Operations Management

Professor: Svenja Sommer

sommers@hec.fr
Building V, Rm 216
Ext. 7431

Assistant: Sophie Mebo

mebo@hec.fr
Building V, Rm 214
Ext. 7055

Overview
Operations management is a central field in virtually every modern business
organization. An understanding of the mechanisms that enable firms to
achieve operational excellence is essential to improve performance both in
the manufacturing and service sectors. It is also a key competence for
consulting companies that are called to analyze and streamline the processes
of their clients. Finally, understanding operations is also important in the
financial sector, since operations is an important criterion to assess the value
of a business. Accordingly, operations management is a fundamental
discipline both for students who envisage a career in industry, and for those
who have interests in the consulting or in the financial sectors.
This course will provide a general introduction to the field and demonstrate
how excellence in designing and managing operations is a primary driver of
business success.
Students will develop an awareness of the principal
operational issues that arise in all businesses, and they will learn a set of
instruments that will enable them to successfully address these issues. The
course will provide the basic terminology, concepts and quantitative tools for
describing, analyzing and improving business processes, and basic knowledge
about operations strategy and supply chain management.

Learning outcomes
When you complete this course, you should be able to:

Understand how operational excellence may become a source of sustained

competitive advantage in both manufacturing and service operations, for
instance through process innovation (e.g., quick response) and process
execution (e.g., lean management).

Use the product-process matrix to discuss the link between business

strategy and product and process choices.

Analyze business processes, identify appropriate performance metrics and

use these metrics to improve process performance in terms of output,

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processing times and productivity.

Understand why variability has a detrimental impact on both

manufacturing and services operations and apply queuing theory to
estimate its impact and evaluate alternatives to reduce it.

Understand the characteristics, advantages and limits of the

most representative manufacturing models such as push and pull.

Identify the pillars of lean manufacturing, such as just-in-time and total

quality management, and understand how and when they can be applied
to service operations.

Understand why supply-demand mismatches are a constraint to

profitability in industries with volatile demand. Examine the sources of
these mismatches, and identify structural remedies and analytical
techniques to hedge against demand uncertainty.

Apply basic inventory management models to trade off different cost

factors such as setup costs, holding costs and cost of shortages.

Understand how the lack of coordination among multiple decision makers

affects the performance of supply chains by creating a bull-whip effect, and
identify its causes and potential remedies.

Create a project time line and understand how project managers can
impact a projects durations

Key topics
The course is organized in two parts and covers the following topics:

Part I: Focus on Internal Processes

o Operations strategy and product-process-matrix
o Project Planning
o Process analysis
o Impact of variability on manufacturing and service operations
(queuing)
o JIT and lean operations

Part II: Focus on Matching Supply with Demand

o Inventory management and process innovation in apparel
industry
o Supply chain coordination (Beergame)

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o Sustainable operations
In addition, the course includes a practical exercise (the Littlefield
Technologies simulation) in which students will team up with their colleagues
and run a virtual factory for two weeks, possibly outperforming the other
teams. Precise details on the game and a final schedule for its administration
will be communicated in class.

Course materials
Required Readings
You will be provided a course package for this course, which contains the
cases and all required and optional readings. You are not required to complete
optional readings before coming to class. However, you are advised to review
this material after each session to improve your understanding of the topics
addressed and to develop additional insights.

Online Resources
We will make extensive use of our course web site on K-Hub to post slides,
exercises and additional material, or just to discuss interesting news from the
press that may pertain to the course topic, so please consult it regularly.
Additional Reading Material
For a more detailed analysis of some topics (going beyond the material
covered in class) you can also consult the following textbooks (available in
the library). Some of the chapters are specified in the session details below.
Jacobs, Chase and Aquilano: Operations and Supply Management. 12th
edition. Mc Graw Hill.
Cachon and Terwiesch: Matching Supply With Demand. 2nd edition. McGraw
Hill.
Hopp and Spearman: Factory Physics. 2nd edition. Irwin / McGraw-Hill.

Teaching methods
The majority of classes will consist of a combination of lectures and case
discussions. In addition, we will make use of simulation exercises.

Prerequisites

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For this class, you need to have a good understanding of the basic concepts
of Statistics.

Grading
The learning occurred in the course will be assessed through the following
means:
Quality of classroom participation:

20 %

Analysis Littlefield Simulation game (group):

30%

Final Exam:

50%

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Schedule
Session 1: Operations Strategy
Frameworks or Concepts covered:
After discussing what operations management is, why it is important for
organizations in the 21st century and how we will study it, we will also
introduce some fundamental concepts in operations such as the link
between Business Strategy and Process Choice. With the Wriston case, we
will look at the comparison of different plants in a network and discuss
some typical fallacies managers fall into.
Preparation:
Required reading:
- Case: Wriston Manufacturing Corporation (HBS 9-698-049)
Questions:
- Why do the burden rates (overhead costs) vary so greatly from plant
to plant?
- Why is the Heavy Equipment Division under-investing in the Detroit
plant?
- What should Richard Sullivan do with the Detroit Plant?
Session 2: Introduction to Managing Processes
Frameworks or Concepts covered:
We will introduce the process view as a unified framework for describing,
analyzing and improving processes. We will discuss process flow charting
and how to measure and improve capacity and processing time. We will
cover fundamental process measures: inventory, throughput and flow
time. Finally, we will briefly discuss the link between process design
decisions and business strategy.
Preparation:
Required reading:
- Case: Scharffen Berger Chocolate Maker (HBS 9-606-043)
Questions:
- What are the most important competitive operational priorities for
Scharffen Berger?
- How could they significantly increase capacity without affecting
product quality?
Optional readings:
- Book chapter: Jacobs, Chase and Aquilano: Chapter 5 (Process
Analysis)
For more details you may refer to:
- Cachon-Terwiesch Chapter 6 (Batching and Other Flow Interruptions)
- An OM classic about bottleneck management: The novel The Goal:
A Process of Ongoing Improvement by Goldratt and Cox

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Session 3a: Managing variability in service operations

Frameworks or Concepts covered:
In this session we will dedicate special attention to study the role of
variability. We will understand why it has a detrimental impact on both
manufacturing and services operations and we will discuss some
techniques to limit this impact. Please bring your laptop in the lecture
theatre (we need at least one laptop every other student).
Preparation:
Required reading:
- Benihana simulation instructions
Questions:
We will run the simulation together in and try to answer questions 2, 4,
6 and 8. Before coming to class, please read the case summary and
download the simulation files from K-hub.
The simulation runs on Extend. Unless you already have a copy of the
software, you will also have to download a demo version from the site:
http://www.extendsim.com/prods_demo.html. Although the instructions
indicate that the simulation requires Extend v 5.0, it will run well on the
recent version too (the one you can download). So don't worry about
that.
Optional readings:
- Note on Queuing systems
For more details you may refer to:
- Jacobs, Chase and Aquilano: Chapter 7a (Waiting Line Analysis)
- Cachon-Terwiesch Chapter 7 (Variability and Its Impact on Process
Performance)
Session 3b: Introduction to the Littlefield Simulation
Frameworks or Concepts covered:
This short session is dedicated to the description of the simulation
environment used for the group assignment.
Preparation:
Please read the introductory note to the Littlefield simulation in your
course package before the game starts. Precise details on the game and a
final schedule for its administration will be communicated in class.

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Session 4: Lean Operations

Frameworks or Concepts covered:
This session reviews some of the most widely used models to run
operations (from MRP to JIT and lean operations) with the objectives to
identify their strengths, their weaknesses and their optimal domains of
application. The session will also provide some insights into the Total
Quality Management philosophy.
Despite the recent and well known events that are threatening Toyotas
reputation as high quality manufacturer, the Toyota Production System
remains a model of operational excellence for both manufacturing and
service processes. Yet, the recent crisis will help us understand when and
why even a very successful and apparently robust operational model may
display some limits, particularly when the model is not consistently applied
or when some compromises are introduced to chase volumes and growth
at any cost.
Preparation:
Required reading:
- Article: Toyota, Losing its Shine.
Optional readings:
- Article: Spear, S. and Kent Bowen, H. Decoding the DNA of the Toyota
Production System (HBR 2904)
- Book chapter: Jacobs, Chase and Aquilano: Chapter 17 (Inventory
Control): Please focus on the basic fixed order quantity model.
For more details you may refer to:
- Jacobs, Chase and Aquilano: Chapter 9 (Six-Sigma Quality and 9a
Process Capability and SPC)
- Jacobs, Chase and Aquilano: Chapter 13 (Lean and Sustainable Supply
Chains)
- Cachon-Terwiesch Chapter 9 (Quality Management, Statistical Process
Control and Six-Sigma Capability)
Session 5: Process innovation in the apparel industry
Frameworks or Concepts covered:
By comparing two alternative strategies to design and operate supply
chains in a highly variable environment (the apparel industry), this session
discusses how process innovation may become a source of sustained
competitive advantage. In this session, we also take a closer look at the
Newsvendor model. This model helps managers make a procurement
decision when there is a single ordering opportunity.
Preparation:
Required reading:
- Case: Marks & Spencer and Zara: Process Competition in the Textile
Apparel Industry (INSEAD 602-010-1)

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Questions:
- Compare the supply chains of M&S with that of Zara. In what ways do
they differ? (structure, operational practices, etc)
- How does the supply chain structure support the companys business
strategy in the two cases?
- Is the strategy adopted by Zara replicable in other contexts? Provide
examples to motivate your answer.
- Identify companies in other industries where excellence in supply
chain management generated competitive advantage.
Optional reading:
- Article: Christensen and Overdorf,
Meeting the Challenge of
Disruptive Change (HBR 3456)
- Book chapter: Jacobs, Chase and Aquilano: Chapter 17 (Inventory
Control): Please focus on the single-period inventory model.
For more details you may refer to:
- Cachon-Terwiesch Chapter 11 (Betting on Uncertain Demand)
- Cachon-Terwiesch Chapter 15 (Revenue Management with Capacity
Controls)
Session 6: The Bullwhip Effect in Supply Chains
Frameworks or Concepts covered:
We will play the Beer Game in this session. This exercise highlights the
need for efficient information exchange in a supply chain.
Optional Reading:
- Will be distributed or posted online after class.
For more details you may refer to:
- Cachon-Terwiesch Chapter 16 (Supply Chain Coordination)
Session 7: Project Management
Frameworks or Concepts covered:
Todays class will provide an introduction to project management, with a
focus on project planning, that is, the phase of a project in which the
schedule is determined, a budget is allocated, project team members are
selected, etc. We will learn about planning tools such as network planning
and Gantt Charts, and we will also discuss how we can deal with variations
in the duration of tasks, assessing its impact on time and budget risk.
Finally, we will discuss whether project (and task) durations are truly
exogenous factors and what management can do to influence project
durations.
Preparation:

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Required reading:
- Case: Dragonfly: Developing a Proposal for an Uninhabited Aerial
Vehical (UAV) (INSEAD 600-003-1)
Questions:
- Do you think Dragonfly has any chance to make it on time? Would you
invest your money in it?
- What could be a derailing factor for timely completion of the project?
Optional readings:
- Book chapter: Jacobs, Chase and Aquilano: Chapter 3 (Project
Management)
Session 8a:
economies

Last

mile

distribution

challenges

in

developing

Frameworks or Concepts covered:

This session discusses the challenges of distributing renewable energy
products in a developing country. Using the example of portable solar
systems, the session aims to help participants: i) recognize the operational
context and operational challenges in developing countries, which are
characterized by limited infrastructure, extreme climate events, lack of
financial resources, and idiosyncratic consumer behavior; ii) anticipate the
particular characteristics of local customers in developing countries and
stress the importance of adapting the design of products, supply chains,
and financing mechanisms to those characteristics; iii) understand the
challenges of setting up a new distribution network in such a context by
clearly identifying the pros and cons of each alternative examined; and iv)
identify the clear link between operations decisions and financing
decisions.
Preparation
Required reading:
Case: ASR: Electrifying rural Tanzania (Globalens case n. 1-429384)
Questions:
- In terms of building a distribution network, what are the major
differences between the rural Tanzanian context and a developed
country?
- Which approachtopdown or bottomupwould you recommend
that African Solar Rise use to scale up its distribution? What is the
role of local entrepreneurs under each approach?
- What are some possible ways to finance ASR operations?
- Should ASR adopt a payasyougo system to finance customers and
entrepreneurs? What are the pros and cons of such system, and how
should ASR manage its potential difficulties? What are the
alternatives?
- Should ASR pursue a partnership with the crowdfunding platform
KIVA and seek more opportunities for collaborating with MFIs?

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Optional readings:
- Article: Fisher, M.L., What is the right supply chain for your product?
(HBR 97205)

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Session 8b: Littlefield Technologies Debrief and course wrap-up

Frameworks or Concepts covered:
In this session, we will debrief the Littlefield Technologies simulation, and
we will celebrate the winner of your MBA intake. This session will also give
us the opportunity to review the different concepts we learned in class,
and to see how you could apply them to the Littlefield Technologies
simulation to improve the performance of your factory. We will also
discuss an inventory management system for situations when along with
demand uncertainty there are multiple opportunities to order the product
like it was the case in Littlefield. Finally, the session will provide
opportunities to clarify any questions you may have on the most important
concept from the course and to help you prepare for the final exam.
If you enjoyed the Littlefield Technology competition, please note
that you might have a chance to play the simulation once more, in a
much more challenging and rewarding environment. Each year MIT
sponsors an international Littlefield Technologies competition for MBA
students from top business schools all over the world. The competition
usually takes place in April. Last year first prize amounted to $3500 (you can
check
last
years
winners
at:
http://web.mit.edu/sloanops/SubPages/OpsSimCom.html).
If you are
interested in participating, further information and the new URL to register
for this years game will be provided by your lecturer as soon as available.

Estimated Workload
Estimated time required to prepare for each Session (i.e., before a Session).
Note that these time estimates are subjective, and the true time required will
depend on both your English reading skills (speed) and your quantitative
skills.
Preparation for Session 1: 30 min (reading of case)
Preparation for Session 2: 30 min (reading of case)
Preparation for Session 3: 15 min (reading of case summary; download
software)
Preparation for Session 4: 15 min (reading of article)
Preparation for Session 5: 30 min (reading of case)
Preparation for Session 6: 3 hour (Littlefield simulation)
Preparation for Session 7: 3 hour (reading of case, Littlefield simulation)
Preparation for Session 8: 4 hour (reading of case, Littlefield simulation
write-up)
We also post practice problems throughout the course. We strongly suggest
you spend 1 hour each week looking at sample problems in preparation for
the exam, rather than waiting until the very end.

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