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Operations Management
Semester II, 2013/2014
Lecturer: Lucy G. Chen
Office: BIZ 1, #08-60
Phone: 6516-3013
Email: bizcg@nus.edu.sg
Consultation: Wed, 4 - 6pm,
or by appointment
DSC 2006, Operations Management, Lucy Chen

Course Administration
Be punctual!
Five-minute break.
Cell phones should be turned off or silenced.
Zero tolerance for chit chatting.
Laptops are generally not allowed in class.
Class participation attitude, comments, attendance
Exams
Closed book, one double sided A4 sheet is allowed
Midterm no make-up exam. Please make sure there is no
time conflict.
DSC 2006, Operations Management, Lucy Chen

DSC 2006, Operations Management, Lucy Chen

Introduction to Operations
Management
What is operations management?
Why is operations important?
How does operations contribute to a firm?
How does operations relate to your interests?

DSC 2006, Operations Management, Lucy Chen

Introduction to Operations
Management
What is operations management?
Why is operations important?
How does operations contribute to a firm?
How does operations relate to your interests?

DSC 2006, Operations Management, Lucy Chen

Common Response

Airplane Boarding Strategies

Boarding strategies normally used

First class -> Business class -> Coach class
Coach class in groups
back to front (Northwest Airlines)
window to aisle (United Airlines)
first come, first board (Southwest Airlines)

DSC 2006, Operations Management, Lucy Chen

Airplane Boarding Strategies

Why does boarding strategy matter?

For an airplane, cutting ground time between flights
from an hour to 40 minutes creates one or two more
flights a day!
Four to five minutes boarding time savings generate
$1 million per year (United Airlines).

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Airplane Boarding Strategies

Reverse pyramid by

Reverse pyramid

American West
Saves boarding time by over
2 minutes (20% saving)

OM tools applied:

Process Analysis
Capacity Planning
Queuing Analysis
Linear Programming

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What is Operations Management?

Management of systems or processes that
create goods and/or provide services.
Manage processes to better match supply and
demand

Restructure operations to improve performance and

remain competitive in the face of ever changing
business conditions

Find the right balance between multiple measures of

performance

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The Process View

Value-adding
Transformation Process
Inputs

Outputs

(Raw materials

(Goods,

Customers,
Resources, etc.)

Services)

Feedback
Feedback

Control

Feedback

Value-added: The
difference between
the cost of inputs
and the value or
price of outputs.
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Example: Food Processor

Inputs

Processing

Raw vegetables
Metal sheets
Water
Energy
Labor
Building
Equipment

Cleaning
Making cans
Cutting
Cooking
Packing
Labeling

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Outputs
Canned
vegetables

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Example: Hospital
Inputs

Processing

Outputs

Doctors, nurses
Hospital
Medical supplies
Equipment
Laboratories

Examination
Surgery
Monitoring
Medication
Therapy

Healthy
patients

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Goods vs. Service

Characteristic

Goods

Service

Output
Uniformity of output
Uniformity of input

Tangible
High
High

Intangible
Low
Low

Labor content
Measurement of productivity

Low
Easy

High
Difficult

Customer contact
Opportunity to correct quality

Low

High

problems before delivery

Inventory

High
Much

Low
Little

Evaluation
Patentable

Easy
Usually

Difficult
Not Usually

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Introduction to Operations
Management
What is operations management?
Why is operations important?
What is the role of operations within a firm?
How does operations relate to your interests?

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Why is Operations Important?

Importance as a leading economic indicator
Purchasing managers index (PMI)
Durable goods orders

50% or more of the jobs in industry are operations-related:

Customer Service
Quality Assurance
Production Planning
Scheduling
Inventory Management
Logistics

In every company, there is usually an underlying value-adding

product transformation that needs to be well-managed

Operations activities are at the core of all business

organizations.

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Three Major Business Functions

Fulfillment lead time
Judgment of
manufacturability

Marketing

Financial indicators

Operations

Finance

Competitor
Customer preference
Trend of technology

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Budgeting
Economic analysis of
investment proposals
Provision of funds

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Why is Operations Important?

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Introduction to Operations
Management
What is operations management?
Why is operations important?
How does operations contribute to a firm?
How does operations relate to your interests?

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The Strategic Role of Ops

A companys operations
function is
either a competitive weapon
or
a corporate millstone.
It is seldom neutral.
---- C. Wickham Skinner

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The Cold Hard Facts -- Competition

Those who
understand
how to play
succeed; th
the game w
ose who do
ill
nt were do
omed to fai
l
ing
t
e
p
m
o
c
s
ie
n
a
p
om
c
t
s
ju
is
e
m
a
g
e
le
ip
lt
Dont think th
u
m
h
it
w
s
ie
an
p
m
o
c
n
I
.
r
e
h
t
o
s or
h
d
o
o
g
e
with eac
m
a
s
e
h
t
ing
c
u
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o
r
p
s
n
io
is
iv
lves
e
s
factories or d
m
e
h
t
d
in
f
s
n
isio
iv
d
r
o
s
ie
r
o
t
c
a
f
services,
er
h
t
o
h
c
a
e
h
it
w
g
competin
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Dimensions of Competitiveness
Price
Quality
Time

Flexibility
...

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Order Winners vs. Order Qualifiers

Order Qualifiers
Characteristics that potential customers perceive
as minimum standards

Order Winners
Characteristics of an organizations goods or
services that cause them to be perceived better
than the competition

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Order Winners vs. Operational

Capability
Price

Low cost process

Quality

High quality process

Delivery Lead Time

Fast process

Flexibility

Flexible process

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A Strategic Framework for Ops

Business
Strategy

Desired
Capabilities

Processes

Operations
Structure

Resources

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Competitive Success through

Operations: Wal-Mart
Strong as always as of 2009
$405.6 Billion Revenue (7% increase from 2008)
$95 Billion Gross Profit (8% increase from 2008)

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Order Winner
Paris Hilton
on Wal-Mart:
"I went to Wal-Mart for the first time. I always
thought they sold wallpaper. I didnt realize it
has everything. You can get anything you want
there for really, really cheap."

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Order Winner
Which store is the best at each of the
following aspects?
Price
Selection of products
In-stock merchandise
Convenience
Parking
Service

Wal-Mart

K-Mart

Target

84%
70%
66%
57%
48%
48%

6%
5%
5%
14%
14%
6%

11%
25%
28%
29%
38%
46%

Source: Shoppers Rank Wal-Mart, Target And Kmart, Consumer

Technographics north America, July 23, 2003
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Wal-Mart
Business Strategy
(Gain competitive advantage by) providing customers access to
quality goods, when and where needed, at competitive prices

Operations Strategy/
Capability
Short flow times
Low inventory levels

Compatible!
Order Winners
Low price
Variety
Convenience

Operations Structure
EDLP (everyday low prices)
Fast transportation system
Hub & Spoke distribution
Cross docking
Supplier management, use of
technology (e.g., EDI, RFID)
Big stores offer economy of
scale and variety

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The Romance of
Business Strategy
$16.82

Operational Strategies
$9.94

$24.96

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More Success through Ops

Southwest Airlines
Dell Inc.
McDonalds

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Tradeoff of Priorities
Cant Be Good At Everything.
Which store is the best at each of the following aspects?
Wal-Mart

K-Mart

Target

Quality of products

44%

5%

51%

Cleanliness

30%

3%

67%

Checkout

40%

10%

50%

Source: Shoppers Rank Wal-Mart, Target And Kmart, Consumer

Technographics north America, July 23, 2003

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Strategic Tradeoffs
Quality

Low price
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Tradeoffs and Efficient Frontier

Quality

World class
Improvement

Low price
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Tradeoffs and Efficient Frontier

Quality

World class
Improvement

Low price
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Introduction to Operations
Management
What is operations management?
Why is operations important?
How does operations contribute to a firm?
How does operations relate to your interests?

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How Does Ops Relate to your

Interests?
Consulting

Analyzing and improving business processes

SCM and use of ERP systems to achieve SC efficiency is a hot topic
Problem solving modeling and analysis
Finance
How healthy is that company?
Balance the upside versus the downside risk analysis
How do financial objectives relate to operational measures
Marketing
Sales promotions and their impact on operational performance
Level of customization how to achieve it at low cost
Order qualifiers and winners
Accounting
What is the cost of making this product Activity based or time
based
Are inventories assets or liabilities?

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Salary of Executives
Chief Executive Officer
Chief Operating Officer
Chief Financial Officer
Chief HR Executive
Chief Marketing Executive
Chief Purchasing Executive

$1,583,567
$869,449
$599,209
$399,281
$383,100
$279,472*

Medium Annual Pay

(base salary + bonus+ benefit, in USD)
www.salary.com, Jan 2014, New York City
*For Chicago
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Todays Takeaways
What is Operations Management about?
Design operations to better match supply with demand.
A set of quantitative models and qualitative strategies.

Why is operations important?

Contribute to a companys bottom line
Relationship between Ops and marketing, Ops and Finance.

Order winners and order qualifiers

Strategic tradeoffs and operations frontier
Operational capabilities and structures have to be
compatible with firm strategy
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Assignments
Readings: Chapters 1 & 2 (excluding pages 51-57)
Tutorial Questions: Please see IVLE.
Experiential Exercises: Select two stores that you shop at
regularly and identify their order winners.

Quiz of the Day: Assume Walmart decides to enter the

Singapore market. What will be the challenges for Walmart
as well as the incumbent firms such as NTUC Fairprice,
Cold Storage, Sheng Siong, and Giant? Do you think Walmart will succeed?

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