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PRODUCTION AND OPERATIONS MANAGEMENT ANA PPLMIOEDDE RANP PROACH 5. JOSEPHMA RTINICH UniveorMfsi istsyo uLroiu-iSst . WILEY- INDIA PRODUCTIAONNDO PERATIOMNASN AGEMENT AnA ppliMeodd erAnp proach Copyri1g9h9bt7©yJ ohWni l&eS yo nIsn,cA .lr li grhetsse rved. AuthorriezperbdiyW n itl Ienyd (iPaL. t)d4 .4,3 5A/n7s,aR roia Dda,r yagNaenwDj e,l1 h1i00 0 2. Alrli grhetsse rAvUeTdH.O RIRZEEPDR IONFTT HEE DITIPOUNB LISBHYEJD O HNW ILE&Y SONSI,N CU.. KN.o.p arotft hibso omka yb er eprodiunac neydf orwmi thtohuwetr itten permisosfi.potunhb el isher. 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Wilaelysp ou bliistbhsoe osik nsav arioefet lye ctfroornmiSacot msce.o nttehnaatpt p eianpr rsi nt mayn obte a vailianeb lleec tbrooonk·isFc.om ro rien formaabtoiWuoitnl peryo duvcitsosiu,tr websaitwt wew .wiley.com. Repr:2i 0n0t9 Prinatt:Pe rdi InntdP irae Ssash,i babad ISB:N9 78-81-265-1609-4 ABOUT THE AUTHOR 7o Vic.kt:-2/1(y wife anclp.ipel.ine lo compuler lechnolo y_y Joseph S. Martinich Louis), the Engineering Management Department is Professor of Op of the University of Missouri-Rolla, _and the Indus era,tiorn; Manage trial Engineering Department of California State ment at the Univer Polytechnic University-Pomona. sity of Missouri-St. Dr. Martinich is the co-author (with Arthur P. Louis. He holds a Hurter) of the book Facility Location and the Theory of B.S. degree in lnr Production (Kluwer Academic), and he is the au dustrial Engineer thor of nearly 20 scholarly articles a.nd reviews. ing from North His work has appeared in leading journals, such western University: as Decision Sciences, European Journai of Operational an M.A. in Eco Research, Naval Research Logistics, American Economic nomics from Cali Review, Journal of Regional Science, and Technological fornia State University-Fullerton: and a Ph.D. in In Forecasting arid Social Change. His early research fo dustrial Engineering and Management Sciences cused on the interrelationship between produc from Northwestern University. He has worked tion technology, process selection, and facility lo and/or consulted for companies in the steel, oil cation decisions, and the effects of uncertainty and chemical, paperboard and packaging, retail, and government intervention on these decisions. business services, and publishing industries, as His current research includes the environmental well as for governmental and not-for-profit organi aspects of operations management, and the ap zations. He has held visiting and adjunct faculty plication of Lean Production methods to service positions at the John M. Olin School of Business systems, not-for-profit organizations, and small Administration of Washington University (St. businesses. III \ I. I PREFACE No one undertakes a five-year writing project with accounting, finance, engineering, MIS, medi out compelling personal reasons. In my case I had cine, law, and most other professions, will find taught production and operations management for that a large part of their jobs will be devoted to 12 years to over a thousand students, 98% of whom operational issues. were not operations management majors but rather • Opening each chapter is an On the Job box, were majoring in accounting, marketing, finance, which briefly describes the featured per- . MIS, and several other fields. Few students had any son's opera�ions management activities. idea what operations management was, and their Many of the people profiled work outside quantitative skills were quite varied, with many of the operations function of their companies; them exhibiting severe math anxiety. These factors they include accounting managers, financial presented several special challenges in teaching officers, customer service and sales person this course: how to demonstrate the relevance of nel, purchasing managers, engineers, and operations management to this wide variety of non entrepreneurs. Few had extensive formal majors; how to teach the thought processes and an training in operations management, but alytical reasoning required in operations manage most have found that their formal exposure ment in a mathematically accessible and interesting to operations management, though limited, way that reduces math anxiety; how to eliminate ar has been invaluable. tificial separations between quantitative and quali • Over 200 companies are used to illustrate tative/behavioral material; and how to make the dis the applicability and importance of opera cussion and examples realistic, and familiarize tions management to a wide variety of or students with the richness and importance of opera ganizations, as well as a variety of jobs. tions, without overwhelming them. Over the years, I prepared in-class notes, trans • Each chapter contains an In Good Com parencies, and exercises that addressed these issues pany box, which describes how the pro in the course, but I found no textbook that adequately filed organization has addressed the oper assisted the students (and me) in doing so. Many stu ations management issues in that chapter dents encouraged me to turn my notes into a book be to improve its performance. cause they found them more readable and interesting 2. To familiarize students with real production sgs than the text. Little did I know that this "conversion" of tems. Although many of my students hold part notes would take five years of my life, but I believe the or full-time jobs, most of them are familiar with result has been a book that will help instructors teach, very few production systems and frequently with and students learn, about the extent, substance, and only a small part of their own companies, such excitement of operations management. as the accounts receivable department. Accoun tants, sales representatives, and computer sys tems analysts who understand the general na ture and activities of production systems are • GOALS AND CORRESPONDING better able to work with and communicate with FEATURES customers, suppliers, and co-workers and be more effective in their jobs. • Chapter 3, therefore, provides tours of In writing this book I had the following goals: four production systems. These tours, I. To demonstrate the importa11ce of operatio11s which include both manufacturing and management to 11011-mafors. Anyone seeking a service operations, describe the main ac supervisory or managerial career in marketing, tivities involved in producing the compa- v VI Preface nies' products, whether it be a roll of liner titative and qualitative aspects of P/OM board or a title insurance policy. More im must be integrated to solve real problems . portantly, the chapter identifies opera and bring together the topics of the chap tional problems and issues important to ter and related chapters. With two excep the success of the company. These discus tions (Walt Disney World and Southwest sions preview and motivate the topics to Airlines). the companies used are ficti be covered in the remainder of the book. tious, but the problems underlying most • The end-of-chapter Cases and ·some in of the cases are a synthesis of. actual situa text examples have also been designed to tions from my experiences and those of provide descriptions of real production colleagues or from w�itten reports. The systems or parts of systems. cases are quite different from those in other books in that they tell a story of the 3. To make the topics realistic and applicable. Be problem and how it was solved. They cause of their work experiences, students want demonstrate the problems that occur in to see how the topic applies to their.jobs. They implementation; the unexpected events have also encountered the ambiguities, "messi that can occur; and how behavioral and ness," and unanticipated consequences of real quantitative tools can be combined to ob situations, so they will not accept tools that tain better solutions than either one alone work only in idealized worlds. can achieve. Although the cases are not • I have used real examples extensively to designed for "solution," discussion ques show how companies and workers are tions are provided wjth each one. confronting P/OM issues and problems. 4. To provide a state-oHfte art treatment of topics. Over I 00 photos make the people, compa In the past 20 years, businesses have radically nies, and situations more tangible. changed the way they design and produce • Many of the illustrative examples are a bit goods and services; they have redesigned jobs . longer and "messier" than the "toy" problems and work systems, quality management sys commonly used in texts. Typically, a single tems, and material management and inventory example will grow in complexity and realism systems, and they have changed tne technolo as the discussion progresses and additional gies they use at a dizzying pace. Terms such as factors are introduced. For example, Chapter lean production, just-in-time production, electronic 7 first presents the rationale, thought data interchange, total quality management, concur process, and mechanics of a standard heuris rent engineering, and cellular production have en tic for designing a single repetitive flow tered the vernacular of the business press. process (assembly line). Unlike many P/OM texts, however, this chapter then discusses • These approaches and methodologies are methods for improving the design, including not simply tacked onto this book as a sepa switching heuristics and nonquantitative rate "new methods" section resembling a considerations involving staffing, technol glossary. They are discussed extensively ogy, and task synergies. More advanced top throughout the book in an integrated fash ics, such as the use of parallel work-stations, ion. For example, not only is Chapter 11 de parallel production lines, and the effects of voted entirely to quality management, total randomness and variation on the production quality management principles and tech system, are presented for instructors who niques are woven into the chapters on op wish to cover the topic in greater depth. erations strategy, product design, process Without being smothered in mathematical design, job design, and lean production. calculations, students can see the complex • Entire chapters or substantial sections, ity of operational problems and possible ap not just brief abstracts, are devoted to top proaches to resolving them and become fa ics such as lean and just-in-time production, cel miliar with available tools. lular production, and vendor relations. • The end-of-chapter Cases provide de • Attention to the ecological implications of opera tailed and realistic examples of how quan- tions decisions has been increasing, and not Preface VII simply because of environmental regula, • When presenting quantitative material I tions. Several chapters contain sections that have tried to focus on the thought-process point out, and illustrate with real examples, of how to approach various types of prob the opportunities that exist for companies to lems, and when and why the approach pre increase profits by designing products and sented is appropriate in practice. production processes and managing opera • To a large extent, I have avoided present tions in an environmentally sound manner. ing quantitative material in a fashion 5. To emphasize the strategic role of operations in or where assumptions and formulas are ganizations. The major changes occurring in stated, followed by a "toy" numerical ex business have involved fundamental changes in ample where the student simply substi strategy. Companies such as Hewlett-Packard, tutes numbers for variables. Because my Southwest Airlines, Walt Disney, Wal-Mart, Toy illustrative examples explain the rationale of ota, and Chrysler have become successful not the approach and the reasons for each step, the simply because they have marketed their prod mathematical steps are more intuitive, ucts well, but because they have developed pro less magical, and more likely to be com duction systems that allow them to excel in vari prehended and retained by students. • Solved Problems are provided at the end ous ways: introducing new products more quickly, producing products of higher quality or of all chapters that contain quantitative at lower cost than competitors, or being more· material. The solutions for these problems responsive and flexible in the timeliness of de are explained in detail, providing further livery and variety of products produced. reinforcement and practice for students. • Chapter 2, therefore, provides an extensive discussion of the role of operations in the devel-. opment and execution of an organization's strategy. • ORGANIZATION OF THE BOOK The need for compatibility between the marketing strategy, such as one based on providing customized products, and the The general organization of the book is consistent operations strategy and production system with most P/OM courses. It begins with general back is emphasized. Numerous real-world exam ground information on operations management, strat ples and numerical illustrations are used to egy, and production processes. It then discusses is show how companies can, and have, ex sues related to the design of production systems. . The ploited operational strengths. final part focuses on shorter-term operations plan-· • Subsequent chapters dealing with system de ning and control decisions. Three features of the orga sign issues reinforce and expand the discus nization of the book should also assist instruction. sion of operations strategy, such as how ca Topics are Integrated and reinforced. Topics such pacity and facility location decisions can be as quality management and lean production per used to enhance competitive position. meate so many aspects of operations that it is ar 6. To make the quantitative models and tools ac tificial to segment totally their coverage from cessible. The proliferation of computers and other operations management topics. For exam model-based software has made the use of ple, mistake-proofing of jobs (poka yoke) is a com quantitative models and methods in opera mon tool used in quality management, but not to tions management more wide-spread and im include it in the job design chapter would be to portant rather than less so. However, the form omit an important job design principle. For this and level of knowledge students need regard reason, many popular topics are covered in more ing quantitative methods has changed. Every than one place in the book. Typically, one chapter student needs to develop the ability to analyze will provide detailed discussion of the topic, but it a situation or problem, identify what informa will be discussed within other relevant chapters as tion is known, structure the problem, identify well. This approach allows instructors to omit what is to be determined, and select a method chapters from the course and still be able to cover for finding the solution. desired topics. VIII Preface Quantitative a11d qualitative topics are integrated. • OTHER FEATURES To perform good operational planning and to solve operational problems, a manager must uti_lize a wide In addition to the features mentioned earlier-On set of skills and knowledge. A theme of this book is that quantitative methods are tools to be used as part the Job and In Good Company profiles, End-of Chapter Cases, Plant Tours, and Solved of the decision-making process, not an end in them Problems-the book contains several other fea seives. Too often operations·management topics and tures that support the learning process: problems are divided into mutually exclusive cate gories--quantitative or qualitative-where one and • Chapter Summaries. The most impor only one approach is presented. I have organized the tant issues discussed in the chapter are book by general topics or problems and have in presented in one- or two-sentence state cluded whatever knowledge or skills are helpful or ments at the end of each chapter. These ap'Jropriate. For example, Chapter 9 not only pre reinforce key ideas and provide a quick ref sents mathematical models of queueing systems, it erence for the main ideas. also considers "qualitative" issues,• such as the rela • Highlighted Formulas and Key Formulas Sec tive advantages of single waiting lines and express tion. The most important and frequently servers, the psychology of waiting, and selection of needed formulas and equations are high appropriate performance measures. lighted with color in the body of the chapter. They are then printed together at the end of Tf11· hook is flexible a11d usable by a wide audie11ce. the chapter for easy reference when stu Material in this book has been used at four universi dents are solving numerical problems. '.ies in both undergraduate and graduate business • Highlighted Key Terms and Key Terms Sec courses and in a senior level engineering manage tio11. Key terms are highlighted in bold ment course with success. The topics covered in in where they are first defined and then are troductory P/OM courses vary considerably from listed at the end of each chapter with the school to school and instructor to instructor. There page number cited where their definition fore, this book contains all the standard P/OM top was given. ics, from which an instructor can customize his or • End-of-Chapter Problems. The book con her course. Further, almost all chapters are suffi tains approximately 250 end-of-chapter ciently self-contained so any set of chapters can be problems. I have intentionally tried to pro combined for a course. vide a set of problems with a wide range of Instructors should find this text very flexible difficulty from the very direct and simple to with respect to the degree of mathematical content relatively complex mini-cases requiring con desired in the course. By choosing to include or siderable analysis and possibly the use of omit individual chapter sections, Chapter Supple computer software. (The most difficult ones ments, or Tutorials, instructors can use this book are designated by an asterisk • .) To a large for courses ranging from those with quite modest to extent, the problems have been constructed very substantial mathematical emphasis. The core in pairs; problems I and 2 address the same of the book only assumes students have prerequi topic, and so on. In general, even-numbered site knowledge of college algebra and basic proba problems will only use data from other bility and statistics. For those schools that wish to even-numbered problems and similarly for introduce management science tools, such as linear odd-numbered problems. The answers to al programming or simulation, as part of the P/OM most all odd-numbered problems are given course, three Tutorials provide in-depth introduc at the end of the book. tions with special focus on how these tools can be • Discussion and Review Questions. Over used for operations management. At those schools 270 questions are provided at the end of where students have more advanced mathematical the chapters. These not only help students preparation, such as a prerequisite management review the important topics, but many re science course, the tutorials can either be omitted quire students to relate the topics to their or sections of them can be used to illustrate the ap own experiences and to draw upon several plication of these tools to P/OM topics. topics together to an,·;:cr the que:::tions. Preface IX sion of various companies and industries, and for • SUPPLEMENTARY MATERIALS their reinforcement of key concepts in the text. Each segment is approximately 3-5 minutes long and can be used to introduce topics to students and provide a real-_world context for related concepts. Addition ally, a selection of plant tour videos are available, related to companies and industries in the text. So�ware Animated Simulations. This selection of Instructor's Guide. The Instructor's Guide was writ software simulations of key concepts from the text ten by the author to make sure it was compatible are designed for use in classroom presentation. The with the themes and style of the text. For each chap simulations, including queuing and IIT scheduling, ter, the Guide contains: (I) a list of learning objec allow instructors to demonstrate the effects of key tives, (2) possible in-class exercises to motivate or il parameters. lustrate the chapter topic, (3) suggested examples or Supplement CD-ROM. This CD-ROM contains all additional comments instructors can use to illus of the supplements for this text (excluding video) in trate topics, (4) solutions to all end-of-chapter prob computerized form, allowing instructors to print. lems, (5) answers to review and discussion ques edit. and project the material as needed. Instructors tions where there is a dominant answer (for many may print out any of the material for their own use questions, especially those requiring students to use or for distribution to students. Also included on the their own experiences no single answer exists). and CD-ROM are the Software Animated Simulations, (6) possible answers to the case questions. the PowerPoint Presentations, and the text illustra PowerPoint Presentation. These PowerPoint lec tions. Available for 1MB or IBM compatibles. ture slides contain a combination of key concepts, images, and examples from the text. Developed by Lance Matheson of Virginia Tech, the slides are di • ACKNOWLEDGMENTS vided into a thorough presentation file for each chapter, and consist of over 600 instructional im This book is the result of hard work by many people. ages. Designed according to the organization of the First, I would like to thank the hundreds of students material in the text, this series of electronic trans who used parts of this book in class and provided parencies can be used for classroom presentation to helpful feedback. I would especially like to thank reinforce P/OM concepts visually and graphically. Carolyne Weigel Schriefer, my research assistant for Computer Software. Software developed by Y. this book. I am also grateful to Professor L. S. · Chang (developer of OSOM™ Prentice Hall) is avail Hiraoka's P/OM students at Kean College of New able with the book. However, the book is designed Jersey, who told us what pedagogical elements were so it can be used with any of the standard operations most useful to them as they studied and who evalu management or management science packages. ated the proposed design of the text. Second, I would like to thank the following faculty reviewers Test Bank. Including objective questions and who reviewed various drafts very conscientiously problems, as well as short-answer and essay ques and provided superb comments to improve the style tions,,the Test Bank has been designed to meet the and content of the text. varying testing needs of instructors. John Buzacott York University Computerized Test Bank. The entire Test Bank is Barbara Flynn Iowa State University also available in a computerized form, allowing in Frank Forst Loyola University of Chicago structors to create and modify exams. It is available Gregory Frazier University of Oregon in a Windows format for IBM and IBM compatibles. Manton Gibbs Indiana University of Per;msyl Video Tapes. The Wiley/Nightly Business Report vania Video contains segments from the highly respected S. K. Goyal Concordia University, Mon . Nightly Business Report that have been selected for treal their applicability to P/OM concepts, their discus- Jeff Heyl DePaul University