Principles of

OPERATIONSMANAGEMENTSeventh Edition

Jay HeizerJesse H. Jones Professor of Business AdministrationTexas Lutheran University

Barry RenderCharles Harwood Professor of Operations ManagementCrummer Graduate School of BusinessRollins College

r

PEARSON

PrenticeHall

Upper Saddle River, New Jersey 07458

About the Authors viForeword xxPreface xxi

PART i l l 1,Introduction to OperationsManagement 1

Operations and Productivity 1

Global Company Profile: Hard Rock Cafe 2

What Is Operations Management? 4Organizing to Produce Goods and Services 4

Why Study OM? 4What Operations Managers Do 7

How This Book Is Organized 7

The Heritage of Operations Management 8

Operations in the Service Sector 9Differences between Goods and Services 10

Growth of Services 11

Service Pay 12

Exciting New Trends in Operations Management 12

The Productivity Challenge 14Productivity Measurement 15

Productivity Variables 17

Productivity and the Service Sector 19

Ethics and Social Responsibility 20Summary 20 • Key Terms 21 • Solved Problems 21 <Self-Test 22 • Internet and Student CD-ROM/DVDExercises 22 • Discussion Questions 22 • EthicalDilemma 23 • Problems 23 • Case Studies:National Air Express 24; Zychol ChemicalsCorporation 25 • Video Case Study: Hard RockCafe: Operations Management in Services 25 •Additional Case Study 26 • Bibliography 26 •Internet Resources 26

2.| Operations Strategy in aGlobal Environment 27

Global Company Profile: Boeing 28

A Global View of Operations 31

Cultural and Ethical Issues 33

Developing Missions and Strategies 34Mission 34

Strategy 35

Achieving Competitive AdvantageThrough Operations 36

Competing on Differentiation 36

Competing on Cost 37

Competing on Response 37

Ten Strategic OM Decisions 39Issues in Operations Strategy 42

Research 42

Preconditions 43

Dynamics 43

Strategy Development and Implementation 43

Critical Success Factors and Core Competencies 44

Build and Staff the Organization 46

Integrate OM with Other Activities 47

Global Operations Strategy Options 47

International Strategy 47

Multidomestic Strategy 47

Global Strategy 48

Transnational Strategy 49

Summary 49 • Key Terms 50 • Solved Problem 50 •Discussion Questions 50 • Self-Test 51 • Internetand Student CD-ROM/DVD Exercises 51 • EthicalDilemma 51 • Problems 52 • Case Study: Minit-Lube 52 • Video Case Studies: Strategy at RegalMarine 53; Hard Rock Cafe's Global Strategy 53 •Additional Case Studies 54 • Bibliography 54 •Internet Resources 54

3. Project Management 55J

Global Company Profile: Bechtel Group 56The Importance of Project Management 58Project Planning 59

The Project Manager 59

Work Breakdown Structure 60

Project Scheduling 61Project Controlling 62Project Management Techniques: PERT and CPM 63

The Framework of PERT and CPM 63

Network Diagrams and Approaches 63

Xli Contents

Activity-on-Node Example 65Activity-on-Arrow Example 68

Determining the Project Schedule 68Forward Pass 69Backward Pass 71Calculating Slack Time and Identifyingthe Critical Path(s) 72

Variability in Activity Times 73Three Time Estimates in PERT 74Probability of Project Completion 76

Cost-Time Trade-Offs and Project Crashing 79A Critique of PERT and CPM 81Using Microsoft Project to Manage Projects 82

Creating a Project Schedule UsingMicrosoft Project 82Tracking Progress and Managing Costs UsingMicrosoft Project 86Summary 87 • Key Terms 87 • Using Software toSolve Project ManagemenfProblems 88 • SolvedProblems 88 • Active Model Exercise 91 • Self-Test92 • Internet and Student CD-ROM/DVD Exercises93 • Discussion Questions 93 • Ethical Dilemma 93 •Problems 93 • Case Study: Southwestern University(A) 99 • Video Case Studies: Project Management atArnold Palmer Hospital 100; Managing Hard Rock'sRockfest 101 'Additional Case Studies 102 •Bibliography 102 • Internet Resources 102

4.1 Forecasting 103

Global Company Profile: Disney World 104What Is Forecasting? 106

Forecasting Time Horizons 106The Influence of Product Life Cycle 107

Types of Forecasts 107The Strategic Importance of Forecasting 107

Human Resources 107Capacity 107Supply Chain Management 107

Seven Steps in the Forecasting System 108Forecasting Approaches 108

Overview of Qualitative Methods 108Overview of Quantitative Methods 109

Time-Series Forecasting 109Decomposition of a Time Series 110Naive Approach 110Moving Averages 111Exponential Smoothing 113Measuring Forecast Error 115Exponential Smoothing with Trend Adjustment 118Trend Projections 121

Seasonal Variations in Data 123Cyclical Variations in Data 128

Associative Forecasting Methods: Regressionand Correlation Analysis 128

Using Regression Analysis for Forecasting 128

Standard Error of the Estimate 130

Correlation Coefficients for Regression Lines 131

Multiple-Regression Analysis 133

Monitoring and Controlling Forecasts 133Adaptive Smoothing 135

Focus Forecasting 135

Forecasting in the Service Sector 136Summary 137 • Key Terms 139 • Using Softwarein Forecasting 139 • Solved Problems 140 • ActiveModel Exercise 142 • Self-Test 143 • Internet andStudent CD-ROM/DVD Exercises 143 • DiscussionQuestions 143 • Ethical Dilemma 144 • Problems144 • Case Studies: Southwestern University: (B)151; Digital Cell Phone, Inc. 151 • Video CaseStudy: Forecasting at Hard Rock Cafe 152 •Additional Case Studies 153 • Bibliography 153 •Internet Resources 153

Designing Operations 1 5 5

@ Design of Goods and Services 155

Global Company Profile: Regal Marine 156Goods and Services Selection 158

Product Strategy Options Support

Competitive Advantage 158

Product Life Cycles 159

Life Cycle and Strategy 159

Product-by-Value Analysis 160

Generating New Products 160New Product Opportunities 160

Importance of New Products 161

Product Development 162Product Development System 162

Quality Function Deployment (QFD) 162

Organizing for Product Development 165

Manufacturability and Value Engineering 166

Issues for Product Design 167Robust Design 167

Modular Design 167

Computer-Aided Design (CAD) 167

Computer-Aided Manufacturing (CAM) 168

Virtual Reality Technology 169

J

Contents x i i i

Value Analysis 169Ethics and Environmentally FriendlyDesigns 169

Time-Based Competition 172Purchasing Technology by Acquiring a Firm 174Joint Ventures 174Alliances 174

Defining a Product 174Make-or-Buy Decisions 176Group Technology 176

Documents for Production 176Product Life-Cycle Management (PLM) 178

Service Design 178Documents for Services 180

Application of Decision Trees to Product Design 182Transition to Production 183

Summary 184 • Key Terms 184 * Solved Problem184 * Self-Test 185 • Active Model Exercise 186 •Internet and Student CD-ROM/DVD Exercises 186 •Discussion Questions 187 • Ethical Dilemma 187 *Problems 187 * Case Study: De Mar's ProductStrategy 189* Video Case Study: Product Designat Regal Marine 189 * Additional Case Studies 190*Bibliography 190 * Internet Resources 190

6.) Managing Quality 191Global Company Profile: Arnold Palmer Hospital 192Quality and Strategy 194Defining Quality 194

Implications of Quality 195Malcolm Baldrige National Quality Award 195Cost of Quality (COQ) 196Ethics and Quality Management 196

International Quality Standards 198

ISO 9000198ISO 14000198

Total Quality Management 198Continuous Improvement 198Six Sigma 199Employee Empowerment 200Benchmarking 201Just-in-Time (JIT) 202Taguchi Concepts 203Knowledge of TQM Tools 204

Tools of TQM 204Check Sheets 204Scatter Diagrams 205Cause-and-Effect Diagrams 205Pareto Charts 206Flowcharts 207

Histograms 208Statistical Process Control (SPC) 208

The Role of Inspection 208When and Where to Inspect 208Source Inspection 209Service Industry Inspection 210Inspection of Attributes versus Variables 210

TQM in Services 210Summary 213 • Key Terms 213 * Active ModelExercise 213 * Self-Test 214 • Internet and StudentCD-ROM/DVD Exercises 214 * DiscussionQuestions 214 * Ethical Dilemma 215 * Problems215 * Case Study: Southwestern University (C)217* Video Case Studies: The Culture of Qualityat Arnold Palmer Hospital 218; Quality at theRitz-Carlton Hotel Company 218 * AdditionalCase Studies 219 • Bibliography 219 * InternetResources 219

Statistical Process Control 221Statistical Process Control (SPC) 222

Control Charts for Variables 224The Central Limit Theorem 224Setting Mean Chart Limits (x-Charts) 225Setting Range Chart Limits (R-Charts) 228Using Mean and Range Charts 229Control Charts for Attributes 230Managerial Issues and Control Charts 233

Process Capability 235Process Capability Ratio (Cp) 235Process Capability Index (C k) 236

Acceptance Sampling 237Operating Characteristic Curve 238Average Outgoing Quality 239Summary 240 * Key Terms 240 * Using Softwarefor SPC 240 * Solved Problems 241 * Active ModelExercise 242 * Self-Test 243 * Internet and StudentCD-ROM/DVD Exercises 244 • DiscussionQuestions 244 • Problems 244 * Case Studies:Bayfield Mud Company 248; Alabama Airlines'On-Time Schedule 249 * Video Case Study: Farmto Fork: Quality at Darden Restaurants 250 *Additional Case Studies 251 * Bibliography 251 *Internet Resources 251

7.1 Process Strategy 253Global Company Profile: Dell Computer Corp. 254Four Process Strategies 256

Process Focus 256Repetitive Focus 258Product Focus 259

XIV Contents

Mass Customization Focus 260Comparison of Process Choices 263

Process Analysis and Design 266Flow Diagrams 266Time-Function Mapping 266Value-Stream Mapping 267Process Charts 268Service Blueprinting 269

Service Process Design 270

Customer Interaction and Process Design 270

More Opportunities to Improve ServiceProcesses 271

Selection of Equipment and Technology 271Production Technology 272

Machine Technology 272Automatic Identification System (AISs) and RFID 273Process Control 273Vision Systems 274Robots 274

Automated Storage and Retrieval System (ASRSs) 274

Automated Guided Vehicles (AGVs) 275

Flexible Manufacturing Systems (FMSs) 275

Computer-Integrated Manufacturing (CIM) 275Technology in Services 275Process Redesign 277Ethics and Environmentally Friendly Processes 279

Summary 279 * Key Terms 280 * Solved Problem280 * Active Model Exercise 280 * Self-Test 281 •Internet and Student CD-ROM/DVD Exercises281 * Discussion Questions 281 • EthicalDilemma 282 * Problems 282 * Case Study:Rochester Manufacturing Corporation 283 •Video Case Studies: Process Analysis at ArnoldPalmer Hospital 283; Process Strategy at WheeledCoach 284 * Additional Case Studies 285 *Bibliography 285 * Internet Resources 285

Supplement 7: Capacity Planning 287

Capacity 288Design and Effective Capacity 289

Capacity and Strategy 290

Capacity Considerations 290

Managing Demand 291Demand and Capacity Managementin the Service Sector 293

Capacity Planning 295Break-Even Analysis 296

Single-Product Case 298

Multiproduct Case 298

Applying Decision Trees to Capacity Decisions 300

Applying Investment Analysis to Strategy-DrivenInvestments 301

Investment, Variable Cost, and Cash Flow 302

Net Present Value 302Summary 305 • Key Terms 305 * Using Softwarefor Break-Even Analysis 305 • Solved Problems306 * Self-Test 308 * Internet and Student CD-ROM/DVD Exercises 308 * Discussion Questions 308 *Problems 309 • Video Case Study: CapacityPlanning at Arnold Palmer Hospital 312 •Additional Case Studies 312 * Bibliography 313 *Internet Resources 313

FID Location Strategies 315LJLJ

Global Company Profile: FedEx 316The Strategic Importance of Location 318Factors That Affect Location Decisions 319

Labor Productivity 320

Exchange Rates and Currency Risk 320

Costs 321

Political Risk, Values, and Culture 322

Proximity to Markets 322

Proximity to Suppliers 322

Proximity to Competitors (Clustering) 322

Methods of Evaluating Location Alternatives 323The Factor-Rating Method 323

Locational Break-Even Analysis 324

Center-of-Gravity Method 326

Transportation Model 328

Service Location Strategy 328

How Hotel Chains Select Sites 329The Call Center Industry 330Geographic Information Systems 331Summary 332 * Key Terms 332 * Using Softwareto Solve Location Problems 333 * SolvedProblems 333 * Self-Test 335 * Active ModelExercise 335 • Internet and Student CD-ROM/DVD Exercises 336 * Discussion Questions 336 •Ethical Dilemma 336 * Problems 337 • CaseStudy: Southern Recreational Vehicle Company341 * Video Case Studies: Locating the Next RedLobster Restaurant 342; Where to Place the HardRock Cafe 343 • Additional Case Studies 343 *Bibliography 344 * Internet Resources 344

9. | Layout Strategies 345

Global Company Profile: McDonald's 346The Strategic Importance of Layout Decisions 348Types of Layout 348Office Layout 350

Contents XV

Retail Layout 351Servicescapes 352

Warehousing and Storage Layouts 353Cross-Docking 354

Random Stocking 354

Customizing 354

Fixed-Position Layout 355Process-Oriented Layout 356

Computer Software for Process-OrientedLayouts 360

Work Cells 360Requirements of Work Cells 361Staffing and Balancing Work Cells 361The Focused Work Center and the FocusedFactory 364

Repetitive and Product-Oriented Layout 364Assembly-Line Balancing 366Summary 370 * Key Terms 371 • Using Software toSolve Layout Problems 371 • Solved Problems 372 *Self-Test 375 * Active Model Exercise 375 • Internetand Student CD-ROM/DVD Exercises 376 •Discussion Questions 376 * Ethical Dilemma 377 *Problems 377* Case Study: State AutomobileLicense Renewals 382 * Video Case Studies: LayingOut Arnold Palmer Hospital's New Facility 383;Facility Layout at Wheeled Coach 384 * AdditionalCase Studies 384 • Bibliography 385 * InternetResources 385

Summary 404 * Key Terms 404 • Solved Problem404 * Self-Test 405 • Internet and Student CD-ROM/DVD Exercises 405 * Discussion Questions 405 *Ethical Dilemma 406 • Problems 406 • Case Study:The Fleet That Wanders 407 • Video Case Study:Hard Rock's Human Resource Strategy 407 •Additional Case Studies 408 • Bibliography 408 *Internet Resources 409

Supplement 10: Work Measurement 411

10.J Human Resources and Job Design 387

Global Company Profile: Rusty Wallace'sNASCAR Racing Team 388Human Resource Strategy for Competitive"Advantage 390

Constraints on Human Resource Strategy 390

Labor Planning 391Employment-Stability Policies 391

Work Schedules 391

Job Classifications and Work Rules 392

Job Design 392

Labor Specialization 392

Job Expansion 393

Psychological Components of Job Design 394

Self-Directed Teams 394

Motivation and Incentive Systems 395

Ergonomics and the Work Environment 397Methods Analysis 399The Visual Workplace 402Ethics and the Work Environment 403Labor Standards 403

Labor Standards and Work Measurement 412Historical Experience 413

Time Studies 413Predetermined Time Standards 418

Work Sampling 420Summary 423 * Key Terms 423 * Solved Problems423 * Active Model Exercise 425 * Self-Test 425 •Internet and Student CD-ROM/DVD Exercises 426«Discussion Questions 426 • Problems 426 * CaseStudy: Jackson Manufacturing Company 429 •Additional Case Studies 430 • Bibliography 430 *Internet Resources 430

Managing Operations 431

[ i l l ] Supply Chain Management 431Global Company Profile: Darden Restaurants 432The Supply Chain's Strategic Importance 434

Global Supply Chain Issues 435

Supply Chain Economics 436Make-or-Buy Decisions 437

Outsourcing 438

Ethics in the Supply Chain 438Supply Chain Strategies 438

Many Suppliers 439

Few Suppliers 439

Vertical Integration 439

Keiretsu Networks 440

Virtual Companies 440

Managing the Supply Chain 441Issues in an Integrated Supply Chain 441

Opportunities in an Integrated Supply Chain 442

E-Procurement 445

Online Catalogs 445

Auctions 446

RFQs 446

Real-Time Inventory Tracking 446

XVI Contents

Vendor Selection 447Vendor Evaluation 447

Vendor Development 448

Negotiations 448

Logistics Management 448Distribution Systems 449

Third-Party Logistics 450

Cost of Shipping Alternatives 451

Logistics, Security, and JIT 452

Measuring Supply Chain Performance 452

Summary 455 * Key Terms 455 • Solved Problem455 * Self-Test 456 * Internet and Student CD-ROM/DVD Exercises 456 • Discussion Questions 456 *Ethical Dilemma 457 * Problems 457 * Case Study:Dell's Value Chain 458 * Video Case Studies:Darden's Global Supply Chains; Arnold PalmerHospital's Supply Chain; Supply ChainManagement at Regal Marine 459 • AdditionalCase Studies 461 • Bibliography 461 * InternetResources 461

Supplement 11: Outsourcing as a SupplyChain Strategy 463

What Is Outsourcing? 464Types of Outsourcing 465

Strategic Planning and Core Competencies 466The Theory of Comparative Advantage 467

Outsourcing Trends and Political Repercussions 467Risks in Outsourcing 468

Methodologies for Outsourcing 470

Evaluating Multiple Criteria with Factor Rating 470

Break-even Analysis 472

Advantages and Disadvantages of Outsourcing 473Advantages of Outsourcing 473

Disadvantages of Outsourcing 474

Audits and Metrics to Evaluate OutsourcingPerformance 475Ethical Issues in Outsourcing 475

Summary 476 * Key Terms 476 • Using Software toSolve Outsourcing Problems 476* Solved Problem476 • Self-Test 477 * Internet and Student CD-ROM/DVD Exercises 477 • Discussion Questions 477 *Problems 478 • Case Study: Outsourcing to Tata479 * Video Case Study: Outsourcing Offshoreat Darden 479 * Bibliography 480 • InternetResources 480

[12.J Inventory Management 481

Global Company Profile: Amazon.com 482Functions of Inventory 484

Types of Inventory 484

Inventory Management 485

ABC Analysis 485

Record Accuracy 486

Cycle Counting 487

Control of Service Inventories 488

Inventory Models 489

Independent vs. Dependent Demand 489

Holding, Ordering, and Setup Costs 490

Inventory Models for Independent Demand 490

The Basic Economic Order Quantity (EOQ)

Model 490

Minimizing Costs 491

Reorder Points 495

Production Order Quantity Model 497

Quantity Discount Models 500

Probabilistic Models and Safety Stock 502

Other Probabilistic Models 505

Fixed-Period (P) Systems 507Summary 509 * Key Terms 510 * Using Softwareto Solve Inventory Problems 510 * SolvedProblems 511 * Self-Test 515 * Active ModelExercise 515 • Internet and Student CD-ROM/DVDExercises 516 • Discussion Questions 516 •Ethical Dilemma 516 • Problems 517 * CaseStudies: Zhou Bicycle Company; SturdivantSound Systems 521 * Video Case Study:Inventory Control at Wheeled Coach 522 •Additional Case Studies 522 * Bibliography 523 *Internet Resources 523

13. Aggregate Planning 525

Global Company Profile: Anheuser-Busch 526

The Planning Process 528

The Nature of Aggregate Planning 528

Aggregate Planning Strategies 530

Capacity Options 531

Demand Options 532

Mixing Options to Develop a Plan 532

Methods for Aggregate Planning 533

Graphical Methods 534

Mathematical Approaches 538

Comparison of Aggregate Planning Methods 540

Aggregate Planning in Services 541

Restaurants 542

Hospitals 542

National Chains of Small Service Firms 542

Miscellaneous Services 542

Airline Industry 543

Yield Management 543

Contents xv i i

Summary 546 • Key Terms 547 * Using Softwarefor Aggregate Planning 547 • Solved Problems548 • Self-Test 550 * Active Model Exercise 550 •Internet and Student CD-ROM/DVD Exercises551 • Discussion Questions 551 * EthicalDilemma 552 * Problems 552 * Case Studies:Southwestern University: (G); Andrew-Carter,Inc. 556 • Additional Case Studies 558 *Bibliography 558 * Internet Resources 558

14.J Material Requirements Planning (MRP)andERP 559

Global Company Profile: Wheeled Coach 560

Dependent Demand 562Dependent Inventory Model Requirements 562

Master Production Schedule 562

Bills of Material 565

Accurate Inventory Records 567

Purchase Orders Outstanding 567

Lead Times for Components 567

MRP Structure 568MRP Management 572

MRP Dynamics 572

MRP and JIT 572

Lot-Sizing Techniques 574Extensions of MRP 578

Material Requirements Planning II (MRP II) 578

Closed-Loop MRP 579

Capacity Planning 579

MRP in Services 580Distribution Resource Planning (DRP) 581

Enterprise Resource Planning (ERP) 582Advantages and Disadvantages of ERP Systems 585ERP in the Service Sector 585Summary 586 * Key Terms 586 * Using Software toSolve MRP Problems 586 * Solved Problems 587 *Self-Test 590 * Active Model Exercise 590 * Internetand Student CD-ROM/DVD Exercises 591 *Discussion Questions 591 • Ethical Dilemma 592 •Problems 592 • Case Study: Ikon's Attempt atERP 595 * Video Case Study: MRP at WheeledCoach 596 • Additional Case Studies 597 *Bibliography 597 * Internet Resources 597

15. Short-Term Scheduling 599

Global Company Profile: Delta Air Lines 600The Strategic Importance of Short-Term Scheduling 602Scheduling Issues 602

Forward and Backward Scheduling 603Scheduling Criteria 605

Scheduling Process-Focused Facilities 605Loading Jobs 606

Input-Output Control 606Gantt Charts 607Assignment Method 609

Sequencing Jobs 612Priority Rules for Dispatching Jobs 612Critical Ratio 615Sequencing N Jobs on Two Machines:Johnson's Rule 616Limitations of Rule-Based Dispatching Systems 618

Finite Capacity Scheduling (FCS) 618Theory of Constraints 619

Bottlenecks 620Drum, Buffer, Rope 620

Scheduling Repetitive Facilities 621Scheduling Services 621

Scheduling Service Employees with CyclicalScheduling 623 L

Summary 625 * Key Terms 625 * Using Software forShort-Term Scheduling 625 • Solved Problems 627 *Active Model Exercise 630 * Self-Test 631 • Internetand Student CD-ROM/DVD Exercises 631 •Discussion Questions 631 * Ethical Dilemma 632 *Problems 632 * Case Study: Old Oregon WoodStore 635 • Video Case Study: Scheduling at HardRock Cafe 636 * Additional Case Studies 637 *Bibliography 637 • Internet Resources 637

JIT and Lean Operations 639

Global Company Profile: Toyota Motor Corporation 640Just-in-Time, the Toyota Production System,and Lean Operations 642

Eliminate Waste 642Remove Variability 643Improve Throughout 644

Just-in-Time (JIT) 644

JIT Partnerships 645Concerns of Suppliers 646

JIT Layout 647Distance Reduction 647

Increased Flexibility 647Impact on Employees 647Reduced Space and Inventory 647

JIT Inventory 648Reduce Variability 648Reduce Inventory 649Reduce Lot Sizes 649

Reduce Setup Costs 650JIT Scheduling 651

Level Schedules 652Kanban 652

xv i i i Contents

JIT Quality 655Toyota Production System 656

Continuous Improvement 656

Respect for People 656

Standard Work Practice 656

Lean Operations 657Building a Lean Organization 657

Lean Operations in Services 658Summary 659 * Key Terms 659 * Solved Problem659 • Self-Test 660 • Internet and Student CD-ROM/DVD Exercises 660 * Discussion Questions 660 *Ethical Dilemma 661 • Problems 661 * CaseStudies: Mutual Insurance Company of Iowa; JITAfter the Fire 662 • Video Case Study: JIT at ArnoldPalmer Hospital 664 * Additional Case Studies 664 *Bibliography 665 • Internet Resources 665

17. Maintenance and Reliability 667

Global Company Profile: Orlando UtilitiesCommission 668

The Strategic Importance of Maintenanceand Reliability 670Reliability 671

Improving Individual Components 671

Providing Redundancy 673

Maintenance 674Implementing Preventive Maintenance 674

Increasing Repair Capabilities 678

Total Productive Maintenance 679Techniques for Enhancing Maintenance 679

Summary 679 • Key Terms 680 * Using Software toSolve Reliability Problems 680 • Solved Problems680 * Internet and Student CD-ROM/DVD Exercises680 * Self-Test 681 * Discussion Questions 681 •Ethical Dilemma 681 * Problems 682 * Case Study:Worldwide Chemical Company 683 * AdditionalCase Studies 684 * Bibliography 684 * InternetResources 684

Appendices Al

Indices I I

Photo Credits Cl

Continuous Probability Distributions Tl-4The Normal Distribution Tl-4Summary Tl-7* Key Terms Tl-7* DiscussionQuestions Tl-7* Problems Tl-7* Bibliography Tl-8

2. Acceptance Sampling T2-1

Sampling Plans T2-2Single Sampling T2-2

Double Sampling T2-2

Sequential Sampling T2-2

Operating Characteristic (OC) Curves T2-2Producer's and Consumer's Risk T2-3Average Outgoing Quality T2-5

Summary T2-6 * Key Terms T2-6 * Solved ProblemT2-7 • Discussion Questions T2-7 * Problems T2-7

3. The Simplex Method of LinearProgramming T3-1

Converting the Constraints to Equations T3-2

Setting Up the First Simplex Tableau T3-2Simplex Solution Procedures T3-4 L

Summary of Simplex Steps for MaximizationProblems T3-6Artificial and Surplus Variables T3-7Solving Minimization Problems T3-7

Summary T3-8 • Key Terms T3-8 • Solved ProblemT3-8 • Discussion Questions T3-8 • Problems T3-9

4. The MODI and VAM Methods of SolvingTransportation Problems T4-1

MODI Method T4-2How to Use the MODI Method T4-2

Solving the Arizona Plumbing Problemwith MODI T4-2

Vogel's Approximation Method: Another Wayto Find an Initial Solution T4-4

Discussion Questions T4-8 • Problems T4-8

CD-ROM Tutorials

1. Statistical Tools for Managers Tl-1

Discrete Probability Distributions Tl-2Expected Value of a Discrete ProbabilityDistribution Tl-3Variance of a Discrete Probability Distribution Tl-3

5. Vehicle Routing and Scheduling T5-1

Introduction T5-2

Service Delivery Example: Meals-for-ME T5-2

Objectives of Routing and Scheduling Problems T5-2

Characteristics of Routing and SchedulingProblems T5-3

Classifying Routing and Scheduling Problems T5-3

Solving Routing and Scheduling Problems T5-4

Contents xix

Routing Service Vehicles T5-5The Traveling Salesman Problem T5-5

Multiple Traveling Salesman Problem T5-8

The Vehicle Routing Problem T5-9

Cluster First, Route Second Approach T5-10

Scheduling Service Vehicles T5-11The Concurrent Scheduler Approach T5-13

Other Routing and Scheduling Problems T5-13Summary T5-14 • Key Terms T5-15 * DiscussionQuestions T5-15 * Problems T5-15 * Case Study:Routing and Scheduling of Phlebotomists T5-17 *Bibliography T5-17