Operations Management Module 1

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Questions and Answers

What are the two things that make up the total cost of owning products or receiving services?

Price and inconvenience of obtaining the product

What are the components of utility?

  • Consumption utility
  • Price
  • Inconvenience of obtaining the products or receiving the service
  • All of the above (correct)

What is consumption utility?

  • The strength of the customer's preference for a given product or service.
  • The total cost of owning the products or receiving the services.
  • How much average consumer desires a product or service.
  • A measure of how much a customer enjoys a product or service, without considering its price and inconvenience of obtaining it. (correct)

What are the two subcomponents of "Inconvenience of obtaining the product or receiving the service"?

<p>Location and timing</p> Signup and view all the answers

What are the factors that drive utility in choosing a tourist destination?

<p>All of the above (D)</p> Signup and view all the answers

Companies can be very good at everything

<p>False (B)</p> Signup and view all the answers

What are the dimensions of the customer's utility that a firm can satisfy?

<p>Capabilities of the company</p> Signup and view all the answers

What are the two major concerns for businesses regarding trade-offs? (Select all that apply)

<p>Low cost with poor responsiveness (A), Higher cost with good responsiveness (B)</p> Signup and view all the answers

What does "Inflexibility" mean in the context of operational management?

<p>The inability to adjust to changes in the supply process or changes in customer demand</p> Signup and view all the answers

Which of the following is an example of "Inflexibility" in operational management?

<p>Inability to admit patients due to lack of advanced medical services (A)</p> Signup and view all the answers

A firm's product or service is Pareto dominated if it is inferior to one or multiple competitors on all dimensions of the customer utility function.

<p>True (A)</p> Signup and view all the answers

What is the efficient frontier in business?

<p>Firms in the industry that are not Pareto-dominated</p> Signup and view all the answers

Which of these are considered system inhibitors or inefficiencies? (Select all that apply)

<p>Waste (A), Variability (B), Inflexibility (C)</p> Signup and view all the answers

What is meant by "Waste" in the context of operational management?

<p>The consumption of inputs and resources that do not add value to the customers</p> Signup and view all the answers

Give an example of "Waste" in operational management.

<p>Paying a waiter to bring food to customers when they are willing to pick it up themselves</p> Signup and view all the answers

What is meant by "Variability" in the context of operational management?

<p>Changes in the demand or the supply process</p> Signup and view all the answers

What are the examples for demand variability? (Select all that apply)

<p>All of the above (D)</p> Signup and view all the answers

What are the examples for supply variability? (Select all that apply)

<p>All of the above (D)</p> Signup and view all the answers

What is a key question to consider when analyzing customer needs?

<p>Who are the customers?</p> Signup and view all the answers

What is a key question to consider when analyzing the product or service offered by a business?

<p>What is the product or service?</p> Signup and view all the answers

What are the key questions regarding the pricing of products and services?

<p>How much do we charge?</p> Signup and view all the answers

What is a key question to consider regarding the efficiency of delivering products and services?

<p>How efficient are the products or services delivered?</p> Signup and view all the answers

What are the critical questions to consider regarding the place of fulfillment of customer demand?

<p>Where will the demand be fulfilled?</p> Signup and view all the answers

What are the critical questions to consider regarding the timing of fulfilling customer demand?

<p>When will the demand be fulfilled?</p> Signup and view all the answers

What is a "process" in operational management?

<p>A set of activities that takes a collection of inputs, performs some work or activities with those inputs, and then yields a set of outputs.</p> Signup and view all the answers

What is a "Process Flow Diagram"?

<p>A graphical way to describe the process</p> Signup and view all the answers

What is a "Flow Unit" in the context of operational management?

<p>The basic unit that moves through a process</p> Signup and view all the answers

What are the steps of a process?

<p>All of the above (D)</p> Signup and view all the answers

What are the different stages of a hospital process? (Name 3 stages)

<p>Accepting a patient, performing surgery, discharging patients</p> Signup and view all the answers

What is meant by "Inventory" in the context of operational management?

<p>The number of flow units within the process</p> Signup and view all the answers

Why is it important to know the inventory?

<p>Because inventory generally takes up space and may cost money</p> Signup and view all the answers

What is "Flow Time" in the context of operational management?

<p>The time a flow unit spends in a process from start to finish</p> Signup and view all the answers

What is the impact of flow time on customer satisfaction?

<p>Flow time influences the satisfaction of the customers.</p> Signup and view all the answers

What is "Process Scope"?

<p>The set of activities and processes included in the process</p> Signup and view all the answers

What is "Flow Rate"?

<p>The rate at which flow units travel through a process</p> Signup and view all the answers

A higher flow rate through a process is generally undesirable.

<p>False (B)</p> Signup and view all the answers

What is "Resource" in the context of operational management?

<p>Workers or machines that transform inputs into outputs</p> Signup and view all the answers

What is a "Process Metric"?

<p>A scale or measure of process performance and capability</p> Signup and view all the answers

What are the key process metrics?

<p>Inventory, flow rate, and flow time</p> Signup and view all the answers

What is "Little's Law"?

<p>A law that describes the relationship between three key process metrics: inventory, flow rate, and flow time</p> Signup and view all the answers

What is the formula for calculating the relationship between inventory, flow rate, and flow time?

<p>Inventory = flow rate x flow time (I = R x T)</p> Signup and view all the answers

Flashcards

Demand

The products or services that customers want.

Supply

The products or services that a business provides.

Matching Supply with Demand

Matching supply and demand is essential for business success; offering products or services customers desire.

Utility

A measure of a customer's preference for a product or service, indicating how much they value it.

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Consumption Utility

The enjoyment a customer derives from a product or service, excluding price and inconvenience.

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Price

The total cost of owning a product or receiving a service.

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Inconvenience of obtaining the product or receiving the service

The effort and inconvenience a customer experiences obtaining a product or service.

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Location

The place where a customer can obtain a product or service.

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Timing

The time between ordering and receiving a product or service.

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Performance

The overall capability of a product or service to satisfy a customer's desires.

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Capabilities

A company's ability to satisfy different dimensions of customer utility.

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Trade-offs

The need to sacrifice one capability to enhance another.

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Inflexibility

The inability to adjust to changing supply or demand.

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Pareto Dominated

A firm's product or service is inferior to competitors in all aspects of customer utility.

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Efficient Frontier

Firms in an industry that are not Pareto-dominated; they offer a competitive edge in at least one dimension of customer utility.

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Waste

The consumption of resources that do not add value for customers.

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Variability

Changes in demand or supply that disrupt the flow of operations.

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Process

A set of activities that transforms inputs into outputs.

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Process Flow Diagram

A graphical representation of a process, showcasing its steps and flow.

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Flow Unit

The basic unit that moves through a process, often representing the output.

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Inventory

The number of flow units within a process.

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Flow Time

The time a flow unit spends in a process from start to finish.

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Flow Rate

The rate at which flow units travel through a process.

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Little's Law

A mathematical relationship between inventory, flow rate, and flow time; Inventory = Flow Rate x Flow Time.

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Labor Content

The sum of the processing time involving labor in serving one flow unit.

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Average Labor Utilization

The average utilization of employees across a process.

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Idle Time

The amount of time a resource is paid but not actively working on a flow unit.

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Takt Time

The ratio between the time available and the quantity that needs to be produced to meet demand.

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Target Manpower

The ratio between labor content and takt time, indicating the ideal staffing level to meet demand.

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Efficiency

A process is efficient when it achieves a high flow rate with minimal resources.

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Cost of Direct Labor

The labor cost associated with serving one customer, calculated by dividing the total wages by the flow rate.

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Bottleneck

A process bottleneck is a constraint that limits the overall process flow rate.

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Study Notes

Module 1: Introduction to Operations Management

  • Demand: Products or services customers want
  • Supply: Products or services a business provides
  • Matching Supply and Demand: Companies must offer products/services customers want.
  • Utility: Measuring customer preference for a product/service. Combining consumption and convenience (in terms of obtaining the products or service.)
  • Consumption Utility: How much a customer enjoys a product/service, disregarding its price and inconvenience. Example: weight of a bicycle, pixel count of a camera.
  • Example of Consumption Utility: Consumers prefer durable products.
  • Price: Total cost of owning a product/service.
  • Inconvenience of Obtaining/Receiving a Service: Comprised of two subcomponents: location (accessibility e.g. branch locations) and timing (delay between ordering service and receiving service).
  • Inconvenience: Examples include difficulty in obtaining a product, time delay between ordering and receiving a product etc.

Key Operational Decisions

  • Who are the customers?
  • What is the product/service?
  • How much do we charge?
  • How efficient are the product/service delivery?
  • Where will the demand be fulfilled?
  • When will the demand be fulfilled?

Module 2: Process Analysis

  • Process: Collection of activities that transforms inputs, performs work, and yields outputs. Example, patient input, surgery work, discharged patient output.
  • Process Flow Diagram: Way to illustrate the process.

Module 3: Process Improvement

  • Profit Maximization: Aim to maximize the difference between revenue and cost.
  • Profit: Revenue - Cost
  • Efficiency: Ratio of how well a process achieves a high flow rate using few resources.
  • Labor Content: Sum of processing time involving labor, measures work required to serve one flow unit. High number not desirable.
  • Cost of Direct Labor: Wages per unit time/flow rate. Lower cost is preferred.
  • Idle Time: Time a resource is paid for but not actually working. Lower idle time is desirable.
  • Flow Time: Time a flow unit spends in the process from start to finish.

Module 4: Lean Operation and the Toyota Production System

  • Operation's Goals: Eliminate waste, create value.
  • Just-in-Time (JIT): Coordinating production steps timely.
  • Toyota Production System: A framework for minimizing waste and improving efficiency.
  • Jidoka (Automation with a human touch): Quickly identifying and fixing issues in any stage of manufacturing.
  • Waste of Capacity: Activities that do not add value to the product from the customer's perspective, e.g., Reworking, transporting products.
  • Value Added Work: Operations that customers value to take a product from input to output.

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