Management Question

Critical Thinking Assignment
Module 05: Product and Service Design
In this module, you will learn about product and service design and capacity planning for products and
services. Without the capacity to produce products or deliver services, the organization cannot meet
customer and client demand.
Question Requirements:
Service Life Cycle
Suppose a company intends to offer a new service to some of its internal customers. Discuss how the
fact that the customers are internal would change the process of managing the four phases of the
service life cycle.
Address the following questions:
•
•
How does the internal nature of customers influence service introduction, considering factors
like organizational culture and potential resistance to change?
How do internal customer relationships affect service growth, including feedback mechanisms
and resource utilization?
Directions:
• Write an essay that includes an introduction paragraph, the essay’s body, and a conclusion
paragraph to address the assignment’s guide questions. Do not address the questions using
a question-and-answer format.
Your well-written paper should meet the following requirements:
• Be 5 pages in length, which does not include the title and reference pages, which are never a
part of the content minimum requirements.
• Use Saudi Electronic University academic writing standards and APA style guidelines.
• Support your submission with course material concepts, principles, and theories from the
textbook and at least two current, scholarly, peer-reviewed journal articles. Current articles are
those published in the last five years.
•
Ensure zero plagiarism. (very, very important)
In advance of submission, review the grading rubric to see how you will be graded for this
assignment.
Learning Outcomes
• Analyze how decisions made in product and service design impact operations management.
• Evaluate how decisions made in product and service design impact the organization’s overall
success.
• Appraise how capacity planning impacts the ability of the production system to perform
effectively.
• Examine the reliability computations value for operations management.
• Argue how capacity planning impacts customers’ satisfaction.
Readings
Required:
• Chapters 4 & 4S in Operations Management
• Chapter 4 & 4S PowerPoint Presentation
• Long, Y., Ceschin, F., Mansour, N., & Harrison, D. (2020). Product-Service systems applied
to reusable packaging systems: A strategic design tool. Design Management Journal, 15(1),
15–32.
Recommended:
•
•
Hazee, S., Yves Van, V., Delcourt, C., & Kabadayi, S. (2020). Service delivery system design
for risk management in sharing-based product service systems: A customer-oriented
approach. International Journal of Operations and Production Management, 40(4), 459479.
Cabanes, B., Hubac, S., Masson, P.L., Weil, b. (2021). Improving reliability engineering in
product development based on design theory: The case of FMEA in the semiconductor
industry. Research in Engineering Design, 32(3), 309-329.
Product and Service
Design
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4-1
You should be able to:
LO 4.1
LO4.2
LO4.3
LO4.4
LO4.5
LO4.6
Explain the strategic importance of product and service design
Describe what product and service design does
Name the key questions of product and service design
Identify some reasons for design or redesign
List some of the main sources of design ideas
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
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4-2
 The essence of an organization is the goods and services it
offers
 Every aspect of the organization is structured around
them
 Product and service design – or redesign – should be
closely tied to an organization’s strategy
LO 4.1
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4-3
Activities and responsibilities of product and service design include:
1.
Translate customer wants and needs into product and service
requirements
2.
Refine existing products and services
3.
Develop new products and services
4.
Formulate quality goals
5.
Formulate cost targets
6.
Construct and test prototypes
7.
Document specifications
8.
Translate product and service specifications into process
specifications
9.
Involve inter-functional collaboration
LO 4.2
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4-4
Is there a demand for it?
1.
 Market size
 Demand profile
Can we do it?
2.
 Manufacturability – the capability of an organization
to produce an item at an acceptable profit
 Serviceability – the capability of an organization to
provide a service at an acceptable cost or profit
LO 4.3
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4-5
What level of quality is appropriate?
3.
 Customer expectations
 Competitor quality
 Fit with current offering
Does it make sense from an economic
standpoint?
4.
 Liability issues, ethical considerations, sustainability
issues, costs and profits
LO 4.3
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4-6
 The driving forces for product and service design or
redesign are market opportunities or threats:
 Economic
 Social and demographic
 Political, liability, or legal
 Competitive
 Cost or availability
 Technological
LO 4.4
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4-7
Supply-chain based
2. Competitor based
3. Research based
1.
LO 4.5
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4-8
 Ideas can come from anywhere in the supply
chain:
 Customers
 Suppliers
 Distributors
 Employees
 Maintenance and repair personnel
LO 4.5
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4-9
 By studying how a competitor operates and its
products and services, many useful ideas can be
generated
 Reverse engineering
 Dismantling and inspecting a competitor’s product to
discover product improvements
LO 4.5
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4-10
 Research and development (R&D)
 Organized efforts to increase scientific knowledge or product
innovation
 Basic research
 Has the objective of advancing the state of knowledge about a
subject without any near-term expectation of commercial
applications
 Applied research
 Has the objective of achieving commercial applications
 Development
 Converts the results of applied research into useful commercial
applications
LO 4.5
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4-11
 Legal considerations
 Product liability
 The responsibility a manufacturer has for any injuries or
damages caused by a faulty product
 Some of the concomitant costs
 Litigation
 Legal and insurance costs
 Settlement costs
 Costly product recalls
 Reputation effects
 Uniform Commercial Code
 Under the UCC, products carry an implication of
merchantability and fitness
LO 4.6
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4-12
 Designers are often under pressure to
 Speed up the design process
 Cut costs
 These pressures force trade-off decisions
 What if a product has bugs?
 Release the product and risk damage to your reputation
 Work out the bugs and forego revenue
LO 4.6
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4-13
 Human factors
 Safety and liability
 Cultural factors
 Colors, preferred food, product labels
 Global design
 Design teams can be in different countries
LO 4.6
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4-14
 Sustainability
 Using resources in ways that do not harm ecological systems that
support human existence
 Key aspects of designing for sustainability
 Cradle-to-grave assessment (life cycle analysis)
 End-of-life programs
 The 3-Rs
 Reduction of costs and materials used
 Re-using parts of returned products
 Recycling
LO 4.7
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4-15
 Cradle-to-Grave Assessment
 aka life cycle analysis (LCA)
 The assessment of the environmental impact of a
product or service throughout its useful life
 Focuses on such factors as
 Global warming
 Smog formation
 Oxygen depletion
 Solid waste generation
 LCA procedures are part of the ISO 14000 environmental
management procedures
LO 4.7
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4-16
Designers often reflect on three particular aspects
of potential cost savings and reducing
environmental impact
 Reduce
 Reuse
 Recycle
LO 4.8
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4-17
 Value analysis
 Examination of the function of parts and materials in an effort to
reduce the cost and/or improve the performance of a product
 Common questions used in value analysis
 Is the item necessary; does it have value; could it be eliminated?
 Are there alternative sources for the item?
 Could another material, part, or service be used instead?
 Can two or more parts be combined?
 Can specifications be less stringent to save time or money?
 Do suppliers/providers have suggestions for improvements?
 Can packaging be improved or made less costly?
LO 4.8
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4-18
 Remanufacturing
 Refurbishing used products by replacing worn-out or
defective components
 Can be performed by the original manufacturer or another
company
 Reasons to remanufacture:
 Remanufactured products can be sold for about 50% of the cost of a
new product
 The process requires mostly unskilled and semi-skilled workers
 In the global market, European lawmakers are increasingly
requiring manufacturers to take back used products
 Design for disassembly (DFD)
 Designing a product to that used products can be easily taken apart
LO 4.8
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4-19
 Recycling
 Recovering materials for future use
 Applies to manufactured parts
 Also applies to materials used during production
 Why recycle?
 Cost savings
 Environmental concerns
 Environmental regulations
 Companies doing business in the EU must show that a specified
proportion of their products are recyclable
 Design for recycling (DFR)
 Product design that takes into account the ability to disassemble
a used product to recover the recyclable parts
LO 4.8
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4-20
LO 4.9
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4-21
 Standardization
 Extent to which there is an absence of variety in a
product, service, or process
 Products are made in large quantities of identical items
 Every customer or item processed receives essentially the
same service
LO 4.10
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4-22
LO 4.10
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4-23
 Mass customization
 A strategy of producing basically standardized goods or
services, but incorporating some degree of
customization in the final product or service
 Facilitating techniques
 Delayed differentiation
 Modular design
LO 4.10
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4-24
 Delayed differentiation
 The process of producing a product or service but not
quite completing production until customer preferences
are known
 It is a postponement tactic
 Produce a piece of furniture, but do not stain it; the customer
chooses the stain
LO 4.10
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4-25
 Modular design
 A form of standardization in which component parts are grouped
into modules that are easily replaced or interchanged
 Advantages

Easier diagnosis and remedy of failures

Easier repair and replacement

Simplification of manufacturing and assembly

Training costs are relatively low
 Disadvantages
LO 4.10

Limited number of possible product configurations

Limited ability to repair a faulty module; if it cannot be
disassembled, the entire module must often be scrapped
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4-26
 Reliability
 The ability of a product, part, or system to perform its
intended function under a prescribed set of conditions
 Failure
 Situation in which a product, part, or system does not
perform as intended
 Reliabilities are always specified with respect to
certain conditions
 Normal operating conditions
 The set of conditions under which an item’s reliability is
specified
LO 4.10
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4-27
LO 4.10
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4-28
 Robust design
 A design that results in products or services that can
function over a broad range of conditions
 The more robust a product or service, the less likely it will fail
due to a change in the environment in which it is used or in
which it is performed
 Pertains to product as well as process design
 Consider the following automobiles:
 Ferrari Enzo
 Toyota Avalon
 Which is design is more robust?
LO 4.10
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4-29
 Product or service design changes:
1.
Modification of an existing product or service
2. Expansion of an existing product line or service offering
3. Clone of a competitor’s product or service
4. New product or service
 The degree of change affects the newness of the product or
service to the market and to the organization
 Risks and benefits?
LO 4.10
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4-30
 Quality Function Deployment (QFD)
 An approach that integrates the “voice of the customer”
into both product and service development
 The purpose is to ensure that customer requirements are
factored into every aspect of the process
 Listening to and understanding the customer is the central
feature of QFD
 House of Quality
LO 4.10
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4-31
LO 4.10
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4-32
LO 4.10
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4-33
 Basic quality
 Refers to customer requirements that have only limited effect on
customer satisfaction if present, but lead to dissatisfaction if absent
 Performance quality
 Refers to customer requirements that generate satisfaction or
dissatisfaction in proportion to their level of functionality and
appeal
 Excitement quality
 Refers to a feature or attribute that was unexpected by the customer
and causes excitement
LO 4.10
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4-34
LO 4.10
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4-35
1. Feasibility analysis
2. Product specifications
3. Process specifications
4. Prototype development
5. Design review
6. Market test
7. Product introduction
8. Follow-up evaluation
LO 4.10
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4-36
 Concurrent engineering
 Bringing engineering design and manufacturing
personnel together early in the design phase
 Also may involve manufacturing, marketing and purchasing
personnel in loosely integrated cross-functional teams
 Views of suppliers and customers may also be sought
 The purpose is to achieve product designs that reflect
customer wants as well as manufacturing capabilities
LO 4.10
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4-37
 CAD
 Product design using computer graphics
 Advantages
Increases productivity of designers, 3 to 10 times
 Creates a database for manufacturing information and product
specifications
 Provides possibility of engineering and cost analysis on proposed
designs


LO 4.10
CAD that includes finite element analysis (FEA) can significantly reduce
time to market
 Enables developers to perform simulations that aid in the design,
analysis, and commercialization of new products
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4-38
 Designers must take into account production
capabilities
 Equipment
 Skills
 Types of materials
 Schedules
 Technologies
 Special abilities
LO 4.10
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4-39
 Manufacturability
 Ease of fabrication and/or assembly
 It has important implications for
 Cost
 Productivity
 Quality
 Design for manufacturing
 Design for assembly
LO 4.10
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4-40
 When products have a high degree of similarity in features
and components, a part can be used in multiple products
 Benefits:
 Savings in design time
 Standard training for assembly and installation
 Opportunities to buy in bulk from suppliers
 Commonality of parts for repair
 Fewer inventory items must be handled
LO 4.10
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4-41
 Begins with a choice of service strategy, which
determines the nature and focus of the service, and
the target market
 Key issues in service design
 Degree of variation in service requirements
 Degree of customer contact and involvement
LO 4.11
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4-42
Products are generally tangible; services are intangible
2. Services are created and delivered at the same time
3. Services cannot be inventoried
4. Services are highly visible to consumers
5. Some services have low barriers to entry and exit
6. Location is often important to service design, with convenience
as a major factor
7. Service systems range from those with little or no customer
contact to those that have a very high degree of customer
contact
8. Demand variability alternately creates waiting lines or idle
service resources
1.
LO 4.11
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4-43
1. Conceptualize
•
•
•
Idea generation
Assessment of customer wants/needs
Assessment of demand potential
2. Identify service package components needed
3. Determine performance specifications
4. Translate performance specifications into design
specifications
5. Translate design specifications into delivery specifications
LO 4.11
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4-44
 Characteristics
 Consistent with the organization mission
 User-friendly
 Robust if variability is a factor
 Easy to sustain
 Cost-effective
 Has value that is obvious to the customer
 Has effective linkages between back- and front-of-the-house
operations
 Has a single, unifying theme
 Has design features and checks that will ensure service that is
reliable and of high quality
LO 4.12
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4-45
1.
2.
3.
4.
5.
6.
7.
8.
9.
Define the service package in detail
Focus on the operation from the customer’s perspective
Consider the image that the service package will present both to
customers and to prospective customers
Recognize that designers’ familiarity with the system may give them
a quite different perspective than that of the customer, and take steps
to overcome this
Make sure that managers are involved and will support the design
once it is implemented
Define quality for both tangibles and intangibles
Make sure that recruitment, training, and reward policies are
consistent with service expectations
Establish procedures to handle both predictable and unpredictable
events
Establish system to monitor, maintain, and improve service
LO 4.13
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4-46
 Effective product and service design can help the
organization achieve competitive advantage:
 Packaging products and ancillary services to increase sales
 Using multiple-use platforms
 Implementing tactics that will achieve the benefits of high volume
while satisfying customer needs for variety
 Continually monitoring products and services for small
improvement opportunities
 Reducing the time it takes to get a new or redesigned product or
service to the market
LO 4.13
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4-47
Reliability
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4S-1
You should be able to:
LO 4s.1
LO 4s.2
LO 4s.3
Define reliability
Perform simple reliability computations
Explain the term availability and perform simple
calculations
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4S-2
 Reliability
 The ability of a product, part, or system to perform its
intended function under a prescribed set of conditions.
Reliability can be expressed as a probability.
LO 4s.1
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4S-3
The probability that a system or a product will operate as
planned is an important concept in system and product
design. Thus, the corresponding reliability can be
expressed as a probability:
 The probability that the product or system will
function when activated
 The probability that the product or system will
function for a given length of time
LO 4s.2
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4S-4
 Finding the probability under the assumption that the
system consists of a number of independent
components
 Requires the use of probabilities for independent events
 Independent event
 Events whose occurrence or non-occurrence do not influence one
another
LO 4s.2
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4S-5
 Rule 1
 If two or more events are independent and success is
defined as the probability that all of the events occur,
then the probability of success is equal to the product of
the probabilities of the events
LO 4s.2
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4S-6
 A machine has two buttons. In order for the machine
to function, both buttons must work. One button has a
probability of working of .95, and the second button
has a probability of working of .88.
P(Machine Works) = P(Button 1 Works)  P(Button 2 Works)
= .95  .88
= .836
Button 1
.95
LO 4s.2
Button 2
.88
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4S-7
 Though individual system components may have high
reliabilities, the system’s reliability may be
considerably lower because all components that are in
series must function
 One way to enhance reliability is to utilize redundancy
 Redundancy
 The use of backup components to increase reliability
LO 4s.2
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4S-8
 Rule 2
 If two events are independent and success is defined as
the probability that at least one of the events will occur,
the probability of success is equal to the probability of
either one plus 1.00 minus that probability multiplied by
the other probability
LO 4s.2
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4S-9
 A restaurant located in an area that has frequent power outages has a
generator to run its refrigeration equipment in case of a power failure.
The local power company has a reliability of .97, and the generator has
a reliability of .90. The probability that the restaurant will have power
is
P(Power) = P(Power Co.) + (1 – P(Power Co.))  P(Generator)
= .97 + (1 – .97)(.90)
= .997
Generator
.90
Power Co.
.97
LO 4s.2
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4S-10
 Rule 3
 If two or more events are involved and success is defined
as the probability that at least one of them occurs, the
probability of success is 1 − P(all fail)
LO 4s.2
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4S-11
 A student takes three calculators (with reliabilities of .85, .80, and .75)
to her exam. Only one of them needs to function for her to be able to
finish the exam. What is the probability that she will have a
functioning calculator to use when taking her exam?
P(any Calc.) = 1 − [(1 – P(Calc.1)  (1 − P(Calc. 2)  (1 − P(Calc. 3)]
= 1 − [(1 – .85)(1 – .80)(1 – .75)]
= .9925
Calc. 3
.75
Calc. 2
.80
Calc. 1
.85
LO 4s.2
Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
4S-12
.75
.80
.80
.70
.95
.85
.90
.99
.9925
.97
.9531
LO 4s.2
Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
4S-13
 In this case, reliabilities are determined relative to a
specified length of time
 This is a common approach to viewing reliability when
establishing warranty periods
LO 4s.2
Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
4S-14
LO 4s.2
Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
4S-15
 To properly identify the distribution and length of
each phase requires collecting and analyzing historical
data
 The mean time between failures (MTBF) in the infant
mortality phase can often be modeled using the
negative exponential distribution
LO 4s.2
Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
4S-16
LO 4s.2
Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
4S-17
P(no failure before T ) = e −T / MTBF
where
e = 2.7183…
T = Length of service before failure
MTBF = Mean time between failures
LO 4s.2
Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
4S-18
 A light bulb manufacturer has determined that its 150 watt bulbs have
an exponentially distributed mean time between failures of 2,000
hours. What is the probability that one of these bulbs will fail before
2,000 hours have passed?
P(failure before 2,000) = 1 − e −2000/ 2000
e-2000/2000 = e-1
From Table 4S.1, e-1 = .3679
So, the probability one of these bulbs will fail before 2,000 hours is 1 −
.3679 = .6321
LO 4s.2
Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
4S-19
 Sometimes, failures due to wear-out can be modeled using the normal
distribution
T − Mean wear – out time
z=
Standard deviation of wear – out time
LO 4s.2
Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
4S-20
 Availability
 The fraction of time a piece of equipment is expected to
be available for operation
MTBF
Availabili ty =
MTBF + MTR
where
MTBF = Mean time between failures
MTR = Mean time to repair
LO 4s.3
Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
4S-21
 John Q. Student uses a laptop at school. His laptop operates 30 weeks
on average between failures. It takes 1.5 weeks, on average, to put his
laptop back into service. What is the laptop’s availability?
MTBF
Availabili ty =
MTBF + MTR
30
=
30 + 1.5
= .9524
LO 4s.3
Copyright ©2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
4S-22
Operations Management
Operations Management
FOURTEENTH EDITION
William J. Stevenson
Saunders College of Business
Rochester Institute of Technology
OPERATIONS MANAGEMENT, FOURTEENTH EDITION
Published by McGraw-Hill Education, 2 Penn Plaza, New York, NY 10121. Copyright © 2021 by McGraw-Hill
Education. All rights reserved. Printed in the United States of America. Previous editions © 2018, 2015, and
2012. No part of this publication may be reproduced or distributed in any form or by any means, or stored in a
database or retrieval system, without the prior written consent of McGraw-Hill Education, including, but not
limited to, in any network or other electronic storage or transmission, or broadcast for distance learning.
Some ancillaries, including electronic and print components, may not be available to customers outside the
United States.
This book is printed on acid-free paper.
1 2 3 4 5 6 7 8 9 LWI 24 23 22 21 20
ISBN 978-1-260-23889-1 (bound edition)
MHID 1-260-23889-X (bound edition)
ISBN 978-1-260-71842-3 (loose-leaf edition)
MHID 1-260-71842-5 (loose-leaf edition)
Portfolio Manager: Noelle Bathurst
Product Developer: Fran Simon/Katie Ward
Marketing Manager: Harper Christopher
Content Project Managers: Fran Simon/Jamie Koch
Buyer: Sandy Ludovissy
Design: Matt Diamond
Content Licensing Specialist: Jacob Sullivan
Cover Image: Daniel Prudek/Shutterstock
Compositor: SPi Global
All credits appearing on page or at the end of the book are considered to be an extension of the copyright page.
Library of Congress Cataloging-in-Publication Data
Library of Congress Cataloging-in-Publication Data
Names: Stevenson, William J., author.
Title: Operations management / William J. Stevenson, Saunders College of
Business, Rochester Institute of Technology.
Description: Fourteenth edition. | New York, NY : McGraw-Hill Education,
[2021] | Includes bibliographical references and index.
Identifiers: LCCN 2019044799 | ISBN 9781260238891 (bound edition ;
acid-free paper) | ISBN 126023889X (bound edition ; acid-free paper) |
ISBN 9781260718423 (loose-leaf edition ; acid-free paper) | ISBN
1260718425 (loose-leaf edition ; acid-free paper)
Subjects: LCSH: Production management.
Classification: LCC TS155 .S7824 2021 | DDC 658.5–dc23
LC record available at
The internet addresses listed in the text were accurate at the time of publication. The inclusion of a website does
not indicate an endorsement by the authors or McGraw-Hill Education, and McGraw-Hill Education does not
guarantee the accuracy of the information presented at these sites.
mheducation.com/highered
The McGraw-Hill Series in Operations
and Decision Sciences
Supply Chain Management
Business Research Methods
Business Statistics
Benton
Purchasing and Supply Chain Management
Third Edition
Schindler
Business Research Methods
Thirteenth Edition
Bowerman, Drougas, Duckworth,
Froelich, Hummel, Moninger,
and Schur
Business Statistics and Analytics
in Practice
Ninth Edition
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Supply Chain Logistics Management
Fifth Edition
Burt, Petcavage, and Pinkerton
Supply Management
Eighth Edition
Business Forecasting
Keating and Wilson
Forecasting and ­Predictive Analytics
Seventh Edition
Business Systems Dynamics
Johnson
Purchasing and Supply ­Management
Sixteenth Edition
Sterman
Business Dynamics: Systems Thinking
and Modeling for Complex World
Simchi-Levi, Kaminsky, and Simchi-Levi
Designing and Managing the ­Supply
Chain: Concepts, Strategies, Case ­Studies
Third Edition
Operations Management
Stock and Manrodt
Supply Chain Management
Project Management
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Managing Projects: A Team-Based
Approach
Larson
Project Management: The
­Managerial Process
Eighth Edition
Service Operations Management
Bordoloi, Fitzsimmons, and ­Fitzsimmons
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Introduction to ­Management Science:
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Operations ­Management
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Matching Supply with Demand: An
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Fourth Edition
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Operations and ­Supply Chain
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Fifth Edition
Jacobs and Chase
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Second Edition
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Business Analytics
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and Chen
­Business Analytics: Communicating
with Numbers
v
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, inventory management, scheduling, supply chain management, and
project management.
My purpose in revising this book continues to be to provide
a clear presentation of the concepts, tools, and applications of
the field of operations management. Operations ­management
is evolving and growing, and I have found updating and
­integrating new material to be both rewarding 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,
and so on.
As in previous editions, there are major pedagogical f­ eatures
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 fourteenth edition, and suggested
applications for classroom instruction. By providing this support, it is our hope that instructors and students will have the
tools to make this learning experience a rewarding one.
What’s New in This Edition
In many places, content has been rewritten or added to
improve clarity, shorten wording, or update information. New
material has been added on supply chains, and other topics.
Some problems are new, and others have been revised. Many
new readings and new photos have been added.
Some of the class preparation exercises have been revised.
The purpose of these exercises is to introduce students to the
subject matter before class in order to enhance classroom
learning. They have proved to be very popular with students, both as an introduction to new material and for study
purposes. These exercises are available in the Instructor’s
Resource Manual. Special thanks to Linda Brooks for her
help in developing the exercises.
Acknowledgments
I want to thank the many contributors to this edition. Reviewers and adopters of the text have provided a “continuously
improving” wealth of ideas and suggestions. It is encouraging to me as an author. I hope all reviewers and readers will
know their suggestions were valuable, were carefully considered, and are sincerely appreciated. The list includes post-­
publication reviewers.
Jenyi Chen
Eric Cosnoski
Mark Gershon
Narges Kasiri
Nancy Lambe
Anita Lee-Post
Behnam Nakhai
Rosa Oppenheim
Marilyn Preston
Avanti Sethi
John T. Simon
Lisa Spencer
Nabil Tamimi
Oya Tukel
Theresa Wells
Heath Wilken
Cleveland State University
Lehigh University
Temple University
Ithaca College
University of South Alabama
University of Kentucky
Millersville University of Pennsylvania
Rutgers Business School
Indiana University Southeast
University of Texas at Dallas
Governors State University
California State University, Fresno
University of Scranton
Cleveland State University
University of Wisconsin-Eau Claire
University of Northern Iowa
Additional thanks to the instructors who have contributed extra
material for this edition, including accuracy ­checkers: Ronny
Richardson, Kennesaw State University and Gary Black,
­University of Southern Indiana; Solutions and ­SmartBook:
Tracie Lee, Idaho State University; PowerPoint Presentations:
Avanti Sethi, University of Texas-Dallas; Test Bank: Leslie
Sukup, Ferris State University.
Special thanks goes out to Lisa Spencer, California State
University-Fresno, for her help with additional readings and
examples.
vii
viii
Preface
Finally, I would like to thank all the people at ­McGraw-Hill
for their efforts and support. It is always a pleasure to work
with such a professional and competent group of p­eople.
Special thanks go to Noelle Bathurst, Portfolio Manager;
Michele Janicek, Lead Product Developer; Fran Simon and
Katie Ward, Product Developers; Jamie Koch, Assessment
Content Project Manager; Sandy Ludovissy, Buyer; Matt Diamond, Designer; Jacob Sullivan, Content Licensing Specialist; Harper Christopher, Executive Marketing Manager; and
many others who worked behind the scenes.
I would also like to thank the many reviewers of previous
editions for their contributions: Vikas Agrawal, Fayetteville
State University; Bahram Alidaee, University of Mississippi;
Ardavan Asef-Faziri, California State University at Northridge; Prabir Bagchi, George Washington State University;
Gordon F. Bagot, California State University at Los Angeles;
Ravi Behara, Florida Atlantic University; 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 Tennessee 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 University;
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 Fullerton; Richard Ehrhardt,
University of North Carolina at Greensboro; Kurt Engemann,
Iona College; Diane Ervin, DeVry University; Farzaneh
Fazel, Illinois State University; Wanda Fennell, University of
Mississippi at Hattiesburg; Joy Field, Boston College; Warren Fisher, Stephen F. Austin State University; Lillian Fok,
University of New Orleans; Charles Foley, Columbus State
Community College; 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
Gunasekaran, University of Massachusetts at Dartmouth;
Haresh Gurnani, University of Miami; Terry Harrison, Penn
State University; Vishwanath Hegde, California State University 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 College;
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; Kenneth Lawrence, New Jersey
Institute of Technology; Jooh Lee, Rowan University; Anita
Lee-Post, University of Kentucky; Karen Lewis, University of
Mississippi; Bingguang Li, Albany State University; Cheng
Li, California State University at Los Angeles; Maureen P.
Lojo, California 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,
University of Idaho; Douglas Micklich, Illinois State University; 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, Cleveland State University; Taeho Park, San Jose State University; Allison Pearson,
Mississippi State University; Patrick Penfield, Syracuse University; Steve Peng, California State University at Hayward;
Richard Peschke, Minnesota State University at Moorhead;
Andru Peters, San Jose State University; Charles Phillips,
Mississippi State University; Frank Pianki, Anderson University; Sharma Pillutla, Towson University; Zinovy Radovilsky, California State University at Hayward; Stephen A.
Raper, University of Missouri at Rolla; Pedro Reyes, Baylor
University; Buddhadev Roychoudhury, Minnesota State University at Mankato; Narendra Rustagi, Howard University;
Herb Schiller, Stony Brook University; Dean T. Scott, DeVry
University; Scott J. Seipel, Middle Tennessee State University; Raj Selladurai, Indiana University; Kaushic Sengupta,
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; Kenneth Solheim,
DeVry University; Young Son, Bernard M. Baruch College;
Victor Sower, Sam Houston State University; 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 Wisconsin at Eau Claire; Emre Veral,
Preface
Baruch College; Mark Vroblefski, University of Arizona;
Gustavo Vulcano, New York University; Walter Wallace,
Georgia State University; James Walters, Ball State University; John Wang, Montclair State University; Tekle Wanorie,
Northwest Missouri State University; Jerry Wei, University
of Notre Dame; Michael Whittenberg, University of Texas;
ix
Geoff Willis, 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
Walkthrough
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.
Examples with Solutions
Rev.Confirming Pages
Throughout the text, wherever a quantitative or
analytic technique is introduced, an example is
included to illustrate the application of that technique. These are designed to be easy to follow.
Chapter Three Forecasting
EXAMPLE
Determining a Regression Equation
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
Units sold . . . . . . . . . . 20
Unemployment %
(three-month lag)
7.2
1.
2
41
3
17
4
35
5
25
6
31
7
38
8
50
9
15
10
19
11
14
4.0
7.3
5.5
6.8
6.0
5.4
3.6
8.4
7.0
9.0
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
Units sold, y
40
30
20
10
0
2
4
6
8
10
Level of unemployment (%), x
2.
Check the correlation coefficient to confirm that it is not close to zero using the website template, and then obtain the regression equation:
r = −.966
This is a fairly high negative correlation. The regression equation is
y = 71.85 − 6.91x
Note that the equation pertains only to unemployment levels in the range 3.6 to 9.0, because
sample observations covered only that range.
x
103
8
mhhe.com/stevenson14e
S O L U T I O N
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 website.
2.
Strategy formulation is critical because strategies provide direction for the organization, so they
can play a role in the success or failure of a business organization.
3.
Functional strategies and supply chain strategies need to be aligned with the goals and strategies
of the overall organization.
4.
The three primary business strategies are low cost, responsiveness, and differentiation.
5.
Productivity is a key factor in the cost of goods and services. Increases in productivity can
become a competitive advantage.
6.
High productivity is particularly important for organizations that have a strategy of low costs.
competitiveness, 42
core competencies, 46
environmental scanning, 48
goals, 44
mission, 44
mission statement, 44
operations strategy, 51
order qualifiers, 48
order winners, 48
productivity, 56
quality-based strategies, 52
strategies, 44
SWOT, 48
tactics, 45
time-based strategies, 53
SOLVED PROBLEMS
Computing Productivity
A company that processes fruits and vegetables is able to produce 400 cases of canned peaches in
one-half hour with four workers. What is labor productivity?
400 cases
Quantity produced
Labor productivity = ________________ = ________________________
Labor hours
4 workers × 1 / 2 hour / worker
Problem 1
mhhe.com/stevenson14e
Solution
= 200 cases per labor hour
Computing Multifactor Productivity
A wrapping-paper company produced 2,000 rolls of paper in one day. Labor cost was $160, material
cost was $50, and overhead was $320. Determine the multifactor productivity.
Quantity produced
Multifactor productivity = ______________________________
Labor cost + Material cost + Overhead
Problem 2
mhhe.com/stevenson14e
Solution
2,000 rolls
= _______________ = 3.77 rolls per dollar input
$160 + $50 + $320
A variation of the multifactor productivity calculation incorporates the standard price in the
numerator by multiplying the units by the standard price.Rev.Confirming Pages
Computing Multifactor Productivity
Compute the multifactor productivity measure for an eight-hour day in which the usable output was
300 units, produced by three workers who used 600 pounds of materials. Workers have an hourly
wage of $20, and material cost is $1 per pound. Overhead is 1.5 times labor cost.
TABLE 16.5 Excel solution for Example 2a
KEY TERMS
Chapter Sixteen Scheduling Usable output
707
Multifactor productivity = __________________________________
Labor cost + Material cost + Overhead cost
300 units
= _____________________________________________________
(3 workers × 8 hours × $20 / hour) + (600 pounds × $1 / pound) +
(3 workers × 8 hours × $20 / hour × 1.50)
300 units
= ________________
$480 + $600 + $720
= .167 units of output per dollar of input
Problem 3
mhhe.com/stevenson14e
Solution
Excel Spreadsheet
Solutions
ste3889X_ch02_040-073.indd
63
Where applicable, the
­examples and solved
­problems include screen
shots of a spreadsheet
solution.
09/04/19 09:59 AM
Source: Microsoft
c.
Using earliest due date as the selection criterion, the job sequence is C-A-E-B-D-F.
The measures of effectiveness are as follows (see table):
(1) Average flow time: 110/6 = 18.33 days
(2) Average tardiness: 38/6 = 6.33 days
(3) Average number of jobs at the work center: 110/41 = 2.68
xi
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.
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.
Rev.Confirming Pages
Rev.Confirming Pages
4
Product and Service
Design
C H A P T E R
LEARNING OBJECTIVES
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.
C H A P T E R
4.1
Mark Lennihan/AP Images
4.11 Service Design 165
Overview of Service Design 166
Differences between
Service Design and
Product Design 166
Phases in the Service Design
Process 167
Service Blueprinting 168
Characteristics of WellDesigned Service Systems 168
Challenges of Service
Design 169
Guidelines for Successful
Service Design 169
4.12 Operations Strategy 170
Operations Tour: High Acres
Landfill 174
Chapter Supplement:
Reliability 176
O U T L I N E
Introduction 140
4.7
What Does Product and Service
Design Do? 140
Objectives of Product and
Service Design 141
Key Questions 141
Reasons for Product or Service
Design or Redesign 141
4.2
Idea Generation 142
4.3
Legal and Ethical
Considerations 144
4.4
Human Factors 145
4.5
Cultural Factors 145
4.6
Global Product and Service
Design 146
4.8
Environmental Factors:
Sustainability 146
Designing for Mass
Customization 154
Reliability 156
Robust Design 157
Degree of Newness 158
Quality Function Deployment 158
The Kano Model 160
Cradle-to-Grave Assessment 146
End-of-Life Programs 147
The Three Rs: Reduce, Reuse,
and Recycle 147
Reduce: Value Analysis 147
Reuse: Remanufacturing 148
Recycle 149
4.9
Other Design
Considerations 151
4.10 Designing for Production 163
Strategies for Product or
Service Life Stages 151
Product Life Cycle
Management 153
Degree of Standardization 153
Phases in Product Design
and Development 162
Concurrent Engineering 163
Computer-Aided Design
(CAD) 164
Production Requirements 165
Component Commonality 165
The essence of a business organization is the products and services it offers, and every
LO4.1 Explain the strateaspect of the organization and its supply chain are structured around those products
gic importance of product
and services. Organizations that have well-designed products or services are more
and service design.
likely to realize their goals than those with poorly designed products or services. Hence,
organizations have a strategic 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
are 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.
continued
138
ste3889X_ch04_138-175.indd 138
139
08/01/19 07:17 AM
ste3889X_ch04_138-175.indd
139
Chapter Outlines
Opening Vignettes
Every chapter and supplement includes an
outline of the topics covered.
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.
xii
08/01/19 07:17 AM
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 14th 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.
56
Chapter Two
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.
Rev.Confirming Pages
246
Chapter Six
Process Selection and Facility Layout
FIGURE 6.1
Process selection and
capacity planning influence
system design
Inputs
Outputs
Forecasting
Facilities and
equipment
Capacity
Planning
Product and
service design
Layout
Rev.Confirming Pages
Process
Selection
Technological
change
Work
design
Competitiveness, Strategy, and Productivity
LO6.1 Explain the
strategic importance of
process selection and the
influence it has on the
organization and its supply
chain.
6.1 INTRODUCTION
Process selection refers to deciding on the way production of goods or services will be organized. It has major implications for capacity planning, layout of facilities, equipment, and
design of work systems. Process selection occurs as a matter of course when new products or
services are being planned. However, it also occurs periodically due to technological changes
in products or equipment, as well as competitive pressures. Figure 6.1 provides an overview
of where process selection and capacity planning fit into system design. Forecasts, product
and service design, and technological considerations all influence capacity planning and process selection. Moreover, capacity and process selection are interrelated, and are often done in
concert. They, in turn, affect facility and equipment choices, layout, and work design.
How an organization approaches process selection is determined by the organization’s process strategy. Key aspects include:
• Capital intensity: The mix of equipment and labor that will be used by the organization.
• Process flexibility: The degree to which the system can be adjusted to changes in
processing requirements due to such factors as changes in product or service design,
changes in volume processed, and changes in technology.
Pieter Beens/Shutterstock
Moreover, this approach pays little attention to suppliers and government regulations, and
community, environmental, and sustainability issues are missing. These are closely linked,
theoftwo
and business organizations LO6.2
need to Name
be aware
the impact they are having in these areas and
Process
choice
demand-driven.
main factors
that influence
respond accordingly. Otherwise,
organizations
may be subject
to attack
by is
pressure
groups The two key questions in process selection are:
process selection.
and risk damage to their reputation.
6.2 PROCESS SELECTION
1.
2.
LO2.6 Define the term
productivity and explain
why it is important to companies and to countries.
Productivity A measure of
the effective use of resources,
usually expressed as the ratio
of output to input.
How much variety will the process need to be able to handle?
How much volume will the process need to be able to handle?
Answers to these questions will serve as a guide to selecting an appropriate process. Usually, volume and variety are inversely related; a higher level of one means a lower level of the
other. However, the need for flexibility of personnel and equipment is directly related to the
One of the primary responsibilities of a manager is to achieve productive use of an organizalevel
of variety the
will need to handle: The lower the variety, the less the need for
tion’s resources. The term productivity is used to describe this.
Productivity
is anprocess
index that
flexibility,
while
the higher
the variety, the greater the need for flexibility. For example, if a
measures output (goods and services) relative to the input (labor,
materials,
energy,
and other
worker’s
job to
in input:
a bakery is to make cakes, both the equipment and the worker will do the same
resources) used to produce it. It is usually expressed as the ratio
of output
thing day after day, with little need for flexibility. But if the worker has to make cakes, pies,
Output
cookies, brownies, and croissants,
both the worker and the equipment must have the flexibilProductivity = ______
(2–1)
Input
ity to be able to handle the different requirements of each type of product.
Thereitisisanother
aspect
of variety that is important. Variety means either having dedicated
Although productivity is important for all business organizations,
particularly
impordifferentthe
product or service, or if not, having to get equipment ready every
tant for organizations that use a strategy of low cost, becauseoperations
the higherfor
theeach
productivity,
time there is the need to change the product being produced or the service being provided.
lower the cost of the output.
2.7 PRODUCTIVITY
A productivity ratio can be computed for a single operation, a department, an organization, or an entire country. In business organizations, productivity ratios are used for planning
workforce requirements, scheduling equipment, financial analysis, and other important tasks.
Productivity has important implications for business organizations and for entire nations.
For nonprofit organizations, higher productivity means lower costs; for profit-based organizations, productivity is an important factor in determining how competitive a company is. For
a nation, the rate of productivity
growth is of great importance. Productivity growth is the
ste3889X_ch06_244-299.indd 246
increase in productivity from one period to the next relative to the productivity in the preceding period. Thus,
Current productivity − Previous productivity
Productivity growth = _____________________________________ × 100
Previous productivity
(2–2)
08/01/19 07:28 AM
xiii
Rev.Confirming Pages
Chapter Five
Strategic Capacity Planning for Products and Services
213
Operations Strategies
5.12 OPERATIONS STRATEGY
An Operations Strategy section
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
is included at the end of most
of conditions within which operations will be required to function. Hence, it is extremely
­chapters. These sections discuss
important to include input from operations management people in making capacity decisions.
how the chapters’ concepts can
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
be applied and how they impact
an organization to be agile—that is, responsive to changes in the marketplace. Also, it reduces
the operations of a company.
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 produce at costs lower than what new competitors can. However, such a strategy means higherthan-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 nonbottleneck operations to achieve maximum utilization of bottleneck operations.
In cases where capacity expansion will be undertaken, there are two strategies for determining 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
Rev.Confirming Pages
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
READING
DUTCH BOY BRUSHES UP ITS PAINTS
risks are loss of market share and the inability to meet demand if expansion requires a long
lead time.
Sherwin-Williams’ Dutch Boy Group put a revolutionary spin on
In cases where capacity contraction will paint
be undertaken,
capacity
disposal Twist
strategies
cans with its innovative
square-shaped
& PourTM
become important. This can be the result of thepaint-delivery
need to replace
equipment
with
container aging
for the Dirt
Fighter interior
latexnewer
paint line.
The four-piece
square containeroperations.
could be the first
major
change
equipment. It can also be the result of outsourcing
and downsizing
The
cost
or in
how house paint is packaged in decades. Lightweight but sturdy,
benefit of asset disposal should be taken into account
when
contemplating
these
actions.
the Twist & Pour “bucket” is packed with so many conveniences, it
Readings
is next to impossible to mess up a painting project.
Winning Best of Show in an AmeriStar packaging competition sponsored by the Institute of Packaging Professionals, the
exclusive,
paint services
container stands
7½ in. time
tall and
Capacity refers to a system’s potential for producing goods orall-plastic
delivering
over aalmost
specified
holds 126isoz.,
a bit lesson
than
1 gal. Rust-resistant
moistureinterval. Capacity decisions are important because capacity
a ceiling
output
and a majorand
determiresistant, the plastic bucket gives users a new way to mix, brush,
nant of operating costs.
and store paint.
Three key inputs to capacity planning are the kind ofA capacity
thatonwill
muchtowill
hollow handle
one be
sideneeded,
makes it how
comfortable
pourbe
and
needed, and when it will be needed. Accurate forecasts
areA critical
to the
planning
process.
carry.
convenient,
snap-in
pour spout
neatly pours paint into
a trayimportant
with no dripping
but canthat
be removed
if desired,
allow
The capacity planning decision is one of the most
decisions
managers
make.toThe
a wide
brushinvolving
to be dipped
into the 5¾-in.-diameter
mouth. Capcapacity decision is strategic and long term in nature,
often
a significant
initial investment
ping
the
container
is
a
large,
twist-off
lid
that
requires
no
tools
of capital. Capacity planning is particularly difficult in cases where returns will accrue over a lengthyto
open or close. Molded with two lugs for a snug-finger-tight closperiod, and risk is a major consideration.
ing, the threaded cap provides a tight seal to extend the shelf life
A variety of factors can interfere with effective capacity,
so effective capacity is usually somewhat
of unused paint.
less than design capacity. These factors include facilities
and layout,
product/
Whiledesign
the lid requires
no tools human
to access,factors,
the snap-off
carry bail
is assembled
on theconsiderations.
container in a “locked-down position” and
service design, equipment failures, scheduling problems,
and quality
can
be
pulled
up
after
purchase
for
toting
or
hanging
on
a ladder.
Capacity planning involves long-term and short-term considerations. Long-term considerations relate
Large, nearly 4½-inch-tall label panels allow glossy front and back
to the overall level of capacity; short-term considerations relate to variations in capacity requirements
labels printed and UV-coated to wrap around the can’s rounded
due to seasonal, random, and irregular fluctuations corners,
in demand.
Ideally, display.
capacity will match demand.
for an impressive
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
easier to stack in stores. It can also be nested, courtesy of a recess
Readings highlight important
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.
ste3889X_ch05_190-221.indd 213
xiv
LO4.5 List some of the
main sources of design
ideas.
SUMMARY
Jerry Simon
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.”
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.
4.2 IDEA GENERATION
08/01/19 07:22 AM
Ideas for new or redesigned products or services can come from a variety of sources, including customers, the supply chain, competitors, employees, and research. Customer input can
come from surveys, focus groups, complaints, and unsolicited suggestions for improvement.
Input from suppliers, distributors, and employees can be obtained from interviews, direct or
indirect suggestions, and complaints.
One of the strongest motivators for new and improved products or services is competitors’ products and services. By studying a competitor’s products or services and how the
competitor operates (pricing policies, return policies, warranties, location strategies, etc.), an
organization can glean many ideas. Beyond that, some companies purchase a competitor’s
∑ y − b∑ t
a = ______ or ¯y − b¯t
n
Trend-adjusted
forecast
Linear regression
forecast
TAF t+1 = S t + T t
where
S t = TAF t + α( A t − TAF t)
T t = T t−1 + β( TAF t − TAF t−1 − T t−1)
t = Current period
TAF t+1 = Trend-adjusted forecast for
next period
S = Previous forecast plus
smoothed error
T = Trend component
Y c = a + bx
where
n (∑ xy ) − (∑ x) (∑ y)
b = _____________________
n(∑ x 2) − (∑ x 2)
y c = Computed value of dependent
variable
x = Predictor (independent) variable
b = Slope of the line
a = Value of y c when x = 0
∑ y − b∑ x
a = ______ or ¯y − b¯x
n
END-OF-CHAPTER RESOURCES
Standard error of
estimate
√
________
Se =
(y − y c) 2
∑
_______
n−2
S e = Standard error of estimate
y = y value of each data point
n = Number of data points
For student study and review, the following items are
√
√
√
­provided at the end
of each chapter or chapter supplement.
t
Tracking signal
∑e
TS t = _____
MAD t
Control limits
UCL = 0 + z MSE
_____
LCL = 0 − z MSE
_____
_____
MSE = standard deviation
z = Number of standard deviations;
2 and 3 are typical values
Microsoft
1.
2.
3.
4.
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.
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.
Other, nonrandom factors might also be present, so it is necessary to monitor forecast errors to
check for nonrandom patterns in forecast errors.
It is important to choose a forecasting technique that is cost-effective and one that minimizes forecast error.
associative model, 80
judgmental forecasts, 80
regression, 98
bias, 109
least squares line, 99
seasonality, 82
centered moving average, 96
linear trend equation, 89
seasonal relative, 94
Chapter
One deviation
Introduction to Operations
Management
control chart, 107
mean absolute
seasonal variations,
93
correlation, 102
(MAD), 106
standard error of estimate, 100
cycle, 82
mean absolute percent error
time series, 82
7. What
are models
Delphi
method,and
81why are they important?
(MAPE), 106
time-series forecasts, 80
8. Why
is the
degree of customization an mean
important
consideration
in process
error,
105
squared
error (MSE),
106 planning?
tracking signal, 109
smoothing,
87consider for
moving
trend, 82
9. Listexponential
the trade-offs
you would
each average,
of these 84
decisions:
focus forecasting, 88
naive forecast, 82
trend-adjusted exponential
a. Driving your own car versus public transportation.
forecast, 76
predictor variables, 98
smoothing, 92
b. irregular
Buying a variation,
computer 82
now versus waiting
for an
improved82model.
random
variations,
weighted average, 86
c. Buying a new car versus buying a used car.
d. Speaking up in class versus waiting to get called on by the instructor.
e. A small business owner having a website versus newspaper advertising.
Taking Stock and Critical
Thinking Exercises
10. Describe each of these systems: craft production, mass production, and lean production.
11. Why might some workers prefer not to work in a lean production environment?
12. Discuss the importance of each of the following:
a. ste3889X_ch03_074-137.indd
Matching supply and demand
117
b. Managing a supply chain
These
activities encourage analytical thinking
13. List and briefly explain the four basic sources of variation, and explain why it is important for
managers to be able to effectively deal with variation.
and14.help
broaden
conceptual
understanding.
Why do people
do things that
are unethical?
15. Explain the term value-added.
A ­q16.uestion
related to ethics is included in the
Discuss the various impacts of outsourcing.
17. Discuss the term sustainability, and its relevance for business organizations.
­Critical
Thinking Exercises.
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 technology. 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?
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 the production of goods and the 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.
4. What ethical considerations are important in development of technology in general, as well as AI
(artificial intelligence)?
5. a. What would cause a businessperson to make an unethical decision?
Problem Sets
b. What are the risks of doing so?
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 students
can check their understanding and see
­immediately how they are progressing.
ste3889X_ch01_002-039.indd 37
Summaries and Key Points
KEY POINTS
Chapters contain summaries that provide an
overview of the material covered, and the
key points of the chapter are emphasized in a
­separate section.
Rev.Confirming Pages
KEY TERMS
37
Confirming Pages
Key Terms
Key
terms are highlighted in the text and then217
Strategic Capacity Planning for Products and Services
repeated
in the margin with brief definitions for
5. Give some examples of building flexibility into system design.
6. Why is it important to adopt a big-picture
approach to capacity
planning?
emphasis.
They
are listed at the end of each
7. What is meant by “capacity in chunks,” and why is that a factor in capacity planning?
8. What kinds of capacity problems do chapter
many elementary(along
and secondarywith
schools periodically
page experireferences) to aid in
ence? What are some alternatives to deal with those problems?
9. How can a systems approach to capacity
planning be useful?
reviewing.
Chapter Five
09/25/19 10:58 AM
10. How do capacity decisions influence productivity?
11. Why is it important to match process capabilities with product requirements?
12. Briefly discuss how uncertainty affects capacity decisions.
13. Discuss the importance of capacity planning in deciding on the number of police officers or fire
trucks to have on duty at a given time.
Discussion and Review Questions
14. Why is capacity planning one of the most critical decisions a manager has to make?
15. Why is capacity planning for services more challenging than it is for goods production?
16. What are some capacity measures for each of the following?
Each chapter and each supplement have a
list of discussion and review questions. These
Computer repair shop
TAKING c.STOCK
d. Farm
precede
sets and are intended
17. What is the benefit to a business organization
of havingthe
capacityproblem
measures?
to serve as a student self-review or as class
1. What are the major trade-offs in capacity planning?
TAKING STOCK
iscussion starters.
2. Who needs to be involved in capacity­d
planning?
a. University
b. Hospital
3. In what ways does technology have an impact on capacity planning?
1. A computer repair service has a design capacity of 80 repairs per day. Its effective capacity, however, is 64 repairs per day, and its actual output is 62 repairs per day. The manager would like to
increase
the number of repairs per day because demand is higher than 70 repairs per day, creating a
CRITICAL
THINKING
backlog of orders. Which factors would you recommend that the manager investigate? Explain your
EXERCISES
CRITICAL THINKING
EXERCISES
reasoning.
2. Compared to manufacturing, service requirements tend to be more time dependent, location dependent, and volatile. In addition, service quality is often directly observable by customers. Find a
recent article in a business magazine that describes how a service organization is struggling with
one or more of these issues and make recommendations on what an organization needs to do to
overcome these difficulties.
3. Identify four potential unethical actions or inactions related to capacity planning, and the ethical
principle each violates (see Chapter 1).
4. Any increase in efficiency also increases utilization. Although the upper limit on efficiency is
100 percent, what can be done to achieve still higher levels of utilization?
1. Determine the utilization and efficiency for each of the following 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.
PROBLEMS
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?
08/01/19 06:47 AM
ste38891_ch05_190-221.indd
217
07/12/19 04:29 PM
xv
Marty designed: the Arrow and the Dart. The company hasn’t
turned a profit yet, but Marty feels that once he resolves some of
the problems he’s having with inventory and scheduling, he can
increase productivity and reduce costs.
At first, he ordered enough bike parts and subassemblies for
four months’ worth of production. Parts were stacked all over the
place, seriously reducing work space and hampering movement
of workers and materials. And no one knew exactly where anything was. In Marty’s words, “It was a solid mess!”
He and his two partners eventually managed to work off
most of the inventory. They hope to avoid similar problems in the
future by using a more orderly approach. Marty’s first priority is to
develop a materials requirement plan for upcoming periods. He
wants to assemble 15 Arrows and 10 Darts each week, to have
them ready at the start of weeks 4 through 8. The product structure trees for the two bikes follow.
Operations Tours
Arrow
Dart
These provide a simple “walkthrough” of an ­operation
Chapter Thirteen MRP and ERP
for students, describing the company, its product
M
X
K(2)
F
17. The MRP Department has a problem. Its computer
“died”
just as it spit W
out the following
inforor service, and
its Planned
process
of managing
operations.
mation:
order release
for item J27 = 640
units in week 2. The firm has been able to
F the master schedule for end item 565. The firm is
reconstruct all the information they lost except
­Companies featured
include
Wegmans
Food
Markets,
fortunate because
J27 is used
only in 565s. Given
the following
productW(2)
structure tree and assoQ
ciated inventory status record information, determine what master schedule entry for 565 was
Morton Salt, Stickley
and Boeing.
exploded intoFurniture,
the material requirements
plan that killed the computer.
Part Number
565
X43
N78
Y36
J27
On Hand
0
60
0
200
0
Lot Size
Lead Time
565
Lot-for-lot
1 week
Multiples of 120
1 week
X43
Y36 (2)
N78
Lot-for-lot
2 weeks
Lot-for-lot
1 week
OPERATIONS TOUR
J27 (4)
X43
Lot-for-lot
2 weeks
D(2)
E(2)
H(3)
2
5
Lot-for-lot
Dart
2
2
Lot-for-lot
X
1
5
Multiples of 25
W
2*
2
Multiples of 12
F
1
10
Multiples of 30
K
1
3
Lot-for-lot
Q
1
15
Multiples of 30
M
1
0
Lot-for-lot
*LT = 3 weeks for orders of 36 or more units on this item
Confirming Pages
Scheduled receipts are:
Period 1:
Period 2:
20 Arrows and 18 Ws
20 Darts and 15 Fs
As the third partner, it is your job to develop the material requirements plan.
605
STICKLEY FURNITURE
18. Develop a material requirements plan for component H. Lead times for the end item and each component except B are one week. The lead time forIntroduction
B is three weeks. Sixty units of A are needed at the start
of week 8. There are currently 15 units of B on hand and 130 of E on hand, and 50 units of H are in
production and will be completed by the start www.stickley.com
of week 2. Lot-for-lot ordering will be used for all items.
B(2)
Arrow
in New York State, two in Connecticut, one in North Carolina, and
its furniture is sold nationally by some 120 dealers.
AL. & J.G. Stickley was founded in 1900 by brothers Leopold and
Production
George Stickley. Located just outside of Syracuse, New York, the
company is a producer of fine cherry, white oak, and mahogany
furniture. In the 1980s, the company reintroduced the company’s
original line of Cmission oak furniture, which now accounts for
nearly 50 percent of the company’s sales.
Over the years, the company experienced both good and bad
times, and at one point it employed over 200 people. However,
by the
was in disarray; there were only
D(2)early 1970s, the business
E(4)
about 20 full-time employees, and the company was on the brink
of bankruptcy. The present owners bought the ailing firm in 1974,
and under their leadership, the company has prospered and grown,
and
has five retail showrooms
K now has 1,350
H(3)employees. Stickley
K
The production facility is a large, rectangular building with a
30-foot ceiling. Furniture making is labor intensive, although saws,
sanders, and other equipment are very much a part of the process. In fact, electric costs average about $60,000 a month. The
company has its own tool room where cutting tools are sharpened, and replacement parts are produced as needed.
Worker skills range from low-skilled material handlers to highly
skilled craftsmen. For example, seven master cabinet makers handle customized orders.
The process (see figure below) begins with various sawing
operations where large boards received from the lumber mills
are cut into smaller sizes. The company recently purchased a
606
CASE
PROMOTIONAL NOVELTIES
ste3889X_ch13_560-609.indd
Promotional Novelties provides a wide range of novelty items for
its corporate customers. It has just received an order for 20,000
toy tractor-trailers that will be sold by a regional filling station company as part of a holiday promotion. The order is to be shipped
at the beginning of week 8. The tree diagram shows the various
components of the trucks.
Tractor-trailer
Tractor
Wheel
assembly
Trailer
Body
Wheel
assembly
Body
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The company can complete final assembly of the tractortrailers at the rate of 10,000 a week. The tractor and trailer bodies
are purchased; lead time is three weeks. The wheels are the
manager’s main concern.
The company has a sufficient supply of brackets on hand.
Assembly time is one week each for tractors, trailers, and wheel
assembly. However, the wheel department can only produce
wheels at the rate of 100,000 a week. The manager plans to
use the wheel department to full capacity, starting in week 2
of the schedule, and order additional wheels from a supplier
as needed. Ordered wheels come in sets of 6,400. The lead
time for delivery from the supplier is expected to be two to
three weeks. Use lot-for-lot ordering for all items except the
purchased wheels.
Questions
Wheels (6)
Bracket
ste3889X_ch13_560-609.indd
Wheels (12)
Bracket
1. How many wheel sets should the manager order?
2. When should the wheel sets be ordered?
605
08/08/19 09:27 AM
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.
xvi
INSTRUCTOR RESOURCES
Available within Connect, instructors have access to teaching supports such as electronic files
of the ancillary materials: Solutions Manual, Instructor’s Manual, Test Bank, PowerPoint
Lecture Slides, Digital Image Library, and accompanying Excel files.
Instructor’s Manual. This manual, revised for the new edition by Tracie Lee, Idaho
State University, includes teaching notes, chapter overview, an outline for each chapter, and
­solutions to the problems in the text.
Test Bank. Updated for the new edition by Leslie Sukup, Ferris State University, and
reviewed by Nancy Lambe, University of South Alabama, the Test Bank includes over
2,000 true/false, multiple-choice, and discussion questions/problems at varying levels of
difficulty. The Test Bank is available to assign within Connect, as Word files available in
the Instructor Resource Library, and through our online test generator. Instructors can organize, edit, and customize questions and answers to rapidly generate tests for paper or online
administration.
PowerPoint Lecture Slides. Revised by Avanti Sethi, University of Texas-Dallas, 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.
Digital Image Library. All the figures in the book are included for insertion in PowerPoint
slides or for class discussion.
xvii
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Note to Students
The material in this text is part of the core knowledge in your
education. Consequently, you will derive considerable benefit from your study of operations management, regardless
of your major. Practically speaking, operations is a course in
management.
This book describes principles and concepts of operations
management. You should be aware that many of these principles and concepts are applicable to other aspects of your
professional and personal life. You can expect the benefits of
your study of operations management to serve you in those
other areas as well.
Some students approach this course with apprehension, and
perhaps even some negative feelings. It may be that they have
heard that the course contains a certain amount of quantitative
material that they feel uncomfortable with, or that the subject
matter is dreary, or that the course is about “factory management.” This is unfortunate, because the subject matter of this
book is interesting and vital for all business students. While
it is true that some of the material is quantitative, numerous
examples, solved problems, and answers at the back of the
book help with the quantitative material. As for “factory management,” there is material on manufacturing, as well as on
services. Manufacturing is important, and something that you
should know about for a number of reasons. Look around you.
Most of the “things” you see were manufactured: cars, trucks,
planes, clothing, shoes, computers, books, pens and pencils,
desks, and cell phones. And these are just the tip of the iceberg. So it makes sense to know something about how these
things are produced. Beyond all that is the fact that manufacturing is largely responsible for the high standard of living
people have in industrialized countries.
After reading each chapter or supplement in the text,
attending related classroom lectures, and completing assigned
questions and problems, you should be able to do each of the
following:
1. Identify the key features of that material.
2. Define and use terminology.
3. Solve typical problems.
4. Recognize applications of the concepts and techniques
covered.
xx
5. Discuss the subject matter in some depth, including its
relevance, managerial considerations, and advantages
and limitations.
You will encounter a number of chapter supplements.
Check with your course syllabus to determine which ones are
included.
This book places an emphasis on problem solving. There
are many examples throughout the text illustrating solutions.
In addition, at the end of most chapters and supplements you
will find a group of solved problems. The examples within
the chapter itself serve to illustrate concepts and techniques.
Too much detail at those points would be counterproductive.
Yet, later on, when you begin to solve the end-of-chapter
problems, you will find the solved problems quite helpful.
Moreover, those solved problems usually illustrate more and
different details than the problems within the chapter.
I suggest the following approach to increase your chances
of getting a good grade in the course:
1. Do the class preparation exercises for each chapter if
they are available from your instructor.
2. Look over the chapter outline and learning objectives.
3. Read the chapter summary, and then skim the chapter.
4. Read the chapter and take notes.
5. Look over and try to answer some of the discussion and
review questions.
6. Work the assigned problems, referring to the solved
problems and chapter examples as needed.
Note that the answers to many problems are given at the
end of the book. Try to solve each problem before turning to
the answer. Remember—tests don’t come with answers.
And here is one final thought: Homework is on the
Highway to Success, whether it relates to your courses, the
workplace, or life! So do your homework, so you can have a
successful journey!
W.J.S.
Brief Contents
Preface
vii
1 Introduction to Operations Management 2
2 Competitiveness, Strategy, and Productivity 40
3 Forecasting 74
4 Product and Service Design 138
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