OPERATIONS AND
SUPPLY CHAIN MANAGEMENT
thirteenth edition
F. ROBERT JACOBS
Indiana University
RICHARD B. CHASE
University of Southern California
McGraw-Hill
Irwin
CONTENTS
STRATEGY AND SUSTAINABILITY 1. OPERATIONS AND SUPPLY C H A I N
MANAGEMENT 2
Quick Supply Chains Enable Retailers to Get Fashions to Market Quickly 3 What Is Operations and Supply Chain Management? 4
Operations and Supply Chain Processes 7
Differences between Services and Goods 8
The Goods-Services Continuum 9 Servitization Strategies 10 Growth of Services 10 Efficiency, Effectiveness, and Value 11
Careers in Operations and Supply Chain Management 12
Chief Operating Officer 14 Historical Development of Operations and Supply Chain Management 14
Current Issues in Operations and Supply Chain Management 16
Key Terms 17
Review and Discussion Questions 17 Internet Exercise: Harley-Davidson Motorcycles 18
Case: Fast-Food Feast 18 Super Quiz 18
Selected Bibliography 19 Footnotes 19
2 STRATEGY AND SUSTAINABILITY 20 How IKEA Designs Its Sexy Prices 21 A Sustainable Strategy 22
What Is Operations and Supply Chain Strategy? 23
Competitive Dimensions 25 The Notion of Trade-Offs 27
Order Winners and Order Qualifiers: The Marketing-Operations Link 27
Strategic Fit: Fitting Operational Activities to Strategy 28
A Framework for Operations and Supply Chain Strategy 29
Productivity Measurement 30
How Does Wall Street Evaluate Operations Performance 32
Summary 33 Key Terms 33 Solved Problem 34
Review and Discussion Questions 34 Problems 34
Case: The Tao of Timbuk2 36 Super Quiz 37
Selected Bibliography 37 Footnote 37
PRODUCT AND SERVICE DESIGN 38 IDEO, A Design and Innovation Firm 39
The Product Design Process 40 The Product Development Process 42 Economic Analysis of Product
Development Projects 46
Build a Base-Case Financial Model 47 Sensitivity Analysis to Understand Project Trade-Offs 49
Designing for the Customer 50 Quality Function Deployment 51 Value Analysis/Value Engineering 52 Designing Products for Manufacture and Assembly 53
How Does Design for Manufacturing and Assembly (DFMA) Work? 54
Designing Service Products 56 Ecodesign 58
Measuring Product Development Performance 58
Summary 59 Key Terms 60 Solved Problem 60
Review and Discussion Questions 62 Internet Enrichment Exercise 63 Problems 63
Case: IKEA: Design and Pricing 65 Case: Dental Spa 67
Super Quiz 67
Selected Bibliography 67 Footnotes 67
CONTENTS XXXI
JBECT i o N T w o
MANUFACTURING, SERVICE, AND HEALTH CARE PROCESSES
4 STRATEGIC CAPACITY MANAGEMENT 70 Shouldice Hospital: Hernia Surgery Innovation 70
Capacity Management in Operations 72 Capacity Planning Concepts 73
Economies and Diseconomies of Scale 73 Capacity Focus 74
Capacity Flexibility 74 Capacity Planning 75
Considerations in Changing Capacity 75 Determining Capacity Requirements 77 Using Decision Trees to Evaluate Capacity Alternatives 78
Planning Service Capacity 81 Capacity Planning in Service versus Manufacturing 81
Capacity Utilization and Service Quality 82 Summary 83
Key Terms 84 Formula Review 84 Solved Problem 84
Review and Discussion Questions 85 Problems 86
Case: Shouldice Hospital—A Cut Above 87 Super Quiz 89
Selected Bibliography 89 4A LEARNING CURVES 90
Application of Learning Curves 91 Plotting Learning Curves 92
Logarithmic Analysis 93 Learning Curve Tables 93
Estimating the Learning Percentage 96 How Long Does Learning Go On? 97 General Guidelines for Learning 97
Individual Learning 97 Organizational Learning 98 Learning Curves Applied to Heart Transplant Mortality 99
Key Terms 101 Formula Review 101 Solved Problems 101
Review and Discussion Questions 102 Problems 102
Super Quiz 105
Selected Bibliography 105 Footnotes 105
PROCESS ANALYSIS 106
Customer-Driven Service for McDonald's Self-Ordering Kiosks 107
Process Analysis 108
Analyzing a Las Vegas Slot Machine 108 Process Flowcharting 110
Types of Processes 112
Buffering, Blocking, and Starving 112 Make-to-Stock versus Make-to-Order 113 Measuring Process Performance 116
107
Production Process Mapping and Little's Law 118
Process Analysis Examples 121 A Bread-Making Operation 121 A Restaurant Operation 122
Planning a Transit Bus Operation 124 Process Flow Time Reduction 126 Summary 128
Key Terms 129 Formula Review 129 Solved Problems 129
Review and Discussion Questions 131 Problems 131
Advanced Problem 134
Case: Analyzing Casino Money-Handling Processes 135
Case: Kristen's Cookie Company (A) 13S Super Quiz 137
Selected Bibliography 137 Footnotes 137
S A J O B DESIGN AND WORK MEASUREMENT 138 Job Design Decisions 139
Behavioral Considerations in Job Design 140 Degree of Labor Specialization 140
Job Enrichment 141 Sociotechnical Systems 141
Work Measurement and Standards 142 Work Measurement Techniques 143 Time Study 144
Work Sampling 146
Work Sampling Compared to Time Study 151 Summary 152
Key Terms 153 Formula Review 153 Solved Problems 153
Review and Discussion Questions 154 Problems 155
Super Quiz 156
Selected Bibliography 157 Footnotes 157
6 PRODUCTION PROCESSES 158
Toshiba: Producer of the First Notebook Computer 159
Production Processes 160 How Production Processes Are Organized 162
Break-Even Analysis 164
Designing a Production System 165 Project Layout 166
Workcenters 166 Manufacturing Cell 166
Assembly Line and Continuous Process Layouts 166
Manufacturing Process Flow Design 167 Summary 172
Key Terms 172 Solved Problems 173
Review and Discussion Questions 174 Problems 174
Case: Circuit Board Fabricators, Inc. 177 Super Quiz 178
XXXII CONTENTS
Selected Bibliography 179 Footnotes 179
6A FACILITY LAYOUT 180
Basic Production Layout Formats 182 Workcenters 182
Systematic Layout Planning 186 Assembly Lines 186
Assembly-Line Balancing 188 Splitting Tasks 191
Flexible and U-Shaped Line Layouts 192
Mixed-Model Line Balancing 192
Current Thoughts on Assembly Lines 194 Cells 194
Developing a Manufacturing Cell 194 Virtual Manufacturing Cells 196 Project Layouts 196
Retail Service Layout 196 Servicescapes 197
Signs, Symbols, and Artifacts 199 Office Layout 199
Summary 200 Key Terms 200 Formula Review 201 Solved Problems 201
Review and Discussion Questions 205 Problems 205
Advanced Problem 210 Case: Soteriou's Souvlaki 211 Case: Designing Toshiba's Notebook Computer Assembly Line 212 Super Quiz 214
Selected Bibliography 215 Footnotes 215
7 SERVICE PROCESSES 216
My Week as a Room-Service Waiter at the Ritz 217
The Nature of Services 218
An Operational Classification of Services 219 Designing Service Organizations 221 Structuring the Service Encounter: Service-System Design Matrix 221
Strategic Uses of the Matrix 223 Virtual Service: The New Role of the Customer 223
Service Blueprinting and Fail-Safing 224 Three Contrasting Service Designs 226
The Production-Line Approach 226 The Self-Service Approach 227 The Personal-Attention Approach 227 Managing Customer-Introduced Variability 230
Applying Behavioral Science to Service Encounters 232
Service Guarantees as Design Drivers 233 Summary 234
Key Terms 234
Review and Discussion Questions 234 Problems 235
Case: Pizza USA: An Exercise in Translating Customer Requirements into Process Design Requirements 235
Case: Contact Centers Should Take a Lesson from Local Businesses 236 Super Quiz 237
Selected Bibliography 237 Footnotes 237
7A W A I T I N G LINE ANALYSIS 238
Economics of the Waiting Line Problem 239
The Practical View of Waiting Lines 239 The Queuing System 240
Customer Arrivals 241 Distribution of Arrivals 242 The Queuing System: Factors 244 Exiting the Queuing System 247 Waiting Line Models 247
Approximating Customer Waiting Time 256 Computer Simulation of Waiting Lines 258 Summary 258
Key Terms 258 Formula Review 259 Solved Problems 260
Review and Discussion Questions 262 Problems 262
Case: Community Hospital Evening Operating Room 266
Super Quiz 267
Selected Bibliography 267 Footnotes 267
8 HEALTH CARE PROCESSES 268
A Prescription for Innovation 269
The Mayo Clinic's New SPARC Lab Is Driving Experimentation at the Frontier of Health Care. How? By Getting Physicians to Think More Like Designers 269
The Nature of Health Care Operations 270 Classification of Hospitals 271
Hospital Layout and Care Chains 272 Capacity Planning 274
Workforce Scheduling 274 Quality Management and Process Improvement 274
Health Care Supply Chains 276 Inventory Management 278 Performance Measures 279 Trends in Health Care 279 Summary 281
Key Terms 281
Review and Discussion Questions 282 Case: Venice Family Clinic: Managing Patient Wait Times 282
Super Quiz 283
Selected Bibliography 283 Footnotes 283
9 S I X - S I G M A QUALITY 284
Total Quality Management 286 Quality Specification and Quality Costs 288
Developing Quality Specifications 288 Cost of Quality 289
CONTENTS XXXIII
Six-Sigma Quality 291 Six-Sigma Methodology 292
Analytical Tools for Six Sigma and Continuous
Improvement 293
Six-Sigma Roles and Responsibilities 296 The Shingo System: Fail-Safe Design 297 ISO 9000 and ISO 14000 298
External Benchmarking for Quality Improvement 300
Summary 300 Key Terms 300
Review and Discussion Questions 301 Problems 301
Internet Enrichment Exercises 302 Case: Hank Kolb, Director of Quality Assurance 302
Case: Appreciative Inquiry—A Different Kind of Fishbone 303
Super Quiz 305
Selected Bibliography 305 Footnotes 305
9A PROCESS CAPABILITY AND SPC 306
Variation Around Us 308 Process Capability 309
Capability Index (Cplc) 311 Process Control Procedures 314
Process Control with Attribute Measurements: Using p Charts 514
Process Control with Attribute Measurements: Using c Charts 317
Process Control with Variable Measurements: Using X and R Charts 317
How to Construct X and R Charts 319 Acceptance Sampling 322
Design of a Single Sampling Plan
for Attributes 322
Operating Characteristic Curves 323 Summary 325
Key Terms 325 Formula Review 325 Solved Problems 326
Review and Discussion Questions 327 Problems 327
Advanced Problem 332
Case: Hot Shot Plastics Company 332 Super Quiz 333
Selected Bibliography 333 Footnotes 333
10 PROJECTS 334
National Aeronautics and Space Administration's Constellation Program May Land Men on the Moon by 2020 335
What Is Project Management? 337 Structuring Projects 337
Pure Project 338 Functional Project 338 Matrix Project 338
Work Breakdown Structure 340 Project Control Charts 342
Earned Value Management (EVM) 344
Network-Planning Models 347 Critical Path Method (CPM) 347
CPM with Three Activity Time Estimates 351 Time-Cost Models and Project Crashing 354 Managing Resources 358 Tracking Progress 359 Summary 359 Key Terms 359 Formula Review 360 Solved Problems 360
Review and Discussion Questions 364 Problems 364
Advanced Problem 369
Case: Cell Phone Design Project 370 Case: The Campus Wedding (A) 371 Case: The Campus Wedding (B) 372 Super Quiz 372
Selected Bibliography 372
SUPPLY C H A I N PROCESSES
11 GLOBAL SOURCING AND PROCUREMENT 374 The World Is Flat 375
Flattener 5: Outsourcing 375 Flattener 6: Offshoring 375 Strategic Sourcing 376
The Bullwhip Effect 377 Outsourcing 381 Green Sourcing 385
Total Cost of Ownership 387 Measuring Sourcing Performance 389 Summary 391
Key Terms 391 Formula Review 392
Review and Discussion Questions 392 Problems 392
Case: Pepe Jeans 394 Super Quiz 395
Selected Bibliography 395 Footnotes 395
12 L O C A T I O N , LOGISTICS, AND DISTRIBUTION 396
FedEx: A Leading Global Logistics Company 397
Logistics 398
Decisions Related to Logistics 399 Cross-Docking 400
Issues in Facility Location 400 Plant Location Methods 403
Factor-Rating Systems 403 Transportation Method of Linear Programming 403
Centroid Method 406
Locating Service Facilities 408 Summary 410
Key Terms 410 Formula Review 410 Solved Problem 410
XXXIV CONTENTS
Problems 411
Case: Applichem—The Transportation Problem 414
Super Quiz 415
Selected Bibliography 415 Footnote 415
Review and Discussion Questions 464 Problems 464
Super Quiz 467
Selected Bibliography 467 Footnotes 467
13 LEAN AND SUSTAINABLE SUPPLY CHAINS 416 Green Is the New Black 417
Survey Suggests that Enviro-Conscious Manufacturers Are the Best Risk for Investors 417
Lean Production 418 Lean Logic 419
The Toyota Production System 420
Elimination of Waste 420 Respect for People 420 '
Lean Supply Chains 421 Value Stream Mapping 423
Lean Supply Chain Design Principles 426
Lean Layouts 427
Lean Production Schedules 429
Lean Supply Chains 433
Lean Services 434 Summary 435 Key Terms 435 Formula Review 436 Solved Problems 436
Review and Discussion Questions 440 Problems 440
Case: Quality Parts Company 441 Case: Value Stream Mapping 441 Case: Pro Fishing Boats—A Value Stream Mapping Exercise 444
Super Quiz 444
Selected Bibliography 445 Footnotes 445
13A OPERATIONS CONSULTING AND REENGINEERING 446 Pittiglio Rabin Todd & McGrath
(PRTM)—A Leading Operations Consulting Company 447
What Is Operations Consulting? 448 The Management Consulting Industry 448 Economics of Consulting Firms 449 When Operations Consulting Is Needed 450
When Are Operations Consultants Needed? 451
The Operations Consulting Process 452 Operations Consulting Tool Kit 453
Problem Definition Tools 453 Data Gathering 456
Data Analysis and Solution Development 459 Cost Impact and Payoff Analysis 460 Implementation 461
Business Process Reengineering (BPR) 461 Principles of Reengineering 462
Guidelines for Implementation 463 Summary 464
Key Terms 464
SUPPLY AND DEMAND PLANNING
14 ENTERPRISE RESOURCE PLANNING SYSTEMS 470 I n f o r m a t i o n Crisis—The Missing Desk 471 SAP 473 SAP A p p l i c a t i o n Modules 474 Financials 475
Human Capital Management 476 Operations 476
Corporate Services 477
mySAP.com and SAP NetWeaver—Integrated E-Business Applications 477
Implementing ERP Systems 479 Summary 480
Key Term 481
Review and Discussion Questions 481 Super Quiz 481
Selected Bibliography 481 Footnote 481
15 DEMAND MANAGEMENT AND FORECASTING 482
Walmart's Data Warehouse 483 Demand Management 485 Types of Forecasting 486 Components of Demand 486 Time Series Analysis 488
Linear Regression Analysis 489 Decomposition of a Time Series 492 Simple Moving Average 498 Weighted Moving Average 499 Exponential Smoothing 500 Forecast Errors 504 Sources of Error 504 Measurement of Error 504
Causal Relationship Forecasting 507
Multiple Regression Analysis 508
Qualitative Techniques in Forecasting 509
Market Research 509 Panel Consensus 509 Historical Analogy 509 Delphi Method 510
Web-Based Forecasting: Collaborative Planning, Forecasting, and Replenishment (CPFR) 510
Summary 512 Key Terms 512 Formula Review 513 Solved Problems 514
Review and Discussion Questions 518 Problems 518
CONTENTS XXXV
Super Quiz 527
Selected Bibliography 527 Footnotes 527
16 SALES AND OPERATIONS P L A N N I N G 528 What Is Sales and Operations
Planning? 530
Overview of Sales and Operations Planning Activities 530
The Aggregate Operations Plan 532 Production Planning Environment 532 Relevant Costs 534
Aggregate Planning Techniques 536 A Cut-and-Try Example: The JC Company 536 Aggregate Planning Applied to Services: Tucson Parks and Recreation
Department 541 Level Scheduling 543 Yield Management 544
Operating Yield Management Systems 545 Summary 546
Key Terms 546 Solved Problem 547
Review and Discussion Questions 549 Problems 549
Case: Bradford Manufacturing—Planning Plant Production 552
Super Quiz 553
Selected Bibliography 553 Footnotes 553
17 INVENTORY CONTROL 554
Direct to Store—The UPS Vision 555 The UPS Direct Approach 556 Definition of Inventory 558 Purposes of Inventory 559 Inventory Costs 559
Independent versus Dependent Demand 561 Inventory Systems 562
A Single-Period Inventory Model 562 Multiperiod Inventory Systems 565 Fixed-Order Quantity Models 566
Establishing Safety Stock Levels 569 Fixed-Order Quantity Model with Safety Stock 570
Fixed-Time Period Models 573
Fixed-Time Period Model with Safety Stock 573 Inventory Control and Supply Chain Management 575
Price-Break Models 576 ABC Inventory Planning 578
ABC Classification 579 Inventory Accuracy and Cycle Counting 580
Summary 582 Key Terms 582 Formula Review 582 Solved Problems 584
Review and Discussion Questions 585 Problems 586
Case: Hewlett-Packard—Supplying the DeskJet Printer in Europe 591
Super Quiz 594
Selected Bibliography 594 Footnotes 595
18 MATERIAL REQUIREMENTS P L A N N I N G 596 From Push to Pull 597
Master Production Scheduling 598 Time Fences 600
Where MRP Can Be Used 601
Material Requirements Planning System Structure 601
Demand for Products 602 Bill of Materials 602 Inventory Records 604 MRP Computer Program 604 An Example Using MRP 606
Forecasting Demand 606
Developing a Master Production Schedule 606 Bill of Materials (Product Structure) 607 Inventory Records 608
Performing the MRP Calculations 608 Lot Sizing in MRP Systems 611
Lot-for-Lot 612
Economic Order Quantity 612 Least Total Cost 613
Least Unit Cost 614
Choosing the Best Lot Size 614 Summary 615
Key Terms 616 Solved Problems 616
Review and Discussion Questions 617 Problems 618
Case: Brunswick Motors, Inc.—An Introductory Case for MRP 621 Super Quiz 622
Selected Bibliography 623
E C T I O N F I V
SCHEDULING
19 SCHEDULING 626
Hospitals Cut ER Waits—New "Fast Track" Units, High-Tech IDs Speed Visits; See a Doctor in 17 Minutes 627
Manufacturing Execution Systems 628 The Nature and Importance of Work Centers 628
Typical Scheduling and Control Functions 629 Objectives of Work-Center Scheduling 630 Job Sequencing 631
Priority Rules and Techniques 632 Scheduling n Jobs on One Machine 632 Scheduling n Jobs on Two Machines 634 Scheduling a Set Number of Jobs on the Same Number of Machines 636
Scheduling n Jobs on m Machines 638 Shop-Floor Control 638
Gantt Charts 638
Tools of Shop-Floor Control 639 Input/Output Control 639 Data Integrity 639
XXXVI CONTENTS
Personnel Scheduling in Services 642 Scheduling Daily Work Times 643 Scheduling Hourly Work Times 643 Summary 644
Key Terms 644 Solved Problems 645
Review and Discussion Questions 646 Problems 646
Case: Keep Patients Waiting? Not in My Office 650 Super Quiz 652 Selected Bibliography 653 Footnotes 653 19A SIMULATION 654 Definition of Simulation 655 Simulation Methodology 655 Problem Definition 655
Constructing a Simulation Model 656 Specifying Values of Variables and Parameters 658
Evaluating Results 659 Validation 659
Proposing a New Experiment 659 Computerization 660
Simulating Waiting Lines 660
Example: A Two-Stage Assembly Line 660 Spreadsheet Simulation 663
Simulation Programs and Languages 666 Desirable Features of Simulation
Software 668
Advantages and Disadvantages of Simulation 668
Summary 669 Key Terms 669 Solved Problems 670
Review and Discussion Questions 671 Problems 671
Advanced Case: Understanding the Impact of Variability on the Capacity of a Production System 678
Super Quiz 679
Selected Bibliography 679 Footnotes 679
20 CONSTRAINT MANAGEMENT 6 8 0
Goal of the Firm 684
Performance Measurements 684 Financial Measurements 684 Operational Measurements 684 Productivity 685
Unbalanced Capacity 686 Dependent Events and Statistical Fluctuations 686
Bottlenecks and Capacity-Constrained Resources 688
Basic Manufacturing Building Blocks 688
Methods for Control 689 Time Components 690 Finding the Bottleneck 691 Saving Time 691
Avoid Changing a Nonbottleneck into a Bottleneck 692
Drum, Buffer, Rope 692 Importance of Quality 695 Batch Sizes 696
How to Treat Inventory 697
Comparing Synchronous Manufacturing to MRP and JIT 699
Relationship with Other Functional Areas 699
Accounting's Influence 699 Marketing and Production 700 Summary 707
Key Terms 708 Solved Problem 708
Review and Discussion Questions 709 Problems 710
Case: Solve the OPT Quiz—A Challenge in Scheduling 714 Super Quiz 714 Selected Bibliography 714 Footnotes 715 A B C D E F G H APPENDICES
Linear Programming Using the Excel Solver 716
Operations Technology 736 Financial Analysis 743
Answers to Selected Problems 760 Present Value Table 763
Negative Exponential Distribution: Values of e" 764
Areas of the Cumulative Standard Normal Distribution 765
Uniformly Distributed Random Digits 766
I Interest Tables 767 PHOTO CREDITS 771 NAME INDEX 773 SUBJECT INDEX 777
