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NINTHEDITIONGLOBAL nability and Supply Chain ManagementJ A YHEIZERJesse H. Jones Professor of Business AdministrationTexas Lutheran UniversityBARRYRENDERCharles Harwood Professor of Operations ManagementGraduate School of BusinessRollins CollegePEARSONBoston Columbus Indianapolis New York San Francisco Upper Saddle RiverAmsterdam Cape Town Dubai London Madrid Milan Munich Paris Montreal TorontoDelhi Mexico City Sao Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo
About the Authors7Preface21PART ONEIntroduction to Operations ManagementChapter 1 Operations and Productivity37GLOBAL COMPANY PROFILE: HARD ROCK CAFE 38What Is Operations Management? 40Organizing to Produce Goods and Services 40The Supply Chain 42Why Study OM? 42What Operations Managers Do 43The Heritage of Operations Management 44Operations for Goods and Services 47Growth of Services 47Service Pay 48The Productivity Challenge 49Productivity Measurement 50Productivity Variables 51Productivity and the Service Sector 53New Challenges in Operations Management 54Ethics, Social Responsibility, and Sustainability 55Summary 56Key Terms 56Ethical Dilemma 56Discussion Questions 56Solved Problems 57Problems 57GASE STUDIES 59Norwegian Saimon Processing Faciiity, Trondheim 59Frito-Lay: Operations Management in ManufacturingVideo Case 59Hard Rock Cafe: Operations Management in ServicesVideo Case 60Rapid Review 61Seif Test 62Chapter 2The Global Environment and OperationsStrategy63GLOBAL COMPANY PROFILE: BOEING 64A Global View of Operations and Supply Chains 66Cultural and Ethical Issues 69Developing Missions and Strategies 70Mission 70Strategy 7037Achieving Competitive Advantage ThroughOperations 71Competing on Differentiation 71Competing on Cost 72Competing on Response 73Issues in Operations Strategy 74Strategy Development and Implementation 75Key Success Factors and Core Competencies 76Integrating OM with Other Activities 77Building and Staffing the Organization 77Implementing the 10 Strategie OM Decisions 78Strategie Flanning, Core Competencies, andOutsourcing 78The Theory of Comparative Advantage 80Risks of Outsourcing 80Rating Outsource Providers 81Global Operations Strategy Options 83Summary 84Key Terms 84Ethical Dilemma 85Discussion Questions 85Using Software to Solve Outsourcing Problems 85Solved Problems 86Problems 87CASE STUDIES 89ALDI 89Strategy at Regal Marine Video Case 89Hard Rock Cafe's Global Strategy Video Case 89Outsourcing Offshore at Darden Video Case 90Rapid Review 91Seif Test 92Chapter 3Managing Projects93GLOBAL COMPANY PROFILE: BECHTEL GROUP 94The Importance of Project Management 96Project Flanning 96The Project Manager 97Work Breakdown Structure 98Project Scheduling 99Project Controlling 10011
12TABLE OF CONTENTSProject Management Techniques:PERTandCPM 101The Framework of PERT and CPM 101Network Diagrams and Approaches 101Activity-on-Node Example 102Activity-on-Arrow Example 104Determining the Project Schedule 105Forward Pass 105Backward Pass 107Calculating Slack Time and Identifying the CriticalPath(s) 108Variability in Activity Times 110Three Time Estimates in PERT 110Probability of Project Completion 112Cost-Time Trade-Offs and Project Crashing 115A Critique of PERT and CPM 118Using Microsoft Project to Manage Projects 119Summary 121Key Terms 122Ethical Dilemma 122Discussion Questions 122Using Software to Solve Project ManagementProblems 122Solved Problems 123Problems 126CASE STUDIES 131Southwestern University: (A) 131Project Management at Arnold Palmer HospitalVideo Case 132Managing Hard Rock's Rockfest Video Case 133Rapid Review 135Seif Test 136Chapter 4Forecasting Demand137GLOBAL COMPANY PROFILE: WALT DISNEY PARKS &RESORTS 138What Is Forecasting? 140Forecasting Time Horizons 140Types of Forecasts 141The Strategie Importance of Forecasting 141Suppiy-Chain Management 141PART TWOChapter 5Human Resources 142Capacity 142Seven Steps in the Forecasting System 142Forecasting Approaches 143Overview of Qualitative Methods 143Overview of Quantitative Methods 144Time-Series Forecasting 144Decomposition ofa Time Series 144Naive Approach 145Moving Averages 146Exponential Smoothing 148Measuring Forecast Error 149Exponential Smoothing with Trend Adjustment 152Trend Projections 155Seasonal Variations in Data 157Cyclical Variations in Data 162Associative Forecasting Methods: Regression andCorrelation Analysis 162Using Regression Analysis for Forecasting 162Standard Error of the Estimate 164Correlation Coefficients for Regression Lines 165Multiple-Regression Analysis 167Monitoring and Controlling Forecasts 168Adaptive Smoothing 170Focus Forecasting 170Forecasting in the Service Sector 170Summary 172Key Terms 172Ethical Dilemma 172Discussion Questions 172Using Software in Forecasting 173Solved Problems 174Problems 177CASE STUDIES 184Southwestern University: (B) 184Forecasting Ticket Revenue for Orlando MagicBasketball Games Video Case 185Forecasting at Hard Rock Cafe Video Case 186Rapid Review 187Seif Test 188Designing OperationsProduct Design189GLOBAL COMPANY PROFILE: REGAL MARINE 190Goods and Services Selection 192Product Strategy Options Support CompetitiveAdvantage 193Product Life Cycles 194189Life Cycle and Strategy 194Product-by-Value Analysis 195Generating New Products 195Product Development 196Product Development System 196Quality Function Deployment (QFD) 196
TABLE OF CONTENTSOrganizing for Product Development 199Manufacturability and Value Engineering 200Issues for Product Design 201Robust Design 201Modular Design 201Computer-Aided Design (CAD) and Computer-AidedManufacturing (CAM) 201Virtual Reality Technology 202Value Analysis 203Sustainability and Life Cycle Assessment (LCA) 203Product Development Continuum 203Purchasing Technology by Acquiring a Firm 204Joint Ventures 204Alliances 205Defining a Product 205Make-or-Buy Decisions 206Group Technology 207Documents for Production 208Product Life-Cycle Management (PLM) 208Service Design 209Process-Chain-Network (PCN) Analysis 209Adding Service Efficiency 211Documents for Services 211Application of Decision Trees to ProductDesign 212Transition to Production 214Summary 214Key Terms 215Ethical Dilemma 215Discussion Questions 215Solved Problem 216Problems 216CASE STUDIES 219Temsa Global's Product Strategy 219Product Design at Regal Marine VideoCase 219Rapid Review 221Seif Test 222Supplement 5 Sustainability223Corporate Social Responsibility 224Sustainability 225Systems View 225Commons 225Triple Bottom Line 225Design and Production for SustainabilityProduct Design 228Production Process 230Logistics 230End-of-Life Phase 23222713Regulations and Industry Standards 233International Environmental Policies and Standards 234Summary 235Key Terms 235Discussion Questions 235Solved Problems 235Problems 237CASE STUDIES 237Building Sustainability at the Orlando Magic's AmwayCenter Video Case Study 237Green Manufacturing and Sustainability at Frito-LayVideo Case 238Rapid Review 239Seif Test 240Chapter 6Quality Management and InternationalStandards241GLOBAL COMPANY PROFILE: ARNOLD PALMERHOSPITAL 242Quality and Strategy 244Defining Quality 245Implications of Quality 245Malcolm Baldrige National Quality Award 246ISO 9000 International Quality Standards 246Cost of Quality (COQ) 246Ethics and Quality Management 247Total Quality Management 248Continuous Improvement 248Six Sigma 249Employee Empowerment 250Benchmarking 250Just-in-Time (JIT) 252Taguchi Concepts 252Knowledge of TQM Tools 253Tools of TQM 254Check Sheets 254Scatter Diagrams 255Cause-and-Effect Diagrams 255Pareto Charts 255Flowcharts 256Histograms 257Statistical Process Control (SPC) 257The Role of Inspection 258When and Where to Inspect 258Source Inspection 259Service Industry Inspection 260Inspection of Attributes versus Variables 260TQM in Services 261Summary 263Key Terms 263
14TABLE OF CONTENTSEthical Dilemma 263Discussion Questions 263Solved Problem 264Problems 264CASE STUDIES 266Southwestern University: (C) 266The Culture of Quality at Arnold Palmer HospitalVideo Case 267Quality at the Ritz-Carlton Hotel CompanyVideo Case 268Rapid Review 269Seif Test 270Supplement 6Statistical Process Control271Statistical Process Control (SPC) 272Control Charts for Variables 273The Central Limit Theorem 274Setting Mean Chart Limits (x-Charts) 275Setting Range Chart Limits (R-Charts) 278Using Mean and Range Charts 279Control Charts for Attributes 280Managerial Issues and Control Charts 284Process Capability 285Process Capability Ratio (Cp) 285Process Capability Index (Cpk) 286Acceptance Sampling 287Operating Characteristic Curve 288Average Outgoing Quality 290Summary 291Key Terms 291Discussion Questions 291Using Software for SPC 291Solved Problems 293Problems 295CASE STUDIES 299Cecil Rice Export, Alexandria, Egypt 299Frito-Lay's Quality-Controlled Potato ChipsVideo Case 301Farm to Fork: Quality at Darden RestaurantsVideo Case 301Rapid Review 303Seif Test 304Chapter 7Process DesignSupplement 7305GLOBAL COMPANY PROFILE: HARLEY-DAVIDSONFour Process Strategies 308Process Focus 308Repetitive Focus 309Product Focus 310Mass Customization Focus 310Process Comparison 312Selection of Equipment 314Process Analysis and Design 315Flowchart 315Time-Function Mapping 315Value-Stream Mapping 316Process Charts 317Service Blueprinting 318Special Considerations for Service ProcessDesign 318Production Technology 321Machine Technology 321Automatic Identification Systems (AISs) and RFID 321Process Control 321Vision Systems 322Robots 322Automated Storage and Retrieval Systems (ASRSs) 322Automated Guided Vehicles (AGVs) 323Flexible Manufacturing Systems (FMSs) 323Computer-Integrated Manufacturing (CIM) 323Technology in Services 324Process Redesign 326Summary 326Key Terms 326Ethical Dilemma 327Discussion Questions 327Solved Problem 327Problems 328CASE STUDIES 329Rochester Manufacturing's Process Decision 329Process Analysis at Arnold Palmer HospitalVideo Case 329Process Strategy at Wheeled Coach Video Case 330Rapid Review 331Seif Test 332306Capacity FlanningCapacity 334Design and Effective Capacity 335Capacity and Strategy 336Capacity Considerations 337Managing Demand 337Service-Sector Demand and CapacityManagement 338Bottleneck Analysis and the Theory ofConstraints 340Theory of Constraints 342Bottleneck Management 342Break-Even Analysis 343Single-Product Case 343Multiproduct Case 344333
TABLE OF CONTENTSReducing Risk with Incremental Changes 346Applying Expected Monetary Value (EMV) toCapacity Decisions 347Applying Investment Analysis to Strategy-DrivenInvestments 348Investment, Variable Cost, and Cash Flow 348Net Present Value 348Summary 350Key Terms 351Discussion Questions 351Using Software for Break-Even Analysis 351Solved Problems 351Problems 353CASE STUDY 357Capacity Planning at Arnold Palmer HospitalVideo Case 357Rapid Review 359Seif Test 360Chapter 8Location Decisions361GLOBAL COMPANY PROFILE: FEDEX 362The Strategie Importance of Location 364Factors That Affect Location Decisions 365Labor Productivity 365Exchange Rates and Currency Risk 367Costs 367Political Risk, Values, and Culture 368Proximity to Markets 368Proximity to Suppliers 368Proximity to Competitors (Clustering) 368Methods of Evaluating Location Alternatives 369The Factor-Rating Method 369Locational Cost-Volume Analysis 370Center-of-Gravity Method 372Transportation Model 374Service Location Strategy 374Geographie Information Systems 375Summary 377Key Terms 377Ethical Dilemma 378Discussion Questions 378Using Software to Solve Location Problems 378Solved Problems 379Problems 381CASE STUDIES 386Finding a Location for Electronics ComponentManufacturing in Asia 386Locating the Next Red Lobster RestaurantVideo Case 386Where to Place the Hard Rock Cafe Video Case 38715Rapid Review 389Seif Test 390Chapter 9Layout Decisions391GLOBAL COMPANY PROFILE: McDONALD'S 392The Strategie Importance of Layout Decisions 394Types of Layout 394Office Layout 395Retail Layout 397Servicescapes 398Warehouse and Storage Layouts 399Cross-Docking 399Random Stocking 400Customizing 400Fixed-Position Layout 400Process-Oriented Layout 401Computer Software for Process-Oriented Layouts 405Work Cells 406Requirements of Work Cells 406Staffing and Balancing Work Cells 407The Focused Work Center and the FocusedFactory 409Repetitive and Product-Oriented Layout 409Assembly-Line Balancing 410Summary 415Key Terms 415Ethical Dilemma 415Discussion Questions 415Using Software to Solve Layout Problems 416Solved Problems 417Problems 419CASE STUDIES 425State Automobile License Renewals 425Laying Out Arnold Palmer Hospital's New FacilityVideo Case 426Facility Layout at Wheeled Coach VideoCase 427Rapid Review 429Seif Test 430Chapter 10 Job Design and Work Measurement431GLOBAL COMPANY PROFILE: RUSTY WALLACE'S NASCARRACINGTEAM 432Human Resource Strategy for CompetitiveAdvantage 434Constraints on Human Resource Strategy 434Labor Planning 435Employment-Stability Policies 435Work Schedules 435Job Classifications and Work Rules 436
16TABLE OF CONTENTSJob Design 436Labor Specialization 436Job Expansion 437Psychological Components of Job Design 437Seif-Directed Teams 438Motivation and Incentive Systems 439Ergonomics and the Work Environment 439Methods Analysis 442The Visual Workplace 444Labor Standards 444Historical Experience 445Time Studies 445Predetermined Time Standards 450Work Sampiing 452PART THREEEthics 455Summary 455Key Terms 455Ethical Dilemma 455Discussion Questions 456Solved Problems 456Problems 458CASE STUDIES 461Jackson Manufacturing Company 461Hard Rock's Human Resource StrategyVideo Case 462Rapid Review 463Seif Test 464465Managing OperationsChapter 11 Supply Chain Management465GLOBAL COMPANY PROFILE: DARDEN RESTAURANTS 466The Supply Chain's Strategie Importance 468Sourcing Issues: Make-or-Buy vs. Outsourcing 470Make-or-Buy Decisions 471Outsourcing 471Six Sourcing Strategies 471Many Suppliers 471Few Suppliers 471Vertical Integration 472Joint Ventures 472Keiretsu Networks 472Virtual Companies 473Supply Chain Risk 473Ri
OPERATIONS MANAGEMENT 1 — 1 Sustainability and Supply Chain Management J A Y HEIZER Jesse H. Jones Professor of Business Administration Texas Lutheran University BARRY RENDER Charles Harwood Professor of Operations Management Graduate School of Business Rollins College PEARSON Boston Columbus Indianapolis New York San Francisco Upper Saddle River Amsterdam
