operation management ste67472_fm_i-1.indd i 01/17/17 09:00 PM Operations Management Final PDF to printer ste67472_fm_i-1.indd ii 01/17/17 09:00 PM

operation management ste67472_fm_i-1.indd i 01/17/17 09:00 PM

Operations Management

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ste67472_fm_i-1.indd iii 01/17/17 09:00 PM

Operations Management

William J. Stevenson
Saunders College of Business

Rochester Institute of Technology

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This book is dedicated to you.


Published by McGraw-Hill Education, 2 Penn Plaza, New York, NY 10121. Copyright © 2018 by McGraw-Hill
Education. All rights reserved. Printed in the United States of America. Previous editions © 2015, 2012, and
2009. No part of this publication may be reproduced or distributed in any form or by any means, or stored in
a database or retrieval system, without the prior written consent of McGraw-Hill Education including, but not
limited to, in any network or other electronic storage or transmission, or broadcast for distance learning.

Some ancillaries, including electronic and print components, may not be available to customers outside the
United States.

This book is printed on acid-free paper.

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ISBN 978-1-259-66747-3
MHID 1-259-66747-2

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Library of Congress Cataloging-in-Publication Data

Names: Stevenson, William J., author.
Title: Operations management / William J. Stevenson, Saunders College of Business,
Rochester Institute of Technology.
Description: Thirteenth edition. | New York, NY : McGraw-Hill Education,
[2018] | Series: The McGraw-Hill series in operations and decision sciences
Identifiers: LCCN 2016052871| ISBN 9781259667473 (alk. paper) | ISBN 1259667472 (alk. paper)
Subjects: LCSH: Production management.
Classification: LCC TS155 .S7824 2018 | DDC 658.5–dc23 LC record available at

All credits appearing on page or at the end of the book are considered to be an extension of the copyright page.

The Internet addresses listed in the text were accurate at the time of publication. The inclusion of a website does
not indicate an endorsement by the authors or McGraw-Hill Education, and McGraw-Hill Education does not
guarantee the accuracy of the information presented at these sites.


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The McGraw-Hill Series in Operations
and Decision Sciences

Operations Management

Beckman and Rosenfield, Operations,
Strategy: Competing in the 21st Century,
First Edition

Benton, Purchasing and Supply Chain
Management, Second Edition
Bowersox, Closs, Cooper, and Bowersox,
Supply Chain Logistics Management,
Fourth Edition

Brown and Hyer, Managing Projects: A
Team-Based Approach, First Edition
Burt, Petcavage, and Pinkerton, Supply
Management, Eighth Edition
Cachon and Terwiesch, Operations
Management, First Edition
Cachon and Terwiesch, Matching Supply
with Demand: An Introduction to
Operations Management, Third Edition
Cooper and Schindler, Business Research
Methods, Twelfth Edition
Finch, Interactive Models for Operations
and Supply Chain Management, First

Fitzsimmons, Fitzsimmons, and Bordoloi,
Service Management: Operations,
Strategy, Information Technology, Eighth

Gehrlein, Operations Management Cases,
First Edition

Harrison and Samson, Technology
Management, First Edition
Hayen, SAP R/3 Enterprise Software: An
Introduction, First Edition
Hill, Manufacturing Strategy: Text &
Cases, Third Edition
Hopp, Supply Chain Science, First Edition
Jacobs, Berry, Whybark, and Vollmann,
Manufacturing Planning & Control for
Supply Chain Management, Sixth Edition
Jacobs and Chase, Operations and Supply
Management: The Core, Fourth Edition
Jacobs and Chase, Operations and Supply
Management, Fifteenth Edition
Jacobs and Whybark, Why ERP? First

Larson and Gray, Project Management:
The Managerial Process, Seventh Edition
Leenders, Johnson, and Flynn, Purchasing
and Supply Management, Fifteenth

Olson, Introduction to Information
Systems Project Management, Second

Schroeder, Goldstein, Rungtusanatham,
Operations Management: Contemporary
Concepts and Cases, Seventh Edition
Seppanen, Kumar, and Chandra, Process
Analysis and Improvement, First Edition

Simchi-Levi, Kaminsky, and Simchi-Levi,
Designing and Managing the Supply
Chain: Concepts, Strategies, Case
Studies, Third Edition
Sterman, Business Dynamics: Systems
Thinking and Modeling for Complex
World, First Edition
Stevenson, Operations Management,
Thirteenth Edition

Swink, Melnyk, Cooper, and Hartley,
Managing Operations Across the Supply
Chain, Third Edition
Thomke, Managing Product and Service
Development: Text and Cases, First

Ulrich and Eppinger, Product Design and
Development, Fourth Edition
Zipkin, Foundations of Inventory
Management, First Edition

Quantitative Methods and Management

Hillier and Hillier, Introduction to
Management Science: A Modeling
and Case Studies Approach with
Spreadsheets, Fifth Edition
Stevenson and Ozgur, Introduction to
Management Science with Spreadsheets,
First Edition

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The material in this book is intended as an introduction to the
field of operations management. The topics covered include
both strategic issues and practical applications. Among the
topics are forecasting, product and service design, capacity
planning, management of quality and quality control, inven-
tory management, scheduling, supply chain management, and
project management.

My purpose in revising this book continues to be to provide
a clear presentation of the concepts, tools, and applications of
the field of operations management. Operations management is
evolving and growing, and I have found updating and integrat-
ing new material to be both rewarding and challenging, particu-
larly due to the plethora of new developments in the field, while
facing the practical limits on the length of the book.

This text offers a comprehensive and flexible amount
of content that can be selected as appropriate for different
courses and formats, including undergraduate, graduate, and
executive education.

This allows instructors to select the chapters, or portions of
chapters, that are most relevant for their purposes. That flex-
ibility also extends to the choice of relative weighting of the
qualitative or 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, others cover quality or lean early, etc.

As in previous editions, there are major pedagogical fea-
tures designed to help students learn and understand the mate-
rial. This section describes the key features of the book, the
chapter elements, the supplements that are available for teach-
ing the course, highlights of the eleventh edition, and sug-
gested applications for classroom instruction. By providing
this support, it is our hope that instructors and students will
have the tools to make this learning experience a rewarding

What’s New in This Edition
Class preparation exercises are now available for all chapters
and chapter supplements. The purpose of these exercises is to
introduce students to the subject matter before class in order
to enhance classroom learning. These exercises are available
in the Instructor’s Resource Manual. Special thanks to Linda
Brooks for her help in developing the exercises.

Some content has been rewritten or added to improve clar-
ity, shorten wording, or update information. New material
has been added on supply chains (including a different, more
realistic, way to conceptualize supply chains), as well as on
product life-cycle management, 3-D printing, drones, loca-
tions, and other topics. New critical thinking exercises have

been added. The explanation of learning curve time reduction
has been simplified with a new diagram. Some older readings
have been deleted, and new readings added on such topics as
fracking, mass customization of fast foods, and self-driving

I want to thank the many contributors to this edition. Review-
ers and adopters of the text have provided a “continuously
improving” wealth of ideas and suggestions. It is encourag-
ing to me as an author. I hope all reviewers and readers will
know their suggestions were valuable, were carefully consid-
ered, and are sincerely appreciated. The list includes post-
publication reviewers.

Robert Aboolian, California State University—San Marcos
Pamela Barnes, Kansas State University
Greg Bier, University of Missouri
Gary Black, University of Southern Indiana
Jeff Brand, Marquette University
Cenk Caliskan, Utah Valley University
Cem Canel, University of North Carolina—Wilmington
Jen-Yi Chen, Cleveland State University
Robert Clark, Stony Brook University
Dinesh Dave, Appalachian State University
Abdelghani Elimam, San Francisco State
Kurt Engemann, Iona College
Michael Fathi, Georgia Southwestern State
Warren Fisher, Stephen F. Austin State University
Gene Fliedner, Oakland University
Theodore Glickman, George Washington University
Haresh Gurnani, University of Miami
Johnny Ho, Columbus State University
Ron Hoffman, Greenville Technical College
Lisa Houts, California State University—Fresno
Stella Hua, Western Washington University
Neil Hunt, Suffolk University
Faizul Huq, Ohio University
Richard Jerz, St. Ambrose University
George Kenyon, Lamar University
Casey Kleindienst, California State University—Fullerton
John Kros, East Carolina University


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ste67472_fm_i-1.indd viii 01/17/17 09:00 PM

viii Preface

Anita Lee-Post, University of Kentucky
Nancy Levenburg, Grand Valley State University
F. Edward Ziegler, Kent State University

Other contributors include accuracy checkers: Gary Black,
University of Southern Indiana, Michael Godfrey, Univer-
sity of Wisconsin at Oshkosh, and Richard White, Univer-
sity of North Texas; Test Bank: Alan Cannon, University of
Texas at Arlington; PowerPoints: David Cook, Old Dominion
University; Data Sets: Mehdi Kaighobadi, Florida Atlantic
University; Excel Templates and ScreenCam tutorials: Lee
Tangedahl, University of Montana; Instructors Manual:
Michael Godfrey.

Special thanks goes out to Larry White, Eastern Illinois
University, who helped revise, design, and develop interactive
content in Connect ® Operations Management for this edition.

Finally I would like to thank all the people at McGraw-
Hill/Irwin for their efforts and support. It is always a pleasure
to work with such a professional and competent group of peo-
ple. Special thanks go to Dolly Womack, Senior Brand Man-
ager; Michele Janicek, Lead Product Developer; Christina
Holt and Ryan McAndrews, Product Developers; Harvey Yep
and Kristin Bradley, Content Project Managers; Sandy Ludo-
vissy, Buyer; Matt Diamond, Designer; Shawntel Schmitt and
Beth Thole, Content Licensing Specialists; and many others
who worked behind the scenes.

I would also like to thank the many reviewers of previous
editions for their contributions. Vikas Agrawal, Fayetteville
State University; Bahram Alidaee, University of Mississippi;
Ardavan Asef-Faziri, California State University at North-
ridge; Prabir Bagchi, George Washington State University;
Gordon F. Bagot, California State University at Los Angeles;
Ravi Behara, Florida Atlantic University; Michael Bendixen,
Nova Southeastern; Ednilson Bernardes, Georgia Southern
University; Prashanth N. Bharadwaj, Indiana University of
Pennsylvania; Greg Bier, University of Missouri at Columbia;
Joseph Biggs, Cal Poly State University; Kimball Bullington,
Middle Tennessee State University; Alan Cannon, University
of Texas at Arlington; Injazz Chen, Cleveland State Univer-
sity; Alan Chow, University of Southern Alabama at Mobile;
Chrwan-Jyh, Oklahoma State University; Chen Chung, Uni-
versity of Kentucky; Robert Clark, Stony Brook University;
Loretta Cochran, Arkansas Tech University; Lewis Cooper-
smith, Rider University; Richard Crandall, Appalachian State
University; Dinesh Dave, Appalachian State University; Scott
Dellana, East Carolina University; Kathy Dhanda, DePaul
University; Xin Ding, University of Utah; Ellen Dumond,
California State University at Fullerton; Richard Ehrhardt,
University of North Carolina at Greensboro; Kurt Engemann,
Iona College; Diane Ervin, DeVry University; Farzaneh
Fazel, Illinois State University; Wanda Fennell, University of
Mississippi at Hattiesburg; Joy Field, Boston College; Warren
Fisher, Stephen F. Austin State University; Lillian Fok, Uni-
versity of New Orleans; Charles Foley, Columbus State

Community College; Matthew W. Ford, Northern Kentucky
University; Phillip C. Fry, Boise State University; Charles
A. Gates Jr., Aurora University; Tom Gattiker, Boise State
University; Damodar Golhar, Western Michigan University;
Robert Graham, Jacksonville State University; Angappa
Gunasekaran, University of Massachusetts at Dartmouth;
Haresh Gurnani, University of Miami; Terry Harrison, Penn
State University; Vishwanath Hegde, California State Uni-
versity at East Bay; Craig Hill, Georgia State University;
Jim Ho, University of Illinois at Chicago; Seong Hyun Nam,
University of North Dakota; Jonatan Jelen, Mercy College;
Prafulla Joglekar, LaSalle University; Vijay Kannan, Utah
State University; Sunder Kekre, Carnegie-Mellon Univer-
sity; Jim Keyes, University of Wisconsin at Stout; Seung-Lae
Kim, Drexel University; Beate Klingenberg, Marist College;
John Kros, East Carolina University; Vinod Lall, Minnesota
State University at Moorhead; Kenneth Lawrence, New
Jersey Institute of Technology; Jooh Lee, Rowan University;
Anita Lee-Post, University of Kentucky; Karen Lewis, Uni-
versity of Mississippi; Bingguang Li, Albany State Univer-
sity; Cheng Li, California State University at Los Angeles;
Maureen P. Lojo, California State University at Sacramento;
F. Victor Lu, St. John’s University; Janet Lyons, Utah State
University; James Maddox, Friends University; Gita Mathur,
San Jose State University; Mark McComb, Mississippi Col-
lege; George Mechling, Western Carolina University; Scott
Metlen, University of Idaho; Douglas Micklich, Illinois
State University; Ajay Mishra, SUNY at Binghamton; Scott
S. Morris, Southern Nazarene University; Philip F. Musa,
University of Alabama at Birmingham; Roy Nersesian,
Monmouth University; Jeffrey Ohlmann, University of Iowa
at Iowa City; John Olson, University of St. Thomas; Ozgur
Ozluk, San Francisco State University; Kenneth Paetsch,
Cleveland State University; Taeho Park, San Jose State Uni-
versity; Allison Pearson, Mississippi State University; Pat-
rick Penfield, Syracuse University; Steve Peng, California
State University at Hayward; Richard Peschke, Minnesota
State University at Moorhead; Andru Peters, San Jose State
University; Charles Phillips, Mississippi State University;
Frank Pianki, Anderson University; Sharma Pillutla, Towson
University; Zinovy Radovilsky, California State Univer-
sity at Hayward; Stephen A. Raper, University of Missouri
at Rolla; Pedro Reyes, Baylor University; Buddhadev Roy-
choudhury, Minnesota State University at Mankato; Narendra
Rustagi, Howard University; Herb Schiller, Stony Brook
University; Dean T. Scott, DeVry University; Scott J. Seipel,
Middle Tennessee State University; Raj Selladurai, Indiana
University; Kaushic Sengupta, Hofstra University; Kenneth
Shaw, Oregon State University; Dooyoung Shin, Minnesota
State University at Mankato; Michael Shurden, Lander Uni-
versity; Raymond E. Simko, Myers University; John Simon,
Governors State University; Jake Simons, Georgia Southern
University; Charles Smith, Virginia Commonwealth Uni-
versity; Kenneth Solheim, DeVry University; Young Son,

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ste67472_fm_i-1.indd ix 01/17/17 09:00 PM

Preface ix

Bernard M. Baruch College; Victor Sower, Sam Houston
State University; Jeremy Stafford, University of North
Alabama; Donna Stewart, University of Wisconsin at Stout;
Dothang Truong, Fayetteville State University; Mike Umble,
Baylor University; Javad Varzandeh, California State Uni-
versity at San Bernardino; Timothy Vaughan, University of
Wisconsin at Eau Claire; Emre Veral, Baruch College; Mark
Vroblefski, University of Arizona; Gustavo Vulcano, New
York University; Walter Wallace, Georgia State University;

James Walters, Ball State University; John Wang, Montclair
State University; Tekle Wanorie, Northwest Missouri State
University; Jerry Wei, University of Notre Dame; Michael
Whittenberg, University of Texas; Geoff Willis, University
of Central Oklahoma; Pamela Zelbst, Sam Houston State
University; Jiawei Zhang, NYU; Zhenying Zhao, University
of Maryland; Yong-Pin Zhou, University of Washington.

William J. Stevenson

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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.

Rev.Confirming Pages

Chapter Three Forecasting 105

ste67472_ch03_074-135.indd 105 01/16/17 12:04 PM

Determining a Regression Equation
Sales of new houses and three-month lagged unemployment are shown in the following
table. Determine if unemployment levels can be used to predict demand for new houses
and, if so, derive a predictive equation.

Period . . . . . . . . . . . 1 2 3 4 5 6 7 8 9 10 11
Units sold . . . . . . . . 20 41 17 35 25 31 38 50 15 19 14
Unemployment %
(three-month lag) 7.2 4.0 7.3 5.5 6.8 6.0 5.4 3.6 8.4 7.0 9.0

1. Plot the data to see if a linear model seems reasonable. In this case, a linear model
seems appropriate for the range of the data.






2 4 6 8 10

Level of unemployment (%), x




, y

2. Check the correlation coefficient to confirm that it is not close to zero using the web-
site template, and then obtain the regression equation:
r = −.966
This is a fairly high negative correlation. The regression equation is
y = 71.85 − 6.91x

Note that the equation pertains only to unemployment levels in the range 3.6 to 9.0, because
sample observations covered only that range.


E X A M P L E 1 0


© Andrew McLachlan/All Canada Photos/Getty

Examples with Solutions
Throughout the text, wherever a quantitative or
analytic technique is introduced, an example is
included to illustrate the application of that tech-
nique. These are designed to be easy to follow.

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Solved Problems
At the end of chapters
and chapter supplements,
“Solved Problems” are pro-
vided to illustrate problem
solving and the core con-
cepts in the chapter. These
have been carefully prepared
to help students understand
the steps involved in solving
different types of problems.
The Excel logo indicates that
a spreadsheet is available
on the text’s website, to help
solve the problem.

Confirming Pages

Chapter Two Competitiveness, Strategy, and Productivity 63

ste67472_ch02_040-073.indd 63 01/06/17 09:11 PM

Computing Productivity
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 labor productivity?

Problem 1


1. Competitive pressure often means that business organizations must frequently assess their com-

petitors’ strengths and weaknesses, as well as their own, to remain competitive.
2. Strategy formulation is critical because strategies provide direction for the organization, so they

can play a role in the success or failure of a business organization.
3. Functional strategies and supply chain strategies need to be aligned with the goals and strategies

of the overall organization.
4. The three primary business strategies are low cost, responsiveness, and differentiation.
5. Productivity is a key factor in the cost of goods and services. Increases in productivity can

become a competitive advantage.
6. High productivity is particularly important for organizations that have a strategy of low costs.

competitiveness, 42
core competencies, 46
environmental scanning, 48
goals, 44
mission, 44

mission statement, 44
operations strategy, 51
order qualifiers, 48
order winners, 48
productivity, 56

quality-based strategies, 53
strategies, 44
SWOT, 47
tactics, 45
time-based strategies, 53

Labor productivity


Quantity produced

Labor hours

400 cases

4 workers × 1 / 2 hour / worker

= 200 cases per labor hour


Computing Multifactor Productivity
A wrapping-paper company produced 2,000 rolls of paper one day. Labor cost was $160, material
cost was $50, and overhead was $320. Determine the multifactor productivity.

Problem 2


Multifactor productivity


Quantity produced

Labor cost + Material cost + Overhead

2,000 rolls

$160 + $50 + $320

= 3.77 rolls per dollar input

A variation of the multifactor productivity calculation incorporates the standard price in the
numerator by multiplying the units by the standard price.


Computing Multifactor Productivity
Compute the multifactor productivity measure for an eight-hour day in which the usable output was
300 units, produced by three workers who used 600 pounds of materials. Workers have an hourly
wage of $20, and material cost is $1 per pound. Overhead is 1.5 times labor cost.

Problem 3

Multifactor productivity

Usable output

Labor cost + Material cost + Overhead cost

300 units


( 3  workers × 8 hours × $20 / hour ) + ( 600 pounds × $1 / pound ) +

( 3 workers × 8 hours × $20 / hour × 1.50 )

300 units

$480 + $600 + $720

= .167units of output per dollar of input




First Pages

Chapter Sixteen Scheduling 705

ste67472_ch16_690-729.indd 705 01/10/17 04:30 PM

c. Using earliest due date as the selection criterion, the job sequence is C-A-E-B-D-F.
The measures of effectiveness are as follows (see table):

(1) Average flow time: 110/6 = 18.33 days.
(2) Average tardiness: 38/6 = 6.33 days.
(3) Average number of jobs at the work center: 110/41 = 2.68.






(2) – (3)
Days Tardy

[0 if negative]

C  4    4  4  0
A  2    6  7  0
E  5   11 15  0
B  8   19 16  3
D 10   29 17 12
F 12   41 18 23

41 110 38

TABLE 16.5 Excel solution for Example 2a

Excel Spreadsheet
Where applicable, the exam-
ples and solved problems
include screen shots of a
spreadsheet solution. Many
of these were taken from
the Excel templates, which
are on the text’s website.
Templates are programmed
to be fully functional in Excel
2013 and earlier.

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Within each chapter, you will find the following elements

that are designed to facilitate study and learning. All of

these have been carefully developed over many editions and

have proven to be successful.

Confirming Pages

ste67472_ch04_136-173.indd 136 01/06/17 08:07 PM

4 Product and Service Design

4.1 Introduction, 138
What Does Product and Service
Design Do?, 138
Key Questions, 138
Reasons for Product or
Service Design or
Redesign, 139

4.2 Idea Generation, 140

4.3 Legal and Ethical
Considerations, 143

4.4 Human Factors, 144

4.5 Cultural Factors, 145

4.6 Global Product and
Service Design, 145

4.7 Environmental Factors:
Sustainability, 146
Cradle-to-Grave Assessment, 146
End-of-Life Programs, 146
The Three Rs: Reduce, Reuse,
and Recycle, 146
Reduce: Value Analysis, 146
Reuse: Remanufacturing, 148
Recycle, 149

4.8 Other Design Considerations, 151
Strategies for Product or Service
Life Stages, 151
Product Life Cycle
Management, 152
Degree of Standardization, 153

Designing for Mass
Customization, 154
Reliability, 155
Robust Design, 156
Degree of Newness, 157
Quality Function Deployment, 157
The Kano Model, 160

4.9 Phases in Product Design and
Development, 161

4.10 Designing for Production, 162
Concurrent Engineering, 162
Computer-Aided Design, 163
Production Requirements, 164
Component Commonality, 164


After completing this chapter, you should be able to:

LO4.1 Explain the strategic importance of product and service design.

LO4.2 Describe what product and service design does.

LO4.3 Name the key questions of product and service design.

LO4.4 Identify some reasons for design or redesign.

LO4.5 List some of the main sources of design ideas.

LO4.6 Discuss the importance of legal, ethical, and sustainability considerations in product and service design.

LO4.7 Explain the purpose and goal of life cycle assessment.

LO4.8 Explain the phrase “the 3 Rs.”

LO4.9 Briefly describe the phases in product design and development.

LO4.10 Discuss several key issues in product or service design.

LO4.11 Discuss the two key issues in service design.

LO4.12 List the characteristics of well-designed service systems.

LO4.13 List some guidelines for successful service design.

Rev.Confirming Pages


ste67472_ch04_136-173.indd 137 01/16/17 04:35 PM

The essence of a business organization is the products and services it offers, and every
aspect of the organization and its supply chain are structured around those products and
services. Organizations that have well-designed products or services are more likely to
realize their goals than those with poorly designed products or services. Hence, orga-
nizations have a strategic interest in product and service design. Product or service design should be closely tied to an
organization’s strategy. It is a major factor in cost, quality, time-to-market, customer satisfaction, and competitive advan-
tage. Consequently, marketing, finance, operations, accounting, IT, and HR need to be involved. Demand forecasts and
projected costs are important, as is the expected impact on the supply chain. It is significant to note that an important
cause of operations failures can be traced to faulty design. Designs that have not been well thought out, or incorrectly
implemented, or instructions for assembly or usage that are wrong or unclear, can be the cause of product and service
failures, leading to lawsuits, injuries and deaths, product recalls, and damaged reputations.

The introduction of new products or services, or changes to product or service designs, can have impacts throughout
the organization and the entire supply chain. Some processes may change very little, while others may have to change
considerably in terms of what they do or how and when they do it. New processes may have to be added, and some cur-
rent ones may be eliminated. New suppliers and distributors may need to be found and integrated into the system, and
some current suppliers and distributors may no longer be an appropriate fit. Moreover, it is necessary to take into account
projected impact on demand as well as financial, marketing, and distribution implications. Because of the potential for
widespread effects, taking a “big picture” systems approach early and throughout the design or redesign process is
imperative to reduce the chance of missing some implications and costs, and to understand the time it will take. Likewise,
input from engineering, operations, marketing, finance, …

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