with), identify their management of
supply AND demand chains. What can be
done to improve their value-added activities?
In other words, what can be done to enhance
value? Please address it from both
performance side and cost side.

courseware collection/9G Capacity planning (2)

Capacity and Demand Planning
So we have figured out a unique place in the
circular economy, designed a product/service to
deliver value to target customers, and selected an
appropriate process to make them, but we still
need to answer the following questions:
 How much to produce
 What lot/batch sizes to choose
 When to produce
Today’s manufacturing or service rendering is a
highly complex process that requires a lot of
resources and a considerable amount of planning.
We need to make sure our products/services meet
customer demand in a timely fashion.

Capacity Planning Terms (I)

 SKU (Stock keeping unit): A unique identifier assigned
to each product for easier and more efficient record-
keeping.

 Production function: It is the functional relationship
between the quantity of a good produced (output) and
factors of production (inputs such as labor, capital,
land, technology).

 Bill of Materials: BOM specifies the relationship
between the end product (independent demand) and
the components (dependent demand). It is a
comprehensive list of the raw materials, assemblies,
subassemblies, parts and components, as well as the
quantities of each, needed to manufacture a product.

SKU vs. UPC
UPC (Universal Product Code)
is used only in the US and
Canada, while the EAN
(European Article Number) is
used everywhere else globally.

Capacity Planning Terms (II)
 Master production schedule: An MPS is a plan to

produce individual final items. The MPS lays out
the production plan for each stage’s quantity.

 Materials requirements planning: MRP is a tool
that determines what items are required, how
many, and when.

 MRP II: Manufacturing Resource Planning
 Enterprise resources planning: ERP is commonly

used by (especially) large organizations to
coordinate the ever more complex activities that
they perform. Vendors such as SAP, Oracle,
PeopleSoft are dominating this market segment.

MRP Illustrated

Capacity Planning
• Capacity planning is the process of determining

the production capacity needed by an
organization to meet changing demands for its
products or services.

• Capacity has to do with the space available,
amount of equipment/machines used, number of
people and shifts, manufacturing processes
selected, and management efficiency.

• So you see a business opportunity to build a
plant to make N95 masks during the pandemic.
What factors do you take into account when
building this plant?

Your N95
Mask Plant

• Demand
• Physical facilities
• Manufacturing

process
• Machines
• Staffing
• Storage room
• Production space
• Outbound logistics

Capacity Choices/Decisions
• How much do we need to produce to meet the

anticipated demand?
• Do we buy or make ourselves? How much needs to be

bought or made in the supply chain?
• If we buy, do we source domestically or internationally?

How do we manage the procurement process?
• If we make, how much do we make and how many

parts and subassemblies do we need to buy from
vendors? Do we set up plants or outsource to contract
manufacturers? Domestic or international locations?
Do we use automation or manual labor? Should we
own or lease equipment/factory?

• What’s our contingency plan if demand is higher/lower
than our forecasts?

Hotel ONT
So you bet on increased travel through the Ontario
Airport and would like to build a hotel on a vacant lot
your friend owns. How big of a hotel (how many
rooms) should you build?
Capacity is calculated as number of rooms x 365 x
utilization rate (not 100% rooms are available every
night).
Occupancy rate is the percentage of occupied rooms
in your property at a given time. It is one of the most
important KPIs and is calculated by dividing the total
number of rooms occupied, by the total number of
rooms available, times 100, creating a percentage such
as 75% occupancy.

U.S. Hotel Occupancy Rate

Airlines Load Factor
Load factor for a single flight is calculated by dividing
the number of (fare paying) passengers by the number
of seats (available for sale).
Load factor for an airline represents the proportion of
airline output that is actually consumed. To calculate
this figure, divide Revenue Passenger Miles (RPMs) by
Available Seat Miles (ASMs).
The higher the load factor, the more an airline can
spread its fixed costs amongst passengers.

Worldwide
Passenger Airlines Load Factor

Managing Demand
Demand forecasting is the process using

historical sales or other data to estimate
customer demand. It’s an estimate of the amount
of goods and services that customers will
purchase in the specific time period.

Methods:
 Use historical data (time series)
 Use external factors (regression)
 Use expert opinions
 Use machine learning/AI

Demand management:
 Adjust price
 Adjust arrival (reservation/appointment/queuing)

Managing Demand

Queueing
 Customers oftentimes are asked to be in queue, or

waiting line, before they get the service.
 Too many agents/cashiers at any given time means that

you are wasting money for your employees to do
nothing. Too few, you may agitate customers who
either leave or wait for a long time to get service.

 Service provider has to determine what level of service
they provide at how much cost (i.e. what is the
expected wait time, how many customers can they
handle in a day/hour, etc.)

 Many service providers use an appointment system to
help handle customer arrivals so they can schedule
services accordingly. (i.e. doctor’s office, DMV)

Queueing
Solutions (I)

Mathematical:
 Arrival: customer

arrival rate and
pattern

 Queue: single line or
multiple, single phase
or multiple, first-come
first-serve or
priority/triage, single
or batch

 Service: service rate
and number of servers

Queueing
Solutions (II)

Psychological:
 Keep them occupied
 Get them started
 Explain why
 Give time estimate
 Be fair
 Arrange group wait
 Make the wait more

valuable

Optimal Waiting Line Cost
Cashiers are on your payroll; customers are not!

Discussion Questions
Please answer the following questions with
reference to class and provide evidence to
support your answers.
Everyone: What factors do you take into account when
building an N95 plant in mid-2020? Be methodical.
Everyone: In your current or previous position, how is
capacity managed? How can it be improved?
Everyone: Describe a good waiting line management
from your own personal experience. How can it be even
better (definition first)?
Everyone: Which plane boarding method do you think is
the best and why? What can you do to speed it up?

Group Discussion
Be sure your group is ready to lead and/or
discuss the following question in class, with
research or facts-based evidence.
Learn how California DMV manages demand and
queueing. Critique their management, using what
we have discussed so far in class. Propose a better
(define how you would measure “better”) way as
if you were the head of DMV.

courseware collection/9G Inventory (1)

• Lean thinking refers to approaches that focus on the
elimination of waste in all forms, and smooth,
efficient flow of materials and information
throughout the value chain to obtain faster
customer response, higher quality, and lower costs.

• Manufacturing and service operations that apply
these principles are often called lean operating
systems, initially developed and implemented by the
Toyota Motor Corporation.

Lean

1. Eliminate Waste: Eliminate any activities that do not
add value in an organization. Includes overproduction,
waiting time, transportation, processing, inventory.

2. Increase Speed and Response: Better process designs
allow efficient responses to customers’ needs.

3. Improve Quality: Poor quality reduces yields, requiring
extra inventory, processing time, and space for scrap
and rework. Do it right the first time.

4. Reduce Cost: Simplifying processes and improving
efficiency translates to reduced costs.

Principles of Lean Operating Systems

Avoiding Wastes in Lean Systems

• Inventory is any asset held for future use or sale
with objectives of maintaining sufficient amount
and variety to meet demands while incurring the
lowest possible cost.

• Inventory Management involves planning,
coordinating, and controlling the acquisition,
storage, handling, movement, distribution, and
possible sale of raw materials, component parts and
subassemblies, supplies and tools, replacement
parts, and other assets that are needed to meet
customer wants and needs.

Inventory Management

• Raw materials, component parts, subassemblies,
and supplies: inputs to manufacturing and service-
delivery processes.

• Work-in-process (WIP): partially finished products in
various stages of completion that are awaiting
further processing.

• Finished goods: completed products ready for
distribution or sale to customers.

• In-transit inventory: items in in-bound or out-bound
logistics links.

• Safety stock: additional amount of inventory that is
kept over and above the average amount required
to meet just-in-case demand.

Types of Inventory

• Inventory turnover, or the ability to make
more sales with less investment in inventory:
the higher the better (a measure of
inventory productivity)

• Inventory carrying costs, the expenses
associated with keeping inventory in hand
(obsolescence, storage, moving, etc.)

• Shortage costs or stockout costs, or the costs
associated with an item being unavailable to
meet demand: the lower the better (to an
extent).

Inventory Decisions & Costs

• When inventory level is high (service level or
order fill rate is high): stockouts and resulted
lost sales are less likely to happen but inventory
carrying costs and obsolescence risks are high.

• When inventory level is low (low safety stock):
costs of keeping inventory in hand are
minimized and inventory turnover is high but
there is an increased risk of running out of
stock and the customers may not be happy.

• The question is how much inventory do you
keep?

Inventory Trade-Offs

What type of driver are you
and implications of your
conscientious decision:
costs (stops for gas, time,
mileage, higher price of
gas…), benefits (peace of
mind, ready anytime), risks
(running out of gas, fuel
pump damage…)

Can you analyze this?

Driver A vs. B

Monthly Retail Sales and Inventories,
United States, 1992-2019

Monthly Retail Sales and Inventories,
United States, 1992-2019

Fact 1: Retail sales have been going up.
Fact 2: Retail inventories have been going up as well.
Fact 3: Inventories/Sales ratios have been going
down.

Question 1: What does inventories/sales ratio
mean?
Question 2: Why are they going down?

Think…

What? Pareto again?

• “A” items account for a large dollar value but
relatively small percentage of total items (e.g., 10%
to 30 % of items, yet 60% to 80% of total dollar
value).

• “C” items account for a small dollar value but a
large percentage of total items (e.g., 50% to 60%
of items, yet about 5% to 15% of total dollar value).
These can be managed by automated systems.

• “B” items are between A and C.

ABC Inventory (Pareto) Analysis

ABC Inventory (Pareto) Analysis

• Just-in-Time (JIT) production system was introduced
at Toyota a half-century ago.

• Traditional factories use a push system, which
produces finished goods inventory in advance of
customer demand using a forecast of sales.

• The JIT or pull system, products are not produced
until the customer demand is more certain or
confirmed. Then items are “pulled” from the source
or the suppliers “just in time” to make the required
parts and products for the customer. The result is
lower inventory throughout the system.

Just-in-Time Systems

• Traditional accounting treats inventory as asset, the
more the merrier.

• Just-in-Time (JIT) treats inventory as (necessary) evil
and tries to avoid keeping it at all costs. Inventory is
nothing but trouble (expensive) in a JIT system.

Just-in-Time Philosophy

Damages Mark downs Theft or pilferage

• VMI is where the vendor (e.g. a consumer goods
manufacturer) monitors and manages the inventory
for the customer (e.g. a grocery store).
⁻ Chevron monitors gasoline levels then delivers

fuels to gas stations…automatically.
⁻ Pepsi comes into Von’s to restock.

• Vendors love to do more for customers. Why?

Vendor Managed Inventory (VMI)

Who is responsible
for making sure all
products face front
and shelves are
fully stocked?

Who should be
blamed for
empty shelves?
And who lost?

Inventory Velocity
(Turnover)

Inventory turnover is a
ratio that measures the
number of times
inventory is sold or
consumed in a given
period of time.

It’s also known as
inventory turns, stock
turn, and stock turnover.
The inventory turnover
formula is calculated by
dividing the cost of
goods sold (COGS) by
average inventory.

Inventory Velocity (Turnover)
Cash to cash cycle: time from the acquisition of a firm’s
inventory to the time that specific inventory is sold and
money received. It is usually measured in days.

Inventory Velocity Among Retailers
Groceries: 13.5; Apparel retail: 3.5; Dept stores: 4

Costco: 12; Walmart: 8.5; Target: 6; Home Depot: 5

How Fast is Fast Fashion?

Turnover ratio 3-4 5 3 4

Zara Front-Positioned Inventory

Inventory Turnover: Amazon v Apple

Square root law: Number of stock points (warehouses
or DCs or stores) increases by X times, total inventory
increases by the square root of X times.

The Square Root Law in
Inventory Management

How much inventory has increased at Amazon?

Amazon Fulfillment Centers

Amazon Growing Logistics Costs

Discussion Questions
Please research the following questions and
provide evidence to support your answers.
Everyone: Compare and contrast Just in time and Just in
case inventory management thoughts in the Lean context.
Everyone: Analyze and answer questions of the slide on
Monthly Retail Sales and Inventories, U.S., 1992-2019
Everyone: Discuss the costs and benefits of Type A vs. B
drivers as shown in my PPT slide on inventory trade-offs.
What’re the lifetime costs/benefits of type B drivers?
Everyone: Why did Amazon’s inventory turnovers drop
from 16 to 8? And what happened to Apple’s from 80-100
around 2012-13 to about 40 in 2017-20? Can you explain?

Group Discussion
Be sure your group is ready to lead and/or
discuss the following question in class, with
research or facts-based evidence.
This is the $64,000 question: Are you concerned
about Amazon’s growing logistics costs if you were
the COO of Amazon? What would you do if you
think it’s a concern? What would your
conversations be with the CEO and with the
logistics managers?

Guidelines for Journals

Each week, you write in Canvas to answer every question in the end of every PPT/PDF of the
same week. Your answers are a direct response to my questions and a self inquiry to satisfy your
inner hunger for knowledge. You should start by repeating my question, followed by your
answer and additional thoughts, and references if any, for over 150 words. (see examples) Be
sure to provide a link if you reference anything online. Please submit work before weekly
deadline on Saturday. Canvas keeps all your submissions and I am able to see them all when I
grade them twice a quarter. Your work is considered late if it’s not in by the weekly deadline.

Journal Grading Rubric

Sample Entries for Journal (good examples)
(exceeding word count minimum, separate paragraphs, personal experiences, personal thoughts,
reference to course materials, answers to all questions)

(Repeating question, exceeding minimum word count, detailed explanations with personal/work
examples)

Everyone: Do you practice Mise En Place in your everyday life? Why or why not? Explain and
give two examples at least.
I do practice mise en place to some extent. Mise en place is a French term meaning put in place.
It teaches us to prepare for the upcoming tasks with all the materials and processes ready ahead
of time. In the podcast, I also learned the seemingly contradictory way of going slow so you can
go fast. Taking time to plan and prepare oftentimes makes things a lot easier and faster when it
comes down to execution. If one rushes into doing things without much preparation and thinking,
it may not save time in the end as it may require second or third stitches to save it. So this “go
slow to go fast” makes a lot of sense to me.
When I cook, I put out all the ingredients and seasonings. I’d wash the veggies, cut the meats,
and take the seasonings out near the stove so I can access them when needed. And the cooking
does not start from the kitchen; I plan ahead for the meals I wanted to prepare then come up with
a shopping list so I get all the ingredients I need at the supermarket. I also browse supermarket
flyers so I know what’s on sale therefore I can save money on family meals with these items.
At work, if I have a meeting tomorrow, I’d prepare the meeting materials the night before and
put them in a folder so the next morning it’s grab and go. I also mentally go over the meeting
process and read the background information to make up my mind and take my positions before
the meeting. I may be convinced by my colleagues to take a different position at the meeting but
I pretty much know what I would say before I enter the meeting room.
I am glad we are learning this mise en place in this class. Now I know what I have been doing
right is based on scientific research! I’d be more systematic in the future when it comes to
organization and implementation of tasks.

(Repeating question, exceeding word count minimum, answering all sub-questions, detailed
explanations with personal/work experiences, arguments backed by evidence in real life cases
and theoretical references)
1. What is Customer Lifetime Value and how do companies use it to drive revenue growth?
Should companies treat customers differently based on their CLVs? Why or why not?
Customer Lifetime Value is the total revenues a customer brings to the company over the
lifetime the customer does business with the company. Over time, customers leave the company
because of demographic changes, relocation, changes in preferences, dissatisfaction with the
product or service, or other reasons.
Companies should treat customers differently based on the “values” or profits that they bring to
the company. The relationship between customers and companies is one of the most important
factors of the competitive advantage because “customer satisfaction and loyalty affects the
bottom line.” (Pg.57). Competitive advantage is described as “a firm’s ability to achieve market
and financial superiority over its competitors.” (Pg. 71). In my opinion, a company benefits
greatly from the relationships that it builds with its customers because it creates an avenue for
financial and market growth.
Customer loyalty continues to drive profits even during slow economic periods. Loyalty
marketing is an example of how businesses can focus on retaining and growing their customer
base by providing incentives to customers. This is why Macy’s always has special deals and
exclusive promotions for their credit card holders. Other companies in retail, tourism, travel,
hospitality also have developed similar programs to deepen their relationships with customers
and to drive revenues growth.

Recently, there has been a push to incorporate social media into loyalty marketing. Companies
are now providing incentives to customers that subscribe to the various outlets of social media
that are used by the company. For example, companies are now using Facebook and Twitter to
advertise special incentives to those who subscribe to their feeds. Loyalty marketing has a
significant impact when combined with social media because it reaches target markets fast. It is
also an effective way for companies to reach into new markets with minimal effort or expense.
References: Collier, David A., and James R. Evans. OM4. Mason, OH: South-Western Cengage
Learning, 2013.

Sample Entries for Journal (bad examples)
(missing one or more: not enough words, one big paragraph, quotes from web without reference,
no reference to course materials, not answering all questions, one entry for three questions, not
including my original question)

(Personal opinion, no references) Jack Welch: I don’t like his style. I think he is too mean.
Managers should be kind. They should keep employees happy to be productive.

(Really?) Please develop a quantifiable measurement for the quality of In-N-Out hamburgers:
Sorry but I am a vegetarian so I wouldn’t know.

(Definition) MTO: Make to order, a way to make stuff.

(Not meeting word count minimum, two answers in one entry, not separating answers, not
answering questions fully)
Everyone: Describe the servicescape of a family doctor’s clinic.
2. Find a low contact service and explain why low contact is preferred or beneficial.
The service scape of a family’s doctor clinic is sort of the same throughout all medical
professions. They all have a waiting room/ lobby where the patients sit before being seen by the
doctors. Receptionist desk is where you’re first helped and asked to fill out any paperwork.
Normally credentials or certificates will be displayed around the reception area. Family doctor
clinics are distinguished by a small section normally designated for children filled with books
and toys. One low contact service that i found is the automated self serve car washes. Low
contact is preferred and beneficial for many reasons. These car washes give a full car wash
within minutes and let you vacuum on your own. This can be seen as preferred or beneficial
because it removes human error and lets you vacuum to your liking. No dialogue or transaction
interactions also aids in reducing the time you spend cleaning your vehicle.

(Not repeating question, not meeting word count minimum, two answers in one entry, no depth,
writing is distractive, can you capitalize I?)
The product i found i like that is designed for the environment is bamboo straws. They are not
only aesthetically fun, but also an eco friendly alternative to plastic straws. These straws are
made from regular bamboo stalks, which means they do not under go any sort of processing, and
can be washed and reused. The example i found for a product that adds a pink tax is women’s
shaving razors. This product is the exact same as the mens counterpart, but has something known
as the pink tax taking effect, which ups the price. This is a price discrimination since its a
women’s product and the sellers know its a necessity for them.