Assignment task:
Many organizations offer a combination of goods and services to their customers. As you learned in Chapter 1, there are some key differences between production of goods and delivery of services. What are the implications of these differences relative to managing operations?
TOPIC 1 - PROBLEM SOLVING
Productivity can be measured in a variety of ways, such as by labor, capital, energy, material usage, and so on. At Modern Lumber, Inc., Art Binley, president and producer of apple crates sold to growers, has been able, with his current equipment, to produce 240 crates per 100 logs. He currently purchases 100 logs per day, and each log requires 3 labor-hours to process. He believes that he can hire a professional buyer who can buy a better-quality log at the same cost. If this is the case, he can increase his production to 260 crates per 100 logs. His labor-hours will increase by 8 hours per day.
a) What will be the impact on productivity (measured in crates per labor-hour) if the buyer is hired?
TOPIC: CASE STUDIES - De Mar's Product Strategy
De Mar, a plumbing, heating, and air-conditioning company located in Fresno, California, has a simple but powerful product strategy: Solve the customer's problem no matter what, solve the problem when the customer needs it solved, and make sure the customer feels good when you leave. De Mar offers guaranteed, same-day service for customers requiring it. The company provides 24-hour-a-day, 7-day-a-week service at no extra charge for customers whose air conditioning dies on a hot summer Sunday or whose toilet overflows at 2:30 A.M. As assistant service coordinator Janie Walter puts it: "We will be there to fix your A/C on the fourth of July, and it's not a penny extra. When our competitors won't get out of bed, we'll be there!" De Mar guarantees the price of a job to the penny before the work begins. Whereas most competitors guarantee their work for 30 days, De Mar guarantees all parts and labor for one year. The company assesses no travel charge because "it's not fair to charge customers for driving out." Owner Larry Harmon says: "We are in an industry that doesn't have the best reputation. If we start making money our main goal, we are in trouble. So I stress customer satisfaction; money is the by-product." De Mar uses selective hiring, ongoing training and education, performance measures, and compensation that incorporate customer satisfaction, strong teamwork, peer pressure, empowerment, and aggressive promotion to implement its strategy. Says credit manager Anne Semrick: "The person who wants a nine-to five job needs to go somewhere else." De Mar is a premium price. Yet customers respond because De Mar delivers value-that is, benefits for costs. In 8 years, annual sales increased from about $200,000 to more than $3.3 million.
DISCUSSION QUESTIONS:
Q1. What is De Mar's product? Identify the tangible parts of this product and its service components.
Q2. How should other areas of De Mar (marketing, finance, personnel) support its product strategy?
Q3. Even though De Mar's product is primarily a service product, how should each of the 10 strategic OM decisions in the text be managed to ensure that the product is successful?