Toledo custom manufacturing quality control

Please read the case study from page 455-456 in the text titled " Toledo Custom Manufacturing Quality Control". Answer the questions as thoroughly as possible at the end on page 456.

Operations Management in the Supply Chain Decisions and Cases Eighth Edition

Roger G. Schroeder Susan Meyer Goldstein Carlson School of Management University of Minnesota

Final PDF to printer

sch68106_fm_i-xxiv.indd ii 10/16/19 07:32 PM

mheducation.com/highered

OPERATIONS MANAGEMENT IN THE SUPPLY CHAIN: DECISION AND CASES, EIGHTH EDTION

Published by McGraw-Hill Education, 2 Penn Plaza, New York, NY 10121. Copyright © 2021 by McGraw-Hill Education. All rights reserved. Printed in the United States of America. Previous editions © 2018, 2013, and 2011. No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written consent of McGraw-Hill Education, including, but not limited to, in any network or other electronic storage or transmission, or broadcast for distance learning.

Some ancillaries, including electronic and print components, may not be available to customers outside the United States.

This book is printed on acid-free paper.

1 2 3 4 5 6 7 8 9 LWI 24 23 22 21 20

ISBN 978-1-260-36810-9 (bound edition) MHID 1-260-36810-6 (bound edition) ISBN 978-1-260-93700-8 (loose-leaf edition) MHID 1-260-93700-3 (loose-leaf edition)

Portfolio Manager: Noelle Bathurst Product Developers: Ryan McAndrews Marketing Manager: Harper Christopher Content Project Managers: Fran Simon/Angela Norris Buyer: Sandy Ludovissy Design: Beth Blech Content Licensing Specialists: Gina Oberbroeckling Cover Image: ©Shutterstock/Ekaphon maneechot Compositor: SPi Global

All credits appearing on page or at the end of the book are considered to be an extension of the copyright page.

Library of Congress Cataloging-in-Publication Data

Names: Schroeder, Roger G., author. | Goldstein, Susan Meyer. Title: Operations management in the supply chain decisions and cases / Roger G. Schroeder, Susan Meyer Goldstein, Carlson School of Management, University of Minnesota. Other titles: Operations management Description: Eighth edition. | New York, NY : McGraw-Hill Education, [2019] | Original edition entitled: Operations management. | Includes index. Identifiers: LCCN 2019018226| ISBN 9781260368109 (acid-free paper) | ISBN 1260368106 (acid-free paper) Subjects: LCSH: Production management. | Production management—Case studies. | Decision making. Classification: LCC TS155 .S334 2019 | DDC 658.5—dc23 LC record available at https://lccn.loc.gov/2019018226

The Internet addresses listed in the text were accurate at the time of publication. The inclusion of a website does not indicate an endorsement by the authors or McGraw-Hill Education, and McGraw-Hill Education does not guarantee the accuracy of the information presented at these sites.

Final PDF to printer

sch68106_fm_i-xxiv.indd iii 10/16/19 07:32 PM

SUPPLY CHAIN MANAGEMENT Benton Purchasing and Supply Chain Management Third Edition

Bowersox, Closs, Cooper, and Bowersox Supply Chain Logistics Management Fifth Edition

Burt, Petcavage, and Pinkerton Supply Management Eighth Edition

Johnson Purchasing and Supply Management Sixteenth Edition

Simchi-Levi, Kaminsky, and Simchi-Levi Designing and Managing the Supply Chain: Concepts, Strategies, Case Studies Third Edition

Stock and Manrodt Fundamentals of Supply Chain Management

PROJECT MANAGEMENT Brown and Hyer Managing Projects: A Team-Based Approach Larson Project Management: The Managerial Process Eighth Edition

SERVICE OPERATIONS MANAGEMENT Bordoloi, Fitzsimmons, and Fitzsimmons Service Management: Operations, Strategy, Information Technology Ninth Edition

MANAGEMENT SCIENCE Hillier and Hillier Introduction to Management Science: A Modeling and Case Studies Approach with Spreadsheets Sixth Edition

BUSINESS RESEARCH METHODS Schindler Business Research Methods Thirteenth Edition

BUSINESS FORECASTING Keating and Wilson Forecasting and Predictive Analytics Seventh Edition

LINEAR STATISTICS AND REGRESSION Kutner, Nachtsheim, and Neter Applied Linear Regression Models Fourth Edition

BUSINESS SYSTEMS DYNAMICS Sterman Business Dynamics: Systems Thinking and Modeling for a Complex World

OPERATIONS MANAGEMENT Cachon and Terwiesch Operations Management Second Edition

Cachon and Terwiesch Matching Supply with Demand: An Introduction to Operations Management Fourth Edition

Jacobs and Chase Operations and Supply Chain Management Sixteenth Edition

Jacobs and Chase Operations and Supply Chain Management: The Core Fifth Edition

Schroeder and Goldstein Operations Management in the Supply Chain: Decisions and Cases Eighth Edition

Stevenson Operations Management Fourteenth Edition

Swink, Melnyk, and Hartley Managing Operations Across the Supply Chain Fourth Edition

BUSINESS MATH Slater and Wittry Practical Business Math Procedures Thirteenth Edition

Slater and Wittry Math for Business and Finance: An Algebraic Approach Second Edition

BUSINESS STATISTICS Bowerman, Drougas, Duckworth, Froelich, Hummel, Moninger, and Schur Business Statistics in Practice Ninth Edition

Doane and Seward Applied Statistics in Business and Economics Sixth Edition

Doane and Seward Essential Statistics in Business and Economics Third Edition

Lind, Marchal, and Wathen Basic Statistics for Business and Economics Ninth Edition

Lind, Marchal, and Wathen Statistical Techniques in Business and Economics Eighteenth Edition

Jaggia and Kelly Business Statistics: Communicating with Numbers Third Edition

Jaggia and Kelly Essentials of Business Statistics: Communicating with Numbers Second Edition

McGuckian Connect Master: Business Statistics

The McGraw-Hill Education Series Operations and Decision Sciences

Final PDF to printer

sch68106_fm_i-xxiv.indd iv 10/16/19 07:32 PM

iv

Roger G. Schroeder is the Frank A. Donaldson Chair Emeritus in Supply Chain and Operations Management at the Curtis L. Carlson School of Management, University of Minnesota. He received B.S. and MSIE degrees in Industrial Engineering with high distinction from the Univer- sity of Minnesota, and a Ph.D. from Northwestern University. He held positions in the Carlson School of Management as Director of the Ph.D. program, Chair of the Operations and Management Science Department, and Co-Director of the Joseph M. Juran Center for Leadership in Quality. Professor Schroeder has obtained research grants from the National Science Foundation, the Ford Foundation, and the American Production and Inventory Control Society. His research is in the areas of quality management, operations strategy, and high-performance manufacturing, and he is among the most widely published and cited researchers in the field of operations management. He has been selected as a mem- ber of the University of Minnesota Academy of Distinguished Teachers and is a recipient of the Morse Award for outstanding teaching. Professor Schroeder received the lifetime achievement award in operations management from the Academy of Management, and he is a Fellow of the Decision Sciences Institute and a Fellow of the Production and Opera- tions Management Society. Professor Schroeder has consulted widely with numerous orga- nizations, including 3M, Honeywell, General Mills, Motorola, Golden Valley Foods, and Prudential Life Insurance Company.

Susan Meyer Goldstein is Associate Professor in the Supply Chain and Operations Department at the Curtis L. Carlson School of Management, University of Minnesota. She earned a B.S. degree in Genetics and Cell Biology and an M.B.A. at the University of Minnesota and worked in the health care industry for several years. She later obtained a Ph.D. in operations management from Fisher College of Business at The Ohio State University. She has served on the faculty at the Uni- versity of Minnesota since 1998 and was a Visiting Professor at the Olin Business School at Washington University in St. Louis for two years. Her current research and teaching interests involve service process design and management, as well as operations strategy issues. Her research has been published in Decision Sciences, Journal of Operations Management, Production and Operations Management, and Manufacturing and Service Operations Management, among others. She serves on the editorial boards of many operations and ser- vice journals. She is the recipient of several research awards and research grants, and has received the Carlson School of Management Teaching Award and the Carlson School of Management Service Award.

About the Authors

Dedication To our families, whose encouragement and love we appreciate

—Roger G. Schroeder —Susan Meyer Goldstein

Final PDF to printer

sch68106_fm_i-xxiv.indd v 10/16/19 07:32 PM

v

Preface FEATURES

Operations and supply chain management is an exciting and vital field in today’s com- plex business world. Therefore, students in both MBA and undergraduate courses have an urgent need to understand operations—an essential function in every business.

This textbook on Operations Management in the Supply Chain emphasizes decision making in operations with a supply chain orientation. The text provides materials of inter- est to general business students and operations and supply chain management majors. By stressing cross-functional decision making, the text provides a unique and current business perspective for all students. This is the first text to incorporate cross-functional decision making in every chapter, which provides more relevance for non-majors.

The book is organized into five unique sections to help students understand the key types of decisions made by operations and supply chain managers. See the illustration below.

Introduction 1. Process design - How to get work done? 2. Quality - How to satisfy customers? 3. Capacity and scheduling - When and how much work to do? 4. Inventory - How to manage parts and products? 5. Supply chain decisions - How to manage across organizations?

The text provides a balanced treatment of both service and manufacturing firms. Many books give only cursory treatment to service operations.

The most current knowledge is incorporated, including global operations, supply chain management, service blueprinting, competency-based strategy, Six Sigma, lean systems, 3D printing, blockchain technology, artificial intelligence, analytics, sustainability, and sup- ply chain risk. Complete coverage is also provided on traditional topics, including process design, service systems, quality management, ERP, inventory control, and scheduling.

Decision-making framework for operations in the supply chain.

The Firm

Process

Quality

Capacity

Inventory

Supply Chain

Decisions

Human Resources Finance

Marketing

Accounting Information

Systems

Supplier

Process

Quality

Capacity

Inventory

Supply Chain

Decisions Process

Quality

Capacity

Inventory

Supply Chain

Decisions

Distributor

Final PDF to printer

sch68106_fm_i-xxiv.indd vi 10/16/19 07:32 PM

vi Preface

While covering the concepts of operations and supply chain management in 18 chapters, the book also provides 19 case studies. A key feature of this book is learning how operations issues are tackled in real situations. The cases are intended to strengthen problem formula- tion skills and illustrate the concepts presented in the text. Long and short case studies are included. The cases are not just large problems or examples; rather, they are substantial man- agement case studies, including some from Amazon, 3M, Mayo Clinic, and Polaris Industries.

The softcover edition with fewer pages than most introductory books covers all the essen- tials students need to know about operations management in the supply chain, leaving out only superfluous and tangential topics. By limiting the size of the book, we have condensed the material to the basics. The book is also available in Connect and LearnSmart digital versions.

This book is ideal for regular operations and supply chain management courses and also case courses and modular courses. It is particularly useful for those who desire a cross- functional and decision-making perspective that reaches across the supply chain. Instructors can easily supplement the text with their own cases, readings, or course materials as desired.

The Connect Library and Instructor Resources contain 22 Excel templates designed to assist in solving analytic problems at the end of chapters and the case studies. These resources also contain technical chapters on linear programming, simulation, transportation method, and queuing, which can be assigned by the instructor, if desired. Using these resources covers all the main analytics in operations and supply chain management. The resources also have PowerPoint slides, a solutions manual, and the test bank. Access to these resources can be obtained from your McGraw-Hill sales representative or directly in the Connect Library.

Walkthrough of Key Learning Features

∙ Over forty Operations Leader boxes are included in the chapters to illustrate current practices implemented by leading firms

Confirming Pages

sch68106_ch04_053-075.indd 68 05/07/19 07:21 PM

68 Part Two Process Design

design of the eyewear by taking a digital photo of the customer and recommending a style of lenses that fits the customer’s face. An optometrist then adjusts the lenses to fit the cus- tomer’s preference. Finally, the customer selects options for nose bridges, hinges, and arms for the frame. The customer receives a photo of the proposed eyewear. Finally, a technician makes the lenses and frames at the store within one hour.

There are three forms of mass customization:

1. Modular production and assemble-to-order (ATO). 2. Fast changeover (nearly zero setup time between orders). 3. Postponement of options.

Modular production can provide a variety of options by using an assemble-to-order process. For example, when Dell receives a computer order, the company assembles stan- dard modules or components rapidly to fulfill the customer’s order. The order is then shipped and the customer receives it in a few days. But this requires modular design, as well as modular production. Dell also uses the same process to make standard computers for stock and shipment to retail stores.

Fast changeover is the form of mass customization used by Paris Miki for its glasses, where moving from one customer order to the next is very quick, with little or no setup between them. In this case, it is critical that each order is uniquely identified by a bar code, or other identifier, that specifies the customer’s options. It is also essential to have nearly zero changeover time on equipment so that a lot size of a single unit can be produced economically.

Postponement is used to defer a portion of the production until the point of delivery. For example, customized T-shirt shops can put a unique design on a T-shirt at the point of purchase. Hewlett-Packard printers receive their final configuration for various volt- ages and power supplies at U.S. or overseas warehouses before delivery. Postponement makes it possible to ship standard units anywhere in the world and customize them at the last minute.

From a manufacturing point of view, mass customization has changed the dynamics of the product-process matrix. Flexible automation makes it possible to make small lot sizes along with large lot sizes without a great cost penalty. Thus, with mass customiza- tion a firm can operate over a wider range of product choices without major changes to its

Shoes with a customized “fit” are significantly more elusive. While there are firms offering custom-fitted shoes, they sell at prices reflecting the significant work to individually size the shoe, most likely performed in a job shop. These shoes are cus- tom, but not mass customized.

Mass customization gives custom- ers many options, as well as the enjoyment of designing and using a product with their own personal stamp on it.

Nike and Nike-owned Converse, among other athletic shoe brands, offer customized shoes that can be ordered online for a reasonable price and delivered within a few weeks. Customers can select from numerous fabric or leather colors and patterns on various pieces of the shoe, as well as the colors of laces, stitching, and soles. These shoes, with their many customizable options, are an example of successful mass customization.

Nike Does It

OPERATIONS LEADER

obsession.24k/Stockimo/Alamy Stock Photo

∙ Every function in every organization touches Operations and the Supply Chain in some manner. This is the first book to add materials in every chapter to show how topics apply to majors in Marketing, Finance, Accounting, Human Resources, and Information Systems. The hand- shake symbol indicates these cross-functional decisions.

Final PDF to printer

sch68106_fm_i-xxiv.indd vii 10/16/19 07:32 PM

Preface vii

∙ Students can both preview and review the key points and terms. These are found at the end of each chapter.

Revised Pages

sch68106_ch07_118-140.indd 132 05/16/19 11:01 AM

132 Part Two Process Design

container is being moved from A to B, two full contain- ers are sitting in the input area of work center B, and one container is being used at B. These eight containers are needed since work center A also produces parts for other work centers, machines at A may break down, and move times from A to B are not always exactly predictable.

Some companies control the movement of containers by using two types of kanban cards: production cards and withdrawal (move) cards. These cards are used to authorize production and to identify the parts in any container. Instead of using cards, production can also be controlled by kanban squares that visually signal the need for work (to fill the kanban square), or by visual control of the empty containers.

Most importantly, the kanban system is visual in nature. As empty containers accumulate, it is a clear signal that the producing work center is falling behind. When all the containers are filled, production is stopped. The production lot size is exactly equal to one container of parts. All parts are neatly placed in containers of a fixed size. All of these are visual indicators of the work that should be done or stopped.

The number of containers needed to operate a work center is a function of the demand

formula:2

n = DT ___ C

where n = total number of containers

D = demand rate of the using work center

C = container size, in number of parts, usually less than 10 percent of daily demand

T = time for a container to complete an entire circuit: filled, wait, moved, used, and returned to be filled again (also called lead time)

2 Safety stock can be added to the numerator to account for uncertainty in demand or time.

KANBAN SQUARE AT HONEYWELL. The dashed rectangle signals the need for the production of a cabinet. Only one cabinet is placed on this square at a time. When the square is emptied by subsequent production, another cabinet is produced. ©Tulasi Ranganathan/Honeywell

Suppose demand at the receiving work center B is 2 parts per minute and a standard con- tainer holds 25 parts. It takes 100 minutes for a container to make a complete circuit from work center A to work center B and back to A again, including all setup, run, move, and wait times. The number of containers needed in this case is:

n = 2(100)

______ 25

= 8

The maximum inventory in the production system, a useful measure of how lean the system is, equal to the container size times the number of containers (200 units = 8 × 25), since the most inventory we can have is all containers filled:

Maximum inventory = nC = DT

Example

Revised Pages

sch68106_ch07_118-140.indd 138 05/16/19 11:01 AM

138 Part Two Process Design

LEARNING ENRICHMENT (for self-study or instructor assignments)

Introduction to Lean Thinking—Gemba Academy Video https://youtu.be/a255lkYgIpI 6:35

Routing Out Waste in a Hospital Video https://youtu.be/jZLtbye--sg 8:46

Lean Manufacturing Tour—5S implementation Video https://youtu.be/mqgHUwSaKj8 9:13

The Toyota Production System Video https://youtu.be/P-bDlYWuptM 4:14

Push vs. Pull with Kanban Simulation Video https://youtu.be/a7YvJB0n16I 8:48

SOLVED PROBLEMS

1. Kanban and takt time. A work center uses kanban containers that hold 300 parts. To produce enough parts to fill the container, 90 minutes of setup plus run time are needed. Moving the container to the next workstation, waiting time, processing time at the next workstation, and return of the empty container take 140 minutes. There is an overall demand rate of nine units per minute.

a. Calculate the number of containers needed for the system. b. What is the maximum inventory in the system? c. A quality team has discovered how to reduce setup time by 65 minutes. If these

changes are made, can the number of containers be reduced? d. What is the takt time for this process?

Problem

a. T is the time required for a container to complete an entire circuit, in this case 90 minutes for setup and run time plus 140 minutes to move the container through the rest of the circuit.

n = DT ÷ C = (9 × (90 + 140)) ÷ 300 = 6.9 (round up to 7)

b. Since production will stop when all the containers are full, the maximum inventory is when all containers are full, that is, nC:

nC = 7(300) = 2100

c. n = DT ÷ C = (9 × (25 + 140)) ÷ 300 = 4.95 (round up to 5), so yes, the number of containers can be reduced from 7 to 5.

d. Takt time = 1/9 minute = 60/9 seconds = 6.67 seconds. Since the process produces 9 units per minute, the takt time is 1/9 minute or 6.67 seconds per unit.

Solution

2. Kanban. Work center A produces parts that are then processed by work center B. Kanban containers used by the work centers hold 100 parts. The overall rate of demand is 4.5 parts per minute at work center B. The table below shows setup, run, move, and wait times for parts at each of the work centers.

Problem Revised Pages

Chapter 7 Lean Thinking and Lean Systems 137

sch68106_ch07_118-140.indd 137 05/16/19 11:01 AM

7.7 KEY POINTS AND TERMS

Lean concepts, principles, and tenets can be deployed to reduce waste in manufacturing and service firms. We have seen how the lean tenets create lean production systems with non-value-added activities eliminated and waste minimized. Key points in the chapter include the following:

∙ Lean thinking is a way of thinking about processes that includes five tenets: specify customer value, improve the value stream, flow the product or service, pull from the customer, and strive for perfection.

∙ The five lean tenets seek to eliminate waste by utilizing the full capability of workers and partners in continuous improvement efforts. Lean tools, or methods, are described for each of the five tenets.

∙ In manufacturing, smooth flow is ensured by a stable and level master schedule. This requires consistent daily production within the master schedule and mixed model assembly. Takt time matches the rate of output with the average demand rate in the market.

∙ Reducing lot sizes, setup times, and lead times is the key to decreasing inventories in a lean production system and ensures smooth flow. Service and administrative activities should also work toward a fast changeover from one customer to the next and a reduced lead time.

∙ The plant layout in a lean production system requires much less space and encourages evolution toward cellular or group technology layouts.

∙ A lean system requires cross-trained workers who can perform multiple tasks. A flex- ible workforce will require changing the way workers are selected, trained, evaluated, and rewarded.

∙ A kanban system is used to pull parts through the production system. A fixed number of containers is provided for each part, thus limiting the amount of work-in-process inven- tory. The pull system can also be applied in service operations by providing only what is needed when it is needed by the customer.

∙ New supplier relationships must be established to make lean production successful. Frequent deliveries and reliable quality are required. Often, long-term single-source contracts will be negotiated with suppliers.

∙ Kaizen emphasizes continuous improvement. Kaizen events are used to implement lean thinking improvements quickly in one week or less on a particular process.

∙ Lean concepts, principles, and techniques can be applied to design, manufacturing, dis- tribution, services, and the supply chain.

Key Terms Toyota Production System (TPS) 119

Just-in-Time (JIT) manufacturing 119

Lean production 119 Lean thinking 120 Waste (muda) 121 Value stream 121 Value stream

mapping 121 Gemba 121

Internal setup 128 External setup 128 Cellular manufacturing 129 Preventative maintenance 129 Cross-training 130 Respect for people 130 Kanban 130 Reducing lead time 133 Supplier relationships 133 Co-location 133 Kaizen 135

Push 123 Pull 123 Perfection 124 5 Whys 125 5S 125 Stabilizing the master

schedule 127 Uniform load 127 Takt time 127 Reducing setup time 128 Single setups 128

∙ To help practice calculations, example boxes are included within chapters and solved problems are added at the end of the chapter.

Final PDF to printer

sch68106_fm_i-xxiv.indd viii 10/16/19 07:32 PM

viii Preface

Revised Pages

Chapter 7 Lean Thinking and Lean Systems 137

sch68106_ch07_118-140.indd 137 05/16/19 11:01 AM

7.7 KEY POINTS AND TERMS

Lean concepts, principles, and tenets can be deployed to reduce waste in manufacturing and service firms. We have seen how the lean tenets create lean production systems with non-value-added activities eliminated and waste minimized. Key points in the chapter include the following:

∙ Lean thinking is a way of thinking about processes that includes five tenets: specify customer value, improve the value stream, flow the product or service, pull from the customer, and strive for perfection.

∙ The five lean tenets seek to eliminate waste by utilizing the full capability of workers and partners in continuous improvement efforts. Lean tools, or methods, are described for each of the five tenets.

∙ In manufacturing, smooth flow is ensured by a stable and level master schedule. This requires consistent daily production within the master schedule and mixed model assembly. Takt time matches the rate of output with the average demand rate in the market.

∙ Reducing lot sizes, setup times, and lead times is the key to decreasing inventories in a lean production system and ensures smooth flow. Service and administrative activities should also work toward a fast changeover from one customer to the next and a reduced lead time.

∙ The plant layout in a lean production system requires much less space and encourages evolution toward cellular or group technology layouts.

∙ A lean system requires cross-trained workers who can perform multiple tasks. A flex- ible workforce will require changing the way workers are selected, trained, evaluated, and rewarded.

∙ A kanban system is used to pull parts through the production system. A fixed number of containers is provided for each part, thus limiting the amount of work-in-process inven-

is needed when it is needed by the customer. ∙ New supplier relationships must be established to make lean production successful.

Frequent deliveries and reliable quality are required. Often, long-term single-source contracts will be negotiated with suppliers.

∙ Kaizen emphasizes continuous improvement. Kaizen events are used to implement lean thinking improvements quickly in one week or less on a particular process.

∙ Lean concepts, principles, and techniques can be applied to design, manufacturing, dis- tribution, services, and the supply chain.

Key Terms Toyota Production System (TPS) 119

Just-in-Time (JIT) manufacturing 119

Lean production 119 Lean thinking 120 Waste (muda) 121 Value stream 121 Value stream

mapping 121 Gemba 121

Internal setup 128 External setup 128 Cellular manufacturing 129 Preventative maintenance 129 Cross-training 130 Respect for people 130 Kanban 130 Reducing lead time 133 Supplier relationships 133 Co-location 133 Kaizen 135

Push 123 Pull 123 Perfection 124 5 Whys 125 5S 125 Stabilizing the master

schedule 127 Uniform load 127 Takt time 127 Reducing setup time 128 Single setups 128

∙ Twenty-two Excel spreadsheets are included for solving problems and analyzing case studies using analytic methods.

Revised Pages

sch68106_ch09_163-188.indd 188 06/08/19 11:44 AM

188 Part Three Quality

a. Using this five-day sample, is the process of the fish supplier in control in average and range?

b. How can the supplier more carefully control the pro- cess to provide 100 pounds of fish each day?

11. As cereal boxes are filled in a factory, they are weighed for their contents by an automatic

scale. The target value is to put 10 ounces of cereal in each box. Twenty samples of three boxes each have been weighed for quality control purposes. The fill weight for each box is shown below.

a. Calculate the center line and control limits for the _ x