Important Business Decisions

Examples:

Introduction to Operations
Management

Process selection & improvement

It is everywhere!

Capacity requirement
Resource allocation
Logistics

BUAD 311T Operations Management for

Accounting Majors
Session 1

Inventory

Where your leaders come from?

Course Outline
Process Analysis and Capacity Management
Waiting Line Management
Optimization and Linear Programming
Revenue Management
Inventory and Supply Chain Management

3
Right Management 2011

Processes

Processes: Examples

Definition: A business process is a set of

coordinated tasks and activities that will lead to
accomplishing a specific organizational goal.
Processes are the main building block of
operations.
Inputs
(customers
and/or
materials)

Transformation Process
(components)

Producing an iPad
Acquiring a company
Making a hamburger
Delivering a book from Amazon to a customer
Receiving a BS degree from Marshall
Others?

Outputs
(goods
and
services)
5

Process Selection

McDonalds
Customer
places order

Will different companies intentionally choose

different processes to accomplish the same
goal?
Examples?
Let us describe the process of making a
hamburger

Raw
Material

in McDonalds
in IN-N-OUT

Cook

Assemble

Activity

Storage

Decision

Flow

Finished
Goods

Deliver

This is a make-to-stock system.

(Prior to 1999)

McDonalds Advantages and

Disadvantages

IN-N-OUT

Advantages:

Customer
places order
Raw
Material

Cook

What are the advantages

and disadvantages?

Fast (customers get the hamburger right away).

Assemble

Disadvantages:

Deliver

Hamburger quality may suffer.

Some hamburgers may not be sold, and will have to be
discarded.

This is a make-to-order system.

9

How can McDonalds improve its quality

(taste)?

Make-to-stock vs. Make-to-order

MTS

10

Customer
places order

MTO

Cost
Responsiveness
Variety (customization)
Quality

Raw
Material

11

Cook

Assemble

Activity

Storage

Decision

Flow

Finished
Goods

Deliver

This is a make-to-stock system.

(Prior to 1999)
12

McDonalds New Hybrid Process

New Hybrid Process

Customer
places order
Raw
Material

Cook

WIP

Assemble

Advantages:
Customized hamburger, tailored to customer preferences
Fast
Deliver

Disadvantages:
High investment cost
Need to manage inventory of cooked materials

(Patties can be kept for up to 30 minutes.)

(After 1999)

This is a hybrid system.

13

14

Process Analysis

Make-to-stock vs. Make-to-order

Any other companies/examples?

Process Evaluation
Different processes lead to different advantages and
disadvantages.
Is there a simply better process, i.e., no trade-offs?

15

Processes: Selling a ticket

16

Processes: Selling a ticket

We are interested in the management of processes.

Selling a ticket seems easy, but
17

18

Processes: Selling a ticket

Processes: Selling a ticket

What do the flow charts look like?

Which one has better performance?

Risk pooling effect
By aggregating individual processes, the variability is
reduced and better performance can be achieved.
19

Why learn OM?

20

Operations Management

OM defines the competitiveness of the

corporations
OM enables a systematic view at organizational
processes
OM provides the concepts and tools used in
business decision making
OM presents promising career opportunities

What is Operations Managements philosophy to

decision-making? (DMAIC)
DEFINE the problem and scope the work effort of the project
team
MEASURE the current process or performance
ANALYZE the current performance to isolate the problem
IMPROVE the problem by selecting a solution
CONTROL the improved process or product performance to
ensure the targets are met
21

Operations Management

What have we learned?

Key questions:

22

An overview of Operations Management

How to build a process flowchart
The advantages/disadvantages of make-to-order
vs. make-to-stock
A preview of risk pooling
Operations Management Approach/Philosophy

How to design processes to improve performance?

How to reduce cost?
How to deliver goods and services faster?
How to improve quality?
How to provide more variety and advance customer
satisfaction?
23

24

Next Class
ARES reading:
Changing Ahead to Push Electric Cars
Los Angeles Times, December 27, 2008
Latest Starbucks Buzzword: Lean Japanese Techniques
Wall Street Journal, August 1, 2009

Starts to form teams