Indian School of

Business Operations
Strategy (OSTR)
TENTATIVE OUTLINE

Academic Year & Term: 2023-24 Term: 8

Instructor: Professor Vinod Singhal
Office
Affiliation: Scheller College of Business, Georgia TBA
Hours: By
Institute of Technology, USA
Appointment
Home School id: [Link]@[Link]
Instructor: Professor Glen Schmidt
Affiliation: David Eccles School of Office
Business, University of Utah, USA Hours: By TBA
Home School id: [Link]@[Link] Appointment

Course Overview and Description

This course provides a framework to describe and formulate an operations strategy

and understand and evaluate the key decisions in operations that have a substantial
impact on a firm's competitive position. The word strategy has two connotations:
formulating an operational strategy (long-term plan) and making strategic (important)
operational decisions. We will study articles, and cases in a variety of settings using a
variety of tools to achieve these two goals. The course will also examine today’s critical
strategic issues such as outsourcing and globalization.

Operations strategy consists of the strategic use of functions such as manufacturing,

supply chain, or service provision. Traditionally, these areas have been viewed as narrow,
functional areas, and management of them was based on some simple criterion such
as cost minimization. More recently, managers and business observers have
understood that manufacturing and operations must be managed in the broader context
of business strategy. In this sense, decisions on manufacturing and operations
capabilities must fit and be consistent with the business strategy and consider the
competitive environment. Furthermore, decisions about different areas of manufacturing
and operations must be consistent with each other. Choices about facilities, capacity,
sourcing, technology, control and information systems, quality management, human
resources, organization, and other areas are all strategic choices that significantly affect

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 what the business brings to the marketplace. The course will examine how decisions
in these areas can be made in a coherent manner.

Beyond integration of manufacturing decisions with business strategy, manufacturing

and operations strategy emphasize the concept of operations as a source of competitive
advantage. Using the broad notion of manufacturing, a company's strength in
manufacturing and operations can be the basis of competitive position. A competitive
advantage can accrue through better performance on cost, quality, responsiveness, and
flexibility etc.

Business Strategy suggests that a firm derives competitive advantage either by achieving
a cost advantage, or through product differentiation (Michael Porter, Competitive
Advantage, Free Press, NY, NY, 1985). That is, either the firm must be able to produce
its goods at a lower cost (through process innovation), or it must offer features that
customers desire and competitors lack (through product innovation). We explore
specific operational strategies that the firm might pursue to achieve this superior
process or product innovation. While the course is not strictly divided into topics of
process innovation versus product innovation (these two pursuits are not always as
separable as they might initially seem), the first half of the course focuses more on
strategies that yield a cost advantage (e.g., topics of competitive cost analysis,
investments in production technology and capacity, and risk management) while the
second half of the course focuses more on strategies that yield a product advantage (e.g.,
virtuous new product development cycles, encroachment strategies, mass customization,
and outsourcing of product design).

Learning Goals

Ability to Comprehend and Assess an Organization’s Operations Strategy

Each student shall be able to describe an organization’s Operations strategy understand its
components and intent and assess its strengths and weaknesses.

Effective Oral Communication

Each student shall be able to communicate verbally in an organized, clear, and persuasive
manner, and be a responsive listener.

Critical and Integrative Thinking

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 Each student shall be able to identify key issues in a business setting, develop a perspective
that is supported with relevant information and integrative thinking, to draw and assess
conclusions. Interpersonal

Awareness and Working in Teams

Each student shall demonstrate an ability to work effectively in a team, exhibiting behavior
that reflects an understanding of the importance of individual roles and tasks, and the ability to
manage conflict and compromise, so that team goals are achieved.

Awareness of Global Issues Affecting Business

Each student shall be able to identify key relevant global factors and be able to analyze the
impact of the global environment on business issues, as compared with domestic factors.

Required Textbook
None
Other Required Materials:

1. Course case pack

2. Course home page: This page will guide you to all the downloadable files related
to the course.
3. Additional handouts: To be distributed as needed.
Supplementary Textbooks (optional, for additional reading):

1. Operations Strategy, Competing in the 21stCentury, by Beckman and Rosenfield,

Irwin/McGraw Hill, 2007
2. Designing and Managing the Supply Chain, by Simchi-Levi, Kaminsky, & Simchi-Levi

Additional Optional Readings

Additional references that may be useful as background:

1. Pursuing the Competitive Edge, by Hayes, Pisano, Upton, and Wheelwright

2. Operations Strategy, by Slack and Lewis
3. Manufacturing Strategy, by Hill
4. Operations Strategy, Principles and Practice, by Van Mieghem
5. The Machine the Changed the World, by Womack, Jones, and Roos
6. Dynamic Manufacturing, by Hayes, Wheelwright, and Clark
7. Lean Thinking, by Womack and Jones
8. The Productive Edge, by Lester
9. The World is Flat, by Friedman (Globalization)
10. Collapse, by Diamond (Sustainability)

Grading

The grade you receive for the course is intended to certify your demonstrated proficiency
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 in the course material. You will be required to do four case write-ups, two individually and two
in groups. Overall proficiency will be estimated by measuring your performance in:

1. Class participation: 20% Coding Scheme 1N

2. Three group assignments: 50% (20% in class session 3, 15% in session 8, and 15% in
session 9). Coding Scheme 3N-a (discussion restricted to within the group).
3. Two individual assignments: 30% (15% in class session 4, 15% in session 7). Coding
Scheme 4N

Coding_Scheme_2023-24 ([Link])

Each group may have a maximum of five people, all from the same section. No cross
section groups allowed.

Individual Contribution
Your class participation contributions are expected to create and enhance a positive learning
environment for this course. This includes enhancing the atmosphere and quality of classroom
discussions, as well as interactions outside the classroom. To support this environment,
please leave laptops, cell phones and PDA’s turned OFF during class. Grading will be based
on the quality and impact of your contributions, not primarily on quantity (although a minimum
amount of the latter is necessary to deliver on the former).
Class Discussion
In a typical class session, one or more students will be asked to begin the discussion by addressing
specific questions. If you have thoroughly prepared the case or reading, you should have no
difficulty in handling such a leadoff request. After the leadoff initial analysis and
recommendations, the discussion will be opened to the rest of the class, sometimes with cold
calling mixed in. Some of the criteria for judging effective class participation include:

1. Relevance,
2. Insightfulness (in analysis, observation, or questions),
3. Constructiveness in the context of the class discussion flow,
4. Depth of analysis,
5. Clarity and brevity.

ISB Attendance Policy

Learning is an interactive process. ISB students are admitted partly based on the experiences they
bring to the learning community and what they can add to class discussions. Therefore, attendance is
an important aspect of studying here. Absence is only appropriate in cases of extreme personal illness
or injury leading to hospitalization, bereavement within the immediate family. Even in situations
such as hospitalization or bereavement within the family, the excuse provided, if any, will only be
limited to class attendance and not for any other components of the course.

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Please note, voluntary activities such as job interviews, business school competitions, travel plans,
joyous family occasions, etc., are not valid reasons for missing a class.
You are required to attend the entire 2-hour class as per the schedule. Late arrival and early departure
are disruptive to the learning environment; you should be present in class before the scheduled start
time and stay till the conclusion of class.
Requests for excuse of attendance, if any, should be forwarded to the Office of Academic and Student
Affairs (ASA) – ASA_AcademicAffairsHyd@[Link] (for Hyderabad) and
ASA_AcademicAffairsMoh@[Link] (for Mohali) for approval. ASA team will verify the same and
in turn keep the Faculty and Academic Associate/s informed of the same.
The ISB expects students to attend all class sessions in every course section. Attendance will be
marked and recorded on LMS. However, if due to completely unavoidable reasons a student is forced
to miss a session, the School policy is below:
• If a student misses 20% of sessions in a course; there will be no grade penalty.
• If a student misses 30% of sessions in a course, s/he will obtain a letter grade lower than that
awarded by the faculty for that course.
• If a student misses 40% of sessions in a course, the student will receive a letter grade that is two
levels lower.
• If a student misses more than 40% of sessions in a course, the student will receive an 'F' grade for
that course.
Assignments

Each student must write up five cases (two individually and three in groups).

• The first group assignment will be to write up the American Connector Case for
Class #3. Coding Scheme 3N-a (discussion restricted to within the group). This is
worth 20% of the grade.

• The first individual assignment will be to write up the Genentech – Capacity Planning
Case for Class #4. Coding Scheme 4N. This is worth 15% of the grade.

• The second individual assignment will be to write up the Auto Industry: Flexible
Networks for Class #6. Coding Scheme 4N. This is worth 15% of the grade.

• The second group assignment will be to write up the Intel case for session #8. This is
worth 15% of your grade. Coding Scheme 3N-a (discussion restricted to within the
group).

• The third group assignment will be to write up the Seagate case for session #9. This
is worth 15% of your grade. Coding Scheme 3N-a (discussion restricted to within
the group).

Format for Assignments

Assume you are writing to someone who knows the facts; keep it succinct. You do not need to

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restate facts except as to show how you derive your conclusions and recommendations.
Submissions should be guided by the assignment questions, any readings for the session, and any
ideas discussed previously in the course. Please see the guidelines for case write-ups later in this
syllabus.

• For the first group assignment (Class #3), the write-up is not to exceed three single-
spaced pages of typed text (not smaller than 12 pt. font, please), with as many
supporting exhibits as you wish.

• For the first individual assignment (class #4) you need to submit a spreadsheet that has
your computations. See the syllabus for detailed instructions.

• For the second individual assignment (Class #6), the write-up is not to exceed three single-
spaced pages of typed text (not smaller than 12 pt. font, please), with as many
supporting exhibits as you wish.

• For the second group assignment (Class #8), you are asked to write up the Intel case. The
report is to be structured as a PowerPoint presentation instead of being written in
paragraph form, with a maximum of 16 slides. However, the other principles described
above continue to apply; for example, you do not need to restate facts except as to show
how you derive your conclusions and recommendations. Your slides must be readable
when printed at 4 per page in landscape mode (what is not easily readable cannot be
graded). A couple of teams will be selected to present their slides in class.

• For the third group assignment (Class #9), you are asked to write up the Seagate case.
Again, the report is to be structured as a PowerPoint presentation instead of in paragraph
form, with a maximum of 16 slides. Your slides must be readable when printed at 4 per
page in landscape mode. A couple of teams will be selected to present their slides in class.

Structure of Assignment
A good assignment should clearly and succinctly state recommendations in the first paragraph (or
slide, following the title slide). The remaining paragraphs (or slides) should present the rationale
for the recommendations, including expected consequences (both desirable and undesirable). Each

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 case has a set of questions, which are a guide to help you with the analysis – however, you
should not limit your analysis to narrowly answering these questions. A good report is not a
chronology of analysis, but a clearly articulated statement of recommendation and support. If
there are options under consideration in the case that you reject, a clear rationale for your
decision should be provided. Facts stated in the case need not be restated unless used to make
a point.

Grading of Assignments
Write-ups will be graded with the following items considered:
1. Broad discussion of relevant strategic, operational, and environmental issues.
2. Analysis
a. Qualitative analysis of all factors relevant to the problem.
b. Quantitative analysis (if appropriate) and explanation of approach.
3. Explicit recommendations, reasoning, and implications of such, including discussion of
implementation and expected consequences of the recommendations.

Electronic versions of the write-ups are due by 8:00 am of the day of class. Please submit
your papers electronically (one per team for the team assignments) per instructions of the AA for
the course.

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Class #1: Lecture on developing a framework for designing and evaluating operations
strategy.

Read before class.

1. Austen. H., B. Tita. "Manufacturers Move Supply Chains Out of China; Tariff costs prompt
executives to shift production to other countries; 'Once you move, you don't go back”. The
Wall Street Journal Online, 14 July 2019.

2. Rana, P., H. Haddon. “The Race To Make Food Delivery Pay --- The pandemic sent
business soaring for companies like DoorDash and Uber Eats, but they're still trying to cook
up a recipe for profitability. The math of making 90 cents on a $36 order”. The Wall Street
Journal, 29 May 2021.

3. Mandavia, M. “Apple's Best Bet Against China Might Be India”. The Wall Street Journal,
28 December 2022.

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 Class #2: Competitive cost analyses and operations strategy.

Case: Tork Corporation: The Competitive Cost Analyses (Harvard Business Press
UV3549- PDF-ENG).

The Tork Corporation case provides an opportunity to utilize cost modeling tools to assess the
validity of a pricing strategy. Tork is faced with the opportunity to purchase low-end air
conditioners from an overseas competitor (Haier) to achieve some cost savings. Based on the
quoted price, Tork suspects that Haier might be guilty of dumping, an illegal and anti-competitive
practice.

To assess the validity of the price quote, the case explores competitive cost analysis by using
a process called product teardown, which analyzes the costs by each subcomponent of the
product and by each process associated with the production. Additionally, operational factors
such as facility scale and utilization are considered to enhance the analysis. All these factors
considered together enable the student to develop a competitive cost analysis between Tork and
Haier low-end air conditioners.

Questions

1. What are the primary cost drivers for room air conditioning? How do the drivers differ
between Haier and Tork? You can use the Tork analysis worksheet with acc [Link] to enter
your numbers.
2. Is Haier’s cost advantage in the small room air conditioning unit sustainable? What are
the key risks?

3. Does Haier’s advantage extend to the larger range of room air conditioning products?
Note: Use case data from the small units to extrapolate across the product line making
reasonable assumptions. Hard numbers expected, not solely opinions.
4. How should Tork respond to the Haier offer? Why?

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Lecture: Competitive cost analyses.

Background Reading.

A note on competitive cost analyses. Darden Business Publishing, University of Virginia,

(Harvard Business Press UV3557-PDF- ENG).

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Class #3: Competitive cost Analyses and operations Strategy.

Case: American Connector Company (Harvard Business School Case 693035-PDF-

ENG) (Group Write-up due).

American Connector Company and DJC Corp. are two companies in the electrical connector
market, which have chosen different competitive and operating strategies. Historically, the two
firms have not been head-t o -head rivals. In 1992, there were rumors that DJC was
planning to build a plant in the United States. The case focuses on American Connector’s
decision about if and how it should respond to the potential threat posed by DJC entry in
the U.S. market. The issue requires comparing the competitive and operating strategies of
both firms and identifying and evaluating the sources of cost differentials at their plants.

Questions and group assignment:

Each group must submit a write-up for this case. Consider both quantitative analysis and
qualitative factors in making your recommendations. Also, your write-up should at least address
the following issues:

1. How serious is the threat of DJC to American Connector Company? Would you be
worried about DJC? And why?
2. How big are the cost differences between DJC’s plant and American Connector’s
Sunnyvale Plant? Consider both DJC’s performance in Kawasaki and its potential in the
United States.
3. What accounts for these differences? How much of the differences are inherent in the way
each of the two firms compete? How much is due strictly to differences in the efficiency
of the operations? How much of the differences are due to the market conditions
(currently the demand is soft/sluggish/low in the USA)? Focus your analyses on material,
labor, and depreciation (capital) components of the total difference that you have identified
in the answer to #2. Some quantitative analyses must be provided to support your
answers.
4. What should American Connector’s Management at the Sunnyvale plant do?

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Lecture: Capacity Management.

Read before class.

1. Terlep, S. “Clorox's New CEO To Push Output Of Wipes”. The Wall Street Journal, 4
August 2020.

2. Levinson, M. “The Megaships That Broke Global Trade --- With a new generation of
giant container ships, firms and governments made a big bet on the future of globalization --
and lost”. 24 October 2020. The Wall Street Journal.

3. Chinese industry: Ambitions in excess

[Link]
5D059
2B/1?accountid=26511

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Class #4: Investment in capacity.
Case: Genentech – Capacity Planning: Individual write-up due. (Harvard Business
School Case 606052-PDF-ENG).
In November 2004, David Ebersman was preparing to meet with his team to discuss whether
they should recommend that Genentech begin construction of a $600M US cell culture
production plant (CCP3) to produce Avastin, a new cancer product and other related products.
The decision was complicated by long construction lead times and by the uncertainty about future
demand for Avastin and yields in the production process. A number of FDA trials involving
Avastin were underway and the outcomes of those trials would not be known for some time. In
addition, Genentech would have to estimate the size of the patient population that would choose
Avastin if the FDA approved its use for additional types of cancers. In addition, yields related to
existing production facilities made process calculations regarding available production capacity
uncertain as well. Finally, if Genentech decided to proceed with construction, it would have
to decide where to build the new plant - close to the company’s current operation in Northern
California, or elsewhere, possibly abroad.

Assignment - Each student must submit the filled out excel spread sheet ([Link]) as
described below. You only need to submit the filled out excel spreadsheet – no write-up is
required on your recommendations. Please be prepared to discuss your recommendations
in the class when we discuss the case.

The excel file ([Link]) that has templates for estimating the demand and capacity for
Genentech’s products. I would like you to use the data given in the text and particularly
exhibits 11 and 12 to fill out the spreadsheet. Note that some of the potential market size
information on pages 8 and 9 in the text are different from that in Exhibit 12. Please use the
numbers in exhibit 12.
In the spreadsheet some cells have been pre-defined in the sense that once you enter
numbers in some cells the values in other cells will be automatically computed. You might want
to save the original under another name before you start working just in case you want to start
fresh as you become familiar with the spreadsheet.
There are three sheets in the spreadsheet, and they are all linked in the sense that as you
add data in one sheet the other sheets will get updated. The three sheets are as follows:
• First Sheet: Weighted Avastin demand: I would begin working on this first and
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 create a demand forecast for Avastin – a blockbuster drug for Genentech. Use the data
in exhibit 11 and 12 and some information given in the case to estimate the expected
demand for Avastin. Make assumptions as you need. Note on page 8 of the case the
prescribed dosage is indicated as 0.375 KG. This is a typo - it should be 0.375 grams
and not 0.375 KG.
• Second sheet: Capacity and demand: the top half of the sheet lists the various locations
where Genentech has capacity including outsourced capacity – fill this part out. The
bottom half of the sheet attempts to estimate the total demand including Avastin
(which you have estimated in the first sheet). Also fill out the demand for Other Drug
Demand (row 29) and Omnitrag (row 30)
• Third sheet: Capacity and demand chart – this chart is automatically generated as you
fill data in the first and second sheets. You don’t have to change this – it will give
you an idea of how close demand and capacity are.

Please submit your assignment electronically and change the name of the excel spreadsheet to
Lastname_Firstname_Genentech.xls. I may show some of the numbers generated by the class
during the class.

Questions for class discussion:

1. What is your evaluation of Genentech’s production capacity requirements given expected
demand in 2010 and 2015 for Avastin and Genentech’s other products? Does your evaluation

change if Genentech wants to cover the 85th percentile level of demand?

2. Given your demand and capacity analyses in #1 above, what options besides CCP3 would
you consider bridging the gap, if any, between demand and capacity?
3. Assuming Genentech decides to proceed with CCP3, what size production lines (tank sizes)
and how many lines would you recommend and why? What criteria should Ebersman use in
selecting a location? Would you recommend moving away from California?
4. What should Genentech do?

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 Lecture: Justifying investments in new technology.

Read before class.

1. Mims, C. 3-D Printing and The Future of Global Manufacturing --- The technology is now
useful for making more than plastic prototypes, with major implications. 14 January 2023,
The Wall Street Journal, 6 June 2013, The Wall Street Journal.
2. Loten, A. Banking & Finance: Manufacturers Turn to 'Machine Health' Tech. 8 September
2022, The Wall Street Journal.
3. Weiss, R. Adidas automates to make shoes faster. Bloomberg Businessweek, October 9,
2017.
4. Kaplan, R. S. “Must CIM be justified by faith alone”, Harvard Business Review, March-
April 1986, 87-95. (Harvard Business Review 86204- PDF-ENG

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Class #5: Investment in new technology.

Case: Microlite S. A.: The Pan-Orient Decision (Harvard Business School Case
694055-HCB- ENG) (Group Write-up due).

In 1992 Brazilian companies such as Microlite were beginning to prepare for a future in
which tariffs on imported manufactured goods would be reduced from an average of 80% to
20% by 1995. To become more internationally competitive, Microlite, the largest producer of
Batteries in South America, had dramatically reduced its overhead costs. Management was
now in the process of reducing manufacturing costs through moving production of zinc-
carbon batteries from a plant near Sao Paulo to Recife, a region with lower labor costs and
tax advantages. The decision facing managers of Microlite was whether to simply move
several existing final assembly machines from Sao Paulo to add the required capacity or to
invest in a faster fully automated assembly line.
Group write-up questions.

• The case is about replacing the lost capacity of AA batteries. Microlite has already made
the decision to shut the plant in Guarulhos and has lost one-eight of its production
capacity of AA batteries. This decision cannot be reversed. Microlite is looking at how
to replace this lost capacity in the Jaboatao plant.
• Microlite has several options to replace the lost capacity. One option is the transfer
option, which is a labor-intensive option. The other option is to replace capacity by
investing in automated technology (the Pan Orient line). As you look at both these
options, it is possible that the effective capacity may be more than the combined capacity
in the Guarulhos and Jaboatao plants. In your analyses assume that Microlite cannot sell
more than the combined capacity it had in the Guarulhos and Jaboatao plants. Thus, if
the capacity from the transfer option or the Pan-Orient line is higher than the combined
capacity of Guarulhos and Jaboatao plants, this extra capacity may not be useful as
Micolite cannot sell more than the combined capacity of Guarulhos and Jaboatao plants.
In other words, assume that the number of batteries Microlite can sell is the same in both
the labor-intensive technology and the Pan Orient line, which is the same as the
combined capacity of Guarulhos and Jaboatao plants. So, the justification is basically on
cost savings.
• Your group write-up should focus on four things.

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 1. Prepare a financial analysis of the Pan Orient Line. In doing this assume that the transfer
option is the base case. You can assume the following:
▪ The case talks about hyperinflation – do not worry about this. All number are in
US dollars and one can assume that they have adjusted for inflation. So ignore
hyperinflation in your financial analysis.
▪ In doing the financial analyses you could use criteria like Net Present value,
Internal rate of return, payback period, or return on investment to judge the
financial viability of the Pan Orient. The choice is yours. If you want to do Net
Present value or Internal rate of return calculations assume that the cost of capital
is 15%. Also assume that the Pan Orient line will last for 10 years.
2. Suppose that top management of Microlite does not like the transfer option and the Pan
Orient line. Please identify three other options that Microlite can use to increase the
capacity in the Jaboatao plant. You do not have to do a financial analysis of these
options. Just describe these options.
3. Discuss the various factors that Microlite should consider in making the decision to
expand capacity at the Jaboatao plant.
4. Based on the above recommend what Microlite should do and why.

In the Microlite case the Pan Orient Line replaces 6 operations: These operations are:
Install Paper Cup
Add Paste to Cup
Install Paper Top
Insert Carbon Rod
Place Cap
Place into Cardboard Shell, Jacket, and Seal unit
It may be possible that the case version that you have Place Cap is not listed as one of
the operations replaced by the Pan-Orient line. This is an omission in the case. Please consider
that the Pan-Orient line will also replace the Place Cap operation.

Lecture: The economics consequences of supply chain risks.

Read before class.

1. Stahl, G. “Ship Stuck in Suez Canal and Chip Shortages: What Global Supply-Chain
Problems Mean for You; The blocked Suez, semiconductor shortages and surprisingly
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cold weather have disrupted how manufacturers world-wide ship and receive goods”.
The Wall Street Journal Online, 26 March 2021.

2. Yap, C. “Pandemic Lays Bare U.S. Reliance on China for Drugs --- Disruptions, high
demand expand concern for supply of medicines”. The Wall Street Journal, 6 August
2020.

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Class #6: Investment in flexibility capacity

Case: The Auto Industry: Flexible Networks. Individual write-up due. (Copyright Trustees
of Dartmouth College - Permission to use approved by Brian Tomlin at the Tuck school of
Business, Dartmouth College)

Flexibility is a critical operations priority in many industries. In this session, we will discuss various
categories of operational flexibility and do a deep dive on one very important type of flexibility:
mix flexibility – whereby a plant can produce more than one kind of product. Using the
automotive industry as a motivating example, we will explore and answer two key questions that
operations executives must answer. How do we create flexible plants? How do we go from flexible
plants to a cost-effective flexible network?

Details about the Auto Industry: Flexible Networks. (Individual Write-up).

Please ignore discussion questions on Page 8 of the case. Use the information given below.
This assignment requires the use of the web-based “FlexCap” software. To use the software,
you will have to register. Instructions for registering are as follows:
1. Go to [Link]
2. Click the red registration button to begin registration
3. Enter 24 as the FlexCap ID.
4. Fill out the remainder of the form: User Name, Email, and Password.
5. Click the blue Register button to complete the registration and begin using the app

The software is quite intuitive. User instructions (and a short demo video) can be obtained by
clicking on the “getting started” icon (? on blue background) in the upper right corner. Review
the written documentation and the 6-minute video. I strongly suggest that you become familiar
with the software by creating a small network (use some of the data from the case - for example
Plants 1 through 3 and products A through E), and learn how to save the network, run the
network, make changes to the network by adding and deleting links etc. This should take you
about 60 to 90 minutes. If you have any questions, please let me know.

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Assignment Questions:
1. What is the Expected Sales (in 000’s of units) for the existing network?
• First create the network in the FlexCap software and enter the relevant capacity and demand
data. There is no uncertainty in plant capacity, i.e., capacity std dev = 0 for all plants. You
do not have to enter the maximum and minimum demands. The software should default to
the values in Table 1 (mean demand +/- 2 standard deviations) but you can check these if
you want by selecting Product Demand Range under Settings.
• Next, select the Units Sold under Maximize Metric and set the number of scenarios to
1000 under # of trials. Click on the “run simulation” icon (circle with an arrow). It should
take a few seconds to run.
• Print and attach FlexCap output and include this in the hard copy that you will submit.
Select the Hide Products not Produced under Settings to reduce the length of your
printout.
• Before moving on to Question 2, it is a good idea to save your existing network using the
save feature (square with + icon) and give it a name. The network will be saved and
accessible under My Simulations. I would also save another backup of the existing network
under a different name in case you happen to accidently delete the file that you are working
with or overwrite the file with changes that you have made. This will ensure that you do not
have to input the original network again as you can use the backup. This will be helpful
when you work on Question 2 which will involve testing different improvements on the
existing network. You may also want to save your new scenarios as you test different
networks in Question 2 and then decide which one you want to go with. If you make changes
to a particular scenario (say Scenario XYZ) and then decide that you want to discard the
changes and revert to Scenario XYZ, use the revert to saved (circular arrow). If you make
changes to a particular scenario (say Scenario XYZ) and then decide to save it under the
same name, use the disk icon.
2. Assuming that the variable contribution margin is $5000 per unit for all products and that
each link costs $75 million to create, which specific links would you recommend the company
add to the existing network? (Please clearly specify how many links you add and identify the
new links by the plant number and product letter: e.g. Link 1-C would mean the company creates
a link between Plant 1 and Model C.) What is the Expected Sales (in 000’s of units) of your
recommended network?
• The link investment cost and variable contribution margin are intended to help guide your
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 design strategy but there is no need to conduct a sophisticated financial analysis. For
simplicity, imagine the network only operates for one year and so links are justified if the
increase in expected contribution margin (5000 x increase in Expected Sales) exceeds the
links investment cost.
• Do not set this up as an optimization problem. Instead, use the FlexCap software to identify
a good network based on your judgment and testing of possible networks. You can apply
some logic before deciding where to add links and how many, and so it does not have to be
pure trial and error search. Because the contribution margin is the same across all models,
you can still use the Units Sold metric when evaluating a potential network. There is not one
“correct” answer, but the grade will be based on how well your recommendation performs
relative to other possible answers.
• Print and attach the initial FlexCap output of the existing network and the final
configuration for your recommended network.
3. Briefly articulate the key principles of your strategy, i.e., why did you choose the
links you recommended.

Turn in answers to assignment questions 1, 2, and 3. I am not looking for a detailed write-up as
the previous two write-ups. A few paragraphs (a page or two) that answer the questions will be
sufficient.

Please e-mail the following information to the Academic Associate:

- Expected Sales (in 000's of units) for the existing network.

- How many links are you adding?
- Expected Sales (in 000’s of units) of your recommended network.

I will share the summary of the analyses submitted by the class during our discussion.

Lecture: Regionalization of supply chains

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Class #7: The Product Development Supply Chain

Read Before Class:

1. Intel’s 2001 Annual Report, Letter to our Stockholders, pp. 1-11, available here:
[Link]
2. The Genius Behind [Apple’s] Steve [Jobs], available here:
[Link]
3. Explore the “Renaissance Innovator” site [Link] is-this/,
including some of the links at the right-hand side of the page – for example,
[Link] innovate/#more-639
4. Watch the “shopping cart video” at [Link] As you
watch the video, jot down a list of the “process steps” that IDEO uses to develop new
products. A further optional video is the one “How to Design Breakthrough Inventions”
[Link]
5. Take an initial look at the Intel and Seagate-Quantum case studies listed for classes #8 and #9.
You need not be prepared to discuss these readings; they are simply mentioned so that you can
begin to familiarize yourself with these future assignments.
6. Skim the article “Product Fundamentals” by Ken Homa. (Permission for distribution given by
Ken Homa.).

Discussion Questions (not for submission):

1. Think about what has happened with regard to the internet. What phase of the innovation
cycle has the industry gone through? Has what we have seen been predictable in any way?

2. There are two basic strategies for creating competitive advantage – either you sell something
that nobody else sells (we call this product innovation) or you can sell it at a lower cost
(we call this process innovation – we will also include in process innovation the prospect of
distributing your product differently, for example Amazon has innovated the way products
are sold and delivered). The links that you explored on the “Renaissance Innovator” site are
describing process innovation – what those authors are calling “Business Model Innovation”
are effectively what I have called “Process Innovation.” Please come to class with 2
examples of “Business Model Innovation”, either from the web site or from your own
experience.

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Class #8: Virtuous Cycles of Product Innovation

Case: “The Growth of Intel, and the Learning Curve,” Stanford University
Case S- OIT-17 by Glen Schmidt and Sam Wood. Product OIT27-PDF-ENG

Assignment (Group write-up, 15% of grade): Your team’s deliverable for this assignment is a
PowerPoint presentation. Your team may be asked to deliver your PowerPoint presentation to
your fellow students during the class time; all team members must be prepared to participate
in the presentation. Your slides should be readable if printed 4 per page in landscape mode
(what is not easily readable not be graded). The full slide deck (including both items below)
should be no more than 16 slides (anything beyond 16 will not be graded).

In the assignment for the Intel case, your task is to provide a rebuttal to Bill Gates, who
reportedly stated: “If automobile companies had only achieved the same level of improvement
as the computer industry, we wouldn’t have the environmental concerns that we have today.
Cars would be getting thousands of miles per gallon, they would travel as fast as airplanes,
and they would weigh only a few pounds. Yet they would be safe, reliable, and affordable.”
Your first reaction may be to say that you can’t compare automobiles and computers; it is like
comparing apples and oranges, or oil and water. However, you DO have a way to compare; you
should compare them using the learning curve framework. In your rebuttal slide deck, discuss how
learning rates and demand growth rates differ between these industries, and how that impacts
each industry’s progress. This means you will have to actually estimate the learning rate and
the (instantaneous) growth rate in demand for transistors (based on the data given in Table 2
of the case). You will have access to an Excel file to help you make the calculations.

Intel’s strategy relies on a “virtuous cycle.” In other words, they do “x” which leads to “y” which
leads to “z” which leads to more of “x” which leads to more of “y” which leads to more of “z”
which leads to even more of “x”… You should include a slide that explicitly describes the
virtuous cycle for Intel (what are “x” and “y” and “z”? Of course, there may be more than three
elements to the cycle.)

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Class #9: Encroachment Strategies

Case: Seagate-Quantum: Encroachment Strategies”.By Glen Schmidt and

Jan Van Mieghem. Available at [Link]

Assignment (Group write-up, 15% of grade): Your team’s deliverable for this assignment is a
PowerPoint presentation; 16 slides maximum. Your team may be asked to deliver your
PowerPoint presentation to your fellow students during the class time; all team members
must be prepared to participate in the presentation. Your slides should be readable when
printed 4 per page in landscape mode.

Regarding the Seagate-Quantum case, your task is to prepare a presentation to be made to

Seagate’s private investors as of the time of the case, giving your assessment of what will happen
in this market (worth 10 of the 15 points). The presentation should show your estimates for
pricing, market share, and profitability of the Seagate and Quantum drives at introduction, and
after 1, 2, 4, 6, and 7 years. Please include a slide showing the virtuous cycle for Seagate. For
the other 5 of the 15 points related to your presentation, you should briefly (and only
qualitatively) pitch another investment idea to these private investors; an electric car. Choose
(and explain your logic to support) either a low-end encroachment scenario or a high-end
encroachment strategy. In your discussion, identify who the first customers will be, and
qualitatively describe how (and why) the diffusion process will progress. Please include a slide
showing the virtuous cycle for your proposed electric vehicle.

Background “Readings” and Discussion Questions:

1. “How to Position Your Innovation in the Marketplace,” Sloan Management Review, Winter
2014. By Glen Schmidt and Bo Van der Rhee.

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 Class #10: More Op’s Strategies! (Product Architecture; Spackling; Where to Hold Inventory)

Background Readings:
1. “Mass Customization”. Teaching note by Glen Schmidt.
2. Abstract to: “Hold safety inventory before, at, or after the fan-out point?” Van der Rhee,
Schmidt, and Tsai.
[Link]
3. Case (for discussion only): “Where in the World is Timbuk2.” Wharton Case Study.
4. “Offshoring versus Spackling.” MIT Sloan Management Review. Spring, 2005. Cattani,
Dahan, and Schmidt.
5. “Modularity: An Unfilled Promise? Or Your Company’s Future?” By Kamrad, Schmidt, and
Ulku.
6. Video (preponed ice cream) [Link]
7. Watch one of the following two videos (they are alternate presentations of the same material).
As you watch the video, think about how you would use the “MAP principles” (Mastery,
Autonomy, and Purpose) to come up with better products and processes at a firm. Again, you are
only required to watch one or the other of these videos:
a. The YouTube video on “Drive: The Surprising Truth About What Motivates Us.”
[Link]
b. The TED talk on “The Puzzle of Motivation”
[Link]

Discussion Questions (not for submission):

1) Timbuk2 sells messenger bags over the internet via its website [Link], and must
produce them domestically in make-to-order fashion because it promises delivery within a
couple of days after the order is received, and because thousands of possible bag
combinations may offered. Timbuk2 also sells messenger bags at retail outlets such as REI
and at bike shops. These bags can be produced in make-to-stock fashion in China and
held in inventory for future sale. How should Timbuk2 configure its supply chain and its
production?
2) You’ve learned about how much safety stock inventory to hold – the ROP and newsvendor
formulas can be used to that, for example. But did you ever learn how to decide WHERE to hold
inventory? I bet not! Here’s how to decide – see the reading on “Hold safety inventory before,
at, or after the fan-out point?”

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