Key Concept Explanation: Define your key topic by using a source other than the textbook. Give a clear, concise overview of the essential elements relevant to understanding your key

Criteria Ratings Points

Thread/Key Topic

50 to >44.0 pts

Advanced

Comply with all assignment requirements. Major points are supported by all of the following: Learn Materials; Pertinent Research; and Assignment Requirements.

44 to >40.0 pts

Proficient

Comply with all assignment requirements. Major points are supported by most of the following: Learn Materials; Pertinent Research; and Assignment Requirements.

40 to >0.0 pts

Developing

Comply with most assignment requirements. Major points are supported by most of the following: Learn Materials; Pertinent Research; and Assignment Requirements.

0 pts

Not Present

50 pts

Replies 20 to >17.0 pts

Advanced

Substantive replies made to at least two classmates. Major points are supported by all of the following: Learn Materials; Pertinent Research; and Assignment Requirements.

17 to >16.0 pts

Proficient

Substantive replies made to at least two classmates. Major points are supported by most of the following: Learn Materials; Pertinent Research; and Assignment Requirements.

16 to >0.0 pts

Developing

Substantive replies made to one to two classmates. Major points are supported by some of the following: Learn Materials; Pertinent Research; and Assignment Requirements.

0 pts

Not Present

20 pts

Thread- Spelling, Grammar, and Word Count

15 to >13.0 pts

Advanced

Proper spelling, grammar and APA are used. Meets the required word count for each section.

13 to >10.0 pts

Proficient

Between 1-2 spelling, grammar and APA are present. Meets the required word count for each section.

10 to >0.0 pts

Developing

Between 3-4 spelling, grammar and APA are present. Contains 50 to 99 percent of the required word count for each section.

0 pts

Not Present

15 pts

Replies- Spelling, Grammar, and Word Count

15 to >13.0 pts

Advanced

Proper spelling, grammar and APA are used. At least 200 words

13 to >10.0 pts

Proficient

Between 1-2 spelling, grammar and APA are present. At least 200 words.

10 to >0.0 pts

Developing

Between 3-4 spelling, grammar and APA are present. Between 100 and 200 words.

0 pts

Not Present

15 pts

Total Points: 100

Discussion Grading Rubric | BUSI650_B04_202330

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Operations and Supply Chain Management for MBAs

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Sixth Edition

Jack R . Meredith

Scott M. Shafer Wake Forest University

Operations and Supply Chain Management for MBAs

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VICE PRESIDENT & DIRECTOR George Hoffman

EXECUTIVE EDITOR Lise Johnson

DEVELOPMENT EDITOR Jennifer Manias

ASSOCIATE DEVELOPMENT EDITOR Kyla Buckingham

SENIOR PRODUCT DESIGNER Allison Morris

MARKET SOLUTIONS ASSISTANT Amanda Dallas

SENIOR DIRECTOR Don Fowley

PROJECT MANAGER Gladys Soto

PROJECT SPECIALIST Nichole Urban

PROJECT ASSISTANT Anna Melhorn

PROJECT ASSISTANT Emily Meussner

EXECUTIVE MARKETING MANAGER Christopher DeJohn

ASSISTANT MARKETING MANAGER Puja Katariwala

ASSOCIATE DIRECTOR Kevin Holm

SENIOR CONTENT SPECIALIST Nicole Repasky

PRODUCTION EDITOR Ezhilan Vikraman

This book was set in 10/12 Times LT Std by SPi Global and printed and bound by Lightning Source Inc.

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ISBN: 978-1-119-23953-6 (PBK)

ISBN: 978-1-119-22321-4 (EVALC)

Library of Congress Cataloging in Publication Data:

Names: Meredith, Jack R., author. | Shafer, Scott M., author.

Title: Operations and Supply Chain Management for MBAs / Jack R. Meredith, Scott M. Shafer.

Description: Sixth edition. | Hoboken, NJ : John Wiley & Sons, 2016. |

Includes bibliographical references and index.

Identifiers: LCCN 2015038625 | ISBN 978-1-119-23953-6 (pbk. : alk. paper)

Subjects: LCSH: Production management. | Business logistics.

Classification: LCC TS155 .M393 2016 | DDC 658.5—dc23 LC record available at http://lccn.loc.gov/2015038625

Printing identification and country of origin will either be included on this page and/or the end of the book. In addition,

if the ISBN on this page and the back cover do not match, the ISBN on the back cover should be considered the correct

ISBN.

Printed in the United States of America

10 9 8 7 6 5 4 3 2 1

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This book is dedicated to the Newest Generation:

Avery, Mitchell, Ava, Chase, and Ian. J.R.M.

Brianna, Sammy, and Kacy S.M.S.

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vi

Part 1 Strategy and Execution 1

1 Operations and Supply Chain Strategy for Competitiveness 2

2 Executing Strategy: Project Management 34

Part 2 Process and Supply Chain Design 65

3 Process Planning 66

4 Capacity and Scheduling 97

5 Supply Chain Planning and Analytics 126

6 Supply Chain Management 157

Part 3 Managing and Improving the Process 199

7 Monitoring and Controlling the Processes 200

8 Process Improvement: Six Sigma 225

9 Process Improvement: Lean 258

Cases 284 Glossary 338 Index 343

Brief Contents

Preface xiii

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vii

Part 1 Strategy and Execution 1

1 Operations and Supply Chain Strategy for Competitiveness 2

1.1 Operations 4

1.1.1. Systems Perspective 5

1.1.2. Inputs 6

1.1.3. Transformation Processes 6

1.1.4. Outputs 7

1.1.5. Control 9

1.1.6. Operations Activities 9

1.1.7. Trends in Operations and Supply Chain Management 10

1.2 Customer Value 11

1.2.1. Costs 11

1.2.2. Benefi ts 12

1.2.3. Innovativeness 12

1.2.4. Functionality 14

1.2.5. Quality 14

1.2.6. Customization 15

1.2.7. Responsiveness 18

1.3 Strategy and Competitiveness 19

1.3.1. Global Trends 19

1.3.2. Strategy 21

1.3.3. Strategic Frameworks 22

1.3.4. Core Capabilities 28

2 Executing Strategy: Project Management 34

2.1 Defi ning a Project 37

2.2 Planning the Project 38

2.2.1. The Project Portfolio 38

2.2.2. The Project Life Cycle 41

2.2.3. Projects in the Organizational Structure 42

2.2.4. Organizing the Project Team 42

2.2.5 Project Plans 43

Contents

Preface xiii

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viii Contents

2.3 Scheduling the Project 46

2.3.1. Project Scheduling with Certain Activity Times: A Process Improvement Example 47

2.3.2. Project Scheduling with Uncertain Activity Times 50

2.3.3. Project Management Software Capabilities 55

2.3.4. Goldratt’s Critical Chain 56

2.4 Controlling the Project: Earned Value 58

Part 2 Process and Supply Chain Design 65

3 Process Planning 66

3.1 Forms of Transformation Systems 68

3.1.1. Continuous Process 68

3.1.2. Flow Shop 69

3.1.3. Job Shop 75

3.1.4. Cellular Production 79

3.1.5. Project Operations 83

3.2 Selection of a Transformation System 83

3.2.1. Considerations of Volume and Variety 84

3.2.2. Product and Process Life Cycle 86

3.2.3. Service Processes 87

4 Capacity and Scheduling 97

4.1 Long‐Term Capacity Planning 99

4.1.1. Capacity Planning Strategies 100

4.2 Effectively Utilizing Capacity Through Schedule Management 104

4.2.1. Scheduling Services 106

4.3 Short‐Term Capacity Planning 109

4.3.1. Process‐Flow Analysis 109

4.3.2. Short‐Term Capacity Alternatives 115

4.3.3. Capacity Planning for Services 117

4.3.4. The Learning Curve 119

4.3.5. Queuing and the Psychology of Waiting 122

5 Supply Chain Planning and Analytics 126

5.1 Importance of Supply Chain Planning and Analytics 128

5.2 Demand Planning 129

5.2.1. Forecasting Methods 130

5.2.2. Factors Influencing the Choice of Forecasting Method 131

5.2.3. Time Series Analysis 132

5.2.4. Causal Forecasting with Regression 141

5.2.5. Assessing the Accuracy of Forecasting Models 147

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ixContents

5.3 Sales and Operations Planning 148

5.3.1. Aggregate Planning Strategies 149

5.3.2. Determining the Service Level: An Example Using the Newsvendor Problem 150

5.3.3. Collaborative Planning, Forecasting, and Replenishment 153

6 Supply Chain Management 157

6.1 Defining SCM 160

6.2 Supply Chain Strategy 162

6.2.1. Strategic Need for SCM 163

6.2.2. Measures of Supply Chain Performance 165

6.3 Supply Chain Design 166

6.3.1. Logistics 167

6.4 Sourcing Strategies and Outsourcing 175

6.4.1. Purchasing/Procurement 177

6.4.2. Supplier Management 179

6.5 Inventory and Supply Planning 180

6.5.1. Functions of Inventories 181

6.5.2. Forms of Inventories 182

6.5.3. Inventory‐Related Costs 183

6.5.4. Decisions in Inventory Management 185

6.6 Role of Information Technology 185

6.6.1. ERP 186

6.6.2. Customer Relationship Management Systems 188

6.7 Successful SCM 188

6.7.1. Closed‐Loop Supply Chains and Reverse Logistics 189

Supplement A—The Beer Game 195

Supplement B—The Economic Order Quantity Model (online)

Part 3 Managing and Improving the Process 199

7 Monitoring and Controlling the Processes 200

7.1 Monitoring and Control 201

7.2 Process Monitoring 203

7.2.1. Stages of Operational Effectiveness 203

7.2.2. Balanced Scorecard 204

7.2.3. The Strategy Map 206

7.2.4. ISO 9000 and 14000 207

7.2.5. Failure Mode and Effect Analysis (FMEA) 208

7.3 Process Control 209

7.3.1. Statistical Process Control 210

7.3.2. Constructing Control Charts 213

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x Contents

7.4 Controlling Service Quality 216

7.4.1. Service Defections 217

8 Process Improvement: Six Sigma 225

8.1 Approaches for Process Improvement 228

8.2 Business Process Design (Reengineering) 229

8.3 Six Sigma and the DMAIC Improvement Process 231

8.3.1. Example Six Sigma Project 232

8.4 The Define Phase 235

8.4.1. Benchmarking 235

8.4.2. Quality Function Deployment 236

8.5 The Measure Phase 238

8.5.1. Defects per Million Opportunities (DPMO) 239

8.5.2. Measurement Systems Analysis 241

8.6 The Analyze Phase 243

8.6.1. Brainstorming 244

8.6.2. Cause-and-Effect Diagrams 246

8.6.3. Process Capability Analysis 246

8.7 The Improve Phase 249

8.7.1. Design of Experiments 249

8.8 The Control Phase 251

8.9 Six Sigma in Practice 251

8.9.1. Six Sigma Roles 251

8.9.2. Becoming Certified 252

8.9.3. The Need to Customize Six Sigma Programs 252

9 Process Improvement: Lean 258

9.1 History and Philosophy of Lean 261

9.1.1. Traditional Systems Compared with Lean 262

9.2 Specify Value and Identify the Value Stream 266

9.2.1. Identify the Value Stream 268

9.3 Make Value Flow 271

9.3.1. Continuous Flow Manufacturing 272

9.3.2. The Theory of Constraints 273

9.4 Pull Value through the Value Stream 275

9.4.1. Kanban/JIT in Services 276

9.5 Pursue Perfection 277

9.5.1. 5S 277

9.5.2. The Visual Factory 277

9.5.3. Kaizen 278

9.5.4. Poka Yoke 278

9.5.5. Total Productive Maintenance 278

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xiContents

9.6 Benefits of Lean and Lean Six Sigma 279

9.6.1. Lean Six Sigma 280

Cases 284

BPO, Incorporated: Call Center Six Sigma Project 284

Peerless Laser Processors 297

General Micro Electronics, Inc.: Semiconductor Assembly Process 302

Heublein: Project Management and Control System 315

D. U. Singer Hospital Products Corp. 327

Automotive Builders, Inc.: The Stanhope Project 331

Case (online)—United Lock: Door Hardware Division (A)

Bibliography (online)

Glossary 338

Index 343

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xiii

The enthusiasm of the users of this MBA‐oriented book has been greatly rewarding for us, and

we thank them for their comments, suggestions, criticism, and support. Although the book is not

the massive seller that an undergraduate textbook can become, it is clear that there is, as we felt,

a need for a solely MBA‐level text. The book was originally written because of the express need

we felt in our many MBA programs at Wake Forest University for an operations management

textbook directed specifically to MBA students and especially to those who had some real‐world

experience. We tried all of the current texts but found them either tomes that left no time for the

cases and other materials we wanted to include or shorter but simplistic quantitative books.

Moreover, all the books were so expensive they did not allow us to order all the cases, readings,

and other supplements and class activities (such as the “Beer Game”; see Chapter  6 Supplement)

that we wanted to include in our course.

What we were looking for was a short, inexpensive book that would cover just the introduc-

tory, basic, and primarily conceptual material. This would allow us, as the professors, to tailor the

course through supplementary cases and other materials for the unique class we would be teach-

ing: executive, evening, full time, short course, and so on. Although we wanted a brief,

supplementary‐type book so that we could add other material, we have colleagues who need a

short book because they only have a half‐semester module for the topic. Or they may have to

include another course (e.g., statistics) in the rest of the semester.

Changes in this Sixth Edition A lot has happened since our previous edition, and we felt compelled to reorganize the book to

reflect these changes. First, we amended the title to reflect the increased importance of supply

chain management concepts and added an extra chapter ( 5 ) as well, focusing on demand plan-

ning, forecasting, analytics, and sales and operations planning. Also, project management is now

being used for implementing strategic plans through the project portfolio, since the successful

execution of strategy has continued to be a problem. Also, the concepts of lean and six sigma are

now well established in organizations, and the details of their procedures are of less importance

for MBA students.

As a result of all these changes, we reorganized the material into three parts of the book. In

Part I: Strategy and Execution, we discuss operations and supply chain strategy in Chapter  1 and

then follow this up with executing strategy through project management in Chapter  2 . Part II:

Process and Supply Chain Design then covers four chapters. Process planning is described first

in Chapter  3 and then the planning of capacity and schedules in Chapter  4 . Chapter  5 : Supply

Chain Planning and Analytics is our first chapter on the supply chain as described above, and then

Chapter  6 covers many of the details on managing the supply chain. Part III: Managing and

Improving the Process then begins with Chapter  7 on monitoring and controlling the processes,

followed by Chapter  8 on process improvement through the use of six sigma. The last chapter,

also on process improvement, covers the concepts of lean management.

The book then concludes with six cases, one of which—General Micro Electronics—is

new. This is followed by a Glossary of key terms to help students quickly refresh their memories

on the terminology used in the chapters. We have also updated the examples and added a few new

Preface

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xiv Preface

short cases to those at the back of the chapters. To conserve space and improve the pace of the

book, we have cut about 80 pages from the previous edition and moved the bibliographies online,

as well as some of the supplements. Of course, we have added a lot of new material as listed

below so the book may still run about the same total length:

Process mapping

Supply chain disruptions

Total cost of ownership

Strategic sourcing

Sustainability

Collaborative planning and replenishment

SCOR model

Change management

Reverse logistics

Triple bottom line

Analytics

Demand planning

Forecasting

Sales and operations planning

In revising the book, we have kept the elements of our earlier philosophy. For example, we

kept the other majors such as marketing and finance in mind—what did these students need to know

about operations to help them in their careers? And we still minimize the heavier quantitative mate-

rial, keeping only discussions and examples that illustrate a particular concept since finance and

marketing majors would not be solving operations problems. Moreover, even operations managers

probably wouldn’t themselves be solving those problems; more likely, they would be assigned to an

analyst. For those chapters in which exercises are included, they are intended only to help illustrate

the concept we are trying to convey rather than make experts of the students.

We continued to add service examples throughout the text, since the great majority (over 80

percent these days!) of our students would be, or are already, employed in a service organization.

And since these students will be working and competing in a highly global economy, we employ

many international examples. We also kept the textual flow of material in the chapters away from

the current undergraduate trend of fracturing the material flow with sidebars, examples, applica-

tions, solved problems, and so forth, in an attempt to keep the students’ interest and attention.

Given the maturity of MBA students, we instead worked these directly into the discussions to

attain a smoother, clearer flow. As noted below, the Instructor’s Manual includes suggestions for

readings, cases, videos, and other course supplements that we have found to be particularly helpful

for MBA classes since this book is intended to be only a small part of the MBA class.

Supplements Our approach to supplementary MBA‐level material here is to reference and annotate in the

Instructor’s Manual additional useful cases, books, video clips, and readings for each of the nine

textbook chapters. The annotation is intended to help the instructors select the most appropriate

materials for their unique course. Although we have added some of our own and our colleagues’

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xvPreface

cases to the rear of this edition, we also rely on our favorite Harvard, Darden, Western Ontario, and

European cases, plus Harvard Business Review readings to fully communicate the nature of the

chapter topic we are covering. Although we didn’t think that Test Bank Questions or PowerPoint

slides would be used by most MBA instructors, these materials are available from the publisher

also. For that matter, the publisher can also custom bind selected content from this text, our larger

undergraduate (or any other) Web text, along with cases and articles, should this approach be of

interest to the professor. Please contact your local Wiley representative for more details.

Your Inputs Appreciated We would once again like to encourage users of this book to send us their comments and sugges-

tions. Tell us if there is something we missed that you would like to see in the next edition (or the

Instructor’s Manual or web site) or if there is perhaps material that is unneeded for this audience.

Also, please tell us about any errors you uncover or if there are other elements of the book you

like or don’t like. We hope to continue keeping this a living, dynamic project that evolves to meet

the needs of the MBA audience, an audience whose needs are also evolving as our economy and

society evolve and change.

We want to thank the many reviewers of this book and its previous editions: Alexander Ansari,

Seattle University; Dennis Battistella, Florida Atlantic University; Linda Brennan, Mercer

University; David Cadden, Quinnipiac University; Satya Chakravorty, Kennesaw State University;

Okechi Geoffrey Egekwu; Michael H. Ensby, Clarkson University; James A. Fitzsimmons,

University of Texas; Lawrence D. Fredendall, Clemson University; William C. Giauque, Brigham

Young University; Mike Godfrey, University of Wis