Operations Management: Sustainability and Supply Chain Management, Third Canadian Edition
By Jay Heizer, Barry Render, Chuck Munson and Paul Griffin
Table of Contents:
Preface xvi
PART ONE
Introduction to Operations
Management 1
1 Operations and Productivity 1
What Is Operations Management? 2
Organizing to Produce Goods and Services 3
The Supply Chain 4
Why Study Operations Management? 4
What Operations Managers Do 5
Where Are the OM Jobs? 6
The Heritage of Operations Management 6
Operations in the Service Sector 9
Differences Between Goods and Services 9
Growth of Services 9
Service Pay 10
New Challenges in Operations Management 11
The Productivity Challenge 11
Productivity Measurement 12
Productivity Variables 14
Productivity and the Service Sector 16
Ethics, Social Responsibility, and Sustainability 17
Chapter Summary 18 • Ethical Dilemma
18 • Discussion Questions 19 • Solved Problems
19 • Problems 20 • Case Studies: National
Air Express 21 • Video Case Studies: Frito-
Lay: Operations Management in Manufacturing
22 • Hard Rock Cafe: Operations Management in
Services 22 • Rapid Review 23 • Self-Test 25
2 Operations Strategy in a Global Environment 26
A Global View of Operations and Supply Chains 28
Reduce Costs 29
Improve the Supply Chain 30
Provide Better Goods and Services 30
Understand Markets 30
Learn to Improve Operations 31
Attract and Retain Global Talent 31
Cultural and Ethical Issues 31
Developing Missions and Strategies 32
Mission 32
Strategy 32
Achieving Competitive Advantage Through
Operations 33
Competing on Differentiation 34
Competing on Cost 34
Competing on Response 35
10 Strategic OM Decisions 36
Issues in Operations Strategy 39
Strategy Development and Implementation 40
Key Success Factors and Core Competencies 41
Build and Staff the Organization 42
Integrate OM with Other Activities 42
Strategic Planning, Core Competencies, and Outsourcing 43
The Theory of Comparative Advantage 44
Risks of Outsourcing 44
Rating Outsource Providers 45
Global Operations Strategy Options 47
International Strategy 47
Multidomestic Strategy 48
Global Strategy 48
Transnational Strategy 48
Chapter Summary 49 • Ethical Dilemma 49
Discussion Questions 50 • Solved Problems 50
Problems 51 • Case Studies: Mr. Lube 53
Video Case Studies: Operations Strategy at Regal
Marine 53 • Hard Rock Cafe’s Global Strategy
53 • Rapid Review 54 • Self-Test 56
3 Project Management 58
The Importance of Project Management 59
Project Planning 60
The Project Manager 61
Work Breakdown Structure 61
Project Scheduling 62
Project Controlling 64
Project Management Techniques: PERT and CPM 65
The Framework of PERT and CPM 65
Network Diagrams and Approaches 66
Activity-on-Node Example 67
Activity-on-Arrow Example 69
Determining the Project Schedule 70
Forward Pass 70
Backward Pass 72
Calculating Slack Time and Identifying the Critical Path(s) 73
Variability in Activity Times 75
Three Time Estimates in PERT 76
Probability of Project Completion 77
Cost–Time Trade-Offs and Project Crashing 81
A Critique of PERT and CPM 83
Advantages 83
Limitations 84
Using Microsoft Project to Manage Projects 84
Entering Data 84
Viewing the Project Schedule 85
PERT Analysis 86
Tracking the Time Status of a Project 86
Chapter Summary 87 • Ethical Dilemma
87 • Discussion Questions 87 • Using
Software to Solve Project Management Problems
88 • Solved Problems 88 • Problems 91 • Case
Studies: Fast Creek Lightning: (A) 96 • Video
Case Studies: Project Management at Arnold
Palmer Hospital 97 • Managing Hard Rock’s
Rockfest 98 • Rapid Review 100 • Self-Test 102
4 Forecasting 103
What Is Forecasting? 104
Forecasting Time Horizons 105
The Influence of Product Life Cycle 105
Types of Forecasts 106
The Strategic Importance of Forecasting 106
Supply Chain Management 106
Human Resources 106
Capacity 106
Seven Steps in the Forecasting System 107
Forecasting Approaches 107
Overview of Qualitative Methods 107
Overview of Quantitative Methods 108
Time-Series Forecasting 108
Decomposition of a Time Series 108
Naive Approach 109
Moving Averages 109
Exponential Smoothing 112
Measuring Forecast Error 113
Exponential Smoothing with Trend
Adjustment 116
Trend Projections 119
Seasonal Variations in Data 122
Cyclical Variations in Data 126
Associative Forecasting Methods: Regression and Correlation Analysis 126
Using Regression Analysis for Forecasting 126
Standard Error of the Estimate 128
Correlation Coefficients for Regression Lines 129
Multiple-Regression Analysis 131
Monitoring and Controlling Forecasts 132
Adaptive Smoothing 133
Focus Forecasting 133
Forecasting in the Service Sector 134
Specialty Retail Shops 134
Fast-Food Restaurants 134
Chapter Summary 135 • Ethical Dilemma
135 • Discussion Questions 136 • Using
Software in Forecasting 136 • Solved Problems
138 • Problems 139 • Case Studies: Fast
Creek Lightning: (B) 146 • Video Case Studies:
Forecasting at Hard Rock Cafe 146 • Rapid
Review 147 • Self-Test 150
PART TWO
Designing Operations 151
5 Design of Goods and Services 151
Goods and Services Selection 152
Product Strategy Options Support Competitive
Advantage 153
Life Cycle and Strategy 154
Product-by-Value Analysis 155
Generating New Products 155
New Product Opportunities 155
Importance of New Products 155
Product Development 156
Product Development System 156
Quality Function Deployment (QFD) 157
Organizing for Product Development 160
Manufacturability and Value Engineering 161
Issues for Product Design 162
Robust Design 162
Modular Design 162
Computer-Aided Design (CAD) 162
Computer-Aided Manufacturing (CAM) 163
Virtual Reality Technology 164
Value Analysis 164
Sustainability and Life Cycle Assessment (LCA) 164
Time-Based Competition 164
Purchasing Technology by Acquiring
a Firm 166
Joint Ventures 166
Alliances 166
Defining a Product 166
Make-or-Buy Decisions 167
Group Technology 168
Documents for Production 169
Product Life Cycle Management (PLM) 169
Service Design 170
Process–Chain–Network (PCN) Analysis 170
Adding Service Efficiency 172
Documents for Services 172
Application of Decision Trees to Product Design 173
Transition to Production 175
Chapter Summary 175 • Ethical Dilemma
176 • Discussion Questions 176 • Solved
Problem 176 • Problems 177 • Case Studies:
StackTeck 179 • Video Case Studies: Product
Strategy at Regal Marine 179 • Rapid Review
180 • Self-Test 182
5 Supplement: Sustainability in the Supply Chain 183
Corporate Social Responsibility 184
Sustainability 185
Systems View 185
Commons 185
Triple Bottom Line 185
Design and Production for Sustainability 188
Product Design 188
Production Process 190
Logistics 190
End-of-Life Phase 193
Regulations and Industry Standards 193
International Environmental Policies and Standards 194
Supplement Summary 195 • Discussion
Questions 195 • Solved Problems
196 • Problems 197 • Video Case Studies:
Building Sustainability at the Orlando Magic’s
Amway Center 199 • Green Manufacturing and
Sustainability at Frito-Lay 199 • Rapid Review
200 • Self-Test 202
6 Managing Quality 203
Quality and Strategy 204
Defining Quality 205
Implications of Quality 206
National Quality Awards 206
ISO 9000 International Quality Standards 206
ISO 14000 206
Cost of Quality (COQ) 207
Ethics and Quality Management 208
Total Quality Management 208
Continuous Improvement 209
Six Sigma 210
Employee Empowerment 211
Benchmarking 211
Just-in-Time (JIT) 213
Taguchi Concepts 213
Knowledge of TQM Tools 214
Tools of TQM 214
Check Sheets 214
Scatter Diagrams 214
Cause-and-Effect Diagrams 214
Pareto Charts 215
Flowcharts 217
Histograms 218
Statistical Process Control (SPC) 218
The Role of Inspection 219
When and Where to Inspect 219
Source Inspection 220
Service Industry Inspection 220
Inspection of Attributes versus Variables 220
TQM in Services 221
Chapter Summary 223 • Ethical Dilemma
224 • Discussion Questions 224 • Problems
224 • Case Studies: Fast Creek Lightning: (C)
226 • Video Case Studies: The Culture of Quality
at Arnold Palmer Hospital 227 • Quality Counts
at Alaska Airlines 228 • TQM at Ritz-Carlton
Hotels 229 • Rapid Review 230 • Self-Test 232
6 Supplement: Statistical Process Control 233
Statistical Process Control (SPC) 233
Natural Variations 233
Assignable Variations 234
Samples 234
Control Charts 235
Control Charts for Variables 235
The Central Limit Theorem 235
Setting Mean Chart Limits (X-Charts) 237
Setting Range Chart Limits (R-Charts) 240
Using Mean and Range Charts 240
Control Charts for Attributes 242
Managerial Issues and Control Charts 245
Process Capability 246
Process Capability Ratio (Cp) 246
Process Capability Index (Cpk) 247
Acceptance Sampling 248
Operating Characteristic Curve 248
Average Outgoing Quality 250
Supplement Summary 251 • Discussion
Questions 251 • Using Software for SPC 252
Solved Problems 253 • Problems 254 • Case
Studies: PEI Potato Purveyors 258 • Video Case
Studies: Frito-Lay’s Quality-Controlled Potato Chips
260 • Farm to Fork: Quality at Darden Restaurants
260 • Rapid Review 261 • Self-Test 263
7 Process Strategy 264
Four Process Strategies 266
Process Focus 266
Repetitive Focus 267
Product Focus 267
Mass Customization Focus 268
Comparison of Process Choices 270
Selection of Equipment and Technology 272
Process Analysis and Design 273
Flowchart 274
Time-Function Mapping 274
Value-Stream Mapping 274
Process Charts 275
Service Blueprinting 276
Special Considerations for Service
Process Design 277
Customer Interaction and Process Design 277
More Opportunities to Improve Service
Processes 279
Production Technology 279
Machine Technology 279
Automatic Identification Systems (AISs) and RFID 280
Process Control 280
Vision Systems 281
Robots 281
Automated Storage and Retrieval Systems (ASRSs) 281
Automated Guided Vehicles (AGVs) 281
Flexible Manufacturing Systems (FMSs) 281
Computer-Integrated Manufacturing (CIM) 282
Technology in Services 283
Process Redesign 284
Chapter Summary 285 • Ethical Dilemma
285 • Discussion Questions 285 • Solved
Problem 286 • Problems 286 • Case
Studies: Regina Manufacturing’s Process
Decision 287 • Environmental Sustainability
at Walmart 287 • Video Case Studies: Process
Strategy at Wheeled Coach Ambulance
288 • Process Analysis at Arnold Palmer
Hospital 288 • Alaska Airlines: 20-Minute
Baggage Process—Guaranteed! 289 • Rapid
Review 290 • Self-Test 292
7 Supplement: Capacity and
Constraint Management 293
Capacity 293
Design and Effective Capacity 293
Capacity and Strategy 296
Capacity Considerations 296
Managing Demand 297
Demand and Capacity Management in the Service
Sector 299
Bottleneck Analysis and the Theory of Constraints 299
Theory of Constraints 302
Bottleneck Management 302
Break-Even Analysis 304
Assumptions 304
Graphic Approach 304
Algebraic Approach 305
Single-Product Case 305
Multiproduct Case 306
Reducing Risk with Incremental Changes 308
Applying Expected Monetary Value (EMV) to
Capacity Decisions 309
Applying Investment Analysis to Strategy-Driven
Investments 309
Investment, Variable Cost, and Cash Flow 309
Net Present Value 309
Supplement Summary 312 • Discussion Questions
312 • Using Software for Break-Even Analysis
312 • Solved Problems 313 • Problems 315
Video Case Study: Capacity Planning at
Arnold Palmer Hospital 318 • Rapid Review
319 • Self-Test 321
8 Location Strategies 322
The Strategic Importance of Location 323
Location and Costs 324
Factors that Affect Location Decisions 324
Labour Productivity 326
Exchange Rates and Currency Risk 326 Costs 327
Political Risk, Values, and Culture 327
Proximity to Markets 327
Proximity to Suppliers 328
Proximity to Competitors (Clustering) 329
Methods of Evaluating Location Alternatives 329
The Factor Rating Method 329
Locational Break-Even Analysis 330
Centre-of-Gravity Method 332
Transportation Model 333
Service Location Strategy 334
Geographic Information Systems 334
Chapter Summary 336 • Ethical Dilemma
336 • Discussion Questions 336 • Using
Software to Solve Location Problems 337 • Solved
Problems 337 • Problems 339 • Case Studies:
Atlantic Assembly Services 344 • Video
Case Studies: Locating the Next Red Lobster
Restaurant 344 • Hard Rock’s Location Selection
345 • Rapid Review 346 • Self-Test 348
9 Layout Strategies 349
The Strategic Importance of Layout Decisions 350
Types of Layout 351
Office Layout 352
Retail Layout 353
Services capes 355
Warehousing and Storage Layouts 356
Cross-Docking 356
Random Stocking 357
Customizing 358
Fixed-Position Layout 358
Process-Oriented Layout 359
Computer Software for Process-Oriented
Layouts 363
Work Cells 364
Requirements of Work Cells 364
Staffing and Balancing Work Cells 365
The Focused Work Centre and the Focused
Factory 367
Repetitive and Product-Oriented Layout 367
Assembly-Line Balancing 368
Chapter Summary 373 • Ethical Dilemma
373 • Discussion Questions 373 • Using
Software to Solve Layout Problems 373 • Solved
Problems 374 • Problems 377 • Case
Studies: Automobile Licence Renewals
382 • Video Case Studies: Layout at Arnold
Palmer Hospital 383 • Facility Layout at
Wheeled Coach Ambulance 384 • Rapid
Review 385 • Self-Test 386
10 Human Resources, Job Design,
and Work Measurement 387
Human Resource Strategy for Competitive Advantage 389
Constraints on Human Resource Strategy 389
Labour Planning 390
Employment-Stability Policies 390
Work Schedules 390
Job Classifications and Work Rules 391
Job Design 391
Labour Specialization 391
Job Expansion 392
Psychological Components of Job Design 392
Self-Directed Teams 393
Motivation and Incentive Systems 393
Ergonomics and the Work Environment 395
Ergonomics 395
Operator Input to Machines 395
Feedback to Operators 395
The Work Environment 396
Methods Analysis 397
The Visual Workplace 399
Labour Standards 400
Historical Experience 400
Time Studies 400
Predetermined Time Standards 405
Work Sampling 407
Ethics 409
Chapter Summary 410 • Ethical Dilemma
410 • Discussion Questions 410 • Solved
Problems 411 • Problems 413 • Case
Studies: Jackson Manufacturing Company 416
Video Case Studies: The “People” Focus:
Human Resources at Alaska Airlines
416 • Human Resources at Hard Rock Cafe
417 • Rapid Review 418 • Self-Test 420
PART THREE
Managing Operations 421
11 Supply Chain Management 421
The Supply Chain’s Strategic
Importance 422
Supply Chain Risk 424
Ethics and Sustainability 425
Personal Ethics 425
Ethics within the Supply Chain 425
Ethical Behaviour Regarding the
Environment 425
Supply Chain Economics 426
Make-or-Buy Decisions 427
Outsourcing 427
Supply Chain Strategies 427
Many Suppliers 428
Few Suppliers 428
Vertical Integration 428
Joint Ventures 429
Keiretsu Networks 429
Virtual Companies 429
Managing the Supply Chain 430
Mutual Agreement on Goals 430
Trust 430
Compatible Organizational Cultures 430
Issues in an Integrated Supply Chain 431
Opportunities in an Integrated
Supply Chain 431
Eprocurement 433
Electronic Ordering and Funds Transfer 434
Online Catalogues 434
Auctions 434
RFQs 434
Real-Time Inventory Tracking 434
Vendor Selection 435
Vendor Evaluation 435
Vendor Development 436
Negotiations 436
Contracting 437
Centralized Purchasing 437
E-Procurement 437
Logistics Management 438
Distribution Systems 438
Warehousing 439
Third-Party Logistics 440
Cost of Shipping Alternatives 440
Security and JIT 441
Measuring Supply Chain Performance 442
Supply Chain Performance 442
Assets Committed to Inventory 442
The SCOR Model 444
Chapter Summary 445 • Ethical Dilemma
445 • Discussion Questions 445 • Solved
Problems 445 • Problems 446 • Case Studies:
Dell’s Value Chain 447 • Video Case Studies:
Darden’s Global Supply Chain 448
Supply Chain Management at Regal Marine
449 • Arnold Palmer Hospital’s Supply Chain
449 • Rapid Review 450 • Self-Test 452
11 Supplement: Supply Chain
Management Analytics 453
Techniques for Evaluating Supply Chains 453
Evaluating Disaster Risk in the Supply Chain 453
Managing the Bullwhip Effect 455
A Bullwhip Effect Measure 456
Supplier Selection Analysis 457
Transportation Mode Analysis 458
Warehouse Storage 459
Supplement Summary 460 • Discussion Questions
460 • Solved Problems 460 • Problems
462 • Rapid Review 465 • Self-Test 467
12 Inventory Management 468
The Importance of Inventory 470
Functions of Inventory 471
Types of Inventory 471
Managing Inventory 472
ABC Analysis 472
Record Accuracy 474
Cycle Counting 474
Control of Service Inventories 476
Inventory Models 478
Independent versus Dependent Demand 478
Holding, Ordering, and Setup Costs 478
Inventory Models for Independent Demand 478
The Basic Economic Order Quantity (EOQ)
Model 479
Minimizing Costs 479
Reorder Points 483
Production Order Quantity Model 485
Quantity Discount Models 487
Probabilistic Models and Safety Stock 490
Other Probabilistic Models 493
Single-Period Model 495
Fixed-Period (P) Systems 496
Chapter Summary 497 • Ethical Dilemma
497 • Discussion Questions 497 • Using
Software to Solve Inventory Problems 498
Solved Problem 499 • Problems 502 • Case
Studies: Zhou Bicycle Company 507 • Video
Case Studies: Managing Inventory at Frito-Lay
507 • Inventory Control at Wheeled Coach
Ambulance 508 • Rapid Review 508
Self-Test 510
13 Aggregate Planning and Sales
and Operations Planning 512
The Planning Process 513
Sales and Operations Planning 513
The Nature of Aggregate Planning 515
Aggregate Planning Strategies 516
Capacity Options 517
Demand Options 517
Mixing Options to Develop a Plan 518
Methods for Aggregate Planning 519
Graphical Methods 519
Mathematical Approaches 523
Comparison of Aggregate Planning
Methods 525
Aggregate Planning in Services 526
Restaurants 526
Hospitals 527
National Chains of Small Service Firms 527
Miscellaneous Services 527
Airline Industry 528
Yield Management 528
Chapter Summary 531 • Ethical Dilemma
531 • Discussion Questions 532 • Using
Software for Aggregate Planning 532 • Solved
Problems 533 • Problems 534 • Case Studies:
Fast Creek Lightning (G) 538 • Andrew-Carter,
Inc. 539 • Video Case Studies: Using Revenue
Management to Set Orlando Magic Ticket Prices
540 • Rapid Review 540 • Self-Test 542
14 Material Requirements Planning
(MRP) and ERP 543
Dependent Demand 544
Dependent Inventory Model Requirements 545
Master Production Schedule 545
Bills of Material 547
Accurate Inventory Records 549
Purchase Orders Outstanding 549
Lead Times for Components 549
MRP Structure 550
MRP Management 554
MRP Dynamics 554
MRP and JIT 554
Lot-Sizing Techniques 555
Lot-for-Lot 555
Economic Order Quantity (EOQ) 556
Periodic Order Quantity 557
Lot-Sizing Summary 558
Extensions of MRP 559
Material Requirements Planning II
(MRP II) 559
Closed-Loop MRP 560
Capacity Planning 560
MRP in Services 561
Restaurants 562
Hospitals 562
Hotels 562
Distribution Resource Planning (DRP) 563
Enterprise Resource Planning (ERP) 563
ERP in the Service Sector 565
Chapter Summary 566 • Ethical Dilemma
566 • Discussion Questions 566 • Using
Software to Solve MRP Problems 566 • Solved
Problems 568 • Problems 571 • Case Studies:
Hill’s Automotive, Inc. 575 • Video Case Studies:
When 18 500 Orlando Magic Fans Come to
Dinner 575 • MRP at Wheeled Coach Ambulance
576 • Rapid Review 577 • Self-Test 579
15 Short-Term Scheduling 580
The Importance of Short-Term Scheduling 581
Scheduling Issues 582
Forward and Backward Scheduling 583
Finite and Infinite Loading 584
Scheduling Criteria 585
Scheduling Process-Focused Facilities 586
Loading Jobs 586
Input–Output Control 586
Gantt Charts 588
Assignment Method 588
Sequencing Jobs 592
Priority Rules for Dispatching Jobs 592
Critical Ratio 595
Sequencing N Jobs on Two Machines: Johnson’s Rule 595
Limitations of Rule-Based Dispatching Systems 597
Finite Capacity Scheduling (FCS) 597
Scheduling Repetitive Facilities 599
Scheduling Services 599
Hospitals 599
Banks 599
Retail Stores 600
Airlines 600
24/7 Operations 600
Scheduling Service Employees with Cyclical Scheduling 601
Cyclical Scheduling 601
Chapter Summary 603 • Ethical Dilemma
603 • Discussion Questions 603 • Using
Software for Short-Term Scheduling 603 • Solved
Problems 605 • Problems 608 • Case Studies:
Old Muskoka Wood Store 611 • Video Case
Studies: From the Eagles to the Magic: Converting
the Amway Center 612 • Scheduling at Hard
Rock Cafe 614 • Rapid Review 614
Self-Test 616
16 Lean Operations 617
Lean Operations 619
Eliminate Waste 619
Remove Variability 621
Improve Throughput 621
Lean and Just-in-Time 621
Supplier Partnerships 621
Lean Layout 624
Distance Reduction 624
Increased Flexibility 624
Impact on Employees 624
Reduced Space and Inventory 625
Lean Inventory 625
Reduce Inventory and Variability 625
Reduce Lot Sizes 626
Reduce Setup Costs 627
Lean Scheduling 628
Level Schedules 628
Kanban 629
Lean Quality 631
Toyota Production System 632
Continuous Improvement 632
Respect for People 633
Processes and Standard Work Practice 633
Lean Organizations 633
Building a Lean Organization 633
Lean Sustainability 634
Lean Operations in Services 635
Suppliers 635
Layouts 635
Inventory 635
Scheduling 635
Chapter Summary 635 • Ethical Dilemma
636 • Discussion Questions 636 • Solved
Problems 636 • Problems 637 • Case Studies:
Saskatchewan Mutual Insurance Company
638 • Video Case Studies: Lean Operations
at Alaska Airline 638 • JIT at Arnold
Palmer Hospital 640 • Rapid Review 640
Self-Test 642
17 Maintenance and Reliability 643
The Strategic Importance of Maintenance
and Reliability 644
Reliability 645
Improving Individual Components 645
Providing Redundancy 647
Maintenance 649
Implementing Preventive Maintenance 649
Increasing Repair Capabilities 652
Autonomous Maintenance 653
Total Productive Maintenance 653
Techniques for Enhancing Maintenance 653
Simulation 653
Expert Systems 654
Automated Sensors 654
Chapter Summary 654 • Ethical Dilemma
654 • Discussion Questions 654 • Using
Software to Solve Reliability Problems
655 • Solved Problems 655 • Problems
655 • Video Case Study: Maintenance Drives
Profits at Frito-Lay 657 • Rapid Review 658
Self-Test 659
PART FOUR
Business Analytics
Modules 661
A Decision-Making Tools 661
The Decision Process in Operations 661
Fundamentals of Decision Making 662
Decision Tables 663
Types of Decision-Making Environments 664
Decision Making Under Uncertainty 664
Decision Making Under Risk 665
Decision Making Under Certainty 665
Expected Value of Perfect
Information (EVPI) 666
Decision Trees 667
A More Complex Decision Tree 668
Using Decision Trees in Ethical
Decision Making 670
The Poker Decision Process 671
Module Summary 671 • Discussion
Questions 671 • Using Software for
Decision Models 672 • Solved Problems
673 • Problems 674 • Case Study: Tom
Tucker’s Liver Transplant 678 • Rapid
Review 678 • Self-Test 680
B Linear Programming 681
Why Use Linear Programming? 681
Requirements of a Linear Programming Problem 682
Formulating Linear Programming Problems 682
Glickman Electronics Example 682
Graphical Solution to a Linear Programming Problem 683
Graphical Representation of Constraints 683
Iso-Profit Line Solution Method 684
Corner-Point Solution Method 687
Sensitivity Analysis 688
Sensitivity Report 689
Changes in the Resources or Right-Hand-Side Values 689
Changes in the Objective Function Coefficient 690
Solving Minimization Problems 690
Linear Programming Applications 692
Production-Mix Example 692
Diet Problem Example 693
Labour Scheduling Example 694
The Simplex Method of LP 695
Integer and Binary Variables 696
Creating Integer and Binary Variables 696
Linear Programming Applications with Binary Variables 696
A Fixed-Charge Integer Programming Problem 697
Module Summary 698 • Discussion Questions
698 • Using Software to Solve LP Problems
699 • Solved Problems 700 • Problems
702 • Case Study: Golding Landscaping
and Plants Inc. 708 • Rapid Review 708
Self-Test 710
C Transportation Models 711
Transportation Modelling 711
Developing an Initial Solution 713
The Northwest-Corner Rule 713
The Intuitive Lowest-Cost Method 714
The Stepping-Stone Method 715
Special Issues in Modelling 718
Demand Not Equal to Supply 718
Degeneracy 719
Module Summary 720 • Discussion Questions
720 • Using Software to Solve Transportation
Problems 721 • Solved Problems 722 • Problems
724 • Case Study: Custom Vans Inc. 727
Rapid Review 728 • Self-Test 730
D Waiting-Line Models 731
Queuing Theory 731
Characteristics of a Waiting-Line System 732
Arrival Characteristics 732
Waiting-Line Characteristics 734
Service Characteristics 734
Measuring a Queue’s Performance 736
Queuing Costs 736
The Variety of Queuing Models 737
Model A (M/M/1): Single-Channel Queuing Model
with Poisson Arrivals and Exponential Service Times 738
Model B (M/M/S): Multiple-Channel Queuing
Model 741
Model C (M/D/1): Constant-Service-Time
Model 745
Little’s Law 746
Model D: Limited-Population Model 746
Other Queuing Approaches 749
Module Summary 750 • Discussion
Questions 750 • Using Software to Solve
Queuing Problems 750 • Solved Problems
751 • Problems 753 • Case Studies:
Labrador Foundry Inc. 756 • The Winter
Park Hotel 757 • Rapid Review 758
Self-Test 759
E Learning Curves 761
What Is a Learning Curve? 761
Learning Curves in Services and
Manufacturing 762
Applying the Learning Curve 763
Arithmetic Approach 763
Logarithmic Approach 763
Learning-Curve Coefficient Approach 764
Strategic Implications of Learning Curves 766
Limitations of Learning Curves 767
Module Summary 767 • Discussion
Questions 767 • Using Software for
Learning Curves 767 • Solved Problems
768 • Problems 769 • Case Study:
SMT’s Negotiation with IBM 771 • Rapid
Review 772 • Self-Test 774
F Simulation 775
What Is Simulation? 775
Advantages and Disadvantages of Simulation 776
Monte Carlo Simulation 777
Step 1. Establishing Probability Distributions 777
Step 2. Building a Cumulative Probability Distribution for Each Variable 778
Step 3. Setting Random-Number Intervals 778
Step 4. Generating Random Numbers 779
Step 5. Simulating the Experiment 779
Simulation of a Queuing Problem 780
Simulation and Inventory Analysis 783
Module Summary 786 • Discussion Questions
786 • Using Software in Simulation 786
Solved Problems 788 • Problems 789 • Case
Study: Canadian Shield Airlines Call Centre
793 • Rapid Review 794 • Self-Test 796
Appendix A1
Bibliography B1
Indices I1
Online Tutorials
1 Statistical Tools for Managers T1-1
Discrete Probability Distributions T1-2
Expected Value of a Discrete Probability
Distribution T1-3
Variance of a Discrete Probability
Distribution T1-3
Continuous Probability Distributions T1-4
The Normal Distribution T1-4
Summary T1-7 • Key Terms T1-7 • Discussion
Questions T1-7 • Problems T1-7
Bibliography T1-8
2 Acceptance Sampling T2-1
Sampling Plans T2-2
Single Sampling T2-2
Double Sampling T2-2
Sequential Sampling T2-2
Operating Characteristic (OC) Curves T2-2
Producer’s and Consumer’s Risk T2-3
Average Outgoing Quality T2-5
Summary T2-6 • Key Terms T2-6 • Solved
Problem T2-7 • Discussion Questions T2-7
Problems T2-7
3 The Simplex Method of Linear
Programming T3-1
Converting the Constraints to Equations T3-2
Setting Up the First Simplex Tableau T3-2
Simplex Solution Procedures T3-4
Summary of Simplex Steps for Maximization
Problems T3-6
Artificial and Surplus Variables T3-7
Solving Minimization Problems T3-7
Summary T3-8 • Key Terms T3-8 • Solved
Problem T3-8 • Discussion Questions T3-8
Problems T3-9
4 The MODI and VAM Methods of
Solving Transportation Problems T4-1
MODI Method T4-2
How to Use the MODI Method T4-2
Solving the Arizona Plumbing Problem with
MODI T4-2
Vogel’s Approximation Method: Another Way to Find
an Initial Solution T4-4
Discussion Questions T4-8 • Problems T4-8
5 Vehicle Routing and Scheduling T5-1
Introduction T5-2
Service Delivery Example: Meals-for-ME T5-2
Objectives of Routing and Scheduling
Problems T5-2
Characteristics of Routing and Scheduling
Problems T5-3
Classifying Routing and Scheduling
Problems T5-3
Solving Routing and Scheduling
Problems T5-4
Routing Service Vehicles T5-5
The Traveling Salesman Problem T5-5
Multiple Traveling Salesman Problem T5-8
The Vehicle Routing Problem T5-9
Cluster First, Route Second Approach T5-10
Scheduling Service Vehicles T5-11
The Concurrent Scheduler Approach T5-13
Other Routing and Scheduling Problems T5-13
Summary T5-14 • Key Terms T5-15 • Discussion
Questions T5-15 • Problems T5-15 • Case
Study: Routing and Scheduling of Phlebotomists
T5-17 • Bibliography T5-17