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CASE: THE PURCHASING MANAGERS INDEX (PMI)

During the first week of every month, headlines on the front page of The Wall Street Journal announce the current reading of the Purchasing Managers Index (PMI). What is the PMI? Why is it so important to economists? How does it relate to the study of operations management?

The Institute for Supply Management (ISM, http://www.ism.ws) has been calculating this index since 1931. The index is like the Dow Jones Industrial Average, but instead of measuring the rise and fall of a set of stocks, the PMI measures the rise and fall of manufacturing in the United States. The index is calculated using a set of measures of new manufacturing orders, production volume, supplier deliveries, inventory levels, and employment. The data are collected from a monthly survey conducted by ISM.

The PMI is a leading indicator of economic activity. A PMI over 44.5 percent, over a period of time, indicates that the overall economy, or gross domestic product (GDP), is generally expanding; a PMI below 44.5 percent indicates that the GDP is generally declining. The distance from 44.5 percent indicates the strength of the expansion or decline.

The indicator is calculated from the activity levels for functions we study in operations management. We will study how manufacturing orders are processed, how decisions related to the volume that can be processed are made, the coordination of supplier deliveries, the management of inventory, and the scheduling of employees.

Using the spreadsheet provided on the CD-ROM included with this text, answer the following questions:

1 How has employment levels in manufacturing companies in the United States changed over the past three years?
2 Have manufacturing companies been successful in reducing inventories?
3 How do inventory levels fluctuate with new orders (sales)?

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CASE: FAST-FOOD FEAST

Visit at least two different fast-food restaurants that make hamburgers. For example, in the...