Operations Management: Sustainability and Supply Chain Management, 3rd Canadian Edition By Jay Heizer, Barry Render, Chuck Munson and Paul Griffin

By

Operations Management: Sustainability and Supply Chain Management, Third Canadian Edition

By Jay Heizer, Barry Render, Chuck Munson and Paul Griffin

Operations Management Sustainability and Supply Chain Management, Third Canadian Edition

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

Product Life Cycles 154

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

Servicescapes 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

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