Recommended - Description Module 01: Introduction to Operations Management In this module, you will be introduced to operations management and productivity. You

Description

Module 01: Introduction to Operations ManagementIn this module, you will be introduced to operations management and productivity. You will learn howimportant operations functions are to any organization, whether they are providing a product orservice and whether they are a small business or international organization with global reach.Important concepts related to providing value to the customers or clients will help clarify howorganizations compete. You will identify productivity measures and apply the analytical tools that youlearned in the first module to a series of problems associated with productivity challenges. One toolyou will review is the balanced scorecard.Discussion QuestionQuestion Requirements:Operations ManagementCarrefour is a French owned hypermarket operating in many places including Saudi Arabia. ConsiderCarrefour in Saudi Arabia when you, as a customer, judge the quality of the hypermarket.Explain how quality is evaluated, and the role of technology in the customer perception of quality.Compare Carrefour’s quality and technology to another hypermarket in the area. Order the followingcriteria as most to least important for the successful operation of a hypermarket, and for a differentindustry (not a hypermarket) and explain why there are any differences and the implications foroperations:• Customer satisfaction• Forecasting• Capacity planning• Location• Inventory management• Store layout• SchedulingDirections:• Discuss the concepts, principles, and theories from your textbook. Cite your textbooks andcite any other sources.• Write a discussion that includes an introduction paragraph, the body, and a conclusionparagraph to address the assignment’s guide questions.• Your initial post should address all components of the question with a 600-word limit.Learning Outcomes1. Analyze the importance of the operations function relative to the goals of a businessorganization.2. Distinguish the impact of competition on operations and value.ReadingsRequired:• Chapter 1 in Operations Management• Chapter 1 PowerPoint Presentation• Jackson, A. (2023, March 28). Operations Management: Understanding and Using It.Investopedia. Retrieved October 11, 2023,fromRecommended:• Dhiaf, M. M., Atayah, O. F., Nasrallah, N., & Federico, G. F. (2021, July 2). Thirteenyears of Operations Management Research (OMR) journal: a bibliometric analysis•and future research d. Springer Link. Retrieved October 11, 2023,fromCooper, D., & Taylor, S. (2023). The data revolution in operations management:Unlocking innovation by embracing change. Journal of Securities Operations &Custody, 15(1), 44–55.Operations ManagementOperations ManagementFOURTEENTH EDITIONWilliam J. StevensonSaunders College of BusinessRochester Institute of TechnologyOPERATIONS MANAGEMENT, FOURTEENTH EDITIONPublished by McGraw-Hill Education, 2 Penn Plaza, New York, NY 10121. Copyright © 2021 by McGraw-HillEducation. All rights reserved. Printed in the United States of America. Previous editions © 2018, 2015, and2012. No part of this publication may be reproduced or distributed in any form or by any means, or stored in adatabase or retrieval system, without the prior written consent of McGraw-Hill Education, including, but notlimited to, in any network or other electronic storage or transmission, or broadcast for distance learning.Some ancillaries, including electronic and print components, may not be available to customers outside theUnited States.This book is printed on acid-free paper.1 2 3 4 5 6 7 8 9 LWI 24 23 22 21 20ISBN 978-1-260-23889-1 (bound edition)MHID 1-260-23889-X (bound edition)ISBN 978-1-260-71842-3 (loose-leaf edition)MHID 1-260-71842-5 (loose-leaf edition)Portfolio Manager: Noelle BathurstProduct Developer: Fran Simon/Katie WardMarketing Manager: Harper ChristopherContent Project Managers: Fran Simon/Jamie KochBuyer: Sandy LudovissyDesign: Matt DiamondContent Licensing Specialist: Jacob SullivanCover Image: Daniel Prudek/ShutterstockCompositor: SPi GlobalAll credits appearing on page or at the end of the book are considered to be an extension of the copyright page.Library of Congress Cataloging-in-Publication DataLibrary of Congress Cataloging-in-Publication DataNames: Stevenson, William J., author.Title: Operations management / William J. Stevenson, Saunders College ofBusiness, Rochester Institute of Technology.Description: Fourteenth edition. | New York, NY : McGraw-Hill Education,[2021] | Includes bibliographical references and index.Identifiers: LCCN 2019044799 | ISBN 9781260238891 (bound edition ;acid-free paper) | ISBN 126023889X (bound edition ; acid-free paper) |ISBN 9781260718423 (loose-leaf edition ; acid-free paper) | ISBN1260718425 (loose-leaf edition ; acid-free paper)Subjects: LCSH: Production management.Classification: LCC TS155 .S7824 2021 | DDC 658.5–dc23LC record available atThe internet addresses listed in the text were accurate at the time of publication. The inclusion of a website doesnot indicate an endorsement by the authors or McGraw-Hill Education, and McGraw-Hill Education does notguarantee the accuracy of the information presented at these sites.mheducation.com/higheredThe McGraw-Hill Series in Operationsand Decision SciencesSupply Chain ManagementBusiness Research MethodsBusiness StatisticsBentonPurchasing and Supply Chain ManagementThird EditionSchindlerBusiness Research MethodsThirteenth EditionBowerman, Drougas, Duckworth,Froelich, Hummel, Moninger,and SchurBusiness Statistics and Analyticsin PracticeNinth EditionBowersox, Closs, Cooper, and BowersoxSupply Chain Logistics ManagementFifth EditionBurt, Petcavage, and PinkertonSupply ManagementEighth EditionBusiness ForecastingKeating and WilsonForecasting and Predictive AnalyticsSeventh EditionBusiness Systems DynamicsJohnsonPurchasing and Supply ManagementSixteenth EditionStermanBusiness Dynamics: Systems Thinkingand Modeling for Complex WorldSimchi-Levi, Kaminsky, and Simchi-LeviDesigning and Managing the SupplyChain: Concepts, Strategies, Case StudiesThird EditionOperations ManagementStock and ManrodtSupply Chain ManagementProject ManagementBrown and HyerManaging Projects: A Team-BasedApproachLarsonProject Management: TheManagerial ProcessEighth EditionService Operations ManagementBordoloi, Fitzsimmons, and FitzsimmonsService Management: Operations,Strategy, Information TechnologyNinth EditionManagement ScienceHillier and HillierIntroduction to Management Science:A Modeling and Case Studies Approachwith SpreadsheetsSixth EditionCachon and TerwieschOperations ManagementSecond EditionCachon and TerwieschMatching Supply with Demand: AnIntroduction to Operations ManagementFourth EditionJacobs and ChaseOperations and Supply ChainManagement: The CoreFifth EditionJacobs and ChaseOperations and Supply Chain ManagementSixteenth EditionSchroeder and GoldsteinOperations Management: ContemporaryConcepts and CasesEighth EditionStevensonOperations ManagementFourteenth EditionSwink, Melnyk, and HartleyManaging Operations Across theSupply ChainFourth EditionDoane and SewardApplied Statistics in Business andEconomicsSixth EditionDoane and SewardEssential Statistics in Business andEconomicsThird EditionLind, Marchal, and WathenBasic Statistics for Business andEconomicsNinth EditionLind, Marchal, and WathenStatistical Techniques in Businessand EconomicsEighteenth EditionJaggia and KellyBusiness Statistics: Communicatingwith NumbersThird EditionJaggia and KellyEssentials of Business Statistics:Communicating with NumbersSecond EditionMcGuckianConnect Master: BusinessStatisticsBusiness AnalyticsJaggia, Kelly, Lertwachara,and ChenBusiness Analytics: Communicatingwith NumbersvPrefaceThe material in this book is intended as an introduction to thefield of operations management. The topics covered includeboth strategic issues and practical applications. Among thetopics are forecasting, product and service design, capacityplanning, management of quality and quality control, inventory management, scheduling, supply chain management, andproject management.My purpose in revising this book continues to be to providea clear presentation of the concepts, tools, and applications ofthe field of operations management. Operations managementis evolving and growing, and I have found updating andintegrating new material to be both rewarding and challenging, particularly due to the plethora of new developments inthe field, while facing the practical limits on the length ofthe book.This text offers a comprehensive and flexible amountof content that can be selected as appropriate for differentcourses and formats, including undergraduate, graduate, andexecutive education.This allows instructors to select the chapters, or portionsof chapters, that are most relevant for their purposes. Thatflexibility also extends to the choice of relative weightingof the qualitative or quantitative aspects of the material, andthe order in which chapters are covered, because chapters donot depend on sequence. For example, some instructors coverproject management early, others cover quality or lean early,and so on.As in previous editions, there are major pedagogical f eaturesdesigned to help students learn and understand the material.This section describes the key features of the book, the chapterelements, the supplements that are available for teaching thecourse, highlights of the fourteenth edition, and suggestedapplications for classroom instruction. By providing this support, it is our hope that instructors and students will have thetools to make this learning experience a rewarding one.What’s New in This EditionIn many places, content has been rewritten or added toimprove clarity, shorten wording, or update information. Newmaterial has been added on supply chains, and other topics.Some problems are new, and others have been revised. Manynew readings and new photos have been added.Some of the class preparation exercises have been revised.The purpose of these exercises is to introduce students to thesubject matter before class in order to enhance classroomlearning. They have proved to be very popular with students, both as an introduction to new material and for studypurposes. These exercises are available in the Instructor’sResource Manual. Special thanks to Linda Brooks for herhelp in developing the exercises.AcknowledgmentsI want to thank the many contributors to this edition. Reviewers and adopters of the text have provided a “continuouslyimproving” wealth of ideas and suggestions. It is encouraging to me as an author. I hope all reviewers and readers willknow their suggestions were valuable, were carefully considered, and are sincerely appreciated. The list includes post-publication reviewers.Jenyi ChenEric CosnoskiMark GershonNarges KasiriNancy LambeAnita Lee-PostBehnam NakhaiRosa OppenheimMarilyn PrestonAvanti SethiJohn T. SimonLisa SpencerNabil TamimiOya TukelTheresa WellsHeath WilkenCleveland State UniversityLehigh UniversityTemple UniversityIthaca CollegeUniversity of South AlabamaUniversity of KentuckyMillersville University of PennsylvaniaRutgers Business SchoolIndiana University SoutheastUniversity of Texas at DallasGovernors State UniversityCalifornia State University, FresnoUniversity of ScrantonCleveland State UniversityUniversity of Wisconsin-Eau ClaireUniversity of Northern IowaAdditional thanks to the instructors who have contributed extramaterial for this edition, including accuracy checkers: RonnyRichardson, Kennesaw State University and Gary Black,University of Southern Indiana; Solutions and SmartBook:Tracie Lee, Idaho State University; PowerPoint Presentations:Avanti Sethi, University of Texas-Dallas; Test Bank: LeslieSukup, Ferris State University.Special thanks goes out to Lisa Spencer, California StateUniversity-Fresno, for her help with additional readings andexamples.viiviiiPrefaceFinally, I would like to thank all the people at McGraw-Hillfor their efforts and support. It is always a pleasure to workwith such a professional and competent group of people.Special thanks go to Noelle Bathurst, Portfolio Manager;Michele Janicek, Lead Product Developer; Fran Simon andKatie Ward, Product Developers; Jamie Koch, AssessmentContent Project Manager; Sandy Ludovissy, Buyer; Matt Diamond, Designer; Jacob Sullivan, Content Licensing Specialist; Harper Christopher, Executive Marketing Manager; andmany others who worked behind the scenes.I would also like to thank the many reviewers of previouseditions for their contributions: Vikas Agrawal, FayettevilleState University; Bahram Alidaee, University of Mississippi;Ardavan Asef-Faziri, California State University at Northridge; Prabir Bagchi, George Washington State University;Gordon F. Bagot, California State University at Los Angeles;Ravi Behara, Florida Atlantic University; Michael Bendixen,Nova Southeastern; Ednilson Bernardes, Georgia SouthernUniversity; Prashanth N. Bharadwaj, Indiana University ofPennsylvania; Greg Bier, University of Missouri at Columbia;Joseph Biggs, Cal Poly State University; Kimball Bullington,Middle Tennessee State University; Alan Cannon, Universityof Texas at Arlington; Injazz Chen, Cleveland State University; Alan Chow, University of Southern Alabama at Mobile;Chrwan-Jyh, Oklahoma State University; Chen Chung, University of Kentucky; Robert Clark, Stony Brook University;Loretta Cochran, Arkansas Tech University; Lewis Coopersmith, Rider University; Richard Crandall, Appalachian StateUniversity; Dinesh Dave, Appalachian State University; ScottDellana, East Carolina University; Kathy Dhanda, DePaulUniversity; Xin Ding, University of Utah; Ellen Dumond,California State University at Fullerton; Richard Ehrhardt,University of North Carolina at Greensboro; Kurt Engemann,Iona College; Diane Ervin, DeVry University; FarzanehFazel, Illinois State University; Wanda Fennell, University ofMississippi at Hattiesburg; Joy Field, Boston College; Warren Fisher, Stephen F. Austin State University; Lillian Fok,University of New Orleans; Charles Foley, Columbus StateCommunity College; Matthew W. Ford, Northern KentuckyUniversity; Phillip C. Fry, Boise State University; CharlesA. Gates Jr., Aurora University; Tom Gattiker, Boise StateUniversity; Damodar Golhar, Western Michigan University;Robert Graham, Jacksonville State University; AngappaGunasekaran, University of Massachusetts at Dartmouth;Haresh Gurnani, University of Miami; Terry Harrison, PennState University; Vishwanath Hegde, California State University at East Bay; Craig Hill, Georgia State University;Jim Ho, University of Illinois at Chicago; Seong Hyun Nam,University of North Dakota; Jonatan Jelen, Mercy College;Prafulla Joglekar, LaSalle University; Vijay Kannan, UtahState University; Sunder Kekre, Carnegie-Mellon University;Jim Keyes, University of Wisconsin at Stout; Seung-Lae Kim,Drexel University; Beate Klingenberg, Marist College; JohnKros, East Carolina University; Vinod Lall, Minnesota StateUniversity at Moorhead; Kenneth Lawrence, New JerseyInstitute of Technology; Jooh Lee, Rowan University; AnitaLee-Post, University of Kentucky; Karen Lewis, University ofMississippi; Bingguang Li, Albany State University; ChengLi, California State University at Los Angeles; Maureen P.Lojo, California State University at Sacramento; F. VictorLu, St. John’s University; Janet Lyons, Utah State University; James Maddox, Friends University; Gita Mathur, SanJose State University; Mark McComb, Mississippi College;George Mechling, Western Carolina University; Scott Metlen,University of Idaho; Douglas Micklich, Illinois State University; Ajay Mishra, SUNY at Binghamton; Scott S. Morris,Southern Nazarene University; Philip F. Musa, University ofAlabama at Birmingham; Roy Nersesian, Monmouth University; Jeffrey Ohlmann, University of Iowa at Iowa City; JohnOlson, University of St. Thomas; Ozgur Ozluk, San FranciscoState 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, BaylorUniversity; Buddhadev Roychoudhury, Minnesota State University at Mankato; Narendra Rustagi, Howard University;Herb Schiller, Stony Brook University; Dean T. Scott, DeVryUniversity; Scott J. Seipel, Middle Tennessee State University; Raj Selladurai, Indiana University; Kaushic Sengupta,Hofstra University; Kenneth Shaw, Oregon State University;Dooyoung Shin, Minnesota State University at Mankato;Michael Shurden, Lander University; Raymond E. Simko,Myers University; John Simon, Governors State University;Jake Simons, Georgia Southern University; Charles Smith,Virginia Commonwealth University; Kenneth Solheim,DeVry University; Young Son, Bernard M. Baruch College;Victor Sower, Sam Houston State University; Jeremy Stafford, University of North Alabama; Donna Stewart, University of Wisconsin at Stout; Dothang Truong, Fayetteville StateUniversity; Mike Umble, Baylor University; Javad Varzandeh, California State University at San Bernardino; TimothyVaughan, University of Wisconsin at Eau Claire; Emre Veral,PrefaceBaruch College; Mark Vroblefski, University of Arizona;Gustavo Vulcano, New York University; Walter Wallace,Georgia State University; James Walters, Ball State University; John Wang, Montclair State University; Tekle Wanorie,Northwest Missouri State University; Jerry Wei, Universityof Notre Dame; Michael Whittenberg, University of Texas;ixGeoff Willis, University of Central Oklahoma; Pamela Zelbst,Sam Houston State University; Jiawei Zhang, NYU; Zhenying Zhao, University of Maryland; Yong-Pin Zhou, University of Washington.William J. StevensonWalkthroughMAJOR STUDY AND LEARNING FEATURESA number of key features in this text have been specificallydesigned to help introductory students learn, understand, andapply operations concepts and problem-solving techniques.Examples with SolutionsRev.Confirming PagesThroughout the text, wherever a quantitative oranalytic technique is introduced, an example isincluded to illustrate the application of that technique. These are designed to be easy to follow.Chapter Three ForecastingEXAMPLEDetermining a Regression EquationSales of new houses and three-month lagged unemployment are shown in the followingtable. Determine if unemployment levels can be used to predict demand for new housesand, if so, derive a predictive equation.Period . . . . . . . . . . . . . 1Units sold . . . . . . . . . . 20Unemployment %(three-month lag)7.21.241317435525631738850915101911144.07.35.56.86.05.43.68.47.09.0Plot the data to see if a linear model seems reasonable. In this case, a linear modelseems appropriate for the range of the data.50Units sold, y403020100246810Level of unemployment (%), x2.Check the correlation coefficient to confirm that it is not close to zero using the website template, and then obtain the regression equation:r = −.966This is a fairly high negative correlation. The regression equation isy = 71.85 − 6.91xNote that the equation pertains only to unemployment levels in the range 3.6 to 9.0, becausesample observations covered only that range.x1038mhhe.com/stevenson14eS O L U T I O NSolved ProblemsAt the end of chaptersand chapter supplements,“Solved Problems” areprovided to illustrateproblem solving and thecore concepts in the chapter.These have been carefullyprepared to help studentsunderstand the stepsinvolved in solving differenttypes of problems. The Excellogo indicates that a spreadsheet is available on thetext’s website.2.Strategy formulation is critical because strategies provide direction for the organization, so theycan play a role in the success or failure of a business organization.3.Functional strategies and supply chain strategies need to be aligned with the goals and strategiesof the overall organization.4.The three primary business strategies are low cost, responsiveness, and differentiation.5.Productivity is a key factor in the cost of goods and services. Increases in productivity canbecome a competitive advantage.6.High productivity is particularly important for organizations that have a strategy of low costs.competitiveness, 42core competencies, 46environmental scanning, 48goals, 44mission, 44mission statement, 44operations strategy, 51order qualifiers, 48order winners, 48productivity, 56quality-based strategies, 52strategies, 44SWOT, 48tactics, 45time-based strategies, 53SOLVED PROBLEMSComputing ProductivityA company that processes fruits and vegetables is able to produce 400 cases of canned peaches inone-half hour with four workers. What is labor productivity?400 casesQuantity producedLabor productivity = ________________ = ________________________Labor hours4 workers × 1 / 2 hour / workerProblem 1mhhe.com/stevenson14eSolution= 200 cases per labor hourComputing Multifactor ProductivityA wrapping-paper company produced 2,000 rolls of paper in one day. Labor cost was $160, materialcost was $50, and overhead was $320. Determine the multifactor productivity.Quantity producedMultifactor productivity = ______________________________Labor cost + Material cost + OverheadProblem 2mhhe.com/stevenson14eSolution2,000 rolls= _______________ = 3.77 rolls per dollar input$160 + $50 + $320A variation of the multifactor productivity calculation incorporates the standard price in thenumerator by multiplying the units by the standard price.Rev.Confirming PagesComputing Multifactor ProductivityCompute the multifactor productivity measure for an eight-hour day in which the usable output was300 units, produced by three workers who used 600 pounds of materials. Workers have an hourlywage of $20, and material cost is $1 per pound. Overhead is 1.5 times labor cost.TABLE 16.5 Excel solution for Example 2aKEY TERMSChapter Sixteen Scheduling Usable output707Multifactor productivity = __________________________________Labor cost + Material cost + Overhead cost300 units= _____________________________________________________(3 workers × 8 hours × $20 / hour) + (600 pounds × $1 / pound) +(3 workers × 8 hours × $20 / hour × 1.50)300 units= ________________$480 + $600 + $720= .167 units of output per dollar of inputProblem 3mhhe.com/stevenson14eSolutionExcel SpreadsheetSolutionsste3889X_ch02_040-073.indd63Where applicable, theexamples and solvedproblems include screenshots of a spreadsheetsolution.09/04/19 09:59 AMSource: Microsoftc.Using earliest due date as the selection criterion, the job sequence is C-A-E-B-D-F.The measures of effectiveness are as follows (see table):(1) Average flow time: 110/6 = 18.33 days(2) Average tardiness: 38/6 = 6.33 days(3) Average number of jobs at the work center: 110/41 = 2.68xiCHAPTER ELEMENTSWithin each chapter, you will find the following elementsthat are designed to facilitate study and learning. All ofthese have been carefully developed over many editions andhave proven to be successful.Learning ObjectivesEvery chapter and supplement lists the learningobjectives to achieve when studying the chaptermaterial. The learning objectives are alsoincluded next to the specific material in themargins of the text.Rev.Confirming PagesRev.Confirming Pages4Product and ServiceDesignC H A P T E RLEARNING OBJECTIVESAfter completing this chapter, you should be able to:LO4.1Explain the strategic importance of product and service design.LO4.2Describe what product and service design does.LO4.3Name the key questions of product and service design.LO4.4Identify some reasons for design or redesign.LO4.5List some of the main sources of design ideas.LO4.6Discuss the importance of legal, ethical, and sustainability considerations in product and service design.LO4.7Explain the purpose and goal of life-cycle assessment.LO4.8Explain the phrase “the 3 Rs.”LO4.9Briefly describe the phases in product design and development.LO4.10Discuss several key issues in product or service design.LO4.11Discuss the two key issues in service design.LO4.12List the characteristics of well-designed service systems.LO4.13List some guidelines for successful service design.C H A P T E R4.1Mark Lennihan/AP Images4.11 Service Design 165Overview of Service Design 166Differences betweenService Design andProduct Design 166Phases in the Service DesignProcess 167Service Blueprinting 168Characteristics of WellDesigned Service Systems 168Challenges of ServiceDesign 169Guidelines for SuccessfulService Design 1694.12 Operations Strategy 170Operations Tour: High AcresLandfill 174Chapter Supplement:Reliability 176O U T L I N EIntroduction 1404.7What Does Product and ServiceDesign Do? 140Objectives of Product andService Design 141Key Questions 141Reasons for Product or ServiceDesign or Redesign 1414.2Idea Generation 1424.3Legal and EthicalConsiderations 1444.4Human Factors 1454.5Cultural Factors 1454.6Global Product and ServiceDesign 1464.8Environmental Factors:Sustainability 146Designing for MassCustomization 154Reliability 156Robust Design 157Degree of Newness 158Quality Function Deployment 158The Kano Model 160Cradle-to-Grave Assessment 146End-of-Life Programs 147The Three Rs: Reduce, Reuse,and Recycle 147Reduce: Value Analysis 147Reuse: Remanufacturing 148Recycle 1494.9Other DesignConsiderations 1514.10 Designing for Production 163Strategies for Product orService Life Stages 151Product Life CycleManagement 153Degree of Standardization 153Phases in Product Designand Development 162Concurrent Engineering 163Computer-Aided Design(CAD) 164Production Requirements 165Component Commonality 165The essence of a business organization is the products and services it offers, and everyLO4.1 Explain the strateaspect of the organization and its supply chain are structured around those productsgic importance of productand services. Organizations that have well-designed products or services are moreand service design.likely to realize their goals than those with poorly designed products or services. Hence,organizations have a strategic interest in product and service design. Product or service design should be closely tiedto an organization’s strategy. It is a major factor in cost, quality, time-to-market, customer satisfaction, and competitiveadvantage. Consequently, marketing, finance, operations, accounting, IT, and HR need to be involved. Demand forecasts and projected costs are important, as is the expected impact on the supply chain. It is significant to note that animportant cause of operations failures can be traced to faulty design. Designs that have not been well thought out, orare incorrectly implemented, or instructions for assembly or usage that are wrong or unclear, can be the cause of product and service failures, leading to lawsuits, injuries and deaths, product recalls, and damaged reputations.continued138ste3889X_ch04_138-175.indd 13813908/01/19 07:17 AMste3889X_ch04_138-175.indd139Chapter OutlinesOpening VignettesEvery chapter and supplement includes anoutline of the topics covered.Each chapter opens with an introduction to theimportant operations topics covered in the chapter.This enables students to see the relevance ofoperations management in order to actively engagein learning the material.xii08/01/19 07:17 AMFigures and PhotosThe text includes photographs andgraphic illustrations to supportstudent learning and provide interestand motivation. Approximately 100carefully selected photos highlightthe 14th edition. The photos illustrateapplications of operations and supplychain concepts in many successfulcompanies. More than 400 graphicillustrations, more than any othertext in the field, are included and allare color coded with pedagogicalconsistency to assist students inunderstanding concepts.56Chapter TwoA major key to Apple’s continuedsuccess is its ability to keep pushingthe boundaries of innovation. Applehas demonstrated how to creategrowth by dreaming up products sonew and ingenious that they haveupended one industry after another.Rev.Confirming Pages246Chapter SixProcess Selection and Facility LayoutFIGURE 6.1Process selection andcapacity planning influencesystem designInputsOutputsForecastingFacilities andequipmentCapacityPlanningProduct andservice designLayoutRev.Confirming PagesProcessSelectionTechnologicalchangeWorkdesignCompetitiveness, Strategy, and ProductivityLO6.1 Explain thestrategic importance ofprocess selection and theinfluence it has on theorganization and its supplychain.6.1 INTRODUCTIONProcess selection refers to deciding on the way production of goods or services will be organized. It has major implications for capacity planning, layout of facilities, equipment, anddesign of work systems. Process selection occurs as a matter of course when new products orservices are being planned. However, it also occurs periodically due to technological changesin products or equipment, as well as competitive pressures. Figure 6.1 provides an overviewof where process selection and capacity planning fit into system design. Forecasts, productand service design, and technological considerations all influence capacity planning and process selection. Moreover, capacity and process selection are interrelated, and are often done inconcert. They, in turn, affect facility and equipment choices, layout, and work design.How an organization approaches process selection is determined by the organization’s process strategy. Key aspects include:• Capital intensity: The mix of equipment and labor that will be used by the organization.• Process flexibility: The degree to which the system can be adjusted to changes inprocessing requirements due to such factors as changes in product or service design,changes in volume processed, and changes in technology.Pieter Beens/ShutterstockMoreover, this approach pays little attention to suppliers and government regulations, andcommunity, environmental, and sustainability issues are missing. These are closely linked,theoftwoand business organizations LO6.2need to Namebe awarethe impact they are having in these areas andProcesschoicedemand-driven.main factorsthat influencerespond accordingly. Otherwise,organizationsmay be subjectto attackby ispressuregroups The two key questions in process selection are:process selection.and risk damage to their reputation.6.2 PROCESS SELECTION1.2.LO2.6 Define the termproductivity and explainwhy it is important to companies and to countries.Productivity A measure ofthe effective use of resources,usually expressed as the ratioof output to input.How much variety will the process need to be able to handle?How much volume will the process need to be able to handle?Answers to these questions will serve as a guide to selecting an appropriate process. Usually, volume and variety are inversely related; a higher level of one means a lower level of theother. However, the need for flexibility of personnel and equipment is directly related to theOne of the primary responsibilities of a manager is to achieve productive use of an organizalevelof variety thewill need to handle: The lower the variety, the less the need fortion’s resources. The term productivity is used to describe this.Productivityis anprocessindex thatflexibility,whilethe higherthe variety, the greater the need for flexibility. For example, if ameasures output (goods and services) relative to the input (labor,materials,energy,and otherworker’sjob toin input:a bakery is to make cakes, both the equipment and the worker will do the sameresources) used to produce it. It is usually expressed as the ratioof outputthing day after day, with little need for flexibility. But if the worker has to make cakes, pies,Outputcookies, brownies, and croissants,both the worker and the equipment must have the flexibilProductivity = ______(2–1)Inputity to be able to handle the different requirements of each type of product.Thereitisisanotheraspectof variety that is important. Variety means either having dedicatedAlthough productivity is important for all business organizations,particularlyimpordifferenttheproduct or service, or if not, having to get equipment ready everytant for organizations that use a strategy of low cost, becauseoperationsthe higherfortheeachproductivity,time there is the need to change the product being produced or the service being provided.lower the cost of the output.2.7 PRODUCTIVITYA productivity ratio can be computed for a single operation, a department, an organization, or an entire country. In business organizations, productivity ratios are used for planningworkforce requirements, scheduling equipment, financial analysis, and other important tasks.Productivity has important implications for business organizations and for entire nations.For nonprofit organizations, higher productivity means lower costs; for profit-based organizations, productivity is an important factor in determining how competitive a company is. Fora nation, the rate of productivitygrowth is of great importance. Productivity growth is theste3889X_ch06_244-299.indd 246increase in productivity from one period to the next relative to the productivity in the preceding period. Thus,Current productivity − Previous productivityProductivity growth = _____________________________________ × 100Previous productivity(2–2)08/01/19 07:28 AMxiiiRev.Confirming PagesChapter FiveStrategic Capacity Planning for Products and Services213Operations Strategies5.12 OPERATIONS STRATEGYAn Operations Strategy sectionThe strategic implications of capacity decisions can be enormous, impacting all areas of theorganization. From an operations management standpoint, capacity decisions establish a setis included at the end of mostof conditions within which operations will be required to function. Hence, it is extremelychapters. These sections discussimportant to include input from operations management people in making capacity decisions.how the chapters’ concepts canFlexibility can be a key issue in capacity decisions, although flexibility is not always anoption, particularly in capital-intensive industries. However, where possible, flexibility allowsbe applied and how they impactan organization to be agile—that is, responsive to changes in the marketplace. Also, it reducesthe operations of a company.to a certain extent the dependence on long-range forecasts to accurately predict demand. Andflexibility makes it easier for organizations to take advantage of technological and other innovations. Maintaining excess capacity (a capacity cushion) may provide a degree of flexibility,albeit at added cost.Some organizations use a strategy of maintaining a capacity cushion for the purpose ofblocking entry into the market by new competitors. The excess capacity enables them to produce at costs lower than what new competitors can. However, such a strategy means higherthan-necessary unit costs, and it makes it more difficult to cut back if demand slows, or toshift to new product or service offerings.Efficiency improvements and utilization improvements can provide capacity increases.Such improvements can be achieved by streamlining operations and reducing waste. Thechapter on lean operations describes ways for achieving those improvements.Bottleneck management can be a way to increase effective capacity, by scheduling nonbottleneck operations to achieve maximum utilization of bottleneck operations.In cases where capacity expansion will be undertaken, there are two strategies for determining the timing and degree of capacity expansion. One is the expand-early strategy (i.e.,before demand materializes). The intent might be to achieve economies of scale, to expandRev.Confirming Pagesmarket share, or to preempt competitors from expanding. The risks of this strategy includean oversupply that would drive prices down, and underutilized equipment that would result inhigher unit costs.The other approach is the wait-and-see strategy (i.e., to expand capacity only after demandmaterializes, perhaps incrementally). Its advantages include a lower chance of oversupply dueto more accurate matching of supply and demand,and higher capacity utilization. The keyREADINGDUTCH BOY BRUSHES UP ITS PAINTSrisks are loss of market share and the inability to meet demand if expansion requires a longlead time.Sherwin-Williams’ Dutch Boy Group put a revolutionary spin onIn cases where capacity contraction will paintbe undertaken,capacitydisposal Twiststrategiescans with its innovativesquare-shaped& PourTMbecome important. This can be the result of thepaint-deliveryneed to replaceequipmentwithcontainer agingfor the DirtFighter interiorlatexnewerpaint line.The four-piecesquare containeroperations.could be the firstmajorchangeequipment. It can also be the result of outsourcingand downsizingThecostor inhow house paint is packaged in decades. Lightweight but sturdy,benefit of asset disposal should be taken into accountwhencontemplatingtheseactions.the Twist & Pour “bucket” is packed with so many conveniences, itReadingsis next to impossible to mess up a painting project.Winning Best of Show in an AmeriStar packaging competition sponsored by the Institute of Packaging Professionals, theexclusive,paint servicescontainer stands7½ in. timetall andCapacity refers to a system’s potential for producing goods orall-plasticdeliveringover aalmostspecifiedholds 126isoz.,a bit lessonthan1 gal. Rust-resistantmoistureinterval. Capacity decisions are important because capacitya ceilingoutputand a majoranddetermiresistant, the plastic bucket gives users a new way to mix, brush,nant of operating costs.and store paint.Three key inputs to capacity planning are the kind ofA capacitythatonwillmuchtowillhollow handleone besideneeded,makes it howcomfortablepourbeandneeded, and when it will be needed. Accurate forecastsareA criticalto theplanningprocess.carry.convenient,snap-inpour spoutneatly pours paint intoa trayimportantwith no drippingbut canthatbe removedif desired,allowThe capacity planning decision is one of the mostdecisionsmanagersmake.toThea widebrushinvolvingto be dippedinto the 5¾-in.-diametermouth. Capcapacity decision is strategic and long term in nature,oftena significantinitial investmentpingthecontainerisalarge,twist-offlidthatrequiresnotoolsof capital. Capacity planning is particularly difficult in cases where returns will accrue over a lengthytoopen or close. Molded with two lugs for a snug-finger-tight closperiod, and risk is a major consideration.ing, the threaded cap provides a tight seal to extend the shelf lifeA variety of factors can interfere with effective capacity,so effective capacity is usually somewhatof unused paint.less than design capacity. These factors include facilitiesand layout,product/Whiledesignthe lid requiresno tools humanto access,factors,the snap-offcarry bailis assembledon theconsiderations.container in a “locked-down position” andservice design, equipment failures, scheduling problems,and qualitycanbepulledupafterpurchasefortotingorhangingona ladder.Capacity planning involves long-term and short-term considerations. Long-term considerations relateLarge, nearly 4½-inch-tall label panels allow glossy front and backto the overall level of capacity; short-term considerations relate to variations in capacity requirementslabels printed and UV-coated to wrap around the can’s roundeddue to seasonal, random, and irregular fluctuations corners,in demand.Ideally, display.capacity will match demand.for an impressiveJim MacDonald, co-designer of the Twist & Pour and a packaging engineer at Cleveland-based Sherwin-Williams, tells PackagingDigest that the space-efficient, square shape is easier to ship andeasier to stack in stores. It can also be nested, courtesy of a recessReadings highlight importantreal-world applications, provideexamples of production/operations issues, and offerfurther elaboration of the textmaterial. They also provide abasis for classroom discussionand generate interest in thesubject matter. Many of theend-of-chapter readings includeassignment questions.ste3889X_ch05_190-221.indd 213xivLO4.5 List some of themain sources of designideas.SUMMARYJerry Simonin the bottom that mates with the lid’s top ring. “The new designallows for one additional shelf facing on an eight-foot rack orshelf area.”The labels are applied automatically, quite a feat, consideringtheir complexity, size, and the hollow handle they likely encounterduring application. MacDonald admits, “Label application was achallenge. We had to modify the bottle several times to accommodate the labeling machinery available.”Source: “Dutch Boy Brushes Up Its Paints,” Packaging Digest, October 2002.Copyright ©2002 Reed Business Information. Used with permission.4.2 IDEA GENERATION08/01/19 07:22 AMIdeas for new or redesigned products or services can come from a variety of sources, including customers, the supply chain, competitors, employees, and research. Customer input cancome from surveys, focus groups, complaints, and unsolicited suggestions for improvement.Input from suppliers, distributors, and employees can be obtained from interviews, direct orindirect suggestions, and complaints.One of the strongest motivators for new and improved products or services is competitors’ products and services. By studying a competitor’s products or services and how thecompetitor operates (pricing policies, return policies, warranties, location strategies, etc.), anorganization can glean many ideas. Beyond that, some companies purchase a competitor’s∑ y − b∑ ta = ______ or ¯y − b¯tnTrend-adjustedforecastLinear regressionforecastTAF t+1 = S t + T twhereS t = TAF t + α( A t − TAF t)T t = T t−1 + β( TAF t − TAF t−1 − T t−1)t = Current periodTAF t+1 = Trend-adjusted forecast fornext periodS = Previous forecast plussmoothed errorT = Trend componentY c = a + bxwheren (∑ xy ) − (∑ x) (∑ y)b = _____________________n(∑ x 2) − (∑ x 2)y c = Computed value of dependentvariablex = Predictor (independent) variableb = Slope of the linea = Value of y c when x = 0∑ y − b∑ xa = ______ or ¯y − b¯xnEND-OF-CHAPTER RESOURCESStandard error ofestimate√________Se =(y − y c) 2∑_______n−2S e = Standard error of estimatey = y value of each data pointn = Number of data pointsFor student study and review, the following items are√√√provided at the endof each chapter or chapter supplement.tTracking signal∑eTS t = _____MAD tControl limitsUCL = 0 + z MSE_____LCL = 0 − z MSE__________MSE = standard deviationz = Number of standard deviations;2 and 3 are typical valuesMicrosoft1.2.3.4.Demand forecasts are essential inputs for many business decisions. They help managers decidehow much supply or capacity will be needed to match expected demand, both within the organization and in the supply chain.Because of random variations in demand, it is likely that the forecast will not be perfect, so managers need to be prepared to deal with forecast errors.Other, nonrandom factors might also be present, so it is necessary to monitor forecast errors tocheck for nonrandom patterns in forecast errors.It is important to choose a forecasting technique that is cost-effective and one that minimizes forecast error.associative model, 80judgmental forecasts, 80regression, 98bias, 109least squares line, 99seasonality, 82centered moving average, 96linear trend equation, 89seasonal relative, 94ChapterOne deviationIntroduction to OperationsManagementcontrol chart, 107mean absoluteseasonal variations,93correlation, 102(MAD), 106standard error of estimate, 100cycle, 82mean absolute percent errortime series, 827. Whatare modelsDelphimethod,and81why are they important?(MAPE), 106time-series forecasts, 808. Whyis thedegree of customization an meanimportantconsiderationin processerror,105squarederror (MSE),106 planning?tracking signal, 109smoothing,87consider formovingtrend, 829. Listexponentialthe trade-offsyou wouldeach average,of these 84decisions:focus forecasting, 88naive forecast, 82trend-adjusted exponentiala. Driving your own car versus public transportation.forecast, 76predictor variables, 98smoothing, 92b. irregularBuying a variation,computer 82now versus waitingfor animproved82model.randomvariations,weighted average, 86c. Buying a new car versus buying a used car.d. Speaking up in class versus waiting to get called on by the instructor.e. A small business owner having a website versus newspaper advertising.Taking Stock and CriticalThinking Exercises10. Describe each of these systems: craft production, mass production, and lean production.11. Why might some workers prefer not to work in a lean production environment?12. Discuss the importance of each of the following:a. ste3889X_ch03_074-137.inddMatching supply and demand117b. Managing a supply chainTheseactivities encourage analytical thinking13. List and briefly explain the four basic sources of variation, and explain why it is important formanagers to be able to effectively deal with variation.and14.helpbroadenconceptualunderstanding.Why do peopledo things thatare unethical?15. Explain the term value-added.A q16.uestionrelated to ethics is included in theDiscuss the various impacts of outsourcing.17. Discuss the term sustainability, and its relevance for business organizations.CriticalThinking Exercises.This item appears at the end of each chapter. It is intended to focus your attention on three keyissues for business organizations in general, and operations management in particular. Those issuesare trade-off decisions, collaboration among various functional areas of the organization, and theimpact of technology. You will see three or more questions relating to these issues. Here is the firstset of questions:1. What are trade-offs? Why is careful consideration of trade-offs important in decision making?2. Why is it important for the various functional areas of a business organization to collaborate?3. In what general ways does technology have an impact on operations management decisionmaking?This item also will appear in every chapter. It allows you to critically apply information you learned inthe chapter to a practical situation. Here is the first set of exercises:1. Many organizations offer a combination of goods and services to their customers. As you learnedin this chapter, there are some key differences between the production of goods and the delivery ofservices. What are the implications of these differences relative to managing operations?2. Why is it important to match supply and demand? If a manager believes that supply and demandwill not be equal, what actions could the manager take to increase the probability of achieving amatch?3. One way that organizations compete is through technological innovation. However, there can bedownsides for both the organization and the consumer. Explain.4. What ethical considerations are important in development of technology in general, as well as AI(artificial intelligence)?5. a. What would cause a businessperson to make an unethical decision?Problem Setsb. What are the risks of doing so?Each chapter includes a set of problemsfor assignment. The problems have beenrefined over many editions and are intendedto be challenging but doable for students.Short answers to most of the problemsare included in Appendix A so studentscan check their understanding and seeimmediately how they are progressing.ste3889X_ch01_002-039.indd 37Summaries and Key PointsKEY POINTSChapters contain summaries that provide anoverview of the material covered, and thekey points of the chapter are emphasized in aseparate section.Rev.Confirming PagesKEY TERMS37Confirming PagesKey TermsKeyterms are highlighted in the text and then217Strategic Capacity Planning for Products and Servicesrepeatedin the margin with brief definitions for5. Give some examples of building flexibility into system design.6. Why is it important to adopt a big-pictureapproach to capacityplanning?emphasis.Theyare listed at the end of each7. What is meant by “capacity in chunks,” and why is that a factor in capacity planning?8. What kinds of capacity problems do chaptermany elementary(alongand secondarywithschools periodicallypage experireferences) to aid inence? What are some alternatives to deal with those problems?9. How can a systems approach to capacityplanning be useful?reviewing.Chapter Five09/25/19 10:58 AM10. How do capacity decisions influence productivity?11. Why is it important to match process capabilities with product requirements?12. Briefly discuss how uncertainty affects capacity decisions.13. Discuss the importance of capacity planning in deciding on the number of police officers or firetrucks to have on duty at a given time.Discussion and Review Questions14. Why is capacity planning one of the most critical decisions a manager has to make?15. Why is capacity planning for services more challenging than it is for goods production?16. What are some capacity measures for each of the following?Each chapter and each supplement have alist of discussion and review questions. TheseComputer repair shopTAKING c.STOCKd. Farmprecedesets and are intended17. What is the benefit to a business organizationof havingthecapacityproblemmeasures?to serve as a student self-review or as class1. What are the major trade-offs in capacity planning?TAKING STOCKiscussion starters.2. Who needs to be involved in capacitydplanning?a. Universityb. Hospital3. In what ways does technology have an impact on capacity planning?1. A computer repair service has a design capacity of 80 repairs per day. Its effective capacity, however, is 64 repairs per day, and its actual output is 62 repairs per day. The manager would like toincreasethe number of repairs per day because demand is higher than 70 repairs per day, creating aCRITICALTHINKINGbacklog of orders. Which factors would you recommend that the manager investigate? Explain yourEXERCISESCRITICAL THINKINGEXERCISESreasoning.2. Compared to manufacturing, service requirements tend to be more time dependent, location dependent, and volatile. In addition, service quality is often directly observable by customers. Find arecent article in a business magazine that describes how a service organization is struggling withone or more of these issues and make recommendations on what an organization needs to do toovercome these difficulties.3. Identify four potential unethical actions or inactions related to capacity planning, and the ethicalprinciple each violates (see Chapter 1).4. Any increase in efficiency also increases utilization. Although the upper limit on efficiency is100 percent, what can be done to achieve still higher levels of utilization?1. Determine the utilization and efficiency for each of the following situations.a. A loan processing operation that processes an average of 7 loans per day. The operation has adesign capacity of 10 loans per day and an effective capacity of 8 loans per day.PROBLEMSb. A furnace repair team that services an average of four furnaces a day if the design capacity issix furnaces a day and the effective capacity is five furnaces a day.c. Would you say that systems that have higher efficiency ratios than other systems will alwayshave higher utilization ratios than those other systems? Explain.2. In a job shop, effective capacity is only 50 percent of design capacity, and actual output is 80 percentof effective output. What design capacity would be needed to achieve an actual output of eight jobsper week?08/01/19 06:47 AMste38891_ch05_190-221.indd21707/12/19 04:29 PMxvMarty designed: the Arrow and the Dart. The company hasn’tturned a profit yet, but Marty feels that once he resolves some ofthe problems he’s having with inventory and scheduling, he canincrease productivity and reduce costs.At first, he ordered enough bike parts and subassemblies forfour months’ worth of production. Parts were stacked all over theplace, seriously reducing work space and hampering movementof workers and materials. And no one knew exactly where anything was. In Marty’s words, “It was a solid mess!”He and his two partners eventually managed to work offmost of the inventory. They hope to avoid similar problems in thefuture by using a more orderly approach. Marty’s first priority is todevelop a materials requirement plan for upcoming periods. Hewants to assemble 15 Arrows and 10 Darts each week, to havethem ready at the start of weeks 4 through 8. The product structure trees for the two bikes follow.Operations ToursArrowDartThese provide a simple “walkthrough” of an operationChapter Thirteen MRP and ERPfor students, describing the company, its productMXK(2)F17. The MRP Department has a problem. Its computer“died”just as it spit Wout the followinginforor service, andits Plannedprocessof managingoperations.mation:order releasefor item J27 = 640units in week 2. The firm has been able toF the master schedule for end item 565. The firm isreconstruct all the information they lost exceptCompanies featuredincludeWegmansFoodMarkets,fortunate becauseJ27 is usedonly in 565s. Giventhe followingproductW(2)structure tree and assoQciated inventory status record information, determine what master schedule entry for 565 wasMorton Salt, Stickleyand Boeing.exploded intoFurniture,the material requirementsplan that killed the computer.Part Number565X43N78Y36J27On Hand06002000Lot SizeLead Time565Lot-for-lot1 weekMultiples of 1201 weekX43Y36 (2)N78Lot-for-lot2 weeksLot-for-lot1 weekOPERATIONS TOURJ27 (4)X43Lot-for-lot2 weeksD(2)E(2)H(3)25Lot-for-lotDart22Lot-for-lotX15Multiples of 25W2*2Multiples of 12F110Multiples of 30K13Lot-for-lotQ115Multiples of 30M10Lot-for-lot*LT = 3 weeks for orders of 36 or more units on this itemConfirming PagesScheduled receipts are:Period 1:Period 2:20 Arrows and 18 Ws20 Darts and 15 FsAs the third partner, it is your job to develop the material requirements plan.605STICKLEY FURNITURE18. Develop a material requirements plan for component H. Lead times for the end item and each component except B are one week. The lead time forIntroductionB is three weeks. Sixty units of A are needed at the startof week 8. There are currently 15 units of B on hand and 130 of E on hand, and 50 units of H are inproduction and will be completed by the start www.stickley.comof week 2. Lot-for-lot ordering will be used for all items.B(2)Arrowin New York State, two in Connecticut, one in North Carolina, andits furniture is sold nationally by some 120 dealers.AL. & J.G. Stickley was founded in 1900 by brothers Leopold andProductionGeorge Stickley. Located just outside of Syracuse, New York, thecompany is a producer of fine cherry, white oak, and mahoganyfurniture. In the 1980s, the company reintroduced the company’soriginal line of Cmission oak furniture, which now accounts fornearly 50 percent of the company’s sales.Over the years, the company experienced both good and badtimes, and at one point it employed over 200 people. However,by thewas in disarray; there were onlyD(2)early 1970s, the businessE(4)about 20 full-time employees, and the company was on the brinkof bankruptcy. The present owners bought the ailing firm in 1974,and under their leadership, the company has prospered and grown,andhas five retail showroomsK now has 1,350H(3)employees. StickleyKThe production facility is a large, rectangular building with a30-foot ceiling. Furniture making is labor intensive, although saws,sanders, and other equipment are very much a part of the process. In fact, electric costs average about $60,000 a month. Thecompany has its own tool room where cutting tools are sharpened, and replacement parts are produced as needed.Worker skills range from low-skilled material handlers to highlyskilled craftsmen. For example, seven master cabinet makers handle customized orders.The process (see figure below) begins with various sawingoperations where large boards received from the lumber millsare cut into smaller sizes. The company recently purchased a606CASEPROMOTIONAL NOVELTIESste3889X_ch13_560-609.inddPromotional Novelties provides a wide range of novelty items forits corporate customers. It has just received an order for 20,000toy tractor-trailers that will be sold by a regional filling station company as part of a holiday promotion. The order is to be shippedat the beginning of week 8. The tree diagram shows the variouscomponents of the trucks.Tractor-trailerTractorWheelassemblyTrailerBodyWheelassemblyBody60608/08/19 09:27 AMThe company can complete final assembly of the tractortrailers at the rate of 10,000 a week. The tractor and trailer bodiesare purchased; lead time is three weeks. The wheels are themanager’s main concern.The company has a sufficient supply of brackets on hand.Assembly time is one week each for tractors, trailers, and wheelassembly. However, the wheel department can only producewheels at the rate of 100,000 a week. The manager plans touse the wheel department to full capacity, starting in week 2of the schedule, and order additional wheels from a supplieras needed. Ordered wheels come in sets of 6,400. The leadtime for delivery from the supplier is expected to be two tothree weeks. Use lot-for-lot ordering for all items except thepurchased wheels.QuestionsWheels (6)Bracketste3889X_ch13_560-609.inddWheels (12)Bracket1. How many wheel sets should the manager order?2. When should the wheel sets be ordered?60508/08/19 09:27 AMCasesThe text includes short cases. The cases wereselected to provide a broader, more integratedthinking opportunity for students without takinga full case approach.xviINSTRUCTOR RESOURCESAvailable within Connect, instructors have access to teaching supports such as electronic filesof the ancillary materials: Solutions Manual, Instructor’s Manual, Test Bank, PowerPointLecture Slides, Digital Image Library, and accompanying Excel files.Instructor’s Manual. This manual, revised for the new edition by Tracie Lee, IdahoState University, includes teaching notes, chapter overview, an outline for each chapter, andsolutions to the problems in the text.Test Bank. Updated for the new edition by Leslie Sukup, Ferris State University, andreviewed by Nancy Lambe, University of South Alabama, the Test Bank includes over2,000 true/false, multiple-choice, and discussion questions/problems at varying levels ofdifficulty. The Test Bank is available to assign within Connect, as Word files available inthe Instructor Resource Library, and through our online test generator. Instructors can organize, edit, and customize questions and answers to rapidly generate tests for paper or onlineadministration.PowerPoint Lecture Slides. Revised by Avanti Sethi, University of Texas-Dallas, thePowerPoint slides draw on the highlights of each chapter and provide an opportunity for theinstructor to emphasize the key concepts in class discussions.Digital Image Library. All the figures in the book are included for insertion in PowerPointslides or for class discussion.xvii®FOR INSTRUCTORSYou’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-grading too.65%Less TimeGradingThey’ll thank you for it.Adaptive study resources like SmartBook® 2.0 helpyour students be better prepared in less time. Youcan transform your class time from dull definitions todynamic debates. Find out more about the powerfulpersonalized learning experience available inSmartBook 2.0 at www.mheducation.com/highered/connect/smartbookLaptop: McGraw-Hill; Woman/dog: George Doyle/Getty ImagesMake it simple,make it affordable.Solutions for yourchallenges.Connect makes it easy with seamlessintegration using any of the majorLearning Management Systems—Blackboard®, Canvas, and D2L, amongothers—to let you organize your coursein one convenient location. Give yourstudents access to digital materials ata discount with our inclusive accessprogram. Ask your McGraw-Hillrepresentative for more information.A product isn’t a solution. Realsolutions are affordable, reliable,and come with training andongoing support when you need itand how you want it. Our CustomerExperience Group can also helpyou troubleshoot tech problems—although Connect’s 99% uptimemeans you might not need to callthem. See for yourself at status.mheducation.comPadlock: Jobalou/Getty ImagesCheckmark: Jobalou/Getty ImagesFOR STUDENTSEffective, 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 sets youup 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 youronline eBook or SmartBook 2.0 assignments when it’sconvenient, even if you’re offline. And since the appautomatically syncs with your eBook and SmartBook 2.0assignments in Connect, all of your work is availableevery time you open it. Find out more atwww.mheducation.com/readanywhere“I really liked thisapp—it made it easyto study when youdon’t have your textbook in front of you.”– Jordan Cunningham,Eastern Washington UniversityNo surprises.The Connect Calendar and Reports tools keep you on track with thework you need to get done and your assignment scores. Life gets busy;Connect tools help you keep learning through it all.Calendar: owattaphotos/Getty ImagesLearning for everyone.McGraw-Hill works directly with Accessibility ServicesDepartments and faculty to meet the learning needsof all students. Please contact your AccessibilityServices office and ask them to email[email protected], or visitwww.mheducation.com/about/accessibilityfor more information.Top: Jenner Images/Getty Images, Left: Hero Images/Getty Images, Right: Hero Images/Getty ImagesNote to StudentsThe material in this text is part of the core knowledge in youreducation. Consequently, you will derive considerable benefit from your study of operations management, regardlessof your major. Practically speaking, operations is a course inmanagement.This book describes principles and concepts of operationsmanagement. You should be aware that many of these principles and concepts are applicable to other aspects of yourprofessional and personal life. You can expect the benefits ofyour study of operations management to serve you in thoseother areas as well.Some students approach this course with apprehension, andperhaps even some negative feelings. It may be that they haveheard that the course contains a certain amount of quantitativematerial that they feel uncomfortable with, or that the subjectmatter is dreary, or that the course is about “factory management.” This is unfortunate, because the subject matter of thisbook is interesting and vital for all business students. Whileit is true that some of the material is quantitative, numerousexamples, solved problems, and answers at the back of thebook help with the quantitative material. As for “factory management,” there is material on manufacturing, as well as onservices. Manufacturing is important, and something that youshould 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 thesethings are produced. Beyond all that is the fact that manufacturing is largely responsible for the high standard of livingpeople have in industrialized countries.After reading each chapter or supplement in the text,attending related classroom lectures, and completing assignedquestions and problems, you should be able to do each of thefollowing:1. Identify the key features of that material.2. Define and use terminology.3. Solve typical problems.4. Recognize applications of the concepts and techniquescovered.xx5. Discuss the subject matter in some depth, including itsrelevance, managerial considerations, and advantagesand limitations.You will encounter a number of chapter supplements.Check with your course syllabus to determine which ones areincluded.This book places an emphasis on problem solving. Thereare many examples throughout the text illustrating solutions.In addition, at the end of most chapters and supplements youwill find a group of solved problems. The examples withinthe 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-chapterproblems, you will find the solved problems quite helpful.Moreover, those solved problems usually illustrate more anddifferent details than the problems within the chapter.I suggest the following approach to increase your chancesof getting a good grade in the course:1. Do the class preparation exercises for each chapter ifthey are available from your instructor.2. Look over the chapter outline and learning objectives.3. Read the chapter summary, and then skim the chapter.4. Read the chapter and take notes.5. Look over and try to answer some of the discussion andreview questions.6. Work the assigned problems, referring to the solvedproblems and chapter examples as needed.Note that the answers to many problems are given at theend of the book. Try to solve each problem before turning tothe answer. Remember—tests don’t come with answers.And here is one final thought: Homework is on theHighway to Success, whether it relates to your courses, theworkplace, or life! So do your homework, so you can have asuccessful journey!W.J.S.Brief ContentsPrefacevii1 Introduction to Operations Management 22 Competitiveness, Strategy, and Productivity 403 Forecasting 744 Product and Service Design 138SUPPLEMENT TO CHAPTER 4: Reliability 1765 Strategic Capacity Planning for Products and Services 190SUPPLEMENT TO CHAPTER 5: Decision Theory 2226 Process Selection and Facility Layout 2447 Work Design and Measurement 300SUPPLEMENT TO CHAPTER 7: Learning Curves 3368 Location Planning and Analysis 3489 Management of Quality 37810 Quality Control 41811 Aggregate Planning and Master Scheduling 46412 Inventory Management 50213 MRP and ERP 56014 JIT and Lean Operations 610SUPPLEMENT TO CHAPTER 14: Maintenance 64615 Supply Chain Management 65416 Scheduling 69217 Project Management 73218 Management of Waiting Lines 78419 Linear Programming 824Appendix A: Answers to Selected Problems 858Appendix B: Tables 870Appendic C: Working with the Normal Distribution 876Appendic D: Ten Things to Remember Beyond the Final ExamCompany Index 883Subject Index 884882xxiContentsPreface12viiIntroduction to OperationsManagement 2Introduction 42Competitiveness 42Mission and Strategies 44Readings:Amazon Ranks High in Customer ServiceIntroduction 4Production of Goods Versus ProvidingServices 8Why Learn About Operations Management? 10Career Opportunities and ProfessionalSocieties 12Process Management 13The Scope of Operations Management 14Reading:Why Manufacturing Matters 17Low Inventory Can Increase AgilityKey Issues for Today’s Business OperationsReadings:Sustainable Kisses 28Productivity Improvement 62Summary 62Key Points 63Key Terms 63Solved Problems 63Discussion and Review QuestionsTaking Stock 64Critical Thinking Exercises 65Problems 6527Cases:Home-Style CookiesDiet and the Environment: Vegetarianvs. Nonvegetarian 29646768“Your Garden Gloves”69Girlfriend Collective 69Operations Tour:The U.S. Postal Service70Selected Bibliography and Further Readings363Case:Hazel 38xxiiHazel Revisited33Selected Bibliography and Further ReadingsProblem-Solving Guide 3950Dutch Tomato Growers’ Productivity Advantage 60The Historical Evolution of OperationsManagement 21Operations Today 24Reading:Agility Creates a Competitive Edge 26Summary 36Key Points 36Key Terms 36Discussion and Review QuestionsTaking Stock 37Critical Thinking Exercises 3745Operations Strategy 51Implications of Organization Strategy for OperationsManagement 54Transforming Strategy into Action: The BalancedScorecard 54Productivity 56Readings:Why Productivity Matters 59Operations Management and DecisionMaking 18Reading:Analytics 20Operations Tour:Wegmans Food MarketsCompetitiveness, Strategy, andProductivity 403873Forecasting 74Introduction 76Features Common to All Forecasts 78Elements of a Good Forecast 78Forecasting and the Supply Chain 79Steps in the Forecasting Process 79Approaches to Forecasting 80Qualitative Forecasts 80Forecasts Based on Time-Series Data 82Associative Forecasting Techniques 98Reading:Lilacs 104Legal and Ethical Considerations 144Human Factors 145Cultural Factors 145Reading:Green Tea Ice Cream? Kale Soup? 146Global Product and Service Design 146Environmental Factors: Sustainability 146Readings:Kraft Foods’ Recipe for Sustainability 148Forecast Accuracy 104Reading:High Forecasts Can be Bad News 106China Clamps Down on RecyclablesRecycle City: Maria’s MarketMonitoring Forecast Error 107Choosing a Forecasting Technique 111Using Forecast Information 112Computer Software in Forecasting 113Operations Strategy 113Reading:Gazing at the Crystal Ball 114Summary 115Key Points 117Key Terms 117Solved Problems 118Discussion and Review QuestionsTaking Stock 125Critical Thinking Exercises 125Problems 125Fast-Food Chains Adopt Mass Customization 155Phases in Product Design and Development 162Designing for Production 163Service Design 165Reading:The Challenges of Managing Services 169Operations Strategy4137137Operations Tour:High Acres LandfillProduct and Service Design 138Reading:Design as a Business Strategy140Introduction 140Reading:Dutch Boy Brushes Up Its Paints142Idea Generation 142Reading:Vlasic’s Big Pickle Slices143170Summary 170Key Points 171Key Terms 171Discussion and Review QuestionsTaking Stock 172Critical Thinking Exercises 172Problems 172Cases:M&L Manufacturing 136Highline Financial Services, Ltd.150Other Design Considerations 151Readings:Lego A/S in the Pink 152124Selected Bibliography and Further Readings149171174Selected Bibliography and Further Readings174SUPPLEMENT TO CHAPTER 4: Reliability5176Strategic Capacity Planning for Productsand Services 190Introduction 191Reading:Excess Capacity Can Be Bad News!Capacity Decisions Are Strategic192193xxiiiContentsxxivDefining and Measuring Capacity 194Determinants of Effective Capacity 196Strategy Formulation 197Forecasting Capacity Requirements 198Additional Challenges of Planning Service Capacity 200Do It In-House or Outsource It? 201Reading:My Compliments to the Chef, Er, Buyer 202Developing Capacity StrategiesConstraint Management 207Evaluating Alternatives 207Operations Strategy 213Summary 213Key Points 214Key Terms 214Solved Problems 214Discussion and Review QuestionsTaking Stock 217Critical Thinking Exercises 217Problems 217202Designing Process Layouts7Summary 328Key Points 328Key Terms 329Solved Problems 329Discussion and Review Questions 330Taking Stock 331Critical Thinking Exercises 331Problems 331Selected Bibliography and Further Readings221SUPPLEMENT TO CHAPTER 5: DecisionTheory 222Process Selection and Facility Layout 244Introduction 246Process Selection 246Operations Tour:Morton Salt 250334SUPPLEMENT TO CHAPTER 7: LearningCurves 3368Technology 252Readings:Foxconn Shifts Its Focus to Automation254Zipline Drones Save Lives in Rwanda258Self-Driving VehiclesWork Design and Measurement 300Motion Study 315Work Measurement 316Operations Strategy 327Case:Outsourcing of Hospital Services 2216298Introduction 301Job Design 301Quality of Work Life 305Methods Analysis 310Reading:Taylor’s Techniques Help UPS 311216Selected Bibliography and Further Readings281Summary 285Key Points 286Key Terms 286Solved Problems 286Discussion and Review Questions 290Taking Stock 291Critical Thinking Exercises 291Problems 291Selected Bibliography and Further Readings259Process Strategy 260Strategic Resource Organization: FacilitiesLayout 260Reading:A Safe Hospital Room of the Future 269Designing Product Layouts: Line BalancingReading:BMW’s Strategy: Flexibility 280272Location Planning and Analysis 348The Need for Location Decisions 350The Nature of Location Decisions 350Global Locations 352Reading:Coffee? 355General Procedure for Making LocationDecisions 355Identifying a Country, Region, Community, andSite 356Service and Retail Locations 363Evaluating Location Alternatives 364Summary 370Key Points 370ContentsKey Terms 371Solved Problems 371Discussion and Review QuestionsTaking Stock 372Critical Thinking Exercises 373Problems 373Case:Hello, Walmart?9Process Capability 443Readings:RFID Chips Might Cut Drug Errors inHospitals 448Operations Strategy 448372377Selected Bibliography and Further Readings377Management of Quality 378Introduction 379The Evolution of Quality Management 380The Foundations of Modern Quality Management:The Gurus 381Insights on Quality Management 383Readings:American Fast-Food Restaurants Are HavingSuccess in China 386Hyundai: Exceeding Expectations389Quality and Performance Excellence Awards 391Quality Certification 392Quality and the Supply Chain 393Total Quality Management 394Problem Solving and Process Improvement 398Quality Tools 401Operations Strategy 409Summary 409Key Points 409Key Terms 410Solved Problem 410Discussion and Review QuestionsTaking Stock 412Critical Thinking Exercises 412Problems 412Cases:Chick-n-Gravy Dinner Line 414Tip Top Markets454Cases:Toys, Inc. 462Tiger Tools 462Selected Bibliography and Further Readings41610 Quality Control 418Introduction 419Inspection 420Reading:Falsified Inspection Reports Create Major Risksand Job Losses 42446311 Aggregate Planning and MasterScheduling 464Introduction 466Reading:Duplicate Orders Can Lead to Excess Capacity 470Basic Strategies for Meeting Uneven DemandTechniques for Aggregate Planning 476Aggregate Planning in Services 484Disaggregating the Aggregate Plan 485Master Scheduling 486The Master Scheduling Process 487473496Case:Eight Glasses a Day (EGAD)415Statistical Process Control 425Summary 449Key Points 450Key Terms 450Solved Problems 450Discussion and Review QuestionsTaking Stock 455Critical Thinking Exercises 455Problems 456Summary 491Key Points 491Key Terms 492Solved Problems 493Discussion and Review QuestionsTaking Stock 496Critical Thinking Exercises 496Problems 496411Selected Bibliography and Further Readingsxxv501Selected Bibliography and Further Readings50112 Inventory Management 502Introduction 503Reading:$$$ 504The Nature and Importance of Inventories 504Requirements for Effective InventoryManagement 507ContentsxxviReadings:Radio Frequency Identification (RFID) Tags 509Catch Them Before They Steal! Reducing InventoryLoss With an Assist From AI 510Drones Can Help With Inventory Management inWarehouses 513Inventory Ordering Policies 513How Much to Order: Economic Order QuantityModels 514Reorder Point Ordering 525How Much to Order: Fixed-Order-IntervalModel 530The Single-Period Model 533Operations Strategy 538Summary 538Key Points 538Key Terms 540Solved Problems 540Discussion and Review QuestionsTaking Stock 545Critical Thinking Exercises 545Problems 546Operations Strategy589Summary 589Key Points 590Key Terms 590Solved Problems 590Discussion and Review QuestionsTaking Stock 599Critical Thinking Exercises 600Problems 600599Cases:Promotional Novelties 605DMD Enterprises 606Operations Tour:Stickley Furniture 606Selected Bibliography and Further Readings60914 JIT and Lean Operations 610Introduction 612Reading:Toyota Recalls 614Supporting Goals 615Building Blocks 616Reading:General Mills Studied NASCAR Pit Crew to ReduceChangeover Time 619545Cases:UPD Manufacturing 553Grill Rite 554Farmers Restaurant 554Operations Tours:Bruegger’s Bagel Bakery 556PSC, INC.11 Common ERP Mistakes and How toAvoid Them 587557Selected Bibliography and Further Readings55913 MRP and ERP 560Introduction 561An Overview of MRP 562MRP Inputs 563MRP Processing 566MRP Outputs 573Other Considerations 574MRP in Services 576Benefits and Requirements of MRP 576MRP II 577Capacity Requirements Planning 579ERP 581Readings:The ABCS of ERP 583Lean Tools 632Reading:Gemba Walks 635Transitioning to a Lean SystemLean Services 637JIT II 638Operations Strategy 638Summary 639Key Points 639Key Terms 640Solved Problems 640Discussion and Review QuestionsTaking Stock 642Critical Thinking Exercises 642Problems 642635641Case:Level Operations 643Operations Tour:Boeing 644Selected Bibliography and Further Readings645SUPPLEMENT TO CHAPTER 14: Maintenance646Contents15 Supply Chain Management 654Scheduling Services 715Operations Strategy 719Introduction 656Trends in Supply Chain Management 657Readings:Walmart Focuses on Its Supply Chain 660Supply Chain Transparency661At 3M, a Long Road Became a Shorter Road662Global Supply Chains 663ERP and Supply Chain Management 663Ethics and the Supply Chain 664Small Businesses 664Management Responsibilities 665Procurement 667E-Business 670Supplier Management 671Inventory Management 674Order Fulfillment 675Logistics 676Operations Tour:Wegmans’ Shipping System 677Readings:UPS Sets the Pace for Deliveries and SafeDriving 679Springdale Farm 680Active, Semi-Passive, and Passive RFID Tags 681Creating an Effective Supply Chain 681Readings:Clicks or Bricks, or Both? 683Easy ReturnsStrategy684686Summary 687Key Points 687Key Terms 687Discussion and Review QuestionsTaking Stock 688Critical Thinking Exercises 688Problems 688Case:Mastertag687689Selected Bibliography and Further Readings69016 Scheduling 692Scheduling Operations 694Scheduling in Low-Volume SystemsxxviiSummary 719Key Points 719Key Terms 720Solved Problems 720Discussion and Review QuestionsTaking Stock 724Critical Thinking Exercises 724Problems 725724Case:Hi-Ho, Yo-Yo, Inc. 731Selected Bibliography and Further Readings73117 Project Management 732Introduction 734Project Life Cycle 734Behavioral Aspects of Project Management 736Reading:Artificial Intelligence Will HelpProject Managers 740Work Breakdown Structure 741Planning and Scheduling with Gantt Charts 741PERT and CPM 742Deterministic Time Estimates 745A Computing Algorithm 746Probabilistic Time Estimates 753Determining Path Probabilities 756Simulation 758Budget Control 759Time–Cost Trade-Offs: Crashing 759Advantages of Using PERT and PotentialSources of Error 762Critical Chain Project Management 763Other Topics in Project Management 763Project Management Software 764Operations Strategy 764Risk Management 765Summary 766Key Points 767Key Terms 767Solved Problems 767Discussion and Review QuestionsTaking Stock 774Critical Thinking Exercises 774Problems 774774Case:Time, Please 781697Selected Bibliography and Further Readings782Contentsxxviii18 Management of Waiting Lines 784Why Is There Waiting? 786Reading:New Yorkers Do Not Like Waiting in Line19 Linear Programming 824787Managerial Implications of Waiting Lines 787Goal of Waiting-Line Management 788Characteristics of Waiting Lines 789Measures of Waiting-Line Performance 792Queuing Models: Infinite-Source 793Queuing Model: Finite-Source 807Constraint Management 813The Psychology of Waiting 813Reading:David H. Maister on the Psychology of Waiting 814Operations Strategy 814Reading:Managing Waiting Lines at Disney WorldSummary 815Key Points 816Key Terms 816Solved Problems 816Discussion and Review QuestionsTaking Stock 818Critical Thinking Exercises 818Problems 818Introduction 825Linear Programming Models 826Graphical Linear Programming 828The Simplex Method 840Computer Solutions 840Sensitivity Analysis 843Summary 846Key Points 846Key Terms 846Solved Problems 846Discussion and Review QuestionsProblems 849Cases:Son, Ltd.853Custom Cabinets, Inc.854Selected Bibliography and Further Readings815856APPENDIX A Answers to Selected Problems 858APPENDIX B Tables 870APPENDIX C Working with the NormalDistribution876APPENDIX D Ten Things to Remember Beyond the FinalExam 882818Company Index 883Subject Index 884Case:Big Bank 822Selected Bibliography and Further Readings849822Operations Management1C H A P T E RIntroductionto OperationsManagementLEARNING OBJECTIVESAfter completing this chapter, you should be able to:LO1.1Define the terms operations management and supply chain.LO1.2Identify similarities and differences between production and service operations.LO1.3Explain the importance of learning about operations management.LO1.4Identify the three major functional areas of organizations and describe how they interrelate.LO1.5Summarize the two major aspects of process management.LO1.6Describe the operations function and the nature of the operations manager’s job.LO1.7Explain the key aspects of operations management decision making.LO1.8Briefly describe the historical evolution of operations management.LO1.9Describe current issues in business that impact operations management.LO1.10Explain the importance of ethical decision making.LO1.11Explain the need to manage the supply chainC H A P T E R1.1O U T L I N EIntroduction 41.2 Production of Goods VersusProviding Services 81.3 Why Learn About OperationsManagement? 101.4 Career Opportunities andProfessional Societies 121.5Process Management 13Managing a Process to MeetDemand 13Process Variation 141.6The Scope of OperationsManagement 14Managing the Supply Chain toAchieve Schedule, Cost, andQuality Goals 1521.7 Operations Management andDecision Making 18Models 18Quantitative Approaches 19Performance Metrics 19Analysis of Trade-Offs 19Degree of Customization 20A Systems Perspective 20Establishing Priorities 201.8 The Historical Evolution ofOperations Management 21The Industrial Revolution 21Scientific Management 21The Human RelationsMovement 23Decision Models andManagement Science 23The Influence of JapaneseManufacturers 231.9Operations Today 241.10 Key Issues for Today’sBusiness Operations 27Environmental Concerns 27Ethical Conduct 29The Need to Manage theSupply Chain 31Elements of Supply ChainManagement 32Operations Tour: WegmansFood Markets 33Case: Hazel 38Problem-Solving Guide 39Zapp2Photo/ShutterstockRecalls of automobiles, foods, toys, and other products; major oil spills; and even dysfunctional state andfederal legislatures are all examples of operations failures. They underscore the need for effective operationsmanagement. Examples of operations successes include the many electronic devices we all use, medical breakthroughs in diagnosing and treating ailments, and high-quality goods and services that are widely available.Operations is what businesses do. Operations are processes that either provide services or create goods. Operations takeplace in businesses such as restaurants, retail stores, supermarkets, factories, hospitals, and colleges and universities. Infact, they take place in every business organization. Moreover, operations are the core of what a business organization does.As you read this book, you will learn about managing those operations. The subject matter is relevant for you regardless of your major. Productivity, quality, e-business, competition, and customer satisfaction are important for everyaspect of a business organization. This first chapter presents an introduction and overview of operations management.Among the issues it addresses are: What is operations management? Why is it important? What do operations management professionals do?The chapter also provides a description of the historical evolution of operations management and a discussion of thetrends and issues that impact operations management.You will learn about (1) the economic balance that every business organization seeks to achieve; (2) the conditionthat generally exists that makes achieving the economic balance challenging; (3) the line function that is the core ofevery business organization; (4) key steps in the history and evolution of operations management; (5) the differencesand similarities between producing products and delivering services; (6) what a supply chain is, and why it is essentialto manage it; and (7) the key issues for today’s business operations.3Chapter One Introduction to Operations Management4LO1.1 Define the termsoperations managementand supply chain.Goods Physical itemsproduced by businessorganizations.Services Activities thatprovide some combinationof time, location, form, andpsychological value.Operations managementThe management of systemsor processes that creategoods and/or provideservices.Supply chain A sequence oforganizations—their facilities,functions, and activities—thatare involved in producing anddelivering a product or service.1.1 INTRODUCTIONOperations 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 asmotherboards that go into computers, and final products such as cell phones and automobiles.Services are activities that provide some combination of time, location, form, or psychologicalvalue. Examples of goods and services are found all around you. Every book you read, everyvideo you watch, every e-mail or text message you send, every telephone c onversation youhave, and every medical treatment you receive involves the operations function of one or moreorganizations. So does everything you wear, eat, travel in, sit on, and access through the internet. 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 theability of a nation to compete with other nations, and on the nation’s economy.The ideal situation for a business organization is to achieve an economic match of supplyand demand. Having excess supply or excess capacity is wasteful and costly; having too littlemeans lost opportunity and possible customer dissatisfaction. The key functions on the supplyside 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 organizations have three basic functional areas, as depicted in Figure 1.1: finance, marketing, andoperations. It doesn’t matter whether the business is a retail store, a hospital, a manufacturingfirm, a car wash, or some other type of business; all business organizations have these threebasic functions.Finance is responsible for securing financial resources at favorable prices and allocatingthose resources throughout the organization, as well as budgeting, analyzing investment proposals, and providing funds for operations. Marketing is responsible for assessing consumerwants and needs, and selling and promoting the organization’s goods or services. Operationsis 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 beits 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 responsiblefor managing that core. Hence, operations management is the management of systems orprocesses that create goods and/or provide services.Operations and supply chains are intrinsically linked, and no business organization couldexist 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. Thesequence begins with basic suppliers of raw materials and extends all the way to the finalcustomer. See Figure 1.2. Facilities might include warehouses, factories, processing centers,offices, distribution centers, and retail outlets. Functions and activities include forecasting,purchasing, inventory management, information management, quality assurance, scheduling,production, distribution, delivery, and customer service.Figure 1.3a provides another illustration of a supply chain: a chain that extends from wheatgrowing on a farm and ends with a customer buying a loaf of bread in a supermarket. Thevalue of the product increases as it moves through the supply chain.FIGURE 1.1OrganizationThe three basic functionsof business organizationsFinanceOperationsMarketingChapter OneSuppliers’suppliersDirectsuppliersIntroduction to Operations ManagementProducerFIGURE 1.2FinalcustomersDistributor5A simple product supplychainFIGURE 1.3AA supply chain for breadSuppliers:FarmEquipment suppliersEquipment repairFeed, seed, fertilizers, pesticidesEnergy/fuelTruckingMillSuppliers:Equipment suppliersEquipment repairEnergyTruckingSuppliers:BakeryEquipment suppliersEquipment repairOther ingredientsEnergySupermarketSuppliers:FuelRepairsTiresDriversTrucksTruckingBread$2.29FIGURE 1.3BOne way to think of a supply chain is that it is like a chain, as its name implies. This isshown in Figure 1.2. The links of the chain would represent various production and/or serviceoperations, such as factories, storage facilities, activities, and modes of transportation (trains,railroads, ships, planes, cars, and people). The chain illustrates both the sequential nature ofa supply chain and the interconnectedness of the elements of the supply chain. Each link is acustomer of the previous link and a supplier to the following link. It also helps to understandthat if any one of the links fails for any reason (quality or delivery issues, weather problems,or some other problem [there are numerous possibilities]), that can interrupt the flow in thesupply chain for the following portion of the chain.Another way to think of a supply chain is as a tree with many branches, as shown inFigure 1.3b. The main branches of the tree represent key suppliers and transporters (e.g.,trucking companies). That view is helpful in grasping the size and complexity that oftenexists in supply chains. Notice that the main branches of the tree have side branches (theirown key suppliers), and those side branches also have their own side branches (their ownkey suppliers). In fact, an extension of the tree view of a supply chain is that each supplier6Value-added The differencebetween the cost of inputsand the value or price ofoutputs.Chapter One Introduction to Operations Management(branch) has its own supply tree. Referring to F igure 1.3a, the farm, mill, and bakery of thetrucking companies would have their own “tree” of suppliers.Supply chains are both external and internal to the organization. The external parts ofa supply chain provide raw materials, parts, equipment, supplies, and/or other inputs tothe 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, supplyingoperations with parts and materials, performing work on products, and/or performingservices.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 servicesusing one or more transformation processes (e.g., storing, transporting, repairing). To ensurethat the desired outputs are obtained, an organization takes measurements at various pointsin the transformation process (feedback) and then compares them with previously establishedstandards to determine whether corrective action is needed (control). Figure 1.4 depicts theconversion 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 thatgoods and services often occur jointly. For example, having the oil changed in your car is aservice, but the oil that is delivered is a good. Similarly, house painting is a service, but thepaint is a good. The goods–service combination is a continuum. It can range from primarily goods, with little service, to primarily service, with few goods. Figure 1.5 illustrates thiscontinuum. Because there are relatively few pure goods or pure services, companies usuallysell product packages, which are a combination of goods and services. There are elements ofboth goods production and service delivery in these product packages. This makes managingoperations more interesting, and also more challenging.Table 1.2 provides some specific illustrations of the transformation process.The essence of the operations function is to add value during the transformation process.Value-added is the term used to describe the difference between the cost of inputs and thevalue or price of outputs. In nonprofit organizations, the value of outputs (e.g., highway construction, police and fire protection) is their value to society; the greater the value-added, thegreater the effectiveness of these operations. In for-profit organizations, the value of outputsis measured by the prices that customers are willing to pay for those goods or services. Firmsuse the money generated by value-added for research and development, investment in newfacilities and equipment, worker salaries, and profits. Consequently, the greater the valueadded, the greater the amount of funds available for these purposes. Value can also be psychological, as in branding.Many factors affect the design and management of operations systems. Among them arethe degree of involvement of customers in the process and the degree to which technologyis used to produce and/or deliver a product or service. The greater the degree of customerFIGURE 1.4The operations functioninvolves systems forconverting inputs intooutputsValue-addedInputsLandLaborCapitalInformationTransformation/conversionprocessOutputsGoodsServicesMeasurement and FeedbackMeasurement andFeedbackControlMeasurement andFeedbackChapter OneIntroduction to Operations ManagementInputsTransformationOutputsLandProcessesHigh goods percentageHumanCutting, drillingHousesPhysical laborTransportingAutomobilesIntellectual laborTeachingClothingCapitalFarmingComputersRaw materialsMixingMachinesWaterPackingTelevisionsMetalsCopyingFood productsWoodAnalyzingTextbooksEquipmentDevelopingCell phonesMachinesSearchingComputersResearchingHealth careTrucksRepairingEntertainmentToolsInnovatingVehicle repairFacilitiesDebuggingLegalHospitalsSellingBankingFactoriesEmailingCommunicationRetail storesWriting7TABLE 1.1Examples of inputs,transformation, and outputsHigh service percentageEnergyOtherInformationTimeLegal constraintsGovernment regulationsinvolvement, the more challenging it can be to design and manage the operation. Technologychoices can have a major impact on productivity, costs, flexibility, and quality and customersatisfaction.GoodsServiceSurgery, teachingSongwriting, software developmentComputer repair, restaurant mealAutomobile repair, fast foodHome remodeling, retail salesAutomobile assembly, steelmakingFIGURE 1.5The goods–servicecontinuumChapter One Introduction to Operations Management8TABLE 1.2Illustrations of thetransformation processFood ProcessorInputsProcessingOutputRaw vegetablesCleaningCanned vegetablesMetal sheetsMaking cansWaterCuttingEnergyCookingLaborPackingBuildingLabelingEquipmentHospitalLO1.2 Identify thesimilarities and differencesbetween production andservice operations.Doctors, nursesExaminationHospitalSurgeryMedical suppliesMonitoringEquipmentMedicationLaboratoriesTherapyTreated patients1.2 PRODUCTION OF GOODS VERSUSPROVIDING SERVICESAlthough goods and services often go hand in hand, there are some very bas…Purchase answer to see fullattachment

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