COURSE SYLLABUS1 OPMG-UB.0001.

04 COMPETITIVE ADVANTAGE FROM OPERATIONS

Spring 2012
MEETINGS: Tuesday/Thursday, 2:00PM 3:15PM, KMC 4-60.

INSTRUCTOR: Dr. Gustavo Vulcano, KMC 8-76, x8-4018, [email protected] Office hours: Monday 10:00AM 11:00AM, Wednesday 4:00PM-5:00PM, or by appointment.

TEACHING ASSISTANT: Navaporn Surasvadi [email protected] Office hours: Monday 11:00AM 12:00PM Wednesday 5:00-6:00PM Room KMC 8-172

COURSE WEBSITE: Blackboard (http://sternclasses.nyu.edu)

Subject to minor changes

COURSE OVERVIEW AND GOALS

Operations Management is the design and management of the processes that transform inputs into finished goods or services. Operations is one of the primary functions of a firm. Whereas marketing focuses on the demand for the product, and whereas finance provides the capital for the product, operations actually produces and delivers the product. This course provides a foundation for understanding the operations of a firm. Our objective by the end of the course is to provide you with the basic skills necessary to critically analyze a firm's operating performance and practices. Such knowledge is important for careers in a variety of areas, including general management, entrepreneurship, investment banking (e.g. business restructurings, mergers and acquisitions), venture capital (e.g. evaluating new business plans) and management consulting (business restructuring improvement). Unlike many courses in the core, which tend to treat the firm as a "black box", we will be primarily concerned with "opening up" the black box and discovering what makes a firm "tick" - or, for that matter, "stop ticking". In contrast to your management courses, our focus is on the technological rather than human dimension of a firm's internal operations - though there are obvious connections between the two that we will explore. In contrast to the measurement focus of your accounting courses, our concern is understanding what elements of a firm's operations enable it to produce quality outputs at a competitive cost structure. That is, we will focus on how the "physics" of material, work and information flows and the design and management of a firm's processes interact to determine a firm's cost structure and its ability to compete effectively in terms of non-cost measures such as quality, variety and speed. Because the operations of a firm vary widely from one industry to the next, a course like this cannot cover all topics that are relevant to any given industry. Rather, we have selected a set of topics that are fundamental to understanding operations in a wide range of industries. These concepts are then illustrated using cases from a diverse set of businesses.

MATERIALS REQUIRED
CUSTOM CASES: A set of business cases from Harvard Business Publishing is available from the link: http://cb.hbsp.harvard.edu/cb/access/12246077
BENIHANA OF TOKYO KRISTEN'S COOKIE CO. (A) NATIONAL CRANBERRY COOPERATIVE, 1996 TOYOTA MOTOR MANUFACTURING USA, INC. ZARA FAST FASHION

ONLINE CASES: The following NYU readings and cases will be posted in Blackboard:
TERMS USED IN OPERATIONS MANAGEMENT ANALYSIS OF AN OPERATION FCN SECURITIES DEMO (A), (B) AND (C) NETWORK CASES FIRST CITY NATIONAL BANK SOUTH TREE ELECTRONICS OTTO DEVELOPMENT CORPORATION

COMPUTER SOFTWARE: EXCEL Online simulation tool for the Benihana case, Operations Management Simulation: Benihana V2, included in the online course packet from the link above.

OPTIONAL MATERIAL
THE GOAL: A process of ongoing improvement, by Eliyahu Goldratt, published by North River Press Publishing Corporation, Third revised edition, 2004.

CUSTOM TEXT: COMPETITIVE ADVANTAGE FROM OPERATIONS, Pearson Custom Publishing, 2011, 7th edition. This customized text was prepared by Pearson Custom Publishing for NYU Stern students. It will be denoted as H&R in the outline. The book includes chapters from Heizer and Render, Operations Management, 10th edition, Prentice Hall, 2011. Even though the custom textbook is optional, I recommend it as it will be helpful to anticipate and enrich class discussion.

ETHICAL GUIDELINES
All students are expected to follow the NYU Stern Code of Conduct http://www.stern.nyu.edu/uc/codeofconduct I expect every student to be familiar with the NYU Stern School of Business Honor Code. Some of the ways in which the code applies to this course are discussed below: The honor code stipulates that no student will lie, cheat, copy or otherwise behave in an unfair manner to obtain academic advantage over other students. As per the honor code, an individuals name on a report should be included only if they have contributed to the analysis. If an individual has not contributed to the analysis in an intellectual manner, it is a violation of the honor code to include his or her name. Furthermore, you may not refer to case write-ups from classes offered in earlier semesters. The premise of the honor code is that ideas should be attributed to their source. Therefore, please acknowledge the main source(s) of data, facts, and ideas (other than from the instructor or textbook) in all your written work and when you make a presentation. If you use material from a source other than the lecturer, the textbooks or the lecture notes, you must attribute the source. For example, say, I discussed this with the TF. Or I obtained this from the following website. You may discuss the homework with your classmates, TF or me. However, you must do them individually. The discussion is limited to how to solve type of questions. The actual solution must be done individually. Do not be worried of getting the answer incorrect in the homework. Most of the points will be given for using the correct approach.

STUDENTS WITH DISABILITIES

Students whose class performance may be affected due to a disability should notify the professor immediately so that arrangements can be made in consultation with the Henry and Lucy Moses Center for Students with Disabilities (http://www.nyu.edu/csd/) to accommodate their needs.

GRADING AND COURSE POLICIES

GRADING Midterm I Midterm II Final Exam (Midterm III) Group Mini-Projects Class Participation, Attendance, Quizzes Homework 20% 20% 20% 10% 15% 15%

At NYU Stern we seek to teach challenging courses that allow students to demonstrate their mastery of the subject matter. In general, students in undergraduate core courses can expect a grading distribution where: 25-35% of students can expect to receive As for excellent work 50-70% of students can expect to receive Bs for good or very good work 5-15% of students can expect to receive Cs or less for adequate or below work

Note that while the School uses these ranges as a guide, the actual distribution for this course and your own grade will depend upon how well you actually perform in this course.

RE-GRADING The process of assigning grades is intended to be one of unbiased evaluation. Students are encouraged to respect the integrity and authority of the professors grading system and are discouraged from pursuing arbitrary challenges to it. If you believe an inadvertent error has been made in the grading of an individual assignment or in assessing an overall course grade, a request to have the grade reevaluated may be submitted. You must submit such requests in writing to me within 7 days of receiving the grade, including a brief written statement of why you believe that an error in grading has been made.

GROUP MINI-PROJECTS Business activities involve group effort. Consequently, learning how to work effectively in a group is a critical part of your business education. Every member is expected to carry an equal share of the groups workload. As such, it is in your interest to be involved in all aspects of the project. Even if you divide the work rather than work on each piece together, you are still responsible for each part. The group project will be graded as a whole: its different components will not be

graded separately. Your exams may contain questions that are based on aspects of your group projects. It is recommended that each group establish ground rules early in the process to facilitate your joint work including a problem-solving process for handling conflicts. In the infrequent case where you believe that a group member is not carrying out his or her fair share of work, you are urged not to permit problems to develop to a point where they become serious. If you cannot resolve conflicts internally after your best efforts, they should be brought to my attention and I will work with you to find a resolution. Small groups of students (max 3) will be formed to work on two mini-projects. These projects will not be accepted late. They are to be handed-in at the beginning of the class when they are due. Please, word process your projects.

ATTENDANCE Class attendance is mandatory and part of a students grade. Absences may be excused only in the case of documented serious illness, family emergency, religious observance, or civic obligation. If you will miss class for religious observance or civic obligation, you must inform you instructor no later than the first week of class. Job interviews and incompatible travel plans are considered unexcused absences. Students are expected to arrive to class on time and stay to the end of the class period. Chronically arriving late or leaving class early will have an impact on a students grade. Students may enter class late only if given permission by the instructor and can do so without disrupting the class.

HOMEWORK You will be assigned homework on a regular basis for each topic. Problem statements will be available in Blackboard. The homeworks are due on the dates (sessions) where the assignments appear in the syllabus. Homeworks are to be handed-in at the beginning of class (only hardcopies are accepted). Please, keep a copy of all homework submitted for reference during class. When discussion questions are involved, please answer briefly (just few sentences). Homeworks will be graded and will not be accepted late. They must be prepared individually in order to receive credit. Please write clearly or word process your homework. There are ten homework assignments to be submitted in total. I will disregard the lowest score towards the final homework grade. If you are not attending a class when a homework is due, you should submit it by e-mail to me and the TA before the starting time of the class to receive credit.

QUIZZES A quiz might be given in any class. It will relate to contents given in the previous class or to reading material required for that particular session. There are no make-ups for the quizzes due to absence or lateness.

HOW TO PREPARE FOR CLASS DISCUSSIONS Students are expected to come to class prepared, having read assigned cases and readings prior to class. Participation is an essential part of learning in this course. Students are expected to participate in all facets of classroom learning.

LATE ASSIGNMENTS AND MAKE-UP POLICY Late assignments will not be accepted unless due to documented serious illness or family emergency. I will make exceptions for religious observance or civic obligation only when the assignment cannot reasonably be completed prior to the due date and the student makes arrangements for late submission with me in advance.

CLASSROOM NORMS Laptops, cell phones, Smartphones and other electronic devices are a disturbance to both students and professors. All electronic devices must be turned off prior to the start of each class meeting. If you need to use a calculator during class or during an exam, it must be just a calculator, and not a mobile device used as calculator.

COURSE CALENDAR Please, check the course calendar in advance (see page 17), and make sure not to schedule any job interview or personal appointment that overlaps with any of the exam sessions.

COURSE OUTLINE Spring 2012

MODULE 1: Introduction to Operating Systems: Process Design and Analysis
Jan 24th SESSION 1: INTRODUCTION OPERATIONS AS A SOURCE OF COMPETITIVE ADVANTAGE Class Plan: In this session we discuss the course contents. The main themes in this session are: business processes, how operations management involves the design, planning, and management of business processes, and how operations management is a source of competitive advantage for a firm. 1. Read Chapter 1 in H&R. Jan 26th SESSION 2: FIRM AND OPERATIONS STRATEGY Class Plan: In this session, we discuss the strategy of Benihana. We shall observe how various elements of the operations strategy of Benihana come together to support its business strategy. This will enable us to identify the key factors that determine success and failure from an operations viewpoint for this chain of restaurants. We will also get our first look at a business process and see how to map it out and analyze its performance, cost etc. 1. Read Terms used in operations management (downloadable from Blackboard) 2. Case: Read, analyze, and be prepared to discuss the Benihana of Tokyo case. Use the following study questions as an aid in analyzing the case. (a) What is the Benihana concept? How does the operating system support this concept? (b) How does the cost structure of a Benihana restaurant compare with that of a typical American restaurant? How does Benihana get its competitive advantage? 3. Homework #1: Download from Blackboard. Submit. Retain a copy of homework submitted. Jan 31st SESSION 3: PROCESS ANALYSIS: PERFORMANCE MEASURES. Class Plan: We learn to analyze a business process in detail. The objectives of the analysis are: identify the process capacity, cost, and time to serve customers. Additionally, understand how to execute orders, schedule labor, and identify bottlenecks.

Using a simple setting, we pick up useful tools and techniques such as capacity calculations, flow time calculations, work assignment, and scheduling. We also learn about Gantt charts and their uses. 1. Read Analysis of an operation, pp.1-11 (downloadable from Blackboard) Feb 2nd SESSION 4: OPERATING SYSTEMS TYPES OF OPERATING PROCESSES Class Plan: In this session we discuss process choice. Two of the variables that affect the choice of a process are volume and variety. The choice of process goes beyond determining whether to mass produce or make by hand. It also influences the labor skills, the degree of automation, the controls used, the information systems, etc. We also study service operations. Here, the key factors are the degree of customer/server contact, the sales opportunity and the production efficiency. 1. Read Chapter 7 in H&R, pp. 252-265. 2. Homework #2: Download from Blackboard. Submit. Feb 7th SESSION 5: PROCESS ANALYSIS: CAPACITY AND PROCESS COST, TIME AND VARIETY Class Plan: We discuss the Kristen's Cookie Co. case. The theme in this session is to understand how factors such as lot size and product variety affect the capacity of an operation. We will also briefly touch upon process improvement. We come back to the strategy of the firm and the design of the process. 1. Read Analysis of an operation, pp 12-23 (downloadable from Blackboard) 2. Case: Read, analyze and be prepared to discuss the Kristen's Cookie Company case utilizing the six key questions at the end as guides. What are the cycle time, flow time, and capacity of each operation and the whole production system? Feb 9th SESSION 6: AN INTEGRATIVE EXERCISE TOWARDS PROCESS ANALYSIS Class Plan: In this class, we study the National Cranberry Cooperative case. This case will also serve as another example for analyzing processes. The process in this case is quite complex, but we will see that the simple but powerful ideas of capacity management that we have learnt so far, such as, identifying and managing the bottleneck, will prove to be adequate even for managing the most complex processes. 1. Homework #3: Download from Blackboard. Submit.

2. Case: Read the National Cranberry Cooperative case. Use the following study questions as guides in analyzing the case: (a) What is your analysis of the process fruit operation at Receiving Plant #1? (b) What recommendations, both short and long term, would you make to Mr. Schaeffer?

Feb 14th SESSION 7: DEBRIEF OF THE BENIHANA SIMULATION Class Plan: In this class, we continue the discussion of the National Cranberry Cooperative case. Then, in order to close the first module of the course, we debrief the Benihana Simulation.

MODULE 2: Managing Waiting Times

Feb 16th SESSION 8: THE EFFECTS OF UNCERTAINTY - WAITING LINES Class Plan: Demand and supply often do not match. The mismatch creates special problems for managers. To understand these problems it is important to understand the time-scale at which these uncertainties happen. Very long and gradual changes in demand can be dealt with using techniques for managing seasonal demand. Medium term uncertainties, such as day-to-day fluctuations in demand levels, can be dealt with using staffing solutions and overtime. Demand uncertainties on the same time scale as operational variables such as processing time or set-up time need special techniques. These techniques are called waiting line or queueing techniques. Regarding waiting lines, we learn: why does uncertainty in processing times as well as arrival patterns create delays? These delays are due to queues. We learn why queues form? How to estimate the queueing delays? How to plan to extra capacity to reduce unwanted delays? And how to reduce uncertainty? 1. Read Quantitative Module D on Waiting-Line Models in H&R (pp. 739-768). 2. Mini-Project #1: Process Analysis. Available from Blackboard. Submit. Feb 21st SESSION 9: QUEUEING THEORY IN ACTION Class Plan: We discuss whether multiple lines are better than single lines, whether and when specialization using dedicated servers is preferred. We also discuss several psychological factors that affect the perception of "waiting" in lines. We apply waiting line techniques to analyze the First City National Bank case (downloadable from Blackboard). 1. Read, analyze, and be prepared to discuss the First City National Bank case The following study questions will help:

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(a) Considering the data supplied for arrival and service times, how would you calculate an average arrival rate and service rate? (b) As Mr. Craig, what characteristics of this queuing system would you be most interested in observing? (c) What is the best number of tellers to use? Feb 23rd SESSION 10: REVIEW SESSION. Class Plan: We conclude the discussion of the waiting time management topic, and review the contents of the first two modules of the course. 1. Homework #4: Download from Blackboard. Submit. Feb 28th SESSION 11: FIRST MIDTERM EXAM.

MODULE 3: Simulation
March 1st SESSION 12: AN INTRODUCTION TO SIMULATION Class Plan: Simulation is a useful tool to study processes. It is widely used in practice to answer different types of questions, such as, what should be the configuration and capacity of facilities, what scheduling rules should be used, how should due-dates be assigned to customer orders, how does yield impact process performance etc. In this session we shall learn about discrete event simulation. The technique will be applied to simulate alternate waiting line rules in the First City National case. 1. Read Quantitative Module F on Simulation in H&R. March 6th SESSION 13: USE OF SIMULATION AS A PROBLEM SOLVING TOOL FOR OPERATING SYSTEMS Class Plan: We apply simulation to study alternative scheduling rules in the First City National Bank case. We also discuss other applications of simulation, such as, to project management and analysis of cash flows. 1. Consider the First City National Bank case again. (a) What are the advantages of using simulation to study this operation? What are the limitations? (b) Which alternative arrangement of teller lines should Mr. Craig select based on the simulations?

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MODULE 4: Managing for Competitive Advantage: Quality as a Strategic Issue

March 8th SESSION 14: STATISTICAL QUALITY CONTROL Class Plan: In this session we learn about statistical process control. We discuss how statistical process control techniques are used in many different manufacturing and service industries. 1. Read the Supplement 6 in H&R, pp. 217-233. 2. Homework #5: Download from Blackboard. Submit.

(Spring Break) March 20th SESSION 15: QUALITY ITS DEFINITION AND BASIS FOR COMPETITION Class Plan: In this session we discuss quality management. The objectives of the session are to understand what quality is, what the costs associated with it are, and raise questions about managing quality in the age of super-mass production. We will study the Toyota Production System (TPS), one of the leading paradigms in manufacturing quality. 1. Read Chapter 6 in H&R. 2. Homework #6: Download from Blackboard. Submit. 3. Case: Toyota Motor Manufacturing, USA Inc. Read, analyze, and be prepared to discuss the Toyota case. Use the following study questions as an aid in analyzing the case: a) What are the principal components of the Toyota Production System? What capabilities must an organization possess in order to implement TPS effectively? b) How does quality control work at Toyota Motor Manufacturing? c) 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 and why?

MODULE 5: Project Management

March 22nd SESSION 16: TIME-BASED COMPETITION Class Plan: Competing based on time means being able to execute large projects, on time and within cost. In this session we first discuss the value of time-based competition. Then,

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in this and the next session, we learn about network techniques for planning and managing large projects. Successful project management involves planning and managing the time to complete the project, monitoring the use of resources during project execution, and increasing the probability of successful completion. Network planning and control techniques provide the tools necessary for undertaking these tasks. 1. Read Chapter 3 in H&R, pages 55-73. 2. Draw the networks for the projects described in the FCN Securities Demo (A) exercise (downloadable from Blackboard). March 27th SESSION 17: PROJECT MANAGEMENT Class Plan: We will touch upon project crashing. We will learn why it is sometimes beneficial to reduce the duration of a project, even though it may increase the cost of the project. We will discuss project crashing techniques that optimally reduce the duration of a project by selectively reducing the duration of only certain activities. If time permits, we will discuss the probabilistic methods for project analysis. 1. Read Chapter 3 in H&R, pages 73-89. 2. Prepare an analysis and solution to the FCN(B) case (downloadable from Blackboard).

March 29th SESSION 18: REVIEW SESSION. Class Plan: We conclude the discussion of the project management topic, and review the contents of modules 3-5 of the course. 1. Homework #7: Download from Blackboard. Submit. Apr 3rd SESSION 19: SECOND MIDTERM EXAM.

MODULE 6: Inventory and Supply Chain Concepts and Models

Apr 5th SESSION 20: INVENTORY CONCEPTS Class Plan: In this module, we discuss inventory management and more broadly supply chain management. Material, information and funds flow through supply chains. Demand is matched with supply, orders with fulfillment, and products are planned to fill customer needs and to compete against other products in the market. The integrated management of the three flows, material, information, and funds, is called supply 13

chain management. We learn how firms compete using new principles of supply chains. We also learn how inventory, one of the fundamental levers for managing supply chains, can be analyzed and managed. 1. Read Chapter 12 in H&R, pp. 465-474. Apr 10th SESSION 21: THE ROLE OF INVENTORY THE TRADITIONAL VIEW FOR MATURE PRODUCTS Class Plan: In this session we explore the effects of uncertainty in inventory policies. We also look at the effects of centralization on inventory costs. We see how scale economies can be derived even in very ordinary situations. We then discuss alternate ways of deriving these scale advantages. 1. Read H&R, pp. 474-481, and 487-490. 2. Read the ACME Widget Company case (downloadable from Blackboard). Focus on the two memos (i.e., skip the first page). What problems did ACME face after launching the warehouse program? What could be the potential causes for those problems? 3. Homework #8: Available from Blackboard. Submit. April 12th SESSION 22: INVENTORY MANAGEMENT NEWSVENDOR MODELS Class Plan: In some particular situations or businesses, a decision about inventory level should be made just once, without having the opportunity for replenishment (think of a new apparel for Summer season). We discuss how to decide for this ordering or production quantities, taking into account demand and cost tradeoffs. 1. Read the article "A Note on the Newsvendor Model: Inventory Planning for Short Lifecycle Items" (downloadable from Blackboard). April 17th SESSION 23: INVENTORY IN ACTION: THE BEER GAME Class Plan: We will play the Beer Game, which is about simulating the management of a supply chain. This class will take place in a different room (TBA). PLEASE, BE FEW MINUTES BEFORE TIME! 1. Mini-Project #2: Inventory management. Available from Blackboard. Submit.

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Apr 19th SESSION 24: BEER GAME DEBRIEF Class Plan: We debrief the beer game and discuss how firms manage to smooth product flows in supply chains. 1. Read Chapter and Supplement 11 in H&R Apr 24th SESSION 25: SUPPLY CHAIN MANAGEMENT Class Plan: We learn about the problems of a particular supply chain in the fashion industry: the well known Spanish company Zara. Case: Read, analyze, and be prepared to discuss the Zara: Fast Fashion case Use the following study questions as an aid in analyzing the case. (a) What is Zara value proposition to customers? How is Zaras Supply Chain helping this value proposition? (b) How is Zara managing the uncertainty in demand? (c) Under the Newsvendor paradigm, how would you compare the Overage and Underage costs of Zara and Gap? 2. Homework #9: Available from Blackboard. Submit. 1.

MODULE 7: Allocating Resources for Strategic Capacity Planning

Apr 26th SESSION 26: THE BASIC LINEAR PROGRAMMING (LP) PROBLEM Class Plan: We begin the last module which is integrative in nature. It deals with the use of linear programming for planning and optimizing systems. We shall discuss several applications of LP to Operations Management problems. 1. Read Quantitative Module B in H&R, pages 689-697. May 1st SESSION 27: EXCEL SOLVER AND SENSITIVITY ANALYSIS Class Plan: We learn how to formulate and solve LP problems using Excel. How to interpret Excel outputs for LP problems. We also learn to carry out sensitivity analysis. 1. Read Quantitative Module B in H&R, pages 697-701.

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May 3rd SESSION 28: REVIEW SESSION Class Plan: We will apply LP techniques to analyze the Otto Development Corporation case. Finally, we summarize the main concepts and findings of our course. 1. Read Quantitative Module B in H&R, pages 701-708. 2. Read, analyze, and be prepared to discuss the Otto Development Corporation case (downloadable from Blackboard). 3. Homework #10: Available from Blackboard. Submit.

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OVERVIEW OF EXAMS AND ASSIGNMENTS TO SUBMIT

DUE DATE Jan 26th Feb 2nd Feb 9th Feb 16th Feb 23rd Feb 28th March 8th March 20th March 29th April 3rd April 10th April 17th April 24th May 3rd Between May 9 May 15 ASSIGNMENT HW #1: Benihana case HW #2: Process Analysis HW #3: National Cranberry case Mini-Project #1: Process Analysis HW #4: Waiting Time Management Midterm I HW #5: Simulation HW #6: Toyota case HW #7: Project Management Midterm II HW #8: Inventory Management Mini-Project #2: Inventory Management HW #9: Zara case HW #10: Linear Programming Final Exam (Midterm III) DETAILS FOUND IN SESSION Session 2 Session 4 Session 6 Session 8 Session 10 Session 11 Session 14 Session 15 Session 18 Session 19 Session 21 Session 23 Session 25 Session 28 TBA

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