Prof. Christian Terwiesch

Introduction
Prof. Christian Terwiesch
Operations in a Restaurant
Operations in an Emergency Room
Operations from the Perspective of the Customer
Four Dimensions of Performance

Quality
Cost
Product quality (how good?)
Efficiency
Process quality (as good

as promised?)
Variety
Time
Customer heterogeneity
Responsiveness to
demand
Important for
- Performance measurement
- Defining a business strategy
Four Dimensions of Performance:

Measurements for a Sandwich Store
Cost
Efficiency
Quality
Process quality (as good as

promised?))
p
Variety
Time
Responsiveness to demand
Introduction
Efficient Frontier
Four Dimensions of Performance: Trade-offs

Quality
Cost
Efficiency
Measured by:
=> Price
Process quality (as good
- cost per unit

- utilization
as promised?)
=> Defect rate
Variety
Time
Measured by:
Responsiveness
p
to
demand
Measured by:
- number of options
- flexibility / set-ups
- make-to-order
make to order
- customer lead time

- flow time
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
Tradeoff
Low
Long waiting times,

yet operators are almost
fullyy utilized
Low labor
productivity
High labor
productivity
Labor Productivity
(e.g. $/call)
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

Step 2: Overcome Inefficiencies
Responsiveness
High
Current frontier
In the industry
Competitor A
Eliminate
inefficiencies
Competitor C
Low
Competitor B
Low labor
productivity
High labor
productivity
Labor Productivity
(e.g. $/call)
Example:
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 network

Step 3: Evaluate Proposed Redesigns/New Technologies
Responsiveness
High
Redesign
process
New frontier
Current frontier
In the industry
Low
Low labor
productivity
High labor
productivity
Example:
What will happen if we develop / purchase technology X?
Better technologies are always
al a s (?) nice to ha
have,
e b
butt will
ill the
they pa
pay?
?
OM helps: Evaluates system designs before they occur
Labor Productivity
(
(e.g.
$/call)
$/
)
Example: The US Airline Industry
Example: The US Airline Industry
Introduction
Format of the course
Course Outline / Grading / Homework

Objective of the course:
Understanding and improving business processes
Performance measures
How-to
Mix of industries: healthcare
healthcare, restaurants
restaurants, automotive
automotive, computers
computers, call centers
centers, banking
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 q
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 Introduction
MBA 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

Prof. Christian Terwiesch

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Introduction