Elements of Operations
Guiding Philosophy in Pedagogy
"Tell me and I forget,
Teach me and I remember,
Involve me and I learn"
- Benjamin Franklin
“A teacher hasn’t taught until a student has learned”.
- Dr. Henrietta Mears
The course philosophy is that the effective
management of manufacturing and service
operations is central to all industries, and is
an essential expertise for all executives.
Emphasizes the integration of various
To provide the fundamentals to improve one’s
understanding of business processes.
Focus on managerial tools and concepts
necessary to perform a structured analysis of
these processes, and prepare the managers to
use the results of their analysis to continuously
improve the firm's operational performance.
Process Fundamentals and Taxonomy of
Processes (Lectures 1-4)
Product and Process Design and Long Term
Capacity Planning (Lectures 4-6)
Management, Control and Coordination of
Processes (Lectures 7-9)
Improving Existing Operations and Paving the
Way For the Future (Lectures 10-11)
Casepack : Your casepack contains cases, technical notes and
reprints of articles from different business journals.
Required Novel: The Goal, Second Revised Edition, by Eliyahu
Goldratt and Jeff Cox, North River Press, NY, 1992.
The Machine that Changed the World, by Womack, Jones and
Roos, Rawson Associates, 1990.
Class participation (15%)
Short Quiz (5%)
Midterm Test (25%)
Syndicate Case Assignment (15%)
Final Examination (40%)
Please come to class fully prepared
Inform if you are planning to be late or
Spend about 2 hours outside of class in
preparation for each hour in class.
Try to pull your weight in group exercises.
Switch off mobile phones/beepers.
If you have any difficulty with the course,
please approach me as early in the course as
I will try my best to make this course a
valuable experience for all of you.
Please feel free to provide any feedback that
would help me improve the course.
Successful execution of strategy
Integration with other business functions
Understanding and improving business
Learning Objectives for
Emphasize the link between Business
Strategy and Operations Strategy.
Introduce terminology and foundational
concepts behind Process Analysis.
Apply the principles of Process Analysis to a
case study (Kristen’s Cookie).
What is Strategy?
Types of Strategy
Political Strategy: The Prince by Machiavelli
Military Strategy: The Art of War by Sun-Tzu
Exploring Corporate Strategy by Scholes, Johnson, Whittington
Competitive Advantage by Porter
Making Strategy by Eden, Ackerman
Strategy to Operations
Strategy: Long-Term Plan (Years)
Tactics: Intermediate Term Plan (Months)
Operations: Short-Term Plan (Weeks, Days)
What role should Operations play
in an organization?
“A company’s operations function is
either a competitive weapon
a corporate millstone.
It is seldom neutral.”
- Skinner, Wickham, “Manufacturing – Missing
link in Corporate Strategy,” HBR, May-June, 1969.
What is Operations Management?
Operations Management is the design and
management and improvement of the
transformation processes that create value
Operations Management is the...
Science of Better.
Feedback (information) - control over
process inputs & technology
Inputs and Outputs
Linking Operations to other
Activities in the areas of Marketing,
Purchasing, Finance and Human
Resources interface between Operations
management and the external product,
factor, capital, and labor markets
OM must manage these interfaces
successfully to achieve its value producing
Markets T Markets
Operations Management resides at the technological core of the firm
Interaction between Corporate
Strategy and Operations Strategy
Finance Strategy Operations Strategy Marketing Strategy
Inputs People Plants Parts Processes Outputs
Planning and Control Systems
A Strategic Framework for Operations
businesses in which the operations will participate
acquisition & allocation of key corporate resources to each
Business Unit Strategy
scope of the business (product/market/service segments)
basis on which BU will achieve and maintain competitive
What must operations do particularly well? Which capabilities
must operations develop?
How should operations processes be structured to develop
capabilities to support operations strategy?
Gain Competitive advantage by providing customers
access to quality goods, when and where needed, at
Short flow times
Low inventory levels.
Fast transportation system
Communication between retail stores
Wal-Mart (Resulting Benefits)
Inventory level at retail stores turned over twice a
week (industry average is once a week).
Sales per square foot increased from $102 in
1985 to $140 in 1991 (industry average increased
from $102 to $110).
It is growing three times faster than the retail
discount industry as a whole.
What do customers want?
Shorter lead time
Current OM Challenges
Reducing product development time
Developing production systems to enable
mass customization of products and services
Managing global production networks
Developing and integrating new process
technologies into existing production systems
Current OM Challenges
Achieving high quality quickly and
maintaining it in the face of restructuring
Managing an increasingly diverse workforce
Conforming to environmental constraints,
ethical standards, and government
A process is a collection of tasks connected by a
flow of goods and information that transforms
various inputs into more valuable outputs.
People, machines and procedures are generally
involved in the transformation.
Process Flow Diagram is a pictorial representation
of a production process.
Process Flow Diagram
Tasks in a process are shown as small
rectangles, flows as arrows, and the storage of
goods as inverted triangles.
Key Steps in Process Analysis
Define the process. Determine the tasks and the flows of
information and goods. Also, determine where the inventory is kept
in the process. Record this through a process flow diagram.
Determine the capacity of the process. This will require an
analysis of each task and a comparison of how these tasks are
Determine the effect of inventories on the capacity of
the system. In a long run, the effective capacity of the process is
limited by the capacity of its slowest task (also known as
Cycle Time (CT): Average time between
completion of successive units.
Bottleneck: Task/stage which limits/slows down
production. Usually stage with longest Cycle Time
Manufacturing Lead Time (MLT): Total amount of
time a unit spends on average in the process. This
includes actual working time and waiting time.
Capacity/Throughput: Number of units a process
is able to produce in a given unit of time. Inverse of
Cycle Time. Determined by bottleneck.
Process Terminology (Continued)
Waiting Time: Total amount of time a unit waits in
the queue without being served.
Idle Time: Total amount of time a stage or machine
or worker is idle without working on any unit.
Utilisation: Proportion or percent of time that a
machine or worker is busy. The less idle a machine
is, the higher utilisation it will have.
Symptoms of A Bottleneck
Almost full utilization
Complains of being “overworked”
Perceived as “too slow” by others
Work piles up before bottleneck
Kristen’s Cookie Co.
1. Draw the process flow diagram (for one dozen cookies).
2. How long will it take to fill an order of one dozen cookies? How
much labor time?
3. What is/are the bottleneck operation(s) and what is your cycle
time (for one dozen cookies)?
4. How many cookies can you make in 4 hours, assuming all orders
are for one dozen cookies (Discard the start-up and shutdown
5. What happens to your capacity if you can finish washing-
mixing in 4 minutes rather than 6 (Orders are for one dozen)?
6. If you add a 2nd oven, what happens to your capacity (Orders
are for one dozen)?
7. Repeat 2,3,4 for two-dozen and three-dozen orders.
Strategy-doing the right thing; operations-doing things right
Good strategy must be coupled with good execution
Information, inventory and capacity are substitutes
Processes are building blocks of any operation
Bottleneck limits system output
“Science of better” examples?
Continue reading The Goal
Refresh your memory about Types
Read The Donner Company case
study and answer the questions as
much as you can
What is strategy? By Michael Porter, HBR,
Manufacturing – missing link in corporate
strategy by Wikham Skinner, HBR, May-June
Can marketing and manufacturing coexist?
By Benson Shapiro, HBR Sep-Oct, 1977.
Hospitals get serious about Operations,
P.D.Mango and L.A.Shapiro, The McKinsey
Quarterly, 2001, Number 2.