Operations

Management

Twelfth Global Edition

William J. Stevenson
Saunders College of Business
Rochester Institute of Technology

Mc
Graw
Hill
Education

Preface vii
1
Introduction to Operations
Management
Introduction

Reading:
Al-Jomaih Automotive Excels in Customer
Service 45

Operations Strategy

Production of Goods Versus Providing Services

Why Learn About Operations Management?
Process Management

Reading:
Productivity Gains Curb Inflation

Career Opportunities and Professional Societies

Transforming Strategy into Action: The Balanced

Scorecard 54

14

Reading:
Manufacturing: The Chicken or The Egg?

Productivity

17

Operations Management and Decision Making

Productivity Improvement 62
Summary 62
Key Points 62
Key Terms 63
Soived Problems 63
Discussion and Review Questions 64
Taking Stock 64
Critical Thinking Exercises 65
Problems 65
Gases:
An American Tragedy: Howa Good Company
Died 66

Reading:
Revenue Management: Does It Work in
Manufacturing? 26
Key Issues for Today's Business Operations

27

28

Diet and the Environment: Vegetarian vs.

Nonvegetarian 29
Summary 36
Key Points 36
Key Terms 36
Discussion and Review Questions 36
Taking Stock 37
Critical Thinking Exercises 37
Gase:
Hazel 37
Selected Bibliography and Further Readings 38
Problem-Solving Guide 38

Home-Styie Cookies
Hazel Revisited
Tapijt Express

67

69
69

Operations Tour:
Middle East Airlines 70
Selected Bibliography and Furttier Readings 73
3

Forecasting
Introduction

74

75

Competitiveness, Strategy,
and Productivity 40

Elements of a Good Forecast

Introduction

Forecasting and the Supply Chain

41

Competitiveness

42

Mission And Strategies

xxviii

Features Common to All Forecasts

Forecast Accuracy 79

77

78

Steps in the Forecasting Process

44

59

Dutch Tomate Growers' Productivity

Advantage 60

24

Readings:
Universities Embrace Sustainability

56

Readings:
Productivity as a Double-Edged Sword

17

Reading:
Analytics 20
The Historical Evolution of Operations
Management 21
Operations Today

53

Implications of Organization Strategy for Operations

Management 54

11

12

The Scope of Operations Management

51

78
79

Contents
Readings:
Healthy Chicken from a Heaithy
Environment 145

Reading:
Oil Price Fluctuations Mean Risky Oil Price
Forecasts 80
Approaches to Forecasting
Qualitative Forecasts

Kraft Foods' Recipe for Sustainability

82

Forecasts Based on Time-Series Data

Associative Forecasting Techniques

Using Forecast Information

84

Recycle City: Maria's Market

100

Other Design Considerations

106

Choosing a Forecasting Technique

Reading:
Lego A/S in the Pink

110

112

Computer Software in Forecasting

149

151

Designing for Production

Reading:
Forecasting atABM 113
Summary 114
Key Points 115
Key Terms 117
Solved Problems 117
Discussion and Review Questions 123
Taking Stock 124
Critical Thinking Exercises 124
Problems 124
Gases:
M&L Manufacturing 132

Service Design

159

160

162

Reading:
The Challenges of Managing Services

166

Operations Strategy 167

Summary 167
Key Points 168
Key Terms 168
Discussion and Review Questions 168
Taking Stock 169
Critical Thinking Exercises 169
Problems 169
Operations Tour:
Dubai Sewage Treatment Piants 170
Selected Bibliography and Further Readings 170

Highline Financial Services, Ltd. 133

Selected Bibliography and Further Readings 133

Introduction

148

Phases in Product Design and Development

112

Product and Service Design

146

Xerox Diverts 2 Billion Pounds of Waste from

Landfills through Green Initiatives 147

82

Monitoring Forecast Error

xxix

SUPPLEMENT TO CHAPTER 4: Reliability

134

171

136
5

Readings:
Middle Eastern Carriers Influence Aircraft
Design 136

and Services
Introduction

Product Redesign, Not Offshoring, Holds Cost

Advantage for U.S. Manufacturers 137
Dutch Boy Brushes Up Its Paints
Idea Generation

138

139

Reading:
Vlasic on a Roll with Huge Pickte Siices
Legal and Ethical Considerations
Human Factors

142

Cultural Factors

143

Strategie Capacity Flanning for Products

184

185

Reading:
Capacity Expansion: Good News for All
Capacity Decisions Are Strategie

187

Defining and Measuring Capacity

188

Determinants of Effective Capacity

140

141

Strategy Formulation

189

191

Forecasting Capacity Requirements 192

Additional Challenges of Flanning Service
Capacity 194

143

Do it In-House or Outsource It?

195

Reading:
Do You Want Pickled Beets with That?

Developing Capacity Strategies

196

Global Product and Service Design

Environmental Factors: Sustainability

144

143

Reading:
A Littie Closer to Home

196

186

Contents
Constraint Management
Evaluating Alternatives

Methods Analysis 299

201

Motion Study

201

303

Work Measurement

Operations Strategy 207

Summary 207
Key Points 208
Key Terms 208
Solved Problems 208
Discussion and Review Questions 211
Taking Stock 211
Critical Thinking Exercises 211
Problems 212
Gase:
Outsourcing of Hospital Services 215
Selected Bibliography and Further Readings 215
SUPPLEMENT TO CHAPTER 5: Decision Theory

305

Operations Strategy 316

Summary 317
Key Points 317
Key Terms 318
Solved Problems 319
Discussion and Review Questions 319
Taking Stock 320
Critical Thinking Exercise 320
Problems 320
Gase:
Emaar Enterprises Garment Assembly 323
Selected Bibliography and Further Readings 324

216

SUPPLEMENT TO CHAPTER 7: Learning Curves

Process Selection and Facility Layout
Introduction
Technology

236

237

Process Selection

8
238

244

Reading:
ATM Machines Serve Customers and Banks
Process Strategy

262

338

340

Service and Retail Locations

351

Reading:
Careful Site Selection for Franchises

Designing Process Layouts 271

Summary 275
Key Points 276
Key Terms 276
Solved Problems 276
Discussion and Review Questions 280
Taking Stock 280
Critical Thinking Exercises 280
Problems 281
Selected Bibliography and Further Readings 287

Job Design

The Nature of Location Decisions

Reading:
Selecting the New Facility: Operations and Market
Considerations 344

Reading:
BMW's Strategy: Fiexibility 270

Introduction

337

Identifying a Country, Region, Community,

and Site 343

260

Work Design and Measurement

The Need for Location Decisions

336

General Procedure for Making Location

Decisions 342

Strategie Resource Organization: Facilities

Layout 250

Designing Product Layouts: Line Balancing

Location Flanning and Analysis

Global Locations
246

249

Reading:
Everything Under One Roof

352

Evaluating Location Alternatives 353

Summary 358
Key Points 358
Key Terms 359
Solved Problems 359
Discussion and Review Questions 360
Taking Stock 360
Critical Thinking Exercises 361
Problems 361
Gase:
Bonjour, Costco! 364
Selected Bibliography and Further Readings 364

288

289
289

Quality of Work Life

294

Reading:
Incentives for Good Ideas

Management of Quality
Introduction

298

325

366

367

The Evolution of Quality Management

368

Contents
Process Capability

Reading:
Whatever Happened to Quality?

368

Insights on Quality Management

Readings:
The Name of Quality

372

374

Hyundai: Kissing Ciunkers Goodbye

Quality Awards

378

380

Reading:
HACCP Sets AI RifaiAbove the Rest
Quality Certification

380

Total Quality Management

384

11 Aggregate Flanning and Master

Reading:
Improving Quality and Reducing Risk in
Offshoring 384

Scheduling
Introduction
388

Reading:
WhatKeeps Six Sigma Practitioners Up at Night? 391
Quality Tools

Reading:
Quality Control Starts at the Source 441
Summary 441
Key Points 441
Key Terms 441
Solved Problems 443
Discussion and Review Questions 447
Taking Stock 448
Critical Thinking Exercises 448
Problems 448
Gases:
Kaufkraft 454
Selected Bibliography and Further Readings 455

383

Problem Solving and Process Improvement

456
458

Reading:
Decreasing Workforce Capacity Can Be
Problematic 462
Basic Strategies for Meeting Uneven Demand

392

Reading:
Benchmarking Corporate Web Sites of Fortune 500
Companies 400
Operations Strategy 400
Summary 400
Key Points 401
Key Terms 401
Solved Problem 401
Discussion and Review Questions 402
Taking Stock 403
Critical Thinking Exercises 403
Problems 403
Gases:
Chick-n-Gravy Dinner Line 405
Aegean Markets 406
Selected Bibliography and Further Readings 408

Techniques for Aggregate Flanning

Aggregate Flanning in Services
Master Scheduling

Introduction
Inspection

410

Dino Powdered Milk 492

Selected Bibliography and Further Readings 492

MRP Inputs

Reading:
Mother Nature as a Quality Controller 415
Statistical Process Control

477

494

495

An Overview of MRP

412

417

477

The Master Scheduling Process 478

Summary 483
Key Points 483
Key Terms 484
Solved Problems 484
Discussion and Review Questions 487
Taking Stock 487
Critical Thinking Exercise 487
Problems 487
Gase:

Introduction

411

468

475

Disaggregating the Aggregate Plan

12 MRP and ERP

10 Quality Control

440

Toys, Inc. 454

381

Quality and the Supply Chain

435

Operations Strategy

The Foundations of Modern Quality Management:

The Gurus 369

xxxi

496

MRP Processing
MRP Outputs

495

500

507

Other Considerations

508

465

Contents

xxxiv

Project Management Software

Critical Thinking Exercises 815

Problems 816
Case:
Trans-Siberian Bank 819

762

Risk Management 763

Summary 764
Key Points 765
Key Terms 765
Solved Problems 765
Discussion and Review Questions 772
Taking Stock 772
Critical Thinking Exercises 772
Problems 772
Gases:
The Case of the Mexican Crazy Quilt

Readings:
Stopped at a Light? Why Not Read This, You May
Have Time 819
Selected Bibliography and Further Readings 821

779

19 Linear Programming
Introduction

Boro and Sons Engineering 781

Selected Bibliography and Further Readings 781

822

823

Linear Programming Models

824

Graphical Linear Programming

18 Management ofWaiting Lines
Why is There Waiting?

782

Computer Solutions

784

Managerial Implications of Waiting Lines

Goal of Waiting-Line Management
Reading:
Hotels Avoid Queuing

Characteristics of Waiting Lines

785

786

Measures of Waiting-Line Performance

Queuing Models: Infinite-Source
Constraint Management
The Psychology of Waiting

785

785

Queuing Model: Finite-Source

The Simplex Method

790

790
805

838

Sensitivity Analysis 841

Summary 844
Key Points 844
Key Terms 844
Solved Problems 844
Discussion and Review Questions
Problems 847
Gases:
Al-Hejri Ltd. 851

847

Selected Bibliography and Further Readings

811
811

Managing Waiting Lines at Disney World

Operations Strategy 812
Summary 812
Key Points 813
Key Terms 813
Solved Problems 813
Discussion and Review Questions 815
Taking Stock 815

838

Custom Cabinets, Inc. 852

810

Readings:
Your Time Perception or Mine?

826

812

853

Appendix A

Answers to Selected Problems

Appendix B

Tables

Appendix C

Working with the Normal Distribution

Photo Credits 877

Company Index 878
Subject Index 880

854

867
872

Contents

xxxii
MRP in Services

510

Cases;

Benefits and Requirements of MRP

MRP II

UPD Manufacturing

511

596

Tai Din Fung and Sons Pte Ltd

Capacity Requirements Flanning

ERP

510
513

Grill Rite

516

598

Cafe Kibbe

599

Operations Tours:

Readings:
Implementing ERP SystemsCases from the
GCC

Dairy Khoury 600

AI Rifai 601
Selected Bibliography and Further Readings 603

Challenges in ERP Implementation 522

Operations Strategy 524
Summary 524
Key Points 524
Key Terms 525
SO/yedroA/ems 525
Discussion and Review Questions 534
Taking Stock 534
Critical Thinking Exercises 535
Problems 535
Cases:
Promotional Novelties 540
The Coffee Club of Constantinople

596

14 JIT and Lean Operations

Introduction

604

606

Reading:
JIT Can Be Hard to Implement
Supporting Goals
Building Blocks

608

609
610

Readings:
GlaxoSmithKline and McLaren Team Up for Faster
Changeovers 612

541

Operations Tour:

"People" Firms Boost Profits, Study Shows

Lean Tools

Selected Bibliography and Further Readings 544

627

Transitioning to a Lean System

^ventory Management
introduction

547

The Nature and Importance of Inventories

Lean Services

548

Requirements for Effective Inveritory Management

551

Reading:
Radio Frequency Identification (RFID) Facilitates
B2B Transactions 553
Inventory Ordering Policies

557

How Much to Order: Economic Order Quantity

Models 557
Reorder Point Ordering

569

How Much to Order: Fixed-Order-Interval Model

The Single-Period Model

576

Operations Strategy 581

Summary 581
Key Points 581
Key Terms 582
Solved Problems 583
Discussion and Review Questions 588
Taking Stock 588
Critical Thinking Exercises 588
Problems 589

629

Reading:
Nearby Suppliers Match Ford's Mix

546

573

617

629

630

Reading:
To Build a Better Hospital, Virginia Mason Takes
Lessons from Toyota Plants 632
JIT II

633

Operations Strategy 633

Summary 634
Key Points 635
Key Terms 635
Solved Problems 635
Discussion and Review Questions 636
Taking Stock 636
Critical Thinking Exercises 636
Problems 636
Gase:
Sun Operations 637
Operations Tour:
Vitale Barberis Canonico 638
Selected Bibliography and Further Readings 639
SUPPLEMENT TO CHAPTER 14: Maintenance

640

Contents
15 Suppiy Chain Management
Introduction

Gases:

648

Master Tag

649

Reading:
Veggie Tales

Trends in Suppiy Chain Management

653

Reading:
At 3M, a Long Road Became a Shorter Road

Ethics and the Suppiy Chain

E-Business

656

657
658

660
663

Desperately Seeking E-Fulfillment

663

665

E-Procurement at IBM 666

Supplier Management

Reading:
NestleUSA and Ocean Spray Form Strategie
Operations Alliance 669
Order Fulfillment

670

17 Project Management
Introduction

730

732
732

673

Work Breakdown Structure

675

RFID Tags: Keeping the Shelves Stocked 675

Active RFID vs. Passive RFID

676

677

Creating An Effective Suppiy Chain

679

Strategy 683
Summary 683
Key Points 684
Key Terms 684
Discussion and Re view Questions 684
Taking Stock 684
Critical Thinking Exercises 685
Problems 685

733

Reading:
Project Management on a World Cup Scale 737

Readings:
Zara:A Super-responsive Suppiy Chain

Reading:
The Last Mile

711

Behavioral Aspects of Project Management

672

Rise of the 3PL

693

Readings:
Scheduling at INDEVCO 713
Summary 716
Key Points 716
Key Terms 716
Solved Problems 716
Discussion and Review Questions 721
Taking Stock 721
Critical Thinking Exercises 721
Problems 722
Case:

Project Life Cycle

671

Operations Tour:
Fahed Supervalue

690

Port Said Printing 728

Selected Bibliography and Further Readings 728

667

Inventory Management

Scheduling Operations
Scheduling Services

657

Readings:
IBM's Suppiy Chain Social Responsibility

Logistics

655

688

Scheduling in Low-Volume Systems

Management Responsibilities
Procurement

16 Scheduling

656

ERP and Suppiy Chain Management

Small Businesses

685

PJAT 686
Selected Bibliography and Further Readings 687

652

Global Suppiy Chains

xxxiii

678

739

Flanning and Scheduling with Gantt Charts

PERT and CPM

740

Deterministic Time Estimates

A Computing Algorithm

743

744

Probabilistic Time Estimates

751

Determining Path Probabilities

Simulation

739

754

756

Budget Control

757

Time-CostTrade-Offs: Crashing

757

Advantages of Using PERT and Potential Sources

of Error 760
Critical Chain Project Management
Other Topics in Project Management

761
761