Introduction

Prof. Christian Terwiesch

Operations in a Restaurant

Prof. Christian Terwiesch

Operations in an Emergency Room

Prof. Christian Terwiesch

Operations from the Perspective of the Customer

Prof. Christian Terwiesch

Four Dimensions of Performance
Cost Quality

▪ Efficiency ▪ Product quality (how good?)

▪ Process quality (as good

as promised?)

Variety Time
▪ Customer heterogeneity ▪ Responsiveness to
demand

Important for
- Performance measurement
- Defining a business strategy

Prof. Christian Terwiesch

Four Dimensions of Performance:
Measurements for a Sandwich Store
Cost Quality
▪ Efficiency ▪ Product quality (how good?)

▪ Process quality (as good as

promised?))
p

Variety Time
▪ Customer heterogeneity ▪ Responsiveness to demand

Prof. Christian Terwiesch

Introduction
Efficient Frontier

Prof. Christian Terwiesch

Four Dimensions of Performance: Trade-offs
Cost Quality

▪ Efficiency ▪ Product quality (how good?)

=> Price
▪ Measured by:
- cost per unit ▪ Process quality (as good
- utilization as promised?)
=> Defect rate

Variety Time
▪ Customer heterogeneity ▪ Responsiveness
p to
▪ Measured by: demand
- number of options ▪ Measured by:
- flexibility / set-ups - customer lead time
- make-to-order
make to order - flow time

Prof. Christian Terwiesch

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
fullyy utilized
Low

Low labor High labor Labor Productivity

productivity 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

Prof. Christian Terwiesch

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

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
What Can Ops Management (This Course) Do to Help?
Step 3: Evaluate Proposed Redesigns/New Technologies

Responsiveness

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
al a s (?) nice to ha
have,
e bbutt will
ill the
they pa
pay?
?

OM helps: Evaluates system designs before they occur

Prof. Christian Terwiesch
Example: The US Airline Industry

Prof. Christian Terwiesch

Example: The US Airline Industry

Prof. Christian Terwiesch

Introduction
Format of the course

Prof. Christian Terwiesch

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%

Prof. Christian Terwiesch

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

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