Contents
Preface xv
1 USING OPERATIONS TO CREATE VALUE 1
Disney 1
Role of Operations in an Organization 3
Historical Evolution and Perspectives 4
A Process View 5
How Processes Work 5
Nested Processes 5
Service and Manufacturing Processes 6
A Supply Chain View 7
Core Processes 7
Support Processes 7
Supply Chain Processes 8
Operations Strategy 9
Corporate Strategy 9
Market Analysis 11
Competitive Priorities and Capabilities 12
Managerial Practice 1.1 Zara 13
Order Winners and Qualifiers 14
Using Competitive Priorities: An Airline Example 15
Identifying Gaps between Competitive Priorities
and Capabilities 15
Addressing the Trends and Challenges in Operations
Management 17
Productivity Improvement 17
Global Competition 18
Ethical, Workforce Diversity, and Environmental
Issues 20
The Internet of Things 21
Developing Skills for Your Career 22
Adding Value with Process Innovation 23
Learning Goals in Review 24
MyLab Operations Management Resources 24
Key Equations 25
Key Terms 25
Solved Problems 25
Discussion Questions 26
Problems 27
Active Model Exercise 29
Video Case Using Operations to Create Value at Crayola 29
Case Chad’s Creative Concepts 30
SUPPLEMENT A Decision Making 31
Break-Even Analysis 31
Evaluating Services or Products 32
Evaluating Processes 34
Preference Matrix 35
Decision Theory 36
Decision Making under Certainty 37
Decision Making under Uncertainty 37
Decision Making under Risk 39
Decision Trees 39
Learning Goals in Review 41
MyLab Operations Management Resources 41
Key Equations 42
Key Terms 42
Solved Problems 42
Problems 44
PART 1 Managing Processes 49
2 PROCESS STRATEGY AND ANALYSIS 49
CVS Pharmacy 49
Process Structure in Services 53
Customer-Contact Matrix 53
Service Process Structuring 54
Process Structure in Manufacturing 55
Product-Process Matrix 55
Manufacturing Process Structuring 55
Production and Inventory Strategies 57
Layout 57
Process Strategy Decisions 58
Customer Involvement 58
Resource Flexibility 58
Capital Intensity 59
Strategic Fit 61
Decision Patterns for Service Processes 61
Decision Patterns for Manufacturing Processes 61
Gaining Focus 62
Managerial Practice 2.1 Plants-within-a-Plant at Ford
Camacari 63
Strategies for Change 64
Process Reengineering 64
Process Improvement 64
Process Analysis 65
Defining, Measuring, and Analyzing the Process 66
Flowcharts 66
Work Measurement Techniques 68
Process Charts 70
Data Analysis Tools 72
Redesigning and Managing Process Improvements 77
Questioning and Brainstorming 77
Benchmarking 78
Implementing 78
Learning Goals in Review 80
MyLab Operations Management Resources 80
Key Terms 81
Solved Problems 81
Discussion Questions 84
Problems 85
Active Model Exercise 92
Video Case Process Analysis at Starwood 93
Case Custom Molds, Inc. 94
Case José’s Authentic Mexican Restaurant 96
3 QUALITY AND PERFORMANCE 97
QVC 97
Costs of Quality 99
Prevention Costs 99
Appraisal Costs 100
Internal Failure Costs 100
External Failure Costs 100
Ethical Failure Costs 100
Total Quality Management and Six Sigma 101
Total Quality Management 101
Managerial Practice 3.1 Improving Quality Through
Employee Involvement at Santa Cruz Guitar Company 103
Six Sigma 104
Acceptance Sampling 105
Statistical Process Control 106
Variation of Outputs 106
Control Charts 108
Control Charts for Variables 110
Control Charts for Attributes 114
Process Capability 117
Defining Process Capability 117
Using Continuous Improvement to Determine
the Capability of a Process 118
International Quality Documentation Standards and
Awards 119
The ISO 9001:2008 Documentation Standards 120
Malcolm Baldrige Performance Excellence
Program 120
Systems Approach To Total Quality Management 120
Learning Goals in Review 121
MyLab Operations Management Resources 121
Key Equations 122
Key Terms 123
Solved Problems 123
Discussion Questions 126
Problems 126
Active Model Exercise 134
Video Case Quality at Axon 134
Experiential Learning 3.1 Statistical Process Control with a Coin Catapult 136
4 CAPACITY PLANNING 137
Tesla Motors 137
Planning Long-Term Capacity 139
Measures of Capacity and Utilization 140
Economies of Scale 140
Diseconomies of Scale 141
Capacity Timing and Sizing Strategies 141
Sizing Capacity Cushions 141
Timing and Sizing Expansion 142
Linking Capacity and Other Decisions 143
A Systematic Approach to Long-Term Capacity
Decisions 143
Step 1: Estimate Capacity Requirements 143
Step 2: Identify Gaps 145
Step 3: Develop Alternatives 145
Step 4: Evaluate the Alternatives 146
Tools for Capacity Planning 147
Managerial Practice 4.1 Capacity Planning at PacifiCorp 147
Waiting-Line Models 148
Simulation 149
Decision Trees 149
Learning Goals in Review 149
MyLab Operations Management Resources 149
Key Equations 150
Key Terms 150
Solved Problems 150
Discussion Questions 152
Problems 152
Video Case Gate Turnaround at Southwest Airlines 158
Case Fitness Plus, Part A 159
SUPPLEMENT B Waiting Lines 161
Structure of Waiting-Line Problems 162
Customer Population 162
The Service System 163
Priority Rule 164
Probability Distributions 165
Arrival Distribution 165
Service Time Distribution 165
Using Waiting-Line Models to Analyze Operations 166
Single-Server Model 167
Multiple-Server Model 169
Little’s Law 170
Finite-Source Model 171
Waiting Lines and Simulation 172
SimQuick 172
Decision Areas for Management 173
Learning Goals in Review 174
MyLab Operations Management Resources 174
Key Equations 174
Key Terms 175
Solved Problem 175
Problems 176
5 CONSTRAINT MANAGEMENT 179
Microsoft Corporation 179
The Theory of Constraints 182
Key Principles of the TOC 182
Managing Bottlenecks in Service Processes 183
Managing Bottlenecks in Manufacturing Processes 185
Identifying Bottlenecks 185
Relieving Bottlenecks 187
Drum-Buffer-Rope Systems 187
Applying the Theory of Constraints to Product
Mix Decisions 188
Managing Constraints in Line Processes 190
Line Balancing 190
Rebalancing the Assembly Line 195
Managerial Practice 5.1 Assembly Line Balancing
at Chrysler 195
Managerial Considerations 195
Learning Goals in Review 196
MyLab Operations Management Resources 196
Key Equations 196
Key Terms 197
Solved Problems 197
Discussion Questions 199
Problems 199
Experiential Learning 5.1 Min-Yo Garment Company 206
Video Case Constraint Management at Southwest Airlines 210
6 LEAN SYSTEMS 211
ALDI 211
Continuous Improvement Using A Lean Systems
Approach 213
Strategic Characteristics of Lean Systems 215
Supply Chain Considerations in Lean Systems 215
Process Considerations in Lean Systems 216
Managerial Practice 6.1 Alcoa 218
Toyota Production System 221
Designing Lean System Layouts 222
One Worker, Multiple Machines 222
Group Technology 223
The Kanban System 224
General Operating Rules 225
Determining the Number of Containers 225
Other Kanban Signals 226
Value Stream Mapping 227
Current State Map 227
Future State Map 230
Operational Benefits and Implementation Issues 232
Organizational Considerations 232
Process Considerations 233
Inventory and Scheduling 233
Learning Goals in Review 234
MyLab Operations Management Resources 234
Key Equations 234
Key Terms 234
Solved Problems 234
Discussion Questions 237
Problems 237
Video Case Lean Systems at Autoliv 241
Case Copper Kettle Catering 242
7 PROJECT MANAGEMENT 243
Burj Khalifa 243
Defining and Organizing Projects 247
Defining the Scope and Objectives of a Project 247
Selecting the Project Manager and Team 247
Recognizing Organizational Structure 247
Constructing Project Networks 248
Defining the Work Breakdown Structure 248
Diagramming the Network 249
Developing the Project Schedule 251
Critical Path 251
Project Schedule 252
Activity Slack 254
Analyzing Cost–Time Trade-Offs 255
Cost to Crash 255
Minimizing Costs 256
Assessing and Analyzing Risks 259
Risk-Management Plans 259
Managerial Practice 7.1 San Francisco—Oakland Bay
Bridge 260
Statistical Analysis 261
Analyzing Probabilities 263
Near-Critical Paths 264
Monitoring and Controlling Projects 265
Monitoring Project Status 265
Monitoring Project Resources 265
Controlling Projects 266
Learning Goals in Review 266
MyLab Operations Management Resources 266
Key Equations 267
Key Terms 267
Solved Problems 268
Discussion Questions 272
Problems 272
Active Model Exercise 279
Video Case Project Management at Choice Hotels
International 280
Case The Pert Mustang 281
PART 2 Managing Customer Demand 283
8 FORECASTING 283
Kimberly-Clark 283
Managing Demand 286
Demand Patterns 286
Demand Management Options 286
Key Decisions on Making Forecasts 288
Deciding What to Forecast 288
Choosing the Type of Forecasting Technique 289
Forecast Error 289
Cumulative Sum of Forecast Errors 289
Dispersion of Forecast Errors 290
Mean Absolute Percent Error 291
Computer Support 292
Judgment Methods 292
Causal Methods: Linear Regression 293
Time-Series Methods 295
Naïve Forecast 295
Horizontal Patterns: Estimating the Average 295
Trend Patterns: Using Regression 298
Seasonal Patterns: Using Seasonal Factors 300
Criteria for Selecting Time-Series Methods 302
Insights into Effective Demand Forecasting 303
Big Data 304
Managerial Practice 8.1 Big Data and Health Care
Forecasting 305
A Typical Forecasting Process 305
Using Multiple Forecasting Methods 306
Adding Collaboration to the Process 307
Forecasting as a Nested Process 308
Learning Goals in Review 308
MyLab Operations Management Resources 308
Key Equations 309
Key Terms 310
Solved Problems 310
Discussion Questions 314
Problems 315
Video Case Forecasting and Supply Chain Management at
Deckers Outdoor Corporation 323
Case Yankee Fork and Hoe Company 324
Experiential Learning 8.1 Forecasting a Vital Energy Statistic 326
9 INVENTORY MANAGEMENT 327
Ford’s Smart Inventory Management System (SIMS) 327
Inventory Trade-offs 329
Pressures for Small Inventories 330
Pressures for Large Inventories 330
Managerial Practice 9.1 Inventory Management at Netflix 331
Types of Inventory 332
Accounting Inventories 332
Operational Inventories 333
Inventory Reduction Tactics 335
Cycle Inventory 335
Safety Stock Inventory 335
Anticipation Inventory 336
Pipeline Inventory 336
ABC Analysis 336
Economic Order Quantity 337
Calculating the EOQ 338
Managerial Insights from the EOQ 341
Continuous Review System 342
Selecting the Reorder Point when Demand and Lead
Time Are Constant 342
Selecting the Reorder Point when Demand Is
Variable and Lead Time Is Constant 343
Selecting the Reorder Point when Both Demand
and Lead Time Are Variable 347
Systems Based on the Q System 348
Calculating Total Q System Costs 348
Advantages of the Q System 349
Periodic Review System 349
Selecting the Time Between Reviews 350
Selecting the Target Inventory Level when Demand
Is Variable and Lead Time Is Constant 351
Selecting the Target Inventory Level when Demand
and Lead Time Are Variable 352
Systems Based on the P System 352
Calculating Total P System Costs 353
Advantages of the P System 353
Learning Goals in Review 353
MyLab Operations Management Resources 353
Key Equations 354
Key Terms 355
Solved Problems 356
Discussion Questions 360
Problems 361
Active Model Exercise 366
Video Case Inventory Management at Crayola 367
Experiential Learning 9.1 Swift Electronic Supply, Inc. 368
Case Parts Emporium 369
SUPPLEMENT C Special Inventory
Models 371
Noninstantaneous Replenishment 371
Quantity Discounts 374
One-Period Decisions 376
Learning Goals in Review 379
MyLab Operations Management Resources 379
Key Equations 379
Key Term 379
Solved Problems 380
Problems 382
10 OPERATIONS PLANNING AND SCHEDULING 385
Cooper Tire and Rubber Company 385
Levels in Operations Planning and Scheduling 388
Level 1: Sales and Operations Planning 388
Level 2: Resource Planning 390
Level 3: Scheduling 390
S&OP Supply Options 391
S&OP Strategies 392
Chase Strategy 392
Level Strategy 392
Constraints and Costs 392
Sales and Operations Planning as a Process 392
Spreadsheets for Sales and Operations Planning 395
Spreadsheets for a Manufacturer 395
Spreadsheeets for a Service Provider 396
Scheduling 398
Job and Facility Scheduling 399
Workforce Scheduling 400
Managerial Practice 10.1 Scheduling Major League Baseball
Umpires 401
Sequencing Jobs at a Workstation 404
Software Support 406
Learning Goals in Review 406
MyLab Operations Management Resources 406
Key Terms 407
Solved Problems 407
Discussion Questions 411
Problems 411
Active Model Exercise 418
Video Case Sales and Operations Planning at Starwood 418
Case Memorial Hospital 419
SUPPLEMENT D Linear Programming 421
Characteristics of Linear Programming Models 421
Formulating a Linear Programming Model 422
Graphic Analysis 424
Plot the Constraints 424
Identify the Feasible Region 426
Plot the Objective Function Line 427
Find the Visual Solution 428
Find the Algebraic Solution 429
Slack and Surplus Variables 429
Sensitivity Analysis 430
Computer Analysis 431
Simplex Method 431
Computer Output 431
The Transportation Method 433
Transportation Method for Sales and Operations
Planning 433
Learning Goals in Review 437
MyLab Operations Management Resources 437
Key Terms 438
Solved Problems 438
Discussion Questions 440
Problems 440
11 RESOURCE PLANNING 449
Philips 449
Material Requirements Planning 451
Dependent Demand 451
Master Production Scheduling 453
Developing a Master Production Schedule 454
Available-to-Promise Quantities 455
Freezing the MPS 456
Reconciling the MPS with Sales and Operations Plans 456
MRP Explosion 456
Bill of Materials 457
Inventory Record 458
Planning Factors 460
Outputs from MRP 463
MRP and the Environment 467
MRP, Core Processes, and Supply Chain
Linkages 467
Enterprise Resource Planning 468
How ERP Systems Are Designed 468
Managerial Practice 11.1 ERP Implementation
at Valle del Lili Foundation 469
Resource Planning for Service Providers 470
Dependent Demand for Services 470
Bill of Resources 471
Learning Goals in Review 474
MyLab Operations Management Resources 474
Key Terms 475
Solved Problems 475
Discussion Questions 480
Problems 481
Active Model Exercise 493
Case Flashy Flashers, Inc. 493
PART 3 Managing Supply Chains 497
12 SUPPLY CHAIN DESIGN 497
Amazon.com 497
Creating an Effective Supply Chain 499
Supply Chains for Services and Manufacturing 501
Services 501
Manufacturing 502
Measuring Supply Chain Performance 503
Inventory Measures 503
Financial Measures 505
Strategic Options for Supply Chain Design 506
Efficient Supply Chains 507
Responsive Supply Chains 507
Designs for Efficient and Responsive Supply
Chains 509
Mass Customization 510
Competitive Advantages 510
Supply Chain Design for Mass
Customization 511
Outsourcing Processes 511
Managerial Practice 12.1 Outsourcing in the Food Delivery
Business 512
Vertical Integration 514
Make-or-Buy Decisions 514
Learning Goals in Review 515
MyLab Operations Management Resources 515
Key Equations 516
Key Terms 516
Solved Problem 516
Discussion Questions 517
Problems 517
Video Case Supply Chain Design at Crayola 520
Experiential Learning 12.1 Sonic Distributors 521
Case Brunswick Distribution, Inc. 522
13 SUPPLY CHAIN LOGISTIC NETWORKS 525
Airbus SAS 525
Factors Affecting Location Decisions 528
Dominant Factors in Manufacturing 528
Dominant Factors in Services 530
Load–Distance Method 531
Distance Measures 532
Calculating a Load–Distance Score 532
Center of Gravity 533
Break-Even Analysis 535
Transportation Method 537
Setting Up the Initial Tableau 537
Dummy Plants or Warehouses 537
Finding a Solution 538
Geographical Information Systems 539
Using GIS 539
Managerial Practice 13.1 Using GIS to Find Locations
for Fast-Food Restaurants 540
The GIS Method for Locating Multiple Facilities 540
Inventory Placement 541
A Systematic Location Selection Process 542
Learning Goals in Review 543
MyLab Operations Management Resources 543
Key Equations 544
Key Terms 544
Solved Problems 544
Discussion Questions 547
Problems 547
Active Model Exercise 554
Video Case Continental Tire: Pursuing a Winning Plant
Decision 554
Case R.U. Reddie for Location 555
14 SUPPLY CHAIN INTEGRATION 557
Coral Princess 557
Supply Chain Disruptions 560
Causes of Supply Chain Disruptions 560
Supply Chain Dynamics 562
Integrated Supply Chains 562
Additive Manufacturing 563
Supply Chain Implications of AM 564
Enablers of Adopting AM 565
New Service or Product Development Process 566
Design 566
Analysis 567
Development 567
Full Launch 567
Supplier Relationship Process 567
Sourcing 567
Design Collaboration 571
Negotiation 571
Managerial Practice 14.1 The Consequences of Power in an
Automotive Supply Chain 572
Buying 573
Information Exchange 574
Order Fulfillment Process 575
Customer Demand Planning 575
Supply Planning 576
Production 576
Logistics 576
Customer Relationship Process 578
Marketing 578
Order Placement 579
Customer Service 579
Supply Chain Risk Management 580
Operational Risks 580
Financial Risks 581
Security Risks 582
Performance Measures 584
Learning Goals in Review 585
MyLab Operations Management Resources 585
Key Equations 585
Key Terms 586
Solved Problems 586
Discussion Questions 588
Problems 588
Video Case Sourcing Strategy at Starwood 593
Case Wolf Motors 594
15 SUPPLY CHAIN SUSTAINABILITY 595
FedEx 595
The Three Elements of Supply Chain Sustainability 597
Reverse Logistics 599
Supply Chain Design for Reverse Logistics 599
Financial Implications 600
Energy Efficiency 601
Transportation Distance 601
Freight Density 603
Transportation Mode 605
Disaster Relief Supply Chains 606
Organizing for Disaster Relief 606
Managing Disaster Relief Operations 607
Managerial Practice 15.1 Using Drones in Disaster Relief 608
Supply Chain Ethics 609
Buyer–Supplier Relationships 609
Facility Location 610
Inventory Management 610
Managing Sustainable Supply Chains 611
Learning Goals in Review 611
MyLab Operations Management Resources 611
Key Equation 612
Key Terms 612
Solved Problems 612
Discussion Questions 614
Problems 614
Video Case Supply Chain Sustainability at Clif Bar & Company 616
Appendix NORMAL DISTRIBUTION 617
Selected References 619
Glossary 627
Name Index 639
Subject Index 643
MyLab Operations Management
Supplements
SUPPLEMENT E Simulation E-1
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
SUPPLEMENT K Layout K-1
Chapters, Sections and Learning Goals
Chapter 15. Supply Chain Sustainability
FedEx - Comment on FedEx's supply chain sustainability activities
The three Elements of Supply Chain Sustainability
Reverse Logistics
Energy Efficiency
Disaster Relief Supply Chains
Supply Chain Ethics
Managing Sustainable Supply Chains
Table of Contents
1. Using Operations to Create Value
Supplement A: Decision Making
PART I: MANAGING PROCESSES
2. Process Strategy and Analysis
3. Quality and Performance
4. Capacity Planning
Supplement B: Waiting Lines
5. Constraint Management
6. Lean Systems
7. Project Management
PART II: MANAGING CUSTOMER DEMAND
8. Forecasting
9. Inventory management
Supplement C: Special Inventory Models
10. Operations Planning and Scheduling
Supplement D: Linear Programming
11. Resource Planning
PART III: MANAGING SUPPLY CHAINS
12. Supply Chain Design
13. Supply Chain Logistic Networks
14. Supply Chain Integration
15. Supply Chain Sustainability
Appendix: Normal Distribution
MYLAB OPERATIONS MANAGEMENT SUPPLEMENTS
Supplement E: Simulation
Supplement F: Financial Analysis
Supplement G: Acceptance Sampling Plans
Supplement H: Measuring Output Rates
Supplement I: Learning Curve Analysis
Supplement J: Operations Scheduling
Supplement K: Layout
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