MINI-CASE Canadian Pacific Railway Canadian Pacific Railway (CPR) is one of the two major railways in Canada and its history goes as far back as Canada itself does. However, it is second to Canadian National Railway (CN) in terms of size, and was having a hard time competing with CN before 2012. In 2012, a major institutional investor, unhappy with its performance, removed its head and some of its directors through a proxy contest, and brought in Hunter Harrison (the ex-CEO of CN) as the new CEO, despite a legal challenge by CN In less than six months, Harrison turned CPR around by accomplishing the following tasks: Page 54 a. Closed four of the five hump yards (classification yards using gravity) in Toronto, Winnipeg. Calgary, and Chicago combined the pair of inter-modal yards in each of Chicago and Toronto into a larger one; converted the Winnipeg yard to a local switching yard, and closed Milwaukee inter-modal yard. b. Increased train speed by 15 percent and reduced yard dwell time by 12 percent, allowing CPR to reduce the number of its locomotives, rail-cars, and workers, and to offer a fast four-day inter-modal service from Vancouver to Toronto or Chicago, which is faster than CN's. c. Negotiated five-year collective agreements with major CPR unions. d. Moved the CPR HQ from downtown to Ogden rail yard in Calgary e. Taught 700 managers how to run locomotives and rail yards. f. Reduced the number of customer service staff from 800 to 200. f. Reduced the number of customer service staff from 800 to 200. g. Lengthened some of its trains from approximately 2 km to 3-4 km. Questions 1. What was Harrison's most important competitive priority? 2. Relate the above seven actions to the nine strategic decision categories. Question 1: Short Answer Question Read the mini-case "Canadian Pacific Railway" on pages 53-54 (textbook) and answer the following questions 1) What was Harrison's most important competitive priority? 2) Are the above actions consistent with your answer to question 1)? Briefly explain Question 2: Problem Solving Question 1 Gibson Products produces cast bronze valves for use in offshore oil platforms. Currently, Gibson produces 1600 valves per day. The 20 workers at Gibson work from 7 a.m. until 4 p.m., with 30 minutes off for lunch and a 15-minute break during the morning work session and another at the afternoon work session. Gibson is in a competitive industry, and needs to increase productivity to stay competitive. They sets a goal to target a 20 percent increase Gibson's management believes that the 20 percent increase will not be possible without a change in working conditions, so they change work hours. The new schedule calls on workers to work from 7:30 a.m. until 4:30 p.m., during which workers can take one hour off at any time of their choosing. Obviously, the number of paid hours is the same as before, but production increases, perhaps because workers are given a bit more control over their workday. After this change, valve production increased to 1800 units per day (a) Calculate labor productivity for the initial situation (b) What is the productivity after the change in work rules? (c) Did Gibson Products achieves its goal? Question 3: Problem Solving Question 2 The following data (all in billion $) were the sales and costs (excluding selling and general and administrative costs) of McDonalds for company-operated restaurants (i.e., excluding franchise restaurants) during a three-year period a) Calculate the labour productivity (in $ sales over $ payroll & benefits costs) and its growth over time Interpret your results b) Calculate the multifactor productivity (in $ sales over $ all operating costs given) and its growth over time. Interpret your results 2 6.6 16.6 15.5 5.5 5.9 5.2 4.3 4.3 4.0 3.9 3.8 3.5 3 Sales Operating costs Food& paper Payroll & benefits Occupancy (lease, etc Question 4: Problem Solving Question 3 Weekly sales of copy paper at Cubicle Suppliers are in the table below. Compute a three-period moving average and a four-period moving average for weeks 5, 6, and 7. Compute MAD for each forecast. Which model is more accurate? Forecast week 8 with the more accurate method Week 2 4 Sales (cases) 21 27 31 19 17 21 Question 5: Problem Solving Question 4 Jim's department at a local department store has tracked the sales of a product over the last ten weeks. It decides that the forecast demand uses two methods: 1) an exponential smoothing with an alpha of 0.3, and an initial forecast of 28.0 for period 1; 2) a three-period weighted moving average with weights 0.5, 0.3, and 0.2 (from the latest period to the oldest period) Period Demand 24 23 26 36 26 30 32 26 25 28 2 3 4 28 a. Use demand forecasts from week 4 to week 10 to calculate the MSE and MAD for each forecast. Does one forecast seem superior? Explain b. Calculate 2s control limits for each forecast, plot control charts, and determine if each forecasting process is in control. Explain Question 6: Problem Solving Question 5 John Lindsay sells CDs that contain 25 software packages that perform a variety of financial functions, including net present value, internal rate of return, and other financial programs typically used by business students majoring in finance. Depending on the quantity ordered, its supplier offers the following price discounts. The annual demand is 2,000 units. John's ordering cost is $250 per order and the holding cost is $1 per unit per year. Price ranges 2 4 Quantity ordered To (units 599 1199 1,799 Price $10.00 $9.95 $9.90 $9.85 From (units 600 1,200 1,800 and u a) Determine the order quantity that will minimize total cost. b) If the supplier's lead time is 10 days, what is the optimal purchasing policy of the manufacturer (assuming a year has 250 working days) Question 7: Problem Solving Question 6 Montegut Manufacturing produces a product for which the annual demand is 10,000 units. Production averages 100 units per day, while demand is 40 units per day. Holding costs are $2.00 per unit per year, and setup cost is $200.00 (a) If the firm wishes to produce this product in economic batches, what size batch should be used? (b) What is the maximum inventory level? What is the average inventory level? (c) How many order cycles are there per year? (d) What are the total annual holding and setup costs