Operations Management
BUSN 6110
Spring 2013
Syllabus
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Class 1 (Jan 10): chap 1; chap 2, case study (Introduction, Strategy, Decision
Making)
Class 2: (Jan 17):Chap 9/10, Chap 6 (Supply Chain, Quality)
Class 3: (Jan 24): Chap 4 , Supplemental readings (Take home exam)
(Product and Service Design, Processes and Technologies)
Class 4: (Jan 31): Chap 7, Chap 13 (Facility Planning ,Project Management,
Capacity and Aggregate Planning)
Class 5: (Feb 7): Chap 11 (Inventory Management , Forecasting)
Class 6: (Feb 14): Supplemental Readings (Reverse Logistics – need “The
Forklifts Have Nothing To Do!” Available in the Lewis and Clark Bookstore)
Chap 10 (Lean/Just in Time/TOC)
February 21 No Class
Class 7: (Feb 28) Supply Chain Security, The Beer Game, Take home final
exam
Class 8: (Mar 7) Group presentations
Other requirements:
→visit Harley-Davidson Plant in Kansas City, or Boulevard Brewery in
Kansas City, or The Roasterie Coffee Company in Kansas City or other
operation activity and present as small groups to the class on Mar 7.
Additional Text
The # 2 Selling
Warehousing
and Distribution Book
and #1Non-text book
Warehousing Book
Book on Oct 15, 2011
Grades
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Group Presentation – 10%
Attendance/Participation– 10%
Mid Term – 40%
Final Exam – 40%
Contact Information
• joewalden@supplychainresearch.com
• (760) 447-3651
• Personal background
Class Slides and
Information
• www.supplychainresearch.com
• Slides will be posted/updated week
prior to class – therefore the slides
currently on the website may change
as new materials come available
Chapter 1
Introduction to
Operations
Management
The Operations
Function
Operations as a transformation
process
Operations as a
basic function
Operations as the
technical core
Operations as a
Transformation Process
INPUT
Material
Machines
Labor
Management
Capital
Operations as a
Transformation Process
INPUT
Material
Machines
Labor
Management
Capital
TRANSFORMATION
PROCESS
Operations as a
Transformation Process
INPUT
Material
Machines
Labor
Management
Capital
TRANSFORMATION
PROCESS
OUTPUT
Goods
Services
Operations as a
Transformation Process
INPUT
Material
Machines
Labor
Management
Capital
TRANSFORMATION
PROCESS
Feedback
OUTPUT
Goods
Services
Transformation
Processes
Physical
Locational
(manufacturing)
(transportation/
warehouse)
Exchange
(retail)
Physiological (health care)
Psychological (entertainment)
Informational (communications)
Impacts on Operations
Management
 Industrial Revolution
 Scientific Management
 Human Relations or the lack thereof
 Advent of Management Science
 Quality Emphasis
 Globalization of Supply Chains
 Information Age/Internet Revolution
Key Events
Industrial Revolution
Steam engine
1769 James Watt
Division of labor
1776 Adam Smith
Interchangeable parts 1790 Eli Whitney
Scientific Management
Principles
Frederick W. Taylor 1911
Activity scheduling chart Henry Gantt 1912
Moving assembly line Henry Ford 1913
Key Events
Human Relations
Hawthorne studies
Motivation theories
1930
1940s
1950s
1960s
Elton Mayo
Abraham Maslow
Frederick Hertzberg
Douglas McGregor
Management Science
Linear programming
Digital computer
Simulation, PERT/CPM,
Waiting line theory
MRP
1947 George Dantzig
1951 Remington Rand
1950s Operations research
groups
1960s Joseph Orlicky, IBM
Key Events
Quality Emphasis
JIT
TQM
1970s Taiichi Ohno, Toyota
1980s W. Edwards Deming,
Joseph Juran, et. al.
Strategy and operations
Skinner, Hayes
Reengineering
1990s Hammer, Champy
World Trade Organization 1990s Numerous countries
and companies
Globalization
European Union and
other trade agreements
EDI, EFT, CIM
1970s IBM and others
1980s
Key Events
Information Age/
Internet Revolution
Internet, WWW, ERP
Supply chain
management,
E-commerce
1990s
SAP, i2
Technologies, ORACLE,
PeopleSoft, Amazon,
Yahoo, eBay,
and others
Categories of
E-Commerce
Business
Consumer
Business
B2B
Commerceone.com
B2C
Amazon.com
Consumer
C2B
Priceline.com
C2C
eBay.com
Types of B2B Transactions
Buyers
Buyer
Seller
(a) Electronic Storefront
Sellers
Sellers
(b) Seller’s Auction
Buyers
Sellers
Buyer
(c) Buyer’s Auction
(d) Exchange or E-Marketplace
In Theory:
E-Business Promotes:
Better customer relations
More efficient processes
Lower cost of materials
Information technology synergy
Better and faster decision making
E-Business Promotes:
New forms of organizations
Expanded supply chain
Higher customer expectations
New ways of doing business
Globalization
Competitiveness
The degree to which a nation can
produce goods and services that
meet the test of international
markets while simultaneously
maintaining or expanding the real
incomes of its citizens.
Measures of
Competitiveness
 Productivity
 GDP (Gross domestic product) growth
 Market capitalization
 Technological infrastructure
 Quality of education
 Efficiency of government
Productivity
Output
Productivity =
Input
Productivity improves when firms:
 Become more efficient
 Downsize
 Expand
 Retrench
 Achieve breakthroughs
Barriers to Entry
Economies of scale
Capital investment
Access to supply and distribution
channels
Learning curves
Competition Within
Industries Increases When
 Firms are relatively equal in size
and resources
 Products and services are
standardized
 Industry growth is slow or
exponential
Chapter 2
Operations
Strategy
The Importance of Clearly
Stated Missions/Visions
“one who is confused in purpose
cannot respond to his enemy” Sun
Tzu, The Art of War
• To know the purpose – there must be a
clearly stated mission and vision.
Vision, Mission,
Strategy
• Mission Statement
• Vision
• Strategy
Clearly Stated Mission???
“When you come to a fork in the
road, take it.”
Example of A Clearly
Understood Mission
COL Rusling on General Grant:
“He made certain his
subordinates knew exactly what
he wanted, and why and when he
wanted it.”
Example of A Clearly
Understood Mission
“We endeavor to go to the moon and
return safely before the end of this
decade.”
- John F. Kennedy
Strategy Formulation
• Define a primary task
• Assess core
competencies
• Determine order
winners & order qualifiers
• Positioning the firm
Internal and External
Analysis
• SWOT Analysis
– Strengths
– Weaknesses
– Opportunities
– Threats
STEEPLE Analysis
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Society
Technology
Economic
Environment
Political
Legal
Ethics
STEEPLE and PMESII-PT
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Social
Technological
Environmental
Economic
Political
Legal
Ethical
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Political
Military
Economic
Social
Information
Infrastructure
Physical environment
Time
© 2011, Joe Walden
Core Competencies
• Also known as core capabilities
• Skills that differentiate the service or
manufacturing firm from competitors
• Those things that the company does
best
Strategy Formulation
• Define a primary task
• Assess core
competencies
• Determine order
winners & order qualifiers
• Positioning the firm
Competing on Cost
Eliminate all waste
Invest in
 Updated facilities & equipment
 Streamlining operations
 Training & development
Competitive
Priorities: Cost
• Southwest Airlines
– one type of airplane facilitates crew
changes, record-keeping, maintenance,
and inventory costs
– direct flights mean no baggage
transfers
– $30 million annual savings in travel
agent commissions by requiring
customers to contact the airline directly
Copyright, 2006, John Wiley and Sons
Competing on Quality
Please the customer
 Understand customer
attitudes toward and
expectations of
quality
Example: Ritz Carlton
Competing on
Flexibility
Produce wide variety of
products
Introduce new products
Modify existing
products quickly
Respond to
customer needs
Competing on Speed
Fast moves
Fast adaptations
Tight linkages
Example: FEDEX, UPS
Operations Role in
Corporate Strategy
Provide support for overall
strategy of a firm
Serve as firm’s distinctive
competence
Must be consistent
Must be consistent with overall
strategy
Operations and Wall
Street
• Comparing operations at a firm with
competitors
• Example
income per employee
revenue per employee
inventory turnover
customer turnover
Operations
Strategy at
Wal-Mart
Mission
Wal-Mart
Provide value for our customers
Competitive
Priority
Low prices, everyday
Operations
Strategy
Low inventory levels
Short flow times
Operations
Structure
Linked communications
between stores
Fast transportation
system
Enabling Process
and Technologies
EDI/satellites
Cross-docking
Focused
locations
Strategy and the
Internet
 Create a distinctive business
strategy
 Strengthen existing competitive
advantages
 Integrate new and traditional
activities
 Must provide a unique value to the
customer- Zappos/Amazon
Products & Services
Make-to-order
 Made to customer specifications
after order received
Make-to-stock
 Made in anticipation of demand
Assemble-to-order
 Add options according to
customer specification
Processes & Technology
 Project
 One-time production of product to
customer order
 Batch production
 Process many jobs at same time in batch
 Mass production
 Produce large volumes of standard
product for mass market
 Continuous production
 Very high volume commodity product
Decisions in
Operations
Capacity & Facilities
How much capacity to provide
Size of capacity changes
Handling excess demand
Hiring/firing
workers
Need for new
facilities
Facilities
Best size for facility?
Large or small facilities
Facility focus
Facility location
Global facility
Human Resources
 Skill levels required
 Degree of autonomy
 Policies
 Profit sharing
 Individual or team work
 Supervision methods
 Levels of management
 Training
Quality
 Target level
 Measurement
 Employee involvement
 Training
 Systems needed to ensure quality
 Maintaining quality awareness
 Evaluating quality efforts
 Determining customer perceptions
Sourcing
Degree of vertical integration
Supplier selection
Supplier relationship
Supplier quality
Supplier cooperation
Operating Systems
 Execute strategy daily
 Information technology support
 Effective planning & control systems
 Alignment of inventory levels,
scheduling priorities, & reward
systems
Policy Deployment
Focuses employees on common
goals & priorities
Translates strategy into
measurable objectives
Aligns day-to-day decisions with
strategic plan
Balanced Scorecard
 Finance — How should we look to our
shareholders?
 Customer — How should we look to our
customers?
 Processes — At which business
processes must we excel?
 Learning and Growing — How will we
sustain our ability to change and
improve?
Issues and Trends
 Global markets,
sourcing,
operations
 Virtual companies
 Greater choice
 Emphasis on
service
 Speed and
flexibility
 Supply chains
 Collaboration
 Technological
advances
 Knowledge
 Environment
and social
responsibilities
The Dilbert (Dogbert) Solution –
Change the Name of the Old Program
Intro to Decision
Making
Decision Analysis
• Payoff Table - craps tables
• Maximax - maximum of maximum payoffs
- optimistic - “hard ways”
• Maximin - maximum of minimum payoffs safe bets or even odds bets
• Minimax regret - minimum of maximum
regrets or opportunity costs
Decision Trees
• Graphical method of analyzing a
decision - similar to Theory of
Constraints
• Payoff table can be translated to a
Decision Tree
The Payoff Table
A method of organizing & illustrating
the payoffs from different decisions
given various states of nature
A payoff is the outcome of the
decision – a Craps table pay off chart
is an example of a payoff chart
Payoff Table
States Of Nature
(Alternatives)
Decision
a
b
1
Payoff 1/a
Payoff 1/b
2
Payoff 2/a
Payoff 2/b
STATES OF NATURE
DECISION
Expand
Maintain status quo
Sell now
Good Foreign
Poor Foreign
Competitive Conditions
Competitive Conditions
$ 800,000
1,300,000
320,000
$ 500,000
-150,000
230,000
Maximums: 1,300,000; 800,000, 320,000
Minimums: 500,000; 230,000; -150,000
decision/State of Nature
sell condo
sell beach house
sell office bldg
EVPI
VPI
good economy
295000
175000
275000
295000
0.5
196100
16200
poor
fair economy economy
126000
76000
95000
126000
0.2
19500
37500
78000
78000
0.3
EMV
178550
113950
179900
179900
Homework
• Motel 6 case study