Richard L. Daft - Management. 9th ed., 2010

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PART 6 CONTROLLING590

1. What are the major differences between manufac-

turing and service organizations? Give examples

of each type.

2. Boeing’s 787 Dreamliner was seriously delayed

because of slow deliveries from suppliers who

were responsible for large chunks of the jet. Out-

sourcing has become an important aspect of sup-

ply chain management as companies strive to cut

costs, yet the practice gives managers less control,

as at Boeing, and may decrease speed and  exibility.

As an operations manager, how would you decide

if a multinational supply chain is a better approach

than trying to manufacturing as much as possible

in-house?

3. What type of production layout do you think would

work best in a car dealership? What type would

work best for a company that produces handmade

pottery? Discuss reasons for your answers.

4. What are the three types of inventory? Which type

is most likely to be affected by the just-in-time

inventory system? Explain.

5. Some companies are using both lean manufactur-

ing and Six Sigma (Chapter 18) methods simulta-

neously to improve their operations. How do you

think the two approaches might complement or

con ict with each other? Explain.

6. Critics argue that radio-frequency identi cations

(RFIDs) can potentially jeopardize consumer pri-

vacy by making it possible to link purchases to

individuals or even to track the movement of indi-

viduals. Should this concern prevent companies

from adopting RFIDs? Explain.

7. How do you think the growth of sophisticated man-

agement information systems (MIS) has changed

the importance of personal experience and intu-

ition in decision making? In other words, does MIS

make decision making more of a science than an

art? Discuss.

8. How might the organizers of an upcoming Olym-

pics use an extranet to get all the elements of the

event up and running on schedule?

9. If you were a manager in charge of new product

marketing, what are some ways you might harness

the power of blogs and social networking sites to

help market your latest products?

10. The openness of wikis is both their strength and

their weakness. As a business owner, why might

you want to take advantage of this new technol-

ogy? How might you guard against potential prob-

lems, such as vulnerability to mistakes, pranks,

self-serving posts, or cybervandalism?

ch19

DISCUSSION QUESTIONS

materials, work in process, and  nished goods. Just-in-time inventory is an effec-

tive technique for minimizing inventory levels.

▪ Managers rely on information technology for the ef cient management and

control of operations. Information technology and e-business has transformed

management and contributes to enhanced collaboration and knowledge sharing.

Sophisticated information technology systems can gather huge amounts of data

and transform them into useful information for decision makers. Management

information systems that support operations and decision making include decision

support systems, executive information systems, and collaborative work systems.

An important IT solution for improving business operations is enterprise resource

planning (ERP). Knowledge management is also an important application for new

technology. Key technologies for knowledge management are business intelligence

software and knowledge management portals on the corporate intranet.

▪ Collaborative work systems allow groups of managers or employees to share

information, collaborate electronically, and have access to computer-based sup-

port data for group decision making and problem solving. New IT tools, includ-

ing blogs, wikis, social networking, and peer-to-peer  le sharing, extend the

power of the organization’s collaborative systems.

▪ Most organizations have incorporated the Internet and e-business as part of their

information technology strategy. Traditional organizations use an online division

primarily for market expansion or to increase productivity and reduce costs.

CHAPTER 19 MANAGING THE VALUE CHAIN, INFORMATION TECHNOLOGY, AND E-BUSINESS 591

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ch19

MANAGEMENT IN PRACTICE: EXPERIENTIAL EXERCISE

What Is Your Attitude Toward Productivity?

Complete the following questions based on how you

think and act in a typical work situation. For each

item, circle the number that best describes you.

Disagree Strongly 1 2 3 4 5 Agree Strongly

1. I spend time developing new ways of approach-

ing old problems.

1 2 3 4 5

2. As long as things are done correctly and ef ciently,

I prefer not to take on the hassle of changing them.

1 2 3 4 5

3. I always believe the effort to improve something

should be rewarded, even if the  nal improve-

ment is disappointing.

1 2 3 4 5

4. A single change that improves things 30 percent

is much better than 30 improvements of 1 percent

each.

1 2 3 4 5

5. I frequently compliment others on changes they

have made.

1 2 3 4 5

6. I let people know in a variety of ways that I like to

be left alone to do my job ef ciently.

1 2 3 4 5

7. I am personally involved in several improvement

projects at one time.

1 2 3 4 5

8. I try to be a good listener and be patient with what

people say, except when it is a stupid idea.

1 2 3 4 5

9. I am always proposing unconventional techniques

and ideas.

1 2 3 4 5

10. I usually do not take risks that would create a

problem for me if the idea failed.

1 2 3 4 5

Scoring and Interpretation

Subtract each of your scores for questions 2, 4, 6, 8,

and 10 from the number 6. Then, using the adjusted

scores, add the scores from all 10 items for your total

score.

This scale indicates the extent to which your orienta-

tion toward productivity is based on ef ciency or continu-

ous improvement. Ef ciency sometimes can be maximized

by eliminating change. This approach may be appropri-

ate in a stable organizational environment. Continu-

ous improvement is an attitude that productivity can

always get better and you take personal responsibility

to improve it. This attitude is appropriate for a quality-

conscious company experiencing frequent change.

A score of 40 or higher indicates that you take per-

sonal responsibility for improving productivity and

frequently initiate change. A score of 20 or less indi-

cates you make contributions through ef cient work

in a stable environment. Discuss the pros and cons of

the ef ciency versus continuous improvement orien-

tations for organizations and employees.

Manipulative or Not?

As head of the marketing department for Butter Crisp

Snack Foods, 55-year-old Frank Bellows has been

forced to learn a lot about the Internet in recent years.

Although he initially resisted the new technology,

Frank has gradually come to appreciate the potential

of the Internet for serving existing customers and

reaching potential new ones. In fact, he has been one

of the biggest supporters of the company’s increasing

use of the Internet to stay in touch with customers.

However, something about this new plan just

doesn’t feel right. At this morning’s meeting, Keith

Deakins, Butter Crisp’s CEO, announced that the

company would soon be launching a Web site geared

speci cally to children. Although Deakins has the

authority to approve the site on his own, he has asked

all department heads to review the site and give their

approval for its launch. He then turned the meeting

over to the Information Technology team that devel-

oped the new site, which will offer games and interac-

tive educational activities. The team pointed out that

although it will be clear that Butter Crisp is the sponsor

of the site, the site will not include advertising of Butter

Crisp products. So far, so good, Frank thinks. However,

ch19

MANAGEMENT IN PRACTICE: ETHICAL DILEMMA

PART 6 CONTROLLING592

ch19

CASE FOR CRITICAL ANALYSIS

SunBright Outdoor Furniture, Inc.

James Cowart started making and selling outdoor

furniture in 1984. He built up the business to 300

employees and $28 million in sales in 2005. SunBright

operates a single factory in northern Florida, where

it fabricates and assembles a wide range of outdoor

furniture, including tables, chairs, umbrellas, and

matching accessories. SunBright’s major production

tasks include extruding the aluminum furniture parts,

bending and shaping the extruded parts,  nishing and

painting the parts, and then assembling the parts into

completed furniture. Cloth and leather upholstery,

glass for tabletops, wood  nishing, and hardware

such as screws and bolts are purchased from outside

vendors.

Running this business was an almost 24-hour-a-day

job for Cowart, because manufacturing or sales prob-

lems arose constantly. Cowart seemed to be the only

person who could solve them. In 2005, Cowart decided

to hire a general manager to run the manufacturing and

sales department so he could have more time for other

interests, including his grandchildren. To his good for-

tune, he was approached by Eva Rucker, who offered to

invest in the business and grow it from a regional man-

ufacturer to one that sold to major national retailers.

Rucker had excellent experience in sales and under-

stood manufacturing. After a few months of getting to

know each other, Cowart sold Rucker 25 percent of the

business and installed her as general manager. Cowart

retained for himself the position of president. Although

he would not be at work full time, he would retain  nal

authority on major decisions.

After just two months, Rucker started adding

salespeople, with the goal of doubling the sales force

in one year to reach new regional and national retail

accounts. As sales began to increase, she also hired

additional support staff, including a purchasing

agent, two furniture designers, and an accountant.

By the end of Rucker’s  rst year, SunBright was car-

ried by three national retail chains on a trial basis.

However, new problems started to surface. SunBright

was missing the delivery dates promised by sales reps

and a few orders had been returned for not meeting

quality standards. With the consolidation of retail

stores into fewer chains, the national retailers had the

power to demand high quality, low prices, and rapid

delivery from SunBright or they would order outdoor

furniture from other suppliers.

At the end of her  rst year, Rucker was strug-

gling to improve operations to meet the demands of

he knows that two of the young hotshot employees

in his department have been helping to develop the

site and that they provided a list of questions that

children will be asked to answer online. Just to enter

the Web site, for example, a user must provide name,

address, gender, e-mail address, and favorite TV show.

In return, users receive “Crisp Cash,” a form of virtual

money that they can turn in for toys, games, Butter

Crisp samples, and other prizes. After they enter the

site, children can earn more Crisp Cash by providing

other information about themselves and their families.

Frank watched the demonstration and agreed that

the Web site does indeed have solid educational con-

tent. However, he is concerned about the tactics for

gathering information from children when that infor-

mation will almost certainly be used for marketing

purposes. So far, it seems that the other department

heads are solidly in favor of launching the Web site.

Frank is wondering whether he can sign his approval

with a clear conscience. He also knows that several

groups, including the national PTA and the Center for

Media Education, are calling for stricter governmental

controls regarding collecting information from chil-

dren via the Internet.

What Would You Do?

1. Stop worrying about it. There’s nothing illegal

about what Butter Crisp is pr

oposing to do, and

any personal information gathered will be closely

guarded by the company. Children can’t be harmed

in any way by using the new Web site.

2. Begin talking with other managers and try to build

a coalition in support of some stricter controls, such

as requiring parental permission to enter areas of

the site that offer Crisp Cash in exchange for per-

sonal information.

3. Contact the Center for Media Education and tell

them you suspect Butter Crisp intends to use the

Web site to conduct marketing research. The Center

might be able to apply pressure that would make it

uncomfortable enough for Deakins to pull the plug

on the new kid’s Web site.

SOURCE: Based on Denise Gellene, “Internet Marketing to Kids Is

Seen as a Web of Deceit,” Los Angeles Times, March 29, 1996.

CHAPTER 19 MANAGING THE VALUE CHAIN, INFORMATION TECHNOLOGY, AND E-BUSINESS 593

Controlling

national retailers, but with little success. She invited

a consultant to evaluate SunBright’s operations.

The consultant’s report contained the following

elements.

1. Cooperation among departments is minimal or

nonexistent. For example, the purchasing manager

changed to a new supplier for paint because it saved

a few cents per gallon. But the paint had to be applied

in a thicker coat to wear as long in outdoor use. The

additional labor and paint actually cost more than

the few cents saved in purchasing, and no one in the

manufacturing department had been consulted.

2. Salespeople frequently run promotions and prom-

ise sales delivery dates that are impossible for

manufacturing to meet. The department head of

manufacturing emphasizes that it takes time to

work out the bugs when introducing new products

or increasing production levels.

3. The accounting department reports that productiv-

ity for the plant is low. Equipment utilization is

too low. The operation is not lean enough to make

acceptable pro ts.

4. The comptroller reports that inventory is too high.

Too much capital is tied up in raw materials. Too

much capital is also tied up in excessive in-process

inventory waiting at machines to be  nished and

processed for delivery to customers.

5. Salespeople want to use the Internet to publicize Sun-

Bright product information and to make routine sales,

freeing them to call on new customers. This approach

would entail hiring people who could design and

manage a sophisticated SunBright Web page.

Eva Rucker discussed these six issues with the

consultant and agreed with the report’s  ndings. She

met with Jim Cowart to report the  ndings and ask

for his support and  nancial resources to make cor-

rections. Cowart listened to the presentation and then

said he had some other things to attend to. “I don’t

think it’s as serious as you say,” he told Rucker, “but

you can have a meeting with the department heads if

you want to discuss it with them. Remember that our

production problems are no worse than our competi-

tors’ issues. You don’t have to  x everything over-

night. Things worked pretty well before we started to

grow so fast, and I’m sure they’ll work well again.”

Questions

1. Which of the problems outlined by the consultant

do you consider the highest priority? Second prior-

ity? Why?

2. If you were the consultant, what types of informa-

tion systems would you recommend for Sunbright?

Explain your reasons.

3. If you were James Cowart, how would you have

responded to the report from Eva Rucker? If you

were Rucker, what would you do now?

SOURCE: Adapted from “Taracare, Inc.,” in Jack R. Meredith and

Scott M. Shafer, Operations Management for MBAs (New York: John

Wiley, 2002), pp. 17–18.

ch19

ON THE JOB VIDEO CASE

Numi Organic Tea: Managing the

Value Chain, Information Technol-

ogy, and E-Business

When Brian Durkee shows up at Numi Organic Tea

every day to work as the director of operations, he’s

on a mission to make Numi a worldwide leader in

sustainable supply chain management—and he gets

right to work. Setting up and maintaining an ef cient

enterprise resource planning (ERP) system turned out

to be much easier than converting Chinese suppliers

to profoundly different farming methods and ways of

doing business.

Numi was initially run on Excel spreadsheets and

QuickBooks, which was hard to imagine after walk-

ing through Numi’s box- lled distribution center in

Oakland, California. Durkee pointed out that those

are tools used by most start-up companies. Numi had

just begun to implement an ERP system with inte-

grated inventory management and accounting when

Durkee joined the company. He’s still in awe of what

the system can do. “We’re managing our inventories

in multiple countries through the same software pro-

gram. All we do now is simply go into the system

and push a button to say we want to make a par-

ticular product, and the system pulls all the lots and

PART 6 CONTROLLING594

materials for us and allocates the inventory.” It’s that

simple!

Durkee can calculate the inventory’s value and

cost of goods at any time, too. “The enhancements

we’ve made in our technology have helped us in tre-

mendous ways. It has helped reduce costs, improve

customer service, and most importantly, it has helped

us manage our business more ef ciently.” With clients

like Costco, Target, and Safeway, quality and ef -

ciency are essential. The system also keeps everyone

working on the same page, because it provides a clear,

real-time picture of what’s happening.

Although just-in-time (JIT) inventory sounds

great, it’s not possible for Numi. Because its teas are

grown by carefully chosen suppliers who adhere to

Numi’s standards for organics and fair trade, Durkee

can’t simply pick up the phone to order more tea

or ask his suppliers to grow it instantaneously. The

concept of a raw materials inventory doesn’t really

apply to Numi either, because tea, its raw material,

always requires a labor investment. To effectively

manage his inventory, Durkee uses sales forecasts to

make plans for tea production. JIT doesn’t work for

its specialty bamboo packaging either because the

boxes are handmade. Big changes in forecasts are

dif cult to address given these constraints. Luckily,

tea leaves aren’t perishable once dried and pack-

aged, so Numi can con dently build up its  nished

goods inventory, knowing the products will sell

sooner rather than later.

The people who grow and package Numi tea are

a vital part of the supply chain and the operation’s

technical core. Durkee said the best part of his job

is working with supply partners to improve work-

ing conditions. And although Numi tea is grown all

over the world, its partners in China have the most

trouble comprehending Numi’s fair-trade and organic

practices. No matter how many times Durkee asked

the owner of the packaging plant in China to install

air conditioning for the workers, the owner couldn’t

understand Durkee’s assertion that 120 degree tem-

peratures constitute inhumane conditions. Ultimately,

Durkee lied and said the hot temperatures affected

the quality of the tea. Within two days, the factory

was fully air-conditioned. Durkee has also been

working with tea suppliers to change the conditions

for workers who have historically lived on-site in

dorm-size rooms with 10 or 12 people. Numi will not

partner with anyone who does not comply with the

company’s standards.

Numi is rede ning and expanding the ways com-

panies bring value and quality to the value chain.

Although Numi doesn’t practice lean manufacturing

per se, ongoing efforts to make its supply chain more

sustainable reduce waste on many levels—energy,

natural resources, and packaging materials. In the

eyes of Numi customers, organic and fair-trade prod-

ucts possess more value. They also view organically

grown products as safer, healthier, and of higher

quality than non-organics. Anyone  nding it dif -

cult to quantify value Numi-style, should eavesdrop

on Numi customers as they chat enthusiastically on

Numi’s blog.

Discussion Questions

1. What challenges are inherent in an agricultural

oduction process?

2. How does depending on a big  nished-goods

inventory make Numi vulnerable?

3. Beyond the impact on workers, how might fair-

trade practices affect product quality and costs?

ch19

BIZ FLIX VIDEO CASE

The Good Shepherd

Edward Wilson (Matt Damon) graduates from Yale

University and joins the Of ce of Strategic Services,

the intelligence unit that preceded the Central Intel-

ligence Agency (CIA). His career unfolds during

World War II and into the 1960s. Wilson’s strong work

focus and shallow family focus develop many issues

for him that he does not easily resolve. The  lm’s

centerpiece is Wilson’s task of  nding why the Bay of

Pigs invasion of Cuba has failed. Many strong perfor-

mances and unusual intercutting of scenes from vari-

ous periods make an engaging cinematic experience.

Information Technology

These scenes appear in two parts with a title screen

separating Part I from Part II. You can view the scenes

CHAPTER 19 MANAGING THE VALUE CHAIN, INFORMATION TECHNOLOGY, AND E-BUSINESS 595

Controlling

continuously or pause after Part I to consider the

questions below.

Part I: Beginning the Information Development.

This scene is part of DVD Chapter 7, “Uses of Infor-

mation.” It begins with the Photography Technical

Of cer (Christopher Evan Welch) saying to Edward

Wilson, “The photograph is particularly dark.” The

scene ends after the Sound Technical Of cer (Tuc

Watkins) says, “We are going to keep playing with

it.” The  lm holds a shot on Wilson and then cuts to a

1941 London air raid.

Part II: Continuing the Information Develop-

ment. This scene begins with a shot of Wilson and two

lines of titling that read, “C.I.A. Technical Services

April 23, 1961.” A woman’s voice-over says her lover

is safe with her. This scene ends after Wilson’s ques-

tion about their schedule and the answer of going as

fast as possible. The  lm cuts to an aerial shot of the

Soviet sector of Berlin with a German voice-over.

What to Watch for and Ask Yourself

▪ Which parts of these scenes show data? Which

parts show information?

▪ These  lm scenes show the information technol-

ogy used during the 1960s at the CIA. Compare

it to this chapter’s discussion of modern informa-

tion technology. What are the similarities and

differences?

▪ The chapter described knowledge management

as efforts to systematically gather and organize

knowledge for an organization. Identify the activi-

ties in this scene that show knowledge manage-

ment activities.

Adapted from Carolyn Hopper,1.

Practicing Management Skills (New

York: Houghton Mifﬂ in, 2003); and

Jacquelyn Wonder and Priscilla

Donovan, “Mind Openers,” Self

(March 1984).

James D. Thompson, 2. Organizations

in Action (New York: McGraw-Hill,

1967).

Chad Terhune, “Growing Pains; To 3.

Bag China’s Snack Market, Pepsi

Takes Up Potato Farming,” The Wall

Street Journal, December 19, 2005.

Gregory B. Northcraft and Richard B. 4.

Chase, “Managing Service Demand

at the Point of Delivery,” Academy

of Management Review 10 (1985):

66–75; and Richard B. Chase and

David A. Tanski, “The Customer

Contact Model for Organization

Design,” Management Science 29

(1983): 1037–1050.

Deﬁ nition based on Steven A. 5.

Melnyk and David R. Denzler,

Operations Management: A Value-

Driven Approach (Burr Ridge, IL:

Richard D. Irwin, 1996), p. 613.

Based on Jim Turcotte, Bob Silveri, 6.

and Tom Jobson, “Are You Ready for

the E-Supply Chain?” APICS–The

Performance Advantage (August

1998): 56–59.

Jason Dedrick and Kenneth L. 7.

Kraemer, “The Impacts of IT on Firm

and Industry Structure: The Personal

Computer Industry,” California Man-

agement Review 47, no. 3 (Spring

2005): 122–142; Kathryn Jones, “The

Dell Way,” Business 2.0 (February

2003): 61–66; and Stewart Deck,

“Fine Line,” CIO (February 1, 2000):

88–92.

“The AMR Research Supply Chain 8.

Top 25 for 2008,” http://www

.amrresearch.com/supplychain-

top25/# (accessed May 30, 2008).

Cecilie Rohwedder and Keith Johnson, 9.

“Pace-Setting Zara Seeks More

Speed To Fight Its Rising Cheap-

Chic Rivals,” The Wall Street Journal,

February 20, 2008.

Russ Banham, “Caught in the 10.

Middle,” CFO (May 2001): 69–74.

Nancy Lea Hyer and Karen A. 11.

Brown, “Work Cells with Stay-

ing Power: Lessons for Process–

Complete Operations,” California

Management Review 46, no. 1 (Fall

2003): 27–52.

Kelly Wardle, “One Enchanted 12.

Evening,” Special Events, http://www

.specialevents.com/corporate/events_

one_enchanted_evening_20060203/

index.html (accessed May 27, 2008).

Daniel Michaels and J. Lynn 13.

Lunsford, “Streamlined Plane Mak-

ing,” The Wall Street Journal, April

1, 2005.

Dean Elmuti and Michael Abebe, 14.

“RFID Reshapes the Global Sup-

ply Chain,” Industrial Management

(March–April 2005): 27–31; John

Teresko, “Plant Strategies: Win-

ning with Wireless,” Industry Week

(June 2003): 60–66; and Meridith

Levinson, “The RFID Imperative,”

CIO (December 1, 2003): 78–91; and

“ZDNet Deﬁ nition for: RFID,” from

Computer Desktop Encyclopedia,

http://dictionary.zdnet.com/

deﬁ nition/RFID.html (accessed

May 27, 2008).

Erick Schonfeld, “Tagged for 15.

Growth,”

Business 2.0 (December

2006): 58–61.

Maryanne Murray Buechner, 16.

“Cracking the Code,” FSB: For-

tune Small Business (March 2004):

72–73.

Barnaby J. Feder, “Military to Urge 17.

Suppliers to Adopt Radio ID Tags,”

The New York Times, November 12,

2005.

“ZDNet Deﬁ nition for: RFID.”18.

Scott McCartney, “The Middle 19.

Seat: A New Way to Prevent Lost

ch19

ENDNOTES

PART 6 CONTROLLING596

Luggage,” The W

all Street Journal,

February 27, 2007.

Sumer C. Aggarwal, “MRP, JIT, 20.

OPT, FMS?” Harvard Business

Review 63 (September–October

1985): 8–16; and Paul Ranky, The

Design and Operation of Flexible

Manufacturing Systems (New York:

Elsevier, 1983).

David Welch, “How Nissan Laps 21.

Detroit,” BusinessWeek (December

22, 2003): 58–60.

Kenji Hall, “No One Does Lean Like 22.

the Japanese,” BusinessWeek (July

10, 2006): 40–41.

Peter Strozniak, “Toyota Alters Face 23.

of Production,” Industry Week

(August 13, 2001): 46–48; and Jeffrey

K. Liker and James M. Morgan, “The

Toyota Way in Services: The Case of

Lean Product Development,” Acad-

emy of Management Perspectives

(May 2006): 5–20.

Art Kleiner, “Leaning Toward 24.

Utopia,” Strategy + Business, no.

39 (Second Quarter 2005): 76–87;

Fara Warner, “Think Lean,” Fast

Company (February 2002): 40,

42; Norihiko Shirouzu, “Gadget

Inspector: Why Toyota Wins Such

High Marks on Quality Surveys,”

The Wall Street Journal, March 15,

2001; and James P. Womack and

Daniel T. Jones, The Machine That

Changed the World: The Story of Lean

Production (New York: HarperCollins,

1991).

Evan Ramstad, “Compaq Stumbles 25.

Amid New Pressures on PCs,” The

Wall Street Journal, March 9, 1998.

R. J. Schonberger, 26. Japanese Manu-

facturing Techniques: Nine Hidden

Lessons in Simplicity (New York:

Free Press, 1982).

Luciana Beard and Stephen A. 27.

Butler, “Introducing JIT Manufac-

turing: It’s Easier Than You Think,”

Business Horizons (September–

October 2000): 61–64.

Robert J. Vokurka, Rhonda R. 28.

Lummus, and Dennis Krumwiede,

“Improving Manufacturing Flex-

ibility: The Enduring Value of JIT and

TQM,” SAM Advanced Management

Journal (Winter 2007): 14–21.

Based on Ronald Henkoff, “Deliver-29.

ing the Goods,” Fortune (November

28, 1994): 64–78.

Noel P. Greis and John D. Kasarda, 30.

“Enterprise Logistics in the Infor-

mation Era,” California Management

Review 39, no. 4 (Summer 1997):

55–78; “Kanban: The Just-in-Time

Japanese Inventory System,” Small

Business Report (February 1984):

69–71; and Richard C. Walleigh,

“What’s Your Excuse for Not Using

JIT?” Harvard Business Review 64

(March–April 1986): 38–54.

Thomas L. Friedman, “It’s a Flat 31.

World, After All,” The New York

Times Magazine (April 3, 2005):

32–37.

Ibid.32.

Based on Andrew Mayo, “Memory 33.

Bankers,” People Management

(January 22, 1998): 34–38; William

Miller, “Building the Ultimate

Resource,” Management Review

anuary 1999), 42–45; and Todd

Datz, “How to Speak Geek,” CIO

Enterprise, Section 2 (April 15,

1999), 46–52.

Richard McDermott, “Why Infor-34.

mation Technology Inspired But

Cannot Deliver Knowledge Man-

agement,” California Management

Review 41, no. 4 (Summer 1999),

103–117.

Thomas H. Davenport, Laurence 35.

Prusak, and Bruce Strong, “Business

Insight (A Special Report): Orga-

nization; Putting Ideas to Work:

Knowledge Management Can Make

a Difference—But It Needs to Be

More Pragmatic,” The Wall Street

Journal, March 10, 2008.

Meridith Levinson, “Business 36.

Intelligence: Not Just for Bosses

Anymore,” CIO (January 15, 2006):

82–88; and Alice Dragoon, “Busi-

ness Intelligence Gets Smart,” CIO

(September 15, 2003): 84–91.

David Stires, “How the VA Healed 37.

Itself,” Fortune (May 15, 2006):

130–136.

Julie Schlosser, “Markdown Low-38.

down,” Fortune (January 12, 2004):

40.

Spencer E. Ante, “Giving the Boss 39.

the Big Picture,” BusinessWeek

(February 13, 2006): 48–51; Doug

Bartholomew, “Gauging Success,”

CFO-IT (Summer 2005): 17–19;

Russ Banham, “Seeing the Big Pic-

ture: New Data Tools Are Enabling

CEOs to Get a Better Handle on

Performance Across Their Organiza-

tions,” Chief Executive (November

2003): 46.

This discussion is based on Judy 40.

Sweeney and Simon Jacobson,

“ERP Breaks,” Industry Week (Janu-

ary 2007): 11a–13a; and Vincent A.

Mabert, Ashok Soni, and M. A.

Venkataramanan, “Enterprise Re-

source Planning: Common Myths

Versus Evolving Reality,” Business

Horizons (May–June 2001): 69–76.

Sweeney and Jacobson, “ERP 41.

Breaks.”

Derek Slater, “What Is ERP?” 42. CIO

Enterprise (May 15, 1999): 86.

Anya Kamenetz, “The Network 43.

Unbound,” Fast Company (June

2006): 68ff; and Stephen Baker and

Heather Green, “Blogs Will Change

Your Business,” BusinessWeek (May

2, 2005): 56–67.

Baker and Green, “Blogs Will 44.

Change Your Business.”

Stanley Holmes, “Into the Wild Blog 45.

Yonder,” BusinessWeek (May 22,

2006): 8486; and Erin White, Joann

S. Lublin, and David Kesmodel,

“Executives Get the Blogging Bug,”

The Wall Street Journal, July 13,

2007.

Cindy Waxer, “Workers of the 46.

World—Collaborate,” FSB (April

2005): 57–58.

Evelyn Nussenbaum, “Technology to 47.

Boost Teamwork,” Forbes Small Busi-

ness (February 2008): 51–54; and

Russ Juskalian, “Wikinomics Could

Change Everything As Concept of

Sharing Spreads,” USA Today, Janu-

ary 2, 2007, http://www.usatoday

.com (accessed January 2, 2007).

This discussion of social networks is 48.

based on Kamenetz, “The Network

Unbound.”

Brad Stone, “Facebook Expands Into 49.

MySpace’s Territory,”

The New York

Times, May 25, 2007; and Heather

Green, “The Water Cooler is Now on

the Web,” BusinessW

eek (October 1,

2007).

Spencer E. Ante with Amy Borrus 50.

and Robert D. Hof, “In Search of

the Net’s Next Big Thing,” Business-

Week (March 26, 2001): 140–141;

Amy Cortese, “Peer to Peer: P2P

Taps the Power of Distant Comput-

ers in a Way That Could Transform

Whole Industries,” BusinessWeek

50, Supplement to BusinessWeek

(Spring 2001): 194–196.

Mark Roberti, “Peer-to-Peer Isn’t 51.

Dead,” The Industry Standard (April

23, 2001): 58–59.

Jim Turcotte, Bob Silveri, and Tom 52.

Jobson, “Are You Ready for the

E-Supply Chain?” APICS–The Per-

formance Advantage (August 1998):

56–59.

CHAPTER 19 MANAGING THE VALUE CHAIN, INFORMATION TECHNOLOGY, AND E-BUSINESS 597

Controlling

This discussion is based on Long W. 53.

Lam and L. Jean Harrison-Walker,

“Toward an Objective-Based Typol-

ogy of E-Business Models,” Business

Horizons (November–December

2003): 17–26; and Detmar Straub

and Richard Klein, “E-Competitive

Transformations,” Business Horizons

(May–June 2001): 3–12.

Tom Lowry, “In the Zone,” 54. Business-

Week (October 17, 2005): 66–78;

Tom Lowry, “TV’s New Parallel

Universe,” BusinessWeek (November

14, 2005): 72–74.

Robert Berner, “J. C. Penney Gets 55.

the Net,” BusinessWeek (May 7,

2007): 70; and “Jcpenney.Com Cel-

ebrates 10th Anniversary Of Online

Shopping,” Business Wire (Novem-

ber 8, 2004).

Nanette Byrnes, “More Clicks at the 56.

Bricks,” BusinessWeek (December 17,

2007): 50–52.

“The Web Smart 50,” 57. BusinessWeek

(November 21, 2005): 82–112.

Jonathan L. Willis, “What Impact 58.

Will E-Commerce Have on the U.S.

Economy?” Economic Review—

Federal Reserve Bank of Kansas City

89, no. 2 (Second Quarter 2004):

53ff; Timothy J. Mullaney with

Heather Green, Michael Arndt,

Robert D. Hof, and Linda Himel-

stein, “The E-Biz Surprise,” Business

Week (May 12, 2003): 60–68.

Straub and Klein, “E-Competitive 59.

Transformations.”

“The Web Smart 50.”60.

598

ContinuingCasept6

General Motors

Part Six: Controlling

General Motors Gives Design Teams

the Green Light

With all the bad news about layoffs, outsourcing, and

plant closings at General Motors (GM), it’s not hard to

guess what keeps many GM employees up at night.

However, with the company’s renewed mission to

reinvent the automobile, and with a new $25 billion

bailout from the federal government for automakers

who invest in green technology, at least one group at

GM is sleeping a little easier.

E-Flex Systems, the hybrid-vehicle task force

behind the 2010 Chevy Volt, recently received the green

light from senior management to design cleaner more

energy-ef cient vehicles. And now with a $25 billion

credit line from the feds, GM’s group of more than

600 engineers and designers is hard at work develop-

ing high-quality low-emissions vehicles for the future.

In videotaped comments posted on the company’s

FastLane blog, Bob Lutz, GM’s vice chairman of global

product development, explained the automaker’s per-

spective on quality. “If you ask me, ‘Are we satis ed where

we are in quality?’ the answer has to be ‘No.’ Because

until you’re absolutely perfect, which no company will

ever be, this is really an area where you strive.”

Although quality may be a never-ending pursuit,

getting it right may be more important than ever

before in GM’s history. In recent years, the company

has overhauled design processes to make way for

alternative-fuel vehicles like the Chevy Tahoe hybrid,

the hydrogen-powered Equinox SUV, and the battery-

powered Volt. Such uncharted waters could prove

treacherous if controls are not in place to measure per-

formance and provide swift corrective action when

problems arise.

In the case of the Chevy Volt, E-Flex teams are keep-

ing a close eye on the car’s plug-in electric drive unit—

especially the mission-critical lithium-ion batteries that

deliver Volt’s 40 miles of gas-free driving. As anyone

with a laptop computer knows, battery technology is

improving slowly. Drawbacks of batteries include lim-

ited storage capacity, cost of production, performance

deterioration, and life cycle—and they’re heavy, too.

“It’s the biggest challenge we have with this car,” says

Andrew Farah, chief engineer of the E-Flex Systems

group. To ensure quality in Volt’s state-of-the-art bat-

tery technology, engineers are testing batteries from

Massachusetts-based supplier A123 Systems as well as

packs from Compact Power, a subsidiary of LG Chem.

While not on par with the V-8 engines GM pio-

neered in the past, Volt’s electric drive train produces

plenty of pep. The unit delivers 150 horsepower, 273

pound-feet of torque, speeds of 100 miles per hour, and

0-to-60 in nine seconds. “That doesn’t sound like a golf

cart to me,” quipped Tony Posawatz, vehicle line direc-

tor for the Volt. “It’ll be fun to drive.”

But Volt’s game-changing fuel ef ciency also comes

from its unique design. The Volt seats only four people,

allowing integration of a six-foot T-shaped battery that

sits economically under the center spine and rear seats.

As Global Design Vice President Ed Welburn notes,

“The battery is so integrated into the design that it’s

like, ‘where is it?’” Precisely the point, according to

chief engineer Farah. “The whole idea is to integrate it.

You don’t want to have a battery with some wheels.”

GM product-development teams have more ordi-

nary concerns as well. Although the Volt’s electric

motor is pivotal, Lutz notes that consumers are more

likely to notice things like precise body  ts and the

radiance of the paint job. “These are things that peo-

ple associate with quality,” says the vice chairman.

“They like to have an object that looks like it was put

together with great care and by somebody that had a

lot of respect for the ultimate customer.” As Lutz sees

it, the customer is always at the center of GM’s com-

mitment to quality. “We shoot not only for absence of

problems, but we especially shoot for a joyous owner

experience.”

Questions

1. How might GM use organizational control to

ensur

e that the Chevy Volt meets the expecta-

tions set for it during the vehicle’s early planning

stages?

2. Which total quality management (TQM) tech-

niques may not be applicable to GM as it pioneers

next-generation alternative-fuel vehicles?

3. Would the partnership approach to supply chain

management improve GM’s procurement of mate-

rials for new energy-ef cient vehicles? Why or

why not?

SOURCES: Michael Kanellos, “Does GM Now Mean ‘Green Motors’?”

CNET News, December 14, 2007, http://news.cnet.com/Does-GM-

now-mean-green-motors/2100-11389_3-6222853.html (accessed

October 13, 2008); Robert Snell, “GM Enters Its Second Century by

Finally Taking Wraps Off Volt,” The Detroit News, September 17, 2008,

http://www.detnews.com (accessed October 11, 2008); “GM Starts Its

Next 100 Years with New Approach,” The Bay City Times, September

28, 2008, http://blog.mlive.com/bcopinion/2008/09/gm_starts_its_

599

Controlling

next_100_years_w.html (accessed October 11, 2008); James Quinn,

“GM Steers Towards Green Funding,” Telegraph, October 13, 2008,

http://www.telegraph.co.uk (accessed October 14, 2008); Chuck

Squatriglia, “GM Dedicates Design Studio to Electric Vehicles,” Wired,

December 11, 2007, http://www.wired.com/cars/futuretransport/

news/2007/12/eﬂ ex (accessed October 13, 2008); General Motors,

“The Case for GM: Has GM Closed the Quality Gap?,” videotaped

interview with Bob Lutz, GM FastLane Blog, October 6, 2008, http://

fastlane.gmblogs.com (accessed October 13, 2008); David Welch, “GM

Charges Up the Electric Chevy Volt,” BusinessWeek Online, September

17, 2008, http://www.businessweek.com/lifestyle/content/sep2008/

bw20080916_356100.htm (accessed October 13, 2008).