NYU Stern School of Business

Undergraduate College

OPMG-UB.0001.003 (C60.0001): COMPETITIVE ADVANTAGE FROM OPERATIONS

Spring 2012

Instructor Details

Vulcano, Gustavo

gvulcano@stern.nyu.edu

x8-4018

TR 11am-Noon

KMC 8-76

 

Course Meetings

TR, 9:30am to 10:45am

Tisch T-UC25


Final Exam:

Schedule exceptions
    Class will not meet on:
    Class will meet on:

 

Course Description and Learning Goals

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.

 

COURSE GOALS

The specific course objectives are to teach you to:

 

 

Course Pre-Requisites

No pre-requisites for this course.

 

Course Outline

SAMPLE SYLLABUS

COMPETITIVE ADVANTAGE FROM OPERATIONS

 

 

MODULE 1: Introduction to Operating Systems: Process Design and Analysis

 

SESSION 1: INTRODUCTION – OPERATIONS AS A SOURCE OF  COMPETITIVE ADVANTAGE

Class Plan:

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.

  1.  I suggest to start reading “The Goal” by E.M. Goldratt

 

 SESSION 2: PROCESS DESIGN AND FIRM STRATEGY

Class Plan:

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. 

  1. Read Chapter 1 in H&R, pages 1-21.
  2. Read “Terms used in operations management”, pp. CB 1-3.
  3. Read, analyze, and be prepared to discuss the Benihana of Tokyo case (pp. CB 91-108). Use the following study questions as an aid in analyzing the case.  

      4. Homework #1: Download from Blackboard. Submit. Retain a copy of homework submitted.

 

SESSION 3: OPERATING SYSTEMS – TYPES OF OPERATING PROCESSES

Class Plan:

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. 

  1. Read Chapter 7 in H&R, pages 253-270.
  2. Prepare to discuss questions 2,9,10,11, and 12 (H&R page 280).
    Note: `prepare’ means read and get familiar with the answers, without submitting them. However, some of these questions may appear in a quiz or in the exams.

  

SESSION 4:  PROCESS ANALYSIS: PROCESS CAPACITY AND PROCESS COST, TIME, VARIETY.

Class Plan:

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. 

  1. Read “Analysis of an operation”, CB pages 5-10.
  2. Read, analyze and be prepared to discuss the Kristen's Cookie Company case utilizing the six key questions at the end as guides (CB pages 109-112). What are the cycle time, throughput time, and capacity of each operation and the whole production system?

 

SESSION 5: PROCESS ANALYSIS: PROCESS CAPACITY AND PROCESS COST, TIME AND VARIETY

Class Plan:

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. 

  1. Read “Analysis of an operation”, CB pages 11-21.
  2. Homework #2: Download from Blackboard and submit.

 

 SESSION 6: THE EFFECTS OF SET-UP TIME ON CAPACITY

Class Plan:

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. 

  1. Read the Donner Company case (CB pp. 113-126). Use the EXCEL spreadsheets Donner.xls and Donner1.xls (downloadable from Blackboard) to analyze and understand the relationships between number of orders (set-ups) in a month, order size, and capacity
  2. Use the following study questions as guides in analyzing the case:
  3. How would you define Donner as an operating system, in terms of the product-process matrix? How does Donner get its competitive advantage?
  4. Draw a flow diagram for a typical 8-board panel.
  5. Use breakeven analysis of capacity to set a criteria for choosing between manual drill and CNC drill. What is the maximum order size to start using CNC? Why does Donner choose a larger number instead?
  6. What is the capacity of the DFPR operation? Assume 8 working hours per day, and order sizes of 8 boards. Compare it with the order sizes of 80 boards and 800 boards. What can you conclude?
  7. What are the causes of the major problems described at the end of the case? How would you propose to resolve them?

 

MODULE 2: Managing Waiting Times

 

SESSION 7: THE EFFECTS OF UNCERTAINTY - WAITING LINES

Class Plan:

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?  

  1. Read Quantitative Module D on Waiting Lines Models in H&R (pp. 743-749).
  2. Prepare discussion questions 1 to 8 in page 762.
  3. Mini-Project #1: Process Analysis. Submit.

  

SESSION 8: QUEUING THEORY IN ACTION

Class Plan:

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. 

  1. Read Quantitative Module D on Waiting Lines Models in H&R (pp. 750-755).

  

SESSION 9: QUEUING THEORY IN ACTION

      Class Plan:

     We apply waiting line techniques to analyze the First City National Bank case. 

  1. Read, analyze, and be prepared to discuss the First City National Bank case (CB pp. 83-88). The following study questions will help:
  2. Considering the data supplied for arrival and service times, how would you calculate an average arrival rate and service rate?
  3. As Mr. Craig, what characteristics of this queuing system would you be most interested in observing?
  4. What is the best number of tellers to use?
  5. Calculate the waiting time for a customer (time spent in the queue before service) and determine which of the two line configurations you would recommend. Support your result with the appropriate quantitative queuing analysis.
  6. Homework #3: Available from Blackboard. Submit.

  

SESSION 10: MIDTERM 1

  

MODULE 3: Simulation

 SESSION 11: AN INTRODUCTION TO SIMULATION

Class Plan:

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

  1. Read Quantitative Module F on Simulation (H&R pages 785-798).
  2. Prepare to discuss questions 1through 7 (H&R p. 798)
  3. Prepare problem F.1 in H&R (p.799)
  4. Mini-Project #2: Waiting time management. Submit.

  

SESSION 12: USE OF SIMULATION AS A PROBLEM SOLVING TOOL FOR OPERATING SYSTEMS

Class Plan:

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. 

  1. Consider the First City National Bank case again. What are the advantages of using simulation to study this operation? What are the limitations?
  2. Which alternative arrangement of teller lines should Mr. Craig select based on the simulations?

 

MODULE 4: Managing for Competitive Advantage:  Quality as a Strategic Issue

 

SESSION 13: QUALITY – ITS DEFINITION AND BASIS FOR COMPETITION

Class Plan:

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. 

  1. Read Chapter 6 in H&R, pages 191-206.
  2. Toyota Motor Manufacturing, USA Inc (available in Course-Packet). Read, analyze, and be prepared to discuss the Toyota case. Use the following study questions as an aid in analyzing the case:
  3. What are the principal components of the Toyota Production System? What capabilities must an organization possess in order to implement TPS effectively?
  4. How does “quality control” work at Toyota Motor Manufacturing?
  5. As Doug Friesen, what would you do to address the seat problem? What options exist? Where would you focus your attention and solution efforts? What would you recommend and why?
  6. Homework #4:Download from Blackboard. Submit.

 

 SESSION 14: QUALITY ANALYSIS, MEASUREMENT AND IMPROVEMENT

Class Plan:

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. 

  1. Read Chapter 6 in H&R, pages 206-211.

 

SESSION 15: STATISTICAL QUALITY CONTROL

Class Plan:

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. 

  1. Read the Supplement to Chapter 6 in H&R, pages 221-236.

  

MODULE 5: Project Management

SESSION 16: TIME BASED COMPETITION

Class Plan:

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. 

  1. Read Chapter 3 in H&R, pages 53-75. Prepare the discussion questions 1 to 8 on page 88.
  2. Draw the networks for the projects described in the FCN Securities Demo (A) exercise (CB page 30).
  3. Homework #5: Available from Blackboard. Submit.

  

SESSION 17: PROJECT MANAGEMENT

Class Plan:

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.  

  1. Read Chapter 3 in H&R, pages 75-78.
  2. Draw the networks for the projects described in the Allied Distributing exercise (CB pages 33-34). Prepare an analysis and solution to the FCN(B) case (page 31).
  3. Homework #6: Available from Blackboard. Submit.

  

SESSION 18:MIDTERM 2

  

MODULE 6: Inventory Concepts and Models

 

SESSION 19: INVENTORY CONCEPTS

Class Plan:

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. 

  1. Read Chapter 12 in H&R, pages 473-487.

 

 SESSION 20: THE ROLE OF INVENTORY – THE TRADITIONAL VIEW
                                   FOR MATURE PRODUCTS

Class Plan:

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. 

  1. Read Chapter 12 in H&R, pages 487-489, and 492-495.
  2. Read the ACME Widget Company case (downloadable from Blackboard). Focus on the two memos (i.e., skip the first page). What problems did ACME face after launching the warehouse program? What could be the potential causes for those problems?
  3. Homework #7:Available from Blackboard. Submit.

                     

SESSION 21:  INVENTORY MANAGEMENT – NEWSVENDOR MODELS

Class Plan:

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. 

  1. Read the article "A Note on the Newsvendor Model: Inventory Planning for Short Lifecycle Items",  available on course website.

 

 SESSION 22: INVENTORY MANAGEMENT – NEWSVENDOR MODELS

Class Plan:

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. 

  1. Read and be prepared to discuss the L.L. Bean case (CB pp. 139-143).
  2. Mini-Project #3: Inventory management. Submit.

 

 SESSION 23: INVENTORY IN ACTION: THE BEER GAME

Class Plan:

We will play the Beer Game, which is about simulating the behavior of a supply chain. PLEASE, BE FEW MINUTES BEFORE TIME!

  1. Homework #8: Available from Blackboard. Submit.

  

SESSION 24: BEER GAME REVIEW AND SUPPLY CHAIN MANAGEMENT

Class Plan:

We debrief the beer game and discuss how firms manage to smooth product flows in supply chains. 

  1. Read Chapter 11 in H&R (pp. 429-444).
  2. Prepare to discuss questions 1-10 in Chapter 11 (H&R, p. 452).
  3. Read, analyze, and be prepared to discuss the Zara: Fast Fashion case (available in course packet). Use the following study questions as an aid in analyzing the case.
  4. What is Zara value proposition to customers? How is Zara’s Supply Chain helping this value proposition?
  5. How is Zara managing the uncertainty in demand?
  6. Under the Newsvendor paradigm, how would you compare the Overage and Underage costs of Zara and Gap?

  

                                                    MODULE 7: Allocating Resources for Strategic Capacity Planning

 

SESSION 25: THE BASIC LINEAR PROGRAMMING (LP) PROBLEM

Class Plan:

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.  

  1. Read Quantitative Module B in H&R, pages 691-699.
  2. Prepare todiscuss questions 1,2,3, and 8 (H&R p.712).
  3. Attempt Problem B.1 on page 713. 

 

SESSION 26: GRAPHICAL SOLUTION TECHNIQUE AND SENSITIVITY  ANALYSIS

Class Plan:

We learn how to solve LP problems by hand using a graphical technique. We also learn to carry out sensitivity analysis. 

  1. Read Quantitative Module B in H&R, pages 699-703.
  2. Solve problems B.2 (H&R p. 713) and B.3 (H&R p. 714).
  3. Homework #9: Available from Blackboard. Submit.

 

SESSION 27:  SOLVING LP PROBLEMS USING EXCEL AND REVIEW OF COURSE

      Class Plan:

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. 

  1. Read Quantitative Module B in H&R, pages 703-709.
  2. Read, analyze, and be prepared to discuss the Otto Development Corporation case (CB pp. 79-82).
  3. Mini-Project #4: Linear Programming. Submit electronically by Friday Dec 14that noon.

 

Required Course Materials

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.

 

Assessment Components

 To be completed.

 

Group Projects

Guidelines for Group Projects

Business activities involve group effort. Consequently, learning how to work effectively in a group is a critical part of your business education.

Every member is expected to carry an equal share of the group’s workload. As such, it is in your interest to be involved in all aspects of the project. Even if you divide the work rather than work on each piece together, you are still responsible for each part. The group project will be graded as a whole:   its different components will not be graded separately. Your exams may contain questions that are based on aspects of your group projects.

It is recommended that each group establish ground rules early in the process to facilitate your joint work including a problem-solving process for handling conflicts. In the infrequent case where you believe that a group member is not carrying out his or her fair share of work, you are urged not to permit problems to develop to a point where they become serious. If you cannot resolve conflicts internally after your best efforts, they should be brought to my attention and I will work with you to find a resolution.

You will be asked to complete a peer evaluation form to evaluate the contribution of each of your group members (including your own contribution) at the conclusion of each project. If there is consensus that a group member did not contribute a fair share of work to the project, I will consider this feedback during grading.

 

Grading

At NYU Stern we seek to teach challenging courses that allow students to demonstrate their mastery of the subject matter.  In general, students in undergraduate core courses can expect a grading distribution where: 

Note that while the School uses these ranges as a guide, the actual distribution for this course and your own grade will depend upon how well you actually perform in this course.

 

Re-Grading

The process of assigning grades is intended to be one of unbiased evaluation. Students are encouraged to respect the integrity and authority of the professor’s grading system and are discouraged from pursuing arbitrary challenges to it.

If you believe an inadvertent error has been made in the grading of an individual assignment or in assessing an overall course grade, a request to have the grade re-evaluated may be submitted. You must submit such requests in writing to me within 7 days of receiving the grade, including a brief written statement of why you believe that an error in grading has been made.

 

Professional Responsibilities For This Course

Attendance

 
Participation

In-class contribution is a significant part of your grade and an important part of our shared learning experience. Your active participation helps me to evaluate your overall performance.
You can excel in this area if you come to class on time and contribute to the course by:

 

Assignments

 

Classroom Norms

 

Stern Policies

General Behavior
The School expects that students will conduct themselves with respect and professionalism toward faculty, students, and others present in class and will follow the rules laid down by the instructor for classroom behavior.  Students who fail to do so may be asked to leave the classroom. 

 

Collaboration on Graded Assignments
Students may not work together on graded assignment unless the instructor gives express permission. 

 

Course Evaluations
Course evaluations are important to us and to students who come after you.  Please complete them thoughtfully.

 

Academic Integrity

Integrity is critical to the learning process and to all that we do here at NYU Stern. As members of our community, all students agree to abide by the NYU Stern Student Code of Conduct, which includes a commitment to:

The entire Stern Student Code of Conduct applies to all students enrolled in Stern courses and can be found here:

Undergraduate College: http://www.stern.nyu.edu/uc/codeofconduct
Graduate Programs: http://w4.stern.nyu.edu/studentactivities/involved.cfm?doc_id=102505

To help ensure the integrity of our learning community, prose assignments you submit to Blackboard will be submitted to Turnitin.  Turnitin will compare your submission to a database of prior submissions to Turnitin, current and archived Web pages, periodicals, journals, and publications.  Additionally, your document will become part of the Turnitin database.

 

Recording of Classes

Your class may be recorded for educational purposes

 

Students with Disabilities

If you have a qualified disability and will require academic accommodation of any kind during this course, you must notify me at the beginning of the course and provide a letter from the Moses Center for Students with Disabilities (CSD, 998-4980, www.nyu.edu/csd) verifying your registration and outlining the accommodations they recommend.  If you will need to take an exam at the CSD, you must submit a completed Exam Accommodations Form to them at least one week prior to the scheduled exam time to be guaranteed accommodation.

 

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