oit 262 operations - syllabus - anat admati: faculty ... · pdf fileoit 262 operations -...

OIT 262: Operations Course Syllabus 1

Graduate School of Business Stanford University

Professor Wein Spring 2013

OIT 262 Operations - Syllabus

Contact Information Professor: Lawrence M. Wein Email: [email protected] Office Hours: By appointment

Office: E342 Phone: 650.724.1676

Course Description For the purpose of this course, operations will be defined as the production and delivery of goods and services. This course seeks to provide you with a framework for understanding how to gain competitive advantage through operations. We begin by developing the fundamental concepts of operations management and expand into more contextually specific and strategic discussions of operational issues on a global scale. The course is divided into three segments, with the following key topics: Part I: Process Analysis – Develop the language and tools to analyze business processes; understand the different types of processes and how they align with firm strategy and product choice; learn to manage processes for demand surges, variability, and economies of scale. Part II: Quality Management – Understand the drivers of quality in products and processes; develop quantitative tools to measure quality; discuss quality best practices; motivate the need for continual process improvement. Part III: Supply Chain Management – Analyze how global material flows and ever-growing supply chains have influenced business operations; discuss the importance of coordinating members and functional areas within supply chains; discuss innovative supply chain management practices and how they generate competitive advantage.

Course Text Matching Supply With Demand (3rd Ed) by G. Cachon and C. Terwiesch, McGraw-Hill, 2013


OIT 262 At-a-Glance

# Date Description Major Reading & Assignments

1 4/5 Introduction

CT Chapter 1 and Sections 3.1-3.3 Benihana of Tokyo

2 4/8 Process Analysis CT Section 3.4 Scharffen Berger Chocolate Maker

3 4/12 Process Improvement

National Cranberry Cooperative

4 4/15 Batching and the Product-Process Matrix Bayonne Packaging CT Sections 2.6, 7.1-7.4 A Brief Note on the Theory of Constraints

5 4/19 Tools: Randomness and Waiting Times Optional Attendance

CT Sections 2.2-2.3, 8.1-8.6 and 8.9-8.12

6 4/22 Process Improvement in Health Care

Massachusetts General Hospital Group Write-Up Due – 9:45 am

7 4/26 Quality and the Toyota Production System CT Chapter 11 Toyota Motor Manufacturing, USA

8 4/29 Quality in Service Operations

Lion Financial Services Teaching by the Book, No Asides Allowed

9 5/3 Tools: Measuring and Quantifying Quality Optional Attendance

CT Sections 10.1, 10.2 and 10.5 A Note on Quality Management Tools

10 5/6 Quality Management in Luxury Services Ritz-Carlton Homework 1 Due (Individual) – 9:45 am

11 5/10 Process Improvement in Health care

Stanford Hospital Operating Room Guest Speaker: Sridhar Seshadri

12 5/13 Tools: Supply Chain Inventory Management Optional Attendance

CT Sections 2.5, 7.6-7.7, 12.2 and 12.4 Continuous Review Inventory Management

13 5/17 Managing Product Variety in Supply Chains HP DeskJet Homework 2 Due (Individual) – 9:45 am

14 5/20 Designing a Distribution Network

Amazon.com Dell Article

15 5/24 Wein’s Homeland Security Lecture

16 5/29 Supply Chain Simulation

17 5/31 Leadtime Reduction and Quick Response

Sport Obermeyer, Ltd Group Write-Up Due – 9:45 am

18 6/3 Student Presentations Course Summary

Final Exam – In Class, Friday June 7, 8 AM - noon


Course Outline

Part I: Process Analysis

Class 1 Friday, April 5

Introduction Read Cachon & Terwiesch, Chapter 1, Sections 3.1-3.3

Benihana of Tokyo Discussion Questions

1. What is the Benihana concept?

2. How does Benihana’s cost structure differ from that of a typical sit-down restaurant? What operational and design choices generate efficiencies?

3. Estimate the maximum customer waiting time in the bar on a busy night (i.e., the wait time of the “last customer” to get a seat in the bar) in each of the three restaurant configurations (Benihana West, East, and Palace). To keep everyone on the same page, use the following assumptions:

Total dining time equals 60 minutes (per table of 8), and dining start times are evenly spaced.

Benihana West has 8 seats in the bar and 40 in the dining room, Benihana East has 16 seats in the bar and 80 in the dining room, and Benihana Palace has 56 seats in the bar and 120 in the dining room.

Customers prefer to sit in the bar, rather than outside the restaurant. Any customer that might be waiting outside the restaurant is behind the customers in the bar in the queue for dinner.


Class 2 Monday, April 8

Process Analysis Read Scharffen Berger Chocolate Maker (A)

Cachon & Terwiesch, Section 3.4 Predictable Variability: Inventory Buildup Analysis

Discussion Questions For your analysis of this case, assume that the cycle time of the roaster is 1.5 hours (the operator must wait for the beans to cool before starting another batch). Ignore the packaging step in the process, as this step is not discussed in detail in the case (no capacity is provided) and is primarily outsourced.

1. Create a process flow diagram for the current (pre-ball mill) process. Assuming all production is of semi-sweet (62%) chocolate, compute the daily capacity (in kg of nibs) for each production stage except packaging. What is the bottleneck of this process?

2. Now consider the new process after the ball mill has been incorporated. Re-compute the daily capacity of the conche and the ball mill, assuming that for 62% chocolate 10 hours in the conche is required, followed by 5 hours in the ball mill.

3. Assuming that all of the production is of semi-sweet (62%) chocolate, what changes beyond addition of the ball mill will you need to consider to increase your capacity by 150% of the current (pre-ball mill) level of output? (In other words, to increase output to 2.5 times the current level.) Estimate a payback period for the ball mill given these changes, making assumptions as necessary.

4. Be prepared to replicate the cannery calculations in Predictable Variability: Inventory

Buildup Analysis.



Process Improvement Read National Cranberry Cooperative, 1996 Discussion Questions Assume that a peak harvest-season day involves 18,000 barrels of berries, 70% of them wet harvested, arriving at a constant, smooth rate over a twelve-hour period from 7 am to 7 pm. Assume that berry processing begins at 7 am (rather than 10 am, as stated in the case). You may assume that it takes exactly 7.5 minutes to empty a truck into the dumpers (the case states “7-8 minutes”).

1. Develop a process flow diagram, showing the capacities of the various stages in barrels per hour.

2. Compute the capacity utilization for each stage of the process. What is the bottleneck

operation?

3. Would trucks have to wait to unload? When during the day would trucks be waiting? How much total truck waiting time would you expect? (Hint: you should use an inventory buildup diagram to aid you in this question.)

4. Using your analysis in Questions 1-3 as a starting point, consider how would the various actions contemplated by Hugo Schaeffer affect peak day performance. Suppose the cost of renting cranberry trucks with drivers is $100 per hour. What would you recommend? Provide calculations to support your recommendation.



Batching and the Product-Process Matrix Read Bayonne Packaging, Inc. Cachon & Terwiesch, Sections 2.6, 7.1-7.4 A Brief Note on the Theory of Constraints Discussion Questions

1. What is Bayonne’s process type? From a customer’s perspective, what are its key dimensions of performance? What are its main problems? Download Exhibit 2.xlxs from the coursework website and look at how Bayonne’s planned utilization for each resource is calculated from the data in Exhibit 2.

2. What is the capacity in sheets per hour of the die-cut work center, as currently operated? HINT: Assume that an order contains 10,000 sheets (based on Exhibit 2) and 5 orders are “ganged” together with a single setup (based on footnote c of Exhibit 2), so the current batch size is 50,000 sheets. The setup time is 2.5 hours (based on footnote c in Exhibit 2). The work center has two Bobst die-cut machines.

3. What is the minimum batch size at which the die-cut work center can achieve its target flow rate in sheets per hour for the month of October? HINT: From Exhibit 2, the target flow rate is (3,108,971 sheets)/(347 hours) = 8960 sheets per hour.

4. What is the capacity in pieces per month for the Royal/Queen fold & glue work center, if

no orders are partialed? Assume that the average order size is 80,641 pieces (from Exhibit 2, (6,209,329 pieces)/(77 orders) = 80,641 pieces per order) and the work center operates for 347 hours per month.

5. Exhibit 4 (including footnote a) shows that 107/(353-107)= 43% of orders were partialed in October. Assume that 43% of 77 = 33 orders at the Royal/Queen fold & glue work center were partialed (processed in two equal-sized batches) and it had 347 work hours available in October. What was the resulting capacity for the month of October? HINT: Compute the total time required for the 33 partialed orders, subtract that time from the 347 hours to obtain the number of hours available for regular orders, and compute the number of regular orders that can be made in that time. Finally, sum the number of pieces in the partialed and regular orders.

6. How would you explain Bayonne's performance problems? What should John Milliken recommend to Dave Rand?



Tools: Randomness and Waiting Times OPTIONAL ATTENDANCE Read Cachon & Terwiesch, Sections 2.2-2.3, 8.1-8.6 and 8.9 – 8.12 Assignment Prepare solutions to Practice Queueing Problems (but do not turn in). Class 6 Monday, April 22

Process Improvement in Health Care GROUP WRITE-UP DUE BY 9:45 a.m. Read Massachusetts General Hospital’s Pre-Admission Testing Area (PATA) Discussion Questions Be prepared to discuss your solutions to the Massachusetts General Group Assignment in class.

Part II: Quality Management Class 7 Friday, April 26

Toyota Production System Read Toyota Motor Manufacturing, USA

Cachon & Terwiesch, Chapter 11 Discussion Questions

1. Should andon pulls for seat problems result in a line stoppage?

2. Is implementing the hook design change a cost-effective strategy?

3. Estimate the cost of stopping the production line for one cycle (approximately one minute). What is the cost of not stopping the production line when a problem occurs?

4. What should Doug Friesen do to address the seat problem?

5. In light of what you learn about the Toyota Production System, what do you think of the massive recalls of Toyota vehicles due to braking and unintended acceleration problems in 2009 and 2010?



Quality in Service Operations Read Call Center Design for Lion Financial Services Teaching by the Book, No Asides Allowed (New York Times article) Discussion Questions

1. Estimate overall labor utilization for LFS call center agents, by comparing the overall supply of, and demand for, labor hours per week. Does it appear to you that the overall staff size for the LFS call center system is appropriate?

2. On page 3 it is said that effective call routing can substantially reduce staffing needs. How so? What logic lies behind the proposal for understaffing and overstaffing various agent pools that is mentioned on page 10? Do you have any misgivings about the call routing protocol that Andy proposes?

3. On page 11 there is a mention of "economies of scale" that Andy expects to realize with the proposed configuration. What might these be?

4. What do you like about Andy’s proposal? Do you have any misgivings the proposal?

5. Given the annual turnover rate among agents of 50%, what is the current turnover cost per year?

Class 9 Friday, May 3

Tools: Measuring and Quantifying Quality OPTIONAL ATTENDANCE Read Cachon & Terwiesch, Sections 10.1, 10.2 and 10.5

A Note on Quality Management Tools Discussion Questions

1. Prepare a solution to the Practice Quality Problem at the end of A Note on Quality Management Tools (but do not turn in).

2. In the early 1990s, Motorola’s celebrated Six Sigma Program had the goal of increasing the process capability of each of its process steps from 1 to 2. What might have been Motorola’s reasons for doing this?


Class 10 Monday, May 6

Quality Management in Luxury Services HOMEWORK # 1 DUE BY 9:45 a.m. Read Ritz-Carlton Hotel Company: The Quest for Service Excellence Homework 1 – Ritz-Carlton Discussion Questions Prepare solutions to Homework 1. In addition, be prepared to discuss the following questions in class:

1. Do you believe that Ritz-Carlton has sufficient systems in place to achieve its objective of defect-free service? What changes would you make?

2. Using the analysis you did for homework #3 and your common-sense knowledge of hotel operations, generate hypotheses about the possible root causes of defects.



Process Improvement in Health Care GUEST SPEAKER: SRIDHAR SESHADRI Read Process Improvement in Stanford Hospital’s Operating Room Discussion Questions

1. Estimate the effect of instrumentation errors on the hospital’s finances. To reach an estimate you will need to use the numbers presented in the case and also to make some assumptions. For concreteness, assume that each employee has an accuracy rate of 99.9% (that is, employees make one error per thousand instruments handled) and that an instrumentation error in a case cart delays the start of that case until the error is resolved. Assume a thirty-minute average delay.

2. Identify the root causes for the different types of instrumentation errors described in the case study. These root causes could include people, processes, culture, biological systems, etc.

3. Evaluate the six proposals described in the case study. Which of these proposals should be implemented immediately? Which ones should be left for future implementation and why? How should resources be allocated between these different proposals?

4. How would you monitor the implementation and success of these proposals? What is the most effective way to communicate any improvements achieved by these proposals to the various stakeholders?


Part III: Supply Chain Management Class 12 Monday, May 13

Tools: Supply Chain Inventory Management OPTIONAL ATTENDANCE Read Cachon & Terwiesch, Sections 2.5, 7.6-7.7, 12.2 and 12.4

Continuous Review Inventory Management Assignment Prepare solutions for the problems in the Continuous Review Inventory Management note (but do not turn in).


Managing Product Variety in Supply Chains HOMEWORK # 2 DUE BY 9:45 a.m. Read Hewlett-Packard Company DeskJet Printer Supply Chain (A) Homework 2 – HP DeskJet Printer Supply Chain Discussion Questions Prepare solutions to Homework 2. In addition, be prepared to discuss the following questions in class:

1. What has caused the crisis with inventory and service?

2. Come up with suggestions to mitigate the inventory and service crisis. Evaluate the

costs and benefits of these suggestions by using analytical tools (making assumptions where necessary). Be prepared to argue in favor of the “best” solution, in your opinion.


Class 14 Monday, May 20

Internet Operations and Distribution Read Amazon.com’s European Distribution Strategy Automate or Die (Business 2.0 Article on Dell Computer) Discussion Questions

1. Determine the key factors influencing the design of Amazon’s US distribution network. Be prepared to analyze these factors and discuss their relative importance.

2. The possible configurations of Amazon’s European distribution network are:

a. Keep the status quo (3 decentralized DCs serving each country independently). b. Keep the existing distribution centers but centralize the management of the

three, possibly allowing a DC in one country to fulfill orders in another. c. Combine all DCs into a single DC serving multiple countries.

Be prepared to analyze the pros and cons of each of these strategies, and in particular, be prepared to argue either for or against the idea of centralization (either physical or managerial) in Amazon’s European distribution network.

3. Suppose that Dell pays an average of $1000 per computer to its vendors for components. What is the average dollar value of the component inventories held by Dell vendors? (For the vendors, these are finished goods inventories.)

4. Dell computer is celebrated for the efficiency of its direct-channel marketing and assemble-to-order manufacturing. Could General Motors conceivably adopt this business model? What benefits might GM hope to gain thereby, and what are the obstacles to such a change?


Professor Wein’s Research on Homeland Security


Class 16 Wednesday, May 29

Supply Chain Experiential Exercise Read Supply Chain Game Description Today’s class will be devoted to a participatory simulation exercise. Your only preparation is to read the brief description of the game included in the course packet. Note: you must be on time for today’s class, as any latecomers will not be able to participate in the game. Class 17 Friday, May 31

Supply Chain Demand Management GROUP WRITE-UP DUE BY 9:45 a.m. Read Sport Obermeyer, Ltd. Assignment Be prepared to discuss your solutions to the Sport Obermeyer Group Assignment in class. Class 18 Monday, June 3

Student Presentations and Course Summary The last class will be devoted to course wrap-up and several integrative student presentations on your classmates’ operations experiences.


Course Policies Classroom Procedure Classes will have a mixture of lecture and discussion formats. Please be punctual, as latecomers miss the initial thrust of the class and disturb others. Please leave your name cards up for the entire quarter. A seating chart will be passed around at the beginning of class #2. No open laptops, tablets, or smartphones are allowed in class. Attendance Since most class sessions are case based, it is critical that you be present in class to reap the greatest benefit from the material; many insights and takeaways are developed during the course of class discussion and cannot be neatly summarized on class handouts or slides. Thus, generally speaking, attendance is required. There is an exception to this:

Attendance is optional on the three “tools” sessions (Queueing, Quality, and Supply Chain tools). These are lecture-style sessions in which I introduce and demonstrate the quantitative tools necessary for the course. You are encouraged to attend, as even students with highly quantitative backgrounds find these tools new and unfamiliar; however, I recognize that students have extremely diverse backgrounds, and some are quite capable of picking up a quantitative tool by simply reading the textbook. Regardless of whether you attend the tools sessions or not, you are accountable for all material discussed in these sessions, even material that arises during class discussion and is not included in the printed handouts.

If you plan to miss a non-tools oriented class, please email me in advance to let me know. Missing a non-tools oriented class will result in a reduction in your class participation grade, unless that absence is excused per Stanford University policy (illness, etc.). Examples of unexcused absences include: weddings, college reunions, etc. Missing an excessive number of class sessions will make it difficult to receive a passing grade in OIT 262. Lateness, especially if it is habitual and egregious, will result in a reduction in your class participation grade. If you must be late due to some unavoidable conflict, let me know before class.


Classroom Participation The purpose of the discussion questions listed in the syllabus is to engage you in the issues, to learn ways to think about and analyze them, and to prepare you to be effective managers. There will be cool calls: I will typically put several students’ names on the board before class, along with the question (typically one of the discussion questions listed in the syllabus) that I will ask them. Thus, all students should think about and be prepared to discuss the questions for every class session. The classroom should be considered a laboratory in which you can test your ability to present your analyses and recommendations clearly, to convince your peers of the correctness of your approach to complex problems, and to illustrate your ability to achieve the desired results through the implementation of that approach. To that end, I encourage broad participation by everyone in the class. Grading for class participation will be done on a five-point scale for each session. One point is earned just by being present. The remaining four points are earned by participating in the discussion, with the emphasis being on the quality – rather than the quantity – of your comments. The sum of all your daily participation grades represents your course participation grade, which comprises 15% of your total class grade. Graded Group Assignments

There will be two graded assignments to be done by groups of three students each. For both assignments, you should form your own groups. My only stipulations are that groups should consist of students from within a single section, and there should be no overlap between groups for the two assignments (i.e., you must form completely different groups).


Operations Experiences I will seek 4-5 students in each section with interesting operations experience in their past to give a brief (10-15 minute) presentation to the class on the final day. By participating in these “Operations Experience” presentations, a student may boost his or her participation grade. This provides an outlet for students who feel uncomfortable speaking up in case discussions to increase their participation score; however, the primary purpose of the Operations Experience presentations is not to raise participation grades. Rather, the purpose is to share with your classmates interesting experiences in “real world” operations management, and hence I will select students to participate in these presentations primarily based on the relevance and quality of their experience and the degree to which I feel it will benefit the rest of the class. Interested volunteers should email me during the quarter with a brief description of the proposed presentation. Grading Breakdown

Assignment Percent Homeworks (equal weight) 20% Group Write-ups (equal weight) 40% Final Exam 25% Classroom Participation 15%

A good faith effort on all assignments is required, and egregious or intentional poor performance in any single category may result in a failing grade. Final Exam The 4-hour final exam will be open-book and open-notes. You may bring and consult your textbook, syllabus materials, class notes, and class handouts. The exam is comprehensive: any material discussed in the course, including case studies, is fair game for the exam unless otherwise noted by me. Academic Integrity Group work is acceptable and encouraged for purposes of general class preparation and case discussion. For written assignments (homework and group write-ups), our policy for this course is that you should not benefit from anyone who has already participated in a faculty-led discussion of the material, at Stanford or at another school. Receiving assistance on written assignments outside of the professor or course assistants is a violation of the honor code. For the three individual homework assignments, you may discuss your general approaches to these problems with other students in the class, but you must solve, write up, and submit the problems individually. For the group assignments, your discussions should be limited to the members of your group. On any graded assignments in the course, you should not consult, either directly or indirectly, with other groups, 2nd year students, or persons outside the GSB.

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