Managing operations across the supply chain 4th edition pdf

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Fourth Edition

Managing Operations Across the Supply Chain

Morgan Swink Texas Christian University

Steven A. Melnyk Michigan State University University of Newcastle (Australia)

Janet L. Hartley Bowling Green State University

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MANAGING OPERATIONS ACROSS THE SUPPLY CHAIN

Published by McGraw-Hill Education, 2 Penn Plaza, New York, NY 10121. Copyright © 2020 by McGraw-Hill Education. All rights reserved. Printed in the United States of America. 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 21 20 19

ISBN 978-1-260-54763-4 MHID 1-260-54763-9

Cover Image: Abstract Triangles Planet Earth with Ring of Binary - ©Pitju/GettyImages; Earth globe vector icon - ©Npeter/Shutterstock

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

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.

mheducation.com/highered

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The McGraw-Hill Education Series Operations and Decision Sciences

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 Fundamentals of Supply Chain Management Third Edition

Stock and Manrodt Supply Chain Management

Project Management Brown and Hyer Managing Projects: A Team-Based Approach

Larson and Gray Project Management: The Managerial Process Seventh Edition

Service Operations Management Bordoloi, Fitzsimmons, and Fitzsimmons Service Management 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 Fifteenth 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 Seventh Edition

Stevenson Operations Management Thirteenth 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, et al. Business Statistics and Analytics 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

Jaggia and Kelly Business Statistics: Communicating with Numbers Third Edition

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

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

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

McGuckian Connect Master: Business Statistics

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Dedication

To Jenni, Derek, Rachel, and Sarah, who make my life so full!

Morgan Swink

To my wife and children, Christine, Charles and Beth, for their support and patience.

To my colleagues in the United States (Dave Frayer, Randall Schaefer, Nick Little)

and in Australia (Jim Jose, Suzanne Ryan, Will Rifkin, Kevin Lyons).

To these people, this book is dedicated.

Steven A. Melnyk

To Glenn and Caleb, for their love and support.

Janet Hartley

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About the Authors

Courtesy of Morgan Swink

Morgan Swink

is Professor, Eunice and James L. West Chair of Supply Chain Management, and Executive Director of the Center for Supply Chain Innovation at the Nee- ley School of Business, Texas Christian University. He holds a BS in Mechanical Engineering from Southern Methodist University, an MBA from the University of Dallas, and a PhD in Operations Man- agement from Indiana University. Before becoming a professor, Dr. Swink worked for 10 years in a variety of manufactur- ing and product development positions at Texas Instruments Incorporated. He has co-authored three books and published over 75 articles in a variety of academic and managerial journals. Dr. Swink is formerly the Co-Editor in Chief for the Journal of Operations Management and past president of the Decision Sciences Institute.

Courtesy of Steven A. Melnyk

Steven A. Melnyk

is Professor of Operations Management at Michigan State University. Dr. Melnyk obtained his undergraduate degree from the University of Windsor and his doctor- ate from the Ivey School of Business, the University of Western Ontario. He has co- authored 21 books focusing on operations and the supply chain and has published over 90 refereed articles in numerous international and national journals. He is Associate Editor for the Journal of Busi- ness Logistics. He also is a member of sev- eral editorial advisory boards, including the International Journal of Production Research and the International Journal of Operations and Production Manage- ment. Dr. Melnyk has consulted with over 60 companies. He has also served as a member of the APICS Board of Direc- tors (2014–2016) and the APICS leader- ship team (2015). In 2017, Dr. Melnyk accepted a joint appointment as the Global Innovation Chair in Supply Chain Man- agement at the University of Newcastle, New South Wales, Australia.

Courtesy of Janet L. Hartley

Janet L. Hartley

is Professor at the Department of Manage- ment at Bowling Green State University. She received her BS in Chemical Engi- neering from the University of Missouri- Rolla, and the MBA and PhD degrees in Business Administration from the Uni- versity of Cincinnati. Prior to graduate school, she developed new products and designed new manufacturing processes for the Clorox Company. She has pub- lished over 30 articles on supply man- agement and supply chain management. She serves as an Associate Editor for the Journal of Operations Management, Journal of Business Logistics, Journal of Supply Chain Management, International Journal of Operations and Production Management, and Journal of Purchas- ing and Supply Management. Dr. Hartley is president-elect of the Decision Science Institute.

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We continue to live in dynamic and exciting times. Recent years have seen many changes that have affected nearly every aspect of business, including operations management. In this fourth edition of our book, we continue to reflect key shifts in operations management, including transitions:

• From a focus on the internal system to a focus on the supply chain. In today’s highly competitive busi- ness environment, organizations must leverage the capabilities of their suppliers and customers. Opera- tions managers must look beyond the “four walls” of the firm and take an integrated supply chain perspec- tive of operations.

• From a local focus to a global focus. As Thomas L. Friedman pointed out,1 the world is indeed flat. Business solutions generated in Argentina are used to meet needs in the United States, and parts built by suppliers located in China are used to assemble cars in Canada. Commercial needs have overcome, to a large part, national borders, presenting new opportu- nities and challenges for operations managers.

• From an emphasis on tools and techniques to an emphasis on systems, people, and processes. To be successful, operations managers must think more broadly than just the application of analyti- cal tools and techniques. They must take a systems view to address important managerial issues such as designing processes, working with people, managing information flows, and building interorganizational relationships.

• From myopic pursuit of profit to a holistic pursuit of sustainability. Pressures on businesses have risen to the point that they can no longer ignore or give only lipservice to social and environmental issues. Operations managers have to balance the profit motive with the need to protect and even strengthen both people and the planet.

• From a static to a dynamic treatment of oper- ations and supply chain management. We have revised each new edition to keep pace with changes taking place in the field. In recent years, very evident changes include the emergence of millennials as key

consumers and the rapid developments taking place in digital technologies. Consequently, in this edition, we introduce a new theme: digital. While the basics remain the same, the context in which operations are managed continues to change rapidly.

Managing Operations Across the Supply Chain pro- vides a global, supply chain perspective of operations man- agement for students in introductory courses in operations management and in supply chain management courses that do not require an operations management prerequisite. While the book is primarily written for undergraduates, it also can be used effectively in MBA courses. There are several features that help to differentiate this book in its view of operations management:

• Broader Vision of Operations Management While many operations management textbooks have revised or added a chapter to address supply chain issues, we developed our book from the ground up to effectively integrate operations management and the supply chain. The primary focus of the book is operations management, but we provide a “supply chain” per- spective. Operations management cuts across a firm’s boundaries, bringing together its internal activities with the operations of customers, suppliers, and other partners around the world. We clarify the functional roles of operations, supply management, and logistics while examining the integrative processes that make up the supply chain. One unique aspect of the book is that we examine both the upstream (supply-side) and downstream (demand-side) aspects of the supply chain, including a discussion of marketing and cus- tomer relationships.

• Balanced Treatment The book balances the quanti- tative and qualitative coverage needed to equip opera- tions and supply chain managers for the challenges and opportunities they face. It describes and applies analytical tools that operations managers use to support decision making. However, we also address the important managerial issues such as systems, people, and processes that are critical in a supply chain context.

Preface

1Thomas L. Friedman, The World Is Flat: A Brief History of the Twenty-First Century (New York: Farrar, Straus, and Giroux, 2006).

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entire chapter to sustainability, while also incor- porating it throughout the book.

• Real, Integrated Examples The book brings opera- tions and supply chain management to life through opening vignettes, Get Real highlights, and rich examples throughout the book.

Managing Operations Across the Supply Chain, fourth edition, offers a new, global, supply chain perspective of operations management, a treatment that embraces the foundations of operations management but includes new frameworks, concepts, and tools to address the demands of today and changing needs of the future. The book is orga- nized into five major sections:

• Part 1 Supply Chain: A Perspective for Operations Management provides an overview of operations management as a field, and describes the strategic role operations has in business from the perspective of supply chain management.

• Part 2 Foundations of Operations Management discusses foundational process concepts and princi- ples that govern all operational activities. This section examines concepts such as product/process innova- tion, quality, lean, and inventory fundamentals.

• Part 3 Integrating Relationships Across the Supply Chain deals with the primary functional relationships between internal operations management activities, and other operational functions both inside and outside the firm. This section describes customer relation- ship management, supply management, and logistics management.

• Part 4 Planning for Integrated Operations Across the Supply Chain discusses planning approaches and technologies used at different levels of opera- tions decision making. Key topics such as demand planning, forecasting, sales and operations planning, inventory management, and materials requirements planning are examined.

• Part 5 Managing Change in Supply Chain Operations discusses how operations managers use projects, change programs, and technologies to shape a sustainable future for operations and supply chain management.

CHAPTER-BY-CHAPTER REVISIONS FOR THE FOURTH EDITION In this major revision of Managing Operations Across the Supply Chain, our key objective has been to integrate and highlight the role of digital technologies throughout

• Integrative Frameworks The book introduces and develops various topics in supply chain operations management using five integrative frameworks:

1. An operations strategy framework that brings together three critical elements: (1) the key cus- tomer, (2) the value proposition, and (3) capabili- ties, introducing students to a broad supply chain perspective of operations management.

2. A foundations framework that covers process fundamentals, innovation, quality, inventory, and lean thinking.

3. A relational framework that highlights func- tional, supplier, and customer management aspects of operations management.

4. A planning framework that covers demand and supply planning at multiple levels.

5. A change management framework that illustrates how projects and future developments can be used to drive innovation in operations management.

• Use of Integrating Themes Four key themes are highlighted throughout the book: digital transforma- tion, global issues, relationships, and sustainability.

• Digital technologies such as the Internet and other communication networks, automation, and artificial intelligence are rapidly and radically changing supply chain operations management. The book

highlights numerous examples of these changes, explaining how technologies are enabling faster, better, cheaper, and richer customer experiences.

• Because most organizations have supply chains that reach beyond a home country, we examine the dynamic global environment influ- encing supply chain operations man-

agement, taking care to represent business norms and cultures in many different parts of the world.

• Operations managers must collabo- rate with other functional person- nel, with suppliers, and with customers to accomplish most

operations activities. The book showcases how to build, maintain, and benefit from cross- functional and interorganizational relationships.

• To reduce costs and be competi- tive, organizations today must adopt sustainable business prac- tices. Sustainability is increasingly becoming a key metric for opera-

tions managers, and an important expectation of customers. Accordingly, we have dedicated an

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Chapter 6 Supplement: Quality Improvement Tools • Additional discussion questions and problems.

Chapter 7: Managing Inventories • Added discussion of customization and customer

service aspects of inventory location decisions. • Additional problems applying square root law. • Added discussion of Internet of Things (IoT) and

inventory visibility in the supply chain. • Added fuller discussion of choice between using

P and Q inventory models. • New Case: Dexter’s Chicken.

Chapter 8: Lean Systems • Additional discussion questions and problems.

Chapter 9: Customer Service Management • New opening vignette on the “Amazon Effect.” • New discussion of digital enhancement of customer

service including omnichannel service, product platforms, and crowdsourcing service.

• New discussion of social (millennials) and global impacts on customers’ service expectations.

• New Get Real on service delivery failures. • New section on service information.

Chapter 10: Sourcing and Supply Management • Updated the opening vignette on sourcing and supply

management at Chipotle to reflect challenges with food safety.

• New Get Real on Resilinc and supply chain risk management.

• Updated the Get Real box on Takata airbags. • New Get Real showing how Boeing is doing more

insourcing. • Added a section on Supply Category Management. • Revised the Examining the Sourcing Process. • New Get Real showing the importance of supplier

innovation in self-driving vehicles. • Updated the discussion of information shar-

ing to reflect new digital technologies such as blockchain.

• Additional discussion questions. • Added new sourcing case.

Chapter 11: Logistics Management • Updated opening vignette about Amazon’s innova-

tions in delivery. • Moved cost management discussion to Logistics

Network Design. • Changed Warehouse Management to Distribution and

Fulfillment Management. • New Get Real on Walmart’s delivery policy.

all aspects of supply chain operations management. We also strove to make all of the content more concise and crisp. We have updated or replaced many of the opening vignettes and Get Real stories throughout the book, along with other changes, which are summarized below.

Chapter 1: Introduction to Managing Operations Across the Supply Chain • Introduced digital theme with examples illustrating

how technologies are changing operational processes. • Replaced example (now a restaurant supply chain) of

functional relationships across the supply chain. • Added new Cemex Digital Transformation case.

Chapter 2: Operations and Supply Chain Strategy • New opening vignette on Redbubble. • Added a case on Lil’ Me, a manufacturer of custom-

ized dolls that look like their owner. • Additional discussion questions and problems.

Chapter 3 and 3S: Managing Processes and Capacity • Included a better focus on the notion of process

thinking. • Additional discussion questions and problems. • Expanded alternative process mapping approaches

with the expanded coverage of techniques such as service blueprinting.

Chapter 4: Product/Process Innovation • Introduced new concepts including product service

platforms, servitization, and augmented/virtual reality (VR).

• Added new example for modular design. • New Get Real describing Lockheed’s application of VR.

Chapter 5: Manufacturing and Service Process Structures • Revised Table 5-1 to show inputs, transformation,

outputs, and examples. • New Get Real explaining how Adidas uses digital

technologies to customize shoes. • Moved service blueprinting to Chapter 3S. • Added figure to illustrate market orientation. • Updated the section Capability Enabling Technolo-

gies to reflect advances in digital technologies. • New Get Real on Amazon Go explaining how digital

technologies are changing retailing. • Updated and added a discussion question.

Chapter 6: Managing Quality • Updated the Hyundai story to include awards and

changes within the last 3 years. • Updated Get Real on food safety. • Dropped discussion of Malcolm Baldrige award. • Additional problems.

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Chapter 15 and 15S: Project Management • Updated opening Pixar vignette. • More in-depth discussion of stages in project

life cycle. • New discussion of agile project management. • New Get Real on Spray-N-Wash project. • Deeper discussion of project management software. • New example of a business case for a proposed

project.

Chapter 16: Sustainable Operations Management— Preparing for the Future • Updated Unilever vignette with achievements of zero

landfill waste. • New Get Real on Patagonia’s sustainability efforts. • Discussion of Starbucks Reserve, a new experiential

coffee store in Seattle aimed at making the experi- ence of brewing and enjoying a unique cup of coffee critical and attractive.

• Discussion of how the Internet of Things (IoT) is affecting not only the supply chain but also the busi- ness model.

• New case: “Sourcing Outside the Cage.” • Expanded discussion of the changes in customer

(specifically the advent of millennials) is changing how firms compete and how operations and supply chain management is carried out.

• Added discussion of electronic logging devices (ELDS).

• Added discussion of last mile delivery. • New Get Real explaining how logistics network

design caused a chicken shortage for KFC. • Updated and added discussion questions.

Chapter 12: Demand Planning: Forecasting and Demand Management • New opening vignette on how Walmart uses weather,

social media, and other data to forecast sales. • Get Real on how Lennox uses artificial intelligence

to improve demand planning. • Enhanced discussion of artificial intelligence. • New discussions of social media and dynamic pricing

in demand management.

Chapter 13: Sales and Operations Planning • Additional discussion questions and problems.

Chapter 14: Materials and Resource Requirements Planning • Updated opening vignette on Blue Apron, a home

meal delivery service. • Updated the Advances in Planning Systems to reflect

digital technologies. • New Get Real showing how MOD Pizza is using a

cloud-based ERP system for planning.

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We would like to express our appreciation to the people who have provided assistance in the development of this textbook. We express our sincere thanks to the following individuals for their thoughtful reviews and suggestions:

Andrew Borchers, Lipscomb University Bertie Greer, Wayne State University Brian Jacobs, Michigan State University Bruce A. Meyer, Bowling Green State University David Dobrzykowski, Bowling Green State University Dennis McCahon, Northeastern University Edward D. Walker, Valdosta State University Helen Eckmann, Brandman University Iddrisu Awudu, Quinnipiac University Jeanetta Chrystie, Southwest Minnesota State University Jeff Brand, Marquette University Jiayi Kate Li, Suffolk University John Edward Carroll, Wesleyan University John R. Grandzol, Bloomsburg University Karen Eboch, Bowling Green State University Kelwyn DSouza, Hampton University Madeleine Pullman, Portland State University Narendra K. Rustagi, Howard University Nicoleta Maghear, Hampton University Richard Parrish, Liberty University Rick Bonsall, McKendree University Rosa Oppenheim, Rutgers University Samuel Chinnis, Guilford Technical Community College Sandra Obilade, Brescia University Stephen Hill, University of North Carolina, Wilmington

William Sawaya, Bowling Green State University Xiaowen Huang, Miami University, Ohio Yao Jin, Miami University

We also want to express our sincere thanks to the following individuals for their exceptional contributions: Katherine Eboch, Bowling Green State University; William Berry, Professor Emeritus, Queens College; David Weltman, Texas Christian University; Frank Novakowski, Davenport University; and Jody Wolfe, Clarke University.

We want to thank the outstanding McGraw-Hill Edu- cation production and marketing team who made this book possible, including Harper Christopher, executive market- ing manager; Chuck Synovec, director; Tim Vertovec, man- aging director; Fran Simon and Jamie Koch, content project managers; Sandy Ludovissy, buyer; Kevin Moran, digital content development director; Egzon Shaqiri, designer; and Ann Marie Jannette, content licensing specialist.

A special thanks to our outstanding editorial team. We greatly appreciate the support, encouragement, and patience shown by Tobi Philips, our product developer. Thanks for keeping us on track! Our portfolio manager, Noelle Bathurst, provided excellent guidance and leadership throughout the process. We truly appreciate it!