BA 204
Introduction to Operations Management
Spring 1996






University of California, Berkeley
Walter A. Haas School of Business


Course Syllabus



Class 1: Introduction

Read:
Chapter 1: The Nature of Services, pp 1 - 17
Chapter 2: Supporting the Service Encounter, pp 18 - 36
In this introductory session we will frame the operations management issues in their strategic context and introduce basic terms to be used throughout the semester. Come prepared to discuss the role of the customer in operations management and the types of processes involved.



Class 2: Basics of Process Analysis

Case:
Kristen's Cookies (A)
Read:
Chapter 3: Flows Bottlenecks and Balance, pp 37 - 58
Chapter 6 (Appendix): Studying Methods, pp 119 - 124 (provides more detail on process analysis techniques)
This case introduces the standard tool of process analysis, the process flowchart. It also defines basic terms: set-up time, run time, throughput time, cycle time, labor content and capacity. The case puts you in the position of being about to open a two-person midnight cookie baking operation that you will operate from your apartment. You are asked to analyze the design of this simple process. Using the standard tools of process analysis you will gain insight into whether or not the process will work, how well it will work, how much it will cost, and what improvements are possible.
Prepare the following questions for class discussion:
  1. Answer the case's six key questions. Be sure to consider the effects= of a second oven.
    TURN IN THE ANSWERS TO THESE SIX QUESTIONS.

  2. Answer the case's five problems for further thought.
NOTE: We will likely make flowcharting software available to you that will make analysis of future cases easier.


Class 3: Process Analysis Methodologies

Case:
University Health Services
Read:
Ch. 4: Bottlenecks in Space and Time, pp. 59 - 80
University Health Services allows you to apply process analysis techniques to a more complex service environment.
Prepare the following questions for class:
  1. Draw a process flow diagram that reflects the current UHS walk-in clinic operations.

  2. What are the sources of variability in this system?

  3. Using the average service rate for nurse practitioners given in the case, compute their utilization rate, averaged over the whole week. Compute their utilization rate for the peak hour, Mondays, 8:00 - 9:00 a.m. What assumptions did you make to get these answers?

  4. Perform the same analysis for the doctors, assuming that the clinic operates without allowing patient requests for specific providers.

  5. What recommendations would you make to improve service at the walk-in= clinic?

  6. Could you use simulation to better understand the UHS situation?
    TURN IN THE ANSWERS TO QUESTIONS 1, 3 and 4.


Class 4: Process Analysis in Continuous Flow Manufacturing

Case:
National Cranberry Cooperative
Read:
Managing Capacity and Throughput, in course reader
The National Cranberry Case will allow us to analyze a continuous flow process in depth.
Using what you have learned in the last class, prepare the following questions for class discussion:
  1. What are the problems facing Receiving Plant No. 1 (RP1)?

  2. What industry trends are likely to affect cranberry processing and how?

  3. What are the sources of variability to which NCC is subjected?

  4. Develop a process flow diagram showing the capacities of the various stages in barrels per hour.

  5. Suppose that a peak harvest-season day involves 18,000 barrels of berries, 70% of the wet-harvested, arriving over a twelve-hour period from 7 a.m. to 7 p.m. Would trucks have to wait to unload? When during the day would trucks be waiting? How much truck waiting time would you expect? HINT: The tools presented in the reading will be useful in performing this analysis. Be sure to select the right one.

  6. How would the various actions contemplated by Hugo Schaeffer affect peak day performance? Suppose the cost of renting cranberry trucks with drivers is $10.00/hour. What would you recommend? Why?
    TURN IN THE ANSWERS TO QUESTIONS 4 AND 5.


Class 5: Structuring Service Operations

Case:
USA Services: Loan Disbursement Services (pp 378 - 390, Schmenner= book)
Read:
Ch. 6: Service Standards, Plans, Schedules and Controls, pp 108 - 119
Ch. 7: Matching Demand and Supply, pp 133 - 138=20
NOTE that the material on forecasting demand in the appendix to Chapter 7 should look familiar to you from your marketing class. We will not cover forecasting techniques themselves in this class, but rather will look at the implications of forecasting for the design of operations.

This case describes problems with correspondence processing at the Loan Disbursement Services unit of USA Services, which is itself a division of USA GROUP. The core business is the guaranteeing of federally-support college loans, a service to both the colleges that receive the student's borrowed funds and the banks that lend to the students but need this service to be sure that all is in order and to be assured of selling the loan to USA GROUP if the student defaults on repayment. LDS is having trouble keeping up with the flood of correspondence and phone calls from banks and colleges with changes to the loans they are making. Lateness triggers even more phone calls about the status of the loan and puts the unit even farther behind. The unit is suffering both flagging productivity and lack of control over what they do accomplish.
Address the following questions in your analysis of the case:

  1. What are the problems that LDS faces?

  2. What is the current process and what would you advocate that Cheryl Pearson do to improve things? What metrics should Cheryl put in place?

  3. Develop a flowchart of the present process. Can you redesign the flow to improve operations?


Class 6: Introduction to Inventory Management

Read:
Ch 8: Managing Inventories -- Time Independent Systems
COMPLETE AND TURN IN THE ANSWERS TO THE FOLLOWING INVENTORY PROBLEMS.
  1. Problems 19 and 20 on page 395 in your book.

  2. Complete all sections of the following problem:

    The Supersap Corporation distributes widgets to the upper delta region of the Sunswop river. The demand for widgets if constant and Supersap is able to predict the annual demand with considerable accuracy. The predicted demand for the next couple of years is 200,000 widgets per year.

    Supersap purchases its widgets from a supplier in Calton at a price of $20 per widget. In order to transport the purchases from Calton to the upper delta region, Supersap must charter a ship. The charter service usually charges $1,000 per trip plus $2 per widget (this includes the cost of loading the ship). The ship has a capacity of 10,000 widgets. Placing each order, including arranging for the boat, requires about five hours of employee time. It takes a week for an order to arrive at the Supersap warehouse.

    When a boat arrives at the Supersap warehouse, the widgets can be unloaded at a rate of 25 per hour per employee. The unloading equipment used by each employee is rented from a local supplier at a rate of $5 per hour.

    Supersap leases a large warehouse for storing the widgets; it has a capacity of 15,000 widgets. Every widget must go into the warehouse before it is sold.

    The employees working in the warehouse have several tasks:



    The average cost per hour of labor is approximately $10 (including fringe benefits). The materials used to ship one widget to a customer cost $1 and delivery costs average about $2 per widget. The company requires a before-tax rate of return of 20 percent on its investment. Supersap has decided to base its ordering policy on an EOQ model. What amount should they order each time, and what should they use as the reorder point?



  3. A Christmas tree supplier has evaluated weekly demand for November-December over the last seven years. Demand appears normally dirstributed with a mean of 350 trees demanded weekly and a standard deviation of 200. To assure a fresh shpply and maintain a reputation for quality, trees are cut weekly in anticipation of demand. A Christmas tree sells for an average $6.00 wholesale locally and can be salvaged, if not sold locally, by shipping out of state at an average revenuye of $2 each (sold not freshly cut.) Cost to raise and harvest a tress is $3.75.

    What should be the weekly ordering (harvesting) quantity for the upcoming Christmas season? (You will need to use the chart handed out in class.)



Class 7: Beer Game


We will run a short simulation game during this class session called the Beer Game. Developed at MIT's Organizational Learning Center, the game's purpose is to introduce you to systems thinking. In the simulation, you will have the opportunity to participate as a member of a beer production and supply chain. Come prepared with clever ideas as to what you might name your beer.

DO NOT TALK WITH YOUR CLASSMATES ABOUT THE GAME. WE WILL RESERVE REFLECTION AND CONVERSATION FOR THE NEXT CLASS SESSION. (We will ask for volunteers early in the semester to help us run the game. If you have played the game before, you may wish to volunteer.)



Class 8: Beer Game Debrief

Read:
Effective Supply Chain Management
Ch 9: Issues in Logistics, Location and Franchising
DO NOT TALK WITH YOUR CLASSMATES ABOUT THIS WEEK'S ASSIGNMENT. Jot down your impressions, feelings, reactions to the Beer Game. We'll spend class time debriefing your experiences and talking about the critical aspects of supply chain management.



Class 9: Supply Chain Management

Case:
Sport Obermeyer, Ltd.
This complex case provides you the opportunity to tie together the materials you have covered in the past three class sessions. The Sport Obermeyer case describes the forecasting, planning and production processes of a global skiwear supply channel. Sport Obermeyer is a high-end fashion skiwear design and merchandising company headquartered in Aspen, Colorado that sells its product through U.S. department stores and ski shops. Although the company has a global supply network, most of its critical outerwear products are sourced through the Hong Kong-based company Obersport, a joint venture between Sport Obermeyer and a Hong Kong partner. Obersport, in turn, manages supply and production operations in Hong Kong and China. The case provides an in-depth description of the planning and production processes Sport Obermeyer and its supply channel partners undergo each year to develop and deliver Obermeyer's product line, with particular emphasis on the nature of the information that flows among the members of the supply chain and the timing of key decisions and events.
  1. Using the sample data given in Exhibit 10, make a recommendation for how many units of each style Wally Obermeyer should order during the initial phase of production. Assume that all ten styles in the sample problem are made in Hong Kong, and that Obermeyer=92s initial production commitment must be at least 10,000 units. (Ignore price differences among styles in your initial analysis.)

  2. What operational changes would you recommend to Wally to improve= performance?

  3. How should Obermeyer management think (both long-term and short-term) about sourcing in Hong Kong versus China?



Class 10: Quality Management Vocabulary and Basics

Case:
Kristen's Cookies (B)
Read:
Memory Jogger
Ch. 5: Making Quality Happen, pp. 101 - 107 (Appendix on Statistical Process Control)
Note on Kristen's (A) handed out in second class
This follow-on to Kristen's Cookie Company (A) provides you with an opportunity to learn through experimentation. You will have a chance, using a simulation software package in the computer lab, to adjust the various parameters (e.g., oven temperature) of your cookie factory. By playing with the controls, you will be affecting the quality of your output. This project will require some advance preparation, a trip to the computer lab to play with the simulation software (access instructions to be forwarded by e-mail), and a write-up of your results.
Follow these steps:
  1. The first step in many quality improvement exercises is to brainstorm about the possible causes of the problem. To do so, you must first decide what you think the problem is and state it clearly. A simple methodology for capturing the results of your brainstorming session is creation of a fishbone or Ishikawa diagram (described in the text and in Memory Jogger). Develop a fishbone diagram before going to the computer lab. It will be one of your deliverables with the written assignment. (Don't worry about making it look nice -- handwritten diagrams are fine.) To develop the diagram, ask yourselves what the possible causes of misbaked cookies might be and logically cluster the answers on bones of the fish. The diagrams should not contain only those characteristics you will control in the computer simulation. Rather, they should represent a broader view.

  2. The second step you should undertake prior to going into the computer lab is to determine your approach to experimentation. You will be provided with four ovens, two thermometers and one type of cookie. Baking cookies takes some time, so you will not want to run an infinite number of experiments. Address the following questions in establishing your experimental design: What do you think are the most likely causes of misbaking? Which of these would you like to understand? What are you trying to learn? How will you know when you are done experimenting? Can you use control charts? Prepare a brief description of the criteria you used in selecting an experimental approach as well as the approach itself to submit with the written assignment.

  3. Go to the computer lab and access the software (per instructions provided). The software is a Lotus spreadsheet that allows you to vary baking time and temperature in each of four ovens. Two thermometers are also provided. By performing a series of experiments, you can collect data that will provide insight into the questions you raised in step 1 and give you a sense as to how you might go about getting consistent quality in the future. Although you will have an experimental design before going to the computer lab, you may find that some alterations are needed as you generate data. Document these changes.

  4. Once you have collected your data, you should be able to provide clear instructions to Bill and Sherman on how to bake cookies to obtain the best result. Further, you should be able to document instructions to another store opining on the other side of town to bring it up to the quality standards you have met in this store.

  5. TURN IN THE FOLLOWING ITEMS:

In class we will discuss your experiences in preparing the case itself and doing the simulation, as well as the various tools and techniques for managing quality.



Class 11: Quality Management in New Product and Process Development

Read:
Robust Quality by Taguchi and Clausing (in reader)
The Taguchi Approach to Parameter Design by Byrne and Taguchi (in reader)
Consider the role of product and process design in satisfying the customer. If you were designing a brownie mix to be sold in grocery stores, how might you use the Taguchi parameter design method to develop the best recipe? What would be the controllable input parameters, the uncontrollable sources of noise and the measurable outputs for your experiments?



Class 12: Total Quality Management Program Implementation

Case:
Florida Power & Light's Quality Improvement Program
Florida Power & Light Quality Improvement Story Exercise (A)
Read:
Ch. 5: Making Quality Happen, pp. 81 - 101
This case study and exercise describe a large-scale, company-wide quality improvement program (QIP) at Florida Power & Light Company (FP&L). FP&L's QIP has been praised continually as one of the best in the United States. The case provides a strategic perspective of FP&L's QIP. The exercise brings to life the methodology used by FP&L to make quality improvement happen. In particular, the exercise presents an application of the heart of FP&L's QIP, a problem-solving mechanism known as a quality improvement story.
To prepare the case, answer the following questions:
  1. What are the strengths and weaknesses of FP&L's QIP?

  2. What factors are responsible for the success of FP&L's QIP? Consider both organizational issues and contextual factors.

  3. What are the characteristics of businesses in which an FP&L-style program is appropriate? Inappropriate?

  4. With your study group, go through the exercise, stopping to answer each question before continuing. Try to imagine what it would actually be like to be on the team. TURN IN YOUR ANSWERS TO EACH OF THE QUESTIONS AS YOU GO THROUGH THE EXERCISE. DO NOT GO BACK AND CHANGE YOUR ANSWERS UPON SEEING WHAT FP&L HAS DONE; JUST TURN IN YOUR THOUGHTS AS TO HOW TO ANSWER THE QUESTIONS.



Class 13: Knowledge Creation and Management -- An Extension of Quality Management

Case:
Solagen: Process Improvement in the Manufacturing of Gelatin
Read:
Managing and Measuring Technical Knowledge, in course reader
In this class we will integrate material from the prior two sessions on quality with an understanding of the role of knowledge management in an organization.
Prepare the following questions for class discussion:
  1. Should Kodak build a new gelatin manufacturing plant based on the new Solagen process?

  2. What issues do you think Mr. Bolten should be considering? What roles do learning and knowledge play in the gelatin manufacturing strategy?

  3. What are the key issues in implementing change to the gelatin manufacturing process?



Class 14: Operations Competitiveness: Integrating Global Strategies

Case:
Ellis Manufacturing Company
Read:
Ch. 10: Dealing with Capacity Change, pp. 187 - 204
In this class we will examine how to manage networks of manufacturing facilities, including those in a global market. Your reading for today focuses on capacity expansion management, while the case is more focused on capacity reduction, a problem faced by many companies in recent years.
Prepare the following questions for case discussion:
  1. What problems does Ellis face? Why does it have these problems?

  2. What is the cost of a blender at Barnstable? Flower Springs? Georgetown?

  3. How should Ellis configure its network?

  4. Does the international aspect of its business change anything?



Class 15: Class Summary



FINAL PROJECTS DUE


We will dedicate the last class session to a summary of the materials covered during the class.


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