E1C10.qxd 8/2/10 12:50 PM Page 420 Chapter PART II Supply Chain Management Web resources for this chapter include Animated Demo Problems Internet Exercises Online Practice Quizzes Lecture Slides in PowerPoint Virtual Tours Company and Resource Weblinks Supply Chain Management Strategy and Design 10 www.wiley.com/college/russell In this chapter, you will learn about Supply Chains The Management of Supply Chains “Green” Supply Chains Information Technology: A Supply Chain Enabler Supply Chain Integration Supply Chain Management (SCM) Software Measuring Supply Chain Performance Supply Chain Management Strategy and Design AT MARS reating a “sustainable” global supply chain has become an important goal of most major companies The United Nations has defined sustainability as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” Mars views sustainability as a source of innovation and a business opportunity, enabling the company to gain competitive advantage, increase revenue, and add long-term value, while also making the world a better place by making a difference Two of its five guiding principles, “responsibility” and, in particular, “mutuality,” relate directly to sustainability Mars seeks to achieve mutual benefit among all parties involved with its business, with a goal to consider at every point the social, environmental, and economic impact of their business decisions from the local level to the global level C E1C10.qxd 8/2/10 12:50 PM Page 421 Chapter 10 • Supply Chain Management Strategy and Design 421 As an example of its commitment to sustainability, Mars supports good farming practices in cocoa-growing regions and equitable labor practices along the cocoa supply chain, which places it as an industry leader in the pursuit of socially responsible cocoa production Mars is one of the world’s largest users of cocoa, which is the primary agricultural export of West African countries like Cote d’Ivoire, Ghana, Nigeria, and Cameroon It is estimated that throughout West Africa there are more than million small cocoa farms and those affected by cocoa farming may be as many as 10 million people Aging trees, outdated farming techniques, and plant disease diminish annual crop yields by as much as 35% Overcoming these problems is essential to the economic sustainability of this region, and sustaining a critical part of Mars’ supply chain Mars is addressing these problems by engaging in research projects in pest management techniques and breeding disease-resistant cocoa trees Mars is a founding member of the World Cocoa Foundation and partners with them to deliver practical farming knowledge directly to farmers, including the Sustainable Tree Crops Program in West Africa Mars was a key signatory to the Harkin-Engel protocol that brings together national governments and the global cocoa and chocolate industry to improve working conditions and labor practices on cocoa farms along the cocoa supply chain Mars was the first global chocolate company to commit to certifying its entire cocoa supply as being produced in a sustainable manner by 2020 It has committed to source 100,000 tons of Rainforest Alliance-certified cocoa by 2020, and has contracted the first UTZ certified cocoa beans UTZ is a global certification program that has developed a meaningful, practical, and inclusive code of conduct that reflects minimum requirements for sustainable global cocoa production In this chapter we will learn about supply chains and the key role supply chain management plays in successfully integrating a company like Mars’ different operations management functions and processes Source: Mars, Incorporated, www.mars.com SUPPLY CHAINS Globalization and the evolution of information technology have provided the catalysts for supply chain management to become the strategic means for companies to manage quality, satisfy customers, and remain competitive A supply chain encompasses all activities associated with the flow and transformation of goods and services from the raw materials stage to the end user (customer), as well as the associated information flows In essence, it is all the assets, information, and processes that provide “supply.” It is made up of many interrelated members, starting with raw material suppliers, and including parts and components suppliers, subassembly suppliers, the product or service producer, and distributors, and ending with the end-use customer Figure 10.1 illustrates the stages, facilities, and physical movement of products and services in a supply chain The supply chain begins with suppliers, which can be as basic as raw material providers These suppliers are referred to as upstream supply chain members, while the distributors, warehouses, and eventual end-use customers are referred to as downstream supply chain members The stream at the bottom of the figure denotes the flow of goods and services (i.e., demand) as the supply chain moves downstream Notice that the stream is very rough at the upstream end and gets smoother as it moves downstream, a characteristic we will discuss in greater detail later Also note that “information” is at the center of Figure 10.1; it is the “heart and brains” of the supply chain, another characteristic we will talk more about later Supply chain: the facilities, functions, and activities involved in producing and delivering a product or service from suppliers (and their suppliers) to customers (and their customers) E1C10.qxd 8/2/10 422 12:50 PM Page 422 Part • Supply Chain Management The supply chain is also an integrated group of processes to “source,” “make,” and “deliver” products procurement: purchasing goods and services from suppliers The supply chain in Figure 10.1 can represent a single producer directly linked to one level of suppliers and one set of end-use customers A grocery store that gets food products like milk, eggs, or vegetables directly from a farmer (and not through a distributor), and sells them directly to the customer who consumes them reflects this basic level of supply chain However, supply chains are more typically a series of linked suppliers and customers; every customer is in turn a supplier to the next, up to the final end user of the product or service For example, Figure 10.2 shows the supply chain for denim jeans, a straightforward manufacturing process with a distinct set of suppliers Notice that the jeans manufacturer has suppliers that produce denim who in turn have suppliers who produce cotton and dye As Figures 10.1 and 10.2 show, the delivery of a product or service to a customer is a complex process, encompassing many different interrelated processes and activities First, demand for a product or service is forecast, and plans and schedules are made to meet demand within a time frame The product or service can require multiple suppliers (who have their own suppliers) who prepare and then ship parts and materials to manufacturing or service sites A large manufacturer like General Electric or Hewlett-Packard, has thousands of suppliers including first-tier suppliers that supply it directly, second-tier suppliers that supply those suppliers, third-tier suppliers that supply second-tier suppliers, and so on Parts and materials are transformed into final products or services These products may then be stored at a distribution center or warehouse Finally, these products are transported by carriers to external or internal customers However, this may not be the final step at all, as these customers may transform the product or service further and ship it on to their customers All of this is part of the supply chain—that is, the flow of goods and services from the materials stage to the end user The supply chain is also an integrated group of business processes and activities with the same goal—providing customer satisfaction As shown in Figure 10.3, these processes include the procurement of services, materials, and components from suppliers; production of the products and services; and distribution of products to the customer including taking and filling orders Information and information technology tie these processes together; it is what “integrates” them into a supply chain SUPPLY CHAINS FOR SERVICE PROVIDERS Supply chains for services are sometimes not as easily defined as supply chains for manufacturing operations Since the supply chain of a service provider does not always provide the customer with a physical good, its supply chain does not focus as much on the flow of physical items (material, parts, and subassemblies) through the supply chain It instead may focus more on the human resources and support services necessary to provide its own service The supply chain of a service provider also tends to be more compact and less extended than a manufacturing supply chain It generally does not have as many tiers of suppliers, and its distribution network is smaller or nonexistent However, supply chains of service companies are definable and can be effectively managed using many of the same principles Service companies and organizations have suppliers (who have suppliers), and they distribute their products to customers (who may have their own customers) Although a hospital and HMO not provide actual goods to its customers, they nevertheless purchase equipment, computers, drugs, and medical supplies from suppliers (who have suppliers) They also contract for services (such as food preparation or laundry); hire doctors, nurses, accountants, administrators, and staff; and provide health care They have quality-management issues throughout their supply chain They also encounter the same problems and inefficiencies as a manufacturing-based supply chain Other service-oriented companies, like McDonald’s, do, in fact, provide a physical product, and thus have a more discernible supply chain with distribution, transportation and inventory like a manufacturing company VALUE CHAINS In recent years, terms such as value chain and demand chain have been used instead of, or interchangeably with, supply chain Are there any differences between the two terms? Originally, a value chain was thought to have a broader focus than a supply chain A value chain included every step from raw materials to the eventual end user, whereas a supply chain focused more narrowly on the activities that get raw materials and subassemblies into the manufacturing operation, that is, supply In this context, the ultimate goal of a value chain is the delivery of maximum value to E1C10.qxd 8/2/10 12:50 PM Page 423 Chapter 10 • Supply Chain Management Strategy and Design 423 Figure 10.1 the end user However, we have already indicated that the general perception of a supply chain is that it also encompasses this same broad focus, from raw material to end user Alternatively, a demand chain has been referred to as a network of trading partners that extends from manufacturers to end-use consumers The objective of demand chain management is to increase value for any part or all of the chain This perhaps is a somewhat more narrowly defined perspective then a supply chain or value chain However, in reality all of these terms have come to mean approximately the same thing to most people, and the terms are frequently used interchangeably A common thread among these perceptions of supply, value, and demand chains is that of value Value to the customer is good quality, a fair price, and fast and accurate delivery To achieve value for the customer, the members of the supply chain must act as partners to systematically create value at every stage of the supply chain Thus, companies not only look for ways to create value internally in their own production processes, but they also look to their supply chain partners to create value by improving product design and quality, enhancing supply chain performance and speed, and lowering costs To accomplish these value enhancers, supply chain members must often collaborate with each other and integrate their processes, topics that we will continually return to in this chapter THE MANAGEMENT OF SUPPLY CHAINS Supply chain management (SCM) focuses on integrating and managing the flow of goods and services and information through the supply chain in order to make it responsive to customer needs while lowering total costs Traditionally, each segment of the supply chain was managed as a separate (stand-alone) entity focused on its own goals However, to compete in today’s The Supply Chain Value: the creation of value for the customer is an important aspect of supply chain management E1C10.qxd 8/2/10 424 12:50 PM Page 424 Part • Supply Chain Management Produce Schedule Grow Figure 10.2 The Supply Chain for Denim Jeans Supply chain management (SCM): requires managing the flow of information through the supply chain in order to attain the level of synchronization that will make it more responsive to customer needs while lowering costs Keys to effective supply chain management are information, communication, cooperation, and trust global marketplace a company has to count on the combined and coordinated effort of all members of the supply chain Supply chains require close collaboration, cooperation, and communication among members to be effective Suppliers, and their customers must share information It is the rapid flow of information among customers, suppliers, distributors, and producers that characterizes today’s supply chain management Suppliers and customers must also have the same goals They need to be able to trust each other: Customers need to be able to count on the quality and timeliness of the products and services of their suppliers Furthermore, suppliers and customers must participate together in the design of the supply chain to achieve their shared goals and to facilitate communication and the flow of information SUPPLY CHAIN UNCERTAINTY AND INVENTORY One of a company’s main objectives in managing its supply chain is to synchronize the upstream flow of incoming materials, parts, subassemblies, and services with production and distribution downstream so that it can respond to uncertainty in customer demand without creating costly excess inventory Examples of factors that contribute to uncertainty, and hence variability, in the supply chain are inaccurate demand forecasting, long variable lead times for orders, late deliveries, incomplete shipments, product changes, batch ordering, price fluctuations and discounts, and inflated orders The primary negative effects of supply chain uncertainty and variability are lateness and incomplete orders If deliveries from suppliers are late or incomplete, they slow down the E1C10.qxd 8/2/10 12:50 PM Page 425 Chapter 10 • Supply Chain Management Strategy and Design Shipping 425 Inventory Demand Figure 10.2 flow of goods and services through the supply chain, ultimately resulting in poor-quality customer service Companies cope with this uncertainty and try to avoid delays with their own form of “insurance,” inventory Supply chain members carry buffer (or extra) inventory at various stages of the supply chain to minimize the negative effects of uncertainty and to keep goods and services flowing smoothly from suppliers to customers For example, if a parts order arrives late (or does not arrive at all) (continued) Inventory: insurance against supply chain uncertainty Figure 10.3 Supply Chain Processes E1C10.qxd 8/2/10 426 12:50 PM Page 426 Part • Supply Chain Management from a supplier, the producer is able to continue production and maintain its delivery schedule to its customers by using parts it has stored in inventory for just such an occurrence Companies also accumulate inventory because they may order in large batches in order to keep down order and transportation costs or to receive a discount or special price from a supplier However, inventory is very costly Products sitting on a shelf or in a warehouse are just like money sitting there not being used when it could be used for something else It is estimated that the cost of carrying a retail product in inventory for one year is over 25% of what the item cost Inventory-carrying costs are over $300 billion per year in the United States As such, suppliers and customers would like to minimize or eliminate it THE BULLWHIP EFFECT Bullwhip effect: occurs when slight demand variability is magnified as information moves back upstream Figure 10.4 The Bullwhip Effect Distorted information or the lack of information, such as inaccurate demand data or forecasts, from the customer end can ripple back upstream through the supply chain and magnify demand variability at each stage This can result in high buffer inventories, poor customer service, missed production schedules, wrong capacity plans, inefficient shipping, and high costs This phenomenon, which has been observed across different industries, is known as the bullwhip effect It occurs when slight to moderate demand variability becomes magnified as demand information is transmitted back upstream in the supply chain In Figure 10.1 the stream at the bottom of the figure reflects this occurrence; the flow is greater (and the waters more turbulent) further upstream Figure 10.4 presents a detailed perspective of the bullwhip effect The bullwhip effect is created when supply chain members make ordering decisions with an eye to their own self-interest and/or they not have accurate demand information from the adjacent supply chain members If each supply chain member is uncertain and not confident about what the actual demand is for the succeeding member it supplies and is making its own demand forecast, then it will stockpile extra inventory to compensate for the uncertainty In other words, they create a security blanket of inventory As shown in Figure 10.4, demand for the end user is relatively stable and the inventory is small However, if slight changes in demand occur, and the distributor does not know why this change occurred, then the distributor will tend to overreact and increase its own demand, or conversely reduce its own demand too much if demand from its customer unexpectedly drops This creates an even greater overreaction by the manufacturer who E1C10.qxd 8/2/10 12:50 PM Page 427 Chapter 10 • Supply Chain Management Strategy and Design 427 supplies the distributor and the suppliers who supply the manufacturer One way to cope with the bullwhip effect is for supply chain members to share information, especially demand forecasts If the supply chain exhibits transparency, then members can have access to each other’s information, which reduces or eliminates uncertainty RISK POOLING When supply chains stretch over long distances and include multiple parts, services, and products, uncertainty increases In “lean” supply chains there is little redundancy and slack (i.e, inventory), so when disruptions occur, the effects can cascade through the supply chain hindering normal operations For example, a labor strike at an automobile plant can cause downstream assembly plants to reduce or stop production, which, in turn, can result in a lack of autos on dealer lots Parts shortages, customer order changes, production problems and quality problems are the types of things that can disrupt a supply chain As we have suggested, one way to offset this uncertainty is by carrying extra inventory at various stages along the supply chain, (i.e., the bullwhip effect) However, another way to reduce uncertainty is called risk pooling In risk pooling, risks are aggregated to reduce the impact of individual risks As this implies, there are several ways to pool supply chain risks One way is to combine the inventories from multiple locations into one location, like a warehouse or distribution center It is well known (and can be shown mathematically) that it is more economical to hold inventory at one central location than dispersing it across several customer locations Doing so reduces the overall inventory investment needed to achieve a target service level across all the customers the distribution center supplies (i.e., it’s more costly to meet variations in demand from several locations than from one), which in effect, reduces demand variability Adding a distribution center between the supplier and the end-use customers can also shorten the lead time between the supplier and customer, which is A L O N G T H E S U P P LY C H A I N Eliminating the Bullwhip Effect at Philips Electronics Philips Electronics is one of the world’s largest electronics companies with over 165,000 employees in more than 150 countries, and with sales in 2005 of over 30.4 billion Euros Philips Semiconductors, headquartered in Eindhoven, The Netherlands, with over 33,000 employees, and Philips Optical Storage, with over 9,000 employees around the world are subsidiaries of Philips Electronics Philips Semiconductors is one of the world’s largest semiconductor suppliers with twenty manufacturing and assembly sites around the world, while Philips Optical Storage manufactures optical storage products including drives, subassemblies and components for audio, video, data and gaming playback, and rewritable CD and DVD consumer products Within the Philips supply chain Philips Semiconductor is the furthest upstream supplier of its downstream customer, Philips Optical Storage In 2000 Philips Semiconductor recognized that it was suffering from a substantial bullwhip effect and collaborated with Philips Optical Storage on a project to reduce or eliminate it In order for Philips Optical Storage to assemble a DVD drive, it requires a number of components and subassemblies, including printed circuit boards, which require integrated circuits to produce that can have long manufacturing lead times There are two steps in the process of manufacturing integrated circuits; wafer fabrication, which is a complex process that also has long lead times, and assembly Overall, the total lead time for the supply chain was between 17 and 22 weeks The planning process was decentralized with each stage in the supply chain planning and operating independently In addition, information about changes in demand and orders often lagged and was distorted, and deliveries downstream to Philips Optical Storage were unreliable Individual stages safeguarded against the resulting uncertainty by creating safety stocks Philips developed a collaborative planning process and supporting software that included a new advanced scheduling system that supported weekly collaborative planning sessions One of the most important aspects of the new supply chain management system is the speed with which it is able to solve problems that arise The new system synchronized Philips supply chain, reduced safety stocks, guaranteed order quantities and deliveries, and effectively eliminated the bullwhip effect, resulting in savings of approximately $5 million per year Why you think the “collaborative planning process and supporting software” was a key factor in the ability of Philips to eliminate the bullwhip effect along its supply chain? What obstacles you think might prevent a company from using a collaborative planning process? Source: T de Kok, F Janssen, J van Doremalen, E van Wachem, M Clerkx, and W Peeters, “Philips Electronics Synchronizes Its Supply Chain to End the Bullwhip Effect,” Interfaces 35 (1; January–February 2005), pp 37–48 E1C10.qxd 8/2/10 428 12:50 PM Page 428 Part • Supply Chain Management another way to pool risks When the demand forecast is closer to its actual occurrence (i.e., shorter lead time), then variability is reduced; it’s a lot easier to predict demand for next week than for next month Another way to pool risks is to reduce parts and product variability, thereby reducing the number of product components, which allows a company to meet demand with fewer products Common product components that can be used in a lot of different products enable a company to pool its forecasts for the components demand, resulting in fewer forecasts (The more forecasts there are, the more chances for errors.) Reducing product variability can have the same effect It’s easier to forecast demand for a small number of product configurations than a larger number of configurations This is why automobile companies like Honda offer packages of options rather than just a list of add-ons Yet another way to pool risks is by creating flexible capacity It reduces the uncertainty for the customer if its demand can be met by several different production facilities, which the supplier can achieve by increasing its production capacities at several different locations The customer can reduce its own risks by increasing the number of suppliers it uses “GREEN” SUPPLY CHAINS sustainability: meeting present needs without compromising the ability of future generations to meet their needs “Going green,” also referred to as achieving sustainability, has become one of the most visible recent trends in operations and supply chain management Sustainability, according to the United Nations, is “meeting present needs without compromising the ability of future generations to meet their needs.” Implicit in this definition is not depleting or abusing our natural resources like air, water, land, and energy in a way that’s going to harm current or future generations For businesses it also means sustaining human and social resources However, to many companies, sustainability means becoming environmentally friendly and socially conscious (i.e., “green”), at the expense of competitiveness and higher costs A common perception among many U.S and European corporations is that requiring suppliers, especially in developing countries, to use green practices is not feasible because they not face the same governmental, cultural, and social pressures; that green manufacturing will require costly new equipment and processes; and that the customer market for products designed with green attributes is “soft.” As a result companies often view social and environmental responsibility separately from business objectives However, there is a growing realization among many companies that the social and environmental benefits of developing sustainable products not have to come at the expense of reduced profits and competiveness Sustainability can, in fact, be cost effective and profitable and provide the impetus for product and process innovations Green initiatives can lower costs because fewer resources are used, and additional revenues can result from better products or new businesses Although Toyota realized huge costs in developing its hybrid Prius, it has created a whole new successful and potentially profitable product and market just as gasoline prices were rising Further, by designing products that can be recycled or reused, companies can reduce waste, thereby lowering costs Thus, while a commitment to green practices can create a better image for companies among consumers (and the government), they can also reduce costs and increase revenues A L O N G T H E S U P P LY C H A I N Going Green at Walmart With more than 100,000 suppliers and almost 8,000 retail locations around the world Walmart has the opportunity to make a significant “green” impact, which they have chosen to It has made a commitment to be an environmentally sustainable retailer; to make a difference for the environment and communities around the world It has established sustainability goals “to be supplied 100% by renewable energy, create zero waste, and sell products that sustain our resources and the environment.” To achieve these goals, Walmart has developed a number of sustainability initiatives, including setting a goal to design stores that are 30% more efficient and produce 30% fewer greenhouse gas emissions; creating a solar power program for stores in California and Hawaii that will produce more than 18 million kWh of clean, renewable energy and reduce greenhouse gas emissions (Continued) E1C10.qxd 8/2/10 12:50 PM Page 429 Chapter 10 • Supply Chain Management Strategy and Design by as much as 8,000 metric tons per year; and using over 225 million kWh of wind energy annually for stores in Texas Other initiatives include making its distribution fleet 25% more efficient by working with suppliers to use fuelsaving technologies, load trucks more efficiently and improve routing, and using alternatively fueled trucks It has committed to sending zero waste to U.S landfills by 2025 and it is achieving this goal in part by using process called “super sandwich baling.” In this process recyclable items are compressed between layers of cardboard creating bales, which are sent to recyclers It has a goal of reducing plastic shopping bag waste at its stores around the world by 33% by 2013, which translates to as much as 135 million pounds, and will potentially eliminate 290,000 metric tons of greenhouse gases and the use of 678,000 barrels of oil annually Walmart sells only concentrated liquid laundry detergent in all it U.S stores which will save more than 125 million tons of cardboard, 80 million pounds of plastic resin, and 430 million gallons of water, and will also save diesel fuel used to transport the detergent products It is working with its suppliers to reduce packaging throughout its supply chain by 5% by 2013 with an estimated reduction of 667,000 metric tons of carbon dioxide, which is equal to taking 213,000 trucks off the road each year, eliminating the use of 324,000 429 tons of coal, or almost 67 million gallons of diesel fuel Walmart has given a directive to over 1,000 suppliers in China to (among other things) increase the energy efficiency of products it sells to Walmart by 25% by 2011; to completely eliminate product returns as a result of defects by 2012; and to cut water use in all of its stores by half In order to evaluate the effectiveness of its green initiatives, Walmart provides a survey to each of its 100,000 suppliers with questions in four areas: energy and climate, natural resources, material efficiency, and people and community The survey results in a “product sustainability index” that will provide a global information database on the “Lifecycle” of products—from raw materials to disposal—in order to see where sustainability is possible Walmart’s commitment to sustainability not only makes it a good global corporate citizen but it is also good business General Electric is another large global corporation that has made a strong commitment to sustainability Go to their Web site at www.ge.com and discuss what green activities they are involved in Source: The Walmart Web site at www.walmartstores.com The impetus for, and commitment to, sustainability generally comes from downstream in the supply chain and moves back upstream to include suppliers Companies have found that suppliers can account for as much as 80% of the resources consumed in a product’s supply chain Companies must work with and guide suppliers to reduce the inefficient use of resources, reduce the use of raw materials, reduce waste, and recycle Suppliers can be coerced into using green practices by threats, demands, or incentives, or a combination SUSTAINABILITY AND QUALITY MANAGEMENT Many companies already have quality improvement programs in place that require suppliers to adhere to continuous improvement goals of eliminating returned products, thus reducing waste; poor quality translates to wasted resources The same quality management focus on reducing waste can work to achieve sustainability goals As we discussed in Chapter 2, the cost of poor quality can have a significant impact on a company’s profitability and competitiveness, and quality costs may often come from suppliers along the supply chain, including the cost of materials, labor, and resources for reworking defective products; the cost of shipping delays and customer service errors; and the cost of product replacement and waste Improving fuel efficiency in a distribution fleet, having employees telecommute, using ecofriendly packaging materials, building energy efficient facilities, reducing the use of wooden pallets, and even turning the thermostat up in summer and down in winter are initiatives that improve processes and reduce costs, and also achieve sustainability goals For example, FedEx, which has a fleet of 700 aircraft and 44,000 vehicles that consume an estimated million gallons of fuel per day, is replacing old aircraft with new larger more fuel-efficient Boeing aircraft that will reduce its fuel consumption by over 50% and increase capacity by 20%; it uses hybrid vans that are over 40% more fuel efficient and has replaced over 25% of its fleet with more fuel-efficient vehicles; it has developed new software that will optimize aircraft routes and schedules; and it has developed more energy-efficient solar systems at distribution hubs in California and Germany FedEx has also started a consulting firm to sell the energy expertise it has gained through it own sustainability initiatives E1BAPP.qxd 8/5/10 796 2:12 PM Page 796 Solutions to Selected Odd-Numbered Problems 17 19 21 23 25 27 29 31 33 $451,500 $144,700 5; 105 16, 0, 0, 0, 55, 27 85, 13, 0, 28, 77, 95; weeks seats; seat 55 seats 20 trees a 100; b 75; c 43, d SUPPLEMENT 14 a Maximize Z ϭ $2.25x1 ϩ 3.10x2; s.t 5.0x1 ϩ 7.5x2 Յ 6500, 3.0x1 ϩ 3.2x2 Յ 3000, x2 Յ 510, x1 Ն 0, x2 Ն 0; b and c x1 ϭ 456, x2 ϭ 510, Z ϭ $2,607 Maximize Z ϭ 1,800x1a ϩ 2,100x1b ϩ 1,600x1c ϩ 1,000x2a ϩ 700x2b ϩ 900x2c ϩ 1,400x3a ϩ 800x3b ϩ 2,200x3c; s.t x1a ϩ x1b ϩ x1c ϭ 40, x2a ϩ x2b ϩ x2c ϭ 40, x3a ϩ x3b ϩ x3c ϭ 40, x1a ϩ x2a ϩ x3a Յ 40, x1b ϩ x2b ϩ x3b Յ 60, x1c ϩ x2c ϩ x3c Յ 50, xij Ն 0; x1b ϭ 40, x2a ϭ 40, x3c ϭ 40, Z ϭ $212,000 Maximize Z ϭ 4.5xbs ϩ 3.75xos ϩ 3.60xcs ϩ 4.8xms ϩ 3.25xbd ϩ 2.5xod ϩ 2.35xcd ϩ 3.55xmd ϩ 1.75xbr ϩ 1.00xor ϩ 0.85xcr ϩ 2.05xmr; s.t 0.6xcs Ϫ 0.4xbs Ϫ 0.4xos Ϫ 0.4xms Ն 0, Ϫ 0.3xbs ϩ 0.7xos Ϫ 0.3xcs Ϫ 0.3xms Ն 0, 0.4xbd Ϫ 0.6xod Ϫ 0.6xcd Ϫ 0.6xmd Ն 0, Ϫ 0.1xbd Ϫ 0.1xod Ϫ 0.1xcd ϩ 0.9xmd Յ 0, Ϫ0.6xbr Ϫ 0.6xor Ϫ 0.6xcr ϩ 0.4xmr Յ 0, 0.7xbr Ϫ 0.3xor Ϫ 0.3xcr Ϫ 0.3xmr Ն 0, xbs ϩ xbd ϩ xbr Յ 110, xos ϩ xod ϩ xor Յ 80Ͻ xcs ϩ xcd ϩ xcr Յ 70Ͻ xms ϩ xmd ϩ xmr Յ 150, xij Ն b xos ϭ 52.5, xcs ϭ 70, xms ϭ 52.5, xbd ϭ 52.2, xmd ϭ 8.7, xbr ϭ 57.8, xor ϭ 1.4, xmr ϭ 88.8, xod ϭ 26.1, Z ϭ $1,251 a Maximize Z ϭ 8x1 ϩ 10x2; s.t x1 ϩ x2 Ն 400, x1 Ն 0.4 (x1 ϩ x2), x2 Յ 250 Ͻ x1 ϭ 2x2, x1 ϩ x2 Յ 500, xi Ն 0; b x1 ϭ 333.3, x2 ϭ 166.6, Z ϭ 4332.4 Maximize Z ϭ 3x1s ϩ 5x2s ϩ 6x4s ϩ 9x1P ϩ 11x2P ϩ 6x3P ϩ 12x4P ϩ 1x1R ϩ 3x2R ϩ 4x4R Ϫ 2x3R; s.t x1S ϩ x2S ϩ x3S ϩ x4S Ն 3000, x1P ϩ x2P ϩ x3P ϩ x4P Ն 3000, x1R ϩ x2R ϩ x3R ϩ x4R Ն 4000, x1S ϩ x1P ϩ x1R Յ 5000, x2S ϩ x2P ϩ x2R Յ 2400, x3S ϩ x3P ϩ x3R Յ 4000, x4S ϩ x4P ϩ x4R Յ 1500, 0.6x1S Ϫ 0.4x2S Ϫ 0.4x3S Ϫ 0.4x4S Ն 0, Ϫ0.2x1S ϩ 0.8x2S Ϫ 0.2x3S Ϫ 0.2x4S Յ␾ՆՆ ЉϽ Ϫ0.3x1S Ϫ 0.3x2S ϩ 0.7x3S Ϫ 0.3x4S Ն 0, Ϫ0.4x1P Ϫ 0.4x2P ϩ 0.6x3P Ϫ 0.4x4P Ն 0, Ϫ0.5x1R ϩ 0.5x2R Ϫ 0.5x3R Ϫ 0.5x4R Յ 0, 0.9x1R Ϫ 0.1x2R Ϫ 0.1x3R Ϫ 0.1x4R Ն 0, xij Ն 0; x1S ϭ 1200, x1R ϭ 3800, x2P ϭ 2200, x2R ϭ 200, x3S ϭ 900, x3P ϭ 3100, x4S ϭ 900, x4P ϭ 600, Z ϭ $63,400 11 Minimize Z ϭ 190 ⌺rj ϩ 260 ⌺Oj ϩ ⌺ij; s.t rj Յ 160, Oj Յ 50, r1 ϩ ⌷1 Ϫ i1 Ն 105, r2 ϩ O2 ϩ i1 Ϫ i2 Ն 170, r3 ϩ O3 ϩ i2 Ϫ i3 Ն 230, r4 ϩ O4 ϩ i3 Ϫ i4 Ն 180, r5 ϩ O5 ϩ i4 Ϫ i5 Ն 150, r6 ϩ O6 ϩ i5 Ն 250, Z ϭ $215,600 13 x1 ϭ 12 A.M Ϫ A.M ϭ 40, x4 ϭ 20, x5 ϭ 40, x6 ϭ 20, x7 ϭ 10, x9 ϭ 40, x10 ϭ 10, Z ϭ 180 15 xt1 ϭ 750, xt2 ϭ 180, xt3 ϭ 1,680, xm1 ϭ 750, xm2 ϭ 450, xm3 ϭ 480, xb2 ϭ 270, xb3 ϭ 240, Z ϭ 10,798.50 17 x1 ϭ 3.3, x2 ϭ 6.7, Z ϭ 566.67 19 x1 ϭ 376,470.59; x2 ϭ 343,526.41; Z ϭ 88, 376.47 21 b x1 ϭ 120 cups, x ϭ 80 cups, z ϭ $370; d does not affect solution; e x1 ϭ 123.1 cups, x2 ϭ 82.1 cups, Z ϭ $379.53; f not spend 23 b x11 ϭ 65.385, x14 ϭ 384.615, x22 ϭ 400, x23 ϭ 170, x31 ϭ 150.3, x33 ϭ 169.7; Z ϭ $11,738.28 25 x13 ϭ 25,000, x14 ϭ 8,000, x16 ϭ 2,000, x24 ϭ 4,000, x25 ϭ 8,000, x34 ϭ 5,000, Z ϭ $59,100; b Z ϭ $52,000 27 a x14 ϭ 20, x44 ϭ 40, x35 ϭ 20, x55 ϭ 60, x66 ϭ 90, x17 ϭ 20, x27 ϭ 30, x77 ϭ 50, y5 ϭ 5, y6 ϭ 10, y7 ϭ 20, Z ϭ $31,500; b x34 ϭ 20, x44 ϭ 40, x25 ϭ 5, x35 ϭ 20, x55 ϭ 60, x26 ϭ 10, x66 ϭ 90, x17 ϭ 40, x27 ϭ 25, x77 ϭ 50, y7 ϭ 5, Z ϭ $26,000 29 x1 ϭ 6, xn ϭ 0, xs ϭ 6, xw ϭ 6, yl ϭ 14.44, yn ϭ 10, ys ϭ 7.56, yw ϭ 10, Z ϭ $15,600 31 x1 ϭ 54, x2 ϭ 108, x3 ϭ 162, Z ϭ $253.80; a $0.78; b $0; c x1 ϭ 108, x2 ϭ 104, x3 ϭ 162, Z ϭ $249.48 33 x1 ϭ 1,000, x2 ϭ 800, x3 ϭ 200, Z ϭ $760; a $38; b x1 ϭ 1,000, x2 ϭ 1,000, Z ϭ $770; c x1 ϭ 1,600, x2 ϭ 200, x3 ϭ 200 35 xA3 ϭ 400, xA4 ϭ 50, xB4 ϭ 250, xB5 ϭ 350, xC4 ϭ 175, xC7 ϭ 274.1, xC8 ϭ 50.93, xD2 ϭ 131.7, xD7 ϭ 15.93, xE1 ϭ 208.33, xE8 ϭ 149.07, xF1 ϭ 291.67, xF2 ϭ 108.3, xF6 ϭ 460; Z ϭ 12,853.33 37 x12 ϭ x13 ϭ x14 ϭ x15 ϭ 37,000; x26 ϭ x36 ϭ x46 ϭ x56 ϭ 12,000; x27 ϭ x37 ϭ x47 ϭ x57 ϭ 6,000; x28 ϭ x38 ϭ x48 ϭ x58 ϭ 19,000; x69 ϭ 5,000; x79 ϭ 6,000; x89 ϭ 3,000; x810 ϭ 16,000; x611 ϭ 7,000; x912 ϭ 14,000; x1012 ϭ 16,000; x1112 ϭ 7,000; Z ϭ $40,680 E1BAPP.qxd 8/5/10 2:12 PM Page 797 Solutions to Selected Odd-Numbered Problems 39 41 43 45 xA2 ϭ 34,558.82; xA3 ϭ 145,441.18; xB1 ϭ 167,259.79; xB2 ϭ 147,740.21; xC3 ϭ 61,804.51; xC4 ϭ 278,195.49; xE2 ϭ 61,345.18; Z ϭ $34,133,052.63 x1B ϭ 1, x2A ϭ 1, x3A ϭ 1, x4B ϭ 1, x7C ϭ 1, x11C ϭ 1, z ϭ $79,000 x1G ϭ 1, x2B ϭ 1, x3D ϭ 1, x4L ϭ 1, x5K ϭ 1, x6E ϭ 1, x7A ϭ 1, x8C ϭ 1, z ϭ 4.420 a football fields, playgrounds, walking/running trails, softball fields, z ϭ 123,500; b soccer fields, playgrounds, walking/running trails; z ϭ 4.0 or 1.33 avg priority Chapter 15 13 15 17 19 a 6; b 7; c b 800; c day $240.80 100 B’s, 50 C’s, 50 D’s, 400 E’s, 900 F’s, 200 G’s, 100 H’s, 100 I’s order in periods 1–6 for quantities 50, 50, 56, 50, 50, and 50 b days; c no; d back panel, side panel, legs, drawer guide a POQ or EOQ; b POQ; c POQ; d POQ a Machining 250 hours; Heat treat 500 hours; Assembly 50 hours Chapter 16 SS50—SS100—SS50—SS200 (these answers are rounded up) 125/hr c; decreases a kanbans, inventory increases; b kanbans, inventory halved; c 14 kanbans, no change in inventory Chapter 17 11 13 15 17 19 21 23 Jones to Nurse 1, Hathaway to Nurse 2, Sweeney to Nurse 3, Bryant to Nurse Product to machine B, product to machine D, product to machine A, product to machine C, product to machine E A to Finance, B to Production, C to Customer Service, D to Logistics, E to Sales, F to Marketing Research FCFS; DDATE or SLACK; Point value of assignment, grade in class, major SPT: 23.88, 9.75, 22, 5; DDATE: 30.75, 8.25, 13, 7; SLACK: 3.63, 9.13, 17, 7; depends on criteria a 12, 3, 7; b 12.25, 3.25, 6; c 13, 3.75, 6; depends on criteria a 18 hours, b 20 hours; FCFS E, B, D, C, A; 23 6, 5, 4, 2, 1, 3; hr 35 Backlog ϭ 20, 10, 5, 5, 10 b M T W Th F Sa Sn K.J x x x x x T.S 0 x x x x x F.C x x x x 0 x S.B x x x x x 0 P.T x 0 x x x x M T W Th F Sa Sn A.R 0 x x x x S.H x x x x J.J x x x x T.T x x x x x E.T x x x x x P.D x x x x x 797 E1BINDEX.qxd 8/5/10 10:01 AM Page 798 Index ABC systems, of inventory control systems, 560–563, 561f Ability, motivation v., 319 Acceptable quality level (AQL), 149–150 Acceptance sampling AOQL and, 152, 152f, 153f defects and, 148–149 double- and multiple-sampling plans for, 153 OC curve and, 150–151, 150f with OM Tools, 151 producer’s/consumer’s risk and, 149–150 single-sample attribute plan in, 149 Accessibility, 56, 707 Accounting, 5, 702 ACSI See American Customer Satisfaction Index Action notices, 694 Action plan, 22f Activity, 367 normal activity cost, 401–402, 401f probabilistic activity times in, 389–392, 390f, 392f Activity-on-arrow (AOA), 380, 380f Activity-on-node (AON), 380, 380f Activity scheduling, CPM/PERT and, 383–386, 383f, 384f, 385f Activity slack, 386–387, 387t Actual cycle time, 275 Adjusted exponential smoothing, 510–512, 512f, 520t Advanced planning and scheduling (APS), 772–774, 773f Advanced single-server model, 209–210, 210f Aetna, 330 Affirmative action, 329 Aggregate, 608, 609f disaggregation, 628 Aggregate planning (services), 630 revenue management for, 631–634, 632f, 633t Aggregate planning, scheduling for, 756 Aggregate planning quantitative techniques Excel for, 617f, 618f, 620f, 621f, 622f, 626t, 627f general linear programming model for, 618–619, 620f mixed strategies for, 619, 621 other quantitative techniques and, 623–626, 623t, 624t, 626f pure strategies for, 616–617, 617f, 618f transportation method for, 623–626, 623t, 627f AGV See Automatic guided vehicle AI See Artificial intelligence Aircraft industry, 338–339, 341f Air freight, 460–461, 461f Airlines, 111 See also specific airlines Air Products, 701–702 Alcoa, 498 Alternative workplaces, 324–325 Amadas Industries, 614 Amazon, 18, 69, 194–195, 455, 456f, 462 American Airlines, 378, 777 American Customer Satisfaction Index (ACSI), 21, 69 American Express, 159, 433 American National Standards Institute (ANSI), 94, 97 American Society for Quality (ASQ), 21, 55, 69, 92t, 97 Analysis techniques, 302–308, 304f See also specific types of analyses Analyze, in breakthrough strategy, 79 Andons, 738, 738f Annual savings, of technology, 245 ANSI See American National Standards Institute AOA See Activity-on-arrow AOA network, CPM/PERT and, 380–381, 380f, 381f AON See Activity-on-node AOQ See Average outgoing quality AOQL See Average outgoing quality limit Apple, 10, 18, 69, 162, 441 Applied Materials, 615 Appraisal costs, 84, 85f, 86f APS See Advanced planning and scheduling AQL See Acceptable quality level ARAMARK Healthcare, ARDEC See Army Armament Research, Development and Engineering Center, U.S Army Armament Research, Development and Engineering Center, U.S (ARDEC), 70, 320 Army Corps of Engineers, U.S., 399–400, 400f Artificial intelligence (AI), 246f, 248t ASQ See American Society for Quality ASRS See Automated storage and retrieval system Assemble-to-order, 437, 682 Assembly charts, 235 Assembly Line Configuration Program (ASYBL), 278 Assembly lines, 278, 282–284, 283f, 284f, 318 See also Product layouts Assignment method, of loading, 758–761, 760f ASYBL See Assembly Line Configuration Program ATP See Available-to-promise AT&T, 22, 22f, 97, 317, 323, 325, 330, 430 Attributes, 110 Audi, 159 Australian Business Excellence Award, 92t, 93 Automated scheduling systems, 779 Automated storage and retrieval system (ASRS), 246f, 247t Automatic guided vehicle (AGV), 246f, 247t Automation, 281, 281f, 282, 334 Autonomous maintenance, 739n6 Available-to-promise (ATP), 628–629, 630f Average capacity strategy, 258, 259f Average error, 519–520 Average outgoing quality (AOQ), 152, 153f Average outgoing quality limit (AOQL), 152, 152f, 153f Avis, 75, 349f B2B See Business-to-business B2C See Business-to-consumer Backlogs, 614, 771 Back office, 198f, 199, 199f, 274 Backordering, 614 Backward pass, 385 Backward scheduling, 686, 686f Balance, 282 See also Line balancing Balance delay, 276 Balanced scorecard, 23–24, 23t, 24f, 78 Baldrige Award See Malcolm Baldrige National Quality Award Bank of America, 77, 78, 205, 261–262, 302, 745 Baptist Hospital, Inc., 62 Bar codes, 246f, 248t, 433 See also Radio frequency identification Barnes and Noble, 273 Basic EOQ model, 564–567, 564f, 565t Basic layouts fixed-position layouts in, 266, 266f process layouts in, 262–264, 263f, 264f, 265t product layouts in, 264–265, 264f, 265f, 265t Basic motion time study (BMT), 354 Basic single-server model, 203f, 206–208 advanced single-server model v., 209–210, 210f with Excel, 209, 209f, 210f Basic waiting line structures, 202–203, 203f Batch production, 229, 230f, 231, 231f, 232t, 756, 775 Bauli, 613 The Bayer Group, 516 Bean, Leon Leonwood, 58 Bechtel, 78 Bellin Health System, 116 Benchmarks, 75, 77, 91, 92, 94, 96, 159, 320 benchmarking data, 241, 242f Best Buy, 170, 615 Best of breed, 705 Best operating level, 259 Beta distribution, 389, 390f Bill of material (BOM), 683–685, 685t, 686f Binney & Smith (Crayola), 18 Black Belts, in Six Sigma, 77f, 78, 80 Block diagram, 267–269, 270f Blueprinting, 198, 198f, 199f BMT See Basic motion time study BMW, 69, 159 Boeing, 77, 266f, 430, 498, 745 Boise, Inc., 373 BOM See Bill of material Booz, Allen, and Hamilton, 379 Bottlenecks, 771, 775–777 BPR See Business process reengineering Brainstorming, 64 Brazil, 11f, 470 Breakdown maintenance, 738 Breakeven analysis, 230–236, 231f, 232f, 232t Breakeven point, 233–234, 234f, 235f Breakthrough strategy, 79–80 Brees, Brittany, 74f Brees, Drew, 74f British Airport Authority, 382 British Airways, 382 British Petroleum, 373 British Standard Institute (BSI), 94 BSI See British Standard Institute E1BINDEX.qxd 8/5/10 10:01 AM Page 799 Index BTO See Build-to-order Budgeting, 245, 599 Build-to-order (BTO), 437, 682 Bullwhip effect, 426–427, 426f, 497–498, 555, 615 Bureau of Labor Statistics, U.S., 328 Business intelligence, 704 Business process analysis, 706 Business process reengineering (BPR), 241n1 Business-to-business (B2B), 7, 246f, 248t Business-to-consumer (B2C), 246f, 248t CAD See Computer-aided design CAD/CAM, 168, 231, 231f, 246f, 247t CAE See Computer-aided engineering Calling population, 200–201, 201f, 209f, 210 CAM See Computer-aided manufacturing Campbell’s Soup Company, 166, 452 Canada Awards for Excellence, 92t, 93 Capable-to-promise, 628 Capacity, 229, 258, 260f, 696, 738 services and, 630–631 Capacity adjustment strategies, 612–614, 612f Capacity cushion, 259 Capacity lag strategy, 258, 259f Capacity lead strategy, 258, 259f Capacity planning, 258–260, 259f, 260f, 627f, 628, 700 Capacity requirements plan, 627f, 628 Capacity requirements planning (CRP), 695, 696f, 756 calculating capacity for, 696–697 load leveling in, 699–700, 699f load profiles for, 696, 697–698, 698f overloads in, 698–699 Capital budgeting, 245 Capital investment, 245, 282, 599 Capital One Financial Corporation, 326 CAPP See Computer aided process planning Carbon footprints, 171–172 Carrying costs, 558, 571–573, 571f constant carrying cost, 571–573, 571f Catalogue-order companies, 111 Cause-and-effect diagrams, 63f, 64–65, 64f, 65f Cause-and-effect (C&E) matrix, 65, 65f, 81f CBP See Constraint-based programming c-Charts, 113–114, 117–118, 118f CE See European Conformity (CE) mark C&E See Cause-and-effect (C&E) matrix Cells, 278, 282 Cellular layouts, 180, 278–279, 278f, 279f, 280f, 281f advantages of, 280–281 disadvantages of, 281–282 for lean production, 724–726, 725f Center for Health Design, 267 Center-of-gravity technique, 304, 304f with Excel, 305, 305f with OM Tools, 306, 306f CFI Group, 69 Champion, 79 Changeover time (C/O), 747, 747f Channel Tunnel Rail Link (United Kingdom), 78 Chase demand, 612, 612f, 617, 618f Chase supply, 612 Checksheets, 63f, 65, 235 China, 10, 11f, 12, 12f, 332f, 370, 373, 467, 472, 615 global supply chain and, 468–470 project management and, 374–375 skills in, 331–332 CIGNA Dental, 78 CIM See Computer-integrated manufacturing Cisco Systems, 170, 332, 430 Citibank, 78, 194, 745 Clicker shock, 465 Clorox, 430, 430f Cloud computing, 709 CNC See Computer numerically control C/O See Changeover time Coca-Cola, 433 Coca-Cola Foundation, 373 Coefficient of determination, 529 Coefficient of optimism, 36 Coefficient of pessimism, 36 Coinstar, 193 Collaborative logistics, distribution and, 459–460 Collaborative planning, 628 Collaborative planning, forecasting, replenishment, and design (CPFT), 437–438, 438t, 516 Collaborative product design (CPD), 168–169 Column reductions, 758 Commercial Aviation Partnership, U.S., 533 Communication, 160, 378, 392 Community location factors, 299–300 Competitiveness, 18–19, 175f, 176 New Balance Corporation, 12–13 productivity and, 14–17 Completion time, 762 Complex products, MRP and, 681–682 Computer-aided design (CAD), 167, 168f, 246f, 247t CAD/CAM, 168, 231, 231f, 246f, 247t Computer-aided engineering (CAE), 167, 168, 246f, 247t Computer-aided manufacturing (CAM), 168 CAD/CAM, 168, 231, 231f, 246f, 247t Computer aided process planning (CAPP), 246f, 247t Computer-integrated manufacturing (CIM), 246, 246f, 248t Computerized layout solutions, 272 Computerized line balancing, 279 Computerized mathematical simulation, 590 Computerized Optimization and Simulation Modeling for Operating Supermarkets (COSMOS), 274 Computerized Relative Allocation of Facilities Technique (CRAFT), 272, 278 Computer Method for Sequencing Operations for Assembly Lines (COMSOAL), 278 Computer numerically control (CNC), 246f, 247t COMSOAL See Computer Method for Sequencing Operations for Assembly Lines Concurrent design, 161 Conformance, 56, 83, 87, 97 quality of, 58, 179 Conmed, 735 Connectivity/integration/services, 708–709 Consistency, 6, 56, 180 Constancy of purpose, 743 Constant carrying cost, 571–573, 571f Constant service times, 209f, 210 Constraint-based programming (CBP), 772–773, 773f Constraints, in linear programming, 647 Consumer Price Index (CPI), 436 Consumer Product Safety Commission, 472 Consumer Reports, 743 Consumer’s risk, 149–150 Containers, 461f, 462, 463f, 466f Continuous inventory systems, 559, 560f Continuous production, 230–231, 230f, 231f, 232f, 232t Continuous replenishment, 452, 498 799 Continuous replenishment programs (CRP), 556 Control, 235, 281, 368f, 757 See also Inventory control systems; Process control; Project control; Statistical process control DMAIC, 78–80, 81f, 82 forecast accuracy and, 520–523, 521f, 522f I/O control, 627f, 628, 769–771, 771f visual control, 735, 736f Control charts, 67, 110f, 126 for attributes, 113–118 c-Charts, 113–114, 117–118, 118f control limits and, 112 development of, 113 normal distribution, 113f patterns of, 124–125, 124f, 125f p-charts, 113–117, 115f, 125 process control chart, 112f sample points in, 112–113, 112f Control limits, 112 Convenience, 56 Conveyors, 246f, 247t, 265 Coors, 77 COPQ See Cost of poor quality Coral Springs, Florida, 73, 320 Core competencies, 18, 452 CORELAP, 272 Core rigidities, 18 Corning, 230, 743 Corporate services, 453f Correlation, 529 COSMOS See Computerized Optimization and Simulation Modeling for Operating Supermarkets Cost(s), 19, 88–89, 172, 282, 298, 472 appraisal costs, 84, 85f, 86f carrying costs, 558, 571–573, 571f crash cost, 401–402, 401f, 402f, 403f fixed, 230 inventory management and, 554, 557–559 landed cost, 465 normal activity cost, 401–402, 401f opportunity cost matrix, 758–759 outsourcing and, 228–229 production workers hourly compensation, 10, 10f of quality, 83–87, 85f, 86f, 87f sustainability and, 324, 372–373, 428–430 technology and, 245–246 telecommuting and, 325 time v., 377, 403–404, 404f variable, 230 waiting line analysis and, 204–205, 204f Cost control, 368f Cost index, 85 Cost management, in project control, 377 Cost of poor quality (COPQ), 84–85 Courtesy, 56 Courtyard Marriott, 195 Cp See Process capability ratio CPD See Collaborative product design CPFT See Collaborative planning, forecasting, replenishment, and design CPI See Consumer Price Index Cpk See Process capability index CPM See Critical path method CPM/PERT, 368f activity scheduling and, 383–386, 383f, 384f, 385f activity slack and, 386–387, 387t AOA network and, 380–381, 380f, 381f critical path and, 381f, 382–383, 383f development of, 379–380 E1BINDEX.qxd 8/5/10 800 10:01 AM Page 800 Index CPM/PERT, (Continued ) Gantt chart v., 379–380 OM Tools and, 393–395, 393f, 394f in project management, 379–388, 379f, 380f, 381f, 383f, 384f, 385f, 386f, 387t, 388f project network and, 380, 380f CR See Smallest critical ratio Cradle-to cradle design, 173 CRAFT See Computerized Relative Allocation of Facilities Technique Craft production, Crash cost, 401–402, 401f, 402f, 403f Crashing, 400 See also Project crashing Crash time, 401–403, 401f, 402f, 403f Creativity, 160 Critical path, 381f, 382–383, 383f Critical path method (CPM), 379 See also CPM/PERT CRM See Customer relationship management Crosby, Philip, 60t, 82, 87 Cross-cultural project teams, 370, 374 Cross-docking, 458f, 459 Cross-enterprise teams, 451 Cross training, 321–322 CRP See Capacity requirements planning; Continuous replenishment programs C/T See Cycle time Culture cross-cultural project teams, 370, 374 global diversity and, 331–332, 373–375 Cumulative error, 519–520 Cumulative lead time, 683 Currency Doubleday, 18 Customer complaint costs, 84 Customer contact, services v., 192, 196f, 196t Customer relationship management (CRM), 246f, 248t, 706t, 708f Customers, 56, 421 CUSTPR, 761 employees v., 317 requirements of, 175–179, 175f, 176f, 177f, 178f, 179f VoC, 69, 70, 79 Customer satisfaction, 68–70, 68f Customer service levels, 556, 630 Custom house brokers, 466f Customs and Border Protection, U.S., 472–473 CUSTPR See Highest customer priority CVS, 434 Cycle, 353, 354f, 500, 500f See also Product lifecycle management order cycle, 564–567, 564f, 565f Cycle time (C/T), 274–275, 747, 747f, 748f Dana Corporation, 72 Danaher Motion, 742 Dannon, 77 Days of supply, 440 DBR See Drum-buffer-rope DCs See Distribution centers DDATE See Earliest due date Deal values, 655–656, 656f Decision analysis, 33 with Excel, 36–37, 37f, 38f with OM Tools, 37–38, 37f payoff tables for, 34–36, 34f with probabilities, 38–39 without probabilities, 34–36, 34t sequential decision trees in, 39–41, 40f, 41f Decision making, 34 with simulation, 596–597, 597f, 598f Decision support systems (DSS), 246f, 248t Decision variables, 646–647 Deck, Margie, 772 Deere & Co., 774 Defective parts per million (PPM), 130, 148 Defects, 76, 87, 111, 722f, 772 acceptance sampling and, 148–149 LTPD, 149–150 Defects per million opportunities (DPMO), 76, 77f, 148 Define, in breakthrough strategy, 79 Define, measure, analyze, improve, control (DMAIC), 78–80, 81f, 82 Delivery, 6, 192, 452, 707, 740 Delivery specifications, 194f, 195 Dell, 10, 18, 440, 459, 503, 561 Delphi method, of forecasting, 501, 523 Demand, 452, 592, 592f, 592t, 594, 613 See also Aggregate planning (services) chase demand, 612, 612f countercyclical patterns for, 614 dependent demand, 557, 558f, 680–681, 682f discrete demand, 681, 682f inventory management and, 557, 558f probability distribution of, 591t shifting, 614 variable demand, 575–576, 576f, 578 Demand behavior, in forecasting, 500–501, 500f Demand management strategies, 614–615, 615f Deming, W Edwards, 59–62, 60f, 60t, 61f, 61t, 67, 81f, 109, 316, 321, 323, 743 Deming Medal, 92t Deming Prize, 93, 93t Deming Wheel, 60–61, 61f, 71 Denmark, 10, 10f, 16f Department of Commerce, U.S., 554 Department of Defense, U.S., 97 Department of Homeland Security, 70 Department of the Navy, U.S., 97 Dependent demand, 557, 558f, 681–682, 682f Designated target value, 127 Design characteristics, 176, 176f Design for environment (DFE), 172 Design for manufacture (DFM), 167 Design for Six Sigma (DFSS), 80, 181 Design of Experiments (DOE), 81f Design process, 56, 84, 161–165, 169, 173, 261–262, 266–267 See also Computer-aided design; Environment design; Facility design; Process layouts design; Product design; Production design; Service design CPFT, 437–438, 438t feasibility study in, 158f, 159–160 idea generation in, 157–159, 158f, 159f job design, 332–333, 333t process capability and, 129f in product design, 157–160, 158f, 159f robust design, 179–181, 180f Design quality reviews, 169–170, 169t, 170t Design specifications, 194f, 195 Design technology, 167, 168 design quality reviews in, 169–170, 169t, 170t Desired cycle time, 275 DFE See Design for environment DFM See Design for manufacture DFSS See Design for Six Sigma D&H Manufacturing, 615 Direct-response delivery, 452 Disaggregation, 628 Discrete demand, 681, 682f Discriminating, 150 See also Diversity Diseconomies of scale, 259, 260f Disney, 18, 75 Disney Store, 273 Disney World, 74, 159, 611, 611f waiting at, 205–206, 205f Dispatch list, 757 Distinctive competence, 18 Distinguished Service Medal, 92t Distribution, 113f, 272 Amazon, 455, 456f beta distribution, 389, 390f collaborative logistics and, 459–460 DCs/warehouses and, 457 distribution outsourcing and, 460 normal distribution, 393, 394f Poisson distribution, 201–202, 209, 212 postponement and, 457–458 speed/quality in, 455 VMI and, 459 WMS and, 458–459, 458f Distribution centers (DCs), 457 Diversity, 328–331 Diversity issues, 373–375 Division of labor, DMAIC See Define, measure, analyze, improve, control DOE See Design of Experiments Domino’s, 744 Double-sampling plans, 153 Dow Chemical, 238, 238f, 704 DPMO See Defects per million opportunities Drum-buffer-rope (DBR), 775 DSS See Decision support systems Dummy, 381–382, 381f DuPont, 97 Durability, 56 Duties, 464–465 Duty specialists, 466f DynMcDermott Petroleum Operations, 320 E I du Pont de Nemours & Company, Inc., 379 EAI See Enterprise application integration Earliest due date (DDATE), 761–764, 767 Earliest finish time (EF), 383f, 384–385 Earliest start time (ES), 383–385, 383f Earned value analysis (EVA), 378 eBay, 18, 194–195 e-Business, 431–432, 431f EC See European Community Eco-labeling, 171, 171f eCompany, 706 Economic analysis, in idea generation, 159–160 Economic order quantity (EOQ), 692–693 Economic order quantity (EOQ) model(s) basic EOQ model as, 564–567, 564f, 565t with Excel, 569, 570f with OM Tools, 570, 570f production quantity model as, 567–569, 567f Economics, 5, 170, 190, 190f, 191f Economies of scale, 259–260, 260f Edens & Avant, 302 EDI See Electronic data interchange EF See Earliest finish time Effective capacity, 696 Efficiency, 282, 696 workstations and, 274–278 EFT See Electronic funds transfer EI See Employee-involvement (EI) programs Electronic business, 431–432, 431f Electronic data interchange (EDI), 246f, 248t, 432, 709 Electronic funds transfer (EFT), 22 Elemental standard time files, 354 eM See e-Manufacturing E1BINDEX.qxd 8/5/10 10:01 AM Page 801 Index e-Manufacturing (eM), 246, 246f, 247t, 248t e-Marketplaces, 454 Employees compensation of, 327–328 customers v., 317 Kaizen and, 71–72 motivation of, 319–321, 319f multifunctional employees, 723–724, 724f for problem-solving, 71–72 quality and, 70–73 of Ritz-Carlton, 75, 76f satisfaction of, 70–71, 73, 320–321 scheduling for, 777–779, 778f temporary/part-time employees, 325–327 Employee-involvement (EI) programs, 71 Empowerment, 323 Enterprise application integration (EAI), 708 Enterprise project management, 379 Enterprise resource planning (ERP), 246f, 248t, 272, 438, 498, 700–701, 708f business process analysis and, 706 ERP modules, 702 finance/accounting and, 702 human resources and, 703–704, 703f, 704f implementation of, 704–707, 705f, 706t production/materials management and, 703, 703f, 704f sales/marketing and, 703, 703f Environment, 172, 746 product design for, 170–181, 171f, 172f, 173f, 175f, 176f, 177f, 178f, 179f, 180f Environmental analysis, 333t, 334, 599–600 Environmental Defense Fund, 373 Environmental producer responsibility (EPR), 172 Environmental Protection Agency, U.S (EPA), 476 Environment design, 170, 261–262 EPR in, 171–172, 171f green consumption in, 173 green manufacture in, 172–173, 172f QFD in, 173–179, 174f, 175f, 176f, 177f, 178f, 179f EOQ See Economic order quantity (EOQ) EPA See Environmental Protection Agency, U.S EPR See Environmental producer responsibility e-Procurement, 246f, 247t, 453 e-marketplaces for, 454 reverse auctions for, 454–455 Equal likelihood (La Place) criterion, 36 Equal opportunity, 329 Ergonomics, 334 ERP See Enterprise resource planning ERP implementation business process analysis and, 706 delivery/access finalization in, 707 external partner link in, 707 modules choice in, 706 sophistication level in, 706–707 Erratic orders, MRP and, 682 ES See Earliest start time; Expert systems EU See European Union European Community (EC), 95, 97 European Conformity (CE) mark, 97 European Quality Awards, 92t, 93 European Union (EU), 9, 97 EVA See Earned value analysis Evans, J R., 129 EVPI See Expected value of perfect information e-Waste, 170–171 Excel for aggregate planning quantitative techniques, 617f, 618f, 620f, 621f, 622f, 626t, 627f assignment method with, 760f, 761 basic single-server model with, 209, 209f, 210f center-of-gravity technique with, 305, 305f decision analysis with, 36–37, 37f, 38f EOQ models with, 569, 570f flowcharts with, 237f, 239 I/O control with, 771f Johnson’s rule with, 766f learning curves and, 341, 342f linear programming with, 654, 654f, 655f load-distance technique with, 307, 307f location factor rating with, 303, 303f multiple regression with, 530–533, 530f, 531f, 532f, 533f for multiple-server model, 213f, 214 multiple-server model with, 213f, 214 observation sheet in, 353f periodic inventory system order quantity with, 578, 579f process capability with, 132, 132f process flowcharts in, 239 process layouts with, 270f productivity with, 15f quantity discounts with, 573, 573f regression analysis with, 529–530, 529f, 530f reorder point with, 576, 577f for sensitivity range, 656, 656f sequencing rules with, 764f simulation with, 594–598, 595f, 596f, 597f, 598f SPC with, 126–127, 127f, 128f time series forecasting with, 524–526, 524f, 525f, 526f transportation model and, 477–480, 478f, 479f transshipment model and, 481–482, 481f, 482f Expected value, 38f, 592 Expected value of perfect information (EVPI), 38–39 Expedite, 695, 695t Expertise, outsourcing and, 229 Expert systems (ES), 246f, 248t Explosion, 691 Exponential smoothing, as time series method, 507–510, 507f, 509f, 520t Export management companies, 466f Export packers, 466f Export trading companies, 466f EXTEND, 272 Extended producer responsibility, in environment design, 171–172, 171f Extensible markup language (XML), 246f, 248t, 709 External failure costs, 84–85, 86f External setup, 731–732 Extranet, 246f, 248t Extreme points, 650 Facilities, 261–262 cost of, 298 CRAFT, 272, 278 types of, 297–298 Facilities location, 298 analysis techniques for, 302–308, 304f center-of-gravity technique and, 304–306, 304f GIS and, 301–302, 301f global supply chain and, 299–302, 301f incentives and, 300–301 load-distance technique for, 306–308, 307f, 308f in U.S., 299–300 Facility design green facility design, 261–262 for process layouts, 267–272, 270f, 271f service layouts design in, 273–274, 273f 801 Failure, 164 See also Defects controllable v uncontrollable factors, 179–180 external/internal failure costs, 84–85, 86f robustness v., 179–181, 180f Failure Modes and Effects Analysis (FMEA), 81f, 169, 169t Failure rate, 164 Fairfield Inn, 195 Fare classes, 631, 633t Fast-food restaurants, 111 Fault tree analysis (FTA), 169, 170f FCFS See First-come, first served Feasibility study, in design process, 158f, 159–160 Feasible solution space, 649 Federal Express, 19, 75, 317, 323, 430, 433, 461–462, 461f, 501, 631, 744 Feigenbaum, Armand V., 60t, 83 Fill rate, 440 Final block diagram, 269, 270f Final design, 167 Finance, 4–5, 4f, 245–246 See also Accounting; Cost(s) ERP and, 702 Finite calling population, 209f, 210 Finite scheduling, 772 Firestone, 174 Firm positioning, 19–21, 20f First-come, first served (FCFS), 761–763, 767 Fishbone See Cause-and-effect diagrams Fisher, George, 21 Fitness for use, 56 Why’s, 736–737 Fixed automation, 282 Fixed cost, 230 Fixed-order-quantity system, 559, 560f Fixed-position layouts, 266, 266f Fixed-time-period system, 560 Flexibility, 21, 282–283 Flexible manufacturing systems (FMS), 282, 283f Flexible resources, 723–724, 724f Flexible work schedules, 324 Flextime, 324 Flextronics, 193–194 Flowcharts See Process flowcharts Flow time, 275, 762 FMEA See Failure Modes and Effects Analysis FMS See Flexible manufacturing systems Foodservice, U.S., 373 Ford, 56–57, 57f, 77, 78, 159, 174, 318, 321, 341 Ford, Henry, 7, 8t, 81, 318 Forecast accuracy control and, 520–523, 521f, 522f cumulative error and, 519–520 MAD and, 517–519, 520t Forecast error, 517 Forecasting, See also Regression forecasting methods components of, 499–503, 500f, 502f CPFT, 437–438, 438t, 516 demand behavior in, 500–501, 500f methods of, 501–502, 523 OM Tools and, 526, 526f process of, 502–503, 502f SCM and, 497, 497f supply chain management and, 496–499, 497f time series forecasting as, 524–526, 524f, 525f, 526f Form design, 161 Fortune, 330–331 Fortune 500, 563 Fortune 1000 companies, 329 Forward scheduling, 686, 686f E1BINDEX.qxd 8/5/10 802 10:01 AM Page 802 Index Foxconn, 10 FoxMeyer Drug, 704 France, 374 Free flow layouts, 273, 273f Frito-Lay, 330, 433 Front office, 198f, 199, 199f, 274 FTA See Fault tree analysis Functional design, 163 Functional layouts See Process layouts Gainsharing, as employee compensation, 327–328 Gang process chart, 336–337 Gantt, Henry, 338, 376 Gantt charts, 368f, 765, 765f CPM/PERT v., 379–380 in Microsoft Project, 396f, 397, 398f for monitoring, 768–769, 769f for project scheduling, 376–377, 376f for synchronous manufacturing, 776f The Gap, 298, 457 Gaylord Hotels, 436 GE See Genetic algorithms GE Energy China, 373 General Electric, 73, 77, 80, 169, 170, 278, 422, 429, 523, 737 General linear programming model, 618–619, 620f General Mills, 460 General Motors, 774 General-purpose machines, 723–724 Genetic algorithms (GE), 773–774, 773f Genzyme Corporation, 456 Geographic information systems (GIS), 301–302, 301f German National Quality Award, 93t Ghirardelli’s, 755 Gilbreth, Frank, 337–338 Gilbreth, Lillian, 337–338 GIS See Geographic information systems Global diversity, 331–332, 373–375 Global economy, 190, 190f Globalization, 8t, China and, 10, 11f, 12, 12f India in, 13–14 reverse globalization, 470–472 Global supply chain, 467 China and, 468–470 duties/tariffs/trading groups and, 464–465, 465f facilities location and, 299–302, 301f landed cost and, 465 management obstacles and, 465 reverse globalization and, 470–472 terrorism and, 472–473 U.S and, 468 Global warming, 8t, GM, 323 Goldratt, Eliyahu, 774–775 Goods, 11f services v., 191, 191f, 193 Gradual usage, 567–569, 567f Graphic solution method, for linear programming, 648–652, 649f, 650f, 651f, 652f Green Belts, in Six Sigma, 77f, 78, 80 Green Building Council, U.S., 261 Green consumption, 173 Green facility design, 261–262 Green manufacture, 172–173, 172f Green Revolution, 8t, Green sourcing, 172 “Green” supply chains, 428 QM and, 429–430, 430f Grid layouts, 273, 273f Muther’s grid, 269–270, 270f Grocery stores, 111 Gross domestic product (GDP), 10, 11f industry sector v., 190, 191f Gross requirements, in MRP process, 689, 689t, 690 Group technology (GT), 278, 278f Grupo Salinas, 96 GT See Group technology Guanxi (personal relationships), 374, 469 Guinness brewery, 81, 81f Hampton Inns, 69 Harley-Davidson, 451 Harrah’s Cherokee Casino and Hotel, 631–632, 632f Hawthorne studies, 7, 8t Health-care operations, Heathrow Airport (London), 382 Heavy manufacturing facilities, 297 Heineken USA, 499 Hershey’s, 433, 616 Herzberg, Frederick, 7, 319f, 322–323 Heuristics, in line balancing, 278 Hewlett-Packard, 10, 173, 422, 467, 499–500, 563 Highest customer priority (CUSTPR), 761 High-level process map, 242–243, 242f, 243f Hiring, 322 Hispanic, 330 Hispanics, 328 Histograms, 63f, 65 Holiday Inn, 192 Home Depot, 298, 326, 457 Honda, 69, 321, 452 Honeywell, 77 Hong Kong Award for Industry, 93t Horizontal job enlargement, 323 Hoshins, 22 Hospitals, 62, 64, 78–80, 111, 195, 266–267 Hotel capacity, 260f Hot lists, 768 House of quality, 175, 175f, 176f, 177f, 178f, 179f HSBC Securities, 78 Human resources, 4, 4f, 280 ERP and, 703–704, 703f, 704f QM and, 317–318 services v., 316 technology v., 316 Human resources management alternative workplaces/telecommuting and, 324–326, 325f assembly line and, 318 automation and, 334 Baldrige Awards and, 320–321 changing nature of, 318–321, 319t contemporary trends in, 321–327 diversity and, 328–331 diversity management programs and, 329–31 employee compensation and, 327–328 employee motivation and, 319–321, 319f empowerment and, 323 environmental analysis and, 333t, 334 ergonomics and, 334 flexible work schedules and, 324 global diversity and, 331–332 Japan and, 321 job analysis and, 335–338, 335f, 336f, 337f, 338t job design and, 332–333, 333t job enrichment and, 322–323 learning curves and, 338–342, 339f, 340f, 341f, 342f motion study and, 337–338, 338t scientific management limitations and, 319 task analysis and, 333, 333t teams and, 323 technology and, 334 temporary/part-time employees and, 325–327 worker analysis and, 333–334, 333t worker-machine chart, 336–337, 337f Hurricane Katrina, 399–400 Hurwicz criterion, 36 Hyatt Regency, 329 Hybrid layouts, 283–284, 284f cellular layouts as, 278–282, 278f, 279f, 280f, 281f FMS as, 282, 283f Hyundai Azera, 69 i2 Technologies, 706t, 772 IBM, 13, 278, 325, 430, 469, 701, 709 Idea generation, 157–160, 158f, 159f iGrafx, 238 IIE Award for Excellence in Productivity Improvement, 92t Improvement curve See Learning curves Incentive piece-rate system, 349, 351–352 Incentives, facilities location and, 300–301 Incremental expansion, one-step expansion v., 259f Independent demand, 557, 558f Index, 21, 69, 131–132, 436 Index numbers, 85–87, 86f India, 11f, 13–14, 170, 374 Indonesia, 11f Industrial Revolution, 8t Industry sector, 298, 756 aircraft industry, 338–339, 341f GDP v., 190, 191f Infinite queue, 202 Infinite scheduling, 772 Information, 39, 301–302, 438t Information costs, 84 Information technology, 5, 13, 556 bar codes and, 433 EDI and, 432 electronic business and, 431–432, 431f Internet, 435, 437 RFID, 246f, 248t, 433–434, 434f, 435f, 740, 740n7, 768 as supply chain enabler, 431–437, 431f, 434f, 435f, 436f Infosys, 13, 170 Infrastructure, 300 Innovation, 244t See also Process innovation Input/output, percent change in, 16–17, 16f Input/output (I/O) control, 627f, 628, 769–771, 771f Inspection costs, 84 Insurance companies, SPC and, 111 Intel, 77 Interactive Apparel, 706 Interchangeable parts, 6–7, 8t Intermodal transportation, 461f, 462, 463f Internal failure costs, 84–85, 86f Internal setup, 731–732 International Asia Pacific Award, 92t International freight forwarders, 466f International Organization for Standardization (ISO), 68, 83, 95f, 96, 96f EC and, 95, 97 registrars and, 95, 97 standards of, 94–95 U.S companies and, 95, 97 E1BINDEX.qxd 8/5/10 10:01 AM Page 803 Index International trade logistics (ITL), 465, 467 International trade specialists, 465, 466f Internet, 246f, 248t, 435, 437, 463, 465, 467, 708–709 Internet Revolution, 7, 8t, 19 Intranet, 246f, 248t Inventory, 630, 722f QM and, 556–557 small lots in, 730, 731f supply chain uncertainty and, 424–426, 425f VMI, 459, 556, 561, 563 Inventory control systems, 559, 560f ABC systems, 560–563, 561f periodic inventory systems, 560, 577, 578f Inventory management, 274, 555–556, 599 costs and, 554, 557–559 demand and, 557, 558f Inventory systems, continuous, 559, 560f Inventory turnover (or turns), 439–440 I/O See Input/output (I/O) control Iredell-Statesville Schools, 62, 94 Irregular movements, in demand behavior, 501 Ishikawa, Kaoru, 60t Ishikawa diagram See Cause-and-effect diagrams ISO See International Organization for Standardization Item master file, 687–688, 688t ITL See International trade logistics Ives, Jonathan, 162 J D Power and Associates, 69, 92t J D Power Awards, 92t Japan, 10, 10f, 16f, 59, 109, 321, 374, 615, 722 7-Eleven in, 432–433 U.S v., in lean production, 741–742 Japan Quality Medal, 93t Jenks (Oklahoma) Public School District, 320 Jidoka (workers’ authority to stop production), 737–738, 738f JIT See Just-in-time Job analysis, 335–338, 335f, 336f, 337f, 338t Job design, 332–333, 333t Job rotation, 322 Jobs, 318, 322, 335, 336f See also Employees Job shop production scheduling, 756 Job training, 321–322 Jockeying, in waiting line system, 201 Johnson’s rule, 764–766, 765f Jones, Daniel, 721 Journal of Aeronautical Sciences, 338–339 Jugaad (“invention on the fly”), 170 Juran, Joseph M., 60t, 65, 76 Just-in-time (JIT), 7, 8t, 22, 721, 744, 744f Kaizen, 71–72, 735–737, 737f Kaizen blitzes, 741f, 742 Kanban (card), 726–730, 727f, 728f, 747f Kanban post office, 728f, 729 Kanban racks, 728, 728f Kanban square, 727–728, 728f Kaplan, Robert, 23 K-bills, 685 Keiretsu model, 432–433 Kelley, James E., Jr., 379 Kellogg’s, 577 Kerns, David, 743 Key performance indicators (KPIs), 23–24, 23t, 439–440 K’NEX, 472 Kodak, 21, 159, 330–331 Kohl’s, 273 Korea, 16–17, 16f, 370 KPIs See Key performance indicators Kraft Foods, 77 Kroger, 434 Kyphon, Inc., 322 L L Bean, 56, 57, 58, 58f, 325, 460, 462 Labor, 6, 274, 300, 631 Labor hours, 16, 16f, 656, 657f Labor index, 85 Labor management, 458f, 459 The Lafayette, 379, 379f Landed cost, 465 La Place criterion, 36 Last-come, first-served (LCFS), 761 Latest finish time (LF), 383f, 385–386 Latest start time (LS), 383f, 385–386 Latin America, 374–375 Latina Style, 331 LCFS See Last-come, first-served LDR See Linear decision rule Leadership in Energy and Environment Design (LEED), 261–262 Lead time (LT), 683, 689, 689f, 689t, 700 Lean, in recession, 271–272 Lean banking, 745 Lean health care, 745 Leaning supply chain, 745–746 Lean production, See also Six Sigma benefits of, 740–741 cellular layouts for, 724–726, 725f drawbacks of, 742–743 flexible resources in, 723–724, 724f implementing, 741–743, 741f, 742f in Japan v U.S., 741–742 jidoka in, 737–738, 738f kaizen in, 735–737, 737f kanban in, 726–730, 727f, 728f mixed-model assembly in, 733–734, 734f quick setups in, 730–732, 731f, 732f, 733f small lots in, 730, 731f supplier networks in, 739–740 Toyota and, 721–723, 727f, 729, 731, 738–741, 743, 745 uniform production levels in, 732–735, 734f visual control in, 735, 736f Lean retailing, 745 Lean services, 744–746, 744f, 747f, 748f Lean Six Sigma, 80–82, 81f, 746 Lean systems, 71 Learning curves Excel and, 341, 342f human resources management and, 338–342, 339f, 340f, 341f, 342f OM Tools and, 342, 342f LEED See Leadership in Energy and Environment Design LensCrafters, 19 Level of customer service, 556, 630 Level production, as capacity adjustment strategy, 612, 612f Levi Strauss, 18, 302 Lexus, 69, 94 LF See Latest finish time Li & Fung Trading Company, 3, 469 Light-industry facilities, 298 Lindsay, W M., 129 Line See Waiting line analysis Linear decision rule (LDR), 623 Linear programming, 618–619, 620f, 645, 646t constraints in, 647 decision variables in, 646–647 with Excel, 654, 654f, 655f 803 graphic solution method for, 648–652, 649f, 650f, 651f, 652f model formulation in, 646–648 objective function in, 647 OM application for, 646t Linear programming model solution, 652, 653f, 654f surplus variables for, 653 Linear regression, 527–528, 528f Linear trend line, as time series methods, 512–514, 514f, 520t Line balancing, 279, 283 heuristics in, 278 in product layout design, 274–278 Line of influence, 198, 199f Line of interaction, 198, 199f Line of support, 198, 199f Line of visibility, 198, 198f, 199f LLC See Low level code Load, 696–700, 698f, 699f Load-distance technique with Excel, 307, 307f for facilities location, 306–308, 307f, 308f with OM Tools, 307, 308, 308f Loading, 757 assignment method of, 758–761, 760f nonadjacent loads, 267–268 overloads, 698–699 scheduling and, 757–761, 760f Load leveling, 699–700, 699f, 757 Load percent, 696–697 Load profiles, 696, 697–698, 698f Load summary charts, 267–269 Location, 740 See also Facilities location of services, 300 Location analysis techniques, facilities location and, 302–308, 304f Location factor rating, 302 with Excel, 303, 303f with OM Tools, 303, 303f Location factors, in U.S., 299–300 Lockheed, 379 Logistics, 455 collaborative logistics, 459–460 ITL, 465, 467 for Royal Caribbean, 457–458 simulation application for, 599 UPS Worldwide Logistics, 298, 457 web-based international trade logistics systems, 465, 467 Longest processing time (LPT), 761, 767 Long-range forecast, 500 Loop layouts, 273–274, 273f Lopp, Michael, 162 Lost sales, as capacity adjustment strategy, 614 Lost sales costs, 85 Lot, in acceptance sampling, 148 Lot sizing, 689, 689t, 692–694, 730, 731f Lot tolerance percent defective (LTPD), 149–150 Lower specification limit, 127 Low level code (LLC), 689, 689f LPT See Longest processing time LS See Latest start time LT See Lead time LTPD See Lot tolerance percent defective MAD See Mean absolute deviation Maintainability, in rapid prototyping/concurrent design, 164–165 Maintenance, 738–739, 739f, 739n6 Maintenance, repair and operation (MRO), 453f Makespan, 762, 764 E1BINDEX.qxd 8/5/10 804 10:01 AM Page 804 Index Malcolm, D G., 379 Malcolm Baldrige National Quality Award, 21, 68, 69–73, 77, 87, 93–94, 317 employee satisfaction and, 320–321 human resources management and, 320–321 PDCA and, 62 Management See also specific types of management relevance of, The Management and Control of Quality (Evans and Lindsay), 129 Management coefficients model, 626 Manager, 3, 6, 244 project manager in, 368f, 371 Managing diversity, 329–331 Manufactured products, 56, 89 services v., 73–74 Manufacturing, 263f, 280f, 299 CAD/CAM, 168, 231, 231f, 246f, 247t e-Manufacturing (eM), 246, 246f, 247t, 248t green manufacture, 172–173, 172f simulation application for, 599 Manufacturing cells, 724–726, 725f Manufacturing execution systems (MES), 706t, 773 Manufacturing systems, 599 Manufacturing technology, 246f, 247t, 248t MAPD See Mean absolute percent deviation Marginal values, 655–656, 656f Market, 232t, 728, 728f e-marketplaces, 454 upfront market, 523 Market analysis, in idea generation, 159 Marketing, 4–5, 4f ERP and, 703, 703f Marketing manager, Marriott, 70, 195, 687f Marriott Corporation, 195 Marriott International, Inc., 75 Martin Guitars, 231, 231f Maslow, Abraham, 7, 8t, 319f Mass customization, 21 Mass market, 232t Mass production, 7, 230, 230f, 231, 231f, 232t learning curves and, 339, 340f scheduling in, 756 Mass service, 195, 196f, 197f Master Black Belts, in Six Sigma, 77f, 80 Master production schedule (MPS), 626, 627f, 682–683, 682f, 683t, 684f Master scheduling, 756 Material kanbans, 729 Material requirements planning (MRP), 626, 627f, 680f, 756 See also Capacity requirements planning assemble-to-order and, 682 capacity requirements planning and, 695–700, 696f, 698f, 699f complex products and, 681–682 dependent demand and, 681–682, 682f discrete demand, 681, 682f erratic orders and, 682 item master file in, 687–688, 688t lot sizing and, 692–694 MPS and, 682–683, 682f, 683t, 684f MRP process in, 688–692, 689t, 690f outputs for, 694–695, 694t, 695t overloads in, 698–699 product structure file in, 683–685, 684f, 685t, 686f time-phased bills and, 686, 686f when to use, 680–682, 681f Materials management, ERP and, 703, 703f, 704f Matrix, 368f, 370, 758–759 C&E matrix, 65, 65f, 81f product-process matrix, 229–230, 230f service-process matrix, 195, 196f, 196t SWOT matrix, 19n2 tradeoff matrix, 176, 177f Matrix organization, 370 Matsushita, Maximax criterion, 35 Maximin criterion, 35 Mayo, Elton, 7, 8t Maytag, 745 Mazda, 161 McDonald’s, 19, 73, 75, 111, 159, 192, 193, 207f, 236f, 298, 329, 349f, 498, 614, 631, 744, 777 speed at, 238–239 McGregor, Douglas, 7, 8t, 319f Mean absolute deviation (MAD), 517–519, 520t Mean absolute percent deviation (MAPD), 519, 520t Mean (x–) chart, 119–122, 120f, 121f, 121t, 122f, 128f R-charts with, 123–125 Mean squared error (MSE), 522 Mean time between failures (MTBF), 164 Mean time to repair (MTTR), 164–165 Measure, in breakthrough strategy, 79 Medicare, 78 Memorial Hermann Hospital (Houston), 78 Mercedes, 56–57, 57f Merck, 18 Mercy Health System, 62 MES See Manufacturing execution systems Metamor, 705 Methods time measurement (MTM), 354–355 Mexican Football Federation First Division, 96, 96f Mexico, 468 MFN See Most-favored-nation Micromotion analysis, 337 Microsoft, 77, 701 Microsoft Dynamics, 706t Microsoft Project, 368f, 382, 396, 397f Gantt chart in, 396f, 397, 398f PERT analysis with, 398, 398f, 399f Microsoft Visio, 237f, 238, 747f Minimax regret criterion, 35–36 Minimum slack (SLACK), 761–763, 767 Mission statement, 18 Mixed-model assembly, in lean production, 733–734, 734f Mixed-model assembly lines, 282, 283f model sequencing and, 283–284 U-shaped assembly lines as, 283, 284f Mixed strategies, for aggregate planning quantitative techniques, 619, 621 Mixed strategy, for capacity adjustment, 612 Model formulation See also specific types of models in linear programming, 646–648 Model sequencing, mixed-model assembly lines and, 283–284 “Model to Raise Achievement and Close Gaps” (RACG), 62 Modular bills of material, 685, 686f Modular design, 166 Monarcas Morelia, 96, 96f Monitoring, 757 Gantt charts for, 768–769, 769f I/O control and, 769–771, 771f scheduling and, 768–772, 769f, 771f Monsanto, 701 Monte Carlo technique, 590–592, 591t, 592f, 592t, 593t, 594, 594t Most-favored-nation (MFN), 464 Most likely time, 389, 391 Motion study, 337–338, 338t Motivation, 319–320, 319f Motorola, 7, 69, 73, 76–77, 80, 82, 111, 130, 230, 317, 321, 323 Movement, 722f in demand behavior, 501 Move time, 730 Moving average, as time series method, 503–506, 505f MPS See Master production schedule MRO See Maintenance, repair and operation MRP See Material requirements planning MRP action report, 695, 695t MSE See Mean squared error MTBF See Mean time between failures MTM See Methods time measurement MTTR See Mean time to repair Muda (waste), 722–723, 722f, 723f Multicollinearity, 532–533 Multifactor productivity, 14, 14f Multifunctional employees, 723–724, 724f Multiple regression, with Excel, 530–533, 530f, 531f, 532f, 533f Multiple-sampling plans, for acceptance sampling, 153 Multiple-server model with Excel, 213f, 214 waiting line analysis and, 210–214, 211f, 213f Multistage process, 89–90 Muther’s grid, 269–270, 270f Nabisco, 117f, 440, 460 NAFTA See North American Free Trade Agreement NASA, 77, 92t, 341 National Bicycle Industrial Company, 21 National Health Service, 116 National Institute of Standards and Technology, 92t National Museum of American History, 369, 388 National Park Service, 702 National Quality Institute, 92t National Quality Research Center, 21 Nation groups, 464, 465f Navy, U.S., 379, 379f Navy Special Projects Office, 379 NBC Universal, 523 Near shoring, 746 near-shore suppliers, 470–471, 471f Near-sourcing, 14 Nebraska Medical Center, 78 Net requirements, 689, 689t, 690 Netting, 688, 689t New Balance Corporation, 12–13 New Orleans Restoration Project, 399–400, 400f Nike, 704 reuse and, 173–174, 174f 9/11, 378, 378f, 472–473, 533 Nintendo, 10 Nissan, 321, 742 Nokia, 170 Nokia Siemens Networks, 373 Nominal value, 127 Nonadjacent, 267–269 Nonadjacent loads, 267–268 Nonconformance, 83, 87 Non-instantaneous receipt model, 567–569, 567f E1BINDEX.qxd 8/5/10 10:01 AM Page 805 Index Normal activity cost, 401–402, 401f Normal distribution, 113f of project time, 393, 394f Normal time, 350 North American Free Trade Agreement (NAFTA), 464, 468 North Carolina Baptist Hospital, 78 North Shore University Hospital, 64, 79–80 Norton, David, 23 Norway, 10, 10f, 16f Notified bodies, 97 Objective function, in linear programming, 647 Objectives, 22, 23t, 261–262, 757 OBS See Organizational breakdown structure Observation sheet, for time studies, 352f, 353, 353f OC See Operating characteristic (OC) curve OECD See Organization for Economic Cooperation and Development OEM See Original equipment manufacturer Ohio, 299 Ohno, Taiichi, 721, 723–724, 726, 737–738 Olympic Stadium (London), 386, 386f OM application, for linear programming, 646t OM Tools acceptance sampling with, 151 center-of-gravity technique with, 306, 306f CPM/PERT and, 393–395, 393f, 394f decision analysis with, 37–38, 37f EOQ models with, 570, 570f forecasting and, 526, 526f learning curves and, 342, 342f load-distance technique with, 307, 308, 308f location factor rating with, 303, 303f probabilistic network analysis and, 393–395, 394f process capability with, 132, 133f SPC with, 126–127, 127f, 128f time study number of cycles with, 354f transportation model and, 480, 480f work sampling and, 358f On-demand (direct-response) delivery, 452 One-step expansion, incremental expansion v., 259f Open-Access system, in scheduling, 767–768 Operating characteristic (OC) curve, 150–151, 150f Operating costs, of technology, 245 Operating requirements, in QFD, 179, 179f Operations, 2, 2f, 4f, SCOR, 442–443, 442f, 443t Operations management, 599 evolution of, 6–9 function of, 2–6 historical events in, 8t manager responsibility in, Operations Research, 8t Operations sheets, 235, 236f Operations strategy See also Sales and operations planning core competencies in, 18 definition of, 17 firm positioning in, 19–21, 20f order winners/order qualifiers in, 18–19, 19f primary task in, 17–18 strategy deployment in, 21–25, 22f, 23t, 24f, 25f Operator costs, 84 Opportunity cost matrix, 758–759 Opryland Resort, 436 Optimal solution, 650 Optimistic time, 389, 391 coefficient of optimism, 36 Oracle, 170, 705, 706t Order cycle, 564–567, 564f, 565f See also specific types of orders Order fulfillment, 455, 456f Ordering costs, 558 Order qualifiers/winners, 18–19, 19f Organizational breakdown structure (OBS), 372, 373f Organizational structure, 5f Organization for Economic Cooperation and Development (OECD), 14 Original equipment manufacturer (OEM), 453f Outputs, 16–17, 16f for MRP, 694–695, 694t, 695t Outsourcing, 7, 8t, 13–14 cost and, 228–229 distribution outsourcing, 460 process planning and, 228–229 procurement and, 452, 453f Overbooking, 631, 633t Overflow frequency, 768 Overloads, 698–699 Overproduction, 722f Overtime/undertime, as capacity adjustment strategy, 613 Owens Corning, 701 Pabst Brewing Company, 21 PAC See Production activity control Package carriers, 461–462, 461f Palm, 440 Palm Inc., 454 Pareto, Vilfredo, 65 Pareto analysis, 63f, 65–66, 66f Park Place Lexus, 94 Participative problem solving, 71 Partnering, 69 Parts deployment, 178–179, 179f Part-time employees as capacity adjustment strategy, 613–614 human resources management and, 325–327 Patagonia, 173 Patient scheduling, 767–768 Pattern test, in control charts, 125 Payoff, 34 Payoff tables, 34–36, 34f Pay types, of employee compensation, 327 p-Charts, 113–117, 115f, 125 PDCA See Plan-do-check-act PDM See Product data management Peak demand, as capacity adjustment strategy, 613 Pella Corporation, 745 Pentagon, project management at, 378, 378f PeopleSoft, 325 PepsiCo, 330 Perceptions, of manufactured products, 56 Perceptual maps, 159, 159f Performance, 262 See also Supply chain performance measurement judging, 350 KPIs, 23–24, 23t, 439–440 in manufactured products, 56 of time studies, 351 Performance management, in project control, 377–378 Performance requirements of a task, 333 Performance specifications, 194f, 195 Periodic inventory systems, 560, 577, 578f Periodic inventory system order quantity, 577 with Excel, 578, 579f with variable demand, 578 805 Periodic order quantity (POQ), 692–694 Periodic review system, 560 Perpetual system, 559, 560f PERT See Program evaluation and review technique PERT analysis, 398, 398f, 399f Pessimistic time, 389, 391 coefficient of pessimism, 36 PFA See Production flow analysis Pfizer, 440 Phantom bills, 685 Philips Electronics, 427 Philips Optical Storage, 427 Philips Semiconductors, 427 Piecemeal analysis, of technology, 246 Piece-wage system, 318 incentive piece-rate system, 349, 351–352 Pipelines, for transportation, 461f, 462–463 Pixar, 159, 160 Pizza Hut, Plan-do-check-act (PDCA), 60–61, 61f, 76 Baldrige Awards and, 62 Plank, Kevin, 704–705, 705f Planned order receipts, 689, 689t Planned order releases, 689, 689t, 692 Planned order report, 692, 694, 694t Planning See also specific types of planning available-to-promise, 628–629, 630f collaborative planning, 628 hierarchical nature of, 626, 627f, 628–629, 630f PLM See Product lifecycle management Point of indifference, 234, 235f Point-of-sale data, 433 Poisson distribution, 201–202, 209, 212 Poke-yoke (visual quality control), 735, 736f Polaris Missile Project, 379 Policy deployment action plan in, 22f in strategy deployment, 21–23, 22f POQ See Periodic order quantity Positioning strategy, 20, 20f cost in, 19 flexibility in, 21 quality in, 21 speed in, 19, 22 SWOT matrix in, 19n2 Postal Service, U.S., 205, 455, 456f, 461 Postponement, distribution and, 457–458 Poudre Valley Health System (PVHS), 70, 320 Power sources, 262 PPI See Product Price Indices PPM See Defective parts per million Precedence diagram, 274, 276–277 Precedence relationship, 376–377, 376f Precedence requirements, 274 Predetermined motion times, 354–355, 355t Predictive maintenance, 739n6 Premium seats, 633t President’s Quality Award, 92t, 93 Prevention costs, 84, 85f Preventive maintenance, 738 Price-downgrading costs, 84 Primary task, in operations strategy, 17–18 Principles of motion study, 337–338, 338t Probabilistic activity times, 389–392, 390f, 392f Probabilistic analysis, of project network, 394–395 Probabilistic network analysis, CPM/PERT analysis/OM Tools and, 393–395, 394f Probabilities decision analysis with, 38–39 decision analysis without, 34–36, 34t Probability distribution, of demand, 591t E1BINDEX.qxd 8/5/10 806 10:01 AM Page 806 Index Problem solving DMAIC for, 78–80 employees for, 72 Process(es) definition of, 228 of forecasting, 502–503, 502f function to, 242f types of, 232t Process analysis, 235, 706 Process capability, 128–129 design specifications and, 129f with Excel/OM Tools, 132, 132f measures of, 130–132 6-sigma quality in, 129f, 130 Process capability index (Cpk), 131–132 Process capability ratio (Cp), 130–132 Process control, 67, 246f, 248t, 441–442 See also Statistical process control Process costs, 84 Process downtime costs, 84 Process failure costs, 84 Process flowcharts, 235–236, 238f, 239f, 241f definition of, 335 with Excel, 237f, 239 for jobs, 335, 336f process map v., 238, 240f as quality tool, 63f, 64 swimlane chart, 238, 240f symbols for, 335f Process improvement teams, 72–73 Process industries, 756 Processing, 722f Processing time, 730–763, 767 Process innovation definition of, 241, 241n1 steps in, 241–244, 241f, 242f, 242n2, 243f, 243t, 244t Process layouts in basic layouts, 262–264, 263f, 264f, 265t with Excel, 270f Process layouts design block diagram in, 267–269 relationship diagramming in, 269–272, 270f, 271f Process manager, 244 Process map, 238, 240f high-level process map, 242–243, 242f, 243f Process planning, 246f, 247t See also Process flowcharts definition of, 228 outsourcing and, 228–229 process analysis in, 235 process plans in, 235 process selection in, 229–235, 229f, 230f, 231f, 232f, 232t in QFD, 179, 179f Process plans, in production design, 167 Process selection with breakeven analysis, 230–236, 231f, 232f, 232t in process planning, 229–235, 229f, 230f, 231f, 232f, 232t Process strategy, 228 Process technology, 246f, 247t Procter & Gamble, 170, 430 Procurement, 246f, 247t, 422, 425f, 451, 453–455 outsourcing and, 452, 453f Producer’s risk, 149–150 Product configuration, 246f, 247t Product cost per unit, 89 Product data management (PDM), 246f, 247t Product design See also Design technology design process in, 157–160, 158f, 159f for environment, 170–181, 171f, 172f, 173f, 175f, 176f, 177f, 178f, 179f, 180f rapid prototyping/concurrent design in, 160–167, 161f, 162f, 163f, 164f, 164n1, 166f for robustness, 179–181, 180f technology in, 167–170, 168f, 169t, 170f Product-design costs, 84 Production See also Aggregate planning quantitative techniques ERP and, 703, 703f, 704f Production activity control (PAC), 757 Production control department, 757 Production design definition of, 165 DFM in, 167 final design/process plans in, 167 modular design in, 166 in rapid prototyping/concurrent design, 165–167, 166f simplification in, 166, 166f standardization in, 166 Production flow analysis (PFA), 278–280, 279f, 280f Production index, 85 Production kanban, 727 Production quantity model, 567–569, 567f Production systems, 599, 721, 743 Production workers, hourly compensation costs for, 10, 10f Productivity, 15f, 92t, 262 calculating, 15 competitiveness and, 14–17 definition of, 14, 87 labor hours and, 16, 16f measures of, 14, 14f product manufacturing cost and, 88–89 QM and, 87–91 quality impact on, 88 yield v., 88 Productivity growth (2008), 16, 16f Product layout design, 274–278 Product layouts, 264–265, 264f, 265f, 265t Product liability costs, 85 Product lifecycle management (PLM), 168, 246f, 247t, 706t, 708, 708f Product manufacturing cost product cost per unit in, 89 productivity and, 88–89 product yield in, 89 Product Price Indices (PPI), 436 Product-process matrix, 229–230, 230f Product return costs, 85 Product structure file, 683–685, 684f, 685t, 686f Product technology, 246f, 247t Professional service, 195, 196f, 197f Profit, 232 sensitivity range for, 656–657, 657f Six Sigma and, 82, 82f, 83f Profit sharing, 328 Program evaluation and review technique (PERT), 379 See also CPM/PERT Prohibited route, 479 Projects, 79, 229, 230f, 231, 231f, 232t, 367 scheduling for, 756 Project control communication in, 378 cost management in, 377 enterprise project management and, 379 in project management, 377–379, 378f QM in, 377 time management in, 377 Project crashing, 400–402, 401f, 402f, 403f time v cost in, 403–404, 404f Projected on hand, 689, 689t, 694t Project management CPM/PERT in, 379–388, 379f, 380f, 381f, 383f, 384f, 385f, 386f, 387t, 388f global/diversity issues in, 373–375 9/11 and, 378, 378f plan elements and, 369 probabilistic activity times in, 389–392, 390f, 392f process of, 368f project control in, 377–379, 378f project crashing in, 400–403, 401f, 402f, 403f project manager in, 368f, 371 project planning in, 367, 368f, 369–373, 372f, 373f project return, 369–370 project team in, 368f, 370, 374 RAM in, 368f, 372, 373f scheduling in, 375–377, 376f scope statement in, 371 SOW in, 371 WBS in, 368f, 371–372, 372f, 378 Project network CPM/PERT and, 380, 380f probabilistic analysis of, 394–395 Project planning, 367, 368f, 369–373, 372f, 373f Project scheduling, 375 Gantt chart for, 376–377, 376f Project team, 368f, 370, 384 PROMODEL, 272 Prototyping/concurrent design, 167 See also Rapid prototyping/concurrent design Psychographics, 192 Psychology, 205–206, 205f Pull system, 726, 744, 744f See also Kanban Purchase cost, of technology, 245 Purchase orders, 694 Purchasing agents, 466f Pure strategies for aggregate planning quantitative techniques, 616–617, 617f, 618f for capacity adjustment, 612 Purodenso Manufacturing, 727f Push system, 726 PVHS See Poudre Valley Health System Pyramid of Human Needs, 319f QAD, 706–707 QFD See Quality function deployment QIT See Quality improvement teams QLF See Quality loss function QM See Quality management QMS See Quality management system QRD See Quality resources department Qualitative classification method, 111 Qualitative forecast methods, 496 Quality, 129f, 130, 368f See also Statistical process control AOQ/AOQL, 152, 152f, 153f AQL, 149–150 ASQ, 21, 55, 69, 92t, 97 China v., 472 of conformance, 179 consistency of, 6, 180 from customer’s perspective, 56 definition of, 55 of design, 56, 179 design quality reviews, 169–170, 169t, 170t E1BINDEX.qxd 8/5/10 10:01 AM Page 807 Index in distribution, 455 employees role and, 70–73 house of, 175, 175f, 176f, 177f, 178f, 179f for manufactured products, 56 meaning of, 59f outsourcing and, 229 poke-yoke and, 735, 736f in positioning strategy, 21 productivity and, 88 quality circles and, 72, 72f, 323 in services, 56–57, 57f, 73–75, 74f, 76f SPC and, 110–111 Toyota and, 743 TQM, 8t, 67–68, 75, 82, 109, 149 Quality awards, 92t, 93t Malcolm Baldrige National Quality Award, 21, 62, 68, 69–73, 77, 87, 93–94, 317, 320–321 Quality circles, 72, 72f, 323 Quality-control checksheets, 235 Quality costs, 83 for good quality, 84 measuring/reporting, 85, 85f, 86f, 87 of poor quality, 84–85 quality-cost relationship, 87 Quality function deployment (QFD), 81f benefits of, 179 competitive assessment in, 175f, 176 customer requirements in, 175–179, 175f, 176f, 177f, 178f, 179f design characteristics in, 176, 176f in environment design, 173–179, 174f, 175f, 176f, 177f, 178f, 179f house of quality in, 175, 175f, 176f, 177f, 178f, 179f operating requirements in, 179, 179f parts deployment in, 178–179, 179f process planning in, 179, 179f target values in, 177–178, 177f tradeoff matrix in, 176, 177f Quality improvement teams (QIT), 72–73 Quality Is Free (Crosby), 82 Quality loss function (QLF), 180–181, 180f Quality management (QM), 67, 75, 110, 377 customer satisfaction and, 68, 68f forecasting and, 498 “green” supply chains and, 429–430, 430f human resources and, 317–318 inventory and, 556–557 inventory management and, 555 productivity and, 87–91 in supply chain, 68–69 Quality management system (QMS), 68–69 See also Six Sigma evolution of, 59–62, 60f, 60t, 61f, 61t Quality of conformance, 58 Quality planning costs, 84 Quality-productivity ratio, 90–91 Quality resources department (QRD), 116 Quality Revolution, 7, 8t Quality tools, 62–63 cause-and-effect diagrams as, 63f, 64–65, 64f, 65f cause-and-effect matrix as, 65, 65f, 81f checksheets/histograms as, 63f, 65 Pareto analysis as, 63f, 65–66, 66f process flowcharts, 63f, 64 scatter diagrams as, 63f, 66 Quality Without Tears (Crosby), 87 Quantitative classification method, 111 Quantitative forecast methods, 496 Quantitative techniques, 199 See also Aggregate planning quantitative techniques Quantity, 560f, 567–569, 567f, 577–578, 579f, 599, 632–634, 633t, 692–694 See also Economic order quantity; Material requirements planning Quantity discounts, 570 with constant carrying cost, 571–573, 571f with Excel, 573, 573f Quasar, Queue, 200, 202, 209f, 210, 210f See also Waiting lines Queue discipline, 202 Queuing theory, 200 Quick setups, 730–732, 731f, 732f, 733f RAB See Registrar Accreditation Board RACG See “Model to Raise Achievement and Close Gaps” Radio frequency identification (RFID), 246f, 248t, 433–434, 434f, 435f, 740, 740n7, 768 Railroads, 460, 461f RAM See Responsibility assignment matrix Ramachandran, Vignesh, 687 Random numbers, 591, 592t, 593t Random variations, 500, 500f Range (R-) chart, 119, 121t, 122–123, 127f, 132f x– charts with, 123–124, 125 Rapid prototyping/concurrent design, 160, 161f, 162, 162f form design in, 161 functional design in, 163 maintainability in, 164–165 production design in, 165–167, 166f reliability in, 163–164, 163f, 164f, 164n1 usability in, 165 Rated capacity, 696 R-chart See Range (R-) chart Recession, 271–272 Recycling/re-use, 171, 173, 261–262 Redback Networks, 707 Redbox, 193–194 Regional location factors, 299–300 Registrar Accreditation Board (RAB), 97 Regression forecasting methods, 501, 526 correlation, 529 linear regression, 527–528, 528f multiple regression with Excel, 530–533, 530f, 531f, 532f, 533f regression analysis with Excel, 529–530, 529f, 530f Regression (causal) forecasting methods, 501 Relationship diagram, 269–272, 270f, 271f Reliability, 56, 229 in rapid prototyping/concurrent design, 163–164, 163f, 164f, 164n1 Remington-Rand, 379 Reorder cards, 559 Reorder point, 573 with Excel, 576, 577f safety stocks and, 574, 574f, 575f service level and, 574–575 with variable demand, 575–576, 576f Replacement analysis, of technology, 245 Request for quotes (RFQ), 168 Rescheduling notices, 694 Research and development (R&D), 159 Resource planning, 679–695, 680f, 681f, 682f, 683t, 684f, 685t, 686f, 687f, 688t, 689t, 690f, 694t, 695t Resource requirements plan, 627f, 628, 700 Responsibility assignment matrix (RAM), 368f, 372, 373f Retail facilities, 298 807 Return on investment (ROI), 369 Revenue, 232 total revenue, 232–233, 234f Revenue enhancement, of technology, 245 Revenue management, 631–634, 632f, 633t Reverse auctions, 454–455 Reverse engineering, in idea generation, 159 Reverse globalization, 470–472 Rework costs, 84 RFID See Radio frequency identification RFQ See Request for quotes Rim requirements, 476–477 Risk, 34, 149–150, 245 Risk analysis/quality control, 368f Risk pooling, 427–428 Ritz-Carlton Hotel Company, 21, 70, 74–75, 74f, 76f, 111f, 117–118, 317, 320, 349f Robots, 246f, 247t Robust design, 179–181, 180f ROI See Return on investment Rolls Royce, 230 Rough-cut capacity plan, 627f, 628, 700 Row reductions, 758 Royal Caribbean, 457–458 Royal Mail (United Kingdom), 78 Royal Shakespeare and Company Theater, 369, 388, 388f Run, in control charts, 125 Russian Federation, 11f Saas, 709 Safety, 56, 472 Safety stocks, 574, 574f, 575f Sales, 85, 614, 703, 703f Sales and operations planning (S&OP), 608–611, 609f, 610f, 611f Sales index, 85 Salinas, Ricardo, 96 Sample, 109 Sample points, 112–113, 112f Sample size determination, 125–126 Sampling plan, 149 Sanders, Nicole, 742 SAP, 438, 705–706, 706t, 709, 772 SAP AG, 701 SAS Airlines, 193 Saudi Arabia, 370 Scatter diagrams, 63f, 66 SCC See Supply Chain Council Scheduled receipts, in MRP process, 689, 689t Scheduling, 6, 324, 368f, 383–386, 383f, 384f, 385f, 626, 627f, 694, 700, 738, 756 advanced planning and, 772–774, 773f backward/forward scheduling, 686, 686f for employees, 777–779, 778f loading and, 757–761, 760f monitoring and, 768–772, 769f, 771f patient scheduling, 767–768 in project management, 375–377, 376f sequencing and, 761–768, 764f, 765f, 766f theory of constraints and, 774–775, 776f, 777 Schlitz Brewing Company, 21 Scientific management, 7, 8t, 318 SCM See Supply chain management Scope, 368f Scope statement, 371 SCOR See Supply Chain Operations Reference (SCOR) model Scrap costs, 84 SDR See Search decision rule Search decision rule (SDR), 623 Sears, 317 E1BINDEX.qxd 8/5/10 808 10:01 AM Page 808 Index Seasonal adjustments, as time series methods, 514–516, 514f, 517f Seasonal factor, 515–516 Seasonal pattern, 500f, 501 Secure freight initiative, 473 Sensitivity analysis, 651, 655 Sensitivity range, 656–657, 656f, 657f Sequencing, 278, 757 model sequencing, 283–284 one serial process and, 762–764, 764f rule selection for, 766–768 scheduling and, 761–768, 764f, 765f, 766f two serial processes and, 764–766, 766f Sequencing rules, 764f, 766–767, 766–768 Sequential decision trees, 39–41, 40f, 41f Service(s), 111, 300, 556, 574–575 See also Lean services aggregate planning for, 630–634, 632f, 633t characteristics of, 191–193, 191f connectivity/integration and, 708–709 customer contact v., 192, 196f, 196t goods v., 191, 191f, 193 human resources v., 316 manufactured products v., 73–74 process layout in, 263f professional service, 195, 196f, 197f psychographics and, 192 quality in, 56–57, 57f, 73–75, 74f, 76f simulation application for, 599 time/timeliness of, 56, 74, 202, 209f, 210 Serviceability, 164–165 Service blueprinting, 198, 198f, 199f Service concept, 194–195, 194f Service defect, 111 Service design, 196 front office/back office in, 198f, 199, 199f process of, 193–195, 193f, 194f quantitative techniques in, 199 service blueprinting in, 198, 198f, 199f service economy and, 190, 190f, 191f service-process matrix in, 195, 196f, 196t, 197, 197f Service facilities, 298 Service factory, 195, 196f, 197f Service improvement, 208–210, 209f, 210f See also Waiting line analysis Service layouts design, 273–274, 273f Service level, 556, 574–575, 630 ServiceMaster, 192 Service operations, 599 Service-oriented architecture (SOA), 709 Service package, 194f, 195 Service-process matrix, 195, 196f, 196t, 197, 197f Service providers, 13–14, 422, 556 Servicescapes, 199 Service shop, 195, 196f, 197f Service times, 202, 209f, 210 SETUP See Similar setup Setup times, 730–732, 731f, 732f, 733f 7-Eleven, 432–433 SFC See Shop floor control Shadow prices, 655–656, 656f Shakespeare, William, 388 Sharp HealthCare (San Diego), 78, 93–94, 320 Shewhart, Walter, 60, 60t Shingo, Shigeo, 731 Shop floor control (SFC), 757 Shop floor scheduling, 626, 627f Shortage costs, 558–559 Shortest processing time (SPT), 761–763 for sequencing rule, 767 Short- to mid-range forecast, 499–500 Shouldice Hospital, 195 Siemens, 469, 706t Sierra Club, 430 Signal kanbans, 728–729, 728f Signal-to-noise ratio, 180 Similar setup (SETUP), 761 Simplex method, for linear programming model solution, 652 Simplification, in production design, 166, 166f Simulation, 274 decision making with, 596–597, 597f, 598f with Excel, 594–598, 595f, 596f, 597f, 598f Monte Carlo technique, 590–592, 591t, 592f, 592t, 593t, 594, 594t sequencing rule and, 766–767 Simulation application, 598–600 Single-factor productivity, 14, 14f Single-minute exchange of dies (SMED), 731–732 Single order quantities, 632–634, 633t Single-sample attribute plan, 149 Six Sigma, 64, 68 Black Belts/Green Belts in, 77f, 80 breakthrough strategy of, 79–80 champion in, 79 definition of, 77 DFSS for, 80 goal of, 76–77, 77f highlights of, 78 improvement projects of, 79 lean and, 746 Lean Six Sigma, 80–82, 81f process of, 78 profit and, 82, 82f, 83f tools of, 81f SLACK See Minimum slack Slack, 376, 391–392 activity slack and, 386–387, 387t minimum slack, 761–763, 767 Slack variables, 653, 653f, 654f SLIM See Store Labor and Inventory Management Smallest critical ratio (CR), 761 Small lots, in lean production, 730, 731f SmartDraw, 238 SMED See Single-minute exchange of dies Smith, Adam, 6, 8t Smoothing constant, 507 See also Adjusted exponential smoothing; Exponential smoothing Snead, John, 701–702 SOA See Service-oriented architecture Society for Human Resource Management, 329 Sony, 10, 77, 430 S&OP See Sales and operations planning Sourcing, 14, 172, 271–272, 452, 469 SOW See Statement of work Space, 608, 649 SPC See Statistical process control Special Operations Command, U.S., 70 Speed, 19, 22, 229 See also Time studies in distribution, 455 at McDonald’s, 238–239 Spine layouts, 273–274, 273f SPT See Shortest processing time Sri Lanka, 10, 10f Standard for exchange of product model data (STEP), 246f, 247t Standardization, 166, 231, 231f See also International Organization for Standardization Standard time, 318, 348–350, 354 Starbucks, 75 Statement of work (SOW), 371 State University of New York at Buffalo, 373 Statistical process control (SPC) basics of, 109–112 with Excel/OM tools, 126–127, 127f, 128f QM and, 110 quality measures and, 110–111 services and, 111 Statistical Process Control (SPC) Chart, 81f Stay on schedule, 368f Steady state, 204, 204t Steady-state result, 594 STEP See Standard for exchange of product model data Stockout, 574 Stopwatch time study, 349–352, 349f, 352f, 353f Store Labor and Inventory Management (SLIM), 274 Store layouts, 273–274, 273f Strategic analysis, in feasibility study, 160 Strategic planning, 17f, 499, 616–617, 617f, 618f, 621 See also specific types of strategies Strategy deployment balanced scorecard in, 23–24, 23t, 24f, 78 in operations strategy, 21–25, 22f, 23t, 24f, 25f policy deployment in, 21–23, 22f Strengths, weaknesses, opportunities, threats (SWOT matrix), 19n2 Subcontracting, 613 Sunny Fresh Foods, 93, 320 Supermarkets (kanban racks), 728, 728f Supplier kanbans, 729 Supplier networks, in lean production, 739–740 Suppliers, 4, 4f near-shore, 470–471, 471f as upstream, 421 Supply chains, 68–69, 421–423, 423f See also specific types of supply chains Supply Chain Council (SCC), 442 Supply chain enabler, information technology as, 431–437, 431f, 434f, 435f, 436f Supply chain integration, 437–438, 438t Supply chain management (SCM), 8–9, 9f, 68–69, 246f, 248t, 423, 424f, 707–708, 708f bullwhip effect and, 426–427, 426f forecasting and, 496–499, 497f inventory management in, 555–556 risk pooling and, 427–428 software for, 438 supply chain uncertainty/inventory, 424–426, 425f Supply Chain Operations Reference (SCOR) model, 442–443, 442f, 443t Supply chain performance measurement KPIs in, 439–440 process control in, 441–442 SCOR and, 442–443, 442f, 443t Supply chain uncertainty, 424–426 Surplus variables, for linear programming model solution, 653 Sustainability See also “Green” supply chains at Apple, 441 costs and, 324, 372–373, 428–430 at Hewlett-Packard, 467 packing materials and, 456 Sustainable competitive advantage, 18 Swimlane chart, 238, 240f Swiss Quality Award, 93t SWOT matrix See Strengths, weaknesses, opportunities, threats Synchronous manufacturing, 774–777, 776f Sysco Corporation, 462 E1BINDEX.qxd 8/5/10 10:01 AM Page 809 Index Taco Bell, 507f Taguchi, Genichi, 179–180, 180f Taiwan, 16f Taiwan Semiconductor, 615 Takeback laws, for recycling/re-use, 171 Takt time, 724–725 Tardiness, 762–763 Target (objectives), 22 Target (store), 18, 298, 434, 457, 462 Target values, 127 in QFD, 177–178, 177f Tariffs, 464–465 Task analysis, 333, 333t Tasks, 318 Tata Consultancy Services, 13 Tata Motor, 170 Taylor, Frederick W., 7, 8t, 81, 318, 337–338, 348–349 Teams, 72–73, 330, 374 project team, 368f, 370, 384 self-directed teams, 323 Technical analysis, in feasible study, 160 Technology, 278, 278f, 334f See also Design technology; Information technology costs and, 245–246 eM, 246, 246f, 247t, 248t GIS, 301–302 human resources management and, 334 human resources v., 316 primer for, 246, 246f, 247t, 248t in product design, 167–170, 168f, 169t, 170f Telecommuting, 324–326, 325f Temporary employees, 325–327 Terrorism, 378, 378f, 472–473, 533 Test equipment costs, 84 Testing costs, 84 Texaco, 77 Texas Instruments, 454 ThedaCare, 745 Theory of constraints (TOC), 774–775, 776f, 777 Third-party service providers (3PL), 556 3M, 97 3PL See Third-party service providers Time, 164–165, 324, 352f, 353f, 560, 613, 686, 686f, 767 cellular layouts and, 180 C/O as, 747, 747f constant service times, 209f, 210 cost v., 377, 403–404, 404f crash time, 401–403, 401f, 402f, 403f C/T as, 274–275, 747, 747f, 748f cumulative lead time, 683 demand behavior and, 500–501, 500f EF as, 383f, 384–385 ES as, 383–385, 383f flow time, 275, 762 JIT, 7, 8t, 22, 721, 744, 744f lead time, 689, 689t, 700 most likely time, 389, 391 normal distribution of, 393, 394f optimistic time, 389, 391 part-time employees, 613–614 pessimistic time, 36, 389, 391 predetermined motion times, 354–355, 355t probabilistic time estimates, 389–392, 390f, 392f service and, 56, 74, 202, 209f, 210 setup times, 730–732, 731f, 732f, 733f shifting demand and, 614 S&OP and, 608 SPT, 761–763 standard time, 348–350 stopwatch time study, 349–352, 349f, 352f, 353f takt time, 724–725 Time-based competition, 19 Time fence, 683 Time frame, in forecasting, 499–500 Time management, in project control, 377 Time measurement units (TMUs), 355, 355t Time-phased bills, 686, 686f Time phasing, 689 Time series forecasting, with Excel, 524–526, 524f, 525f, 526f Time series methods adjusted exponential smoothing as, 510–512, 512f, 520t exponential smoothing as, 507–510, 507f, 509f, 520t linear trend line as, 512–514, 514f, 520t moving average as, 503–506, 505f seasonal adjustments as, 514–516, 514f, 517f weighted moving average as, 506 Time studies, 348 elemental standard time files in, 354 number of cycles in, 353, 354f observation sheet for, 352f, 353, 353f performance of, 351 predetermined motion times in, 354–355, 355t stopwatch time study in, 349–352, 349f, 352f, 353f Titleist, 168f TMS See Transportation management system TMUs See Time measurement units TOC See Theory of constraints Tolerance, 127–128, 149–150, 180, 180f Tolerance stack-ups, 180 Tooker, Gary L., 82 Toshiba, 615 Total factor productivity, 14, 14f Total productive maintenance (TPM), 738–739, 739f Total quality management (TQM), 8t, 67–68, 75, 82, 109, 149 Total revenue, 232–233, 234f Toyoda, Eiji, 722 Toyota, 7, 69, 73, 81, 428, 440, 733–734 Camry, Corolla, Lexus, 166 lean production and, 721–723, 727f, 729, 731, 738–741, 743, 745 quality and, 743 Toyota Production System, 721, 743 TPM See Total productive maintenance TQM See Total quality management Tracking signal, 520–522, 521f Trader Joe’s, 20, 20f Trading groups, 464–465, 465f Training costs, 84, 282 Transportation, 461f, 462–463, 722f Transportation management system (TMS), 458f, 459 Transportation method, for aggregate planning quantitative techniques, 623–626, 623t, 627f Transportation model, 475–476, 477f Excel and, 477–480, 478f, 479f OM Tools and, 480, 480f prohibited route in, 479 Transportation Security Administration, 533 Transshipment model, 480 Excel and, 481–482, 481f, 482f Trend, 500, 500f Triage Consulting Group, 322 Trucking, 460, 461f 809 t-Test, 81f 20th Century Fox, 194 Two-bin system, 726, 727f Tyrone Motors, 734f Tyson Foods, 332 Under Armour, 704–705, 705f Undercapacity scheduling, 738 Undertime, as capacity adjustment strategy, 613 Uniform production levels, in lean production, 732–735, 734f Unisys, 330, 500 United States (U.S.), 70, 205, 261, 320, 373, 379, 379f, 455, 456f, 461 GDP per capita of, 10, 11f global supply chain trends and, 468 hourly compensation costs in, 10, 10f input/output percent change in, 16–17, 16f Japan v., in lean production, 741–742 productivity growth (2008), 16, 16f regional/community location factors in, 299–300 service economy in, 190, 190f, 191f Unit load, 267 Universal product code (UPC), 540f, 559 Universal Studios, 194, 737 UPC See Universal product code Upfront market, 523 Upper specification limit, 127 UPS, 74, 77, 325–327, 433, 455, 456f, 461 diversity at, 330–331 UPS Worldwide Logistics, 298, 457 Urban Outfitters, 271–272, 271f U.S See United States Usability, in rapid prototyping/concurrent design, 165 U-shaped assembly lines, 283, 284f USS George Washington, 379 Utilization, 696 Value-added tax (VAT), 465 Value analysis, 169 Value chains, 2, 422–423 Value engineering, 169 Value stream mapping (VSM), 746–747, 747f, 748f Vanity Fair, 702 Variable cost, 230 Variable demand, 578 reorder point with, 575–576, 576f Variable measures, 111 VAT See Value-added tax Vendor-managed inventory (VMI), 459, 556, 561, 563 Vertical integration, 228 Vertical job enlargement, 322 Virginia Department of Transportation, 392 VISA, 74 VisFactory, 272 Visual control, in lean production, 735, 736f VMI See Vendor-managed inventory VoC See Voice of the customer Vodafone, 324 Voice of the customer (VoC), 69, 70, 79 See also Quality function deployment Volume, 230–231, 231f Volvo, 78, 230 W E Deming’s 14 points, 61, 61t, 316, 321, 323 Waiting, 722f at Disney World, 205–206, 205f Waiting lines, 599 E1BINDEX.qxd 8/5/10 810 10:01 AM Page 810 Index Waiting line analysis cost and, 204–205, 204f elements of, 200–201, 201f, 203f multiple-server model and, 210–214, 211f, 213f operating characteristics in, 200, 204, 204t psychology and, 205–206, 205f steady state in, 204, 204t waiting line models and, 206–207, 207f, 209f, 210f Waiting line system arrival rate in, 201, 201f balking in, 201 basic single-server model in, 203f, 206–208 basic waiting line structures in, 202–203, 203f calling population in, 200–201, 201f channels in, 202–203, 203f finite queue in, 202, 209f, 210, 210f infinite queue in, 202 jockeying in, 201 phases in, 202, 203f Poisson distribution in, 201–202, 209, 212 queue discipline in, 202 queue in, 200 reneging in, 201 service times in, 202 Waiting time, 730 Walker, Morgan R., 379 Walmart, 18, 172, 194, 434, 459, 462, 631, 702, 744 going green at, 428–429 Warehouse management systems (WMS), 458–459, 458f Warehouse optimization, 458f, 459 Warner Brothers, 194 Warranty claims costs, 85 Waste, 170–171, 722–723, 722f, 723f See also Value stream mapping Water, transportation by, 461f, 462, 466f WBS See Work breakdown structure Wealth of Nations (Smith), Web-based international trade logistics systems, 465, 467 Weeks of supply, 440 Wegman’s, 440 Weight center technique, 304–305, 304f Weighted moving average, 506 Whitney, Eli, 6, 8t WIPRO, 13 Withdrawal kanban, 727 WMS See Warehouse management systems Womack, James, 721 Work breakdown structure (WBS), 368f, 371–372, 372f, 378 Work elements, 274 Worker analysis, 333–334, 333t Worker-machine chart, 336–337, 337f Workers See Employees Work measurement, 348 Work methods, 335 Work package, 768 Work sampling, 356–357, 358f Workstations, 274–278 World Trade Organization (WTO), 9, 464, 468, 470 Wright, T P., 338–339, 341 WTO See World Trade Organization X chart See Mean (x–) chart Xerox, 77, 159, 246 recycling/reuse at, 173 XML See Extensible markup language Yard management, 458f, 459 Yield, 88–90 Yield management See Revenue management Zara, 19, 272, 745 Zero defects, 76, 87 Zoran, 615 ... $26 .50 67 18 .20 21 0 9.75 97 31 .25 19 721 31 .25 2 ϭ 3,031 .25 Work-in-process:14 021 16 52 ϭ 6,600.00 16 521 23 02 ϭ 14,950.00 Finished goods: 125 2167 02 ϭ 16,750.00 11 821 105 02 ϭ 18,900.00 13 521 520 2 ϭ 18 ,20 0.00... inventory Raw materials: 113 521 $26 .5 02 ϭ $3,577.50 16 721 18 .20 2 ϭ 1 ,21 9.40 Average aggregate value of inventory 1cost of goods sold2>136 52 85 ,27 5.65 12, 730,00 02/ 136 52 = 11.4 days • Internet Exercises... functions, and activities involved in producing and delivering a product or service from suppliers (and their suppliers) to customers (and their customers) E1C10.qxd 8 /2/ 10 422 12: 50 PM Page 422 Part