I. Introduction to Operations Management

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I. Introduction to Operations Management

• What is operations management about?
• Why is operations important?
• Contribution to the economy
• Contribution to a companys bottom line
• Relationship between operations and finance,
  operations and marketing
• Business (organization) as a Process

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Operations Management

• What is included in operations management?
• Examples of supply-demand mismatch
• Air travel
• Emergency room
• Retailing
• Iron ore plant
• Pacemakers

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The Secret of Wal-Marts Success

• Obvious ones
• The genius of founder Sam Walton service
  excellence, employees own part of the business
• The strategy of everyday low prices
• Big stores offer economies of scale and variety
• Key

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Dell Inc.

• Direct sales
• Elimination of reseller markups
• Build to order
• Negative working capital
• Mass customization
• Quick delivery in 5 days
• Supply Chain Management

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Southwest Airlines
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Performance-Importance Map at a Bank
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Typical Comments from Marketing/Manufacturing
Problem area Marketing Manufacturing
Capacity planning, long range sales forecasting Why dont we have enough capacity? Why didnt we have accurate sales forecasts?
Prod. scheduling, short-range sales forecasting We need faster response. Our lead times are ridiculous. We need realistic customer commitments and sales forecasts that dont change like wind direction.
Delivery and physical distribution Why dont we ever have the right merchandise in inventory? We cant keep everything in inventory.
Quality assurance Why cant we have reasonable quality at reasonable cost? Why must we always offer options that are too hard to manufacture and that offer little customer utility?
Breadth of product line Our customers demand variety. The production line is too broad all we get are short, uneconomical runs.
Cost control Our costs are so high that we are not competitive in the market place. We cant provide fast delivery, broad variety, rapid response to change, and high quality at low cost
New product introduction New products are our life blood. Unnecessary design changes are prohibitively expensive.
Adjunct services such as spare parts inventory support, installation, and repair Field service costs are to high Products are being used in ways for which they werent designed.
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Manufacturing and Service Matter

• In order to accurately analyze firms and their
  potential, you need to be able to analyze their
  operations.
• What are their core competencies?
• Why would you recommend Wal-Mart over Disney?
• Finding Easy Money on the Targets Shop Floor
• In an LBO, its important to free up cash
  quickly, for repayment
• Rules of thumb for analyzing shop floor
  opportunities for improvement
• One of the biggest opportunities inventories
  (cash!)
• Business Processes matter
• capacities, throughput times, inventory turns,
  queues, bottlenecks applicable to any process
• optimization and simulation are useful tools

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Design of the Course

• Three Modules
• Process Types and Operational Measures
• Process Management and Improvement
• One Quantitative Tool Constrained Optimization
• Topics
• Introduction to Operations
  
• Process Types and Operational Measures
• Process Analysis
• Optimization
• Inventory
• Just-in-Time, MRP, ERP
• Queueing

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The Process View of an Organization

• Organization as a process
• a black box at the most aggregate level
• uses resources to transform inputs into outputs
• Operations Management Management of processes

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Todays Takeaways

• What is operations management about?
• Design operations to better match supply with
  demand
• A set of quantitative models and qualitative
  strategies
• Why is operations important?
• Contribution to the economy Smoother Economic
  Sailing
• Contribution to a companys bottom line
• Kimberly-Clark
• Wal-Mart
• Dell Computer
• Southwest Airlines
• Relationship between ops and finance, operations
  and marketing
• Business as a process that uses resources to
  transform inputs to outputs