· Operations research, operations analysis, management science, analytics, OR, industrial engineering, supply chain management
· What is OR?
o Uses advance analytical methods such as mathematical modeling, statistical analysis, and mathematical optimization to arrive at optimal or near-optimal solutions to complex decision making problems. It is often concerned with determining the maximum or minimum of some real-world objective.
o It is the only subject in MBA that focuses on producing a product or service.
· Five questions to diagnose and solve operational problems:
o Capacity
§ What is the maximum production in a given period of time?
§ Six ‘M’s could be a bottleneck:
· Methods
o Continuous – high volume, standardized process (no customization)
o Assembly line – series of workstations, less continuous, must coordinate outputs of each process to maximize efficiency
o Job shop – set up for flexibility and many different tasks done by a single person
o Mass customization – popular in the early 2000, use IT (CRM) to facilitate customized elements in a continuous production model
· Material
· Manpower
· Machinery
· Money
· Messages (communication and information)
§ Diagnosing capacity problems with flow diagrams
· Throughputs
· Linear programming: dealing with capacity constraints
o Scheduling
§ What are the steps to take and fulfill the order and and how long does each take?
§ Gantt Chart helps track timeline and dependencies (Henry Gantt)
· Critical Path Method (CPM) and Program Evaluation and Review Technique (PERT)
§ Queuing Theory
· How long will the customer wait?
· If we add another worker, how much shorter will the line be?
· Given: A = Average number of random arrivals per unit of time; S = Average number of services provided per channel per unit of time; M = number of available channels
o Utilization factor of the system = A/MS
o Average # Waiting = Total Number in Line – (A/S)
o Expected Waiting Time in Line = Average # Waiting / A
· In the ‘80s studies showed that a single line is more efficient than multiple lines, this was proved by queuing theory.
o Inventory
§ What supplies need to be on-hand to produce the product?
· Three types of inventory (Raw, Work in progress, Finished goods)
· Reasons you keep inventory
o Pipeline – minimize production delay
o Cycle – avoid ordering too many times (eliminate additional delivery costs)
o Safety – prevent shortage
o Anticipatory and speculative (best price)
· Hot topic of supply chain management
o In high tech companies this is particularly important because the component can become obsolete very quickly and lose value, plus there are many components and international challenges due to globalization; makes this a science.
§ Just in time (JIT) inventory management
o Standards and Quality
§ What constitutes standards and a quality experience?
§ Quality
· Best in the market or meets expectations?
· How do you control quality?
o One sigma quality = 68% of products are between upper and lower limits
o Six sigma quality = 3.4/10^6 defects
· Quality is free. (Philip Crosby)
o If you produce poor quality you lose customers and have to spend to correct quality issues. Upfront quality is better in the long run. Zero defects as ultimate goal.
· Poor quality is a crime. (Genichi Taguchi)
o Making poor products worse than a thief. A thief redistributes existing wealth, but everyone loses when poor-quality products are made.
o Control and communication
§ How do you manage controls and communication?
§ Benchmarking – compare to industry performance standards
· Historical Concepts in Operations
o Fred Taylor: measurement of steel workers
§ Dehumanizing
o Frank and Lillian Gilbert: broke complex processes down to simple components
§ Cheaper by the dozen
o Elton Mayo: Hawthorne effect
§ Showed that researcher interest increases worker productivity, intensity of the light made negligible difference; makes observation very difficult
o Theory X, Y
§ A nasty boss and a nice boss employee performance will increase because they know they are being measured. A boss who does not provide feedback will reduce productivity.
§ Theory X – control the employee and micromanage; more common in manufacturing
§ Theory Y – be nice to the employee and they will perform for you; this is the model most common in Silicon Valley
o Theory Z
§ It depends on the nature of the people and the nature of jobs
· Hot Topics
o Information Technology
§ Customer Relationship Management (CRM)
· Product development
· Sales
· Customer experience
· Retension
· Targeting and marketing
