Graduate School of Business
Stanford University
Professor Wein
Spring 2013
OIT 262 Operations - Syllabus
Contact Information
Professor:
Lawrence M. Wein
Email:
lwein@stanford.edu
Office Hours: By appointment
Office: E342
Phone: 650.724.1676
Course Description
For the purpose of this course, operations will be defined as the production and delivery of
goods and services. This course seeks to provide you with a framework for understanding how
to gain competitive advantage through operations. We begin by developing the fundamental
concepts of operations management and expand into more contextually specific and strategic
discussions of operational issues on a global scale. The course is divided into three segments,
with the following key topics:
Part I: Process Analysis – Develop the language and tools to analyze business processes;
understand the different types of processes and how they align with firm strategy and product
choice; learn to manage processes for demand surges, variability, and economies of scale.
Part II: Quality Management – Understand the drivers of quality in products and processes;
develop quantitative tools to measure quality; discuss quality best practices; motivate the need
for continual process improvement.
Part III: Supply Chain Management – Analyze how global material flows and ever-growing
supply chains have influenced business operations; discuss the importance of coordinating
members and functional areas within supply chains; discuss innovative supply chain
management practices and how they generate competitive advantage.
Course Text
Matching Supply With Demand (3rd Ed) by G. Cachon and C. Terwiesch, McGraw-Hill, 2013
OIT 262: Operations
Course Syllabus
1
OIT 262 At-a-Glance
#
1
Date Description
4/5 Introduction
Major Reading & Assignments
CT Chapter 1 and Sections 3.1-3.3
Benihana of Tokyo
CT Section 3.4
Scharffen Berger Chocolate Maker
National Cranberry Cooperative
2
4/8 Process Analysis
3
4/12 Process Improvement
4
4/15 Batching and the Product-Process Matrix
5
6
4/19 Tools: Randomness and Waiting Times
Optional Attendance
4/22 Process Improvement in Health Care
7
4/26 Quality and the Toyota Production System
8
4/29 Quality in Service Operations
9
10
5/3 Tools: Measuring and Quantifying Quality
Optional Attendance
5/6 Quality Management in Luxury Services
11
5/10 Process Improvement in Health care
12
13
5/13 Tools: Supply Chain Inventory Management
Optional Attendance
5/17 Managing Product Variety in Supply Chains
14
5/20 Designing a Distribution Network
15
5/24 Wein’s Homeland Security Lecture
16
5/29 Supply Chain Simulation
17
5/31 Leadtime Reduction and Quick Response
18
6/3 Student Presentations
Course Summary
Bayonne Packaging
CT Sections 2.6, 7.1-7.4
A Brief Note on the Theory of Constraints
CT Sections 2.2-2.3, 8.1-8.6 and 8.9-8.12
Massachusetts General Hospital
Group Write-Up Due – 9:45 am
CT Chapter 11
Toyota Motor Manufacturing, USA
Lion Financial Services
Teaching by the Book, No Asides Allowed
CT Sections 10.1, 10.2 and 10.5
A Note on Quality Management Tools
Ritz-Carlton
Homework 1 Due (Individual) – 9:45 am
Stanford Hospital Operating Room
Guest Speaker: Sridhar Seshadri
CT Sections 2.5, 7.6-7.7, 12.2 and 12.4
Continuous Review Inventory Management
HP DeskJet
Homework 2 Due (Individual) – 9:45 am
Amazon.com
Dell Article
Sport Obermeyer, Ltd
Group Write-Up Due – 9:45 am
Final Exam – In Class, Friday June 7, 8 AM - noon
OIT 262: Operations
Course Syllabus
2
Course Outline
Part I: Process Analysis
Class 1
Introduction
Friday, April 5
Read Cachon & Terwiesch, Chapter 1, Sections 3.1-3.3
Benihana of Tokyo
Discussion Questions
1. What is the Benihana concept?
2. How does Benihana’s cost structure differ from that of a typical sit-down restaurant?
What operational and design choices generate efficiencies?
3. Estimate the maximum customer waiting time in the bar on a busy night (i.e., the wait
time of the “last customer” to get a seat in the bar) in each of the three restaurant
configurations (Benihana West, East, and Palace). To keep everyone on the same page,
use the following assumptions:

Total dining time equals 60 minutes (per table of 8), and dining start times are
evenly spaced.

Benihana West has 8 seats in the bar and 40 in the dining room, Benihana East has
16 seats in the bar and 80 in the dining room, and Benihana Palace has 56 seats in
the bar and 120 in the dining room.

Customers prefer to sit in the bar, rather than outside the restaurant. Any customer
that might be waiting outside the restaurant is behind the customers in the bar in
the queue for dinner.
OIT 262: Operations
Course Syllabus
3
Class 2
Process Analysis
Monday, April 8
Read Scharffen Berger Chocolate Maker (A)
Cachon & Terwiesch, Section 3.4
Predictable Variability: Inventory Buildup Analysis
Discussion Questions
For your analysis of this case, assume that the cycle time of the roaster is 1.5 hours (the
operator must wait for the beans to cool before starting another batch). Ignore the packaging
step in the process, as this step is not discussed in detail in the case (no capacity is provided) and
is primarily outsourced.
1. Create a process flow diagram for the current (pre-ball mill) process. Assuming all
production is of semi-sweet (62%) chocolate, compute the daily capacity (in kg of nibs)
for each production stage except packaging. What is the bottleneck of this process?
2. Now consider the new process after the ball mill has been incorporated. Re-compute
the daily capacity of the conche and the ball mill, assuming that for 62% chocolate 10
hours in the conche is required, followed by 5 hours in the ball mill.
3. Assuming that all of the production is of semi-sweet (62%) chocolate, what changes
beyond addition of the ball mill will you need to consider to increase your capacity by
150% of the current (pre-ball mill) level of output? (In other words, to increase output
to 2.5 times the current level.) Estimate a payback period for the ball mill given these
changes, making assumptions as necessary.
4. Be prepared to replicate the cannery calculations in Predictable Variability: Inventory
Buildup Analysis.
OIT 262: Operations
Course Syllabus
4
Class 3
Process Improvement
Friday, April 12
Read National Cranberry Cooperative, 1996
Discussion Questions
Assume that a peak harvest-season day involves 18,000 barrels of berries, 70% of them wet
harvested, arriving at a constant, smooth rate over a twelve-hour period from 7 am to 7 pm.
Assume that berry processing begins at 7 am (rather than 10 am, as stated in the case). You
may assume that it takes exactly 7.5 minutes to empty a truck into the dumpers (the case states
“7-8 minutes”).
1. Develop a process flow diagram, showing the capacities of the various stages in barrels
per hour.
2. Compute the capacity utilization for each stage of the process. What is the bottleneck
operation?
3. Would trucks have to wait to unload? When during the day would trucks be waiting?
How much total truck waiting time would you expect? (Hint: you should use an
inventory buildup diagram to aid you in this question.)
4. Using your analysis in Questions 1-3 as a starting point, consider how would the various
actions contemplated by Hugo Schaeffer affect peak day performance. Suppose the
cost of renting cranberry trucks with drivers is $100 per hour. What would you
recommend? Provide calculations to support your recommendation.
OIT 262: Operations
Course Syllabus
5
Class 4
Batching and the Product-Process Matrix
Monday, April 15
Read Bayonne Packaging, Inc.
Cachon & Terwiesch, Sections 2.6, 7.1-7.4
A Brief Note on the Theory of Constraints
Discussion Questions
1. What is Bayonne’s process type? From a customer’s perspective, what are its key
dimensions of performance? What are its main problems? Download Exhibit 2.xlxs from
the coursework website and look at how Bayonne’s planned utilization for each
resource is calculated from the data in Exhibit 2.
2. What is the capacity in sheets per hour of the die-cut work center, as currently
operated? HINT: Assume that an order contains 10,000 sheets (based on Exhibit 2) and
5 orders are “ganged” together with a single setup (based on footnote c of Exhibit 2), so
the current batch size is 50,000 sheets. The setup time is 2.5 hours (based on footnote c
in Exhibit 2). The work center has two Bobst die-cut machines.
3. What is the minimum batch size at which the die-cut work center can achieve its target
flow rate in sheets per hour for the month of October? HINT: From Exhibit 2, the target
flow rate is (3,108,971 sheets)/(347 hours) = 8960 sheets per hour.
4. What is the capacity in pieces per month for the Royal/Queen fold & glue work center, if
no orders are partialed? Assume that the average order size is 80,641 pieces (from
Exhibit 2, (6,209,329 pieces)/(77 orders) = 80,641 pieces per order) and the work center
operates for 347 hours per month.
5. Exhibit 4 (including footnote a) shows that 107/(353-107)= 43% of orders were partialed
in October. Assume that 43% of 77 = 33 orders at the Royal/Queen fold & glue work
center were partialed (processed in two equal-sized batches) and it had 347 work hours
available in October. What was the resulting capacity for the month of October? HINT:
Compute the total time required for the 33 partialed orders, subtract that time from the
347 hours to obtain the number of hours available for regular orders, and compute the
number of regular orders that can be made in that time. Finally, sum the number of
pieces in the partialed and regular orders.
6. How would you explain Bayonne's performance problems? What should John Milliken
recommend to Dave Rand?
OIT 262: Operations
Course Syllabus
6
Class 5
Tools: Randomness and Waiting Times
Friday, April 19
OPTIONAL ATTENDANCE
Read Cachon & Terwiesch, Sections 2.2-2.3, 8.1-8.6 and 8.9 – 8.12
Assignment
Prepare solutions to Practice Queueing Problems (but do not turn in).
Class 6
Process Improvement in Health Care
Monday, April 22
GROUP WRITE-UP DUE BY 9:45 a.m.
Read Massachusetts General Hospital’s Pre-Admission Testing Area (PATA)
Discussion Questions
Be prepared to discuss your solutions to the Massachusetts General Group Assignment in class.
Part II: Quality Management
Class 7
Toyota Production System
Friday, April 26
Read Toyota Motor Manufacturing, USA
Cachon & Terwiesch, Chapter 11
Discussion Questions
1. Should andon pulls for seat problems result in a line stoppage?
2. Is implementing the hook design change a cost-effective strategy?
3. Estimate the cost of stopping the production line for one cycle (approximately one
minute). What is the cost of not stopping the production line when a problem occurs?
4. What should Doug Friesen do to address the seat problem?
5. In light of what you learn about the Toyota Production System, what do you think of the
massive recalls of Toyota vehicles due to braking and unintended acceleration problems
in 2009 and 2010?
OIT 262: Operations
Course Syllabus
7
Class 8
Quality in Service Operations
Monday, April 29
Read Call Center Design for Lion Financial Services
Teaching by the Book, No Asides Allowed (New York Times article)
Discussion Questions
1. Estimate overall labor utilization for LFS call center agents, by comparing the overall
supply of, and demand for, labor hours per week. Does it appear to you that the overall
staff size for the LFS call center system is appropriate?
2. On page 3 it is said that effective call routing can substantially reduce staffing needs.
How so? What logic lies behind the proposal for understaffing and overstaffing various
agent pools that is mentioned on page 10? Do you have any misgivings about the call
routing protocol that Andy proposes?
3. On page 11 there is a mention of "economies of scale" that Andy expects to realize with
the proposed configuration. What might these be?
4. What do you like about Andy’s proposal? Do you have any misgivings the proposal?
5. Given the annual turnover rate among agents of 50%, what is the current turnover cost
per year?
Class 9
Tools: Measuring and Quantifying Quality
Friday, May 3
OPTIONAL ATTENDANCE
Read Cachon & Terwiesch, Sections 10.1, 10.2 and 10.5
A Note on Quality Management Tools
Discussion Questions
1. Prepare a solution to the Practice Quality Problem at the end of A Note on Quality
Management Tools (but do not turn in).
2. In the early 1990s, Motorola’s celebrated Six Sigma Program had the goal of increasing
the process capability of each of its process steps from 1 to 2. What might have been
Motorola’s reasons for doing this?
OIT 262: Operations
Course Syllabus
8
Class 10
Quality Management in Luxury Services
Monday, May 6
HOMEWORK # 1 DUE BY 9:45 a.m.
Read Ritz-Carlton Hotel Company: The Quest for Service Excellence
Homework 1 – Ritz-Carlton
Discussion Questions
Prepare solutions to Homework 1. In addition, be prepared to discuss the following questions
in class:
1. Do you believe that Ritz-Carlton has sufficient systems in place to achieve its objective
of defect-free service? What changes would you make?
2. Using the analysis you did for homework #3 and your common-sense knowledge of
hotel operations, generate hypotheses about the possible root causes of defects.
OIT 262: Operations
Course Syllabus
9
Class 11
Process Improvement in Health Care
Friday, May 10
GUEST SPEAKER: SRIDHAR SESHADRI
Read Process Improvement in Stanford Hospital’s Operating Room
Discussion Questions
1. Estimate the effect of instrumentation errors on the hospital’s finances. To reach an
estimate you will need to use the numbers presented in the case and also to make some
assumptions. For concreteness, assume that each employee has an accuracy rate of
99.9% (that is, employees make one error per thousand instruments handled) and that
an instrumentation error in a case cart delays the start of that case until the error is
resolved. Assume a thirty-minute average delay.
2. Identify the root causes for the different types of instrumentation errors described in
the case study. These root causes could include people, processes, culture, biological
systems, etc.
3. Evaluate the six proposals described in the case study. Which of these proposals should
be implemented immediately? Which ones should be left for future implementation and
why? How should resources be allocated between these different proposals?
4. How would you monitor the implementation and success of these proposals? What is
the most effective way to communicate any improvements achieved by these proposals
to the various stakeholders?
OIT 262: Operations
Course Syllabus
10
Part III: Supply Chain Management
Class 12
Tools: Supply Chain Inventory Management
Monday, May 13
OPTIONAL ATTENDANCE
Read Cachon & Terwiesch, Sections 2.5, 7.6-7.7, 12.2 and 12.4
Continuous Review Inventory Management
Assignment
Prepare solutions for the problems in the Continuous Review Inventory Management note (but
do not turn in).
Class 13
Managing Product Variety in Supply Chains
Friday, May 17
HOMEWORK # 2 DUE BY 9:45 a.m.
Read Hewlett-Packard Company DeskJet Printer Supply Chain (A)
Homework 2 – HP DeskJet Printer Supply Chain
Discussion Questions
Prepare solutions to Homework 2. In addition, be prepared to discuss the following questions
in class:
1. What has caused the crisis with inventory and service?
2. Come up with suggestions to mitigate the inventory and service crisis. Evaluate the
costs and benefits of these suggestions by using analytical tools (making assumptions
where necessary). Be prepared to argue in favor of the “best” solution, in your opinion.
OIT 262: Operations
Course Syllabus
11
Class 14
Internet Operations and Distribution
Monday, May 20
Read Amazon.com’s European Distribution Strategy
Automate or Die (Business 2.0 Article on Dell Computer)
Discussion Questions
1. Determine the key factors influencing the design of Amazon’s US distribution network.
Be prepared to analyze these factors and discuss their relative importance.
2. The possible configurations of Amazon’s European distribution network are:
a. Keep the status quo (3 decentralized DCs serving each country independently).
b. Keep the existing distribution centers but centralize the management of the
three, possibly allowing a DC in one country to fulfill orders in another.
c. Combine all DCs into a single DC serving multiple countries.
Be prepared to analyze the pros and cons of each of these strategies, and in particular,
be prepared to argue either for or against the idea of centralization (either physical or
managerial) in Amazon’s European distribution network.
3. Suppose that Dell pays an average of $1000 per computer to its vendors for
components. What is the average dollar value of the component inventories held by Dell
vendors? (For the vendors, these are finished goods inventories.)
4. Dell computer is celebrated for the efficiency of its direct-channel marketing and
assemble-to-order manufacturing. Could General Motors conceivably adopt this
business model? What benefits might GM hope to gain thereby, and what are the
obstacles to such a change?
Class 15
Professor Wein’s Research on Homeland Security
OIT 262: Operations
Course Syllabus
Friday, May 24
12
Class 16
Supply Chain Experiential Exercise
Wednesday, May 29
Read Supply Chain Game Description
Today’s class will be devoted to a participatory simulation exercise. Your only preparation is to
read the brief description of the game included in the course packet. Note: you must be on
time for today’s class, as any latecomers will not be able to participate in the game.
Class 17
Supply Chain Demand Management
Friday, May 31
GROUP WRITE-UP DUE BY 9:45 a.m.
Read Sport Obermeyer, Ltd.
Assignment
Be prepared to discuss your solutions to the Sport Obermeyer Group Assignment in class.
Class 18
Student Presentations and Course Summary
Monday, June 3
The last class will be devoted to course wrap-up and several integrative student presentations
on your classmates’ operations experiences.
OIT 262: Operations
Course Syllabus
13
Course Policies
Classroom Procedure
Classes will have a mixture of lecture and discussion formats. Please be punctual, as latecomers
miss the initial thrust of the class and disturb others. Please leave your name cards up for the
entire quarter. A seating chart will be passed around at the beginning of class #2. No open
laptops, tablets, or smartphones are allowed in class.
Attendance
Since most class sessions are case based, it is critical that you be present in class to reap the
greatest benefit from the material; many insights and takeaways are developed during the
course of class discussion and cannot be neatly summarized on class handouts or slides. Thus,
generally speaking, attendance is required. There is an exception to this:

Attendance is optional on the three “tools” sessions (Queueing, Quality, and Supply
Chain tools). These are lecture-style sessions in which I introduce and demonstrate the
quantitative tools necessary for the course. You are encouraged to attend, as even
students with highly quantitative backgrounds find these tools new and unfamiliar;
however, I recognize that students have extremely diverse backgrounds, and some are
quite capable of picking up a quantitative tool by simply reading the textbook.
Regardless of whether you attend the tools sessions or not, you are accountable for all
material discussed in these sessions, even material that arises during class discussion
and is not included in the printed handouts.
If you plan to miss a non-tools oriented class, please email me in advance to let me know.
Missing a non-tools oriented class will result in a reduction in your class participation grade,
unless that absence is excused per Stanford University policy (illness, etc.). Examples of
unexcused absences include: weddings, college reunions, etc. Missing an excessive number of
class sessions will make it difficult to receive a passing grade in OIT 262. Lateness, especially if
it is habitual and egregious, will result in a reduction in your class participation grade. If you
must be late due to some unavoidable conflict, let me know before class.
OIT 262: Operations
Course Syllabus
14
Classroom Participation
The purpose of the discussion questions listed in the syllabus is to engage you in the issues, to
learn ways to think about and analyze them, and to prepare you to be effective managers.
There will be cool calls: I will typically put several students’ names on the board before class,
along with the question (typically one of the discussion questions listed in the syllabus) that I
will ask them. Thus, all students should think about and be prepared to discuss the questions
for every class session. The classroom should be considered a laboratory in which you can test
your ability to present your analyses and recommendations clearly, to convince your peers of
the correctness of your approach to complex problems, and to illustrate your ability to achieve
the desired results through the implementation of that approach. To that end, I encourage
broad participation by everyone in the class.
Grading for class participation will be done on a five-point scale for each session. One point is
earned just by being present. The remaining four points are earned by participating in the
discussion, with the emphasis being on the quality – rather than the quantity – of your
comments. The sum of all your daily participation grades represents your course participation
grade, which comprises 15% of your total class grade.
Graded Group Assignments
There will be two graded assignments to be done by groups of three students each. For both
assignments, you should form your own groups. My only stipulations are that groups should
consist of students from within a single section, and there should be no overlap between
groups for the two assignments (i.e., you must form completely different groups).
OIT 262: Operations
Course Syllabus
15
Operations Experiences
I will seek 4-5 students in each section with interesting operations experience in their past to
give a brief (10-15 minute) presentation to the class on the final day. By participating in these
“Operations Experience” presentations, a student may boost his or her participation grade.
This provides an outlet for students who feel uncomfortable speaking up in case discussions to
increase their participation score; however, the primary purpose of the Operations Experience
presentations is not to raise participation grades. Rather, the purpose is to share with your
classmates interesting experiences in “real world” operations management, and hence I will
select students to participate in these presentations primarily based on the relevance and
quality of their experience and the degree to which I feel it will benefit the rest of the class.
Interested volunteers should email me during the quarter with a brief description of the
proposed presentation.
Grading Breakdown
Assignment
Homeworks (equal weight)
Group Write-ups (equal weight)
Final Exam
Classroom Participation
Percent
20%
40%
25%
15%
A good faith effort on all assignments is required, and egregious or intentional poor
performance in any single category may result in a failing grade.
Final Exam
The 4-hour final exam will be open-book and open-notes. You may bring and consult your
textbook, syllabus materials, class notes, and class handouts. The exam is comprehensive: any
material discussed in the course, including case studies, is fair game for the exam unless
otherwise noted by me.
Academic Integrity
Group work is acceptable and encouraged for purposes of general class preparation and case
discussion. For written assignments (homework and group write-ups), our policy for this course
is that you should not benefit from anyone who has already participated in a faculty-led
discussion of the material, at Stanford or at another school. Receiving assistance on written
assignments outside of the professor or course assistants is a violation of the honor code. For
the three individual homework assignments, you may discuss your general approaches to these
problems with other students in the class, but you must solve, write up, and submit the
problems individually. For the group assignments, your discussions should be limited to the
members of your group. On any graded assignments in the course, you should not consult,
either directly or indirectly, with other groups, 2nd year students, or persons outside the GSB.
OIT 262: Operations
Course Syllabus
16