OPERATIONS AND

SUPPLY CHAIN MANAGEMENT

thirteenth

F.

edition

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

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
Servitization Strategies 10
Growth of Services 10

9
PRODUCT AND SERVICE DESIGN

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
XXX

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
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
Assembly (DFMA) Work? 54

and

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

JBECT i o N

Production Process Mapping

and Little's Law 118
Process Analysis Examples 121

Two

MANUFACTURING, SERVICE, AND

HEALTH CARE PROCESSES
4 STRATEGIC CAPACITY MANAGEMENT

A Bread-Making Operation 121

A Restaurant Operation 122
Planning a Transit Bus Operation 124
70

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

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

S A J O B DESIGN AND WORK MEASUREMENT

Degree of Labor Specialization

Job Enrichment 141
Sociotechnical Systems 141

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

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

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 107

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

140

Work Measurement and Standards 142

90

Individual Learning 97
Organizational Learning 98

138

Job Design Decisions 139

Behavioral Considerations in Job Design 140

Summary 83
Key Terms 84
Formula Review 84
Solved Problem 84
Review and Discussion Questions 85
Problems 86
Case: Shouldice HospitalA Cut Above 87
Super Quiz 89
Selected Bibliography 89
4A LEARNING CURVES

XXXI

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

Case: Contact Centers Should Take a

Lesson from Local Businesses 236
Super Quiz 237
Selected Bibliography 237
Footnotes 237

180

Basic Production Layout Formats 182

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

Problem 239

Assembly-Line Balancing 188

Splitting Tasks 191
Flexible and U-Shaped Line Layouts 192

The Practical View of Waiting Lines 239

The Queuing System 240

Mixed-Model Line Balancing 192

Customer Arrivals 241

Distribution of Arrivals 242
The Queuing System: Factors 244
Exiting the Queuing System 247

Current Thoughts on Assembly Lines 194

Cells 194
Developing a Manufacturing Cell 194
Virtual Manufacturing Cells 196

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

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

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

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: ServiceSystem Design Matrix 221

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

Strategic Uses of the Matrix 223

Virtual Service: The New Role of the
Customer 223

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

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

HEALTH CARE PROCESSES 268

A Prescription for Innovation 269

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
Functions of the QC Department 290

CONTENTS

Six-Sigma Quality 291

Network-Planning Models 347

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 InquiryA 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

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 CHAIN PROCESSES

The World Is Flat 375

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

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

Critical Path Method (CPM) 347

CPM with Three Activity Time Estimates 351
Time-Cost Models and Project Crashing 354

11 GLOBAL SOURCING AND PROCUREMENT

Index (Cplc) 311

Operating Characteristic

XXXIII

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

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 LOCATION, 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
Review and Discussion Questions 411

374

XXXIV

CONTENTS

Review and Discussion Questions 464

Problems 464
Super Quiz 467
Selected Bibliography 467
Footnotes 467

Problems 411
Case: ApplichemThe Transportation
Problem 414
Super Quiz 415
Selected Bibliography 415
Footnote 415
13 LEAN AND SUSTAINABLE SUPPLY CHAINS

416

Green Is the New Black 417

SUPPLY AND DEMAND PLANNING

Survey Suggests that Enviro-Conscious

Manufacturers Are the Best Risk for
Investors 417

14 ENTERPRISE RESOURCE PLANNING

SYSTEMS

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
Lean Layouts 427

426

mySAP.com and SAP NetWeaverIntegrated

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

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 BoatsA Value Stream
Mapping Exercise 444
Super Quiz 444
Selected Bibliography 445
Footnotes 445
13A

15 DEMAND MANAGEMENT
AND FORECASTING

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
Cost Impact and Payoff Analysis 460
Implementation 461

482

Walmart's Data Warehouse 483

Demand Management 485
Types of Forecasting 486
Components of Demand 486
Time Series Analysis 488

OPERATIONS CONSULTING
AND REENGINEERING

470

Information CrisisThe 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

459

Business Process Reengineering (BPR) 461

Principles of Reengineering 462
Guidelines for Implementation 463
Summary 464
Key Terms 464

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
Case: Altavox Electronics 526

CONTENTS

Super Quiz 527

Selected Bibliography 527
Footnotes 527
16 SALES AND OPERATIONS PLANNING

Super Quiz 594

Selected Bibliography 594
Footnotes 595
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 ManufacturingPlanning
Plant Production 552
Super Quiz 553
Selected Bibliography 553
Footnotes 553
17 INVENTORY CONTROL

554

Direct to StoreThe 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

XXXV

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-PackardSupplying
the DeskJet Printer in Europe 591

18 MATERIAL REQUIREMENTS PLANNING

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 CT I O N

F IV

SCHEDULING
19 SCHEDULING

626

Hospitals Cut ER WaitsNew "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
Principles of Work-Center Scheduling 641

CONTENTS

XXXVI

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

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

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

Summary 707
Key Terms 708
Solved Problem 708
Review and Discussion Questions 709
Problems 710
Case: Solve the OPT QuizA Challenge
in Scheduling 714
Super Quiz 714
Selected Bibliography 714
Footnotes 715

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

680

Goal of the Firm 684

Performance Measurements 684
Financial Measurements 684
Operational Measurements 684
Productivity 685

APPENDICES
A Linear Programming Using the Excel
Solver 716
B Operations Technology 736
C Financial Analysis 743
D Answers to Selected Problems 760
E Present Value Table 763
F Negative Exponential Distribution:
Values of e" 764
G Areas of the Cumulative Standard
Normal Distribution 765
H Uniformly Distributed Random
Digits 766
I Interest Tables 767

Unbalanced Capacity 686

Dependent Events and Statistical
Fluctuations 686

Bottlenecks and Capacity-Constrained

Resources 688
Basic Manufacturing Building Blocks 688

PHOTO CREDITS
NAME INDEX
SUBJECT INDEX

771

773
777