ISM 101

Operations Management
RISK MANAGEMENT & PRODUCTIVITY LECTURE 16
Risk Management - Case 1
Last few years have been tough for the company ABC. They are manufacturers of the various
parts used in the auto industry and rely heavily on international trade. Multiple events have hit
their operations.
1. Chip backlog
2. Empty container problems with shipping
3. COVID
4. Ukraine – Russia war

The higher management is fed up and wants to do something about this. They call the meeting
with the strategy office and ask them to recommend actions to make their supply chain more
resilient. You are tasked with creating a report on what actions can be taken. What will you do?
Risk Management - Case 2
Indian economy is growing fast. With increasing emphasis being given to the export sector,
Indian exports are on the rise. With this rise the pressure on the Indian ports is increasing. The
pressure is just not on the port terminal side, but also on the marine side. There have been a
few accidents recently and it is already creating a negative image for the Indian capability to
handle such heavy load of international trade.
You are a professor working as a consultant with the ministry of shipping. You have been tasked
to recommend actions to handle this. How will you do it?
How do you measure performance?
Performance dimensions
1. Cost
2. Quality
3. Time
4. Flexibility
Efficiency frontier
Efficiency frontier – Example (US Airline industry)
Process analysis
Processes – measures
Flow rate / throughput: number of flow units going through the process per unit of time
Flow Time: time it takes a flow unit to go from the beginning to the end of the process
Inventory: the number of flow units in the process at a given moment in time
Flow Unit: Customer or Sandwich
Processes –
Find bottleneck
Process performance - measures
Processing times: how long does the worker spend on the task?
Capacity=1/processing time: how many units can the worker make per unit of time If there
are m workers at the activity: Capacity=m/activity time
Bottleneck: process step with the lowest capacity
Process capacity: capacity of the bottleneck
Flow rate =Minimum(Demand rate, Process Capacity)
Utilization =Flow Rate / Capacity
Flow Time: The amount of time it takes a flow unit to go through the process
Inventory: The number of flow units in the system
Little’s law
Inventory (I) = Flow Rate (R) * Flow Time (T)
Implications:
Out of the three fundamental performance measures (I,R,T), two can be chosen by management,
the other is GIVEN by nature
Hold throughput constant: Reducing inventory = reducing flow time

Given two of the three measures, you can solve for the third
Example: Little’s law
1. how long does it take you on average to respond to an email? You write 60 email responses per
day You have 240 emails in your inbox
2. In a large Philadelphia hospital, there are 10 births per day. 80% of the deliveries are easy and
require mother and baby to stay for 2 days. 20% of the cases are more complicated and require
a 5 day stay. What is the average occupancy of the department?
End of Presentation