Introduction

Operations in a Restaurant

Operations in an Emergency Room

Operations from the Perspective of the Customer

CostEfficiencyTimeResponsiveness to demandQualityProduct quality (how good?) Process quality (as good as promised?) Four Dimensions of PerformanceVarietyCustomer heterogeneityImportant for Performance measurement Defining a business strategy

Four Dimensions of Performance: Measurements for a Sandwich Store

IntroductionEfficient Frontier

CostEfficiencyMeasured by: - cost per unit - utilizationTimeResponsiveness to demandMeasured by: - customer lead time - flow timeQualityProduct quality (how good?) => PriceProcess quality (as good as promised?) => Defect rateFour Dimensions of Performance: Trade-offsVarietyCustomer heterogeneityMeasured by: - number of options - flexibility / set-ups - make-to-order

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-offsResponsivenessLabor Productivity(e.g. $/call)LowHighLow laborproductivityHigh laborproductivityTrade-offVery short waiting times,Comes at the expense ofFrequent operator idle timeLong waiting times, yet operators are almost fully utilizedWhat Can Ops Management (This Course) Do to Help? Step 1: Help Making Operational Trade-Offs

ResponsivenessLowHighEliminate inefficienciesCurrent frontierIn the industryLabor Productivity(e.g. $/call)Low laborproductivityHigh laborproductivityCompetitor ACompetitor CCompetitor BExample: Benchmarking shows the pattern above Dont 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 networkWhat Can Ops Management (This Course) Do to Help?Step 2: Overcome Inefficiencies

Example: What will happen if we develop / purchase technology X? Better technologies are always (?) nice to have, but will they pay?

OM helps: Evaluates system designs before they occurWhat Can Ops Management (This Course) Do to Help?Step 3: Evaluate Proposed Redesigns/New Technologies

Example: The US Airline Industry

Example: The US Airline Industry

IntroductionFormat of the course

Course Outline / Grading / HomeworkObjective of the course: Understanding and improving business processesPerformance measuresHow-toMix of industries: healthcare, restaurants, automotive, computers, call centers, banking, etc

Course OutlineIntroduction (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 assignmentsOne large assignment after each module (five assignments); 10% each

Final exam with questions from all modules; 50%

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)

Personal IntroductionMBA core course: Operations Management: Quality and Productivity

Taught ~ 60 times ~ 4000 MBA students McKinsey Ops Practice ~ 500 new associates Research: Operations Management, focus on Healthcare Management Innovation tournaments and contests

Christian Terwiesch terwiesch@wharton.upenn.edu Andrew M. Heller Professor at the Wharton School Senior Fellow Leonard Davis Institute for Health Economics 573 Jon M. Huntsman Hall Philadelphia, PA 19104.6366

*The result of increasing performance pressure and decreasing competitive advantage is that companies must reevaluate how their business and manufacturing strategies fit together.

In general, business strategy should drive manufacturing strategy. Each aspect of the manufacturing strategy (what, where, and how) should be examined to see how the overall business strategy can be advanced. By looking at what is manufactured, for example, a company might decide to not make certain things and thereby free up factory floor space, which can in turn act as a catalyst to ultimately restructuring the entire network. The end result of this hypothetical situation would be that unnecessary factories could be closed down to capture overhead savings. This would not have been the result had the company taken only a narrow, tactical approach to reviewing a certain process in a particular factory. A company must have a comprehensive view when examining manufacturing strategy.*The result of increasing performance pressure and decreasing competitive advantage is that companies must reevaluate how their business and manufacturing strategies fit together.

In general, business strategy should drive manufacturing strategy. Each aspect of the manufacturing strategy (what, where, and how) should be examined to see how the overall business strategy can be advanced. By looking at what is manufactured, for example, a company might decide to not make certain things and thereby free up factory floor space, which can in turn act as a catalyst to ultimately restructuring the entire network. The end result of this hypothetical situation would be that unnecessary factories could be closed down to capture overhead savings. This would not have been the result had the company taken only a narrow, tactical approach to reviewing a certain process in a particular factory. A company must have a comprehensive view when examining manufacturing strategy.