Introduction to Operations

Management

Session 1

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Contact information
• Instructor: Professor Jeunghyun Kim
• Office: Hyundai Motor Hall 524
• Office hours: Monday 14:00 ~ 16:00
• Email: jeunghyunkim@korea.ac.kr
• TA: Sungji Park (sungjipark44@gmail.com)

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Copyright protection
• You cannot distribute course materials with others.

• You cannot record lectures (either online or offline) in any forms (either pictures,
audio records, or videos).

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Course materials
• Lecture slides and practice problems (no textbook required)
• Will be uploaded on Blackboard at least 1 day before each class
• Finalized copy will be uploaded after each class

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Quizzes/homework assignments/exams
• 3 quizzes
• Purpose is to check your understanding of previous materials and that you are prepared for
each class.
• No make-up quizzes are given.

• 3 homework assignments
• Will be collected in class on each due date (electronic copies won’t be accepted).
• Late submissions are not accepted.

• 2 exams (1 mid-term and 1 final)

• No make-up exams are given.

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Due dates
• Quizzes on 4/7, 4/21, and 5/26.
• Midterm is on 5/7.
• The final is on 6/25.

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Academic integrity
• Discussion regarding homework questions is encouraged; however, the final
write-up should be of your own.

• Quizzes and exams are closed books.

• You may bring one double-sided crib sheet (size: A4).

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Case analyses
• Budget allocation problem in digital marketing
• Optimally spending the marketing budget among multiple channels (such as banners, social
media, and search engines)

• Smartphone sellout forecasting

• Accurately predicting smartphone sellouts to streamline a supply chain

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Grading

Category Contribution
Attendance 5%
Quizzes 10%
Homework 15%
Mid-term 30%
Final 40%

• Attendance will be called each class from the third week (3/30).
• For the online lectures, Blackboard can automatically collect the attendance.
• You need to attend minimum 50% of classes not to FAIL.

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Online lectures
• For a better environment, I disable video/audio sharing functionality.

• If you have questions, use “hand raise” function and leave your questions in the
chat room.

• There is a chance that I miss questions posted in the chat room in real time. I will
have a time to review the chat room every 10~15 minutes to respond to missed
questions.

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Make-up classes
• We will have make-up classes for two national holidays (4/30 and 5/5).
• I will open a vote to see your preferences (evening/weekend and online/offline).

• To make-up for missing classes due to the virus outbreak, there will be classes
during the exam weeks as well.

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Why do we learn operations management (OM)?
• OM provides the concepts and tools used in answering important business
questions
• How to design processes to improve performance?
• How to reduce cost?
• How to deliver goods and services faster?
• How to improve quality?
• How to provide more variety and satisfy customer satisfaction?

• Why do decision makers care about these questions and why is it so complicated
to make answers to these questions?
• Whether small or large, companies have access to limited resources.

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Business decisions that OM can answer
• Resources are limited and therefore decision makers should always think about
trade-off.

• Examples
• Overbooking in the hospitality (such as airlines and hotels) industry
• You do not want to be famous for frequently bumping customers due to overbooking.
• Without overbooking, you cannot protect yourself from lost sales due to no shows.
• So, there is always this trade-off between lost sales and reputations

• Inventory management in the manufacturing (such as electronics and car makers) industry
• Running with low inventory level can cause lost sales can be problematic when facing a sudden
demand surge.
• All left over inventory is salvaged.
• So, there is always this trade-off between lost sales and salvage cost.

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Course outline
• The objective of this course is to introduce type of problems that operations
managers face everyday and teach essential techniques to tackle those problems.

• We are going to cover (mainly) five key areas

• Process Analysis and Capacity Management
• Waiting Line Management
• Optimization and Linear Programming
• Revenue Management
• Inventory and Supply Chain Management

• (Subject to change depending on the progress) To have students taste recent

trends in OM, there will one or two sessions about data analytics.

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Processes
• A business process is a set of coordinated tasks and activities that will lead to
accomplishing a specific organizational goal.

• Processes are the main building block of operations.

Inputs Outputs
(customers (goods
Process
and/or and/or
materials) services)

• Examples
• Selling hamburgers
• Receiving a BS degree from KUBS
• Selling smartphones
• Delivering books to customers

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Process behind selling smartphones

Hardware development
Software development
Human resources
Demand prediction
Factories Smartphone sales
Production planning
Raw materials
Marketing
Etc.

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Process behind delivering books

Platform UI design
Human resources Server maintenance
Warehouses Warehouse assignment Book deliveries
Books Pricing
Etc.

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Process selection
• Different companies intentionally choose different processes to accomplish the
same goal.

• Let us compare two famous fast food franchises.

• in McDonald’s
• in IN-N-OUT

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McDonald’s (prior to 1999)
• Prior to 1999, McDonald’s adopted the make-to-stock (MTS) system.

Customer
places order

Raw Finished
Material Goods
Cook Assemble Deliver

Activity Storage

Decision Flow

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Advantages and disadvantages of adopting MTS
• Advantages
• Fast in the sense that customers enjoy their orders right away as long as there are stocks.

• Disadvantages
• Hamburgers/fries are not fresh/juicy when demand is low.
• Left over hamburgers/fries cannot be carried over to the next business day and must be
discarded.

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In-N-Out
• In-N-Out has been operating under the make-to-order (MTO) system.

Customer
places order

Raw
Material
Cook Assemble Deliver

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Comparison between MTS and MTO

MTS MTO
Responsiveness Better
Variety (customization) Better
Quality Better

• It is important to note that the comparison about the responsiveness and the
quality is valid when the demand is not too high.
• When the demand is too high, MTS and MTO behave similarly.

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McDonald’s (after 1999)
• McDonald’s suffered from the poor quality and the lack of customization
• In-N-Out offers secret menus to meet customizations.

• McDonald’s implemented a new process called hybrid which is somewhere

between MTS and MTO.

Customer
places order

Raw
Material WIP
Cook Assemble Deliver

(Patties can be kept for up to 30 minutes.)

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Advantages and disadvantages of hybrid process
• Advantages
• Customization to some extent is possible.
• Faster than MTO

• Disadvantages
• Need to manage inventory of cooked materials (it is much easier to store raw meat than to
keep cooked patties fresh)

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Other examples of MTS and MTO
• MTS
• Fast fashion items
• Back-ordered items are made not due to customer orders but according to companies’
planning.

• MTO
• Cars with specific requirements
• Mostly car dealers keep stocks of somewhat standardized models.
• I once was told to wait for three months for a car with a navigation system but without a
back-up camera.

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 Waiting line management at a ticketing booth
• Simple operation with many options to manage process
• How many agents do we hire?
• If we hire multiple agents, how many lines do we open?

Next in
line. 0

Single agent, single line Multiple agents, single line Multiple agents, multiple lines

• What are advantages and disadvantages of different settings?

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Waiting line management at a ticketing booth
• Risk pooling
• Under some conditions (we will learn about it later), customers experience shorter wait
times when they are kept in a single line.
• It is called risk pooling because randomness in service completions is pooled together in one
line.

Multiple agents, single line Multiple agents, multiple lines

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Process evaluation
• Different processes have different advantages and disadvantages.

• How do we pick one process over other processes?

• On what bases can we say one process is superior to other processes?
• Is there a simply better process?

• Next class
• Another example of risk pooling
• Process evaluation metrics
• Flow rate
• Capacity
• Utilization rate

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