Matching Supply with Demand : An Introduction to Operations Management

by CACHON

• ISBN13: 9780073525167
• ISBN10: 0073525162
• Edition: 2nd
• Format: Hardcover
• Copyright: 2008-04-07
• Publisher: McGraw-Hill/Irwin

Summary

MATCHING SUPPLY WITH DEMAND by Cachon and Terwiesch is the most authoritative, cutting-edge book for operations management MBAs. The book demands rigorous analysis on the part of students without requiring consistent use of sophisticated mathematical modeling to perform it. When the use of quantitative tools or formal modeling is indicated, it is only to perform the necessary analysis needed to inform and support a practical business solution.

Author Biography

Christian Terwiesch teaches MBA and executive classes in the areas of operations management and product development at The Wharton School of the University of Pennsylvania.

Table of Contents

Introduction	p. 1
Learning Objectives and Framework	p. 3
Road Map of the Book	p. 6
The Process View of the Organization	p. 10
Presbyterian Hospital in Philadelphia	p. 10
Three Measures of Process Performance	p. 15
Little's Law	p. 16
Inventory Turns and Inventory Costs	p. 19
Five Reasons to Hold Inventory	p. 23
Pipeline Inventory	p. 23
Seasonal Inventory	p. 24
Cycle Inventory	p. 25
Decoupling Inventory/Buffers	p. 26
Safety Inventory	p. 26
The Product-Process Matrix	p. 27
Summary	p. 29
Further Readings	p. 29
Practice Problems	p. 29
Understanding the Supply Process: Evaluating Process Capacity	p. 32
How to Draw a Process Flow Diagram	p. 33
Bottleneck, Process Capacity, and Flow Rate (Throughput)	p. 38
How Long Does It Take to Produce a Certain Amount of Supply?	p. 40
Process Utilization and Capacity Utilization	p. 41
Workload and Implied Utilization	p. 43
Multiple Types of Flow Units	p. 44
Summary	p. 48
Practice Problems	p. 50
Estimating and Reducing Labor Costs	p. 56
Analyzing an Assembly Operation	p. 56
Time to Process a Quantity X Starting with an Empty Process	p. 58
Labor Content and Idle Time	p. 60
Increasing Capacity by Line Balancing	p. 63
Scale Up to Higher Volume	p. 66
Increasing Capacity by Replicating the Line	p. 67
Increasing Capacity by Selectively Adding Workers	p. 67
Increasing Capacity by Further Specializing Tasks	p. 69
Summary	p. 72
Further Readings	p. 74
Practice Problems	p. 74
The Link between Operations and Finance	p. 80
Paul Downs Cabinetmakers	p. 81
Building an ROIC Tree	p. 82
Valuing Operational Improvements	p. 87
Analyzing Operations Based on Financial Data	p. 90
Summary	p. 95
Further Readings	p. 95
Practice Problem	p. 95
Batching and Other Flow Interruptions: Setup Times and the Economic Order Quantity Model	p. 97
The Impact of Setups on Capacity	p. 98
Interaction between Batching and Inventory	p. 101
Choosing a Batch Size in the Presence of Setup Times	p. 103
Balancing Setup Costs with Inventory Costs: The EOQ Model	p. 106
Observations Related to the Economic Order Quantity	p. 110
Transfer Batches	p. 114
Setup Time Reduction	p. 114
Other Flow Interruptions: Buffer or Suffer	p. 115
Summary	p. 117
Further Reading	p. 119
Practice Problems	p. 119
Variability and Its Impact on Process Performance: Waiting Time Problems	p. 124
Motivating Example: A Somewhat Unrealistic Call Center	p. 125
Variability: Where It Comes From and How It Can Be Measured	p. 127
Analyzing an Arrival Process	p. 129
Stationary Arrivals	p. 131
Exponential Interarrival Times	p. 133
Nonexponential Interarrival Times	p. 134
Summary: Analyzing an Arrival Process	p. 135
Service Time Variability	p. 135
Predicting the Average Waiting Time for the Case of One Resource	p. 137
Predicting the Average Waiting Time for the Case of Multiple Resources	p. 141
Service Levels in Waiting Time Problems	p. 144
Economic Implications: Generating a Staffing Plan	p. 145
Impact of Pooling: Economies of Scale	p. 148
Priority Rules in Waiting Lines	p. 152
Service-Time-Dependent Priority Rules	p. 152
Service-Time-Independent Priority Rules	p. 152
Reducing Variability	p. 153
Ways to Reduce Arrival Variability	p. 153
Ways to Reduce Service Time Variability	p. 154
Summary	p. 156
Further Reading	p. 157
Practice Problems	p. 157
The Impact of Variability on Process Performance: Throughput Losses	p. 163
Motivating Examples: Why Averages Do Not Work	p. 163
Ambulance Diversion	p. 164
Throughput Loss for a Simple Process	p. 165
Customer Impatience and Throughput Loss	p. 169
Several Resources with Variability in Sequence	p. 171
The Role of Buffers	p. 172
Summary	p. 174
Further Reading	p. 175
Practice Problems	p. 175
Quality Management, Statistical Process Control, and Six-Sigma Capability	p. 178
Controlling Variation: Practical Motivation	p. 179
The Two Types of Variation	p. 180
Constructing Control Charts	p. 182
Control Chart Example from a Service Setting	p. 185
Design Specifications and Process Capability	p. 188
Attribute Control Charts	p. 190
Robust Process Design	p. 192
Impact of Yields and Defects on Process Flow	p. 194
Rework	p. 195
Eliminating Flow Units from the Process	p. 196
Cost Economics and Location of Test Points	p. 196
Defects and Variability	p. 197
A Process for Improvement	p. 198
Further Reading	p. 200
Practice Problems	p. 200
Lean Operations and the Toyota Production System	p. 202
The History of Toyota	p. 202
TPS Framework	p. 204
The Seven Sources of Waste	p. 205
JIT: Matching Supply with Demand	p. 208
Achieve One-Unit-at-a-Time Flow	p. 208
Produce at the Rate of Customer Demand	p. 209
Implement Pull Systems	p. 209
Quality Management	p. 211
Exposing Problems through Inventory Reduction	p. 213
Flexibility	p. 214
Standardization of Work and Reduction of Variability	p. 215
Human Resource Practices	p. 216
Lean Transformation	p. 217
Further Reading	p. 218
Practice Problems	p. 218
Betting on Uncertain Demand: The Newsvendor Model	p. 220
O'Neill Inc.	p. 221
An Introduction to the Newsvendor Model	p. 223
Constructing a Demand Forecast	p. 223
The Expected Profit-Maximizing Order Quantity	p. 232
Performance Measures	p. 236
Expected Lost Sales	p. 237
Expected Sales	p. 239
Expected Leftover Inventory	p. 239
Expected Profit	p. 240
Fill Rate	p. 240
In-Stock Probability and Stockout Probability	p. 241
Other Objectives for Choosing an Order Quantity	p. 242
Managerial Lessons	p. 244
Summary	p. 246
Further Reading	p. 248
Practice Problems	p. 248
Assemble-to-Order, Make-to-Order, and Quick Response with Reactive Capacity	p. 256
Evaluating and Minimizing the Newsvendor's Demand-Supply Mismatch Cost	p. 257
When Is the Mismatch Cost High?	p. 259
Reducing Mismatch Costs with Make-to-Order	p. 262
Quick Response with Reactive Capacity	p. 263
Unlimited, but Expensive, Reactive Capacity	p. 263
Limited Reactive Capacity	p. 267
Summary	p. 274
Further Reading	p. 276
Practice Problems	p. 276
Service Levels and Lead Times in Supply Chains: The Order-up-to Inventory Model	p. 283
Medtronic's Supply Chain	p. 284
The Order-up-to Model Design and Implementation	p. 287
The End-of-Period Inventory Level	p. 290
Choosing Demand Distributions	p. 291
Performance Measures	p. 295
In-Stock and Stockout Probability	p. 295
Expected Back Order	p. 297
Fill Rate	p. 298
Expected On-Hand Inventory	p. 299
Pipeline Inventory/Expected On-Order Inventory	p. 300
Choosing an Order-up-to Level to Meet a Service Target	p. 300
An In-Stock Probability Target	p. 301
A Fill Rate Target	p. 301
Choosing an Appropriate Service Level	p. 304
Controlling Ordering Costs	p. 307
Medtronic Wrap-up	p. 310
Managerial Insights	p. 312
Summary	p. 315
Further Reading	p. 316
Practice Problems	p. 316
Risk-Pooling Strategies to Reduce and Hedge Uncertainty	p. 321
Location Pooling	p. 321
Pooling Medtronic's Field Inventory	p. 322
Medtronic's Distribution Center(s)	p. 326
Electronic Commerce	p. 328
Product Pooling	p. 330
Lead Time Pooling: Consolidated Distribution and Delayed Differentiation	p. 336
Consolidated Distribution	p. 336
Delayed Differentiation	p. 341
Capacity Pooling with Flexible Manufacturing	p. 344
Summary	p. 349
Further Reading	p. 352
Practice Problems	p. 352
Revenue Management with Capacity Controls	p. 357
Revenue Management and Margin Arithmetic	p. 357
Protection Levels and Booking Limits	p. 359
Overbooking	p. 365
Implementation of Revenue Management	p. 367
Demand Forecasting	p. 368
Dynamic Decisions	p. 368
Variability in Available Capacity	p. 368
Reservations Coming in Groups	p. 368
Effective Segmenting of Customers	p. 368
Multiple Fare Classes	p. 369
Software Implementation	p. 369
Variation in Capacity Purchase: Not All Customers Purchase One Unit of Capacity	p. 369
Summary	p. 371
Further Reading	p. 372
Practice Problems	p. 372
Supply Chain Coordination	p. 377
The Bullwhip Effect: Causes and Consequences	p. 377
Order Synchronization	p. 380
Order Batching	p. 382
Trade Promotions and Forward Buying	p. 383
Reactive and Overreactive Ordering	p. 386
Shortage Gaming	p. 387
Bullwhip Effect: Mitigating Strategies	p. 388
Sharing Information	p. 389
Smoothing the Flow of Product	p. 389
Eliminating Pathological Incentives	p. 390
Using Vendor-Managed Inventory	p. 390
Incentive Conflicts in a Sunglasses Supply Chain	p. 392
Buy-Back Contracts	p. 395
More Supply Chain Contracts	p. 401
Quantity Discounts	p. 401
Options Contracts	p. 401
Revenue Sharing	p. 401
Quantity Flexibility Contracts	p. 402
Price Protection	p. 402
Summary	p. 403
Further Reading	p. 403
Practice Problems	p. 403
Statistics Tutorial	p. 406
Tables	p. 415
Evaluation of the Loss Function	p. 427
Equations and Approximations	p. 430
Solutions to Selected Practice Problems	p. 437
Glossary	p. 462
References	p. 471
Index of Key "How to" Exhibits	p. 474
Summary of Key Notation and Equations	p. 475
Index	p. 479
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