1. Operations Management Introduction www.ePowerPoint.com

2. Agenda
Self-introduction
Introduce Yourself
Quick Introduction of OM
Four Dimensions of Performance
Efficient Frontier
Course Logistics

3. Personal Introduction
Research Interests:
Operations Management, focus on Scheduling, Optimization
and Data Mining MBA core course: Data, Model and Decision
Global MBA course: Management Analytics
Shijin Wang
Associate Prof., PhD
Dept. of Management Science & Engineering
School of Economics & Management
Tongji University
Office: Room 1407, Tongji Building, Block A

5. Introducing Yourself Name A Brief Background Schooling Work Experience
General Academic Interests

6. The Industrial Revolution
is NOT over
Manufacturing today is caught between the effects of the continuing Industrial Revolution and the beginning of the Information and Knowledge Revolution.
The Industrial Revolution was the transition to new manufacturing processes in the period from about 1760 to sometime between 1820 and This transition included going from hand production methods to machines, new chemical manufacturing and iron production processes, improved efficiency of water power, the increasing use of steam power and the development of machine tools. It also included the change from wood and other bio-fuels to coal.
Information and Knowledge Revolution mainly computer, internet, MIS. Recently, in China, mobile terminal; combination of internet and finances. For example, if I put 10,000RMB in bank, the interest rate is 3.25%/year; but if I put the money in the internet bank, the interest rate is around 4-6%/year.

7. Evolution of the Industrial Revolution
Standardization
Specialization
Coordination
Mass production
Volume and flexibility
Time-based competition
Mass customization

8. Background: Manufacturing in 21st Century
Fewer manufacturing workers
More physical output
More service provision
More demanding customers
Ever-increasing competition

9. Background: Service in the 21st Century
Increasing productivity
More newer technology
More service provision
More demanding customers
Ever-increasing competition

10. The Economic Sectors:
1. Agriculture and Mining
2. Manufacturing and Industry
3. Service

11. Workforce in China by Sector
1980
1990
2000
2005
2010
2011
2012
2013
Agriculture & Mining(%) 69 60 50 45
36.7
34.8
33.6
31.4
Manufacturing & Industry(%) 18 21 22 24
28.7
29.5
30.3
30.1
Service(%) 13 19 28 31
34.6
35.7
36.1
38.5
Workforce
(million)
423.6
647.5
720.8
758.3
761.05
764.2
767
769.8
Source: China Statistical Yearbook, 2014

12. Sector GDP Source: China Statistical Yearbook, 2014 1980 1990 2000
2005
2010
2011
2012
2013
Agriculture & Mining
30%
27%
15%
12.2%
10.1%
10%
Manufacturing & Industry
48%
41%
46%
47.7%
46.8%
46.6%
45.3%
43.9%
Service
22%
32%
39%
40.1%
43.1%
43.4%
44.6%
46.1%
Source: China Statistical Yearbook, 2014

13. Operations Management
Key to improved efficiency through management of process
Video Clip1
Video Clip 2
Video Clip 3

14. EVOLUTION
Scientific Management
Factory Management
Industrial Management
Production Management
Operations Management

15. Operations management (OM) is defined as the design, operation, and improvement of the systems that create and deliver the firm’s primary products and services.
OM is concerned with the management of the entire system that produces a good or delivers a service.
Source: Operations Management for Competitive Advantage,
by Richard B. Chase, F.Robert Jacobs, Nicholas J. Aquilano, 11th Edition. Publisher:  McGraw-Hill (ISBN # )

16. Management Decisions
Within the operations functions, management decisions can be divided into three broad areas:
Strategic (long-term) decisions
Tactical (intermediate-term) decisions
Operational Planning and control (short-term) decisions
How will we make the product? Where do we locate the facility or facilities? How much capacity do we need? When should we add more capacity? The time frame of the decisions is typically long- usually several years or more, depending on the specific industry. Affect the company’s long-range effectiveness in terms of how it can address its customers’ needs.
How to efficiently schedule material and labor within the constraints of previously made strategic decision. How many workers do we need? When should we have material deliveried? Should we have a finished goods inventory?
What jobs do we work on today or this week? Whom do we assign to what tasks? What jobs have priority?
Source: Operations Management for Competitive Advantage,
by Richard B. Chase, F.Robert Jacobs, Nicholas J. Aquilano, 11th Edition. Publisher:  McGraw-Hill (ISBN # )

17. System Perspective and OM in the Organization Chart
Operations
Plant Manager
Manager
Director
Manufacturing, Production control, Quality assurance, Engineering, Purchasing, Maintenance, etc
Finance
Marketing

18. Operations in a Restaurant

19. Operations in an Emergency Room
Bank

20. Four Dimensions of Performance
Quality
Product quality (how good?)
Process quality (as good as promised?)
Cost
Efficiency
Variety
Customer heterogeneity
Time
Responsiveness to demand
Important for
Performance measurement
Defining a business strategy

21. Four Dimensions of Performance: Measurements for a Restaurant
Cost
Efficiency
Time
Responsiveness to demand
Quality
Product quality (how good?)
Process quality (as good as promised?)
Variety
Customer heterogeneity

22. Introduction
Efficient Frontier

23. Four Dimensions of Performance: Trade-offs
Quality
Product quality (how good?) => Price
Process quality (as good as promised?) => Defect rate
Cost
Efficiency
Measured by: - cost per unit - utilization
Variety (Flexibility)
Customer heterogeneity
Measured by: - number of options - flexibility / set-ups - make-to-order
Time
Responsiveness to demand
Measured by: - customer lead time - flow time

24. What Can Ops Management (This Course) Do to Help
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 fully utilized
Low
Low labor
productivity
High labor
productivity
Labor 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

25. The photo shows employees at China-based company Ctrip in the call center of their headquarters in Shanghai. The one-stop China travel service Ctrip.com specialises in discount hotel reservations, cheap airline tickets and package tours

26. What Can Ops Management (This Course) Do to Help
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
productivity
High labor
productivity
Labor 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

27. What Can Ops Management (This Course) Do to Help
What Can Ops Management (This Course) Do to Help? Step 3: Evaluate Proposed Redesigns/New Technologies
Responsiveness
Low
High
Redesign process
Current frontier
In the industry
Labor Productivity
(e.g. $/call)
Low labor
productivity
High labor
New frontier
Example:
What will happen if we develop / purchase technology X?
Better technologies are always (?) nice to have, but will they pay?
OM helps: Evaluates system designs before they occur

28. What is behind the Acronyms?
TQM
ISO 9000 MA
SPC 6σ
CPFR
OEM
EOQ MC
SCM LP
ROP
BPR
MRP I
ERP
MRP II
Collaborative Planning Forecasting and Replenishment
JIT

29. Process Analysis & Design
Quality Management
Supply Chain Strategy
Operations Planning, Scheduling & Coordination
Forecasting
Inventory Control
Project Management

30. Introduction
Format of the course

31. Percentage of final grade
Course Outline / Grading
Objective of the course:
Understanding and improving business processes
Performance measures
How-to
Mix of industries: healthcare, restaurants, automotive, computers, call centers, banking, etc
Course Outline
Introduction(1 session)
1. Process analysis (3 sessions) 2. Productivity (3 sessions) 3. Product variety (2 sessions) 4. Responsiveness (2 sessions) 5. Quality (3 sessions)
6. Supply Chain (1 session)
7. Operations Scheduling (1 session)
Components
Percentage of final grade
Class participation
10%
Group work (Case Study)
60%
Individual work
Final report
30%
Others (Please specify)

32. Teams and Team Projects
Group Work is important
Organize with student no.
4-6 persons/team
Cases will be assigned after I have group names.

33. Cases Help to learn from each other and “real” world
Expect that you be prepared each week to discuss case
Cold-call will be made
Be considerate to your fellow students (especially when you strongly disagree)
Try to discuss cases as a group outside of class
Sometimes a case presentation is required
Summarize major issues
Your Recommendations

34. • Individual Preparation and Commitment
How to Learn from Cases
• Individual Preparation and Commitment
• Small Group Discussion (pre-class)
– Test ideas
– Not to get a consensus
• Large Group Discussion (in-class)
– Vigorous Debate and Friendly Argument
– Commitment to Various Alternatives
– Persuasion of Peers
• Reflection and Personal Generalization
Source: my personal HBS case study learning

35. Cases Case 1: Operations strategy at Galanz
Case 2: New England Feed Supply
Case 3: Two Chinese food restaurant
Case 4: Strategic Sourcing at Whirlpool China

36. Text Book
Course book
Cachon, Gerard, Christian Terwiesch, Matching Supply with Demand: An Introduction to Operations Management, 2nd edition, Irwin - McGraw Hill, 2009 (ISBN , 500 pages)
Reference Book
Operations Management for Competitive Advantage,
by Richard B. Chase, F.Robert Jacobs, Nicholas J. Aquilano, 11th Edition. Publisher:  McGraw-Hill (ISBN # )

37. Historical Development of OM (cont’d)
1990s, Business Process Reengineering.
Supply Chain Management.
Electronic Commerce.
Eliminating non-value-added steps and computerizing the remaining ones to achieve the desired outcome
Total system approach to managing the flows (outsourcing, mass customization).
Taobao, Change the way of shopper and operations managers
BPR: takes a fresh look at what the organization is trying to do in all its business processes, and then eliminating non-value-added steps and computerizing the remaining ones to achieve the desired outcome.
SCM: apply a total system approach to managing the flow of information, materials, and services from raw material suppliers through factories and warehouses to the end customer. (outsourcing, mass customization)
E-commerce refers to the use of the internet as an essential element of business activity.
Source: Operations Management for Competitive Advantage,
by Richard B. Chase, F.Robert Jacobs, Nicholas J. Aquilano, 11th Edition. Publisher:  McGraw-Hill (ISBN # ) 15

38. Optimizing global supplier, production, and distribution network.
Current Issues in OM
Coordinating the relationships between mutually supportive but separate organizations (contract manufacturer).
Optimizing global supplier, production, and distribution network.
Increased co-production of goods and services.
Recently there has been a dramatic surge in the outsourcing of parts and services that had previously been produced internally. This has been encouraged by the availability of fast, inexpensive communications. A whole new breed of contract manufacturers that specialize in performing focused manufacturing activities now exists. The ability to coordinate these activities is a significant challenge for the operations manager of the future.
global ERP leads to large companies, has challenged managers to use all of this information. This requires a careful understanding of where control should be centralized and where autonomy is important, among other issues. Can only survive by using all information from these systems, such as inventory, transportation, and production equipment.
information sharing, intelligent use of information technology will allow the shedding of entire layers of inefficient customer-oriented functions within a firm
Source: Operations Management for Competitive Advantage,
by Richard B. Chase, F.Robert Jacobs, Nicholas J. Aquilano, 11th Edition. Publisher:  McGraw-Hill (ISBN # ) 14

39. Current Issues in OM (cont’d)
Managing customer touch points.
Raising senior management awareness of operations as a significant competitive weapon
(1) As companies strive to become superefficient, they often scrimp on customer support personnel (and training) required to efficiently staff service departments, help lines, and checkout counters
Source: Operations Management for Competitive Advantage,
by Richard B. Chase, F.Robert Jacobs, Nicholas J. Aquilano, 11th Edition. Publisher:  McGraw-Hill (ISBN # ) 15