Introduction

Prof. Christian Terwiesch

Operations in a Restaurant

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Operations in an Emergency Room

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Operations from the Perspective of the Customer

Prof. Christian Terwiesch

Four Dimensions of Performance

Cost Quality

Efficiency

Product quality (how good?) Process quality (as good

as promised?)

Variety

Time

Customer heterogeneity

Responsiveness to
demand

Important for - Performance measurement - Defining a business strategy

Prof. Christian Terwiesch

Four Dimensions of Performance: Measurements for a Sandwich Store

Cost Quality

Efficiency

Product quality (how good?)

Process quality (as good as

promised?) p )

Variety

Time

Customer heterogeneity

Responsiveness to demand

Prof. Christian Terwiesch

Introduction
Efficient Frontier

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Four Dimensions of Performance: Trade-offs

Cost Quality

Efficiency Measured by:

- cost per unit - utilization

Product quality (how good?)

=> Price

Process quality (as good

as promised?) => Defect rate

Variety

Time

Customer heterogeneity Measured by:

- number of options - flexibility / set-ups - make-to-order make to order

Responsiveness p to
demand

Measured by:
- customer lead time - flow time

Prof. Christian Terwiesch

What Can Ops Management (This Course) Do to Help? Step 1: Help Making Operational Trade-Offs
Responsiveness High

Very short waiting times, Comes at the expense of Frequent operator idle time

Tradeoff Low Low labor productivity

Long waiting times, yet operators are almost fully y utilized

High labor productivity

Labor Productivity (e.g. $/call)

Example: Call center of a large retail bank - objective: 80% of incoming calls wait less than 20 seconds - starting point: 30% of incoming calls wait less than 20 seconds - Problem: staffing levels of call centers / impact on efficiency OM helps: Provides tools to support strategic trade-offs
Prof. Christian Terwiesch

What Can Ops Management (This Course) Do to Help? Step 2: Overcome Inefficiencies
Responsiveness

High

Current frontier In the industry Competitor A Eliminate inefficiencies Competitor C

Low Low labor productivity

Competitor B High labor productivity Labor Productivity (e.g. $/call)

Example: Benchmarking shows the pattern above Dont just manage the current system Change it! Provides tools to identify and eliminate inefficiencies => Define Efficient Frontier Types of inefficiencies: -Poor process design - Inconsistencies in activity network
Prof. Christian Terwiesch

What Can Ops Management (This Course) Do to Help? Step 3: Evaluate Proposed Redesigns/New Technologies
Responsiveness High Redesign process

New frontier Current frontier In the industry Low Low labor productivity High labor productivity

Labor Productivity ( (e.g. $/call) $/ )

Example: What will happen if we develop / purchase technology X? Better technologies are always al a s (?) nice to ha have, e b but t will ill the they pa pay? ? OM helps: Evaluates system designs before they occur
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Example: The US Airline Industry

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Example: The US Airline Industry

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Introduction
Format of the course

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Course Outline / Grading / Homework

Objective of the course: Understanding and improving business processes Performance measures How-to Mix of industries: healthcare healthcare, restaurants restaurants, automotive automotive, computers computers, call centers centers, banking banking, etc Course Outline Introduction (0.5 weeks) 1. Process analysis (1.5 weeks) 2. Productivity 3. Product variety 4. Responsiveness 5. Quality Requirements / Prerequisites: There are no prerequisites for the course Some modules require statistical knowledge (standard deviation, normal distribution) Homework assignments One large assignment after each module (five assignments); 10% each Final exam with q questions from all modules; ; 50%

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Text Book
Course book Cachon, Gerard, Christian Terwiesch, Matching Supply with Demand: An Introduction to Operations Management, 3rd edition, Irwin - McGraw Hill, 2012 (ISBN 978-0073525204, 507 pages)

Prof. Christian Terwiesch

Personal Introduction
MBA core course: Operations Management: Quality and Productivity Taught ~ 60 times ~ 4000 MBA students McKinsey Ops Practice ~ 500 new associates Research: Operations Management, focus on Healthcare Management Innovation tournaments and contests

Christian Terwiesch terwiesch@wharton.upenn.edu Andrew M. Heller Professor at the Wharton School Senior Fellow Leonard Davis Institute for Health Economics 573 Jon M. Huntsman Hall Philadelphia, PA 19104.6366

Prof. Christian Terwiesch