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CourseSyllabus

OperationsManagement
COR1GB.2314.U1(Summer2013) Saturday and Sunday, Aug. 17 Sep. 1, 9am12pm & 1pm - 4pm

INSTRUCTOR Dr. Yossi Aviv (aviv@wustl.edu). Office hours: by appointment Teaching Assistant: TBD

COURSE OVERVIEW AND OBJECTIVES Operations Management is concerned with the production and delivery of goods and services. It encompasses the design of the products and processes, the planning and execution of production, and acquisition and deployment of resources. Efficient operations can provide a firm with major competitive advantages, since the ability to respond to consumer and market requirements quickly, at low cost, and with high quality, is vital for sustained profitability and growth.
This courses first goal is to introduce you to the strategic and operational challenges that operations managers are confronted with, and provide you with frameworks to critically understand and deal with those challenges. For example, we will discuss process choice strategies, fundamental principles of quality management and lean systems, business process improvement, capacity strategy and real options, and supply chain management. The second goal of this course is to introduce you to process analysis and improvement tools. We will utilize basic analysis techniques to study process capacity and bottlenecks, evaluate the impact of process variability, and explore the fundamental principles of inventory management.

REQUIRED COURSE MATERIALS Cases and readings are included in the Xanedu Digital Course-pack (available via NYU bookstore). Some cases may be downloaded from NYU Classes; you will need to open a student account, if you do not have one yet. You will need to have access to Microsoft Excel, as we will make extensive use of it during the course (for analysis, optimization, and simulation). Optional Course Material (available in bookstore): Custom Text: A customized version with selected chapters from Operations and Supply Management; Jacobs, Chase, and Aquilano; 12th Edition; McGraw-Hill 2009. As an alternative, you can obtain the original book, or later editions of it. GRADING There are five grade components for this course: Class attendance & participation: 10% Individual case assignments (4 out of 5): 24% Group case assignments (2): 20% Multiple-choice quizzes (3): 36% Final qualitative assignment (essay): 10%

Attendance and participation: Attendance is required in all class sessions for full credit. Students are expected to participate in class discussion and other in-class activities. The use of computers and other electronics during class sessions is only allowed for the purpose of in-class assignments. If you would like to use your laptop for the purpose of note taking, please discuss with the instructor.
Individual case assignments: Five (5) case tasks are assigned to be done individually. You will need to select exactly four (4) of them for submission. Specific guidelines will be provided at least a week in advance. The assignments must be submitted at the beginning of the session in which they are due, in order to receive credit. Keep a copy for your reference during class.

Group case assignments: Two of the cases (Baria, and FoldRite) are assigned for group work. The cases should be done in groups of 3-5 students. The cases are challenging, and you should not wait to the last moment to work on them. Groups should not collaborate with others in preparing these assignments. Specific guidelines will be provided at least a week in advance, and the assignments must be submitted at the beginning of the session in which they are due. Multiple-choice quizzes: At the end of each weekend, a multiple-choice mini-exam (quiz) will be posted on NYU Classes (or sent to you via email). The quizzes must be prepared individually, and specific instructions will be given on the first day of the course. Note: You will typically have 4 hours to complete a quiz. Your answers to the first two quizzes should be submitted online by midnight of the following Friday, and the answers to the last (third) quiz should be submitted by midnight of Monday, Sep. 9.

Final qualitative assignment (essay): At the end of the course, you will be assigned a case for qualitative discussion. This work must be done individually, and submitted electronically by midnight of Monday, Sep. 9. NYU STERN CODE OF CONDUCT I expect every student to be familiar with the NYU Stern Code of Conduct. Some of the ways in which the code applies to this course are discussed below:

The code of conduct stipulates that a student will exercise integrity in all aspects of our academic work including, but not limited to, the preparation and completion of exams, papers and all other course requirements by not engaging in any method or means that provides an unfair advantage. An individuals name on a report should be included only if they have contributed to the analysis. If an individual has not contributed to the analysis in an intellectual manner, it is a violation of the code of conduct to include his or her name. Furthermore, you may not refer to write-ups from classes offered in earlier semesters. The premise of the code of conduct is that ideas should be attributed to their source. Therefore, please acknowledge the main source(s) of data, facts, and ideas (other than from the instructor or textbook) in all your written work and when you make a presentation. If you use material from a source other than the lecturer, TA, the textbooks or the lecture notes, you must acknowledge the source. For example, say, I obtained this from the following website:

BRIEFCOURSEPLAN SATURDAY Weekend#1


Session1 Session3

SUNDAY

9amnoon

IntroductiontoOperations Management(Case:Southwest AirlinesinBaltimore)

ProcessFlowAnalysis(Case:Natural Blends,Inc.)
9amnoon

Aug.17

Session2

Aug.18

IndividualAssignment#1

IndividualAssignment#2
Session4

PrinciplesofQualityManagement (ExperientialLearning:"CookieSPC")
1pm4pm 1pm4pm

ResourceAllocationProblems:AView IntoOptimizationTools(Case Exercise:ProductionMix Optimization)

FirstQuizisduebymidnightofFriday,Aug.23.

Weekend#2
Session5 Session7

ProcessVariabilityandUncertainty (Case:BariaPlanningSolutions,Inc.)
9amnoon 9amnoon

InventoryManagementMotivation, Models,andConcepts(InClass Exercise:MoonChem)

Aug.24

Session6

Aug.25

GroupAssignment#1

Session8

1pm4pm

CapacityPlanningunderUncertainty: ConceptsandSimulationTools(Case: TBD)

ChannelInventoryManagement (Case:HPDeskJet)
1pm4pm

IndividualAssignment#3 SecondQuizisduebymidnightofFriday,Aug.30.

Weekend#3
Session9 Session11

9amnoon

LeanProductionandBusinessProcess Improvement(Case:ToyotaMotor Manufacturing)

9amnoon

MatchingSupplyandDemandfor ShortLifeCycleProducts(Case:L.L. Bean)

Aug.31

Session10

Sep.1

IndividualAssignment#4

Session12

SalesandOperationsPlanning(Case: FoldRiteFurnitureCompany)
1pm4pm 1pm4pm

SupplyChainManagement(Case: SportObermeyer)

GroupAssignment#2 ThirdQuizandEssayareduebymidnightofMonday,Sep.9.

IndividualAssignment#5

DETAILED COURSE PLAN


Weekend #1: Aug. 17-18 Due this weekend: Individual Assignments #1-#2 Session 1: Introduction to Operations Management The objective of the first session is to define the scope of operations management, and characterize the operational capabilities of business processes and their links to strategic success. Using a case study from the airline industry, we will examine the challenge of coordination in complex operations environments. Topics covered 1. 2. 3. 4. Course introduction and administrative details Operations management defined Competitive priorities Linking operations to corporate strategy

Case study: Southwest Airlines in Baltimore (Harvard Case #602156-PDF-ENG) The number of connecting passengers through Southwest Airlines' Baltimore station has grown substantially since 1997. Originally designed as a point-to-point network, this load of connecting passengers has been stressing Baltimore ground operations, resulting in an erosion of service quality and difficulties in achieving fast plane turnarounds one of the key elements of Southwest's low-cost strategy. Case discussion questions 1. How would you characterize the operations strategy of Southwest Airlines (SWA)? What are SWA's advantages and disadvantages relative to other airlines? 2. Why is the operational performance at Baltimore eroding? 3. What issues do you identify that require action? What would you recommend Matt Hafner do? Preparation 1. Read the Southwest Airlines case, considering the discussion questions stated above. 2. Individual Assignment #1. If you select the Southwest case for the individual report (you need to choose 4 out of 5 cases), prepare an up to 2-page (double space, 11pt font) discussion of the above questions, and submit a hardcopy of it at the beginning of the session. 3. Read the article: Competing on Capabilities: The New Rules of Corporate Strategy (included in case Course-packet) by G. Stalk Jr., P. Evans and L. E. Shulman, published in Harvard Business Review, March-April 1992. 4. (Optional) Read book Chapters 1 (Operations and Supply Chain Management) and 2 (Strategy and Sustainability).

Session 2: Principles of Quality Management The objective of this session is to introduce and discuss fundamental concepts in quality management. Part of the session will focus on understand the presence of variation in processes, and learn the basic principles of statistical process control. Topics covered 1. 2. 3. 4. 5. Quality management: importance and challenges Cost of quality Fundamental views on quality management Process capability Statistical process control

Preparation 1. (Optional) Read book Chapters 9 (Six Sigma Quality) and 9a (Process Capability and SPC).

Session 3: Process Flow Analysis In this session, we will review basic principles of process analysis, and appreciate their potential use in process design and improvement. Using illustrations, we will develop an understanding of the effect of process characteristic such as setup times, batch sizes, work-in-process buffers, and flexibility on performance. We will also learn how to identify process bottlenecks via analysis. Topics covered 1. 2. 3. 4. Productivity Capacity utilization Throughput analysis Bottlenecks

Case analysis: Natural Blends, Inc. (Harvard Case #698012-PDF-ENG) This case (exercise) describes the continuous flow process used to generate orange juice concentrate. Production involves several tightly coupled process steps with varying production rates and setup times. Given production constraints and customer requirements, management choices must be made to maximize the greatest contribution. Your assignment is to analyze Natural Blends operations. Case analysis guidelines The questions are provided in the body of the case. For Part A: Note that in this part you are considering the operations under the assumption that only one orange size is processed at the facility (for instance, this means that you do not need to setup the extractor). Part B: There are several possible answers to question 4. Altogether, once you get the idea, its not a hard question. Please chart (on a graph or a table) the schedule of operations over a 6-day period of time. Part C: Question #5 is an easy start. For question #6, keep in mind you can pick any feasible combination of contracts A-D. With the remaining time, see how many 24K standard orders (S-type) you can fit. This question is an optimization problem where you try to maximize the total contribution per week, given the capacity constraints in the system. A spreadsheet model can be very helpful. Preparation 1. Read the Natural Blends, Inc. case/exercise thoroughly, so that you understand the operational setting (i.e., what's going on at the facility? What are the steps of the process?). You may attempt to solve some of the questions in advance, but it is absolutely OK to wait for the class time. 2. Individual Assignment #2. If you select the Natural Blends case for the individual report (you need to choose 4 out of 5 cases), prepare a solution to Questions #1-#5 (no need to go beyond that). Submit a hardcopy of it at the beginning of the session. 3. (Optional) Read book Chapters 5 (Process Analysis).

Session 4: Resource Allocation Problems: A View into Optimization Tools The objective of this session is to discuss the topic of resource optimization via the (relatively simple) framework of Linear Optimization. You will briefly learn how to utilize spreadsheet technology (Excels Solver) to solve elementary capacity allocation problems, and develop an understanding of the value of flexibility, the value of capacity expansion, the wondering bottleneck, and more. Topics covered 1. 2. 3. 4. 5. Resource allocation problems Linear programming Excels Solver Models and illustrations Sensitivity analysis and shadow prices

Case exercise: Production Mix Optimization Prior to the beginning of the course, a quantitative exercise will be posted. You will be asked to work on it, using a set of guidelines, either individually or with other class-mates. There is no need to submit your work. Preparation 1. Read the Production Mix Optimization problem, and attempt to work on it. 2. Recommended: Bring your laptop to class. If you do, I suggest that you activate Excels Solver in advance. If you have Excel 2007, click on the Office Button at the top left corner of the screen. Then, click on Excel options. Then, click on Add-Ins. In the Manage box, select Excel Add-Ins, and click Go. The rest is trivial. If you are using Excel 2010, click on File, then Options, and continue as stated above. 3. (Optional) Read Appendix A in the book (Linear Programming Using the Excel Solver).

Weekend #2: Aug. 24-25


Due this weekend: Ind. Assignments #3; Group Assignment #1; Quiz #1 (by Friday, Aug. 23) Session 5: Process Variability and Uncertainty In this session we will discuss the causes for queuing in business processes, and understand the challenges of capacity planning and resource utilization in service settings. We will gain familiarity with basic timeperformance analysis techniques and waiting-line theory, and explore the benefits of resource pooling, cross-training and scheduling flexibility. Topics covered 1. 2. 3. 4. Why waiting lines form? Trade-offs and managerial insights. Analysis via simulation. Review of simple process and capacity design problems.

Case study: Baria Planning Solutions, Inc.: Fixing the Sales Process (Harvard #4568-PDF-ENG) Baria Planning Solutions (BPS) is a consulting firm that specializes in using spend analysis to help companies identify savings through reduced procurement costs and improved supplier performance. Management is concerned about the disappointing performance of the sales team in attaining new clients and renewing existing ones. The Sales directors feel they do not get the help they need from Sales Support to close new deals, while the Sales Support directors believe they could provide better support by organizing into industry-specific divisions. The consulting industry is becoming increasingly competitive and inefficiencies in the sales process at BPS may interfere with the company's ability to win new business. Discussion questions 1. What are Barias organizational and operational problems? 2. What factors contributed to the company's decision to organize the Sales team by industry? What factors contributed to the company's decision to organize the Sales Support group in a hybrid structure? What aspects of the sales process are most valued by customers? 3. What alternatives are available for dealing with the problems in the Sales Support group? How did you evaluate the alternatives? What actions should Christy Connor propose to Brandon Ali? 4. How do you think each of the major internal constituents, specifically Brandon Ali, Chuck Dee, Jane Albright, the Sales team, and the Sales Support group, will react to your proposed solution? 5. How do you think each of the major external constituent groups, specifically current customers and prospective customers, will react to your proposed solution?? Preparation 1. Read the Baria case thoroughly, and think about the discussion questions stated above. 2. Group Assignment #1. Prepare an up to 5-page (double space, 11pt font) discussion of the above questions, and submit a hardcopy of it (one per group) at the beginning of the session. Support your recommendation with an analysis of the data provided in the case. 3. Optional: Read book chapter 7a (Waiting Line Analysis).

Session 6: Capacity Planning under Uncertainty: Concepts and Simulation Tools The objective of this session is to introduce the concepts of cost of uncertainty and value of information and value of flexibility in operational decision making problems facing uncertainty. In this vein, we will discuss the various factors affecting the value of real options, and the related notions of actionable information, agility, intelligence gathering, and fast asset deployment. We will utilize very basic simulation and decision-tree techniques to study the above topics. Topics covered 1. 2. 3. 4. 5. 6. A motivating example Cost of uncertainty in capacity planning Expected value of information Real options Brief overview of Monte-Carlo simulation Value of flexibility

Article discussion: Options Approach to Capital Investment (Harvard #95303-PDF-ENG) Preparation 1. Read the article "Options Approach to Capital Investment," and think about the following questions: (i) assuming that a project has a positive NPV, should the project be accepted? (ii) how do realoptions introduce managerial flexibility? While you do not have to understand all nuances (accounting, financial, and industry-context details, etc.) in the example provided, I would like you to carefully review all of the calculations described in the right column of page 111 (beginning with the sentence "Suppose that you must decide whether to make an initial investment of $15M in R&D.") and ending on the left column on page 113 (the sentence "... between the creation of options and the exercising of options.").. 2. I recommend that you bring your laptop to class.

Session 7: Inventory Management Motivation, Models, and Concepts In this session, we will develop a sound understanding of the roles of inventories in an organization. We will review basic tactics for reducing inventories, understand elementary inventory control processes, and key factors that determine the appropriate choice of inventory systems. As time permits, we will also discuss the fundamental trade-offs between inventory, logistics, lead time, product availability, and information. Topics covered 1. 2. 3. 4. Reasons for holding inventory. Inventory measures. The Economic Order Quantity (EOQ) model. Continuous and periodic-review models.

Preparation 1. We will work on a quantitative exercise during the class session. It may be useful for you to bring a laptop to class. 2. (Optional) Read book Chapter 17 (Inventory Control).

Session 8: Channel Inventory Management In this section, we will discuss topics pertaining to multi-echelon and multi-location inventory and production systems. In particular, we will discuss the dynamics of production and inventory decisions in uncertain environments and see how variability and uncertainty propagates in supply channels. We will also discuss the concept of risk-pooling and the principle of design-for-postponement. Topics covered 1. Risk-pooling. 2. Inventory dynamics and the bullwhip phenomenon. 3. Postponement strategies. Case study: Hewlett-Packard Co.: DeskJet Printer Supply Chain (A) (Harvard #GS3A-PDF-ENG) Hewlett-Packard's (HP) Vancouver Division faced a challenge in 1990. Although its new inkjet printers were selling well, inventory levels worldwide were rising as sales rose. In Europe, high product variety was making inventory levels especially high. HP considered several ways to address the inventory issue: air-freighting printers to Europe, developing more formalized inventory planning processes, or building a factory in Europe.

Discussion questions 1. What is the Inventory/Service Crisis that HP faces? What are the possible root-causes for it? 2. Propose a solution package (set of initiatives) to effectively deal with the inventory/service crisis. You should be concise and clear about the elements of you package, and explain the way in which they are designed to effectively deal with the various root causes that you have identified earlier. What challenges do you anticipate in implementing your solution? How would you deal with these challenges? 3. One of the initiatives considered by HP was to localize the printers in Europe rather than at the factory in Vancouver. This strategy is one of the classic examples of the concept of design for postponement (DFP), also known as delayed product differentiation. In your best judgment, how significant is the value of DFP in the HP case? 4. In addition to the example of HP, please specify two other examples (whatever products/supply chains you can think of) where DFP takes (or can take) place. How exactly is it done (or could be done)? What drives the benefits of DFP in each one of the examples? 5. Could air transport, rather than ocean transport, be beneficial to HP? How would you choose the best among the two delivery modes (i.e., air vs. ocean)? Preparation 1. Read the HP case, considering the discussion questions stated above. 2. Individual Assignment #3. If you select the HP case for the individual report (you need to choose 4 out of 5 cases), prepare an up to 2-page (double space, 11pt font) discussion of questions 1-3 above (only), and submit a hardcopy of it at the beginning of the session.

Weekend #3: Aug. 31 - Sep. 1


Due this weekend: Ind. Assignments #4-#5; Group Assignment #2; Quiz #2 (by Friday, Aug. 30) Session 9: Lean Production and Business Process Improvement At the beginning of this session, we will discuss the important role of process improvement in operations management, and the meaning of continuous improvement, business process re-engineering, and the difference between the two. We will then use the popular case Toyota Motor Manufacturing, to introduce some of the key principles of Lean Manufacturing. Topics covered 1. 2. 3. 4. The process of process improvement Process improvement tools and Six Sigmas DMAIC. Examples: analyses and discussion The Toyota Production System (TPS) philosophy

Case study: Toyota Motor Manufacturing, U.S.A., Inc. (Harvard Case #693019-PDF-ENG) The case describes a problem with the seats installed in the plant's sole product -- Camry. While we will talk about this issue in class, this wont be at the center of our discussion. Rather, my main objective is to discuss the principles of the Toyota Production System (TPS). Discussion questions 1. In what way does TPS contribute to Toyota competitiveness? For example, you may want to begin by identifying the core principles of TPS. Then, think about the reason for why these principles can be helpful for Toyota in bringing value to customers, and in achieving a sustainable competitive advantage in the market. 2. What are the main challenges in implementing TPS? How could a company cope with these challenges? 3. Think of one setting that is considerably different than a car assembly plant. (For example, it can be a bank, a hospital, a university, etc.) How applicable are the TPS principles to the environment you chose? 4. What do you think would be the meaning of extending the TPS beyond the boundaries of a single company? Think of the potential benefits, challenges, and possible implementation methods. 5. Where, if at all, does the current routine for handling defective seats at the assembly plant deviate from the principles of the Toyota Production System? Preparation 1. Read the Toyota case, considering the discussion questions stated above. 2. Individual Assignment #4. If you select the Toyota case for the individual report, prepare an up to 2page (double space, 11pt font) discussion of the questions 1 and 5 (only!) above, and submit a hardcopy of it at the beginning of the session.

Session 10: Sales and Operations Planning The objective of this session is to understand some of the key challenges involved in sales and operations planning processes, and to develop the ability to formulate aggregate production plans that can be defended based on both sound operations management principles and company strategy. Topics covered 1. Aggregate Planning: Characteristics & Considerations 2. Strategies for Meeting Demand 3. Examples and case analysis. Case study: FoldRite Furniture Company: Planning to Meet a Surge in Demand (Harvard #4555PDF-ENG) Demands for folding and stackable chairs and tables at FoldRite are unexpectedly strong. The company spent the previous two years improving manufacturing quality and efficiency, dropping poor-performing product lines, developing new products that are stylish and environmentally friendly, and instituting a program that allows customers to customize their orders and still get delivery within two weeks. As a result, sales interest in the new products is higher than forecast, in the U.S. and in Europe, where favorable exchange rates make American products highly competitive. In response to the surge in demand, Martin Kelsey, the production manager, must create a manufacturing plan that controls manufacturing and inventory costs, mitigates risk, and aligns with the strategic goals of the company. Discussion questions What recommendations would you make to Martin Kelsey in February 2010? Be specific and provide support for your recommendations. These recommendations should be suitable for presentation to upper management at FoldRite. Preparation 1. Read the FoldRite case thoroughly, and begin summarizing the relevant data in advance. This case is not simple, and it is very time-consuming. 2. Group Assignment #2. Prepare an up to 5-page (double space, 11pt font) report that addresses the discussion questions above. You may add any supporting material (e.g., spreadsheet printout) as an Appendix in your report (no page limit for the appendix, but be reasonable in what you include). Excel files will not be reviewed by the teaching assistant/grader.

Session 11: Matching Supply and Demand for Short-Life-Cycle Products The objective of the first session is to introduce the newsvendor framework as a simple model for determining capacity procurement for short-life-cycle items, and to introduce revenue management concepts such as dynamic pricing and capacity control. Depending on the time available, we may introduce the topic of Supply Chain Management at the very last part of this session, or postpone this topic to the next session. Topics covered 1. The Newsvendor Model 2. Revenue Management Overview and Examples 3. Supply Chain Management Definition, challenges, and complexity. Case study: L.L. Bean, Inc.: Item Forecasting and Inventory Management (Harvard #9-893-003) Case discussion questions 1. How does L.L. Bean use past demand data and a specific item forecast to determine how many unit of that item to stock? 2. What item costs and revenues are relevant to the decision of how many units of that item to stock? Preparation 1. Read the L.L. Bean case, considering the discussion questions stated above. No need to submit any report. 2. I recommend that you bring your laptop to class. 3. (Optional) Read book Chapter 15 (Demand Management and Forecasting).

Session 12: Supply Chain Management The objective of this session is to introduce a framework for supply chain strategy, and using a case from the fashion industry, discuss ways for supply chains to match supply and demand in an uncertain world. Topics covered 1. Supply Chain Fit. 2. The value of flexibility and quick response 3. Accurate response Case study: Sport Obermeyer Ltd. (Harvard Case #695022-PDF-ENG) The case describes operations at a skiwear design and merchandising company and its supply partner. It introduces production planning for short-life-cycle products with uncertain demand and allows us to analyze a reduced version of the company's production planning problem. In addition, the case provides details about information and material flows that allow us to make recommendations for operational improvements, including comparisons between sourcing products in Hong Kong and China. Discussion questions 1. Consider the last part of the case, entitled Production Planning. This part introduces a reduced version of the company's production planning decision problem. How does Obermeyer measure the level of uncertainty about the demand? Why does it make sense to measure demand uncertainty this way? How does the measure of demand uncertainty translate into a set of demand scenarios, and their relative likelihoods? For example, how would you assess the chance that the demand for the Gail style will be below 800 units? Why is it important at all to measure demand uncertainty? 2. Discuss the ways in which Obermeyer can increase the ability of its supply chain to match supply with demand? Discuss the pros, cons, and challenges involved in implementing each one of the possible actions you suggest. 3. How should Obermeyer management think (both short-term and long-term) about sourcing in Hong Kong vs. mainland China? Preparation 1. Read the Sport Obermeyer case, considering the discussion questions stated above. 2. Individual Assignment #5. If you select the Sport Obermeyer case for the individual report, prepare an up to 2-page (double space, 11pt font) discussion of the questions 1-2 (only) above, and submit a hardcopy of it at the beginning of the session. 3. Read the articles What Is the Right Supply Chain for Your Products? (Harvard Case #97205-PDFENG) and Rapid-Fire Fulfillment (Harvard #R0411G-PDF-ENG) (included in case Course-packet). 4. (Optional) Read book Chapters 11 (Global Sourcing and Procurement). *** Due on Monday, Sep 9: Quiz #3 and Essay.

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