Operations Management Chapter 15 Discussion Questions

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cost etc. and so many factors.

When vertical integration has many advantages such as reduced transaction cost, supply assurance, improved coordination, Technological capabilities and higher entry barriers etc., it has some disadvantages too such as huge capital requirement, reduced flexibility and loss of specialization and core competencies etc. and many more.

Thus a business must factor above into its decision process-whether to go for vertical integration or not. (Source: Is Vertical Integration Profitable?, Robert D. Buzzell, Harvard Business Review)

3) From a systems viewpoint, what are some of the environmental issues involved in a decision by a company to outsource manufacturing operations to a foreign country?

The environmental issues that a company should consider in outsourcing manufacturing operations to a foreign country include:

• Knowing and dealing with other country’s environmental regulations.

• Dealing with the ethical dilemma if other country’s environmental regulations are less strict than those in home country.

• The increased pollution and energy usages in transporting goods.

Read the Master Tag Case on pages 685 and 686 in your Operations Management textbook and answer the following questions:

1) Explain the key benefit of the revised approach, and the reason for the benefit

The key benefits are no leftover tags since supply of tags is matched with demand and overall customer satisfaction. These were possible because:

• MasterTag matched supply with demand from the very beginning

• Stopped shipping excess tag until further demand in known

• After knowing demand from end users, MasterTag directly sent the tags to end users.

2) MasterTag has not yet decided to implement this plan. List the pros and cons you think should be considered.

Potential Pros:

• Greater customer satisfaction since if the plan is implemented MasterTag’s largest customers will usually not end up with large numbers of leftover tags.

• Greater customer satisfaction will likely to create competitive advantage.

• Since supply with be matched with demand, the plan will help MasterTag to go for lean operation, reducing cost (inventory and associated cost), wastage, lead times and increasing productivity and profits.

Potential cons:

Implementation of the plan will require:

• Increased trust and cooperation from trading partners/customers to achieve common objectives.

• Effective integrated information systems to facilitate real-time data sharing among MasterTag, its customers and end users (growers).

• Providing supply chain visibility to improve supply chain operations.

• Increased operations, maintenance and man power for sending tags directly to large number of grower, taking and tracking orders from large number of growers

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