DEPARTMENT OF BUSINESS INFORMATICS AND OPERATIONS MANAGEMENT
RESEARCH GROUP OPERATIONS AND PRODUCTION MANAGEMENT
INTRODUCTION TO OPERATIONS MANAGEMENT
Production and Logistics/Logistics and Supply Chain Management Prof. dr. Veronique Limère
OUTLINE
1. Operations Management: an example
2. What is Operations Management?
3. Why learn about operations management?
4. Strategy and competition
5. Performance measurement
Balanced scorecard approach and Key Performance Indicators (KPIs)
Productivity
Copyright © 2020 Limère, 2015 McGraw-Hill Education.
4
All rights reserved. No reproduction or distribution without the prior written consent.
,OPERATIONS MANAGEMENT (OM)
To make a hamburger, you need the
following activities: in a cheeseb rger s and
Cut tomatoes
Unpack meat & cheese
Grill meat
Add spices
Unpack sandwich
Put meat on sandwich bottom
Add cheese
Add salad and tomatoes
Add sauce Problems?
Add sandwich top Solutions?
Pack in box
Total prod c ion ime: 15
Clien an o ai fo onl 5
We have to match supply and demand. (fast food)
Here in this case, supply is slower than
demand!
Copyright © 2020 Limère, 2015 McGraw-Hill Education.
5
All rights reserved. No reproduction or distribution without the prior written consent.
(Additional things goin on)
OM IN A CHEESEBURGER STAND
The meat must be ordered in advance,
it takes four weeks before it is being delivered.
The meat can only be kept for 2 weeks.
Process Map:
- Square box = all the operations/information.
- Triangle = used to show inventory
Problems?
Solutions?
Meat stock
(<2 weeks)
Replenishment lead time = 4 weeks P od c ion lead ime = 15
Clien an o ai fo onl 5
Copyright © 2020 Limère, 2015 McGraw-Hill Education.
6
All rights reserved. No reproduction or distribution without the prior written consent.
,THINK-PAIR-SHARE
Imagine you have to run this cheeseburger stand. What are some of the operations
management decisions that have to be taken?
Think of some decisions?
Think about how you would make these decisions?
THINK during 1 minute: think for your self
PAIR during 5 minutes: discuss in pairs
SHARE afterwards: let us share some thoughts
Copyright © 2020 Limère, 2015 McGraw-Hill Education.
7
All rights reserved. No reproduction or distribution without the prior written consent.
PROBLEMS, POSSIBLE SOLUTIONS
What kind of decision you have to take in this
AND and
situation MORE PROBLEMS
how would you take this decision?
- You can not order more meat than you have space to store it
- Use historical data from your sales to determine how much you need to order
Replenishment lead time is very long:
How often to place an order for meat: once every two weeks, every week, every day?
- Follow-up the stock at the end of every day to check you need to order more/skip the order
- The more youDelivery costs vs.
keep in inventory, stocking
the longer costs
money is stuck in inventory. Money you don’t put in the inventory can be used for
investments orUncertainty
other financial benefits.
- SearchHow much
for a supplier meat
who to order?
can deliver faster than 4 weeks (can possibly be more expensive) = TRADE-OFF
Based on historical sales data and an analysis of customer behavior and consumption patterns
- Make the production lead time shorter (15 minutes): maybe you can already do some preparations to save some time like
(forecasting)
cutting the tomatoes, already unpack everything, pre-bake meat… (= WORK IN PROGRESS)
Watch out you don’t have to trow to much away! Do not prepare to much!
By the time the delivery arrives, the consumption pattern may have changed
- Use theRenegotiate or find
assembly-system from othereveryone
McDonalds: supplier
has awith
task toshorter replenishment
make the final order lead time
This will be more expensive.
- Use a registration system: order the food in advance
How much more are you willing to pay for a shorter lead time
- Make the waiting time more pleasant (maybe not in Corona-times)
Imagine you have a gamut of different kind of hamburgers
Copyright © 2020 Limère, 2015 McGraw-Hill Education.
8
All rights reserved. No reproduction or distribution without the prior written consent.
, PROBLEMS, POSSIBLE SOLUTIONS
AND MORE PROBLEMS
Replenishment lead time is very long:
How often to place an order for meat: once every two weeks, every week, every day?
Delivery costs vs. stocking costs
Uncertainty
How much meat to order?
Based on historical sales data and an analysis of customer behavior and consumption patterns
(forecasting)
By the time the delivery arrives, the consumption pattern may have changed
Renegotiate or find other supplier with shorter replenishment lead time
This will be more expensive.
How much more are you willing to pay for a shorter lead time
Imagine you have a gamut of different kind of hamburgers
Copyright © 2020 Limère, 2015 McGraw-Hill Education.
8
All rights reserved. No reproduction or distribution without the prior written consent.
PROBLEMS, POSSIBLE SOLUTIONS
AND MORE PROBLEMS
Customer lead time << production lead time
Keep an intermediate buffer of semi-finished product
How much burgers to keep in the buffer?
Risk of losing customers that have to wait too long vs. risk of having to throw away cold or
leftover burgers
Increase customer patience
Video games, free drink, pre-order by phone
Mix of phone orders and regular orders
Reduce 5
N ( , , )
Requires investment analysis
Copyright © 2020 Limère, 2015 McGraw-Hill Education.
9
All rights reserved. No reproduction or distribution without the prior written consent.
RESEARCH GROUP OPERATIONS AND PRODUCTION MANAGEMENT
INTRODUCTION TO OPERATIONS MANAGEMENT
Production and Logistics/Logistics and Supply Chain Management Prof. dr. Veronique Limère
OUTLINE
1. Operations Management: an example
2. What is Operations Management?
3. Why learn about operations management?
4. Strategy and competition
5. Performance measurement
Balanced scorecard approach and Key Performance Indicators (KPIs)
Productivity
Copyright © 2020 Limère, 2015 McGraw-Hill Education.
4
All rights reserved. No reproduction or distribution without the prior written consent.
,OPERATIONS MANAGEMENT (OM)
To make a hamburger, you need the
following activities: in a cheeseb rger s and
Cut tomatoes
Unpack meat & cheese
Grill meat
Add spices
Unpack sandwich
Put meat on sandwich bottom
Add cheese
Add salad and tomatoes
Add sauce Problems?
Add sandwich top Solutions?
Pack in box
Total prod c ion ime: 15
Clien an o ai fo onl 5
We have to match supply and demand. (fast food)
Here in this case, supply is slower than
demand!
Copyright © 2020 Limère, 2015 McGraw-Hill Education.
5
All rights reserved. No reproduction or distribution without the prior written consent.
(Additional things goin on)
OM IN A CHEESEBURGER STAND
The meat must be ordered in advance,
it takes four weeks before it is being delivered.
The meat can only be kept for 2 weeks.
Process Map:
- Square box = all the operations/information.
- Triangle = used to show inventory
Problems?
Solutions?
Meat stock
(<2 weeks)
Replenishment lead time = 4 weeks P od c ion lead ime = 15
Clien an o ai fo onl 5
Copyright © 2020 Limère, 2015 McGraw-Hill Education.
6
All rights reserved. No reproduction or distribution without the prior written consent.
,THINK-PAIR-SHARE
Imagine you have to run this cheeseburger stand. What are some of the operations
management decisions that have to be taken?
Think of some decisions?
Think about how you would make these decisions?
THINK during 1 minute: think for your self
PAIR during 5 minutes: discuss in pairs
SHARE afterwards: let us share some thoughts
Copyright © 2020 Limère, 2015 McGraw-Hill Education.
7
All rights reserved. No reproduction or distribution without the prior written consent.
PROBLEMS, POSSIBLE SOLUTIONS
What kind of decision you have to take in this
AND and
situation MORE PROBLEMS
how would you take this decision?
- You can not order more meat than you have space to store it
- Use historical data from your sales to determine how much you need to order
Replenishment lead time is very long:
How often to place an order for meat: once every two weeks, every week, every day?
- Follow-up the stock at the end of every day to check you need to order more/skip the order
- The more youDelivery costs vs.
keep in inventory, stocking
the longer costs
money is stuck in inventory. Money you don’t put in the inventory can be used for
investments orUncertainty
other financial benefits.
- SearchHow much
for a supplier meat
who to order?
can deliver faster than 4 weeks (can possibly be more expensive) = TRADE-OFF
Based on historical sales data and an analysis of customer behavior and consumption patterns
- Make the production lead time shorter (15 minutes): maybe you can already do some preparations to save some time like
(forecasting)
cutting the tomatoes, already unpack everything, pre-bake meat… (= WORK IN PROGRESS)
Watch out you don’t have to trow to much away! Do not prepare to much!
By the time the delivery arrives, the consumption pattern may have changed
- Use theRenegotiate or find
assembly-system from othereveryone
McDonalds: supplier
has awith
task toshorter replenishment
make the final order lead time
This will be more expensive.
- Use a registration system: order the food in advance
How much more are you willing to pay for a shorter lead time
- Make the waiting time more pleasant (maybe not in Corona-times)
Imagine you have a gamut of different kind of hamburgers
Copyright © 2020 Limère, 2015 McGraw-Hill Education.
8
All rights reserved. No reproduction or distribution without the prior written consent.
, PROBLEMS, POSSIBLE SOLUTIONS
AND MORE PROBLEMS
Replenishment lead time is very long:
How often to place an order for meat: once every two weeks, every week, every day?
Delivery costs vs. stocking costs
Uncertainty
How much meat to order?
Based on historical sales data and an analysis of customer behavior and consumption patterns
(forecasting)
By the time the delivery arrives, the consumption pattern may have changed
Renegotiate or find other supplier with shorter replenishment lead time
This will be more expensive.
How much more are you willing to pay for a shorter lead time
Imagine you have a gamut of different kind of hamburgers
Copyright © 2020 Limère, 2015 McGraw-Hill Education.
8
All rights reserved. No reproduction or distribution without the prior written consent.
PROBLEMS, POSSIBLE SOLUTIONS
AND MORE PROBLEMS
Customer lead time << production lead time
Keep an intermediate buffer of semi-finished product
How much burgers to keep in the buffer?
Risk of losing customers that have to wait too long vs. risk of having to throw away cold or
leftover burgers
Increase customer patience
Video games, free drink, pre-order by phone
Mix of phone orders and regular orders
Reduce 5
N ( , , )
Requires investment analysis
Copyright © 2020 Limère, 2015 McGraw-Hill Education.
9
All rights reserved. No reproduction or distribution without the prior written consent.
