DSC26 - perations Management

Module Objectives and Todays Outline

1. Introduce perations Management (M)
Why? What?

2. Introduce some concepts, theories, principles,

and analytic tools in M
What?

3. Raise awareness and interests in M

Bonus

1-1

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M is Process Management

Inputs

Processes

Outputs

A process refers to a collection of steps/operations that together perform

some defined function, to produce products/goods or services
Management of processes is Operations Management (M), i.e.
Process management
Operations Management is about designing, managing, and improving the
activities involved in creating products and services and delivering them to
customers. -- Harvard Prof. Roy D. Shapiro

1-2

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Example of Processes
Canned Vegetables

Raw Vegetables,
Water, Energy, Labor,
Building, Equipment,
Cans/Metal sheets

Cleaning, Cutting,
Cooking, Packing,
Labeling,
Buying/Making Cans

Hospital Service
Patients,
Doctors, nurses,
Hospital
Buildings, Medical
Supplies,
Equipment,
Laboratories

1-3

Examination,
Surgery,
Monitoring,
Medication,
Therapy

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Characteristics of products and services

Products / Goods

Services

Tangible

Measurement of Productivity is
easy

Quality evaluation and

correction is easy

Customer involvements (inputs,

process, outputs) is low

Product definition is consistent

Can be inventoried

Patentable is common

1-4

Intangible
Measurement of Productivity is
hard
Quality evaluation and correction
is not easy
Customer involvements (inputs,
process, outputs) is high
Service definition is not
consistent
Cant be inventoried
Patentable is not common

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Examples of Processes
Financial Institutes or/and Banks

$$$$$$$$$$$
$$$$$$$$$$$
$
$$$$$$$$$$$

Activities such as:

Investments
Loans
Insurances
H funds
Stocks

$$$$$$$$$$$$$$$
$$$$$$$$$$$$$$$
$$$$$$$$$$$$$$$
$$$$$$$$$$$$$$$

Marketing/Accounting/HR agents
Resources

1-5

Innovative
Processes

Services

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What M - Redux?
Most start-ups:
Phase 1: have a good idea,
Phase 2: ???
Phase 3: make money.

INPUTS

1-6

Transformation
Processes

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OUTPUTS

A beautiful world

What Products and Services adds beauty to your world?

1-7

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The Cold Hard Facts

Competition in OM

Product and Service design

Process and Capacity

Quality
Inventory and materials

Quick response
Supply

and Flexibility

Chain Management

Sustainable OM

Marketing, Finance,

1-8

Accounting, HR, Policy

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Competition

Stock price

Google Inc. (GOOG), the biggest maker of Smartphone software

(founded in 1998), agreed to buy Motorola Mobility Holdings Inc. for

$12.5 billion in its largest acquisition, gaining mobile wireless patents
and expanding in the hardware business.

Motorola shareholders will get $40 a share in cash, the companies said
in a statement today. Thats 63 percent more than Motorola Mobilitys
closing price on the New York Stock Exchange on Aug. 12. Both boards
have approved the takeover.

Googles stock price went down immediately from $557.23 per share to
$557

1-9

-------15 August, 2011 by Bloomberg

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Role of M is to add value

Value-added is the difference between the cost of inputs and the value or price of outputs

$$
INPUTS

$$$
Transformation
Processes

$$$$$
OUTPUTS

Teaching is essentially a transformation activity which aims to get students to take charge of
their learning and to make deeply informed judgments about the world
Source: Education for Judgement, HBS, by C. Roland Christensen et al

The transformation process is the hardest

thing for competitors to copy!

1-10

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How can M add value?

Goods or Services

INPUTS

feedbacks

Creating Goods or
Providing Services

Goods or Services

Transformation
Processes

OUTPUTS

feedbacks

feedbacks

Measure Performance
&
Take Corrective Action

1-11

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Measuring Productivity

Productivity is a performance measurement of the effective

use of resources, usually expressed as the ratio of output to
input
Output
Ouput Output
{ e.g.
,
}
Single Input
Labor Capital

Partial Measures :

Multifactor Measures :

Output
Ouput
{ e.g.
}
Multiple Inputs
Labor + Machine

Multifactor Measures :

Output
Labor + Capital + Energy

Total Measure :

1-12

Goods or services produced

All inputs used to produce them
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Why Productivity?

Profits depend on different types of productivity

= units*(price - cost)
= units*(price - labor cost - material cost - asset cost)

Where:

1
labor cost =
labor productivity

1
material cost =
material productivity

1-13

asset cost =

1
asset productivity
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Improving Productivity: steel making

Iron Ore,
Limestone,
Coal etc.

Transformation
Processes

100 kg
Steel
Steel

In 1970s:
144 kg inputs (iron ore, coal, limestone combined)
Raw materials productivity: 100/144 = 69.44%
In 2000s:
115 kg inputs (20% reduction in inputs)
Raw materials productivity: 100/115 = 86.96%
In 2008: 1.3 b. tons steel were produced
Raw materials saved = 260 m. tons combined inputs
Bonus: reduced 1.12 b. tons of CO2
Labour output per hour, indexed to 1987

..
Steelmaking

using recycled material provides significant environmental

benefits and cost savings. For every ton of steel scrap used, 1400 kg of
iron, 400 kg of coal and 55 kg of limestone can be saved. Source: BLS 1996, 2001

1-14

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Improving Productivity: Airline

For the airline companies

20 minutes of ground time (turn around

time) savings between flights can create 1
or 2 extra flights per day

4 to 5 minutes of boarding time savings can

generate $1 million per year (UA)

Some boarding strategies

1-15

First class
Business class
Coach/economy class

Back to front (NWA)

window to aisle (UA)

first come first board (SWA)

reverse pyramid (USA saves > 2 minutes)

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Matching Supply with Demand

Consequences of mismatch

1-16

In 2003, 95 million does of flu vaccine were produced

and 12 millions were not used (Supply >> Demand ->
waste). The year after, 87 millions were produced, and
there were a shortage of flu vaccine which lead to flurelated death (supply < demand -> opportunity and
other indirect deadly costs).
In 2006, Nintendo launched Wii, supply <<< demand

21st June, 2013, Singapore, PSI was more than 400 and
demand for mask > supply
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Matching Supply with Demand

Examples

Food and Restaurants: happy hours

Airline/Hotel managements: low and high seasons

Seasonal products production: swimming suits, perishable

products (Great Singapore Sale!)

Retail Industry: consumer goods (delay color decision)

Hospitals beds per 1,000: 0.5 or 16? (World Bank)

1-17

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Improving efficiency of others

Operations

Accounting, HR, Strategy and Policy,

1-18

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Managing Trade-offs

trade-off is

an exchange where you give up one thing in order to get

something else that you also desire.
what you pay for what you get

Examples

1-19

Means to school: bus, MRT, Taxi, own car, or live in the dorm
Grocery Shopping: daily, weekly, or monthly
Size of the airplane: Boeing vs. Air Bus
Singapore airline (SIA)

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M in Practice
Route to the top
of CEOs of S&P 500 companies
42% had Operations experience at
some point in their career

31% were in Operations

immediately before
becoming CEO
Source: Spencer Stuart Route to the top Survey, 2008

1-20

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DSC26 - perations Management

Module Objectives and Todays Outline

1. Introduce perations Management (M)
All Slides, especially 2-6

2. Introduce some M concepts, theories, and

analytics tools
All Slides, especially 10-19

3. Raise awareness and interests in M (bonus)

Poll: May I get my bonus?

1-21

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Module Overview
Week
1
2
3
4
5
6
7
8
9
10
11
12
13

Lecture Topic
Introduction to Operations Management (OM) and module overview
Product, process, and capacity
Process Selection, facility layout, and line balancing
Manage Queue and Waiting
Quality Management (QM)
Inventory Management I: ABC Analysis and EOQ
Midterm Review
Inventory Management II: Quantity Discount and EPQ
Newsboy and Revenue Management
Aggregate Planning and MRP
Lean (JIT) and Supply Chain Management
Guest Speaker - Mr. Stephan Schablinski
Sustainable OM and Operations Strategy
Goods or Services
INPUTS
feedbacks

1-22

Creating Goods or
Providing Services
Transformation
Processes
feedbacks
Control action
Measure Performance

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Goods or Services
OUTPUTS
feedbacks

Module Overview

IVLE (Announcements, Polls, Surveys, Discussion Forum, chat

room, webcasted Lectures, and module materials)
Assessments (No make-up exams, see more details on IVLE)

Lectures (starts on the hour, 5 minutes break in the middle-ish,

ends 25 minutes before the next 2 hours)

Final exam 60%

Midterm exam 30%
Tutorial participation 10%

To ensure quality of the learning experience of others, no late

entrance is permitted! Use Webcasts!

Tutorials (starts on the hour, no break, ends 15 minutes before

the next hour)
1-23

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Our Apple Example

apples

1-24

Peel
&
Slice

4 peeled slices
per apple

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