Lecture Notes for Operations Management, 2nd Edition

Preview (16 of 95 Pages)

100%

Lecture Notes for Operations Management, 2nd Edition - Page 1 preview image

Loading page ...

1-1Chapter 1–Teaching PlanIntroductionto OperationsManagementSpecific Learning objectivesLO1-1:Identifythe drivers of customer utilityLO1-2:Explaininefficiencies and determine if a firm is on the efficient frontierLO1-3:Explainthe three system inhibitorsLO1-4:Explainwhat work inoperationsmanagement looks likeLO1-5: Articulate the key operational decisions a firm needs to make to match supply with demandWhat Students Learn in this ChapterThis chapteris the beginning of the book, and most likely the corresponding session is the first session inthe student’s first exposure tooperationsmanagement.The goal of the session is for students to gainsome appreciation of the type of operational decisions that a business has to make and to provide themsome idea of what it will take to make these decisions well.To achieve this goal, we like to start with a perspective the student is familiar with. In mostundergraduate settings, students will have little or no work experience. So, rather than starting with theperspective of the business, we find it more engaging to start with the perspective of the consumer.Faculty and students alike, all of us have been in the role of the customer in consumer-facing industries,such as restaurants, travel, healthcare, entertainment, or education.We suggest to use the example ofrestaurants. Even if students have work experience, a common experience/example is helpful fordiscussion and all of us have been in some form of restaurant.The book chapter takes the example of “where do you want to go for lunch today?” to establish thedifferent dimensions driving customer utility. Once we understand what consumers value, we can starttalking about the dimensions of operational performance. Students will see that there are multipledimensions of operational performance. Some operations focus on responsiveness, some on quality,some on efficiency, etc. Unlike the case of finance, where we all agree that more profits are better thanless profits, students will appreciate that there exist trade-offs among the operational dimensions ofperformance. Subway is operationally not better or worse than a five star restaurant. It simply has adifferent strategy.The presence of trade-off then sets up the efficient frontier framework. Some firms are better atmultiple things, others are worse. Typically, students have services that they like a lot (e.g. Starbucks or

Lecture Notes for Operations Management, 2nd Edition - Page 2 preview image

Loading page ...

Lecture Notes for Operations Management, 2nd Edition - Page 3 preview image

Loading page ...

1-2Chipotle) and often times, those are services that are also financially successful. This allows for adiscussion of what makes these services successful, which allows the faculty to introduce concepts suchas waste, variability, and inflexibility.Relationship to other ChaptersThis chapter is related to:Since this is the first chapter, it obviously does not build on other chapters.This chapter is the foundation for:The idea of the efficient frontier and the three system inhibitors is coming up throughout thebook/thecourse. Introducing them on the first day of class is helpful, though not required.ProposedTime LineAny time line will depend on the context of teaching, including the class size, the choice of exercise orcase, the level of prior knowledge of the students, and the teaching style of the faculty. We have usedthe following time line for various audiences. This includes academic settings (business students), butalso professional development settings with participants that learnt this material not to prepare for atest but to advance their careers.0:00Opening exercise (Mortgage exercise)0:20Dimensions of performance0:30The efficient frontier/Pareto dominance0:40The three system inhibitors1:00Course overview and course logisticsPreparation before classSet up exerciseif you plan to use one.If mortgage exercise is used, send out an email to students ahead of time, announcing that (a) on timearrival is critical for the exercise (b) they should not touch any paper on the tables.If you plan to discuss the restaurant example, it might be helpful to do a quickGooglenews search onthe big restaurant chains to have some current updates/examples.

Lecture Notes for Operations Management, 2nd Edition - Page 4 preview image

Loading page ...

1-3Detailed Session PlanOpening ExerciseThe opening exercise is optional. The first 10minutes can be critical in shaping the attitude of thestudents towards the course. So, playing a game can help break the ice. Alternatively, the discussion of“Where will you go/did you go for lunch today?” also breaks the ice. You can share personal experiencesat places on/around campus and likely share many experiences/frustrations with the students.Run the mortgage exercise for 10 to 15 minutes (all teams should have at least 3 mortgages completed,either rejected or approved).Go around the room and ask the underwriters to report how many mortgages they processed (approvedor rejected). Joke about the low performing teams if you feel comfortable.Ask students “If thiswereyour bank, what dimensions of performance would you track?” Answersshould include:-Some measures of efficiency: number of loans processed, costs per loan-Responsiveness: how long the customer hasto wait for the loan-Accuracy: percentage of loans processed correctlyDisplay the correct decisions; ask underwriters to audit their work; then fill out slide#Mortgage1displaying the performance of each team on the dimensions of efficiency and accuracy.Announce that the goal of this course is to improve businesses by helping them to improve on multipledimensions of performance. It is not about trading off efficiency vs quality, but about building betterprocesses. Say something like “In the next sessions, you will learn how to analyze and improve businessprocesses.”Dimensions of performance:Where will you have lunch today?Students understand the operations of a restaurant from a customer perspective.Ask them aboutwhere they go for lunch and what they like about the places. Don’t be too quick in showing the slide#utility;collectingcomments from the students until you have the dimensions together is probably themore engaging teaching style.Then, ask students about the goal of running a restaurant. Divide student responses up into:-Financial goals: profits, returns, value, getting rich, growth, etc.-Operational goals: happycustomers, good food, fast response times, etc.Keep on asking, potentially with some leading questions, until you have the dimensions of:-Efficiency

Lecture Notes for Operations Management, 2nd Edition - Page 5 preview image

Loading page ...

1-4-Quality (good food, fresh)-Responsiveness-Variety/choice (menu items, opportunity to customize)Point out that these dimensions are “universal,” i.e., we can also use these dimensions to run a bank, ahospital, or a tutoring service.The efficient frontier/Pareto dominancePick two dimensions of performance. This could either be quality and cost (price)or responsiveness andcost (price). Alternatively, aggregate all dimensions other than price in a utility/willingness to pay score.Then, draw a two dimensional graph:-X-axis: price to the student-Y-axis: quality of food/willingness to payGo through a number of the lunch places that came up during the discussion and ask students to placethem in this space (you will not get agreement, and sometimes just have to make an executive decision).This should help establish the concept of the efficient frontier. Ask students “in which restaurant wouldyou invest your money?” or “who do you think does the best job running the restaurant?”Draw the frontier and point to the restaurants that are off the frontier and show “inefficiency” as thegap between the restaurant and its frontier.Time permitting, the concept of the efficient frontier can be further illustrated with the slides from theairline industry (#airline1 and #airline2).The three system inhibitorsNow that students have seen what inefficiency looks like in abstract terms, they should see what theseinefficiencies look/feel like in practice. Common reasons for restaurants to be off the frontier are:-Poor menu choices (a form of waste)-Long wait times (often driven by the inflexibility to adjust capacity to demand)-Poor experience (waste in the case when everybody has them, otherwise a form of variability)-Etc.As before, it might be helpful to collect ideas from students before then showing the slides #waste,#variability, and #inflexibility.Course overview and course logisticsWe find it better to end the first day of class with a discussion of course logistics as opposed to startingthe class with this topic. Either way, at some point, make sure to address items such as:-Grading scheme-Attendancepolicy/seating chart

Lecture Notes for Operations Management, 2nd Edition - Page 6 preview image

Loading page ...

1-5-Exam: format/timing/policies-Text book-Preview of content/syllabus-Access to media such as course website,eBooks, Connect, etc.Potential cases/Exercises/PropsFaculty who like using HBS cases/have the budget to do so might want to consider the HBS classic“Benim Hama,” which describes the operation of a restaurant. We found that students have enoughpersonal experiences to draw from that an assigned reading is not necessary.There are many exercises/games one can play. We like the mortgage exercise, as it allows students toexperience the concept of an efficient frontier.Teaching suggestions for the caseThis chapter does not have acase.

Lecture Notes for Operations Management, 2nd Edition - Page 7 preview image

Loading page ...

2-1Chapter2–Teaching PlanIntroduction to ProcessesSpecific Learning objectivesLO2-1: Identify an appropriate flow unit for a processLO2-2: Distinguish among the three key process metrics (flow rate, flow time,and inventory) andevaluate average flow rate and flow time from departure and arrival dataLO2-3: Use Little’sLaw to evaluate the three key process metricsWhat Students Learn in this ChapterOperations management is largely about managing processes. Hence, the goal of this chapter is to startstudents thinking in terms of processes. We begin with the basic definitions of a process and itscomponents (e.g., a resource, a flow unit, etc.). Next, we introduce three key process metrics: inventory,flow rate,and flow time. Not only will we use these metrics in this chapter, they will appear in many ofthe subsequent chapters. Finally, we explainhowthese three metrics are linked, via Little’s Law. Therelationship I = R×T is relatively simple to understand but very powerful for understanding processes. Inparticular, it emphasizes that operations is often about tradeoffs. For example, if inventory is increased(to give better availability to customers) then flow timewill also increase.Many examples are used in the chapter. In one, students are shown a table of departure and arrivaltimes for patients to the Interventional Radiology unit. With those data we are able to demonstrateseveral of the key process metrics, thereby linking plausible and realistic data to actual process analysis.Relationship to other ChaptersThe chapter is the foundation forthe other chapters that directly deal with processes:Process Analysis(Chapter 3), Process Improvement (Chapter 4), Process Analysis with Multiple Flow Units (Chapter 5),and Process Interruptions (Chapter 7). The issues and methods in this chapter are also relevant forIntroduction to Inventory Management (Chapter 10), Supply Chain Management (Chapter11),InventoryManagement with Steady Demand (Chapter 12), Inventory Management with Frequent Orders (Chapter14), Service Systems with Patient Customers (Chapter 16),and Service Systems with ImpatientCustomers (Chapter 17).

Lecture Notes for Operations Management, 2nd Edition - Page 8 preview image

Loading page ...

2-2ProposedTime LineA lecture can be used to introduce this material to students,but then it is probably best to have them dosome hands on exercises to become comfortable with the ideas. Better yet would be to interspersetheseexercises between sections of the lecture.For instance, give students the example of a processand ask them to define an appropriate flow unit, or to evaluate average inventory, etc.Through a seriesof examples (which could also be taken from the solved problems in the chapter), students begin to seethe power of a process view and especially of Little’s Law. The class can close (say 20 minutes) with adiscussion of the chapter’s case.The case is seemingly simple when in fact it isn’t–the “answer” is notintuitive to most students.Students should be able to master this material over a single 80 min session. If you have advancedstudents,thissessioncouldbecombinedwiththematerialintheIntroductiontoInventoryManagement chapter.Potential cases/Exercises/PropsBesides the mini-case in this chapter, most cases and exercises will cover more material than in thischapter. For example, the “snowflake” exercise allows students to use the material in this chapter plusthe Process Analysis (Chapter 3) and Process Improvement (Chapter 4) chapters.Teaching suggestions for thecaseThis case:-Requires students to apply Little’s Law-Tests their understanding of the difference between processing time and process rate.-Reinforces the concept that the average output of a process must equal its average input.Although the analysis of the case is relatively simple, the intuition is not always easy to grasp–manystudents will intuitively believe that the capacity of the faster lift should be greater than the capacity ofthe slower lift. The main lesson in this case is to get students to understand why that intuition is notcorrect.To begin the case discussion, ask the students their opinion as to who is correct, Mark (unloadingcapacity should be twice as high on the detachable lift) or Doug (the unloading capacity should be thesame on the two lifts). Hopefully there are students who support each opinion.To resolve the question, begin with the simple process flow diagram:

Lecture Notes for Operations Management, 2nd Edition - Page 9 preview image

Loading page ...

2-3Ask the question “Do all of the skiers that get on the lift at the bottom get off the lift at the top?” Ofcourse, the answer is “We would hope so!” So “What does that mean about how the rate of skiersgetting on the lift, Ron, is related to the rate of skiers getting off the lift, Roff?” And the answer there mustbe that they are equal! If the rate on were faster than the rate off, the number of people on the liftwould grow and grow and grow. We know that can’t happen. Similarly, if the rate off exceeded the rateon, then the number of people on the lift would shrink and shrink and shrink, leaving the lift eventuallywith nobody. Which also doesn’t happen.So we can add to our process flow diagram:Now it is time to compare the two lifts. We can draw the process flow for each of them, emphasizingthat the rate on for each must equal the rate off:LiftSkiersSkiersLiftSkiersSkiersRonRoff=Slow LiftRsRsFast LiftRfRf

Lecture Notes for Operations Management, 2nd Edition - Page 10 preview image

Loading page ...

2-4w ask students “How can we compare the rates across the two types of lifts?” The answer is given inthe case–we are told that the rate skiers load onto the slow (fixed grip) lift is the same as the rate theyload onto the fast (detachable) lift. That means that Rs= Rf. And that means that the rates that theyunload skiers at the top must be the same!Thus, Doug is correct–both lifts have the same capacity to unload skiers at the top even though one isfaster than the other.And this brings us to Jessica’s question–so what is the difference between the two lifts? If you askstudents this question, the likely first response is that skiers spend less time on the faster lift. And that iscorrect. But are there other differences? Actually, there are two additional differences worthmentioning. The first comes from Little’s Law and thesecondrequires a deeper understanding of thisprocess.The first obvious difference is the number of skiers on the lift. According to Little’s Law, I = R×T. So ifthe two lifts have the same R, but the faster lift has a smaller T, then the faster lift must have a smaller Ias well:Slow LiftRsRsFast LiftRfRf==Fast LiftTf= seconds on liftIf= # of skiersRRTf< TsIf= R x Tf< R x Ts= Is

Lecture Notes for Operations Management, 2nd Edition - Page 11 preview image

Loading page ...

2-5So fewer people are on the faster lift and they spend less time on the lift but the faster lift and theslower lift bring skiers to the top at the same rate.If students can’t get the next difference between the two lifts, then you can prompt them with thefollowing question “If the faster lift has fewer skiers than the slower lift, then where are the additionalskiers?” Or put another way: “If the ski area attracts a certain number of skiers but the faster lift hasfewer skiers on it, then where are the other skiers?” The answer is that they are on the slopes! Thatmeans that adding a faster lift takes skiers off the lift but they don’t disappear. Instead, they are on theonly other place they can be, the slopes. Which means, somewhat counter-intuitively, that adding afaster lift makes the slopes more crowded (holding the total number of skiers fixed).

Lecture Notes for Operations Management, 2nd Edition - Page 12 preview image

Loading page ...

3-1Chapter 3–Teaching PlanProcess AnalysisSpecific Learning objectivesLO3-1: Draw a process flow diagramLO3-2: Determine the capacity for a one-step processLO3-3: Determine the flow rate, the utilization, and the cycle time of a processLO3-4: Find the bottleneck of a multistep process and determine its capacityLO3-5: Determine how long it takes to produce a certain order quantityWhat Students Learn in this ChapterThis chapter introduces the framework of process analysis. Instead of looking at the process as a blackbox, merely tracking inventory, flow rate, and flow time (as we do in chapter 2), this chapter explainshow a process works. The chapter starts by introducing the process flow diagram as a useful tool tovisually describe the flow. The process flow diagram is like a map of the process, using triangles forinventory locations, arrows for the movement of flow units, and boxes for resources.But the process flow diagram only tells parts of the story. Just like a street map will not provide you withany information about how many cars are actually traveling on the road or where to expect a traffic jam,a process flow diagram will not tell you how many units flow through the process.The chapter definesthe capacity of the process. The capacity of the process is determined by theresource with the smallest capacity, the bottleneck. Next, the chapter introduces flow rate. The flowrate determines how many flow units are flowing through the process per unit of time. Flow rate isdefined by looking at the minimum between demand and capacity. The ratio between flow rate andcapacity captures the utilization of the process.Finally, the chapter introduces the concept of cycle time. The cycle time of the processis defined as1/FlowRate.Thecycletimeislikethe“rhythm”oftheoperation.Ifthecycletimeis46seconds/customer,thenevery 46 seconds, thecash register rings anda flow unit is completed. Cycletime will also be an important starting point for several calculations in the next chapter on processimprovement.

Lecture Notes for Operations Management, 2nd Edition - Page 13 preview image

Loading page ...

3-2Relationship to other ChaptersThis chapter is related to:Chapter 1: this chapter picks up the example of fast food restaurantsstarted in chapter 1. However,chapter 3 can be taught without using chapter 1.Chapter 2: this chapter looks “inside the black box” of the process, which is the view taken in chapter 2.However, chapter 3 can be taught without using chapter 2.This chapter is the foundation for:Chapter 4: chapter 4 directly builds on the analysis started in this chapter by talking about processimprovement. So, this chapter is about analyzing a process, chapter 4 is about improving it. One shouldnot use one without the other.Other chapters: the concept of processing times and capacity are fundamental to many other chaptersin the book. This certainly includes chapters 5 (process interruptions) and 6 (multiple flow units).ProposedTime LineAny time line will depend on the context of teaching, including the class size, the choice of exercise orcase, the level of prior knowledge of the students, and the teaching style of the faculty. We have usedthe following time line for various audiences. This includes academic settings (business students), butalso professional development settings with participants that learnt this material not to prepare for atest but to advance their careers.0:00Opening exercise (Mortgage exercise, snow flake exercise)0:20Process lecture; example calculations0:40Subway qualitative discussion0:50Subway process analysis1:20Summary and ConclusionWays to customize this time line:-Include a 30-40 minute case discussion on a process analysis case-Use a different exercise (or, if a case is used, drop the exercise)-Use the Tesla case from this chapter during class timePreparation before classSet up exercise

Lecture Notes for Operations Management, 2nd Edition - Page 14 preview image

Loading page ...

3-3Empty Excel spread sheet and lecture slides readyVideo “I love Lucy”Detailed Session PlanOpening ExerciseRun the mortgage exercise for 10 to 15 minutes (all teams should have at least 3 mortgagescompleted,either rejected or approved).Go around the room and ask the underwriters to report how many mortgages they processed (approvedor rejected). Joke about the low performing teams if you feel comfortable.Ask students “If this would be your bank, what dimensions of performance would you track?”Answersshould include:-Some measures of efficiency: number of loans processed, costs per loan-Responsiveness: how long does the customer have to wait for the loan-Accuracy: percentage of loans processed correctlyDisplay the correct decisions; ask underwriters to audit their work; then fill out slide#Mortgage1displaying the performance of each team on the dimensions of efficiency and accuracy.Announce that the goal of this course is to improve businesses by helping them to improve on multipledimensions of performance. It is not about trading off efficiency vs quality, but about building betterprocesses. Say something like “In the next sessions, you will learn how to analyze and improve businessprocesses.”Process LectureMotivate lecture on process analysis: “if we want to be able to improve processes, we first have to beable to analyze them. We will now discuss some basic vocabulary about a process.”Introduce the concepts of resources, flow units, and process flow diagrams(Slide #ProcessAnalysis1).Explain that in a process flow diagram, resources are captured by boxes, inventories are triangles, andarrows capture the flow of the flow units.Define processing time, capacity, bottleneck, and process capacity (Slide #ProcessAnalysis2).Ask students for processing times in the mortgage exercise (or make up some numbers). TypicalnumbersmightbePreparation:15sec/loan,Analysis1:40sec/loan,Analysis2:80sec/loan,Underwriting 10 sec/loan(Slide #ProcessAnalysis3).

Lecture Notes for Operations Management, 2nd Edition - Page 15 preview image

Loading page ...

3-4Calculate the process capacity as illustrated in Excel file; ask students for the bottleneck:“Howdo youfindthebottleneck?”Emphasizethat thebottleneckis theresourcewiththelowestcapacity(sometimes, students will argue that it is the longest processing time, which is not always the case).Then, ask “how could we have found the bottleneck without doing these calculations?”Review other process measures; talk about matching supply with demand (slides#ProcessAnalysis4 and#ProcessAnalysis5).Subway Qualitative DiscussionAsk students who regularly goes to a Subway restaurant. Ask them for their favorite sandwich. Thenask,“how many people are involved in making your sandwich?” The answer to this might vary from 1 to 6.Give students some background about Subway (slides#Subway1 and #Subway2). Go to a recent newsarticleaboutSubwayforcurrent numbers.Ask students what measures of performance they would track in a Subway restaurant. Emphasizedimensions such as:-Efficiency-Responsiveness-Variety/customization-Quality: fresh, good tasteThen, ask students about the difference between Subway and McDonald’s. This sets up a discussionaround trade-offs and different strategy.If appropriate, introduce the term “make to order.”Emphasize that such strategies are not right or wrong, they simply capture different market segments.Potentially compare Apple with McDonald’s and Dell with Subway to show that the make-to-orderstrategy is not just about sandwiches.Subway Process AnalysisShow slide #Subway3. Give students 5 minutes to work on their own. Say something like “Here is theofficial way to make a Subway sandwich. I want you to spend 5 minutes on your own to (a) draw aprocess flow diagram (b) compute the process capacity.Draw the process flow diagram(slide #Subway 4). Some discussions around the toaster will typicallycome up (note: the toaster is not included in the book chapter, but it makes for a fun discussion; notefurther that the toaster is NOT the bottleneck).Discuss other process flow diagrams (shown onslides #Subway5 and #Subway6).

Lecture Notes for Operations Management, 2nd Edition - Page 16 preview image

Loading page ...

3-5Go through calculations shown in Excel. Note that these calculations do NOT include the toaster. Alsosee slide #Subway8.Note: in general, we find that students learn better when such calculations aredone on the projector/white board/black board/tablet in class as opposed to just being displayed as asolution.Introduce cycle time as 1/Flow Rate (the process makes asandwich every 46 seconds)(Slide #CycleTime). Explain that the word cycle time is often used very differently across industry.Ask students how long it would take to produce 20 sandwiches.Then, ask how long it would take, assuming the process starts empty.Summarize calculations showing slide #TimeToProduce.Summary and ConclusionSummarize for today(slide #Summary).Say something like “Today, by analyzing the process, we laid the foundation for improving the process.”Conclude by introducing the “I love Lucy Video”: “We talked a lot about processes today. So let us watcha real process in action.” Show video (https://www.youtube.com/watch?v=8NPzLBSBzPIor other linksthat you can find via YouTube).Potential cases/Exercises/PropsThere are many games and exercises out there that help students understand the concept of abottleneck. It might be helpful to break those up into two groups:-Hands-on exercises: exercises in which all students engage in doing some work. This includes themortgage exercise (see separate document for instructions). This also includes exercises inwhich students build something out of paper (see our snowflake exercise), Lego, our electronicscomponents.-On stage exercises: for really large audiences, it might be logistically difficult to have all studentsengage in the work hands-on. In this case, it is possible to invite a small group of students to thefront of the class ‘on stage’ and have them demonstrate the work. We found the snow-flakeexercise to work really well for this,as students observing the work can easily see thedifferences in capacity and the accumulation of inventory in front of the bottleneck.The HBS case Toshiba: Ome Works is a great case to illustrate the contents of chapter 3 and 4. The caseis somewhat dated, though the mechanics of electronics assembly have not changed much since thewritingof the case.Suggested assignment questions for the Toshiba case are:

Preview Mode

This document has 95 pages. Sign in to access the full document!

Report

Study Now!

Document Details

Related Documents

Solution Manual for Operations Management, 2nd Edition

Space Age Furniture Problem

Inventory Analysis and Optimizing Staffing

Value Chain Management and Outsourcing in Operations

Inventory Management and Aggregate Planning in Operations

Operations Management: Key Concepts and Core Principles

Forecasting and Production Planning Module 3

Performance Measures and Quality Management in Operations

Technology Systems and Innovations in Operations Management

Operations Management and Decision Theory: A Comprehensive Analysis

Company

Explore

Study Tools