1. OPSM 301 Operations Management Spring 2012 Class 1: Introduction
Evrim Didem Güneş

2. Administrative Details: Methods
The textbook for this course is Managing Business Process Flows: Principles of Operations Management Second Edition (Prentice Hall), by Anupindi, Chopra, Desmukh,van Mieghem, Zemel
Course website:
Lectures:
Readings from the book, Case discussions
Slides and supplementary material on the web site
Cases in Xerox center
Study Questions and office hours
Grading:
Participation %
Quizzes % (~4)
Assignments % (~5)
Midterm %
Final(comprehensive) %

3. The Team My Office Hours: Tuesday-Thursday 15.30-16.30
Teaching Assistants:
Yahya Yavuz, Doğuş Özkök, Duygu Korkmaz, Celal Özgür Ünsal

4. Administrative Details: Classroom Conduct
Expectations:
Attendance:will count for participation grade
Participation in discussions- Ask questions
Being fair: Anything that disturbs the class is unacceptable (making noise, arriving late, using cell phones etc.)
Academic honesty
Check the website regularly
Adhering to the deadlines
Read the syllabus!

5. What is the OPSM 301 course about?
The role of the operations function may be defined as the design, operation, and improvement of the production system that creates the firm’s primary products and services
We will study how organizations “actually do things” 

6. Organizing to Produce Goods and Services
Essential functions:
Marketing – generates demand
Operations – creates the product
Finance/accounting – tracks organizational performance, pays bills, collects money

7. Operations as a Competitive Weapon
Dell Computers
Innovative Supply Chain Strategy (direct model)
Southwest Airlines
Leader in lowfare flights, by elimination of all waste
Zara
Can deliver new styles in 3-6 weeks (compared to 5-12 months for competitors)
Pegasus Airlines
Low fare flights in Turkey

8. Supply Chain of a Typical Original Equipment Manufacturer

9. Management Decisions Strategic (long-term) decisions
Tactical (intermediate-term) decisions
Operational planning and control (short-term) decisions

10. Course Outline Introduction to Processes & Operations Strategy
Process Analysis
Linear Programming
Inventory Management
Managing Variability
Supply Chain Management
Project Management

11. A Process Management Perspective
We all manage processes...
Process
Management
Information
structure
Network of
Activities and Buffers
Inputs
Outputs
Flow units
(customers, data,
material, cash, etc.)
Goods
Services
Labor & Capital
Resources

12. Process Management
A business process is a network of activities performed by resources that transforms inputs into outputs…
Process Management is a set of managerial policies specifying how a process should be operated over time...

13. What defines a “good process”? Delivered value
Delivered value of process =
benefit to process customers – total process cost
Benefit driven by customer value
Purpose: Defining strategic position
Text:
Question: What can we do? If you have to give guidelines to people making operational decisions, how do we get around this?
Ultimately, what we care about are the financial measures. What is going to lead to good financial performance? It’s going to depend on what I am offering in the marketplace in terms of how fast the service is, how much does it cost, what kind of variety do I offer. What is going to lead to good financial performance?
If you have a good strategic position and you execute it well. Once you start thinking about what’s a good strategic position, you can start to think what dimensions matter. In a broader sense, financial measures track the difference between the value provided to the customers and the cost of producing and delivering the product. The goal of every organization is to maximize the difference. For profit-maximizing firms, the key financial measure is profit. For non-profit organization, the key financial measure is the value provided to its clients given a budget constraint. To improve its financial performance a firm must attract and retain customers by providing goods and services that meet or exceeds their expectations.
This is how we are going to think about strategic position. We will think about strategic position in the fairly simplistic way.
If we concentrate of the benefits to the customer, these are driven by the strategic position in terms of : Price (southwest), Quality (Toyota, very low number of problems), Time (FedeX, Apple with ipods, on time performance), Variety (AA – broad network, GM).
Comment- why do we equate the benefits to process customers with revenues – a reasonable estimate of the product value is the price that a specific customer is willing to pay.
Variety V
(flexibility)
Quality Q:
of product or outcome
of service
Time T:
Rapid, reliable delivery
New product development
Price p (Cost) 13
G. Allon/Operations/Strategy

14. Products Products are the desired set of process outputs Product Types
Goods versus Services
Product Attributes
Cost
Delivery response time
Variety
Quality

15. Inputs-Outputs Tangible Inputs Intangible Inputs Tangible Outputs
People
Raw material
Intangible Inputs
Information
Time
Tangible Outputs
Buildings
Cars
Intangible Outputs
Outgoing patient (hospital)
Delivered message (advertising company)

16. Transformations Physical--manufacturing Locational--transportation
Exchange--retailing
Storage--warehousing
Physiological--health care
Informational--telecommunications

17. All Managers are Ops Managers!
All managers must transform inputs into outputs
Example: Accounting Manager
Inputs: data, information
Transformation: application of accounting principles and knowledge
Outputs: accounting reports, knowledge of performance, ...
Therefore, all managers are in some sense Operations managers
All managers have an “operation” to run

18. Characteristics of Goods
Tangible product
Consistent product definition
Production usually separate from consumption
Can be inventoried
Low customer interaction
© 1995 Corel Corp.

19. Characteristics of Service
Intangible product
Produced & consumed at same time
Often unique
High customer interaction
Inconsistent product definition
Often knowledge-based
Frequently dispersed
© 1995 Corel Corp.

20. Goods Contain Services / Services Contain Goods
Automobile
Computer
Installed Carpeting
Fast-food Meal
Restaurant Meal
Auto Repair
Hospital Care
Advertising Agency
Investment Management
Consulting Service
Counseling 25 50 75
100
Percent of Product that is a Good
Percent of Product that is a Service

21. Development of the Service Economy
Percent
United States
Canada
France
Italy
Britain
Japan
W Germany
1970
2000
Services
Industry
Farming
250
200
150
100 50 80
%70 60 40 30 20 10
U.S. Employment, % Share
Services as a Percent of GDP
U.S. Exports of Services
In Billions of Dollars
Year 2000 data is estimated

22. Productivity Units produced Productivity = Input used
Measure of process improvement
Represents output relative to input
Only through productivity increases can our standard of living improve
Productivity
Units produced
Input used =
You might also ask them to consider what happens as the rate of productivity improvement approaches zero. Does this simply mean that the standard of living ceases to rise, or are there more ominous manifestations?

23. Multi-Product (Total Factor) Productivity
Output
Productivity =
Labor + Material + Energy + Capital + Miscellaneous

24. Example 1
Mis Halı cleaned 65 rugs in October, consuming the following resources:
Labor: 520 hours at 13 TL per hour
Solvent: 100 liters at 5 TL per liter
Machine Rental: 20 days at 50 TL per day
a. What is the labor productivity per TL? (0.0096)
b. What is the total factor productivity? (0.0079)
c. In November, they cleaned 100 rugs with 550 hours of labor. Did productivity increase or decrease in November?

25. Example 2
Because of its excellent location and products, a bakery in Sariyer experienced a 25% increase in demand in the last year. Customers are unable to find the product of their choice on many occasions. Space limitations preclude the possibility of adding another oven. A new process is proposed by an employee which allows several loaves to be baked simultaneously, however requires additional manpower. If the bakery made 1500 loaves this time last year with a labor productivity of loaves per labor hour, how many workers will the bakery need to add, assuming each worker works 160 hours per month.
(1 worker)

26. Significant Events in Operations Management

27. Next Time
Read chapter 1-2
We will discuss strategic fit in operations