Introduction to Operations Manag

1. Intro

Four Dimensions of Operational Performance

E.G.
Go to a restaurant: time to wait, variety, quality, price
Emergency Room: time, right care, high quality manner, charger and insurance

截屏2022-07-10 上午8.18.18.png

Trade-offs and the Efficient Frontier

• You have to decided on which of these four dimensions you want to compete.

• Second, we talked about the concept of the efficient frontier. I have casually defined the efficient frontier as a line that includes all firms to its lower left. It was, arguably, a quite casual definition. More formally, in academic terms, we talk about the line of firms that has no other firm that per rate or dominates the firm.

截屏2022-07-10 上午8.39.32.png

2. Process Analysis

Flow Rate, Inventory, and Flow Time

draw two line for store scenario:

• inflow: x-axis is when the customer arrive, y-axis is the customer number (such as first, second)
• outflow: x-axis is when the customer leave, y-axis is the customer number (such as first, second)

截屏2022-07-11 下午12.22.46.png

• vertical distance means how many customers (inventory) are in the store currently, and horizontal distance means how long a customer need to wait(flow time - from beginning to the end).
• flow rate: customer / hour
• flow unit: customer

截屏2022-07-11 下午12.27.04.png 截屏2022-07-11 下午12.31.49.png

Finding the Bottleneck

Consider that making sandwich need three steps:

截屏2022-07-11 下午12.50.39.png

step1 will take 37 sec, step2 takes 46 sec, step3 takes 37 sec.

Diff between process management and project management:
Process management, the topic of this course is all about doing things repeatedly.
You want to serve hundreds and hundreds of customers over the day, and at this point are primarily interested in computing the flow of customers through the process. It turns out that for the flow of customers through the process, it doesn't matter whether we work stations one, two, or three sequentially or in parallel.

截屏2022-07-11 下午12.59.59.png 截屏2022-07-11 下午1.00.23.png

Labor Cost and Labor Utilization

截屏2022-07-11 下午10.34.24.png 截屏2022-07-11 下午10.39.45.png

（IT: Idle time / CT:cycle time / LC: Labor content / FR: flow rate）
Cycle Time 可以理解为每6min会有一个新的输出产品线，而不是一个产品从头到尾需要多久。

We've also seen how firms can hide labor from their books by relying more on their suppliers by outsourcing ultimately, the labor. If you think about Apple and FoxCon, Apple might only have 60 or 70,000 employees, but FoxCon as their main supplier has over a million. So just seeing that, based on the financials of Apple, we don't see a lot of manufacturing labor there, and this manufacturing labor is not important for Apple Computers is really misleading.

Little’s Law

截屏2022-07-11 下午11.01.03.png

inventory = flow rate * flow time

• First of all Little's law tells us that from the three fundamental performance measures that we care about in this course, inventory, flow rate, and flow time, two of them we might be able to mess around with, and then the third one is written in law by nature.
  系统中的平均存货等于存货单位离开系统的比率（亦即平均需求率）与存货单位在系统中平均时间的乘积。

you can calculate one of them by fix others:

截屏2022-07-11 下午11.07.45.png 截屏2022-07-11 下午11.10.08.png

Inventory Turns

截屏2022-07-11 下午11.17.54.png 截屏2022-07-11 下午11.22.23.png

Make to Stock vs Make to Order / Reasons for Inventory

More inventory = Longer flow time (because flow rate is constant)

截屏2022-07-12 上午7.08.41.png

I noticed that the average flow rate is much lower than I initially expected. Remember each of these rows here is occurring with the same probability. And I see that the average flow rate that I obtained this way is just 5 over 9. Put differently, I've lost almost half of my flow rate just because of the effect of variability.

Buffer or suffer means that in a system that is not able to buffer the variability we will suffer a loss of flow rate.

The food truck is not able to make a sandwich before the order occurs, and customers are not willing to wait for it. So we explicitly eliminate inventory. Both inventories of waiting customers and inventories of waiting sandwiches.

By allowing for inventories, we'll actually be able to have a higher flow rate. So in other words, inventory helps us with the flow rate by decoupling the supply and the demand. This is one of the reasons why companies like to have inventory.

截屏2022-07-12 上午7.18.25.png 截屏2022-07-12 上午7.22.04.png

Dealing with Multiple Flow Units

截屏2022-07-12 上午7.31.19.png
(m means how many people at this work)

implied utilization = demand / capacity (highest is the bottleneck)
utilization = flow rate / capacity

截屏2022-07-12 上午7.36.37.png 截屏2022-07-12 上午7.41.57.png

Review of Process Analysis

截屏2022-07-12 下午12.24.18.png 截屏2022-07-12 下午12.31.07.png

• use the cost to calculate the inventory, never use revenue. (cost can be deemed as how much you paid to buy the inventory)

截屏2022-07-12 下午12.37.16.png 截屏2022-07-12 下午12.41.24.png

If none of the resources has an implied utilization higher than 100%, this process is demand-constrained.

3. Productivity

Intro to Productivity, Taylorism

截屏2022-07-12 下午7.02.16.png

The Seven Sources of Waste

• Overproduction: quantity more than user needed
• Transportation: move from A to B and back to A
• Rework: doesn't do the right thing at first time
• Over-processing: longer processing than it should be
• Motion: place the operation tool far away from the processor
• Inventory: space & money waste
• Waiting

Key Performance Indicators and KPI Trees

截屏2022-07-12 下午7.47.50.png

Evaluating changes in the leaves of the tree and predicting the impact on profits is the idea of sensitivity analysis. For example, we can ask ourselves how much more profits do we make if we can put the onions on the sandwich faster? How much more profits would we make if we would reduce our fixed costs? If we would source our bread any cheaper?

break-even point:

截屏2022-07-12 下午7.50.40.png

Overall Equipment Effectiveness

截屏2022-07-12 下午7.56.14.png 截屏2022-07-12 下午9.34.09.png 截屏2022-07-12 下午9.39.21.png

Takt Time

change the process to meet the demand (takt time):

截屏2022-07-12 下午9.43.27.png

but the demand changes: (choose between customer wait or resources idle.)

截屏2022-07-12 下午10.04.36.png

Productivity Ratios

截屏2022-07-12 下午11.11.43.png

higher labor productivity is preferred, and that can be divided into three parts:

截屏2022-07-12 下午11.13.17.png

• revenue/output - price
• output/capacity - utilization
• capacity/cost - wages

截屏2022-07-12 下午11.36.54.png

---

4. Quality

截屏2022-07-13 下午12.23.04.png

assembly line total yield(pass rate) = yield1 * yield2 * ...
swiss cheese total yield = 1 - defect rate1 * defect rate2 * ...

bottleneck:

截屏2022-07-13 下午12.32.05.png 截屏2022-07-13 下午12.37.11.png

more defects => more inventory needed

截屏2022-07-13 下午12.54.00.png

detect defects before bottleneck will be better: put test unit before bottleneck.

截屏2022-07-13 下午9.27.44.png

Jidoka is about alerting an operator or management that there's a problem in the process. That means that the process has to be able to detect there is a problem in the first step.

截屏2022-07-13 下午9.37.37.png

Find Causes

截屏2022-07-13 下午9.43.05.png 截屏2022-07-13 下午10.07.04.png