OPSM 501: Operations Management

1
OPSM 501 Operations Management
Koç University Graduate School of Business MBA
Program

• Week 8
• Variability, Congestion, Quality

Zeynep Aksin zaksin_at_ku.edu.tr
2
The Service Process

• Customer Inflow (Arrival) Rate (Ri) (?)
• Inter-arrival Time 1 / Ri
• Processing Time Tp (unit load)
• Processing Rate per Server 1/ Tp (µ)
• Number of Servers (c)
• Number of customers that can be processed
  simultaneously
• Total Processing Rate (Capacity) Rp c / Tp
  (cµ)

3
Operational Performance Measures
processing
waiting
(?) Ri e.g10 /hr
R (?) 10 /hr
Tw?
10 min, Rp12/hr

• Flow time T Tw Tp (waitingprocess)
• Inventory I Iw Ip
• Flow Rate R Min (Ri, Rp)
• Stable Process Ri lt Rp,, so that R Ri
• Littles Law I R ? T, Iw R ? Tw,
  Ip R ? Tp
• Capacity Utilization ?? Ri / Rp lt 1
• Safety Capacity Rp Ri
• Number of Busy Servers Ip c ?? Ri ? Tp

4
Summary Causes of Delays and Queues

• High Unsynchronized Variability in
• Interarrival Times
• Processing Times
• High Capacity Utilization r Ri / Rp, or Low
  Safety Capacity Rs Rp Ri, due to
• High Inflow Rate Ri
• Low Processing Rate Rp c/ Tp (i.e. long
  service time, or few servers)

5
The Queue Length Formula
Utilization effect
Variability effect
x
where ???? Ri / Rp, where Rp c / Tp, and CVi
and CVp are the Coefficients of Variation
(Standard Deviation/Mean) of the inter-arrival
and processing times (assumed independent)
6
Throughput- Delay Curve
We must have slack capacity ? lt 1
7
In words

• in high utilization case small decrease in
  utilization yields large improvement in response
  time
• this marginal improvement decreases as the slack
  in the system increases

8
Deriving Performance Measures from Queue Length
Formula

• Use the formula to find Iw
• Tw Iw /R
• T Tw Tp
• Ip Tp R
• I Iw Ip

9
How can we reduce waiting?

• Reduce utilization
• Increase capacity faster servers, better
  process design, more servers
• Reduce variability
• Arrival Appointment system
• ServiceStandardization of processes, automation
• We can control arrivals
• Short lines (express cashiers)
• Specific hours for specific customers
• Specials (happy hour)

10
Example Effect of pooling

• 4 Departments and 4 Departmental secretaries
• Request rate for Operations, Accounting, and
  Finance is 2 requests/hour
• Request rate for Marketing is 3 requests/hour
• Secretaries can handle 4 requests per hour
• Marketing department is complaining about the
  response time of the secretaries. They demand 30
  min. response time
• College is considering two options
• Hire a new secretary
• Reorganize the secretarial support
• Assume inter-arrival time for requests and
  service times have exponential distribution (i.e.
  CV1)

11
Current Situation
12
Current Situation waiting times
Accounting, Operations, Finance
T processing timewaiting time 0.25 hrs.
0.25 hrs 0.5 hrs30 min
Marketing
T processing timewaiting time 0.25 hrs.
0.75 hrs 1 hr60 min
13
Proposal Secretarial Pool
Accounting
2
Finance
2
3
Marketing
9 requests/hour
2
Operations
Arrival rateR9/hr
Tp1/4 hr, Rpc/Tp16/hr
UtilizationRi/Rp9/16
14
Proposed System Secreterial pool
T processing timewaiting time 0.25 hrs.
0.04 hrs 0.29 hr17.4 min
In the proposed system, faculty members in all
departments get their requests back in 17
minutes on the average. (Around 50 improvement
for Acc, Fin, and Ops and 75 improvement for
Marketing). Pooling improves waiting times by
ensuring effective use of capacity
15
Effect of Pooling
Ri/2
Ri
Ri/2
Server 1
Pooled service capacity reduces waiting
Ri
Queue
Server 2
16
The impact of task integration (pooling)

• balances utilization...
• reduces resource interference...
• ...therefore reduces the impact of temporary
  bottlenecks
• there is more benefit from pooling in a high
  utilization and high variability process
• pooling is beneficial as long as
• it does not introduce excessive variability in a
  low variability system
• the benefits exceed the task time reductions due
  to specialization

17
Turkish Airlines

• Growth? Quality?

18
Customer assesment of service quality
external communication
Dimensions of service quality
word of mouth
personal needs
past experience

• tangibles
• reliability
• responsiveness
• competence
• courtesy
• credibility
• security
• access
• communication
• understanding
• the customer

expected service
Perceived service quality
perceived service
19
Service quality is

• A relative notion
• Changes dynamically
• The bar goes up
• Measurement can be hard

20
The SERVQUAL dimensions

• tangibles how do I look?
• reliability am I keeping promises?
• responsiveness am I prompt and willing?
• assurance am I capable, polite, and credible?
• empathy do I care?

21
Identifying quality shortfalls
word-of-mouth
personal needs
past experience
expected service
Gap 5
perceived service
Customer
Provider
service delivery
Gap 3 conformance quality
Gap 1 quality of design
external communications to customer
Gap 4
service quality specifications
Gap 2 quality function deployment
management perceptions
22
Diagnosis for Gap 1
expected service

• lack of bottom-up communication
• too many management layers
• no measurement of what customers expect
• marketing failure

Gap 1
management perceptions of these expectations
23
Diagnosis for Gap 2
service quality specifications

• reluctance to tackle challenges
• lack of management commitment
• ease of measurement driving decision
• no employee involvement

Gap 2
management perceptions of customer specifications
24
Diagnosis for Gap 3
service delivery

• wrong incentives (control systems)
• wrong technology for the job
• wrong type of people for the job
• insufficient resources
• lack of management commitment

Gap 3
service quality specifications
25
Diagnosis for Gap 4
service delivery

• over promising
• lack of communication
• lack of product design and
• development discipline

Gap 4
external communications
26
Addressing internal gaps

• Gap 1
• use front-line employees
• give customers an incentive to complain service
  guarantees
• Gap 2
• dont take no measurement as an option
• involve people in measurement
• Gap 3 4
• value proposition / formulation
• process design and management
• capacity design and management
• HRM

27
Next week

• Littlefield reports due
• Start prepping for the midterm