TR, 9:30am to 10:45am
Class will not meet on:
Class will meet on:
Operations is concerned with the systematic design, management and improvement of the processes that transform inputs into finished goods or services. Operations is one of the primary functions of a firm. As marketing induces the demand for products and finance provides the capital, operations produces the product (goods and services).
This course provides a foundation for understanding the operations of a firm. The main objective is to provide you with several skills necessary to critically analyze a firm's operating performance and practices. Unlike many courses, which tend to treat the firm as a "black box", we will be primarily concerned with "opening up" the black box and discovering what makes a firm "tick" - or, for that matter, "stop ticking".
Because the operations of a firm vary widely from one industry to the next, a course like this cannot cover all topics that are relevant to any given industry. Rather, we have selected a set of topics that are fundamental to understanding operations in a wide range of industries. These concepts are then illustrated using cases from a diverse set of businesses.
No pre-requisites for this course.
COMPETITIVE ADVANTAGE FROM OPERATIONS
MODULE 1: Introduction to Operating Systems: Process Design and Analysis
SESSION 1: INTRODUCTION – OPERATIONS AS A SOURCE OF COMPETITIVE ADVANTAGE
In this session we discuss the course contents. The main themes in this session are: what are business processes, how operations management involves the design, planning, and management of business processes, and how operations management is a source of competitive advantage for a firm.
SESSION 2: PROCESS DESIGN AND FIRM STRATEGY
In this session, we discuss the strategy of Benihana. We shall observe how various elements of the operations strategy of Benihana come together to support its business strategy. This will enable us to identify the key factors that determine success and failure from an operations viewpoint for this chain of restaurants. We will also get our first look at a business process and see how to map it out and analyze its cost etc.
4. Homework #1: Download from Blackboard. Submit. Retain a copy of homework submitted.
SESSION 3: OPERATING SYSTEMS – TYPES OF OPERATING PROCESSES
In this session we discuss process choice. Two of the variables that affect the choice of a process are volume and variety. The choice of process goes beyond determining whether to mass produce or make by hand. It also influences the labor skills, the degree of automation, the controls used, the information systems, etc. We also study service operations. Here, the key factors are the degree of customer/server contact, the sales opportunity and the production efficiency.
SESSION 4: PROCESS ANALYSIS: PROCESS CAPACITY AND PROCESS COST, TIME, VARIETY.
In this and the next session, we learn to analyze a business process in detail. The objectives of the analysis are: identify the process capacity, process cost, and time to serve customers. Additionally, understand how to execute orders, schedule labor, and identify bottlenecks.
Using a simple setting, we pick up useful tools and techniques such as capacity calculations, throughput time calculations, work assignment, and scheduling. We also learn about Gantt charts and their uses.
The second session will focus more on the effect of product-mix on capacity. Together, the sessions provide insights into capacity management techniques that are used every day in businesses.
SESSION 5: PROCESS ANALYSIS: PROCESS CAPACITY AND PROCESS COST, TIME AND VARIETY
We continue the discussion of the Kristen's Cookie Co. case. The theme in this session is to understand how factors such as lot size and product variety affect the capacity of an operation. We will also briefly touch upon process improvement. We come back to the strategy of the firm and the design of the process.
SESSION 6: THE EFFECTS OF SET-UP TIME ON CAPACITY
In this class, we study the effect of set-up time on capacity. The Donner Companycase will also serve as another example for analyzing processes. The process in this case is quite complex, but we will see that the simple but powerful ideas of capacity management that we have learnt so far, such as, identifying and managing the bottleneck, will prove to be adequate even for managing the most complex processes. I urge you to explore the spreadsheets before class.
MODULE 2: Managing Waiting Times
SESSION 7: THE EFFECTS OF UNCERTAINTY - WAITING LINES
Demand and supply often do not match. The mismatch creates special problems for managers. To understand these problems it is important to understand the time-scale at which these uncertainties happen. Very long and gradual changes in demand can be dealt with using techniques for managing seasonal demand. Medium term uncertainties, such as day-to-day fluctuations in demand levels, can be dealt with using staffing solutions and overtime. Demand uncertainties on the same time scale as operational variables such as processing time or set-up time need special techniques. These techniques are called waiting line or queueing techniques. We learn a bit about the other two and lot more about the waiting line techniques in this and the next session.
Regarding waiting lines, we learn: why does uncertainty in processing times as well as arrival patterns create delays? These delays are due to queues. We learn why queues form? How to estimate the queueing delays? How to plan to extra capacity to reduce unwanted delays? And how to reduce uncertainty?
SESSION 8: QUEUING THEORY IN ACTION
In particular, we discuss whether multiple lines are better than single lines, whether and when specialization using dedicated servers is preferred. We also discuss several psychological factors that affect the perception of "waiting" in lines.
SESSION 9: QUEUING THEORY IN ACTION
We apply waiting line techniques to analyze the First City National Bank case.
SESSION 10: MIDTERM 1
MODULE 3: Simulation
SESSION 11: AN INTRODUCTION TO SIMULATION
Simulation is a useful tool to study processes. It is widely used in practice to answer different types of questions, such as, what should be the configuration and capacity of facilities, what scheduling rules should be used, how should due-dates be assigned to customer orders, how does yield impact process performance etc. In this session we shall learn about discrete event simulation. The technique will be applied to simulate alternate waiting line rules in the First City National case.
SESSION 12: USE OF SIMULATION AS A PROBLEM SOLVING TOOL FOR OPERATING SYSTEMS
We apply simulation to study alternative scheduling rules in the First City National Bank case. We also discuss other applications of simulation, such as, to project management and analysis of cash flows.
MODULE 4: Managing for Competitive Advantage: Quality as a Strategic Issue
SESSION 13: QUALITY – ITS DEFINITION AND BASIS FOR COMPETITION
In this session we discuss quality management. The objectives of the session are to understand what is quality, what are the costs associated with it, and raise questions about managing quality in the age of super-mass production. These questions will be answered in the next two sessions.
SESSION 14: QUALITY ANALYSIS, MEASUREMENT AND IMPROVEMENT
In this session we learn about the two faces of quality. What does a customer want? What can a process deliver? And, how to manage their interaction? We shall discuss useful quality management tools, such as, the fishbone chart, Pareto analysis, and process control charts. We will also learn about quality improvement through yield analysis.
SESSION 15: STATISTICAL QUALITY CONTROL
In this session we learn about statistical process control. We discuss how statistical process control techniques are used in many different manufacturing and service industries.
MODULE 5: Project Management
SESSION 16: TIME BASED COMPETITION
Competing based on time means being able to execute large projects, on time and within cost. In this session we first discuss the value of time-based competition. Then, in this and the next session, we learn about network techniques for planning and managing large projects. Successful project management involves planning and managing the time to complete the project, monitoring the use of resources during project execution, and increasing the probability of successful completion. Network planning and control techniques provide the tools necessary for undertaking these tasks.
SESSION 17: PROJECT MANAGEMENT
We will touch upon project crashing. We will learn why it is sometimes beneficial to reduce the duration of a project, even though it may increase the cost of the project. We will discuss project crashing techniques that optimally reduce the duration of a project by selectively reducing the duration of only certain activities. If time permits, we will discuss the probabilistic methods for project analysis.
SESSION 18:MIDTERM 2
MODULE 6: Inventory Concepts and Models
SESSION 19: INVENTORY CONCEPTS
In this and the next two sessions, we discuss inventory management and more broadly supply chain management. Material, information and funds flow through supply chains. Demand is matched with supply, orders with fulfillment, and products are planned to fill customer needs and to compete against other products in the market. The integrated management of the three flows, material, information, and funds, is called supply chain management. We learn how firms compete using new principles of supply chains. We also learn how inventory, one of the fundamental levers for managing supply chains, can be analyzed and managed.
SESSION 20: THE ROLE OF INVENTORY – THE TRADITIONAL VIEW
FOR MATURE PRODUCTS
In this session we explore the effect of centralization on inventory costs. We see how scale economies can be derived even in very ordinary situations. We then discuss alternate ways of deriving these scale advantages.
SESSION 21: INVENTORY MANAGEMENT – NEWSVENDOR MODELS
In some particular situations or businesses, a decision about inventory level should be made just once, without having the opportunity for replenishment (think of a new apparel for Summer season). We discuss how to decide for this ordering or production quantities, taking into account demand and cost tradeoffs.
SESSION 22: INVENTORY MANAGEMENT – NEWSVENDOR MODELS
In this class we discuss an application of the newsvendor model: the L.L. Bean case. This case relates forecasting and inventory management concepts in a very interesting setting.
SESSION 23: INVENTORY IN ACTION: THE BEER GAME
We will play the Beer Game, which is about simulating the behavior of a supply chain. PLEASE, BE FEW MINUTES BEFORE TIME!
SESSION 24: BEER GAME REVIEW AND SUPPLY CHAIN MANAGEMENT
We debrief the beer game and discuss how firms manage to smooth product flows in supply chains.
SESSION 25: THE BASIC LINEAR PROGRAMMING (LP) PROBLEM
We begin the last module which is integrative in nature. It deals with the use of linear programming for planning and optimizing systems. We shall discuss several applications of LP to Operations Management problems.
SESSION 26: GRAPHICAL SOLUTION TECHNIQUE AND SENSITIVITY ANALYSIS
We learn how to solve LP problems by hand using a graphical technique. We also learn to carry out sensitivity analysis.
SESSION 27: SOLVING LP PROBLEMS USING EXCEL AND REVIEW OF COURSE
We learn how to formulate and solve LP problems using Excel. How to interpret Excel outputs for LP problems. We shall also apply LP techniques to analyze the Otto Development Corporation case. Finally, we summarize the main concepts and findings of our course.
CUSTOM TEXT: Competitive Advantage From Operations (any edition should be fine), a customized text for Stern students including
The book has two parts: one contains a collection of chapters from H&R and the other contains cases. These two parts will be denoted as H&R I and H&R II, respectively, in the syllabus.
OTHER MATERIAL: The Goal: A process of ongoing improvement, third revised edition, Eliyahu Goldratt, North River Press Publishing Corporation.
To be completed.
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Business activities involve group effort. Consequently, learning how to work effectively in a group is a critical part of your business education.
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