My compliments to the chef er robot

Operations Management

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William J. Stevenson Saunders College of Business

Rochester Institute of Technology

Operations Management Twelfth Edition

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www.mhhe.com

This book is dedicated to you.

OPERATIONS MANAGEMENT, TWELFTH EDITION

Published by McGraw-Hill Education, 2 Penn Plaza, New York, NY 10121. Copyright © 2015 by McGraw-Hill Education. All rights reserved. Printed in the United States of America. Previous editions © 2012, 2009, and 2007. 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 0 DOW/DOW 1 0 9 8 7 6 5 4

ISBN 978-0-07-802410-8 MHID 0-07-802410-2

Senior Vice President, Products & Markets: Kurt L. Strand Vice President, Content Production & Technology Services: Kimberly Meriwether David Managing Director: Douglas Reiner Senior Brand Manager: Thomas Hayward Executive Director of Development: Ann Torbert Senior Development Editor: Wanda J. Zeman Director of Digital Content: Doug Ruby Digital Development Editor: Kevin Shanahan, Meg Maloney Senior Marketing Manager: Heather A. Kazakoff Director, Content Production: Terri Schiesl Content Project Manager: Kristin Bradley Content Project Manager: Rachel Townsend Buyer II: Debra R. Sylvester Design: Srdjan Savanovic Cover Image: Airlines image: © Bloomberg via Getty Images; Apple store image: © FP/Getty Images; Surgeons: © Michie Turpin/Piedmont Healthcare; Workplace image: © Jeff Gilbert/Alamy Lead Content Licensing Specialist: Keri Johnson Typeface: 10/12 Times New Roman Compositor: Laserwords Private Limited Printer: R. R. Donnelley

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.

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The McGraw-Hill Series in Operations and Decision Sciences

Operations Management

Beckman and Rosenfield, Operations, Strategy: Competing in the 21st Century, First Edition

Benton, Purchasing and Supply Chain Management, Second Edition

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

Brown and Hyer, Managing Projects: A Team-Based Approach, First Edition

Burt, Petcavage, and Pinkerton, Supply Management, Eighth Edition

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

Cooper and Schindler, Business Research Methods, Twelfth Edition

Finch, Interactive Models for Operations and Supply Chain Management, First Edition

Fitzsimmons, Fitzsimmons, and Bordoloi, Service Management: Operations, Strategy, Information Technology, Eighth Edition

Gehrlein, Operations Management Cases, First Edition

Harrison and Samson, Technology Management, First Edition

Hayen, SAP R/3 Enterprise Software: An Introduction, First Edition

Hill, Manufacturing Strategy: Text & Cases, Third Edition

Hopp, Supply Chain Science, First Edition

Jacobs, Berry, Whybark, and Vollmann, Manufacturing Planning & Control for Supply Chain Management, Sixth Edition

Jacobs and Chase, Operations and Supply Management: The Core, Third Edition

Jacobs and Chase, Operations and Supply Management, Fourteenth Edition

Jacobs and Whybark, Why ERP? First Edition

Larson and Gray, Project Management: The Managerial Process, Sixth Edition

Leenders, Johnson, and Flynn, Purchasing and Supply Management, Fourteenth Edition

Olson, Introduction to Information Systems Project Management, Second Edition

Schroeder, Goldstein, Rungtusanatham, Operations Management: Contemporary Concepts and Cases, Sixth Edition

Seppanen, Kumar, and Chandra, Process Analysis and Improvement, First Edition

Simchi-Levi, Kaminsky, and Simchi-Levi, Designing and Managing the Supply

Chain: Concepts, Strategies, Case Studies, Third Edition

Sterman, Business Dynamics: Systems Thinking and Modeling for Complex World, First Edition

Stevenson, Operations Management, Twelfth Edition

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

Thomke, Managing Product and Service Development: Text and Cases, First Edition

Ulrich and Eppinger, Product Design and Development, Fourth Edition

Zipkin, Foundations of Inventory Management, First Edition

Quantitative Methods and Management Science

Hillier and Hillier, Introduction to Management Science: A Modeling and Case Studies Approach with Spreadsheets, Fifth Edition

Stevenson and Ozgur, Introduction to Management Science with Spreadsheets, First Edition

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vii

• New material and more emphasis have been devoted to these topics:

Service Supply chain management Sustainability Step-by-step problem solving

• Throughout the text, there are new, updated readings, and photos to provide students with a motivating view of the critical importance of operations management today.

• Connect Plus for Operations Management is now available with LearnSmart, McGraw-Hill’s adaptive learning component. LearnSmart provides assignable modules that help students master core concepts and come to class better prepared.

Acknowledgments I want to thank the many contributors to this edition. Review- ers and adopters of the text have provided a “continuously improving” wealth of ideas and suggestions. It is encourag- ing to me as an author. I hope all reviewers and readers will know their suggestions were valuable, were carefully consid- ered, and are sincerely appreciated. The list includes post- publication reviewers.

Robert Aboolian, California State University— San Marcos

Pamela Barnes, Kansas State University

Greg Bier, University of Missouri

Gary Black, University of Southern Indiana

Jeff Brand, Marquette University

Cenk Caliskan, Utah Valley University

Cem Canel, University of North Carolina—Wilmington

Jen-Yi Chen, Cleveland State University

Robert Clark, Stony Brook University

Dinesh Dave, Appalachian State University

Abdelghani Elimam, San Francisco State

Kurt Engemann, Iona College

Michael Fathi, Georgia Southwestern State

Warren Fisher, Stephen F. Austin State University

Gene Fliedner, Oakland University

Theodore Glickman, George Washington University

Haresh Gurnani, University of Miami

Johnny Ho, Columbus State University

Ron Hoffman, Greenville Technical College

Preface

The material in this book is intended as an introduction to the field of operations management. The topics covered include both strategic issues and practical applications. Among the topics are forecasting, product and service design, capacity planning, management of quality and quality control, inven- tory management, scheduling, supply chain management, and project management.

My purpose in revising this book continues to be to pro- vide a clear presentation of the concepts, tools, and appli- cations of the field of operations management. Operations management is evolving and growing, and I have found updating and integrating new material to be both reward- ing and challenging, particularly due to the plethora of new developments in the field, while facing the practical limits on the length of the book.

This text offers a comprehensive and flexible amount of content that can be selected as appropriate for different courses and formats, including undergraduate, graduate, and executive education.

This allows instructors to select the chapters, or portions of chapters, that are most relevant for their purposes. That flexibility also extends to the choice of relative weighting of the qualitative or quantitative aspects of the material and the order in which chapters are covered because chapters do not depend on sequence. For example, some instructors cover project management early, others cover quality or lean early, etc.

As in previous editions, there are major pedagogical fea- tures designed to help students learn and understand the material. This section describes the key features of the book, the chapter elements, the supplements that are available for teaching the course, highlights of the eleventh edition, and suggested applications for classroom instruction. By pro- viding this support, it is our hope that instructors and stu- dents will have the tools to make this learning experience a rewarding one.

What’s New in This Edition This edition has been revised to incorporate and integrate changes in the field of Operations Management, and the many suggestions for improvement received from instructors around the world who are using the text. The following are key among the revisions:

• New examples, discussion questions, and problems have been incorporated throughout.

• Some content has been rewritten or added to include current information, improve clarity and help understanding.

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viii Preface

Lisa Houts, California State University—Fresno

Stella Hua, Western Washington University

Neil Hunt, Suffolk University

Faizul Huq, Ohio University

Richard Jerz, St. Ambrose University

George Kenyon, Lamar University

Casey Kleindienst, California State University—Fullerton

John Kros, East Carolina University

Anita Lee-Post, University of Kentucky

Nancy Levenburg, Grand Valley State University

F. Edward Ziegler, Kent State University

Other contributors include accuracy checkers: Gary Black, University of Southern Indiana, Michael Godfrey, University of Wisconsin at Oshkosh, and Richard White, University of North Texas; Test Bank: Alan Cannon, University of Texas at Arlington; PowerPoints: David Cook, Old Dominion Univer- sity; Data Sets: Mehdi Kaighobadi, Florida Atlantic Univer- sity; Excel Templates and ScreenCam tutorials: Lee Tangedahl, University of Montana; Instructors Manual: Michael Godfrey.

Special thanks goes out to Larry White, Eastern Illinois University, who helped revise, design, and develop interactive content in Connect ® Operations Management for this edition:

Finally I would like to thank all the people at McGraw- Hill/Irwin for their efforts and support. It is always a plea- sure to work with such a professional and competent group of people. Special thanks go to Thomas Hayward, Senior Brand Manager; Wanda Zeman, Senior Development Editor; Kristin Bradley, Project Manager; Debra Sylvester, Buyer; Heather Kazakoff, Senior Marketing Manager; Srdjan Savanovic, Designer; Rachel Townsend, Content Project Manager; Keri Johnson, Senior Photo Research Coordinator, and many others who worked “behind the scenes.”

I would also like to thank the many reviewers of previ- ous editions for their contributions. Vikas Agrawal, Fay- etteville State University; Bahram Alidaee, University of Mississippi; Ardavan Asef-Faziri, California State Uni- versity at Northridge; Prabir Bagchi, George Washington State University; Gordon F. Bagot, California State Uni- versity at Los Angeles; Ravi Behara, Florida Atlantic Uni- versity; Michael Bendixen, Nova Southeastern; Ednilson Bernardes, Georgia Southern University; Prashanth N. Bharadwaj, Indiana University of Pennsylvania; Greg Bier, University of Missouri at Columbia; Joseph Biggs, Cal Poly State University; Kimball Bullington, Middle Ten- nessee State University; Alan Cannon, University of Texas at Arlington; Injazz Chen, Cleveland State University; Alan Chow, University of Southern Alabama at Mobile; Chrwan-Jyh, Oklahoma State University; Chen Chung, University of Kentucky; Robert Clark, Stony Brook Uni- versity; Loretta Cochran, Arkansas Tech University; Lewis Coopersmith, Rider University; Richard Crandall, Appalachian State University; Dinesh Dave, Appalachian

State University; Scott Dellana, East Carolina University; Kathy Dhanda, DePaul University; Xin Ding, University of Utah; Ellen Dumond, California State University at Ful- lerton; Richard Ehrhardt, University of North Carolina at Greensboro; Kurt Engemann, Iona College; Diane Ervin, DeVry University; Farzaneh Fazel, Illinois State Univer- sity; Wanda Fennell, University of Mississippi at Hatties- burg; Joy Field, Boston College; Warren Fisher, Stephen F. Austin State University; Lillian Fok, University of New Orleans; Charles Foley, Columbus State Community Col- lege; Matthew W. Ford, Northern Kentucky University; Phillip C. Fry, Boise State University; Charles A. Gates Jr., Aurora University; Tom Gattiker, Boise State University; Damodar Golhar, Western Michigan University; Robert Graham, Jacksonville State University; Angappa Gunas- ekaran, University of Massachusetts at Dartmouth; Haresh Gurnani, University of Miami; Terry Harrison, Penn State University; Vishwanath Hegde, California State Univer- sity at East Bay; Craig Hill, Georgia State University; Jim Ho, University of Illinois at Chicago; Seong Hyun Nam, University of North Dakota; Jonatan Jelen, Mercy Col- lege; Prafulla Joglekar, LaSalle University; Vijay Kannan, Utah State University; Sunder Kekre, Carnegie-Mellon University; Jim Keyes, University of Wisconsin at Stout; Seung-Lae Kim, Drexel University; Beate Klingenberg, Marist College; John Kros, East Carolina University; Vinod Lall, Minnesota State University at Moorhead; Ken- neth Lawrence, New Jersey Institute of Technology; Jooh Lee, Rowan University; Anita Lee-Post, University of Kentucky; Karen Lewis, University of Mississippi; Bing- guang Li, Albany State University; Cheng Li, California State University at Los Angeles; Maureen P. Lojo, Califor- nia State University at Sacramento; F. Victor Lu, St. John’s University; Janet Lyons, Utah State University; James Maddox, Friends University; Gita Mathur, San Jose State University; Mark McComb, Mississippi College; George Mechling, Western Carolina University; Scott Metlen, Uni- versity of Idaho; Douglas Micklich, Illinois State Univer- sity; Ajay Mishra, SUNY at Binghamton; Scott S. Morris, Southern Nazarene University; Philip F. Musa, University of Alabama at Birmingham; Roy Nersesian, Monmouth University; Jeffrey Ohlmann, University of Iowa at Iowa City; John Olson, University of St. Thomas; Ozgur Ozluk, San Francisco State University; Kenneth Paetsch, Cleve- land State University; Taeho Park, San Jose State Univer- sity; Allison Pearson, Mississippi State University; Patrick Penfield, Syracuse University; Steve Peng, California State University at Hayward; Richard Peschke, Minne- sota State University at Moorhead; Andru Peters, San Jose State University; Charles Phillips, Mississippi State Uni- versity; Frank Pianki, Anderson University; Sharma Pil- lutla, Towson University; Zinovy Radovilsky, California State University at Hayward; Stephen A. Raper, Univer- sity of Missouri at Rolla; Pedro Reyes, Baylor University; Buddhadev Roychoudhury, Minnesota State University

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Preface ix

at Mankato; Narendra Rustagi, Howard University; Herb Schiller, Stony Brook University; Dean T. Scott, DeVry University; Scott J. Seipel, Middle Tennessee State Uni- versity; Raj Selladurai, Indiana University; Kaushic Sen- gupta, Hofstra University; Kenneth Shaw, Oregon State University; Dooyoung Shin, Minnesota State University at Mankato; Michael Shurden, Lander University; Raymond E. Simko, Myers University; John Simon, Governors State University; Jake Simons, Georgia Southern University; Charles Smith, Virginia Commonwealth University; Ken- neth Solheim, DeVry University; Young Son, Bernard M. Baruch College; Victor Sower, Sam Houston State Uni- versity; Jeremy Stafford, University of North Alabama; Donna Stewart, University of Wisconsin at Stout; Dothang Truong, Fayetteville State University; Mike Umble, Baylor University; Javad Varzandeh, California State University

at San Bernardino; Timothy Vaughan, University of Wis- consin at Eau Claire; Emre Veral, Baruch College; Mark Vroblefski, University of Arizona; Gustavo Vulcano, New York University; Walter Wallace, Georgia State University; James Walters, Ball State University; John Wang, Mont- clair State University; Tekle Wanorie, Northwest Missouri State University; Jerry Wei, University of Notre Dame; Michael Whittenberg, University of Texas; Geoff Wil- lis, University of Central Oklahoma; Pamela Zelbst, Sam Houston State University; Jiawei Zhang, NYU; Zhenying Zhao, University of Maryland; Yong-Pin Zhou, University of Washington.

William J. Stevenson

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x

MAJOR STUDY AND LEARNING FEATURES

A number of key features in this text have been specifically designed to help introductory students learn, understand, and apply Operations concepts and problem-solving techniques.

Walkthrough

Sales of new houses and three-month lagged unemployment are shown in the following table. Determine if unemployment levels can be used to predict demand for new houses and, if so, derive a predictive equation.

Period ................................ 1 2 3 4 5 6 7 8 9 10 11

Units sold .......................... 20 41 17 35 25 31 38 50 15 19 14

Unemployment % (three-month lag) ..... 7.2 4.0 7.3 5.5 6.8 6.0 5.4 3.6 8.4 7.0 9.0

E X A M P L E 1 0 e celx

mhhe.com/stevenson12e

S O L U T I O N 1. Plot the data to see if a linear model seems reasonable. In this case, a linear model seems appropriate for the range of the data.

50

40

30

20

10

0 2 4 6 8 10

Level of unemployment (%), x

U n

it s

so ld

, y

2. Check the correlation coefficient to confirm that it is not close to zero using the Web site template, and then obtain the regression equation:

.966r � �

This is a fairly high negative correlation. The regression equation is

71.85 6.91y x� �

Note that the equation pertains only to unemployment levels in the range 3.6 to 9.0, because sample observations covered only that range.

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Examples with Solutions Throughout the text, wherever a quantitative or analytic technique is introduced, an example is included to illustrate the application of that tech- nique. These are designed to be easy to follow.

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SOLVED PROBLEMS

The tasks shown in the following precedence diagram are to be assigned to workstations with the intent of minimizing idle time. Management has designed an output rate of 275 units per day. Assume 440 minutes are available per day.

a. Determine the appropriate cycle time.

b. What is the minimum number of stations possible?

c. Assign tasks using the “positional weight” rule: Assign tasks with highest following times (including a task’s own time) first. Break ties using greatest number of following tasks.

d. Compute efficiency.

Problem 1

a c e

b d f

g h i

0.3 minute 0.2 minute 0.1 minute 0.5 minute 0.3 minute0.4 minute

0.6 minute 0.6 minute1.2 minutes

a. Cycle time Operating time

Desired output

440 minutes per day

275 units per day 1.6 minutes� � � Solution per unit

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xi

Solved Problems At the end of chapters and chapter supplements, “solved problems” are provided to illustrate problem solving and the core concepts in the chapter. These have been carefully prepared to help students understand the steps involved in solving different types of problems. The Excel logo indicates that a spreadsheet is available on the text’s Web site, to help solve the problem.

TABLE 16.5 Excel solution for Example 2a

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Excel Spreadsheet Solutions Where applicable, the examples and solved prob- lems include screen shots of a spreadsheet solution. Many of these were taken from the Excel templates, which are on the text’s website. Templates are programmed to be fully functional in Excel 2013 and earlier.

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xii

C H A P T E R

4 CHAPTER OUTLINE

4.1 Introduction, 136 What Does Product and Service Design Do? 136

Key Questions, 136

Reasons for Product or Service Design or Redesign, 137

4.2 Idea Generation, 139

4.3 Legal and Ethical Considerations, 141

4.4 Human Factors, 142

4.5 Cultural Factors, 143

4.6 Global Product and Service Design, 143

4.7 Environmental Factors: Sustainability, 144 Cradle-to-Grave Assessment, 144

End-of-Life Programs, 144

The Three Rs: Reduce, Reuse, Recycle, 144

Reduce: Value Analysis, 145

Reuse: Remanufacturing, 145

Recycle, 146

4.8 Other Design Considerations 149 Strategies for Product or Service Life Stages, 149

Degree of Standardization, 151

Designing for Mass Customization, 151

Reliability, 153

Robust Design, 154

Degree of Newness, 155

Quality Function Deployment, 155

The Kano Model, 158

4.9 Phases in Product Design and Development, 159

4.10 Designing for Production, 160 Concurrent Engineering, 160

Computer-Aided Design, 160

Production Requirements, 161

Component Commonality, 162

4.11 Service Design, 162 Overview of Service Design, 163

Differences between Service Design and Product Design, 163

Phases in the Service Design Process, 164

Service Blueprinting, 164

Characteristics of Well-Designed Service Systems, 165

Challenges of Service Design, 166

Guidelines for Successful Service Design, 166

4.12 Operations Strategy, 167

Operations Tour: High Acres Landfill, 170

Chapter Supplement: Reliability, 171

Product and Service Design

After completing this chapter, you should be able to:

LO4.1 Explain the strategic importance of product and service design.

LO4.2 Describe what product and service design does.

LO4.3 Name the key questions of product and service design.

LO4.4 Identify some reasons for design or redesign.

LO4.5 List some of the main sources of design ideas.

LO4.6 Discuss the importance of legal, ethical, and sustainability considerations in product and service design.

LO4.7 Explain the purpose and goal of life cycle assessment.

LO4.8 Explain the phrase “the 3 Rs.”

LO4.9 Briefly describe the phases in product design and development.

LO4.10 Discuss several key issues in product or service design.

LO4.11 Discuss the two key issues in service design.

LO4.12 List the characteristics of well-designed service systems.

LO4.13 List some guidelines for successful service design.

LEARNING OBJECTIVES

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The essence of a business organization is the products and services it offers, and every aspect of the organization and its supply chain are structured around those products and services. Organizations that have well-designed products or services are more likely to realize their goals than those with poorly designed products or services. Hence, organizations have a stra- tegic interest in product and service design. Product or service design should be closely tied to an organization’s strategy. It is a major factor in cost, quality, time-to-market, customer satisfaction, and competitive advantage. Consequently, marketing, finance, operations, accounting, IT, and HR need to be involved. Demand forecasts and projected costs are important, as is the expected impact on the supply chain. It is significant to note that an important cause of operations failures can be traced to faulty design. Designs that have not been well thought out, or incorrectly implemented, or instructions for assembly or usage that are wrong or unclear, can be the cause of product and service failures, leading to lawsuits, injuries and deaths, product recalls, and damaged reputations.

The introduction of new products or services, or changes to product or service designs, can have impacts throughout the organization and the entire supply chain. Some processes may change very little, while others may have to change consider- ably in terms of what they do or how and when they do it. New processes may have to be added, and some current ones may be eliminated. New suppliers and distributors may need to be found and integrated into the system, and some current suppliers and distributors may no longer be an appropriate fit. Moreover, it is necessary to take into account projected impact on demand as well as financial, marketing, and distribution implications. Because of the potential for widespread effects, taking a “big picture” systems approach early and throughout the design or redesign process is imperative to reduce the chance of missing some implications and costs, and to understand the time it will take. Likewise, input from engineering, operations, marketing, finance, accounting, and supply chains is crucial.

In this chapter you will discover insights into the design process that apply to both product and service design.

LO4.1 Explain the strategic importance of product and service design.

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CHAPTER ELEMENTS

Within each chapter, you will find the following elements that are designed to facilitate study and learning. All of these have been carefully developed over many editions and have proven to be successful.

Chapter Outlines Every chapter and supplement includes an outline of the topics covered.

Learning Objectives Every chapter and supplement lists the learning objectives to achieve when studying the chapter material. The learning objectives are also included next to the specific material in the margins of the text.

Opening Vignettes Each chapter opens with an introduction to the important operations topics covered in the chapter. This enables students to see the relevance of operations management in order to actively engage in learning the material.

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xiii

Figures and Photos The text includes photographs and graphic illustrations to support student learning and provide interest and motivation. Approximately 100 carefully selected photos highlight the twelfth edition. The photos illustrate applications of operations and supply chain concepts in many successful companies. More than 400 graphic illustrations, more than any other text in the field, are included and all are color coded with pedagogical consistency to assist students in understanding concepts.

FIGURE 6.1 Process selection and capacity planning influence system design Forecasting

Product and service design

Technological change

Facilities and equipment

Layout

Work design

Capacity Planning

Process Selection

Inputs Outputs

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A major key to Apple’s continued success is its ability to keep pushing the boundaries of innovation. Apple has demonstrated how to create growth by dreaming up products so new and ingenious that they have upended one industry after another.

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Icons Icons are included in the text, to point out relevant applications in a discussion or concept. These include: Excel icons to point out Excel applications; and ScreenCam Tutorial icons to link to the tutorials on the text’s website.

e celx www.mhhe.com/stevenson11e

e celx mhhe.com/stevenson12e SCREENCAM TUTORIAL

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5.12 OPERATIONS STRATEGY The strategic implications of capacity decisions can be enormous, impacting all areas of the organization. From an operations management standpoint, capacity decisions establish a set of conditions within which operations will be required to function. Hence, it is extremely important to include input from operations management people in making capacity decisions.

Flexibility can be a key issue in capacity decisions, although flexibility is not always an option, particularly in capital-intensive industries. However, where possible, flexibility allows an organi- zation to be agile—that is, responsive to changes in the marketplace. Also, it reduces to a certain extent the dependence on long-range forecasts to accurately predict demand. And flexibility makes it easier for organizations to take advantage of technological and other innovations. Maintaining excess capacity (a capacity cushion) may provide a degree of flexibility, albeit at added cost.

Some organizations use a strategy of maintaining a capacity cushion for the purpose of blocking entry into the market by new competitors. The excess capacity enables them to pro- duce at costs lower than what new competitors can. However, such a strategy means higher- than-necessary unit costs, and it makes it more difficult to cut back if demand slows, or to shift to new product or service offerings.

Efficiency improvements and utilization improvements can provide capacity increases. Such improvements can be achieved by streamlining operations and reducing waste. The chapter on lean operations describes ways for achieving those improvements.

Bottleneck management can be a way to increase effective capacity, by scheduling non- bottleneck operations to achieve maximum utilization of bottleneck operations.

In cases where capacity expansion will be undertaken, there are two strategies for deter- mining the timing and degree of capacity expansion. One is the expand-early strategy (i.e., before demand materializes). The intent might be to achieve economies of scale, to expand market share, or to preempt competitors from expanding. The risks of this strategy include an oversupply that would drive prices down, and underutilized equipment that would result in higher unit costs.

The other approach is the wait-and-see strategy (i.e., to expand capacity only after demand materializes, perhaps incrementally). Its advantages include a lower chance of oversupply due to more accurate matching of supply and demand, and higher capacity utilization. The key risks are loss of market share and the inability to meet demand if expansion requires a long lead time.

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gy (i.e., to expand capacity only after demand ges include a lower chance of oversupply due , and higher capacity utilization. The key risks demand if expansion requires a long lead time.

The labels are applied automatically, quite a feat, considering their complexity, size, and the hollow handle they likely encounter during application. MacDonald admits, “Label application was a challenge. We had to modify the bottle several times to accommodate the labeling machinery available.”

Source: “Dutch Boy Brushes Up Its Paints,” Packaging Digest, October 2002. Copyright © 2002 Reed Business Information. Used with permission.

Sherwin-Williams’ Dutch Boy Group has put a revolutionary spin on wall/house painting with its new square-shaped Twist & Pour ™ paint- delivery container for the Dirt Fighter interior latex paint line. The four- piece square container could be the first major change in how house paint is packaged in decades. Lightweight but sturdy, the Twist & Pour “bucket” is packed with so many conveniences, it’s next to impossible to mess up a painting project.

Winning Best of Show in an AmeriStar packaging competition spon- sored by the Institute of Packaging Professionals, the exclusive, all- plastic paint container stands almost 7½ in. tall and holds 126 oz., a bit less than 1 gal. Rust-resistant and moisture-resistant, the plastic bucket gives users a new way to mix, brush, and store paint.

A hollow handle on one side makes it comfortable to pour and [carry]. A convenient, snap-in pour spout neatly pours paint into a tray with no dripping but can be removed if desired, to allow a wide brush to be dipped into the 5¾-in.-dia. mouth. Capping the container is a large, twist-off lid that requires no tools to open or close. Molded with two lugs for a snug-finger-tight closing, the threaded cap provides a tight seal to extend the shelf life of unused paint.

While the lid requires no tools to access, the snap-off carry bail is assembled on the container in a “locked-down position” and can be pulled up after purchase for toting or hanging on a ladder. Large, nearly 4½-in.- tall label panels allow glossy front and back labels printed and UV-coated to wrap around the can’s rounded corners, for an impressive display.

Jim MacDonald, co-designer of the Twist & Pour and a packaging engineer at Cleveland-based Sherwin-Williams, tells Packaging Digest that the space-efficient, square shape is easier to ship and for retail- ers to stack in stores. It can also be nested, courtesy of a recess in the bottom that mates with the lid’s top ring. “The new design allows for one additional shelf facing on an eight-foot rack or shelf area.”

READING Dutch Boy Brushes Up Its Paints

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Operations Strategies An Operations Strategy section is included at the ends of most chapters. These sections discuss how the chapters’ concepts can be applied and how they impact the operations of a company.

Readings Readings highlight impor- tant real-world applications, provide examples of production/ operations issues, and offer further elaboration of the text material. They also provide a basis for classroom discussion and generate interest in the subject matter. Many of the end-of-chapter readings include assignment questions.

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END-OF-CHAPTER RESOURCES

For student study and review, the following items are provided at the end of each chapter or chapter supplement.

TAKING STOCK This item appears at the end of each chapter. It is intended to focus your attention on three key issues for business organizations in general, and operations management in particular. Those issues are trade-off decisions, collaboration among various functional areas of the organization, and the impact of technol- ogy. You will see three or more questions relating to these issues. Here is the first set of questions:

1. What are trade-offs? Why is careful consideration of trade-offs important in decision making?

2. Why is it important for the various functional areas of a business organization to collaborate?

3. In what general ways does technology have an impact on operations management decision making?

CRITICAL THINKING

EXERCISES

This item also will appear in every chapter. It allows you to critically apply information you learned in the chapter to a practical situation. Here is the first set of exercises:

1. Many organizations offer a combination of goods and services to their customers. As you learned in this chapter, there are some key differences between production of goods and delivery of services. What are the implications of these differences relative to managing operations?

2. Why is it important to match supply and demand? If a manager believes that supply and demand will not be equal, what actions could the manager take to increase the probability of achieving a match?

3. One way that organizations compete is through technological innovation. However, there can be downsides for both the organization and the consumer. Explain.

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1. Demand forecasts are essential inputs for many business decisions; they help managers decide how much supply or capacity will be needed to match expected demand, both within the organization and in the supply chain.

2. Because of random variations in demand, it is likely that the forecast will not be perfect, so managers need to be prepared to deal with forecast errors.

3. Other, nonrandom factors might also be present, so it is necessary to monitor forecast errors to check for nonrandom patterns in forecast errors.

4. It is important to choose a forecasting technique that is cost-effective and one that minimizes forecast error.

KEY POINTS

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1. Determine the utilization and the efficiency for each of these situations: a. A loan processing operation that processes an average of 7 loans per day. The operation has a

design capacity of 10 loans per day and an effective capacity of 8 loans per day. b. A furnace repair team that services an average of four furnaces a day if the design capacity is six

furnaces a day and the effective capacity is five furnaces a day. c. Would you say that systems that have higher efficiency ratios than other systems will always

have higher utilization ratios than those other systems? Explain.

2. In a job shop, effective capacity is only 50 percent of design capacity, and actual output is 80 percent of effective output. What design capacity would be needed to achieve an actual output of eight jobs per week?

3. A producer of pottery is considering the addition of a new plant to absorb the backlog of demand that now exists. The primary location being considered will have fixed costs of $9,200 per month and variable costs of 70 cents per unit produced. Each item is sold to retailers at a price that averages 90 cents. a. What volume per month is required in order to break even? b. What profit would be realized on a monthly volume of 61,000 units? 87,000 units? c. What volume is needed to obtain a profit of $16,000 per month? d. What volume is needed to provide a revenue of $23,000 per month?

PROBLEMS

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Summaries Chapters contain summaries that provide an overview of the material covered.

Key Points The key points of the chapter are emphasized.

Key Terms Key terms are highlighted in the text and then repeated in the margin with brief definitions for emphasis. They are listed at the end of each chapter (along with page references) to aid in reviewing.

Discussion and Review Questions Each chapter and each supplement have a list of discussion and review questions. These precede the problem sets and are intended to serve as a student self-review or as class dis- cussion starters.

Problem Sets Each chapter includes a set of problems for assignment. The problems have been refined over many editions and are intended to be challenging but doable for students. Short answers to most of the problems are included in Appendix A so that students can check their understanding and see immedi- ately how they are progressing.

Taking Stock and Critical Thinking Exercises These activities encourage analytical thinking and help broaden conceptual understanding. A question related to ethics is included in the Critical Thinking Exercises.

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Bruegger's Bagel Bakery makes and sells a variety of bagels, includ- ing plain, onion, poppyseed, and cinnamon raisin, as well as assorted flavors of cream cheese. Bagels are the major source of revenue for the company.

The bagel business is a $3 billion industry. Bagels are very popular with consumers. Not only are they relatively low in fat, they are filling, and they taste good! Investors like the bagel industry because it can be highly profitable: it only costs about $.10 to make a bagel, and they can be sold for $.50 each or more. Although some bagel companies have done poorly in recent years, due mainly to poor management, Brueg- ger's business is booming; it is number one nationally, with over 450 shops that sell bagels, coffee, and bagel sandwiches for takeout or on- premise consumption. Many stores in the Bruegger's chain generate an average of $800,000 in sales annually.

Production of bagels is done in batches, according to flavor, with each flavor being produced on a daily basis. Production of bagels at Bruegger's begins at a processing plant, where the basic ingredients of flour, water, yeast, and flavorings are combined in a special mixing machine. After the dough has been thoroughly mixed, it is transferred to another machine that shapes the dough into individual bagels. Once the bagels have been formed, they are loaded onto refrigerated trucks for shipping to individual stores. When the bagels reach a store, they

output at each step in the process. At the stores, employees are instructed to watch for deformed bagels and to remove them when they find them. (Deformed bagels are returned to a processing plant where they are sliced into bagel chips, packaged, and then taken back to the stores for sale, thereby reducing the scrap rate.) Employees who work in the stores are care- fully chosen and then trained so that they are competent to operate the necessary equipment in the stores and to provide the desired level of service to customers.

The company operates with minimal inventories of raw materials and inventories of partially completed bagels at the plant and very little inventory of bagels at the stores. One reason for this is to maintain a high degree of freshness in the final product by continually supplying fresh product to the stores. A second reason is to keep costs down; minimal inventories mean less space is needed for storage.

Questions

1. Bruegger's maintains relatively little inventory at either its plants or its retail stores. List the benefits and risks of this policy.

2. Quality is very important to Bruegger's. a. What features of bagels do customers look at to judge their

quality?

OPERATIONS TOUR Bruegger's Bagel Bakery

(D f d b l

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Operations Tours These provide a simple “walkthrough” of an opera- tion for students, describing the company, its product or service, and its process of managing operations. Companies featured include Wegmans Food Markets, Morton Salt, Stickley Furniture, and Boeing.

Production of bagels is done in batches, according to flavor, with minimal inven

ons

gger reta

ty is hat f ality

Background Harvey Industries, a Wisconsin company, specializes in the assembly of high- pressure washer systems and in the sale of repair parts for these systems. The products range from small portable high-pressure washers to large industrial installations for snow removal from vehicles stored outdoors during the winter months. Typical uses for high-pressure water cleaning include:

Industrial customers include General Motors, Ford, Chrysler, Delta Airlines, United Parcel Service, and Shell Oil Company.

Although the industrial applications are a significant part of its sales, Harvey Industries is primarily an assembler of equipment for coin oper- ated self-service car wash systems. The typical car wash is of concrete block construction with an equipment room in the center, flanked on either side by a number of bays. The cars are driven into the bays where the owner can wash and wax the car, utilizing high-pressure hot water and liquid wax. A dollar bill changer is available to provide change for the use of the equipment and the purchase of various products from dispens- ers. The products include towels, tire cleaner, and upholstery cleaner.

CASE Harvey Industries

Automobiles Airplanes

Building maintenance Barns

Engines Ice cream plants

Lift trucks Machinery

Swimming pools

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Manufacturing manager

Sales manager

Purchasing manager

Controller

President

Stockroom foreman

Assembly foreman

Quality engineer

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Cases The text includes short cases. The cases were selected to provide a broader, more integrated thinking opportunity for students without taking a full case approach.

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INSTRUCTOR RESOURCES

Online Learning Center (OLC) www.mhhe.com/stevenson12e The Online Learning Center provides complete materials for study and review. At this book’s website, instructors have access to teaching supports such as electronic files of the ancillary materials: Solutions Manual, Instructor’s Manual, test bank, PowerPoint Lecture Slides, Digi- tal Image Library, and Excel Lecture scripts.

Instructor’s Manual. Prepared by Michael Godfrey, University of Wisconsin-Oshkosh, with contributions from William J. Stevenson, this manual includes teaching notes, chapter overview, an outline for each chapter, and solutions to the problems in the text.

Test Bank. Prepared by the Alan Cannon, University of Texas-Arlington, the Test Bank includes over 2,000 true/false, multiple-choice, and discussion questions/problems at varying levels of difficulty.

EZ Test Online. All test bank questions are available in EZ Test Online, a flexible elec- tronic testing program. The answers to all questions are given, along with a rating of the level of difficulty, chapter learning objective met, Bloom’s taxonomy question type, and the AACSB knowledge category.

PowerPoint Lecture Slides. Prepared by David Cook, Old Dominion University, the PowerPoint slides draw on the highlights of each chapter and provide an opportunity for the instructor to emphasize the key concepts in class discussions.