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Introduction Session 1 Prof. Christian Terwiesch Operations in a - PowerPoint PPT Presentation

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Introduction Session 1 Prof. Christian Terwiesch Operations in a Restaurant Prof. Christian Terwiesch Operations in an Emergency Room Prof. Christian Terwiesch Four Dimensions of Performance Quality Cost Product quality (how good?)

  1. Introduction Session 1 Prof. Christian Terwiesch

  2. Operations in a Restaurant Prof. Christian Terwiesch

  3. Operations in an Emergency Room Prof. Christian Terwiesch

  4. Four Dimensions of Performance Quality Cost ▪ Product quality (how good?) ▪ Efficiency ▪ Process quality (as good ▪ Process quality (as good as promised?) Time Variety ▪ Responsiveness to ▪ Customer heterogeneity demand Important for - Performance measurement - Defining a business strategy Prof. Christian Terwiesch

  5. Four Dimensions of Performance: Measurements for a Sandwich Store Quality Cost ▪ Product quality (how good?) ▪ Efficiency ▪ Process quality (as good as promised?) p ) Variety Time ▪ Customer heterogeneity ▪ Customer heterogeneity ▪ Responsiveness to demand ▪ Responsiveness to demand Prof. Christian Terwiesch

  6. Introduction Session 2 Prof. Christian Terwiesch

  7. Four Dimensions of Performance: Trade-offs Quality Cost ▪ Product quality (how good?) ▪ Efficiency => Price ▪ Measured by: ▪ Process quality (as good ▪ Process quality (as good - cost per unit as promised?) - utilization => Defect rate Time Variety ▪ Responsiveness to ▪ Customer heterogeneity p Customer heterogeneity demand ▪ Measured by: ▪ Measured by: - number of options - customer lead time - flexibility / set-ups - flow time - flow time - make-to-order make to order Prof. Christian Terwiesch

  8. 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 Trade- off Long waiting times, yet operators are almost fully utilized y Low Low labor High labor Labor Productivity productivity productivity (e.g. $/call) Example: Call center of a large retail bank 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

  9. 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 Competitor B Competitor B Low labor High labor Labor Productivity productivity 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

  10. What Can Ops Management (This Course) Do to Help? Step 3: Evaluate Proposed Redesigns/New Technologies Responsiveness High High Redesign process New frontier Current frontier In the industry Low Low labor High labor Labor Productivity productivity productivity ( (e.g. $/call) $/ ) Example: • What will happen if we develop / purchase technology X? • Better technologies are always (?) nice to have, but will they pay? Better technologies are al a s (?) nice to ha e b t ill the pa ? OM helps: Evaluates system designs before they occur Prof. Christian Terwiesch

  11. Example: The US Airline Industry Prof. Christian Terwiesch

  12. Example: The US Airline Industry Prof. Christian Terwiesch

  13. Introduction Session 3 Prof. Christian Terwiesch

  14. 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 Mix of industries: healthcare, restaurants, automotive, computers, call centers, banking, etc 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 distribution) Homework assignments One large assignment after each module (five assignments); 10% each Final exam with questions from all modules; 50% q ; Prof. Christian Terwiesch

  15. Text Book Course book Cachon, Gerard, Christian Terwiesch, Matching Supply with Demand: An Introduction to Operations Management , 3rd edition, Irwin - McGraw Hill, 2012 (ISBN 978-0073525204, 507 pages) Prof. Christian Terwiesch

  16. Personal Introduction MBA core course: Operations Management: Quality and Productivity Taught ~ 60 times ~ 4000 MBA students Research: Operations Management, focus on Healthcare Management Innovation tournaments and contests Christian Terwiesch Andrew M. Heller Professor at the Wharton School Senior Fellow Leonard Davis Institute for Health Economics Senior Fellow Leonard Davis Institute for Health Economics 573 Jon M. Huntsman Hall Philadelphia, PA 19104.6366 Prof. Christian Terwiesch

  17. Process Analysis Session 1 Prof. Christian Terwiesch

  18. Subway – Sitting in Front of the Store Prof. Christian Terwiesch

  19. Subway – Sitting in Front of the Store Prof. Christian Terwiesch

  20. Processes: The Three Basic Measures • Flow rate / throughput : number of flow units going through the process per unit of time • Flow Time : time it takes a flow unit to go from the beginning to the end of the process • Inventory : the number of flow units in the process at a given moment in time • Flow Unit : Customer or Sandwich Flow Unit : Customer or Sandwich Prof. Christian Terwiesch

  21. Process Analysis: The Three Measures Immigration department Champagne MBA program Auto company Applications Bottle of champagne Student Car Approved or rejected cases Bottles sold per year Graduating class Sales per year Processing time Processing time Time in the cellar Time in the cellar 2 years 2 years 60 days 60 days Pending cases Content of cellar Total campus Inventory population Prof. Christian Terwiesch

  22. Why Do We Care About Inventory? About $1 Trillion in Inventory in the US Economy About $1 Trillion in Inventory in the US Economy That is manufacturing inventory alone Prof. Christian Terwiesch

  23. Why Do We Care About Inventory? (ctd) Inventory corresponds to Supply Demand mismatches Inventory corresponds to Supply-Demand mismatches That is inventory waiting for customers, but also customers wait for products and services Service Examples ER Wait Times: 58-year-old Michael Herrara of Dallas died of a heart attack after an estimated 19  h hours in the local Hospital ER i th l l H it l ER Some ER’s now post expected wait times online / via Apps It takes typically 45 days do get approval on a mortgage; Strong link between wait times and  conversion Waiting times for drive through at McDonald’s: 159 seconds; Long queues deter customers to join Waiting times for drive-through at McDonald s: 159 seconds; Long queues deter customers to join   Production Examples Buying an Apple computer • B Buying a Dell computer i D ll t • => Make-to-order vs Make-to-Stock Prof. Christian Terwiesch

  24. Summary When observing a process always aim to understand the three process measures When observing a process, always aim to understand the three process measures • Flow rate / throughput : number of flow units going through the process per unit of time • Flow Time : time it takes a flow unit to go from the beginning to the end of the process Flow Time : time it takes a flow unit to go from the beginning to the end of the process • Inventory : the number of flow units in the process at a given moment in time In the next session we will discuss what drives these measures In the next session, we will discuss what drives these measures We will then find out that the three measures are related to each other Prof. Christian Terwiesch

  25. Process Analysis Session 2 Prof. Christian Terwiesch

  26. Process Analysis In this session, we will take you INSIDE the black box Specifically, you will learn how to: 1. Create a process flow diagram 2. Find the bottleneck of the process and determine the maximum flow rate 3 Conduct a basic process analysis 3. Conduct a basic process analysis Prof. Christian Terwiesch

  27. Subway – Inside the Store Prof. Christian Terwiesch

  28. Drawing a Process Flow Diagram Prof. Christian Terwiesch

  29. Drawing a Process Flow Diagram Station 1 Station 2 Station 3 Customers Symbols in a process flow diagram Difference between project management and process management Prof. Christian Terwiesch

  30. Basic Process Vocabulary • Processing times : how long does the worker spend on the task? • Capacity =1/processing time: how many units can the worker make per unit of time If there are m workers at the activity: Capacity=m/activity time • Bottleneck : process step with the lowest capacity • Process capacity : capacity of the bottleneck • Flow rate =Minimum{Demand rate, Process Capacity) • Utilization =Flow Rate / Capacity • Flow Time: The amount of time it takes a flow unit to go through the process • Inventory : The number of flow units in the system Inventory : The number of flow units in the system Prof. Christian Terwiesch

  31. Process Analysis Session 3 Prof. Christian Terwiesch

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