Week 1: Summary

1. What is Operations Management?

Aug 2023
2. How do firms compete?

Dr. WANG Qinan

3. What is a process?
4. Process flow and Little’s Law

1
 Case Study:
McDonald’s Made-for-You Kitchen
Watch the video: McDonald’s Just-in-Time Lean Manufacturing
https://www.shmula.com/about-peter-abilla/what-is-just-in-time-manufacturing/

Answer the following questions

• How do you define “Operation Management” at McDonald’s?
• Why did McDonald’s want to change its kitchen system?
• How important is Operation Management to McDonald’s? Do you
think the Made-for-You kitchen system is good? Any potential
problem?
• Define a process based on the kitchen system
• Define a flow unit, flow rate, flow time and inventory for the system

Aug 2023 Dr. WANG Qinan 2

 Key Functions of A Firm

Fundamental activities/functions of a business

Produce Sell
Fund
Inputs Outputs

Revenue

Aug 2023 Dr. WANG Qinan 3

 What is Operations management (OM)?
OM is the design, operation, and improvement of the
operations or production systems that create and
deliver the firm’s primary products and services

OM Produce Sell
Fund
Inputs Outputs
Marketing

Finance/Accounting
Revenue
Aug 2023 Dr. WANG Qinan 4
 How do firms Compete?
Why did McDonald’s Change its Kitchen?
What can you do? What customers want?
• Low cost
• Produce different products
• Low price
to cater to individual needs • High quality
• Produce/Deliver fast/on • Deliver fast/on time
time
• High quality, etc.
• Products meets their own
needs, etc.
Competition:
How do you
perform
relative to
your
competitors?

Aug 2023 Dr. WANG Qinan 5

 Do Better or Do Differently?
1. Perform similar activities better than rivals
2. Perform different activities than rivals – trade offs & blue
ocean strategy

Responsiveness Strategic direction

of movement
Operations Frontier:
? Minimum curve
OE containing all
current positions in
the industry

Cost Efficiency
Aug 2023 Dr. WANG Qinan 6
 What is a Process?
• A process is the set of activities/tasks that
transform inputs into a single or group of outputs
• Flow of materials, customers and information

Inputs (resources)

Inputs (raw Transformation

materials) Outputs
activities

Aug 2023 Dr. WANG Qinan 7

 Process at McDonald’s

Inputs (resources)

Inputs: bun,
ingredients, etc. A hamburger
Or a meal!

McDonald’s kitchen system

Aug 2023 Dr. WANG Qinan 8

Flow Unit, Flow Time, Flow Rate & Inventory
• Flow unit: a basic component that starts as an input,
flows through the whole process, and comes out as part
of the output!

Output: hamburger
Flow unit: bun Or meal

• Flow time: average time for each bun/unit to flow

through the system (from entry to exit)
• Flow rate: average number of units (hamburgers or
meal) coming out from the process per unit time

• Inventory: number of units (buns) in the system

Aug 2023 Dr. WANG Qinan 9
 Little’s Law
On average, the following relationship holds:
Inventory = Flow Rate * Flow Time
I =R *T

Output: hamburger
Flow unit: bun Or meal

• Average number of units (buns) in the system I =

average number of units (buns) coming out from the
system per unit time R * average time for each unit
(bun) in system T

Aug 2023 Dr. WANG Qinan 10

 Examples

Output: hamburger
Flow unit: bun Or meal

A McDonald’s restaurant sells 960 hamburgers in an 8-

hour shift. On average, there are 20 hamburgers/buns in
the system. How long is the average time for a bun to
flow through the system (starting from the time it is
taken from the storage until the hamburger reaches the
hand of customer)?

Aug 2023 Dr. WANG Qinan 11

 Additional Exercises

See classroom discussions

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