Introduction to Operations Management

Class Time: April 28, 2009 (4 sessions)

Instructor: Aditya Jain, aditya_jain@isb.edu

Office: AC4-L1, #4117
Phone: (+91) 40 2318 7146

Office Hours: N/A

TA:

Course Page:
Introduction to Operations Management

Lecture Schedule

Day/Date Session Discussion topics Submission

(before class)
28th April 1 Introduction to Operations Management
1. Introduction to OM, Operations Strategy,
2. Process view of Operations
3. Little’s Law
2 Flow rate and capacity analysis
1. Bottlenecks and capacity (Kristen cookie company – HBS
case)
3 Theory of constraint
The Goal
Managing waiting lines in service settings
Queuing theory
4 Inventory analysis
1. Deciding inventory under uncertain demand
2. Deciding inventory under Economies of scale

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Introduction to Operations Management

Session Description and Objectives

Success of every organization depends upon its ability to attract and retain customers. This requires providing them with products
and services that yield higher levels of consumer satisfaction. With increasing domestic and global competition customer expectations
regarding product price, quality, variety, and availability keep changing. Consequently, to acquire and sustain a competitive
advantage in the marketplace, firms must continuously maintain and improve their products along the four dimensions valued by
customers. Production and delivery of products is carried out by the firm’s business processes that transform raw inputs into desired
products by means of the capital equipment and human resources. These processes constitute core technologies of organizations
for creating value.

Operations management (OM) is concerned with planning and control of a firm’s processes with the objective of improving and
maintaining their performance. The sessions of this short course are intended to provide critical understanding of some basic areas
of process management.

Course Materials and other Readings

Recommended book: Managing Business Process Flows (MBPF) by R. Anupindi, S. Chopra, S. Deshmukh, J. Mieghem, and E.
Zemel, 1st Edition.

Some other textbooks on the subject that may be of interest:

1. Matching Supply with Demand, 2nd Edition, by G. Cachon and C. Terwiesch

2. The Goal, 2nd Edition, by E. M. Goldratt and J. Cox
3. Designing and Managing the supply chain, 2nd Edition, by D. Simchi-Levi, P. Kamisky, and E. Simchi-
Levi

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Introduction to Operations Management

Sessions 1: Introduction to OM and Process Flow Analysis

In this session we will introduce the structural and strategic importance of Operations Management and why it is a source of
competitive advantage. We will discuss several examples to see how operations could be a use weapon for competition.

We will then define the process view of Operations. Processes are the fundamental building blocks of any firm’s operations. In this
module, we will develop understanding of the simplest of processes: those without any uncertainty. Besides familiarizing ourselves
with basic operations management terminology, we will learn systematic ways of characterizing processes and measuring their
performance.
• Basic measures of process flow: Flow rate, flow time and inventory
• Littles’ law

Readings:
– Hayes and Upton, “Operations Bases Strategy”, California Management Review, Summer 1998. (HBS: CMR123)
– Chapters 1 – 3 MBPF

Sessions 2: Flow Rate Analysis

Continuing our discussion from the previous session, we will develop understanding process capacity, and learn how to improve it.
Using the Kristen Cookie Company case we will discuss the notions of bottlenecks, process capacity, process configuration and
theory of constraints.

Discussion Case:
HBS Case: Kristen Cookie Company (A1) (HBS:9-686-093). Consider the questions at the end of the case when preparing the
case.

Readings:
– Chapters 5 MBPF

Somewhere here (either at the end of session 2 or at the beginning of session 3), we will watch to motion picture
adaptation of the book “The Goal” by Eliyahu M. Goldratt.

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Introduction to Operations Management

Sessions 3: Managing Waiting Line

Hungry customers waiting to get their orders in restaurant; sick patients waiting to busy doctors; people standing in check out
lanes at superstores; waiting lines are ubiquitous in service setting. Firms like to reduce waiting lines to improve customer
satisfaction. In this session, we will build an understanding of how waiting lines build up, and what steps could be taken to
reduce them.

Readings:
– Chapters 8, MBPF
– Maister, “Note on the Management of Queues” (HBS: 9-680-053).

Sessions 4: Inventory Management

Firms need to hold inventories for various reasons. Inventories often play a critical role in satisfying customer demand and
account for a portion of firms’ operational cost. In this module, we will develop understanding of various trades-offs involved
in inventory related decisions and learn to cost-efficiently manage inventories. We will begin our discussion by understanding
why inventory builds in systems. First, we will focus our attention on the economies of scale argument and review the basic
EOQ model and its implications. Then, we will extend our discussion to include demand and information uncertainty and
analyze why safety stock builds. Finally, we will discuss seasonal inventory issues and how to decide on the optimal service
level (product availability).

Readings:
– Chapters 6 and 7, MBPF

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