Oprations management 11th stevenson 1

Operations and Decision Sciences Operations Management Beckman and Rosenfield, Operations Strategy: Competing in the 21 st Century, First Edition Benton, Purchasing and Suppl

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OPERATIONS MANAGEMENT

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Operations and Decision Sciences

Operations Management

Beckman and Rosenfield, Operations

Strategy: Competing in the 21 st Century,

First Edition

Benton, Purchasing and Supply Chain

Management, Second Edition

Bowersox, Closs, and Cooper, Supply

Chain Logistics Management, Third

Edition

Brown and Hyer, Managing Projects:

A Team-Based Approach, First Edition

Burt, Petcavage, and Pinkerton, Supply

Management, Eighth Edition

Cachon and Terwiesch, Matching Supply

with Demand: An Introduction to

Operations Management, Second Edition

Finch, Interactive Models for Operations

and Supply Chain Management, First

Edition

Fitzsimmons and Fitzsimmons, Service

Management: Operations, Strategy,

Information Technology, Seventh 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

Hopp and Spearman, Factory Physics,

Third Edition

Jacobs, Berry, Whybark, and Vollmann,

Manufacturing Planning & Control for

Supply Chain Management, Sixth Edition

Jacobs and Chase, Operations and Supply

Management: The Core, Second Edition

Jacobs and Chase, Operations and Supply

Chain Management, Thirteenth Edition Jacobs and Whybark, Why ERP? First

Edition

Johnson, Leenders, and Flynn, Purchasing

and Supply Management, Fourteenth

Edition

Larson and Gray, Project Management:

The Managerial Process, Fifth Edition

Olson, Introduction to Information

Sys-tems Project Management, Second Edition

Schroeder, Goldstein, and Rungtusanatham,

Operations Management: Contemporary

Concepts and Cases, Fifth 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 a Complex

World, First Edition

Stevenson, Operations Management,

Eleventh Edition

Swink, Melnyk, Cooper, and Hartley,

Managing Operations Across the Supply

Chain, First 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 Spread-

sheets, Fourth Edition

Stevenson and Ozgur, Introduction to Management Science with Spreadsheets,

First Edition

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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,

inven-tory 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

manage-ment is evolving and growing, and I have found updating and

integrating new material to be both rewarding and

challeng-ing, particularly due to the plethora of new developments in

the field, while facing the practical limits on the length of the

book

This Eleventh Edition Contains a

Considerable Amount of Material

much more than one could hope to cover in a single

semes-ter However, there is also considerable flexibility in terms of

what material to cover 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

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

appli-cations 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

This edition has been revised to incorporate and integrate

changes in the field of Operations Management, and the

many suggestions for improvement received from instructors

around the world who are using the text The following are

key among the revisions:

• The sequence of chapters has been changed to improve

the flow

• A tutorial has been added on working with the normal

distribution

• A list of key points has been added to every chapter

• New material and more emphasis have been devoted to these topics:

Service Supply chain management Ethical conduct

Sustainability Step-by-step problem solving

• Linear programming is now a chapter rather than a ter supplement, to allow more flexibility on when and where it is used

• There is added emphasis on ethics in every chapter

• Throughout the text, there are new, updated readings and photos to provide students with a motivating view of the critical importance of operations management today

• Available for instructors, OM Video/DVD series Volumes 1–16 document the latest innovations in operations at companies such as Zappos.com, Xerox, Burton Snow-boards, FedEx, Honda, and more

Acknowledgments

I want to thank the many contributors to this edition Over the recent editions, 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 care-fully considered, and are sincerely appreciated The list includes post-publication reviewers, focus group participants, and man-uscript reviewers: Vikas Agrawal, Fayetteville State Univer-sity; Bahram Alidaee, University of Mississippi; Chen Chung, University of Kentucky; Robert Clark, Stony Brook University; Kathy Dhanda, DePaul University; Richard Ehrhardt, Univer-sity of North Carolina at Greensboro; Warren Fisher, Stephen

F Austin State University; Seung-Lae Kim, Drexel University; Jooh Lee, Rowan University; Gita Mathur, San Jose State Uni-versity; Kaushic Sengupta, Hofstra University; Kenneth Shaw, Oregon State University; Michael Shurden, Lander University; John Simon, Governors State University; Young Son, Bernard

M Baruch College; Timothy Vaughan, University of sin at Eau Claire; Pamela Zelbst, Sam Houston State Univer-sity; Tekle Wanorie, Northwest Missouri State University

Other contributors included accuracy checkers: Michael Godfrey, University of Wisconsin at Oshkosh and Pamela Zelbst, Sam Houston State University; Test Bank: Alan Cannon, University of Texas at Arlington; Power Points: David Cook, Old Dominion University; Data Sets: Mehdi Kaighobadi, Florida Atlantic University; Excel Templates and

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ScreenCam tutorials: Lee Tangedahl, University of Montana;

Instructors Manual: Michael Godfrey and Pamela Zelbst

Special thanks goes out to those subject matter experts who

helped design and develop content in Connect™ Operations

Management for this edition: Ronny Richardson of Southern

Polytechnic State University who created Guided Examples

and Shyam Jha, University of Arizona, Nancy Lambe,

Uni-versity of South Alabama, and Andrew Manikas, UniUni-versity

of Wisconsin at Oshkosh, who designed the new assignable

interactive applications

Finally I would like to thank all the people at McGraw-Hill/

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 Dick Hercher, Executive Editor; Gail

Korosa, Managing Developmental Editor; Bruce Gin, Project

Manager; Debra Sylvester, Buyer II; Katie White,

Market-ing Manager; Laurie EntrMarket-inger, Designer; Kerry Bowler and

Ron Nelms, Media Project Managers; Keri Johnson, Photo

Research and many others who worked “behind the scenes.”

I would also like to thank the many reviewers of

previ-ous editions for their contributions 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,

Univer-sity of Southern Alabama at Mobile; Chrwan-Jyh, Oklahoma

State University; Loretta Cochran, Arkansas Tech

Univer-sity; Lewis Coopersmith, Rider UniverUniver-sity; Richard Crandall,

Appalachian State University; Dinesh Dave, Appalachian

State University; Scott Dellana, East Carolina University; Xin

Ding, University of Utah; Ellen Dumond, California State

Uni-versity at Fullerton; Kurt Engemann, Iona College; Diane Ervin,

DeVry University; Farzaneh Fazel, Illinois State University;

Wanda Fennell, University of Mississippi at Hattiesburg; Joy

Field, Boston College; 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

Uni-versity; 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

Univer-sity; Jim Ho, University of Illinois at Chicago; 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; Beate Klingenberg, Marist College; John Kros, East Carolina Uni-versity; Vinod Lall, Minnesota State University at Moorhead;

Kenneth Lawrence, New Jersey Institute of Technology; 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; 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; Seong Hyun Nam, University of North Dakota; Roy Nersesian, Monmouth University; John Olson, University of St Thomas; Jeffrey Ohlmann, University of Iowa at Iowa City; 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, Towson 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 Uni-versity; Herb Schiller, Stony Brook University; Dean T Scott, DeVry University; Scott J Seipel, Middle Tennessee State University; Raj Selladurai, Indiana University; Dooyoung Shin, Minnesota State University at Mankato; Raymond E

Simko, Myers University; Jake Simons, Georgia Southern University; Charles Smith, Virginia Commonwealth Uni-versity; Kenneth Solheim, DeVry University; Victor Sower, Sam Houston 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; Emre Veral, Baruch College;

Mark Vroblefski, University of Arizona; Gustavo Vulcano, New York University; Walter Wallace, Georgia State Uni-versity; James Walters, Ball State University; John Wang, Montclair State University; Jerry Wei, University of Notre Dame; Michael Whittenberg, University of Texas; Geoff Willis, University of Central Oklahoma; Jiawei Zhang, NYU;

Zhenying Zhao, University of Maryland; Yong-Pin Zhou, University of Washington

William J Stevenson

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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

E X A M P L E 7

A furniture manufacturer wants to predict quarterly demand for a certain loveseat for periods

15 and 16, which happen to be the second and third quarters of a particular year The series consists of both trend and seasonality The trend portion of demand is projected using the

equation F t ⫽ 124 ⫹ 7.5 t Quarter relatives are SR 1 ⫽ 1.20, SR 2 ⫽ 1.10, SR 3 ⫽ 0.75, and

SR 4 ⫽ 0.95.

a Use this information to deseasonalize sales for quarters 1 through 8

b Use this information to predict demand for periods 15 and 16

15 16

Multiplying the trend value by the appropriate quarter relative yields a forecast that

includes both trend and seasonality Given that t ⫽ 15 is a third quarter and t ⫽ 16 is a

fourth quarter, the forecasts are

Period 15:

Period 16:

236 5 0 75 177 38 244

( ) ⫽ ( 0 0 95 ) ⫽ 231 80

S O L U T I O N

Examples with Solutions

Throughout the text, wherever a tive or analytic technique is introduced,

quantita-an example is included to illustrate the application of that technique These are designed to be easy to follow

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SOLVED PROBLEMS

a Determine the annual cost of each alternative:

Total cost ⫽ Fixed cost ⫹ Volume ⫻ Variable cost Make:

Because the annual cost of making the item is less than the annual cost of buying it, the manager

would reasonably choose to make the item Note: If the unit cost to buy had been less than the

variable cost to make, there would be no need to even consider fixed costs; it would simply have

been better to buy

b To determine the volume at which the two choices would be equivalent, set the two total costs equal to each other and solve for volume: TC make ⫽ TC buy Thus, $150,000 ⫹ Q ($60) ⫽ 0 ⫹

Q ($80) Solving, Q ⫽ 7,500 units Therefore, at a volume of 7,500 units a year, the manager would be indifferent between making and buying For lower volumes, the choice would be to buy, and for higher volumes, the choice would be to make

Solution

A firm’s manager must decide whether to make or buy a certain item used in the production of vending machines Making the item would involve annual lease costs of $150,000 Cost and volume estimates are as follows:

Annual fixed cost $150,000 None

Annual volume (units) 12,000 12,000

a Given these numbers, should the firm buy or make this item?

b There is a possibility that volume could change in the future At what volume would the manager

be indifferent between making and buying?

Placing the problem data in the cell positions shown, the expected monetary value (EMV) for each

alternative is shown in column J

Then, the overall EMV is obtained in column J as the maximum of the values in J5, J6, and J7

The EVPI is obtained using the Opportunity Loss Table by summing the product of the maximum

in column C2 and the probability in C4, and the product of the maximum in column D and the

prob-ability in D4

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 enhance

student understanding as

well as to provide additional

examples of problem solving

The Excel logo indicates that

a spreadsheet is available

on the text’s Web site, to help

solve the problem

Excel Spreadsheet Solutions

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 Web site

Templates are programmed to be fully functional in Excel 2007 and Excel 2003

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C H A P T E R 1

CHAPTER OUTLINE

Introduction, 000 Production of Goods versus Delivery of Services, 000 Process Management, 000 Managing a Process to Meet Demand, 000 Process Variation, 000 The Scope of Operations Management, 000 Why Learn about Operations Management?, 000 Career Opportunities and Professional Societies, 000 Operations Management and Decision Making, 000

Models, 000 Quantitative Approaches, 000 Performance Metrics, 000 Analysis of Trade-Offs, 000 Degree of Customization, 000

A Systems Approach, 000

The Historical Evolution of Operations Management, 000 The Industrial Revolution, 000 Scientific Management, 000 The Human Relations Movement, 000 Decision Models and Management Science, 000 The Influence of Japanese Manufacturers, 000 Operations Today, 000 Key Issues for Today’s Business Operations 000 Environmental Concerns 000 Ethical Conduct 000 The Need to Manage the Supply Chain, 000 Elements of Supply Chain Management, 000

Operations Tour: Wegmans Food

Markets, 000

Case: Hazel, 000

Introduction to Operations Management

After completing this chapter, you should be able to:

1 Define the term operations management

2 Identify the three major functional areas

of organizations and describe how they interrelate

3 Identify similarities and differences between production and service operations

4 Describe the operations function manager’s job

5 Summarize the two major aspects of process management

6 Explain the key aspects of operations management decision making

7 Briefly describe the historical evolution of operations management

8 Characterize current trends in business that impact operations management

LEARNING OBJECTIVES

1 Introduction

to Operations Management

2 Competitiveness, Strategy and

Productivity

3 Forecasting

4 Product and Service Design

5 Strategic Capacity Planning for

Products and Services

6 Process Selection and Facility

Layout

7 Work Design and Measurement

8 Location Planning and Analysis

14 JIT and Lean Operations

15 Supply Chain Management

The chapter also provides a brief description of the historical evolution of operations management and a discussion of the trends and issues that impact operations management

More specifically, 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 manage it; and (7) the key issues for today’s business operations

Recalls of automobiles, eggs, produce, toys, and other legislatures are all examples of operations failures

They underscore the need for effective operations management

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 eleven editions and have proven to be

successful

Chapter Outlines

Every chapter and supplement includes

an outline of the topics covered

Learning Objectives

Every chapter and supplement lists the

learning objectives as a short guide to

studying the chapter

Opening Vignettes

Each chapter opens with an introduction to the important operations topics covered in the chapter Students need to see the relevance

of operations management in order to actively engage in learning the material

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Figures and Photos

The text includes photographs and

graphic illustrations to support

stu-dent learning and provide interest

and motivation Approximately 100

carefully selected photos highlight

the eleventh edition Many of the

photos provide additional examples

of companies that use operations

and supply chain concepts 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

FIGURE 2.2

The Balanced Scorecard

Source: Reprinted with permission of

Harvard Business School Press from

Rob-ert Kaplan and David Norton, Balanced

Scorecard: Translating Strategy into Action

Financial

"To succeed financially, how should we appear to our shareholders?"

"To achieve our vision, how will

we sustain our ability to change and improve?"

and strategy

"To satisfy our shareholders and customers, what business processes must

Puma’s “Clever Little Bag”

changes the idea of the shoebox

by wrapping footwear in a

cardboard structure with 65

percent less cardboard It uses

a bag made of recycled plastic

as the outer layer that holds

the inner cardboard structure

together Puma expects to

cut carbon dioxide emissions

by 10,000 tons per year and

water, energy, and diesel use

by 60 percent by using fewer

materials—8,500 fewer tons of

paper to be specific—and the

new packaging’s lighter weight.

SERVICE

viceS

serviceser-SCREEN C AM TUTORIAL SUPPLY CHAIN

e cel x

www.mhhe.com/stevenson11e

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OPERATIONS STRATEGY

Forecasts are the basis for many decisions and an essential input for matching supply and demand Clearly, the more accurate an organization’s forecasts, the better prepared it will be

to take advantage of future opportunities and reduce potential risks A worthwhile strategy can

be to work to improve short-term forecasts Better short-term forecasts will not only enhance profits through lower inventory levels, fewer shortages, and improved customer service, they

also will enhance forecasting credibility throughout the organization: If short-term forecasts

are inaccurate, why should other areas of the organization put faith in long-term forecasts?

Also, the sense of confidence accurate short-term forecasts would generate would allow allocating more resources to strategic and medium- to longer-term planning and less on short- term, tactical activities

Maintaining accurate, up-to-date information on prices, demand, and other variables can have a significant impact on forecast accuracy An organization also can do other things to improve forecasts These do not involve searching for improved techniques but relate to the inverse relation of accuracy to the forecast horizon: Forecasts that cover shorter time frames tend to be more accurate than longer-term forecasts Recognizing this, management might

choose to devote efforts to shortening the time horizon that forecasts must cover Essentially, this means shortening the lead time needed to respond to a forecast This might involve build- ing flexibility into operations to permit rapid response to changing demands for products and

services, or to changing volumes in quantities demanded; shortening the lead time required to obtain supplies, equipment, and raw materials or the time needed to train or retrain employ-

ees; or shortening the time needed to develop new products and services

Lean systems are demand driven; goods are produced to fulfill orders rather than to hold in inventory until demand arises Consequently, they are far less dependent on short-term forecasts than more traditional systems

Operations Strategies

Throughout the text, whenever the concepts being presented have significant strategic implications for firms, a distinctive heading is placed

to signify that text will relate

to strategic issues

The threat of global warming and the desire to protect the ronment has many companies embracing sustainability initiatives

envi-And they are finding that in many instances, there are cost savings

in doing so Among them is the Kraft Foods company, whose known brands include Cool Whip, Philadelphia Cream Cheese, DiGiorno pizza, Oscar Mayer, Oreo cookies, and Kraft cheeses and salad dressings Kraft is the world’s second largest food company with 100,000 employees and annual revenues of $42 billion The company is a member of the Dow Jones Sustainability Index and the Ethibel Sustainability Index

The company has set some ambitious goals that it wants to achieve:

• Reduce plant energy usage by 25 percent

• Reduce plant energy-related carbon dioxide emissions by

25 percent

• Reduce plant water consumption by 15 percent

• Reduce plant waste by 15 percent

• Eliminate 150 million pounds of packaging material from the supply chain

Some of Kraft’s successes have come from redesigned aging The goal is ambitious It will require more efficient packaging and a reduction in the amount of packaging material used

pack-Kraft believes that the greatest opportunity to reduce the ronmental impact of a package is early in the design phase Their packaging designers worldwide critically consider the amount of packaging used, how much postconsumer material can be used, how much energy is used to create the packing materials, how much CO 2 is generated as the materials are created and formed, and how well the package fits the product physically According to Kraft’s press releases, examples and benefits of recent packaging redesigns include:

• DiGiorno and California Pizza Kitchen pizzas: Using slimmer cartons that allow shipment of two extra pizza boxes per case and 14 percent more pizzas per pallet This leads to a savings

of approximately 1.4 million pounds of packaging per year, and the ability to load more pizzas on each truck means there are fewer trucks on the road and less fuel consumed

• Oscar Mayer Deli Creations: Using 30 percent less paperboard than the previous design results in 1.2 million fewer pounds of packaging going to landfills

• Kraft salad dressing: Using 19 percent less plastic per bottle translates to 3 million pounds fewer annually Additionally the new design allows more bottles to be shipped per truckload, leading to an increase in transportation efficiency of 18 percent

The company is also working to help the environment, reduce water pollution/soil erosion, and support biodiversity Considering these successes, Kraft’s recipe for sustainability is one that other companies should emulate

READING

Kraft Foods’ Recipe for Sustainability

Kraft Natural Cheese new packaging zipper eliminates more than one million pounds of packaging per year.

Readings

Throughout the text, and in

the assignment sections of

some chapters, are readings

These 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

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2 Who needs to be involved in preparing forecasts?

3 How has technology had an impact on forecasting?

CRITICAL THINKING EXERCISES

1 It has been said that forecasting using exponential smoothing is like driving a car by looking in the

rear-view mirror What are the conditions that would have to exist for driving a car that are

analo-gous to the assumptions made when using exponential smoothing?

2 What capability would an organization have to have to not need forecasts?

3 When a new business is started, or a patent idea needs funding, venture capitalists or investment

bankers will want to see a business plan that includes forecast information related to a profit and

loss statement What type of forecasting information do you suppose would be required?

4 Discuss how you would manage a poor forecast

5 Omar has heard from some of his customers that they will probably cut back on order sizes in the

next quarter The company he works for has been reducing its sales force due to falling demand and

he worries that he could be next if his sales begin to fall off Believing that he may be able to

con-vince his customers not to cut back on orders, he turns in an optimistic forecast of his next quarter

sales to his manager Is that ethical?

ste25251_ch03_072-131.indd 121 10/7/10 5:54:10 PM

1 A range of factors can cause an organization to design or redesign a product or service, including

economic, legal, political, social, technological, and competitive pressures Furthermore, an

impor-tant cause of operations failures can be traced to faulty design

2 Every area of a business organization, and its supply chain, is connected to, and influenced by, its

products and/or services, so the potential impact on each area must be taken into account when

prod-ucts or services are redesigned or new prodprod-ucts or services are to be designed

3 Central issues relate to the actual or expected demand for a product or service, the organization’s

capabilities, the cost to produce or provide, the desired quality level, and the cost and availability of

necessary resources

4 Among considerations that are generally important are legal, ethical, and environmental

5 Although there are some basic differences between product design and service design, there are

many similarities between the two

KEY POINTS

1 Examine and compare one of the following product sets Base your comparison on such factors as

features, costs, convenience, ease of use, ease and/or cost of repair, and safety.

a VCR players versus DVD players

b Cell phones versus landlines

c Wide-screen versus traditional television sets

d Standard gasoline automobile engines versus hybrids

e Standard wooden mousetraps versus new plastic mousetraps

f Satellite television versus cable

2 Use the Internet to obtain recent crash-safety ratings for passenger vehicles Then answer these questions:

a Which vehicles received the highest ratings? The lowest ratings?

b How important are crash-safety ratings to new car buyers? Does the degree of importance depend

on the circumstances of the buyer?

c Which types of buyers would you expect to be the most concerned with crash-safety ratings?

d Are there other features of a new car that might sway a buyer from focusing solely on crash safety? If so, what might they be?

3 Prepare a service blueprint for each of these banking transactions:

a Make a savings deposit using a teller

b Apply for a home equity loan

Discussion and Review Questions

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

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

Check-answers to most of the problems are

included in Appendix A so that students can

see immediately how they are progressing

Taking Stock and Critical

Thinking Exercises

These activities encourage analytical thinking

and help broaden conceptual understanding

A question related to ethics is included in the

Critical Thinking Exercises

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“Neither rain, nor snow ”

The U.S Postal Service (USPS) is the largest postal service in the world, handling about 41 percent (630 million pieces a day) of the world’s mail volume The second largest is Japan’s, which handles only about 6 percent of the world’s mail The USPS is huge by any standard It employs over 760,000 workers, making it the largest civilian employer in the United States It has over 300,000 mail collection boxes, 38,000 post offices, 130 million mail delivery points, more than 300 processing plants to sort and ship mail, and more than 75,000 pieces of mail processing equipment It handles over 100 billion pieces of first-class mail a year, and ships about

3 billion pounds of mail on commercial airline flights, making it the airlines’ largest shipper

Processing First-Class Mail

The essence of processing the mail is sorting, which means nizing the mail into smaller and smaller subgroups to facilitate its timely delivery Sorting involves a combination of manual and automatic operations Much of the mail that is processed is first- class mail

Most first-class mail is handled using automated equipment A small portion that cannot be handled by automated equipment must

be sorted by hand, just the way it was done in colonial times

The majority of first-class mail begins at the advanced facer canceling system This system positions each letter so that it is face up, with the stamp in the upper corner, checks to see if the

Productivity

Over the years, the USPS has experienced an ever-increasing volume of mail Productivity has been an important factor for the USPS in keeping postal rates low and maintaining rapid delivery service Two key factors in improved productivity have been the increased use of automation and the introduction of zip codes

Mail processing underwent a major shift to mechanization ing the 1950s and 1960s, which led to more rapid processing and higher productivity In 1978, an expanded zip code was introduced

dur-That was followed in 1983 by a four-digit expansion in zip codes

These changes required new, automated processing equipment, and the use of bar codes and optical readers All of these changes added greatly to productivity But even with these improvements, the USPS faced increasing competitive pressures

Competition

In the late 1980s, the USPS experienced a slowdown in the volume

of mail Some of this was due to a slowing of the economy, but most

of it was the result of increasing competition Delivery giants FedEx and UPS, as well as other companies that offer speedy delivery and package tracking, gave businesses and the general public conve- nient alternatives for some mail services At the same time, there was a growing use of fax machines and electronic communications and increased use of alternate forms of advertising such as cable

TV, all of which cut into the volume of mail Early in this century, e-mail and automated bill paying also cut into mail volume

OPERATIONS TOUR

The U.S Postal Service

Due to financial pressures that many hospitals face, the ess Clinic in Billings, Montana, decided to outsource a number of services, although in somewhat different ways

Deacon-First, the hospital outsourced its cafeteria food service

Although the food service employees were hired by the outside firm, they still felt a sense of ownership of their jobs, and still felt connected to the hospital because of the family atmosphere in the kitchen and the cafeteria

When the hospital tried the same thing with housekeeping, employee turnover became a problem An investigation revealed that because the housekeeping employees were more isolated in their work, they lost what little feeling of being connected to the hospital they had The problem was solved by hiring the employees back but using the outsource company to manage housekeeping

The hospital also decided to outsource its laundry service This time the hospital approached a rival hospital about joining it in outsourcing laundry service

Questions

1 In some instances the outsourced service occurs in a ent location, while in others it takes place inside the organization doing the outsourcing, as the food service did in this case

differ-What advantages were there in having the outsourced work performed within the hospital? Suppose a different hospital outsourced its food service but decided not to have the work performed in-house What might its rationale be?

2 In the housekeeping situation, why not just forget about sourcing, especially since the hospital ended up rehiring its employees anyway?

3 For laundry service, what might have been the rationale for asking another hospital to join it?

Source: Based on Norm Friedman, “Is Outsourcing the Solution?”

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

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

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ASSURANCE OF LEARNING READY

Many educational institutions today are focused on the notion of assurance of learning, an important element of some accreditation standards Operations Management is designed

specifically to support your assurance of learning initiatives with a simple, yet powerful, solution

Each test bank question for Operations Management maps to a specific chapter learning

outcome/objective listed in the text You can use our test bank software, EZ Test and EZ Test Online, or Connect Operations Management to easily query for learning outcomes/objectives that directly relate to the learning objectives for your course You can then use the reporting features of EZ Test to aggregate student results in similar fashion, making the collection and presentation of assurance of learning data simple and easy

AACSB STATEMENT

The McGraw-Hill Companies is a proud corporate member of AACSB International

Under-standing the importance and value of AACSB accreditation, Operations Management

recog-nizes the curricula guidelines detailed in the AACSB standards for business accreditation by connecting selected questions in the test bank to the six general knowledge and skill areas in the AACSB’s Assessment of Learning Standards

The statements contained in Operations Management are provided only as a guide for

the users of this textbook The AACSB leaves content coverage and assessment within the

purview of individual schools, the mission of the school, and the faculty While Operations

Management and the teaching package make no claim of any specific AACSB qualification

or evaluation, we have within the test bank labeled questions according to the six general knowledge and skill areas

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FOR INSTRUCTORS

Instructor Resource CD-ROM (ISBN 0077327446)

This all-in-one resource incorporates the Instructor’s Manual, Test Bank, EZ Test,

PowerPoint slides, Instructor PowerPoint slides, Excel Lecture Scripts, Data Sets,

Textbook Art Files, and Chapter Study Outlines

Instructor’s Manual

Prepared by William J Stevenson, Michael Godfrey, and Pamela Zelbst, this manual

includes “teaching notes” for each chapter and complete solutions to all text

prob-lems Also included are several enrichment modules that cover such topics as Simplex,

Vogel’s Approximation, Distance Measurement, and Emergency Facility Location

Test Bank and EZ Test

Prepared by Alan Cannon, the Test Bank includes over 2,000 questions and problems

for exams All of these have been class tested by the author or contributors EZ Test

is a flexible electronic testing program

PowerPoint Lecture Slides

Prepared by David Cook, Old Dominion University, the PowerPoint slides draw on the

highlights of each chapter and provide an opportunity for the instructor to emphasize

the more relevant visuals in class discussions

Excel Lecture Scripts

Prepared by Lee Tangedahl, University of Montana, the scripts provide suggestions

on using Excel and the templates in classroom lectures

Online Learning Center (OLC)—Text’s Web Site

• Lecture Scripts – How to demonstrate OM concepts using Excel

• Supplementary Problems and Solutions

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FOR STUDENTS Online Learning Center (OLC)—Text’s Web Site www.mhhe.com/stevenson11e

The Online Learning Center provides a wealth of materials for study and review, as well as enrichment

• PowerPoint Slides for students

• Interactive Operations Management (IOM) Java applets

(All of these are also included in the Instructor’s Edition of the Online Learning Center.)

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TABLE 3.1 Excel Solution for Example 5

Excel Templates

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 of all cells, hiding rows

or columns, and entering data or calculations in blank cells Many of the templates

have been expanded to accommodate solving larger problems and cases

Trend-Adjusted Exponential Smoothing

A variation of simple exponential smoothing can be used when a time series exhibits a linear

trend It is called trend-adjusted exponential smoothing or, sometimes, double smoothing,

to differentiate it from simple exponential smoothing, which is appropriate only when data vary around an average or have step or gradual changes If a series exhibits trend, and simple forecast will be too low; if decreasing, each forecast will be too high.

The trend-adjusted forecast (TAF) is composed of two elements: a smoothed error and a trend factor.

where

Trend-adjusted exponential smoothing Variation of exponential smoothing used when trend

SCREEN C AM TUTORIAL

ste25251_ch03_072-131.indd 92 10/7/10 5:53:39 PM

ScreenCam Tutorials

These screen “movies” and voiceover tutorials explain key chapter content, using

Excel and other software platforms

SCREEN C AM TUTORIAL

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McGraw-Hill Connect Operations Management is an online assignment and assessment solution that connects your

students with the tools and resources needed to achieve success through faster learning, more efficient studying,

and higher retention of knowledge

Management helps students learn more efficiently

by providing feedback and practice material when

they need it, where they need it Connect grades

homework automatically and gives immediate

feed-back on any questions students may have missed

presen-tations provide engaging narratives of all chapter learning

objectives in an interactive online format The

presenta-tions are tied specifically to Operapresenta-tions Management, 11e

They follow the structure of the text and are organized to

match the learning objectives within each chapter While

the interactive presentations are not meant to replace the

textbook in this course, they provide additional explanation

and enhancement of material from the text chapter,

allow-ing students to learn, study, and practice with instant

feed-back at their own pace

Operations Management Student Study Center

gives access to additional resources such as recorded lectures, PowerPoint slides, Excel tem-plates and data sets, video library, online practice materials, an eBook, and more

operations management

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Connect Operations Management offers a number of powerful tools and features to make managing assignments

easier, so faculty can spend more time teaching With Connect Operations Management, students can engage with

their coursework anytime and anywhere, making the learning process more accessible and efficient

Simple Assignment Management and Smart Grading

With Connect Operations Management, creating assignments is easier than ever, so you can spend more time teaching and less time managing Connect Operations Management enables you to:

comparisons with correct answers

Student Reporting

Connect Operations Management keeps instructors informed

about how each student, section, and class is performing,

allowing for more productive use of lecture and office hours

The reporting function enables you to:

• View scored work immediately and track individual or

group performance with assignment and grade reports

relative to learning objectives

accred-itation organizations, such as the AACSB

Instructor Library

The Connect Operations Management Instructor

Library is your repository for additional resources to

improve student engagement in and out of class You

can select and use any asset that enhances your

course approach The Connect Operations

Manage-ment Instructor Library includes: access to the eBook

version of the text, PowerPoint files, Instructor’s

Man-ual, and Test Bank

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McGraw-Hill Connect Plus Operations Management

the textbook

your students and the location in the eBook where that problem

or question is covered

in a snap

For more information about Connect, go to www.mcgrawhillconnect.com,

or contact your local McGraw-Hill sales representative

operations management

TEGRITY CAMPUS: LECTURES 24/7

Tegrity Campus is a service that makes class time available 24/7 by automatically

capturing every lecture in a searchable format for students to review when they

study and complete assignments With a simple one-click start-and-stop process,

you capture all computer screens and corresponding audio Students can replay any

part of any class with easy-to-use browser-based viewing on a PC or Mac

Educa-tors know that the more students can see, hear, and experience class resources,

the better they learn In fact, studies prove it With Tegrity Campus, students quickly

recall key moments by using Tegrity Campus’s unique search feature

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Operations Management Center (OMC)

The OM Center, edited and maintained by Byron Finch, provides additional

opera-tions management resources for both students and instructors Please consider this

as your site for pedagogical support or reference and for getting current OM

infor-mation To explore, visit http://www.mhhe.com/pom

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VIDEO LIBRARY

The OM Video Series includes professionally developed videos showing students real applications of key manufacturing and service topics For a full description of all volumes, visit http://www.mhhe.com/pom/video-frames.htm

Volume 14 (ISBN 0073278785), DVD

Service at Zappos.com (13:14) Zappos.com currently stocks more than

3 million shoes, handbags, and accessories from over 1,100 brands Their slogan,

“Powered by Service” highlights their emphasis on a service culture Featured in this video is the company’s random access inventory system and distinctive spider-merge conveyor system which speeds shipping time

Green Manufacturing at Xerox (9:42) This video focuses on Xerox’s goal to use energy and raw materials as efficiently as possible while reducing the amount

of waste through sustainable product design

Burton Snowboards—Manufacturing Design (19:34) This segment takes the viewer on a plant tour of the Burton Snowboards factory in Vermont, showcas-ing their unique manufacturing and design process Focusing on their “Just enough system” and built-to-order process, the step-by-step, hand-customized board build process is presented in depth

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Volume 15 (ISBN 007336486X), DVD

Noodles & Company—Service Process Design (8:17) Noodles & C ompany

uses business processes to provide quality food in a speedy manner Everything

from location to layout is designed to improve the order process Line flow for

cus-tomers and line flow for the food are examined Division of tasks and failsafing each

station allows team members to succeed FIFO and JIT are also discussed

Honda-Green Product Design and PHILL (8:25) The Honda Civic GX is

similar to the Civic, but is powered by natural gas for environmental and cost

efficiencies They share most of the same components and can use the same

assembly line for efficient operations and to meet demand

FedEx—Logistics and Customer Service (7:20) FedEx has long been

known for its small package delivery service This video focuses on the logistics

in freight shipments involving FedEx’s vast plane and ground network and

technology Customer service is a high priority, developed in its Customer

Critical Service Center

Volume 16 (ISBN 0077248341), DVD “Profitable

Sustainability” featuring Subaru of Indiana

Segment 1 Reduce (8:02) At Subaru the first and most cost-effective

sustainability initiative is reduction—bringing less onsite This segment provides

examples such as reducing sealant, based on associate (employee) suggestions

Another example is using new technology to analyze the internal structure of

welds, thus reducing the normal destruction method of testing and examining

the welds As a result of these and other initiatives, Subaru sends no waste

to landfills

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Segment 2 Reuse (7:47) Subaru’s goal is to reuse all materials that are not leaving the plant within a finished automobile Examples include reusing containers and packaging In some cases, packaging for engine blocks has been shipped back and forth from suppliers as many as seven or eight times before being recycled

All plastic, paper, wood, and even fluorescent lightbulbs are recycled Over

95 percent of wood pallets are returned multiple times to vendors—an annual cost saving of $1.3 million

Segment 3 Recycle (7:58) Recycling includes setting up sorting systems that match recycler input For example, different plastics are sorted on the spot to specifically match different recycler needs and to be a better “supplier” to them

Hazardous waste contained in fluorescent lightbulbs is prepped for recycling by way of a “bulb eater” that compresses glass and metal and separates them from hazardous waste such as mercury Even floor sweepings at welding stations are packaged for metal recyclers

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Note to the Student

The material in this text is part of the core knowledge in your

education Consequently, you will derive considerable

ben-efit 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 prin-

ciples 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

manage-ment.” 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

“fac-tory 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 Identify the key features of that material

2 Define and use terminology

3 Solve typical problems

4 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 an “A” in the course:

1 Look over the chapter outline and learning objectives

2 Read the chapter summary, and then skim the chapter

3 Read the chapter and take notes

4 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

6 Take the quizzes on the text’s Web site

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

An Online Learning Center (www.mhhe.com/stevenson11e)

is also available, containing many of the same study tools found

in the text

And here is one final thought: Homework is on the way to Happiness! Enjoy the journey!

W.J S

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Brief Contents

Preface v

1 Introduction to Operations Management 2

2 Competitiveness, Strategy, and Productivity 40

3 Forecasting 72

4 Product and Service Design 132

5 Strategic Capacity Planning for Products and Services 182

6 Process Selection and Facility Layout 234

7 Work Design and Measurement 284

8 Location Planning and Analysis 332

9 Management of Quality 370

10 Quality Control 418

11 Aggregate Planning and Master Scheduling 472

12 MRP and ERP 508

13 Inventory Management 554

14 JIT and Lean Operations 618

15 Supply Chain Management 662

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Why Learn about Operations Management? 14 Operations Management and Decision

Making 17

The Historical Evolution of Operations Management 21

Operations Today 24 Key Issues for Today’s Business Operations 27

Readings:

Diet and the Environment: Vegetarian vs

Critical Thinking Exercises 37

Case:

Selected Bibliography and Further Readings 38

2 Competitiveness, Strategy, and

Productivity 40

Introduction 42 Competitiveness 42 Mission and Strategies 44

Reading:

AMAZON Tops in Customer Service 45

Operations Strategy 52

Reading:

Productivity Gains Curb Inflation 53

Implications of Organization Strategy for

Transforming Strategy into Action:

The Balanced Scorecard 54 Productivity 56

Reading:

High Forecasts Can Be Bad News 78

Approaches to Forecasting 80 Qualitative Forecasts 80

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Forecasts Based on Time-Series Data 82

Choosing a Forecasting Technique 107

Computer Software in Forecasting 109

Highline Financial Services, Ltd 130

4 Product and Service Design 132

Reading:

Design as a Business Strategy 134

Reading:

Product Redesign, Not Offshoring, Holds Cost

Advantages for U.S Manufacturers 135

Reading:

Dutch Boy Brushes Up Its Paints 136

Reading:

Vlasic on a Roll with Huge Pickle Slices 138

Legal and Ethical Considerations 139

Reading:

Do You Want Pickled Beets with That? 141

Global Product and Service Design 141

Environmental Factors: Sustainability 142

Recycle City: Maria’s Market 146

Phases in Product Design and Development 157

Critical Thinking Exercises 166 Problems 167

Operations Tour:

High Acres Landfill 168 Selected Bibliography and Further Readings 168

SUPPLEMENT TO CHAPTER 4: Reliability 169

5 Strategic Capacity Planning for Products and Services 182

Reading:

Excess Capacity Can Be Bad News! 184

Capacity Decisions Are Strategic 185 Defining and Measuring Capacity 186 Determinants of Effective Capacity 187

Reading:

Less Trash Leaves Landfills in a Bind 188

Additional Challenges of Planning Service Capacity 192

Do It In-House or Outsource It? 193

Reading:

My Compliments to the Chef, er, Buyer 194

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Operations Strategy 204

Summary 205 Key Points 205 Key Terms 206 Solved Problems 206 Discussion and Review Questions 208 Taking Stock 208

7 Work Design and Measurement 284

Critical Thinking Exercise 316 Problems 317

Case:

Making Hotplates 319 Selected Bibliography and Further Readings 319

SUPPLEMENT TO CHAPTER 7:

Learning Curves 320

8 Location Planning and Analysis 332

The Need for Location Decisions 333 The Nature of Location Decisions 334

Clicks or Bricks, or Both? 350

Summary 356 Key Points 356 Key Terms 356 Solved Problems 357 Discussion and Review Questions 358

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Whatever Happened to Quality? 372

Insights on Quality Management 373

Readings:

The Sounds of Quality 375

Medical Mistakes Kill Almost 98,000 a Year 378

Hyundai: Kissing Clunkers Goodbye 379

Recipe for Business Success: Quality 380

The Evolution of Quality Management 382

The Foundations of Modern Quality Management:

In the Chips at Jays 423

Cases:

Toys, Inc 460 Tiger Tools 460 Selected Bibliography and Further Readings 461

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Disaggregating the Aggregate Plan 493

The Master Scheduling Process 494

Critical Thinking Exercise 503 Problems 503

Cases:

Promotional Novelties 549 DMD Enterprises 549

Operations Tour:

Stickley Furniture 550 Selected Bibliography and Further Readings 552

Radio Frequency Identification (RFID) Tags 561

How Much to Order: Economic Order Quantity Models 566

How Much to Order: Fixed-Order-Interval Model 585

Cases:

UPD Manufacturing 609 Harvey Industries 609 Grill Rite 611

Farmers Restaurant 612

Operations Tours:

Bruegger’s Bagel Bakery 613 PSC, Inc 614

14 JIT and Lean Operations 618

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Pedal Pushers 629

“People” Firms Boost Profits, Study Shows 631

Reading:

Nearby Suppliers Match Ford’s Mix 643

Transitioning to a Lean System 643

Reading:

To Build a Better Hospital, Virginia Mason

Takes Lessons from Toyota Plants 646

Trends in Supply Chain Management 667

Active RFID vs Passive RFID 687 Rise of the 3PL 688

Creating an Effective Supply Chain 689

Summary 694 Key Points 695 Key Terms 695 Discussion and Review Questions 695 Taking Stock 695

Cases:

Master Tag 696 B&L Inc 697 Selected Bibliography and Further Readings 698

Behavioral Aspects of Project Management 744

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Reading:

Project Managers Have Never Been More Critical 747

Planning and Scheduling with Gantt Charts 749

Advantages of Using PERT and Potential Sources of Error 770

Critical Chain Project Management 771 Other Topics in Project Management 771

Cases:

The Case of the Mexican Crazy Quilt 789 Time, Please 790

18 Management of Waiting Lines 792

Why Is There Waiting? 794 Managerial Implications of Waiting Lines 795

Reading:

New Yorkers Do Not Like Waiting in Line 795

Goal of Waiting-Line Management 795 Characteristics of Waiting Lines 796 Measures of Waiting-Line Performance 800

Queuing Model: Finite-Source 815

Summary 854 Key Points 854 Key Terms 854 Solved Problems 854 Discussion and Review Questions 857 Problems 857

Cases:

Son, Ltd 861 Custom Cabinets, Inc 862 Selected Bibliography and Further Readings 863

Appendix A: Answers to Selected Problems 864

Appendix B: Tables 879

Appendix C: Working with the Normal

Photo Credits 892 Company Index 893 Subject Index 894

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Operations Management

Trang 37

A Systems Approach, 20 Establishing Priorities, 20

The Historical Evolution of Operations Management, 21

The Industrial Revolution, 21 Scientific Management, 21 The Human Relations Movement, 23 Decision Models and Management Science, 24

The Influence of Japanese Manufacturers, 24

Operations Today, 24 Key Issues for Today’s Business Operations 27

Environmental Concerns 28 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

Introduction to Operations

Management

After completing this chapter, you should be able to:

of organizations and describe how they interrelate

between production and service operations

and the nature of the operations manager’s job

aspects of process management

management decision making

evolution of operations management

that impact operations management

4 Product and Service Design

5 Strategic Capacity Planning for

Products and Services

6 Process Selection and Facility

Layout

7 Work Design and Measurement

8 Location Planning and Analysis

14 JIT and Lean Operations

15 Supply Chain Management

16 Scheduling

17 Project Management

18 Management of Waiting Lines

19 Linear Programming

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This book is about operations management The subject matter is

fascinating and timely: Productivity, quality, e-business, global

competition, and customer service are very much in the news,

and all are part of operations management 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 brief description of the historical evolution of operations management and a discussion of the trends and issues that impact operations management

More specifically, 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 important to

manage it; and (7) the key issues for today’s business operations

Recalls of automobiles, eggs, produce, toys, and other products; major oil spills; and even dysfunctional state legislatures are all examples of operations failures

They underscore the need for effective operations management

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INTRODUCTION

Operations is that part of a business organization that is responsible for producing goods and/

or services Goods are physical items that include raw materials, parts, subassemblies such as motherboards that go into computers, and final products such as cell phones and automobiles

psychologi-cal value Examples of goods and services are found all around you Every book you read, every video you watch, every e-mail you send, every telephone conversation you have, and every medical treatment you receive involves the operations function of one or more organi-zations So does everything you wear, eat, travel in, sit on, and access the Internet with The operations function in business can also be viewed from a more far-reaching perspective: The collective success or failure of companies’ operations functions has an impact on the ability of

a nation to compete with other nations, and on the nation’s economy

The ideal situation for a business organization is to achieve a match of supply and demand

Having excess supply or excess capacity is wasteful and costly; having too little means lost opportunity and possible customer dissatisfaction The key functions on the supply side are operations and supply chains, and sales and marketing on the demand side

While the operations function is responsible for producing products and/or delivering services, it needs the support and input from other areas of the organization Business orga-nizations have three basic functional areas, as depicted in Figure 1.1 : finance, marketing, and operations It doesn’t matter whether the business is a retail store, a hospital, a manufacturing firm, a car wash, or some other type of business; all business organizations have these three basic functions

Finance is responsible for securing financial resources at favorable prices and allocating those resources throughout the organization, as well as budgeting, analyzing investment proposals, and providing funds for operations Marketing and operations are the primary, or “line,” func-tions Marketing is responsible for assessing consumer wants and needs, and selling and pro-moting the organization’s goods or services Operations is responsible for producing the goods

or providing the services offered by the organization To put this into perspective, if a business organization were a car, operations would be its engine And just as the engine is the core of what a car does, in a business organization, operations is the core of what the organization does

Operations management is responsible for managing that core Hence, operations

Operations and supply chains are intrinsically linked and no business organization could exist without both A supply chain is the sequence of organizations—their facilities, functions, and activities—that are involved in producing and delivering a product or service

The sequence begins with basic suppliers of raw materials and extends all the way to the final customer, as seen in Figure 1.2 Facilities might include warehouses, factories, process-ing centers, offices, distribution centers, and retail outlets Functions and activities include forecasting, purchasing, inventory management, information management, quality assur-ance, scheduling, production, distribution, delivery, and customer service Figure 1.3 provides another illustration of a supply chain: a chain that begins with wheat growing on a farm and ends with a customer buying a loaf of bread in a supermarket Notice that the value of the product increases as it moves through the supply chain

by business organizations

some combination of time,

loca-tion, form, and psychological

value

by business organizations

some combination of time,

loca-tion, form, and psychological

value

Operations management

The management of systems or

processes that create goods and/

or provide services

of activities and organizations

involved in producing and

delivering a good or service

Operations management

The management of systems or

processes that create goods and/

or provide services

of activities and organizations

involved in producing and

delivering a good or service

Organization

Operations Marketing Finance

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Supply chains are both external and internal to the organization The external parts of a supply chain provide raw materials, parts, equipment, supplies, and/or other inputs to the

organization, and they deliver outputs that are goods to the organization’s customers The

internal parts of a supply chain are part of the operations function itself, supplying operations

with parts and materials, performing work on products and/or services, and passing the work

on to the next step in the process

The creation of goods or services involves transforming or converting inputs into outputs

Various inputs such as capital, labor, and information are used to create goods or services

using one or more transformation processes (e.g., storing, transporting, repairing) To ensure

that the desired outputs are obtained, an organization takes measurements at various points in

the transformation process ( feedback ) and then compares them with previously established

standards to determine whether corrective action is needed ( control ) Figure 1.4 depicts the

conversion system

Table 1.1 provides some examples of inputs, transformation processes, and outputs

Although goods and services are listed separately in Table 1.1 , it is important to note that

goods and services often occur jointly For example, having the oil changed in your car is a

service, but the oil that is delivered is a good Similarly, house painting is a service, but the

Final customers Distributor

Producer Direct

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