BUS 172aOperations Management

COURSE SYLLABUS

Fall 2014

Class Hours: Monday and Wednesday 8:30 am – 10:00 amLocation: Lemberg Academic Center 55

Anita L. Tucker, DBAAssociate Professor of Operations Management

Office Hours: Mondays 2:00 pm – 4:00 pmI am happy to meet with you on other days and times, just send me an email request.

Sachar 209B781-736-8542 (office phone)

atucker@brandeis.edu

Revision date: August 25, 2014

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COURSE DESCRIPTIONOverviewOperations Management is central to value creation in organizations. It is the scientific study and optimization of the processes that organizations use to create the products/services purchased by their customers. To be successful, organizations must have reliable processes that are aligned with their strategic positioning. They also must effectively design and manage their supply chain.

By taking this course you will gain the knowledge and skills to assess the efficiency of organizations’ operations and make informed recommendations for improvement. The topics that we will cover include: process analysis, the impact of variability on process performance (waiting time and throughput losses), quality management (lean production), inventory management and supply chain coordination.

Learning Goals In this course, you will learn the fundamentals of operations management. By the end of the course you will:

Be able to apply the vocabulary, tools, and formulas used to analyze processes. Quantify the impact of variability on system performance, and determine strategies for

reducing variability’s negative impact on performance. Be able to identify opportunities for improving the performance of operating systems,

and know a variety of approaches to improvement (e.g., lean) Understand techniques used to determine inventory levels and manage supply chains. Understand how to manage supply and demand, and techniques for handling imbalances

between the two (e.g, delayed differentiation, flexible capacity).

Teaching MethodsThe focus of the course will be on learning and applying fundamental operations management principles and techniques. We will learn key concepts through reading textbook chapters, journal articles, and teaching cases. In our classes, we will use a variety of formats to deepen our understanding including lectures, case study discussions and hands-on exercises. We will apply what we learned in homework assignments, case write-ups, projects, and exams.

Course Prerequisites: BUS 1b and BUS 10a

MaterialsThis course will use business school cases, a textbook, and two online simulations, all of which need to be purchased by the student. The lowest total cost for all of the materials is around $80.

Business School Cases: I have created a course area on the Harvard Business Online website where you can order required materials for this course. If you have not registered with Harvard Business Online, you will be required to do so.

The new coursepack title is “2014 Operations Management” and the new URL is

https://cb.hbsp.harvard.edu/cbmp/access/28499945

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The cost of purchasing PDF files for the course is about $45. Students can access PDF files of course materials via a link on Harvard Business Online for six months from the date of purchase. You will have immediate access to the materials upon placing your order, for subsequent access, you must login to http://harvardbusinessonline.org For technical assistance, please view the Quick Tips section or contact Harvard Business School Publishing at 1-800-810-8858 or 617-783-7700. They are open 8am-6pm Eastern Standard Time. They can also be reached at techhelp@hbsp.harvard.edu

Textbook. The following book is required for the course.

Matching Supply with Demand by G. Cachon and C. Terwiesch, McGraw-Hill. 2013, 3rd edition.

ISBN-13:978-0073525204

The book may be purchased from Amazon.com, the Brandeis bookstore or any other bookseller that carries it. The cost is $180 to purchase a new book, $100 for a used one, and about $35 to rent. To save money, I have designed the readings and homework such that you may purchase the 1st (about $30 including shipping) or 2nd edition (about $10 including shipping) instead of the 3rd

edition. If you purchase an earlier edition, please note that the chapter numbers have changed, so please use titles rather than chapter numbers to locate the correct materials. I will also place the second edition of the textbook on reserve at the Brandeis library.

On-line exercises. We will be using two on-line exercises which require each individual student to purchase a license code. The total cost of the two exercises per person is $24. They will be purchased from Responsive Technologies, Inc.

You will need to purchase a license for the following products: 1. Littlefield Labs2. On-line Beer Game

You will need to create your own individual account with a username and password here:http://mgr.responsive.net/Manager/NewClient?submit=create+a+new+account

Your institution name is "Brandeis University". Once you have an account, you can purchase the products at this urlhttp://mgr.responsive.net/Manager/ShowClient

The product is titled "LL and eB Code for Professor Tucker".

After getting an individual code, you will be able to create a “team” of 3-4 students for Littlefield Labs at http://ops.responsive.net/lt/tucker/start.html .

To register, you will first be asked for your course code, which is 209b. You will have to create a name and password for your team. You will need to provide your intended other team members with the name and password. If you need help finding a team, please contact me.

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Grading:Grades are based on several components.

Class Participation (25%). Class participation is determined by your preparation and active engagement during class. Class attendance is required. If you are unable to attend class, please let me know in advance, if possible, including the reason you are unable to attend. You will not be penalized for one absence, but any absences beyond that will hurt your grade.

For case discussion and group exercises, you are expected to actively listen, respond to questions, express your viewpoints, and respond to comments from your fellow students. I will keep a record of class participation for each student and assign a grade based on your non-verbal participation and the quality and quantity of in-class comments. Attendance without participation will result in a C+ participation grade (assuming there are no more than one absence). High quality (e.g., contributing analysis, synthesis) participation for most classes will be an A. Consistent, although not always breakthrough participation will be a B. The beer game simulation is part of your class participation grade.

In general, we will be leaving laptops (and smart phones) closed during case discussions. During the simulations exercises, please bring your laptops to class.

Homework Assignments (35%)All assignments must be handed in via Latte. Late assignments will not be accepted. Assignments are due at the beginning of class. Your submission must be your own, but you may work with other students to discuss the homework.

Littlefield Lab is a major component of your homework grade. Littlefield Lab is a group-based online simulation where you get to manage the operations of a blood testing laboratory. I will explain this in more detail in class. Your Littlefield lab will be determined in part by your overall ranking (~30% of your Littlefield grade) and by your write ups (~70% of your Littlefield grade).

Midterm Exam (15%) Final Exam (25%) The final exam is cumulative. Format to be determined (e.g. a case write up). Exams are mandatory and may not be rescheduled. They are open book, open notes.

CommunicationWe will use Latte for posting course slides and for class announcements. Email usually is the best way to reach me besides coming to my office hours.

Special AccommodationIf you are a student with a documented disability on record at Brandeis University and wish to have a reasonable accommodation made for you in this class, please see me immediately.

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Academic IntegrityYou are expected to be familiar with and to follow the University’s policies on academic integrity (see http://www.brandeis.edu/global/current-students/academic/integrity/index.html). Instances of alleged dishonesty will be forwarded to the Office of Campus Life for possible referral to the Student Judicial System. Potential sanctions include failure in the course and suspension from the University.

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Date Day Class # Topic Format Material Assignment DueProcess Analysis

9/3/2014 W 1 Introduction to Operations

Management

Lecture CT3 Ch 1 Introduction;Ch 2 Process View (2.0 – 2.3

Little’s Law)Ch 3 Process Capacity

Problem Set #1 Assigned. Q2.2 (Airline), Q2.7

(Industrial baking process), Q3.4 (Western Penn Milk), Q3.6 (Tax

advice)9/8/2014 M 2 Analyzing Business

Process & Little’s Law

Case Discussion Aahan (A): Diagnosing Tuberculosis in Rural India

ISB0139/10/2014 W 3 Labor and Batching Lecture CT3 Ch 4 Labor Costs

CT3 Ch 7 BatchingProblem Set #1 due

9/15/2014 M 4 Processes with Set up Times

Case Discussion Donner Co. (689030)

9/17/2014 W 5 Case Discussion Donner (day 2) Deadline for registering for Littlefield Lab and

the Beer Game. Deadline for creating

your team for LL9/22/2014 M 6 Bottleneck

ManagementDiscussion National Cranberry 688122

Operations’ Interdependence with Marketing and Finance9/24/2014 W 7 Integration between

Sales, Marketing, and Operations

Case Discussion Delivery Problems at Arrow Electronics 601131

Class Guest Steve Kaufman, former CEO of Arrow

Electronics

Littlefield data (first 50 days) will be available

after class.

9/29/2014 M 8 Link between Finance and Operations

Lecture CT3 Ch 6 The Link between Operations and Finance

Littlefield Lab Part 1 begins at the start of class. Come to class

ready to play!Variability

10/1/2014 W 9 Queuing Theory Lecture CT3 Ch 8 Variability: Waiting Problem set #2 assigned

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time 8.9 (Mango electronics)9.7 (Gotham)

10/6/2014 M 10 Queuing Theory Case Discussion Delwarca Software 913541 Littlefield Lab Part 1 ends at the start of class

10/8/2014 W 11 Loss Function Lecture and discussion

CT3 Ch 9 Variability: Throughput losses

Problem set #2 due

10/13/2014 M No Class- Brandeis DaySupply Chain

10/15/2014 W 12 Newsvendor Model Lecture CT3 Ch 12: Newsvendor Littlefield Lab Part 1 write up due

10/20/2014 M 13 Demand Forecasting Case Discussion Le Club Francais (Terwiesch)10/22/2014 W 14 Midterm Exam

(Classes 1-11)10/27/2014 M 15 Supply Chain

FlexibilityCase Discussion CT3 Ch 13 Assemble-to-order

Case: Timbuk2 (Cachon, Cattani, Netessine)

Problem Set #3 Assigned. 12.9 (CPG

Bagels), 13.6 (Shillings), 14.8

(ACold)10/29/2014 W 16 Quick Response Case Discussion Sport Obermeyer HBP Case

695022Littlefield Part 2 first 50

days of data available11/3/2014 M 17 Order-up-to Model Lecture CT3 Ch 14 Order-up-to Model Littlefield Part 2 starts

at the beginning of class. Come to class

ready to play!11/5/2014 W 18 Postponement Case discussion Hewlett Packard Desk Jet (A)

and (B) (GS-3A)Risk and Coordination

11/10/2014 M 19 Managing risk Lecture CT3 Ch 15 Risk-pooling Problem set #3 due

Littlefield Part 2 Ends at the start of class.

Please have registered and signed up for a

team for the beer game11/12/2014 W 20 Managing risk Case discussion Online book retailing

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(Netessine)Instructor will introduce the

Beer Game11/17/2014 M 21 Supply Chain

Coordination: The Beer Game

In-Class Exercise CT3 Ch17 Supply Chain Coordination

Littlefield Part 2 write up due

Bring your computer and be ready to play the

beer game in class11/19/2014 W 22 Supply Chain

CoordinationCase Discussion Barilla 694046

Performance Improvement11/24/2014 M 23 Quality Management Lecture CT3 Ch 10 Quality

Management11/26/2014 W No class12/1/2014 M 24 Toyota Production

SystemCase Discussion Toyota 693019

12/3/2014 W 25 Process Improvement Case Discussion Cincinnati Children’s Hospital Medical Center 609109

Final Exam – TBD

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Session 1 Introduction to Operations Management

This session introduces the course and the topic of operations management. Please read Chapter 1 (Introduction), Ch 2 (Process view sections 2.0-2.3), and Ch 3 (Process Capacity in the Cachon and Terwiesch (3rd edition) textbook.

The first problem set is assigned today, and is due at the start of Session #3.

Problem Set #1 (due September 10, 2014 at the start of class)

o Q2.2 (Airline)

o Q2.7 (Industrial Baking process)

o Q3.4 (Western Penn Milk)

o Q3.6 (Tax advice).

Session 2 Analyzing Business Processes and Little’s Law

During this class we will have a case discussion. You should read the case before class and be prepared to discuss the assignment questions, although you do NOT need to hand in anything in writing. Your preparation ahead of time should enable you to participate effectively during the class discussion.

Case: Aahan (A): Diagnosing Tuberculosis in Rural India (ISB013603080)

Manish Bhardwaj, co-founder of Innovators in Health, is contemplating setting up Aahan, a community based tuberculosis (TB) control program in rural India. The case describes TB diagnosis and treatment in the public and private healthcare sectors n India and the attendant challenges. A number of candidate interventions aimed at improving the existing system of healthcare delivery are presented at the end of the case, each one of which could form the core of Aahan. Students are encouraged to use operations management principles to quantify the potential health benefits and costs of these interventions and prioritize them accordingly. Key concepts include process flow mapping, flow balance, Little’s Law and selection of appropriate process measures based on the strategic objective of the process.

Case Preparation Questions:

1. Draw a unified process flow diagram for TB diagnosis in the public and private sectors in DalSinghSarai and label it appropriately. Clearly state all of your assumptions.

2. Quantify the performance of the public and private diagnosis systems along the following dimensions: (i) accuracy, (ii) delay, and (iii) cost.

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3. Based on the calculations above, draw a simplified process diagram for the public and private diagnosis systems and appropriately label them.

4. Identify flows of active TB patients in different parts of each process and use flow balance to calculate the total number of new TB cases. [Hint: Include the active TB infections caused by both latent TB to active TB conversions and TB transmissions. Assume that 40% of the population of DalSinghSarai has latent TB infection.]

5. Which of the alternative interventions presented at the end of the case would you recommend to Manish Bhardwaj? Why?

Session 3 Labor and Batching

During this class we will discuss how to think about calculating labor costs and how batching production impacts throughput times.

Reading: CT3 Ch 4 Labor Costs, C7 Batching (You may skip the section on economic order quantity).

Problem Set #1 due at the start of class.

o Q2.2 (Airline)

o Q2.7 (Industrial Baking process)

o Q3.4 (Western Penn Milk)

o Q3.6 (Tax advice).

Session4 Processes with Set Up Times

We will be applying what we learned about batching and labor costs to a case. This is a time-consuming case preparation, so please start early.

Case: Donner (689030)

The Donner Company is a small but rapidly growing firm that produces circuit boards to the specifications of electronics manufacturing companies. At the time of the case, the company is only its third year of operations, and is experiencing a rapid surge in business. The rate of sales in August and September is 50 to 60 percent greater than that of the preceding months and four times that of the previous year. The case provides a detailed, step-by-step description of the manufacturing process—which involves only 22 production employees –defines the order processing and control procedures, and identifies operating problems concerning production bottlenecks, worker performance and methods, and quality and delivery problems.

Case Preparation Questions:

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1. What is the normal process flow of the production system at Donner? Draw a process flow diagram.

2. What orders would you schedule on the CNC drill? On the CNC router?

3. What is the capacity for the Dry Film Photoresist area? (Assume order size is eight.) How does capacity change with order size?

4. What is the standard labor time for an order of 1 board? 8 boards? 200 boards?

Session 5 Donner Day 2

We will leverage what we learned about Donner’s process from last class. In today’s class, we will discuss recommendations for Donner.

Case: Donner (689030)

Case Preparation Questions:

1. How is Donner doing? What problems do you see?

2. Why do these problems exist?

3. What are the information flows within the Donner factory? Trace an order as it moves from the originating customer to completion.

4. What specific actions do you recommend Plummer take to address these problems?

Deadline for registering for Littlefield Labs and the Beer Game. Please register, purchase access for yourself, and sign up for a team. You will make teams of 3 for Littlefield labs, and teams of 4 for the Beer game.

Sign up for an account here:

http://mgr.responsive.net/Manager/ShowClient.

Your institution name is "Brandeis University".

You will need to enter your email, name, and create a password. After you create an account, you can select your product.

The product is titled "LL and eB Code for Professor Tucker". The cost is $24, payable by MasterCard, Visa, Discover or American Express cards. Keep track of your license code.

After you purchase your license, you can register your team (3 students per team, a total of 8 teams in the class) at http://ops.responsive.net/lt/tucker/start.html To register, you need BOTH the individual code you purchased and the course code 209b. You will need to come up with a team name and a password.

Once the simulator has started, you can access your team (using your team id and password) from http://ops.responsive.net/lt/tucker/entry.html

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Session 6 Bottleneck ManagementThe last class in the process analysis module will consider a continuous production system. In these types of systems, we consider the rate of production as a flow rather than as discrete units.

Case: National Cranberry Cooperative (688122)

National Cranberry Cooperative (NCC) is a grower-owned agricultural cooperative that processes and markets cranberries. The case relates the vice president of operations’ concerns about NCC’s receiving plant #1 (RP1). This plant receives harvested berries which it cleans, grades, and sorts in preparation for packaging or further processing. RP1 is open for operation about four months a year. During the processing season in the year prior to the time of the case, the plant incurred high overtime costs. In addition, the coop’s grower-owners’ truck drivers were frequently forced to wait long hours to unload their crops. Several alternative solutions to these problems are mentioned in the case, and additional alternatives can be formulated and evaluated.

The National Cranberry case is a “classic” and has become a point of reference for nearly everyone who has attended business school. A common pitfall in analyzing the case is to become mired in too much detail, so be careful to maintain the big picture while addressing the questions. For the purposes of your analysis, you may make the following assumptions:

The Flow Time of the National Cranberry process (starting after the holding bins) is 1 hour (i.e., it takes 1 hour for a cranberry to flow through the plant).

During a high-volume period the dryer operator can start at whatever time you choose, rather than 11 AM as shown in Figure E,

The amount of inventory other than in the bins is negligible.

Case Preparation Questions:

1. What are the most critical problems facing National Cranberry that Mr. Schaeffer must address?

2. Draw a Process Flow Diagram of the cranberry process beginning with Receiving and ending with the Bailey Mills (i.e., ignore Sorting and Shipping at the end of the process).

3. Compute the Capacity in barrels per hour of each process step.

4. Consider a peak harvest day (18,000 barrels of berries unloaded with 70% of them wet harvested). Assume that trucks arrive uniformly over a period of 12 hours. Identify the Bottleneck of the process.

5. When would processing be completed on a peak day?

6. When would the last truck unload and how long would it have waited?

7. What recommendations, both short-term and long-term, would you make to Mr. Schaeffer?

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Session 7 Integration between Sales, Marketing and Operations

We begin a new module that considers the integration of Operations with other business functions, such as marketing and finance. In today’s class, we consider an electronics distributor, Arrow Electronics, and try to diagnose the cause of its delivery problems.

Class Guest: We will be joined Mr. Steve Kaufman, former CEO of Arrow Electronics.

Case: Delivery Problems at Arrow Electronics (601131)

The case describes a dramatic decrease in service levels (on-time shipments) from the warehouse network of a large electronics distributor.

Please watch the video before class.

Case Preparation Questions:

1. What are the key success drivers for Arrow Electronics? Where is operational excellence on the list of success drivers?

2. What do you think are the underlying causes of the order surges and the stress that placed on the primary distribution centers (PDC).

3. Which of the four recommendations do you advocate? (push back carrier pick up times, add permanent full-time staff, build a part-time staff that can be called in on short notice, or work more overtime.)

Data from the first 50 days of the Littlefield simulation will be available in the program. Analyze this data to determine your initial values for your simulation. You will want to look at system performance, such as:

(1) average daily demand, trend over time to inform your forecast for demand;

(2) capacity and utilizations of the machines to inform if you purchase additional machines, and how many, at the three different stations

Session 8 The Link between Finance and Operations

In the first part of this session we talk about the link between operations management and finance. Two topics will be emphasized. First, we will talk about inventory turns and other aspects of working capital management. Second, we will outline the link between financial performance metrics and operational decisions using the case of a small furniture company. In the second part of the session, we discuss the impact of set-up times on capacity and inventory levels.

Reading: CT3 Ch 6 The Link between Finance and Operations

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Littlefield Lab Part 1 will begin at the start of class. Bring your laptop to class and be prepared to play!

Session 9 Queuing TheoryThis module considers the impact of variability on the performance of operating systems. This lecture will introduce queuing formulas needed for the next several classes

Reading: Cachon and Terwiesch Ch 8 “Variability and its impact on process performance.”

Problem Set #2 is assigned, and is due at the start of class #11.

o Q8.9 (Mango Electronics)

o Q9.7 (Gotham City Ambulance Services)

Session 10 Queuing Theory During this class we will discuss the application of queuing theory to a software company

Case: Delwarca Software (A) (913541)

The manager of a technical support call center for business software six months earlier introduced a change in the way incoming calls are directed in an effort to reduce waiting time and costs. Now the manager is evaluating the results of the change, which have not been wholly positive, and must develop a set of recommendations.

Case Preparation Questions:1. Draw the process flow diagrams for the unit before Rapid ID and after. What

changed?

2. What is capacity utilization of the Remote Support Unit, and how is this affecting waiting times? Perform a queuing analysis of Associates before and after Rapid ID. What is weighted average waiting time for customers served by Associates?

3. What would be the effect on capacity utilization of improving the productivity of the least productive two Associates and by Senior Associates? What is the cost per resolved call by Associates and by Senior Associates?

4. What is the labor cost per call taken by Associates and Senior Associates? What is the cost per resolved call by Associates and by Senior Associates?

5. Why do you think system performance in terms of waiting time changes as it did? Why did customer behavior change as it did?

6. What would you recommend to Jack McKinnon?

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Littlefield Lab Part 1 ends at the start of class. Bring your laptop to class and be prepared to learn which teams did the best.

Session 11 Loss Function This lecture discusses the formulas we need to determine how many customers will go without service.

Reading: Cachon and Terwiesch Ch 9 Loss Systems

Problem Set #2 is due at the start of class.

o Q8.9 (Mango Electronics)

o Q9.7 (Gotham City Ambulance Services)

Session 12 Newsvendor Model

We begin a new module on supply chains. We first examine techniques for estimating future demand based on historical data.

Reading: Cachon Terwiesch Ch 12: Newsvendor

Littlefield Part 1 Write up due

Your team should turn in one two-page summary of what actions you took during the week you had access to the lab, why you took those actions, and in retrospect whether you think you did the right thing. Show analysis to justify your conclusions. Your team’s grade will be partially based on your performance, but mainly based on what you learned by doing the simulation and your summary. The summary cannot exceed 2 pages in length, and no appendices are allowed.

Session 13 Forecasting Demand

During this class we will use the forecasting techniques we discussed in the prior session to analyze data from an actual company.

Case: Le Club Francais du Vin (Wharton)

Case Preparation Questions:

For the following three questions, consider a 10 Euro (retail price) bottle.

1. What are the costs of having one bottle too few in inventory (underage cost)? What are the costs of having one bottle too many in inventory (overage cost)? List these costs qualitatively and attempt to attach numbers to them.

2. Assume the underage cost is 3 Euro and the overage cost is 1 Euro. How many bottles would you order of a wine that is forecasted to sell 2000 bottles if your

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objective is to maximize profits? How do these numbers change if you use the cost numbers from your answer to Question 1?

3. Assume you would like to achieve a fill rate of 98%. How would the answer to question 2 change?

4. How much of each wine listed in Exhibit 2 would you order? Be prepared to explain and justify your decisions. (An excel file is provided that contains the data in Exhibit 2.)

Session 14 Midterm Exam

You will take an in-class midterm exam. It will be open book, open notes. Be sure to bring a calculator.

Session15 Supply Chain Flexibility

Assemble-to-order is when manufacturers make the product after the customer places an order. The challenge of this approach is being able to respond quickly enough and also to do it at an affordable price. There are several strategies to accomplish these goals. One of them is mass customization, which offers an infinite variety of goods that are customized to a consumer’s exact specifications. This session explores the pros and cons of this strategy.

Reading: Cachon Terwiesch Ch 13 Assemble-to-Order

Case: Where in the World is Timbuk2? (Wharton case)

Case Preparation Questions:

1. What are some of the pros and cons of Timbuk2’s “Build your own” channel (i.e., its ecommerce channel)?

2. How should Timbuk2 go about deciding which options to offer customers in the ecommerce channel? In other words, what general principles or analysis could be used to deepen their understanding of the appropriate choices? You may want to consider several of the options mentioned (an added handle, different color logos, different size panels, etc.)

3. Estimate the cost of manufacturing a bag in San Francisco and the cost of producing a bag in China.

4. Should Timbuk2 pursue the option of manufacturing in China? If so, what challenges are they likely to face and what changes will they need to make?

Problem Set #3 is due at the start of session 19.

o Q12.9 (CGP Bagels)

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o Q13.6 (Shillings)

o Q14.8 (ACold)

Session 16 Quick Response with Reactive Capacity

This session studies how one fashion apparel supplier used early sales information to increase its supply flexibility.

Case: Sport Obermeyer (695022)

Case Preparation Questions:

1. How much of each style described in Exhibit 10 should be produced if you only had one production run? What is Sport Obermeyer’s expected profit?

2. What do you think about Sport Obermeyer’s forecasting process? Contrast it with LL Bean’s forecasting process.

3. Suppose you now have the opportunity to make two production runs. The first must be decided before the Las Vegas show, and the second is decided after the show. Let’s say the production minimums are large (i.e., you essentially get to produce a style either in the first production run or the second, but not both). Furthermore, suppose the first production run must total at least 15,000 units across all styles, but then there is no capacity restriction on the second production run. In addition, the production cost per unit of a style does not depend on which production run it is ordered. How many units of each style in Exhibit 10 should Sport Obermeyer order in the first production run? How much is the mismatch tax reduced by the second production run opportunity?

4. How can Sport Obermeyer improve upon their system to better match supply to demand?

Data from the first 50 days of the Littlefield simulation Part 2 will be available in the program. Analyze this data to determine your initial values for your simulation. You will want to look at system performance, such as:

(1) average daily demand, trend over time to inform your forecast for demand;

(2) capacity and utilizations of the machines to inform if you purchase additional machines, and how many, at the three different stations

(3) You will also need to think about how many test kits to order and when to place the order

Session 17 The Order Up-To Model This session studies service levels and lead times in a supply chain. Unlike with the newsvendor model, we now consider a supply chain that has demand over a long time horizon, so multiple replenishments are possible.

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Reading: Cachon Terwiesch Ch 14 Order-up-to Model

Littlefield Lab Part 2 will begin at the start of class. Bring your laptop to class and be prepared to play!

Session 18 Postponement Hewlett-Packard's (HP) Vancouver Division faced a challenge in 1990. Although its new inkjet printers were selling well, inventory levels worldwide were rising as sales rose. In Europe, high product variety was making inventory levels especially high. HP considered several ways to address the inventory issue: air-freighting printers to Europe, developing more formalized inventory planning processes, or building a factory in Europe.

Case: Hewlett-Packard: DeskJet Printer Supply Chain (A) (Stanford GS-3A) and (B)

Case Preparation Questions:

1. What are the pros and cons of the following proposals mentioned in the A case: a European factory, better forecasting, more inventory.

2. Assess quantitatively the air freight option relative to current operations. Just consider the products for the European market. Do not forget to consider pipeline inventory (since HP owns the pipeline inventory from Vancouver to Europe). Use the following assumptions:

- HP wants to minimize inventory while still achieving at least a 98% fill rate.- The lead time from Vancouver to Europe is 5 weeks by the current method (ocean) but 1

week by air. - HP orders and received inventory on a weekly basis.- There are 4.33 weeks per month and demand is independent across time. - The product sells for $450 and marginal production cost is $300. - Inventory carrying costs are 24% per year.- Shipping via sea (the current operation) costs $10 per printer, whereas airfreight costs $25 per

printer.

3. Evaluate quantitatively the proposal in the B case for the European market.

4. Will the B case proposal be effective in the other major markets, North America and Asia?

5. Would you support the B case proposal? If so, why? If not, why?

Session 19 Managing Risk in Operations

In this module, we discuss coordinating across the multiple players in the supply chain. This session explores several operations strategies for reducing and hedging uncertainty.

Reading: Cachon Terwiesch Ch15 Risk-Pooling

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Problem Set #3 is due at the start of class. Each student should submit a copy of his or her own work on the problems, including the answers. You may discuss the problems with other students, but your work must be your own.

o 12.9 CPG Bagelso 13.6 Shillingso 14.8 ACold

Littlefield Labs Part 2 ends at the start of class.

Please also have registered for the beer game, and signed up for a team of 4 students. If there are less than 4 people on your team, the computer can play the missing role.

Session 20 Managing Risk in Operations

Internet retailing requires less inventory and retail space than brick-and-mortar retailing. But Internet retailing introduces additional costs. We shall compare these two models from an operations perspective.

Case: Online Book Retailing: Operational Strategies (Wharton case)

Case Preparation Questions:

1. What operational advantages and disadvantages does Amazon have relative to Barnes and Noble’s (BN) superstores?

2. Compare costs at BN with Amazon using data from the case. Does Amazon’s operational advantage outweigh its operational disadvantage? Discuss the source of cost advantage/disadvantage for every item of financial data in Figure 5.

3. Consider the same analysis for BN.com versus Amazon. Did BN.com benefit from its parent brick-and-mortar company?

Session 21 Supply Chain Coordination

This module is about the logistics of getting the physical product to customers. You will have the opportunity to participate in a supply chain “Beer Game” exercise. Before coming to class today, please make sure you have purchased the simulation and have read through the instructions. Please bring your laptop to class!

Simulation: The Beer Game

Reading: CT3 Ch 17 Supply Chain Coordination

Littlefield Part 2 Write up Due

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Your team should turn in one summary of what actions you took during the week you had access to the lab, why you took those actions, and in retrospect whether you think you did the right thing. Show analysis to justify your conclusions. Your team’s grade will be partially based on your performance, but mainly based on your summary. The summary cannot exceed 3 pages in length, and no appendices are allowed.

Session 22 Supply Chain Coordination

The session explores the topic of developing a network of facilities to distribute product in Europe.

Case: Barilla (694046)

Case Preparation Questions:

1. Diagnose the underlying causes of the difficulties that the JITD program was created to solve. What are the benefits and drawbacks of this program?

2. What conflicts or barriers internal to Barilla does the JITD program create? What causes those conflicts? As Giorgio Maggiali, how would you deal with these?

3. As one of Barilla’s customers, what would your response to JITD be? Why?

4. In the environment in which Barilla operated in 1990, do you believe JITD (or a similar kind of program) would be feasible? Effective? If so, which customers would you target next? How would you convince them that the JITD program was worth trying? If not, what alternatives would you suggest to combat some of the difficulties that Barilla’s operating system faces?

Session 23 Quality Management

We begin our final module on quality and improvement. In today’s class we will discuss common techniques for ensuring quality, such as statistical process control charts.

Reading: CT3 Ch 10 Quality Management

Session 24 Toyota Production System

Toyota's approach to manufacturing, often called "lean manufacturing" has been associated with superior financial performance and higher quality. In today's class we take an in-depth look at Toyota with a particular interest in understanding how they are able to achieve superior performance in quality without simultaneously charging customers a price premium for the high level of quality.

Case: Toyota Motor Manufacturing USA, Inc. (693019)

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On 1 May 1992, Doug Friesen, manager of assembly at Toyota's Georgetown, Kentucky plant, is concerned about problems with seat installation, wonders how best to resolve them, and to which he should give highest priority. With sales approaching plant capacity, it is crucial that Friesen choose the most effective path in light of TPS and the realities of the plant organization.

Case Preparation Questions

1. How does the andon procedure work and what are its fundamental aspects? How much does it cost to stop the line? What are the benefits of stopping the line?

2. What are the underlying causes of the problems facing Doug Friesen?

3. As Doug Friesen, what would you do to address the seat problem? What options exist? Where would you focus your attention and solution efforts? What would you recommend? Why?

Session 25 Process Improvement

In this class we will explore an organization that, unlike Toyota, did not have a culture of continuous improvement. The case discusses the steps that the senior leadership team undertook to create such a culture. The case also enables us to explore commonly used tools for process improvement, such as Plan-Do-Study-Act (PDSA) cycles.

Case: Cincinnati Children’s Hospital Medical Center (609109)

Cincinnati Children’s Hospital Medical Center (CCHMC)’s performance on cystic fibrosis was in the bottom quarter of all cystic fibrosis centers in the U.S. when it began its turnaround efforts.

Case Preparation Questions:

1. How would you characterize the improvement strategy at CCHMC?

2. What is your assessment of CCHMC's policy of transparency? Are they being too open with performance data? Why or Why not?

3. What are your thoughts on CCHMC’s pursuit of perfection without regard to financial implications? Will pursuing perfection put them out of business?

4. Moving forward, what would you recommend to sustain the hospital's improvement efforts?

Final ExamDate and location to be announced

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