Introduction to Operations Management

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Introduction

Prof. Christian Terwiesch

Operations in a Restaurant

Prof. Christian Terwiesch

Operations in an Emergency Room

Prof. Christian Terwiesch

Operations from the Perspective of the Customer

Prof. Christian Terwiesch

Four Dimensions of Performance
Cost Quality

▪ Efficiency

▪ Product quality (how good?) ▪ Process quality (as good as promised?)

Variety

Time

▪ Customer heterogeneity

▪ Responsiveness to
demand

Important for - Performance measurement - Defining a business strategy

Prof. Christian Terwiesch

Four Dimensions of Performance: Measurements for a Sandwich Store Cost Quality

▪ Efficiency

▪ Product quality (how good?)

▪ Process quality (as good as
p promised?) )

Variety

Time

▪ Customer heterogeneity

▪ Responsiveness to demand

Prof. Christian Terwiesch

Introduction
Efficient Frontier

Prof. Christian Terwiesch

Four Dimensions of Performance: Trade-offs
Cost Quality

▪ Efficiency ▪ Measured by:
- cost per unit - utilization

▪ Product quality (how good?)
=> Price

▪ Process quality (as good
as promised?) => Defect rate

Variety

Time

▪ Customer heterogeneity ▪ Measured by:
- number of options - flexibility / set-ups - make to order make-to-order

▪ Responsiveness to p
demand

▪ Measured by:
- customer lead time - flow time

Prof. Christian Terwiesch

What Can Ops Management (This Course) Do to Help? Step 1: Help Making Operational Trade-Offs Responsiveness High

Very short waiting times, Comes at the expense of Frequent operator idle time

Tradeoff Low Low labor productivity

Long waiting times, yet operators are almost fully utilized y

High labor productivity

Labor Productivity (e.g. $/call)

Example: Call center of a large retail bank - objective: 80% of incoming calls wait less than 20 seconds - starting point: 30% of incoming calls wait less than 20 seconds - Problem: staffing levels of call centers / impact on efficiency OM helps: Provides tools to support strategic trade-offs Prof. Christian Terwiesch

What Can Ops Management (This Course) Do to Help? Step 2: Overcome Inefficiencies Responsiveness

High

Current frontier In the industry Competitor A Eliminate inefficiencies Competitor C

Low Low labor productivity

Competitor B High labor productivity Labor Productivity (e.g. $/call)

Example: • Benchmarking shows the pattern above • Don’t just manage the current system… Change it! Provides tools to identify and eliminate inefficiencies => Define Efficient Frontier Types of inefficiencies: -Poor process design - Inconsistencies in activity network Prof. Christian Terwiesch

What Can Ops Management (This Course) Do to Help? Step 3: Evaluate Proposed Redesigns/New Technologies Responsiveness High Redesign process

New frontier Current frontier In the industry Low Low labor productivity High labor productivity

Labor Productivity (e.g. $/call) ( $/ )

Example: • What will happen if we develop / purchase technology X? • Better technologies are always (?) nice to ha e b t will the pa ? al a s have, but ill they pay? OM helps: Evaluates system designs before they occur Prof. Christian Terwiesch

Example: The US Airline Industry

Prof. Christian Terwiesch

Example: The US Airline Industry

Prof. Christian Terwiesch

Introduction
Format of the course

Prof. Christian Terwiesch

Course Outline / Grading / Homework
Objective of the course: Understanding and improving business processes Performance measures How-to Mix of industries: healthcare restaurants automotive computers call centers banking etc healthcare, restaurants, automotive, computers, centers, banking, Course Outline Introduction (0.5 weeks) 1. Process analysis (1.5 weeks) 2. Productivity 3. Product variety 4. Responsiveness 5. Quality Requirements / Prerequisites: There are no prerequisites for the course Some modules require statistical knowledge (standard deviation, normal...
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