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ELEVENTH

E D I T I O N

GLOBAL EDITION

OPERATIONS
MANAGEMENT
i

Sustainability and Supply Chain Management

J AY

HEIZER
Jesse H. Jones-Professor of Business Administration
Texas Lutheran University

BARRY

RENDER
Charles Harwood Professor of Operations Management
Graduate School of Business
Rollins College

PEARSON
Boston Columbus Indianapolis New York San Francisco Upper Saddle River
Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montreal * Toronto
Delhi Mexico City Sao Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo

Table of Contents
About the Authors
Preface

PART ONE

6
21

Introduction to Operations Management

Chapter 1 Operations and Productivity


37
GLOBAL COMPANY PROFILE: HARD ROCK CAFE 38
What Is Operations Management? 40
Organizing to Produce Goods and Services 40
The Supply Chain 42
Why Study OM? 42
What Operations Managers Do 43
The Heritage of Operations Management 44
Operations for Goods and Services 47
Growth of Services 47
Service Pay 48
The Productivity Challenge 49
Productivity Measurement 50
Productivity Variables 51
Productivity and the Service Sector 53
New Challenges in Operations Management 54
Ethics, Social Responsibility, and Sustainability 55
Summary 56
Key Terms 56
Ethical Dilemma 56
Discussion Questions 56
Solved Problems 57
Problems 57
CASE STUDIES 59
Norwegian Salmon Processing Facility, Trondheim 59
Frito-Lay: Operations Management in Manufacturing
Video Case 59
Hard Rock Cafe: Operations Management in Services
Video Case 60
Rapid Review 61
Self Test 62
Chapter 2

GLOBAL COMPANY PROFILE: BOEING 64


A Global View of Operations and Supply Chains
Cultural and Ethical Issues 69
Developing Missions and Strategies 70
Mission 70
Strategy 70

Achieving Competitive Advantage Through


Operations 71
Competing on Differentiation 71
Competing on Cost 72
Competing on Response 73
Issues in Operations Strategy 74
Strategy Development and Implementation 75
Key Success Factors and Core Competencies 76
Integrating OM with Other Activities 77
Building and Staffing the Organization 77
Implementing the 10 Strategic OM Decisions 78
Strategic Planning, Core Competencies, and
Outsourcing 78
The Theory of Comparative Advantage 80
Risks of Outsourcing 80
;
Rating Outsource Providers 81
Global Operations Strategy Options 83
Summary 84
Key Terms 84
Ethical Dilemma 85
Discussion Questions 85
Using Software to Solve Outsourcing Problems 85
Solved Problems 86"
Problems 87
CASE STUDIES 89
ALDI 89
Strategy at Regal Marine Video Case 89
Hard Rock Cafe's Global Strategy Video Case 89
Outsourcing Offshore at Darden Video Case 90
Rapid Review 91
Self Test 92
Chapter 3

The Global Environment and Operations


Strategy
63
66

37

Managing Projects

93

GLOBAL COMPANY PROFILE: BECHTEL GROUP 94


The Importance of Project Management 96
Project Planning 96
The Project Manager 97
Work Breakdown Structure 98
Project Scheduling 99
Project Controlling 100

10

TABLE OF CONTENTS
Human Resources 142

Project Management Techniques:


PERT and CPM 101

Capacity 142

The Framework of PERT and CPM 101

Seven Steps in the Forecasting System

Network Diagrams and Approaches

Forecasting Approaches

101

Activity-on-Node Example 102

143

Overview of Quantitative Methods

Determining the Project Schedule

105

Time-Series Forecasting

144

144

Forward Pass 105

Decomposition of a Time Series 144

Backward Pass 107

Naive Approach

Calculating Slack Time and Identifying the Critical


Path(s) 108

Moving Averages 146

Variability in Activity Times

110

115

118
119

121
122

Ethical Dilemma

122

Correlation Coefficients for Regression Lines 165

Using Software to Solve Project Management


Problems 122
123

168

170

Forecasting in the Service Sector

Southwestern University: (A) ' 131

Summary

Project Management at Arnold Palmer Hospital


Video Case 132
Managing Hard Rock's Rockfest

Chapter 4

Monitoring and Controlling Forecasts


Focus Forecasting 170

CASE STUDIES 131

Self Test

Multiple-Regression Analysis 167


Adaptive Smoothing

126

Rapid Review

Associative Forecasting Methods: Regression and


Correlation Analysis 162
Standard Error of the Estimate 164

Discussion Questions

Problems

Seasonal Variations in Data 157

Using Regression Analysis for Forecasting 162


122

Solved Problems

Video Case 133

135

172

Ethical Dilemma

172

Discussion Questions

Problems

137

What Is Forecasting?

170

172

Solved Problems

Forecasting Demand

172
173

174

177

CASE STUDIES 184


Southwestern University: (B) 184
Forecasting Ticket Revenue for Orlando Magic
Basketball Games Video Case 185

140

Forecasting Time Horizons 140


Types of Forecasts

Key Terms

Using Software in Forecasting

136

GLOBAL COMPANY PROFILE: WALT DISNEY PARKS &


RESORTS 138

Forecasting at Hard Rock Cafe

141 '

The Strategic Importance of Forecasting

141

Supply-Chain Management 141

Rapid Review
Self Test

Video Case 186

187

188

PART TWO Designing Operations


Chapter 5

152

Cyclical Variations in Data 162

Using Microsoft Project to Manage Projects


Key Terms

148

Trend Projections 155

Cost-Time Trade-Offs and Project Crashing

Summary

Exponential Smoothing

Exponential Smoothing with Trend Adjustment

Probability of Project Completion 112


A Critique of PERT and CPM

145

Measuring Forecast Error 149

Three Time Estimates in PERT 110

143

Overview of Qualitative Methods

Activity-on-Arrow Example 104

142

Product Design

Life Cycle and Strategy 194

189

GLOBAL COMPANY PROFILE: REGAL MARINE 190


Goods and Services Selection

192

Product Strategy Options Support Competitive


Advantage 193
Product Life Cycles 194

189
Product-by-Value Analysis 195
Generating New Products
Product Development

195

196

Product Development System 196


Quality Function Deployment (QFD)

196

TABLE OF CONTENTS
Organizing for Product Development

199

Manufacturability and Value Engineering


Issues for Product Design

Regulations and Industry Standards


200

201

Summary

235

Key Terms

235

Modular Design 201

Discussion Questions

Computer-Aided Design (CAD) and Computer-Aided


Manufacturing (CAM) 201

Solved Problems

Virtual Reality Technology 202

CASE STUDIES

Value Analysis 203

Problems

237
237

Green Manufacturing and Sustainability at Frito-Lay


Video Case 238

203

Purchasing Technology by Acquiring a Firm 204

Rapid Review

Joint Ventures 204

Self Test
Chapter 6

205

Make-or-Buy Decisions

206

Documents for Production

208

Product Life-Cycle Management (PLM)


Service Design

209

Adding Service Efficiency

Implications of Quality 245

211

Documents for Services 211

246

246

Total Quality Management

214

Continuous Improvement

215

Ethical Dilemma

215

Discussion Questions
Solved Problem

216
.

Product Design at Regal Marine


Rapid Review

248
p

Employee Empowerment

250

250

Just-in-Time (JIT)

252

Taguchi Concepts

252

Knowledge of TQM Tools 253

219

Temsa Global's Product Strategy

247

248

Six Sigma 249


Benchmarking

215

216

CASE STUDIES

246

ISO 9000 International Quality Standards


Ethics and Quality Management

214

Key Terms

Malcolm Baldrige National Quality Award


Cost of Quality (COQ)

Application of Decision Trees to Product


Design 212
,
Transition to Production

Quality Management and International


Standards
241

Quality and Strategy 244


Defining Quality 245

208

Process-Chain-Network (PCN) Analysis 209

Self Test

240

GLOBAL COMPANY PROFILE: ARNOLD PALMER


HOSPITAL 242

Group Technology 207

Problems

239

205

Defining a Product

Summary

235

235

Building Sustainability at the Orlando Magic's Amway


Center Video Case Study 237

Sustainability and Life Cycle Assessment


(LCA) 203

Alliances

233

International Environmental Policies and Standards 234

Robust Design 201

Product Development Continuum

Tools of TQM

219
Video Case 219

254

Check Sheets

254

Scatter Diagrams 255

221

Cause-and-Effect Diagrams 255

222

Pareto Charts 255


Supplement 5

Sustainability

Corporate Social Responsibility


Sustainability 225

223

224

256

Histograms

257

The Role of Inspection

Commons 225

257

258

When and Where to Inspect' 258

Triple Bottom Line 225


Product Design 228

Flowcharts

Statistical Process Control (SPC)

Systems View 225

Design and Production for Sustainability

11

Source Inspection
227

259

Service Industry Inspection

260

Inspection of Attributes versus Variables 260

Production Process 230

TQM in Services

Logistics 230

Summary

End-of-Life Phase 232

Key Terms

263
263

261

12

TABLE OF CONTENTS
Ethical Dilemma

Selection of Equipment

263

Discussion Questions
Solved Problem
Problems

263

264

Flowchart

264

CASE STUDIES

315

Value-Stream Mapping

316

Process Charts 317


Service Blueprinting

The Culture of Quality at Arnold Palmer Hospital


Video Case 267

318

Special Considerations for Service Process


Design 318

Quality at the Ritz-Carlton Hotel Company


Video Case 268
Rapid Review

315

315

Time-Function Mapping

266

Southwestern University: (C) 266

Self Test

314

Process Analysis and Design

Production Technology

269

321

Machine Technology 321

270

Automatic Identification Systems (AISs) and RFID 321

Supplement 6

Statistical Process Control

Statistical Process Control (SPC)

271

Process Control
Vision Systems

272

321
322

Control Charts for Variables 274

Robots

The Central Limit Theorem 274

Automated Storage and Retrieval Systems (ASRSs) 322

Setting Mean Chart Limits (x-Charts)

Automated Guided Vehicles (AGVs) 323

275

Flexible Manufacturing Systems (FMSs) 323

Setting Range Chart Limits (R-Charts) 278

Computer-Integrated Manufacturing (CIM) 323

Using Mean and Range Charts 279


Control Charts for Attributes

Technology in Services

280

Process Redesign

Managerial Issues and Control Charts 284


Process Capability

Summary

285

Process Capability Ratio (Cp)


Acceptance Sampling

Operating Characteristic Curve 288

Solved Problem

'

Problems

Average Outgoing Quality ,290


Summary

291

Solved Problems

291

Process Strategy at Wheeled Coach

293

Rapid Review

295

Self Test

299

Cecil Rice Export, Alexandria, Egypt

299

Chapter 7

Four Process Strategies

308

Bottleneck Analysis and the Theory of


Constraints 340
342

Bottleneck Management

Repetitive Focus 309

Break-Even Analysis

310

Mass Customization Focus


Process Comparison

306

Theory of Constraints

Process Focus 308

312

310

337

337

Service-Sector Demand and Capacity


Management 338

305

GLOBAL COMPANY PROFILE: HARLEY-DAVIDSON

335,

336

Capacity Considerations
Managing Demand

333

Capacity and Strategy

304

Product Focus

Capacity Planning

Design and Effective Capacity

303

Process Design

Video Case 330

331

Capacity 334

Farm to Fork: Quality at Darden Restaurants


Video Case 301
Self Test

329

332

Supplement 7

Frito-Lay's Quality-Controlled Potato Chips


Video Case 301

Rapid Review

329

Process Analysis at Arnold Palmer Hospital


Video Case 329

291

Using Software for SPC

CASE STUDIES

327

Rochester Manufacturing's Process Design

Discussion Questions

Problems

327

328

CASE STUDIES

291

Key Terms

327

Discussion Questions

287

'

326

Ethical Dilemma

286

324

326

326

Key Terms

285

Process Capability Index (Cpk)

322

342

343

Single-Product Case 343


Multiproduct Case 344

13

TABLE OF CONTENTS
Reducing Risk with Incremental Changes

346

Rapid Review

Applying Expected Monetary Value (EMV) to


Capacity Decision's 347

Self Test

Applying Investment Analysis to Strategy-Driven


Investments 348
Investment, Variable Cost, and Cash Flow 348
Net Present Value 348
Summary
Key Terms

351

Using Software for Break-Even Analysis

351

GLOBAL COMPANY PROFILE: MCDONALD'S

392
394

394

Office Layout

395

Retail Layout

397

Warehouse and Storage Layouts

399

Cross-Docking 399

CASE STUDY 357

Random Stocking 400

Capacity Planning at Arnold Palmer Hospital


Video Case 357
Self Test

391

Servicescapes 398

351

353

Rapid Review

Layout Decisions

Types of Layout

351

Discussion Questions

Problems

Chapter 9

389

390

The Strategic Importance of Layout Decisions

350

Solved Problems

Video Case 387

Customizing 400
Fixed-Position Layout

359

400

Process-Oriented Layout

360

401

Computer Software for Process-Oriented Layouts 405


Chapter 8

Location Decisions

Work Cells

361

GLOBAL COMPANY PROFILE: FEDEX 362


The Strategic Importance of Location

Staffing and Balancing Work Cells 407

364

Factors That Affect Location Decisions

The Focused Work Center and the Focused


Factory 409

365

Labor Productivity 365

Repetitive and Product-Oriented Layout

Exchange Rates and Currency Risk 367


Costs 367

406

Requirements of Work Cells 406

Assembly-Line Balancing 410


Summary

415

Political Risk, Values, and Culture 368

Key Terms

Proximity to Markets 368

Ethical Dilemma

Proximity to Suppliers 368

Discussion Questions

Proximity to Competitors (Clustering) 368

Using Software to Solve Layout Problems

Methods of Evaluating Location Alternatives

409

369

415
415

Solved Problems

415
416

417

The Factor-Rating Method 369

Problems

Locational Cost-Volume Analysis 370

CASE STUDIES 425

419

Center-of-Gravity Method 372

State Automobile License Renewals 425

Transportation Model 374

Laying Out Arnold Palmer Hospital's New Facility


Video Case 426

Service Location Strategy

374

Geographic Information Systems


Summary
Key Terms

375

Rapid Review

377

Ethical Dilemma

Self Test

430

Chapter 10 Job Design and Work Measurement

378

Using Software to Solve Location Problems


Solved Problems

429

378

Discussion Questions

Problems

Facility Layout at Wheeled Coach Video Case 427

377

379

381

CASE STUDIES 386


Finding a Location for Electronics Component
Manufacturing in Asia 386

378

431

GLOBAL COMPANY PROFILE: RUSTY WALLACE'S NASCAR


RACING TEAM 432

Human Resource Strategy for Competitive


Advantage 434
Constraints on Human Resource Strategy 434
Labor Planning

435

Locating the Next Red Lobster Restaurant


Video Case 386

Employment-Stability Policies 435

Where to Place the Hard Rock Cafe

Job Classifications and Work Rules- 436

Work Schedules 435

14

TABLE OF CONTENTS

Job Design

436

Ethics

Labor Specialization

436

455

Summary

455

Job Expansion 437

Key Terms

Psychological Components of Job Design 437

Ethical Dilemma

Self-Directed Teams 438


439

Solved Problems

Ergonomics and the Work Environment

439

Problems

442

The Visual Workplace


Labor Standards

444

Chapter 11

Rapid Review
Self Test

450

463

464

452

Managing Operations

Supply Chain Management

465

465

GLOBAL COMPANY PROFILE: DARDEN RESTAURANTS


The Supply Chain's Strategic Importance
Make-or-Buy Decisions

470

471

Measuring Supply Chain Performance

Summary
472

487

489

Ethical Dilemma

489

Discussion Questions

472

Solved Problem

Virtual Companies 473

Problems

473

489

489

490

CASE STUDIES

Risks and Mitigation Tactics 474

491

Darden's Global Supply Chains Video


Case 491

Security and JIT 475


" Managing the Integrated Supply Chain

485

485

488

Key Terms

Joint Ventures 472

Supply Chain Risk

Establishing Sustainability in Supply Chains 484

The SCOR Model

Few Suppliers 471

Keiretsu Networks

Supply Chain Management Ethics 484

Benchmarking the Supply Chain 487

471

Many Suppliers 471


Vertical Integration

Ethics and Sustainable Supply Chain


Management 484

Assets Committed to Inventory

471

Six Sourcing Strategies

466

468

Sourcing Issues: Make-or-Buy vs. Outsourcing


Outsourcing

461

Hard Rock's Human Resource Strategy


Video Case 462

Predetermined Time Standards

PART THREE

461

Jackson Manufacturing Company

444

445

Work Sampling

456

456

458

CASE STUDIES

Historical Experience 445


Time Studies

455

Discussion Questions

Motivation and Incentive Systems


Methods Analysis

455

475

Issues in Managing the Integrated Supply Chain 475

Supply Chain Management at Regal Marine


Video Case 491

Opportunities in Managing the Integrated Supply


Chain 476

Arnold Palmer Hospital's Supply Chain


Video Case 492

Building the Supply Base

478

Supplier Evaluation 478


Supplier Development
Negotiations
Contracting

Rapid Review
Self Test

493

494

478
Supplement 11

479
479

Centralized Purchasing

479

E-Procurement 480
Logistics Management

480

Shipping Systems 480


Warehousing 481
Third-Party Logistics (3PL)
Distribution Management

482
483

Supply Chain Modeling

495

Techniques for Evaluating Supply Chains 496


Evaluating Disaster Risk in the Supply Chain 496
Managing the Bullwhip Effect 498
A Bullwhip Effect Measure

499

Supplier Selection Analysis 500


Transportation Mode Analysis 501
Summary 502
Discussion Questions 502

TABLE OF CONTENTS
Solved Problems
Problems

Rapid Review
Self Test

502

Aggregate Planning Strategies

504

559

Capacity Options 559


507

Demand Options 560

508

Mixing Options to Develop a Plan 561


Methods for Aggregate Planning

Chapter 12 Managing Inventory

509

GLOBAL COMPANY PROFILE: AMAZON.COM


The Importance of Inventory

Mathematical Approaches 567

510

Aggregate Planning in Services

512

Functions of Inventory 512

Restaurants 570

Types of Inventory 512

Hospitals 570

Managing Inventory

Miscellaneous Services 570


Airline Industry 571

Record Accuracy 515


515

Revenue Management

Summary

Control of Service Inventories 517


Inventory Models

569

National Chains of Small Service Firms 5 70

513

ABC Analysis 513


Cycle Counting

562

Graphical Methods 562

Key Terms

518

574
574

Independent vs. Dependent Demand 518

Ethical Dilemma

Holding, Ordering, and Setup Costs 518

Discussion Questions

Inventory Models for Independent Demand

519

571

575
575

Using Software for Aggregate Planning

The Basic Economic Order Quantity (EOQ)


Model 519

Solved Problems

Minimizing Costs 520

CASE STUDIES 582

Problems

576

576

578

Reorder Points 524

Andrew-Carter, Inc. 582

Production Order Quantity Model 525

Using Revenue Management to Set Orlando Magic


Ticket Prices Video Case 583

Quantity Discount Models

528 '

Probabilistic Models and Safety Stock

Rapid Review

530

Self Test

Other Probabilistic Models 534


Single-Period Model

536

Fixed-Period (P) Systems


Summary
Key Terms

537

Chapter 14 Material Requirements Planning (MRP)


and ERP
587

538
538

Ethical Dilemma

GLOBAL COMPANY PROFILE: WHEELED COACH 588


538

Discussion Questions

Dependent Demand
539

Problems

539

540

Master Production Schedule 591


Accurate Inventory Records 594

CASE STUDIES 548

Purchase Orders Outstanding 594

Zhou Bicycle Company 548

Lead Times for Components 594

Parker Hi-Fi Systems 548


Managing Inventory at Frito-Lay

MRP Structure
Video Case 549

Inventory Control at Wheeled Coach


Self Test

590

Bills of Material 592

543

Rapid Review

590

Dependent Inventory Model Requirements

Using Software to Solve Inventory Problems


Solved Problems

585

586

Video Case 549

551

595

MRP Management

599

MRP Dynamics 599


MRP Limitations 599

552

Lot-Sizing Techniques
Extensions of MRP

Chapter 13 Aggregate Scheduling

553

600

604

Material Requirements Planning II (MRP II) 604

GLOBAL COMPANY PROFILE: FRITO-LAY 554

Closed-Loop MRP 605

The Planning Process

Capacity Planning 605

556

Sales and Operations Planning

557

The Nature of Aggregate Planning

558

MRP in Services

607

Distribution Resource Planning (DRP) 608

15

16

TABLE OF CONTENTS
Enterprise Resource Planning (ERP)

Rapid Review

608

ERP in the Service Sector 611


Summary
Key Terms

Self Test

611
Chapter 16 JIT, Lean Operations, and the Toyota
Production System
659

611

Ethical Dilemma

611

Discussion Questions

612

Using Software to Solve.MRP Problems


Solved Problems
Problems

612

613

616

MRP at Wheeled Coach

Video Case 620

JIT Inventory 667


623

GLOBAL COMPANY PROFILE: DELTA AIR LINES 624


The Importance of Short-Term Scheduling
Scheduling Issues

626

Scheduling Process-Focused Facilities

629

Building a Lean Organization 676


Lean Operations in Services

Input-Output Control 630

Summary

Gantt Charts 631

679

Discussion Questions

Priority Rules for Sequencing Jobs 635

Solved Problem

Critical Ratio 638


Sequencing N Jobs on Two Machines: Johnson's
Rule 639
Limitations of Rule-Based Sequencing Systems 640
Finite Capacity Scheduling (FCS)
Scheduling Services

678

Ethical Dilemma

635

Problems

680

CASE STUDIES 681


ICICIBank

681

Rapid Review

642

Self Test

Scheduling Service Employees with Cyclical


Scheduling 644

Chapter 17

645
645

Video Case 682

683

684
Maintenance and Reliability Decisions

GLOBAL COMPANY PROFILE: ORLANDO UTILITIES


COMMISSION 686

645

Discussion Questions

679

679

JIT at Arnold Palmer Hospital

641

677

678

Key Terms

Assignment Method 632

646

Using Software for Short-Term Scheduling


Problems

676

Lean Sustainability 677

629

Solved Problems

674

Standard Work Practice 675


Lean Operations

Scheduling Criteria 628

Ethical Dilemma

JIT Quality 674


Toyota Production System (TPS)
Respect for People 675

Finite and Infinite Loading 628

Sequencing Jobs

JIT Scheduling 670

Continuous Improvement 675

626

Forward and Backward Scheduling 627

Key Terms

664

JIT Layout 667

Chapter 15 Scheduling for the Short-Term

Summary

Improve Throughput 664


Just-in-Time (JIT)

JIT Partnerships 665

621

622

Loading Jobs

Just-in-Time, the Toyota Production System, and


Lean Operations 662
Remove Variability 663

When 18,500 Orlando Magic Fans Come to Dinner


Video Case 619
Rapid Review

GLOBAL COMPANY PROFILE: TOYOTA MOTOR


CORPORATION 660

Eliminate Waste 662

CASE STUDIES 619

Self Test

657

658

646

Reliability

648

689

System Reliability 689

651

Providing Redundancy 691

CASE STUDIES 654

Maintenance

Old Oregon Wood Store 654


From the Eagles to the Magic: Converting the Amway
Center Video Case 655
Scheduling at Hard Rock Cafe

The Strategic Importance of Maintenance


and Reliability 688

Video Case 656

693

Implementing Preventive Maintenance 693


Increasing Repair Capabilities 696
Autonomous Maintenance 696

685

TABLE OF CONTENTS

Total Productive Maintenance 697


Summary 697
Key Terms 697
Ethical Dilemma 697
Discussion Questions 698
Using Software to Solve Reliability Problems

PART FOUR
Module A

Solved Problems
Problems
CASE STUDY

698
700

Maintenance Drives Profits at Frito-Lay Video Case 700

698

Rapid Review 701


Self Test 702

703
Production-Mix Example 737

703

The Decision Process in Operations 704


Fundamentals of Decision Making 705
Decision Tables 706
Types of Decision-Making Environments 707
Decision Making Under Uncertainty

707

Decision Making Under Risk 708


Decision Making Under Certainty

709

Expected Value of Perfect Information (EVPI) 709

Decision Trees

698

Quantitative Modules

Decision Modeling

710

A More Complex Decision Tree 712

Diet Problem Example 738


Labor Scheduling Example 739

The Simplex Method of LP 740


Summary 741
Key Terms 741
Discussion Questions 741
Using Software to Solve LP Problems
Solved Problems 743
Problems 745
CASE STUDY 750
Quain Lawn and Garden, Inc.

The Poker Decision Process 714

Summary 715
Key Terms 715
Discussion Questions 715
Using Software for Decision Models
Solved Problems 716
Problems 718
CASE STUDY 721

Module C

715

Transportation Modeling

The Northwest-Corner Rule 756


The Intuitive Lowest-Cost Method

721

Demand Not Equal to Supply

757

727

Glickman Electronics Example 727

Graphical Solution to a Linear Programming


Problem 728
Graphical Representation of Constraints
Iso-Profit Line Solution Method
Corner-Point Solution Method

761

Degeneracy 761

725

Why Use Linear Programming? 726


Requirements of a Linear Programming
Problem 727
Formulating Linear Programming Problems

Sensitivity Report

753

The Stepping-Stone Method 758


Special Issues in Modeling 761

Linear Programming Models

Sensitivity Analysis

750

Transportation Modeling 754


Developing an Initial Solution 756

Rapid Review 723


Self Test 724
Module B

741

Rapid Review 751


Self Test 752

Warehouse Tenting at the Port of Miami

728

Summary 762
Key Terms 762
Discussion Questions 762
Using Software to Solve Transportation
Problems 762
Solved Problems 764
Problems 765
CASE STUDY 767
Custom Vans, Inc.

729

767

Rapid Review 769


Self Test 770

731

733
734

Module D

Changes in the Resources or Right-Hand-Side


Values 734
Changes in the Objective Function Coefficient

Solving Minimization Problems 735


Linear Programming Applications 737

17

735

Queuing Models

771

Queuing Theory 772


Characteristics of a Waiting-Line System
Arrival Characteristics

773

Waiting-Line Characteristics

774 ,

773

18

TABLE OF CONTENTS
Service Characteristics

775

Measuring a Queue's Performance

Queuing Costs 777


The Variety of Queuing Models

776

778

Model A (MIMI1): Single-Server Queuing Model with


Poisson Arrivals and Exponential Service Times 778
Model B (M/M/S): Multiple-Server Queuing Model
Model C (MID/1): Constant-Service-Time Model

781
786

Little's Law 787


Model D: Limited-Population Model

New England Foundry

797

The Winter Park Hotel

798

Module F

791

Rapid Review 799


Self Test 800
Module E

Learning Curves

801

What Is a Learning Curve? 802


Learning Curves in Services and Manufacturing
Applying the Learning Curve 804
Doubling Approach
Formula Approach

SMT's Negotiation with IBM

Alabama Airlines's Call Center 832

803

Rapid Review 833


Self Test 834

Bibliography

805

808

817

What Is Simulation? 818


Advantages and Disadvantages of
Simulation 819
Monte Carlo Simulation 820
Simulation and Inventory Analysis 823
Summary 825
Key Terms 825
Discussion Questions 825
Using Software in Simulation 826
Solved Problems 827
Problems 829
CASE STUDY 832

Appendix

805

Strategic Implications of Learning Curves


Limitations of Learning Curves 809

813

Modeling with Simulation

804

Learning-Curve Table Approach

810

Rapid Review 815


Self Test 816

787

Other Queuing Approaches 790


Summary 790
Key Terms 790
Discussion Questions 790
Using Software to Solve Queuing Problems
Solved Problems 791
Problems 793
CASE STUDIES 797

Summary 809
Key Terms 809
Discussion Questions 809
Using Software for Learning Curves
Solved Problems 810
Problems 811
CASE STUDY 813

Name Index
General Index

A1
B1
11
15

19

TABLE OF CONTENTS

ONLINE TUTORIALS
1.

Statistical Tools for Managers


Discrete Probability Distributions

Solved Problem T3-8


Discussion Questions T3-8
Problems T3-9

T1-1
T1 -2

Expected Value of a Discrete Probability


Distribution T1-3

4. The MODI and VAM Methods of Solving


Transportation Problems
T4-1

Variance of a Discrete Probability


Distribution T1-3

Continuous Probability Distributions


The Normal Distribution

How to Use the MODI Method

T1-4

5. Vehicle Routing and Scheduling

T2-1

Introduction

T2-2

Single Sampling
Double Sampling

T2-2

Operating Characteristic (OC) Curves T2-2


Producer's and Consumer's Risk T2-3
Average Outgoing Quality T2-5
Summary T2-6
Key Terms T2-6
Solved Problem T2-7
Discussion Questions T2-7
Problems T2-7

Converting the Constraints to Equations T3-2


Setting Up the First Simplex Tableau T3-2
Simplex Solution Procedures T3-4
Summary of Simplex Steps for Maximization
Problems T3-6
Artificial and Surplus Variables T3-7
Solving Minimization Problems T3-7
Summary T3-8
Key Terms T3-8

T5-2
T5-2

Objectives of Routing and Scheduling


Problems T5-2
Characteristics of Routing and Scheduling
Problems T5-3

T2-2

3. The Simplex Method of Linear Programming

T5-1

Service Delivery Example: Meals-for-ME

T2-2

Sequential Sampling

T4-2

Vogel's Approximation Method: Another Way to Find


an Initial Solution T4-4
Discussion Questions T4-8
Problems T4-8

T1 -7

Acceptance Sampling
Sampling Plans

T4-2

Solving the Arizona Plumbing Problem with MODI T4-2

Summary T1-7
Key Terms T1 -7
Discussion Questions
Problems T1 -7
Bibliography T1-7
2.

MODI Method

T1 -4

Classifying Routing and Scheduling Problems


Solving Routing and Scheduling Problems

Routing Service Vehicles

T5-4

T5-5

The Traveling Salesman Problem

75-5

Multiple Traveling Salesman Problem


The Vehicle Routing Problem

Scheduling Service Vehicles

T5-8

T5-9

Cluster First, Route Second Approach

T3-1

T5-3

T5-10

T5-11

The Concurrent Scheduler Approach

T5-13

Other Routing and Scheduling Problems


Summary T5-14
Key Terms T5-15
Discussion Questions T5-15
Problems T5-15
Case Study: Routing and SchedulingDf
Phlebotomists T5-17
Bibliography T5-17

T5-13