Introduction

Operations Management
Fall 2021
Department of Business Administration
UC3M
Professor Gemma Berenguer
Today’s class

• Introduction

Gemma Berenguer
Operations Management
• Syllabus

• What is OM?

• Form groups

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About me
• Professor Gemma Berenguer
• Office 6.0.11

• Office phone 91 624 8679

Gemma Berenguer
Operations Management
• Background
• I am from Spain
• BS in Mathematics
• Ms in Economics
• MEng in Logistics and SCM
• PhD in Operations Research (U.C. Berkeley)
• Professor at Purdue University

• Experience/Interests
• Optimization and Supply chain design
• Operations management for public and nonprofit institutions
• Sustainable and socially responsible operations 3
About you?
• Country/Provincia
• Main interest

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 Syllabus

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Materials
• Case packet
• Case questions on Aula Global
• Textbooks:
• David Bamford and Paul Forrester. “Essential Guide to Operations

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Management”. Wiley. 2012

• Jay Heizer, Barry Render and Chuck Munson "Operations Management:

sustainability and supply chain management". Pearson, 12th Edition.

• Slides
• Posted on Aula Global after each session
• Quiz solutions
• Sample exams
• Supplemental files 6
Course Grading
Continuous Evaluation (70%)

• Class attendance and participation (5%)

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Operations Management
• Related to practical sessions (30 %)

o 3 in-class quizzes (10% each)

• Related to theoretical sessions (magistrales) (35%)

o 3 Case deliverables (10% each, but only counting best 2, so 20%)

o Final project (15%)

Final Examination (30%): December 20th! 7

 Submissions

Operations Management
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Goals of the course
• An overview of Operations Management and Operations
Strategy
• A process view of the firm and tools for analyzing processes
• Tools for managing manufacturing and service processes

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• Tools for understanding and managing the impact of variability
• Examples on how companies can use (and have used) the OM
tools from this course to significantly enhance their
competitiveness

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How will we do it?
• Lectures
• Examples
• Case discussions

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• Quizzes
• Final project

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What is Operations
Management?
• It is an area of business concerned with the production
of goods and services, and involves the responsibility of

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Operations Management
ensuring that business operations are efficient in terms
of using as little resource as needed, and effective in
terms of meeting customer requirements.

• In short: Matching supply with demand

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 If excessive supply…

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Goods-service continuum
Goods Service

Surgery, teaching

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Song writing, software development

Computer repair, restaurant meal

Automobile Repair, fast food

Home remodeling, retail sales

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Automobile assembly, steel making
If excessive demand…

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 Operations Management
The management of systems or processes that create goods
and/or provide services.
people, equipment, money, raw Goods/
material, components services

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Output
Input

Operations

Control
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Supply Chain Management

Sequence of activities and organizations involved in

producing and delivering a good or service.

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Manufacturer Distributor Wholesaler Retailer

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 Supply Chain Management

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What defines a ‘good process’?
Ultimately, all organizations compete on delivered value.

Delivered value of process =

benefit to customers – total process cost

Benefit driven
by customer value

Price p Variety V

Quality Q: Time T (Response time):

▪ of product ▪ rapid, reliable delivery
▪ outcome of service ▪ new product 18
development
How do we measure OM
success?
• Absolute measures:
• Revenues, costs, operating income, net income

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• Relative measures:
• ROA
• ROI, ROE

• Survival measure:
• Cash flow

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ROA

Operating Profit
ROA = =
Total Assets

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Sales - Costs
= =
Total Assets
Sales - Costs Sales
= * =
Total Assets Sales
Sales Sales - Costs
= *
Total Assets Sales
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Is it enough?
• However, it is very difficult to understand the exact impact of
operations on assets and sales.
• Why?
•

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Aggregate measure – hard to separate the impact;
• No details;
• Direct connection is not transparent;
• Many dependencies;
• External factors;

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Competitive measures
• Cost vs. quality

• Cost vs. variety

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• Cost vs. time

• Time vs. quality

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Cost
• Fixed (overhead) costs

• Variable costs

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Cost
Quantity

• Total costs = fixed costs + quantity x variable costs 23

• Average costs = Total costs/quantity
Cost
• Fixed (overhead) costs

• DOES NOT CHANGE WITH QUANTITY

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Cost
• Variable costs

• CHANGES WITH QUANTITY

Q*
Quantity
Need to produce more than Q*
to justify new technology

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• Total costs = fixed costs + quantity x variable costs
• Average costs = Total costs/quantity
Variety
• E.g. HP Workstations -- 500,000 options
• RAM cards, video cards, graphic cards, monitors, disk drives, CD-
ROM drives

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• Why?
• Market Segmentation

• Competition

• Technology

• International Differences

• Government Requirements
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Is variety good or bad?
• Manufacturing Costs vs. Customer Choice

Higher Complexity Cost:

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more parts, changeovers, etc.
• High variety
Happier Customers:
more choices

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Understanding tradeoffs

Cost

High Inefficient

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Not attainable

Low

Low High Product Variety

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Caterpillar Inc.
• Engine options: 200 hp, 250 hp, 300 hp;
• Stick options: Integrated or Standard;
• Cabin Options: Canopy or Deluxe with A/C…

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• 2,275,000 Configurations

Before After
Configurations sold 569 76
Sales Volume 3825 3812 28

Profit $63M $67M

Shifts

Cost

High Caterpillar move:

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Inefficient

Low
Not attainable
Low High Product Variety
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Shifts

Cost

High Caterpillar move:

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Inefficient

Shifting the frontier

requires innovation

Low
Not attainable
Low High Product Variety
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 Type of decisions in OM

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Outline of the course
• Part 1 (Quiz 1)
• Operations Strategy
• Project Management
• Forecasting

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• Part 2 (Quiz 2)
• Process Analysis

• Part 3 (Quiz 3)
• Statistical Process Control
• Lean Operations
• SCM
• Humanitarian Logistics

• Part 4 (Final project)

• Circular Economy/Sustainability 32
Next day (Wednesday!)
2 08/09 Topic: Operations and Strategy

Case: American Connector Company

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1. What are the key differences in the operations at American Connector’s
Sunnyvale plant and DJC's Kawasaki plant?
2. How does ACC compete? Do the operations choices made by ACC
support ACC’s competitive strategy?
3. How does DJC compete? Do the operations choices made by DJC
support DJC’s competitive strategy?
4. What should ACC do to respond to the threat of DJC starting operations 33
in the US?
• Form study teams of 4 or 5 students!

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