Practice Operations Student Manual

Student Manual
Updated April 2023
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
McGraw-Hill Practice Operations
Table of Contents
Introduction...............................................................................................................................................................................3
Game Description............................................................................................................................................................................................ 3
How to Win........................................................................................................................................................................................................ 3
Gameplay............................................................................................................................................................................................................ 3
Learning Outcomes........................................................................................................................................................................................ 4
Overview of Modules...................................................................................................................................................................................... 4
Module 1: The Production Process...............................................................................................................................................4
Module 2: Managing Suppliers.......................................................................................................................................................4
Module 3: Forecasting and Contracts..........................................................................................................................................4
Module 4: Human Resources and Capacity Planning...........................................................................................................4
Module 5: The New Branch..............................................................................................................................................................4
Module 6: Maximize Net Worth..................................................................................................................................................... 4
System Requirements.................................................................................................................................................................................... 5
Registering and Logging In...................................................................................................................................................6
Module 1: The Production Process....................................................................................................................................8

Make-to-Order Processes............................................................................................................................................................................. 9
Operations Management: Priority and Utilization........................................................................................................................ 10
Follow the Tutorial for Module 1........................................................................................................................................................... 12
Module 2: Managing Suppliers.........................................................................................................................................13

The “Lean or “Just-In-Time” Strategy.................................................................................................................................................. 14
Quality Inspection........................................................................................................................................................................................ 16
Quantity Flexibility and Supplier Capacity........................................................................................................................................ 17
Creating a Vendor Scorecard.................................................................................................................................................................. 18
Module 3: Forecasting and Contracts.............................................................................................................................21

Research........................................................................................................................................................................................................... 21
Make-to-Order vs. Make-to-Stock.......................................................................................................................................................... 21
Bids..................................................................................................................................................................................................................... 21
Work Request Analysis............................................................................................................................................................................... 22
Batch Manufacturing.................................................................................................................................................................................. 24
Forecasting and Specialization.............................................................................................................................................................. 25
Module 4: Human Resources and Capacity Planning...............................................................................................26

Human Resources......................................................................................................................................................................................... 26
© McGraw Hill LLC. All rights reserved. No reproduction1or distribution without the prior written consent of McGraw Hill LLC.
Training.................................................................................................................................................................................................. 27
Hiring...................................................................................................................................................................................................... 27
Managing the Organization Chart...............................................................................................................................................28
Capacity Planning........................................................................................................................................................................................ 29
Scheduling a Job Shop with a Spreadsheet........................................................................................................................................ 30
Gather Basic Information............................................................................................................................................................... 30
Prepare a Schedule............................................................................................................................................................................ 31
Compare Schedules using Different Priorities......................................................................................................................32
Matching Capacity to Demand............................................................................................................................................................... 32
Maximizing Throughput................................................................................................................................................................. 33
Constraints and Bottlenecks.................................................................................................................................................................... 34
Routing Pathways.............................................................................................................................................................................. 34
Finding Bottlenecks.......................................................................................................................................................................... 34
End of the Tutorial....................................................................................................................................................................................... 37
Module 5: The New Branch................................................................................................................................................38

Hiring vs. Training....................................................................................................................................................................................... 38
Analyzing Employee Expenses.................................................................................................................................................... 39
Reputation....................................................................................................................................................................................................... 43
Module 6: Maximizing Profits...........................................................................................................................................44

Long-Term Perspective.............................................................................................................................................................................. 44
Total Cost of Ownership................................................................................................................................................................. 45
NOTE: Due to the update that caused Practice Operations to be hosted via Connect ABA assignment rather than MHPractice,
each module is now designed and scored around a set number of turns so that student performance may be compared against
values derived from historical norms. As a result of this, the number of turns per module is now set and not customizable by
instructors.
Introduction
Game Description
Practice Operations puts players in the role of an operations decision maker for a clothing
manufacturing company. Operations is the engine that drives a business. Play begins with an overview
of the heart of that engine – managing the production process. Players review the contract
specifications as well as the production process by walking through the Production Floor and Shipping
area. Players then analyze the receiving department functions of managing the supply chain and
material inventories to ensure client needs can be met. In order to grow the business, players choose
which new contracts to pursue and then optimize their receiving, production, and shipping departments
accordingly. As the business grows, players manage both the human and facility resources in order to
meet capacity challenges. Customer satisfaction is a key metric for success. In the final stages of the
game, the company puts players in complete control over all areas of operations at the New Branch,
with the challenge to build the most profitable company possible.
How to Win
Your goal is to make the most money possible. This will happen if you run your operation efficiently.
Getting orders out to customers on time, with the correct quantity and quality will make your customers
happy, which in turn raises your reputation. As your reputation increases, you will be able to
successfully bid on contracts from a larger pool of customers, which will generate more revenue. If you
run your operation poorly and your customers receive orders late or with errors in quality or amount,
your sales force will lose bids to your competitors and you will make less money, or even run a deficit!
Gameplay
The game is turn-based. Each turn is one week. Each module is a specific length and has objectives that
must be achieved before time runs out.
Learning Outcomes
 The interactive experience focuses on gaining experience through trial and error and learning
how the elements of operations and production come together.
 Supports online, out-of-class play and competition between you and your fellow students.
 Features game-world data and situations that reflect real world operational situations.
 Highlights the inherently interdisciplinary nature of business by demonstrating that the various
functional areas of the company – Human Resources, Manufacturing, Accounting, and Sales –
must work together in order to meet company goals.
 Opportunity for actual hands-on practice as an operations manager in a manufacturing scenario
 Analyze and evaluate quality considerations in the production process.
 Stresses both customer satisfaction and financial results as the key success metrics.
 Provides reporting features that make it easy for instructors and students to review and assess
your performance and decision-making.
Overview of Modules
Module 1: The Production Process
Operations is the engine that drives a business. This module focuses on the heart of that engine,
managing the production process. Module 1 should take 25-45 minutes to complete.
Module 2: Managing Suppliers

This module unlocks the receiving department, putting players in charge of managing the supply
chain and material inventories to meet client needs. Module 2 should take 25-45 minutes to
complete.
Module 3: Forecasting and Contracts

In this module, players choose which contracts to pursue, and optimize their receiving,
production, and shipping departments accordingly. Module 3 should take 25-45 minutes to
complete.
Module 4: Human Resources and Capacity Planning

In this challenging scenario, players will manage both human and facility resources to meet
capacity challenges. Module 4 should take 35-55 minutes to complete.
Module 5: The New Branch

In this module, players will have complete control over all areas of their operations, and will be
challenged to reach a net worth of $50,000 as quickly as possible. Module 5 should take 1 to 2
hours to complete.
Module 6: Maximize Net Worth

In this capstone module, players again have complete control over all areas of their operations.
The goal is to maximize the net worth of the firm over 50 turns. Module 6 should take 2 to 3
hours to complete.
System Requirements
Computers used to run Practice Operations must meet the Technical Requirements listed below.
Windows OS:
1. Operating systems: Windows XP with Service Pack 3 / Windows Vista SP2 / Windows 7
/ Windows 8.
2. Internet Browser: Firefox version 31 or above OR Internet Explorer 11 or above OR
Google Chrome version 31 or above
3. Memory: 512MB RAM
4. Processor: Intel Pentium 3-4 processor or equivalent/better
5. Video: NVIDIA GeForce 6600 or better OR ATI Radeon 8500, 9250 or better OR Intel 945
chipset or better, 1024 x 768 resolution minimum
6. Internet: 128kbit/s Cable/DSL/LAN connection per computer
7. Hard Disk Space: 500MB free
8. Direct X: DirectX 9.0c
Mac OSX:
1. Operating system: Must have OS X 10.6 (Snow Leopard) or later.
2. Processor: Intel Core 2 Duo (PowerPC not supported)
3. RAM: 1GB System Memory
4. Video Memory: 256MB graphics card or decent integrated graphics chip. Must support
OpenGL 1.5+
5. Internet Browser: Firefox version 31 or above OR Safari 7.1 or above OR Google Chrome
version 31 or above
Apple iPad:
1. Model: iPad2 or later.
2. Operating System: iOS 8 or later.
3. Screen Resolution: 1024x768 or greater.
Android Tablet:
1. Operating System: Android 4 or later.
Registering and Logging In

Practice Operations can be accessed directly through the McGraw-Hill Connect system. Practice
Operations assignments will be listed with all other assignments for your course.
Practice Operations assignments will be designated by the Application-Based Activity icon ( ).
You also may be able to access Practice Operations assignments directly from your learning
management system, if your instructor chooses to add the links.
To start working on a Practice Operations assignment, simply click the arrow ( ) located at the right-
hand side of the assignment.
A window will appear displaying the assignment information (see below). In addition to the assignment
title, the window will also show the start and due dates for the assignment, the number of attempts you
are allowed and the total points associated with the assignment. Click the Continue button to enter the
simulation.
The Launch Assignment window will open. This window includes basic information about the module
and will also show you the instructions your instructor has included with this assignment. To start an
attempt, click the Play Attempt button. To return to the previous screen without starting an attempt,
click the Previous button.
You can start the simulation by clicking the Play Attempt button. This will start the Practice Operations
simulation. Each module starts with an introduction that describes the goal of the module. You can click
on the View Objectives button to see the specific learning objectives for the current module.
For example, module 1 is designed to familiarize you with production processes and the Practice
Operations simulation itself.
When you have read the learning objectives, click the Play button to enter the simulation. Each module
starts a little differently, so pay close attention to the introduction that is presented at the beginning of
the module.
7
Module 1: The Production Process

In this module, you will learn to manage the basic production process. This product flow appears in the
Production Floor panel (below), and you can also see the progression of products through the various
machines. The managers in the game will help guide you through the process.
In Practice Operations, the production floor uses a workcenter (or job shop) layout, where machines are
grouped by type, with products traveling from one machine to the next as they are completed. Products
start in Cutting and then move through Sewing, Press Transfer (for some products), and finally arrive at
Packaging. Additional workcenters will be added in later modules, and each station can be upgraded for
a one-time cost to increase the speed and maximum amount that can be processed.
8
Make-to-Order Processes
By following the screen prompts, a production order that precisely matches the customer order is
started on the production floor. This 1:1 relationship between customer orders and production orders is
a key characteristic of a make-to-order process.
For example, review the open contract from Stallion Apparel (below), highlighting the importance of
individual orders in a make-to-order system. In particular, the key elements are the client, item ordered,
order quantity, unit price, and due date.
Once your production is underway, you can

view the details by looking at the Current
Production Runs panel. The side arrows let
you quickly cycle through all products
currently in production. The icons under
Production Tasks let you see which machines
are required for the specific product. You can
view the material required per unit and see
how much of that material you have in stock.
You can view the current status, the amount
being produced, what priority you have it set
for, and finally the quantity of finished
product you have in stock.
9
Operations Management: Priority and Utilization

One of your key decisions is the sequencing of jobs. By varying the priority of jobs, the quantity of each
item produced during a given period can be varied widely. In this example, the priority of three jobs
(shirts, shorts, and pants) is varied to show how this can impact total output. Prioritization of jobs is
established in the Production Area.
Click the Manager’s Desk, then select each order from the Production Schedule.
NOTE:
You can also change
priority of production
with the mouse by
grabbing a product in
“Current Production
Runs” and dragging it
to a new slot.
To keep track of the state of multiple orders, go to the View Production Plan panel.
© McGraw Hill LLC. All rights reserved. No reproduction10

or distribution without the prior written consent of McGraw Hill LLC.
The Production Plan panel shows which machines are in use and how much of their total capacity is
being utilized. Prioritizing jobs can save players from several utilization mishaps such as being on track
to complete orders for your customers on time only to have several products all arrive at the packaging
station at the same time.
Can you get your average utilization to 100 percent?

Probably not, but the higher that score, the more efficient you are managing your operations. See the
equation below:
𝐶𝑎𝑝𝑎𝑐𝑖𝑡𝑦 𝑢𝑠𝑒𝑑 1280

𝑈𝑡𝑖𝑙𝑖𝑧𝑎𝑡𝑖𝑜𝑛 = 𝐵𝑒𝑠𝑡 𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑙𝑒𝑣𝑒𝑙 = = 53.3%
2400
11
This priority order has increased the utilization average by 10%!
Follow the Tutorial for Module 1

It’s important to follow the in-game tutorial for this module to be sure you are introduced to all the key
elements. They will be needed when you start playing Module 2. If you are unsure of any part of the
module, replay it, and then review this section of the manual. If you feel comfortable with the concepts
introduced in Module 1, try playing through it several times to beat your own high score!
12
Module 2: Managing Suppliers

Time to get busy with supply chain management! This module introduces the receiving department,
and shows how to efficiently order the materials you need to produce your products. As you learned in
Module 1, proper scheduling is critical to keep your production running smoothly. The same is true with
managing your supply chain. You must make sure you receive the proper amount and quality of
materials in a time frame that allows you to sort them, send them to production to create completed
products, and ship them in enough time to arrive at their destination within the specified number of
weeks. This will make your clients happy and increase your reputation.
Of course, it is also important to manage the costs associated with suppliers. In Practice Operations,
there are two main costs associated with raw materials – purchasing costs and holding costs. Purchasing
costs can be managed by selecting a vendor with the right quality (to avoid overpaying for excessive
quality), by taking advantage of lead-time and quantity discounts, and by comparing prices among
vendors. Holding costs are
charged for materials held in
stock (about 10% per turn for
raw materials, 5% per turn for
finished
products) and
can be
minimized
through careful
scheduling of
purchases and
production.
Excess materials
can be sold, but the cash
received for inventory (either
raw materials or finished
products) that are disposed of
in this manner is a small
portion of the original cost.
In the receiving department,
you click on the manager’s desk to order new materials, and you will see trucks back up to the loading docks when
materials arrive. Materials first go to the double pallet at the bottom of the screen until they can be sorted. Then each
pallet displays specific raw materials that are letter coded.
13
The “Lean” or “Just-In-Time” Strategy

One gameplay option you can experiment with in Module 2 is to use a true lean/JIT approach, ordering
raw materials to arrive just as they are needed. For example, in turn 3 (January, week 3) orders arrive for
slacks (250 units) and shorts (400 units). Both of these products are due to arrive at the customer in 6
weeks (March, week 1). Less than one week is required for production of these items (the limiting factor
is packaging capacity, but even this step can be completed in less than a week for both products).
Therefore, with 2 weeks to ship and 1 week to produce, these two production orders can be started as
late as February, week 2. Therefore, when ordering the raw materials, ordering with a lead time of 3
weeks will minimize inventory holding and allow for just-in-time delivery of raw materials.
JIT/Lean requires highly reliable suppliers: for khaki either United Fabrics or Preston Premium would be
preferred suppliers. Both offer the required level of quality and both can meet the required quantity.
Since the price is the same for both, place an order for 500 units of khaki with Preston Premium.
For silk, Preston Premium, Reliable Clothing, and United Fabrics are highly reliable suppliers. Once again,
all meet the necessary quality level. Reliable Clothing offers a significantly better price, even though an
order of 400 units of silk will not qualify for a quantity discount. Preston Premium is more expensive
than Reliable Clothing
and United Fabrics has
a minimum order
quantity of 500 units.
Therefore, we place an
order for 400 units of
silk with Reliable
Clothing.
13
14
Thanks to our reliable suppliers, the requested

quantities of silk and khaki arrive exactly as
promised in February, week 2, and can be used in
production the following week.
However, we have encountered a

snag! The sorting capacity in the
warehouse is insufficient to process
the shipments. 98 units of khaki and
2 units of silk are left unsorted. This is
going to delay production.
This element of operations is dealt
with in Module 4, where you will get
the opportunity to expand your staff
for different departments. In the
meantime, it’s vital to run the
numbers ahead of time to avoid
these situations, especially since
hiring more staff may not be an
option for you.
Due to the delay in getting materials sorted, the slacks and shorts are not completed and in finished
goods inventory until February, week 4. As a result, you would be forced to use expedited shipping to
get the products to the customers on time at an additional cost of $404! That small holdup will
significantly impact your bottom line!
15
Quality Inspection
Stock inspections can increase the quality of your raw materials. This identifies and removes sub-
standard items, decreasing the available quantity but increasing the overall quality of the remaining
stock. Inspection is
generally an expensive
option since you are, in
effect, throwing away raw
materials that you’ve
already paid for.
In Module 2 gameplay, you
are prompted to inspect a
shipment of Denim. Quality
inspection is initiated from
the Material Stock window.
Students are asked to confirm the inspection…
…and are shown the results of the inspection. Here, 19 “defective”

units were removed, raising the quality level of the 81 remaining units
to 59.0.
However, inspection is rarely an

efficient strategy for improving
quality. In fact, if a higher quality
material had been purchased in the
first place, the total cost of the
materials would be significantly
lower.
United Fabrics offers a higher-quality

denim for $1.80 per unit.
A comparison of final cost per unit

shows that purchasing from United Fabrics would result in a lower cost of ownership.
16
Red Maple Fabrics United Fabrics
Purchase Price per Unit $1.50 $1.80
Inspection Cost 19 x $1.50 = $28.50 $0.00
Final Quantity 81 100
Final Cost per Unit $178.50/81 = $2.20 $1.80
So how can inspections help you? Well, they can allow you to make use of extra materials. Perhaps you
ordered cotton at a quality of 40 and you have several hundred left over. If a small order comes in with
a quick turnaround at quality 50, you may be able to produce it right away by inspecting the lower
quality material and finding enough quality 50 material to get the job done.
Quantity Flexibility and Supplier Capacity

Although price is an important consideration in vendor selection, ability to meet surges in demand is
also an
important
attribute.
Vendors with
low levels of
available
capacity may be
unable to meet
demand.
For example,
Alpine and
Tigerlily Textiles
are very similar
suppliers of
wool. Both have
the same price,
reliability, and
quality levels.
However, their
available capacity is not comparable.
17
Vendor selection must include more aspects than just quoted price. Quantity discounts, lead times, and
other factors can make a significant difference between vendors.
Creating a Vendor Scorecard

By now it is clear that there are several different dimensions you can use to evaluate the suppliers.
These include price, quality, and reliability. This data can be used to prepare a vendor scorecard. For
example, an evaluation of cotton suppliers can be prepared by gathering data from the Receiving
screen.
18
After gathering this data for all cotton suppliers, the following table can be assembled.
Supplier Price Quality Reliability
Owens Textiles $0.08 50 Low
Freeway Fabrics $0.08 25 Medium
Preston Premium $0.12 80 High
Reliable Clothing $0.10 35 High
Tigerlily Textiles $0.10 60 Medium
United Fabrics $0.12 70 High
The vendor scorecard can be prepared in many ways. One possibility is to rank the vendors in each
category, and to assign equal weighting to each category. The vendor with the lowest weighted rating is
most attractive.
Rank
Supplier Price Quality Reliability Score
Owens Textiles 1 4 3 2.67
Freeway Fabrics 1 6 2 3.00
Preston Premium 3 1 1 1.67 3+1+1

3 = 1.67
Reliable Clothing 2 5 1 2.67
Tigerlily Textiles 2 3 2 2.33
United Fabrics 3 2 1 2.00
In this example, Preston Premium would be considered the “best” vendor.
19
0.6
Use of different weights for the three categories can lead to a different result. Consider the results if
price is considered most important (assigned a weight of 0.6), while quality and reliability are assigned a
weight of 0.2.
Rank (1) + 0.2(4)

+ 0.2(3) = 2.00
Supplier Price Quality Reliability Score
Owens Textiles 1 4 3 2.00
Freeway Fabrics 1 6 2 2.20
Preston Premium 3 1 1 2.20
Reliable Clothing 2 5 1 2.40
Tigerlily Textiles 2 3 2 2.20
United Fabrics 3 2 1 2.40
Now Owens Textiles is the preferred vendor.

As with Module 1, it is important to follow the in-game tutorial for this module to be sure you are
introduced to all the key elements. A clear understanding of all the points from the two modules you’ve
played through will be needed when you start playing Module 3. If you are unsure of any part of the
module, replay it, and review this section of the manual. If you feel comfortable with the concepts
introduced in Module 2, make use of your Vendor Scorecard and try playing through it several times to
beat your own high score!
20
Module 3: Forecasting and Contracts

Making the right choices about which contracts to bid on can make a huge difference on your bottom
line. One way to do that is forecasting. By obtaining market research that predicts upcoming trends,
you will gain a better understanding of which products customers will likely be asking for. Another
important element in this module is evaluating contracts and making effective bids.
Research NOTE:
In longer games, purchase as much market
You can buy market research reports that forecast
research as you can right away. There is a
trends for up to a year in advance. minimal cost to buy it, and the knowledge
can really help you plan your strategy!
Make-to-Order vs. Make-to-Stock
Until now, you have been running a Lean / Just-in-Time operation and buying specific raw materials
when you needed them. However, once you have a sense of what products will be popular in the near
future, you can stockpile required materials in advance, and upgrade or add machines to your
production floor. Of course, there is a risk involved in purchasing materials without a specific contract in
place.
Bids
It’s tempting to bid on everything; however, if too many bids are accepted, you can easily be swamped
and unable to complete the work. Therefore,Module 3 limits you to 2 bids per turn. A higher concern is
bidding on contracts that you are unlikely to win.In this case, you can easily find yourself with too much
of your facility idle and losing money. Properly acknowledging these scenarios can help you build a
positive reputation!
21
Work Request Analysis

A good match between producer and customer is important. The bidding process offers a chance to
strategically analyze jobs to determine if the opportunity is a good fit. In Practice Operations, key
aspects are reputation, quality, materials, processes, capacity, and profitability. The bidding process can
be used to highlight each of these aspects.
At the beginning of
Module 3, there are
three materials already
in stock – Nylon, Silk,
and Cotton.
Notice that the factory
is already short of
cotton, so bidding on
jobs that use cotton
will require additional
purchases. However,
we have unallocated
supplies of both Nylon
and Silk, so jobs that
use those materials will
allow us to reduce our
overall inventory
holdings.
Looking at the production floor, we currently have four

processes available – cutting, sewing, press transfer, and
packaging. Jobs that require other processes will
necessitate a capital investment before we can begin
production.
22
There is only one production run currently in process, so there

is sufficient capacity for additional work requests.
Looking at the work requests available for bid, most are out of
our league (as far as reputation is concerned) or require
materials that are already in short supply, such as cotton.
However, the order for Boxer Shorts (Down Under) and one
order for sports pants (Burgundy Fashion) are possibilities. We
can see that both orders require only cutting, sewing, and
packaging, so no new equipment is needed. Although both require more material than we currently
have on hand, the lead time is sufficient to obtain more.
These appear to be good matches for

our system.. Notice that the quality
requirements for each are in line
with the quality level of our existing
materials. The final check is to ensure
profitability of the orders.
Boxer Shorts use one unit of silk for
each item. Silk of acceptable quality (50) can be purchased for $3.20 per unit from Owens Textiles.
Since we are already paying our
employees, their salaries are a sunk
cost, unless we intend to fire them.
However, in this module, employee
costs can be ignored (each employee’s
salary is $0.00 per week).
Shipping the products will cause some additional costs to be incurred, but the unit price of $15.25, with
a material cost of just $3.20, leaves plenty of room for profit.
23
To overcome the mismatch in reputation with Down Under, we reduce the unit price to $13.50.
Sports pants use 2 units of nylon for each item. Nylon of acceptable quality (50) can be purchased for
$1.76 per unit from Owens Textiles. Once again, the unit price of $14.75 leaves a large profit margin.
To overcome the mismatch in reputation with Burgundy Fashions, we reduce the unit price to $13.00.
Although both bids are
rejected, additional
opportunities to reduce raw
material inventories will
arise. In turn 3, a work
request from Stallion Apparel
becomes available for
bidding. This request
matches our reputation
better, and still utilizes the
existing stock of nylon.
However, it requires heat
transfer equipment which is
not currently in the factory.
This equipment must be
purchased at a cost of $1,800.
In this case, the profitability of the order ($5,850 less $1,056 in materials) can justify the purchase of the
new equipment. If the bid is accepted, the new equipment can be purchased in the next turn.
Batch Manufacturing
In Practice Operations, products are produced in batches. Each batch moves through the factory
together, from machine to machine, until all necessary processes have been completed. The
shortcomings of batch manufacturing can be highlighted in Practice Operations.
For example, a work order for
200 coaches’ jackets will first be
processed at the cutting station,
then proceed to sewing, heat
transfer, and packaging.
Notice that each step doesn’t
begin until the preceding step is
completed, which results in a
long lead time for the products,
with much of the time spent idle.
In this example, each finished
goods item spends 550 seconds
being processed (96 seconds in cutting, 166 seconds in sewing, 144 seconds in heat transfer, and 144
seconds in packaging.) However, total production time for the batch of 200 units is 1,873 minutes.
Therefore, each item spends less than 0.5% of its time in the factory actually being processed and over
99.5% of the time waiting! Batch processes can also lead to low levels of equipment usage.
24
Forecasting and Specialization

Rather than attempting to be all
things to all customers, an effective
strategy is to specialize. Focusing on a
few, similar products can simplify
processes and minimize investment in
equipment. Selecting an area of
specialization can begin with
forecasting.
In the Research screen, the Top
Product and Hot Products are
identified. Examining the reports
(here only the winter and spring
reports since the Module 3 simulation
lasts for 20 turns), it is clear that only a small number of materials are used to produce the majority of
the Top/Hot products.
Clearly silk and nylon offer more flexibility.

MATERIAL This allows
“HOT” speculative purchases of these raw materials to ensure
PRODUCTS
stock is available on short notice.
Silk Boxer Shorts, Ties
Nylon Sports pants, Coaches Jackets NOTE:

and Windbreakers Raw material availability
may allow bidding on
Denim Denim Jackets lucrative short lead-time
contracts.
Wool Hunting Pants
Khaki
In Bermuda Shorts
addition to raw material considerations, process commonality is another key factor. Existing
processes (cutting, sewing, press transfer, and packaging) can support sports pants, ties, and boxer
shorts. Addition of heat transfer equipment will allow production of coaches’ jackets and windbreakers.
A specialized production system with cutting, sewing, press transfer, heat transfer, and packaging, using
nylon and silk raw materials, would support at least two of the top/hot products for both the winter and
spring seasons.

As with previous modules, it is important to follow the in-game tutorial for this module to be sure you
are introduced to all the key elements. Players will need a clear understanding of of the previous
modules before starting Module 4. If you are unsure of any part of the module, replay it, and review
this section of the manual. If you feel comfortable with the concepts introduced in Module 3, try
different bidding and purchasing strategies to see how it affects your profits.
Module 4: Human Resources and Capacity Planning

25
So far, you’ve been managing production, ordering, shipping, receiving, sales and predicting the market.
It’s time to add human resources to the mix. This module will help you identify when and how to
expand your workforce to handle a growing customer base seeking more and larger orders. You will
also see when it is cost effective to purchase upgraded equipment and to train existing staff to increase
production capacity.
Human Resources
When more work is required in a specific area, you can either train an existing employee or hire
somebody new. This area is also where you manage the organization of each department.
26
Training
When you get really busy, you will
quickly reach a point where more
help is needed. You can train an
existing employee or hire someone
new. If you have an area that won’t
be busy for several weeks, it can
make sense to train an employee
who is currently working in a
relatively quiet department and
reassign that person to the busy
area. Staff trained in multiple areas
can be very useful at preventing
holdups in production.
Hiring
Training is a good idea overall, but you will also need to
hire new people when the volume of work demands it.
Your pool of potential hires will have a variety of skills and
demand different amounts for a salary. For example, Tom
O’Leary is hired into the receiving department in order to
help sort more incoming materials. As was illustrated
earlier in the manual, the inability to sort fast enough can
delay production. However, that skill will also serve you if
you need to shift Tom to the shipping department after
materials have been sorted and you need more staff
helping to get product out the door.
NOTE:
Be sure to compare all potential hires
before making a decision. An employee
Try not to wait too long to hire or train new staff.
may require a higher salary but have skill
Anticipating your needs will prevent delays that in multiple areas, saving you the cost of
may occur while waiting for a person to accept training later. Conversely, hiring someone
your offer or complete training. with higher skills in a single area for less
salary can make sense if that area is
always busy.
(More on this is in the Tips in Module 5)
27
Severance
Employee salaries are paid whether or not

the worker is busy. While it may be
tempting to fire an idle worker, Practice
Operations does impose a severance
charge of two weeks’ salary for any
employee who is fired. Careful planning of
staffing levels, along with retraining and
reassignment of current workers can help
players avoid these charges.
Managing the Organization Chart

Clicking on the HR manager’s desk brings up the organization chart. Here you can review payroll, both
overall and for specific departments. You can see how many staff you have in each department and
how good they are at their assigned job. Their skill level raises the amount of work they can do, so a
person with 4 stars in Production will create more product than someone with only 2 stars.
28
Capacity Planning
The most straightforward approach to capacity planning takes place in the receiving area. Each shipment
must be sorted before it is available for use. Since incoming shipments are fairly predictable,
determining the necessary
capacity is easier here than
elsewhere. Each week’s
expected deliveries can be
observed in the Receiving
screen by clicking on the
Delivery Schedule.
For example, early in
Module 4, the delivery
schedule shows 825 units
per week are scheduled to
arrive.
However, there is already a backlog of unsorted stock

(accessed by clicking on the unsorted stock in the Receiving
area) and sorting capacity is currently insufficient to keep
up with incoming materials (in this example, sorting
capacity is 525 units per week as shown in the Unsorted
Stock window). With over 1,400 units unsorted, plus 825
units per week arriving, sorting capacity must be increased
to about 1,525 units per week to clear the backlog in two
weeks. This will require hiring two or three new employees
to work in the receiving area.
NOTE:
Longer term, you should
observe your usage of raw
materials and plan your
receiving staff accordingly.
29
Scheduling a Job Shop with a Spreadsheet

With multiple work requests in process, prioritization can become an issue. With three or more
workcenters, even a small number of work requests can be daunting to prioritize. A spreadsheet
program (for example, Microsoft Excel) can be a useful tool when evaluating potential schedules.
At the beginning of Module 4,

there are five work requests
waiting to be scheduled in the
Production area.
These five products have different routings, which causes different processing durations as they pass
through production. Here it will be helpful for you to build an interactive spreadsheet to evaluate the
impact of different prioritization schemes.
Gather Basic Information

First, some basic information must be gathered and a few calculations are needed. The quantity for each
order is entered in column C and the due date is entered in column J. Multiplying the processing time for
each station (Cutting, Sewing, etc.) by the quantity ordered allows the student to calculate the time
required (shown in weeks here) for each process/job combination.
30
Prepare a Schedule
With this information, it is possible to prepare a schedule for each work center. The Cutting process for
the first job (Plain T-Shirts) starts at time 0 and lasts 0.9 weeks. Once this order is complete, the next job
at the Cutting center (Sports Shorts) can begin and the Plain T-Shirts order can begin at the Sewing
center (the next process required for this product).
Note that an order cannot begin processing until it has finished at the preceding workstation. For
example, Sports Shorts cannot begin processing at the Dyeing station when Plain T-Shirts are finished (at
time 6.0) because the Sports Shorts are not finished at the Press Transfer station until time 8.2. Sports
Shorts are similarly delayed at the Packaging station.
31
Compare Schedules using Different Priorities

For example, compared to the earliest due date schedule shown earlier, scheduling jobs to prioritize
those with the shortest overall duration reduces the number of late jobs (from two to one), but
increases the total lateness (from 2.4 weeks to 4.2 weeks).
Matching Capacity to Demand

On the Production Floor, capacity is determined in two ways. First, the number of jobs that can be in the
system at any given time is limited by the number of production employees (one employee is required
for each job after the first). Second, the processing rate of each machine can limit the number of items
that can be produced each week.
To determine the number of employees to staff the production floor, it is necessary to balance the
capacity across all aspects of the business. If too many jobs are active in production, there may be
insufficient capacity in Receiving and/or Shipping. In addition, to keep production employees busy, it
may be necessary to hire additional
customer service agents.
For example, at the beginning of
Module 4 there are 5 work requests
waiting to be produced.
32
Maximizing Throughput
In order to maximize throughput, these jobs should be processed as quickly as possible. Assuming there
are no equipment upgrades, the production floor should be staffed to maximize utilization of the
equipment. Although this staffing level does depend somewhat on the order in which jobs are
processed, we will assume jobs are processed in order of their due dates. Therefore, the approximate
production schedule for these jobs will be as follows (if no equipment upgrades are purchased).
From this production schedule, it is clear that as many as 4 jobs can be active at any time. In fact, if we
consider that additional work requests may be added to the schedule as earlier jobs are completed, it
seems that 3 or 4 active jobs will be the norm. Therefore, staffing the production floor with 3 employees
is a good starting point.
With this production schedule, it will be necessary to have all raw materials in stock and available within
3 weeks. This means that receiving capacity may need to be as high as 3,000 units per week. This is, in
fact, not feasible in this module. A more reasonable plan might be to increase receiving capacity to
1,500 units per week (by hiring 3 new employees for the receiving area). This causes the production
schedule to be modified, but production staffing of 3 employees is still reasonable.
In the Shipping area, base capacity is quite low. One order with a size limit of 75 pounds is insufficient.
Therefore, additional staffing is required. Hiring two workers increases capacity to three orders per
week with a total weight of about 2,500 pounds. This may be more weight than is needed, but our long
term goal of having about 3 orders per week in process will require this level of capacity.
Finally, the Bidding and Contracts area also needs to be in balance with the rest of the facility. With two
to three jobs being completed each week, the ability to bid on two or three orders (assuming some bids
will not be won) is needed. Staffing the Bidding and Contracts area with two employees gives us the
ability to bid on three contracts each week.
At this point, the production system is well-balanced, with each department capable of supporting the
goal of three active jobs at any given time.
33
Constraints and Bottlenecks

Because the Practice Operations factory is set up as a job shop with batch scheduling, attention to
constraints and bottlenecks is particularly important. Identifying the bottlenecks in the process is
straightforward, beginning with determining cycle time for each work station.
To prepare for this demonstration, employees must be hired in Receiving (hire 2 employees) and
Production (hire 2 employees). Start production orders for Plain T-Shirts, Sports Shorts, White Socks,
and Low-Rise Jeans as soon as all workers are available.
Routing Pathways
At the start of Module 4 there are five work requests in the factory, with three separate routings.
Routing 1 Plain T-shirts Cutting, Sewing, Press Transfer, Packaging
Routing 2 Sports Shorts and White Socks Cutting, Sewing, Packaging
Routing 3 Low Rise Jeans and Bermuda Shorts Cutting, Sewing, Dyeing, Packaging
Finding Bottlenecks
To identify the bottleneck, cycle through the stations and record the cycle time (notice that the cutting
station has already been upgraded in the first turn).
Process Time (seconds per unit)
Routing Cutting Sewing Press Transfer Dyeing Packaging Bottleneck
1 72 166 244 N/A 144 Press Transfer
3 72 166 N/A 144 144 Sewing
For routings 1 and 2, the bottleneck operation is Press Transfer. For routing 3, the bottleneck operation
is Sewing. Upgrading both of these work stations is recommended (with the following results).
Process Time (seconds per unit)
Routing Cutting Sewing Press Transfer Dyeing Packaging Bottleneck

34
3 72 136 N/A 144 144 Dyeing/Packaging

After the upgrades, the Press Transfer station remains the bottleneck for routings 1 and 2, but Dyeing
and Packaging are now bottlenecks for routing 3.
the presence of several different routings complicates the bottleneck analysis. An alternative means of
identifying bottlenecks is to examine the utilization of equipment. Machines with particularly high
utilizations are potential bottlenecks.
With four work requests active in the factory, the production plan initially shows that Sewing is the most
highly-utilized work station (after upgrades as described earlier).
This is not surprising because Sewing (and Packaging) are two of the three operations that all work
requests pass through (the third is Cutting, but capacity there is highest of all workstations). Packaging
has not been highly utilized at this point because no jobs have reached that stage.
For the next week, the production plan shows that Sewing and Press Transfer are the most utilized
operations.
35
For February, Week 2, utilization changes as the product mix begins to shift.
36
As products move closer to completion, the Packaging station becomes highly utilized.
37
And remains so for several weeks.
Note that in this example no new jobs were started into the system. However, it is clear from actual
utilizations that the bottleneck resources are still Sewing and Packaging. Upgrading each of these
stations is recommended.
Students can continue this analysis as the module progresses to better tune their system.
End of the Tutorial

There is a brief Tutorial at the start of Module 4 to introduce Human Resources and describe how to hire
and train people. From then on, you are on your own! Make use of this manual as a reference
supplement. As you can see from the material above in Module 4, there are a lot of useful tips for
improving your results when playing Practice Operations. More of these plans are contained in the next
section for the full length game in Module 5.
38
Module 5: The New Branch

Module 5 gives you the opportunity to be in total control of Kibby & Strand. Your goal is simple – build
your net worth to $50,000 as quickly as possible. You can choose any strategy you like, but be sure you
are as efficient as possible to keep those orders (and profits) rolling in!
You’ve already learned a lot in the other modules, but module 5 offers a chance to polish your human
resources skills. One way to keep your operation efficient is to employ highly-skilled workers. In Practice
Operations, there are two ways to accomplish this task. You can hire outside talent or you can develop
your own workers through training.
Hiring vs. Training

A common human resources dilemma is whether to hire talent from outside the organization or to
develop talent within the firm. This issue can be explored in Practice Operations, Module 5.
One way to explore the

talent development issue
is to look at the total cost
of employment. At the
beginning of Module 5, a
number of applicants are
waiting to be hired. Two
of these are Aiko Chan
and Sandeep Patel.
If we are hiring for the Production area, Aiko Chan has a higher
skill level (his Machine Operations skill level is 3) than Sandeep
Patel. However, the higher skill level comes with a higher salary
cost. To equalize the skill level, we will need to provide Sandeep
Patel with training at a cost of $800 per week (for two weeks). In
addition, Sandeep will not be available to work during the two
weeks of training, making the total cost of training $1,240.
However, after training, Sandeep Patel will have equivalent skills to Aiko Chan at a lower salary. The
train-versus-hire decision can be evaluated using a “make versus buy” analysis.
39
Employee Training Cost Weekly Salary
Aiko Chan $0 $250
Sandeep Patel $1,240 $220
The total cost of

hiring Sandeep Patel
becomes less
expensive after 42
weeks of employment
(41.33 weeks, in fact)
and benefits of in-
house training
continue to accrue
after that. If you
expect to reach your
goal sooner than 42
weeks, you may be
better off hiring Aiko
Chan.
Analyzing Employee Expenses

The hiring process involves a number of factors. One is the current needs of the organization while a
second is the availability of candidates. In Module 5, students can learn that one key element of hiring
success is alignment between different functional units and human resources. For example, if the firm
has a hiring goal of three production employees, it is helpful for human resources to have this
information early to allow for strategic hiring.
At the beginning of Module 5, there are three candidates in the hiring pool.
40
Since we are hiring for the Production area, the candidates’ Machine Operations skills are of highest
interest to us. Clearly, Ali Ismail is significantly more expensive to hire than either Danny Kaiser or
Joseph Escobar. It seems prudent at this point to hire only two candidates and to wait to see if a better
candidate arises in the near future. Note that this ability to wait is only available if the firm has planned
ahead and begins the hiring process before actual needs occur. In this case, an economic analysis of
total hiring costs can be used to examine the total cost of employment.
Assuming employees will be actively working in Production for 10 weeks (starting in week 4), total cost
for these three candidates is:
Candidate Week 2 Week 3 Weeks 4 – 13 Total Cost
Ali Ismail $400 $400 $4,000 $4,800
Danny Kaiser $220 $220 $2,200 $2,640
Joseph Escobar $150 $150 $1,500 $1,800
To complete week 1, hire Danny Kaiser and Joseph Escobar, with

both assigned to the Production area.
At the beginning of week 2,
only one candidate is available in
human resources.
With a weekly salary of $200, Johnathan Martin has a favorable
total cost of employment (compared to both Ali Ismail and Danny
Kaiser).
Ali Ismail $400 $400 $4,000 $4,800
Danny Kaiser $220 $220 $2,200 $2,640
Joseph Escobar $150 $150 $1,500 $1,800
Johnathan Martin $0 $200 $2,000 $2,200
Although it may be prudent to hire Johnathan Martin, we may decide to see if a better option will arise
in week 3.
41
In week 3, there are three candidates available.
Total cost analysis for the candidates shows the possible outcomes.
Ali Ismail $400 $400 $4,000 $4,800
Danny Kaiser $220 $220 $2,200 $2,640
Joseph Escobar $150 $150 $1,500 $1,800
Johnathan Martin $0 $200 $2,000 $2,200
Aleksander Batalev $0 $0 $1,700 $1,700
Ming Zhou $0 $0 $2,200 $2,200
Dolph Bankins $0 $0 $2,000 $2,000
If we choose to hire Aleksander Batalev, total costs for the decisions made are $6,140.
Danny Kaiser $220 $220 $2,200 $2,640
Joseph Escobar $150 $150 $1,500 $1,800
Total $6,140
42
If we had known the available pool of candidates ahead of time, we could have made the best possible
hiring decisions, with a resulting total cost of just $5,500.
Joseph Escobar $150 $150 $1,500 $1,800
Dolph Bankins $0 $0 $2,000 $2,000
Total $5,500
On the other hand, hiring the first three available candidates would result in a total cost of $9,240.
Ali Ismail $400 $400 $4,0000 $4,800
Danny Kaiser $220 $220 $2,200 $2,640
Joseph Escobar $150 $150 $1,500 $1,800
Total $9,240
Remember, if you find you don’t need an employee’s services you can fire him/her. However, this is not
a decision to be taken lightly. You will be charge the equivalent of two week’s salary in severance
charges.
43
Reputation
In Practice Operations, customers rate performance on three dimensions. Quality is determined by the
quality of raw materials used, timeliness is measured by how well the requested delivery date was met,
and customer service is driven by the number and skill of Bidding and Contracts staff.
As in the real world, improving your reputation increases your potential customer base and can improve
margins by allowing the firm to charge a higher price for goods. Students can directly observe the impact
of quality, timeliness, and customer service on an order-by-order basis.
In this case,
timeliness was
good, quality was
fair, and customer
service was poor,
leading to a
moderately
satisfied
customer.
In this order,
timeliness was
poor, quality was
bad, and customer
service was good,
leading to a
moderately
dissatisfied
customer.
44
Finally, by
exceeding
customer
expectations in
quality and
delivery, strong
improvements in
customer
satisfaction can be
realized.
Although the treatment of customer satisfaction in Practice Operations is necessarily simplified, the
impact of meeting (or exceeding) customer expectations is clearly visible.
Module 6: Maximizing Profits

This is it! A chance to see if all your training in the previous 4 modules will pay off. You are now the
boss of a brand new branch! All the decisions are yours to make! Can you run an efficient operation
and make so much money that all your fellow classmates can do is shower you with admiration and ask
your advice? Or will your workcenter be the one labeled as what –NOT– to do? This section of the
manual will offer you a number of tips to help you be in the former category. GOOD LUCK!
Long-Term Perspective
In this module, you are committed to run your business for 50 turns, so be sure to consider the long-
term effects of you decisions. The two main expenses you are likely to encounter are employee wages
and inventory costs. Wages were covered in the Module 4 and 5 guides. In module 6, you should also
pay close attention to your inventory expenses.
45
Total Cost of Ownership

Naturally, the purchase price for raw materials is a key element of inventory cost. However, other
factors also contribute to the total cost of ownership. One of the less-visible issues associated with
inventory is holding costs. Holding costs have many potential causes:
 Opportunity costs – the inability to use capital that is tied up in inventory for other purposes
 Storage costs – the need to rent or buy space to hold inventory
 Loss/damage/theft – inventory in storage is susceptible to many hazards
 Taxes – some government entities assess annual inventory taxes on the value of stock being
held
These costs can really add up! In Practice Operations, the cost of holding raw materials is about 10% of
the inventory value each turn. Finished products are less expensive, but still cost you 5% of value each
turn. Managing inventory carefully can really contribute to your net worth.
One way to carefully manage your inventory is to delay raw material purchases as long as possible. This
expands upon the vendor selection discussion that was started in module 2. The Total Cost of Ownership
analysis allows us to develop a more complete view of what each vendor really offers.
Let’s examine the Total Cost of Ownership for silk material by evaluating two potential vendors. First, we
need to gather the necessary data.
We will compare two potential vendors – Owens Textiles and Tigerlily Textiles. For silk, the holding cost
is $0.41 per unit each turn (this is based upon the average cost of all vendors). To continue our analysis,
we will also need the specific quantities and price discounts offered by each vendor.
46
For now, we will ignore the difference in quality between the two vendors. Both vendors offer a
quantity discount, although Tigerlily is more generous with this discount if the quantities are high
enough. On the other hand, Owens offers a larger discount if we can provide them with sufficient lead
time. To keep our analysis from getting too complicated, we will assume that we can order with at least
three weeks’ lead time and that we will order at least 175 units at any given time. This evens the special
discounts to 25% for each vendor.
The biggest difference between the two vendors is their maximum order quantity. Owens can provide
up to 250 units per week while Tigerlily can meet larger weekly orders --up to 1,200 units per week. If
we need to accumulate larger quantities, this could be very beneficial. Of course, Tigerlily’s higher initial
price may still tilt the scales in favor of Owens.
To complete our analysis, we will evaluate the two vendors over a range of purchase quantities to
determine the total cost of ownership.
For any given desired quantity, we will need to determine how long it will take to accumulate the
materials from the vendor. This will allow us to calculate the average inventory and holding costs
associated with waiting for the materials to all become available.
For example, if we want to have 1,000 units of silk available at some time in the future (say 5 weeks
from now), we can place an order with Tigerlily to have all 1,000 units delivered 5 weeks from now.
However, the quantity constraints imposed by Owens will require us to have the deliveries spread over
time. It will take us 4 weeks to accumulate 1,000 units from Owens, so we will hold inventory according
to this schedule.
Period Week 1 Week 2 Week 3 Week 4 Week 5
Inventory 0 250 500 750 1000
Holding Cost $0.00 $102.50 $205.00 $307.50 $0.00

0+250+500+750
For weeks 1 through 4, our average inventory is 375 units ( = 375). At a holding cost of
4
$0.41 per unit each week, this is a total added cost of $615. If we choose to work with Tigerlily, we have
no holding costs in weeks 1 – 4 because our entire inventory arrives in
week 5.
The other major difference between the two vendors is quality. Owens
delivers a lower quality product, so we may have to perform an
inspection to achieve the higher level of quality offered by Tigerlily.
Inspecting 250 units of silk from Owens appears to result in about 11%
of the units being rejected. This raises our cost per unit if we purchase
47
from Owens.
48
Continuing this analysis for a range of quantities, we can determine the total cost of ownership
associated with the two vendors.
Total Cost of Ownership – Owens Textiles
Quantity Unit Time to Average Total Purchase Quality Total Cost
Price accumulate Inventory Holding Cost Cost
(weeks) Cost
250 $2.40 1 0 $0.00 $ 600.00 $ 64.80 $664.80
500 $2.40 2 125 $102.50 $1,200.00 $129.60 $1,432.10
750 $2.40 3 250 $307.50 $1,800.00 $194.40 $2,301.90
1000 $2.40 4 375 $615.00 $2,400.00 $259.20 $3,274.20
1250 $2.40 5 500 $1,025.00 $3,000.00 $324.00 $4,349.00
1500 $2.40 6 625 $1,537.50 $3,600.00 $388.80 $5,526.30
1750 $2.40 7 750 $2,152.50 $4,200.00 $453.60 $6,806.10
2000 $2.40 8 875 $2,870.00 $4,800.00 $518.40 $8,188.40
2250 $2.40 9 1,000 $3,690.00 $5,400.00 $583.20 $9,673.20
2500 $2.40 10 1,125 $4,612.50 $6,000.00 $648.00 $11,260.50
2750 $2.40 11 1,250 $5,637.50 $6,600.00 $712.80 $12,950.30
3000 $2.40 12 1,375 $6,765.00 $7,200.00 $777.60 $14,742.60
Total Cost of Ownership – Tigerlily Textiles
Quantity Unit Time to Average Total Purchase Quality Total Cost
Price accumulate Inventory Holding Cost Cost
(weeks) Cost
250 $ 3.00 1 0 $0.00 $ 750.00 $0.00 $750.00
500 $ 3.00 1 0 $0.00 $1,500.00 $0.00 $1,500.00
750 $ 3.00 1 0 $0.00 $2,250.00 $0.00 $2,250.00
1000 $ 3.00 1 0 $0.00 $3,000.00 $0.00 $3,000.00
1250 $ 3.00 2 1200 $492.00 $3,750.00 $0.00 $4,242.00
1500 $ 3.00 2 1200 $492.00 $4,500.00 $0.00 $4,992.00
1750 $ 3.00 2 1200 $492.00 $5,250.00 $0.00 $5,742.00
2000 $ 3.00 2 1200 $492.00 $6,000.00 $0.00 $6,492.00
2250 $ 3.00 2 1200 $492.00 $6,750.00 $0.00 $7,242.00
2500 $ 3.00 3 1800 $738.00 $7,500.00 $0.00 $8,238.00
2750 $ 3.00 3 1800 $738.00 $8,250.00 $0.00 $8,988.00
3000 $ 3.00 3 1800 $738.00 $9,000.00 $0.00 $9,738.00
The results of this comparison show that for small quantities (500 or fewer units), Owens Textiles
provides a lower total cost of ownership. However, once the required quantity rises to 750 or more
units, choosing Tigerlily Textiles can lead to significant savings.
49
In addition, Tigerlily’s ability to provide larger weekly quantities means your firm can respond much
more quickly to large customer orders. By the time the required quantity reaches 2,000 or more
units, the total savings can add up to thousands of dollars. Of course, be careful not to order too
much material. If you have to sell it back later you will lose all of these savings and more!
Careful analysis of purchasing options allows you to consider all of the costs of buying (and holding)
materials. The cost savings you identify can quickly add up, enabling your firm to achieve a truly
impressive net worth. j
50

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Student Manual

Updated April 2023

Registering and Logging In...................................................................................................................................................6

Module 1: The Production Process....................................................................................................................................8

Module 2: Managing Suppliers.........................................................................................................................................13

Module 3: Forecasting and Contracts.............................................................................................................................21

Module 4: Human Resources and Capacity Planning...............................................................................................26

Module 5: The New Branch................................................................................................................................................38

Module 6: Maximizing Profits...........................................................................................................................................44

Module 2: Managing Suppliers

Module 3: Forecasting and Contracts

Module 4: Human Resources and Capacity Planning

Module 5: The New Branch

Module 6: Maximize Net Worth

Registering and Logging In

Practice Operations assignments will be designated by the Application-Based Activity icon ( ).

Module 1: The Production Process

Once your production is underway, you can

Operations Management: Priority and Utilization

© McGraw Hill LLC. All rights reserved. No reproduction10

Can you get your average utilization to 100 percent?

𝐶𝑎𝑝𝑎𝑐𝑖𝑡𝑦 𝑢𝑠𝑒𝑑 1280

This priority order has increased the utilization average by 10%!

Follow the Tutorial for Module 1

Module 2: Managing Suppliers

The “Lean” or “Just-In-Time” Strategy

Thanks to our reliable suppliers, the requested

However, we have encountered a

Students are asked to confirm the inspection…

…and are shown the results of the inspection. Here, 19 “defective”

However, inspection is rarely an

United Fabrics offers a higher-quality

A comparison of final cost per unit

Red Maple Fabrics United Fabrics

Purchase Price per Unit $1.50 $1.80

Inspection Cost 19 x $1.50 = $28.50 $0.00

Final Quantity 81 100

Final Cost per Unit $178.50/81 = $2.20 $1.80

Quantity Flexibility and Supplier Capacity

Creating a Vendor Scorecard

Supplier Price Quality Reliability

Owens Textiles $0.08 50 Low

Freeway Fabrics $0.08 25 Medium

Preston Premium $0.12 80 High

Reliable Clothing $0.10 35 High

Tigerlily Textiles $0.10 60 Medium

United Fabrics $0.12 70 High

Supplier Price Quality Reliability Score

Owens Textiles 1 4 3 2.67

Freeway Fabrics 1 6 2 3.00

Preston Premium 3 1 1 1.67 3+1+1

Tigerlily Textiles 2 3 2 2.33

United Fabrics 3 2 1 2.00

In this example, Preston Premium would be considered the “best” vendor.

McGraw-Hill Practice Operations

Rank (1) + 0.2(4)

Owens Textiles 1 4 3 2.00

Freeway Fabrics 1 6 2 2.20

Preston Premium 3 1 1 2.20

Reliable Clothing 2 5 1 2.40

Tigerlily Textiles 2 3 2 2.20

United Fabrics 3 2 1 2.40

Now Owens Textiles is the preferred vendor.