Operations Management

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1 Operations Management 郭幸民 Shin Ming Guo, Ph.D. Department of Logistics Management office: C415, phone: ext e mail: smguo@nkfust.edu.tw web: www2.nkfust.edu.tw/~smguo/teaching/pom.htm Textbook Cachon and Terwiesch, Matching Supply with Demand An Introduction to Operations Management, 3rd edition, McGraw Hill. Reference Fitzsimmons and Fitzsimmons, Service Management, 8th edition, McGraw Hill. Reading News and articles, available at my web site Software Excel 2 1

2 Course Outline I 1 Introduction 2 The Process View of the Organization 3 Evaluating Process Capacity Service Blueprinting and Service Encounter 4 Estimating and Reducing Labor Costs 5 The Link between Operations and Finance 3 Course Outline II 7 Variability and Waiting Times 8 The Impact of Variability on Throughput Losses Waiting Line Management 12 Forecasting and Betting on Uncertain Demand 14 Inventory Management: Service Levels 16 Revenue Management 4 2

3 Grading Homework 40% Report 20% Final Exam 30% Participation 10% No Plagiarism, No Cheating 5 Sample Topics for Team Report Loan Processing at Capital One Wharton School Great Italian Cuisine without the Wait HBS Taco Bell Corp. HBR British Columbia NICU Bed Allocation University of Western Ontario Which Products Should You Stock? HBR The Morrison Company: redesigning the manufacturing process HBR 6 3

4 Chapter 1 Introduction What is Operations Management? Matching Supply with Demand What Can Operations Management Do? What is an Operation System? Transformation = Production = Service Physical: manufacturing Location: transportation Exchange: retailing Storage: warehousing Physiological: health care Informational: telecommunications 8 4

5 What is Service? Tangible or intangible? Customer involvement? Standardization or customization? Human or machine processing? Inventory and leftover? 9 Differences between Manufacturing & Service Characteristic Manufacturing Service Product Tangible Tangible & Intangible Customer involvement Low High Uniformity of input High Low Labor content Low High Uniformity of output High Low Performance Measurement Easy Difficult Quality Control High Low Inventory Much Little or Perishable 10 5

6 Focus: Matching Supply with Demand Demand can vary and is unpredictable. Supply is inflexible and maybe costly. Demand < Supply Impossible to stock service Demand > Supply Customers may not want to wait 11 What About a Shortage of Vaccine? Nintendo 於 2006 年推出大受歡迎的 Wii 遊戲機, 民眾排隊搶購後立刻轉售以賺取數百美元差價 12 6

7 Who Cares About Inventory? Acer 在 2011 年出現有史以來第一次虧損, 出清過剩 PC 庫存導致一億五千萬美元的虧損 13 Economic Consequences of Mismatch Supply Demand Air travel Emergency Room Retailing Seats on specific Medical service Consumer flight electronics Travel for specific Urgent need for time & destination medical service Kids buying video games Supply Exceeds Demand Empty seat Doctors, nurses, and infrastructure are under utilized High inventory costs Demand Exceeds Supply Overbooking; Profit loss Crowding and delays in the ER, Deaths Foregone profit; Consumer dissatisfaction 14 7

8 How to Run a Successful Business? Low Cost? Fast Delivery? Quality Service? Better Selection? 15 Four Dimensions of Performance Tradeoffs Cost Efficiency Measured by: cost per unit utilization Quality Product quality (how good?) Process quality (as good as promised?) Variety Customer heterogeneity Measured by: number of options flexibility / set ups Time Responsiveness to demand Measured by: customer lead time flow time 16 8

9 1st Use: Overcome Inefficiencies High Responsiveness Low Competitor A Eliminate inefficiencies Competitor C Current frontier In the industry Competitor B Low Labor Productivity High 17 It s Details that Count 旅客登機時間會影響旅客對服務品質的認知 航空公司準點表現與營運成本 Speed and Convenience for Passengers! 18 9

10 2nd Use: Help Making Trade-Offs High Very short waiting times Frequent operator idle time Responsiveness Low Trade off Long waiting times, yet operators are almost fully utilized Low Labor Productivity High 19 Call center of Deutsche Bundesbahn Goal: 80% of incoming calls wait less than 20 seconds Starting point: 30% of incoming calls wait less than 20 secs. Problem: Must decide staffing levels of call centers and understand impact on efficiency Solution: Provides tools to support strategic trade offs 20 10

11 3rd Use: Evaluate Proposed Redesigns/New Technologies High Responsiveness Low Redesign process Current frontier In the industry New frontier Low Labor Productivity High

12 Operation is the Heart of the Business Operations account for 60 to 80% of the direct expenses that burden a firm s profit. Operations directly affect customers and are essential to the competitiveness of the firm. Managers need to perform and make decisions in all functions