Introduction to operations and supply chain management PDF
Preview Introduction to operations and supply chain management
Global Edition Fourth Edition IntroductIon to operatIons and supply chaIn ManageMent Cecil C. Bozarth North Carolina State University Robert B. Handfield North Carolina State University Boston Columbus Indianapolis New York San Francisco Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montréal Toronto Delhi Mexico City São Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo A01_BOZA3420_04_SE_FM.indd 1 06/23/15 8:47 AM Vice President, Product Management: Donna Battista Operations Specialist: Carol Melville Acquisitions Editor: Dan Tylman Creative Director: Blair Brown Editorial Assistant: Linda Siebert Albelli Art Director: Jonathan Boylan Vice President, Marketing: Maggie Moylan Vice President, Director of Digital Strategy and Director of Marketing, Digital Services and Products: Assessment: Paul Gentile Jeanette Koskinas Manager of Learning Applications: Paul DeLuca Senior Product Marketing Manager: Alison Haskins Digital Editor: Megan Rees Executive Field Marketing Manager: Lori DeShazo Director, Digital Studio: Sacha Laustsen Senior Strategic Marketing Manager: Erin Gardner Digital Studio Manager: Diane Lombardo Team Lead, Program Management: Ashley Santora Product Manager: James Bateman Program Manager: Kathryn Dinovo Digital Content Team Lead: Noel Lotz Team Lead, Project Management: Jeff Holcomb Digital Content Project Lead: Courtney Kamauf Project Manager: Heather Pagano Full-Service Project Management and Composition: Acquisitions Editor, Global Edition: Vrinda Malik Lumina Datamatics, Inc. 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Pearson Education Limited Edinburgh Gate Harlow Essex CM20 2JE England and Associated Companies throughout the world Visit us on the World Wide Web at: www.pearsonglobaleditions.com © Pearson Education Limited 2016 The rights of Cecil C. Bozarth and Robert B. Handfield to be identified as the authors of this work have been asserted by them in accordance with the Copyright, Designs and Patents Act 1988. Authorized adaptation from the United States edition, entitled Introduction to Operations and Supply Chain Management, 4th edition, ISBN 978-0-13-387177-7, by Cecil C. Bozarth and Robert B. Handfield, published by Pearson Education © 2016. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without either the prior written permission of the publisher or a license permitting restricted copying in the United Kingdom issued by the Copyright Licensing Agency Ltd, Saffron House, 6–10 Kirby Street, London EC 1N 8TS. All trademarks used herein are the property of their respective owners. The use of any trademark in this text does not vest in the author or publisher any trademark ownership rights in such trademarks, nor does the use of such trademarks imply any affiliation with or endorsement of this book by such owners. ISBN-10: 1-292-09342-0 ISBN-13: 978-1-292-09342-0 British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library 10 9 8 7 6 5 4 3 2 1 Typeset by Courier Westford Printed and bound by Courier Westford A01_BOZA3420_04_SE_FM.indd 2 06/23/15 8:47 AM To Andrea, James, and Philip C.B. To the Memory of My Brother, Carl Handfield R.H. A01_BOZA3420_04_SE_FM.indd 3 06/23/15 8:47 AM A b o u t t h e A u t h o r s Cecil Bozarth is Professor of Operations and Supply Chain Management at the Poole College of Management at N.C. State University, where he has received awards for teaching excellence at both the undergraduate and graduate levels. He is a former chair of the Operations Management Division of the Academy of Management, and in 1999 was recognized by APICS as a subject matter expert (SME) in the area of supply chain management. His particular areas of interest are operations and sup- ply chain strategy and supply chain information systems. Cecil’s consulting experi- ence cuts across a wide range of industries, including such companies as BlueCross BlueShield of North Carolina, Daimler-Benz, John Deere, Duke Energy, Eisai, Ford Motor Company, GKN, IBM, GlaxoSmithKline, Milliken, Patheon, Sonoco, and oth- ers. For thirteen years, Cecil was an associate editor for the Journal of Operations Management; he now serves on the journal’s editorial advisory board. Cecil has also served as a guest editor for the Academy of Management Journal, as well as the J ournal of Operations Management. Robert Handfield is the Bank of America Professor and a Distinguished University Professor at N.C. State University. Handfield has consulted with over 25 Fortune 500 companies, including Biogen Idec, Caterpillar, John Deere, GlaxoSmithKline, Boston Scientific, Delphi, Chevron, British Petroleum, Chevron Phillips, Bank of America, Sensata, Honda of America, KPMG, Conoco Phillips, Federal Express, SAP, and others, and is a world-renowned expert in the areas of purchasing and logistics. Rob is the former editor-in-chief of the Journal of Operations Management and has written several books on SCM topics, including Introduction to Supply Chain Management (Prentice Hall, with Ernest L. Nichols; translated into Japanese, Korean, Chinese, and Indonesian), Supply Chain Redesign (Prentice Hall Financial Times), and Purchasing and Supply Chain Management, 5th edition (South-Western College Publishing, with Robert M. Monczka, Larry C. Giunipero, and James L. Patterson). 4 A01_BOZA3420_04_SE_FM.indd 4 06/23/15 8:47 AM br i e f C o n t e n t s Preface 11 part I CReating Value tHRougH oPeRations and suPPly CHains 17 1 Introduction to Operations and Supply Chain Management 17 2 Operations and Supply Chain Strategies 34 part II estaBlisHing tHe oPeRations enViRonment 53 3 Process Choice and Layout Decisions in Manufacturing and Services 53 4 Business Processes 87 5 Managing Quality 121 6 Managing Capacity 155 6S Advanced Waiting Line Theory and Simulation Modeling 189 part III estaBlisHing suPPly CHain linkages 203 7 Supply Management 203 8 Logistics 233 part IV Planning and ContRolling oPeRations and suPPly CHains 265 9 Forecasting 265 10 Sales and Operations Planning (Aggregate Planning) 310 11 Managing Inventory throughout the Supply Chain 342 12 Managing Production across the Supply Chain 374 12S Supply Chain Information Systems 409 13 JIT/Lean Production 418 part V PRojeCt management and PRoduCt/seRViCe deVeloPment 439 14 Managing Projects 439 15 Developing Products and Services 461 appendices 479 glossary 485 Index 497 5 A01_BOZA3420_04_SE_FM.indd 5 06/23/15 8:47 AM C o n t e n t s Preface 11 PArt ii establishing the operations PArt i environment 53 Creating Value through operations and 3 Process Choice and layout supply Chains 17 decisions in manufacturing and services 53 1 introduction to operations and supply Chain management 17 Introduction 54 3.1 Manufacturing Processes 55 Introduction 18 Production Lines and Continuous Flow 1.1 Why Study Operations and Supply Chain Manufacturing 56 Management? 19 Job Shops 57 Operations Management 20 Batch Manufacturing 58 Supply Chain Management 22 Fixed-Position Layout 58 1.2 Important Trends 25 Hybrid Manufacturing Processes 58 Electronic Commerce 26 Linking Manufacturing Processes across Increasing Competition and Globalization 26 the Supply Chain 59 Relationship Management 26 Selecting a Manufacturing Process 60 The Product-Process Matrix 60 1.3 Operations and Supply Chain Management and You 27 3.2 Product Customization within the Professional Organizations 27 Supply Chain 60 Cross-Functional and Interorganizational Four Levels of Customization 61 Linkages 28 The Customization Point 61 1.4 Purpose and Organization of This Book 29 3.3 Service Processes 63 Service Packages 64 Chapter Summary 30 Service Customization 65 Key Terms 30 Customer Contact 66 Discussion Questions 31 Service Positioning 69 Problems 31 Services within the Supply Chain 70 Case Study 31 3.4 Layout Decision Models 71 References 32 Line Balancing 71 Assigning Department Locations in Functional Layouts 75 2 operations and supply Chain Chapter Summary 78 strategies 34 Key Formulas 79 Key Terms 79 Introduction 36 Solved Problem 79 2.1 Elements of the Business 36 Discussion Questions 82 2.2 Strategy 36 Problems 82 2.3 Operations and Supply Chain Strategies 39 Case Study 85 Customer Value 40 Four Performance Dimensions 41 References 86 Trade-Offs among Performance Dimensions 43 4 Business Processes 87 Order Winners and Order Qualifiers 43 Stages of Alignment with the Business Strategy 44 Core Competencies in Operations and Introduction 88 Supply Chains 45 4.1 Business Processes 89 Chapter Summary 47 Improving Business Processes 89 Key Formula 47 4.2 Mapping Business Processes 92 Key Terms 48 Process Maps 92 Swim Lane Process Maps 95 Solved Problem 48 4.3 Managing and Improving Business Processes 97 Discussion Questions 49 Measuring Business Process Performance 97 Problems 50 Productivity 97 Case Study 51 Efficiency 99 References 52 Cycle Time 100 6 A01_BOZA3420_04_SE_FM.indd 6 06/23/15 8:47 AM Contents 7 Benchmarking 101 6.4 Understanding and Analyzing Process Capacity 171 The Six Sigma Methodology 102 The Theory of Constraints 171 Continuous Improvement Tools 103 Waiting Line Theory 174 4.4 Business Process Challenges and the Little’s Law 178 SCOR Model 111 Chapter Summary 180 How Standardized Should Processes Be? 111 Key Formulas 180 Business Process Reengineering 112 Key Terms 182 Coordinating Process Management Efforts across Using Excel in Capacity Management 182 the Supply Chain 112 The SCOR Model 112 Solved Problem 183 Chapter Summary 114 Discussion Questions 184 Key Formulas 114 Problems 184 Key Terms 115 Case Study 188 Solved Problem 115 References 188 Discussion Questions 117 6s advanced Waiting line theory Problems 117 Case Study 119 and simulation modeling 189 References 120 Introduction 190 5 managing Quality 121 6S.1 Alternative Waiting Lines 190 Assumptions behind Waiting Line Theory 191 Waiting Line Formulas for Three Different Introduction 123 Environments 191 5.1 Quality Defined 123 6S.1 Simulation Modeling 195 5.2 Total Cost of Quality 126 Monte Carlo Simulation 196 5.3 Total Quality Management 128 Building and Evaluating Simulation Models with TQM and the Six Sigma Methodology 130 SimQuick 198 5.4 Statistical Quality Control 131 Supplement Summary 201 Process Capability 131 Discussion Questions 202 Six Sigma Quality 133 Problems 202 Control Charts 134 Acceptance Sampling 140 References 202 Taguchi’s Quality Loss Function 142 5.5 Managing Quality across the Supply Chain 143 ISO 9000 Family 143 PArt iii External Failures in the Supply Chain 144 Chapter Summary 144 establishing supply Chain linkages 203 Key Formulas 144 Key Terms 146 Using Excel in Quality Management 147 7 supply management 203 Solved Problem 147 Discussion Questions 148 Introduction 204 Problems 149 7.1 Why Supply Management Is Critical 205 Case Study 153 Global Sourcing 205 Financial Impact 205 References 154 Performance Impact 208 7.2 The Strategic Sourcing Process 209 6 managing Capacity 155 Step 1: Assess Opportunities 209 Step 2: Profile Internally and Externally 210 Introduction 156 Step 3: Develop the Sourcing Strategy 213 6.1 Capacity 156 Step 4: Screen Suppliers and Create Selection Measures of Capacity 157 Criteria 219 Factors That Affect Capacity 158 Step 5: Conduct Supplier Selection 220 Supply Chain Considerations 158 Step 6: Negotiate and Implement Agreements 222 6.2 Three Common Capacity Strategies 158 7.3 The Procure-to-Pay Cycle 224 6.3 Methods of Evaluating Capacity Alternatives 160 Ordering 224 Cost 160 Follow-Up and Expediting 224 Demand Considerations 163 Receipt and Inspection 224 Expected Value 163 Settlement and Payment 225 Decision Trees 164 Records Maintenance 225 Break-Even Analysis 166 7.4 Trends in Supply Management 225 Learning Curves 167 Sustainable Supply 225 Other Considerations 170 Supply Chain Disruptions 226 A01_BOZA3420_04_SE_FM.indd 7 06/23/15 8:47 AM 8 Contents Chapter Summary 227 9.3 Selecting a Forecasting Method 269 Key Formulas 227 9.4 Qualitative Forecasting Methods 270 Key Terms 227 9.5 Time Series Forecasting Models 271 Solved Problem 228 Last Period 272 Moving Average 273 Discussion Questions 229 Weighted Moving Average 275 Problems 229 Exponential Smoothing 275 Case Study 231 Adjusted Exponential Smoothing 278 References 232 Linear Regression 279 Seasonal Adjustments 283 8 logistics 233 9.6 Causal Forecasting Models 287 Linear Regression 287 Multiple Regression 289 Introduction 235 9.7 Measures of Forecast Accuracy 292 8.1 Why Logistics is Critical 235 9.8 Computer-Based Forecasting Packages 294 8.2 Logistics Decision Areas 236 Transportation 236 9.9 Collaborative Planning, Forecasting, Selecting a Transportation Mode 237 and Replenishment (CPFR) 294 Multimodal Solutions 238 Chapter Summary 299 Warehousing 239 Key Formulas 299 Logistics Information Systems 242 Key Terms 301 Material Handling and Packaging 244 Solved Problem 301 Inventory Management 245 Discussion Questions 304 8.3 Logistics Strategy 245 Owning versus Outsourcing 245 Problems 304 Measuring Logistics Performance 247 Case Study 308 Landed Costs 248 References 309 Reverse Logistics Systems 249 8.4 Logistics Decision Models 250 10 sales and operations Planning Weighted Center of Gravity Method 250 (aggregate Planning) 310 Optimization Models 252 The Assignment Problem 252 Chapter Summary 257 Introduction 311 Key Formulas 258 10.1 S&OP in the Planning Cycle 311 Key Terms 258 10.2 Major Approaches to S&OP 313 Top-Down Planning 314 Solved Problem 259 Level, Chase, and Mixed Production Plans 316 Discussion Questions 260 Bottom-Up Planning 320 Problems 260 Cash Flow Analysis 322 Case Study 263 10.3 Organizing for and Implementing S&OP 324 References 264 Choosing between Alternative Plans 324 Rolling Planning Horizons 325 Implementing S&OP in an Organization 326 PArt iV 10.4 Services Considerations 327 Making Sales Match Capacity 327 Making Capacity Match Sales 328 Planning and Controlling operations 10.5 Linking S&OP throughout the Supply Chain 329 and supply Chains 265 10.6 Applying Optimization Modeling to S&OP 330 Chapter Summary 333 Key Formulas 333 9 Forecasting 265 Key Terms 334 Solved Problem 334 Introduction 266 Discussion Questions 335 9.1 Forecast Types 267 Demand Forecasts 267 Problems 335 Supply Forecasts 267 Case Study 340 Price Forecasts 267 References 341 9.2 Laws of Forecasting 268 Law 1: Forecasts Are Almost Always Wrong 11 managing inventory throughout (But They Are Still Useful) 269 the supply Chain 342 Law 2: Forecasts for the Near Term Tend to Be More Accurate 269 Law 3: Forecasts for Groups of Products or Introduction 344 Services Tend to Be More Accurate 269 11.1 The Role of Inventory 345 Law 4: Forecasts Are No Substitute for Calculated Inventory Types 345 Values 269 Inventory Drivers 347 A01_BOZA3420_04_SE_FM.indd 8 06/23/15 8:47 AM Contents 9 Independent versus Dependent Demand 12S.2 Supply Chain Information Systems 412 Inventory 349 12S.3 Trends to Watch 414 11.2 Periodic Review Systems 349 BPM Tools 415 Restocking Levels 350 Cloud Computing 415 11.3 Continuous Review Systems 351 Supplement Summary 416 The Economic Order Quantity (EOQ) 352 Key Terms 416 Reorder Points and Safety Stock 354 Discussion Questions 416 Quantity Discounts 356 References 417 11.4 Single-Period Inventory Systems 358 Target Service Level 359 13 jit/lean Production 418 Target Stocking Point 360 11.5 Inventory in the Supply Chain 362 The Bullwhip Effect 362 Introduction 420 Inventory Positioning 363 13.1 The Lean Perspective on Waste 421 Transportation, Packaging, and Material 13.2 The Lean Perspective on Inventory 422 Handling Considerations 364 13.3 Recent Developments in Lean Thinking 423 Chapter Summary 365 13.4 Kanban Systems 424 Key Formulas 366 Controlling Inventory Levels Using Kanbans 429 Key Terms 367 Synchronizing the Supply Chain Using Excel in Inventory Management 367 Using Kanbans 431 Using MRP and Kanban Together 432 Solved Problems 368 Chapter Summary 433 Discussion Questions 368 Key Formula 433 Problems 369 Key Terms 434 Case Study 372 Solved Problem 434 References 373 Discussion Questions 435 12 managing Production across Problems 435 Case Study 436 the supply Chain 374 References 438 Introduction 375 12.1 Master Scheduling 376 The Master Schedule Record 377 PArt V Using the Master Schedule 382 12.2 Material Requirements Planning 383 Project management and Product/service The MRP Record 385 The Advantages of MRP 390 development 439 Special Considerations in MRP 390 12.3 Production Activity Control and Vendor Order 14 managing Projects 439 Management Systems 392 Job Sequencing 392 Monitoring and Tracking Technologies 393 Introduction 440 12.4 Synchronizing Planning and Control across 14.1 The Growing Importance of Project the Supply Chain 394 Management 441 Distribution Requirements Planning 394 14.2 Project Phases 442 Chapter Summary 397 Concept Phase 442 Key Formulas 399 Project Definition Phase 442 Planning Phase 443 Key Terms 399 Performance Phase 443 Solved Problem 400 Postcompletion Phase 443 Discussion Questions 400 14.3 Project Management Tools 444 Problems 401 Gantt Charts 444 Case Study 408 Network Diagrams 446 References 408 Constructing a Network Diagram 446 Crashing a Project 450 12s supply Chain information 14.4 Project Management Software 452 14.5 PMI and the Project Management Body systems 409 of Knowledge (PMBOK®) 455 Chapter Summary 455 Introduction 410 Key Formulas 455 12S.1 Understanding Supply Chain Information Key Terms 456 Needs 410 Differences across Organizational Levels 410 Solved Problem 456 Direction of Linkages 412 Discussion Questions 457 A01_BOZA3420_04_SE_FM.indd 9 06/23/15 8:47 AM
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