Operations Management

Operations Management: Creating Value Along the Supply Chain, 2nd Canadian Edition is designed to teach students how to create value and competitive advantage along the supply chain in a rapidly changing global environment. Beyond providing a solid foundation, this course covers increasingly important OM topics including sustainability, corporate social responsibility, global trade policies, securing the supply chain, and risk and resilience. Most importantly, Operations Management, Second Canadian Edition makes the quantitative topics easy for students to understand and the mathematical applications less intimidating. Appropriate for all business students, this course takes a balanced approach to the foundational understanding of both qualitative and quantitative operations management processes.

Preface ix Part One Operations Management 1 Introduction to Operations and Supply Chain Management 1 Tim Hortons: Every Cup Tells a Story 1 Introduction 2 1.1 The Operations Function 2 Along the Supply Chain 1.1: What Do Operations and Supply Chain Managers Do? 3 1.2 The Evolution of Operations and Supply Chain Management 6 1.3 Globalization 9 Along the Supply Chain 1.2: Creating Shared Value at Nestlé 10 1.4 Productivity and Competitiveness 14 1.5 Strategy and Operations 16 Along the Supply Chain 1.3: Whole Foods Market’s Unique Strategy 20 Along the Supply Chain 1.4: New Players Disrupt with Innovation 21 Along the Supply Chain 1.5: Feeding Canada 26 Summary of Learning Objectives / Summary of Key Terms / Questions / Problems Case Problem 1.1 Visualize This 30 Case Problem 1.2 Whither an MBA at Brandon? 31 Case Problem 1.3 Weighing Options at the Weight Club 31 References 31 S1 Operational Decision-Making Tools: Decision Analysis 33 Introduction 33 S1.1 Decision Analysis with and without Probabilities 34 Summary of Learning Objective / Summary of Key Terms / Summary of Key Formulas / Solved Problems / Problems Case Problem S1.1 Whither an MBA at Brandon? 50 Case Problem S1.2 Transformer Replacement at Mountain Side Electric Company 51 Case Problem S1.3 Evaluating Projects at Nexcom Systems 51 References 52 2 Quality Management 53 The Coffee Customer is Always Right 53 Introduction 54 2.1 What is Quality? 54 2.2 Quality Management System 58 Along the Supply Chain 2.1: Applying Deming’s Principles in Award-Winning Hospitals 60 2.3 Quality Tools 64 2.4 The Role of Employees in Quality Improvement 69 Along the Supply Chain 2.2: Customer Focus and Employee Empowerment at Maple Leaf Foods 71 Along the Supply Chain 2.3: Customer Satisfaction at Ritz-Carlton Hotels 73 2.5 Six Sigma 74 Along the Supply Chain 2.4: Motorola’s Six Sigma Quality 74 2.6 The Cost of Quality 80 2.7 The Effect of Quality Management on Productivity 85 Along the Supply Chain 2.5: ISO Certifications for Sustainability and Social Responsibility 92 Summary of Learning Objectives / Summary of Key Terms / Summary of Key Formulas / Solved Problems / Questions / Problems Case Problem 2.1 Designing a Quality-Management Program for the Internet at D4Q 100 Case Problem 2.2 Quality Management at Local University 101 Case Problem 2.3 Quality Problems at the Tech Bookstores 101 Case Problem 2.4 Product Yield at Continental Luggage Company 102 References 103 3 Statistical Process Control 104 Quality Control in Athletic Shoe Manufacturing 104 Introduction 105 3.1 The Basics of Statistical Process Control 105 Along the Supply Chain 3.1: Using Sampling and Statistics to Analyze MillerCoors’ Distribution Network Performance 106 Along the Supply Chain 3.2: Using Control Charts for Improving Health-Care Quality 108 3.2 Control Charts 109 3.3 Control Charts for Attributes 111 3.4 Control Charts for Variables 116 3.5 Control Chart Patterns 122 3.6 Process Capability 125 Along the Supply Chain 3.3: Determining Quality Process Parameters for Starbucks Coffee Bags 127 Along the Supply Chain 3.4: Design Tolerances at Harley-Davidson Company 128 Summary of Learning Objectives / Summary of Key Terms / Summary of Key Formulas / Solved Problems / Questions / Problems Case Problem 3.1 Quality Control at Rainwater Brewery 144 Case Problem 3.2 Quality Control at Green Grass 145 Case Problem 3.3 Improving Service Time at Dave’s Burgers 145 References 146 S3 Operational Decision-Making Tools: Acceptance Sampling 147 Introduction 147 S3.1 Single-Sample Attribute Plan 147 S3.2 The Operating Characteristic Curve 149 S3.3 Average Outgoing Quality 150 S3.4 Double- and Multiple-Sampling Plans 151 Summary of Learning Objectives / Summary of Key Terms / Solved Problem / Questions / Problems 4 Product Design 155 Brewing Up New Products 155 Introduction 156 4.1 The Design Process 156 Along the Supply Chain 4.1: Pixar’s Creativity 159 Along the Supply Chain 4.2: Apple’s Design Process 161 4.2 Technology in Design 166 4.3 Design Quality Reviews 168 Along the Supply Chain 4.3: Jugaad, Design for the Times 169 4.4 Design for the Environment 170 Along the Supply Chain 4.4: Consider Nike’s Flyknit Design 171 Along the Supply Chain 4.5: Creating Fairphones 173 4.5 Quality Function Deployment 174 Summary of Learning Objectives / Summary of Key Terms / Summary of Key Formulas / Solved Problems / Questions / Problems Case Problem 4.1 Greening Product Design 186 Case Problem 4.2 Lean and Mean 187 References 188 5 Service Design 189 Driving Better Customer Service 189 Introduction 190 5.1 The Service Economy 190 5.2 Characteristics of Services 190 5.3 The Service Design Process 193 Along the Supply Chain 5.1: Uber and the Sharing Economy 194 Along the Supply Chain 5.2: Warby Parker Game Changer 195 5.4 Tools for Service Design 198 5.5 Waiting Line Analysis for Service Improvement 200 Summary of Learning Objectives / Summary of Key Terms / Summary of Key Formulas / Solved Problems / Questions / Problems Case Problem 5.1 Streamlining the Refinancing Process 224 Case Problem 5.2 Herding the Patient 225 Case Problem 5.3 The Faculty of Business Copy Centre 225 Case Problem 5.4 Northwoods Backpackers 225 References 226 6 Processes and Technology 227 The Process of Making Maple Syrup 227 Introduction 228 6.1 Process Planning 228 6.2 Process Analysis 238 6.3 Process Innovation 241 6.4 Technology Decisions 244 Along the Supply Chain 6.1: 3D Printing and Other Advances in Additive Manufacturing 245 Summary of Learning Objectives / Summary of Key Terms / Summary of Key Formulas / Solved Problem / Questions / Problems Case Problem 6.1 A Manager’s Woes 255 Case Problem 6.2 Wrong Meds, Again! 255 Case Problem 6.3 The “Double Sale” 256 References 257 7 Capacity and Facilities Design 258 Mark’s is “Well Worn” and Well Laid Out 258 Introduction 259 7.1 Capacity Planning 259 Along the Supply Chain 7.1: Tesla’s Gigafactories Produce Energy as Well as Batteries and Solar Panels 261 7.2 Facilities 262 Along the Supply Chain 7.2: Is There Really a Starbucks at Every Corner? 263 7.3 Basic Layouts 263 7.4 Designing Process Layouts 267 Along the Supply Chain 7.3: The Health Benefits of Good Layout 268 7.5 Designing Service Layouts 273 Along the Supply Chain 7.4: Inviting Retail Layouts 274 7.6 Designing Product Layouts 275 7.7 Hybrid Layouts 279 Summary of Learning Objectives / Summary of Key Terms / Summary of Key Formulas / Solved Problems / Questions / Problems Case Problem 7.1 Workout Plus 294 Case Problem 7.2 Photo Op—Please Line Up 295 Case Problem 7.3 The Grab ’n Go Café 295 References 297 S7 Operational Decision-Making Tools: Facility Location Models 298 Introduction 298 S7.1 Types of Facilities 298 S7.2 Site Selection: Where to Locate 299 S7.3 Site Selection: Factors to Consider 300 S7.4 Location Analysis Techniques 303 Summary of Learning Objectives / Summary of Key Terms / Summary of Key Formulas / Solved Problem / Questions / Problems Case Problem S7.1 Selecting a European Distribution Centre Site for AIAI 315 References 316 8 Human Resources 317 A Commitment to Worker Sustainability in the Athletic Shoe Industry 317 Introduction 318 8.1 Human Resources and Quality Management 319 8.2 The Changing Nature of Human Resources Management 320 8.3 Contemporary Trends in Human Resources Management 322 Along the Supply Chain 8.1: Human Resources Management: Helping Women Break the “Glass Ceiling”; Rotman School of Management with TD Bank Group 323 Along the Supply Chain 8.2: Creating Sustainable Workplaces 326 8.4 Employee Compensation 328 8.5 Managing Diversity in the Workplace 329 Along the Supply Chain 8.3: English and French in the Workplace 329 Along the Supply Chain 8.4: ERIEC: A Commitment to Diversity 330 8.6 Job Design 331 8.7 Job Analysis 334 8.8 Learning Curves 338 Summary of Learning Objectives / Summary of Key Terms / Summary of Key Formula / Solved Problem / Questions / Problems Case Problem 8.1 Star Renovation 345 Case Problem 8.2 HQ Recruitment Services 345 References 346 S8 Operational Decision-Making Tools: Work Measurement 347 Introduction 347 S8.1 Time Studies 347 S8.2 Work Sampling 354 Summary of Learning Objectives / Summary of Key Terms / Summary of Key Formulas / Solved Problems / Questions / Problems Case Problem S8.1 Alan’s Autos 363 Case Problem S8.2 Blue Bird Bistro 364 References 364 9 Project Management 365 Mega Projects Equal Mega Risk 365 Introduction 366 9.1 Project Planning 366 Along the Supply Chain 9.1: Sustainable Wind Farm Projects 372 9.2 Global Cultural and Diversity Issues in Project Management 373 Along the Supply Chain 9.2: Cross-Cultural Project Teams 375 9.3 Project Scheduling 375 9.4 Project Control 377 Along the Supply Chain 9.3: Transoceanic Cable-Laying Projects 378 9.5 CPM/PERT 380 9.6 Probabilistic Activity Times 388 9.7 CPM/PERT Analysis with Excel 392 9.8 Project Crashing and Time–Cost Trade-off 395 9.9 Project Management with Smartsheet 400 Summary of Learning Objectives / Summary of Key Terms / Summary of Key Formulas / Solved Problem / Questions / Problems Case Problem 9.1 The Bloodless Coup Concert 417 Case Problem 9.2 Retirement Home Renovation 418 References 419 Part Two Supply Chain Management 10 Supply Chain Management: Strategy and Design 420 Delivering the Goods to Tim Hortons Lovers 420 Introduction 421 10.1 Supply Chains 421 Along the Supply Chain 10.1: The Digital Supply Chain at Apple and Amazon 425 10.2 The Management of Supply Chains 426 10.3 Supply Chain Sustainability 429 Along the Supply Chain 10.2: Green Supply Chain at Ontario Power Generation 430 Along the Supply Chain 10.3: Walmart’s Commitment to Sustainability 431 Along the Supply Chain 10.4: Reducing Costs with Sustainability at UPS 432 10.4 Information Technology: A Supply Chain Enabler 432 Along the Supply Chain 10.5: Blockchain Strategies at IBM, Maersk, Walmart, UPS, and Nestlé 437 10.5 Supply Chain Integration 438 Along the Supply Chain 10.6: Supply Chain Integration in the Health Care System of Ontario 439 10.6 Measuring Supply Chain Performance 441 Along the Supply Chain 10.7: Amazon, a Supply Chain “Master” 442 Summary of Learning Objectives / Summary of Key Terms / Summary of Key Formulas / Solved Problem / Questions / Problems Case Problem 10.1 Somerset Furniture Company’s Global Supply Chain 450 Case Problem 10.2 Saboo Inc.’s Sustainable Supply Chain 451 References 452 11 Global Supply Chain Procurement and Distribution 453 A Fresh Approach to the Supply Chain 453 Introduction 454 11.1 Procurement 454 Along the Supply Chain 11.1: World-Class Supply Chain Management at Inditex Group 457 11.2 E-Procurement 457 11.3 Distribution 459 Along the Supply Chain 11.2: Innovative Distribution Solution for Pharmaceuticals Industry 461 11.4 Transportation 464 Along the Supply Chain 11.3: Mammoth Global Supply Chain Company, Maersk 466 11.5 The Global Supply Chain 467 Along the Supply Chain 11.4: Global Supply Chain Management at Li & Fung 468 Along the Supply Chain 11.5: Sustainability Initiatives at Lego 471 Along the Supply Chain 11.6: North American Nearshoring in Central and South America 474 Along the Supply Chain 11.7: From Offshoring to Reshoring Production 476 Summary of Learning Objectives / Summary of Key Terms / Questions Case Problem 11.1 Somerset Furniture Company’s Global Supply Chain—Continued 479 Case Problem 11.2 DMI Chemicals Inc. 479 S11 Operational Decision-Making Tools: Transportation and Trans-shipment Models 480 Introduction 480 S11.1 The Transportation Model 480 S11.2 The Trans-shipment Model 486 Summary of Learning Objectives / Summary of Key Terms / Solved Problem / Problems Case Problem S11.1 Canaline Shipping and Transport Company 500 Case Problem S11.2 Global Supply Chain Management at Cantrex Apparel International 500 References 502 12 Forecasting 503 Looking into the Future with Forecasting 503 Introduction 504 12.1 The Strategic Role of Forecasting in Supply Chain Management 504 Along the Supply Chain 12.1: Forecasting Denim Jeans Trends 507 12.2 Components of Forecasting Demand 507 Along the Supply Chain 12.2: Global Supply Chain Forecasting at Hershey’s 508 Along the Supply Chain 12.3: Forecasting the Global Smart Phone Market 511 12.3 Time Series Methods 513 Along the Supply Chain 12.4: Forecasting Empty Shipping Containers 524 12.4 Forecast Accuracy 529 Along the Supply Chain 12.5: Forecasting Market Demand at Saputo 529 12.5 Regression Methods 535 12.6 Data Mining 543 Summary of Learning Objectives / Summary of Key Terms / Summary of Key Formulas / Solved Problems / Questions / Problems Case Problem 12.1 Forecasting the Demand for Medical Cannabis 561 Case Problem 12.2 Cascades Swim Club 562 Case Problem 12.3 Forecasting Passenger Arrivals at the Gotham International Airport 562 References 563 13 Inventory Management 564 Inventory Management at Nike 564 Introduction 565 13.1 The Role of Inventory in Supply Chain Management 566 13.2 The Elements of Inventory Management 568 13.3 Inventory Control Systems 570 13.4 Economic Order Quantity Models 574 Along the Supply Chain 13.1: Multi-Echelon Inventory Optimization at Procter & Gamble 575 13.5 Quantity Discounts 581 13.6 Reorder Point 587 Along the Supply Chain 13.2: World Class Inventory Management at Apple 589 13.7 Order Quantity for a Periodic Inventory System 591 Along the Supply Chain 13.3: Vendor-Managed Inventory (VMI) at Dell 592 13.8 Order Quantity for the Single-Period Inventory Model 594 Summary of Learning Objectives / Summary of Key Terms / Summary of Key Formulas / Solved Problems / Questions / Problems Case Problem 13.1 The Instant Paper Clip Office Supply Company 606 Case Problem 13.2 The Calgary Stampeders Apparel Store 606 Case Problem 13.3 Cambridge Foods Company 607 References 607 S13 Operational Decision-Making Tools: Simulation 608 Introduction 608 S13.1 Monte Carlo Simulation 608 S13.2 Areas of Simulation Application 617 Summary of Learning Objectives / Summary of Key Terms / Solved Problem / Questions / Problems / References 14 Sales and Operations Planning 626 Planning for Success 626 Introduction 627 14.1 The Sales and Operations Planning Process 627 Along the Supply Chain 14.1: Disney’s Magic Numbers 629 14.2 Strategies for Adjusting Capacity 630 14.3 Strategies for Managing Demand 633 14.4 Quantitative Techniques for Aggregate Planning 634 Along the Supply Chain 14.2: Chevron’s Best Mix 637 14.5 The Hierarchical Nature of Planning 648 Along the Supply Chain 14.3: How LEGO Rebuilt Its Supply Chain and Found S&OP 649 14.6 Aggregate Planning for Services 652 Along the Supply Chain 14.4: Revenue Management at Caesars Windsor Hotel and Casino 653 Summary of Learning Objectives / Summary of Key Terms / Solved Problems / Questions / Problems Case Problem 14.1 Seats for Sale 666 Case Problem 14.2 Erin’s Energy Plan 666 References 667 S14 Operational Decision-Making Tools: Linear Programming 668 Introduction 668 S14.1 Model Formulation 669 S14.2 Graphical Solution Method 671 S14.3 Linear Programming Model Solution 675 S14.4 Solving Linear Programming Problems with Excel 677 S14.5 Sensitivity Analysis 679 Summary of Learning Objectives / Summary of Key Terms / Solved Problem / Questions / Problems Case Problem S14.1 Mosaic Tile Company 698 Case Problem S14.2 The Sea Village Amusement Park 698 Case Problem S14.3 Spring Garden Tools 699 Case Problem S14.4 Walsh’s Juice Company 700 Case Problem S14.5 Julia’s Food Booth 700 References 701 15 Resource Planning 702 Target Misses the Mark 702 Introduction 703 15.1 Material Requirements Planning (MRP) 703 15.2 Capacity Requirements Planning (CRP) 719 15.3 Enterprise Resource Planning (ERP) 726 Along the Supply Chain 15.1: SAP Powers NFL Fantasy Football and the NFL 730 Along the Supply Chain 15.2: Implementation of ERP at Pratt & Whitney Canada 731 15.4 ERP and Related Software: Connectivity and Integration 732 Along the Supply Chain 15.3: Roku Runs on NetSuite 735 Summary of Learning Objectives / Summary of Key Terms / Solved Problems / Questions / Problems Case Problem 15.1 Just ERP 743 Case Problem 15.2 Hosuki 744 Case Problem 15.3 It’s Snowing Again! 744 References 745 16 Lean Systems 746 Lean Thinking at an Airline 746 Introduction 747 16.1 The Basic Elements of Lean Production 747 Along the Supply Chain 16.1: UltraFit Manufacturing: Lean and Fit Manufacturing 761 Along the Supply Chain 16.2: Universal Studios Holds “Treasure Hunt” Kaizen Event 762 16.2 Implementing Lean Production 766 Along the Supply Chain 16.3: Nike’s Lean Philosophy 767 16.3 Other Applications of Lean Systems 768 Along the Supply Chain 16.4: Leaning in to Better Patient Care 770 Summary of Learning Objectives / Summary of Key Terms / Summary of Key Formula / Questions / Problems Case Problem 16.1 The Blitz is On 777 Case Problem 16.2 Where’s My Cart? 777 Case Problem 16.3 Leaning the Warehouse 779 References 779 17 Scheduling 781 Taking the Guesswork out of Employee Scheduling 781 Introduction 782 17.1 Scheduling Techniques 782 17.2 Loading 783 Along the Supply Chain 17.1: Analytics at Airbnb 787 Along the Supply Chain 17.2: Scheduling Major League Baseball Umpires 787 17.3 Sequencing 788 Along the Supply Chain 17.3: Solving Tough Scheduling Problems in Health Care 795 17.4 Monitoring 796 Along the Supply Chain 17.4: Eliminate Bottlenecks, Don’t Just Move Them Somewhere Else! 800 17.5 Advanced Planning and Scheduling Systems 801 17.6 Employee Scheduling 805 Along the Supply Chain 17.5: Employee Scheduling at NAV CANADA 806 Summary of Learning Objectives / Summary of Key Terms / Summary of Key Formulas / Solved Problems / Questions / Problems Case Problem 17.1 Learn Canada 817 Case Problem 17.2 From a Different Perspective 818 References 818 Appendix A Standard Normal Distribution 821 Appendix B Solutions to Selected Problems 823 Index 827