Production and Operations Management

(POM)
Welcome !

Pedro Oliveira
Nova School of Business and Economics
What is Operations all about?

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 Boeing’s Everett Factory:
the largest building in the world
(472 million cubic feet)

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Boeing 747-8

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Suppliers from across the globe

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Food Supply Chain

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 MAERSK Containers (TEU)
If all MAERSK containers (3.8 million x 20 feet) were all aligned ... they would
give almost 2 complete turns around the globe

Ships to compete with planes for vaccine deliveries, says Maersk

Container group says jab supply likely to outstrip air freight capacity
by middle of the year
(FT, March 19 2021)
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Supply Chain at Amazon Prime

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 Supply Chain
• All facilities, functions, activities, associated with flow and
transformation of goods and services from raw materials to
customer, as well as the associated information flows
• An integrated group of processes to “source,” “make,” and
“deliver” products

Material, Information, Invoicing

Suppliers Manufacturers Distributors Customers

After-sales support, Recycling, Order information, Payments

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Renova ‘black & colors’

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 Today’s Agenda
• Welcome!
• Introduction to Process and Operations Management
• Course Contents and Policies

• Process and Capacity Analysis

• Little’s Law

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Production and Operations Management

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Program and Course Policies

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 Class Topics
PART 1: INTRODUCTION – PROCESSES AND OPERATIONS STRATEGY
PART 2: DESIGN, ANALYSIS AND MANAGEMENT OF PROCESSES
a. Process Analysis and Improvement
b. Operations and Capacity Planning
c. Queuing / Waiting Lines Management
PART 3: SUPPLY CHAIN MANAGEMENT
a. Inventory Management (probabilistic and deterministic models)
b. Push (MRP) vs. Pull systems (JIT)
c. Information, Coordination in the Supply Chain
d. ‘Beer game’ and bullwhip effect
PART 4: QUALITY MANAGEMENT
a. Statistical Process Control
b. Strategies, Processes and Methods
PART 5: INNOVATION AND IMPACT ON POM
a. Innovation and POM
b. Artificial Intelligence and POM
c. Sustainability, Climate Change and Energy Transition
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 Administrative
• Typical class: lecture ; case discussion ; guest speaker ; activity such as
Quizzes (Kahoot) etc

• Handouts available for download at the portal

• Emails: pedro.oliveira@novasbe.pt

Teaching Assistant: Maria João Jacinto

email: maria.joao.jacinto@patient-innovation.com

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 Grading Elements and Weights
Final grade = 50% Exam + 20% Simulation* + 10% Homework* + 20% Class Participation

Final Exam: There will be a final examination (open book, open notes) covering the entire
course. The grade in the exam must be higher or equal to 7,5/20.
Simulation with two parts, 8% part#1 and 12% part#2: The Supply Chain Game is an
online simulator where teams of students manage a supply network on a fictional continent.
The simulator was designed to provide hands on experience in dealing with operations
issues that managers face, using concepts and tools acquired during the course. Participants
compete among each other over the web while developing POM skills.
Homework: One problem set intended for the participant to become better familiar with
the concepts covered in lectures and in the text.
Class Participation: Participants are expected to take part in constructive class discussion.
Class participation includes answering questions related to assigned problems, cases, or
readings. You will earn a participation score for each session. Quizzes will be considered
as part of participation.

* group exercise
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Production and Operations Management

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Introduction
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 What is Operations
Management?
“OM is the business function that plans,
coordinates, and controls the resources needed
to produce a company’s products and services.
(...) OM is the central core function of every company.

(Reid and Sanders, 2002)

“Operations managers are responsible for producing

the supply of goods or services in organizations
(…) and make decisions regarding the operations
function and the transformation systems used.”
(Schroeder, 1989)

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 Operations as transformation process
Feedback

INPUT Transformation
OUTPUT
process
Material Goods
Machines or
Labor
Services
Management
Capital

• Physical (manufacturing)
• Locational (transport/storage)
• Exchange (retail)
• Physiological (healthcare)
• Psychological (entertainment)
• Informational (communications)

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 Diferences between goods
and services
Goods
• Tangible
• Produced and consumed
separately
• Low customer interaction
• Can be inventoried
• Quality is “easier” to measure
Services
• Intangible
• Produced and consumed
together
• High customer interaction
• Cannot be inventoried
• Quality is difficult to measure

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 What do you sell?

The differences between manufacturing and services are

blurring…

Rolls-Royce no longer sells jet engines - it sells the hours

that each engine is thrusting an aeroplane through the sky.

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Hot topic in operations

Sustainability
“Coca-Cola, Absolut And L’Oreal Join Carlsberg
In Paper Bottle Community”
(Forbes Oct 24, 2019)

The prototype for the Carlsberg paper beer bottle is

made from sustainably sourced wood fibre

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Hot topic in operations
CopenHill

Up to 300 trucks arrive each day

Beneath the slopes, furnaces,

steam, and turbines convert
440,000 tons of waste annually into
enough clean energy to deliver
electricity and district heating for
150,000 homes.

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Hot topic in operations
Information Sharing
• Largest & most profitable retailer in the world
– Only 229 stores in 1979 vs 1.891 for Kmart
– #1 Fortune 500 list in recent years 5.163 retail units in US
(>10.000 worlwide)
• Focus on efficient logistics
– Walton influenced by military logistics 1,3 million associates in
– now US Marines are studying Wal-Mart US (>2,2 worlwide)
logistics 61 000 suppliers
• Invested $700 million in 1985 to connect
stores to key vendors via satellite – sales 200 million customers
transmitted daily per week

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Hot topic in operations
Information Sharing

• Wal-Mart’s approach is a more significant innovation than

the transistor (Paul Romer, Stanford)
• The apparel company VF receives daily sales data from Wal-
Mart stores
– Today: a VF product is sold at a Wal-Mart store
– Tomorrow: a replacement product leaves a VF warehouse
for the store
– Two days after the sale: the replacement product arrives at
the store & is put on the shelf

“People think we got big by putting big

stores in small towns. Really, we got big
by replacing inventory with information.”

- Sam Walton, Founder of Wal-Mart

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Hot topic in operations

Trimming the Chain

Traditional
Supply Chain

Dell Supply
Chain

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Hot topic in operations

The 3rd industrial revolution?

• Manufacturing is going digital…
• The digitization of manufacturing will transform the
way goods are made

• You can 3D-print yourself

3D scan
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Hot topic in operations

3-D Printing
• Food can be printed.

• Download your favorite shoes,

customize them, select the sole
for the heel and for the toes,
select the design, select the
colors and the print them

• Bioprinting...
print human organs

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Nuno
https://www.youtube.com/watch?v=O_Crk5RZopg

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Dear AI,
what if famous
brands designed
forklifts?

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Team George

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“So I said to myself:
I’m an engineer, this is just
a plumbing problem”
Tal Golesworthy | Marfan syndrome (UK)

Over 600 patients have received the PEARS aortic

support as of April 1 2022
(class III medical device)

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Patient Innovation
• 1,5 million visits/year
• Community of 100.000 frequent users

• 5000+ submissions from 100+ countries

• 1600+ screened by medical team
• 1,5 innovations/day (~3 submissions/day)

• Types:
• 68% are of Class I
• 30% are of Class II
• 2% are of Class III

• 340 COVID-19 solutions (incl

+ 110 ventilators)

patient-innovation.com

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 PI Awards

Patient Innovation Bootcamp

Boosting Patient Entrepreneurship

Off-platform
July Aug-Sept Sept Oct

Teams EIT Health

3 or 4 members Bootcamp Tour

Kickoff meeting
Online

DESIGNING
THE BUSINESS PLAN
Barcelona
Online

CONSOLIDATING,
DEVELOPING & VALIDATING IMPLEMENTING
Lisbon & DIFFUSING
Copenhagen

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 Can AI help patients develop their own medical innovations/devices to help them
cope with their medical conditions ?
Yes, AI has the potential to assist patients in developing their own medical innovations and devices to
cope with their conditions, but this comes with both advantages and limitations.

Advantages:
1.Data Interpretation: AI can process large volumes of medical research and clinical data to help
patients understand their conditions better and potentially identify gaps where existing solutions may
be lacking.
2.Design Assistance: AI-based CAD (Computer-Aided Design) tools can help in the design and
prototyping phase of a new medical device.
3.Personalization: Machine learning algorithms can customize devices or software to better fit the
individual needs of a patient, based on their unique medical data.
4.Rapid Prototyping: AI can assist in quickly developing a prototype for testing, speeding up the
overall development process.
5.Cost-Effectiveness: AI tools can make the design and testing process more efficient, potentially
reducing the costs associated with developing a new medical solution.

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For learning purposes, can you provide instructions to 3D print an aortic support ?
I must emphasize that 3D printing medical devices—especially something as critical as an aortic support—requires expert
knowledge in medicine, material science, and engineering. The following example is purely for learning purposes and should not
be used for actual medical treatment. Consult qualified medical and engineering professionals if you're seriously considering
developing a medical device.
Preliminary Steps:
1.Medical Imaging: Obtain a 3D image of the affected aorta using medical imaging techniques like CT or MRI scans. This
image will serve as the basis for your design.
2.Software Selection: Choose a CAD (Computer-Aided Design) software that allows you to manipulate medical images and
has features for designing medical devices. Some popular options include Materialise Mimics, Autodesk Fusion 360, or
SolidWorks.
3.Material Selection: Choose a biocompatible material that is suitable for 3D printing and has mechanical properties
compatible with the stress and strain conditions in the aorta.
4.Consult Experts: Engage with medical professionals and engineers experienced in the design of medical implants to
review your design parameters.
Design:
1.Import Medical Images: Import the 3D medical images into the CAD software.
2.Initial Model: Create an initial 3D model of the aortic support based on the dimensions and shape of the affected aorta.
3.Refinements: Incorporate features like brackets or hooks that will help secure the implant in place. Make sure the design
will not disrupt blood flow or cause clotting.
4.Stress Analysis: Use the software's simulation capabilities to test how the design will withstand physiological conditions
(e.g., blood pressure, flow rates).
5.Iterate: Modify the design based on simulation results and expert feedback.

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For learning purposes, can you provide instructions to 3D print an aortic support ?
Preparing for Printing:
1.File Format: Export your final design into a file format supported by your 3D printer, commonly STL or OBJ.
2.Slicing: Use slicing software to prepare the model for 3D printing. This software will convert the 3D model into layers that the
3D printer can build.
3.Printer Configuration: Configure the 3D printer settings according to the material you've chosen and load the material into the
printer.
3D Printing:
1.Calibration: Make sure the 3D printer is calibrated correctly to ensure high precision.
2.Printing: Start the 3D printing process. Monitor the printer during this period to check for errors or malfunctions.
3.Post-Processing: Once the print is complete, you may need to remove support structures or perform other post-processing
steps like sterilization, depending on the material used.
Validation:
1.Quality Control: Use imaging techniques to check the dimensions and quality of the printed implant.
2.Mechanical Testing: Subject the implant to mechanical tests to ensure it meets the required specifications.
3.Expert Review: Have the final product reviewed by medical and engineering experts for feedback.
4.Clinical Trials: Theoretical validation must be followed by rigorous clinical trials before the implant can be used in medical
procedures.
Again, this is a simplified example for educational purposes. Real-world development of a medical implant is a complex, highly
regulated process that requires multi-disciplinary expertise. Always consult with qualified professionals when dealing with life-
critical applications like medical devices.

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Lisa Crites, USA

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48
 Gérard Niyondiko (Burkina Faso)
“I almost died from malaria while
doing my military service in Burundi,
where I was almost left for death
because of malaria”

Faso Soap: Low-cost mosquito repellent made

with natural and local ingredients. It leaves a
scent on the skin for up to 6 hrs. Estimated to
save 100,000 lives by end-2020

Gérard Niyondiko, Burkina Faso

Mosquito repellent soap for Malaria prevention

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Can you provide DYI instruction to prevent patients from being bitten by mosquitos
and infected with malaria?
Certainly, preventing mosquito bites is an essential step in reducing the risk of malaria, especially in areas where the
disease is prevalent. Here are some Do-It-Yourself (DIY) instructions to help you create an environment less conducive to
mosquitoes, as well as personal protection methods. Remember, these DIY methods are not a substitute for professional
medical advice or preventive medications if you're in a high-risk area.
Create Mosquito-Repellent Sprays:
Essential Oil Spray
1.Fill a spray bottle with 1 cup of water.
2.Add 10-15 drops of essential oils like citronella, lavender, or peppermint.
3.Shake well and spray around living spaces.
Vinegar Spray
1.Fill a spray bottle with apple cider vinegar.
2.Add a few drops of essential oil for a more pleasant scent (optional).
3.Spray around potential mosquito breeding sites.
Make Natural Mosquito Repellents for Skin:
Coconut and Essential Oil Lotion
1.Mix 1 cup of coconut oil with 10-15 drops of an essential oil like citronella or eucalyptus.
2.Apply to exposed skin.
Aloe Vera Gel
1.Mix aloe vera gel with a few drops of tea tree oil or lavender oil.
2.Apply to skin.

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Can you provide DYI instruction to prevent patients from being bitten by
mosquitos and infected with malaria??
Build a Mosquito Trap:
DIY Bottle Trap
1.Cut the top third off a plastic bottle and invert it into the bottom third.
2.Fill the bottom with water and add a spoonful of sugar and a few drops of dish soap.
3.Place near mosquito-prone areas. The mosquitoes are attracted to the sugar water and get trapped in the bottle.
Physical Barriers:
1.Install window and door screens.
2.Use mosquito nets impregnated with insecticides for added protection while sleeping.
Personal Protection:
1.Wear long sleeves and pants during peak mosquito activity times, usually dawn and dusk.
2.Use commercially available insect repellent that contains DEET or Picaridin according to the manufacturer's
instructions.
Environmental Modifications:
1.Eliminate standing water where mosquitoes could breed—clear out gutters, old tires, buckets, etc.
2.Keep grass and vegetation trimmed.
Chemical Methods:
1.Use larvicides in water bodies where mosquito larvae are found.
2.Use vaporizer mats, coils, or aerosols containing pyrethroids for indoor protection.

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AI will totally revolutionize the way we think about
innovation processes and entrepreneurship

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Production and Operations Management

Processes and Capacity Analysis

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 Capacity - basic definition
• Capacity: the productive capability of a facility, usually
measured as a quantity of output per unit time.

• Why is capacity important?

– Meet demand in the short term
– Strategically
• Save lives and the economy (vaccines, ICUs, ventilators, hospitals)
• Better service (internet, telecommunications)
• Demand in the long term (opportunities)

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How to measure capacity across
industries?
Shoe Manufacturing Facility:

Vaccine production:

Vaccine distribution/administration:

Hospital:

Airline:

Automobile Assembly Plant:

University:

Consulting Firm:

Gas Station:
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 Capacity terminology
Maximum output for which the
Design Capacity facility was designed

Maximum output given current

Effective Capacity operating conditions (e.g., hours of
operation, product mix, etc.)

Actual production level being

Output achieved

Local vs. System Capacity

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 Capacity bottlenecks

Inputs To customers
1 2 3

200/hr 50/hr 200/hr

(a) Operation 2 a bottleneck

Inputs To customers
1 2 3
200/hr 200/hr 200/hr

(b) All operations are bottlenecks

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 The ‘bottleneck tyranny’
First critical principle in process analysis

The capacity of a process is dictated by the capacity

of the slowest stage, which we normally characterize
as the ‘bottleneck’

To increase the capacity of a process ones needs to

act where the Bottleneck is

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 Steel mill production example
The Steel Corporation of Portugal (SCP)

3 2
Parts Parts F:
A: Iron Ore C: Blast E: Oxygen G: Finishing
Continuous
Processing Furnace Furnace Mill
Caster
DC: 4,500 tpd DC: 3,000 tpd DC: 4,200 tpd DC: 6,000 tpd DC: 5,000 tpd

1 1
Part Part
B: Coke D: Scrap
Ovens Handling

DC: 1,000 tpd DC: 1,500 tpd

System
Forward Pass Capacity
Capacity
Utilization Backward Pass

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 Service system example:
restaurant
Department/Area Capacity/Size Additional Information

Parking Area 100 spaces 2.2 people / car,

average stay of 90 minutes

Bar Area 80 seats 80% occupancy, 20% of people,

40% order meal

Dining Area 200 seats 85% occupancy, 80% of people,

100% order meal

Cooking Area 600 square feet 4 square feet needed for each
meal/hour

Key Question: How do we measure capacity (i.e., what are the units)?

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Little’s Law

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 Little’s Law
Second critical principle in process analysis

The Capacity of a process is related to the level of

inventory and Throughput Time, or Lead Time in the
following way:

Inventory = Capacity * Throughput Time

Abbreviately: I= R*T
Formula also valid for stochastic processes

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 Little’s law (John DC Little 1961)
Throughput rate
(aka flow rate)
WIP Inventory R [units/hr]
[units]
... ... ... ... ...
Throughput rate =
1/Cycle time
Flow time
(aka Throughput time or lead time)
T [hrs]

WIP Inventory = Throughput rate x Flow time

I =RxT
Flow time = WIP Inventory x Cycle time
T=IxC
“Rotation” = Throughput rate / WIP Inventory
Ro = 1 / T

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 Application of Little’s law
Material Flux: A fast-food restaurant processes on average 5,000 kg. of hamburgers per
week. If the average inventory of raw meat is 2,500 kg., what is the average
throughput time for the hamburgers?

Client Flux: The restaurant processes, on average, 1,500 clients per day (15 hours). On
average, there are 75 clients in the restaurant (waiting to complete the order, waiting to
receive the order, eating, etc.). How long does the average client stay in the restaurant?

Order Flux: A branch of an insurance firm processes, on average, 10,000 policies per
year. The average processing time for a policy are 3 weeks.
Assuming there are 50 weeks in a year,
what is the average number of policies being processed?

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 Application of Little’s law (2)
The emergency room (ER) at The Carcavelos Hospital is currently organized so
that all patients register through an initial check-in process. At his or her turn,
each patient is seen by a doctor and then exits the process, either with a
prescription or with admission to the hospital.
Currently, 50 people per hour arrive at the ER, 10% of whom are admitted to
the hospital. On average, 30 people are waiting to be registered and 40 are
registered and waiting to see a doctor. The registration process takes, on
average, 2 minutes per patient.
Among patients who receive prescriptions, average time spent with a doctor is 5
minutes. Among those admitted to the hospital, average time is 30 minutes.
Assume this is a stable system, i.e. the average inflow equals average outflow at
every stage.

a) Draw a process flow diagram for the ER.

b) On average, how long does a patient stay in the ER?
c) On average, how many patients are being examined by doctors?
d) On average, how many patients are in the ER?

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Application of Little’s law: process diagram

prescription out
Wait to Wait for
register doctor
50 p/h I = 30 people I = 40 people 5 mins
90%

in Chek-in Examination
by doctor
10%
30 mins
T = 2 mins
admit to
hospital
Application of Little’s law: process diagram

prescription out
Wait to Wait for
register doctor
50 p/h I = 30 people I = 40 people 5 mins
90%

in Chek-in Examination
by doctor
10%
30 mins
T = 36 mins T = 2 mins T = 48 mins
admit to
hospital
 Processes and diagrams

• Process: Group of interconnected tasks by fluxes of

information and goods that transform inputs in
outputs with greater value
• Process Diagram: utilization of a diagram to represent
the main elements of a process. These key elements
may include tasks or operations, material or client
fluxes, decision points, and areas for inventory or
queuing

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Process mapping symbols
(formal)

Activity

Storage or queuing area

Decision Point

Start or Stop Process

Direction of Flow
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 Process map:
cleaning the bathroom
Start

Does it
really need no Wait a month
it?

yes
Play tennis

no no
Does it really,
REALLY need
it?
Do you have no
Do you
yes
cleaning have
supplies? $?

yes yes yes

Is the sun
shining?
Clean bathroom Go to store
no

End

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 Fast food: compare processes
Client
Old McDonalds Order

Burger
Materials
Ready
Cook Assemble Delivery

Client
Order
New McDonalds

Materials WIP
Cook Assemble Delivery

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 Client
Wendys Order Compare processes
Materials
Cook Assemble Delivery

Chili
Assemble
Burger King
Yes

Materials WIP
Client Special
Cook Order? Delivery
Order
No

Burger
Ready
Assemble

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Flow diagrams and Visibility
Service visible to customer Service not visible to customer
Repair Parts
authorized available

Discuss
Customer Mechanic Check
needed Perform
drops off makes parts
work with work†
car diagnosis* availability†
customer*

Parts not
available

Order Inspect/
Repair not authorized parts
test and
repair

Corrective
work
necessary

Customer Repair complete Perform

Collect Notify
departs corrected
payment customer
with car work

* = Points critical to the success of the service

† = Points at which failure is most often experienced

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True solace is finding none, which is to say,
it is everywhere.
Gretel Ehrlich
The Solace of Open Spaces

True OPERATIONS is finding none, which is

to say, it is everywhere