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Contents
PREFACE xv
CHAPTER 1 Introduction to Operations
Management 1
Introduction 2
Why Study Operations Management?
OM IN ACTION Drone Delivery Canada
Careers in Operations Management
Functions Within Organizations 4 Pick-Up Towers 33
Operations 4
Finance 6
Marketing 6
Other Functions 7
The Scope of Operations Management 7
Differentiating Production of Goods
and Services 9
The Operations Manager’s Job 10
Operations Managers and Decision Making
Models 11
Quantitative Techniques 11
Performance Metrics 12
Analysis of Trade-Offs 12
The Systems Approach 12
Establishing Priorities 13
Ethics 13
The Historical Evolution of Operations
Management 13
The Industrial Revolution 14
Scientific Management 14
The Human Relations Movement 15
Decision Models and Computers 16
The Influence of Japanese Manufacturers 16
Major Trends 18
Summary 20
Key Terms 20
MINI-CASE Sharing Economy 22
MINI-CASE Lynn 23
MINI-CASE Sobeys 23
vi
CHAPTER 2 Competitiveness, Strategy,
and Productivity 26
Competitiveness 27
Mission and Strategies 29
OM IN ACTION Porter Airlines 30
3
Strategies and Tactics 31
3
Operations Strategy 32
4
OM IN ACTION Canadian Tire’s Self-Serve
OM IN ACTION Loblaw Joins the Loop Reusable
Packaging Program 38
Productivity 39
Measuring Productivity 40
Productivity Measurement of Services 43
OM IN ACTION Examples of Health Care Productivity
Measurement 43
Factors That Affect Productivity 43
11 Summary 44
Key Terms 45
MINI-CASE Canadian Pacific Railway 51
MINI-CASE Competing the Loblaw Way 51
MINI-CASE WestJet’s Strategy 52
MINI-CASE Home-Style Cookies 53
CHAPTER 3 Demand Forecasting 55
Introduction 56
OM IN ACTION Forecasting in Ocean Spray 57
OM IN ACTION Barilla SpA 58
Features Common to All Forecasts 59
Elements of a Good Forecast 59
Steps in the Forecasting Process 60
Approaches to Forecasting 60
Overview of Demand Forecasting by
Forecasting Horizon 61
Judgmental Methods 61
Executive Opinions 61
Sales Force Opinions 62
Consumer Surveys 62

Sequencing 646
Priority Rules and Performance Measures 646
Sequencing Jobs Through Two Work Centres/
Machines 650
Sequencing Jobs With Sequence-Dependent Setup
Times 652
Sequencing Jobs Through One Work Centre/
Machine in Order to Minimize Number of Late
Jobs 652
Sequencing Jobs Through Three or More Work
Centres/Machines in Order to Minimize
Make-Span 653
Shop-Floor Control 655
OM IN ACTION Mattec MES 655
Schedule Gantt Chart 655
Input/Output Control 656
Difficulty of Scheduling and Using the Bottleneck
Operation 657
Why Scheduling Can Be Difficult 657
Theory of Constraints 659
OM IN ACTION OFD (Oregon Freeze Dry) 660
Staff Scheduling 661
OM IN ACTION Metro Vancouver Transit Police
Scheduling 662
Cyclical Scheduling 663
Shift Scheduling 664
OM IN ACTION ESP by ThoughtWorks Inc. 665
OM IN ACTION Employee Scheduling in Hard
Rock Cafe 667
Airline Crew Scheduling 667
OM IN ACTION Edmonton Transit Service 668
Some Other Scheduling Problems 669
OM IN ACTION ClickSoftware 669
OM IN ACTION Trapeze Group 670
Summary 670
Key Terms 671
MINI-CASE Scotsburn Dairy—Operational
­Sequencing 681
MINI-CASE Zappos 681
CHAPTER 17 Project Management 682
Introduction to Project Management 683
The Nature of Projects 684
OM IN ACTION Saskatoon Police Service
Headquarters 687
OM IN ACTION Pacific Blue Cross 688
Project Manager Responsibilities 688
CONTENTS xiii
Project Planning 690
OM IN ACTION Tim Hortons 690
Work Breakdown Structure 690
Introduction to Project Scheduling 692
Gantt Chart 692
PERT/CPM 692
The Network Diagram 693
Scheduling Using Deterministic Durations 695
PERT/CPM Solution Technique 695
Probabilistic Durations 700
Determining Path Probabilities 702
Risk Management Planning 706
Project Crashing 707
Project Execution and Control 709
OM IN ACTION Warner Robins Air Logistics
Complex 710
OM IN ACTION McGill University Health Centre 712
OM IN ACTION New Champlain Bridge 712
Project Management Software 713
Using Microsoft® Project 713
Summary 715
Key Terms 716
MINI-CASE Time, Please 729
MINI-CASE Fantasy Products 729
CHAPTER 18 Waiting-Line Analysis 731
Introduction 732
Why Is There Waiting? 732
OM IN ACTION Traffic at Canadian Tire 733
Goal of Waiting-Line Analysis 734
Psychology of Waiting 734
OM IN ACTION Six Flags 735
OM IN ACTION Disney 736
Constraint Management 736
Queueing System Characteristics and Performance
Measures 737
Potential Number of Customers 737
Number of Servers and Structure of Queueing
System 737
Arrival and Service Patterns 738
Queue Discipline (Order of Service) 740
Performance Measures 740
OM IN ACTION Queueing Theory and Healthcare
Operations 741
Queueing Models: Infinite Source 742
Basic Relationships 742
xiv CONTENTS

Single Server Models 744 Appendix A: A

 nswers to Selected
Model 1: Single Server, Exponential Service
Durations 744
Problems AP-1
Model 2: Single Server, Exponential Service Appendix B: Tables AP-4
Durations, Finite Number in System 745
Model 3: Single Server, Constant Service Appendix C: W
 orking With
Durations 746
Model 4: Single Server, General Service
the Normal
Durations 747 Distribution AP-9
Multiple Server Models 748
Model 5: Multiple Servers, Exponential Service
Chapter Sources CS-1
Durations 748
Index IN-1
Determining the Number of Servers Using
Wait Time Standards 752
Determining the Number of Servers by Minimizing Chapter Supplements
Total Cost 753
Available on Connect
Model 6: Multiple Servers, Exponential Service
Durations, Finite Number in System 755 Chapter 4S Reliability
OM IN ACTION L.L. Bean 756
Chapter 5S Decision Analysis
Model 7: Multiple Servers, General Interarrival Chapter 6S Linear Programming
and Service Durations 756 Chapter 7S Learning Curves
Model 8: Multiple Servers With Priority, Chapter 8S The Transportation Model
Exponential Service Durations 757 Chapter 10S Acceptance Sampling
Queueing Model: Finite Source 760 Chapter 14S Maintenance
Summary 766 Chapter 18S Simulation
Key Terms 767
MINI-CASE Big Bank 774
MINI-CASE Lourdes Hospital 774
MINI-CASE Peace Arch Border Crossing 775
Preface
Operations Management, Seventh Canadian Edition, was written for students and faculty teaching the
fascinating and ever-changing world of operations management and supply chain management in
­Canada. The importance of supply chain and operations management has never been more apparent
than during the COVID-19 crisis—from restocking toilet paper all the way to distributing the vaccine
worldwide. The Seventh Canadian Edition continues to offer a comprehensive and flexible amount of
content appropriate for different courses and formats, including undergraduate, graduate, and executive
education. While the chapters in the text are connected, and certainly build upon themselves, they can
still be selected and presented in the order that is most relevant for the instructor. That flexibility also
extends to the choice of relative weighting of the qualitative and quantitative aspects of the material
and the order in which chapters are covered, because chapters do not depend on sequence. For example,
some instructors cover project management early, while others cover quality or JIT/lean early.
The topics covered include both strategic issues and planning/control decisions. Activities such
as capacity, designing production process and work methods, inventory management and control,
and assuring and improving quality are core issues in organizations. Whether operations is your field
of study or not, knowledge of operations management will certainly benefit you and the organization
you work for.
The advantages of using a Canadian resource for your operations management learning are
numerous, including:
● Canadian locations and companies are showcased
● Examples of Canadian organizations and their decisions are highlighted
● Issues important for Canadian instructors and reviewers are addressed
● International examples are framed and reflected from a Canadian perspective
● There is a focus on Canadian data for context

What’s New in the Seventh Canadian Edition?

The Seventh Canadian Edition has had an extensive revision. The authors worked very hard to
­sequence the material in a way that will support student learning and understanding. In the new edi-
tion, readers will find many new opening cases, new OM in Action feature boxes, and many new and
revised examples. For an in-depth look at the updates to the new edition, please see below for the
chapter-by-chapter changes.

Chapter Title Important Changes/Additions

1 Introduction to
Operations Management
2 Competitiveness,
Strategy, and Productivity
● Updated introductory material and summary
● Updated figures and examples
● Updated statistics
● Updated list of related associations
● New and revised OM in Actions
New
●  sections on global strategy, globalization, supply chain strategy, and
sustainability strategy
● Revised sections on mission and strategies and productivity
● New figures
● New example and solved problem for productivity
● New Mini-Case, “Home-Style Cookies”
● New and revised OM in Actions

xv
xvi PREFACE

Chapter Title Important Changes/Additions

3 Demand Forecasting
4 Product and Service
Design
5 Strategic Capacity
Planning
6 Process Design and
Facility Layout
7 Work/Job Design
8 Location Planning and
Analysis
9 Management of Quality
10 Statistical Quality Control
● Updated statistics and figures
Revised
●  the introduction as well as sections on time series models, techniques for
trend, seasonality, associative models, and forecasting accuracy
● Updated methodology in the forecasting methods with trend section
● Updated examples
● New and revised OM in Actions
● New sections on global product and service design
● Revised sections on product life cycle
● New Mini-Case, “The Challenges of Managing Services”
● Revised learning outcomes
● New and revised OM in Actions
● Revised Operations Tour, “3twenty Modular”
● New figures and images
Revised
●  sections on capacity management, strategic capacity planning and break-
even analysis
● Updated examples, key terms, summary, and solved problems
● Revised tables
● Expanded coverage of overall equipment effectiveness including an example
● New and revised OM in Actions
New
●  sections on lean process design, project process, fixed position layout, hybrid
layout, and 3D printer technology
● Revised sections on process layout, product layout, and FMS
● Revised learning outcomes
● New figures
● New Mini-Cases: “A Safe Hospital Room of the Future” and “Morton Salt”
● New and revised OM in Actions
Revised
●  sections on work/job design, methods analysis, working conditions, time
studies, and compensation
Revised
●  and updated examples, figures, key terms, end-of-chapter problems, and
chapter supplement
● New and revised OM in Actions
● Revised chapter opener on Canada Royal Milk
● Revised sections on location decisions and alternatives
● Revised end-of-chapter problems and chapter supplement
● New and revised OM in Actions
New
●  sections on ethics and quality management, quality and global supply
chain, PDSA process improvement, DMAIC, quality control circles (QCCs), summary
of quality costs, the European Quality Award, the Deming Prize, and the Baldrige
Award
● Revised sections on quality gurus, and total quality management (TQM)
● New and revised learning outcomes
● New and revised OM in Actions
● Revised examples, key terms, end-of-chapter problems, and chapter supplement
● Revised sections on statistical process control, process capability, and Six Sigma
 PREFACE xvii

Chapter Title Important Changes/Additions

11 Inventory Management ● Revised learning outcomes
● New and revised sections on bar code, RFID, two bin system, and FOI
● New figures
● New Mini-Case, “Health Care Appliances Company”
● New and revised OM in Actions
● New example, solved problem, and discussion questions
12 Aggregate Operations Revised
●  figures, pictures, Internet exercises, solved problems, and end-of-chapter
Planning and Master questions
Scheduling Revised
●  sections on aggregate production and service planning and master
production scheduling
● New and revised OM in Actions
13 Material Requirements New
●  and revised sections on low-level coding, MRP processing, MRP in services,
Planning and Enterprise special types of BOMs, lot-for-lot ordering, economic order quantity model, and ERP
Resource Planning in services
● New and revised OM in Actions
14 Just-in-Time and Lean ● New learning outcomes
Production New
●  sections on JIT II, process improvement using 5W2H approach, lean and Six
Sigma, and lean and ERP
● Revised section on level loading (heijunka)
● New and revised OM in Actions
15 Supply Chain ● New and revised learning outcomes
Management New
●  chapter opener case study on Ocado’s smart centralized fulfillment distribution
centre
New
●  sections on ethics in SCM, warehousing, warehouses/distribution centres,
warehousing benefits, warehousing activities, warehouse slotting, order picking
methods, order fulfillment, factor-weighting technique in supplier
selection, blockchain technology
Revised
●  sections on trends in supply chain management, supply chain management
activities and responsibilities, and the SCOR model
● New figures
● New and revised OM in Actions
● New Operations Tour, solved problem, problems, and discussion questions
16 Job and Staff Scheduling ● New chapter opener on Petal Solutions Inc.
● Revised examples, tables, and end-of-chapter problems
● Revised sections on loading, sequencing, theory of constraints, and staff scheduling
● New and revised OM in Actions
17 Project Management ● New and revised learning outcomes
● New chapter opener case study on Billy Bishop Toronto City Airport
New
●  and revised sections on project organizational structure, project life cycle, project
manager responsibilities, project champions, certification, and risk management planning
● New and revised OM in Actions
● New example, solved problem, problems, and discussion questions
18 Waiting-Line Analysis ● Revised examples, end-of-chapter problems, and chapter supplement
● Revised sections on characteristics and performance measures and queueing models
● New and revised OM in Actions
xviii PREFACE

Important Features
Balanced Content. The text strives to achieve a careful balance in the presentation of opera-
tions management. Care has been taken to balance definitions and concepts with quantitative,
hands-on problems; to balance theoretical material with real-life applications; and to balance
classical topics in operations management with new developments that particularly interest
students.
Problem-Solving Approach. To further students’ hands-on experience of OM, the text contains
examples with solutions throughout. At the end of most chapters is a group of solved problems to
illustrate concepts and techniques. Some of the end-of-chapter problems have answers at the end of
the book.
Easy to Read. The writing style is clear, concise, and student friendly, while maintaining the tech-
nical rigour necessary for the subject matter. From step-by-step problem solving to theoretical expo-
sition, to in-depth Mini-Cases and readings, the book is designed to promote student understanding
of the role of operations management in successful organizations—which, in turn, promotes student
success in class.

Pedagogy and Learning Tools

A number of key features in this text have been specifically designed to help introductory students
learn, understand, and apply operations concepts and problem-solving techniques. All of these have
been carefully developed over the previous six Canadian editions and 13 U.S. editions and have
proven successful.
Learning Objectives. Every chapter lists the learning objectives as a short guide to studying the
chapter. These objectives are linked to each section and to the questions and problems at the end of
the chapter.
Opening Vignettes. Every chapter has an opening vignette (chapter opener) that illustrates the
importance of the topic, usually highlighting a company.
Figures and Photos. The Seventh Canadian Edition includes extensive photographs and
graphic illustrations to support student study and provide interest and motivation for all types of
learners.

Plan

Act Do

Study

OM in Action. Throughout the new edition are readings about applications of OM. These OM in
Action boxes highlight important real-world applications, provide examples of operations issues,
and/or offer further elaboration of the content. They also provide a basis for classroom discussion
and generate interest in the subject matter.
 PREFACE xix

OM in ACTION www.dronedeliverycanada.com

Drone Delivery Canada deliveries could prove especially useful in transporting

Drone Delivery Canada Corp. is a drone technology
company focused on the design, development, and
implementation of its proprietary logistics software plat-
form, using drones. The company’s platform will be used
as a software as a service (SaaS) model for government
and corporate organizations globally.
According to news published in March and April
2020, in light of developments related to the coronavi-
rus disease (COVID-19) pandemic, the Vaughan-based
company started reviewing drone-related regulations
with the federal government. The company hopes to
investigate procedures that would ensure quick access
to medical supplies by remote communities. Drone
blood samples to laboratories when there is a need for
limited person-to-person contact.
In 2017, the company partnered with Moose Cree First
Nation to initiate the delivery of mail, food, and medical
goods to its remote communities using drones.
Moose Cree is located on an island in the middle of
Moose River. Crossing the river by boat or ice road is not
always possible and transportation by helicopter is very
expensive. As a result, drone deliveries could prove to
be a successful and efficient mode of transportation for
the community.
Source: https://www.newswire.ca/news-releases/drone-delivery-canada
-reaches-out-to-healthcare-industry-for-covid-19-related-drone-delivery-use
-cases-839027203.html

Examples With Solutions. Throughout the new edition, wherever a quantitative technique is
introduced, an example is included to illustrate the application of that technique. These are designed
to be easy to follow.

Compute 2s control limits for forecast errors when the MSE is 9.0. EXAMPLE 3-14
SOLUTION

The 2s control limits should correspond to approximately 95 percent of all forecast errors. This produces the following UCL and
LCL values.
_____ __
s = √ MSE = √ 9 = 3
UCL = 0 + 2(3.0) = +6.0
LCL = 0 − 2(3.0) = −6.0

Service Icons. Where operations management service topics are addressed in the new edition, a ervice
service icon appears in the corresponding margin to flag the attention of both students and instructors.

Web Links. Web addresses of relevant websites are highlighted in the margin with a web icon.

Globe Icons. Where a concept or example has international effect, it is flagged with a globe icon.

Excel Icons. Excel icons have been added to the examples and questions for which the Excel
templates are available on Connect.

End-of-Chapter Resources
For student study and review, the following items are provided at the end of each chapter.
Summary. An overview of the material covered is given in point form.
Key Terms. Key terms are highlighted in the text.
xx PREFACE

Solved Problems. At the end of most chapters, solved problems illustrate problem solving and the
core concepts of the chapter. These have been carefully prepared to enhance student understanding,
Solved Prob ems
as well as to provide additional examples of problem solving.

Problem 1
A company that processes fruits and vegetables is able to produce 400 cases of canned peaches in
one-half hour with four workers. What is its labour productivity?

Solution
Quantity produced
Labour productivity = ______________
Labour hours
= 400 cases
_______________
4 workers × 1 ∕ 2 hour
= 200 cases per worker hour

Excel Spreadsheet Solutions. Where applicable, the solved problems include screen shots of a
spreadsheet solution. These are taken from the Excel templates, which can be found on Connect.

Discussion and Review Questions. These are intended to serve as a student self-review or as
class discussion starters.
Taking Stock, Critical Thinking Exercises, Experiential Learning Exercises, and Internet
Exercises.
duction to These activities
erations Manag encourage
ment analytical thinking and help broaden conceptual understanding.

Critical Thinking Exercises

This item also will appear in every chapter. It allows you to critically apply information you learned in the chapter to practical situations.
LO4 1. Many organizations offer a combination of goods and
services to their customers. As you learned in this chap-
ter, there are some key differences between production of
goods and delivery of services. What are the implications
of these differences to managing operations?
LO1 2. Some people who work in the knowledge or arts sectors
and whose jobs involve creativity argue that their job can-
not be defined as a process (i.e., a sequence of predeter-
mined activities). Discuss.
LO1 3. Car sharing is a model of car rental in which people rent
cars for short periods of time, often by the hour. The car
has to be located close to the customer’s residence or work-
place, so cars are distributed in the community. The rental
process has to be self-service and cars need to be available
24 hours a day. The primary markets are large metropoli-
tan areas, universities, and corporate campuses where there
is a relatively high burden of car ownership. The car-share
operator pays for maintenance, parking, gas, and insurance
of the vehicle. Explain in detail how a car-sharing business
such as Enterprise CarShare (https://www.enterprise
carshare.ca/ca/en/home.html) operates.
 PREFACE xxi

Problems 3 Ly practice
n ecid problems
to of r that
t e
the stress Most
of j b chapters haves numerous
hunting and e was excitedproblems,
about t ranging
e prosp from
ct simple
5 o s
apply techniques
of being h r ow to more
bos difficult
But sheconceptual problems
was also fearful of bethat
ng provide
com- a challenge and require students
to integrate
pletely onconcepts
her own (these
Neve are marked
theless, Lynn with
wasand asterisk)
termined
g
Operations w o pro osed the idea as
t i Tours. These readingsl ttl lo give students
t a descriptive
l r li look at operations in action at manu-
facturing a competitor.
application Sto ould Lynn
Lynn or service organizations
v ilable m ny aske her These real-life
t take care illustrations
of their l w show
s direct reinforce
the Some
importance of the concepts described in the textbook/ebook.
peo le were simply gl d to turn the work over to her; oth
r s d r r l a
Mini-Cases. Many chapters include short cases selected to provide a broader, more integrated
h r i i i s L l li i
thinking opportunity for students.

MINI-CASE

Sobeys Sobeys has five different store sizes and formats, and uses
them in each location based on market size and customer demo-
Sobeys Inc. is the second largest grocery store chain in Canada graphics. There is the large full-service format (such as Sobeys,
(the largest is Loblaw). Sobeys distinguishes itself from Loblaw Sobeys extra, IGA extra, Safeway and Thrifty Foods); urban fresh
by offering better quality fresh food and customer service. format (such as Sobeys Urban Fresh and IGA in Quebec); small
Sobeys grew out of Nova Scotia mostly through acquisition of community format (such as Foodland, Marché Bonichoix, and
other grocery chains. The integration of the latest acquisition, Les Marchés Tradition); discount format (such as FreshCo and
Safeway Canada (over 200 stores in Western Canada), has been Price Chopper); and convenience format (such as Needs Conve-
challenging. Sobeys now owns 908 grocery stores and franchises nience and IGA express). Approximately 350 large full-service
hapterthroughout
977 stores 1 Introduction to Operations
Canada. Sobeys Management
has revenues of over $24 stores have in-store pharmacies. Sobeys also has a chain of 78
billion and employs over 125,000 people. Sobeys is also a whole- drugstores (Lawtons Drugs) in Atlantic Canada, over 300 retail
saler to over 8,000 retail accounts. gas stations, and 80 liquor stores.

Sam Dao/Alamy Stock Images

xxii PREFACE

Superior Learning Solutions and Support

The McGraw Hill team is ready to help you assess and integrate any of our products, technology, and
services into your course for optimal teaching and learning performance. Whether it’s helping your
students improve their grades, or putting your entire course online, the McGraw Hill team is here to
help you do it. Contact your learning solutions consultant today to learn how to maximize all of
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We would like to thank the McGraw Hill team, including the portfolio manager, Amy Clarke-
Spencley; content developer, Shalini Khanna; supervising editor, Janie Deneau; permissions editor,
Derek Capitaine; and copy editor, Laurel Sparrow, for their excellent work and support.

Hydeh Mottaghi
Behrouz Bakhtiari
Award-Winning
Technology
McGraw-Hill Connect® is an award-winning digital teaching and learning solution that empowers
students to achieve better outcomes and enables instructors to improve efficiency with course man-
agement. Within Connect, students have access to SmartBook®, McGraw-Hill’s adaptive learning
and reading resource. SmartBook prompts students with questions based on the material they are
studying. By assessing individual answers, SmartBook learns what each student knows and identi-
fies which topics they need to practise, giving each student a personalized learning experience and
path to success.
Connect’s key features also include analytics and reporting, simple assignment management,
smart grading, the opportunity to post your own resources, and the Connect Instructor Library, a
repository for additional resources to improve student engagement in and out of the classroom.

Instructor Resources for Operations Management,

Seventh Canadian Edition
● Instructor’s Solutions Manual
● Test Bank
● Microsoft® PowerPoint® Presentations
● Practice Operations Instructor Manual

Test Builder
Available within Connect, Test Builder is a cloud-based tool that enables instructors to format tests
that can be printed or administered within a learning management system. Test Builder offers a
modern, streamlined interface for easy content configuration that matches course needs, without
requiring a download.
Test Builder allows you to:
● access all test bank content from a particular title
● easily pinpoint the most relevant content through robust filtering options
● manipulate the order of questions or scramble questions and/or answers
● pin questions to a specific location within a test
● choose the layout and spacing
● add instructions and configure default settings
Test Builder provides a secure interface for better protection of content and allows for just-in-
time updates to flow directly into assessments.

End-of-Chapter Problems
Connect for Operations Management provides assignable, gradable end-of-chapter content to help
students learn how to solve problems and apply concepts. Advanced algorithms allow students to
practise problems multiple times to ensure full comprehension of each problem.

Practice Operations
Practice Operations is a learning resource that brings operations management to life while reinforc-
ing key concepts in a way that promotes critical thinking and strategic decision making. Practice
Operations is a 3D, interactive, game-based simulation that allows students to manage operations of

xxiii
xxiv AWARD-WINNING TECHNOLOGY

a manufacturing and distribution company. Players assume the role of an operations manager in a
company that manufactures clothing products for clients. Players are in charge of placing bids for
contracts, managing physical and human resources, ordering raw materials, turning them into re-
fined clothing, and shipping the final products to the client. The game is set up in a number of fo-
cused modules that deal with the issues of the production process, capacity, supply chain, JIT, labour
management, order fulfillment, customer satisfaction, and quality control.

Excel Simulation Problems

Excel Simulation Problems allow students to master their Excel skills within the context of opera-
tions management. The problems feature animated and narrated Help and Show Me tutorials for
students, with automatic feedback and grading.

Writing Assignments
The Writing Assignment tool delivers a learning experience to help students improve their written
communication skills and conceptual understanding. As an instructor, you can assign, monitor,
grade, and provide feedback on writing more efficiently and effectively.

Remote Proctoring and Browser-Locking Capabilities

New remote proctoring and browser-locking capabilities, hosted by Proctorio within Connect, pro-
vide control of the assessment environment by enabling security options and verifying the identity
of the student.
Seamlessly integrated within Connect, these services allow instructors to control students’ as-
sessment experience by restricting browser activity, recording students’ activity, and verifying that
students are doing their own work.
Instant and detailed reporting gives instructors an at-a-glance view of potential academic integrity
concerns, thereby avoiding personal bias and supporting evidence-based claims.
CHAPTER 1
Introduction to
Operations
Management LEARNING
OBJECTIVES
After completing this chapter,
you should be able to:

Cavan Images/Getty Images

LO 1 Define the term operations
Tashi-Delek/Getty Images

management and identify

operations management jobs.
LO 2 Identify the three major
functions of organizations and
describe how they interact.
LO 3 Describe the scope of
Lars Hagberg/Alamy Stock Photo

operations management and

provide an overview of this
textbook, including
differentiating between design
and planning/control decisions.
LO 4 Compare production of goods
and services.
LO 5 Discuss the operations

R
ecalls of automobiles, foods, toys, and other products; major oil spills; and even
manager’s job.
dysfunctional government legislatures are all examples of operations failures.
They underscore the need for effective operations management. Examples of oper- LO 6 Describe the key aspects of
ations successes include the many electronic devices we all use, medical breakthroughs operations management
in diagnosing and treating ailments, and high-quality goods and services that are widely
decision making.
available.
Operations are what businesses do. Operations are processes that either provide ser- LO 7 Briefly describe the historical
vices or create goods. Operations take place in businesses such as restaurants, retail stores, evolution of operations
supermarkets, factories, hospitals, and colleges and universities. In fact, they take place in
management.
every business organization. Moreover, operations are the core of what a business organiza-
tion does. LO 8 Identify the major trends that
As you read this book, you will learn about managing those operations. The subject affect operations management.
matter is relevant for you regardless of your major. Productivity, quality, ebusiness, com-
petition, and customer satisfaction are important for every aspect of a business organiza-
tion. This first chapter presents an introduction and overview of operations management.
Among the issues it addresses are: What is operations management? Why is it important?
What do operations management professionals do?
The chapter also provides a description of the historical evolution of operations management
and a discussion of the trends and issues that impact operations management.
2 Chapter 1 Introduction to Operations Management

operations management
The management of processes
(i.e., sequences of activities and
resources) that create goods
and/or provide services.
process A sequence of
activities, usually performed by
more than one person, which
uses resources and achieves a
desired result.
good A tangible item.
service An act or work for
someone.
LO 1 Introduction
Operations management is the management of processes that create goods and/or provide ser-
vices. A process is a sequence of activities, usually performed by more than one person, which uses
resources and achieves a desired result. A good is a tangible item, whereas a service is an act or
work for someone (a customer or client).
Let’s use an airline to illustrate the processes involved in its operations. The resources include
staff, aircraft, airports, and maintenance facilities. The processes can be classified as core, support,
and managerial:
• Core processes include taking customer reservations, communicating with customers, checking
and boarding, in-flight service, and baggage handling.
• Support processes include employee recruitment and training, buying and maintaining aircraft,
and buying fuel and spare parts.
• Managerial processes include forecasting travel demand, capacity and flight planning, locating
maintenance facilities, scheduling planes/pilots/crew and counter staff/baggage handlers, man-
aging inventories, and ensuring that quality standards are met. Most of the managerial
processes fall into the realm of operations management.
Now let’s consider a bicycle manufacturing facility:
• Core processes include buying raw materials (tubes, etc.) and parts (gears, chains, tires, etc.),
fabrication (forming and welding the frame, etc.), and assembly.
• Support processes include recruiting and training workers, and purchasing and maintaining
equipment.
• Managerial processes include deciding on the style of bicycle (product design), deciding which
components to make and which to buy, forecasting demand, scheduling production, and ensur-
ing that quality standards are met.
Obviously, an airline and a bicycle factory are completely different. One is a service provider,
the other a producer of goods. Nonetheless, these two companies have many support and managerial
processes in common. Both involve buying and managing equipment and supplies, recruiting and
training employees, forecasting demand, scheduling activities, and satisfying quality standards.

Cycles Devinci is a
Canadian manufacturer
of bicycles, founded in
Chicoutimi, Quebec, in
1987. In addition to a full
line of road, mountain, and
hybrid bicycles, Devinci
also manufactures the Bixi
brand of bicycles used in
bike sharing programs in
cities such as Montreal
and Toronto. See http://
www.vitalmtb.com/photos
/features/Inside-the-Industry
-Devinci-Cycles-Factory
-Tour,10452/Slideshow,0
/FredLikesTrikes,18548 for a
tour of the Devinci factory.

Peter Macdiarmid/Getty Staff

 Chapter 1 Introduction to Operations Management 3

Many companies use operations management strategies, tactics, and actions in order to improve
their efficiency and effectiveness. Efficiency measures the amount of resources (e.g., time, cost,
etc.) used to produce one unit of output. It is also customary to use “efficiency” to refer to the state efficiency Operating at
of minimizing resources used to achieve one unit of output. If the resources used to produce one unit minimum cost and time. As a
of output in a process are reduced, the process is said to have improved its efficiency. Effectiveness measure, efficiency is the
measures the extent to which an operation is achieving the intended goals (quality and timeliness). amount of resources used (e.g.,
This textbook contains many practical and real-life examples of operations management in the time, cost, etc.) to produce one
form of chapter openers, photos with captions, readings in the form of OM in Action boxes, mini- unit of output.
cases, problems, and operations tours. For example, the chapter openers are: IKEA’s strategy (Chapter effectiveness Achieving
2), Bombardier Business Aircraft forecasting (Chapter 3), 3D printing (Chapter 4), Ford’s capacity quality and timeliness.
planning (Chapter 5), Ford’s factory changeover (Chapter 6), GE Aviation’s participative management
(Chapter 7), Feihe’s new plant in Kingston (Chapter 8), Lac-Megantic rail disaster (Chapter 9), Trek
Bicycle’s quality control (Chapter 10), Federated Cooperatives’ inventory management (Chapter 11),
Canada Post’s holiday planning (Chapter 12), Progressive Turf Equipment’s material requirements plan-
ning (Chapter 13), lean production in healthcare (Chapter 14), supply chain management in online gro-
cery retailing (Chapter 15), healthcare job and staff scheduling (Chapter 16), Billy Bishop Toronto City
Airport’s project management (Chapter 17), and border crossing waiting line management (Chapter 18).

Why Study Operations Management?

There are a number of reasons to study operations management. First, because a large percentage
of a company’s expenses occur in the operations area (e.g., purchasing materials, paying workforce
salaries), more efficient operations can result in large increases in profit.
Second, many management positions in companies are operations management positions.
This includes positions in forecasting, logistics and supply chain management, purchasing, quality
assurance, production planning and control, scheduling, inventory management, and more.
Third, activities in all the other areas of organizations—such as finance, accounting, human
resources, management information systems, and marketing—are all interrelated with operations
management activities. So, it is essential for people who work in these areas to have a basic under-
standing of operations management.
Fourth, operations innovations lead to marketplace and strategic benefits. Examples include
Toyota Production System, Dell’s direct shipping of personal computers, Zara’s fast and respon-
sive supply chain, and Walmart’s cross-docking (goods received from suppliers at a distribution
centre are transferred to outbound trucks to retail stores without being stored).1 For an example of
operational innovation, see the “Drone Delivery Canada” OM in Action.

OM in ACTION www.dronedeliverycanada.com

Drone Delivery Canada deliveries could prove especially useful in transporting

Drone Delivery Canada Corp. is a drone technology
company focused on the design, development, and
implementation of its proprietary logistics software plat-
form, using drones. The company’s platform will be used
as a software as a service (SaaS) model for government
and corporate organizations globally.
According to news published in March and April
2020, in light of developments related to the coronavi-
rus disease (COVID-19) pandemic, the Vaughan-based
company started reviewing drone-related regulations
with the federal government. The company hopes to
investigate procedures that would ensure quick access
to medical supplies by remote communities. Drone
blood samples to laboratories when there is a need for
limited person-to-person contact.
In 2017, the company partnered with Moose Cree First
Nation to initiate the delivery of mail, food, and medical
goods to its remote communities using drones.
Moose Cree is located on an island in the middle of
Moose River. Crossing the river by boat or ice road is not
always possible and transportation by helicopter is very
expensive. As a result, drone deliveries could prove to
be a successful and efficient mode of transportation for
the community.
Source: https://www.newswire.ca/news-releases/drone-delivery-canada
-reaches-out-to-healthcare-industry-for-covid-19-related-drone-delivery-use
-cases-839027203.html

1
https://hbr.org/2004/04/deep-change-how-operational-innovation-can-transform-your-company.
4 Chapter 1 Introduction to Operations Management

Careers in Operations Management

If you are thinking of a career in operations management, you can obtain relevant information from
one or more of the following associations:
http://supplychaincanada. • Supply Chain Canada
com/en/
• Canadian Institute of Traffic and Transportation (CITT)
http://www.citt.ca
http://legacy.cscrf.ca/www • Canadian Supply Chain Sector Council (CSCSC)
.supplychaincanada.org/en • Association for Supply Chain Management (ASCM)
/index.html • Institute for Operations Research and Management Sciences (INFORMS)
http://www.ascm.org
• Institute for Supply Management (ISM)
http://www.informs.org
http://www.ism.ws • American Society for Quality (ASQ)
http://www.asq.org • Project Management Institute (PMI)
http://www.pmi.org
Most of these associations offer certification programs and a job bank.

LO 2 Functions Within Organizations

Organizations are formed to pursue goals that are achieved more efficiently and effectively by the
concerted efforts of a group of people rather than by individuals working alone. Organizations are
usually structured into departments or functions. Each department is given resources and managed
independently, however, they have to collaborate on multi-functional processes.
Organizations are devoted to producing goods and/or providing services. They may be for-
profit (i.e., businesses) or non-profit (e.g., hospitals). Their goals, design, management, and outputs
(goods/services) may be similar or quite different. Nonetheless, their functions and their processes
are similar.
A typical organization has three basic functions: operations (representing manufacturing/
service), finance, and marketing (including sales) (see Figure 1-1).

FIGURE 1-1 Organization

The three basic functions
of an organization and
flows between them.

$ Operations Products
Finance (manufacturing/ Marketing
service)
Funding Demand
needs

These three functions and other supporting functions (e.g., research and development) per-
form different but related processes necessary for the organization. The functions must interact to
achieve the goals and objectives of the organization, and each makes an important contribution. For
instance, unless operations and marketing work together, marketing may promote goods or services
that operations cannot profitably deliver, or operations may turn out goods or services for which
there is no demand. Similarly, unless finance and operations work closely, funds for materials,
building expansion, and new equipment may not be available when needed. Let’s take a closer look
at these functions.

Operations
The operations function, representing manufacturing/service processes, manages all the
activities directly related to producing goods or providing services. Hence, it exists both in
manufacturing industries which are goods producing and in service industries which provide
services (see Table 1-1).
 Chapter 1 Introduction to Operations Management 5

Industries Examples TABLE 1-1

Goods producing . . . .
Services . . . . . . . . . . .
Farming, mining, construction, manufacturing
Examples of industries.
Healthcare, transportation, food, warehousing, retailing,
wholesaling, banking, film production, broadcasting,
phone

The production of goods or services involves transforming/converting inputs into finished

goods or services. For example, a car body manufacturing process converts sheets of steel into a car
body by cutting, forming, and welding operations.
The production process must be an adaptive system. To ensure that the desired outputs are
obtained, measurements should be taken at various points (feedback), and then compared with previ-
ously established standards to determine whether corrective action is needed (control). Figure 1-2
shows the conversion process. Table 1-2 provides two examples of inputs, transformation processes,
and outputs.

Inputs
Building FIGURE 1-2
Labour Transformation/ Outputs
Machines conversion Goods The operations
Materials processes Services
function involves the
Customers
Information conversion of inputs
into outputs.
Feedback

Feedback
Control

Food Processor Inputs Process Output TABLE 1-2

Raw vegetables Cleaning Canned vegetables
Illustrations of the
Metal sheets Making cans transformation process.
Water Cutting
Energy Cooking
Labour Packing
Building Labelling
Equipment
Hospital Inputs Process Output
Sick patients, doctors, nurses Examination Healthy patients
Building Surgery
Medical supplies and drugs Monitoring
Equipment Medication
Laboratories Therapy

It is important to note that goods and services often occur jointly. For example, having the oil
changed in your car is a service, but the new oil is a good. Similarly, house painting is a service, but ervice
the paint is a good. The goods–service package is a continuum. It can range from primarily goods
with little service to primarily service with few goods (see Figure 1-3).
6 Chapter 1 Introduction to Operations Management
FIGURE 1-3
The goods–service
continuum.
value added The difference
between the cost of inputs and
the value or price of outputs.
Goods Service
Surgery, teaching
Songwriting, software development
Computer repair, restaurant meal
Automobile repair, fast food
Home remodelling, retail sales
Automobile assembly, steelmaking
The essence of the operations function is to add value during the transformation process: Value
added is the term used to describe the difference between the cost of inputs and the value or price of
outputs. In non-profit organizations, the value of outputs (e.g., highway construction, police and fire
protection) is their value to society; the greater the value added, the greater the efficiency of these
operations. In for-profit organizations, the value of outputs is measured by the prices that customers
are willing to pay for those goods or services. Companies use the money generated by value added
for research and development, investment in new facilities and equipment, workers’ salaries, and
owners’ profits. Consequently, the greater the value added, the greater the amount of funds available
for these purposes.
One way that organizations attempt to become more productive (i.e., make more output with
the same or fewer inputs) is to critically examine whether any of their activities adds value. Those
that do not add value are wasteful. Eliminating or improving such wastes decreases the cost of inputs
or transformation, thereby increasing the value added. For instance, a company may discover that
it is producing an item much earlier than the scheduled delivery date to a customer, thus requiring
the storage of the item in a warehouse until delivery. In effect, additional costs are incurred by
storing the item without adding to the value of the item. Reducing storage time would reduce the
transformation cost and, hence, increase the value added. A similar comment applies for receiving
raw material/parts too early. This is the concept called just-in-time (more in Chapter 14). Obviously,
working with suppliers and customers can lead to increased productivity for all sides. This is called
supply chain management (more in Chapter 15).
Finance
The finance function secures funds at favourable terms and allocates those funds throughout the
organization. Finance and operations management personnel cooperate by exchanging information
and expertise in activities such as:
• Budgeting. Budgets must be periodically prepared to plan financial requirements. Budgets must
sometimes be adjusted, and performance relative to a budget must be evaluated.
• Provision of funds. The necessary funding of operations and the amount and timing of funding
can be important and even critical when funds are tight. Careful planning can help avoid cash
flow problems. Most businesses obtain the majority of their funds through the revenues gener-
ated by sales of their goods and services.
• Economic analysis of capital investment proposals. Evaluation of alternative investments in
plant and equipment requires inputs from both operations and finance people.
Marketing
Marketing, including sales, is responsible for receiving customer wants/needs and feedback, and
for communicating them to operations and to product design (usually engineers). Operations
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