OPERATIONS AND

SUPPLY CHAIN MANAGEMENT

thirteenth edition

F. ROBERT JACOBS
Indiana University

RICHARD B. CHASE
University of Southern California

McGraw-Hill
Irwin
CONTENTS

A Framework for Operations and Supply

Chain Strategy 29
STRATEGY AND SUSTAINABILITY Productivity Measurement 30
How Does Wall Street Evaluate Operations
1. OPERATIONS AND SUPPLY C H A I N Performance 32
MANAGEMENT 2 Summary 33
Quick Supply Chains Enable Retailers to Key Terms 33
Get Fashions to Market Quickly 3 Solved Problem 34
What Is Operations and Supply Chain Review and Discussion Questions 34
Management? 4 Problems 34
Operations and Supply Chain Case: The Tao of Timbuk2 36
Processes 7 Super Quiz 37
Differences between Services Selected Bibliography 37
and Goods 8 Footnote 37
The Goods-Services Continuum 9
Servitization Strategies 10 PRODUCT AND SERVICE DESIGN 38
Growth of Services 10 IDEO, A Design and Innovation
Efficiency, Effectiveness, and Firm 39
Value 11 The Product Design Process 40
Careers in Operations and Supply Chain The Product Development Process 42
Management 12 Economic Analysis of Product
Chief Operating Officer 14 Development Projects 46
Historical Development of Build a Base-Case Financial Model 47
Operations and Supply Chain Sensitivity Analysis to Understand Project
Management 14 Trade-Offs 49
Current Issues in Operations and Supply Designing for the Customer 50
Chain Management 16 Quality Function Deployment 51
Key Terms 17 Value Analysis/Value Engineering 52
Review and Discussion Questions 17 Designing Products for Manufacture and
Internet Exercise: Harley-Davidson Assembly 53
Motorcycles 18 How Does Design for Manufacturing and
Case: Fast-Food Feast 18 Assembly (DFMA) Work? 54
Super Quiz 18 Designing Service Products 56
Selected Bibliography 19 Ecodesign 58
Footnotes 19 Measuring Product Development
Performance 58
2 STRATEGY AND SUSTAINABILITY 20 Summary 59
How IKEA Designs Its Sexy Prices 21 Key Terms 60
A Sustainable Strategy 22 Solved Problem 60
What Is Operations and Supply Chain Review and Discussion Questions 62
Strategy? 23 Internet Enrichment Exercise 63
Competitive Dimensions 25 Problems 63
The Notion of Trade-Offs 27 Case: IKEA: Design and Pricing 65
Order Winners and Order Qualifiers: The Case: Dental Spa 67
Marketing-Operations Link 27 Super Quiz 67
Strategic Fit: Fitting Operational Activities Selected Bibliography 67
to Strategy 28 Footnotes 67

XXX
 CONTENTS XXXI

Production Process Mapping

JBECT i o N Two and Little's Law 118
Process Analysis Examples 121
MANUFACTURING, SERVICE, AND A Bread-Making Operation 121
HEALTH CARE PROCESSES A Restaurant Operation 122
Planning a Transit Bus Operation 124
4 STRATEGIC CAPACITY MANAGEMENT 70 Process Flow Time Reduction 126
Shouldice Hospital: Hernia Surgery Summary 128
Innovation 70 Key Terms 129
Capacity Management in Operations 72 Formula Review 129
Capacity Planning Concepts 73 Solved Problems 129
Economies and Diseconomies of Scale 73 Review and Discussion Questions 131
Capacity Focus 74 Problems 131
Capacity Flexibility 74 Advanced Problem 134
Capacity Planning 75 Case: Analyzing Casino Money-Handling
Considerations in Changing Capacity 75 Processes 135
Determining Capacity Requirements 77
Case: Kristen's Cookie Company (A) 13S
Using Decision Trees to Evaluate Capacity
Super Quiz 137
Alternatives 78
Selected Bibliography 137
Planning Service Capacity 81
Capacity Planning in Service
Footnotes 137
versus Manufacturing 81
S A J O B DESIGN AND WORK MEASUREMENT 138
Capacity Utilization and Service Quality 82
Summary 83 Job Design Decisions 139
Key Terms 84 Behavioral Considerations in Job Design 140
Formula Review 84 Degree of Labor Specialization 140
Solved Problem 84 Job Enrichment 141
Sociotechnical Systems 141
Review and Discussion Questions 85
Work Measurement and Standards 142
Problems 86
Work Measurement Techniques 143
Case: Shouldice Hospital—A Cut Above 87 Time Study 144
Super Quiz 89 Work Sampling 146
Selected Bibliography 89 Work Sampling Compared to Time Study 151
4A LEARNING CURVES 90 Summary 152
Key Terms 153
Application of Learning Curves 91
Formula Review 153
Plotting Learning Curves 92
Solved Problems 153
Logarithmic Analysis 93
Learning Curve Tables 93 Review and Discussion Questions 154
Estimating the Learning Percentage 96 Problems 155
How Long Does Learning Go On? 97 Super Quiz 156
General Guidelines for Learning 97 Selected Bibliography 157
Individual Learning 97 Footnotes 157
Organizational Learning 98
6 PRODUCTION PROCESSES 158
Learning Curves Applied to Heart
Transplant Mortality 99 Toshiba: Producer of the First Notebook
Key Terms 101 Computer 159
Formula Review 101 Production Processes 160
Solved Problems 101 How Production Processes Are
Review and Discussion Questions 102 Organized 162
Problems 102 Break-Even Analysis 164
Super Quiz 105 Designing a Production System 165
Project Layout 166
Selected Bibliography 105
Workcenters 166
Footnotes 105
Manufacturing Cell 166
PROCESS ANALYSIS 106 Assembly Line and Continuous Process
Customer-Driven Service for McDonald's 107 Layouts 166
Self-Ordering Kiosks 107 Manufacturing Process Flow Design 167
Process Analysis 108 Summary 172
Analyzing a Las Vegas Slot Machine 108 Key Terms 172
Process Flowcharting 110 Solved Problems 173
Types of Processes 112 Review and Discussion Questions 174
Buffering, Blocking, and Starving 112 Problems 174
Make-to-Stock versus Make-to-Order 113 Case: Circuit Board Fabricators, Inc. 177
Measuring Process Performance 116 Super Quiz 178
XXXII CONTENTS

Selected Bibliography 179 Case: Contact Centers Should Take a

Footnotes 179 Lesson from Local Businesses 236
Super Quiz 237
6A FACILITY LAYOUT 180 Selected Bibliography 237
Basic Production Layout Formats 182 Footnotes 237
Workcenters 182
Systematic Layout Planning 186 7A W A I T I N G LINE ANALYSIS 238
Assembly Lines 186 Economics of the Waiting Line
Assembly-Line Balancing 188 Problem 239
Splitting Tasks 191 The Practical View of Waiting Lines 239
Flexible and U-Shaped Line Layouts 192 The Queuing System 240
Mixed-Model Line Balancing 192 Customer Arrivals 241
Current Thoughts on Assembly Lines 194
Distribution of Arrivals 242
Cells 194 The Queuing System: Factors 244
Developing a Manufacturing Cell 194
Exiting the Queuing System 247
Virtual Manufacturing Cells 196
Waiting Line Models 247
Project Layouts 196 Approximating Customer Waiting Time 256
Retail Service Layout 196 Computer Simulation of Waiting Lines 258
Servicescapes 197
Summary 258
Signs, Symbols, and Artifacts 199
Key Terms 258
Office Layout 199
Formula Review 259
Summary 200
Solved Problems 260
Key Terms 200
Review and Discussion Questions 262
Formula Review 201
Problems 262
Solved Problems 201
Review and Discussion Questions 205 Case: Community Hospital Evening
Problems 205 Operating Room 266
Advanced Problem 210 Super Quiz 267
Case: Soteriou's Souvlaki 211 Selected Bibliography 267
Case: Designing Toshiba's Notebook Footnotes 267
Computer Assembly Line 212
8 HEALTH CARE PROCESSES 268
Super Quiz 214
Selected Bibliography 215 A Prescription for Innovation 269
Footnotes 215 The Mayo Clinic's New SPARC Lab Is Driving
Experimentation at the Frontier of Health
Care. How? By Getting Physicians to Think
7 SERVICE PROCESSES 216
More Like Designers 269
My Week as a Room-Service Waiter
The Nature of Health Care Operations 270
at the Ritz 217 Classification of Hospitals 271
The Nature of Services 218 Hospital Layout and Care Chains 272
An Operational Classification of Services 219 Capacity Planning 274
Designing Service Organizations 221 Workforce Scheduling 274
Structuring the Service Encounter: Service- Quality Management and Process
System Design Matrix 221 Improvement 274
Strategic Uses of the Matrix 223 Health Care Supply Chains 276
Virtual Service: The New Role of the Inventory Management 278
Customer 223 Performance Measures 279
Service Blueprinting and Fail-Safing 224 Trends in Health Care 279
Three Contrasting Service Designs 226 Summary 281
The Production-Line Approach 226 Key Terms 281
The Self-Service Approach 227 Review and Discussion Questions 282
The Personal-Attention Approach 227 Case: Venice Family Clinic: Managing
Managing Customer-Introduced Patient Wait Times 282
Variability 230 Super Quiz 283
Applying Behavioral Science to Service Selected Bibliography 283
Encounters 232 Footnotes 283
Service Guarantees as Design Drivers 233
Summary 234 9 S I X - S I G M A QUALITY 284
Key Terms 234 Total Quality Management 286
Review and Discussion Questions 234 Quality Specification and Quality
Problems 235 Costs 288
Case: Pizza USA: An Exercise in Translating Developing Quality Specifications 288
Customer Requirements into Process Cost of Quality 289
Design Requirements 235 Functions of the QC Department 290
 CONTENTS XXXIII

Six-Sigma Quality 291 Network-Planning Models 347

Six-Sigma Methodology 292 Critical Path Method (CPM) 347
Analytical Tools for Six Sigma and Continuous CPM with Three Activity Time Estimates 351
Improvement 293 Time-Cost Models and Project Crashing 354
Six-Sigma Roles and Responsibilities 296 Managing Resources 358
The Shingo System: Fail-Safe Design 297 Tracking Progress 359
ISO 9000 and ISO 14000 298 Summary 359
External Benchmarking for Quality Key Terms 359
Improvement 300 Formula Review 360
Summary 300 Solved Problems 360
Key Terms 300 Review and Discussion Questions 364
Review and Discussion Questions 301 Problems 364
Problems 301 Advanced Problem 369
Internet Enrichment Exercises 302 Case: Cell Phone Design Project 370
Case: Hank Kolb, Director of Quality Case: The Campus Wedding (A) 371
Assurance 302 Case: The Campus Wedding (B) 372
Case: Appreciative Inquiry—A Different Super Quiz 372
Kind of Fishbone 303 Selected Bibliography 372
Super Quiz 305
Selected Bibliography 305
Footnotes 305
SUPPLY CHAIN PROCESSES
9A PROCESS CAPABILITY AND SPC 306
Variation Around Us 308 11 GLOBAL SOURCING AND PROCUREMENT 374
Process Capability 309
The World Is Flat 375
Capability Index (Cplc) 311 Flattener 5: Outsourcing 375
Process Control Procedures 314 Flattener 6: Offshoring 375
Process Control with Attribute Measurements: Strategic Sourcing 376
Using p Charts 514
The Bullwhip Effect 377
Process Control with Attribute Measurements:
Outsourcing 381
Using c Charts 317
Process Control with Variable Measurements:
Green Sourcing 385
Using X and R Charts 317 Total Cost of Ownership 387
How to Construct X and R Charts 319 Measuring Sourcing Performance 389
Acceptance Sampling 322 Summary 391
Design of a Single Sampling Plan Key Terms 391
for Attributes 322 Formula Review 392
Operating Characteristic Curves 323 Review and Discussion Questions 392
Summary 325 Problems 392
Key Terms 325 Case: Pepe Jeans 394
Formula Review 325 Super Quiz 395
Solved Problems 326 Selected Bibliography 395
Review and Discussion Questions 327 Footnotes 395
Problems 327
Advanced Problem 332 12 LOCATION, LOGISTICS,
Case: Hot Shot Plastics Company 332 AND DISTRIBUTION 396
Super Quiz 333 FedEx: A Leading Global Logistics
Selected Bibliography 333 Company 397
Footnotes 333 Logistics 398
Decisions Related to Logistics 399
10 PROJECTS 334 Cross-Docking 400
National Aeronautics and Space Issues in Facility Location 400
Administration's Constellation Plant Location Methods 403
Program May Land Men on the Moon Factor-Rating Systems 403
by 2020 335 Transportation Method of Linear
What Is Project Management? 337 Programming 403
Structuring Projects 337 Centroid Method 406
Pure Project 338 Locating Service Facilities 408
Functional Project 338 Summary 410
Matrix Project 338 Key Terms 410
Work Breakdown Structure 340 Formula Review 410
Project Control Charts 342 Solved Problem 410
Earned Value Management (EVM) 344 Review and Discussion Questions 411
XXXIV CONTENTS

Problems 411 Review and Discussion Questions 464

Case: Applichem—The Transportation Problems 464
Problem 414 Super Quiz 467
Super Quiz 415 Selected Bibliography 467
Selected Bibliography 415 Footnotes 467
Footnote 415

13 LEAN AND SUSTAINABLE SUPPLY CHAINS 416

Green Is the New Black 417
Survey Suggests that Enviro-Conscious SUPPLY AND DEMAND PLANNING
Manufacturers Are the Best Risk for
14 ENTERPRISE RESOURCE PLANNING
Investors 417
SYSTEMS 470
Lean Production 418
Lean Logic 419 Information Crisis—The Missing
The Toyota Production System 420 Desk 471
Elimination of Waste 420 SAP 473
Respect for People 420 ' SAP A p p l i c a t i o n Modules 474
Lean Supply Chains 421 Financials 475
Value Stream Mapping 423 Human Capital Management 476
Lean Supply Chain Design Principles 426 Operations 476
Lean Layouts 427 Corporate Services 477
Lean Production Schedules 429 mySAP.com and SAP NetWeaver—Integrated
Lean Supply Chains 433 E-Business Applications 477
Lean Services 434 Implementing ERP Systems 479
Summary 435 Summary 480
Key Terms 435 Key Term 481
Formula Review 436 Review and Discussion Questions 481
Solved Problems 436 Super Quiz 481
Review and Discussion Questions 440 Selected Bibliography 481
Problems 440 Footnote 481
Case: Quality Parts Company 441
Case: Value Stream Mapping 441 15 DEMAND MANAGEMENT
Case: Pro Fishing Boats—A Value Stream AND FORECASTING 482
Mapping Exercise 444 Walmart's Data Warehouse 483
Super Quiz 444 Demand Management 485
Selected Bibliography 445 Types of Forecasting 486
Footnotes 445 Components of Demand 486
Time Series Analysis 488
13A OPERATIONS CONSULTING Linear Regression Analysis 489
Decomposition of a Time Series 492
AND REENGINEERING 446
Simple Moving Average 498
Pittiglio Rabin Todd & McGrath Weighted Moving Average 499
(PRTM)—A Leading Operations Consulting Exponential Smoothing 500
Company 447 Forecast Errors 504
What Is Operations Consulting? 448 Sources of Error 504
The Management Consulting Industry 448 Measurement of Error 504
Economics of Consulting Firms 449 Causal Relationship Forecasting 507
When Operations Consulting Is Multiple Regression Analysis 508
Needed 450 Qualitative Techniques in Forecasting 509
When Are Operations Market Research 509
Consultants Needed? 451 Panel Consensus 509
Historical Analogy 509
The Operations Consulting Process 452
Delphi Method 510
Operations Consulting Tool Kit 453
Problem Definition Tools 453 Web-Based Forecasting: Collaborative
Data Gathering 456 Planning, Forecasting, and Replenishment
Data Analysis and Solution Development 459 (CPFR) 510
Cost Impact and Payoff Analysis 460 Summary 512
Implementation 461 Key Terms 512
Business Process Reengineering (BPR) 461 Formula Review 513
Principles of Reengineering 462 Solved Problems 514
Guidelines for Implementation 463 Review and Discussion Questions 518
Summary 464 Problems 518
Key Terms 464 Case: Altavox Electronics 526
 CONTENTS XXXV

Super Quiz 527 Super Quiz 594

Selected Bibliography 527 Selected Bibliography 594
Footnotes 527 Footnotes 595

16 SALES AND OPERATIONS PLANNING 528 18 MATERIAL REQUIREMENTS PLANNING 596

What Is Sales and Operations From Push to Pull 597

Planning? 530 Master Production Scheduling 598
Overview of Sales and Operations Planning Time Fences 600
Activities 530 Where MRP Can Be Used 601
The Aggregate Operations Plan 532 Material Requirements Planning System
Production Planning Environment 532 Structure 601
Relevant Costs 534 Demand for Products 602
Aggregate Planning Techniques 536 Bill of Materials 602
A Cut-and-Try Example: The JC Company 536 Inventory Records 604
Aggregate Planning Applied to Services: MRP Computer Program 604
Tucson Parks and Recreation An Example Using MRP 606
Department 541 Forecasting Demand 606
Level Scheduling 543 Developing a Master Production Schedule 606
Bill of Materials (Product Structure) 607
Yield Management 544
Inventory Records 608
Operating Yield Management Systems 545
Performing the MRP Calculations 608
Summary 546 Lot Sizing in MRP Systems 611
Key Terms 546 Lot-for-Lot 612
Solved Problem 547 Economic Order Quantity 612
Review and Discussion Questions 549 Least Total Cost 613
Problems 549 Least Unit Cost 614
Case: Bradford Manufacturing—Planning Choosing the Best Lot Size 614
Plant Production 552 Summary 615
Super Quiz 553 Key Terms 616
Selected Bibliography 553 Solved Problems 616
Footnotes 553 Review and Discussion Questions 617
Problems 618
17 INVENTORY CONTROL 554 Case: Brunswick Motors, Inc.—An
Direct to Store—The UPS Vision 555 Introductory Case for MRP 621
The UPS Direct Approach 556 Super Quiz 622
Definition of Inventory 558 Selected Bibliography 623
Purposes of Inventory 559
Inventory Costs 559
Independent versus Dependent Demand 561 E CT I O N F IV
Inventory Systems 562
A Single-Period Inventory Model 562 SCHEDULING
Multiperiod Inventory Systems 565
Fixed-Order Quantity Models 566 19 SCHEDULING 626
Establishing Safety Stock Levels 569 Hospitals Cut ER Waits—New "Fast Track"
Fixed-Order Quantity Model with Units, High-Tech IDs Speed Visits; See a
Safety Stock 570 Doctor in 17 Minutes 627
Fixed-Time Period Models 573 Manufacturing Execution Systems 628
Fixed-Time Period Model with Safety Stock 573 The Nature and Importance of Work
Inventory Control and Supply Chain Centers 628
Management 575 Typical Scheduling and Control Functions 629
Price-Break Models 576 Objectives of Work-Center Scheduling 630
ABC Inventory Planning 578 Job Sequencing 631
ABC Classification 579 Priority Rules and Techniques 632
Inventory Accuracy and Cycle Scheduling n Jobs on One Machine 632
Counting 580 Scheduling n Jobs on Two Machines 634
Scheduling a Set Number of Jobs on the Same
Summary 582
Number of Machines 636
Key Terms 582
Scheduling n Jobs on m Machines 638
Formula Review 582
Shop-Floor Control 638
Solved Problems 584
Gantt Charts 638
Review and Discussion Questions 585 Tools of Shop-Floor Control 639
Problems 586 Input/Output Control 639
Case: Hewlett-Packard—Supplying Data Integrity 639
the DeskJet Printer in Europe 591 Principles of Work-Center Scheduling 641
XXXVI CONTENTS

Personnel Scheduling in Services 642 Methods for Control 689

Scheduling Daily Work Times 643 Time Components 690
Scheduling Hourly Work Times 643 Finding the Bottleneck 691
Summary 644 Saving Time 691
Key Terms 644 Avoid Changing a Nonbottleneck into a
Solved Problems 645 Bottleneck 692
Review and Discussion Questions 646 Drum, Buffer, Rope 692
Importance of Quality 695
Problems 646
Batch Sizes 696
Case: Keep Patients Waiting? Not in My
How to Treat Inventory 697
Office 650
Comparing Synchronous Manufacturing
Super Quiz 652
to MRP and JIT 699
Selected Bibliography 653
Relationship with Other Functional
Footnotes 653
Areas 699
Accounting's Influence 699
19A SIMULATION 654
Marketing and Production 700
Definition of Simulation 655 Summary 707
Simulation Methodology 655 Key Terms 708
Problem Definition 655 Solved Problem 708
Constructing a Simulation Model 656
Review and Discussion Questions 709
Specifying Values of Variables
Problems 710
and Parameters 658
Evaluating Results 659 Case: Solve the OPT Quiz—A Challenge
Validation 659 in Scheduling 714
Proposing a New Experiment 659 Super Quiz 714
Computerization 660 Selected Bibliography 714
Simulating Waiting Lines 660 Footnotes 715
Example: A Two-Stage Assembly Line 660
Spreadsheet Simulation 663
Simulation Programs and Languages 666
Desirable Features of Simulation APPENDICES
Software 668
Advantages and Disadvantages A Linear Programming Using the Excel
of Simulation 668 Solver 716
Summary 669
B Operations Technology 736
Key Terms 669
Solved Problems 670
C Financial Analysis 743
Review and Discussion Questions 671
Problems 671 D Answers to Selected Problems 760
Advanced Case: Understanding the
Impact of Variability on the Capacity E Present Value Table 763
of a Production System 678
Super Quiz 679 F Negative Exponential Distribution:
Selected Bibliography 679 Values of e" 764
Footnotes 679
G Areas of the Cumulative Standard
20 CONSTRAINT MANAGEMENT 680 Normal Distribution 765
Goal of the Firm 684
Performance Measurements 684 H Uniformly Distributed Random
Financial Measurements 684 Digits 766
Operational Measurements 684
Productivity 685 I Interest Tables 767
Unbalanced Capacity 686
Dependent Events and Statistical PHOTO CREDITS 771
Fluctuations 686
Bottlenecks and Capacity-Constrained NAME INDEX 773
Resources 688
Basic Manufacturing Building Blocks 688 SUBJECT INDEX 777