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Copyright, ii
About the Authors, iv
Preface, xvi
Part 1. Using Operations to Compete, 2
1. Competing with Operations, 2
Scholastic and Harry Potter, 2
Operations and Supply Chain Management Across the Organization, 4
A Process View, 5
How Processes Work, 5
Nested Processes, 6
Service and Manufacturing Processes, 6
The Supply Chain View, 7
Core Processes, 8
Support Processes, 8
Adding Value with Process Innovation in Supply Chains, 8
Managerial Practice 1.1: Operational Innovation is a Competitive Weapon at Progressive Insurance, 9
Operations Strategy, 9
Corporate Strategy, 10
Market Analysis, 12
Competitive Priorities and Capabilities, 13
Order Winners and Qualifiers, 13
Managerial Practice 1.2: Changing Competitive Priorities at FedEx, 15
Using Competitive Priorities: an Airline Example, 16
Operations Strategy as a Pattern of Decisions, 17
Trends in Operations Management, 18
Productivity Improvement, 19
Global Competition, 20
Managerial Practice 1.3: Impact of Globalization on Sonoco, 20
Ethical, Workforce Diversity, and Environmental Issues, 22
Operations Management as a Set of Decisions, 22
Computerized Decision-Making Tools, 23
Addressing the Challenges in Operations Management, 23
Part 1: Using Operations to Compete, 24
Part 2: Managing Processes, 24
Part 3: Managing Supply Chains, 24
Internet Resources, 25
Key Equation, 25
Key Terms, 25
Solved Problems 1, 25
Discussion Questions, 26
Problems, 27
Active Model Exercise, 29
Video Case: Operations as a Competitive Weapon at Starwood, 30
Case: Chad’s Creative Concepts, 30
Selected References, 31
Supplement A. Decision Making, 33
Break-Even Analysis, 34
Evaluating Services or Products, 34
Evaluating Processes, 36
Preference Matrix, 37
Decision Theory, 38
Decision Making Under Certainty, 39
Decision Making Under Uncertainty, 40
Decision Making Under Risk, 41
Decision Trees, 42
Internet Resources, 44
Key Equations, 44
Solved Problems 1, 44
Problems, 47
Selected References, 50
2. Project Management, 52
Xbox 360, 52
Design, 52
Analysis, 53
Development, 53
Launch, 53
Project Management across the Organization, 54
Defining and Organizing Projects, 55
Defining the Scope and Objectives of a Project, 55
Selecting the Project Manager and Team, 55
Organizational Structure, 55
Planning Projects, 56
Defining the Work Breakdown Structure, 56
Diagramming the Network, 57
Developing the Schedule, 59
Analyzing Cost–Time Trade-Offs, 63
Assessing Risks, 67
Managerial Practice 2.1: Boston’s Big Dig Project Poses Many Challenges, 68
Analysis, 69
Monitoring and Controlling Projects, 72
Monitoring Project Status, 72
Monitoring Project Resources, 72
Controlling Projects, 73
Internet Resources, 74
Key Equations, 74
Key Terms, 74
Solved Problems 1, 74
Discussion Questions, 79
Problems, 79
Active Model Exercise, 88
Video Case: Project Management at the Phoenician, 88
Case: The Pert Mustang, 90
Selected References, 91
Part 2. Managing Processes, 92
3. Process Strategy, 92
eBay, 92
Process Strategy across the Organization, 94
Process Strategy Decisions, 94
Process Structure in Services, 95
Nature of Service Processes: Customer Contact, 95
Customer-Contact Matrix, 95
Service Process Structuring, 96
Process Structure in Manufacturing, 97
Product-Process Matrix, 98
Manufacturing Process Structuring, 98
Production and Inventory Strategies, 100
Layout, 100
Customer Involvement, 105
Possible Disadvantages, 105
Possible Advantages, 105
Resource Flexibility, 106
Workforce, 106
Equipment, 106
Capital Intensity, 107
Automating Manufacturing Processes, 107
Automating Service Processes, 108
Managerial Practice 3.1: Flexible Automation at R.R. Donnelley, 109
Economies of Scope, 109
Strategic Fit, 110
Decision Patterns for Service Processes, 110
Decision Patterns for Manufacturing Processes, 111
Gaining Focus, 112
Strategies for Change, 113
Process Reengineering, 113
Process Improvement, 113
Internet Resources, 113
Key Equation, 114
Key Terms, 114
Solved Problems 1, 114
Discussion Questions, 115
Problems, 116
Active Model Exercise, 118
Case: Custom Molds, Inc., 119
Selected References, 121
4. Process Analysis, 122
Baptist Memorial Hospital, 122
Process Analysis across the Organization, 124
A Systematic Approach, 124
Step 1: Identify Opportunities, 125
Step 2: Define the Scope, 125
Step 3: Document the Process, 125
Step 4: Evaluate Performance, 126
Step 5: Redesign the Process, 126
Step 6: Implement Changes, 126
Documenting the Process, 126
Flowcharts, 126
Managerial Practice 4.1: Process Improvement at McDonald’s, 127
Service Blueprints, 129
Process Charts, 130
Work Measurement Techniques, 131
Time Study Method, 131
Elemental Standard Data Approach, 131
Predetermined Data Approach, 132
Work Sampling Method, 132
Evaluating Performance, 133
Data Analysis Tools, 133
Data Snooping, 137
Simulation, 137
Redesigning the Process, 137
Generating Ideas: Questioning and Brainstorming, 137
Benchmarking, 139
Managing Processes, 140
Internet Resources, 141
Key Terms, 141
Solved Problems 1, 141
Discussion Questions, 145
Problems, 145
Active Model Exercise, 152
Video Case: Process Analysis at Starwood, 152
Case: José’s Authentic Mexican Restaurant, 154
Selected References, 155
Supplement B. Simulation, 156
Reasons for Using Simulation, 157
The Simulation Process, 157
Data Collection, 157
Random-Number Assignment, 159
Model Formulation, 159
Analysis, 160
Computer Simulation, 162
Simulation with Excel Spreadsheets, 162
Simulation with More Advanced Software, 165
Internet Resources, 166
Solved Problems 1, 166
Problems, 169
Selected References, 173
5. Quality and Performance, 174
Verizon Wireless, 174
Quality and Performance across the Organization, 176
Costs of Quality, 176
Prevention Costs, 176
Appraisal Costs, 177
Internal Failure Costs, 177
External Failure Costs, 177
Ethics and Quality, 177
Total Quality Management, 178
Customer Satisfaction, 178
Managerial Practice 5.1: Quality and Performance at Steinway & Sons, 179
Employee Involvement, 180
Continuous Improvement, 180
Six Sigma, 181
Six Sigma Improvement Model, 182
Acceptance Sampling, 183
Statistical Process Control, 184
Variation of Outputs, 184
Control Charts, 187
Statistical Process Control Methods, 188
Control Charts for Variables, 188
Control Charts for Attributes, 193
Process Capability, 195
Defining Process Capability, 196
Using Continuous Improvement to Determine the Capability of a Process, 197
Quality Engineering, 199
International Quality Documentation Standards, 199
The ISO 9000:2000 Documentation Standards, 200
ISO 14000:2004 Environmental Management System, 200
Benefits of ISO Certification, 200
Malcolm Baldrige National Quality Award, 201
Internet Resources, 202
Key Equations, 202
Key Terms, 203
Solved Problems 1, 203
Discussion Questions, 206
Problems, 206
Active Model Exercise, 214
Video Case: Process Performance and Quality at Starwood Hotels & Resorts, 215
Experiential Learning: Statistical Process Control with a Coin Catapult, 216
Selected References, 217
6. Capacity Planning, 218
Sharp Corporation, 218
Planning Capacity across the Organization, 220
Planning Long-Term Capacity, 220
Measures of Capacity and Utilization, 221
Economies of Scale, 221
Diseconomies of Scale, 222
Capacity Timing and Sizing Strategies, 222
Sizing Capacity Cushions, 222
Timing and Sizing Expansion, 223
Managerial Practice 6.1: Downsizing Capacity in the Airline Industry, 224
Managerial Practice 6.2: Expansionist Capacity Strategy in the Ethanol Industry, 225
Linking Capacity and Other Decisions, 225
A Systematic Approach to Long-Term Capacity Decisions, 226
Step 1: Estimate Capacity Requirements, 226
Step 2: Identify Gaps, 228
Step 3: Develop Alternatives, 228
Step 4: Evaluate the Alternatives, 228
Tools for Capacity Planning, 229
Waiting-Line Models, 229
Simulation, 230
Decision Trees, 230
Internet Resources, 231
Key Equations, 231
Key Terms, 231
Solved Problems 1, 232
Discussion Questions, 234
Problems, 234
Video Case: Gate Turnaround at Southwest Airlines, 239
Case: Fitness Plus, Part A, 240
Selected References, 241
Supplement C. Waiting Lines, 242
Why Waiting Lines Form, 243
Uses of Waiting-Line Theory, 243
Structure of Waiting-Line Problems, 243
Customer Population, 243
The Service System, 244
Priority Rule, 246
Probability Distributions, 246
Arrival Distribution, 246
Service Time Distribution, 247
Using Waiting-Line Models to Analyze Operations, 248
Single-Server Model, 249
Multiple-Server Model, 251
Little’s Law, 252
Finite-Source Model, 253
Decision Areas for Management, 255
Internet Resources, 255
Key Equations, 256
Solved Problems 1, 256
Problems, 258
Selected References, 260
7. Constraint Management, 262
Eastern Financial Florida Credit Union, 262
Managing Constraints across the Organization, 264
The Theory of Constraints, 264
Key Principles of the TOC, 265
Identification and Management of Bottlenecks, 266
Managing Bottlenecks in Service Processes, 266
Managerial Practice 7.1: Constraint Management in Health Care, 268
Managing Bottlenecks in Manufacturing Processes, 268
Managerial Practice 7.2: The Drum-Buffer-Rope System at a U.S. Marine Corps Maintenance Center, 274
Managing Constraints in a Line Process, 274
Line Balancing, 274
Managerial Considerations, 278
Internet Resources, 279
Key Equations, 279
Key Terms, 279
Solved Problems 1, 279
Discussion Questions, 281
Problems, 281
Experiential Learning: Min-Yo Garment Company, 288
Video Case: Constraint Management at Southwest Airlines, 291
Selected References, 292
8. Lean Systems, 294
Toyota Production System, 294
Lean Systems across the Organization, 296
Continuous Improvement Using a Lean Systems Approach, 296
Supply Chain Considerations in Lean Systems, 298
Close Supplier Ties, 298
Managerial Practice 8.1: Continuous Improvement at Panasonic Corporation, 298
Small Lot Sizes, 299
Process Considerations in Lean Systems, 299
Pull Method of Work Flow, 300
Quality at the Source, 300
Uniform Workstation Loads, 301
Standardized Components and Work Methods, 302
Flexible Workforce, 302
Automation, 303
Five S Practices, 303
Total Preventive Maintenance (TPM), 304
Designing Lean System Layouts, 304
One Worker, Multiple Machines, 305
Group Technology, 305
The Kanban System, 306
Managerial Practice 8.2: Lean Systems at New Balance Athletic Shoe Company, 307
General Operating Rules, 308
Determining the Number of Containers, 308
Other Kanban Signals, 310
Value Stream Mapping, 310
Managerial Practice 8.3: Lean Systems at the University of Pittsburgh Medical Center Shadyside, 311
House of Toyota, 313
Operational Benefits and Implementation Issues, 313
Organizational Considerations, 314
Process Considerations, 315
Inventory and Scheduling, 315
Internet Resources, 316
Key Equations, 316
Key Terms, 316
Solved Problems 1, 316
Discussion Questions, 317
Problems, 317
Video Case: Lean Systems at Autoliv, 318
Case: Copper Kettle Catering, 320
Selected References, 321
Part 3. Managing Supply Chains, 322
9. Supply Chain Design, 322
FedEx, 322
Supply Chain Design across the Organization, 324
Supply Chains for Services and Manufacturing, 325
Services, 325
Manufacturing, 326
Inventory and Supply Chains, 326
Pressures for Small Inventories, 327
Pressures for Large Inventories, 328
Types of Inventory, 329
Inventory Reduction Tactics, 331
Inventory Placement, 332
Measures of Supply Chain Performance, 332
Inventory Measures, 332
Financial Measures, 334
Mass Customization, 335
Competitive Advantages, 336
Supply Chain Design for Mass Customization, 336
Managerial Practice 9.1: Mass Customization at Lands’ End, 337
Outsourcing Processes, 338
Vertical Integration, 339
Outsourcing, 339
Managerial Practice 9.2: Building a Supply Chain for the Dreamliner, 341
Strategic Implications, 342
Efficient Supply Chains, 342
Responsive Supply Chains, 342
The Design of Efficient and Responsive Supply Chains, 343
Internet Resources, 344
Key Equations, 344
Key Terms, 344
Solved Problems 1, 344
Discussion Questions, 345
Problems, 346
Experiential Learning: Sonic Distributors, 348
Video Case: Supply Chain Design at Clif Bar & Company, 349
Case: Brunswick Distribution, Inc., 350
Selected References, 352
10. Supply Chain Integration, 354
Eastman Kodak, 354
Supply Chain Integration across the Organization, 356
Supply Chain Dynamics, 356
External Causes, 357
Internal Causes, 358
Integrated Supply Chains, 358
New Service or Product Development Process, 359
Design, 360
Analysis, 360
Development, 360
Full Launch, 360
Supplier Relationship Process, 361
Sourcing, 361
Design Collaboration, 364
Negotiation, 364
Buying, 366
Information Exchange, 367
The Order Fulfillment Process, 368
Customer Demand Planning, 368
Supply Planning, 369
Production, 369
Logistics, 370
The Customer Relationship Process, 372
Marketing, 372
Order Placement, 373
Customer Service, 374
Levers for Improved Supply Chain Performance, 374
The Levers, 374
Performance Measures, 375
Supply Chains and the Environment, 376
Sustainability, 376
Reverse Logistics, 376
Managerial Practice 10.1: Reverse Logistics at Citiraya Industries Helps Recycle High-Tech Equipment, 378
Internet Resources, 378
Key Equations, 378
Key Terms, 378
Solved Problems 1, 379
Discussion Questions, 380
Problems, 381
Video Case: Sourcing Strategy at Starwood, 384
Case: Wolf Motors, 385
Selected References, 386
11. Location, 388
Bavarian Motor Works (BMW), 388
Location Decisions across the Organization, 390
Factors Affecting Location Decisions, 391
Dominant Factors in Manufacturing, 391
Dominant Factors in Services, 392
Geographical Information Systems and Location Decisions, 393
Managerial Practice 11.1: How Fast-Food Chains Use GIS to Select Their Sites, 394
Locating a Single Facility, 394
Comparing Several Sites, 395
Applying the Load–Distance Method, 396
Using Break-Even Analysis, 398
Locating a Facility within a Network of Facilities, 399
The GIS Method for Locating Multiple Facilities, 400
Other Methods of Location Analysis, 403
Internet Resources, 404
Key Equations, 404
Key Terms, 404
Solved Problems 1, 404
Discussion Questions, 407
Problems, 407
Active Model Exercise, 411
Case: Industrial Repair, Inc., 412
Selected References, 412
12. Inventory Management, 414
Inventory Management at Wal-Mart, 414
Inventory Management across the Organization, 416
ABC Analysis, 416
Economic Order Quantity, 417
Calculating the EOQ, 418
Managerial Insights from the EOQ, 422
Inventory Control Systems, 422
Continuous Review System, 423
Periodic Review System, 429
Comparative Advantages of the Q and P Systems, 431
Managerial Practice 12.1: The Supply Chain Implications of Periodic Review Inventory Systems at Celanese, 432
Hybrid Systems, 433
Internet Resources, 433
Key Equations, 433
Key Terms, 434
Solved Problems 1, 434
Discussion Questions, 439
Problems, 440
Active Model Exercise, 444
Experiential Learning: Swift Electronic Supply, Inc., 445
Case: Parts Emporium, 447
Selected References, 448
Supplement D. Special Inventory Models, 450
Noninstantaneous Replenishment, 451
Quantity Discounts, 453
One-Period Decisions, 455
Internet Resources, 457
Key Equations, 457
Key Terms, 458
Solved Problems 1, 458
Problems, 460
Selected References, 461
13. Forecasting, 462
UNILEVER, 462
Forecasting across the Organization, 464
Demand Patterns, 464
Key Decisions on Making Forecasts, 465
Deciding What to Forecast, 465
Choosing a Forecasting System, 466
Choosing the Type of Forecasting Technique, 466
Judgment Methods, 466
Managerial Practice 13.1: Wal-Mart Uses CPFR and the Internet to Improve Demand Planning Performance, 467
Causal Methods: Linear Regression, 468
Time-Series Methods, 470
Naive Forecast, 470
Estimating the Average, 470
Including a Trend, 473
Seasonal Patterns, 475
Choosing a Time-Series Method, 477
Forecast Error, 477
Criteria for Selecting Time-Series Methods, 480
Using Multiple Techniques, 480
Putting It All Together: Forecasting As a Process, 481
A Typical Forecasting Process, 481
Managerial Practice 13.2: Combination Forecasts and the Forecasting Process, 482
Forecasting as a Nested Process, 483
Internet Resources, 483
Key Equations, 483
Key Terms, 484
Solved Problems 1, 484
Discussion Questions, 489
Problems, 490
Video Case: Forecasting and Supply Chain Management at Deckers Outdoor Corporation, 497
Case: Yankee Fork and Hoe Company, 498
Experiential Learning: Forecasting with Holdout Sample, 500
Selected References, 500
14. Operations Planning and Scheduling, 502
Air New Zealand, 502
Operations Planning and Scheduling across the Organization, 504
Stages in Operations Planning and Scheduling, 505
Aggregation, 505
The Relationship of Operations Plans and Schedules to Other Plans, 505
Managing Demand, 506
Demand Options, 507
Managerial Practice 14.1: Revenue Management in Airlines and Casino Industries, 508
Sales and Operations Plans, 509
Information Inputs, 509
Supply Options, 509
Managerial Practice 14.2: Anticipation Inventory at Whirlpool Corporation, 510
Planning Strategies, 511
Constraints and Costs, 512
Sales and Operations Planning as a Process, 512
Using Spreadsheets, 514
Scheduling, 518
Gantt Charts, 518
Scheduling Employees, 519
Sequencing Jobs at a Workstation, 523
Software Support, 525
Internet Resources, 526
Key Terms, 526
Solved Problems 1, 526
Discussion Questions, 530
Problems, 530
Active Model Exercise, 535
Video Case: Sales and Operations Planning at Starwood, 536
Case: Memorial Hospital, 537
Selected References, 538
15. Resource Planning, 540
Dow Corning, 540
Resource Planning across the Organization, 542
Enterprise Resource Planning, 542
How ERP Systems Are Designed, 542
Material Requirements Planning, 544
Dependent Demand, 544
Bill of Materials, 545
Master Production Scheduling, 547
Inventory Record, 550
Managerial Practice 15.1: Master Production Scheduling at Cypress Semiconductor, 551
Planning Factors, 553
Outputs from MRP, 556
Managerial Practice 15.2: Material Requirements Planning at Winnebago Industries, 560
MRP and the Environment, 560
Resource Planning for Service Providers, 561
Dependent Demand for Services, 561
Bill of Resources, 562
Internet Resources, 563
Key Terms, 563
Solved Problems 1, 564
Discussion Questions, 568
Problems, 568
Active Model Exercise, 578
Case: Flashy Flashers, Inc., 578
Selected References, 581
Supplement E. Linear Programming, 582
Basic Concepts, 583
Formulating a Problem, 584
Graphic Analysis, 585
Plot the Constraints, 585
Identify the Feasible Region, 587
Plot an Objective Function Line, 588
Find the Visual Solution, 589
Find the Algebraic Solution, 589
Slack and Surplus Variables, 590
Sensitivity Analysis, 591
Computer Solution, 591
Simplex Method, 592
Computer Output, 592
The Transportation Method, 595
Transportation Method for Location, 595
Transportation Method for Production Planning, 597
Applications, 601
Internet Resources, 601
Solved Problems 1, 602
Discussion Questions, 605
Problems, 605
Case: R.U. Reddie for Location, 614
Selected References, 616
Appendix 1. Normal Distribution, 619
Appendix 2. Table of Random Numbers, 620
Glossary, 621
Photo Credits, 631
Name Index, 633
Subject Index, 637
Supplement F. Financial Analysis, F-1
Supplement G. Acceptance Sampling Plans, G-1
Supplement H. Measuring Output Rates, H-1
Supplement I. Learning Curve Analysis, I-1
Supplement J. Operations Scheduling, J-1

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