Operations management 7e creating value along the supply chain russell taylor Part 1

IEMBA PARIS GRADUATE SCHOOL MANAGEMENT


This page intentionally left blank


E1FFIRS01.qxd

8/5/10

11:37 AM

Page i


E1FFIRS01.qxd

8/5/10

11:37 AM

Page ii


E1FFIRS01.qxd

8/5/10

11:37 AM

Page iii

7 TH EDITION

Operations
Management
Creating Value Along the Supply Chain

Roberta S. Russell
Professor
Virginia Polytechnic Institute and State University

Bernard W. Taylor III
R. B. Pamplin Professor
Virginia Polytechnic Institute and State University

JOHN WILEY & SONS, INC.


E1FFIRS01.qxd

8/5/10

11:37 AM

Page iv

To my mother, Margaret Snead, with appreciation
for your love and support.
To my mother, Jean V. Taylor,
and in memory of my father, Bernard W. Taylor, Jr.,

with love and appreciation.
Opener Photo Credits
Repeat chocolate chip © Geoffrey Holman/iStockphoto, Chapter 1 © Yin Yang/iStockphoto,
Chapter 2 © ECKEHARD SCHULZ/AP/Wide World Photos, Chapter 3 © H. Mark Weidman Photography/
Alamy, Chapter 4 © Ina Peters/iStockphoto, Chapter 5 © Patrik Urban/Alamy, Chapter 6 © Yaiza Fernandez
Garcia/iStockphoto, Chapter 7 © Lyn Hughes/Corbis, Chapter 8 © “Andersen Ross/Getty Images, Inc.”,
Chapter 9 © John O'Boyle/Star Ledger/Corbis, Chapter 10 © Norman Chan/iStockphoto, Chapter 11 © Jim
West/ Alamy, Chapter 12 © “Spencer Platt/Getty Images, Inc.”, Chapter 13 © Julian Nieman/Alamy,
Chapter 14 © Richard Levine/Alamy, Chapter 15 © H-Gall/iStockphoto, Chapter Opener 16 © mediablitzimages
Limited/Alamy, Chapter 17 © Ei Katsumata/Alamy

VP & EXECTUIVE PUBLIHSER
EXECUTIVE EDITOR
ASSISTANT EDITOR
PRODUCTION SERVICES MANAGER
PRODUCTION EDITOR
EXECUTIVE MARKETING MANAGER
CREATIVE DIRECTOR
PRODUCTION MANAGEMENT SERVICES
PHOTO EDITOR
SENIOR EDITORAL ASSISTANT
MEDIA EDITOR
CENTER COVER PHOTO:
BOTTOM INSET PHOTOS (left to right):

COVER AND INTERIOR DESIGN

George Hoffman
Lise Johnson
Sarah Vernon

Dorothy Sinclair
Anna Melhorn
Karolina Zarychta
Harry Nolan
Elm Street Publishing Services
Sarah Wilkin, Hilary Newman
Chelsea Theis
Elena Santa Maria
© Brigitte Wegner/Getty Images, Inc.
© Norman Chan/iStockphoto; © Yaiza Fernandex
Garcia/iStockphoto; © Julian Nieman/Alamy;
© James L. Stanfield/National Geographic/Getty
Images, Inc; ©GoGo Images Corporation/Alamy
James O’Shea

This book was set in Times by Thomson Digital and printed and bound by Courier/Kendallville.
The cover was printed by Courier/Kendallville.
This book is printed on acid free paper.
Copyright © 2011 John Wiley and Sons, Inc. All rights reserved. No part of this publication, stored in a retrieval
system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning or
otherwise, except as permitted under Sections 107 or 108 of the 1976 United States Copyright Act, without either
the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to
the Copyright Clearance Center, Inc. 222 Rosewood Drive, Danvers, MA 01923, website www.copyright.com.
Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons,
Inc., 111 River Street, Hoboken, NJ 07030-5774, (201) 748-6011. Fax (201) 748-6008, website />go/permissions.
“Evaluation copies are provided to qualified academics and professionals for review purposes only, for use in their
courses during the next academic year. These copies are licensed and may not be sold or transferred to a third party.
Upon completion of the review period, please return the evaluation copy to Wiley. Return instructions and a free of
charge return shipping label are available at www.wiley.com/ go/returnlabel. Outside of the United States, please
contact your local representative.”

ISBN-13 9780470525906
Printed in the United States of America
10 9 8 7 6 5 4 3 2 1


E1FFIRS01.qxd

8/5/10

11:37 AM

Page v

About the Authors

Bernard W. Taylor III and Roberta S. Russell

Bernard W. Taylor III is the Pamplin Professor of Management Science and Head of the Department of Business Information Technology in the Pamplin College of Business at
Virginia Polytechnic Institute and State University. He received a Ph.D. and an M.B.A. from the University of Georgia
and a B.I.E. from the Georgia Institute of Technology. He is
the author of the book Introduction to Management Science
(10th ed.) and co-author of Management Science (4th ed.),
both published by Prentice Hall. Dr. Taylor has published
over 80 articles in such journals as Operations Research,
Management Science, Decision Sciences, IIE Transactions,
Journal of the Operational Research Society, Computers and
Operations Research, Omega, and the International Journal
of Production Research, among others. His paper in Decision
Sciences (with P. Y. Huang and L. P. Rees) on the Japanese
kanban production system received the Stanley T. Hardy

Award for its contribution to the field of production and operations management. He has served as President of the Decision Sciences Institute (DSI) as well as Program Chair,
Council Member, Vice President, Treasurer, and as the Editor
of Decision Line, the newsletter of DSI. He is a Fellow of
DSI and a recipient of their Distinguished Service Award. He
is a former President, Vice-President, and Program Chair of
the Southeast Decision Sciences Institute and a recipient of
their Distinguished Service Award. He teaches management
science and production and operations management courses
at both the undergraduate and graduate level. He has received
the University Certificate of Teaching Excellence on four
occasions, the Pamplin College of Business Certificate of

Teaching Excellence Award, and the Pamplin College of
Business Ph.D. Teaching Excellence Award at Virginia Tech.
Roberta S. Russell is a Professor of Business Information
Technology in the Pamplin College of Business at Virginia
Polytechnic Institute and State University. She received a
Ph.D. from Virginia Polytechnic Institute and State University, an M.B.A. from Old Dominion University, and a B.S.
degree from Virginia Polytechnic Institute and State University. Dr. Russell’s primary research and teaching interests are
in the areas of operations and supply chain management, service operations, scheduling, and quality. She has published
in Decision Sciences, IIE Transactions, International Journal
of Production Research, Journal of Operations Management,
IEEE Transactions, Annals of Operations Research, Computers and Operations Research, and others. She is also coauthor of the Prentice Hall book Service Management and
Operations. Dr. Russell is a member of DSI, ASQ, POMS,
and IIE and a certified fellow of APICS. She is past Vice
President of POMS, past President of the Southwest Virginia
Chapter of APICS and has held numerous offices in Southeast DSI. She has received the Pamplin College of Business
Certificate of Teaching Excellence, the University Certificate
of Teaching Excellence, and the MBA Association’s Outstanding Professor Award. She serves on the Education and
Research Foundation Board of APICS, and is a certified supply chain management professional (CSCMP). Her consulting experience with IBM, AT&T, Dupont, Courtaulds, Xaloy,

Northrup Grumman Shipbuilding and others brings a practical perspective into the classroom.


E1FTOC01.qxd

8/5/10

2:30 PM

Page vi

Brief Contents
PART ONE:

1.

Operations Management

1

Introduction to Operations and Supply Chain Management

1

Operational Decision-Making Tools: Decision Analysis

33

S1.
2.

Quality Management

3.

Statistical Process Control
S3.

54
108

Operational Decision-Making Tools: Acceptance Sampling

148

4.

Product Design

156

5.

Service Design

189

6.

Processes and Technology

226

7.

Capacity and Facilities Design

257

S7.
8.

Human Resources
S8.

9.
PART TWO:

Operational Decision-Making Tools: Facility Location Models

297
315

Operational Decision-Making Tools: Work Measurement

Project Management

348
366

Supply Chain Management

420

10.

Supply Chain Management Strategy and Design

420

11.

Global Supply Chain Procurement and Distribution

450

S11.

Operational Decison-Making Tools: Transportation
and Transshipment Models

475

12.

Forecasting

495

13.

Inventory Management

553

S13.
14.

Operational Decision-Making Tools: Simulation

590

Sales and Operations Planning
S14.

607

Operational Decision-Making Tools: Linear Programming

645

15.

Resource Planning

678

16.

Lean Systems

720

17.

Scheduling

755

APPENDIX A—Normal Curve Areas

789

SOLUTIONS TO SELECTED ODD-NUMBERED PROBLEMS
INDEX

798

790


E1FTOC01.qxd

8/5/10

2:30 PM

Page vii

Contents

PART ONE:

OPERATIONS MANAGEMENT

1

Introduction to Operations and

1. Supply Chain Management

■ Operations and Supply Chain Management
for Chocolate
■ What Do Operations and Supply Chain
Managers Do?
The Operations Function
■ OM Dialogue: Mark Jackson, Marketing Manager
The Evolution of Operations and Supply Chain Management
Globalization
The China Factor
■ The Balancing Act at New Balance
India, The World’s Service Provider
Productivity and Competitiveness
Strategy and Operations
Primary Task
Core Competencies
Order Winners and Order Qualifiers
Positioning the Firm
Competing on Cost
Competing on Speed
■ Trader Joe’s Unique Strategy

Competing on Quality
Competing on Flexibility
Strategy Deployment
Policy Deployment
Balanced Scorecard
Operations Strategy
Organization of this Text
Learning Objectives of this Course
Summary
Summary of Key Terms
Questions
Problems
Case Problem 1.1–Visualize This
Case Problem 1.2–Whither an MBA at Strutledge?
Case Problem 1.3–Weighing Options at the Weight Club
References

1
1
3
2
6
6
9
10
12
13
14
17
17

18
18
19
19
19
20
21
21
21
21
23
25
25
26
26
27
27
28
30
30
31
31

SUPPLEMENT

1. Operational Decision-Making Tools:
Decision Analysis
Decision Analysis With and Without Probabilities
Decision Making Without Probabilities
Decision Analysis With Excel

Decision Analysis With OM Tools

33
33
34
36
37

Decision Making With Probabilities
Expected Value of Perfect Information
Sequential Decision Trees
Summary
Summary of Key Formulas
Summary of Key Terms
Solved Problems
Problems
Case Problem S1.1–Whither an MBA at Strutledge?
Case Problem S1.2–Transformer Replacement at
Mountain States Electric Service
Case Problem S1.3–Evaluating Projects at Nexcom
Systems
References

2. Quality Management
■ Quality Management at Mars
What Is Quality?
Quality from the Customer’s Perspective
Dimensions of Quality for Manufactured Products
Dimensions of Quality for Services
Quality from the Producer’s Perspective

A Final Perspective on Quality
Quality Management System
The Evolution of Quality Management
■ Applying Deming’s PDCA Cycle in Baldrige
Award-Winning Schools and Hospitals
Quality Tools
Process Flowcharts
Cause-and-Effect Diagrams
Checksheets and Histograms
Pareto Analysis
Scatter Diagrams
Process Control Charts and Statistical Quality Control
TQM and QMS
The Focus of Quality Management—Customers
Quality Management in the Supply Chain
Measuring Customer Satisfaction
■ Measuring Customer Satisfaction with
“Voice of the Customer (VoC)” at Two
Baldrige Award Winners
The Role of Employees in Quality Improvement
Kaizen and Continuous Improvement
Quality Circles
Process Improvement Teams
■ Customer Focus and Employee Empowerment
in a Baldrige Award-Winning City
Quality in Services

38
38
39

41
42
42
42
42
51
51
52
53

54
54
55
56
56
56
58
59
59
59
62
62
64
64
65
65
66
67
67
68

68
69

70
70
71
72
72
73
73


E1FTOC01.qxd

8/5/10

viii

2:30 PM

Page viii

Contents

Quality Attributes in Services
■ Ritz-Carlton Hotels: Two-Time Baldrige National
Quality Award Winner
Six Sigma
The Six Sigma Goal—3.4 DPMO
■ Motorola’s Six Sigma Quality

The Six Sigma Process
■ Six Sigma Highlights
Improvement Projects
The Breakthrough Strategy: DMAIC
■ North Shore University Hospital: A Six Sigma
Project Example
Black Belts and Green Belts
Design for Six Sigma
Lean Six Sigma
The Bottom Line—Profitability
The Cost of Quality
The Cost of Achieving Good Quality
The Cost of Poor Quality
Measuring and Reporting Quality Costs
The Quality–Cost Relationship
The Effect of Quality Management on Productivity
Productivity
Measuring Product Yield and Productivity
The Quality–Productivity Ratio
Quality Awards
The Malcolm Baldrige Award
Other Awards for Quality
■ Baldrige National Quality Award Winners:
What It Takes
ISO 9000
Standards
Certification
Implications of ISO 9000 for U.S. Companies
■ ISO 9001 Certification at Monarcas Morelia
ISO Registrars

Summary
Summary of Key Formulas
Summary of Key Terms
Solved Problems
Questions
Problems
Case Problem 2.1–Designing a Quality-Management
Program for the Internet at D4Q
Case Problem 2.2–Quality Management at State University
Case Problem 2.3–Quality Problems at the Tech Bookstores
Case Problem 2.4–Product Yield at Continental Luggage
Company
References

3. Statistical Process Control
■ Statistical Process Control at Mars and
Hershey’s
The Basics of Statistical Process Control
SPC in Quality Management
Quality Measures: Attributes and Variables

74
75
76
76
77
78
78
79
79

79
80
80
80
82
83
84
84
85
87
87
87
88
90
91
91
93
93
94
94
95
95
96
97
98
98
98
99
99
102

104
105
105
107
107

SPC Applied to Services
Where to Use Control Charts
Control Charts
Control Charts for Attributes
p-Chart
■ Using Control Charts for Improving
Health-Care Quality
c-Chart
Control Charts for Variables
Mean (x–) Chart
Range (R-) Chart
Using x–- and R- Charts Together
Control Chart Patterns
Sample Size Determination
SPC with Excel and OM Tools
Process Capability
Process Capability Measures
■ Design Tolerances at Harley-Davidson
Company
Process Capability with Excel and OM Tools
Summary
Summary of Key Formulas
Summary of Key Terms
Solved Problems

Questions
Problems
Case Problem 3.1–Quality Control at Rainwater
Brewery
Case Problem 3.2–Quality Control at Grass, Unlimited
Case Problem 3.3–Improving Service Time at Dave’s
Burgers
References

108
109
110
110

116
117
119
119
122
123
124
125
126
127
130
131
132
133
133
133

134
135
135
145
146
147
147

SUPPLEMENT

3. Operational Decision-Making Tools:
Acceptance Sampling
Single-Sample Attribute Plan
Producer’s and Consumer’s Risks
The Operating Characteristic Curve
Developing a Sampling Plan with OM Tools
Average Outgoing Quality
Double- and Multiple-Sampling Plans
Summary
Summary of Key Terms
Solved Problem
Questions
Problems

4. Product Design
108

111
112
112

113
114

■ Product Design at Mars
The Design Process
Idea Generation
Feasibility Study
■ Pixar’s Creativity
Rapid Prototyping and Concurrent Design

148
149
149
150
151
152
153
154
154
154
155
155

156
156
157
158
159
160
160

E1FTOC01.qxd

8/5/10

2:30 PM

Page ix

Contents
Form Design
■ Apple’s Design Process
Functional Design
Reliability
Maintainability
Usability
Production Design
Final Design and Process Plans
Technology in Design
Collaborative Product Design Systems
Design Quality Reviews
■ Jugaad, Design for the Times
Design for Environment
Green Sourcing
Green Manufacture
Green Consumption
Recycling and Re-Use
Quality Function Deployment
■ Nike’s Trash Talking Shoes

Design for Robustness
Summary
Summary of Key Terms
Summary of Key Formulas
Solved Problems
Questions
Problems
Case Problem 4.1–Greening Product Design
Case Problem 4.2–Lean and Mean
References

5. Service Design
■ Service Design at Hershey’s
The Service Economy
Characteristics of Services
The Service Design Process
■ Redbox Brings Self-Service to Movie Rentals
The Service-Process Matrix
Tools for Service Design
Service Blueprinting
Front Office and Back-Office Activities
Servicescapes
Quantitative Techniques
Waiting Line Analysis for Service Improvement
Elements of Waiting Line Analysis
Elements of a Waiting Line
The Calling Population
The Arrival Rate
Service Times
Queue Discipline and Length

Basic Waiting Line Structures
Operating Characteristics
Traditional Cost Relationships in Waiting Line
Analysis
The Psychology of Waiting
Waiting Line Models
The Basic Single-Server Model

161
162
163
163
164
165
165
167
167
168
169
170
170
172
172
173
173
173
174
179
181
181

182
182
183
183
186
187
188

189
189
190
191
193
193
195
196
198
199
199
199
200
200
200
200
201
202
202
202
204
204

205
206
206

Service Improvement Analysis
Solution of the Single-Server Model with Excel
Advanced Single-Server Models
Multiple-Server Model
The Basic Multiple-Server Model
Summary
Summary of Key Terms
Summary of Key Formulas
Solved Problems
Questions
Problems
Case Problem 5.1–Streamlining the Refinancing Process
Case Problem 5.2–Herding the Patient
Case Problem 5.3–The College of Business Copy
Center
Case Problem 5.4–Northwoods Backpackers
References

6. Processes and Technology
■ Processes and Technology for Chocolate
Manufacturing
Process Planning
Outsourcing
Process Selection
Process Selection with Breakeven Analysis
Process Plans

Process Analysis
Process Flowcharts
■ Making Fast Food Faster
Process Innovation
Steps in Process Innovation
■ OM Dialogue: Anastasia Thatcher, Business
Process Manager
Technology Decisions
Financial Justification of Technology
A Technology Primer
Summary
Summary of Key Terms
Summary of Key Formulas
Solved Problems
Questions
Problems
Case Problem 6.1–A Manager’s Woes
Case Problem 6.2–Wrong Meds, Again!
Case Problem 6.3–The DPA Protocol
References

7. Capacity and Facilities Design
■ Capacity and Facilities Design at the
New England Confectionery Company
Capacity Planning
Facilities
Objectives of Facility Layout
■ Bank of America’s Towering Achievement in
Green Design

ix
207
209
209
210
210
214
214
215
215
216
217
222
223
223
224
225

226
226
228
228
229
230
235
235
236
238
241
241

244
245
245
246
249
249
249
249
250
251
253
254
255
255

257
257
258
261
261
261


E1FTOC01.qxd

8/5/10

x

2:30 PM

Page x

Contents

Basic Layouts
Process Layouts
Product Layouts
Fixed-Position Layouts
Designing Process Layouts
Block Diagramming
■ The Health Benefits of Good Layout
Relationship Diagramming
Computerized Layout Solutions
■ Urban Outfitters’ New Distribution Facility
Designing Service Layouts
Designing Product Layouts
Line Balancing
Computerized Line Balancing
Hybrid Layouts
Cellular Layouts
Advantages of Cellular Layouts
Disadvantages of Cellular Layouts
Flexible Manufacturing Systems
Mixed-Model Assembly Lines
Summary
Summary of Key Formulas
Summary of Key Terms
Solved Problems
Questions

Problems
Case Problem 7.1–Workout Plus
Case Problem 7.2–Photo Op–Please Line Up
Case Problem 7.3–The Grab ’n Go Café
References

262
262
264
266
266
266
267
269
271
272
273
274
274
278
278
278
280
281
282
282
284
285
285
286

287
287
293
294
294
296

SUPPLEMENT 7

7. Operational Decision-Making Tools:
Facility Location Models
Types of Facilities
Site Selection: Where to Locate
Global Supply Chain Factors
Regional and Community Location Factors in
the United States
Location Incentives
Geographic Information Systems
Location Analysis Techniques
Location Factor Rating
Location Factor Rating with Excel and OM Tools
Center-of-Gravity Technique
Center-of-Gravity Technique with Excel and OM Tools
Load-Distance Technique
Load-Distance Technique with Excel and OM Tools
Summary
Summary of Key Formulas
Summary of Key Terms
Solved Problems
Questions

Problems
Case Problem S7.1–Selecting a European Distribution Center
Site for American International Automotive Industries
References

297
297
298
299
299
300
301
302
302
303
304
305
305
307
308
308
308
309
309
310
314
314

8. Human Resources
■ Human Resources at Hershey’s

Human Resources and Quality Management
The Changing Nature of Human Resources Management
The Assembly Line
Limitations of Scientific Management
Employee Motivation
■ Human Resources Management at Baldrige
National Quality Award-Winning Companies
Contemporary Trends in Human Resources Management
Job Training
Cross Training
■ Employee Training at Kyphon, Inc., and Triage
Consulting Group
Job Enrichment
Empowerment
Teams
■ Reducing Costs by Going Green in the
Workplace
Flexible Work Schedules
Alternative Workplaces and Telecommuting
Temporary and Part-Time Employees
■ Telecommuting at Capital One
Employee Compensation
■ Part-Time Employees at UPS
Types of Pay
Gainsharing and Profit Sharing
Managing Diversity in the Workplace
■ English in the Workplace
Affirmative Action and Equal Opportunity
Diversity Management Programs
■ A Commitment to Diversity at UPS and Kodak

Global Diversity Issues
■ Developing a Skilled Workforce in China
Job Design
The Elements of Job Design
Task Analysis
Worker Analysis
Environmental Analysis
Ergonomics
Technology and Automation
Job Analysis
Process Flowchart
Worker-Machine Chart
Motion Study
Learning Curves
Determining Learning Curves with Excel
Learning Curves with OM Tools
Summary
Summary of Key Formulas
Summary of Key Terms
Solved Problems
Questions
Problems
Case Problem 8.1–Maury Mills
References

315
315
317
318
318

319
319
320
321
321
321
322
322
323
323
324
324
324
325
326
326
327
327
327
328
328
329
329
330
331
331
332
333
333
333

334
334
334
335
335
336
337
338
341
342
342
342
343
343
343
344
345
347


E1FTOC01.qxd

8/5/10

2:30 PM

Page xi

Contents

SUPPLEMENT 8

8. Operational Decision-Making Tools:
Work Measurement
Time Studies
Stopwatch Time Study
Number of Cycles
Elemental Time Files
Predetermined Motion Times
Work Sampling
Summary
Summary of Key Formulas
Summary of Key Terms
Solved Problems
Questions
Problems
Case Problem S8.1–Measuring Faculty Work Activity
at State University
References

9. Project Management
■ Project Management at Mars
Project Planning
Elements of a Project Plan
Project Return
The Project Team
■ Cross-Cultural Project Teams
The Project Manager
Scope Statement
Work Breakdown Structure

Responsibility Assignment Matrix
■ Green Projects on the Increase Around the
World
Global and Diversity Issues in Project Management
■ Project Management Diversity in China
Project Scheduling
The Gantt Chart
Project Control
Time Management
Cost Management
Quality Management
Performance Management
Communication
■ Reconstructing the Pentagon after 9/11
Enterprise Project Management
CPM/PERT
The Project Network
AOA Network
AON Network
■ British Airport Authority’s Terminal 5 Project
at Heathrow Airport
The Critical Path
Activity Scheduling
Activity Slack
■ A Couple of Iconic Building Renovation Projects
Probabilistic Activity Times

348
348
349

353
354
354
356
358
358
358
359
359
360
364
365

Probabilistic Time Estimates
■ An Interstate Highway Construction Project
in Virginia
CPM/PERT Analysis with OM Tools
Probabilistic Network Analysis
Microsoft Project
PERT Analysis with Microsoft Project
■ The Corps of Engineers Hurricane Katrina
New Orleans Restoration Project
Project Crashing and Time-Cost Tradeoff
Project Crashing
The General Relationship of Time and Cost
Summary
Summary of Key Formulas
Summary of Key Terms
Solved Problems
Questions

Problems
Case Problem 9.1–The Bloodless Coup Concert
Case Problem 9.2–Moore Housing Contractors
References

xi
389
392
393
393
396
398
399
400
401
403
404
405
405
406
407
408
417
418
419

366
366
367
369

369
370
370
371
371
371
372
372
373
374
375
376
377
377
377
377
377
378
378
379
379
380
380
381
382
382
383
386
388
389

PART TWO:

SUPPLY CHAIN MANAGEMENT

420

Supply Chain Management Strategy

10. and Design

■ Supply Chain Management Strategy and
Design at Mars
Supply Chains
Supply Chains for Service Providers
Value Chains
The Management of Supply Chains
Supply Chain Uncertainty and Inventory
The Bullwhip Effect
Risk Pooling
■ Eliminating the Bullwhip Effect at Philips
Electronics
“Green” Supply Chains
■ Going Green at Walmart
Sustainability and Quality Management
■ Achieving Sustainability While Reducing
Costs and Increasing Profits
Information Technology: A Supply Chain Enabler
Electronic Business
Electronic Data Interchange

■ Strategic Supply Chain Design at 7-Eleven
in Japan and the United States
Bar Codes
Radio Frequency Identification
The Internet
■ Supply Chain Management at Gaylord Hotels
Build-To-Order (BTO)
Supply Chain Integration
Collaborative Planning, Forecasting, and
Replenishment

420
420
421
423
425
425
425
426
427
427
428
428
429
430
431
431
432
432
433

433
435
436
437
437
437


E1FTOC01.qxd

xii

8/5/10

2:30 PM

Page xii

Contents

Supply Chain Management (SCM) Software
Measuring Supply Chain Performance
Key Performance Indicators
■ Apple’s Top-Ranked Supply Chain
Process Control
SCOR
Summary
Summary of Key Terms
Summary of Key Formulas
Solved Problems

Questions
Problems
Case Problem 10.1–Somerset Furniture Company’s
Global Supply Chain
References

438
439
439
441
441
442
444
444
444
444
445
447
448
449

Global Supply Chain Procurement

11. and Distribution

■ Global Supply Chain Procurement and
Distribution at Hershey’s
Procurement
Outsourcing
E-Procurement

E-Marketplaces
■ Virtual Manufacturing at Palm Inc.
Reverse Auctions
Distribution
Speed and Quality
Internet Companies: Amazon.com
■ Achieving Warehouse Efficiency and
Sustainability at Genzyme Corporation
Distribution Centers and Warehousing
Postponement
■ Supply Chain Management at Royal Caribbean
Warehouse Management Systems
Vendor-Managed Inventory
■ Vendor-Managed Inventory (VMI) at Dell
Collaborative Logistics
Distribution Outsourcing
Transportation
■ Supply Chain Operations at Food Distributor
Sysco Corporation
Internet Transportation Exchanges
The Global Supply Chain
Obstacles to Global Supply Chain Management
Duties, Tariffs, and Global Trading Groups
Landed Cost
Web-Based International Trade Logistics Systems
■ Achieving Global Sustainability at HP in
China
Recent Trends in Globalization for U.S. Companies
China’s Increasing Role in the Global Supply Chain
■ Brazil as a Potential Near Shore Supplier for

the United States
Reverse Globalization
■ Reverse Globalization at K’NEX
Effects of Terrorism on Global Supply Chains
Summary of Key Terms

450
450
451
452
453
454
454
454
455
455
455
456
457
457
457
458
459
459
459
460
460
462
463
463

464
464
465
465
467
468
468
470
470
472
472
473

Questions
Case Problem 11.1–Somerset Furniture Company’s
Global Supply Chain–Continued

473
474

SUPPLEMENT 11

11. Operational Decision-Making Tools:
Transportation and Transshipment
Models
The Transportation Model
Solution of the Transportation Model with Excel
The Transshipment Model
Solution of the Transshipment Problem with Excel
Summary

Summary of Key Terms
Solved Problems
Problems
Case Problem S11.1–Stateline Shipping and Transport
Company
Case Problem S11.2–Global Supply Chain Management
at Cantrex Apparel International
References

12. Forecasting
■ Forecasting at Hershey’s
The Strategic Role of Forecasting in Supply Chain
Management
Supply Chain Management
■ Sharing Forecasts at Boeing and Alcoa
Quality Management
Strategic Planning
■ Supply Chain Forecasting at Heineken USA
Components of Forecasting Demand
Time Frame
Demand Behavior
Forecasting Methods
Forecasting Process
■ Forecasting at Dell
Time Series Methods
Moving Average
Weighted Moving Average
Exponential Smoothing
Adjusted Exponential Smoothing
Linear Trend Line

Seasonal Adjustments
■ The CPFR Process at Bayer Consumer Care
in the EU
Forecast Accuracy
Mean Absolute Deviation
Cumulative Error
Forecast Control
■ Forecasting Market Demand at NBC
Time Series Forecasting Using Excel
Forecasting with OM Tools
Regression Methods
Linear Regression
Correlation

475
475
477
480
481
482
482
482
483
492
493
494

495
495
496

496
498
498
499
499
499
499
500
501
502
503
503
504
506
507
510
512
514
516
517
517
519
520
523
524
526
526
527
529

E1FTOC01.qxd

8/5/10

2:30 PM

Page xiii

Contents
Regression Analysis with Excel
Multiple Regression with Excel
■ Forecasting Airport Security Gate Arrivals at
the Transportation Security Administration
Summary
Summary of Key Formulas
Summary of Key Terms
Solved Problems
Questions
Problems
Case Problem 12.1–Forecasting at State University
Case Problem 12.2–The University Bookstore Student
Computer Purchase Program
Case Problem 12.3–Cascades Swim Club
Case problem 12.4–Forecasting Passenger Arrivals at the
Gotham International Airport
References

13. Inventory Management
■ Inventory Management at Mars

The Role of Inventory in Supply Chain Management
The Effects of Information Technology on Inventory
Management
Inventory and Quality Management in the Supply Chain
The Elements of Inventory Management
Demand
Inventory Costs
Inventory Control Systems
Continuous Inventory Systems
Periodic Inventory Systems
The ABC Classification System
■ Inventory Management at Dell
■ Determining Supply Chain Strategy
by Evaluating Inventory Costs at
Hewlett-Packard
Economic Order Quantity Models
The Basic EOQ Model
The Production Quantity Model
Solution of EOQ Models with Excel
Solution of EOQ Models with OM Tools
Quantity Discounts
Quantity Discounts with Constant Carrying Cost
Quantity Discount Model Solution with Excel
Reorder Point
Safety Stocks
Service Level
Reorder Point with Variable Demand
Determining the Reorder Point with Excel
■ Establishing Inventory Safety Stocks at
Kellogg’s

Order Quantity for a Periodic Inventory System
Order Quantity with Variable Demand
Determining the Order Quantity for the Fixed-Period
Model with Excel
Summary
Summary of Key Formulas
Summary of Key Terms

529
530
533
534
534
535
535
537
538
549
549
550
551
552

553
553
555
556
556
557
557

557
559
559
560
560
561

563
564
564
567
569
570
570
571
573
573
574
574
575
576
577
577
578
578
579
580
580

Solved Problems

Questions
Problems
Case Problem 13.1–The Instant Paper Clip Office
Supply Company
Case Problem 13.2–The Texas Gladiators Apparel
Store Case
Problem 13.3–Pharr Foods Company
References

xiii
580
582
582
587
587
588
589

SUPPLEMENT 13

13. Operational Decision-Making Tools:
Simulation
Monte Carlo Simulation
Computer Simulation with Excel
Decision Making with Simulation
Areas of Simulation Application
Waiting Lines/Service
Inventory Management
Production and Manufacturing Systems
Capital Investment and Budgeting

Logistics
Service Operations
Environmental and Resource Analysis
Summary
Summary of Key Terms
Solved Problems
Questions
Problems
References

14. Sales and Operations Planning
■ Sales and Operations Planning at
Hershey’s
The Sales and Operations Planning Process
■ Disney’s Magic Numbers
Strategies for Adjusting Capacity
Level Production
Chase Demand
Peak Demand
Overtime and Undertime
Subcontracting
Part-Time Workers
■ Meeting Demand for Panettones
Backlogs, Backordering, and Lost Sales
Strategies for Managing Demand
■ The Bullwhip Effect in a Slowdown
Quantitative Techniques for Aggregate Planning
Pure Strategies
General Linear Programming Model
Mixed Strategies

The Transportation Method
Other Quantitative Techniques
The Hierarchical Nature of Planning
Collaborative Planning
Available-to-Promise

590
590
594
596
598
599
599
599
599
599
599
599
600
600
600
602
602
606

607
607
608
611
612

612
612
613
613
613
613
613
614
614
615
616
616
618
619
623
623
626
628
628


E1FTOC01.qxd

8/5/10

xiv

2:30 PM

Page xiv

Contents

Aggregate Planning for Services
Revenue Management
Overbooking
Fare Classes
■ Revenue Management at Harrah’s
Single Order Quantities
Summary
Summary of Key Terms
Solved Problems
Questions
Problems
Case Problem 14.1–Seats for Sale
Case Problem 14.2–Erin’s Energy Plan
References

630
631
631
631
631
632
634
634
635
636
637
642

643
644

SUPPLEMENT 14

14. Operational Decision-Making Tools:
Linear Programming
Model Formulation
Graphical Solution Method
Linear Programming Model Solution
The Simplex Method
Slack and Surplus Variables
Solving Linear Programming Problems with Excel
Sensitivity Analysis
Sensitivity Ranges
Summary
Summary of Key Terms
Solved Problems
Questions
Problems
Case Problem S14.1–Mosaic Tile Company
Case Problem S14.2–Summer Sports Camp at
State University
Case Problem S14.3–Spring Garden Tools
Case Problem S14.4–Walsh’s Juice Company
Case Problem S14.5–Julia’s Food Booth
Case Problem S14.6–The Sea Village Amusement Park
References

15. Resource Planning

■ Resource Planning at Hershey’s
Material Requirements Planning (MRP)
When to Use MRP
Dependent Demand
Discrete Demand
Complex Products
Erratic Orders
Assemble-to-Order
Master Production Schedule
Product Structure File
Phantom Bills
K-Bills
Modular Bills
Time-Phased Bills

645
646
648
652
652
653
654
655
656
658
658
658
659
659
672

673
674
674
675
676
677

Item Master File
■ OM Dialogue: Vignesh Ramachandran,
Systems Auditor
The MRP Process
Lot Sizing in MRP Systems
Economic Order Quantity
Periodic Order Quantity
MRP Outputs
Capacity Requirements Planning (CRP)
Calculating Capacity
Load Profiles
Overloads
Load Leveling
Relaxing MRP Assumptions
Enterprise Resource Planning (ERP)
■ OM Dialogue: John Snead, Financial
Planning and Analysis
ERP Modules
Finance/Accounting
Sales/Marketing
Production/Materials Management
Human Resources
ERP Implementation

■ Under Armour at the Top of Their Game
with ERP
Analyze Business Processes
Choose Modules to Implement
Align Level of Sophistication
Finalize Delivery and Access
Link with External Partners
Customer Relationship Management (CRM)
Supply Chain Management (SCM)
Product Lifecycle Management (PLM)
Connectivity, Integration, and Services
Summary
Summary of Key Terms
Questions
Solved Problems
Problems
Case Problem 15.1–Just ERP
Case Problem 15.2–Hosuki
References

687
687
688
692
692
692
694
695
696
697

698
699
700
700
701
702
702
703
703
703
704
704
706
706
706
707
707
707
707
708
708
709
710
710
711
712
717
717
718

678
678
679
680
680
681
681
682
682
682
683
685
685
685
686

16. Lean Systems
■ Lean Production at Mars and Nestlé
The Basic Elements of Lean Production
Flexible Resources
Cellular Layouts
The Pull System
Kanbans
Small Lots
Quick Setups
Uniform Production Levels
■ Production On-Demand at Conmed
Quality at the Source
Visual Control

720
720
722
723
724
726
726
730
730
732
735
735
735


E1FTOC01.qxd

8/5/10

2:30 PM

Page xv

Contents
Kaizen
■ Universal Studios Holds “Treasure Hunt”
Kaizen Event
Jidoka
Total Productive Maintenance
Supplier Networks

The Benefits of Lean Production
Implementing Lean Production
Drawbacks of Lean Production
■ OM Dialogue: Nicole Sanders, Commodity
Manager
■ Toyota’s Quality Problems
Lean Services
Lean Retailing
Lean Banking
Lean Health Care
Leaning the Supply Chain
Lean Six Sigma
Lean and the Environment
Value Stream Mapping (VSM)
Summary
Summary of Key Formulas
Summary of Key Terms
Questions
Problems
Case Problem 16.1–The Blitz is On
Case Problem 16.2–Where’s My Cart?
References

17. Scheduling
■ Scheduling at Ghirardelli’s
Objectives in Scheduling

735
737
737

738
739
740
741
742
742
743
744
745
745
745
745
746
746
746
748
748
749
749
750
751
751
753

755
755
757

xv

Loading
The Assignment Method of Loading
Sequencing
Sequencing Jobs Through One Process
Sequencing Jobs Through Two Serial Processes
Guidelines for Selecting a Sequencing Rule
■ Patient Scheduling
Monitoring
Gantt Charts
Input/Output Control
■ OM Dialogue: Margie Deck, Plant
Manager
Advanced Planning and Scheduling Systems
■ When Good Genes Make Good Schedules
Theory of Constraints
Drum-Buffer-Rope
Process vs. Transfer Batch Sizes
Employee Scheduling
Automated Scheduling Systems
Summary
Summary of Key Formulas
Summary of Key Terms
Solved Problems
Questions
Problems
Case Problem 17.1–America Reads, America Counts
Case Problem 17.2–From a Different Perspective
References

757

758
761
762
764
766
767
768
768
769
772
772
774
774
775
775
777
779
779
780
780
780
781
782
786
787
788

Appendix A Normal Curve Areas
Solutions to Selected Odd-Numbered Problems
Index

789
790
798


E1FPREF01.qxd

8/5/10

12:02 PM

Page xvi

Preface
CHANGES IN THE SEVENTH EDITION
This new seventh edition is organized around the increasingly important and prevalent topic of operations
as the creation of value along the supply chain. We describe how every chapter topic fits within a supply
chain framework in a company or organization in a global operating environment. To this end two
chapters deal directly with supply chain management: Chapter 10, Supply Chain Management Strategy
and Design, and Chapter 11, Global Supply Chain Procurement and Distribution. However, every chapter
includes material relating the chapter topic(s) to supply chain management. In addition, Chapter 5,
Service Design, reflects the expanding presence and importance of service companies in operations
management. We have also added new material in almost every chapter on an increasingly important
global topic: sustainability.
To help us show how the OM topics in this new edition all fit together within a supply chain
framework, we open each chapter with a specific example about one product: chocolate. Chocolate is
an ideal product to use as an example to introduce the various OM topics in this text because its supply
chain is global, and its production process is straightforward and interesting.
In addition to opening each chapter with a chocolate example, this new edition also includes

numerous new “Along the Supply Chain” boxes within each chapter that describe real-world business
applications of OM topics. This edition includes discussion questions that accompany many of these
boxes for in-class or online discussion.
Chapter 1 focuses on examples of excellence in operations management and on the strategic design
of operations and supply chain management. Chapter 2, Quality Management, emphasizes quality
management systems and has expanded coverage of Six Sigma, including the Six Sigma process, Six
Sigma tools, Six Sigma and profitability, and lean Six Sigma.
Chapter 4, has new sections on Design for the Environment. Chapter 5, Service Design, includes
discussions of the service economy, characteristics of services, the service design process, and tools for
service design. A streamlined waiting line analysis section is included in this chapter. Chapter 6 emphasizes
process analysis skills, and Chapter 7 contains examples of various service layouts.
Both Chapter 8, Human Resources, and Chapter 9, Project Management, emphasize diversity in the
workplace and global diversity issues. Chapter 10, Supply Chain Management Strategy and Design, and
Chapter 11, Supply Chain Procurement and Distribution, both focus on creating value along the supply
chain and include new material on sustainability. Chapter 11 includes a section on China’s increasing role
in the global supply chain. Chapter 12, Forecasting, and Chapter 13, Inventory Management, both
emphasize the important role of these topics in operations and supply chain management.
Chapter 14 introduces Sales and Operations Planning into the aggregate planning process. Chapter 15,
updates resource planning with discussions of SOA (service oriented architecture) and PLM (product
lifecycle management). Chapter 16, has sections on leaning the supply chain, lean services, value
stream mapping, and lean and the environment.

MAJOR TEXT THEMES
OPERATIONS STRATEGY: CREATING VALUE ALONG
THE SUPPLY CHAIN
A company’s plan for being competitive is its strategy. The success of a strategic plan is largely
determined by how well a company coordinates all of its internal processes, including operations, with
its suppliers and customers to produce products and services that provide value. Throughout this book,
we try to show how the functions and processes described in each chapter fit into a company’s strategic

E1FPREF01.qxd

8/5/10

12:02 PM

Page xvii

Preface
design for the creation of value. In each chapter, we emphasize the need for considering the overall
strategic implications of particular operating decisions.
One way in which companies can gain a competitive edge is by deploying the basic functions of
operations management in a more effective manner than their rivals, e.g., build a better supply chain.
Therefore, we give literally dozens of examples that explain how companies deploy specific operations
functions along their supply chain to provide value and make them successful. Throughout the book,
“Along the Supply Chain” boxes describe how successful companies have gained a competitive edge
through operations.

GLOBAL OPERATIONS
Companies and organizations today must increasingly compete in a global marketplace. The
establishment of new trade agreements between countries, innovations in information technology, and
improvements in transport and shipping are just a few of the factors that have enabled companies to
develop global supply chains. The opening of the global marketplace has only served to introduce more
competitors and make competition tougher, thus making strategic supply chain design even more
important for achieving success. In this edition, we have sought to introduce this global aspect of
operations into our discussion at every opportunity. In each chapter, we include examples that touch on
the impact of global operations relative to the topic under discussion, and we discuss how globalization
affects supply chain management.

SUSTAINABILITY
Environmental concerns are changing every aspect of operations and supply chain management from
product and service design, to supplier sourcing, to manufacture and delivery. In virtually every chapter of
this text we address the impact of “sustainability” (i.e., meeting present needs without sacrificing future
resources) and give examples of “green practices”. For example, in Chapter 4 on product design, we
discuss the design for environment lifecycle, eco-labeling, recycling and reuse, and sustainable operations.
In Chapter 6 on processes we discuss green manufacturing; in Chapter 7 on facilities we discuss LEED
certified green buildings; in Chapter 10 on supply chain management we discuss green sourcing; and in
Chapter 16 on lean systems we discuss lean and the environment.

SERVICES AND MANUFACTURING
We have attempted to strike a balance between manufacturing and service operations in this book.
Traditionally, operations management was thought of almost exclusively in a manufacturing context.
However, in the United States and other industrialized nations, there has been a dramatic shift toward
service industries. Thus, managing service operations is an important area of study. In many cases,
operations management processes and techniques are indistinguishable between service and
manufacturing. However, in many other instances, service operations present unique situations and
problems that require focused attention and unique solutions. We have tried to reflect the uniqueness
of service operations by providing focused discussions on service operations throughout the text. For
example, in Chapter 2 on quality management we specifically address the importance of quality
management in service companies, in Chapter 5 on Service Design we emphasize the differences in
design considerations between manufacturing and services, and in Chapter 14 we discuss aggregate
planning in services. One type of service examined in virtually every chapter in the book is health
care.

QUALITATIVE AND QUANTITATIVE PROCESSES
We have also attempted to strike a balance between the qualitative (or managerial) aspects of operations
management and the quantitative aspects. In the contemporary world of operations management, the
quantitative and technological aspects are probably more important than ever. The ability to manage
people and resources effectively, to motivate, organize, control, evaluate, and adapt to change, have

become critical to competing in today’s global markets. Thus, throughout this book we seek to explain
and clearly demonstrate how the successful operations manager manages and how to use quantitative
techniques and technology when they are applicable.
However, we attempt to present these quantitative topics in a way that’s not overly complex or
mathematically intimidating. Above all, we want to show how the quantitative topics fit in with, and

xvii


E1FPREF01.qxd

8/5/10

xviii

12:02 PM

Page xviii

Preface
complement, the qualitative aspects of operations management. We want you to be able to see both “the
forest and the trees.”

TEACHING AND LEARNING SUPPORT FEATURES
This text is accompanied by many features and supplements both in the text and online for students and
instructors.

PEDAGOGY IN THE TEXTBOOK
“Along the Supply Chain” Boxes
These boxes are located in every chapter in the text. They describe the application of operations in a

real world company, organization or agency related to specific topics in each chapter. They emphasize
how companies effectively compete with operations management in the global marketplace. The
descriptions of operations at actual companies in these boxes help the student understand how specific
OM techniques and concepts are used by companies, which also make the topics and concepts easier to
understand. In addition, we have added discussion questions to these boxes to help students and
teachers “connect” the example to the chapter topics.

OM Dialogue Boxes
These boxes include dialogues with recent college business school graduates who are working in
operations management in the real world. They describe how they apply various OM topics in the text
in their own jobs and the value of their own OM training in college. This provides students with a
perspective on the benefit of studying operations management now and its future benefit.

Marginal Notes
Notes are included in the margins that serve the same basic function as notes that students
themselves might write in the margin. They highlight important topics, making it easier for students
to locate them; they summarize important points and key concepts and provide brief definitions of
key terms.

Examples
The primary means of teaching the various quantitative topics in this text is through examples. These
examples are liberally distributed throughout the text to demonstrate how problems are solved in a
clear, straightforward approach to make them easier to understand.

Solved Example Problems
At the end of each chapter, just prior to the homework questions and problems, there is a section with
solved examples to serve as a guide for working the homework problems. These examples are solved in
a detailed step-by-step manner.

Summary of Key Formulas

These summaries at the end of each chapter and supplement include all of the key quantitative formulas
introduced in the chapter in one location for easy reference.

Summary of Key Terms
Located at the end of each chapter these summaries provide a list of key terms introduced in that
chapter and their definitions in one convenient location for quick and easy reference.

Homework Problems, Questions and Cases
Our text contains a large number of end-of-chapter exercises for student assignments. There are over 560
homework problems and 55 more advanced end-of-chapter case problems. There are also 420 end-ofchapter discussion questions including new questions. Answers to selected odd-numbered homework
problems are included in the back of the book. As we mention in the following “Online Resources for
Instructors” section, Excel spreadsheet solution files are available to the instructor for the majority of the
end-of-chapter problems and cases.


E1FPREF01.qxd

8/5/10

12:02 PM

Page xix

Preface

ONLINE RESOURCES FOR STUDENTS,
WWW.WILEY.COM/ COLLEGE/RUSSELL
No other innovation has affected operations management in the past few years as much as computer
technology and the Internet, and this is no less true in education. Therefore, we make full use of this
technology as a learning and teaching medium in the courses we teach and in our text. Students can link

to the text Web site where an exciting set of Internet resources have been compiled.
The text web site contains animated demo problems, interactive applications and exercises, and direct
links to other sources on the Internet. These various resources and learning tools are organized by chapter
and are flagged in the textbook with a web icon. Here are some of the items found on the text web site.
Web links for companies and concepts discussed in each chapter can be accessed online. These
provide enrichment for those students who want to learn more about a topic, and serve as a valuable
resource for student assignments and papers.
Virtual Tours provided for each chapter bring operations management to life. Selected tours are
accompanied by a set of questions directly related to concepts discussed in the chapter.
Internet Exercises provide up-to-date access to current issues in operations. These add immediacy
to classroom discussions and ensure that operations management topics remain relevant to the student.
Practice Quizzes are provided online where students can get immediate feedback on their progress.

EXCEL FILES OF EXHIBITS
Excel is used extensively throughout the text to solve various quantitative problems and many Excel
illustrations are provided throughout the text.

Exhibit 12.1

Every Excel spreadsheet used to prepare the examples in the text is available on the text Web site for
students and instructors. They are organized by chapter and are listed by their exhibit number. Above is
an example of Exhibit 12.1 from Chapter 12 (Forecasting). Notice the file name is simply the Exhibit
number (i.e., Exhibit 12.1.xls). Please look in each file carefully. In many cases several sheets in one file
have been used to display different parts of a problem, such as a graphical solution as well as a numerical
solution. Example files are also available for MS Project files in Chapter 9.

ONLINE RESOURCES FOR INSTRUCTORS
www.wiley.com/college/russell
Instructor’s Manual The Instructor’s Manual, updated by the authors, features sample course syllabi,
chapter outlines, teaching notes, experiential exercises, alternate examples to those provided in the text,

pause and reflect questions for classroom discussion, practice quizzes, videos guide, projects,

xix


E1FPREF01.qxd

xx

8/5/10

12:02 PM

Page xx

Preface
Test Bank Fully revised from the previous edition by Scott Hedin of Gonzaga University this test bank
consists of true/false, multiple-choice, short answer, and essay questions. All questions have been
carefully accuracy-checked to ensure the highest quality of materials for our customers. The questions
are also available electronically on the textbook support site. The Computerized Test Bank, for use on a
PC running Windows, is from a test-generating program that allows instructors to modify and add
questions in order to customize their exams.
PowerPoint Presentation Slides The PowerPoint presentation slides, revised by Lance Matheson of
Virginia Tech, include outlines for every chapter, exhibits from the text, and additional examples,
providing instructors with a number of learning opportunities for students. The PowerPoint slides can be
accessed on the instructor’s portion of the 7th edition Web site and lecture notes accompany each slide.
Instructor Solutions Manual The Instructor Solutions Manual, updated by the authors, features
detailed answers to end-of-chapter questions, homework problems, and case problems.
Excel Homework Solutions and Excel Exhibit Files This new edition includes of 560 end-of-chapter
homework problems and 55 case problems. Excel solution files for the instructor are provided on the

Web site for the majority of these problems. In addition, Microsoft Project solution files are provided for
most of the homework problems in Chapter 9 (Project Management). Excel worksheets for class
handouts or homework assignments are provided for QFD, process flow charts, MRP matrices, and
others. Excel exhibit files for every example in the text solved with Excel are provided as templates for
solving similar problems for both student and instructor and are available on the text website.
Web Quizzes These online quizzes, revised by Scott Hedin of Gonzaga University vary in level of
difficulty and are designed to help your students evaluate their individual progress through a chapter.
Web quizzes are available on the student portion of the Web site. Here students will have the ability to
test themselves with 15–20 questions per chapter that include true-false and multiple choice questions.
OM Tools OM Tools is an Excel add-in designed to accompany the Russell/Taylor, Operations
Management, 7th edition text. The software consists of 18 modules with over 60 problem types. OM
Tools is easy to use and interpret, and is accompanied by a help file with text references.
Virtual Tours Are online tours of service and production facilities. These are made available to students
on the student portion of the website, along with questions that help students apply the concepts they’ve
learned in the text to real-world companies. Answers to the Virtual Tours questions are available to
professors on the instructor Web site.
Wiley Operations Management Video Series, Winners of the Malcolm Baldrige Award Wiley Video
Series for Operations Management: Winners of the Malcolm Baldrige Award. Clips feature interviews and
footage from the inside of major companies. These videos are accompanied by a video guide, found on
the 7th edition instructor Web site. Please go to www.wiley.com/college/russell, then to the Supplements
section, to get information on how to access a DVD of the videos.
OM Student Videos Offered on DVD and on the instructor companion website, we offer a collection of
videos done by students that provide excellent examples of the concepts illustrated in the text. These
videos can be accessed on the instructor companion Website. Please go to www.wiley.com/college/
russell, then to the Supplements section, for more information.
Business Extra Select Business Extra Select enables you to add copyright-cleared articles, cases, and
readings from such leading business resources as INSEAD, Ivey, Harvard Business School Cases,
Fortune, The Economist, The Wall Street Journal, and more. You can create your own custom CoursePack,
combining these resources with content from Wiley’s business textbooks, your own content such as
lecture notes, and any other third-party content.

ONLINE RESOURCES FOR INSTRUCTORS
WWW.WILEY.COM/COLLEGE/RUSSELL
WileyPLUS
WileyPLUS is an innovative, research-based, online environment for effective teaching and learning.


E1FPREF01.qxd

8/5/10

12:02 PM

Page xxi

Preface

What do students receive with WileyPLUS?
A Research-based Design. WileyPLUS provides an online environment that integrates relevant
resources, including the entire digital textbook, in an easy-to-navigate framework that helps students
study more effectively.
• WileyPLUS adds structure by organizing textbook content into smaller, more manageable “chunks”.
• Related media, examples, and sample practice items reinforce the learning objectives.
• Innovative features such as calendars, visual progress tracking and self-evaluation tools improve
time management and strengthen areas of weakness.
One-on-one Engagement. With WileyPLUS for Russell/Taylor, Operations Management, 7th ed. text,
students receive 24/7 access to resources that promote positive learning outcomes. Students engage
with related examples (in various media) and sample practice items, including:
• Animations based on key illustrations in each chapter
• Office Hours Videos, created by Jearl Walker, including: video sample problems, video discussions

of key concepts and topics, and math help videos
• Concept Simulations
• Interactive LearningWare problems
• Physics Simulations (interactive)
• Physics Demonstrations (video)
• Links to real world application examples from The Flying Circus of Physics
• Guided Online (GO) Tutorial problems
• Concept Questions
Measurable Outcomes. Throughout each study session, students can assess their progress and gain
immediate feedback. WileyPLUS provides precise reporting of strengths and weaknesses, as well as
individualized quizzes, so that students are confident they are spending their time on the right things.
With WileyPLUS, students always know the exact outcome of their efforts.

What do instructors receive with WileyPLUS?
WileyPLUS provides reliable, customizable resources that reinforce course goals inside and outside of
the classroom as well as visibility into individual student progress. Pre-created materials and activities
help instructors optimize their time:
Customizable Course Plan: WileyPLUS comes with a pre-created Course Plan designed by a subject
matter expert uniquely for this course. Simple drag-and-drop tools make it easy to assign the course
plan as-is or modify it to reflect your course syllabus.
Pre-created Activity Types Include:
Questions
Readings and resources
Presentation
Print Tests
Concept Mastery
Project

•
•

•
•
•
•

Course Materials and Assessment Content:
• Lecture Notes PowerPoint Slides
• Classroom Response System (Clicker) Questions
• Image Gallery
• Instructor’s Manual
• Gradable Reading Assignment Questions (embedded with online text)
• Question Assignments: all end-of-chapter problems coded algorithmically with hints, links to text,
whiteboard/show work feature and instructor controlled problem solving help.
• Testbank
Gradebook: WileyPLUS provides instant access to reports on trends in class performance, student use
of course materials and progress towards learning objectives, helping inform decisions and drive
classroom discussions.

WileyPLUS. Learn More. www.wileyplus.com.
Powered by proven technology and built on a foundation of cognitive research, WileyPLUS has
enriched the education of millions of students, in over 20 countries around the world.

xxi


E1FLAST01.qxd

8/5/10

12:07 PM

Page xxii

Acknowledgments

T

he writing and revision of a textbook, like any large project, requires the help and creative
energy of many people, and this is certainly not the exception. We especially appreciate the
confidence, support, help, and friendship of our editor at Wiley. We also thank the Wiley staff
members who helped with our book including:

Sarah Vernon, Assistant Editor; Lise Johnson, Executive
Editor; Alison Morris, Media Editor; Elena SantaMaria, Associate Media Editor; Karolina Zarychta,
Marketing Manager; Anna Melhorn, Production Editor;
and numerous other people who work behind the scenes
to whom we never saw or talked. We are indebted to the
reviewers of the text including: Robert Donnelly;
Robert Aboolian, California State University San
Marcos; Ajay Aggarwal, Millsaps College; Fred
Anderson, Indiana University of Pennsylvania; Beni
Asllani, University of Tennessee Chattanooga; Anteneh
Ayanso, University of Connecticut, Storrs; Brent Bandy,
University of Wisconsin, Oshkosh; Joe Biggs,
California Polytechnic State University; Tom
Bramorski, University of Wisconsin, Whitewater;
Kimball Bullington, Middle Tennessee State University;
Cem Canel, University of North Carolina, Wilmington;
Janice Cerveny, Florida Atlantic University; Robert
Clark, SUNY Stony Brook; Ajay Das, Baruch College

CUNY; Kathy Dhanda, University of Portland; Susan
Emens, Kent State University; Yee Fok, University of
New Orleans; Phillip Fry, Boise State University; Mark
Gershon, Temple University; Robert Greve, Oklahoma
State University; Robert Frese, Maryville University;
Jay Jayaram, University of South Carolina, Columbia;
Vaidy Jayaraman, University of Miami; Serge Karalli,
DePaul University; William Kime, University of New
Mexico; Peter Klein, Ohio University; Howard Kraye,
University of New Mexico, Albuquerque; John Kros,
East Carolina University; Gopalan Kutty, Mansfield
University; Bingguang Li, Albany State University;
Royce Lorentz, Slippery Rock University; Sheldon Lou,
California State University, San Marcos; Ken Mannino,
Milwaukee School of Engineering; Lance Matheson,
Virgina Tech; Duncan McDougall, Plymouth State
University; Jaideep Motwani, Grand Valley State
University; Hilary Moyes, University of Pittsburgh;
Barin Nag, Towson University; Ozgur Ozluk, San
Francisco State University; Amer Qureshi, University of

Texas Arlington; Jim Robison, Sonoma State
University; Raj Selladurai, Indiana University
Northwest; Robert Setaputro, University of Wisconisin,
Milwaukee; Jacob Simons, Georgia Southern
University; Marilyn Smith, Winthrop University; Donna
Stewart, University of Wisconsin, Stout; Donald Stout,
St. Martin’s College; Dothang Truong, Fayetteville
State University; Elizabeth Trybus, California State
University,

Northridge;
Ray
Vankataraman,
Pennsylvania State University, Erie; Timothy Vaughan,
University of Wisconsin, Eau Claire; Mark
Vrobelfski, University of Arizona; Gustavo Vulcano, New
York University; Kevin Watson, University of New
Orleans; Michel Whittenberg, University of Texas,
Arlington; Hulya Yazici, University of Wisconsin, La
Crosse; Jinfeng Yue, Middle Tennessee State
University; and Xiaoqun Zhang, Pennsylvania State
University, Harrisburg. We also thank the reviewers of
the sixth edition including: Ajay Aggarwal, Millsaps
College; Binguang Li, Albany State University;
Christina McCart, Roanoke College; Cuneyt Altinoz,
East Carolina University; Dana Johnson, Michigan
Technical University; David Frantz, Indiana University;
Donald Stout, St. Martin’s University; Doug Hales,
University of Rhode Island; Drew Stapleton, University
of Wisconsin, LaCrosse; Fataneh Taghaboni-Dutta,
University of Michigan, Flint; Ike Ehie, Kansas State
University; John Hebert, University of Akron; John
Kros, East Carolina University; Kaushik Sengupta,
Hofstra University; Larry White, Eastern Illinois
University; Lewis Coopersmith, Rider University;
Mohammad Sedaghat, Fairleigh Dickinson University;
Morgan Henrie, University of Alaska, Anchorage; Phil
Fry, Boise State University; Robert Aboolian, California
State University, San Marcos; Robert Clark, SUNY,
Stony Brook; Scott Hedin, Gonzaga University; Susan

Emens, Kent State University, Trumbull; Tom Wilder,
California State University, Chico; Zhiwei Zhu,
University of Louisiana, Lafayette.

They contributed numerous suggestions, comments, and ideas that dramatically improved and
changed this edition. We would also like to thank David Frantz, Indiana University for his insightful
suggestions about the book title. We offer our sincere thanks to these colleagues and hope that they can
take some satisfaction in their contribution to our final product. We wish to thank our students who
have class-tested, critiqued, and contributed to the first six editions and this seventh edition from a
consumer’s point of view. We thank colleagues Kellie Keeling, University of Denver, for her
extensive work on OM Tools; Laura Clark, Virginia Tech, for her help with WileyPLUS; Anita Lee
Post, University of Kentucky, who accuracy checked all of the supplements for this text; and
Franklin Warren, PhD student, for his assistance in numerous capacities. We are especially grateful
to Tracy McCoy and Sylvia Seavey at Virginia Tech for their unstinting help, hard work, and patience.
R.S.R. and B.W.T.


E1C01.qxd

8/2/10

10:18 AM

Page 1

Chapter

PART I

Operations Management

Web resources for
this chapter include
OM Tools Software
Internet Exercises
Online Practice Quizzes
Lecture Slides in
PowerPoint
Virtual Tours
Excel Exhibits
Company and Resource
Weblinks

www.wiley.com/college/russell

Introduction to
Operations and
Supply Chain
Management

1

In this chapter, you will learn about . . .
The Operations Function
The Evolution of Operations and
Supply Chain Management
Globalization
Productivity and Competitiveness
Strategy and Operations
Organization of This Text
Learning Objectives of This Course

Operations and Supply Chain
Management FOR CHOCOLATE

T

HROUGHOUT THIS TEXT, we’ll use chocolate to introduce the topics to
be covered in each chapter. The cacao bean, from which chocolate is
made, is the third most traded raw material in the world. We’ll trace
the path of cacao beans through the supply chain from South America and
the Ivory Coast of Africa through the roasters, brokers, and importers, to
global factories and regional distribution centers, to local stores and other
outlets that sell the myriad types of chocolate products. We’ll look at large
and small companies, specialty products, mass-produced products, and
services. We’ll cover design and quality, processes and technology, planning
and control, supply chains, and more. At each stage we’ll illustrate how the
principles of operations and supply chain management can be applied. Join
us on this journey through the world of chocolate.