OPERATIONS
MANAGEMENT
OPRE 6260
Raymond Lutz
Products, Processes, and
Performance - Chapter 1
Learning Objectives
• An operation as a transformation
process
• Product attributes / Operational
capabilities
• Process drivers / Operations structure
Operations and Strategy Chapter 2
– Operational focus
Learning Objectives
• Link between business strategy,
operations strategy, and operations
structure
– Strategy vs. Operational effectiveness
– Process drivers / Operations structure
– How to do an operational audit
Operations and Strategy Chapter 2
• Link between business strategy,
operations strategy, and operations
structure
– Process classification and relationship with
strategy
– Tradeoffs of price vs. variety competition:
trade off scale economies with variety
diseconomies
Process Flow Measures Chapter 3
Learning Objectives
• Process measures: time, inventory, and
throughput
• What is an improvement?
– Link financial and operational measures
– Good operational measures are leading
indicators of financial performance
• Using Little’s Law for process flow
analysis: CRU Rental
Flow Time Analysis - Chapter
4
Learning Objectives
• Process measures:
– Flow time - manages critical activities
– Capacity manages critical resources
• Levers for improving
– Flow time - manages critical activities
– Capacity and throughput
• Process capacity depends upon a zillion
Flow Rate and Capacity
Analysis - Chapter 5
Learning Objectives
• Effect of product mix decisions on
process capacity
– Marginal contribution per unit of bottleneck
capacity used
• Process flow charts with multiple
products
Flow Rate and Capacity
Analysis - Chapter 5
• Backups may not occur in front of a
bottleneck
• Bottlenecks may shift on adding
capacity, diminishing returns to capacity
investment
Inventory Analysis - Chapter 6
Learning Objectives
• Increasing batch size of production or
purchase increases average inventories
and thus cycle time
• Average inventory for a batch of size Q
is Q/2
• The optimal batch size trades off setup
cost and holding cost
Inventory Analysis - Chapter 6
• To reduce batch size, one has to reduce
setup time (cost)
• Square-root relationship between Q and
(R,S)
– If demand increases by a factor of 4, it is
optimal to increase batch size by a factor
of 2 and produce twice as often
– To reduce a batch size by a factor of 2,
setup cost has to be reduced by a factor of
4
Managing Flow Variability:
Safety Inventory - Chapter 7
Learning Objectives
• Postponement can be used to better
match supply and demand
• Accurate response for “fashion” goods
– Trade-off cost of over and understocking
Managing Flow Variability:
Safety Capacity - Chapter 8
Learning Objectives
• Queues build up due to variability
• Reducing variability improves
performance
• If service cannot be provided from
stock, safety capacity must be provided
to cover for variability
Managing Flow Variability:
Safety Capacity - Chapter 8
• Pooling servers improves performance
• Demand and supply management in
servers
Process Control and
Capability - Chapter 9
Learning Objectives
• Every process displays variability normal or abnormal
• Control charts monitor processes to
identify abnormal variability
• Local control yields early detection and
correction of abnormal variability
• Process “in control” indicates only its
Process Control and
Capability - Chapter 9
• Process capability is its ability to meet
external customer needs
• Improving process capability involves
changing the mean and reducing
normal variability, requiring a long term
investment
Process Control and
Capability - Chapter 9
• Robust, simple, standard, and mistakeproof design improves process
capability
• Joint, early involvement in design
improves quality, speed, and cost