Notes on Operations Management

The dimensions used to measure performance of an operation and to differenciate it from other operations are:

• Cost and efficiency,
• Variety for supporting heterogensous customer
• Quality of the operation can be divided into product quality and process quality (does the promise hold?)
• Time and responsiveness

for example in case of a restaurant operations, the cost can be measured with indicators like number of served customer per employee or number of customer per restaurant (in case someone want to rent a restaurant), the heterogenity can be measured by the number of items in the menu, the quality can be measured by heigienity, the responsivness can be measured by the waiting time before serving.

It is impossible to out perform in all these dimensions, that's why as a manager/consultant you need to find a compromise; priorities dimensions.
Step1. Help making operational trade-offs (picture).
Example call center of a large retail bank, at the service level, the objective is 80% of incoming calls wait less than 20s, and the starting point is 30% of incoming calls wait less than 20s.
Here, the problem is the staffing levels of call centers with respect on efficiency. In fact, very short waiting time leads to frequent operator idle time. While long waiting times means the operators are fully utilized.
Step2. Overcome inefficiencies ny providing tools to identify and eliminate inefficiency
Example: Benchmarking of the market shows the pattern in the picture where the inefficiency of a given operation is the difference to the competitor with better productivity (less cost) and better responsiveness (less waiting time).
The curve that hold the competitor operations is the ineffecieny frontier that the operation should go beyond (to the right side).
Step 3. Evaluate proposed redesign/new technologies before they occur by answering questions like what will happen if we develop / purchase technology X? Are better technologies always nice to have? but will they pay?

Example in the picture the innovation related to the process redesign lead to a new frontier.

Module 1; business process analysis
To measure the performance of a business process three dimensions flow rate (throughput), inventiry and flow time.

Subway example: sitting in front of the store and counts number of arrival (flow rate) and departure and draw the corresponding cumulative customers number based on time. The difference at any time between both graphs represent the number of customers currently in the system.

Definitions:
Flow Unit: customer or Sandwich
Flow rate/throughput: number of flow units going through the process per unit of time
Flow Time: time it takes a flow unit to go from the beginning to the end of the process
Inventory: the number of flow units in the process at a given moment in time

Process Analysis: examples.
            Immigration department        MBA program                Auto company
Flow unit  Applications                   Student                      Car
Flow rate  Approved or rejected cases     Graduating class             Sales per year
Flow Time  Processing time                2 years                      60 days
Inventory  Pending cases                  Total campus population      inventory

Finding the bottleneck
Figure 1 processing/activity times (time needed for serving a customer in a given station) in subway example.

Drawing a Process Flow Diagram:
Triangles captures waiting time in a queue or some delay while boxes capture an activity. Arrows capture the flow of the process.
Process managemebnt is about doing things repeatdly, where project management deals.

Basic Process Vocabulary:
Processing times: how long does the worker spend on the task?
Capacity=1/processing time: how many units can the worker make per unit of time. If there are m workers at the activity: Capacity=m/processing time.
Bottleneck: process step with the lowest capacity
Process capacity: capacity of the bottleneck
Flow rate: Minimum{Demand rate, Process Capacity}
Uitilization: Flow rate / Capacity
Flow Time: The amount of time it takes a flow unit to go through the process
Inventory: The number of flow units in the system

Session 3: Labor cost and labor utilization
Labor Productivity Measures
Some definitions:
*Cycle time CT = 1/Flow Rate
Direct Labor Content = p1 + p2 + p3 + p4 (p stands for process)
If one worker per resource then we define
Direct Idle Time= (CT-p1) + (CT-p2) + (CT-p3)

*Average labor utilization = labor content / (labor content + direct idle time)
*Cost of direct labor = Total wages per unit of time / Flow Rate per unit of time
In an example of using these definition, calculate based on the Proccessing time: Capacity of each resource, its process capacity, flow rate, cycle time (which is the porcessing time of the bottleneck), idle time for (which is cycle time minus processing time) each resource, total idle time, labor content, labor utilization, utilization.

The Role of Labor Costs in Manufacturing (The Auto Industry):
While labor costs appear small at first, they are important:
 - look relative to value added
 - role up costs throughout the value chain

Implications
 - also hunt for pennies (e.g. line balancing)
 - spread operational excellence through the value chain