MGMT 601-SECTION 02 OPERATIONAL ANALYSIS Spring 2011 Instructor: Dr. Lifang Wu Campus Phone: (513) 745-3928 Office: Smith 333 Fax: (513) 745-3692 Office Hours: 4:00PM-6:00PM Monday 10:00AM-12:00PM Friday Email: WUL@xavier.edu Class Time: Monday 6:00PM-5:30PM Class Location: Smith G29 PURPOSE OF THE COURSE The purpose of this introductory course is to provide MBA students with a thorough introduction to the concepts and analytical skills of operations management needed to understand and improve the business of various organizations. My main goal is to educate managers or to-be-managers so that they can provide big picture ideas and back them up with rigorous analysis for any operations issues they may encounter. INTRODUCTION TO OPERATIONS MANAGEMENT Operations Management refers to the systematic design, direction, and control of processes that transform inputs into services and products for external, as well as internal customers. The course is one of the few MBA core courses required by AACSB. We will introduce various concepts and decision-making models related to issues such as operations strategy, process improvement, quality control, inventory, and supply chain management. These topics are widely considered .core. in operations courses. PREREQUISITES AND FOLLOWING COURSES MGMT 500 and basic knowledge of calculus and probability (i.e., STAT 500); or consent of the instructor. Related further courses include MGMT 633 Global Supply Chain Management, BUAD 623 Health Care Operations, and MGMT 654 Project Management. COURSE MATERIALS Textbooks (Recommended): (1) CE: Collier and Evans, OM2, 2010-2011 edition, South-Western, Cengage Learning (ISBN: 9780538745567) (2) CT: Cachon and Terwiesch, Matching Supply with Demand: An Introduction to Operations Management, 2th edition, McGraw-Hill, 2009 (ISBN: 9780073525167) *These books will be referred to as CE or CT in this syllabus later. Case packet (Required): The packet includes the following Harvard Business School Cases: (1) Netflix (HBS# 9-607-138); (2) Manzana Insurance Fruitvale Branch (HBS# 9-692-015), (3) Six Sigma Quality at Flyrock Tires (HBS# KEL 028). This packet is available for purchase from www.study.net. You can search for individual cases or the entire course packet. Other Materials: 1. All lecture slides, which are solely developed by the instructor for this course, will be posted on our course website blackboard.xu.edu. Additional cases, examples, teaching notes, practice problems, and articles will be posted on this website as well. (I developed a macro in PowerPoint for better managing the PPT slides, however, this feature is useless to you. When opening up the slides, please choose .disable macros. to avoid any security concerns). 2. I will also supplement the course with latest articles/examples from newspapers and journals as the course progresses. COURSE REQUIREMENTS Attendance: All students are normally expected to attend each class. Please bring your copy of course documents (normally including PPT slides, teaching notes, examples, practice problems, cases) and a scientific calculator to every class. If you have an urgent need to miss one class, you are still responsible for the materials covered and expected to complete required work. In this case please contact me in advance if possible. Attendance will be taken on a regular basis and will be counted as part of your participation score. (Special note on laptop: Please do not bring your laptop to class unless specified) Participation: To foster a productive learning environment, it is important that everyone comes to class prepared and willing to contribute to discussion (Complete all pre-class assignments for each session contained in this syllabus before coming to class, you may skip any technical details at this time). I will expect you to raise/answer questions and/or make organized and concise comments in every class. In particular, your speech needs to be based on real life examples, journal articles, own insights, and business applications related to the course materials. Your participation score will be based on factors such as the quantity and quality of speeches, group work effort, after-class communications, etc. Teamwork: I prefer group to individual work on written assignments as I have found that groups develop significantly better solutions (with better grades), and that you learn from one another in group interactions. To maximize learning efficiency, everyone is strongly encouraged to work in a study group of no more than 3 students. During some class sessions, all groups will be asked to analyze some short cases / do practice problems. Every team member is expected to make active contributions on an equal basis. Peer evaluation forms are expected to be returned to me at the end of the semester and the result will be counted toward each individual student's group-based work. Homework: There will be two homework assignments in this semester which mainly include workout problems to help you understand the analytics and prepare for the exams. It is essentially important for everyone to do all these problems on an individual basis in order to fully understand the methodology and perform well in exams. However, please be advised that you can submit your homework in groups(one hard copy per group, can be printed or hand written, make sure I can read. Note hard copies are always preferred since emails are not equally reliable). Case Reports: There will be three case reports due (Each requires about 3 pages in length, with single space and font size #11) in this semester. All three will be counted toward your final grade. I believe that the process of composing the paper is a valuable part of your learning process. Teamwork is also encouraged, therefore, I encourage you to develop and submit case report in groups (one hardcopy submission per group). Please note that 20% off per week penalty will be applied to any late submitted case reports (and homework). Case report usually includes three pages of text (and several pages of exhibits if necessary). Exhibits should contain specific types of analyses, such as quantitative analysis, calculations, flow charts, cost items, etc. They should contain any relevant supporting information that is too detailed for the body of the paper. Exhibits must not be simply an extension of the text. Exams: There will be two exams in this semester. The exams would cover concepts and analytical techniques presented in lectures. Students are responsible for all materials covered in classes (including any session they did not attend). Each student will be allowed to bring in one 8.5 by 11 inch (double-sided) note sheet containing whatever he or she chooses for reference during the exam. A calculator is required for taking exams. Make-up exam will require documentation of illness or other unavoidable emergency, in which case please contact me as early as possible. GRADING SCALE Grade Percentages Grading Scale (tentative) 1. Participation 10% A – = 89 – 92% A=92–100% 2. Homework 10% B (including + /–) = 79 – 89% 3. Case Reports 20% C (including + /–) = 70 – 79% 4. Midterm 30% D = 60 – 69% 5. Final Exam 30% F = below 60% Note this grading scale is tentative and will be adjusted according to the overall class performance. COURSE CALENDAR Week Date Topics Related Chapters 1 01/10/2011 Syllabus Introduction to Operations CE: 1-3; CT: 1-2 2 01/17/2011 MLK holiday, No class 3 01/24/2011 Operations Strategy CE: 4 4 01/31/2011 Process Capacity Analysis HBS note; CT: 3 5 02/07/2011 Flow Time Analysis * Netflix case due CT: 7 6 02/14/2011 Process Strategy & Case Discussion CE: 7 7 02/21/2011 Decision Analysis Midterm Review * HW#1 and Manzana case due CE: C 8 02/28/2011 Midterm Exam 9 03/07/2011 Spring break, No class 10 03/14/2011 Quality Analysis CE: 15 11 03/21/2011 Statistical Quality Control CE: 16; CT: 9 12 03/28/2011 Six Sigma Strategy and Case Discussion CE: 15 13 04/04/2011 Inventory Analysis * Six sigma case due CE: 12 14 04/11/2011 Supply Strategies CT: 11-12 15 04/18/2011 Supply Chain Management Final Review * HW#2 due CE: 9; CT: 16 16 04/25/2011 Easter holiday, No class 17 05/02/2011 Final Exam (6:00pm-8:30pm) TENTATIVE TEACHING TOPICS Topic 1: Introduction to Operations In this class, we will discuss our course syllabus and introduce operations management as a business field. We will define process view and value chain concepts, business model and operations key decisions, and performance measurements in both goods- and service-producing firms. The road map of the course will also be discussed. Pre-class reading assignment is listed as follows (please remember to prepare any questions): 1. Course syllabus 2. PPT slides: Introduction 3. HBR article: Reinventing your business model, 12/2008 4. ISM article: Why metrics matter (a supply professional's perspective), 09/2010 5. Cincinnati Enquirer article: Data shaping store shelves, 07/2010 Topic 2: Operations Strategy The goal of this class is to provide students with concepts and a strategic framework to analyze business models of various organizations. We will describe the role of operations strategy and demonstrate how operational decisions can be made based on marketing research and competitive analysis. This is followed by case discussions on business models of grocery retailing operations. The pre-class reading assignments are listed as follows: 1. Related text chapters (Read at least one whole chapter of either text) 2. PowerPoint slides: Operations strategy 3. Xavier teaching case: .Grocery store operations strategies. prepared by L. Wu 4. Teaching case: Diapers.com and Amazon.com 5. HBR article: Michael Porter, What is strategy? 11-12/1996 6. HBS article: Linking strategy to operations, 08/2009 After-class assignment (due in two weeks) Write a case report for the Netflix case. Please use the following case questions as a guideline: a. Did Netflix do the same jobs for consumers that Blockbuster did? How did this evolve over time? Why? b. Compare Blockbuster's and Netflix's business model and competitiveness. How might the differences affect the respective company's operations strategies? c. As you examine each major shift in Netflix's operations strategy, find what caused them to make each shift? What were the uncertainties about each shift? How did they manage to reduce risks? d. Also discuss the business model for VOD. Would you have been long or short Netflix stock at the time of the case? Why? Topic 3: Process Capacity Analysis The primary goal of this class is to introduce the basic concepts and analytical tools for process analysis. We will start with process mapping tools and then focus on bottleneck analysis and efficiency analysis (such as utilization). After the class, students are expected to understand the basic elements for analyzing and improving capacity and utilization of various multi-stage business processes. Pre-class reading assignments: 1. PowerPoint slides: Process Analysis 2. .Process Fundamentals., Harvard Business School Note (6-696-023) 3. Teaching note about Business Process Management 4. HBR article: Competing on analytics, 01/2006 5. (Further reading) HBR article: When a process is art, not science? 03/2009 After-class assignment (Due in three weeks): 1. Process analysis homework problems 1, 2, 3 Topic 4: Process Flow Time Analysis We will introduce flow time analysis techniques in this class. Specifically, we will learn how to measure process waiting time with various types of variability and explain the relationship among inventory, flow time and flow rate. Both single unit and multiple flow units processes will be covered. Pre-class reading assignments: 1. Read PowerPoint slides for flow time analysis 2. Flow time teaching examples 3. (Further reading) Little's law teaching note, 2008, Springer Science After-class assignment (Due in two weeks): 1. Process analysis problem 4 and 5 2. Case report for Manzana Insurance Case (HBS# 9-692-015) Please focus on the following items: (a) Specify key performance indicators and assess the overall performance of the business; (b) Compute the theoretical turnaround time (TAT) as the foundation of your performance evaluation, note that TAT computation in Exhibit 3 is wrong; You need to use Little’s Law for computing TAT (flow time); You are encouraged to compute the flow rate (or capacity) based on the weighted average processing times (given in Exhibit 4) and the process flow chart given in Exhibit 2; (c) Find their actual TAT and explain why the branch was underperforming (Consider operations process and marketing policy, these are the main things you need to present in the report); (d) Propose your recommendations to fix the problem(s). A more detailed version of case hint information will be posted online. Topic 5: Process Strategy & Case Discussion We consider strategic decisions in managing processes for creating long-term competitiveness, including process structure, customer involvement, resource flexibility and capital intensity. This is followed by case discussions on a Make-To-Order cookie manufacturing and retailing process. Pre-class reading assignments: 1. PowerPoint slides: Process strategy 2. Harvard Business School case: Kristen’s Cookie (A) (9-686-093) (Note: This case will be discussed in class, appropriate preparation is expected) 3. Teaching note: Process strategy real world examples Topic 6: Project Management (not covered in this section) In this class we focus on the technical aspects of managing projects, covering topics such as project work breakdown structure and critical path analysis. We aim at establishing your basic understanding about planning, scheduling and controlling projects in a way that project resources are utilized effectively and efficiently. In the meantime, we compare project techniques with repetitive process techniques to complement our understanding of process analysis. Pre-class reading assignments: 1. PowerPoint slides: Project Management 2. Please remember the first HW assignment and Manzana case report will be due today After-class assignment: 1. Project homework problem 1 (not part of HW#1, please do not turn in) Topic 7: Decision Analysis (Not Part of Midterm) We will introduce the fundamental framework of quantitative decision making in business management. In particular, we introduce how to formulate LP-based problems for real applications and then how to solve the problem using Excel. Managerial insights from the analysis will be further discussed. Pre-class reading assignment: 1. PowerPoint slides 2. Teaching note: Spreadsheet modeling basics, 01/2010 After-class homework (due date indicated on course calendar): 1. LP homework problem 1 (HW#2 problem 1) Topic 8: Quality Analysis In this class, we will present concepts and framework for quality management. We focus on quantitative methods for measuring process quality (variations) for manufacturing and service processes, specifically, on sigma quality and six sigma metric. After the class you will understand how to assess and interpret the process quality for a given process. Pre-class reading assignment: 1. PowerPoint slides 2. HBR article: Competing on the eight dimensions of quality, 11-12/1987 3. SMR article: How do customers judge quality in an e-tailer? Fall 2006 After-class assignment (due date indicated on course calendar): 1. Do quality analysis homework problems (HW#2 problems 2, 3, 4) Topic 9: Statistical Process Control In this class, we will explore the root causes for quality variations and introduce the statistical process control tools—the same techniques used at IBM, GE and Motorola to achieve high quality standards. Please remember to bring in one quarter coin (for each group) to play an in- class game. Pre-class reading assignments: 1. PowerPoint slides 2. Bring in one quarter coin for playing exercise A After-class assignment (due date indicated on course calendar) 1. Case report for case Six sigma quality at Flyrock tires (Case questions are attached at the end of the case) (case report due in two weeks) 2. Do quality homework problems (HW#2 problems 5, 6) Topic 10: Six Sigma and Case Discussion Session We will discuss the famous six sigma strategy in the class, specifically, we explain the relevant techniques in the domain of sigma process improvement. You will understand the key for process improvement is how to reduce process variability and six sigma strategy is totally data-driven for solving real operational problems. The lecture is followed by a case discussion on sigma quality management. Pre-class assignments: 1. Read PowerPoint slides 2. Teaching note: Real world examples on six sigma (from Bloomberg Business Week), 2009 3. SMR article: Process management and the future of six sigma, winter 2002 Topic 11: Inventory Analysis In this class, we discuss the functions, types, costs and management of physical inventory. We then introduce the basic EOQ model for making inventory decisions, which is followed by lecturing on safety inventory and inventory performance measures. Pre-class assignment: 1. PowerPoint slides 2. HBR article: Control inventory in lean retailing, 11-12/2000 3. (Further reading) Teaching note: The EOQ model by Prof. Leroy Schwarz of Purdue University, 2008 4. Remember the six sigma quality case is due today After-class assignment (due date indicated on course calendar): 1. Do inventory homework problems (HW#2 problems 7, 8) Topic 12: Supply Strategies We consider supply strategies to meet uncertain product demand. Starting from the traditional Newsvendor model, we discuss and compare the financial performance of make-to-stock strategies without and with perfect demand information. The profit gap is defined as mismatch cost. Then we explain the impacts (both positive and negative) of quick response strategy as an effort to shrink the mismatch cost. Pre-class assignment: 1. Read PowerPoint slides 2. Teaching note: The newsvendor problem by Dr. Evan Porteus of Stanford University, 2008 3. (Further reading) IJLRA article: The optimal quantity of quick response manufacturing for an onshore and offshore sourcing model, 2005. After-class assignment (due date indicated on course calendar) 1. Do quick response problem (HW #2 problem 11 parts 1-4) Topic 13: Risk Pooling Analysis (Not covered in this section) In this class we introduce the concept of risk pooling. We will start with location pooling and show that consolidating inventory across locations reduces safety inventory. Further, we extend to consider other formats of operational pooling for cost reduction purpose. Next we explain the role of facility pooling in reducing average flow time and waiting time in service setting. The application of risk pooling concept in forecasting will also be discussed. Pre-class assignment: 1. Read PowerPoint slides 2. Teaching note: Risk pooling by Dr. Matt Sobel of Case Western Reserve University, 2008 3. Please remember the second HW assignment is due today (including LP, quality, inventory, and quick response problems) Topic 14: Supply Chain Analysis In this class we introduce the framework of supply chain management. We will describe main terminologies and concepts of global supply chain management, including bullwhip effect and supply chain coordination. A brief final review will also be provided in this class. Pre-class assignment: 1. Read PowerPoint slides 2. (Further reading) IJPE article: Supply chain coordination: Perspectives, empirical studies and research directions. May 2008. SUPPLEMENTAL BOOKS AND JOURNALS (1) Goldratt, E. M., and J. Cox. The Goal: A Process of Ongoing Improvement. 2nd Revised Ed. North River Press, 1992. (2) R. Anupindi, S. Chopra, SD Deshmukh, JAV Mieghem and E Zemel. 2006. Managing Business Process Flows (2nd Edition), Pearson Prentice Hall. (3) Bloomberg BusinessWeek and the other journals you have free access through Xavier University library: Harvard Business Review, Supply Chain Management Review, and Interface. POLICY Our general policy for this class is that when preparing cases and assignments students should not benefit from anyone who has already participated in a faculty-lead discussion of the same material, at Xavier or at another school. MISSION OF THE WILLIAMS COLLEGE OF BUSINESS We educate students of business, enabling them to improve organizations and society, consistent with the Jesuit tradition.