KMC Suite 8-154
TR, 2:00pm to 3:15pm
Class will not meet on:
Class will meet on:
Operations Management is the design and management of the processes that transform inputs into finished goods or services. Operations is one of the primary functions of a firm. Whereas marketing focuses on the demand for the product, and whereas finance provides the capital for the product, operations actually produces and delivers the product.
This course provides a foundation for understanding the operations of a firm. Our objective by the end of the course is to provide you with the basic skills necessary to critically analyze a firm's operating performance and practices. Such knowledge is important for careers in a variety of areas, including general management, entrepreneurship, investment banking (e.g. business restructurings, mergers and acquisitions), venture capital (e.g. evaluating new business plans) and management consulting (business restructuring improvement).
Unlike many courses in the core, 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". In contrast to your management courses, our focus is on the technological rather than human dimension of a firm's internal operations - though there are obvious connections between the two that we will explore. In contrast to the measurement focus of your accounting courses, our concern is understanding what elements of a firm's operations enable it to produce quality outputs at a competitive cost structure. That is, we will focus on how the "physics" of material, work and information flows and the design and management of a firm's processes interact to determine a firm's cost structure and its ability to compete effectively in terms of non-cost measures such as quality, variety and speed.
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.
Module I: Production Processes
Plan: Course introduction and overview.
Topic: Process strategy and vocabulary of process analysis
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. We also learn some useful concepts such as how to measure capacity that will be used to analyze the Kristen's Cookie Company case.
Topic: Process analysis
Plan: In this session, we learn how to analyze a process by using the bottleneck analysis. A recipe of bottleneck analysis will be given in class. Following the bottleneck analysis, we can identify bottlenecks, determine the process capacity, and time to serve customers. More importantly, we can provide concrete suggestions to improve the process performance.
You will receive Homework #1 in class.
Reading: Read Terms Used In Operations Management and Analysis of an Operation (pages 1-16 of H&R II).
Topic: Kristen's Cookie Companycase
Plan: We discuss the Kristen's Cookie Company case. We should realize that the process in this case is not as complicated as many processes in real companies. Nevertheless, this is an excellent example where we can practice using the bottleneck analysis as introduced in Session 3. Furthermore, our methodology and insights obtained from this case are useful for analyzing more complicated processes.
Preparation:Read Kristen's Cookie Companycase (pages 109-110 of H&R II). Following the guidelines provided in Homework #1, analyze the case and submit Homework #1 at the beginning of class.
Module II: Time-to-market and Responsiveness
Topic: Waiting-Line Models
We explain why queues exist, and introduce two important queuing models: M/M/1 and M/M/s. In these two models, we can compute various system performance measures, either by using the closed-form expressions or the Excel spreadsheet. These two models provide ammunition for you to analyze the First City National Bank case that will be discussed in Session 6.
You will receive Homework #2 in class.
Read Quantitative Module D on Waiting Lines and Queuing Theory (pages 743-769 of H&R I).
Topic: First City National Bank
Plan: We use the M/M/1 and M/M/s models to analyze the First City National Bank case. In particular, we make comparisons between a system of s separate M/M/1 subsystems and an M/M/s system. We demonstrate how to use the Excel spreadsheet to analyze important queuing problems in practice.
Module III: Simulation
Topic: Simulation I
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 FirstCityNational case.
Reading: Read Quantitative Module F on simulation (pages 785-806 of H&R I).
Topic: Simulation II
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.
Plan: Review of course material; Go over questions on sample midterm.
Plan: First midterm exam (open notes)
Module IV: Quality Control
Topic: Quality Management
Plan: In these two sessions we discuss quality management, which includes questions such as what is quality, what are the tools for total quality management, and how to control quality. We shall discuss useful quality management tools such as process control charts.
You will receive Homework #3 in class.
Reading: Chapter 6 & Supplement 6 of H&R I.
Module V: Just-in-time Philosophy
Topic: Toyota Production System
Plan: We use the Toyota case in part as a “plant tour” to illustrate the Toyota Production System (TPS).
Submit Homework #3 at the beginning of class.
Reading: Toyota Motor Manufacturing, U.S.A., Inc.
Module VI: Project Management
Topic: Project Management I
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. You will receive Homework #4 in class.
Read Chapter 3 in H&R I (p. 54-101).
Topic: Project Management II
We will discuss the probabilistic methods for project analysis. We will also 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.
Topic: Review of quality management and project management
Submit Homework #4at the beginning of class.
Topic: Second midterm exam (open notes)
Module VII: Inventory and Supply Chain Management
Topic: Inventory Management and Inventory Models (I)
Plan: We discuss inventory management and study an important inventory model: the EOQ model. You will receive Homework #5 in class.
Reading:Chapter 12 of H&R I (page 473-486)
Topic: Inventory Management and Inventory Models (II)
Plan: We introduce another important inventory model: the newsvendor model. We also discuss the case of L.L.Bean to demonstrate how firms use newsvendor model to make their inventory decisions.
Submit Homework #5at the beginning of class.
Topic: Supply Chain Management and Beer Game
Plan: 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 briefly introduce the beer game.
Reading: Skim through Chapter 11 of H&R I (p. 429-450)
Topic: Playing Beer game
Topic: The Bullwhip Effect
Module VIII: Optimal Resource Allocation
Topic:The basic linear programming (LP) problem
Plan: We begin the last module that 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.
Plan:We demonstrate how to formulate and solve LP problems using Excel. We also interpret Excel outputs for LP problems.
Topic:Examples of LP
Topic: Review for the final exam.
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.
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.
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