Preference matrix in operations management

Business Case Study

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TENTH EDITION

Operations Management PROCESSES AND SUPPLY CHAINS

GLOBAL EDITION

LEE J. KRAJEWSKI Professor Emeritus at

The Ohio State University and the University of Notre Dame

LARRY P. RITZMAN Professor Emeritus at

The Ohio State University and Boston College

MANOJ K. MALHOTRA University of South Carolina

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About the Authors Lee J. Krajewski is Professor Emeritus at The Ohio State University and Professor Emeritus at the University of Notre Dame. While at The Ohio State University, he received the University Alumni Distinguished Teaching Award and the College of Business Outstanding Faculty Research Award. He initiated the Center for Excellence in Man- ufacturing Management and served as its director for 4 years. In ad- dition, he received the National President’s Award and the National Award of Merit of the American Production and Inventory Control So- ciety. He served as president of the Decision Sciences Institute and was elected a fellow of the institute in 1988. He received the Distinguished Service Award in 2003.

Lee received his PhD from the University of Wisconsin. Over the years, he has designed and taught courses at both graduate and under-

graduate levels on topics such as operations strategy, introduction to operations management, operations design, project management, and manufacturing planning and control systems.

Lee served as the editor of Decision Sciences, was the founding editor of the Journal of Operations Management, and has served on several editorial boards. Widely published himself, Lee has contrib- uted numerous articles to such journals as Decision Sciences, Journal of Operations Management, Management Science, Production and Operations Management, International Journal of Production Research, Harvard Business Review, and Interfaces, to name just a few. He has received five best- paper awards. Lee’s areas of specialization include operations strategy, manufacturing planning and control systems, supply chain management, and master production scheduling.

Larry P. Ritzman is Professor Emeritus at The Ohio State University and Professor Emeritus at Boston College. While at The Ohio State University, he served as department chairman and received several awards for both teaching and research, including the Pace Setters’ Club Award for Outstanding Research. While at Boston College, he held the Thomas J. Galligan, Jr. chair and received the Distinguished Service Award from the School of Management. He received his doctorate at Michigan State University, having had prior industrial experience at the Babcock and Wilcox Company. Over the years, he has been privileged to teach and learn more about operations management with numerous students at all levels—undergraduate, MBA, executive MBA, and doctorate.

Particularly active in the Decision Sciences Institute, Larry has served as council coordinator, publications committee chair, track

chair, vice president, board member, executive committee member, doctoral consortium coordi- nator, and president. He was elected a fellow of the institute in 1987 and earned the Distinguished Service Award in 1996. He has received three best-paper awards. He has been a frequent reviewer, discussant, and session chair for several other professional organizations.

Larry’s areas of particular expertise are service processes, operations strategy, produc- tion and inventory systems, forecasting, multistage manufacturing, and layout. An active researcher, Larry’s publications have appeared in such journals as Decision Sciences, Journal of Operations Management, Production and Operations Management, Harvard Business Review, and Management Science. He has served in various editorial capacities for several journals.

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Manoj K. Malhotra is the Jeff B. Bates Professor in the Moore School of Business, and has served as the chairman of the Management Science Department at the University of South Carolina (USC), Columbia, since 2000. He is the founding director of the Center for Global Supply Chain and Process Management (GSCPM), which has been in opera- tion since 2005. He earned an engineering undergraduate degree from the Indian Institute of Technology (IIT), Kanpur, India, in 1983, and a PhD in operations management from The Ohio State University in 1990. He is a fellow of the Decision Sciences Institute and is certified as a fellow of the American Production and Inventory Management Society (CFPIM). Manoj has conducted seminars and consulted with firms such as Cummins Turbo Technologies, John Deere, Metso Paper, Palmetto Health Richland, Phelps Dodge, Sonoco, UCB Chemicals, Verizon, Walmart Global Logistics, and Westinghouse Nuclear Fuels Division, among others.

Apart from teaching operations management, supply chain management, and global busi- ness issues at USC, Manoj has also taught at the Terry School of Business, University of Georgia; Wirtschaftsuniversität Wien in Austria; and the Graduate School of Management at Macquarie University, Australia. His research has thematically focused on the deployment of flexible resourc- es in manufacturing and service firms, and on the interface between operations and supply chain management and other functional areas of business. His work on these and related issues has been published in refereed journals such as Decision Sciences, European Journal of Operational Research, IIE Transactions, International Journal of Production Research, Journal of Operations Management, OMEGA, and Production and Operations Management Journal. He is a recipient of the Decision Sciences Institute’s Outstanding Achievement Award for the best application paper in 1990, and the Stan Hardy Award in 2002 and 2006 for the best paper published in the field of operations management. In 2007, his co-authored study on the evolution of manufacturing plan- ning systems was a finalist for the best paper award in the Journal of Operations Management. In 2007, Manoj won the University of South Carolina Educational Foundation Award for Professional Schools, which is the university’s most prestigious annual prize for innovative research, scholar- ship, and creative achievement. More recently, he received the Decision Sciences journal best paper award for the year 2011.

Manoj has won several teaching awards, including the Michael J. Mungo Outstanding Graduate Teaching Award in 2006 from the University of South Carolina and the Alfred G. Smith Jr. Excellence in Teaching Award in 1995 from the Moore School of Business. He was voted by the students as an outstanding professor in the international MBA program by the classes of 1997, 1998, 1999, 2000, 2005, and 2008; and as the outstanding professor in the IMBA-Vienna program by the classes of 1998 and 2004. He was designated as one of the first “Master Teachers” in the Moore School of Business in 1998, and has been listed in “Who’s Who among America’s Teachers” in 1996 and 2000.

Manoj is an associate editor of Decision Sciences and senior editor for the POMS journal. He has served as the past area editor for POMS journal (2000–2003) and an associate editor for the Journal of Operations Management (2001–2010). He is an active referee for several other journals in the field, and has served as the co-editor for special focus issues of Decision Sciences (1999) and Journal of Operations Management (2002). He was the program chair for the 36th International Meeting of the Decision Sciences Institute (DSI) in San Francisco in 2005, and has also served as an associate program chair for the POMS national meeting. He has been involved in the Mid- Carolina chapter of APICS as its past president, executive board member, and as an instructor of professional level CPIM certification courses. He is a founding board member of Shingo Prize for Lean Excellence in South Carolina.

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Brief Contents PART 1 Competing with Operations 21

1 USING OPERATIONS TO COMPETE 21 SUPPLEMENT A DECISION MAKING MODELS 51 2 MANAGING EFFECTIVE PROJECTS 69

PART 2 Designing and Managing Processes 109

3 DEVELOPING A PROCESS STRATEGY 109 4 ANALYZING PROCESSES 139 5 MANAGING QUALITY 177 6 PLANNING CAPACITY 221 SUPPLEMENT B WAITING LINE MODELS 245 7 MANAGING PROCESS CONSTRAINTS 263 8 DESIGNING LEAN SYSTEMS 295

PART 3 Designing and Managing Supply Chains 327

9 MANAGING INVENTORIES 327 SUPPLEMENT C SPECIAL INVENTORY MODELS 365 10 DESIGNING EFFECTIVE SUPPLY CHAINS 379 11 LOCATING FACILITIES 405 12 INTEGRATING THE SUPPLY CHAIN 431 13 MANAGING SUSTAINABLE SUPPLY CHAINS 461 14 FORECASTING DEMAND 483 15 PLANNING AND SCHEDULING OPERATIONS 527 16 PLANNING SUFFICIENT RESOURCES 563 SUPPLEMENT D LINEAR PROGRAMMING MODELS 607

Appendix 1 NORMAL DISTRIBUTION 637

Appendix 2 TABLE OF RANDOM NUMBERS 638

Glossary 639

Name Index 653

Subject Index 657

MYOMLAB SUPPLEMENTS

SUPPLEMENT E SIMULATION E-1

SUPPLEMENT F FINANCIAL ANALYSIS F-1

SUPPLEMENT G ACCEPTANCE SAMPLING PLANS G-1

SUPPLEMENT H MEASURING OUTPUT RATES H-1

SUPPLEMENT I LEARNING CURVE ANALYSIS I-1

SUPPLEMENT J OPERATIONS SCHEDULING J-1

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Contents

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Preface 13

PART 1 Competing with Operations 21

1 USING OPERATIONS TO COMPETE 21

Scholastic and Harry Potter 21 Operations and Supply Chain Management across

the Organization 22 Historical Evolution of Operations and

Supply Chain Management 23 A Process View 24

How Processes Work 24 Nested Processes 25 Service and Manufacturing Processes 25

The Supply Chain View 26 Core Processes 27 Support Processes 27 Operations Strategy 27 Corporate Strategy 28 Market Analysis 30

Competitive Priorities and Capabilities 31 Order Winners and Qualifiers 31 Using Competitive Priorities: An Airline Example 33

Operations Strategy as a Pattern of Decisions 35 Trends in Operations Management 36

Productivity Improvement 36 Global Competition 37

Managerial Practice 1.1 Japanese Earthquake and its Supply Chain Impact 39

Ethical, Workforce Diversity, and Environmental Issues 39

Operations Management as a Set of Decisions 40 Computerized Decision-Making Tools 41

Addressing the Challenges in Operations Management 41

Part 1: Competing with Operations 41 Part 2: Designing and Managing Processes 41 Part 3: Designing and Managing Supply

Chains 42 Adding Value with Process Innovation in

Supply Chains 42 Managerial Practice 1.2 Zara–“Fast Fashion”

Operational Innovation 42 Learning Goals in Review 43 MyOMLab Resources 43 Key Equation 43 Key Terms 44 Solved Problems 44 Discussion Questions 45 Problems 46 Advanced Problems 47 Active Model Exercise 48

Video Case Operations as a Competitive Weapon at Starwood 49

Case Theorganicgrocer.com 49 Selected References 50

SUPPLEMENT A Decision Making Models 51

Break-Even Analysis 51 Evaluating Services or Products 52 Evaluating Processes 53

Preference Matrix 55 Decision Theory 56

Decision Making under Certainty 56 Decision Making under Uncertainty 57 Decision Making under Risk 58

Decision Trees 59 Learning Goals in Review 61 MyOMLab Resources 61 Key Equations 62 Key Terms 62 Solved Problems 62 Problems 65 Selected References 68

2 MANAGING EFFECTIVE PROJECTS 69

XBOX 360 69 Project Management across the Organization 71 Defining and Organizing Projects 71

Defining the Scope and Objectives of a Project 71 Selecting the Project Manager and Team 72 Recognizing Organizational Structure 72

Planning Projects 73 Defining the Work Breakdown Structure 73 Diagramming the Network 74 Developing the Schedule 77 Analyzing Cost–Time Trade-Offs 80 Assessing Risks 84

Managerial Practice 2.1 Deadline 2004 85 Analysis 86

Monitoring and Controlling Projects 89 Monitoring Project Status 89 Monitoring Project Resources 90 Controlling Projects 90 Learning Goals in Review 91 MyOMLab Resources 91 Key Equations 92 Key Terms 92 Solved Problems 92 Discussion Questions 97 Problems 97 Advanced Problems 102 Active Model Exercise 105

Video Case Project Management at the Phoenician 106 Case The Pert Mustang 107

Selected References 108

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PART 2 Designing and Managing Processes 109

3 DEVELOPING A PROCESS STRATEGY 109

eBay 109 Process Strategy across the Organization 110

Supply Chains Have Processes 110 Processes Are Not Just in Operations 111

Process Strategy Decisions 111 Process Structure in Services 112

Nature of Service Processes: Customer Contact 112 Customer-Contact Matrix 113 Service Process Structuring 114

Process Structure in Manufacturing 114 Product-Process Matrix 114 Manufacturing Process Structuring 115 Production and Inventory Strategies 116

Layout 117 Gather Information 117 Develop a Block Plan 118 Applying the Weighted-Distance Method 118 Design a Detailed Layout 120

Customer Involvement 120 Possible Disadvantages 121 Possible Advantages 121

Resource Flexibility 122 Workforce 122 Equipment 122

Capital Intensity 122 Automating Manufacturing Processes 123 Automating Service Processes 123 Economies of Scope 124

Strategic Fit 124 Managerial Practice 3.1 DP World Steps Up International

Shipping 125 Decision Patterns for Service Processes 125 Decision Patterns for Manufacturing Processes 126 Gaining Focus 127

Strategies for Change 128 Process Reengineering 128 Process Improvement 129 Learning Goals in Review 129 MyOMLab Resources 129 Key Equations 130 Key Terms 130 Solved Problems 130 Discussion Questions 131 Problems 132 Active Model Exercise 134

Case Sims Metal Management 135 Selected References 136

4 ANALYZING PROCESSES 139 McDonald’s Corporation 139

Process Analysis across the Organization 141 A Systematic Approach 141

Step 1: Identify Opportunities 141 Step 2: Define the Scope 142 Step 3: Document the Process 142 Step 4: Evaluate Performance 142

Step 5: Redesign the Process 143 Step 6: Implement Changes 143

Documenting the Process 143 Flowcharts 143 Swim Lane Flowcharts 145 Service Blueprints 146 Work Measurement Techniques 147

Evaluating Performance 151 Data Analysis Tools 152

Redesigning the Process 155 Generating Ideas: Questioning and Brainstorming 155 Benchmarking 157 Managerial Practice 4.1 Baptist Memorial Hospital 157 Managing and Implementing Processes 158

Learning Goals in Review 160 MyOMLab Resources 160 Key Terms 161 Solved Problems 161 Discussion Questions 164 Problems 165 Advanced Problems 171 Active Model Exercise 172

Video Case Process Analysis at Starwood 172 Case José’s Authentic Mexican Restaurant 174

Selected References 175

5 MANAGING QUALITY 177 Verizon Wireless 177

Quality and Performance across the Organization 178 Costs of Quality 179

Prevention Costs 179 Appraisal Costs 179 Internal Failure Costs 179 External Failure Costs 179

Ethics and Quality 179 Total Quality Management 180

Customer Satisfaction 180 Employee Involvement 181

Managerial Practice 5.1 Quality and Performance at Omega 182

Continuous Improvement 183 Six Sigma 184

Six Sigma Improvement Model 184 Acceptance Sampling 185 Statistical Process Control 186

Variation of Outputs 186 Control Charts 189

Statistical Process Control Methods 190 Control Charts for Variables 190 Control Charts for Attributes 194

Process Capability 197 Defining Process Capability 198 Using Continuous Improvement to Determine

the Capability of a Process 199 Quality Engineering 199

International Quality Documentation Standards 201 The ISO 9001:2008 Documentation Standards 201 ISO 14000:2004 Environmental Management

System 201 ISO 26000:2010 Social Responsibility Guidelines 201 Benefits of ISO Certification 202

Baldrige Performance Excellence Program 202

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Learning Goals in Review 203 MyOMLab Resources 203 Key Equations 204 Key Terms 205 Solved Problems 205 Discussion Questions 208 Problems 209 Advanced Problems 214 Active Model Exercise 217

Video Case Process Performance and Quality at Starwood Hotels & Resorts 217

Experiential Learning Statistical Process Control with a Coin Catapult 218

Selected References 219

6 PLANNING CAPACITY 221 Sharp Corporation 221

Planning Capacity across the Organization 223 Planning Long-Term Capacity 223

Measures of Capacity and Utilization 223 Economies of Scale 224 Diseconomies of Scale 224

Capacity Timing and Sizing Strategies 225 Sizing Capacity Cushions 225 Timing and Sizing Expansion 226

Managerial Practice 6.1 Expansionist Capacity Strategy in the Ethanol Industry 227

Linking Capacity and Other Decisions 227 A Systematic Approach to Long-Term Capacity

Decisions 228 Step 1: Estimate Capacity Requirements 228 Step 2: Identify Gaps 230 Step 3: Develop Alternatives 230 Step 4: Evaluate the Alternatives 230

Tools for Capacity Planning 232 Waiting-Line Models 232 Simulation 233 Decision Trees 233 Learning Goals in Review 233 MyOMLab Resources 234 Key Equations 234 Key Terms 235 Solved Problems 235 Discussion Questions 237 Problems 237 Advanced Problems 240

Video Case Gate Turnaround at Southwest Airlines 242 Case Fitness Plus, Part A 243

Selected References 244

SUPPLEMENT B Waiting Line Models 245 Why Waiting Lines Form 245 Uses of Waiting-Line Theory 246 Structure of Waiting-Line Problems 246

Customer Population 246 The Service System 247 Priority Rule 249

Probability Distributions 249 Arrival Distribution 249 Service Time Distribution 250

Using Waiting-Line Models to Analyze Operations 250 Single-Server Model 251

Multiple-Server Model 253 Little’s Law 254 Finite-Source Model 255

Waiting Lines and Simulation 256 Decision Areas for Management 257

Learning Goals in Review 258 MyOMLab Resources 258 Key Equations 259 Key Terms 260 Solved Problem 260 Problems 260 Advanced Problems 262 Selected References 262

7 MANAGING PROCESS CONSTRAINTS 263

The Radcliffe Infirmary 263 Managing Constraints across the Organization 265 The Theory of Constraints 265

Key Principles of the TOC 266 Identification and Management of Bottlenecks 267

Managing Bottlenecks in Service Processes 267 Managing Bottlenecks in Manufacturing

Processes 268 Managerial Practice 7.1 The Drum-Buffer-Rope System

at a U.S. Marine Corps Maintenance Center 273 Managing Constraints in a Line Process 274

Line Balancing 274 Managerial Considerations 278 Learning Goals in Review 279 MyOMLab Resources 279 Key Equations 280 Key Terms 280 Solved Problems 280 Discussion Questions 282 Problems 282 Advanced Problems 285

Experiential Learning Min-Yo Garment Company 289 Video Case Constraint Management at Southwest Airlines 292

Selected References 293

8 DESIGNING LEAN SYSTEMS 295 Panasonic Corporation 295

Lean Systems across the Organization 296 Continuous Improvement Using a Lean Systems

Approach 297 Supply Chain Considerations in Lean Systems 298

Close Supplier Ties 298 Small Lot Sizes 299

Process Considerations in Lean Systems 299 Pull Method of Work Flow 299 Quality at the Source 300 Uniform Workstation Loads 301 Standardized Components and Work Methods 302 Flexible Workforce 302 Automation 302 Five S Practices 302 Total Preventive Maintenance (TPM) 303

Toyota Production System 304 House of Toyota 304

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Designing Lean System Layouts 305 One Worker, Multiple Machines 305 Group Technology 306

Value Stream Mapping 307 The Kanban System 310

General Operating Rules 311 Determining the Number of Containers 311

Other Kanban Signals 313 Operational Benefits and Implementation Issues 313

Organizational Considerations 313 Managerial Practice 8.1 Lean Systems at the University of

Pittsburgh Medical Center Shadyside 314 Process Considerations 315 Inventory and Scheduling 315 Learning Goals in Review 316 MyOMLab Resources 316 Key Equation 316 Key Terms 316 Solved Problems 317 Discussion Questions 319 Problems 319 Advanced Problems 321

Video Case Lean Systems at Autoliv 323 Case Duraweld Ltd. 324

Selected References 325

PART 3 Designing and Managing Supply Chains 327

9 MANAGING INVENTORIES 327 Inventory Management at Walmart 327

Inventory Management across the Organization 328 Inventory and Supply Chains 329

Pressures for Small Inventories 329 Pressures for Large Inventories 330 Types of Inventory 331 Inventory Reduction Tactics 333

ABC Analysis 334 Economic Order Quantity 335

Calculating the EOQ 335 Managerial Insights from the EOQ 339

Inventory Control Systems 339 Continuous Review System 340 Periodic Review System 345

Managerial Practice 9.1 The Supply Chain Implications of Periodic Review Inventory Systems at Celanese 346

Comparative Advantages of the Q and P Systems 348 Hybrid Systems 349 Learning Goals in Review 349 MyOMLab Resources 350 Key Equations 351 Key Terms 352 Solved Problems 352 Discussion Questions 356 Problems 356 Advanced Problems 360 Active Model Exercise 361

Experiential Learning Swift Electronic Supply, Inc. 361 Case Parts Emporium 363

Selected References 364

SUPPLEMENT C Special Inventory Models 365

Noninstantaneous Replenishment 365 Quantity Discounts 368 One-Period Decisions 370

Learning Goals in Review 372 MyOMLab Resources 373 Key Equations 373 Key Term 373 Solved Problems 374 Problems 376 Selected References 377

10 DESIGNING EFFECTIVE SUPPLY CHAINS 379

Nikon 379 Supply Chain Design across the Organization 381 Supply Chains for Services and Manufacturing 382

Services 382 Manufacturing 382

Measures of Supply Chain Performance 383 Inventory Measures 384 Financial Measures 385

Inventory Placement 387 Mass Customization 387

Competitive Advantages 387 Supply Chain Design for Mass Customization 388

Outsourcing Processes 389 Vertical Integration 390 Outsourcing 390

Managerial Practice 10.1 Building a Supply Chain for the Dreamliner 392

Strategic Implications 392 Efficient Supply Chains 392 Responsive Supply Chains 393 The Design of Efficient and Responsive Supply Chains 394 Learning Goals in Review 395 MyOMLab Resources 396 Key Equations 396 Key Terms 396 Solved Problem 397 Discussion Questions 397 Problems 398 Advanced Problems 398

Experiential Learning Sonic Distributors 400 Case Brunswick Distribution, Inc. 401

Selected References 403

11 LOCATING FACILITIES 405 Bavarian Motor Works (BMW) 405

Location Decisions across the Organization 407 Factors Affecting Location Decisions 407

Dominant Factors in Manufacturing 408 Dominant Factors in Services 409

Geographical Information Systems and Location Decisions 410

Managerial Practice 11.1 How Fast-Food Chains Use GIS to Select Their Sites 411

Locating a Single Facility 411 Comparing Several Sites 412

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Applying the Load–Distance Method 413 Using Break-Even Analysis 415

Locating a Facility Within a Supply Chain Network 416 Managerial Practice 11.2 General Electric’s Expansion

in India 417 The GIS Method for Locating Multiple Facilities 417 The Transportation Method 417 Learning Goals in Review 420 MyOMLab Resources 420 Key Equations 421 Key Terms 421 Solved Problems 421 Discussion Questions 424 Problems 425 Advanced Problems 428 Active Model Exercise 430 Selected References 430

12 INTEGRATING THE SUPPLY CHAIN 431

Eastman Kodak 431 Supply Chain Integration across the Organization 432 Supply Chain Dynamics 433

External Causes 434 Internal Causes 434 Implications for Supply Chain Design 434 Integrated Supply Chains 435

New Service or Product Development Process 436 Design 436 Analysis 437 Development 437 Full Launch 437

Supplier Relationship Process 437 Sourcing 438 Design Collaboration 441 Negotiation 441 Buying 442 Information Exchange 444

The Order Fulfillment Process 445 Customer Demand Planning 445 Supply Planning 445 Production 445 Logistics 445

Managerial Practice 12.1 Order Fulfillment aboard the Coral Princess 448

The Customer Relationship Process 448 Marketing 448 Order Placement 449 Customer Service 449

Levers for Improved Supply Chain Performance 450 The Levers 450 Performance Measures 451 Learning Goals in Review 451 MyOMLab Resources 451 Key Equations 452 Key Terms 452 Solved Problems 452 Discussion Questions 454 Problems 454 Advanced Problems 456

Video Case Sourcing Strategy at Starwood 458 Case Hassia Waters 459

Selected References 460

13 MANAGING SUSTAINABLE SUPPLY CHAINS 461

FedEx 461 Sustainability across the Organization 463 Supply Chains and Environmental Responsibility 463

Reverse Logistics 464 Managerial Practice 13.1 Recycling at Hewlett-Packard and

Walmart 466 Energy Efficiency 467

Supply Chains, Social Responsibility, and Humanitarian Logistics 472

Disaster Relief Supply Chains 473 Supply Chain Ethics 475

Managing Sustainable Supply Chains 477 Learning Goals in Review 477 MyOMLab Resources 477 Key Equations 478 Key Terms 478 Solved Problems 478 Discussion Questions 479 Problems 480

Video Case Supply Chain Sustainability at Clif Bar & Company 481

Selected References 482

14 FORECASTING DEMAND 483 Motorola Mobility 483

Forecasting across the Organization 485 Demand Patterns 485 Key Decisions on Making Forecasts 486

Deciding What to Forecast 486 Choosing the Type of Forecasting Technique 486 Forecast Error 487 Computer Support 490

Judgment Methods 490 Causal Methods: Linear Regression 490 Time-Series Methods 492

Naïve Forecast 493 Estimating the Average 493 Trend Projection with Regression 496 Seasonal Patterns 499

Choosing a Quantitative Forecasting Method 501 Criteria for Selecting Time-Series Methods 501 Tracking Signals 501

Using Multiple Techniques 502 Managerial Practice 14.1 Combination Forecasts and the

Forecasting Process 503 Putting It All Together: Forecasting as a Process 503

A Typical Forecasting Process 504 Adding Collaboration to the System 505 Forecasting as a Nested Process 505 Learning Goals in Review 506 MyOMLab Resources 506 Key Equations 507 Key Terms 508 Solved Problems 508 Discussion Questions 512 Problems 513 Advanced Problems 516

Video Case Forecasting and Supply Chain Management at Deckers Outdoor Corporation 520

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Case Yankee Fork and Hoe Company 522 Experiential Learning 14.1 Forecasting with Holdout

Sample 523 Experiential Learning 14.2 Forecasting a Vital Energy

Statistic 524 Selected References 525

15 PLANNING AND SCHEDULING OPERATIONS 527

Air New Zealand 527 Operations Planning and Scheduling across the

Organization 528 Stages in Operations Planning and Scheduling 529

Aggregation 529 The Relationship of Operations Plans and Schedules

to Other Plans 529 Managing Demand 531

Demand Options 531 Managerial Practice 15.1 Singapore Airlines Group 532 Sales and Operations Plans 533

Information Inputs 534 Supply Options 534 Planning Strategies 535 Constraints and Costs 536 Sales and Operations Planning as a Process 536 Using Spreadsheets 538

Scheduling 541 Gantt Charts 541 Scheduling Employees 542 Sequencing Jobs at a Workstation 545 Software Support 548 Learning Goals in Review 548 MyOMLab Resources 549 Key Terms 549 Solved Problems 550 Discussion Questions 553 Problems 553 Active Model Exercise 558

Video Case Sales and Operations Planning at Starwood 559 Case Memorial Hospital 560

Selected References 561

16 PLANNING SUFFICIENT RESOURCES 563

Dow Corning 563 Resource Planning across the Organization 564 Enterprise Resource Planning 564

How ERP Systems Are Designed 565 Material Requirements Planning 566

Dependent Demand 567 Bill of Materials 567 Master Production Scheduling 569 Inventory Record 573 Planning Factors 576 Outputs from MRP 579

Managerial Practice 16.1 Material Requirements Planning at Winnebago Industries 583

MRP, Core Processes, and Supply Chain Linkages 583 MRP and the Environment 584

Resource Planning for Service Providers 585 Dependent Demand for Services 585 Bill of Resources 586 Learning Goals in Review 587 MyOMLab Resources 587 Key Terms 588 Solved Problems 588 Discussion Questions 592 Problems 592 Advanced Problems 597 Active Model Exercise 602

Case Flashy Flashers, Inc. 602 Selected References 605

SUPPLEMENT D Linear Programming Models 607

Basic Concepts 607 Formulating a Problem 608

Graphic Analysis 610 Plot the Constraints 610 Identify the Feasible Region 612 Plot an Objective Function Line 613 Find the Visual Solution 614 Find the Algebraic Solution 614 Slack and Surplus Variables 615 Sensitivity Analysis 616

Computer Solution 616 Simplex Method 616 Computer Output 617

The Transportation Method 619 Transportation Method for Production Planning 620

Applications 623 Learning Goals in Review 624 MyOMLab Resources 624 Key Terms 624 Solved Problems 625 Discussion Questions 627 Problems 627

Case R.U. Reddie for Location 634 Selected References 636

Appendix 1 Normal Distribution 637 Appendix 2 Table of Random Numbers 638

Glossary 639 Name Index 653 Subject Index 657

MyOMLab SUPPLEMENTS SUPPLEMENT E Simulation E-1 SUPPLEMENT F Financial Analysis F-1 SUPPLEMENT G Acceptance Sampling

Plans G-1

SUPPLEMENT H Measuring Output Rates H-1 SUPPLEMENT I Learning Curve Analysis I-1 SUPPLEMENT J Operations Scheduling J-1

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Preface Creating Value through Operations Management Operations management is a vital topic that every business student needs to understand because it is at the heart of the creation of wealth for businesses and the improvement in the living standard of citizens of all countries. Operations managers are responsible for the production of services and products in an ethical and environmentally responsible way while being responsive to the market. Sound like a challenge? Add to it the need to manage supply chains of materials, information, and funds reaching to all areas of the world. While challenging, there are concepts, tools and meth- ods that managers use to deal with operating problems in a global environment. The mission of this text is to provide you with a comprehensive framework for addressing operational and supply chain issues. We accomplish this mission by using a systemized approach while focusing on is- sues of current interest to you. It is important to be efficient and capable with respect to internal processes; however, it is critical for organizations to be able to link those processes to those of their customers and their suppliers to provide competitive supply chains. This text is unique in that it builds the concept of a supply chain from the ground up. Starting with the analysis of business processes and how they relate to the overall operational goals of a firm, our text proceeds to show how these processes are integrated to form supply chains and how they can be managed to ob- tain efficient flows of materials, information, and funds. This approach reinforces the concept that supply chains are only as good as the processes within and across each firm in them.

This text has been thoroughly revised to meet your needs regardless of your major. Any man- ager needs to know the global implications of supply chains and how to make decisions in a dy- namic environment. We address these contemporary issues of interest through opening vignettes and managerial practices in each chapter. We show you the essential tools you will need to im- prove process performance. Irrespective of the industry in which you are seeking a career, pro- cesses and supply chains are analyzed from the perspective of service as well as manufacturing firms. Our philosophy is that you will learn by doing; consequently, the text has ample oppor- tunities for you to experience the role of a manager with challenging problems, cases, a library of videos customized to the individual chapters, simulations, experiential exercises, and tightly integrated online computer resources. With this text, you will develop the capability to analyze problems and support managerial decisions.

What’s New in the Tenth Edition? Since the ninth edition, we have been hard at work to make the tenth edition even better, based upon the suggestions of adopters and nonadopters. We have carefully monitored for errors in the book and all supplements. We have more figures, photos, company examples, cases, and problems to test your understanding of the material. Here are some of the highlights of the many changes:

1. Major overhaul of MyOMLab as major teaching and learning tool.

2. Five chapters devoted to supply chain management, beginning with “Managing Inventories.”

3. New Chapter 13, “Managing Sustainable Supply Chains,” which addresses critical issues such as reverse logistics, energy efficiency, disaster relief, and ethics, and provides new prob- lem-solving exercises.

4. Added “Learning Goals in Review” at the end of each chapter, which highlights where each goal is addressed in the chapter.

5. Supplement B “Simulation” is now MyOMLab Supplement E.

6. Major overhaul of references so almost all are 2005 or later, with emphasis on references that are student friendly rather than research based.

7. Updates of most Managerial Practices, giving current examples of operations management to students.

8. Continual upgrade of extensive set of software (OM Explorer, POM for Windows, Active Mod- els, and SimQuick). One such example is OM Explorer’s Time Series Solver which replaces Trend-Adjusted Exponential Smoothing with Projection with Regression, and is expanded to support holdout samples which can be used as an experiential exercise by class teams.

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9. Added MyOMLab Resources at the end of each chapter, which cross references a rich set of MyOMLab videos, advanced problems, cases, virtual tours, and internet exercises at the in- structor’s disposal.

10. Refreshment of about 20 percent of the Problems, all of which are are now fully coded and represented in the MyOMLab.

Chapter-by-Chapter Changes � Chapter Count: Relative to the ninth edition, we have added one chapter and moved one

supplement to MyOMLab, for a total of only 16 chapters and four supplements in the book and six supplements in MyOMLab. A central figure in the margin of each chapter shows how each chapter fits into our general theme of processes to supply chains.

� Part 1: Competing with Operations – The first part of the text lays the foundation for why operations management is a strategic weapon.

� Chapter 1, “Using Operations to Compete,” defines operations management and supply chain management.

� Chapter 2, “Managing Effective Projects,” opens with the product development story of Xbox 360 and shows how you can manage the projects needed to achieve efficient pro- cesses and supply chains.

� Part 2: Designing and Managing Processes – The second part of the text shows how you can design and manage the internal processes of a firm.

� Chapter 3, “Developing a Process Strategy,” brings out that supply chains also have pro- cesses through a revised opening section, explains the importance of the four key process decisions in the revised “Process Strategy Decisions” section.

� Chapter 4, “Analyzing Processes,” begins with a new opening vignette on McDonalds, and now has a section on swim lanes and a major expansion of the “Service Blueprints” section.

� Chapter 5, “Managing Quality,” with additional material on ethics and the environ ment, provides the essential statistical tools for identifying the onset of process performance problems.

� Chapter 6, “Planning Capacity,” focuses on the long-term capacity decisions that define the process capacities of the firm to do business in the future.

� Chapter 7, “Managing Process Constraints,” shows how you can get the best output rates within the process capacities you have to work with.

� Chapter 8, “Designing Lean Systems,” which now presents Value Stream Mapping (VSM) as a major tool for analyzing and improving Lean Systems, reveals the methods you can use to improve the system performance.

� Part 3: Designing and Managing Supply Chains – The third part of the text provides the tools and perspectives you will need to manage the flow of materials, information, and funds be- tween your suppliers, your firm, and your customers.

� Chapter 9, “Managing Inventories,” combines, from the ninth edition, the introductory in- ventory material of Chapter 9 with Chapter 12 to create a consistent and compact chapter on inventory.

� Chapter 10, “Designing Effective Supply Chains,” has been completely revised to focus on supply chain design, with new material on the motivation for supply chain design and out- sourcing in today’s perspective.

� Chapter 11, “Locating Facilities,” with reduced GIS coverage and the addition of the trans- portation method from the ninth edition’s Supplement D, provides guidelines and tools for finding the best location for single or multiple facilities in a supply chain.

� Chapter 12, “Integrating the Supply Chain,” by making a better connection to supply chain design and the addition of material on the implications of supply chain dynamics on sup- ply chain design, focuses on the importance of integrating processes along the supply chain, how to choose a supplier, how to determine the capacity of a logistics system, and how to design supply chains that are environmentally responsible.

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Competing with Operations

Designing and Managing Supply Chains

Designing and Managing Processes

Using Operations to Compete Managing Effective Projects

Managing Inventories Designing Effective

Supply Chains Locating Facilities

Integrating the Supply Chain Managing Sustainable

Supply Chains Forecasting Demand

Planning and Scheduling Operations

Planning Sufficient Resources

Developing a Process Strategy Analyzing Processes

Managing Quality Planning Capacity

Managing Process Constraints Designing Lean Systems

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� Chapter 13, “Managing Sustainable Supply Chains,” a completely new chapter address- ing sustainability, focuses on how supply chains can support environmental and social re- sponsibility and provides quantitative tools to analyze these issues.

� Chapter 14, “Forecasting Demand,” now has a new opening vignette about Motorola Mo- bility, a stronger discussion of the use of the Error Analysis module for POM for Windows, and has replaced the Trend-Adjusted Exponential Smoothing model with the Trend Pro- jection with Regression model.

� Chapter 15, “Planning and Scheduling Operations,” shows that operations planning and scheduling provide a link between a firm, its suppliers, and its customers to create a capa- bility that lies at the core of supply chain integration.

� Chapter 16, “Planning Sufficient Resources,” focuses on translating the demands for ser- vices and products to requirements for the resources to produce them.

� Supplements – The book also offers 4 supplements that dig deeper on technical topics, and another 6 MyOMLab supplements.

Helping You Learn

Key Features Several new additions and changes have been made to the book to retain and enhance its theme of processes and supply chains and to expand these themes through new content, Managerial Practices, Examples, and End-of-Chapter Problems and Cases. Several key features designed to help aid in the learning process are highlighted next:

Chapter Opening Vignettes engage and stimulate student interest by profiling how real compa- nies apply specific operational issues addressed in each chapter.

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McDonald’s continually seeks ways to improve its processes so as to provide better quality at a lower cost, with more sustainable resources. This effort combined with innovative menu options pays off. In September, 2011 it delivered its 100th consecutive month of positive global comparable sales. Sales were up by 3.9% in the US and 2.7% in Europe.

McDonald’s Corporation

System revenues (company-operated and franchised restaurants) at McDonald’s reached a record-high $24 billion in 2010. It has more than 32,000 restaurants around the world and 62 million customers visit them each day. It employs 1.7 million people across the globe. Its stock price in October 2011 was $89.94. Things were not so good in 2002, when customer complaints were growing more frequent and bitter. Its stock price was only $16.08 at the end of 2002. McDonald’s is now listening to the customers again, and changing its processes to reflect it. The board brought on a new CEO who had spent 20 years on the operational side of the business. With a zeal for mea- suring customer satisfaction and sharing the data freely with operators, he pulled off a turnaround that stunned everyone in the business with its speed and scope.

Initiatives were launched to collect performance measures and revamp McDonald’s processes to meet customer expectations. McDonald’s sends mystery shoppers to restaurants to conduct anonymous reviews using a hard- number scoring system. Mystery diners from outside survey firms jot down on a paper checklist their grades for speed of service; food temperature; presenta- tion and taste; cleanliness of the counter, tables and condiment islands; even whether the counter crewperson smiles at diners. Trailing six-month and year-to- date results are posted on an internal McDonald’s Web site so owners can com- pare their scores with regional averages. Operators could now pinpoint lingering problems, and performance measures focus operators’ attention on needed

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Managerial Practices provide current examples of how companies deal—either successfully or unsuccessfully—with process and supply chain issues facing them as they run their operations.

Examples demonstrate how to apply what students have learned and walk them through the solution process modeling good problem-solving techniques. These examples always close with a unique feature called Decision Point, which focuses students on the decision implications for managers.

End of Chapter Resources � Learning Goals in Review for review purposes. � MyOMLab Resources lists the resources found in MyOMLab and how those resources relate

back to the topics and discussions in the chapter.

� Key Equations for review purposes. � Key Terms for review purposes, the page references highlight where the concept was first

discussed.

� Solved Problems reinforce and help students prepare their homework assignments by detail- ing how to solve model problems with the appropriate techniques presented in the chapter.

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� Discussion Questions test student comprehension of the concepts through the use of short scenarios.

� Problems sharpen students’ quantitative skills by providing a bridge between chapter ma- terials with a wide selection of homework material. Advanced problems are also included to increase the level of difficulty. Most of the homework problems can be done manually, or stu- dents can utilize a variety of software tools through MyOMLab, which is discussed in a later section.

� Active Model Exercises enable students to use pre-created spreadsheets to do “what-if” anal- ysis of examples presented in the text to see what would happen if certain parameters were changed.

� Video Cases provide a summary of content covered in a series of on-location video profiles of real-world service and manufacturing companies and challenges they face in their opera- tions. Questions are included for classroom discussion or assignment purposes.

� Cases challenge students to grapple with a capstone problem that can be used as an in-class exercise or a homework assignment or team project.

� Experiential Learning forms students into teams who work both in and out of class on ex- ercises that actively involve them in team-based discussion questions and decisions. The six exercises reinforce student learning. Each exercise has been thoroughly tested in class and proven to be a valuable learning tool.

� A Video Library of 23 cases in MyOMLab (including 3 tutorials) offers at least one video cus- tomized for each chapter, which make for excellent class discussion and learning.

Teaching and Learning Support MyOMLab A key capability of MyOMLab is as an online homework and assessment tool designed to help students practice operations management problems and improve their understanding of course concepts, and to give their instructors feedback on their performance. This online prod- uct expands the student’s learning experience with out-of-class quizzes that are automatically graded and tutorials to guide the problem solving process, keeping students up to date, and free- ing instructors for more creative use of class time.

MyOMLab lets you teach your course your way. Use MyOMLab as an out-of-the-box resource for students who need extra help, or take full advantage of its advanced customization options.

For Instructors Instructor’s Resource Center—Reached through a link at www.pearsonglobaleditions.com/ krajewski, the Instructor’s Resource Center contains the electronic files for the complete Instructor’s Solutions Manual, PowerPoint lecture presentations, the Image Library, and the Test Item File.

� Register, redeem, log in At www.pearsonglobaleditions.com/krajewski, instructors can ac- cess a variety of print, media, and presentation resources that are available with this book in downloadable digital format. Resources are also available for course management platforms such as Blackboard, WebCT, and CourseCompass.

� Need help? Pearson Education’s dedicated technical support team is ready to assist in- structors with questions about the media supplements that accompany this text. Visit http://247pearsoned.com for answers to frequently asked questions and toll-free user sup- port phone numbers. The supplements are available to adopting instructors. Detailed de- scriptions are provided at the Instructor’s Resource Center.

Instructor’s Solutions Manual—Prepared by John Jensen at The University of South Carolina, this resource begins with instructor notes. It then provides solutions and answers to end-of-chapter questions, problems, and cases. This manual is available for download by visiting www.pearson- globaleditions.com/krajewski.

MyOMLab

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Instructor’s Resource Manual—Prepared by John Jensen at The University of South Carolina, this resource begins with sample syllabi for the course suited to various situations: with or without MyOMLab, quarter vs. 7-week course, undergraduate vs. MBA, quantitative vs. qualitative ori- entation, and process vs. supply chain orientation. It then offers generic (in both Word and PDF versions) Instructor and Student Notes. Both must be revised to reflect the instructor’s approach to the course. The Student Notes can be handed out or posted so that the students can have them during class to simplify note taking and concentrate more on what is being said. The Image Library provides possible inserts to the Student Notes. The Instructor Notes offer a course outline, chapter outlines, teaching notes, sample course syllabi, and solutions to the videos. This manual is avail- able for download by visiting www.pearsonglobaleditions.com/krajewski.

PowerPoint lecture slides in chapter-by-chapter files for classroom presentation purposes are available for download by visiting www.pearsonglobaleditions.com/krajewski. PowerPoints can be customized by the instructor, including inserts from Image Library, just as with the Student Notes.

Image Library—most of the images and illustrations featured in the text are available for download by visiting www.pearsonglobaleditions.com/krajewski.

Test Item File—this resource offers an array of questions and problems ranging from easy to dif- ficult. This resource includes true/false and multiple choice questions, which can be accessed by MyOMLab, and short answer, and essay questions. These files are available for download by visiting www.pearsonglobaleditions.com/krajewski.

TestGen EQ—Pearson Education’s test-generating software is available from www . pearsonglobaleditions.com/krajewski. The software is PC/MAC compatible and preloaded with all of the Test Item File questions. You can manually or randomly view test questions and drag and drop to create a test. You can add or modify test-bank questions as needed.

For Students Besides having access to study plans and tutorial resources in MyOMLab, students can utilize the following additional course resources within MyOMLab:

OM Explorer a text-specific software tool consisting of Excel worksheets and including tutors, additional exercises, and solvers.

� Tutors provide coaching for more than 60 analytical techniques presented in the text. The tu- tors also provide additional examples for learning and practice.

� Additional Exercises pose questions and can be answered with one or more of the tutor applications.

� Solvers provide powerful general purpose routines often encountered in practice. These are great for experiential exercises and homework problems.

POM for Windows an easy-to-use software program that covers over 25 common OM techniques.

Active Models include 29 spreadsheets requiring students to evaluate different situations based on problem scenarios.

Download page offers access to software (such as OM Explorer, POM for Windows, SimQuick, and Active Models), and links to free trial of software (such as MS Project, MS MapPoint, and SmartDraw).

Acknowledgments No book is just the work of the authors. We greatly appreciate the assistance and valuable contri- butions by several people who made this edition possible. Thanks to Beverly Amer of Aspenleaf Productions for her efforts in filming and putting together the new video segments for this edition; and Annie Puciloski for her diligent work of accuracy checking the book and ancillary materials. Special thanks are due to Howard Weiss, of Temple University, whose expertise in upgrading the software for this edition was greatly appreciated.

Many colleagues at other colleges and universities provided valuable comments and sugges- tions for this and previous editions. We would also like to thank the following faculty members who gave extensive written feedback and commentary to us:

Harold P. Benson, University of Florida

James P. McGuire, Rhode Island College

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David L. Bakuli, Westfield State College

David Levy, Bellevue University

Tobin Porterfield, Towson University

Anil Gulati, Western New England College

Linda C. Rodriguez, University of South Carolina–Aiken

Kathryn Marley, Duquesne University

Qingyu Zhang, Arkansas State University

Ching-Chung Kuo, University of North Texas

We would like to thank the people at Pearson Prentice Hall, including Chuck Synovec, Mary Kate Murray, Ashlee Bradbury, Anne Fahlgren, Judy Leale, Sarah Petersen, and Lauren McFalls and Haylee Schwenk at PreMediaGlobal. Without their hard work, dedication, and guidance this book would not have been possible.

At the University of Notre Dame Mendoza College of Business, we want to thank Jerry Wei, Sarv Devaraj, Dave Hartvigsen, Carrie Queenan, Xuying Zhao and Daewon Sun for their constant encouragement and for their willingness to share their teaching secrets. At the University of South Carolina, we thank Sanjay Ahire, Jack Jensen, and Ashley Metcalf for contributing their thoughts and insights on classroom pedagogical issues to this text. In particular, we gratefully acknowledge Jack Jensen for the stellar contributions he has made to the development of ISM and MyOMLab. Thanks go to colleagues at The Ohio State University for their encouragement and ideas on text revision.

Finally, we thank our families for supporting us during this project involving multiple tele- conference calls and long periods of seclusion. Our wives, Judie, Barb, and Maya, have provided the love, stability, and encouragement that sustained us while we transformed the ninth edition into the tenth.

Pearson wish to thank and acknowledge the following people for their work on the Global Edition:

Nora’Asikin Abu Bakar, Kuala Lumpur Infrastructure University College, Malaysia.

Dr. Peter Bollen, School of Business and Economics, Maastricht University, The Netherlands.

Steven Formaneck, Department of Management, The American University Of Cairo, Egypt.

Goh Puay Guan, Department of Decision Sciences, Business School, National University of Singapore, Singapore.

Dr. Thomas Goh, Chairman of Innodaptive, a think-tank devoted to the study of innovation, competitiveness, change and crisis management.

Associate Professor Dr. Mohd Ezani Mat Hassan, Graduate School of Business, The National University of Malaysia, Malaysia.

Dr. Aymen Kayal, Associate Professor of Engineering and Technology Management, Management and Marketing Department, College of Industrial Management, King Fahd University of Petro- leum and Minerals, Dhahran, Saudi Arabia.

Paul Massiah, Department of Strategy and Applied Management, Coventry Business School, UK

Dr. David Parker, Senior Lecturer, Business School, The University of Queensland, Brisbane, Australia.

Xavier Pierron, Department of Strategy and Applied Management, Coventry Business School, UK.

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21

The seventh novel in the Harry Potter series was released on July 21, 2007 and became an instant best seller around the globe. Because the book had to be delivered in a tight time window to the customers, Scholastic coordinated its publishing and distribution processes in USA months in advance of the release date.

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1 PART 1 Competing with Operations

USING OPERATIONS TO COMPETE

Scholastic and Harry Potter

Scholastic is the world’s largest publisher and distributor of children’s books and educational materials. Founded in 1920, it had $1.9 billion in revenues in fiscal 2011 with offices in 16 countries including North America, Europe, Southeast Asia, Latin America, the Middle East, Australia, New Zealand, and Africa. Scholastic started planning in early 2007 for the worldwide release of the eagerly awaited seventh book Harry Potter and the Deathly Hallows in the ac- claimed series by J.K. Rowling on the boy wizard. When the author finished the book in spring 2007, Scholastic’s printers R.R. Donnelly & Sons and Quebecor World worked around the clock to make sure that the book would be ready by the release date. To save time in loading and unloading, Scholastic bypassed its own warehouses and required its truckers, Yellow Transportation and JB Hunt Transport Services, to use the same size trailers and pallets to ship books directly from six printing sites to big retailers like Barnes & Noble and Amazon.com. This fleet of trucks, if lined up bumper-to-bumper, would stretch for 15 miles. GPS transponders were used to alert Scholastic by e-mail if the driver or the trailer veered off the designated routes. The timing was particularly tricky for e-tailers, who had to directly ship books in advance for individual orders to arrive simultaneously around the country in order to minimize the risk of someone leaking the book’s ending.

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22 PART 1 COMPETING WITH OPERATIONS

Since close to 90 percent of sales of such special books occur in the first week, they get special treatment to save time, money, space, and work. Scho- lastic had to customize, coordinate, and synchronize its operations and supply chain processes across multiple partners at the printing, warehousing, distribu- tion, and retailing locations to ensure that the last book in the Harry Potter series reached the final customers no more than a few hours before the scheduled July 21, 12:01 A.M. release deadline. Not bad for a bunch of Muggles who transported 12 million copies in a short time window without the magical floo powder, portkeys, and broomsticks!

Source: Dean Foust, “Harry Potter and the Logistical Nightmare,” Business Week (August 6, 2007), p. 9; Michelle Regenold, “Shipping Harry Potter: How Do They Do That?” www.go-explore-trans.org/2007/mar-apr/shipping_ HP.cfm; www.scholastic.com, 2011.

� Describe operations and supply chains in terms of inputs, processes, outputs, information flows, suppliers, and customers.

� Define an operations strategy and its linkage to corporate strategy, as well as the role it plays as a source of competitive advantage in a global marketplace.

� Identify nine competitive priorities used in operations strategy, and their linkage to marketing strategy.

� Explain how operations can be used as a competitive weapon.

� Identify the global trends and challenges facing operations management.

LEARNING GOALS After reading this chapter, you should be able to:

process

Any activity or group of activities that takes one or more inputs, transforms them, and provides one or more outputs for its customers.