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Lean manufacturing

Lean manufacturing is a philosophy of production that focuses on the minimization of resources used throughout the organization in the production of goods and services. Lean manufacturing involves identifying and eliminating non-value adding activities in design, production, supply-chain management, and in dealing with the customers.

Select a manufacturing business in Saudi Arabia and discuss the following:

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The company’s employee empowerment opportunities.

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Using websites as a reference is not acceptable, it must be books or scientific papers.

Should be Using at least 3 references.

Use Saudi Electronic University academic writing standards and APA style (7th ed.) guidelines

Operations Management
Operations Management
THIRTEENTH EDITION
William J. Stevenson
Saunders College of Business
Rochester Institute of Technology
This book is dedicated to you.
OPERATIONS MANAGEMENT, THIRTEENTH EDITION
Published by McGraw-Hill Education, 2 Penn Plaza, New York, NY 10121. Copyright © 2018 by McGraw-Hill
Education. All rights reserved. Printed in the United States of America. Previous editions © 2015, 2012, and
2009. No part of this publication may be reproduced or distributed in any form or by any means, or stored in
a database or retrieval system, without the prior written consent of McGraw-Hill Education including, but not
limited to, in any network or other electronic storage or transmission, or broadcast for distance learning.
Some ancillaries, including electronic and print components, may not be available to customers outside the
United States.
This book is printed on acid-free paper.
1 2 3 4 5 6 7 8 9 0 LWI 21 20 19 18 17
ISBN
MHID
978-1-259-66747-3
1-259-66747-2
Chief Product Officer, SVP Products & Markets: G. Scott Virkler
Vice President, General Manager, Products & Markets: Marty Lange
Vice President, Content Design & Deliver: Betsy Whalen
Managing Director: Tim Vertovec
Senior Brand Manager: Charles Synovec
Director, Product Development: Rose Koos
Lead Product Developer: Michele Janicek
Product Developer: Christina Holt / Ryan McAndrews
Marketing Manager: Trina Maurer
Senior Director of Digital Content: Douglas Ruby
Digital Product Analyst: Kevin Shanahan
Director, Content Design & Delivery: Linda Avenarius
Program Manager: Mark Christianson
Content Project Managers: Harvey Yep (Core) / Kristin Bradley (Assessment)
Buyer: Sandy Ludovissy
Design: Matt Diamond
Content Licensing Specialists: Shawntel Schmitt (Image) / Beth Thole (Text)
Typeface: 10/12 STIX Mathjax Main
Compositor: SPi Global
Printer: LSC Communications – Willard
Cover images: © Andrew Bret Wallis/Getty Images; © Peopleimages.com/Getty Images; © Echo/Getty Images;
© Jorg Greuel/Getty Images; © Monty Rakusen/Getty Images
Library of Congress Cataloging-in-Publication Data
Names: Stevenson, William J., author.
Title: Operations management / William J. Stevenson, Saunders College of Business,
Rochester Institute of Technology.
Description: Thirteenth edition. | New York, NY : McGraw-Hill Education,
[2018] | Series: The McGraw-Hill series in operations and decision sciences
Identifiers: LCCN 2016052871| ISBN 9781259667473 (alk. paper) | ISBN 1259667472 (alk. paper)
Subjects: LCSH: Production management.
Classification: LCC TS155 .S7824 2018 | DDC 658.5–dc23 LC record available at
https://lccn.loc.gov/2016052871
All credits appearing on page or at the end of the book are considered to be an extension of the copyright page.
The Internet addresses listed in the text were accurate at the time of publication. The inclusion of a website does
not indicate an endorsement by the authors or McGraw-Hill Education, and McGraw-Hill Education does not
guarantee the accuracy of the information presented at these sites.
mheducation.com/highered
The McGraw-Hill Series in Operations
and Decision Sciences
Operations Management
Beckman and Rosenfield, Operations,
Strategy: Competing in the 21st Century,
First Edition
Benton, Purchasing and Supply Chain
Management, Second Edition
Bowersox, Closs, Cooper, and Bowersox,
Supply Chain Logistics Management,
Fourth Edition
Brown and Hyer, Managing Projects: A
Team-Based Approach, First Edition
Burt, Petcavage, and Pinkerton, Supply
Management, Eighth Edition
Cachon and Terwiesch, Operations
Management, First Edition
Cachon and Terwiesch, Matching Supply
with Demand: An Introduction to
Operations Management, Third Edition
Cooper and Schindler, Business Research
Methods, Twelfth Edition
Finch, Interactive Models for Operations
and Supply Chain Management, First
Edition
Fitzsimmons, Fitzsimmons, and Bordoloi,
Service Management: Operations,
Strategy, Information Technology, Eighth
Edition
Gehrlein, Operations Management Cases,
First Edition
Harrison and Samson, Technology
Management, First Edition
Hayen, SAP R/3 Enterprise Software: An
Introduction, First Edition
Hill, Manufacturing Strategy: Text &
Cases, Third Edition
Hopp, Supply Chain Science, First Edition
Jacobs, Berry, Whybark, and Vollmann,
Manufacturing Planning & Control for
Supply Chain Management, Sixth Edition
Jacobs and Chase, Operations and Supply
Management: The Core, Fourth Edition
Jacobs and Chase, Operations and Supply
Management, Fifteenth Edition
Jacobs and Whybark, Why ERP? First
Edition
Larson and Gray, Project Management:
The Managerial Process, Seventh Edition
Leenders, Johnson, and Flynn, Purchasing
and Supply Management, Fifteenth
Edition
Olson, Introduction to Information
Systems Project Management, Second
Edition
Schroeder, Goldstein, Rungtusanatham,
Operations Management: Contemporary
Concepts and Cases, Seventh Edition
Seppanen, Kumar, and Chandra, Process
Analysis and Improvement, First Edition
Simchi-Levi, Kaminsky, and Simchi-Levi,
Designing and Managing the Supply
Chain: Concepts, Strategies, Case
Studies, Third Edition
Sterman, Business Dynamics: Systems
Thinking and Modeling for Complex
World, First Edition
Stevenson, Operations Management,
Thirteenth Edition
Swink, Melnyk, Cooper, and Hartley,
Managing Operations Across the Supply
Chain, Third Edition
Thomke, Managing Product and Service
Development: Text and Cases, First
Edition
Ulrich and Eppinger, Product Design and
Development, Fourth Edition
Zipkin, Foundations of Inventory
Management, First Edition
Quantitative Methods and Management
Science
Hillier and Hillier, Introduction to
Management Science: A Modeling
and Case Studies Approach with
Spreadsheets, Fifth Edition
Stevenson and Ozgur, Introduction to
Management Science with Spreadsheets,
First Edition
v
Preface
The material in this book is intended as an introduction to the
field of operations management. The topics covered include
both strategic issues and practical applications. Among the
topics are forecasting, product and service design, capacity
planning, management of quality and quality control, inventory management, scheduling, supply chain management, and
project management.
My purpose in revising this book continues to be to provide
a clear presentation of the concepts, tools, and applications of
the field of operations management. Operations management is
evolving and growing, and I have found updating and integrating new material to be both rewarding and challenging, particularly due to the plethora of new developments in the field, while
facing the practical limits on the length of the book.
This text offers a comprehensive and flexible amount
of content that can be selected as appropriate for different
courses and formats, including undergraduate, graduate, and
executive education.
This allows instructors to select the chapters, or portions of
chapters, that are most relevant for their purposes. That flexibility also extends to the choice of relative weighting of the
qualitative or quantitative aspects of the material and the order
in which chapters are covered because chapters do not depend
on sequence. For example, some instructors cover project
management early, others cover quality or lean early, etc.
As in previous editions, there are major pedagogical features designed to help students learn and understand the material. This section describes the key features of the book, the
chapter elements, the supplements that are available for teaching the course, highlights of the eleventh edition, and suggested applications for classroom instruction. By providing
this support, it is our hope that instructors and students will
have the tools to make this learning experience a rewarding
one.
What’s New in This Edition
Class preparation exercises are now available for all chapters
and chapter supplements. The purpose of these exercises is to
introduce students to the subject matter before class in order
to enhance classroom learning. These exercises are available
in the Instructor’s Resource Manual. Special thanks to Linda
Brooks for her help in developing the exercises.
Some content has been rewritten or added to improve clarity, shorten wording, or update information. New material
has been added on supply chains (including a different, more
realistic, way to conceptualize supply chains), as well as on
product life-cycle management, 3-D printing, drones, locations, and other topics. New critical thinking exercises have
been added. The explanation of learning curve time reduction
has been simplified with a new diagram. Some older readings
have been deleted, and new readings added on such topics as
fracking, mass customization of fast foods, and self-driving
vehicles.
Acknowledgments
I want to thank the many contributors to this edition. Reviewers and adopters of the text have provided a “continuously
improving” wealth of ideas and suggestions. It is encouraging to me as an author. I hope all reviewers and readers will
know their suggestions were valuable, were carefully considered, and are sincerely appreciated. The list includes postpublication reviewers.
Robert Aboolian, California State University—San Marcos
Pamela Barnes, Kansas State University
Greg Bier, University of Missouri
Gary Black, University of Southern Indiana
Jeff Brand, Marquette University
Cenk Caliskan, Utah Valley University
Cem Canel, University of North Carolina—Wilmington
Jen-Yi Chen, Cleveland State University
Robert Clark, Stony Brook University
Dinesh Dave, Appalachian State University
Abdelghani Elimam, San Francisco State
Kurt Engemann, Iona College
Michael Fathi, Georgia Southwestern State
Warren Fisher, Stephen F. Austin State University
Gene Fliedner, Oakland University
Theodore Glickman, George Washington University
Haresh Gurnani, University of Miami
Johnny Ho, Columbus State University
Ron Hoffman, Greenville Technical College
Lisa Houts, California State University—Fresno
Stella Hua, Western Washington University
Neil Hunt, Suffolk University
Faizul Huq, Ohio University
Richard Jerz, St. Ambrose University
George Kenyon, Lamar University
Casey Kleindienst, California State University—Fullerton
John Kros, East Carolina University
vii
viii
Preface
Anita Lee-Post, University of Kentucky
Nancy Levenburg, Grand Valley State University
F. Edward Ziegler, Kent State University
Other contributors include accuracy checkers: Gary Black,
University of Southern Indiana, Michael Godfrey, University of Wisconsin at Oshkosh, and Richard White, University of North Texas; Test Bank: Alan Cannon, University of
Texas at Arlington; PowerPoints: David Cook, Old Dominion
University; Data Sets: Mehdi Kaighobadi, Florida Atlantic
University; Excel Templates and ScreenCam tutorials: Lee
Tangedahl, University of Montana; Instructors Manual:
Michael Godfrey.
Special thanks goes out to Larry White, Eastern Illinois
University, who helped revise, design, and develop interactive
content in Connect ® Operations Management for this edition.
Finally I would like to thank all the people at McGrawHill/Irwin for their efforts and support. It is always a pleasure
to work with such a professional and competent group of people. Special thanks go to Dolly Womack, Senior Brand Manager; Michele Janicek, Lead Product Developer; Christina
Holt and Ryan McAndrews, Product Developers; Harvey Yep
and Kristin Bradley, Content Project Managers; Sandy Ludovissy, Buyer; Matt Diamond, Designer; Shawntel Schmitt and
Beth Thole, Content Licensing Specialists; and many others
who worked behind the scenes.
I would also like to thank the many reviewers of previous
editions for their contributions. Vikas Agrawal, Fayetteville
State University; Bahram Alidaee, University of Mississippi;
Ardavan Asef-Faziri, California State University at Northridge; Prabir Bagchi, George Washington State University;
Gordon F. Bagot, California State University at Los Angeles;
Ravi Behara, Florida Atlantic University; Michael Bendixen,
Nova Southeastern; Ednilson Bernardes, Georgia Southern
University; Prashanth N. Bharadwaj, Indiana University of
Pennsylvania; Greg Bier, University of Missouri at Columbia;
Joseph Biggs, Cal Poly State University; Kimball Bullington,
Middle Tennessee State University; Alan Cannon, University
of Texas at Arlington; Injazz Chen, Cleveland State University; Alan Chow, University of Southern Alabama at Mobile;
Chrwan-Jyh, Oklahoma State University; Chen Chung, University of Kentucky; Robert Clark, Stony Brook University;
Loretta Cochran, Arkansas Tech University; Lewis Coopersmith, Rider University; Richard Crandall, Appalachian State
University; Dinesh Dave, Appalachian State University; Scott
Dellana, East Carolina University; Kathy Dhanda, DePaul
University; Xin Ding, University of Utah; Ellen Dumond,
California State University at Fullerton; Richard Ehrhardt,
University of North Carolina at Greensboro; Kurt Engemann,
Iona College; Diane Ervin, DeVry University; Farzaneh
Fazel, Illinois State University; Wanda Fennell, University of
Mississippi at Hattiesburg; Joy Field, Boston College; ­Warren
Fisher, Stephen F. Austin State University; Lillian Fok, University of New Orleans; Charles Foley, Columbus State
Community College; Matthew W. Ford, Northern Kentucky
University; Phillip C. Fry, Boise State University; Charles
A. Gates Jr., Aurora University; Tom Gattiker, Boise State
University; Damodar Golhar, Western Michigan University;
Robert Graham, Jacksonville State University; Angappa
Gunasekaran, University of Massachusetts at Dartmouth;
Haresh Gurnani, University of Miami; Terry Harrison, Penn
State University; Vishwanath Hegde, California State University at East Bay; Craig Hill, Georgia State University;
Jim Ho, University of Illinois at Chicago; Seong Hyun Nam,
University of North Dakota; Jonatan Jelen, Mercy College;
Prafulla Joglekar, LaSalle University; Vijay Kannan, Utah
State University; Sunder Kekre, Carnegie-Mellon University; Jim Keyes, University of Wisconsin at Stout; Seung-Lae
Kim, Drexel University; Beate Klingenberg, Marist College;
John Kros, East Carolina University; Vinod Lall, ­Minnesota
State University at Moorhead; Kenneth Lawrence, New
­Jersey Institute of Technology; Jooh Lee, Rowan University;
Anita Lee-Post, University of Kentucky; Karen Lewis, University of Mississippi; Bingguang Li, Albany State University; Cheng Li, California State University at Los Angeles;
Maureen P. Lojo, California State University at Sacramento;
F. Victor Lu, St. John’s University; Janet Lyons, Utah State
University; James Maddox, Friends University; Gita Mathur,
San Jose State University; Mark McComb, Mississippi College; George Mechling, Western Carolina University; Scott
Metlen, University of Idaho; Douglas Micklich, Illinois
State University; Ajay Mishra, SUNY at Binghamton; Scott
S. Morris, Southern Nazarene University; Philip F. Musa,
University of Alabama at Birmingham; Roy Nersesian,
Monmouth University; Jeffrey Ohlmann, University of Iowa
at Iowa City; John Olson, University of St. Thomas; Ozgur
Ozluk, San Francisco State University; Kenneth Paetsch,
Cleveland State University; Taeho Park, San Jose State University; Allison Pearson, Mississippi State University; Patrick Penfield, Syracuse University; Steve Peng, California
State University at Hayward; Richard Peschke, Minnesota
State University at Moorhead; Andru Peters, San Jose State
University; Charles Phillips, Mississippi State University;
Frank Pianki, Anderson University; Sharma Pillutla, T
­ owson
University; Zinovy Radovilsky, California State University at Hayward; Stephen A. Raper, University of Missouri
at Rolla; Pedro Reyes, Baylor University; Buddhadev Roychoudhury, Minnesota State University at Mankato; ­Narendra
Rustagi, Howard University; Herb Schiller, Stony Brook
­University; Dean T. Scott, DeVry University; Scott J. Seipel,
Middle Tennessee State University; Raj Selladurai, Indiana
University; Kaushic Sengupta, Hofstra University; Kenneth
Shaw, Oregon State University; Dooyoung Shin, Minnesota
State University at Mankato; Michael Shurden, Lander University; Raymond E. Simko, Myers University; John Simon,
Governors State University; Jake Simons, Georgia Southern
University; Charles Smith, Virginia Commonwealth University; Kenneth Solheim, DeVry University; Young Son,
Preface
Bernard M. Baruch College; Victor Sower, Sam H
­ ouston
State University; Jeremy Stafford, University of North
­Alabama; Donna Stewart, University of Wisconsin at Stout;
Dothang Truong, Fayetteville State University; Mike Umble,
Baylor University; Javad Varzandeh, California State University at San Bernardino; Timothy Vaughan, University of
Wisconsin at Eau Claire; Emre Veral, Baruch College; Mark
Vroblefski, University of Arizona; Gustavo Vulcano, New
York University; Walter Wallace, Georgia State University;
ix
James Walters, Ball State University; John Wang, Montclair
State University; Tekle Wanorie, Northwest Missouri State
University; Jerry Wei, University of Notre Dame; Michael
Whittenberg, University of Texas; Geoff Willis, University
of Central Oklahoma; Pamela Zelbst, Sam Houston State
University; Jiawei Zhang, NYU; Zhenying Zhao, University
of Maryland; Yong-Pin Zhou, University of Washington.
William J. Stevenson
Walkthrough
MAJOR STUDY AND LEARNING FEATURES
A number of key features in this text have been specifically
designed to help introductory students learn, understand, and
apply Operations concepts and problem-solving techniques.
Examples with Solutions
Rev.Confirming Pages
Throughout the text, wherever a quantitative or
analytic technique is introduced, an example is
included to illustrate the application of that technique. These are designed to be easy to follow.
Chapter Three Forecasting
EXAMPLE
Determining a Regression Equation
Sales of new houses and three-month lagged unemployment are shown in the following
table. Determine if unemployment levels can be used to predict demand for new houses
and, if so, derive a predictive equation.
Period . . . . . . . . . . . 1
Units sold . . . . . . . . 20
Unemployment %
(three-month lag) 7.2
1.
2
41
3
17
4
35
5
25
6
31
7
38
8
50
9
15
10
19
11
14
4.0
7.3
5.5
6.8
6.0
5.4
3.6
8.4
7.0
9.0
Plot the data to see if a linear model seems reasonable. In this case, a linear model
seems appropriate for the range of the data.
50
Units sold, y
40
30
20
10
0
2
4
6
8
10
Level of unemployment (%), x
2.
Check the correlation coefficient to confirm that it is not close to zero using the website template, and then obtain the regression equation:
r = −.966
This is a fairly high negative correlation. The regression equation is
y = 71.85 − 6.91x
Note that the equation pertains only to unemployment levels in the range 3.6 to 9.0, because
sample observations covered only that range.
x
105
10
mhhe.com/stevenson13e
S O L U T I O N
1.
Competitive pressure often means that business organizations must frequently assess their competitors’ strengths and weaknesses, as well as their own, to remain competitive.
2.
Strategy formulation is critical because strategies provide direction for the organization, so they
can play a role in the success or failure of a business organization.
3.
Functional strategies and supply chain strategies need to be aligned with the goals and strategies
of the overall organization.
4.
The three primary business strategies are low cost, responsiveness, and differentiation.
5.
Productivity is a key factor in the cost of goods and services. Increases in productivity can
become a competitive advantage.
6.
High productivity is particularly important for organizations that have a strategy of low costs.
competitiveness, 42
core competencies, 46
environmental scanning, 48
goals, 44
mission, 44
Solved Problems
At the end of chapters
and chapter supplements,
“Solved Problems” are provided to illustrate problem
solving and the core concepts in the chapter. These
have been carefully prepared
to help students understand
the steps involved in solving
different types of problems.
The Excel logo indicates that
a spreadsheet is available
on the text’s website, to help
solve the problem.
mission statement, 44
operations strategy, 51
order qualifiers, 48
order winners, 48
productivity, 56
quality-based strategies, 53
strategies, 44
SWOT, 47
tactics, 45
time-based strategies, 53
Computing Productivity
A company that processes fruits and vegetables is able to produce 400 cases of canned peaches in
one-half hour with four workers. What is labor productivity?
400 cases
Quantity produced
Labor productivity = ________________ = ________________________
Labor hours
4 workers × 1 / 2 hour / worker
= 200 cases per labor hour
A wrapping-paper company produced 2,000 rolls of paper one day. Labor cost was $160, material
cost was $50, and overhead was $320. Determine the multifactor productivity.
Quantity produced
Multifactor productivity = ______________________________
Labor cost + Material cost + Overhead
2,000 rolls
= _______________ = 3.77 rolls per dollar input
$160 + $50 + $320
Problem 2
mhhe.com/stevenson13e
Solution
Computing Multifactor Productivity
Problem 3
mhhe.com/stevenson13e
705
Usable output
Multifactor productivity = __________________________________
Labor cost + Material cost + Overhead cost
300 units
= _____________________________________________________
(3 workers × 8 hours × $20 / hour) + (600 pounds × $1 / pound) +
(3 workers × 8 hours × $20 / hour × 1.50)
300 units
= ________________
$480 + $600 + $720
= .167units of output per dollar of input
Solution
Excel Spreadsheet
Solutions
ste67472_ch02_040-073.indd
63
Using earliest due date as the selection criterion, the job sequence is C-A-E-B-D-F.
The measures of effectiveness are as follows (see table):
(1) Average flow time: 110/6 = 18.33 days.
(2) Average tardiness: 38/6 = 6.33 days.
(3) Average number of jobs at the work center: 110/41 = 2.68.
(3)
mhhe.com/stevenson13e
A variation of the multifactor productivity calculation incorporates the standard price in the
First Pages
numerator by multiplying the units by the standard price.
TABLE 16.5 Excel solution for Example 2a
(2)
Problem 1
Solution
Computing Multifactor Productivity
Chapter Sixteen Scheduling
(1)
KEY TERMS
SOLVED PROBLEMS
Compute the multifactor productivity measure for an eight-hour day in which the usable output was
300 units, produced by three workers who used 600 pounds of materials. Workers have an hourly
wage of $20, and material cost is $1 per pound. Overhead is 1.5 times labor cost.
c.
KEY POINTS
(2) – (3)
Where applicable, the examples and solved problems
include screen shots of a
spreadsheet solution. Many
of these were taken from
the Excel templates, which
are on the text’s website.
Templates are programmed
to be fully functional in Excel
2013 and earlier.
01/06/17 09:11 PM
xi
CHAPTER ELEMENTS
Within each chapter, you will find the following elements
that are designed to facilitate study and learning. All of
these have been carefully developed over many editions and
have proven to be successful.
Learning Objectives
Every chapter and supplement lists the learning
objectives to achieve when studying the chapter material. The learning objectives are also
included next to the specific material in the margins of the text.
Rev.Confirming Pages
Confirming Pages
4
Product and Service
Design
LEARNING OBJECTIVES
After completing this chapter, you should be able to:
LO4.1
Explain the strategic importance of product and service design.
LO4.2
Describe what product and service design does.
LO4.3
Name the key questions of product and service design.
LO4.4
Identify some reasons for design or redesign.
LO4.5
List some of the main sources of design ideas.
LO4.6
Discuss the importance of legal, ethical, and sustainability considerations in product and service design.
LO4.7
Explain the purpose and goal of life cycle assessment.
LO4.8
Explain the phrase “the 3 Rs.”
LO4.9
Briefly describe the phases in product design and development.
© Mark Lennihan/AP Images
4.11 Service Design, 165
Overview of Service Design, 165
Differences between Service
Design and Product Design, 165
Phases in the Service Design
Process, 166
Service Blueprinting, 167
Characteristics of Well-Designed
Service Systems, 168
Challenges of Service Design, 168
Guidelines for Successful Service
Design, 168
4.12 Operations Strategy, 169
Operations Tour: High Acres
Landfill, 173
Chapter Supplement: Reliability, 174
LO4.10 Discuss several key issues in product or service design.
LO4.11 Discuss the two key issues in service design.
LO4.12 List the characteristics of well-designed service systems.
LO4.13 List some guidelines for successful service design.
C H A P T E R
4.1
O U T L I N E
Introduction, 138
What Does Product and Service
Design Do?, 138
Key Questions, 138
Reasons for Product or
Service Design or
Redesign, 139
4.2 Idea Generation, 140
4.3 Legal and Ethical
Considerations, 143
4.4 Human Factors, 144
4.5 Cultural Factors, 145
4.6 Global Product and
Service Design, 145
4.7 Environmental Factors:
Sustainability, 146
Designing for Mass
Customization, 154
Reliability, 155
Robust Design, 156
Degree of Newness, 157
Quality Function Deployment, 157
The Kano Model, 160
Cradle-to-Grave Assessment, 146
End-of-Life Programs, 146
The Three Rs: Reduce, Reuse,
and Recycle, 146
Reduce: Value Analysis, 146
Reuse: Remanufacturing, 148
Recycle, 149
4.9 Phases in Product Design and
Development, 161
4.8 Other Design Considerations, 151
4.10 Designing for Production, 162
Strategies for Product or Service
Life Stages, 151
Product Life Cycle
Management, 152
Degree of Standardization, 153
Concurrent Engineering, 162
Computer-Aided Design, 163
Production Requirements, 164
Component Commonality, 164
The essence of a business organization is the products and services it offers, and every
LO4.1 Explain the strateaspect of the organization and its supply chain are structured around those products and
gic importance of product
services. Organizations that have well-designed products or services are more likely to
and service design.
realize their goals than those with poorly designed products or services. Hence, organizations have a strategic interest in product and service design. Product or service design should be closely tied to an
organization’s strategy. It is a major factor in cost, quality, time-to-market, customer satisfaction, and competitive advantage. Consequently, marketing, finance, operations, accounting, IT, and HR need to be involved. Demand forecasts and
projected costs are important, as is the expected impact on the supply chain. It is significant to note that an important
cause of operations failures can be traced to faulty design. Designs that have not been well thought out, or incorrectly
implemented, or instructions for assembly or usage that are wrong or unclear, can be the cause of product and service
failures, leading to lawsuits, injuries and deaths, product recalls, and damaged reputations.
The introduction of new products or services, or changes to product or service designs, can have impacts throughout
the organization and the entire supply chain. Some processes may change very little, while others may have to change
considerably in terms of what they do or how and when they do it. New processes may have to be added, and some current ones may be eliminated. New suppliers and distributors may need to be found and integrated into the system, and
some current suppliers and distributors may no longer be an appropriate fit. Moreover, it is necessary to take into account
projected impact on demand as well as financial, marketing, and distribution implications. Because of the potential for
widespread effects, taking a “big picture” systems approach early and throughout the design or redesign process is
imperative to reduce the chance of missing some implications and costs, and to understand the time it will take. Likewise,
input from engineering, operations, marketing, finance, accounting, and supply chains is crucial.
In this chapter you will discover insights into the design process that apply to both product and service design.
137
ste67472_ch04_136-173.indd
136
01/06/17 08:07 PM
Chapter Outlines
Opening Vignettes
Every chapter and supplement includes an
outline of the topics covered.
Each chapter opens with an introduction to the
important operations topics covered in the chapter.
This enables students to see the relevance of operations management in order to actively engage in
learning the material.
xii
ste67472_ch04_136-173.indd 137
01/16/17 04:35 PM
Figures and Photos
The text includes photographs and
graphic illustrations to support
­student learning and provide interest
and motivation. Approximately 100
­carefully selected photos highlight
the 13th edition. The photos illustrate
applications of operations and supply
chain concepts in many successful
companies. More than 400 graphic
illustrations, more than any other
text in the field, are included and all
are color coded with ­pedagogical
­consistency to assist students in
understanding concepts.
56
Chapter Two
Confirming Pages
Chapter Six Process Selection and Facility Layout
244
FIGURE 6.1
Process selection and
capacity planning influence
system design
Inputs
Outputs
Forecasting
Facilities and
equipment
Capacity
Planning
Product and
service design
Layout
Confirming Pages
Process
Selection
Technological
change
Work
design
Competitiveness, Strategy, and Productivity
A major key to Apple’s continued
success is its ability to keep pushing
the boundaries of innovation. Apple
has demonstrated how to create
growth by dreaming up products so
new and ingenious that they have
upended one industry after another.
of where process selection and capacity planning fit into system design. Forecasts, product
and service design, and technological considerations all influence capacity planning and process selection. Moreover, capacity and process selection are interrelated, and are often done in
concert. They, in turn, affect facility and equipment choices, layout, and work design.
How an organization approaches process selection is determined by the organization’s process strategy. Key aspects include:
• Capital intensity: The mix of equipment and labor that will be used by the organization.
• Process flexibility: The degree to which the system can be adjusted to changes in
processing requirements due to such factors as changes in product or service design,
changes in volume processed, and changes in technology.
Pieter Beens/Shutterstock
LO6.2 Name the two
main factors that influence
process selection.
6.2 PROCESS SELECTION
Process choice is demand driven. The two key questions in process selection are:
1.
2.
How much variety will the process need to be able to handle?
How much volume will the process need to be able to handle?
and business organizations need to be aware of the impact they Answers
are havingtointhese
thesequestions
areas and will serve as a guide to selecting an appropriate process. Usually,tovolume
andpressure
variety groups
are inversely related; a higher level of one means a lower level of the
respond accordingly. Otherwise, organizations may be subject
attack by
other. However, the need for flexibility of personnel and equipment is directly related to the
and risk damage to their reputation.
LO2.6 Define the term
productivity and explain
why it is important to companies and to countries.
Productivity A measure of
the effective use of resources,
usually expressed as the ratio
of output to input.
level of variety the process will need to handle: the lower the variety, the less the need for
flexibility, while the higher the variety, the greater the need for flexibility.
2.7 PRODUCTIVITY
There is another aspect of variety that is important. Variety means either having separate
operations for each product or service, with a steady demand for each, or being willing to
One of the primary responsibilities of a manager is to achieve
productive
useidle
of an
organizalive with some
time,
or to get equipment ready every time there is the need to change the
tion’s resources. The term productivity is used to describe this.
Productivity
is an index
thatservice being provided.
product
being produced
or the
Icons
measures output (goods and services) relative to the input (labor, materials, energy, and other
resources) used to produce it. It is usually expressed as the ratio
of output to
input:
Process
Types
Icons are included in the text, to point out relevant applications in a discussion or concept.
TheseOutput
include: Excel icons to point
Excel
ScreenCam
Tutorial and
icons
to
Thereout
are five
basicapplications;
process
types: job and
shop, batch,
repetitive, continuous,
project.
Productivity = ______
(2–1)
link toInput
the tutorials on the text’s website.
Job Shop.
A job shopimporusually operates on a relatively small scale. It is used when a low
Although productivity is important for all business organizations,
it is particularly
of high-variety
goods
tant for organizations that use a strategy of low cost, becausevolume
the higher
the productivity,
the or services will be needed. Processing is intermittent; work
includes small jobs, each with somewhat different processing requirements. High flexibility
lower the cost of the output.
A productivity ratio can be computed for a single operation,
department, an organizausinga general-purpose
equipment and skilled workers are important characteristics of a job
tion, or an entire country. In business organizations, productivity
are used forexample
plan- of a job shop is a tool and die shop that is able to produce
shop. Aratios
manufacturing
ning workforce requirements, scheduling equipment, financial analysis, and other important
tasks.
Productivity has important implications for business organizations
and for entire nations.
screenCam tutorial
mhhe.com/stevenson13e
For nonprofit organizations, higher productivity means lower costs; for profit-based organizations, productivity is an important factor in determining how competitive a company is. For
a nation, the rate of productivity growth is of great importance. Productivity growth is the
increase in productivity from one period to the next relative to the productivity in the preceding period. Thus,
ste67472_ch06_242-295.indd
244
Current productivity − Previous productivity
Productivity growth = _____________________________________ × 100
Previous productivity
For example, if productivity increased from 80 to 84, the growth rate would be
84 − 80
______
× 100 = 5%
80
01/06/17 07:38 PM
(2–2)
xiii
Confirming Pages
Chapter Five Strategic Capacity Planning for Products and Services
211
Operations Strategies
5.12 OPERATIONS STRATEGY
The strategic implications of capacity decisions can be enormous, impacting all areas of the
organization. From an operations management standpoint, capacity decisions establish a set
of conditions within which operations will be required to function. Hence, it is extremely
important to include input from operations management people in making capacity decisions.
Flexibility can be a key issue in capacity decisions, although flexibility is not always an option,
particularly in capital-intensive industries. However, where possible, flexibility allows an organization to be agile—that is, responsive to changes in the marketplace. Also, it reduces to a certain
extent the dependence on long-range forecasts to accurately predict demand. And flexibility makes
it easier for organizations to take advantage of technological and other innovations. Maintaining
excess capacity (a capacity cushion) may provide a degree of flexibility, albeit at added cost.
Some organizations use a strategy of maintaining a capacity cushion for the purpose of
blocking entry into the market by new competitors. The excess capacity enables them to produce at costs lower than what new competitors can. However, such a strategy means higherthan-necessary unit costs, and it makes it more difficult to cut back if demand slows, or to
shift to new product or service offerings.
Efficiency improvements and utilization improvements can provide capacity increases.
Such improvements can be achieved by streamlining operations and reducing waste. The
chapter on lean operations describes ways for achieving those improvements.
Bottleneck management can be a way to increase effective capacity, by scheduling nonbottleneck operations to achieve maximum utilization of bottleneck operations.
In cases where capacity expansion will be undertaken, there are two strategies for determining the timing and degree of capacity expansion. One is the expand-early strategy (i.e., before
demand materializes). The intent might be to achieve economies of scale, to expand market share,
or to preempt competitors from expanding. The risks of this strategy include an oversupply that
would drive prices down, and underutilized equipment that would result in higher unit costs.
The other approach is the wait-and-see strategy (i.e., to expand capacity only after demand
materializes, perhaps incrementally). Its advantages include a lower chance of oversupply due
to more accurate matching of supply and demand, and higher capacity utilization. The key risks
are loss of market share and the inability to meet demand if expansion requires a long lead time.
In cases where capacity contraction will READING
be undertaken, capacity disposal strategies
DUTCH BOY BRUSHES
become important. This can be the result of the need to replace aging equipment with newer
equipment. It can also be the result of outsourcing and downsizing operations. The cost or
Sherwin-Williams’ Dutch Boy Group put a revolutionary spin
benefit of asset disposal should be taken into account
when
contemplating
these actions.
on paintcans
with
its innovative square-shaped
Twist & Pourâ„¢
paint-delivery container for the Dirt Fighter interior latex paint line.
The four-piece square container could be the first major change in
how house paint is packaged in decades. Lightweight but sturdy,
the Twist & Pour “bucket” is packed with so many conveniences,
it’s next to impossible to mess up a painting project.
Capacity refers to a system’s potential for producing goods
or Best
delivering
overpackaging
a specified
time
Winning
of Show services
in an AmeriStar
competition
sponsoredisbya the
Institute
Packaging
the excluinterval. Capacity decisions are important because capacity
ceiling
onofoutput
andProfessionals,
a major determisive, all-plastic paint container stands almost 7½ in. tall and holds
nant of operating costs.
a bit lessthat
thanwill
1 gal.be
Rust-resistant
and moisture-resistant,
Three key inputs to capacity planning are the kind126
ofoz.,
capacity
needed, how
much will be
the plastic bucket gives users a new way to mix, brush, and store
needed, and when it will be needed. Accurate forecasts
are
critical
to
the
planning
process.
paint.
The capacity planning decision is one of the mostAimportant
managers
make.
The
hollow handledecisions
on one sidethat
makes
it comfortable
to pour
and
capacity decision is strategic and long-term in nature,
often
involvingsnap-in
a significant
investment
[carry].
A convenient,
pour spoutinitial
neatly pours
paint into
traycases
with no
dripping
but can
be accrue
removed over
if desired,
to allow
of capital. Capacity planning is particularly difficultain
where
returns
will
a lengthy
a wide brush to be dipped into the 5¾-in.-dia. mouth. Capping
period and risk is a major consideration.
the container is a large, twist-off lid that requires no tools to open
A variety of factors can interfere with effective capacity,
so effective capacity is usually somewhat
or close. Molded with two lugs for a snug-finger-tight closing,
less than design capacity. These factors include facilities
design
layout,
factors,
the threaded
cap and
provides
a tighthuman
seal to extend
theproduct/
shelf life of
service design, equipment failures, scheduling problems,
and
quality considerations.
unused
paint.
the lid requiresLong-term
no tools to access,
the snap-off carry
bail
Capacity planning involves long-term and short-termWhile
considerations.
considerations
relate
is assembled
container in
“locked-down
position” and
to the overall level of capacity; short-term considerations
relateontothe
variations
inacapacity
requirements
pulled upIdeally,
after purchase
for toting
hangingdemand.
on a ladder.
due to seasonal, random, and irregular fluctuations can
in be
demand.
capacity
willormatch
Large, nearly 4½-inch-tall label panels allow glossy front and back
Thus, there is a close link between forecasting and capacity
planning, particularly in the long term. In
labels printed and UV-coated to wrap around the can’s rounded
the short term, emphasis shifts to describing and coping
with
indisplay.
demand.
corners,
forvariations
an impressive
Jim MacDonald, co-designer of the Twist & Pour and a packaging engineer at Cleveland-based Sherwin-Williams, tells Packaging Digest that the space-efficient, square shape is easier to ship
and for retailers to stack in stores. It can also be nested, courtesy
Readings
Readings highlight important
real-world applications, provide
examples of production/operations issues, and offer further
elaboration of the text material.
They also provide a basis for
classroom discussion and generate interest in the subject matter. Many of the end-of-chapter
readings include assignment
questions.
ste67472_ch05_188-219.indd
xiv
211
An Operations Strategy section
is included at the ends of most
chapters. These sections discuss
how the chapters’ concepts can
be applied and how they impact
the operations of a company.
Confirming Pages
UP ITS PAINTS
SUMMARY
Courtesy of Dutch Boy
of a recess in the bottom that mates with the lid’s top ring. “The
new design allows for one additional shelf facing on an eight-foot
rack or shelf area.”
The labels are applied automatically, quite a feat, considering
their complexity, size, and the hollow handle they likely encounter
during application. MacDonald admits, “Label application was a
challenge. We had to modify the bottle several times to accommodate the labeling machinery available.”
Source: “Dutch Boy Brushes Up Its Paints,” Packaging Digest, October 2002.
Copyright © 2002 Reed Business Information. Used with permission.
smaller microprocessor that spawns a new generation of personal digital assistants or cell
phones). Technology also can indirectly affect product
and service
01/06/17
07:26 PMdesign: Advances in processing technology may require altering an existing design to make it compatible with the
new processing technology. Still another way that technology can impact product design is
illustrated by new digital recording technology that allows television viewers to skip commercials when they view a recorded program. This means that advertisers (who support a
television program) can’t get their message to viewers. To overcome this, some advertisers
have adopted a strategy of making their products an integral part of a television program, say
by having their products prominently displayed and/or mentioned by the actors as a way to
call viewers’ attention to their products without the need for commercials.
The following reading suggests another potential benefit of product redesign.
Technique
Formula
Exponential smoothing
forecast
Ft = Ft – 1 + α(At – 1 − Ft – 1)
α = Smoothing factor
Ft = a + bt
where
n∑ ty − ∑ t∑ y
b = ______________
n∑ t 2 − (∑ t 2)
a = y intercept
b = Slope
Linear trend forecast
Definitions
∑ y − b∑ t
a = ______ or ¯y − b¯t
n
Trend-adjusted
forecast
TAF t+1 = S t + T t
where
S t = TAF t + α( A t − TAF t)
T t = T t−1 + β( TAF t − TAF t−1 − T t−1)
t = Current period
TAF t+1 = Trend-adjusted forecast for
next period
S = Previous forecast plus
smoothed error
T = Trend component
Y c = a + bx
where
n(∑ xy) − (∑ x) (∑ y)
b = ___________________
n(∑ x 2) − (∑ x 2)
y c = Computed value of dependent
variable
x = Predictor (independent) variable
b = Slope of the line
a = Value of y c when x = 0
END-OF-CHAPTER RESOURCES
Linear regression
forecast
For student study and review, the following items are
provided at the end of each chapter or chapter supplement.
∑ y − b∑ x
a = ______ or ¯y − b¯x
n
Standard error of
estimate
Tracking signal
Control limits
√
________
Se =
(y − y c) 2
∑
_______
n−2
S e = Standard error of estimate
y = y value of each data point
n = Number of data points
Summaries
n
∑e
TS t = _____
MAD
_____
UCL = 0 + z √MSE
_____
LCL = 0 − z √MSE
_____
Chapters contain summaries that provide an
overview of the material covered.
√MSE =
standard deviation
z = Number of standard deviations;
2 and 3 are typical values
Confirming Pages
KEY POINTS
1.
Demand forecasts are essential inputs for many business decisions; they help managers decide
how much supply or capacity will be needed to match expected demand, both within the organization and in the supply chain.
Key Points
2.
Because of random variations in demand, it is likely that the forecast will not be perfect, so manChapter One Introduction to Operations Management
37
agers need to be prepared to deal with forecast errors.
The key points of the chapter are emphasized.
3. Other, nonrandom factors might also be present, so it is necessary to monitor forecast errors to
7. What are models and why are they check
important?
for nonrandom patterns in forecast errors.
8. Why is the degree of customization
in processtechnique
planning?that is cost-effective and one that minimizes fore4. Itan
is important
important consideration
to choose a forecasting
castfor
error.
9. List the trade-offs you would consider
each of these decisions:
Key Terms
a. Driving your own car versus public transportation.
b. Buying a computer now versus waiting for an improved model.
Key terms are highlighted in the text and then
repeated in the margin with brief definitions for
emphasis. They are listed at the end of each
chapter (along with page references) to aid in
reviewing.
c. Buying a new car versus buying a used car.
d. Speaking up in class versus waiting to get called on by the instructor.
Taking Stock and Critical
Thinking Exercises
e. A small business owner having a website versus newspaper advertising.
10. Describe each of these systems: craft production, mass production, and lean production.
11. Why might some workers prefer not to work in a lean production environment?
12. Discuss the importance of each of the following:
a. Matching supply and demand
Theseb. activities
analytical thinking
Managing a supply encourage
chain
List and briefly explain the four basic sources of variation, and explain why it is important for
and13.help
broaden
conceptual
managers to be able to effectively deal with variation.understanding.
14. Why do people do things that are unethical?
A question
related
15. Explain the term
value-added.to ethics is included in the
16. Discuss the various impacts of outsourcing.
Critical
Thinking
Exercises.
17. Discuss the term sustainability, and its relevance for business organizations.
ste67472_ch03_074-135.indd 116
This item appears at the end of each chapter. It is intended to focus your attention on three key issues
for business organizations in general, and operations management in particular. Those issues are
trade-off decisions, collaboration among various functional areas of the organization, and the impact
of technology. You will see three or more questions relating to these issues. Here is the first set of
questions:
Discussion and Review Questions
01/06/17 08:04 PM
Each chapter and each supplement have a
list of discussion and review questions. These
precede the problem sets and are intended to
serve as a student self-review or as class discussion starters.
TAKING STOCK
1. What are trade-offs? Why is careful consideration of trade-offs important in decision making?
2. Why is it important for the various functional areas of a business organization to collaborate?
3. In what general ways does technology have an impact on operations management decision making?
This item also will appear in every chapter. It allows you to critically apply information you learned in
the chapter to a practical situation. Here is the first set of exercises:
1. Many organizations offer a combination of goods and services to their customers. As you learned in
this chapter, there are some key differences between production of goods and delivery of services.
What are the implications of these differences relative to managing operations?
2. Why is it important to match supply and demand? If a manager believes that supply and demand
will not be equal, what actions could the manager take to increase the probability of achieving a
match?
3. One way that organizations compete is through technological innovation. However, there can be
downsides for both the organization and the consumer. Explain.
4. a. What would cause a business person to make an unethical decision?
CRITICAL THINKING
EXERCISES
Confirming Pages
b. What are the risks of doing so?
Chapter Five Strategic Capacity Planning for Products and Services
216
Problem Sets
Each chapter includes a set of problems
for assignment. The problems have been
refined over many editions and are intended
to be challenging but doable for students.
Short answers to most of the problems are
included in Appendix A so that students can
check their understanding and see immediately how they are progressing.
ste67472_ch01_002-039.indd
37
PROBLEMS
1.
Determine the utilization and the efficiency for each of these situations:
a. A loan processing operation that processes an average of 7 loans per day. The operation has a
design capacity of 10 loans per day and an effective capacity of 8 loans per day.
b. A furnace repair team that services an average of four furnaces a day if the design capacity is
six furnaces a day and the effective capacity is five furnaces a day.
c. Would you say that systems that have higher efficiency ratios than other systems will always
have higher utilization ratios than those other systems? Explain.
2.
In a job shop, effective capacity is only 50 percent of design capacity, and actual output is 80
percent of effective output. What design capacity would be needed to achieve an actual output of
eight jobs per week?
3.
A producer of pottery is considering the addition of a new plant to absorb the backlog of demand that
now exists. The primary location being considered will have fixed costs of $9,200 per month and variable costs of 70 cents per unit produced. Each item is sold to retailers at a price that averages 90 cents.
01/06/17 09:09 PM
a. What volume per month is required in order to break even?
b. What profit would be realized on a monthly volume of 61,000 units? 87,000 units?
c. What volume is needed to obtain a profit of $16,000 per month?
d. What volume is needed to provide a revenue of $23,000 per month?
e. Plot the total cost and total revenue lines.
4.
A small firm intends to increase the capacity of a bottleneck operation by adding a new machine.
Two alternatives, A and B, have been identified, and the associated costs and revenues have been
estimated. Annual fixed costs would be $40,000 for A and $30,000 for B; variable costs per unit
would be $10 for A and $11 for B; and revenue per unit would be $15.
a. Determine each alternative’s break-even point in units.
b. At what volume of output would the two alternatives yield the same profit?
c. If expected annual demand is 12,000 units, which alternative would yield the higher profit?
5.
A producer of felt-tip pens has received a forecast of demand of 30,000 pens for the coming
month from its marketing department. Fixed costs of $25,000 per month are allocated to the felttip operation, and variable costs are 37 cents per pen.
xv
Operations Tours
These provide a simple “walkthrough” of an operation for students, describing the company, its product
or service, and its process of managing operations.
Companies featured include Wegmans Food Markets,
Morton Salt, Stickley Furniture, and Boeing.
OPERATIONS TOUR
First Pages
BRUEGGER’S BAGEL BAKERY
Bruegger’s Bagel Bakery makes and sells a variety of bagels,
output at each step in the process. At the stores, employees are
including plain, onion, poppyseed, and cinnamon raisin, as well as
instructed to watch for deformed bagels and to remove them when
assorted flavors of cream cheese. Bagels are the major source of
they find them. (Deformed bagels are returned to a processing plant
revenue for the company.
where they are sliced into bagel chips, packaged, and then taken
First
Pages
The bagel business is a $3 billion industry. Bagels are very
back
to the
stores for sale, thereby reducing the scrap rate.) Employpopular with consumers. Not only are they relatively low in fat,
ees who work in the stores are carefully chosen and then trained
they are filling, and they taste good! Investors like the bagel
so that they are competent to operate the necessary equipment in
industry because it can be highly profitable: it only costs about
the stores and to provide the desired level of service to customers.
$.10 to make a bagel, and they can be sold for $.50 each or more.
The company operates with minimal inventories of raw materiAlthough some bagel companies have done poorly in recent years,
als and inventories of partially completed bagels at the plant and
due mainly to poor management, Bruegger’s business is booming;
very little inventory of bagels at the stores. One reason for this
CASE
it is number one nationally, with over 450 shops that sell bagels,
is to maintain a high degree of freshness in the final product by
coffee, and bagel sandwiches for takeout or onpremise consumpcontinually supplying fresh product to the stores. A second reation. Many stores in the Bruegger’s chain generate an average of
son is to keep costs down; minimal inventories mean less space is
$800,000 in sales annually.
needed for storage.
Background
Current Inventory Control System
Production of bagels is done in batches, according to flavor,
Harvey Industries, a Wisconsin company, specializes in the assemThe current inventory control “system” consists of orders for stock
with each flavor being produced on a daily basis. Production of
Questions
bly of highpressure washer systems and in the sale of repair parts
replenishment being made by the stockroom foreman,
the purbagels at Bruegger’s begins at a processing plant, where the basic
1. Pages
Bruegger’s
for these systems. The products range from small portable highchasing manager, or the manufacturing managerFirst
whenever
one ofmaintains relatively little inventory at either its
ingredients of flour, water, yeast, and flavorings are combined in
plants or its retail stores. List the benefits and risks of this
pressure washers to large industrial installations for snow removal
them notices that the inventory is low. An order for replenishment
a special mixing machine. After the dough has been thoroughly
from vehicles stored outdoors during the winter months. Typical
of inventory is also placed whenever someone (eitherpolicy.
a customer
mixed, it is transferred to another machine that shapes the dough
uses for high-pressure water cleaning include:
or an employee in the assembly area) wants an item
it isisnot
2. and
Quality
very important to Bruegger’s.
into individual bagels. Once the bagels have been formed, they
in stock.
a. What features of bagels do customers look at to judge their
are loaded onto refrigerated trucks for shipping to individual
Automobiles
Airplanes
Some
inventory
needed
for the assembly
quality?
stores. When the bagels
reach
a store, is
they
are unloaded
from theof the high-pressure
Building maintenance
Barns
equipment
for thethey
car rise.
washThe
andfinal
industrial
applications.
arepoints in the production process do workers check
b. There
At what
trucks and temporarily
stored while
two steps
current
andtheaccurate
bills
of material
for and
these assemblies.
Ice cream plants
CASE Engines
bagelThe
quality?
of processing involve
boiling
bagels in
a kettle
of water
material
needs
to support
the in
assembly
are
Lift trucks
Machinery
c. generally
List the steps in the production process, beginning with
malt for one minute,
and then
baking
the bagels
an ovenschedule
for
known well in advance of the build schedule.
purchasing ingredients, and ending with the sale, and state
Swimming pools
approximately 15 minutes.
The
majority
of
inventory
transactions are for repair parts
and can be positively affected at each step.
how quality
Background
Current
Inventory
Control
System
The process
is depicted
in the figure.
for supplies
the car business.
washes, such
as paper towels,
deterIndustrial customers include General Motors, Ford,Quality
Chrysler,
is an
featureused
ofcontrol
a by
successful
CustomHarvey Industries, a Wisconsin company, specializes in the assemTheimportant
current inventory
“system” consists
of orders 3.
for Which
stock inventory models could be used for ordering the ingreand by
wax
concentrate.
Because
of the
and rugged
Delta Airlines, United Parcel Service, and Shell Oil Company.
ersparts
judge thereplenishment
qualitygent,
of bagels
their
appearance
(size, shape,
andconstant
bly of highpressure washer systems and in the sale of repair
being
made
by the stockroom
foreman,
thedients
pur- for bagels? Which model do you think would be most
use of the car
wash equipment,
there istoa the
steady demand
for the for deciding how many bagels to make in a given
Although the industrial applications are a significant
part of itsand consistency.
appropriate
shine),
are also sensitive
for these systems. The products range from small portable
high-taste, chasing
manager,Customers
or the manufacturing
manager whenever one
of
various
repairmake
parts.their purchases. Bruegger’s
sales, Harvey Industries is primarily an assembler service
of equipment
batch?
they them
receive
when that
they
pressure washers to large industrial installations for snow removal
notices
the inventory
is low. An order for replenishment
The stockroom
is well
organized,
with from
parts stored
in locationshas bagel-making machines at its plants. Another
for coin operated self-service car wash systems. The typical
car attention
4. Bruegger’s
at every
stage
of operation,
from vehicles stored outdoors during the winter months.devotes
Typical careful
of inventorytoisquality
also placed
whenever
someone (either
a customer
according
to each
vendor.
The number
of vendors is relatively
limwash is of concrete block construction with an equipment
room
in
would be to have a bagel-making machine at each
choosing
suppliers
ingredients,
careful
monitoring
ingredients,
uses for high-pressure water cleaning include:
or an of
employee
in the
assembly
area) of
wants
an item and it possibility
is not
ited, with each vendor generally supplying many different
the center, flanked on either side by a number of bays.
The carsequipment
store. parts.
What advantages does each alternative have?
and keeping
in stock. in good operating condition to monitoring
For example, the repair parts from Allen Bradley, a manufacturer
are driven into the bays
where the owner can wash and wax the
Automobiles
Airplanes
Some inventory is needed for the assembly of the high-pressure
of electrical motors, are stocked in the same location. These repair
car, utilizing high-pressure hot water and liquid wax. A dollar bill
Building maintenance
Barns
equipment for the car wash and industrial applications. There are
parts will be used to provide service for the many electrical motors
changer is available to provide change for the use of the equipcurrent and accurate bills of material for these assemblies. The
Engines
Ice cream plants
that are part of the high-pressure pump and motor assembly used
ment and the purchase of various products from dispensers. The
material
needs to support the assembly schedule are generally
Liftproducts
trucks include towels,
Machinery
Mixer
by all of the car washes. of
tire cleaner, and upholstery cleaner.
known well in advance of Trays
the build schedule.
Swimming pools
bagels
The majority of inventory transactions are for repair parts and
for supplies used by the car washes, such as paper towels, deterIndustrial customers include General Motors, Ford, Chrysler,
President
Shaper
gent, and wax
concentrate. Because of the constant and rugged
Kettle
Oven
Delta Airlines, United Parcel Service, and Shell Oil Company.
use of the car wash equipment,
there plant
is a steady demand for the
Although the industrial applications are a significant part of its
Processing
A retail store
various
repair
parts.
sales, Harvey Industries is primarily an assembler of equipment
The stockroom is well organized, with parts stored in locations
for coin operated self-service car wash systems. The typical car
Sales
Purchasing
according toController
each vendor. The number
of vendors is relatively limwash is of concrete block construction
with an equipmentManufacturing
room in
manager
manager many different parts.
ited, with each vendor generally supplying
the center, flanked on either side by
a number of bays.manager
The cars
For example, the repair parts from Allen Bradley, a manufacturer
are driven into the bays where the owner can wash and wax the
of electrical motors, are stocked in the same location. These repair
car, utilizing high-pressure hot water and liquid wax. A dollar bill
parts will be used to provide service for the many electrical motors
changer is available to provide change for the use of the equipthat are partQuality
of the high-pressure pump and motor assembly used
Stockroom
ment and the purchase of various Assembly
products from dispensers.
The
foreman
foreman
by all of the engineer
car washes.
products include towels, tire cleaner,
and upholstery cleaner.
HARVEY INDUSTRIES
HARVEY INDUSTRIES
FLOU
R
604
xvi
In recent years Harvey Industries has been in financial difficulty.
President
The company has lost money for three of the last four years,
with
the last year’s loss being $17,174 on sales of $1,238,674. Inventory
levels have been steadily increasing to their present levels of
$124,324.
Untitled-5 604
The company employs
management team
Sales23 people with the
Manufacturing
manager
consisting of the following
key employees: manager
president, sales manager, manufacturing manager, controller, and purchasing manager. The abbreviated organization chart reflects the reporting
relationship of the key employees and the three individuals who
report directly to the manufacturing
manager.Stockroom
Assembly
foreman
foreman
In recent years Harvey Industries has been in financial difficulty.
The company has lost money for three of the last four years, with
the last year’s loss being $17,174 on sales of $1,238,674. Inventory
Because of the heavy sales volume of repair parts, there are
generally two employees working in the stockroom—a stockroom
foreman who reports to the manufacturing manager and an assistant to the foreman. One of these two employees will handle customer orders. Many customers stop by and order the parts and
supplies they need. Telephone
Purchasingorders are also received and are
Controller
manager
shipped by United Parcel
Service the same day.
The assembly area has some inventory stored on the shop floor.
This inventory consists of low-value items that are used every day,
such as nuts, bolts, screws, and washers. These purchased items
do not amount to very much dollar volume throughout the year.
Quality
Cases
The text includes short cases. The cases were
selected to provide a broader, more integrated
thinking opportunity for students without taking
a full case approach.
engineer
(continued)
Because of the heavy sales volume of repair parts, there are
generally two employees working in the stockroom—a stockroom
foreman who reports to the manufacturing manager and an assis-
601
01/10/17 06:31 PM
INSTRUCTOR RESOURCES
Available within Connect, instructors have access to teaching supports such as electronic files
of the ancillary materials: Solutions Manual, Instructor’s Manual, Test Bank, PowerPoint
Lecture Slides, Digital Image Library, and Excel Lecture scripts.
Instructor’s Manual. This manual includes teaching notes, chapter overview, an outline
for each chapter, and solutions to the problems in the text.
Test Bank. Prepared by Larry R. White, Eastern Illinois University, the Test Bank includes
over 2,000 true/false, multiple-choice, and discussion questions/problems at varying levels of
difficulty.
TestGen. TestGen is a complete, state-of-the-art test generator and editing application software that allows instructors to quickly and easily select test items from McGraw Hill’s testbank
content. The instructors can then organize, edit and customize questions and answers to rapidly
generate tests for paper or online administration. Questions can include stylized text, symbols,
graphics, and equations that are inserted directly into questions using built-in mathematical templates. TestGen’s random generator provides the option to display different text or calculated
number values each time questions are used. With both quick-and-simple test creation and flexible and robust editing tools, TestGen is a complete test generator system for today’s educators.
PowerPoint Lecture Slides. Prepared by James Anthony Swaim, Kennesaw State University, the PowerPoint slides draw on the highlights of each chapter and provide an opportunity for the instructor to emphasize the key concepts in class discussions.
Digital Image Library. All the figures in the book are included for insertion in PowerPoint
slides or for class discussion.
Operations Management Video Series
The operations management video series, free to text adopters, includes professionally developed videos showing students applications of key manufacturing and service topics in real
companies. Each segment includes on-site or plant footage, interviews with company managers, and focused presentations of OM applications in use to help the companies gain competitive advantage. Companies such as Zappos, FedEx, Subaru, Disney, BP, Chase Bank, DHL,
Louisville Slugger, McDonald’s, Noodles & Company, and Honda are featured.
xvii
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McGraw-Hill Connect®
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that is proven to deliver better results for
students and instructors.
Connect empowers students by continually
adapting to deliver precisely what they
need, when they need it, and how they need
it, so your class time is more engaging and
effective.
73% of instructors who use
Connect require it; instructor
satisfaction increases by 28%
when Connect is required.
Using Connect improves retention
rates by 19.8%, passing rates by
12.7%, and exam scores by 9.1%.
Analytics
Connect Insight®
Connect Insight is Connect’s new one-of-akind visual analytics dashboard—now available
for both instructors and students—that
provides at-a-glance information regarding
student performance, which is immediately actionable.
By presenting assignment, assessment, and topical
performance results together with a time metric that
is easily visible for aggregate or individual results, Connect
Insight gives the user the ability to take a just-in-time approach
to teaching and learning, which was never before available.
Connect Insight presents data that empowers students and
helps instructors improve class performance in a way that is
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Students can view
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SCREENCAM TUTORIALS
Confirming Pages
These screen “movies” and voiceover tutorials explain key chapter
content, using Excel and other software platforms.
screenCam tutorial
Confirming Pages
Chapter Three Forecasting
94
Chapter Three Forecasting
95
Trend-Adjusted
Exponential
Smoothing
c. Substituting
values
of t into this equation, the forecasts for the next two periods
A variation of simple(i.e.,
exponential
smoothing
usedare:
when a time series exhibits a linear
t = 11
and tcan
=be12)
trend. It is called trend-adjusted exponential smoothing or, sometimes, double smoothing, Trend-adjusted exponential
F
=
699.40
+
7.51(11)
= 782.01
to differentiate it from 11
simple exponential smoothing, which
is appropriate only when data smoothing Variation of expovary around an average
have699.40
step or gradual
changes. If =
a series
exhibits trend, and simple nential smoothing used when
F12or =
+ 7.51(12)
789.52
smoothing is used on it, the forecasts will all lag the trend: If the data are increasing, each a time series exhibits a linear
trend.
forecast will be too low; if decreasing, each forecast will be too high.
d. For purposes of illustration, the original data, the trend line, and the
The trend-adjusted forecast (TAF) is composed of two elements—a smoothed error and a
LO3.12 Prepare a trendtrend factor.
(forecasts) are shown on the following graph:
TAF t+1 = St + T t
800
where
(3–11)
Forecasts
St = Previous forecast plus smoothed error
Tt = Current trend estimate
780
and
St = TAF t + α(At − TAF t )
α = Smoothing constant for average
β = Smoothing constant for trend
Excel Templates
Sales
Tt = Tt−1 + β (TAF t − TAF t−1 − Tt−1 )
where
760
two projections
adjusted exponential
smoothing forecast.
screenCam tutorial
(3–12)
740
Data through trial and
Trend line
In order to use this method, one must select values of α and β (usually
error) and make a starting forecast and an estimate of trend.
Using the cell phone data from the previous example (where it was concluded that the data
720 smoothing to obtain forecasts for
exhibited a linear trend), use trend-adjusted exponential
periods 6 through 11, with α = .40 and β = .30.
The initial estimate of trend is based on the net change of 28 for the three changes from
period 1 to period 4, for an average of 9.33. The700
Excel spreadsheet is shown in Table 3.2.
Notice that an initial estimate of trend is estimated from the first four values and that the starting forecast (period 5) is developed using the previous (period 4) value of 728 plus the initial
trend estimate:
Templates created by Lee Tangedahl, University of Montana, are included on the OLC. The templates, over 70 total,
include dynamically linked graphics and variable controls. They allow you to solve a number of problems in the text
or additional problems. All templates have been revised to allow formatting of1 all2 cells,
columns,
and
3 4 hiding
5 6 7rows
8 9or 10
11 12
Starting forecast = 728 + 9.33 = 737.33
Week
entering data or calculations in blank cells. Many
of
the
templates
have
been
expanded
to
accommodate
solving
Unlike a linear trend line, trend-adjusted smoothing has the ability to adjust to changes
in trend. Of course, trend projections are much simpler with a trend line than with trendlarger problems and cases.
adjusted forecasts, so a manager must decide which benefits are most important when choosing between these two techniques for trend.
Techniques
for Seasonality
TABLE 3.1 Excel solution
for Example
5
Seasonal variations in time-series data are regularly repeating upward or downward movements in series values that can be tied to recurring events. Seasonality may refer to regular annual variations. Familiar examples of seasonality are weather variations (e.g., sales of
winter and summer sports equipment) and vacations or holidays (e.g., airline travel, greeting
card sales, visitors at tourist and resort centers). The term seasonal variation is also applied
to daily, weekly, monthly, and other regularly recurring patterns in data. For example, rush
hour traffic occurs twice a day—incoming in the morning and outgoing in the late afternoon.
Theaters and restaurants often experience weekly demand patterns, with demand higher later
in the week. Banks may experience daily seasonal variations (heavier traffic during the noon
hour and just before closing), weekly variations (heavier toward the end of the week), and
monthly variations (heaviest around the beginning of the month because of Social Security,
payroll, and welfare checks being cashed or deposited). Mail volume; sales of toys, beer, automobiles, and turkeys; highway usage; hotel registrations; and gardening also exhibit seasonal
variations.
ste67472_ch03_074-135.indd
xx
95
Seasonal variations Regularly repeating movements in
series values that can be tied
to recurring events.
01/06/17 08:04 PM
Note to Students
.
The material in this text is part of the core knowledge in your education. Consequently, you will derive considerable benefit from
your study of operations management, regardless of your major.
Practically speaking, operations is a course in management.
This book describes principles and concepts of operations
management. You should be aware that many of these principles and concepts are applicable to other aspects of your
professional and personal life. You can expect the benefits of
your study of operations management to serve you in those
other areas as well.
Some students approach this course with apprehension, and
perhaps even some negative feelings. It may be that they have
heard that the course contains a certain amount of quantitative
material that they feel uncomfortable with, or that the subject matter is dreary, or that the course is about “factory management.”
This is unfortunate, because the subject matter of this book is
interesting and vital for all business students. While it is true that
some of the material is quantitative, numerous examples, solved
problems, and answers at the back of the book will help you with
the quantitative material. As for “factory management,” there
is material on manufacturing as well as on services. Manufacturing is important, and something that you should know about
for a number of reasons. Look around you. Most of the “things”
you see were manufactured: cars, trucks, planes, clothing, shoes,
computers, books, pens and pencils, desks, and cell phones. And
these are just the tip of the iceberg. So it makes sense to know
something about how these things are produced. Beyond all that
is the fact that manufacturing is largely responsible for the high
standard of living people have in industrialized countries.
After reading each chapter or supplement in the text,
attending related classroom lectures, and completing assigned
questions and problems, you should be able to do each of the
following:
1.
2.
3.
4.
Identify the key features of that material.
Define and use terminology.
Solve typical problems.
Recognize applications of the concepts and techniques
covered.
5. Discuss the subject matter in some depth, including its
relevance, managerial considerations, and advantages
and limitations.
You will encounter a number of chapter supplements.
Check with your instructor to determine whether to study
them.
This book places an emphasis on problem solving.
There are many examples throughout the text illustrating solutions. In addition, at the end of most chapters and
supplements you will find a group of solved problems. The
examples within the chapter itself serve to illustrate concepts and techniques. Too much detail at those points would
be counterproductive. Yet, later on, when you begin to solve
the end-of-chapter problems, you will find the solved problems quite helpful. Moreover, those solved problems usually illustrate more and different details than the problems
within the chapter.
I suggest the following approach to increase your chances
of getting a good grade in the course:
1.
2.
3.
4.
Look over the chapter outline and learning objectives.
Read the chapter summary, and then skim the chapter.
Read the chapter and take notes.
Look over and try to answer the discussion and review
questions.
5. Solve the problems, referring to the solved problems and
chapter examples as needed.
Note that the answers to many problems are given at the
end of the book. Try to solve each problem before turning to
the answer. Remember—tests don’t come with answers.
And here is one final thought: Homework is on the Highway to Happiness! Enjoy the journey!
W.J.S.
xxi
Brief Contents
Preface
vii
1 Introduction to Operations Management 2
2 Competitiveness, Strategy, and Productivity 40
3 Forecasting 74
4 Product and Service Design 136
SUPPLEMENT TO CHAPTER 4: Reliability 174
5 Strategic Capacity Planning for Products and Services 188
SUPPLEMENT TO CHAPTER 5: Decision Theory 220
6 Process Selection and Facility Layout 242
7 Work Design and Measurement 296
SUPPLEMENT TO CHAPTER 7: Learning Curves 330
8 Location Planning and Analysis 342
9 Management of Quality 372
10 Quality Control 416
11 Aggregate Planning and Master Scheduling 462
12 MRP and ERP 500
13 Inventory Management 550
14 JIT and Lean Operations 608
SUPPLEMENT TO CHAPTER 14: Maintenance 644
15 Supply Chain Management 652
16 Scheduling 690
17 Project Management 730
18 Management of Waiting Lines 782
19 Linear Programming 822
Appendix A: Answers to Selected Problems 854
Appendix B: Tables 866
Appendic C: Working with the Normal Distribution 872
Company Index 877
Subject Index 879
xxiii
Contents
2
Preface vii
1
Introduction to Operations
Management 2
Introduction 41
Competitiveness 42
Mission and Strategies 44
Reading:
Amazon Tops in Customer Service
Introduction 4
Production of Goods Versus Providing
Services 8
Why Learn About Operations Management? 10
Career Opportunities and Professional
Societies 12
Process Management 13
The Scope of Operations Management 14
Reading:
Why Manufacturing Matters 17
Dutch Tomato Growers’ Productivity
Advantage 60
Productivity Improvement 62
T he Historical Evolution of Operations
Management 21
Operations Today 24
Reading:
Agility Creates a Competitive Edge 26
Summary 62
Key Points 63
Key Terms 63
Solved Problems 63
Discussion and Review Questions
Taking Stock 64
Critical Thinking Exercises 65
Problems 65
Key issues for Today’s Business Operations 27
Readings:
Universities Embrace Sustainability 28
Case
Hazel
Home-Style Cookies
Hazel Revisited
33
68
69
“Your Garden Gloves”
Operations Tour
The U.S. Postal Service
36
70
70
Selected Bibliography and Further Readings
3
38
Selected Bibliography & Further Readings
Problem-Solving Guide 39
64
Case
An American Tragedy: How a Good Company
Died 67
Diet and the Environment: Vegetarian vs.
Nonvegetarian 29
Summary 36
Key Points 36
Key Terms 36
Discussion and Review Questions
Taking Stock 37
Critical Thinking Exercises 37
38
45
Operations Strategy 51
Implications of Organization Strategy for Operations
Management 54
Transforming Strategy into Action: The Balanced
Scorecard 54
Productivity 56
Readings:
Why Productivity Matters 59
perations Management and Decision
O
Making 18
Reading:
Analytics 20
Operations Tour
Wegmans Food Markets
Competitiveness, Strategy, and
Productivity 40
73
Forecasting 74
Introduction 76
Features Common to All Forecasts 77
Elements of a Good Forecast 78
xxv
xxvi
Contents
Forecasting and the Supply Chain 78
Steps in the Forecasting Process 79
Forecast Accuracy 79
Reading:
High Forecasts Can Be Bad News 80
Cultural Factors 145
Global Product and Service Design 145
Environmental Factors: Sustainability 146
Readings:
Best Buy Wants Your Junk 147
Approaches to Forecasting 82
Qualitative Forecasts 82
Forecasts Based on Time-Series Data 84
Associative Forecasting Techniques 101
Monitoring Forecast Error 106
Choosing a Forecasting Technique 110
Using Forecast Information 111
Computer Software in Forecasting 112
Operations Strategy 112
Reading:
Gazing at the Crystal Ball 113
Kraft Foods’ Recipe for Sustainability
Summary 114
Key Points 116
Key Terms 117
Solved Problems 117
Discussion and Review Questions
Taking Stock 124
Critical Thinking Exercises 124
Problems 124
Xerox Diverts 2 Billion Pounds of
Waste From Landfills Through Green
Initiatives 149
Recycle City: Maria’s Market
Fast-Food Chains Adopt Mass
Customization 155
P hases in Product Design and
Development 161
Designing for Production 162
Service Design 165
Operations Strategy 169
Reading:
The Challenges of Managing Services 169
Case
M&L Manufacturing 134
4
Summary 170
Key Points 170
Key Terms 170
Discussion and Review Questions
Taking Stock 171
Critical Thinking Exercises 171
Problems 172
135
Selected Bibliography and Further Readings
135
Product and Service Design 136
Reading:
Design as a Business Strategy
Operations Tour
High Acres Landfill
138
170
173
Selected Bibliography and Further Readings
Introduction 138
Readings:
Product Redesign, Not Offshoring,
Holds Cost Advantage for U.S.
Manufacturers 139
Dutch Boy Brushes up Its Paints
149
Other Design Considerations 151
Readings:
Lego A/S in the Pink 152
123
Highline Financial Services, Ltd.
148
173
SUPPLEMENT TO CHAPTER 4: Reliability
5
Idea Generation 140
Reading:
Vlasic on a Roll with Huge Pickle Slices
Strategic Capacity Planning for Products
and Services 188
Introduction 189
Reading:
Excess Capacity Can Be Bad News!
140
142
Legal and Ethical Considerations 143
Human Factors 144
Reading:
Do You Want Pickled Beets with That? 145
174
190
Capacity Decisions are Strategic 191
Defining and Measuring Capacity 192
Determinants of Effective Capacity 193
Strategy Formulation 195
Forecasting Capacity Requirements 196
Contents
dditional Challenges of Planning Service
A
Capacity 198
Do it in-House or Outsource it? 199
Reading:
My Compliments to the Chef, er, Buyer 200
Developing Capacity Strategies
Constraint Management 205
Evaluating Alternatives 205
Operations Strategy 211
Summary 211
Key Points 212
Key Terms 212
Solved Problems 212
Discussion and Review Questions
Taking Stock 215
Critical Thinking Exercises 215
Problems 216
Critical Thinking Exercises 288
Problems 288
Selected Bibliography and Further Readings
7
219
SUPPLEMENT TO CHAPTER 5: Decision
Curves
Process Selection and Facility Layout 242
Introduction 243
Process Selection 244
Operations Tour
Morton Salt 248
Technology 250
Readings:
Foxconn Shifts its Focus to Automation
Self-Driving Vehicles are on the Horizon
252
257
Process Strategy 257
Strategic Resource Organization: Facilities Layout 257
Reading:
A Safe Hospital Room of the Future 267
Designing Product Layouts: Line Balancing
Reading:
BMW’s Strategy: Flexibility 278
Summary 283
Key Points 283
Key Terms 283
Solved Problems 283
Discussion and Review Questions
Taking Stock 288
278
287
329
SUPPLEMENT TO CHAPTER 7: Learning
Theory 220
Designing Process Layouts
Work Design and Measurement 296
Summary 323
Key Points 323
Key Terms 324
Solved Problems 324
Discussion and Review Questions 325
Taking Stock 326
Critical Thinking Exercises 326
Problems 326
Selected Bibliography and Further Readings
215
Case
Outsourcing of Hospital Services 219
6
295
Introduction 297
Job Design 297
Quality of Work Life 301
Methods Analysis 306
Motion Study 310
Work Measurement 311
Operations Strategy 322
200
Selected Bibliography and Further Readings
xxvii
269
8
330
Location Planning and Analysis 342
The Need for Location Decisions 343
The Nature of Location Decisions 344
Global Locations 346
General Procedure for Making Location
Decisions 348
Identifying a Country, Region, Community, and
Site 349
Service and Retail Locations 356
Reading:
Site Selection Grows Up: Improved Tech Tools
Make the Process Faster, Better 357
Evaluating Location Alternatives
Summary 364
Key Points 364
Key Terms 364
Solved Problems 364
Discussion and Review Questions
Taking Stock 366
Critical Thinking Exercises 366
Problems 367
Case
Hello, Walmart?
358
366
370
Selected Bibliography and Further Readings
370
Contents
xxviii
9
Reading:
Making Potato Chips
Management of Quality 372
Introduction 373
Reading:
Whatever Happened to Quality?
374
The Evolution of Quality Management 374
The Foundations of Modern Quality Management:
The Gurus 375
Insights on Quality Management 378
Readings:
The Sounds of Quality 380
Hyundai: Kissing Clunkers Goodbye
384
Rework and Morale 386
Quality Awards 386
Quality Certification 387
Quality and the Supply Chain 389
Reading:
Improving Quality and Reducing Risk in
Offshoring 390
Total Quality Management 390
Problem Solving and Process
Improvement 394
Reading:
What Keeps Six Sigma Practitioners up at
Night? 397
Quality Tools 398
Reading:
Benchmarking Corporate Websites of Fortune 500
Companies 406
Operations Strategy
406
Summary 406
Key Points 407
Key Terms 407
Solved Problem 407
Discussion and Review Questions
Taking Stock 409
Critical Thinking Exercises 409
Problems 409
408
10 Quality Control 416
Introduction 417
Inspection 418
Summary 447
Key Points 447
Key Terms 449
Solved Problems 449
Discussion and Review Questions
Taking Stock 454
Critical Thinking Exercises 454
Problems 454
Case
Toys, Inc.
Tiger Tools
453
460
460
Selected Bibliography and Further Readings
414
461
11 Aggregate Planning and Master
Scheduling 462
Introduction 464
Reading:
Duplicate Orders Can Lead to Excess
Capacity 468
asic Strategies for Meeting Uneven Demand
B
Techniques for Aggregate Planning 474
Aggregate Planning in Services 481
Disaggregating the Aggregate Plan 483
Master Scheduling 483
The Master Scheduling Process 484
493
Case
Eight Glasses a Day (EGAD)
412
Selected Bibliography and Further Readings
Statistical Process Control 423
Process Capability 441
Operations Strategy 446
Reading:
Bar Codes Might Cut Drug Errors in
Hospitals 447
Summary 489
Key Points 489
Key Terms 490
Solved Problems 490
Discussion and Review Questions
Taking Stock 493
Critical Thinking Exercises 493
Problems 493
Case
Chick-N-Gravy Dinner Line 411
Tip Top Markets
422
498
Selected Bibliography and Further Readings
12 MRP and ERP 500
Introduction 501
An Overview of MRP
501
498
471
Contents
MRP Inputs 502
MRP Processing 506
MRP Outputs 513
Other Considerations 514
MRP in Services 516
Benefits and Requirements of MRP 516
MRP II 517
Capacity Requirements Planning 519
ERP 521
Readings:
The ABCs of ERP 523
The Top 10 ERP Mistakes
Operations Strategy
Summary 585
Key Points 586
Key Terms 587
Solved Problem 587
Discussion and Review Questions
Taking Stock 592
Critical Thinking Exercises 592
Problems 593
Case
UPD Manufacturing
592
600
Harvey Industries
601
Grill Rite 602
Farmers Restaurant
603
Operations Tour
Bruegger’s Bagel Bakery
527
529
Summary 529
Key Points 529
Key Terms 530
Solved Problems 530
Discussion and Review Questions
Taking Stock 539
Critical Thinking Exercises 540
Problems 540
xxix
PSC, Inc.
604
605
Selected Bibliography and Further Readings
14 JIT and Lean Operations 608
539
Introduction 610
Reading:
Toyota Recalls 612
Case
Promotional Novelties 545
Supporting Goals 613
Building Blocks 614
Readings:
General Mills Turns to Nascar to Reduce
Changeover Time 617
Dmd Enterprises 546
Operations Tour
Stickley Furniture 546
Selected Bibliography and Further Readings
607
549
“People” Firms Boost Profits, Study
Shows 621
13 Inventory Management 550
Introduction 551
Reading:
$$$ 552
Lean Tools 631
Reading:
Nearby Suppliers Match Ford’s Mix
The Nature and Importance of Inventories 552
Requirements for Effective Inventory
Management 555
Reading:
Radio Frequency Identification (RFID)
Tags 557
Transitioning to a Lean System 633
Lean Services 634
Reading:
To Build a Better Hospital, Virginia Mason Takes
Lessons from Toyota Plants 636
Inventory Ordering Policies 561
How Much to Order: Economic Order Quantity
Models 561
Reorder Point Ordering 573
How Much to Order: Fixed-Order-interval Model
The Single-Period Model 580
Operations Strategy 585
JIT II 637
Operations Strategy
577
637
Summary 638
Key Points 639
Key Terms 639
Solved Problems 639
Discussion and Review Questions
Taking Stock 640
Critical Thinking Exercises 640
Problems 640
640
633
Contents
xxx
Case
Level Operations 641
Key Terms 685
Discussion and Review Questions
Taking Stock 686
Critical Thinking Exercises 686
Problems 686
Operations Tour
Boeing 642
Selected Bibliography and Further Readings
Case
Master Tag
643
SUPPLEMENT TO CHAPTER 14:
Maintenance
Introduction 654
Trends in Supply Chain Management 655
Reading:
At 3M, a Long Road Became a Shorter Road
Global Supply Chains 659
ERP and Supply Chain Management 659
Ethics and the Supply Chain 660
Small Businesses 660
Management Responsibilities 661
Procurement 662
Reading:
IBMs Supply Chain Social Responsibility
658
665
675
Readings:
Springdale Farm 677
RFID Tags: Keeping the Shelves Stocked
Active RFID vs. Passive RFID 678
Creating An Effective Supply Chain 680
Reading:
Clicks or Bricks, or Both? 681
684
Summary 685
Key Points 685
Scheduling Operations 692
Scheduling in Low-Volume Systems
Scheduling Services 713
Operations Strategy 717
Summary 717
Key Points 717
Key Terms 718
Solved Problems 718
Discussion and Review Questions
Taking Stock 722
Critical Thinking Exercises 722
Problems 723
Case
Hi–Ho, Yo–Yo, Inc.
695
722
729
Selected Bibliography and Further Readings
729
17 Project Management 730
668
Supplier Management 669
Reading:
NestléUSA and Ocean Spray Form Strategic
Operations Alliance 671
Strategy
688
16 Scheduling 690
15 Supply Chain Management 652
Inventory Management 672
Order Fulfillment 673
Logistics 674
Operations Tour
Wegmans’ Shipping System
687
Selected Bibliography and Further Readings
644
E-Business 666
Reading:
E-Procurement at IBM
685
678
Introduction 732
Project Life Cycle 732
Behavioral Aspects of Project Management 733
Reading:
Project Managers Have Never Been More
Critical 738
Work Breakdown Structure 739
Planning and Scheduling with Gantt Charts 739
PERT and CPM 740
Deterministic Time Estimates 743
A Computing Algorithm 744
Probabilistic Time Estimates 751
Determining Path Probabilities 754
Simulation 756
Budget Control 757
Time–Cost Trade-offs: Crashing 757
Advantages of Using PERT and Potential Sources of
Error 760
Critical Chain Project Management 761
Contents
ther Topics in Project Management 761
O
Project Management Software 762
Operations Strategy 763
Risk Management 763
Summary 764
Key Points 765
Key Terms 765
Solved Problems 765
Discussion and Review Questions
Taking Stock 772
Critical Thinking Exercises 772
Problems 772
Summary 813
Key Points 814
Key Terms 814
Solved Problems 814
Discussion and Review Questions
Taking Stock 816
Critical Thinking Exercises 816
Problems 816
Case
Big Bank
772
820
781
18 Management of Waiting Lines 782
Why is There Waiting? 784
Managerial Implications of Waiting Lines 785
Reading:
New Yorkers Do Not Like Waiting in Line 785
Goal of Waiting-Line Management 785
Characteristics of Waiting Lines 786
Measures of Waiting-Line Performance 790
Queuing Models: Infinite-Source 790
Queuing Model: Finite-Source 805
Constraint Management 811
The Psychology of Waiting 811
Reading:
David H. Maister on the Psychology of
Waiting 812
Operations Strategy 812
Reading:
Managing Waiting Lines at Disney World
820
19 Linear Programming 822
781
Selected Bibliography and Further Readings
816
Selected Bibliography and Further Readings
Case
The Case of the Mexican Crazy Quilt 779
Time, Please
xxxi
Introduction 823
Linear Programming Models 824
Graphical Linear Programming 826
The Simplex Method 838
Computer Solutions 838
Sensitivity Analysis 841
Summary 844
Key Points 844
Key Terms 844
Solved Problems 844
Discussion and Review Questions
Problems 847
Case
Son, Ltd.
847
851
Custom Cabinets, Inc.© 852
Selected Bibliography and Further
Readings 853
APPENDIX A Answers to Selected Problems 854
APPENDIX B Tables 866
APPENDIX C Working with the Normal
Distribution
813
Company Index 877
Subject Index 879
872
TEN THINGS TO REMEMBER BEYOND THE FINAL EXAM
1
The way work is organized (i.e., project, job shop, batch, assembly, or continuous)
has significant implications for the entire organization, including the type of work
that is done, forecasting, layout, equipment selection, equipment maintenance,
accounting, marketing, purchasing, inventory control, material handling, scheduling, and more.
2
Pay attention to variability, and reduce it whenever you can. Variability causes
problems for management, whether it is variability in demand (capacity planning,
forecasting, and inventory management), variability in deliveries from suppliers
(inventory management, operations, order fulfillment), or variability in production
or service rates (operations planning and control). Any of these can adversely
affect customer satisfaction and costs. Recognize this, and build an appropriate
amount of flexibility into systems.
3
“Homework is on the Highway to Happiness.” This relates not only to coursework, but also to your career: Be prepared for interviews, meetings, conferences,
presentations (yours and others’), and other events. You can achieve a great deal
of success by simply “doing your homework.”
4
How managers relate to subordinates can have a tremendous influence on the
success or lack of success of an organization. Selection, training, motivation, and
support are all important. One philosophy is: “Choose the right people, give them
the tools they need, and then stay out of their way.”
5
Quality and price will always be prominent factors in consumers’ buying decisions.
Strive to integrate quality in every aspect of what you do, and to reduce costs.
6
Pay careful attention to technology; consider both the opportunities and the risks.
Opportunities: improvements in quality, service, and response time. Risks:
technology can be costly, difficult to integrate, needs to be periodically updated
(for additional cost), requires training, and quality and service may temporarily
suffer when new technology is introduced.
7
Pay attention to capacity; the roads to success and failure both run through
capacity.
8
Never underestimate your competitors. Assume they will always make the best
decisions.
9
Most decisions involve tradeoffs. Understand the tradeoffs.
10
Make ethics a part of everything you do.
1
Introduction
to Operations
Management
LEARNING OBJECTIVES
After completing this chapter, you should be able to:
LO1.1
Define the terms operations management and supply chain.
LO1.2
Identify similarities and differences between production and service operations.
LO1.3
Explain the importance of learning about operations management.
LO1.4
Identify the three major functional areas of organizations and describe how they interrelate.
LO1.5
Summarize the two major aspects of process management.
LO1.6
Describe the operations function and the nature of the operations manager’s job.
LO1.7
Explain the key aspects of operations management decision making.
LO1.8
Briefly describe the historical evolution of operations management.
LO1.9
Describe current issues in business that impact operations management.
LO1.10
Explain the need to manage the supply chain.
C H A P T E R
1.1
O U T L I N E
Introduction 4
1.2 Production of Goods versus
Providing Services 8
1.3 Why Learn about Operations
Management? 10
1.4 Career Opportunities and
Professional Societies 12
1.5 Process Management 13
Managing a Process to Meet
Demand 13
Process Variation 14
1.6 The Scope of Operations
Management 14
Managing the Supply Chain to
Achieve Schedule, Cost, and
Quality Goals 15
2
1.7
Operations Management
and Decision Making 18
Models 18
Quantitative Approaches 19
Performance Metrics 19
Analysis of Trade-Offs 19
Degree of Customization 20
A Systems Approach 20
Establishing Priorities 20
1.8 The Historical Evolution of
Operations Management 21
The Industrial Revolution 21
Scientific Management 21
The Human Relations
Movement 24
Decision Models and
Management Science 24
The Influence of Japanese
Manufacturers 24
1.9 Operations Today 24
1.10 Key Issues for Today’s
Business Operations 27
Environmental Concerns 27
Ethical Conduct 29
The Need to Manage the Supply
Chain 30
Elements of Supply Chain
Management 32
Operations Tour: Wegmans Food
Markets 33
Case: Hazel 38
Problem Solving Guide 39
O
FP
Michie Turpin/Piedmont Healthcare
Recalls of automobiles, foods, toys, and other products; major oil
spills; and even dysfunctional state and federal legislatures are
all examples of operations failures. They underscore the need
for effective operations management. Examples of operations
­successes include the many electronic devices we all use, medical
breakthroughs in diagnosing and treating ailments, and high-quality
goods and services that are widely available.
Operations is what businesses do. Operations are processes that either provide services or create goods. Operations
take place in businesses such as restaurants, retail stores, supermarkets, factories, hospitals, and colleges and universities. In fact, they take place in every business organization. Moreover, operations are the core of what a business organization does.
As you read this book, you will learn about managing those operations. The subject matter is relevant for you regardless of your major. Productivity, quality, e-business, competition, and customer satisfaction are important for every aspect
of a business organization. This first chapter presents an introduction and overview of operations management. Among
the issues it addresses are: What is operations management? Why is it important? What do operations management professionals do?
The chapter also provides a description of the historical evolution of operations management and a discussion of the
trends and issues that impact operations management.
You will learn about (1) the economic balance that every business organization seeks to achieve; (2) the condition that
generally exists that makes achieving the economic balance challenging; (3) the line function that is the core of every
business organization; (4) key steps in the history and evolution of operations management; (5) the differences and similarities between producing products and delivering services; (6) what a supply chain is, and why it is essential to manage
it; and (7) the key issues for today’s business operations.
3
Chapter One Introduction to Operations Management
4
LO1.1 Define the terms
operations management
and supply chain.
Goods Physical items
produced by business…
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