PRODUCTION/OPERATIONS MANAGEMENT Concepts and Situations

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1 PRODUCTION/OPERATIONS MANAGEMENT Concepts and Situations Fourth Edition ROGER W. SCHMENNER School of Business Indiana University TECHNISCHE HOCHSCHULE ' DARMSTADT Facbbereich 1 Gesamtbibliothek Betriebswirtschattslehre Inveniof-Nr. : 4AZ4tf& Abstel I -r Jr. :.A2r {A8.Q. Sacficiebiete' MACMILLAN PUBLISHING COMPANY New York COLLIER MACMILLAN PUBLISHERS London

2 CONTENTS Preface Introduction SEGMENT I PLANT AND SERVICE TOURS v 1 Products, Sales, and Order Handling Plant and Personnel The Workings of the Shop 5 Recordkeeping Tour A A CONTINUOUS FLOW PROCESS International Paper Company Androscoggin Mill Jay, Maine A Brief and Simplified Description of Papermaking Maintaining the Environment The Design of the Androscoggin Mill Loading the Factory The Workforce Controlling the Operation. Evaluating Mill Performance The Process Flow Information in the Process Capacity Workers Questions Situations for Study Tour B A JOB SHOP Norcen Industries Jersey Shore, Pennsylvania The Process Flow The Information Flow Capacity in the Job Shop The Role of Standards and Incentives Questions Situations for Study Tour C A BATCH FLOW PROCESS Jos. A. Bank Clothiers Hampstead Manufacturing Operations Hampstead, Maryland The Process Flow The Workforce and the Piece-Rate System Production and Quality Control Loading the Factory Technological Innovation 22 IX The Process and Information Flows Capacity in the Batch Flow Process The Role of Standards and Incentives Workforce and Questions Situations for Study

3 X CONTENTS Tour D A MACHINE-PACED LINE FLOW PROCESS <, General Motors Corporation Chevrolet-Pontiac-Canada Group Tarrytown, New York 89 The Workforce Control and Evaluation of the Operation How a Car Was Assembled: A Simplified Description Loading the Plant Changes in Materials Controlling the Operation" The Workforce and the Personnel Department Supervision The Process Flow The Information Flow Capacity Measures Standards and Incentives Workers Hybrid Processes Questions Situations for Study 145 Information Capacity Capacity Workforce Appendix: Line Balance Line Balance in Practice Questions Problems Situations for Study Reference Notes Tour E A HYBRID (BATCH/ CONTINUOUS FLOW) PROCESS Stroh Brewery Company Winston-Salem, North Carolina The Brewing and Packaging of Beer Loading the Plant Tour F A WORKER-PACED LINE FLOW PROCESS AND A SERVICE FACTORY 151 Burger King Restaurant Route 37 Noblesville, Indiana 152 Restaurant Operations 152 Purchasing and Materials 160 The Workforce 161 Quality Facilities and Technology Information Workforce Questions Situation for Study 167

4 CONTENTS XI Tour G A SERVICE SHOP Ogle-Tucker Buick Auto Service and Repair Indianapolis, Indiana Writing the Service Order Dispatching Shop Operations and the Workforce Quality Control How Workers Were Paid The Duties of the Service N Manager Promotions and Specials Information Workforce Questions Situation for Study Tour H MASS SERVICE Thalhimers-Cloverleaf Mall Store Richmond, Virginia SERVICE Layout and the.workforce The Transaction and Supporting It Managing and Controlling the Inventory Variations on the Standard Receipt of Material Shipping Items Out of the Store Evaluating the Store's Performance Information Workforce Questions Situation for Study Tour I A PROFESSIONAL SERVICE Arthur Andersen Company Accounting and Auditing Services Charlotte, North Carolina Lines of Business Auditing Attest Services Managing the Practice Personnel Policy 1^ Information Workforce The Pyramid Questions Situation for Study Reference Note Chapter 1 A COMPARISON OF PRODUCTION AND SERVICE PROCESSES 205 MANUFACTURING Trends 210 Analyzing the Trends

5 Xll CONTENTS The Process Spectrum The Product-Process Matrix Opportunity Cost SERVICE OPERATIONS Job Design and Quality of Work Life Other Aspects of Workforce Relations Some Comments on Labor Relations Distinguishing Service Operations from Manufacturing Operations Comparison of Services Questions Situation for Study Reference Notes SEGMENT II Chapter 2 IMPROVING EXISTING OPERATIONS BREAKING BOTTLENECKS Analyzing Bottlenecks Inventory Buildup Graphs The Causes of Bottlenecks Plant Layouts and Bottlenecks Variability and Bottlenecks Appendix: Waiting Lines and Bottlenecks The General Anatomy of Waiting Line Problems Routine Wait at Devine Nuts Simulation Models Queuing Theory and Decision Making Questions Problems Situations for Study Reference Notes Chapter 4 PLANNING PRODUCTION Factors in the Design of Production Plans Capacity Planning and the Development of the Master Production Schedule Scheduling Techniques Appendix A: Forecasting Demand Quantitative Techniques Using Time Series Data Appendix B: Basic Concepts of Linear Programming Linear Programming in Practice Duality and the Economic Interpretation of Linear Programming Questions Problems Situations for Study Reference Notes Chapter 5 CONTROLLING THE PROCESS Questions Problems Situations for Study Reference Note Chapter 3 ' MANAGING THE WORKFORCE Methods Improvement Time Study and Time Standards Standards, Incentives, and Wage Payments The Functions of Production Control Dispatching More on Dispatching Monitoring a Production Schedule The Japanese Contribution to Production Control Appendix: Project The Critical Path Concept

6 CONTENTS Xlll An Alternative Program: Evaluation and Review Technique (PERT) Some Principles for Project Managers Questions Problems Chapter 6 MANAGING INVENTORIES Objectives and Philosophies of Inventory THE WORKINGS OF NON-TIME- PHASED INVENTORY SYSTEMS Relevant Costs and Concepts The Periodic Reorder System The Reorder Point System Choosing Between Periodic Reorder and Reorder Point Inventory Systems SAFETY STOCKS Chapter 7 PROCUREMENT AND LOGISTICS 529 PROCUREMENT 529 Purchasing 530 Receiving, Inspection, and Storage 533 The Make-Buy Decision 535 ISSUES IN LOGISTICS 539 Distribution System Structure and Operation 540 Distribution Center Location 545 Transportation Mode Choice 546 PART THREE ORGANIZING THE MATERIALS FUNCTION 546 Questions Problems 548 Chapter 8 MAKING QUALITY HAPPEN 551 Levels of Customer Service The Critical Fractile Approach PART THREE MATERIAL REQUIREMENTS PLANNING A Description of Its Operation "Wrinkles" to Add to the Basic MRP Logic Material Requirements Planning as a Tool The Success of MRP The Cost of MRP.:' Choosing MRP or the Two Non-Time- Phased Inventory Systems Managing the Work in Process Study Case for Study Reference Notes 507 APPRECIATING QUALITY 551 What Quality Means 551 Improving Quality 553 Attitudes Toward Quality 555 TECHNIQUES FOR MAKING QUALITY HAPPEN 558 Is the Product Design Adequate? 558 Is the Process Adequate? 560 Is the Inspection Adequate? 581 Removing Chaos A Recap of Lessons Learned 586 Some Do's and Don'ts in the Deming Manner 586 Study Reference Notes 587

7 XIV CONTENTS Chapter 9 JUST-IN-TIME MANUFACTURING 593 JIT Manufacturing Philosophy 593 Implementing Just-in-Time Manufacturing. 613 Study Reference Notes 619 Recent Developments in Manufacturing Technology 693 Concluding Remarks 698 Appendix: An Example of Managing Innovation 699 Questions Problems Situations for Study Case for Study Reference Notes 705 SEGMENT III Chapter 10 DECIDING FUTURE OPERATIONS DEALING WITH CAPACITY CHANGE An Overview of Capacity Planning Deciding How Much Capacity to Add and When Common Pitfalls in Dealing with Capacity Capacity in a Service Industry On-Site Expansion, Branch Establishment, and Relocation Study Case for Study Reference Notes Chapter 11 DEALING WITH TECHNOLOGICAL CHANGE SEGMENT IV Chapter 12 OPERATIONS STRATEGY AND ORGANIZATION DEALING WITH OPPORTUNITIES FOR VERTICAL INTEGRATION Factors in the Vertical Integration Decision The Advantages of Vertical Integration The Perils of Vertical Integration A Recapitulation Vertical Integration in the Life Cycles of Products and Processes Study Reference Notes Chapter 13 OPERATIONS STRATEGY SOURCES OF TECHNOLOGICAL CHANGE Product Innovation New Product Introduction Process Innovation EVALUATING AND IMPLEMENTING NEW TECHNOLOGY MANUFACTURING STRATEGY Operations Choices Consistency in These Operations Choices The Impact of Competitive Priorities on Operations Revisiting the Product-Process Matrix Some Issues Affecting Manufacturing Strategy

8 CONTENTS XV Manufacturing Performance Revisiting the Service Process Matrix 776 Measurement 765 The Paradox of Flexibility 767 Questions Problems Situations, for Organizing Manufacturing. 769 Stud Y ' Reference Notes 782 SERVICE OPERATIONS STRATEGY 776 INDEX 789

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