Operations and supply chain management 16e by jacobs

page iiOperations and Decision Sciences SUPPLY CHAIN MANAGEMENT Bowersox, Closs, and Cooper Supply Chain Logistics Management Fifth Edition Johnson Purchasing and Supply Management Sixte

page i

OPERATIONS AND SUPPLY CHAIN

MANAGEMENT

page ii

Operations and Decision Sciences

SUPPLY CHAIN MANAGEMENT

Bowersox, Closs, and Cooper

Supply Chain Logistics Management

Fifth Edition

Johnson

Purchasing and Supply Management

Sixteenth Edition

Simchi-Levi, Kaminsky, and Simchi-Levi

Designing and Managing the Supply Chain: Concepts, Strategies, Case Studies

Third Edition

Stock and Manrodt

Fundamentals of Supply Chain Management

PROJECT MANAGEMENT

Brown and Hyer

Managing Projects: A Team-Based Approach

Larson

Project Management: The Managerial Process

Eighth Edition

SERVICE OPERATIONS MANAGEMENT

Fitzsimmons, Fitzsimmons, and Bordoloi

Service Management: Operations, Strategy, Information Technology

Ninth Edition

MANAGEMENT SCIENCE

Hillier and Hillier

Introduction to Management Science: A Modeling and Case Studies Approach with Spreadsheets

Sixth Edition

Stevenson and Ozgur

Introduction to Management Science with Spreadsheets

First Edition

MANUFACTURING CONTROL SYSTEMS

Jacobs, Berry, Whybark, and Vollmann

Manufacturing Planning & Control for Supply Chain Management: The CPIM Reference

Second Edition

BUSINESS RESEARCH METHODS

LINEAR STATISTICS AND REGRESSION

Kutner, Nachtsheim, and Neiter

Applied Linear Regression Models

Cachon and Terwiesch

Matching Supply with Demand: An Introduction to Operations Management

Second Edition

Cachon and Terwiesch

Operations Management

Second Edition

Jacobs and Chase

Operations and Supply Chain Management: The Core

Fifth Edition

Jacobs and Chase

Operations and Supply Chain Management

Sixteenth Edition

Jacobs and Whybark

Why ERP? A Primer on SAP Implementation

First Edition

Schroeder, Goldstein, and Rungtusanatham

Operations Management in the Supply Chain: Decisions and Cases

Eighth Edition

Stevenson

Operations Management

Fourteenth Edition

Swink, Melnyk, Cooper, and Hartley

Managing Operations across the Supply Chain

Fourth Edition

BUSINESS MATH

Slater and Wittry

Practical Business Math Procedures

Thirteenth Edition

Slater and Wittry

Math for Business and Finance: An Algebraic Approach

Second Edition

BUSINESS STATISTICS

Bowerman, Drougas, Duckworth, Froelich, Hummel, Moninger, and Schur

Business Statistics and Analytics in Practice

Ninth Edition

Doane and Seward

Applied Statistics in Business and Economics

Sixth Edition

Jaggia and Kelly

Business Statistics: Communicating with Numbers

Third Edition

Jaggia and Kelly

Essentials of Business Statistics: Communicating with Numbers

Second Edition

Lind, Marchal, and Wathen

Basic Statistics for Business and Economics

Ninth Edition

Lind, Marchal, and Wathen

Statistical Techniques in Business and Economics

Eighteenth Edition

McGuckian

Connect Master: Business Statistics

page iv

OPERATIONS AND SUPPLY CHAIN MANAGEMENT

Published by McGraw-Hill Education, 2 Penn Plaza, New York, NY 10121 Copyright © 2021 by McGraw-Hill Education All rights reserved Printed in the United States of America 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

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page v

To the next generation: Cole, Connor, and Grant

To my wife, Harriet, and to our children

Laurie, Andy, Glenn, Robb, and Christine

10 Waiting Line Analysis and Simulation 258

11 Process Design and Analysis 301

11S Operations Consulting 334

12 Six Sigma Quality 344

13 Statistical Quality Control 363

Section Three

SUPPLY CHAIN PROCESSES

14 Lean Supply Chains 396

15 Logistics, Distribution, and Transportation 424

16 Global Sourcing and Procurement 448

Section Four

SUPPLY AND DEMAND PLANNING AND CONTROL

17 The Internet of Things and ERP 472

18 Forecasting 485

19 Sales and Operations Planning 526

19S Linear Programming Using the Excel Solver 552

B Negative Exponential Distribution: Values of E–X 707

C Areas of the Cumulative Standard Normal Distribution 708

D Uniformly Distributed Random Digits 709

E Answers to Selected Objective Questions 710

INDEX 712

Introduction—The Elements of OSCM 3

What Is Operations and Supply Chain Management? 3

Distinguishing Operations versus Supply Chain Processes 4

Categorizing Operations and Supply Chain Processes 6

Differences between Services and Goods 7

The Goods–Services Continuum 8

Product–Service Bundling 9

Careers in OSCM 9

The Major Concepts that Define the OSCM Field 10

Current Issues in Operations and Supply Chain Management 13

Efficiency, Effectiveness, and Value 13

The Notion of Trade-Offs 24

Order Winners and Order Qualifiers: The Marketing–Operations Link 24

Strategies Are Implemented Using Operations and Supply Chain Activities—IKEA’SStrategy 25

Assessing the Risk Associated with Operations and Supply Chain Strategies 25

Risk Management Framework 27

Productivity Measurement 28

A Sustainable Operations and Supply Chain Strategy 30

Concept Connections 31

Product Development Process 41

Product Design Criteria 46

Designing for the Customer 47

Value Analysis/Value Engineering 48

Designing Products for Manufacture and Assembly 49

Designing Service Products 53

Economic Analysis of Product Development Projects 54

Build a Base-Case Financial Model 55

Sensitivity Analysis to Understand Project Trade-Offs 57

Measuring Product Development Performance 58

Concept Connections 59

Solved Problem 60

Discussion Questions 63

Objective Questions 63

Case: IKEA: Design and Pricing 66

Case: Comparison of Competing Products 68

Practice Exam 70

4 P ROJECTS  71

What Is Project Management? 72

Organizing the Project Team 73

CPM with Three Activity Time Estimates 86

Time–Cost Models and Project Crashing 88

Project Management Information Systems 92

5 S TRATEGIC C APACITY M ANAGEMENT  108

Capacity Management in Operations and Supply Chain Management 109Capacity Planning Concepts 110

Economies and Diseconomies of Scale 110

Capacity Focus 111

Capacity Flexibility 111

Capacity Planning 112

Considerations in Changing Capacity 112

Determining Capacity Requirements 113

Using Decision Trees to Evaluate Capacity Alternatives 115

Planning Service Capacity 118

Capacity Planning in Services versus Manufacturing 118

Capacity Utilization and Service Quality 119

The Effects of Taxes 132

Choosing among Investment Proposals 133

Methods of Ranking Investments 139

Sample Problems: Investment Decisions 140

Concept Connections 143

6 L EARNING C URVES  144

What Are Learning Curves? 145

How Are Learning Curves Modeled? 146

Logarithmic Analysis 147

Learning Curve Tables 147

Estimating the Learning Percentage 152

How Long Does Learning Go On? 152

In Practice, How much Learning Occurs? 152Individual Learning 152

What Are Manufacturing Processes? 163

How Manufacturing Processes Are Organized 165Break-Even Analysis 167

Manufacturing Process Flow Design 169

page ix

Analyzing the Four Most Common Layout Formats 191

Workcenters (Job Shops) 191

Systematic Layout Planning 195

Assembly Lines 195

Assembly-Line Design 195

Splitting Tasks 199

Flexible and U-Shaped Line Layouts 200

Mixed-Model Line Balancing 200

The Nature of Services 224

An Operational Classification of Services 225

Designing Service Organizations 225

Structuring the Service Encounter: The Service-System Design Matrix 227

Web Platform Businesses 228

Managing Customer-Introduced Variability 230

Applying Behavioral Science to Service Encounters 230

Service Blueprinting and Fail-Safing 233

Three Contrasting Service Designs 234

The Production-Line Approach 235

The Self-Service Approach 236

The Personal-Attention Approach 236

Seven Characteristics of a Well-Designed Service System 237

Quality Management and Process Improvement 248

Health Care Supply Chains 249

10 WAITING LINE ANALYSIS AND SIMULATION 258

The Waiting Line Problem 259

The Practical View of Waiting Lines 259

The Queuing System 260

Waiting Line Models 267

Approximating Customer Waiting Time 273

Simulating Waiting Lines 276

Example: A Two-Stage Assembly Line 276

Objective Questions 288

Case: Community Hospital Evening Operating Room 293Analytics Exercise: Processing Customer Orders 293Practice Exam 296

11 PROCESS DESIGN AND ANALYSIS 301

Measuring Process Performance 309

Production Process Mapping and Little’s Law 311

Job Design Decisions 313

Behavioral Considerations in Job Design 314

Work Measurement and Standards 314

Process Analysis Examples 315

A Bread-Making Operation 315

A Restaurant Operation 316

Planning a Transit Bus Operation 318

Process Flow Time Reduction 320

What is Operations Consulting? 334

The Management Consulting Industry 334

Economics of Consulting Firms 335

When Operations Consulting is Needed 336

The Operations Consulting Process 337

Operations Consulting Tool Kit 338

Problem Definition Tools 338

Data Gathering 340

page x

Data Analysis and Solution Development 341

Cost Impact and Payoff Analysis 341

12 SIX SIGMA QUALITY 344

Total Quality Management 345

Quality Specifications and Quality Costs 346

Developing Quality Specifications 346

Cost of Quality 347

Six Sigma Quality 349

Six Sigma Methodology 350

Analytical Tools for Six Sigma 351

Six Sigma Roles and Responsibilities 354

The Shingo System: Fail-Safe Design 355

ISO 9000 and ISO 14000 356

External Benchmarking for Quality Improvement 357

13 STATISTICAL QUALITY CONTROL 363

Statistical Quality Control 364

Understanding and Measuring Process Variation 365

Measuring Process Capability 367

Statistical Process Control Procedures 371

Process Control with Attribute Measurements: Using p-Charts 372

Process Control with Attribute Measurements: Using c-Charts 374

Process Control with Variable Measurements: Using X–- and R-Charts 375

How to Construct X–- and R-Charts 376

Acceptance Sampling 379

Design of a Single Sampling Plan for Attributes 379

Operating Characteristic Curves 380

Concept Connections 382

Solved Problems 383

Discussion Questions 386

Objective Questions 386

Analytics Exercise: Hot Shot Plastics Company 391

Analytics Exercise: Quality Management—Toyota 392

Practice Exam 393

Section Three

SUPPLY CHAIN PROCESSES

14 LEAN SUPPLY CHAINS 396

Lean Production 397

The Toyota Production System 398

Lean Supply Chains 399

Value Stream Mapping 401

Lean Supply Chain Design Principles 403

Lean Concepts 404

Lean Production Schedules 405

Lean Supply Chains 409

Case: Quality Parts Company 419

Case: Value Stream Mapping 421

Case: Pro Fishing Boats—A Value Stream Mapping Exercise 422

Plant Location Methods 429

The Bullwhip Effect 450

Supply Chain Uncertainty Framework 451

Outsourcing 454

Logistics Outsourcing 454

Framework for Supplier Relationships 455

Green Sourcing 457

Total Cost of Ownership 460

Measuring Sourcing Performance 462

SUPPLY AND DEMAND PLANNING AND CONTROL

17 THE INTERNET OF THINGS AND ERP 472

Intelligent Devices Connected through the Internet 473

page xi

Manufacturing and Logistics 476

Sales and Marketing 477

SAP Supply Chain Management 479

SAP Supply Chain Execution 480

SAP Supply Chain Collaboration 480

SAP Supply Chain Coordination 481

Performance Metrics to Evaluate Integrated System Effectiveness 481

The “Functional Silo” Approach 482

Forecasting in Operations and Supply Chain Management 486

Quantitative Forecasting Models 487

Components of Demand 487

Time Series Analysis 488

Forecast Errors 501

Causal Relationship Forecasting 504

Qualitative Techniques in Forecasting 506

Analytics Exercise: Forecasting Supply Chain Demand—Starbucks Corporation(LO18-2) 524

Practice Exam 525

19 SALES AND OPERATIONS PLANNING 526

What Is Sales and Operations Planning? 527

An Overview of Sales and Operations Planning Activities 527

The Aggregate Operations Plan 529

Aggregate Planning Techniques 533

A Cut-and-Try Example: The JC Company 533

Aggregate Planning Applied to Services: Tucson Parks and Recreation

19S L INEAR P ROGRAMMING U SING THE E XCEL S OLVER  552

The Linear Programming Model 553

Linear Programming Using Microsoft Excel 554

Independent versus Dependent Demand 570

Inventory Control Systems 571

A Single-Period Inventory Model 572

Multiperiod Inventory Systems 573

Fixed–Order Quantity Models 576

Fixed–Time Period Models 582

Inventory Turn Calculation 584

21 MATERIAL REQUIREMENTS PLANNING 609

Understanding Material Requirements Planning 610

Where MRP Can Be Used 610

Master Production Scheduling 610

Material Requirements Planning System Structure 613

Demand for Products 613

Developing a Master Production Schedule 618

Bill-of-Materials (Product Structure) 619

Inventory Records 619

Performing the MRP Calculations 619

Lot Sizing in MRP Systems 622

Lot-for-Lot 623

Economic Order Quantity 623

Least Total Cost 624

Least Unit Cost 625

Choosing the Best Lot Size 625

Concept Connections 626

Solved Problems 628

Discussion Questions 633

The Nature and Importance of Workcenters 641

Typical Scheduling and Control Functions 643

Objectives of Workcenter Scheduling 644

Job Sequencing 644

Priority Rules and Techniques 645

Scheduling n Jobs on One Machine 645

Scheduling n Jobs on Two Machines 648

Scheduling a Set Number of Jobs on the Same Number of Machines 649

Scheduling n Jobs on m Machines 651

Shop-Floor Control 651

Gantt Charts 651

Tools of Shop-Floor Control 652

Principles of Workcenter Scheduling 654

Personnel Scheduling in Services 655

Scheduling Daily Work Times 655

Scheduling Hourly Work Times 656

Eli Goldratt’s Theory of Constraints 672

The Goal of the Firm 673

Performance Measurements 673

Unbalanced Capacity 675

Bottlenecks, Capacity-Constrained Resources, and Synchronous Manufacturing 676Basic Manufacturing Building Blocks 677

Methods for Synchronous Control 677

Comparing Synchronous Manufacturing (Toc) to Traditional Approaches 686

MRP and JIT 686

Relationship with Other Functional Areas 687

Theory of Constraints—Problems About What to Produce 688Concept Connections 695

B Negative Exponential Distribution: Values of E −X 707

C Areas of the Cumulative Standard Normal Distribution 708

D Uniformly Distributed Random Digits 709

E Answers to Selected Objective Questions 710

INDEX 712

page xiii

PREFACE

Operations and supply chain management (OSCM) is a key element in the improvement in

productivity in business around the world Establishing a competitive advantage through operations

requires an understanding of how the operations and supply chain functions contribute to productivitygrowth However, our intent in this book is to do more than just show you what companies are doing

to create a competitive advantage in the marketplace by conveying to you a set of skills and tools thatyou can actually apply

Hot topics in business today that relate to operations and supply chain management are reducing thecost of supply chain processes, integration and collaboration with customers and suppliers,sustainability, and minimizing the long-term cost of products and processes These topics are studied

in the book with up-to-date, high-level managerial material to clarify the “big picture” of what thesetopics are and why they are so important to business today

A significant feature of this book is the organization of each chapter by concise learning objectives.Each objective relates to a block of knowledge that should be studied as a unit The objectives arecarried through the end-of-chapter material that includes Concept Connections, Discussion Questions,Objective Questions, and a Practice Exam The material is organized to ease understanding of eachtopic

Success in OSCM requires a data-driven view of a firm’s business Every chapter in the book has

analytic content that ties decisions to relevant data Mathematical models are used to structure the

data for making decisions Given the facts that are supported by data, success in OSCM requires

using a strategy that is consistent with the operations-related priorities of a firm Different

approaches can often be used, and usually trade-offs related to cost-and-flexibility-related criteria

exist Strategies are implemented through processes that define exactly how things are done.

Processes are executed over and over again as the firm conducts business, so they must be designed

to operate efficiently to minimize cost while meeting quality-related standards Great managers areanalytic in their approach to decision making; they understand and select the appropriate strategy, andthen execute the strategy through great processes We develop this pattern throughout the topics in thisbook

The reality of global customers, global suppliers, and global supply chains has made the globalfirm recognize the importance of being both lean and green to ensure competitiveness Applicationsthat range from high-tech manufacturing to high-touch service are used in the balanced treatment of thetraditional topics of the field Success for companies today requires successfully managing the entiresupply flow, from the sources of the firm, through the value-added process of the firm, and on to thecustomers of the firm

Each chapter includes information about how operations and supply chain–related problems aresolved There are concise treatments of the many decisions that need to be made in designing,planning, and managing the operations of a business Many spreadsheets are available from the bookwebsite to help clarify how these problems are quickly solved We have indicated those spreadsheetswith an Excel icon in the margin

page xiv

OSCM should appeal to individuals who want to be directly involved in making products orproviding services The entry-level operations specialist is the person who determines how best todesign, supply, and run the processes Senior operations managers are responsible for setting thestrategic direction of the company from an operations and supply chain standpoint, deciding whattechnologies should be used and where facilities should be located, purchasing the resources needed,and managing the facilities that make the products or provide the services OSCM is an interestingmix of managing people and applying sophisticated technology The goal is to efficiently createwealth by supplying quality goods and services

Features to aid in your understanding of the material include the following:

Chapter supplements provide additional material for students that relate to thechapter In some cases analytical tools are discussed, such as financial present valueanalysis and linear programming In other cases, specialized applications such ashealth care and consulting are discussed

OSCM at Work boxes provide short overviews of how leading-edge companies areapplying OSCM concepts today

Solved problems at the end of chapters serve as models that can be reviewed prior toattempting problems

The Concept Connections section in each chapter summarizes the concepts in eachlearning objective, has definitions of the key terms, and lists the equations whereappropriate

Discussion questions are designed to review concepts and show their applicability inreal-world settings These are included in each chapter and organized by learningobjectives

Objective questions at the end of chapters cover each concept and problem Theseare organized by the chapter learning objectives

Practice exam questions at the end of each chapter are special questions designed torequire a deeper understanding of the material in the chapter They are similar to thetype of short-answer questions that might be given on a test

Answers to selected problems are in Appendix E

The sixteenth edition is supported by a wealth of content in McGraw-Hill’s Connecthomework management system, including the adaptive SmartBook eBook, assignableand autogradable problems and exercises from the text, Test Bank questions, andconcept videos Instructors can access additional resources through the Connectlibrary, including PowerPoint slide outlines of each chapter, Excel spreadsheets for thesolved problems and other examples, practice quizzes, ScreenCam tutorials, Internetlinks, and video segments that illustrate the application of operations concepts incompanies such as Apple, Amazon, Tesla, Honda, Disney, Ford, and many others.Additional student resources are also available in Connect or directly at

mhhe.com/Jacobs16e.

page xv

Our aim is to cover the latest and the most important issues facing OSCM managers, as well asbasic tools and techniques We supply many examples of leading-edge companies and practices andhave done our best to make the book an interesting read and give you a competitive advantage in yourcareer

We hope you enjoy it

Plan of the Book

This book is about methods to effectively produce and distribute the goods and services sold by acompany To develop a better understanding of the field, this book is organized into four majorsections: Strategy, Products, and Capacity; Manufacturing and Service Processes; Supply ChainProcesses; and Supply and Demand Planning and Control In the following paragraphs, we quicklydescribe the major topics in the book

Strategy and sustainability are important and recurring topics in the book Any company must have

a comprehensive business plan that is supported by a marketing strategy, operations strategy, andfinancial strategy It is essential for a company to ensure that the three strategies support each other.Strategy is covered from a high-level view in Chapter 2 (Strategy), and more details that relate toeconomies of scale and learning are covered in Strategic Capacity Management (Chapter 5), andLearning Curves (Chapter 6) Because the company strategy must be supported financially, financialtools that are commonly used are reviewed in the supplement to Chapter 5 (Financial Analysis)

The lifeline of the company is a steady stream of innovative products that are offered to themarketplace at the lowest cost possible Design of Products and Services (Chapter 3) includes a view

of how products are designed in the context of having to actually produce and distribute

the product over its life cycle The chapter includes material on how to manage and

analyze the economic impact of a stream of products that are developed over time Projects (Chapter4) are used to implement change in a firm, be it a change in strategy, a new product introduction, or anew process

The second section of the book, titled Manufacturing and Service Processes, focuses on the design

of internal processes Chapters 7 and 9 cover the unique characteristics of production and serviceprocesses The supplement to Chapter 7 discusses health care services, an industry of interest to manystudents taking the course Important technical material that relates to design activities is covered inChapters 8 (Facility Layout) and 10 (Waiting Line Analysis and Simulation)

Chapter 11, Process Design and Analysis, is a nuts-and-bolts chapter on process flow charting andstatic process analysis using some easily understood real-life examples The supplement to Chapter

11 discusses how these techniques are used in consulting businesses, another industry of interest tomany students taking the course

An essential element of process design is quality Six Sigma Quality is the topic of Chapter 12.Here we cover total quality management concepts, Six Sigma tools, and ISO 9000 and 14000.Technical details covering all the statistical aspects of quality are in Chapter 13 (Statistical QualityControl)

The third section of the book, titled Supply Chain Processes, expands our focus to the entiredistribution system from the sourcing of material and other resources to the distribution of productsand services We discuss the concepts behind lean manufacturing and just-in-time processes inChapter 14 These are ideas used by companies throughout the world and are key drivers for efficient

and quick-responding supply systems Many different transformation processes are needed to puttogether a supply chain There are critical decisions such as: Where should we locate our facility?What equipment should we buy or lease? Should we outsource work or do it in-house? These are thetopics of Chapters 15 and 16 that relate to sourcing, procurement, location of facilities, anddistribution All of these decisions have a direct financial impact on the firm.

Section Four, titled Supply and Demand Planning and Control, covers the techniques required toactually run the system This is at the heart of OSCM The Internet of Things (Chapter 17) is a termused to describe the connection of intelligent devices through the Internet This technology combinedwith the use of enterprise resource planning systems has rapidly changed the way business is donetoday The basic building blocks are Forecasting (Chapter 18), Sales and Operations Planning(Chapter 19), Inventory Management (Chapter 20), Material Requirements Planning (Chapter 21), andWorkcenter Scheduling (Chapter 22) These daily processes are often partially automated withcomputer information systems

Making fact-based decisions is what OSCM is all about, so this book features extensive coverage

of decision-making approaches and tools One useful way to categorize decisions is by the length ofthe planning horizon, or the period of time that the decision maker must consider For example,building a new plant would be a long-term decision that a firm would need to be happy with for 10 to

15 years into the future At the other extreme, a decision about how much inventory for a particularitem should be ordered for tomorrow typically has a much shorter planning horizon of a few months

or, in many cases, only a few days Such short-term decisions are usually automated using computerprograms In the intermediate term are decisions that a company needs to live with for only 3 to 12months Often these decisions correspond to yearly model changes and seasonal business cycles

As you can see from this discussion, this material is all interrelated A company’s strategy dictateshow operations are designed The design of the operation dictates how it needs to be managed.Finally, because businesses are constantly being presented with new opportunities through newmarkets, products, and technologies, a business needs to be very good at managing change

page xvi

FOR INSTRUCTORS

You’re in the driver’s seat.

Want to build your own course? No problem Prefer to use our turnkey, prebuilt course? Easy Want

to make changes throughout the semester? Sure And you’ll save time with Connect’s auto-gradingtoo

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They’ll thank you for it.

page xvii

Adaptive study resources like SmartBook® 2.0 help your students be better prepared in less time.You can transform your class time from dull definitions to dynamic debates Find out more about thepowerful personalized learning experience available in SmartBook 2.0 at

www.mheducation.com/highered/connect/smartbook

Make it simple, make it affordable.

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Connect makes it easy with seamless integration using any of the major Learning Management

Systems—Blackboard®, Canvas, and D2L, among others—to let you organize your course in oneconvenient location Give your students access to digital materials at a discount with our inclusiveaccess program Ask your McGraw-Hill representative for more information

Solutions for your challenges.

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A product isn’t a solution Real solutions are affordable, reliable, and come with training and

ongoing support when you need it and how you want it Our Customer Experience Group can alsohelp you troubleshoot tech problems—although Connect’s 99% uptime means you might not need to

call them See for yourself at status.mheducation.com

FOR STUDENTS

Effective, efficient studying.

Connect helps you be more productive with your study time and get better grades using tools likeSmartBook 2.0, which highlights key concepts and creates a personalized study plan Connect setsyou up for success, so you walk into class with confidence and walk out with better grades

Study anytime, anywhere.

Download the free ReadAnywhere app and access your online eBook or SmartBook 2.0 assignmentswhen it’s convenient, even if you’re offline And since the app automatically syncs with your eBookand SmartBook 2.0 assignments in Connect, all of your work is available every time you open it Find

out more at www.mheducation.com/readanywhere

“I really liked this app—it made it easy to study when you don't have your

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The Connect Calendar and Reports tools keep you on track with the work you need to get done andyour assignment scores Life gets busy; Connect tools help you keep learning through it all

Learning for everyone.

McGraw-Hill works directly with Accessibility Services Departments and faculty to meet the

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accessibility@mheducation.com, or visit www.mheducation.com/about/accessibility for more

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Supplements are a great deal of work to write, and we appreciate the efforts that make teaching thecourse easier for everyone who uses the text John Kros of East Carolina University created theConnect guided examples P Sundararaghavan of University of Toledo updated the test bank RonnyRichardson of Kennesaw State University updated the PowerPoint decks and revised Smartbook.

We also want to thank the following individuals for their thoughtful reviews of the previous editionand their suggestions for this text: Antonio Arreola-Risa, Texas A&M University; Abdullahel Bari,University of Texas at Tyler; Steven Carnovale, Portland State University; Mohsen El-Hafsi,University of California Riverside; Xin James He, Fairfield University; Joyce Orsini, FordhamUniversity; Gabelli School of Business; Kathryn Marley, Duquesne University; Kim Roberts, AthensState University; Larry Taube, University of North Carolina at Greensboro

Thanks to the McGraw-Hill Education team who make this possible—Chuck Synovec, Director;Noelle Bathurst, Portfolio Manager; Harper Christopher, Executive Marketing Manager; RyanMcAndrews, Product Developer; Fran Simon, Content Project Manager; Jamie Koch, AssessmentProject Manager; and Egzon Shaqiri, Senior Designer Also, thanks to Gary Black for keepingConnect current

Finally, I want to thank my past coauthors Dick Chase and Nick Aquilano for giving me theopportunity to work with them on their book for the past 16 years I had the opportunity to work withNick Aquilano on two editions of the book and with Dick Chase on six editions Both Nick and Dickhave now retired from writing the book, but they are still engaged in many creative activities Theyhave been an inspiration to me and wonderful colleagues

F Robert Jacobs

page xix

Discussion of Sixteenth Edition Revisions

The revisions to the sixteenth edition are a reflection of how the field is changing and an intent tomake the material relevant to students Each chapter is organized around a short set of learningobjectives These learning objectives define the major sections of each chapter A complete set ofDiscussion Questions together with Objective Questions, which include concepts and problems,are included

The many questions now included in each chapter are all available for use in Connect, the

automated assignment grading system available to adopters of the book

Much work has been put into Connect to make it an easy to use and reliable tool The

Objective Question problems are available and many have both static versions (these areidentical to the problem in the book) and scenario versions In the scenario versions of theproblem, the parameters have been changed, but the problem is essentially the same, thusallowing students to see different examples of the same problem The instructor can selectpredefined or set up custom problem sets that students can complete These are automaticallygraded with the results available in a spreadsheet that can be easily downloaded by the instructor.There are many options for how these problem sets can be used, such as allowing the studentsmultiple tries, giving the students help, and timed exams

In this edition, we have continued to focus on supply chain analytics, while featuring material

on more specialized applications such as health care, consulting, investment analysis, andoptimization Supply chain analytics involve the analysis of data to better solve businessproblems We recognize that this is not really a new concept because data has always been used

to solve business problems But what is new is the reality that there is so much more data nowavailable for decision making

In the past, most analysis involved the generation of standard and ad hoc reports thatsummarized the current state of the firm Software allowed query and “drill down” analysis to thelevel of the individual transaction, useful features for understanding what happened in the past.Decision making was typically left to the decision maker, based on their judgment or simplybecause they were aware of the rules The new “analytics” movement takes this to a new levelusing statistical analysis, forecasting to extrapolate what to expect in the future, and evenoptimization, possibly in real time, to support decisions

In this edition, our goal is to capture this spirit of using integrated analytic and strategic criteria

in making operations and supply chain decisions We have done this in two major ways First, wehave reorganized the material in the book by integrating the strategic and analytic material Next,

we have refined our series of 11 Analytics Exercises spread throughout the chapters In thisedition, many small changes designed to increase clarity, simplify assumptions, and make the

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exercises better learning tools have been made

These Analytics Exercises use settings that are modern and familiar to students taking thecourse They include Starbucks, cell phones, notebook computers, Taco Bell Restaurant, Toyota,

a retail website-based company, and industrial products that are sourced from China/Taiwan andsold globally The book has been reorganized into four major sections: Strategy, Products, andCapacity; Manufacturing and Service Processes; Supply Chain Processes; and Supply andDemand Planning and Control Our strategy is to weave analytics into the managerial material sostudents see the important role of data analysis in making operations and supply chainmanagement decisions

In the first section, Strategy, Products, and Capacity, our chapters cover Strategy, the Design ofProducts and Services, Project Management, Strategic Capacity Management, and LearningCurves The key themes of operations strategy, product design to support the strategy, andstrategic capacity are a good foundation for learning about operations and supply chainmanagement Because most strategic plans are implemented using projects, we include this topic

in the first section as well In the project management chapter, we introduce a good amount ofmaterial on product design through examples and exercises, emphasizing the strategic importance

of these projects to the success of the firm

The second section, Manufacturing and Service Processes, gets into the nuts and bolts ofoperations management The section introduces the ways manufacturing and service systems areorganized and includes new Analytics Exercises for assembly line design and queuing The SixSigma and Statistical Quality Control chapters cover topics that would be appropriate for agreen-belt program and include good coverage of the popular value-stream mapping technique.The third section, Supply Chain Processes, discusses processes that source material forinternal operations and then distribute products to the customers The analytic models involvedwith location/transportation are included here The topics are tied together in the Lean SupplyChain chapter, which now stresses the cost versus disruption risk trade-offs that are involved insuch tactics as single sourcing and just-in-time inventory

The fourth section, Supply and Demand Planning and Control, covers the techniques typicallyimplemented in Enterprise Resource Planning Systems These include Forecasting, Sales andOperations Planning, Inventory Management, Material Requirements Planning, and WorkcenterScheduling We also include supplements on Linear Programming Using the Excel Solver, and theTheory of Constraints, a set of thought-provoking concepts

The following is a list of the major revisions in selected chapters:

Chapter 1  Introduction—New material was added to categorize servicebusinesses into four main types New examples from Apple Computer and IBMwere added The section on careers in OSCM was streamlined The OSCMconcepts timeline now includes the Internet of Things (which has become a majortopic in the old ERP chapter) The section “How Does Wall Street EvaluateEfficiency?” has been removed from the chapter and is now an Analytic Exercise atthe end of the chapter This material can now be optionally assigned as an

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exercise

Chapter 2  Strategy—The opening vignette now features Alphabet’s (Google’s)operations strategy The material on sustainability was moved to learningobjective 5 (the last one in the chapter) This change was suggested by bookadopters The chapter now starts with defining operations and supply chainstrategy BMW is now a featured example in “The Notion of Trade-Offs” section.The Tao of Timbuk2 case as updated to reflect what the company is currentlydoing (outsourcing some items to China)

Chapter 3  Design of Products and Services—An OSCM at Work box entitledSamsung Electronics—“Inspire the World, Create the Future” was added The IKEAcase was shortened and updated to reflect what the company is doing with mugsnow A new exercise entitled “Case: Comparison of Competing Products” wasadded to replace the Dental Spa case The new case is designed to show thestudent how to identify product attributes that are important to customersinterested in purchasing a product The new case can be used as an in-classexercise or as an assignment

Chapter 4  Projects—The chapter was reorganized by moving network planningmodels after earned value management concepts This places more management(big picture) topics early in the chapter and the analytics later, a changesuggested by book adopters The Analytics Exercise: “Product Design Project” wasupdated to bring it more in line with current practice

Chapter 5  Strategic Capacity Management—The opening vignette now featuresTesla and Model 3 manufacturing Example 5.1: “Determining CapacityRequirements” was totally rewritten to make it easier to understand TheShouldice Hospital case was updated based on what is currently happening withthe Canadian company

Chapter 5S  Investment Analysis—This is a supplement that can be optionallyassigned Because many product, project, and capacity decisions require afinancial analysis the supplement was placed here so students have a quickreference to the basic concepts such as fixed and variable costs, paybackcalculations, and present value analysis

Chapter 6  Learning Curves—The opening vignette now features Tesla and thelearning curve experienced by the company during the initial production of theirModel S, X, and 3 cars Rather than using the learning curve tables, students arenow directed to a new app that can be run from a cell phone for doing thesecalculations The app is free and can be accessed through the author’s website

Analysis” was changed to make it easier to understand

Chapter 7S Manufacturing Technology—This is a supplement that describes thetechnologies used in manufacturing Terminology such as numerically controlledmachines, robots, and manufacturing cells are described This can be optionallyassigned depending on the emphasis in the course

Chapter 8  Facility Layout—The opening vignette now features the Amazon Gocashier- less grocery store The Analytics Exercise: “Designing a ManufacturingProcess” was updated to better reflect current industry thought.

Chapter 9 Services—The opening vignette now features Amazon A new section(and key term) was added that describes Web platform businesses These are thenew virtual services that operate completely from the Internet The distinctionbetween “pure” and “hybrid” business is made in the description The case PizzaUSA was updated

Chapter 9S Health Care—This is a supplement that describes how this industryworks from an operations and supply chain view Technology, inventorymanagement, and performance measures are topics covered in the supplement.Chapter 10  Waiting Line Analysis and Simulation—The notation used in thequeuing models was simplified to make it less confusing Rather than usingequations and tables, students are now directed to a new app that can be runfrom a cell phone for doing these waiting line calculations The app is free and can

be accessed through the author’s website

Chapter 11 Process Design and Analysis—The Las Vegas S machine example hasbeen updated to reflect the current state of automation A new case entitled

“Runners Edge” replaces the casino money-handling case The new case centers

on the analysis of a call center process

Chapter 11S  Operations Consulting—This supplement describes managementconsulting companies and the operations and supply chain consulting practices run

by these companies The economics of how levels of employees are used and thetypes of projects undertaken are described The tools used by the companies arealso described The idea of the supplement is to relate what these companies do

to the material in the book

Chapter 12  Six Sigma Quality—The opening vignette now features Disney Thedescription of the Malcolm Baldrige National Quality Award was updated Theexplanation of the goal of having 3.4 defects out of a million units was simplified.The case “Tesla’s Quality Challenge” was updated based on what the company isnow doing with the Model 3 and Model Y

Chapter 13 Statistical Quality Control—The notation and terminology that relates

to the “sample” standard deviation was made consistent throughout the chapter.Chapter 14  Lean Supply Chains—The opening vignette describes the “Toyota—New Global Architecture” that standardizes the size and position of keycomponents in their cars This streamlines car design and manufacturing A newlearning objective was added: Explain lean design principles The value streammapping exhibits were updated to clarify terminology The key term heijunka(smoothing or leveling) was added

Chapter 15  Logistics, Distribution, and Transportation—The opening vignette isnow about Fedex and the hidden speed arrow in its logo The definition of the keyterm logistics was updated to reflect current thought The material on trading

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blocs was updated to reflect current happenings

Chapter 16  Global Sourcing and Procurement—The section “Supply ChainUncertainty Framework” was changed to make it easier to understand Example16.2: “Inventory Turnover Calculation” was updated based on current AppleComputer data

Chapter 17  The Internet of Things and ERP—This chapter was updated tocapture current computing trends and technology The opening vignette discusseswireless and “cloud” computing The key term Internet of Things was added to thematerial A description of the term and how it relates to new types of data wasincluded in the chapter This is all related to ERP systems, which are still thebackbone of OSCM planning and control The cash-to-cash cycle time calculationswere removed from this chapter These calculations are now included in theAnalytical Exercise in Chapter 1

Chapter 18  Forecasting—Some notation changes were made to clarify

equations The material covering the calculation of season factors using

least squares regression decomposition was removed from the chapter based oninput from reviewers The calculation of seasonal indexes using other methods isstill included in the chapter

Chapter 19 Sales and Operations Planning—Only some minor edits were made.Chapter 19S  Linear Programming Using the Excel Solver—This supplement wasplaced here so that it can be conveniently used with the Sales and OperationsPlanning chapter The material on graphical linear programming was removedfrom the supplement

Chapter 20  Inventory Management—The opening vignette now featuresAmazon The definition of inventory was changed to be easier to understand.Some minor edits were made to some notations for more consistency

Chapter 21 Material Requirements Planning—The opening vignette was updated

to feature the iPhone X

Chapter 22  Workcenter Scheduling—Only minor changes to supplementreferences were made to this chapter

Chapter 22S  Theory of Constraints—This streamlined supplement nowcomplements the material in Chapter 22

F Robert Jacobs

June 2019