Operations and Supply Chain Management.pdf

OPERATIONS ANDSUPPLY CHAIN MANAGEMENT fourteenth edition F. R O B E R T J A C O B S Indiana University RICHARD B. CHASE University of Southern California jac24021_fm_i-xxxvi.indd iii 08/12/12 1:16 AM OPERATIONS AND SUPPLY CHAIN MANAGEMENT, FOURTEENTH EDITION Published by McGraw-Hill/Irwin, a business unit of The McGraw-Hill Companies, Inc., 1221 Avenue of the Americas, New York, NY, 10020. Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved. Printed in the United States of America. Previous editions © 2011, 2009, and 2006. No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written consent of The McGraw-Hill Companies, Inc., including, but not limited to, in any network or other electronic storage or transmission, or broadcast for distance learning. Some ancillaries, including electronic and print components, may not be available to customers outside the United States. This book is printed on acid-free paper. l 2 3 4 5 6 7 8 9 0 RJE/RJE 1 0 9 8 7 6 5 4 3 ISBN 978-0-07-802402-3 MHID 0-07-802402-1 Senior Vice President, Products & Markets: Kurt L. Strand Vice President, Content Production & Technology Services: Kimberly Meriwether David Managing Director: Douglas Reiner Senior Brand Manager: Thomas Hayward Executive Director of Development: Ann Torbert Development Editor: Kaylee Putbrese Director of Digital Content: Doug Ruby Digital Development Editor: Meg B. Maloney Marketing Manager: Heather Kazakoff Director, Content Production: Sesha Bolisetty Senior Project Manager: Dana M. Pauley Senior Buyer: Michael R. 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The inclusion of a website does not indicate an endorsement by the authors or McGraw-Hill, and McGraw-Hill does not guarantee the accuracy of the information presented at these sites. www.mhhe.com jac24021_fm_i-xxxvi.indd iv 08/12/12 1:16 AM T o m y m o t h e r, J o a n To m y w i f e , H a r r i e t , a n d t o o u r c h i l d r e n L a u r i e , A n d y, G l e n n , R o b b , a n d C h r i s t i n e jac24021_fm_i-xxxvi.indd v 08/12/12 1:16 AM CONTENTS IN BRIEF SE C T I O N O N E 16 Global Sourcing and Procurement 399 S T R A T E G Y, P R O D U C T S , A N D C A P A C I T Y SE C T I O N FO U R 1 Introduction 2 SUPPLY AND DEMAND 2 Strategy 23 P L A N N I N G A N D C O N T R O L 3 Design of Products 17 Enter prise Resource Planning and Ser vices 42 Systems 424 4 Project Management 72 18 Forecasting 442 5 Strategic Capacity 19 Sales and Operations Management 109 Planning 487 6 Lear ning Cur ves 129 20 Inventor y Management 513 21 Material Requirements SE C T I O N TW O Planning 556 MANUFACTURING AND SER VICE 22 Workcenter Scheduling 586 PROCESSES 23 Theor y of Constraints 618 7 Manufacturing Processes 146 8 Facility Layout 166 SE C T I O N FI V E 9 Ser vice Processes 200 S P E C I A L TO P I C S 10 Waiting Line Analysis and 24 Health Care 653 Simulation 221 25 Operations Consulting 670 11 Process Design and Analysis 262 APPENDICES 12 Six Sigma Quality 295 13 Statistical Quality Control 316 A Linear Programming Using the Excel Solver 692 SE C T I O N T H R E E B Operations Technology 712 SUPPLY CHAIN PROCESSES C Financial Analysis 719 14 Lean Supply Chains 346 D Answer s to Selected Objective 15 Logistics, Distribution, and Questions 737 Transpor tation 374 vi jac24021_fm_i-xxxvi.indd vi 08/12/12 1:16 AM CONTENTS IN BRIEF vii E Present Value H Unifor mly Distributed Random Table 740 Digits 743 F Negative Exponential I Interest Tables 744 Distribution: Values of e 2X 741 P H O T O C R E D I T S 748 G Areas of the Cumulative Standard Nor mal N A M E I N D E X 750 Distribution 742 S U B J E C T I N D E X 752 jac24021_fm_i-xxxvi.indd vii 08/12/12 1:16 AM . Chain Strategies 32 Risk Management Framework 33 AND CAPACITY Productivity Measurement 33 Concept Connections 36 1 INTRODUCTION 2 Solved Problem 37 Introduction 3 Discussion Questions 37 W hat is Operations and Supply Chain Management? 3 Objective Questions 38 Distinguishing Operations versus Supply Case: The Tao of Timbuk2 40 Chain Processes 4 Practice Exam 41 Categorizing Operations and Selected Bibliography 41 Supply Chain Processes 6 Footnote 41 Dif ferences Between Ser vices and Goods 8 3 DESIGN OF PRODUCTS A N D S E R V I C E S 42 T he Goods–Ser vices Continuum 8 Product Design 43 Product-Ser vice Bundling 9 Product Development Process 44 Career s in Operations and Supply Product Design Criteria 49 Chain Management 9 Designing for the Customer 49 Chief Operating Of ficer 10 Value Analysis/Value Engineering 50 Historical Development of Operations Designing Products for and Supply Chain Management 11 Manufacture and Assembly 51 Cur rent Issues in Operations Designing Ser vice Products 55 and Supply Chain Management 14 Economic Analysis of Product Ef ficiency. P R O D U C T S . CONTENTS SE C T I O N O N E Assessing the Risk Associated with Operations and Supply S T R A T E G Y. Ef fectiveness. and Value 14 Development Projects 57 How Does Wall Street Evaluate Efficiency? 15 Build a Base-Case Financial Model 57 Concept Connections 19 Sensitivity Analysis to Understand Discussion Questions 20 Project Trade-Of fs 59 Objective Questions 20 Measuring Product Development Analytics Exercise: Comparing Com. Perfor mance 60 panies Using Wall Street Ef ficiency Concept Connections 61 Measures (LO1–4) 21 Solved Problem 62 Practice Exam 22 Discussion Questions 65 Selected Bibliography 22 Objective Questions 66 Footnotes 22 Case: Ikea: Design and Pricing 68 Case: Dental Spa 71 2 S T R A T E G Y 23 Practice Exam 71 A Sustainable Operations Selected Bibliography 71 and Supply Chain Strategy 24 Footnotes 71 What is Operations and Supply Chain Strategy? 26 4 P R O J E C T M A N A G E M E N T 72 Competitive Dimensions 27 What is Project Management? 73 T he Notion of Trade-Of fs 29 Organizing the Project Team 74 Order W inners and Order Qualifiers: T he Pure Project 74 Marketing–Operations Link 30 Functional Project 74 Strategies Are Implemented Using Matrix Project 76 Operations and Supply Chain Organizing Project Tasks 77 Activities—Ikea’s Strategy 30 Network-Planning Models 78 viii jac24021_fm_i-xxxvi.indd viii 08/12/12 1:16 AM . 163 Capacity Utilization 111 Practice Exam 165 Economies and Diseconomies of Scale 111 Selected Bibliography 165 Capacity Focus 112 Footnote 165 Capacity Flexibility 112 Capacity Analysis 113 8 F A C I L I T Y L A Y O U T 166 Considerations in Changing Capacity 113 Analyzing the Four Most Deter mining Capacity Requirements 114 Common Layout For mats 168 Using Decision Trees to Evaluate Workcenters (Job Shops) 168 Systematic Layout Planning 172 Capacity Alter natives 116 Assembly Lines 172 Planning Ser vice Capacity 119 Assembly-Line Design 173 Capacity Planning in Ser vices Splitting Tasks 177 versus Manufacturing 119 Flexible and U-Shaped Line Layouts 178 Capacity Utilization and Ser vice Mixed-Model Line Balancing 179 Quality 120 Cells 180 Concept Connections 121 Project Layouts 180 Solved Problem 122 Retail Ser vice Layout 182 Discussion Questions 124 Ser vicescapes 182 Objective Questions 124 Signs. and Supply Chain Management 110 Inc. How Much Lear ning An Operational Classification of Occur s? 137 Ser vices 202 Individual Lear ning 137 Designing Ser vice Organizations 202 Organizational Lear ning 138 Structuring the Ser vice Encounter: Concept Connections 140 Ser vice-System Design Matrix 204 Solved Problems 140 Managing Customer-Introduced Discussion Questions 141 Variability 206 Objective Questions 142 Applying Behavioral Science Practice Exam 144 to Ser vice Encounters 207 Selected Bibliography 144 Ser vice Blueprinting Footnotes 144 and Fail-Safing 209 jac24021_fm_i-xxxvi.indd ix 08/12/12 1:16 AM . CONTENTS ix Critical Path Method (CPM) 79 CPM with Three Activity Time Estimates 82 SE C T I O N TW O Time–Cost Models and Project Crashing 85 Managing Projects 89 MANUFACTURING AND SER VICE Ear ned Value Management (EVM) 91 PROCESSES Project Management Infor mation Systems 94 7 M A N U F A C T U R I N G P R O C E S S E S 146 Concept Connections 95 What Are Manufacturing Solved Problems 96 Processes? 147 Discussion Questions 100 How Manufacturing Objective Questions 100 Processes Are Organized 149 Analytics Exercise: Product Design Break-Even Analysis 151 Project 106 Manufacturing Process Practice Exam 108 Flow Design 153 Selected Bibliography 108 Concept Connections 158 Footnote 108 Solved Problems 158 Discussion Questions 160 5 S T R A T E G I C C A P A C I T Y M A N A G E M E N T 109 Objective Questions 160 Capacity Management in Operations Case: Circuit Board Fabricator s. and Ar tifacts 184 Case: Shouldice Hospital— Of fice Layout 184 A Cut Above 126 Concept Connections 185 Practice Exam 128 Solved Problems 185 Selected Bibliography 128 Discussion Questions 189 Objective Questions 189 6 L E A R N I N G C U R V E S 129 Analytics Exercise: Designing a What Are Lear ning Cur ves? 130 Manufacturing Process 195 How Are Lear ning Practice Exam 198 Cur ves Modeled? 131 Selected Bibliography 199 Logarithmic Analysis 132 Footnotes 199 Lear ning Cur ve Tables 132 Estimating the Lear ning Percentage 137 9 S E R V I C E P R O C E S S E S 200 How Long Does Lear ning Go On? 137 The Nature of Ser vices 201 In practice. Symbols. and Process Flowchar ting 265 R-Char ts 327 _ Under standing Processes 267 How to Construct X . Handling Processes 292 Designed Ser vice System 215 Practice Exam 293 Concept Connections 215 Selected Bibliography 294 Discussion Questions 216 Footnotes 294 Objective Questions 217 Case: Pizza USA: An Exercise in Translating Customer 12 S I X S I G M A Q U A L I T Y 295 Requirements into Process Total Quality Management 296 Quality Specifications and Quality Design Requirements 218 Costs 296 Practice Exam 219 Developing Quality Specifications 297 Selected Bibliography 219 Cost of Quality 299 Footnotes 220 Six Sigma Quality 301 Six Sigma Methodology 301 10 W A I T I N G L I N E A N A L Y S I S Analytical Tools for Six Sigma 302 A N D S I M U L A T I O N 221 Six Sigma Roles and Waiting Line Analysis and Queuing Responsibilities 303 Theor y 222 T he Shingo System: Fail-Safe T he Practical View of Waiting Lines 222 Design 307 T he Queuing System 223 ISO 9000 and ISO 14000 308 Waiting Line Models 230 Exter nal Benchmarking for Quality Approximating Customer Waiting Time 238 Improvement 309 Simulating Waiting Lines 241 Concept Connections 310 Example: A Two-Stage Assembly Discussion Questions 310 Line 241 Objective Questions 311 Spreadsheet Simulation 244 Case: Quality Simulation Programs and Management—Toyota 313 Languages 247 Practice Exam 314 Concept Connections 248 Selected Bibliography 315 Solved Problems 250 Footnotes 315 Discussion Questions 253 Objective Questions 253 Case: Community Hospital Evening 13 S T A T I S T I C A L Q U A L I T Y C O N T R O L 316 Operating Room 258 Statistical Quality Control 317 Understanding and Measuring Process Analytics Exercise: Processing Variation 318 Customer Order s 258 Measuring Process Capability 319 Practice Exam 260 Statistical Process Control Selected Bibliography 261 Procedures 324 Footnotes 261 Process Control with Attribute Measurements: Using p-Char ts 324 11 P R O C E S S D E S I G N AND A N A L Y S I S 262 Process Control with Attribute Process Analysis 263 Measurements: Using c-Char ts 327 Example—Analyzing a Las Vegas Slot Process Control with Variable _ Machine 263 Measurements: Using X . and Star ving 267 Acceptance Sampling 331 Make-to-Stock versus Make-to-Order 268 Design of a Single Sampling Plan for Measuring Process Perfor mance 270 Attributes 331 Production Process Mapping and Little’s Operating Characteristic Cur ves 332 Law 272 Concept Connections 334 Job Design Decisions 275 Solved Problems 335 Behavioral Considerations in Job Discussion Questions 338 Design 275 Objective Questions 338 Work Measurement and Standards 276 Case: Hot Shot Plastics Company 342 Process Analysis Examples 277 Case: Quality A Bread Making Operation 277 A Restaurant Operation 278 Management—Toyota 343 Planning a Transit Bus Operation 280 Practice Exam 344 Process Flow Time Reduction 282 Selected Bibliography 344 Concept Connections 284 Footnotes 344 jac24021_fm_i-xxxvi. x CONTENTS Three Contrasting Ser vice Designs 212 Solved Problems 286 T he Production-Line Approach 212 Discussion Questions 287 T he Self-Ser vice Approach 212 Objective Questions 288 T he Personal-Attention Approach 213 Case: Analyzing Casino Money- Seven Characteristics of a Well. Blocking.and R-Char ts 328 Buf fering.indd x 08/12/12 1:16 AM . Forecasting.indd xi 08/12/12 1:16 AM . CONTENTS xi Analytics Exercise: Global Sourcing SE C T I O N T H R E E Decisions—Grainger: Reengineering the China/U.S. Supply Chain 420 SUPPLY CHAIN PROCESSES Practice Exam 421 Selected Bibliography 421 14 L E A N S U P P L Y C H A I N S 346 Footnotes 422 Lean Production 347 T he Toyota Production System 348 Lean Supply Chains Processes 349 Lean Supply Chain Processes 350 SE C T I O N FO U R Lean Layouts 351 Lean Production Schedules 352 SUPPLY AND DEMAND PLANNING Kanban Production Control Systems 353 A N D C O N T R O L Minimized Setup Times 356 Lean Supply Chains 357 17 E N T E R P R I S E R E S O U R C E P L A N N I N G Value Stream Mapping 357 S Y S T E M S 424 Lean Ser vices 360 What Is ERP? 425 Concept Connections 363 Consistent Numbers 426 Solved Problems 364 Software Imperatives 426 Discussion Questions 368 Routine Decision Making 426 Objective Questions 368 How ERP Connects the Functional Case: Quality Par ts Company 369 Units 427 Case: Value Stream Mapping 371 Finance 427 Case: Pro Fishing Boats—A Value Manufacturing and Logistics 428 Stream Mapping Exercise Sales and Marketing 428 (LO14–3) 372 Human Resources 429 Practice Exam 373 Customized Software 429 Data Integration 429 Selected Bibliography 373 Footnotes 373 How Supply Chain Planning and Control Fits within ERP 430 Simplified Example 430 15 L O G I S T I C S . D I S T R I B U T I O N . and Objective Questions 417 Replenishment (CPFR) 468 jac24021_fm_i-xxxvi. AND SAP Supply Chain Management 431 TR A N S P O R T A T I O N 374 SAP Supply Chain Execution 432 Logistics 375 SAP Supply Chain Collaboration 432 Decisions Related to Logistics 376 SAP Supply Chain Coordination 433 Locating Logistics Facilities 377 Perfor mance Metrics to Evaluate Plant Location Methods 379 Integrated System Ef fectiveness 433 Centroid Method 383 T he “Functional Silo” Approach 434 Locating Ser vice Facilities 385 Integrated Supply Chain Metrics 434 Concept Connections 387 Calculating the Cash-to-Cash Time 436 Solved Problems 388 Concept Connections 438 Discussion Questions 392 Solved Problem 439 Objective Questions 393 Discussion Questions 440 Analytics Exercise: Distribution Center Objective Questions 440 Location 396 Practice Exam 441 Practice Exam 398 Selected Bibliography 441 Selected Bibliography 398 Footnotes 398 18 F O R E C A S T I N G 442 Forecasting in Operations and Supply 16 G L O B A L S O U R C I N G A N D Chain Management 443 P R O C U R E M E N T 399 Quantitative Forecasting Models 444 Components of Demand 445 Strategic Sourcing 400 Time Series Analysis 446 T he Bullwhip Ef fect 401 Forecast Er rors 462 Supply Chain Uncer tainty Framework 403 Causal Relationship Forecasting 465 Outsourcing 405 Qualitative Techniques Logistics Outsourcing 406 in Forecasting 467 Framework for Supplier Relationships 406 Market Research 467 Green Sourcing 409 Panel Consensus 467 Total Cost of Owner ship 411 Historical Analogy 467 Measuring Sourcing Perfor mance 414 Delphi Method 468 Concept Connections 416 Web-Based Forecasting: Collaborative Discussion Questions 417 Planning. xii CONTENTS Concept Connections 470 Selected Bibliography 555 Solved Problems 471 Footnotes 555 Discussion Questions 475 Objective Questions 476 21 M A T E R I A L R E Q U I R E M E N T S Analytics Exercise: Forecasting P L A N N I N G 556 Supply Chain Demand—Starbucks Under standing Material Requirements Cor poration (LO18–2) 484 Planning 557 Practice Exam 485 W here MRP Can Be Used 557 Selected Bibliography 486 Master Production Scheduling 558 Material Requirements Planning 19 S A L E S AND O P E R A T I O N S P L A N N I N G 487 System Str ucture 560 What is Sales and Operations Demand for Products 560 Planning? 488 Bill-of-Materials 561 An Over view of Sales and Operations Inventor y Records 562 Planning Activities 488 MRP Computer Program 563 T he Aggregate Operations Plan 490 An Example Using MRP 564 Aggregate Planning Techniques 493 Forecasting Demand 564 A Cut-and-Tr y Example: T he JC Developing a Master Production Company 494 Schedule 565 Aggregate Planning Applied to Bill of Materials (Product Structure) 565 Ser vices: Tucson Parks and Recreation Inventor y Records 566 Depar tment 499 Perfor ming the MRP Calculations 566 Yield Management 501 Lot Sizing in MRP Systems 569 Operating Yield Management Lot-for-Lot 570 Systems 502 Economic Order Quantity 570 Concept Connections 503 Least Total Cost 571 Solved Problem 504 Least Unit Cost 571 Choosing the Best Lot Size 573 Discussion Questions 507 Concept Connections 573 Objective Questions 507 Solved Problems 574 Analytics Exercise: Developing Discussion Questions 579 an Aggregate Plan—Bradford Objective Questions 580 Manufacturing 510 Analytics Exercise: An MRP Practice Exam 511 Explosion—Br unswick Motor s 584 Selected Bibliography 512 Practice Exam 585 Footnotes 512 Selected Bibliography 585 20 I N V E N T O R Y M A N A G E M E N T 513 22 W O R K C E N T E R S C H E D U L I N G 586 Under standing Inventor y Workcenter Scheduling 587 Management 514 T he Nature and Impor tance of Purposes of Inventor y 516 Workcenters 587 Inventor y Costs 517 Typical Scheduling and Control Independent versus Dependent Functions 589 Demand 517 Objectives of Workcenter Inventor y Control Systems 519 Scheduling 590 A Single-Period Inventor y Model 519 Job Sequencing 590 Multiperiod Inventor y Systems 522 Priority Rules and Techniques 591 Fixed–Order Quantity Models 523 Scheduling n Jobs on One Machine 591 Fixed–Time Period Models 530 Scheduling n Jobs on Two Inventor y Tur n Calculation 531 Machines 594 Price-Break Model 533 Scheduling a Set Number of Jobs Inventor y Planning and on the Same Number of Machines 595 Accuracy 535 Scheduling n Jobs on m Machines 596 ABC Classification 535 Shop-Floor Control 597 Inventor y Accuracy and Cycle Gantt Char ts 598 Counting 537 Tools of Shop-Floor Control 598 Concept Connections 539 Principles of Workcenter Scheduling 600 Solved Problems 540 Per sonnel Scheduling in Ser vices 601 Discussion Questions 543 Scheduling Daily Work Times 602 Objective Questions 544 Scheduling Hourly Work Times 602 Analytics Exercise: Concept Connections 603 Inventor y Management at Solved Problems 604 Big10Sweater s.indd xii 08/12/12 1:16 AM .com 552 Discussion Questions 609 Practice Exam 554 Objective Questions 610 jac24021_fm_i-xxxvi. Capacity-Constrained Data Analysis and Solution Development 682 Resources. CONTENTS xiii Case: Keep Patients Waiting? Not in 25 O P E R A T I O N S C O N S U L T I N G 670 My Of fice 615 What Is Operations Consulting? 671 Practice Exam 617 T he Management Consulting Selected Bibliography 617 Industr y 671 Footnotes 617 Economics of Consulting Fir ms 672 W hen Operations Consulting 23 T H E O R Y OF C O N S T R A I N T S 618 Is Needed 673 Eli Goldratt’s Theor y of The Operations Consulting Constraints 620 Process 675 Goal of the Fir m 621 Operations Consulting Tool Kit 676 Perfor mance Measurements 621 Problem Definition Tools 677 Unbalanced Capacity 622 Data Gathering 679 Bottlenecks.indd xiii 08/12/12 1:16 AM . and Synchronous Cost Impact and Payof f Analysis 683 Manufacturing 624 Implementation 684 Basic Manufacturing Building Blocks 624 Business Process Reengineering Methods for Synchronous Control 625 (BPR) 684 Principles of Reengineering 685 Comparing Synchronous Guidelines for Implementation 686 Manufacturing (TOC) to Traditional Concept Connections 687 Approaches 635 MRP and JIT 635 Discussion Questions 687 Relationship with Other Objective Questions 688 Functional Areas 635 Analytics Exercise: Rapid Plant Theor y of Constraints—Problems Assessment 689 about What to Produce 636 Practice Exam 691 Concept Connections 643 Selected Bibliography 691 Solved Problem 644 Footnotes 691 Discussion Questions 646 Objective Questions 646 Practice Exam 650 APPENDICES Selected Bibliography 651 Footnotes 651 A Linear Programming Using the Excel Solver 692 SE C T I O N F I V E B Operations Technology 712 S P E C I A L TO P I C S C Financial Analysis 719 24 H E A L T H C A R E 653 D Answers to Selected Objective The Nature of Health Care Questions 737 Operations 654 E Present Value Table 740 Classification of Hospitals 655 Hospital Layout and Care Chains 655 F Negative Exponential Capacity Planning 657 Workforce Scheduling 658 Distribution: Values of e 2X 741 Quality Management and Process Improvement 658 G Areas of the Cumulative Standard Health Care Supply Chains 660 Normal Distribution 742 Inventor y Management 661 Perfor mance Measures 663 H Uniformly Distributed Random Trends in Health Care 663 Digits 743 Concept Connections 665 Discussion Questions 666 I Interest Tables 744 Objective Questions 666 Case: Venice Family Clinic: Managing P H O T O C R E D I T S 748 Patient Wait Times 667 N A M E I N D E X 750 Practice Exam 668 Selected Bibliography 669 S U B J E C T I N D E X 752 Footnotes 669 jac24021_fm_i-xxxvi. The objectives are carried through the end-of-chapter material that includes Concept Connections. and process we use special icons in the margin to point out each type of material.indd xiv 08/12/12 1:16 AM . Each objective relates to a block of knowledge that should be studied as a unit. OSCM should appeal to individuals who want to be directly involved in making products or providing services. deciding what technologies should be used and where facilities should be located. and managing the facilities that make the products or provide the services. The goal is to efficiently create wealth by supplying quality goods and services. success in OSCM requires using a strategy that is consistent with the operations-related priorities of a firm. and on to the customers of the firm. global suppliers. The entry-level operations specialist is the person who determines how best to design. Mathematical models are used to structure the data for making decisions. Establishing a competitive advantage through operations requires an understanding of how the operations and supply chain functions contrib- ute to productivity growth. Great managers are analytic in their approach to decision making. Many spreadsheets are available from the book website to help clarify how these problems are quickly solved. Objective Questions. and managing the operations of a business. supply. We have indicated those spreadsheets with an Excel icon in the margin. and improving the efficiency of supply chain processes. Every chapter in the book has analytic content that ties decisions to relevant data. understand and select the appropriate strategy. xiv jac24021_fm_i-xxxvi. To emphasize this relationship between analytics. PREFACE Operations and supply chain management (OSCM) is a key element in the improvement in productivity in business around the world. planning. and then execute the strategy through great processes. The material is organized to ease understanding of each topic. our intent in this book is to do more than just show you what companies are doing to create a competitive advantage in the marketplace. Discussion Questions. Success in OSCM requires a data-driven view of a firm’s business. by conveying to you a set of skills and tools that you can actually apply. and run the processes. Success for companies today requires successfully managing the entire supply flow. and usually trade-offs related to cost- and-flexibility-related criteria exist. Different approaches can often be used. OSCM is an interesting mix of managing people and applying sophisticated technology. Senior operations managers are responsible for setting the strategic direction of the company from an operations and supply chain stand- point. Applications that range from high-tech manufacturing to high-touch service are used in the balanced treatment of the traditional topics of the field. Strategies are implemented through processes that define exactly how things are done. We develop this pattern throughout the topics in this book. There are concise treatments of the many decisions that need to be made in designing. The reality of global customers. A significant new feature of this book is the organization of each chapter by concise learning objectives. These topics are studied in the book with up-to-date. strategy. Processes are executed over and over again as the firm conducts business. Given the facts that are supported by data. and global supply chains has made the global firm recognize the importance of being both lean and green to ensure competitiveness. from the sources of the firm. through the value- added process of the firm. Hot topics in business today that relate to operations and supply chain management are sustainability. high-level managerial material to clarify the “big picture” of what these topics are and why they are so important to business today. so they must be designed to operate efficiently to minimize cost while meeting quality related standards. However. Each chapter includes information about how operations and supply chain–related problems are solved. and a Practice Exam. lean supply chains. and ISO 9000 and 14000. Burton Snowboards.indd xv 08/12/12 1:16 AM . They are similar to the type of short-answer questions that might be given on a test. practice quizzes. Excel spreadsheets for the solved problems and other examples. Sup- ply Chain Processes. Any company must have a comprehensive business plan that is supported by a marketing strategy. Process Design and Analysis. Technical details covering all the statistical aspects of quality are in Chapter 13 (Statistical Quality Control).com. Strategy and sustainability are important and recurring topics in the book. • OSCM at Work boxes provide short overviews of how leading-edge companies are applying OSCM concepts today. • Objective questions at the end of chapters that cover each concept and problem. These are organized by the chapter learning objectives. we quickly describe the major topics in the book. Design of Products and Services (Chapter 3) includes a view of how products are designed in the context of having to actually produce and distribute the product over its life cycle. Internet links. Chapter 11. Manufacturing and Service Processes. Strategy is covered from a high-level view in Chapter 2 (Strategy). is a nuts-and-bolts chapter on process flow charting and static process analysis using some easily understood real-life examples. In the following paragraphs. • Practice exam questions at the end of each chapter. The third section of the book. These are special questions designed to require a deeper understanding of the material in the chapter. • Key terms highlighted in the chapter with their definitions in the margin. titled Manufacturing and Service Processes. Six Sigma tools. and more details that relate to economies of scale and learning are covered in Chapters 5 and 6. Ford. The chapter includes material on how to manage and analyze the economic impact of a stream of products that are developed over time. and video segments that illustrate the application of operations concepts in companies such as Xerox. a new product introduction. PLAN OF THE BOOK This book is about methods to effectively produce and distribute the goods and services sold by a company. An essential element of process design is quality. and financial strategy. titled Supply Chain Processes. PREFACE xv Features to aid in your understanding of the material include the following: • Solved problems at the end of chapters to serve as models that can be reviewed prior to attempting problems. • Answers to selected problems in Appendix D. Caterpillar. Disney. Honda. Products and Capacity. It is essential for a company to ensure that the three strategies support each other. To develop a better understanding of the field. We hope you enjoy it. We supply many examples of leading-edge companies and prac- tices. and Special Topics. Supply and Demand Planning and Control. We have done our best to make the book interesting reading and give you a competitive advantage in your career. Important technical material that relates to design activities is covered in Chapters 8 (Facility Layout) and 10 (Waiting Line Analysis and Simulation). Here we cover total quality management concepts. this book is organized into five major sections: Strategy. Six Flags. The second section of the book. Chapters 7 and 9 cover the unique characteristics of production and service processes. and many others. • The book website. operations strategy. The lifeline of the company is a steady stream of innovative products that are offered to the marketplace at the lowest cost possible. or a new process. Our aim is to cover the latest and the most important issues facing OSCM managers as well as basic tools and techniques. Zappos. ScreenCam tutorials. which includes PowerPoint slide outlines of each chapter. Projects (Chapter 4) are used to implement change in a firm be it a change in strategy. focuses on the design of internal processes. expands our focus to the entire distribution system from the sourcing of material and other resources to the distribution jac24021_fm_i-xxxvi. Six Sigma Quality is the topic of Chap- ter 12. location of facilities. building a new plant would be a long-term decision that a firm would need to be happy with for 10 to 15 years into the future. procurement. At the other extreme. covers the techniques required to actually run the system. products. Material Requirements Planning (Chapter 21). The basic building blocks are Forecasting (Chapter 18). and Workcenter Scheduling (Chapter 22). Here we have selected two types of businesses. Health Care (Chapter 24) and Operations Consulting (Chapter 25). a growing segment of the world economy. This is at the heart of OSCM. xvi PREFACE of products and services. we know that many of those interested in OSCM are also interested in consulting as a profession. Often these decisions correspond to yearly model changes and seasonal business cycles. In the intermediate term are decisions that a company needs to live with for only 3 to 12 months. Coverage of Enterprise Resource Planning Systems is the topic of Chapter 17. jac24021_fm_i-xxxvi.indd xvi 08/12/12 1:16 AM . In addition. These are ideas used by companies throughout the world and are key drivers for efficient and quick-responding supply systems. Sales and Operations Planning (Chapter 19). a business needs to be very good at managing change. only a few days. These daily processes are often partially automated with computer information systems. Such short-term decisions are usually automated using computer programs. We discuss the concepts behind lean manufacturing and just-in-time processes in Chapter 14. For example. a decision about how much inventory for a particular item should be ordered for tomorrow typically has a much shorter planning horizon of a few months or. Section Four. The design of the operation dictates how it needs to be managed. As you can see from this discussion. We know that many of you may be interested in working for hospitals and similar specialized care facilities. this material is all interrelated. or the period of time that the decision maker must consider. in many cases. and distribution. Many different transformation processes are needed to put together a supply chain. There are critical decisions such as: Where should we locate our facility? What equipment should we buy or lease? Should we outsource work or do it in-house? These are the topics of Chapters 15 and 16 that relate to sourcing. In the final section of the book titled Special Topics we show how the concepts in the book are applied to special business situations. Finally. so this book features extensive coverage of decision-making approaches and tools. Making fact-based decisions is what OSCM is all about. because businesses are constantly being presented with new opportunities through new markets. Inventory Management (Chapter 20). titled Supply and Demand Planning and Control. and technologies. A company’s strategy dictates how operations are designed. One useful way to categorize decisions is by the length of the planning horizon. All of these decisions have a direct financial impact on the firm. Helene Caudill. Kyle Cattani. Marie-Laure Bougnol-Potter. Nazim Ahmed. and Wayne Winston of the ODT department at the Kelley School of Business. Nicholas Leifker. Sanjeev Bordoloi. Weber State University. Seb Hesse. DePaul University. Marijane Hancock. Paul Hong. Hampton University. Chen-Hua Chung. Florida International University. University of Tennessee. Dongli Zhang. University of Nebraska-Lincoln.indd xvii 08/12/12 1:16 AM . Robert F. Art Duhaime. University of Wisconsin–Oshkosh. Goker Aydin. Uni- versity of Cincinnati. Pittsburgh State University. Athens State University. Rotterdam. and it has been a pleasure working with him on this edition. Thomas. Augustana College. We also wish to thank the following individuals whose input over past editions has helped the book to evolve to its present form: Ajay Aggarwal. Edward’s University. Steven A. Univer- sity of Arkansas. John Fisher College. Richard Morris. Jonathan Furdek. Sundararaghavan of University of Toledo updated the test bank and prepared the PowerPoint slides. Craig Hill. Robert H. D. California Polytechnic State University. University of Texas at Austin. Nichols College. Jr. University of New Mexico. San Francisco State University.. Chris Ellis. Indiana University. The Ohio State University. Godfrey. Farzaneh Fazel. Michael R. Ash Soni. for all the time spent discussing ideas. Bruce Christensen. Frank Barnes. David Cook. University of Central Oklahoma. Saba Bahouth. Mary Holcomb. University of Kentucky. Paul had many great ideas for the book. Millsaps College. We are pleased to thank the following individuals: Rhonda Lummus of Indiana University for her many ideas for improving the material in the book. who prepared the new end-of-chapter questions and the Solutions Manual. Doug Blocher. Ajay Das. ACKNOWLEDGMENTS Many very talented scholars have made major contributions to specific chapters in this edition of the book. Yourstone. Rex Cutshall of Indiana University and Greg DeYong prepared the ScreenCam tutorials. Ap- palachian State University. Bryant College. Sridhar Seshadri. Western Michigan University. Fordham University. Ardeshir Lohrasbi. Uni- versity of Iowa. Xavier University. P. Eddie Davila. Arkansas State University. Dan- iel Heiser. University of Illinois–Springfield. Paul Schikora of Indiana State University. University of Cincinnati. Texas A&M Univer- sity. Univer- sity of Illinois. George Washington University School of Business. Yasemin Askoy. Georgia State University. Cleve- land State University. St. Ball State University. Tim Fry. Uday Apte. Susan Cholette. Georgia State University. We wish to express our gratitude to the reviewers of the thirteenth edition who provided many helpful suggestions for this fourteenth edition: Tony Arreola-Risa. Purdue University–Calumet. Simons. Theodore S. Glickman. Ruth Seiple. Chris Albright. Illinois State University. Jacob V. and we appreciate the efforts that make teaching the course easier for everyone who uses the text. University xvii jac24021_fm_i-xxxvi. University of Nebraska–Lincoln. University of St. Bill Cosgrove. Kubec. Schniederjans. Greg DeYong of University of Michigan— Flint. St. Marc J. Erasmus University. Arizona State University. Craig Froehle. Xin James He. Dinesh Dave. Nicoleta Maghear. Baruch College. Mark Ferguson. David Alexander. John Aloysius. Yih-Long Chang. Chen. who spent countless hours checking problems and proofing the manuscript. Park University. Henry Crouch. Halemane. Conti. Fairfield University. University of North Carolina–Charlotte. Qingyu Zhang. Injazz J. Greinier. Michael Essary. Georgia Institute of Technology. James Ho. Tulane Univer- sity. Florida Atlantic Uni- versity. Renato de Matta. Gilvan Souza. Fairleigh Dickinson University. Zhaobo Wang. Naval Postgraduate School. Georgia Institute of Technology. Georgia Southern University. University of South Carolina. Cincinnati. DePaul University. Joy Field. Boston College. Chicago. Lori Cook. Joseph B. University of Texas. Ravi Chinta. Uttarayan Bagchi. M. Angelo State University. Steven Dickstein. Old Dominion Univer- sity. Ravi Behara. Supplements are a great deal of work to write. University of Western Alabama. University of Wisconsin–Stout. University College. Indiana State University. Arvinder Loomba. Kent State University. Jeremy Stafford. University of Akron. Seiple. Enjoy your retirement. Thomas Hayward. Varga. Iowa State University. Sham Kekre. Ward. Souza. Eau Claire. Thunderbird American Graduate School of International Management. Rohit Verma. lead media project manager. Bill L. Sharma Pillutla. Drexel University. production supervisor and senior buyer. Fariborz Partovi. Theresa Wells. Purdue University. Idaho State University. Nagesh Murthy. University of Oregon. Anita Lee Post. Paul Schikora. Joao Neves. Robert Jacobs jac24021_fm_i-xxxvi. Carnegie Mellon University. Ruth A. Paul J. Salt Lake City. Hofstra University. I had the opportunity to work with Nick Aquilano on two editions of the book and with Dick Chase on the past six editions. Vera Tilson. Stewart. University of Colorado–Denver. Seung-Lae Kim. xviii ACKNOWLEDGMENTS of Toledo. Blair Berkeley. George Washington University. California State University. Harm-Jan Steenhuis. Cornell Hotel School. University of Arizona. San Diego State University. including Mahesh Nagarajan. John Jensen. Kaushik Sengupta. David Lewis. University of North Carolina–Wilmington. University of Maryland. Donna H. David Levy. Arizona State University. Edie K. University of Southern Maine. James Stewart. Kuzdrall. University of North Florida. Buchi Felix Offodile. Jian Li. Vinod Lall. and Daryl Horrocks. University of British Columbia. I want to thank my past co-authors Dick Chase and Nick Aquilano for giving me the opportunity to work with them on their book for the past 16 years. Alysse Morton. Wayne Johannson. Don Smith. University of Wisconsin. University of New Mexico. Ronald Tibben- Lembke. San Jose State University. College of New Jersey. Case Western Reserve University. Tekle Wanorie. Gregory Stock. Kimberly Snyder. Purdue University. F. Eddy Patuwo. Frank Montabon. Finally. West Virginia University Institute of Technology. Drew Rosen. Northern Illinois University. Winona State University. Minnesota State University. We also want to thank former doctoral students who have contributed to the book over the years. Vicente A. Carl Steiner. University of Kentucky. Patrick McDonald. Purdue University. Eastern Washington University. Lowell. Willard Price. marketing manager. Northeastern Illinois University. Anderas Soteriou. Georgia State University. Schmidt. Florida Atlantic University. Matt Baldwin. They have been an inspiration to me and wonderful colleagues. Thanks to the McGraw-Hill/Irwin marketing and production team who make this possible—Heather Kazakoff. Peter Zhang. but they are still engaged in many creative activities. University of San Diego. University of Cyprus. University of Maryland. Dana Pauley. Thanks for the patience. Zinovy Radovilsky. senior project manager. Roy Nersesian. Lafayette. University of North Alabama. Michael McCormick. Hsiu-Yueh Hsu. Shrikant Panwalkar. University of Louisiana. Towson University. Kent State University. Ina Van Loo. Deborah Kellogg. California State University–San Bernardino. Jay Varzandeh. Yuehwern Yih. Gilvan C. Özgür Özlük. Mehdi Kaighobadi. and Jason Niggley. Northwest Missouri State. We sincerely appreciate the dedication of our new editor and senior brand manager. University of Cincinnati. San Diego State University. Hiroshi Ochiumi. San Francisco State Uni- versity. Rahul Kale. University of Utah. lead designer. and Bill Youngdahl. University of Illinois– Chicago. Douglas Stewart. Fullerton. University of Northern Iowa. G. It’s great working with you. Sue Siferd. Bellevue University. Marie Matta. University of the Pacific. University of Massachusetts. Moorhead. Helio Yang. University of Nevada–Reno. you both deserve it. California State University–Los Angeles. has done a great job editing our scribbling and nudging us to hit those due dates. Fred Raafat. Drexel Univer- sity. Both Nick and Dick have now retired from writing the book. California State Uni- versity–East Bay. our new development editor. Monmouth University. Dennis Krumwiede. Douglas Reiner. and the managing director.indd xviii 08/12/12 1:16 AM . Andru Peters. Kaylee Putbrese. USC. These learning objectives define the major sections of each chapter. The second objective is the increased focus on supply chain analytics. They include Starbucks. Supply Chain Processes. The key themes of operations strategy. These new Analytics Exercises use settings that are modern and familiar to students taking the course. We have done this in two major ways. Toyota. we have written a series of eleven Analytics Exercises that are spread through the chapters. we include this topic in the first section as well. In this new edition. Since most strategic plans are implemented using projects. to support decisions. The section introduces the ways that manufacturing and service systems are organized and includes new Analytics Exercises for assembly line design and queuing. cell phones. notebook computers. and industrial products that are sourced from China/ Taiwan and sold globally. First. In the project management chapter. Strategic Capacity Management. the Design of Products and Services. Sup- ply and Demand Planning and Control. Software allowed query and “drill down” analysis to the level of the individual transaction. we have reorganized the material in the book by integrating the strategic and analytic material. product design to support the strategy. The new “analytics” movement takes this to a new level using statistical analysis. our chapters cover Strategy. possibly in real time. The third section. our goal is to recapture this spirit of using integrated analytic and strategic criteria in making operations and supply chain decisions. and even optimization. and Capacity. Supply chain analytics involve the analysis of data to better solve business problems. forecasting to extrapolate what to expect in the future. The analytic models involved with location/transportation are included here. and Learning Curves. useful features for understanding what happened in the past. First. The book has been reorganized into five major sections: Strategy. Products. and Capacity. Project Management. Supply Chain Processes. Strategy. which include concepts and problems. We recognize that this is not really a new concept since data has always been used to solve business problems. a retail website-based company.indd xix 08/12/12 1:16 AM . Manufacturing and Service Processes. The Six Sigma and Statistical Quality Control chapters cover topics that would be appropriate for a green-belt program and include good coverage of the popular value-stream mapping technique. Eight of the eleven exercises are totally new in this edition. and strategic capacity are a good foundation for learning about operations and supply chain management. most analysis involved the generation of standard and ad hoc reports that summarized the current state of the firm. Decision making was typically left to the decision maker based on judgment or simply being alert to rules. discusses processes that source material for internal operations and then distribute products to the customers. are now included. In the past. But what is new is the reality that there is so much more data now available for decision making. gets into the nuts and bolts of operations management. The many new questions added to each chapter are all available for use in Connect ®. Products. each chapter is now organized around a short set of learning objectives. Manufacturing and Service Processes. In the first section. and Special Topics. NOTE TO INSTRUCTORS DISCUSSION OF FOURTEENTH EDITION REVISIONS The revisions to the fourteenth edition have been driven by two major objectives. we introduce a good amount of material on product design through examples and exercises. emphasizing the strategic importance of these projects to the success of the firm. the automated assignment grading system available to adopters of the book. Our strategy is to weave analytics into the managerial material so that students see the important role of data analysis in making operations and supply chain management decisions. The topics are tied together in the Lean Supply xix jac24021_fm_i-xxxvi. A complete set of Discussion Questions together with new Objective Questions. Taco Bell Restaurant. The second section. Next. We also include a chapter on the Theory of Constraints. covers the techniques that are typically implemented in Enterprise Resource Planning Systems. a set of thought-provoking concepts. which offers guidance on socially jac24021_fm_i-xxxvi. A new section on assessing the risk associated with operations and supply chain strategies now includes material on categorizing risk and a risk management process. The first is Health Care. The Simulation appendix that was included in the last edition has been removed. The chapter now includes concise coverage of simple simulations that can be developed with spreadsheets. These include Forecast- ing. Finally. with the majority of our material on hospital and special care facilities. The following are a list of the major revisions in selected chapters: • Chapter 1 Introduction to operations and supply chain management—Here our focus on integrating analytics is introduced in the opening section. and the explanation of assembly line balancing has been revised. • Chapters 7 and 8 Manufacturing Processes and Facility Layout—The “positioning inventory in the supply chain” (decoupling point) exhibit has been changed to make it easier to understand. An interesting Analytics Exercise where students must compare similar companies relative to their efficiency is now included in the chapter. There are a series of changes in the project and students are asked to assess the impact of these changes. The material has been expanded to show the leveraging impact of a reduction in the cost of raw material on profit and return on investment. the fifth section titled Special Topics covers two industries where operations and supply chain management concepts are being applied with great success. and students should be able to see how these models can be applied to many real-world settings. We have made a number of other changes to better explain the history of the topic and its tie to em- ployment opportunities. We have written a new Analytics Exercise that is much better than the old one. • Chapters 12 and 13 Six Sigma Quality and Statistical Quality Control—Information on ISO standards are updated to include ISO 26000. The last change involves a complete flipping of the project in which vendors are selected at the beginning of the project and work directly with project teams to its completion (much like Apple designs the iPhone). We also discuss Operations Consulting since this is an area where many of our students find jobs. The problem is set up in a general way. xx NOTE TO INSTRUCTORS Chain chapter. but the tasks and the design of the initial network are much easier to understand. We have moved and expanded the material on how Wall Street measures efficiency. which now stresses the cost versus disruption risk trade-offs that are involved in such tactics as single sourcing and just-in-time inventory. We include more examples and better explanations of order winning and qualifying criteria to help students better understand these important concepts. Inventory Management. • Chapter 2 Strategy—We have written a new introduction that shows how many companies are expanding their focus beyond just making a profit. and Workcenter Scheduling. Material Requirements Planning. which was in the strategy chapter. • Chapters 9 and 10 Service Processes and Waiting Line Analysis and Simulation— A new Analytics Exercise has been added to the Waiting Line chapter. • Chapter 5 Strategic Capacity Management—A new and much clearer summary of strategic capacity planning has been added to the chapter. The scenario is a Taco Bell drive-thru where the students are asked to analyze the system using queuing models. The theme is still cell phone design.indd xx 08/12/12 1:16 AM . Many new problems have been added to the chapter. Supply and Demand Planning and Control. The fourth section. Many new problems have been added to these chapters. to this chapter. Sales and Operations Planning. and a completely revised Analytics Exercise is included that involves the design of a notebook computer assembly line. • Chapter 4 Project Management—The vignette has been changed and describes how a Chinese construction company builds 30-story hotels in only 15 days. We have put much work into improving the explanations of the models in the chapter and have added a new solved problem. Based on feedback from reviewers. An example of a “freeze window” has been included in the “Lean Production Schedules” section. • Chapter l5 Logistics. and other factors.com” was added that discusses a new startup company that sells custom sweaters on a website. • Chapter 21 Materials Requirements Planning—A new opening vignette that shows the bill of materials for the iPad was added to this chapter.indd xxi 08/12/12 1:16 AM . • Chapter 20 Inventory Management—A new Analytics Exercise titled “Inventory Management at Big10Sweaters. Decisions related to purchasing the sweaters from an overseas supplier need to be made prior to the start of football season. We have revised the material on using lean concepts to explain how the differences in uncertainty and variability are much more difficult to control in the services field than they are in manufacturing. NOTE TO INSTRUCTORS xxi responsible behavior. and Transportation—A new opening vignette that describes the logistics operations of a global cement company has been added. Costs related to the shipping of large and small containers of items. The material is fresh and relates to the significant forecasting challenges a growing company like Starbucks has. Ten new problems were also added to the chapter. and packing efficiency are considered in the case. risk of doing business in a particular region of the world. The vignette highlights the impact of logistics on the goals the company has related to sustainability. This includes data on the cost of the various items needed to build the iPad. Some additional material has been added to the “Total Cost of Ownership” section that discusses other factors that may need to be considered including exchange rates. starting with simpler time series analysis. and. An all new Analytics Exercise replaces the Hank Kolb Case and relates to the issues that Toyota has dealt with in its recent recalls. • Chapter 16 Global Sourcing and Procurement—The opening vignette is new and is about the cost of batteries for electric cars. the material has been reorganized.” This gives a better flow where “Master Production Scheduling” immediately precedes the start of the MRP logic material. The case involves shipping goods from suppliers in China and Taiwan to a distribution center in the United States. The value-stream mapping material has been streamlined a little. The vignette also describes how this reduction makes companies vulnerable to disruptions in the supply chains. running consolidation centers. progressing to linear regression. and the second is a capability analysis for a part in the accelerator pedal mechanism used in cars. which is tied to a new Analytics Exercise at the end of the chapter. jac24021_fm_i-xxxvi. Distribution. A new Analytics Exercise has been added that involves the location of U. Brunswick Motors was converted to an Analytics Exercise. decomposition of time series. • Chapter 17 Enterprise Resource Planning Systems—This chapter has been totally rewritten and it is now less centered on SAP and includes material on “cloud” technologies. • Chapter 14 Lean Supply Chains—The opening vignette is new and shows how dramatically inventories have been reduced by companies over the past 20 years. This exercise and the one used in Chapter 15 are related. The first part deals with managerial issues and processes that Toyota has changed in reaction to the problem. A new solved problem was also added to the chapter. distribution centers for an industrial supplier. A new Analytics Exercise centered on Global Sourcing Decisions is included in the chapter. • Chapter 19 Sales and Operations Planning—The Bradford Manufacturing Case has been updated to an Analytics Exercise. error measurement.S. The use of regression for locating facilities has been revised to make the example more understandable. The material was resequenced by moving “Where MRP Can Be Used” ahead of “Master Production Scheduling. • Chapter 18 Forecasting—We have a new opening vignette on Starbucks. finally. Some changes were made to the exhibits to make them easier to understand. and assignment grading to make classroom management more efficient than ever. McGraw-Hill Connect ® Operations Man- agement helps prepare students for their future by enabling faster learning. xxii NOTE TO INSTRUCTORS • Chapters 22 and 23 Workcenter Scheduling and Theory of Constraints—We have updated these chapters to the new Learning Objectives format and have added three new solved problems together with many new Discussion and Objective Questions. student progress reporting. jac24021_fm_i-xxxvi. students can engage with their coursework anytime and anywhere.H I L L C O N N E C T ® O P E R AT I O N S MANAGEMENT L e s s M a n a g i n g . McGraw-HiII Connect® Operations Management Features Connect ® Operations Management offers a number of powerful operations management tools and features to make managing assignments easier. so faculty can spend more time teaching. F. manually change grades or leave comments for students to review. and higher retention of knowledge. giving students immediate feedback on their work and side-by-side comparisons with correct answers. Robert Jacobs November 2012 M c G R AW .indd xxii 08/12/12 1:16 AM . Greater Learning. where they need it. M o r e Te a c h i n g . • Reinforce classroom concepts with practice tests and instant quizzes. McGraw-Hill Connect ® Operations Management is an online assignment and assessment solution that connects students with the tools and resources TM they’ll need to achieve success. • Streamline lesson planning. • Go paperless with the eBook and online submission and grading of student assignments. • Chapters 24 and 25 Health Care and Operations Consulting—We have included a new opening vignette that covers Health Care optimization to the former and have added many new Discussion and Objective Questions to both chapters. With Connect Operations Management. The grading function enables you to: • Have assignments scored automatically. Smart Grading When it comes to studying. • Access and review each response. Connect ® Operations Management offers you the features described below. more efficient studying. making the learning process more accessible and efficient. creating assignments is easier than ever. Simple Assignment Management With Connect ® Operations Management. so you can spend more time teaching and less time managing. time is precious. The assignment management function enables you to: • Create and deliver assignments easily with selectable end-of-chapter questions and test bank items. When it comes to teaching. your time is also precious. Connect ® Operations Management helps students learn more efficiently by providing feedback and practice material when they need it. • Record and index PowerPoint presentations and anything shown on your computer so it is easily searchable. not the tops of their heads. • Offer access to lectures anytime and anywhere by computer. section. such as AACSB and AICPA. • Provides instant practice material and study questions. • Adapts automatically to each student. The result for every student is the fastest path to mastery of the chapter concepts. jac24021_fm_i-xxxvi. NOTE TO INSTRUCTORS xxiii Instructor Library The Connect ® Operations Management Instructor Library is your repository for additional resources to improve student engagement in and out of class. eBooks. Lecture Capture will make it more likely you will see students’ faces. Lecture Capture enables you to: • Record and distribute your lecture with a click of a button.indd xxiii 08/12/12 1:16 AM . assessment. • Enables you to assess which concepts students have efficiently learned on their own. frame by frame. while reducing time devoted to the concepts already mastered. Diagnostic and Adaptive Learning of Concepts: LearnSmart Students want to make the best use of their study time. For an additional charge Lecture Capture offers new ways for students to focus on the in-class discussion. and more. The Student Study Center: • Offers students quick access to lectures. LearnSmart: • Applies an intelligent concept engine to identify the relationships between concepts and to serve new concepts to each student only when he or she is ready. The progress-tracking function enables you to: • View scored work immediately and track individual or group performance with assignment and grade reports. practice materials. but gives only as much guidance as students need. Learn- Smart’s intelligent software adapts to every student response and automatically delivers concepts that will advance the student’s understanding. knowing they can revisit important topics later. • Collect data and generate reports required by many accreditation organizations. The LearnSmart adaptive self-study technology within Connect ® Operations Management provides students with a seamless com- bination of practice. S t u d e n t P r o g r e s s Tr a c k i n g Connect ® Operations Management keeps instructors informed about how each student. and class is performing. Lecture Capture Increase the attention paid to lecture discussion by decreasing the attention paid to note taking. and remediation for every concept in the textbook. • Provides continual reinforcement and remediation. • Access an instant view of student or class performance relative to learning objectives. Student Study Center The Connect ® Operations Management Student Study Center is the place for students to access additional resources. allowing for more productive use of lecture and office hours. iPod. or mobile device. • Increase intent listening and class participation by easing students’ concerns about note taking. thus freeing class time for more applications and discussion. so students spend less time on the topics they understand and practice more on those they have yet to master. • Integrates diagnostics as part of the learning experience. easily accessible on the go. You can select and use any asset that enhances your lecture. yet powerful solution.com. or contact your local McGraw-Hill sales representative. hear. For more information about Connect. Students can replay any part of any class with easy-to-use browser-based viewing on a PC or Mac. This helps students efficiently find what they need. This state-of-the-art. allowing for anytime. TEGRITY CAMPUS: LECTURES 24/7 Tegrity Campus is a service that makes class time available 24/7 by automatically capturing every lecture in a searchable format for students to review as they study and complete assignments. studies prove it. Connect® Plus Operations Management provides all of the Connect Operations Management features plus the following: • An integrated eBook. students quickly recall key moments by using Tegrity Campus’s unique search feature.com and search by title. With a simple one- click start-and-stop process. or ISBN. • A powerful search function to pinpoint and connect key concepts in a snap. thoroughly tested system supports you in preparing students for the world that awaits. • Dynamic links between the problems or questions you assign to your students and the location in the eBook where that problem or question is covered. Help turn all your students’ study time into learning moments. and student learning. you capture all computer screens and corresponding audio. anywhere access to the textbook. In fact. teaching.com.mcgrawhillconnect. jac24021_fm_i-xxxvi. when they need it. Try a free chapter to see if it’s right for you. immediately supported by your lecture To learn more about Tegrity watch a 2-minute Flash demo at http://tegritycampus. go to www. At CourseSmart you can save up to 50 percent of the cost of your print textbook. and experience class resources.CourseSmart. Operations and Supply Chain Manage- ment is designed specifically to support your assurance of learning initiatives with a simple. Connect ® Operations Management also offers a wealth of content resources for both instructors and students. COURSESMART CourseSmart is a new way to find and buy eTextbooks.indd xxiv 08/12/12 1:16 AM . Visit www. enabling you to focus on course content. With Tegrity Campus. reduce your impact on the environment. the better they learn. and gain access to powerful web tools for learning. Connect ® Operations Management offers you and your students powerful tools and features that will optimize your time and energies. xxiv NOTE TO INSTRUCTORS McGraw-Hill Connect® Plus Operations Management McGraw-Hill reinvents the textbook learning experience for the operations management modern student with Connect® Plus Operations Management. In short. an important element of some accreditation standards. ASSURANCE OF LEARNING READY Many educational institutions today are focused on the notion of assurance of learning.mhhe. across an entire semester of class recordings. author. Educators know that the more students can see. A seamless integration of an eBook and Connect® Operations Management. You can then use the reporting features of EZ Test to aggregate student results in a similar fashion. EZ Test and EZ Test Online. jac24021_fm_i-xxxvi. That’s why our services don’t stop after you purchase our products.mhhe. or visit www. NOTE TO INSTRUCTORS xxv Each test bank question for Operations and Supply Chain Management maps to a specific chapter learning objective listed in the text.indd xxv 08/12/12 1:16 AM . You can use our test bank software. e-mail hmsupport@mcgraw-hill. Or you can search our knowledge bank of Frequently Asked Questions on our support website. call 800-331-5094. One of our Technical Support Analysts will be able to assist you in a timely fashion. making the collection and presentation of assurance of learning data simple and easy. For Customer Support.com/support.com. You can e-mail our Product Specialists 24 hours a day to get product-training online.H I L L C U S TO M E R C A R E C O N TA C T I N F O R M AT I O N At McGraw-Hill. or Connect ® Operations Management to easily query for learning objectives that will directly relate to the learning objectives for your course. M c G R AW. we understand that getting the most from new technology can be challenging. “Delivery NET PROFIT OF $845 MILLION. 2011. Walkthrough The following section highlights the key features developed to provide you with the best overall 7 MANUFACTURING PROCESSES text available. with resolution on the scale of tens of micrometers. Technology for printing three-dimensional objects has existed for decades. including ceram- ics and metals such as titanium and aluminum. A UNITED PARCEL SERVICE (UPS) DRIVER DELIVERS PACKAGES IN GLENDALE. New York. perform better. page 129 day. Chapter 18. The to be studied. B6. The company turning three-dimensional printing technology into aims to take advantage of the technology’s poten- a viable means of manufacturing functional parts tial to make parts that are lighter. xxvi jac24021_ch11_262-294. LO7–3 Analyze simple manufacturing processes. Inc. CREATED BY Source: Kevin Bullis.5 paces a second. while also reducing motion and fa- tigue. keyless system in which drivers start their vehicle include: with a fob hooked to their belt. page 262 from computers aboard each truck. COMPARED TO $445 MILLION Drivers to Pick Up Pace by Surrendering Keys. such as in making personalized prosthetics. But the technology has now improved to the point that these printers can make intricate objects out of durable materials. where large numbers of the same part are needed. That automatic door opening saves 1. ies. to keep things moving fast. or even seem to be going out of their way page 442 for lunch. that is devoted to volving health care and aerospace. IS MADE PRACTICAL BY THREE-DIMENSIONAL PRINTING TECHNOLOGY.indd jac24021_ch07_145-165. how often they back up. THE NEW DESIGN.” Technology Review (MIT). learn. Chapter 6. • Starbucks. GE is starting a new lab at its global research head. but its applications have been largely limited to novelty items and specialized custom fabrication. companies such as GE and the Eu- ropean defense and aerospace giant EADS are working to apply it in situations more akin to conventional manufacturing. The data show details such as how much drivers are idle. We hope these features give you Learning Objectives LO7–1 Understand what a manufacturing process is. September 16. The information helps shape new procedures. or 6.. so as not to waste time waiting for a break in oncoming traffic. jac24021_ch07_145-165 copy. for a range of its businesses.indd 146 146 12/7/12 12/6/12 11:52 AM 8:35 PM Opening Vignettes Each chapter opens with a short vignette to set the stage U N I T E D PA R C E L S E R V I C E D R I V E F O R E F F I C I E N C Y and help pique students’ United Parcel Service. WHICH IS JUST AS STRONG BUT WEIGHS HALF AS MUCH. maximum support to LO7–2 Explain how manufacturing processes are organized. A YEAR AGO. and G E A N D E A D S T O P R I N T PA R T S F O R A I R P L A N E S apply operations concepts. The company is “obsessive. And the company requires replace them with a digital-remote fob to turn on the ignition and unlock the bulkhead door.indd 262 12/6/12 8:48 PM jac24021_fm_i-xxxvi. A few examples drivers to walk at a “brisk pace. As a result.75 seconds per stop. T h e Te c h n o l o g y C o u l d b e U s e d t o M a k e P a r t s T h a t P e r f o r m Better and Cost Less. Chapter Opener and cost less than parts made with conventional manufacturing techniques.indd xxvi 08/12/12 1:16 AM . whether they are wearing seatbelts.” OR 44 CENTS. Airplanes. UPS SAID ITS SECOND QUAR TER PROFIT NEARLY DOUBLED POSTING A Source: Adapted from Jennifer Levitz. CALIFORNIA. when drivers return from deliver- • United Parcel Service (UPS).” Each night.5 minutes per driver per • Boeing. designs its delivery routes UPS drivers have had to toss their keys and interest in the material about to avoid left turns.” which it defines as company will save $70 million a year by going to a 2. UPS industrial engineers study data Chapter 11. May 9. “GE and EADS to Print Parts for EADS. OR 84 CENTS A SHARE. 2011. including those in- quarters in Niskayuna. LIGHTER LOAD: A CONVENTIONAL HINGE FOR THE COVER OF A JET ENGINE (TOP) COULD BE REPLACED BY THE MORE INTRICATE ONE AT BOTTOM. The Wall Street Journal. understand. Professor of Surgery at the University of Medicine and munication and patients really like him.” The screen rotates 340 degrees and pivots up and down noted Dr. 2004. Ballantyne. The the room is more personal than a phone call from my • J.3 procedures and techniques. we are providing extra coverage patients might not ordi- Dr. Rounder Is On-Call at to be monitored by the medical center’s Magnet award– Source: Hackensack University Medical Center press release. much of the technical data needed for patient care. run their operations. Rounder also provides access to electronic pa- gate its travels. UCL 5 c 1 zÏ c 5 4 1 3(2) 5 10 _ ___ LCL 5 c 2 zÏ c 5 4 2 3(2) 5 22 0 (Zero is used since it is worked-out solutions for not possible to have a negative number of defects. Physician-to-patient communication is now The Remote Presence Robot (RP-7) from InTouch Health is a mobile telemedicine possible regardless of whether a physician unit that connects physicians and specialists with patients and other doctors in is out of town or out of the country for that real time through computers equipped with cameras and microphones. As you watch Mr. Chapter 8. Garth H. page 298 creating personalized mechanical affectations. “I can view vital signs.staff passing by quickly greet Dr. For a step-by-step walkthrough of this they help students understand SOLUTION __ example.indd 664 12/7/12 12:01 PM topics and demonstrate specific EXAMPLE 13.indd 327 12/7/12 12:06 PM jac24021_fm_i-xxxvi. Ballantyne. jac24021_ch13_316-344 copy. “In essence.com/prhumc.com/ the computations. Ballantyne’s image is displayed on a tient files. M. As part of an initiative to improve the quality and efficiency of patient care. I am now able to connect and see my patients office anytime of the day via a laptop computer connected when family members are visiting. you’re lying in bed or expansions of the topics and the nurse informs you the doctor will be in shortly. c 5 4. blood tests— Initial Quality Study of New flat-screen computer monitor mounted on top of the robot. is the first to “test drive” enthusiastic response. QR codes provide links to the step-by-step content. A series of detailed. sp 5 Ï c 5 2 _ ___ jacobs14e_sbs_ch13. Driving the robot into to the Internet via broadband and a wireless network.” said Dr. Rounder. leading companies practicing Not because the doctor is there as promised. December winning nursing staff.pdf. page 15 as part of the services available to patients. Ballantyne is able to make his rounds off-site or from his narily get. D. which provides another level of detailed support for students. page 174 Mr.” dubbed affectionately by staff. Rounder humming Cars. Dr. Assembly Line?. It provides virtual com.” Mr.indd xxvii 08/12/12 1:17 AM . of four knotholes per 8-foot board. For their medium-quality boards they expect an average Clearly set off from the text. Hackensack University Medical Center. WALKTHROUGH xxvii OSCM AT WORK OSCM at Work Boxes Mr. Chapter 24.mhhe. page 664 Examples with Solutions Examples follow quantitative jac24021_ch24_652-669 copy. CT scans. you get a sense he’s become a famil- the patient and surroundings through a video camera iar face around Hackensack University Medical Center as located above the monitor allowing live interactive com. Count. chief of Minimally Invasive Surgery at the medical center and “The robot is remarkably personal. 4 inches and 215 pounds and you can’t believe your eyes. Sure enough presented by highlighting in rolls your doctor. Ballantyne. visit www. www.office. Rounder at Hackensack University Medical Center.D. Of course in the meantime. “Mr. Power and Associates robot has a two-way video and 24 infrared sensors to navi. breakthrough ways to remote-controlled adult-sized robot. _ _ For this problem. Ballantyne as though munication. Design a control chart for use by the person receiving the boards using three-sigma (standard deviation) limits. the medical center introduced • Efficiency: It’s the Details That InTouch Health’s RP-6 for Remote Presence. Chapter 1. but because your doctor is housed within a new. Good news—just the person you’re hoping to see will be in soon. The owners of a lumberyard want to design a control chart to monitor the quality of 2 3 4 boards that come from their supplier. Examples The sophisticated mechanical physician include: made its debut at Hackensack University Medical Center. Chapter 12. It has received an Dentistry of New Jersey (UMDNJ). patients continue he’s really there—physically that is! • Mr.intouchhealth. Does this sound a bit like science fiction? It isn’t.) every example in the text can be found on the text website. He views through the halls. • What’s It Like Working on an matter.. all 5 feet. Rounder Is On-Call at Hackensack University Medical Center The boxes provide examples It’s the day after surgery. Strategy Process Process icons identify material that describes how things are done.mhhe. worked-out For a step-by-step walkthrough of this solutions on the text website. Excel Excel icons point out concepts where Excel templates are available on the text website. Analytics Process Analytics icons identify content that ties decision models to relevant data.mhhe. xxviii WALKTHROUGH Strategy Strategy icons are used to highlight material that describes alternative approaches that usually involve trade-offs.indd xxviii 08/12/12 1:17 AM . To view a tutorial on break-even analysis. jac24021_ch11_262-294. jac24021_fm_i-xxxvi. Analytics Step by Step Every example and solved problem in the book includes a step-by-step QR code.com/ jacobs14e_tutorial_ch07. visit www.com/jacobs14e Tutorials The tutorial QR codes direct students to the ScreenCam tutorials on the text website.indd 274 12/6/12 8:49 PM For the excel template. please visit www.mhhe. example. visit www.com/ jacobs14e_sbs_ch11. These draw students’ attention and provide students with a direct link to detailed. Many of the photos illustrate additional examples of companies that utilize the operations and supply chain concepts in their business. KEY IDEA Individual learning can vary greatly across different employees. Low— one-of-a-kind Mass Customization Project Product Workcenter Manufacturing Standardization Cell Assembly Line Continuous High— Process standardized Inefficient commodity Processes product Low Product Volume High Key Ideas Important points in the text are called out and summarized in the margins. jac24021_fm_i-xxxvi. WALKTHROUGH xxix Photos and Exhibits Over 60 photos and 200 exhibits are included in the text to enhance the visual appeal and clarify text discussions.indd xxix 08/12/12 1:17 AM . This can create challenges when estimating expected production rates. xxx WALKTHROUGH Solved Problems Representative problems are placed at the end of appropriate SOLVED PROBLEM 2 chapters. Each includes a Items purchased from a vendor cost $20 each, and the forecast for next year’s demand is 1,000 worked-out solution, giving units. If it costs $5 every time an order is placed for more units and the storage cost is $4 per unit per year, students a review before solving a. What quantity should be ordered each time? problems on their own. b. What is the total ordering cost for a year? c. What is the total storage cost for a year? Solution a. The quantity to be ordered each time is _____ _________ Ï 2(1,000)5 Ï Q 5 ____2DS 5 _________ 5 50 units H 4 b. The total ordering cost for a year is 1,000 D S 5 _____ __ ($5) 5 $100 Q 50 c. The storage cost for a year is Q __ 50 ($4) 5 $100 H 5 ___ 2 2 Concept Connections The Concept Connections grid appears at the end of every chapter. This tool draws students’ attention to the main points, key terms, and formulas for each learning objective. The organization of the Concept Connections gives students a quick and effective reference when applying the chapter content. CONCEPT CONNECTIONS LO10–1 Understand what a waiting line problem is. Summary jac24021_ch20_513-555.indd 541 12/6/12 9:23 PM The study of waiting in line is the essence of this problem. Queuing theory is the mathematical analysis of the waiting line. A queuing (or waiting line) system is decomposed into three major parts: (1) the customers arriving to the system, (2) the servicing of the customers, and (3) how customers exit the system. Queuing theory assumes that customers arrive according to a Poisson arrival distribution and are served according to an exponential service time distribution. These are specific probability distributions that often match well with actual situations. Key Terms Queues, 222 Arrival rate, 225 Poisson distribution, 226 Queuing system, 223 Exponential distribution, 225 Service rate, 228 Key Formulas Exponential distribution Poisson distribution (!T )ne2!T [10.1] f (t) 5 !e2!t [10.2] PT (n) 5 ________ n! jac24021_fm_i-xxxvi.indd xxx 08/12/12 1:17 AM WALKTHROUGH xxxi Practice Exam The Practice Exams are designed to allow students to see how well they understand the material using a format that is similar to what they might see in an exam. This feature includes many straightforward review questions, but also has a selection that tests for mastery and integration/application level understanding, i.e., the kind of questions that make an exam challenging. The practice exams include short answers at the bottom so students can see how they perform. Practice Exam 1. This is the currently used term for a system that schedules, 7. For a single machine scheduling problem, what prior- dispatches, tracks, monitors, and controls production. ity rule guarantees that the average (mean) flow time is 2. This is when work is assigned to workcenters based minimized? simply on when it is needed. Resources required to 8. Consider the following three jobs that need to be run complete the work are not considered. on two machines in sequence: A(3 1), B(2 2), and 3. This is when detailed schedules are constructed that C(1 3), where the run times on the first and second consider setup and run times required for each order. machine are given in parenthesis. In what order should 4. This is when work is scheduled from a point in time the jobs be run to minimize the total time to complete and out into the future, in essence telling the earliest all three jobs? the work can be completed. 9. According to APICS, this is a system for utilizing data 5. This is when work is scheduled in reverse from a future from the shop as well as data processing files to main- due date, to tell the time original work must be started. tain and communicate status information on shop or- 6. If we were to coin the phrase “dual constrained” rela- ders and workcenters. tive to the resources being scheduled, we would prob- 10. A resource that limits the output of a process by limit- ably be referring to what two resources? ing capacity is called this. 6. Labor and equipment (machines) 7. Shortest operating time 8. C B A 9. Shop-floor (or production activity) control 10. Bottleneck 1. Manufacturing Execution System 2. Infinite scheduling 3. Finite scheduling 4. Forward scheduling 5. Backward scheduling jac24021_ch22_586-617.indd 617 12/7/12 12:13 PM jac24021_fm_i-xxxvi.indd xxxi 08/12/12 1:17 AM xxxii WALKTHROUGH Text Website The text website, our Online Learning Center (OLC), can be found at www.mhhe.com/jacobs14e. It includes a variety of material to help students succeed in the course. These assets include: • Excel templates • Online quizzes • PowerPoint presentations • Step-by-step solutions to examples • ScreenCam tutorials • Chapter outlines • Updates to the text • Interactive Operations Management • Web links jac24021_fm_i-xxxvi.indd xxxii 08/12/12 1:17 AM WALKTHROUGH xxxiii Student Website Online quizzes Excel templates ScreenCam tutorials Chapter outlines Step-by-step solutions to text examples Updates to the text Interactive Operations Management Instructor Site Instructor’s Resource Manual Test Bank Instructor PowerPoint Slides Instructor Solutions Manual Map to Harvard Cases OSCM Framework PowerPoints OMC The Operations Management Center at www.mhhe.com/pom offers a wealth of edited and organized OM resources including links to Operations Management BusinessWeek articles, OM Organizations, and virtual tours of operations in real companies. jac25227_fm_i-xxxvi.indd xxiv 2/10/ jac24021_fm_i-xxxvi.indd xxxiii 08/12/12 1:17 AM 12/6/12 10:39 PM jac25227_fm_i-xxxvi. If demand is between 640 (point B) and 2.000 units. The total cost for each option is Purchase cost 5 $200 3 Demand Produce-using-lathe cost 5 $80. or it can make the break-even analysis. There is negligible fixed www. jac24021_fm_i-xxxvi.000 1 $75 3 Demand Produce-using-machining-center cost 5 $200.com/ SOLUTION jacobs14e_sbs_ch07. the machine center is the best choice because this would result in the lowest total cost. visit www.indd xxvi Exhibit 7.mhhe. the most economical course is to buy the product. If demand is expected2/10/10to be7:43:47 more PM than 2. the semiautomatic lathe is the cheapest. Whether we approach the solution to this problem as cost minimization or profit maximiza- tion really makes no difference as long as the revenue function is the same for all alternatives.000 units (point A).000 1 $15 3 Demand For a step-by-step walkthrough of this example.000. costs $200.000. xxxiv WALKTHROUGH ScreenCam Tutorials These screen “movies” and voice-over tutorials demonstrate chapter content using Excel and other software platforms. and a machining center jacobs14e_tutorial_ch07. it can make the part on a numeri- To view a tutorial on cally controlled semiautomatic lathe at $75 per unit (including materials).mhhe. visit part on a machining center at $15 per unit (including materials).3 shows the break-even point for each process.1: Break-Even Analysis Suppose a manufacturer has identified the following options for obtaining a machined part: It can buy the part at $200 per unit (including materials). If demand is less than 640 (between 0 and point B). EXAMPLE 7. a semiautomatic lathe costs $80.com/ cost if the item is purchased.indd xxxiv 08/12/12 10:39 12/6/12 1:17 PM AM . mhhe.indd xxxv 08/12/12 1:17 AM .com/jacobs14e. visit www. WALKTHROUGH xxxv Excel An icon in the margin indicates there is a spreadsheet available on the text website. jac24021_fm_i-xxxvi. For the Excel template. 21 Apple’s iPod Has It’s Own Product Development Team 22 What Is Project Management? Project defined Project management defined 23 Structuring Projects Pure Project Pure project defined Functional Project Functional project defined Matrix Project Matrix project defined 26 Work Breakdown Structure Project milestone defined Work breakdown structure defined Activities defined 28 Project Control Charts Gantt chart defined 28 Network-Planning Models Critical Path Method (CPM) Critical path defined Time–Cost Models Immediate predecessor defined Slack time defined Early start schedule defined Late start schedule defined Time–cost models defined 39 Managing Resources Tracking Progress 40 Summary 48 Case: Cell Phone Design Project .jac0330x_ch02. 2.” or reduce the length.qxd 8/21/06 3:56 PM Page 20 CONFIRMING PROOF Chapter 2 PROJECT MANAGEMENT After reading the chapter you will: 1. Know how to determine the “critical path” for a project. of a project. Know the different ways projects can be structured. Know how projects are organized into major subprojects. 4. 5. 3. 6. Know what project management is and why it is important. Know what a project milestone is. Know how to “crash. Apple’s iPod product has been wildly successful due in large part to successful project management efforts.8-inch Toshiba hard drive. The rest of the device uses a dedicated MP3 decoder and controller chip from Portal- Player. a Wolfson Microelectronics Ltd. including portable digital music devices. a flash memory chip from Sharp Electronics Corp. the topic of this chapter. a Texas Instruments 1394 firewire interface controller. hard drive.qxd 8/21/06 3:56 PM Page 21 CONFIRMING PROOF APPLE’S IPOD HAS IT’S OWN PRODUCT DEVELOPMENT TEAM How does Apple develop the innovative products it sells? Apple has two separate product development teams. Apple developed a layered project that relied on a platform created by a third party. PortalPlayer. The subsequent design parameters were dictated by its appearance and form factor. Consumer electronics is a fast moving area and using established experts linked together in what could be called a design chain. The iPod has reinvigorated Apple and its bottom line over the past two years. Working with these partners the iPod design project was completed in a few months of iterative loops. The essential units—battery. including the planar lithium battery from Sony and the 1. and circuit board—are layered. and streaming audio receivers. Managing activities among the multiple partners was extremely difficult since Apple needed to make sure that its suppliers’ development schedules matched the product introduction schedule. and a power management and battery charging integrated circuit from Linear Technologies. California. That outside-in perspective helped determine a number of the components. Apple was able to quickly bring the iPod to market. of Santa Clara. one organized around its Macintosh computer and the other focused on the iPod music player.jac0330x_ch02. one on top of the next. No doubt subsequent versions of the iPod will depend on this dynamic design chain as different components and optimizations are discovered.. general audio systems. Stereo digital-to-analog converter. Much of the underlying iPod design was performed by outside companies. By organizing this way Apple can precisely focus resources on its amazingly successful products. Apple started with a vision of what the player should be and what it should look like. Inc. PortalPlayer had developed a base platform for a variety of audio systems. . process change. management often involves juggling a portfo- lio of projects. As organizations flatten (through reengineering. downsizing. but the projects just do not deliver the expected results. Although projects are often thought to be one-time occurrences. Success in Management” project management is very much an activity that requires careful control of critical resources. Your success at leading a project will spread quickly through the individuals in the team. Projects can be categorized in four major areas: product change. just as important. At the highest levels in an organization. the ability to resolve conflicts as key decision points occur in the project is a critical skill. consultants. for projects. The result will be . and controlling resources (people. We spend much of the time in this book focused on the management of nonhuman resources such as machines and material. cost. Professional project managers are individuals skilled at not only the technical aspects of calculating such things as early start and early finish time but. VI “Project the opening vignette. directing. outsourcing). new marketing plans. . and engineers. and time constraints of the project. the people skills related to motivation. Most companies deal with projects individually—pushing each through the pipeline as quickly and cost-effectively as possible. the fact is that many projects can be repeated or transferred to other settings or products. leading successful projects is the best way to prove your promotability to the people who make promotion decisions. In addition. revisions to old products. There are many different types of projects ranging from the development of totally new products. Without a doubt. Project management can be Project defined as planning. however. what often happens is the projects consuming the most resources have the least connection to the firm’s strategy. well WOW!” —Tom Peters Although most of the material in this chapter focuses on the technical aspects of project management (structuring project networks and calculating the critical path). the fundamental atomic particle from which the new white collar world will be constructed and/or reconstructed. as we see in Vol. Many of these same companies are very good at applying the techniques described in this chapter in a manner where the myriad of tasks are executed flawlessly. A firm should have the right mix of projects that best support a company’s strategy. . equipment. platform (fundamental improvements to existing products). research and development. . Virtually all project work is team work and leading a project involves leading a team. The vital big-picture decision is what mix of projects is best for the organization. more will depend on projects and project leaders to get work done. Human resources are often the most expensive and those people involved in the projects critical to the success of the firm are often the most valuable managers. and alliance and partnership (see Exhibit 2. . Projects should be selected from the following types: derivative (incremental changes such as new product packaging or no-frills versions).1).qxd 8/21/06 3:56 PM Page 22 CONFIRMING PROOF 22 section 1 STRATEGY “The high-impact project is the gem . Worse. material) to management meet the technical. and a vast array of projects for better serving customers and reducing costs. the fundamental nugget .jac0330x_ch02. breakthrough (major changes that create entirely new markets). the management aspects are certainly equally important. the key resource is often our employees’ time. W H AT I S P RO J E C T M A N AG E M E N T ? Project A project may be defined as a series of related jobs usually directed toward some major output and requiring a significant period of time to perform. Projects should be. In this chapter we only scratch the surface in our introduction to the topic of project management. work that previously was handled within departments. We next discuss the strengths and weaknesses of the three main forms. DISADVANTAGES • Duplication of resources. STRUCTURING PROJECTS Before the project starts. out of the three basic project organizational structures. Pure project where a self-contained team works full time on the project.qxd 8/21/06 3:56 PM Page 23 CONFIRMING PROOF PROJECT MANAGEMENT chapter 2 23 Types of Development Projects exhibit 2. They do not have to worry about dividing loyalty with a functional-area manager. Equipment and people are not shared across projects. or matrix project. senior management must decide which of three organizational structures will be used to tie the project to the parent firm: pure project. Peters favors the pure project (nicknamed skunkworks). locomotives. and commitment are high. • Organizational goals and policies are ignored. ADVANTAGES • The project manager has full authority over the project. entrepreneurial center of opportunity. A contractor building houses or a firm producing low-volume products such as supercomputers.1 More Less Change Breakthrough Platform Derivative Projects Projects Projects New core Additional to Product Product Change product product family enhancement New core Process Incremental Process Change process upgrade change Research & New core Technology Incremental Development technology upgrade change Alliance & Outsource Select Incremental Partnership major activity new partner change another project output. motivation. Pure Project Tom Peters predicts that most of the world’s work will be “brainwork. each one an autonomous.jac0330x_ch02. • Lines of communication are shortened. functional project.” done in semiperma- nent networks of small project-oriented teams. where the necessity for speed and flexibility dooms the hierarchical Cross Functional management structures we and our ancestors grew up with. as team members are often both physically and psychologically removed from headquarters. • Team members report to one boss. Thus. . Decisions are made quickly. or linear accelerators can effectively consider these as projects. • Team pride. yielded a phone 53 millimeters wide. it was also a technical challenge. It was a perts had concluded that a phone wider than 49 millimeters skunkworks project whose tight-knit team repeatedly flouted wouldn’t fit well in a person’s hand. The second brainstorm was rearranging the phone’s innards. however.jac0330x_ch02. Money wasn’t an object or a constraint. The new Motorola RAZR was incubated and “hatched” in color. The company sold its 50-millionth RAZR in June 2006! Motorola will sell more RAZRs this year than Apple will iPods. standing ovation. even from their colleagues. There were two key innovations that allowed the team to make quantum leaps in thinness. and so on. The team made its They used materials and techniques Motorola had never tried own model to see how a 53-millimeter phone felt and in the before.” Fortune Magazine. in a con. • Because team members have no functional area home. pri- marily by placing the battery next to the circuit board. but secrecy hit product. The full team met daily at 4 P. they threw out ac. June 1. and project termination is delayed. created a new problem: width. the team members decided on their own that the company cepted models of what a mobile telephone should look and was wrong and that four extra millimeters were acceptable. speaker.M. housing the project within a functional division. and speed were. the team that created the RAZR broke the mold. feel like. in the case of the at a meeting of top executives at company headquarters. That solution. Adapted from “RAZR’S edge. accept the company’s research as gospel. The team prohibited digital pictures of the project so that nothing could be inadvertently disseminated by e-mail. Several key To design the look and feel as well as the internal configuration players from the RAZR development team were asked to appear of a telephone takes a team of specialists. Motorola’s “human factors” ex- less cubicles in Libertyville. The first was placing the antenna in the mouthpiece of the phone instead of at the top. The side-by-side design Motorola’s own company rules for developing new products. But the RAZR team didn’t They kept the project top-secret. B re a k t h ro u g h The Motorola RAZR Cell Phone charger port. Functional Project Functional project At the other end of the project organization spectrum is the functional project. weren’t told why. The “thin clam” project became a rebel The unique design process Motorola’s team used for the new outpost. After contentious internal battles. light source. In short. They RAZR about 20 people. keypad. rather than beneath it. . The Motorola RAZR cell phone was developed using a pure project team (see Break- through box). and display. and in the process rejuvenated the company. one of the key design features they aimed at. 2006. camera. rewarded with a significant bonus of stock options. Scheduled for an hour. delivering a progress as they worked down a checklist of components: an. While this had not been done in cell phones before. battery. the meetings frequently ran past 7 P. Then. as the team members filed in. or internal computer.qxd 8/21/06 3:56 PM Page 24 CONFIRMING PROOF 24 section 1 STRATEGY • The organization falls behind in its knowledge of new technology due to weakened functional divisions. the ference room in Libertyville to hash over the previous day’s Motorola brass awaiting them raised in applause. Models of the phone could leave the premises only when physically carried or accompanied by a team member. they worry about life-after- project. Team members were also told they would be tenna. a northern Chicago suburb.M. end. President Research Engineering Manufacturing Marketing and Development Manager Project A Manager Project B Manager Project C . The project manager (PM) decides what tasks and when they will be performed. “the matrix project. equal. • A critical mass of specialized functional-area experts creates synergystic solutions to a project’s technical problems. Functional specialists can advance vertically. but the functional managers control which people and technologies are used.jac0330x_ch02. This establishes whether project managers have little. or strong form of a matrix is to be used. balanced.qxd 8/21/06 3:56 PM Page 25 CONFIRMING PROOF PROJECT MANAGEMENT chapter 2 25 President Research Engineering Manufacturing and Development Project Project Project Project Project Project Project Project Project A B C D E F G H I ADVANTAGES • A team member can work on several projects. different projects (rows of the matrix) borrow resources from functional areas (columns). Each project utilizes people from different functional areas. DISADVANTAGES • Aspects of the project that are not directly related to the functional area get short- changed. • Motivation of team members is often weak. Senior management must then decide whether a weak. Matrix Project The classic specialized organizational form. or more authority than the functional managers with whom they negoti- ate for resources. • The functional area is a home after the project is completed. • Technical expertise is maintained within the functional area even if individuals leave the project or organization. • Needs of the client are secondary and are responded to slowly. If the matrix form is chosen.” attempts to blend Matrix project properties of functional and pure project structures. the completion of all tasks is required to complete the project. • Policies of the parent organization are followed. After all.2. The SOW may be a written description of the objectives to be achieved.qxd 8/21/06 3:56 PM Page 26 CONFIRMING PROOF 26 section 1 STRATEGY ADVANTAGES • Communication between functional divisions is enhanced. sub- structure tasks. Often the functional manager will be listened to before the project manager. • Suboptimization is a danger. A subtask may be used if needed to further subdivide the project into more meaningful pieces. Exhibit 2. DISADVANTAGES • There are two bosses. • The level at which budget and cost data will be collected during the project. measures of performance. when it is to be started and completed. This increases support for the project. who can promote you or give you a raise? • It is doomed to failure unless the PM has strong negotiating skills. It also could contain performance measures in terms of budget and completion steps (milestones) and the written reports to be supplied. It still falls into the format of all project management. Typical milestones might be the completion of the design. the completed testing of the prototype. the project manager is the primary contact point with the customer. Communication and flexibility are greatly enhanced because one person is responsible for successful completion of the project. as PMs hoard resources for their own project. and specific events to be reached at points in time. A task is a further subdivision of a project. The number of levels will vary depending on the project. the package provides a description of what is to be done. • A project manager is held responsible for successful completion of the project. • Team members have a functional “home” after project completion. the budget.3 shows the WBS for an optical scanner project. The WBS is important in organizing a project because it breaks the project down into manageable pieces. thus harming other projects. and the approval of a pilot run. and work packages. It is usually not longer than several months in duration and is performed by one group or organization. WORK BREAKDOWN STRUCTURE A project starts out as a statement of work (SOW). Completion of one or more work packages results in the completion of a subtask. and finally. How much detail or how many levels to use depends on the following: • The level at which a single individual or organization can be assigned responsibility and accountability for accomplishing the work package. • Duplication of resources is minimized. A work package is a group of activities combined to be assignable to a single organizational unit. Work breakdown The work breakdown structure (WBS) defines the hierarchy of project tasks. Note that regardless of which of the three major organizational forms is used. completion of one or more subtasks results in the completion of a task.jac0330x_ch02. with a brief statement of the work to be done and a proposed schedule specifying the start and completion dates. . so they are less worried about life-after-project than if they were a pure project organization. These spe- Project milestone cific events are called project milestones. A representation of this structure is shown in Exhibit 2. the production of a prototype. 4 Ancillary simulator optical component specification x 1. Activities are defined within the context of the work breakdown structure and are pieces Activities of work that consume time. because there are so many different ways that a project can be approached. Large Optical Scanner Design exhibit 2.1 Overall system firmware and software control x 1.1.2.2 Cost/system performance analysis x 1.4 Cost analysis x 1.5 Management x 1.1 Large optics x 1.2 Work Breakdown Structure.jac0330x_ch02.1.3 Simulator zoom system design x 1.2 Far beam analyzer x 1.1.3 Detectors There is not a single correct WBS for any project.1.1 Subtask 1.1 Telescope design/fab x 1.1 Work package 1.1.3 System inter.2.3 Level 1 2 3 4 x 1 Optical simulator design x 1.2 Target components x 1.2.1.and intra-alignment method design x 1.2 3 Subtask 1.5.1.1.1.2 4 Work package 1.1 Cost/system schedule analysis x 1.4.3 System integration x 1.4 Data recording and reduction requirements x 1.2. Finding the correct way to organize a project depends on experience with the particular task.2 Program management x 1.1.6 Long lead item procurement x 1.4.1. Some experts have referred to project management as an art rather than a science. Activities do not necessarily require the expenditure of effort .6.6.2 Level Program 1 Project 1 Project 2 2 Task 1.2 System performance analysis x 1.1.2 Basic control algorithm design x 1.1 Task 1.2.6.2.5.1 Logic flow diagram generation and analysis x 1.1 System design/engineering management x 1.qxd 8/21/06 3:56 PM Page 27 CONFIRMING PROOF PROJECT MANAGEMENT chapter 2 27 An Example of a Work Breakdown Structure exhibit 2.2 Telescope/simulator optical interface x 1.1 Optical design x 1. and two different project teams might develop different WBSs for the same project. Charts are useful because their visual presentation is easily understood. Project 3 continues to be worked on without interruption.3. The chart is named after Henry L. therefore. material. From our sample project in Exhibit 2.S. the project is done. For example. and data recording (1. For example. Gantt. Its value is its clarity in identifying sources and amounts of cost. and overhead. Computer programs are available to quickly generate the charts described in this section.4B graphs the amounts of money spent on labor. is already late because it still has work to be done. These labor hours are related to the proportion of the project’s total labor cost.4D compares actual total costs and projected costs. Gantt chart Exhibit 2. The dotted vertical line signifies today. but this 50 percent has been allocated just 40 percent of the total labor dollars charged. In the example in Exhibit 2. The bottom of Exhibit 2. The three milestones mark specific points in the project where checks can be made to see if the project is on time and where it should be. “long lead procurement” and “manufacturing schedules” are independent activities and can occur simultaneously.4).2. The best place to locate milestones is at the completion of a major activity. All other activities must be done in the sequence from top to bottom.4D shows the degree of completion of these projects. Since maintenance projects are performed often in Interactive this industry. manufacturing is responsible for 50 percent of the project’s labor hours.” “invoices received.jac0330x_ch02. who won a presidential citation for his application of this type of chart to shipbuilding during World War I. In this exhibit. so there is a space before the projected work.1. Exhibit 2.” and “material received.4E is a milestone chart. The top half of Exhibit 2.4A is a sample Gantt chart.4C shows the percentage of the project’s labor hours that comes from the various areas of manufacturing.1). CPM is based Operations on the assumptions that project activity times can be estimated accurately and that they Management do not vary. showing both the amount of time involved and the sequence in which activities can be performed. The Critical Path Method (CPM) was developed for scheduling maintenance shutdowns at chemical processing plants owned by Du Pont. Activities are identified as part of the WBS. and so on. As we see.4 shows a sample of the available charts. the major activities completed were “purchase order release. Department of Defense (one of the earliest large users of project management) has published a variety of helpful standard forms.” Other standard reports can be used for a more detailed presentation comparing cost to progress (such as cost schedule status report—CSSR) or reports providing the basis for partial payment (such as the earned value report).qxd 8/21/06 3:56 PM Page 28 CONFIRMING PROOF 28 section 1 STRATEGY by people. Activities need to be defined in such a way that when they are all completed. finance.4A. Project 2 is not being worked on temporarily. Many are used directly or have been modified by firms engaged in project management.1. P RO J E C T CO N T RO L C H A RT S The U. The Program Evaluation and Review Technique (PERT) was developed . Exhibit 2. and the current cumulative costs are over projected cumulative costs. two cost overruns occurred. activities would include telescope design and fabrication (1. sometimes referred to as a bar chart. NET WORK-PL ANNING MODELS The two best-known network-planning models were developed in the 1950s. although they often do. waiting for paint to dry may be an activity in a project. Exhibit 2.2). Exhibit 2. reasonably accurate time estimates for activities are available. Project 1. telescope/ simulator optical interface (1. Material received Weeks after start of project . Total Program Cost Breakdown Activity Contract Total $ negotiated Contract signed Long lead Overhead $ procurement Material $ Manufacturing Dollars $ schedules Bill of materials Short lead Labor $ procurement Material specifications Manufacturing Time plans Start-up 2 4 6 8 10 12 14 16 18 20 Weeks after start of project D.qxd 8/21/06 3:56 PM Page 29 CONFIRMING PROOF PROJECT MANAGEMENT chapter 2 29 A Sample of Graphic Project Reports exhibit 2. Divisional Breakdown of Costs and Labor Hours Project 2 Percentage of labor hours Percentage of cost Project 3 Projected 50 Manufacturing 40 Completed Finance 10 Time 15 Projected Actual 10 Engineering 15 Overruns Total program 20 Overhead 25 costs $ 5 Personnel 10 60 40 20 0 0 20 40 Time Tracking date line E. Purchasing order release 2. Gantt Chart for Single Activities B. Cost and Performance Tracking Schedule Project 1 C. Invoices received 9 10 11 3.jac0330x_ch02. Bar/ Milestone Chart 1 2 3 Milestones Short lead procurement 1.4 A. The techniques calculate when an activity must start and end. Critical path The critical path of activities in a project is the sequence of activities that form the longest chain in terms of their time to complete. You decide that all the team members should be involved in se- lecting the company and that it should take one week to complete this activity. so in our treatment here we just use the term CPM. Your group of four people decides that the project can be divided into four activities as suggested by the instructor. You will . As years passed. then the entire project is delayed. If any one of the activities in the critical path is delayed. the interrelationship of activities. EMPLOYING EFFECTIVE PROJECT MANAGEMENT AND USING THE CORRECT TOOLS AND TECHNIQUES. Navy’s Polaris missile project. when displayed in this form. the CPM techniques illustrated here owe their development to the widely used predecessor. In a sense. together with whether the activity is part of the critical path. for the U. WITHIN ONE YEAR FROM COMMISSION TO COMPLETION. Your instructor has suggested that you perform the analysis in the following four steps: A Select a company. This was a massive project involving over 3. D Individually review the data and make a team decision on whether to buy the stock. Also. the Gantt chart. which is of great practical value to identify. C Collect technical stock price data and construct charts.S. Consider that you have a group assignment that requires a decision on whether you should invest in a company. ON-TIME AND WITHIN BUDGET.000 contractors. Although the Gantt chart is able to relate activities to time in a usable fashion for small projects. becomes extremely difficult to visualize and to work with for projects that include more than 25 activities. B Obtain the company’s annual report and perform a ratio analysis. PERT was developed to handle uncertain time estimates. Critical Path Method (CPM) Here is a procedure for scheduling a project. AND ACTS AS BENCHMARK FOR LATER WIND FARM PROJECTS. features that distinguished CPM from PERT have diminished.jac0330x_ch02.qxd 8/21/06 3:56 PM Page 30 CONFIRMING PROOF 30 section 1 STRATEGY NEW ZEALAND’S TE APITI WIND FARM PROJECT CONSTRUCTED THE LARGEST WIND FARM IN THE SOUTHERN HEMISPHERE. a single time estimate is used because we are assuming that the activity times are known. THE MERIDIAN ENERGY COMPANY PROVIDED A VIABLE OPTION FOR RENEWABLE ENERGY IN NEW ZEALAND. Determining scheduling information about each activity in the project is the major goal of CPM techniques. A very simple project will be scheduled to demonstrate the basic approach. In this case. the Gantt chart provides no direct procedure for determining the critical path. Because most of the activities had never been done before. predecessors ity. This is simple. 2. B and C need to be completed before D can start. Finally. you agree to meet as a team to make the purchase decision. The immediate prede. D(1).qxd 8/21/06 3:56 PM Page 31 CONFIRMING PROOF PROJECT MANAGEMENT chapter 2 31 meet at the end of the week to decide what company the group will consider. Identify each activity to be done in the project and estimate how long it will take to complete each activity. You agree that the two groups can work independently. you want to allow one week for each team member to review all the data. The following table reflects what we know so far: IMMEDIATE ACTIVITY DESIGNATION PREDECESSORS TIME (WEEKS) Select company A None 1 Obtain annual report B A 2 and perform ratio analysis Collect stock price data C A 1 and perform technical analysis Review data and make D B and C 1 a decision Here is a diagram that depicts these precedence relationships: B(2) A(1) D(1) C(1) . We identify the activities as follows: A(1). but it will serve to demonstrate the approach. Your group expects it to take two weeks to get the annual report and perform the ratio analysis. Determine the required sequence of activities and construct a network re- flecting the precedence relationships. and the other two will collect the technical data and construct the charts. given the information from your instructor.jac0330x_ch02. Immediate cessors are the activities that need to be completed immediately before an activ. An easy way to do this is to first identify the immediate predecessors associated with an activity. The number is the expected duration of the activity. and a week to collect the stock price data and generate the charts. C(1). During this meeting you will divide your group: two people will be responsible for the annual report and ratio analysis. Before you meet. B(2). 1. The following are the appropriate steps. Activity A needs to be completed before activities B and C can start. This is a simple project. is 3. is A–B–D. . Determine the critical path. With a duration of 1. C’s early start is 1. a duration of three weeks. Consider activity D. To help keep all of this straight. Because B cannot be done until 3. and late finish times. Finally. designated as period 0. Activity B must be done by time 3 so that D can start. 1 3 B(2) 0 1 3 4 A(1) D(1) 1 2 C(1) To calculate the late finish and late start times. late start. Activity A has an early start of 0 and an early finish of 1. as shown here. then the entire project will be delayed. C must be done by time 3 so that D can start. To calculate numbers. therefore. the latest that D can start is 3. we place these numbers in special places around the nodes that represent each activity in our network diagram. Determine the early start/finish and late start/finish schedule. To schedule the project. The earliest that it can be done is at time 4. D cannot start until both B and C are done. Consider each sequence of activities that runs from the beginning to the end of the project. There is no slack in B. we calculate four points in time: the early start. The early start for D. activity A must be done so that B and C can start. the late finish needs to be set to 4. Our diagram now looks like this. Start counting with the current period. start from the beginning of the network and work to the end. The critical path. Similarly. so C’s late finish time is 3 and its late start time is 2. This is called Slack time start finish the slack time in an activity. Now consider activity D. start from the end of the network and work toward the front.jac0330x_ch02. and the early finish for C is 2. so its late finish time is 3 and late start time is 1. The early finish for B is 3. calculating the early start and early finish numbers. The early (duration) start and early finish are the earliest times that the Late Late activity can start and be finished. therefore.qxd 8/21/06 3:56 PM Page 32 CONFIRMING PROOF 32 section 1 STRATEGY 3. The critical path is the path where the sum of the activity times is the longest. For some activities in a project there may be some leeway Early Early in when an activity can start and finish. For each activity in the project. the late start finish start and late finish are the latest times the activities can start and finish. Activity B’s early start is A’s early finish or 1. and if we do not want to delay the completion of the project. Now consider activity C. For our simple project there are two paths: A–B–D and A–C–D. Activity early finish. If any activity along the critical path is delayed. and the early finish is 4. find when each activity needs to start and when it needs to finish. Notice the difference between the early and late start and finish times: This activity has one week of slack time. D cannot start until that time. Similarly. A–B–D has a duration of four weeks and A–C–D. 4. The difference between the late start time and early start time is the slack time. prototype construction. but it could have a much wider market. The final network looks like this. take care to ensure that the activities are in the proper order and that the logic of their relationships is maintained.1: Critical Path Method Many firms that have tried to enter the notebook computer market have failed. B. and A must get done in time for B to start. the project manager develops the precedence table and sequence network shown in Exhibit 2. (Hopefully the stock your investment team has chosen is a winner!) 1 3 B(2) 0 1 3 4 1 3 A(1) D(1) 1 2 0 1 3 4 C(1) 2 3 Example 2. evaluation studies of automatic assembly equipment. The ideal size will be no Excel: Project larger than 5 inches × 91⁄2 inches × 1 inch with a folding keyboard. including students. Finally. and D. Notice there is no slack in activities A. B precedes C. and produce a prototype of this small computer. On the basis of discussion with staff. In the rapidly changing computer industry. equipment. Therefore. It should weigh no more than Management 15 ounces and have an LCD display. Suppose your firm believes that there is a big demand in this market because existing products have not been designed correctly. Activity identification. Let’s follow the steps in the development of the network. Your intended computer will be small enough to carry inside a jacket pocket if need be. 1. .jac0330x_ch02. it is crucial to hit the market with a product of this sort in less than a year. it would be illogical to have a situation where Event A precedes Event B. and a wireless connection. This should appeal to traveling businesspeople. develop. The project team decides that the following activities are the major components of the project: design of the computer.qxd 8/21/06 3:56 PM Page 33 CONFIRMING PROOF PROJECT MANAGEMENT chapter 2 33 Because B must start earlier than C. For example. and a final report summarizing all aspects of the design.5. The project. and methods. or too small to have standard-size keyboards. 2. the project team has been allowed approximately eight months (35 weeks) to produce the prototype. It should be priced in the $175–$200 range. prototype testing. When constructing a network. is to design. methods specification (summarized in a report). and C precedes A. then. a micro disk drive. SOLUTION The first charge of the project team is to develop a project network chart and estimate the likelihood of completing the prototype computer within the 35 weeks. Activity sequencing and network construction. the late start time for A is 0. They are too heavy. too large. the late finish time for A is 1. an assembly equipment study report. . For this reason. D 5 Write methods report F C. and A–B–D–E–G. Calculating the early start and late start schedules gives additional insight into how difficult this project might be to complete on time. This certainly would be a fairly difficult project to complete on time. Note that this project has two different critical paths. there is slack time between the completion of each activity and the start of the next activity. time–cost models have been devised. the use of labor. This network has four different paths: A–C–F–G. F 2 C(7) F(8) A(21) G(2) B(5) D(2) E(5) 3. The lengths of these paths are 38. Late start schedule A late start schedule lists the activities to start as late as possible without delaying the completion date of the project. • Early start schedule E a r l y S t a r t a n d L a t e S t a r t S c h e d u l e s An early start schedule is one that lists all of the activities by their early start times. 35. Time–Cost Models In practice. project managers are as much concerned with the cost to complete a project as Time–cost models with the time to complete the project. These calculations are shown in Exhibit 2. For activities not on the critical path. From this we see that the only activity that has slack is activity E. and 35 weeks. The early start schedule completes the project and all its activities as soon as possible.jac0330x_ch02.qxd 8/21/06 3:56 PM Page 34 CONFIRMING PROOF 34 section 1 STRATEGY exhibit 2. A–C–E–G. 38. D 8 Write final report G E. One motivation for using a late start schedule is that savings are realized by postponing purchases of materials. These models—extensions of the basic critical path method—attempt to develop a minimum-cost schedule for an entire project and to control expenditures during the project. and other costs until necessary. A–B–D–F–G.5 CPM Network for Computer Design Project CPM ACTIVITY DESIGNATIONS AND TIME ESTIMATES IMMEDIATE TIME ACTIVITY DESIGNATION PREDECESSORS (WEEKS) Design A – 21 Build prototype B A 5 Evaluate equipment C A 7 Test prototype D B 2 Write equipment report E C. The critical path is the longest sequence of connected activities through the network and is defined as the path with zero slack time. Determine the critical path.6. this might indicate that this would be a fairly difficult project to manage. 7. Prepare a CPM-type network diagram. For each activity this diagram should list a. Some may be worker-related. Crash cost (CC): the cost associated with each crash time. Crash time (CT): the shortest possible activity time. The costs associated with sustaining the project are termed project indirect costs: overhead. Normal cost (NC): the lowest expected activity costs. The costs associated with expediting activities are termed activity direct costs and add to the project direct cost.6 21 28 28 36 C(7) F(8) 0 21 21 28 36 36 38 28 A(21) G (2) 0 21 21 26 26 28 33 36 38 28 B(5) D(2) E(5) 21 26 26 28 31 36 SLACK CALCULATIONS AND CRITICAL PATH DETERMINATIONS ACTIVITY LS!ES SLACK ON CRITICAL PATH A 0!0 0 B 21!21 0 C 21!21 0 D 26!26 0 E 31!28 3 F 28!28 0 G 36!36 0 M i n i m u m . and resource opportunity costs. The relationship between activity time and cost may be shown graphically by . penalty costs or lost incentive payments. such as buying or leasing additional or more efficient equipment and drawing on additional support facilities. Because activity direct costs and project indirect costs are opposing costs dependent on time. or in other words. on the other. Determine the cost per unit of time (assume days) to expedite each activity. Normal time (NT): the time associated with each normal cost. it costs money to expedite an activity. The procedure for finding this point consists of the following five steps. d. the scheduling problem is essentially one of finding the project duration that minimizes their sum. 2. On one hand. hiring more workers. under certain contractual situations. and. Assume that the indirect costs remain constant for eight days and then increase at the rate of $5 per day. c.) b. (These are the lesser of the cost figures shown under each node in Exhibit 2.O f f ) The basic assumption in minimum-cost scheduling is that there is a relationship between activity completion time and the cost of a project. and transferring workers from other jobs. others are resource-related.C o s t S c h e d u l i n g ( T i m e – C o s t T r a d e .jac0330x_ch02. facilities.7. it costs money to sustain (or lengthen) the project.qxd 8/21/06 3:56 PM Page 35 CONFIRMING PROOF PROJECT MANAGEMENT chapter 2 35 CPM Network for Computer Design Project exhibit 2. finding the opti- mum point in a time–cost trade-off. 1. It is explained by using the simple four-activity network shown in Exhibit 2. such as overtime work. $9 C NC 1 2 3 4 $6. Prepare CPM Diagram with Activity Costs Step 2. 3. Repeat this procedure until the time of completion is satisfactory. depending on the actual cost structure of activity performance.9 shows the reduction of the network one day at a time. all activities are at their normal time and costs are at their lowest value. we assume a linear relationship between time and cost. Then recompute and find the new critical path and reduce it by one day also.8. For activity A. $18 A D 6 NC. and the project completion time is 10 days. . The critical path is A–B–D. and reduce the path time by one day using the lowest-cost activity. This assumption is common in practice and helps us derive the cost per day to expedite because this value may be found directly by taking the slope of the line using the formula Slope = (CC − NC) ÷ (NT − CT).7 Example of Time–Cost Trade-Off Procedure Step 1.) The calculations needed to obtain the cost of expediting the remaining activities are shown in Exhibit 2. or straight line—or some other form. The critical path is A–B–D. NT 4. (When the assumption of linearity cannot be made. convex. Compute the Critical Path 2 7 B(5) 0 2 2 7 7 10 A(2) D(3) CC Crash cost 0 2 2 6 7 10 CT Crash time NC Normal cost C(4) NT Normal time 3 7 plotting CC and CT coordinates and connecting them to the NC and NT coordinates by a concave. $10 $5.9 might initially seem difficult. For the simple network we have been using.1 Management $9. The easiest way to proceed is to start with the normal schedule. $8 Time CC Step 3. or until there can be no further reduction in the project completion time.3 $6. Working though Exhibit 2.7. the cost of expediting must be determined graphically for each day the activity may be shortened. as in Exhibit 2.2 NT Activity 8 B cost Excel: Project 2.jac0330x_ch02. Determine Cost per Unit of Time $10 CC. this schedule would take 10 days. In the first line. Exhibit 2. cost for completing the project is $26. 4. Compute the critical path. Shorten the critical path at the least cost.qxd 8/21/06 3:56 PM Page 36 CONFIRMING PROOF 36 section 1 STRATEGY exhibit 2. CT Activity A CT 5. find the critical path. 1 3. activity B can be reduced three days (from five to two days).8 CC − NC COST PER DAY NUMBER OF DAYS ACTIVITY ACTIVITY CC − NC NT − CT NT − CT TO EXPEDITE MAY BE SHORTENED A $10 − $6 2− 1 $10 − $6 $4 1 2−1 B $18 − $9 5− 2 $18 − $9 $3 3 5−2 C $8 − $6 4− 3 $8 − $6 $2 1 4−3 D $9 − $5 3− 1 $9 − $5 $2 2 3−1 Reducing the Project Completion Time One Day at a Time exhibit 2. B–2. † B&C must be crashed together to reduce the path by one day. D–2 D 28 9 ABD A–1. B–3 A–4. In the second column we note that activity A can be reduced one day (from two to one day). so this additional cost would not be incurred.qxd 8/21/06 3:56 PM Page 37 CONFIRMING PROOF PROJECT MANAGEMENT chapter 2 37 Calculation of Cost per Day to Expedite Each Activity exhibit 2. B–3. B–3. D–2 A–4. a $4 increase. C–2 A* 37 6 ABCD B–2. C–2 B&C† 42 5 ABCD B–1 B–3 B+ 45 5 * To reduce the critical path by one day. The next column tracks the cost to reduce each of the activities by a single day. So we indicate the cost to expedite activity A by one day is $4. B–3 B 33 7 ABCD A–1. D–2 D 30 8 ABD A–1. B–3. for activity A. For example. B–3. C–1 B–3. We know it is necessary to reduce the time for one or more of the activities on the critical path. It could be completed in one day at a cost of $10. + Crashing activity B does not reduce the length of the project.jac0330x_ch02. $26 10 ABD A–1. The goal in line two is to reduce the project completion time by one day. it normally costs $6 to complete in two days.9 CURRENT REMAINING NUMBER COST PER DAY LEAST-COST TOTAL COST OF PROJECT CRITICAL OFDAYS ACTIVITY TOEXPEDITE ACTIVITY TO ALL ACTIVITIES COMPLETION PATH MAY BE SHORTENED EACH ACTIVITY EXPEDITE IN NETWORK TIME ABD All activity times and costs are normal. it normally costs $9 to complete in five days. For activity B. D–1 A–4. and activity D can be reduced two days (from three to one day). reduce either A alone or B and C together at the same time (either B or C by itself just modifies the critical path without shortening it). C–1 A–4. B–3. It could . B. In line five (actually our fifth iteration in solving the problem). our only option is to reduce activity B. Our next iteration starts in line three. Since B and C are in parallel and we cannot reduce C. and the total project cost is shown as the total of the two costs. The nine-day critical path is A–B–D. C. B is reduced.9.qxd 8/21/06 3:56 PM Page 38 CONFIRMING PROOF 38 section 1 STRATEGY be completed in two days at a cost of $18. B by three days. We could shorten activity A by one day. it normally costs $5 to complete in three days. 5. Our options are to reduce A alone at a cost of $4 or B and C together at a cost of $5 ($3 for B and $2 for C). we take the B and C option that was considered in line five. the least expensive activity to reduce is D. Note that B and C are in parallel. so it does not help to reduce B without reducing C. For C. It could be completed in one day at a cost of $9. in line seven. Again. which costs $40 ($30 direct + $10 indirect). Finally. D cannot be reduced. Plot project direct. and total-cost curves and find the minimum-cost schedule. and D are all critical. but now only A and B are on the critical path and can be reduced. Exhibit 2. Line four is similar to line three. this curve is at its minimum with an eight-day schedule. and D by one day (note D has already been reduced from three to two days).10 shows the indirect cost plotted as a constant $10 per day for eight days and increasing $5 per day thereafter. indirect. a two-day reduction would cost $4 ($2 per day). activities A.10 Plot of Costs and Minimum-Cost Schedule $ 50 Project total costs 40 Cost Project direct costs 30 20 Project indirect costs 10 0 5 6 7 8 9 10 Minimum cost schedule (days) . In line six. which takes our cost up $3 to $33 and reduces the project completion time to seven days. Total cost for the network goes up to $28 and the project completion time is reduced to nine days. The least expensive alternative for a one-day reduction in time is to expedite activity D at a cost of $2. B. Cost to reduce each activity by one day is the same as in line two. exhibit 2. so our only options are activities A. or $3 per day. so we reduce A in this iteration. and C. Summing the values for direct and indirect costs for each day yields the project total cost curve. Reducing activity D from two to one day results in the total cost for all activities in the network going up to $30 and the project completion time coming down to eight days. The direct costs are plotted from Exhibit 2. there is no value in reducing B alone. Our cost to reduce B by three days is $9. As you can see. We can reduce the project completion time no further. where the goal is to reduce the project completion time to eight days.jac0330x_ch02. which is one reason for its overwhelming popularity Interest in the techniques and concepts of project manage. Microsoft offers. To resolve overallocations manually. B re a k t h ro u g h Project Management Information Systems The Microsoft Project program comes with an excellent online tutorial. which opens all parallel increase in project management software offerings. For the most up-to-date information about allocating and leveling resources. we must assign resources. with Primavera Project Planner. you can either add resources or reschedule.qxd 8/21/06 3:56 PM Page 39 CONFIRMING PROOF PROJECT MANAGEMENT chapter 2 39 MANAGING RESOURCES In addition to scheduling each task. Moving a task within its slack can free up resources.pmi. check out the Web site of the Project and producing presentation-quality graphics and reports. The following is a brief Primavera was the first major vendor of this type of software review of these two programs: and has possibly the most sophisticated capability. Management Institute (www. the communications and Internet integration capability that Now there are over 100 companies offering project manage.jac0330x_ch02. with project managers tracking midsized projects. and Primav- several projects. Internet . Modern software quickly highlights overallocations—situations in which allocations exceed resources. as well as controlling costs software available. This package ment has exploded in the past 10 years. for managing very large projects or programs having companies are Microsoft. The program includes features for scheduling. Primavera Project Planner is often the choice. era. with Microsoft Project.org). Two of the leading Finally. This has resulted in a is compatible with the Microsoft Office Suite. ment software. DESIGN. a spreadsheet view of the same information could be output.to high-level project management information systems (PMIS) software can resolve overallocations through a “leveling” feature. to perform. so you can compare monthly snapshots. This organization spans the use of a dedicated team to a largely undedicated matrix structure. and time constraints of a project. Pure project A structure for organizing a project where a self-contained team works full time on the project. the technical details of calculating the shortest time it should take to complete a project are covered. Several rules of thumb can be used. . Next. Each project uses people from differ- sources (people.”) SIMULATION IN ORDER TO COMPLY WITH RIGID SAFETY STANDARDS FOR THE WORLDS FIRST “FLYING COASTER. the chapter considers how projects can be shortened through the use of “crashing” concepts. Software can hold several different baseline plans. Following this. Management by exception also can be applied to find deviations PARAMOUNT INVESTED OVER $17 MILLION IN THIS PROJECT AT GREAT AMERICA IN SANTA CLARA. Deviations between planned start/finish and newly scheduled start/finish also appear. planned progress. (See the Breakthrough box A UNIQUE USE OF COMPUTERS FOR LAYOUT. pure project structures. Matrix project A structure that blends the functional and Project management Planning. A tracking Gantt chart superimposes the current schedule onto a baseline plan so deviations are easily noticed. You can specify that low-priority tasks should be delayed until higher-priority ones are complete. Ke y Te r m s Project A series of related jobs usually directed toward team members remain a part of their functional units and typ- some major output and requiring a significant period of time ically are not dedicated to the project. The chapter first describes how the people involved with a project are organized from a management view- point. and work packages. A dedicated project manager decides cost. the chapter considers how project activities are organized into subprojects by using the work breakdown structure. and controlling re. assigned from the functional units of the organization. The subtasks. Tra c k i n g P ro g re ss The real action starts after the project gets underway. ent functional areas.jac0330x_ch02.qxd 8/21/06 3:57 PM Page 40 CONFIRMING PROOF 40 section 1 STRATEGY Mid. or that the project should end before or after the original deadline. what tasks need to be performed and when. or baseline. material) to meet the technical. The scope of the project will help define the organization. Actual progress will differ from your original.” S U M M A RY This chapter provides a description of the basics of managing projects. Functional project A structure where team members are Work breakdown structure The hierarchy of project tasks. and a “slipping filter” can be applied to highlight or output only those tasks that are scheduled to finish at a later date than the planned baseline. THE PROJECT INCLUDED between budgeted costs and actual costs. directing. Finally. AND titled “Project Management Information Systems. but the functional managers control which people to use. If you prefer. equipment. Project milestone A specific event in a project. This is often referred to as “crashing” the immediately before another activity. H a. and late finish times. b. considers the trade-off between the time required to complete Immediate predecessor Activity that needs to be completed an activity and cost. Time of completion is 23 days. Late start schedule A project schedule that lists all activities Critical path The sequence of activities in a project that by their late start times. c. the critical path are called CPM or Critical Path Method Time–cost models Extension of the critical path models that techniques. What would happen if activity F was revised to take four days instead of two? Solution The answers to a.qxd 8/21/06 3:57 PM Page 41 CONFIRMING PROOF PROJECT MANAGEMENT chapter 2 41 Activities Pieces of work within a project that consume time. Techniques used to find with the project. . New critical path: A–D–F–G–I. postponing purchases of material and other costs associated This path contains zero slack time. Slack time The time that an activity can be delayed. Gantt chart Shows in a graphic manner the amount of time Early start schedule A project schedule that lists all activities involved and the sequence in which activities can be per. project. by their early start times. along with their required times for completion: ACTIVITY TIME (DAYS) IMMEDIATE PREDECESSORS A 1 — B 4 A C 3 A Excel: D 7 A PM_Solved E 6 B Problems. Often referred to as a bar chart. Draw the critical path diagram. Show the early start. early finish. and c are shown in the following diagram. b. 1 5 5 11 11 18 B(4) E(6) G(7) 1 5 5 11 0 1 1 4 11 18 18 22 A(1) C(3) I(4) 8 10 0 1 6 9 18 22 F(2) 1 8 8 17 9 11 D(7) H(9) Critical path: 2 9 A–B–E–G–I 9 18 d. D G 7 E. This schedule may create savings by forms the longest chain in terms of their time to complete. Show the critical path. late start.jac0330x_ch02. F H 9 D I 4 G. d. formed. the The completion of all the activities of a project marks the end difference between the late and early start times of an of the project. Solved Problems SOLVED PROBLEM 1 A project has been defined to contain the following list of activities. activity.xls F 2 C. Critical path stays the same.000 11.000 6 5 9.000 3 2 1. Cheapest is A at $500. E 4 1 11.000 1 D 18. Normal completion time is 22 weeks.000 1 C 6.000 29.000 5 3 2. G 6 5 20.000 8.000 4 2 $ 500 2 B 9.000 9.000 1 G 25.000 4 2 6.000 $11. ACTIVITY CRASH COST NORMAL COST NORMAL TIME CRASH TIME COST PER WEEK WEEKS A $11.000 E B.000 C A 2 1 4.000 2 E 9. F 4 2 13. b.000 F C 3 2 7.000 2 1 2.000 20.000 I H. Critical path stays the same. (2) 2nd week: A is still the cheapest at $500. Critical path A–B–D–H–I.xls ACTIVITY ACTIVITIES NORMAL CRASH NORMAL CRASH A — 4 2 $10.000 $10.000 1 (1) 1st week: CP = A–B–D–H–I.qxd 8/21/06 3:57 PM Page 42 CONFIRMING PROOF 42 section 1 STRATEGY SOLVED PROBLEM 2 Here are the precedence requirements.000 3 2 3.000 14.000 9. normal and crash activity times. C 1 1 9. which tasks would be shortened and what would the final total project cost be? Solution The construction project network is shown below: 4 7 7 12 12 16 B(3) D(5) H(4) 0 4 7 8 16 22 A(4) E(1) I(6) 9 13 4 6 6 9 G(4) C(2) F(3) a. What are the critical path and the estimated completion time? b.000 9.000 6.333 3 I 29.000 4 1 2.000 25.000 1 1 0 F 8.000 a.000 4. To shorten the project by three weeks.000 18.000 G E. and normal and crash costs for a construction project: Excel: PM_Solved PRECEDING REQUIRED TIME (WEEKS) COST Problems.000 D B 5 3 14.000 18. .000 7.000 B A 3 2 6.000 13.000 6.jac0330x_ch02.000 H D.000 2 H 18. ACTIVITY IMMEDIATE PREDECESSOR TIME (WEEKS) c.000 D 16. choose D at $2.000 H 11. Draw the network.4.000).” Comment.000 E 9. D 4 F D 3 G E. subtasks.333). H (at $2. a. A–C–D–E–G. A — 6 d.000 I 20. D (at $2.000 Review and Discussion Questions 1 What was the most complex project that you have been involved in? Give examples of the following as they pertain to the project: the work breakdown structure.000 F 7. 26 weeks. How many weeks will it take to complete the project? d.000. B A 3 C A 7 D C 2 E B.000 B 6. and work package.jac0330x_ch02. Total project cost shortened three weeks is A $ 11. See ISM. Were you on the critical path? Did it have a good project manager? 2 What are some reasons project scheduling is not done well? 3 Discuss the graphic presentations in Exhibit 2.qxd 8/21/06 3:57 PM Page 43 CONFIRMING PROOF PROJECT MANAGEMENT chapter 2 43 (3) 3rd week: Because A is no longer available. b. Therefore.000). 7 Why would subcontractors for a government project want their activities on the critical path? Under what conditions would they try to avoid being on the critical path? Problems 1 The following activities are part of a project to be scheduled using CPM: 1. b.000 G 13. What is the critical path? c. Are there any other graphic outputs you would like to see if you were project manager? 4 Which characteristics must a project have for critical path scheduling to be applicable? What types of projects have been subjected to critical path analysis? 5 What are the underlying assumptions of minimum-cost scheduling? Are they equally realistic? 6 “Project control should always focus on the critical path. or I (at $9.000).000 $97. How much slack does activity B have? . tasks. Six weeks (15 − 9). the choices are B (at $3.000 C 4. F 7 a. What is the critical path? c. ACTIVITY IMMEDIATE PREDECESSOR TIME (WEEKS) d. B A 2 d. F 2 H D 3 I E. munication system for commercial planes. The accompanying table shows the activities. 1 — 4 2 1 2 3 1 4 4 1 3 5 2. How many weeks will it take to complete the project? d. C. Which would you shorten? d. 7 5 10 8. 4 A construction project is broken down into the following 10 activities: b.jac0330x_ch02. H 3 a. ACTIVITY IMMEDIATE PREDECESSOR TIME (WEEKS) c. C. and G each one week. Two paths: C A 4 A–C–F–G–I and D A 4 E B 6 A–D–F–G–I. 1–3–6–9–10. A — 1 G. What is the new critical path and earliest completion time? 4. C: one week. a.qxd 8/21/06 3:57 PM Page 44 CONFIRMING PROOF 44 section 1 STRATEGY 2. 9 7 . 3 5 6 3 6 7 4 2 8 5 3 9 6. ACTIVITY IMMEDIATE PREDECESSOR TIME (WEEKS) D: one week. Draw the network. 3 The R&D department is planning to bid on a large project for the development of a new com- b. See ISM. B A 4 C A 3 D B 2 E C. c. 1 week. c. a. and you have the option of shortening any or all of B. Draw the network diagram. G. and how much? 3. D 5 F D 2 G F 2 H E. Which activities have slack. F. G 3 a. 3 weeks. G D. See ISM. F C. 15 weeks. 2 Schedule the following activities using CPM: b. 1 week. What is the critical path? c. and sequences required: and A–D–F–G–I. D 6 16 weeks. See ISM. A — 3 G: one week. See ISM. times. b. Suppose you want to shorten the completion time as much as possible. b. a. A–B–D–E–H. A–C–F–G–I. D. would be shortened and the resulting cost. 100 hours.000 7.500 E 2 1 2.200 C A(7) G(5) Third 1.000 B 3 2 5.200 a.000 per week. a.e. b. a. b. ACTIVITY NORMAL TIME CRASH TIME NORMAL COST CRASH COST A 7 6 $7. b and d). which activities would you shorten to cut the project by four weeks? 5 Here is a CPM network with activity times in weeks: 5. Find the critical path. If activities 1 and 10 cannot be shortened. but activities 2 through 9 can be shortened to a minimum of one week each at a cost of $10.000 $ 8.000 A D(5) F(4) Second 1. in order of reduction. b. c.jac0330x_ch02. E(4) F(8) a. Determine the critical path.000 G 5 4 5. 26 weeks. b. See ISM. show which activities.000 3. Find the critical path. How would this affect the completion date? 6 Here is a network with the activity times shown in days: 6.000 10. b. c. b.000 If the project is to be shortened by four days.000 4. Those not on the 7 The home office billing department of a chain of department stores prepares monthly inventory reports for use by the stores’ purchasing agents.000 F 4 2 4. Critical path is A–C–D–F–G. Suppose F could be shortened by two weeks and B by one week. Draw the network diagram..000 C 4 3 9. Given the following information. DAY COST ACTIVITY B(3) First $1. critical path use the critical path method to determine (i. B(5) C(6) No difference in A(7) G(3) D(6) completion date. .200 D 5 4 3.qxd 8/21/06 3:57 PM Page 45 CONFIRMING PROOF PROJECT MANAGEMENT chapter 2 45 a. 7. The following table shows the normal times and the crash times.500 D (or F) C(4) E(2) Fourth 1. along with the associated costs for each activity.000 8.000 7.500 F (or D) $5. Critical path is A–E–G–C–D. a. How many weeks will the project take to complete? c. step by step.000 7 18. Which jobs can be delayed without delaying the early start of any subsequent activity.qxd 8/21/06 3:57 PM Page 46 CONFIRMING PROOF 46 section 1 STRATEGY a.000 C 8 5. IMMEDIATE TIME JOB AND DESCRIPTION PREDECESSORS (HOURS) a Start — 0 b Get computer printouts of customer purchases a 10 c Get stock records for the month a 20 d Reconcile purchase printouts and stock records b. E. 25 weeks. b. G by one week.jac0330x_ch02. D(6) B(10) A(5) E(7) G(4) C(8) F(4) a.000 3 $13. f 20 h Finish g 0 8.000 5 5. activities: c.000 D 6 4. two weeks.000 F 4 6. c 20 f Determine reorder quantities for coming period e 40 g Prepare stock reports for purchasing agents d.000 7 7. A–B–D–G.000 B 10 12. how you arrived at your schedule. c 30 e Total stock records by department b. and show. reduce the project completion time by three weeks. a.000 3 9.000 6 6. How long the total process will take. 8 For the network shown: b. B(2) D(5) F(4) A(7) G(5) C(4) E(2) . two weeks. For the data shown. and A by one week. Determine the critical path and the early completion time in weeks for the project.000 3 7.000 9. B. D by one week. A–C–D–F–G. 25 weeks. NORMAL NORMAL CRASH CRASH ACTIVITY TIME COST TIME COST A 5 $ 7.000 E 7 3. 9 The following CPM network has estimates of the normal time in weeks listed for the b. b. Assume a linear cost per week shortened.000 G 4 7. a. Shorten A by one b.000 7. B A 8 5 $3. 36 NORMAL CRASH EXPEDITING c. d. What is the normal project length? c.000 10.000 G 5 4 5.000 a. d. Draw the project diagram. Which activities have slack. installed.200. A 7 6 $7. What is the length of time to complete the project? week at a cost of c.000 3. Which activities would you shorten Shorten C by one to cut two weeks from the schedule in a rational fashion? What would be the incremental cost? Is the critical path changed? week at a cost of $1. Here is a table of normal and crash times and costs. 13 ! $760 14 ! $660 A 2 $50 1 $70 — B 4 80 2 160 A 15 ! $600 C 8 70 4 110 A 16 ! $550 D 6 60 5 80 A 17 ! $520 E 7 100 6 130 B F 4 40 3 100 D 18 ! $500 G 5 100 4 150 E.000. NORMAL NORMAL CRASH TIME CRASH IMMEDIATE ACTIVITY TIME (WEEKS) COST (WEEKS) COST PREDECESSORS c.000 C 4 3 9. See ISM for activities that need to be completed to get the new bakery built and the equipment diagram.000 29 weeks. Bragg’s loses $3. What is the project length if all activities are crashed to their minimum? d.000 4.qxd 8/21/06 6:19 PM Page 47 CONFIRMING PROOF PROJECT MANAGEMENT chapter 2 47 a. b.200. E 2 1 $5. Identify the critical path. See ISM.000 7. b. How many weeks will the project take if we are willing to pay crashing cost as long as it is less than $3.jac0330x_ch02.000 10 Bragg’s Bakery is building a new automated bakery in downtown Sandusky. Only crash to A — 9 6 $3. a.000 Critical path is still B 2 1 5. and how much? $1.000 D B. A–B–E–G. C 5 3 $2. a.500 C A 15 10 $4. NORMAL CRASH NORMAL CRASH Total cost for two ACTIVITY TIME TIME COST COST weeks is $2. F .200 the same. b. D 5 4 3.000 E C 10 6 $2.500 E 2 1 2.000 F 4 2 4.000 8.500? Advanced Problem 11 Assume the network and data that follow: 11.500 in profit per week for every week the bakery is not completed. 23 ACTIVITY PREDECESSOR TIME (WEEKS) TIME (WEEKS) COST/WEEK d. Here are the 10.500 F D.000 $ 8. 15 ! $850 c. probably prefer 15. V1 2 . Your boss wants the schedule and costs on his desk have been made project manager for the design of a new cell tomorrow morning! phone model.I2 5 Subcontracting (V) Vendor selection V1 D7 10 Contract negotiation V2 I3. If the indirect costs for each project duration are $400 (18 weeks). Indicate the critical path when normal activity times are used. what is 18 ! $900 the total project cost for each duration? Indicate the minimum total project cost Minimum cost either duration. and 18 weeks. D4. Your supervisors have already scoped the pro. D3. 14 ! $860 b. D6 3 Software I2 D7 5 Prototype Testing I3 I1. $350 (17 weeks). You must plan the duration of each activity. Compute the minimum total direct cost for each project duration based on the cost associ- 16 ! $850 ated with each activity. Also. 13 ! $910 a. It ject so you have a list showing the work breakdown structure includes all the activities required in the project and the and this includes major project activities. d. 11 Work Breakdown Structure and Activities for the Cell Phone Design Project ACTIVITY MAJOR PROJECT TASKS/ACTIVITIES IDENTIFICATION DEPENDENCY DURATION (WEEKS) Product specifications (P) Overall product specifications P1 — 4 Hardware specifications P2 P1 5 Software specifications P3 P1 5 Market research P4 P2. 14. D6 4 Product integration (I) Hardware I1 D1. 16.jac0330x_ch02.qxd 8/21/06 3:57 PM Page 48 CONFIRMING PROOF 48 section 1 STRATEGY d. dependencies between the project schedule and calculate project duration and project activities have been identified. Remember that the preceding e x h i b i t 2 .11. and $150 (13 weeks). You costs. C A S E –Cell Phone Design Project You work for Motorola in their global cell phone group. S2. D2. Consider durations of 13. 17 ! $870 $300 (16 weeks). S3 1 Functionality D7 D5.xls Hardware S1 P2 5 Software S3 P3 6 Market research S2 P4 1 Product design (D) Circuits D1 S1. $200 (14 weeks). Construct the network diagram. D7 3 Battery D2 S1 1 Display D3 S1 2 Outer cover D4 S3 4 User interface D5 S2 4 Camera D6 S1. 15 or 16 days. P3 2 Excel: Cell_Phone Supplier specifications (S) Design. $250 (15 weeks). 15. You have been given the information in Exhibit 2. 17. 8th ed. New York: Wiley. Project Management: The Managerial Process. the subcontractors that will actually make the new cell phone 3 Identify slack in the activities not on the project criti- in Task “S” supplier specifications. James P. size of 2 Calculate the start and finish times for each activity the phone and features need to be determined. 1999. Hill Professional Publishing. Agile Project Management: How to Succeed in the Face of Changing Kerzner. Your project is divided into five major tasks. Larson. H. These involve engineer. Schedul- Project Requirements. The individual 4 Your boss would like you to suggest changes that components that make up the product are the focus of Task could be made to the project that would significantly “D”. ing. C. What would you suggest? Selected Bibliography Gray. Find the critical set of activi- specifications are redefined in terms that have meaning to ties for the project. 2002. working prototype is built and tested. These details and determine how many weeks is the minimum for are based on how a customer uses the cell phone. and E. New York: McGraw- Gray. . 2002. New York: Irwin/McGraw-Hill. ing details for how the product will perform. Finally in Task “V”. Task “I” brings all the components together and a shorten it. W. Project Management: A Systems Approach to Planning.. Task “P” involves developing specifications for the new cell phone.qxd 8/21/06 3:57 PM Page 49 CONFIRMING PROOF PROJECT MANAGEMENT chapter 2 49 activity must be fully completed before work on the follow. Lewis.jac0330x_ch02. ing activity can be started. New York: American Management Association. Here decisions related to such things as battery life. C. cal path. The Project Manager’s Desk Reference. 2004. 1 Draw a project network that includes all the activities. These user completing the project. vendors are selected and contracts are negotiated. and Controlling. F. 3. Know how to prepare a process flowchart. Wen- dy’s is working hard to reduce this time even further.7 seconds and 21 seconds faster than McDonald’s and Burger King respectively. McDonald’s. Wendy’s and Burger King are building special drive-through kitchens. Calculate the different measures of process performance. kitchen choreography designed to eliminate unnecessary 3rd Pass . Burger King.indd Page 157 7/27/09 3:17:39 PM user-s176 /Users/user-s176/Desktop/Temp Work/July/14-07-09/VGP_14_07_09/Gabor/MHRL022 Work/July/14-07-09/VGP_14_07_09/Gabor/MHRL022- PROCESS ANALYSIS Learning Objectives: 1. Yet. which made it 16. It is estimated that increasing drive-through efficiency by 10 percent bolsters sales for the average fast-food restaurant by about 10 percent per year. Timers. making the cash transaction redundant. and others are battling to be the fastest in the business. the big chains are focusing on this newer battleground. employee retraining. Understand the different types of processes used by businesses. 4. FASTER SERVICE HAS BENEFITS AND COSTS Saying “HimayItakeyourorderplease?” takes only one second for the drive-through greeter at Wendy’s Old- Fashioned Hamburgers. Why this emphasis on reducing process and waiting times? The drive-through business has been growing at a faster rate than on-premise sales. McDonald’s estimates that it can shave off 15 seconds from its drive-through time and boost sales by 2 percent. and new technology. far from resting on its laurels. Since the growth in the number of new restaurants is slowing. Cars spent on average 150.3 seconds at Wendy’s. drive-through sales. Taco Bell. Using product development. Understand process analysis. while McDonald’s is experimenting with windshield transponders that can automatically bill the purchaser’s account. Arby’s. 2. This is two seconds faster than Wendy’s guidelines and illustrates the effort fast food chains are putting into speeding up their drive-through pick-up windows.jac69078_ch06_157-176. the leader in this category. the outputs of many processes are services. ‘Kitchen Choreography’—Mesclun in a Milkshake Cup?” Wall Street Jour- nal. After nine months at a drive-through. The airline uses airplanes. specialized equipment and highly trained doctors. Ontario. for example. and potatoes. Analyzing a process allows some important questions to be answered. and wireless headsets that let all workers hear customer orders. and the beepers irritated her too.NewsletterSummer. This chapter describes how to analyze a process. uses inputs such as hamburger meat. Ontario. only to discover back at home that the order contained beans and no meat. The patient is transformed through proper treatment and care into a healthy patient. and even voices congratulating or admonishing crews are also being used.07. and other foods. tomatoes. February 7. Says he. In the case of Tim Hortons. Is there a trade-off in speeding up the service? The same survey that placed Wendy’s on top in speed also ranked it eleventh in accuracy. “Next! An Efficiency Drive: Fast-Food Lanes Are Getting Even Faster—Big Chains. In a hospital. 2000. Sounding alarms such as beeps. Using labour. University student Clint Toland and his girlfriend recently drove through a Taco Bell to get a late-night meal of nachos with meat but no beans.com/publications/E.org/wiki/Tim_Hortons. In both of these examples. french fries. February 7. Tim Horton’s recently stopped making donuts at is locations and outsourced them to Maidstone Bakeries of Brantford. 2009. This is a good illustration of some of the trade-offs in process design.” Speed can also be stressful for employees. http://www. trained labour is added in the form of cooks and order takers. ground equipment. An airline is another example of a service organization. Maidstone ships frozen donuts to Tim Horton’s locations in Canada and the U. night manager Tiffany Swan Holloway vows never to work again in fast food. reservation personnel. Consider some examples of processes. ultimately they may not be desirable at the cost of lower quality or higher server stress. Honda Motors assembles the Civic in a plant in Alliston. retrieved. are of greater value to the organization than the original inputs. such as these: How many customers can the process 3rd Pass . Use High-Tech Timers. However. and fuel to transport customers and freight between locations all over the world. The assembly plant takes in parts and components that have been fabricated for the plant. and capital equipment is used to transform the inputs into hamburgers. and energy.S. flight crews. ground crews. Although faster processes are desirable. A1. are other initiatives. Her small night crew had a hard time keeping up with the 60-second service goal. the process produces products as output. and technicians are combined with another input. This allows the Tim Horton’s stores to make donuts quickly by reheating them. lettuce. some may argue that freezing donuts and reheating them later could reduce their taste quality (though others might argue that making fresh donuts in the store in large batches can result in donuts becoming stale a few hours later). Vying for Traffic. PROCESS ANALYSIS What is a process? A process is any part of an organization that takes inputs and transforms them into outputs that. at each of its restaurants. sirens. May 18.pdf. 2009.wikipedia. “I am never coming back. To these inputs.indd Page 158 7/27/09 3:17:44 PM user-s176 /Users/user-s176/Desktop/Temp Work/July/14-07-09/VGP_14_07_09/Gabor/MHRL022 Work/July/14-07-09/VGP_14_07_09/Gabor/MHRL022- 158 Section 2 PROCESSES movement. these parts and components are transformed into automobiles.D. McDonald’s. retrieved. Jennifer Ordonez. equipment along an assembly line. it is hoped. the patient. nurses. ■ Sources: http://en.brantfordbrant.jac69078_ch06_157-176. so it is important to consider the simultaneous performance of a number of activities. first step in process analysis is to clearly define the purpose of the analysis. flows as arrows. and the storage of goods or other items as inverted triangles.indd Page 159 7/27/09 3:17:45 PM user-s176 /Users/user-s176/Desktop/Temp Work/July/14-07-09/VGP_14_07_09/Gabor/MHRL022 Work/July/14-07-09/VGP_14_07_09/Gabor/MHRL022- CHAPTER 6 Process Analysis 159 A stage in the assembly line process of producing an automobile where inputs are transformed into outputs. tasks. Keep the analysis as simple as possible. handle per hour? How long will it take to serve a customer? What change is needed in the process to expand capacity? How much does the process cost? A difficult. but important. Decision points are depicted as a diamond. But first. The following sections of this chapter discuss the details of constructing flowcharts and measures that are appropriate for different types of processes. The line is paced as the car moves from one stage to the next after a fixed time interval.jac69078_ch06_157-176. and storage areas. with the different flows running from the points on the diamond. along with their use in an example. Sometimes. all operating at the same time. Tasks are shown as rectangles. flows through a process can be diverted in multiple directions depending on some condition. the activities associated with a process affect one another. Exhibit 6. PROCESS FLOWCHARTING Often. flows. A good way to start analyzing a process is with a diagram showing the basic elements of a process—typically. Is the purpose to solve a problem? Is it to better understand the impact of a change in how business will be done in the future? Clearly understanding the purpose of the analysis is critical to setting the level of detail in modelling the process. exhibit 6.1 displays examples of these symbols. consider a simple example.1 Raw Move to material Component Wait Final Final assembly processing assembly inspection facility 5 days 2 days 5 days 3 days 1 day Inspection Ship decision Pass Fail 3rd Pass . Excel. Assuming that there are many cars waiting to be washed all the time.e. Exhibit 6. one may question why components need to be moved to a second facility for assembly. then the actual cycle time is 6 minutes (one car coming out every 6 minutes on average). the cycle time for the wash is then 3 minutes.e. only 10 cars come in an hour. if. all of the activities in the process would be collapsed and analyzed using a single cycle time to represent its speed. However. the component processing and final assembly process nodes could be expanded to show more detail. resulting in a faster process. We will also see that the type of process used should tie in with the position of the product on the product–process matrix discussed in Chapter 5.1 does not include the option for inspection after component processing.. The raw material for processing is held in inventory. in reality. A multiple-stage process has multiple groups of activities that are Stage 1 Stage 2 Stage 3 linked through flows. This could be added if appropriate. on average. more dedicated. An easy way to draw flowcharts is to use the Shapes gallery available in the Microsoft Office programs (i. Further. If the process in Exhibit 6. For example. process flowcharting is related to a concept called Value Stream Mapping (VSM) which analyzses processes for improvement. Otherwise. The term stage is used to indicate that multiple activities Multistage process have been pulled together for analysis purposes.. Word. For more sophisticated flow charting. The product then goes through a final inspection. a car comes out of the wash every 3 minutes. the raw material is withdrawn from the inventory in appropriate quantities and the components are made. TYPES OF PROCESSES It is useful to categorize processes to describe how a process is designed. This might lead to reorganization of the process so that all the processing is done in one facility.indd Page 160 7/27/09 3:17:49 PM user-s176 /Users/user-s176/Desktop/Temp Work/July/14-07-09/VGP_14_07_09/Gabor/MHRL022 Work/July/14-07-09/VGP_14_07_09/Gabor/MHRL022- 160 Section 2 PROCESSES The example shown is that of a product that is made from processed components. 3rd Pass . flowcharting software is also available. and PowerPoint). Utilization is the ratio of the time that a resource is actually activated relative to the time that it is available for use (also see Chapter 4). it is returned to the final assembly area for rework. thus encountering delays. If. the utilization of this facility is only 50 percent (10 cars per hour/20 cars per hour). The first way to categorize a process is to determine whether it is a single-stage or a multiple-stage process. If it passes inspection it is shipped.jac69078_ch06_157-176. only 10 cars on average arrive in an hour. When the product is ready to be manu- factured. it would be categorized as a single-stage process. other. even though the fastest cycle time for the car wash is 3 minutes. as required. To be consistent. Thus. we can show the similarities and differences between processes. One important advantage of process flowcharting is that it allows decision makers to identify opportunities for improving the process. in this text the term “cycle time” refers to the fastest cycle time Note that this car wash can handle 20 cars an hour (3 minutes per car).1 were viewed as a simple black box. Then these components are shipped to the second facility where they wait for some time before being assembled into the final product. For example. Cycle Time and Utilization The cycle time (discussed in Chapter 5) of a repetitive process is the average time between completions of successive units. i. In this case. Suppose we have an automatic car wash that can wash one car in 3 minutes. The flowchart could be more or less detailed. By being able to quickly categorize a process. and each unit would go directly from the first stage to the second.jac69078_ch06_157-176. Multistage process with buffer tracted from the 3000 seconds because the second stage is starved for the first 30 seconds. variability would have little impact on the performance of this system. The second stage in this case is called a bottleneck because it limits the capacity of the process. Starving occurs when the activities in a stage must stop because there is no work. So the cycle time is related to the processing time at the bottleneck. All of this assumes that there is no variability in the cycle time. This would mean that the 50% inventory would build up to 34 units (100 units 2 66 units) over that first 3000 seconds. Consider a two-stage process where the first stage has a cycle time of 30 seconds and the second a cycle time of 45 seconds. What would happen if an inventory buffer were placed between the two stages? In this case. All of the units would be produced in 4530 seconds. but if the cycle times were closer. Buffer Stage 1 Stage 2 onds. The second stage would be starved for 15 seconds waiting for each unit to arrive. Buffering allows the stages to operate independently. then the assumption is that the two stages are directly linked. the first stage would be the bottleneck. and Starving A multiple-stage process may be buffered internally. 3rd Pass . During these 3000 sec. If this process needs to produce 100 units. Blocking. When a process is designed this way. it would still take 4530 seconds to complete all 100 units. 50% What would happen if the first stage Alternative paths required 45 seconds and the second stage had the 30-second cycle time? In this case. If one stage feeds a second stage with no intermediate buffer. Buffering refers to a storage area between stages where the output of a stage is placed prior to being used in a downstream stage. however. then the first stage would be blocked for 15 seconds for each unit produced. the first stage would complete the 100 units in 3000 seconds (30 seconds/ unit 3 100 units). some inventory Different products produced might collect in the buffer. Note that the cycle time is 45 seconds (one unit comes out Simultaneous activities every 45 seconds) which is the time required to process each unit at the bottleneck stage.indd Page 161 7/27/09 3:17:51 PM user-s176 /Users/user-s176/Desktop/Temp Work/July/14-07-09/VGP_14_07_09/Gabor/MHRL022 Work/July/14-07-09/VGP_14_07_09/Gabor/MHRL022- CHAPTER 6 Process Analysis 161 Buffering. With the relatively low 67 percent utilization on the second stage. the second stage would complete only 66 units ((3000 2 30) seconds/45 seconds/unit). Blocking occurs when the activities in the stage must stop because there is no place to deposit the item just completed. the most common problems that can happen are blocking and starving. The 30 seconds are sub. Services by their very nature often use make-to-order processes. cheese. for whom speed of delivery is important. A make-to-stock process can be controlled based on the actual or anticipated amount of finished goods inventory. pickles. stages. Or perhaps two different sets of activities can be done at the same time on the unit being produced. hamburgers were grilled in batches. In the case of McDonald’s. cheese. onions. it is important to understand the context. activities. and onion on a sesame seed bun) were then prepared and stored in a holding bin for immediate delivery to the customer. We begin our tour of the approaches used by the top fast-food restaurants by first reviewing the traditional approach. In the case where parallel processes represent alternatives. two or more processes terminate in a common inventory buffer.jac69078_ch06_157-176. McDonald’s revolutionized the hamburger-making process by developing a high-volume approach. for example. Until recently. A diagram of McDonald’s traditional process is shown in Exhibit 6. To illustrate these concepts. for customized products produced in low volumes. This make-to-order process is activated only in response to an actual order. The quality of the hamburger is highly dependent on the skill of the cook. in 1999 the company converted to a new make-to-order process. Separate inventories should be used in the diagram if the outputs of the parallel processes are different. but the company has now revised that into a “hybrid” system. Normally. this inventory is refrigerated and the patties have already been made). and the process would be periodically activated to maintain that target stocking level. hamburgers were always made to order. sauce. A make-to-order process is used for products in the project and job shop part of the diagonal in the product process matrix. Sometimes. customer orders are then served from this inventory. In analyzing a system with parallel activities or stages. Make-to-Stock versus Make-to-Order Another useful way to characterize a process is whether the process makes to stock or makes to order. This is a highly efficient make-to-stock process that produces standard products that can be delivered quickly to the customer. a make-to-stock process ends with finished goods inventory. In general. A target stocking level. a diamond should show that flows divert and what percentage of the flow moves in each direction.e. might be set. the cook takes raw hamburger meat from inventory (typically. the customer places an order specifying the degree of cooking (medium or well done) and requests specific condiments (pickles. Using this specification. This quick process appeals to families with small children. operating two identical activities in parallel would theoretically double capacity. Before the era of fast food.2A. For example. ketchup). one would expect that response time would be slow because all the activities need to be completed before the product is delivered to the customer. The hamburger is then assembled and delivered to the customer. cooks the hamburger. lettuce.indd Page 162 7/27/09 3:17:54 PM user-s176 /Users/user-s176/Desktop/Temp Work/July/14-07-09/VGP_14_07_09/Gabor/MHRL022 Work/July/14-07-09/VGP_14_07_09/Gabor/MHRL022- 162 Section 2 PROCESSES Often. Theoretically. Make-to-stock processes are also used when demand is seasonal. A person who judged current demand and placed orders to keep inventory in the bin at an appropriate level controlled the whole process. inventory can be built during the slow season and used during 3rd Pass . In the traditional process. In this case. mustard.. consider the processes used to make hamburgers at the three major fast-food restaurant chains in North America: McDonald’s. and even entire processes are operated in parallel. and warms the bun. Standard hamburgers (for example. and Wendy’s. i. the “Big Mac” consists of two beef patties. Consider a traditional restaurant making hamburgers. Inventory (both work-in-process and finished goods) is kept to a minimum. for example. this indicates that the two processes make identical items that are going into this inventory. Burger King. Custom material process or Cook standard? Finished Standard goods Assemble Deliver Customer places order C.2 A. McDonald’s—New Process Customer places order Raw Work-in- material process Cook Assemble Deliver 3rd Pass . Burger King. and Wendy’s exhibit 6. Wendy’s Customer places order Raw material Cook Assemble Deliver Chili D. McDonald’s—Old Process Customer places order Raw Finished material goods Cook Assemble Deliver B. Burger King Customer places order Assemble Deliver Custom Raw Work-in.jac69078_ch06_157-176.indd Page 163 7/27/09 3:17:54 PM user-s176 /Users/user-s176/Desktop/Temp Work/July/14-07-09/VGP_14_07_09/Gabor/MHRL022 Work/July/14-07-09/VGP_14_07_09/Gabor/MHRL022- CHAPTER 6 Process Analysis 163 Making Hamburgers at McDonald’s. while at the same time offering customization (assem- bling the standard modules into many different end products). is a highly specialized conveyor–broiler. Patties that are on the grill too long are used in the chili soup.e. In general. the cook tries to get a little ahead and anticipates the arrival of customers. Wendy’s uses a make-to-order process (as shown in Exhibit 6. During periods of high demand. At the same time. and reliability versus uniqueness. quality. having too many unique parts in each model can bring its own problems.indd Page 164 7/27/09 3:17:57 PM user-s176 /Users/user-s176/Desktop/Temp Work/July/14-07-09/VGP_14_07_09/Gabor/MHRL022 Work/July/14-07-09/VGP_14_07_09/Gabor/MHRL022- 164 Section 2 PROCESSES the peak season. it does not want too many common components either. hybrid processes combine the features of both make-to- order and make-to-stock. generic components (sub-assemblies or modules) are first made-to-stock. The customer can see what is going on. Modularized products are made using a hybrid process.. a patty is taken from the grill and the hamburger is assembled to the exact specifications of the customer. the patties are cooked on both sides with a unique broiler taste. The components are then assembled in different combinations. 3rd Pass . Modularization is also related to mass customization. two types of process are parallel alternatives at the end of the Burger King process.2C) that is in full view of the customer. When a customer order arrives. As shown in the OSMP. Modulariza- tion thus uses the characteristics of both make-to-order and make-to-stock processes. resulting in product recalls. i.2B. During high-volume times. Hamburger patties are cooked on a grill. This could be a disadvantage if a competitor like Lexus or BMW introduces a state-of-the art model more quickly. when actual customer demand occurs. Make-to-stock processes are used for products in the assembly line and continuous process part of the product process matrix. while Mercedes realized that while having every model as unique as possible (differentiating between the various models) was important to a luxury car brand. shown in Exhibit 6. Mass customization implies that mass production methods (high volume process for the modules with the advantages discussed in Chapter 5) are employed. thus allowing the process to run at a constant rate throughout the year. whereas using common parts that have already been field tested would be more reliable. Also. In exactly 90 seconds. So Mercedes is using limited modularization. it is a little slower.jac69078_ch06_157-176. Thus. the Burger King “have it your way” slogan. Custom hamburgers with unique combinations of condiments are prepared to order. For example. Mercedes wants to keep its reputation for innovation in each model. new and untested parts have a higher risk of unanticipated failure in the field. Raw hamburger patties are placed on a moving conveyor that runs through a flaming broiler. Because the process starts with the cooking of the patty.1 Continuing with our tour. a company like Silent Witness is able to offer more than 1000 different end products. and the perception is of a high- quality custom product. with fewer than 40 standard modules. those products with high volume but little customization. highly consistent product. though. In modularized products. The cooked patties are stored in a warmed storage container. Due to the fixed time for a patty to move through the conveyor–broiler. Here. This hybrid process provides flexibility to respond to customer prefer- ences through the assemble-to-order backend process—thus. Mass customization is discussed in more detail in Chapter 8. the thickness of the patties must be the same for all the hamburger products. Designing unique parts requires increasing the time needed to design a new model. A key trade-off in modularization is the speed of design. This system results in a unique. some standard hamburgers are prepared and inventoried for immediate delivery. The unique feature of the Burger King process. The buns are also warmed on a conveyor. the new McDonald’s process introduced in 1999 (Exhibit 6. By combining the latest technology and clever process engineering. you can have more than 1000 Founded in 1986 and based in Surrey. Buns are toasted in only 11 seconds. catering to families with young children. and made to the exact specifications of the customer. digital and analog storage solutions. delivered quickly. McDonald’s is the high-volume leader. The product is fresh. This is a good including high-performance closed circuit television (CCTV) example of how modular design gives the customer more cameras. camera configurations. only for 40. Each of the processes used by these companies has its strengths and weaknesses. British Columbia. and 6 types of on the Web lenses (each for two different types of television systems). using a specially designed computer system. digital choices while making operations management easier for the processing technologies. So they don’t have to forecast demand and manage video monitoring technology for the global marketplace. The process makes extensive use of the latest cooking technologies.com/support/configurations/modular Finally. and network-based remote video provider. McDonald’s has developed a very quick response process. Cooked hamburger patties are inventoried in a special storage device that main- tains the moistness of the cooked patties for up to 30 minutes.2D) is a hybrid process. the supply chain for 1000 items. surveillance.jac69078_ch06_157-176. Hamburger patties are cooked in less than 45 seconds. and carry only a little more than 40 stock keeping units is a company that designs and manufactures a full range of (SKUs). The assembly process that includes toasting the buns is designed to respond to a customer order in only 15 seconds. and some other options. Burger 3rd Pass . You can design your preferred surveillance camera by going to the Silent Witness Web site. Individual items on each customer order are transmitted immediately to the area where the hamburgers are assembled. yet the company needs to produce Silent Witness (now a unit of Honeywell Video Systems).indd Page 165 9/1/09 6:46:46 AM user-s176 /Users/user-s176/Desktop CHAPTER 6 Process Analysis 165 Operations and Supply Management in Practice Design Your Own Surveillance Camera 19 types of housings. With about ■ Source: www.honeywellvideo. 12 types of cameras. to understand exactly how a metric coming from a particular company or industry is calculated prior to making any decisions. Another mechanism used is a clock that counts down the amount of time left in each cycle. a standard follow-up question is “How did you calculate that?” Metrics are often calculated in the context of a particular process. for example. An assembly line may. the utilization of direct labour or the utilization of a machine resource. Often. In a serial process. if a manager says that his utilization is 90 percent or her efficiency is 115 percent. partial factor productivity is measured based on an individual input. often referred to as benchmarking. but this is just not the case.indd Page 166 7/27/09 3:17:57 PM user-s176 /Users/user-s176/Desktop/Temp Work/July/14-07-09/VGP_14_07_09/Gabor/MHRL022 Work/July/14-07-09/VGP_14_07_09/Gabor/MHRL022- 166 Section 2 PROCESSES King has its unique taste. Productivity is the ratio of output to input. Total factor productivity is usually measured in monetary units. Partial factor productivity answers the question of how much output we can get from a given level of input. within the context of the case. The metrics described in this section are important for answering these questions. To help in understanding these calculations. Comparing the metrics of one company to another. Exhibit 6.2 seconds/automobile). Similar to the value of financial measures to accountants. the movement of items through each activity (or stage) is often paced in some mechanical way to coordinate the line. labour. operations managers need to improve the performance of a process or project the impact of a proposed change. Alternatively.3 shows how these metrics relate to one another. Metrics used in cases that you are studying may be defined slightly differently from what is given here. how a term is being used. is an important activity. utilization is the ratio of the time that a resource is actually being used relative to the time that it is available for use. This section defines metrics in a manner consistent with the most common use in practice. Dividing the time available to produce a certain product by customer demand for the product calculates the required cycle time for a process.) Utilization measures the 3rd Pass .2 seconds (420 minutes/1000 automobiles 3 60 seconds/minute 5 25. dollars. Possibly the most common process metric is utilization. by taking the dollar value of the output (such as goods and services sold) and dividing by the cost of all the inputs (that is. For example. material. The distinction between productivity and utilization is important. When the clock reaches zero. As discussed earlier in the chapter. how many computers are made per employee working in the computer manufacturing plant. One final method for categorizing a process is by whether it is paced or nonpaced. process performance metrics give the operations manager a gauge on how productively a process is currently operating and how productivity is changing over time.jac69078_ch06_157-176. So. It is vital. It is important to understand. Recall that Burger King uses the conveyor–broiler to cook hamburgers in exactly 90 seconds. the cycle time is 25. if an automobile manufacturer needs to produce 1000 automobiles during a shift where the assembly line operates 420 minutes. the parts are manually moved to the next activity. for example. labour being the most common. MEASURING PROCESS PERFORMANCE There is much variation in the way performance metrics are calculated in practice. move every 45 seconds. Utilization is always measured in reference to some resource—for example. Metrics tell a firm if progress is being made toward improvement. Pacing refers to the fixed timing of the movement of items through the process. Each company focuses advertising and promotional efforts toward attracting the segment of the market its process characteristics best support. (See Chapter 2 for additional information about productivity. though. Wendy’s appeals to those who want their hamburgers prepared the old-fashioned way. for example. and capital investment). It would be easier if metrics were calculated more consistently. Consider the cereal-boxing machine that is designed to produce at a rate of 30 boxes per minute. The operation time to make a batch of 10 000 250 g boxes is 21800 seconds (30 minutes’ set-up 3 60 seconds/minute 1 2 seconds/box 3 10 000 boxes). set-up time is often not included in the utilization of the process. For example. set-up time is categorized like the downtime caused by repair or some other disruption to the process. or 363. The set-up time is the time required to prepare a machine to make a particular item. consider a machine designed to package cereal at a rate of 30 boxes per minute.jac69078_ch06_157-176. what is the percentage of time that an expensive machine is actually operating? Efficiency is a ratio of the actual output of a process relative to some standard.33 minutes. then the efficiency of the machine is 120 percent (36/30). if 1000 units of energy are put into a process designed to convert that energy to some alternative form. The run time for each box is 2 seconds. An alternative way to use the term efficiency is to measure the loss or gain in a process. and the process produces only 800 units of energy in the new form. For example. 3rd Pass . so it is important when comparing the utilization of a machine or other resource to understand exactly how the company categorizes set-up time.indd Page 167 7/27/09 3:17:57 PM user-s176 /Users/user-s176/Desktop/Temp Work/July/14-07-09/VGP_14_07_09/Gabor/MHRL022 Work/July/14-07-09/VGP_14_07_09/Gabor/MHRL022- CHAPTER 6 Process Analysis 167 Process Performance Metrics exhibit 6. during a shift. the operators actually produce at a rate of 36 boxes per minute. In practice. To switch the machine from 500 g boxes to 250 g boxes requires a set-up time of 30 minutes. Machines that have significant set-up time will typically run parts in batches. This is calculated by mul- tiplying the time required to produce each unit by the batch size. In essence.3 Batch Time/ Set-up Queue size unit time time Operation time !Set-up time " Run time Throughput time ! Average time for a unit to move through the system Run Operation Throughput time time time Throughput time Velocity ! Value-added time Cycle time ! Average time between Cycle completion of units Standards Velocity time 1 Throughput rate ! Cycle time Actual output Efficiency ! Efficiency Throughput Productivity Inputs Standard output rate Output Productivity ! Input Time activated Time Time Utilization ! Utilization Time available available activated actual activation of the resource. Run time is the time required to produce a batch of parts. For example. The operation (process) time is the sum of the set-up time and run time for a batch of parts that are run on a machine. then the process is 80 percent efficient. This assumption can vary from company to company. If. The throughput rate is the output rate that the process is expected to produce over a period of time. two are between stations 2 and 3. Assuming that all of the activities that are included in the process are value-added activities. units are not worked on 100 percent of the time as they move through a process. Because the cycle time of the individual parts of a process often varies. consider a paced assembly line that has six stations and runs with a cycle time of 30 seconds. the chapter emphasized the importance of managing the critical path. 3rd Pass .indd Page 168 7/27/09 3:18:00 PM user-s176 /Users/user-s176/Desktop/Temp Work/July/14-07-09/VGP_14_07_09/Gabor/MHRL022 Work/July/14-07-09/VGP_14_07_09/Gabor/MHRL022- 168 Section 2 PROCESSES Another related term is throughput time. Process velocity (also known as throughput ratio) is the ratio of the total throughput time to the value-added time. is 2. buffers are incorpo- rated in the process to allow individual activities to operate independently. assuming the positions are used 100 percent of the time. Lean Manufacturing (Chapter 10) and more recently the Theory of Contraints2 have also reiterated the importance of bottlenecks in process management. then the throughput time is three minutes (30 seconds 3 6 stations/60 seconds per minute). Value-added time is the time in which useful work is actually being done on the unit. A cereal production line running a particular package size. consider the impact of having 10 additional buffer positions along the line. If the stations are located one right after another and every 30 seconds parts move from one station to the next.jac69078_ch06_157-176. Assume that two of these positions are between the first and second workstations. Changing the package size would entail a set-up during which the production line would be idle.66 (8 minutes/3 minutes). then the average throughput time would be eight minutes (assuming a total of 16 positions along the assembly line and an average cycle time of 30 seconds). So in practice it is important to determine how the term is being used in the context of the process being studied. To minimize this idle time. The throughput rate of the assembly line is 120 units per hour (60 minutes/hour 3 60 seconds/minute 4 30 seconds/unit). and so forth. The process velocity (or throughput ratio) for our assembly line with the 10 additional buffer positions. Sometimes throughput time and cycle time are used interchangeably (recall that cycle time is related to the operation time at the bottleneck). In fact. In this text. often called a lot size. It has been long recognized that cycle time depends on the bottleneck and that managing the bottleneck is important in ensuring the effectiveness of a process. In this case. As a simple example. Throughput time includes the time that the unit spends actually being worked on together with the time spent waiting in a queue. the “critical path” in a project schedule is the bottleneck in the process since it determines when the project can be completed. value-added time should be the sum of the activity operation times in the process. Thus. Often. in Chapter 3. If these positions are always occupied. In the six-station assembly line just described. the throughput rate is the mathematical inverse of the cycle time. each package size is produced in large batches. cycle time and throughput time are considered to be different. at least to some extent. The diagram should include all the operating elements and show how they fit together. Remember this fundamental concept when analyzing a process: What goes into the process must come out of the process. If too much liquid is poured into the funnel.4 Rate Must Be Less Than or Equal to the Output Rate. If too many jobs are pumped into the process. Input exhibit 6. the System Will Overflow. You can obtain great insight by drawing a simple flowchart showing the flow of materials or information through an enterprise. the time it takes the liquid to flow through the funnel increases. If liquid is poured into the funnel at a rate greater than it can exit. merely eliminating the waiting time can dramatically improve the performance of the process.indd Page 169 7/27/09 3:18:04 PM user-s176 /Users/user-s176/Desktop/Temp Work/July/14-07-09/VGP_14_07_09/Gabor/MHRL022 Work/July/14-07-09/VGP_14_07_09/Gabor/MHRL022- CHAPTER 6 Process Analysis 169 Process analysis is a basic skill you need to understand how a business operates. the tube leading out of the funnel needs to be made larger. This requires finding what activity is limiting the output of the process and increasing the capacity of that activity. What Goes into a Process Must Come Out of the Process. In a real business process. the time that it takes to complete a job will increase because the waiting time will increase. it just spills over the top and never flows through. The same is true of a real process.4. the only way to take on more work without increasing the waiting time is to add more capacity. In essence. A process taken as a whole is like the funnel shown in Exhibit 6. 90 percent or more of the time required for a customer to be served is spent just waiting. the level in the funnel will continue to grow. At some point. New work enters the process Work waiting to be completed Throughput time Process required to complete work Completed work 3rd Pass . customers will go somewhere else and the business will be lost.jac69078_ch06_157-176. Often. The outlet of the funnel restricts the amount that can flow through. As the level of liquid in the funnel grows. Be sure to indicate where material is stored or where orders are queued. When a process is operating at capacity. Hence. certain resources limit output. Otherwise. indd Page 170 7/27/09 3:18:07 PM user-s176 /Users/user-s176/Desktop/Temp Work/July/14-07-09/VGP_14_07_09/Gabor/MHRL022 Work/July/14-07-09/VGP_14_07_09/Gabor/MHRL022- 170 Section 2 PROCESSES Blocking The activities in the stage must stop because there Process Any set of activities performed by an organization is no place to deposit the item just completed. These generic compo. The general flow of the process is shown below. inventory. no work. Set-up time The time required to prepare a machine to make a particular item. Bottleneck A stage or activity (or resource) that limits the capacity or maximum output of the process. generic components are made and Starving The activities in a stage must stop because there is stocked at some point in the process. Usually.jac69078_ch06_157-176. Taking the dollar Buffering allows the stages to operate independently. to an actual order. being done on the unit. a batch of parts that are run on a machine. that takes inputs and transforms them into outputs. Throughput rate The output rate that the process is ex- Make-to-order A process that is activated only in response pected to produce over a period of time. 3rd Pass . between starting and completing a job (throughput time). manufacturing process. Buffering A storage area between stages where the output of a stage is placed prior to being used in a downstream stage. but assembly lines are usually paced. Throughput time The average time that it takes a unit to Make-to-stock A process that produces standard products move through an entire process. Dave is analyzing the processes at the shop. Alternatively. Run time The time required to produce a batch of parts. the term lead time is that are stored in finished goods inventory. Value stream mapping Visually describing a process and Operation time The sum of the set-up time and run time for analyzing it for improvement. Cycle time The average time between completions of suc. ent end products from standard modules (components). Process velocity or throughput ratio The ratio of the total throughput time to the value-added time. Productivity The ratio of output to input. Most processes are not paced. A separate person works at each of the steps in the process. and delivery time). Efficiency A ratio of the actual output of a process relative to some standard. The term is sometimes used to mean the elapsed time ple would be units/person). Hybrid Combines the features of both make-to-order and make-to-stock. nents are customized in a final process to meet actual orders. value of the output and dividing by the dollar value of the inputs usually measures total factor productivity. throughput time. Typically. Mass customization Providing customized end products Utilization The ratio of the time that a resource is actually while at the same time using the efficiencies of a high volume activated relative to the time that it is available for use. Value-added time The time in which useful work is actually Modular products Products that are assembled into differ. Daffy Dave’s Sub Shop makes custom submarine sandwiches to order. ideally of greater value to the organization than the original inputs. Pacing Movement of items through a process is coordinated through a timing mechanism. used to refer to the total time that it takes a customer to receive livered quickly to the customer from the finished goods an order (includes time to process the order. partial factor productivity is measured based on an individual cessive units in a process (this is the definition used in this input and often is not calculated using dollar values (an exam- book). The product is de. per order) * 8 hours 5 120 subs per day Bag the Order (60 min. per hour/2 min. OPERATION OUTPUT Take Orders (60 min. per hour/3 min. Maximum output is 120 subs per day. Toppings/Condiments station will go from 4 minutes to 3 minutes. a. therefore. per hour/2 min. per order) * 8 hours 5 240 subs per day There is no benefit to this change. so that is the maximum output. per order) * 8 hours 5 240 subs per day Output per day is determined by the slowest station.indd Page 171 7/27/09 3:18:07 PM user-s176 /Users/user-s176/Desktop/Temp Work/July/14-07-09/VGP_14_07_09/Gabor/MHRL022 Work/July/14-07-09/VGP_14_07_09/Gabor/MHRL022- CHAPTER 6 Process Analysis 171 Slice the bun Add the Take the and add the toppings and Bag the order order meat/cheese condiments 1 minute/order 3 minutes/order 4 minutes/order 2 minutes/order Daffy Dave wants to figure out the following for a typical 8-hour work day.jac69078_ch06_157-176. If we add another person. per order) * 8 hours 5 160 subs per day Toppings/Condiments (60 min. and Bun and Meat goes from 3 minutes to 2 minutes. per hour/1 min. per order) * 8 hours 5 240 subs per day Bun and Meat (60 min. 3rd Pass . c. d. per order) * 8 hours 5 240 subs per day Toppings/Condiments (60 min. OPERATION OUTPUT Take Orders (60 min. and Bagging goes from 2 minutes to 3 minutes. per hour/2 min. Dave should add the person to the slowest station (Condiments/Toppings) since it is the bottleneck. b. we can only produce 120 per day because that is the limit of the Toppings/Condiments station. per order) * 8 hours 5 120 subs per day Bag the Order (60 min. where would we add him or her and what is the benefit? c. Is there a benefit if we shift 1 minute of work from Condiments to Bagging? Assume we do not make the changes in parts b and c above. per order) * 8 hours 5 480 subs per day Bun and Meat (60 min. per hour/4 min. SOLUTION a. OPERATION OUTPUT Take Orders 480 subs per day Bun and Meat 160 subs per day Toppings/Condiments 120 * 2 5 240 subs per day Bag the Order 240 subs per day The impact is not a very big one. the Bun and Meat station can only do 160. d. What is the current maximum output of the process? b. per hour/2 min. Even though the Toppings/Condiments station now can do 240 subs per day. Is there a benefit if we can shift 1 minute from Bun and Meat to Order Taking? Assume we do not make the change in part b above. Order Taking station will go from 1 minute to 2 minutes. per hour/4 min. Dave can still only make 120 subs per day since we can only produce 120 per day because that is the limit of the Toppings/Condiments station. Rockness Recycling refurbishes rundown business students. which carries each student through the five steps of the process in sequence. 1. which actually means minimizing the time that it takes to process something through the system. per hour/3 min. This will provide the same benefit as hiring another worker. The traditional method requires about 20 minutes to review the form and arrange the information in the proper order for processing. per order) * 8 hours 5 160 subs per day Bag the Order (60 min.indd Page 172 7/27/09 3:18:09 PM user-s176 /Users/user-s176/Desktop/Temp Work/July/14-07-09/VGP_14_07_09/Gabor/MHRL022 Work/July/14-07-09/VGP_14_07_09/Gabor/MHRL022- 172 Section 2 PROCESSES OPERATION OUTPUT Take Orders (60 min. How valid is McDonald’s claim that the new process will produce fresher hamburgers for the customer? Comparing McDonald’s new process to the processes used by Burger King and Wendy’s. The five steps are as follows: TIME REQUIRED STEP DESCRIPTION PER STUDENT 1 Unpack and place on belt 1. if Dave wants to increase output further. How has this set-up time reduction helped? 1. Each student who uses the service fills out a form and lists up to 10 companies that he or she would like to have contacted. he will have to hire some additional staff. which takes only a minute to prepare but requires five minutes per company for completing the processing. Compare McDonald’s old and new processes for making hamburgers. per order) * 8 hours 5 160 subs per day Toppings/Condiments (60 min. How can this be bad? 3. However. Dave can now make 160 subs per day. For what type of products or services would it not be appropriate to use a hybrid process? 7. which process appears to produce the freshest hamburgers? 2. Recently. per hour/3 min. it takes only two minutes per company requested to complete the processing. Explain how having more work-in-process inventory can improve the efficiency of a process. per hour/3 min. If it costs about the same amount per minute for processing with either of the two methods. some operations management experts have begun insisting that simply minimizing process velocity. when should each be used? 2. an enterprising student. per order) * 8 hours 5 160 subs per day There is a benefit to this change. Give an example of a process where you have observed a reduction in set-up time through the use of better technology or better techniques. What are the advantages and disadvantages of a modularized process compared to make-to-stock and make-to-order processes? 6. Osakwe. Can you think of a situation in which this might not be true? 4. Once this set-up is done. has set up an internship clearinghouse for business students. The other alternative uses an optical scan/retrieve system.5 minutes 3 Scrub and clean mind 0. The clearinghouse has a choice of two methods to use for processing the forms.0 minute 5 Polish and pack 1. per hour/1 min. The process uses a moving belt.8 minute 4 Insert modern methods 1.0 minute 2 Strip off bad habits 1.2 minutes 3rd Pass .jac69078_ch06_157-176. What is a bottleneck and how does it help manage a process? 5. per order) * 8 hours 5 480 subs per day Bun and Meat (60 min. is the single most important measure for improving a process. Mr. After some practice. This person would both gather and analyze the data. a. and L assemble the chair frame. What is the possible daily output of this “process” if 8 hours of processing time is available each day? b. What is the production (output per hour) for each alternative? What is the productivity (output per labour hour)? b. and some final tasks are completed in stations Y and Z. K. Generally. The process would require the data gatherer to fill out a matrix on the computer. Rockness has been working on a contract from General Eclec- tic. which requires delivery of 2000 refurbished students per week. complaining that the company hasn’t been receiving the agreed-upon number of students. The following represents a process used to assemble a chair with an upholstered seat. Stations A. Given your output rate in part a. B. A B C X Y Z L K J Given the following amount of work in seconds required at each station: A 38 J 32 X 22 B 34 K 30 Y 18 C 35 L 34 Z 20 a.jac69078_ch06_157-176. and C make the seat. although there is room for one unit between each of the stations that might be used for a brief amount of time. A representative of the human resources department has just called. Using this approach. The firm’s management is thinking of assigning two people to each project in order to allow them to specialize and become more efficient. What is the throughput time of the process? 3rd Pass .indd Page 173 7/27/09 3:18:09 PM user-s176 /Users/user-s176/Desktop/Temp Work/July/14-07-09/VGP_14_07_09/Gabor/MHRL022 Work/July/14-07-09/VGP_14_07_09/Gabor/MHRL022- CHAPTER 6 Process Analysis 173 One faculty member is assigned to each of these steps. check it. A local market research firm has just won a contract for several thousand small projects involving data gathering and statistical analysis. no inventory is kept anywhere in the system. the firm has assigned each project to a single member of its highly trained professional staff. A check of finished goods inventory by Mr. How long would it take to complete 1000 projects with each alternative? What would the labour content (total number of labour hours) for 1000 projects be for each alternative? 4. an experienced person can complete an average of 10 such projects in an eight-hour day. the new process can be completed with a standard time of 20 minutes for the data gathering and 30 minutes for the analysis. station X is where the two subassemblies are brought together. Rockness reveals that there is no stock left. and transmit it to the statistical analysis program for the analyst to complete. but the analysis must be complete before the statistical analysis program can accept the new data. Data can be gathered on one project while the analysis is being completed on another. stations J. What is going on? 3. what is the efficiency of the process? c. One worker is assigned to each of the stations. In the past. Faculty members work a 40-hour week and rotate jobs each week. your cookies will be com. put the Several factors will set you apart from competing products cookies into the oven. using any combi. available right on campus. The first step is to take the order from a customer (capacity: 100 customers/hr). The cookies will be Baking cookies is simple: mix all the ingredients in a food ready for pickup at your apartment within an hour. A batch of 100 loaves is baked every hour. take the tray of cookies out such as store-bought cookies. The time for each individual bread-making operation is still one hour per 100 loaves. a. First. The first is preparing the dough and baking the loaves. d. If we double the packing capacity (from 60 to 120 orders per hour). Draw flowcharts for the situations with both one and two bread-making machines. olate chips. take the cookies pletely fresh. b. Given c. Draw the flowchart of the process from customer order placement to shipping b.m. what impact does this have on your answers in parts c. Two steps are required in preparing the bread.jac69078_ch06_157-176.m. Your apartment 3rd Pass . the manager of a bakery. most exotic cookies anywhere. When there is only one bread-making machine what is the capacity of the bakery per hour? What are the utilizations of the bread-making and packing operations? c. finally. therefore. What is the current maximum output of the process assuming that no one works overtime? c. Wally promises that every order placed today gets shipped tomorrow. Buyers will telephone in their orders and specify production process to figure out many variables there are. The loaves are then stored. In short. freshest. spoon out the cookie dough onto a tray. like Steve’s Ice Cream. cookie sheets. You and your the order. here referred to as bread making. The second step is to pick the order for the customer (capacity: 80 customers/hr). When there are two bread-making machines what is the capacity of the bakery per hour? What are the utilizations of the bread-making and packing operations? You and your roommate are preparing to start Kristen’s Second. Assume that the bakery can sell all it can bake.indd Page 174 7/27/09 3:18:11 PM user-s176 /Users/user-s176/Desktop/Temp Work/July/14-07-09/VGP_14_07_09/Gabor/MHRL022 Work/July/14-07-09/VGP_14_07_09/Gabor/MHRL022- 174 Section 2 PROCESSES 5. M&M’s. you will have the make a profit. and how many orders to accept. That means that the picking and packing operations must finish all orders before they go home. Anvi. Given c. bread is made in batches of 100 loaves. which of these ingredients they want in their cookies. You will not bake any cookies before receiving off the tray and carefully pack them in a box. to 7 p. what is the maximum number of orders waiting to be picked? e. walnuts. The company ingredients available to add to the basic dough. There are three steps required to ship a customer order.5 you will have a variety of Cookie Company in your on-campus apartment. The loaves are then put into an intermediate stocking area ready for packing. You including what prices to charge. Packaging needs only 0. How long will the picking and packing operations have to work if we have a day where the order taker works at his maximum capacity? d. The manager wants to analyze the process. coconut. Wally’s Widget Warehouse takes orders from 7 a. Crispy Crunch bars. of the oven. bake them. is interested in analyzing her bread-making process. and spoons. The second is packaging the loaves. and. The raw materials required for making bread are carried in inventory. and e? 6. The Production Process nation of ingredients that the buyer wants. the buyer will be getting cookies that are roommate already own all the necessary capital equipment: literally hot out of the oven. waiting for shipment Anvi is considering buying an additional bread-making machine (though not an additional packaging machine).4 a. one food processor. You need to evaluate the preliminary design for the company’s and raisins. what is the maximum number of orders waiting to be packed? f. processor. including choc- will provide fresh cookies to starving students late at night. whether you will be able to guarantee completely fresh cookies. and then the warehouse has to pack the order ready for shipping (capacity: 60 customers/hr). Wally wants to figure out the following.75 hour to place the 100 loaves in bags. let the cookies cool. Due to the size of the mixers in the bakery. Business Concept Your idea is to bake fresh cookies to order. All Rights Reserved. Because this runs automatically on your 3. 3rd Pass . When should you promise delivery? How can you look Kristen’s Cookie Company. when you conduct a market survey to (what value do you place on your time?). 4. Written by Roger accepting orders. Questions cause the oven holds only one cookie sheet. Are there any changes you can make in your production plans enough dough and ingredients for two dozen cookies takes the that will allow you to make better cookies. during the first minute of which your roommate is busy setting the oven. The cookies bake for the next nine minutes. lord pays for all the electricity. out a roommate? Your roommate also performs the last steps of the process 2. Copyright © 1986 by The Harvard Business School Publishing Corpora- get started and try out different ways of producing the cookies.10 per box. The variable costs. with as much as possible specified. How many orders can you fill in a night. These activities 5. however. What happens if you are trying to do this by yourself with- take an additional 10 minutes to bake. which what your order policies will be. tion. For example.jac69078_ch06_157-176. So total baking time is 10 minutes. determine the likely demand. It takes two minutes to pack each dozen and already in the oven? If not. such complexities will 4. Case 9-686-093. you at least want a preliminary plan. Should you offer special rates for rush orders? Suppose by first removing the cookies from the oven and putting them you have just put a sheet of cookies into the oven and aside to cool for five minutes. The mixing bowls hold much? Will it take you any longer to fill a two-dozen ingredients for up to three dozen cookies. (Actually. you will produce and sell cookies by the dozen. this step will be ignored in further analysis. However. and your time to make. how should you change the production system? Launch the Business The order-taking process? To launch the business. dishing up less time or at lower cost? For example. Removing the cookies from the cookies of a different flavour. Therefore. Your product must be made to order because each order is potentially unique. is to put the cheaply? What is the effect of adding another oven? How cookies in the oven and set the thermostat and timer. you need to set prices and rules for Source: Kristen’s Cookie Company (A). the cost of the box in which the cookies are packed business each night. Your land. is there a bottleneck the cookies onto the sheet takes two minutes per sheet. 1.indd Page 175 7/27/09 3:18:11 PM user-s176 /Users/user-s176/Desktop/Temp Work/July/14-07-09/VGP_14_07_09/Gabor/MHRL022 Work/July/14-07-09/VGP_14_07_09/Gabor/MHRL022- CHAPTER 6 Process Analysis 175 has a small oven that will hold one tray at a time. which your roommate has figured out how to do quickly and with 100 percent accuracy. The first physical production step is to wash out the Should you give any discount for people who order two mixing bowl from the previous batch. add all of the ingredients. regardless of need? how many cookies are being made in the batch. it does not take any of your time. For example. so that you can do a careful are merely the cost of the ingredients (estimated to be $0. 5. Can you fill the priority oven takes only a negligible amount of time. assuming you are accept orders and to inform customers when their orders will open four hours each night? be ready for pickup. how and mix them in your food processor. a second dozen 1. The first following operational questions should help you: step is to take an order. three dozen cookies. Begin your analysis by developing a planning your business? process flow diagram of the cookie-making process. Because your cookie sheets can hold exactly one dozen You and your roommate have timed the necessary physical cookies. each box holds a dozen cookies). or more cookies in same six minutes as one dozen cookies. operations. therefore. which much would you be willing to pay to rent an additional oven? takes about one minute. operation in your production process that you can expand The next step. How many food processors and cookie sheets will you take six minutes for the washing and mixing steps. Some issues will be resolved only after you Bohn. the first batch of cookies for the night a safety margin for timing should you allow? requires preheating the oven. how much of a premium should about one minute to accept payment for the order. That is. follows. answering the specifies how long each of the steps will take. time will it take to fill each order? fore. one dozen at a time. dozen cookies. onto a cookie tray. How much of your own and your roommate’s valuable personal computer. If you decide to sell standard cookies Key Questions to Answer Before You instead. Be. or more? If so. However. performed by your roommate. What other factors should you consider at this stage of be put aside for now. Before you start. a quickly at your order board (list of pending orders) and tell few simplifications were made in the actual cookie production a caller when his or her order will be ready? How much of process.60/ calculation of how much time you will have to devote to this dozen). to mix 6. then carefully packing them in a someone calls up with a “crash priority” order for a dozen box and accepting payment. and how much money you can expect ($0. How long will it take you to fill an order? you and your roommate devised a method using the Internet to 2. As experienced bakers know. You then dish up the cookie order than a one-dozen cookie order? cookies. you will want to specify exactly A detailed examination of the production process. but it must be order while still fulfilling the order for the cookies that are done promptly. you charge for filling the rush order? That is the process for producing cookies by the dozen in 3.) There. 2 Source: www. R. Gray in “Capacity Analysis: Sample Problems. and J. 5 Steve’s Ice Cream was started in the Boston area by a young entrepreneur to provide make-to-order ice cream. and J. On a busy day.” Wall Street Journal. A. The process of blood donors can spend more than an hour in the system before being collection at such places is as follows: When a potential donor sent back because they are ineligible. nity. This ques. This blood cost savings? sample is tested immediately for sufficient iron. If you could do some market intelligence on the commu- this test. Managing Business Process Flows. 1 This case is adopted from a real situation observed at a CBS blood collection first-called sequence.bloodservices. Times are not necessary. This has caused a lot arrives. MA: Butterworth- River. Burlington. Donors then wait with the questionnaire drive.ca 1 Stephen Power. Gray. which ensures first-drop. they are ineligible to donate blood in local communities.. Both needle and test tube are disposable. 2005. (even if they did not contract malaria). The nurse also pricks the 2. Business Process Management: Practical Guide- E. van Mieghem. Anupindi. S. they are given a questionnaire to fill out. July 11. Donors then wait in a queue till their number is called. Donors are they would not return even when eligible. 2 Eliyahu Goldratt.1. if a person has travelled to a region on behalf of the government. Mercedes Looks to New Model Of Flagship S-Class to Reverse An Image of Sagging Quality. 2nd ed.indd Page 176 8/11/09 1:02:39 PM user-s176 /Users/user-s176/Desktop/satish abcku[/FM/fm 176 Section 2 PROCESSES Canadian Blood Services is a not-for-profit organization A nurse goes through the questionnaire with the donor to ensure created in 1998 that manages the blood supply for Canadians eligibility.A. J. “Betting on the S. B. Zemel. S. Some have commented that he or she is assigned a number in order of arrival.E. E. potential tion centre in places like gymnasiums. Leonard. 3 The authors are indebted to D. such as income or ethnicity or any other relevant tionnaire elicits information on any current illnesses and recent information. a nurse records 1. NJ: Prentice Hall. 4 This example is similar to one given by A. 2006. Deshmukh.jac69078_ch06_157-176. donors drop the other point to expeditiously weed out ineligible donors? card obtained upon arrival into a box. Heinemann. p. How might you improve the process to avoid wasting the donor’s finger.” Harvard Business School 9-696-023. For example. J. also given a card with their name on it. Theory of Constraints (Great Barrington MA: North River Press. and verifies details about the donor.D. Clay Whybark of the University of North Carolina for contributing Problems 1–3. 1990). setting up a temporary blood collec. Draw a flow chart of the process. At that time. After completing the questionnaire.. using a special needle to draw blood into a mini. until their card is taken out of the box and their name is called. and Jeston. what might you do at the collection centre or travel.2 It often organizes blood drives with malaria in the last year. 3rd Pass . If donors pass 3.. “Process Fundamentals. Nelis. Chopra. Upper Saddle lines to Successful Implementation. using mix-ins.” Harvard Business School 9-696-058. his or her name and address are recorded manually and of annoyance to potential donors. 2005. time of ineligible donors? Would there be any material test tube.

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