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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
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