Introduction to Operations

Management & Decision Science

Welcome to the Course…

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Syllabus & Textbook

Please go through your Syllabus

(LMS Course-Summary at the top of
the course page)

Pedagogy
Student Expectations
Course Evaluation Components
Textbook
Session Plan

[email protected]

https://nsmart.wsu.ac.kr/

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Introduction to: the Process view,
Tradeoffs, Metrics and Operations
Strategy
These slides are only for the learning purposes of the
Introduction to Operations Management & Decision
Science course. Do not distribute these slides. Slides are
not a substitute for readings / textbook and are only
meant to complement the textbook and readings.

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Operations Management – Balance D & S through processes

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Where would you go? What’s driving your
decision?

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 Do you observe Trade-offs?
◼ A Firm’s Strategic trade-offs
◼ Capabilities – not good at everything!
◼ The ability of a firm to orchestrate its resources to satisfy the customer’s
utility function

◼ Common trade-offs
◼ Cost – Responsiveness (speed, variety)
◼ Cost – Convenience (location, waits)
◼ Responsiveness (degree of customization) – Convenience (waits)

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Let’s understand Strategic Trade-offs for a firm

Restaurants with similar profit per

customer (for e.g., $3 more than the
Wait
Time cost per customer)

Cost per Customer

Wait
time

What do you think about

Restaurant C? 7
An example of the Airline Industry

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 Efficiency Frontier & OM Decisions to balance D&S

Efficient
Frontier

Inefficient

◼ Skinner’s Focussed Factory – Designing an operation (process) for a

particular identified market segment

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OM Decisions – balancing D&S
Eliminating inefficiencies ▪ Inefficiency: Waste, Variability, Inflexibility
▪ Cost of inputs and resources, what
customers value
▪ Customer arrivals/requests/behavior
▪ Supply/processing times, disruptions,
defects
▪ Making changes, adjustments

▪ Straddling

Transformations – shift the frontier

▪ Process
▪ Technology

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 Operations Management – a Process View
◼ The management (Design, Operation and Improvement) of the
system that create & deliver the firm’s products & services

◼ Such a system is the production system

◼ Produces both products & services
◼ Involved in a process of Transformation of Inputs into Outputs using
some Resources
Few
Value added Examples??
Inputs Transformations
Land Transformation/ Outputs
Goods
Labor Conversion ◼ Physical
Services
Capital process
◼ Locational
Feedback
◼ Exchange

Control ◼ Storage
Feedback Feedback ◼ Physiological

◼ Informational

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 Success depends on…..

◼ Clever integration of a great

operations-related strategy

◼ Processes to deliver products

and services

◼ Analytics to support the

decisions needed to manage
the firm

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Let’s Identify the Core Processes

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Operations Management – in practice

Video on the LMS-Week 1

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Efficiency & Effectiveness

◼ Efficiency - doing something at the lowest possible cost

◼ Effectiveness - doing the right things to create the most

value for the company
How Does Wall Street Evaluate Efficiency?

◼ Earnings growth is largely a function of profitability

◼ Profits can be increased through higher sales or lower

cost

◼ Highly efficient firms usually do well during recessions

◼ Benchmarking - a process in which one company

studies the processes of another company (or industry)
to identify best practices
Management Efficiency Ratios
Dell Supply Chain-Early 2000s

Accounts Payable Cycle

~45 days – The credit time that
Dell has to pay its suppliers

Inventory Cycle - The

days sales of
inventory ~6 days

Accounts Receivable Cycle

~ 10 days in advance! 18
Cash to Cash Cycle – Let’s compute
◼ Worksheet

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Triple Bottom Line
Operations management impacts social–environmental
sustainability
◼ Activities of operations managers have a huge impact on:
◼ The natural environment
◼ Society
◼ Specific stakeholder groups such as the employees, suppliers, investors and regulators

◼ Social–Environmental considerations
◼ Direct Relationship

◼ Example: reducing hazardous waste or emissions, recycling, improving working

conditions, sustainable sourcing, etc.
◼ Indirect Relationship
◼ Example: supporting social causes, promoting community engagement,
encouraging employee volunteering, etc.

◼ Exploring new forms of business practices / models specifically to address social or

environmental challenges
◼ Example: focusing on women employees, focusing on differently abled workforce,

etc.
◼ Ethical Practices

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 Competitiveness: Operations has major influence…..
◼ Competitiveness: How effectively an organization meets the wants and needs
of customers relative to others that offer similar goods or services
◼ Identifying consumer wants
◼ Source of competitiveness
◼ Marketing ◼ Pricing
◼ Operations ◼ Promotion

◼ Low Cost – Make it cheap

◼ Top Quality – Make it outstanding

Cost
◼ Consistent Quality – It’s the same everywhere, every time

◼ Delivery Speed – Make it fast Flexibility Time

◼ Delivery Reliability (on-time) – Deliver it when promised
◼ New Product Introduction – Rapid & Reliable Quality

◼ Volume Flexibility – Cope with changes in demand

◼ Customization – Make it unique for the customer
◼ Variety – Offer wide assortments 22
Operations Strategy – Consistent with Organization Strategy

Order Order
Qualifiers Winners

Delivery
System Infrastructure

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 Productivity
Improving Productivity
◼ Productivity ◼ Develop productivity measures
◼ A measure of the effective use of
◼ Determine critical (bottleneck) operations
resources, usually expressed as the
ratio of output to input ◼ Develop methods for productivity
improvements
◼ Establish reasonable goals
◼ Productivity ratios are used for
◼ Get management support
◼ Planning workforce requirements
◼ Measure and publicize improvements
◼ Scheduling equipment
◼ Don’t confuse productivity with efficiency
◼ Financial analysis

Capital Quality

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Technology Management
An Example….

7040 Units Produced

Sold for $1.10/unit

Cost of labor of $1,000 What is the

multifactor
Cost of materials: $520 productivity?

Cost of overhead: $2000 Ans. 2.20

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 Problem

•As Operations Manager, you are concerned about being

able to meet sales requirements in the coming months. You
have just been given the following production report.
Find the average monthly productivity (units per machine
hour).
JAN FEB MAR APR

Units Produced 2300 1800 2800 3000

Hours per Machine 325 200 400 320

Number of Machines 3 5 4 4

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Problem

◼ Live Trap Corporation received the data below for its rodent cage
production unit. Find the total productivity.
50,000 cages Production time 620 labor hours

Sales price: $3.50 per unit Wages $7.50 per hour

Raw materials (total cost) $30,000

Component parts (total cost) $15,350

Output Input

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◼ A U.S. manufacturing company operating a subsidiary in an LDC
(less-developed country) shows the following results:

U.S. LDC
Sales (units) 100,000 20,000
Labor (hours) 20,000 15,000
Raw materials (currency) $20,000 LC 20,000
Capital equipment (hours)60,000 5,000

Calculate partial labor, capital and material productivity figures for the parent and
subsidiary. ($1 = 10 LC)

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Thank you

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