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 things

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 internal

stability

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 mistake-proof design improves process capability

• Joint, early involvement in design improves quality, speed, and cost