Business unit 3- AOS 3

Operations management

Consists of all activities in which managers engage to produce goods or services. Also need to ensure that strategies used within operations align with the objectives and stated of the entire business

Relationship to business objectives

Core objectives of all businesses is to maximise profit- requires businesses to maximise efficiency and effectiveness when using resources to produce goods or services at the lowest prices for good qualtiy- operations management responsible

Effectiveness

The degree to which a business achieves its states objectives

Efficiency

Refers to how well a business uses its resources to achieve objectives

Productivity

A measure of the amount of output compared to the amount of inputs going into production- improvement associated with efficiency

Competiviness

The ability of a business to sell products in a market. A business will be competitive when it is able to produce goods or services at the same or better level tha competitors

Inputs

The resources that are used to produce its goods or services (raw materials, plant, capital, labour, equipment)

Operations system

Series of procedures and processes an organisation undertakes in order to create its outputs of finished goods and services through the transformation of inputs (Materials, capital equipment, labour, information, time, money/finances)

Process

Set of coordinated tasks and activities conducted by people and equipment that will lead to accomplishing a specific organisational goal, such as production of service/product

Transformation process

Conversion of inputs (resources) into outputs (Goods/services)

Manufacture

Inputs- tangible (goods)

• Automated/merchanised - machines, robots and computers to transform inputs to outputs

• Services rely on customer interaction

Outputs

End result of a business’ efforts the product or service that is delivered or provided to the customer

Manufacturer (characteristics)

Transform inputs into tangible products

• Produce a tangible product (physically touched)

• Handled and stored as inventory

• Production and consumption (using it) typically not linked

• Customer is not usually involved in the production

Service (characteristics)

Business will transform inputs into services

• Produce an intangible product

• Can’t be handled or stored for future use

• Producrion and consumption are usually linked

• Customer is usually present during production

Similarities between manufacturer and service

• Both result in a product/output

• Both utilise an operation system

Automated production lines

Comprised of machinery and equipment arranged in a sequence with componentts added to the goods as it progresses through each step

Robotics

Combination of sience, engineering and technology that produce machines (robots)

Robotics effectiveness and efficiency

Efficiency: Cost, consistency/precision, 24/7

Effectiveness: increase profit, increase market share

Robotics adv and disadv

Adv: increased output, increased productivity, reduced cost, increased accuracy/precision, minimise waste

Disadv: neds to be contantly maintained, take jobs of humans

Computer-aided design (CAD)

Computerised design tool that allows a business to create product possibilities from a series of input parameters

CAD adv and disadv

Adv: faster designing, allow changes to be made before a prototype, design from multiple angles

Disadv: software can crash, software experiences, time involved from training, may lead to loss of jobs

CAD efficiency and effectiveness

Efficiency: saving money, not wasting resources creating prototypes, can be done quickly

Effectiveness: increased profit (more precision, less wastage)

Computer aoded manufacturing (CAM)

Software used to allow the manufacturing process become computer directed by designing and controlling the process

CAM efficiency and effectiveness

efficiency: costs, consistency, 24/7

effectiveness: increased profit, increased market share

CAM adv and disadv

adv: faster rates, greater consistency, greater accuracy

disadv: software can crash, machinery is very expensive, cost and time in training, loss of jobs

Artificial intelligence (AI)

The ability of a computer or a robot controlled by a computer to do tasks that are usually done by humans because they require human intelligence and discerniment (e.g. search engines, chatbots, siri, autopilot, facial recognition)

AI efficiency and effectiveness

Efficiency: save time

effectiveness: increasing market share

AI adv and disadv

Adv: saves time

Disadv: may crash, costly to set up, loss of human interaction

Online services- Website development

Creation and/ or improvement of a connected group of pages on the internet rhat will be maintained by a business

Materials management

Series of strategies that managers use, storage and delivery of materials to ensure the right amount of inputs is available when required in the operations system

Forecasting

A material planning tool that relies on data from the past and present and analysis of trends to attempt to determine future events (estimate materials needed and quantities)

Forecasting adv amd disadv

Adv: no over or underproducing (greater efficiency)

Disadv: doesn’t guarentee accuracy

Production plan- materials planning

An outline of the activities undertaken to combine resources (inputs) to create goods or services (outputs)

Master production schedule- materials planning

Plan that describes what is to be produced in what quantities, how and when (linked to specific dates/contracts for delivery)

Materials requirement planning

Completed after business has a clear understanding of the quantities to be produced and the time frame involved. An itemised list of materials involved in production to meet specific orders

Materials planning adv and disadv

Adv: avoid over or underproducing

Disadv: rely on accurate info, may not be able to adjust to changed quickly

Inventory control

A system used to ensure that costs associated with maintaining an inventory of materials can be kept to a minimum, not allowing materials to remain idle, ensuring that inputs are available for operations system when needed

Just in time

Materials management strategy that ensures the exact amount of materia inputs will arrive, only as they are needed in the operations process

Just in time adv and disadv

Adv: reduce storage cost, reduce waste

Disadv: deliveries must be reliable, must be recieved at appropriate time (production line halted)

Quality

The degree of excellence of goods or services and their fitness for a stated purpose

Quality Control

The use of inspections at various points in the production process to check for problems and defects

• Reactive process, internal benchmarks

• Ongoing

Quality control effectiveness and efficiency

Effectiveness: Less waste= less spent on resources/cost= more profit, quality products = consisten= customer satisfaction/increase profit

Efficiency: Reduces wastage, consistancy

Quality control adv and disadv

Adv: internal benchmarks, ongoing

Disadv: reactive, internal benchmarks

Quality assurance

Involves the use of a system so that a business achieves set standards in production

• Proactive strategy (prevention)

• External standards (benchmarks, set my an independant body for a particular industry)

• Regularly audited

Quality assurance adv and disadv

Adv: guarentee of quality, stops wastage and poor quality items getting to customers, identify defects and prevent for future

Disadv: costly and time consuming

Quality assurance efficiency and effectiveness

Efficiency: Proactive, less wastage

Effective: Better quality = more sales

Total quality management

Ongoing, business wide commitment to excellence that is applied to every aspect of that business’s operations (maintaining quality)

• 3 core business principles: customer focus, continuous improvement, employee empowerment

3 core business principles

Customer focus: What they want

Continuous improvement: Make it better

Employee empowerment: Comfortable to share ideas and be onboard with quality improvement

Total quality management adv and disadv

Adv: improve price competiveness, improve product quality (more competiveness)

Disadv: expensive and time consuming, relies on participation of all employees

Total qualtiy management efficiency and effectiveness

Efficiency: proactive, less waste, less idle time (constantly improving)

Effective: Better quality= more sales

Waste minimisation

A process involving the reduction of the amount of unwanted or unusable resources produced by a business in an attempt to improve the efficiency and effectiveness of operations

Reduce

Achieved by creating less waste, decresed costs- improving efficiency

May include:

• Just in time

• introduction of automation and robotics

• Introduction of quality system (QA or TQM)

Reuse

Taking unwanted/old items that might otherwise be thrown away and finding a new use for them (repurposing)

May include:

• Reusing waste products for animal feed

• Reusing waste water

• Reusing components of disused items

Recycle

Changing discarded materials into new products in order to avoid using more new resources

May include:

• Purchasing inputs from market made up of recycled materials

• INventing new ways to recycle different items

• Avoiding hazardous materials that could be difficult to recycle

Lean management

An approach to operations management that attempts to improve efficiency and effectiveness by eliminating waste and improving quality

Lean management = no excess

Four principles of lean management

Pull, one-piece flow, takt and zero defects

Pull

Production of the good or service is only started when the customer places an order

• Likely minimises waste as only producing the outputs that will be sold

Pull efficiency and effectiveness

efficiency: cost of inventory reduced, avoiding overproduction and stock piling

effectiveness: improved by reduction in cost, thus overall profitability

One Piece flow (one piece at a time)

The operations process focuses on one good or service at a time. Involves a piece of production moving through the operation process one at a time

One piece flow efficiency and effectiveness

efficiency: smooth, uninterrupted manner= idle time minimised, ost and overal waste is minimised

effective: reduced cost, increased productivity and quality input

Takt

Operations process seeks to create rhythm where by all the steps in the production of the good or service are synchronised to create ‘continuous flow’

e.g. takt time= 10 min- every 10 min a product is purchased by a customer ad therefore needs to be finished

Takt efficiency and effectiveness

efficiency: avoid overproduction

effectiveness: reduce storage cost, inputs costs, potentially increasing profit

Zero defects

The operations process strives for perfection by continuously improving until it achieves zero defects. Errors/defects identified as closely as possible to where they occur (resolved quickly, reduced waste)

Zero defects efficiency and effectiveness

efficiency: minimise waste, avoid quality issues

effectiveness: reduce waste= potential to increase profit

CSR consideration

• enviornmental sustainability of inputs

• amount of waste generated from the production of outputs

• amount of waste generated from production outputs

Consideration

Used to reflect concepts, themes, concerns ect. that bsuiness managers commonly take into consideration when making business decisions

CSR

Managements awareness or obligations of going above and beyond its legal requirements

Global sourcing

Practice of seeking the most cost efficient materials and other inputs- taking advantage of lower labour costs overseas in producing an input NOT sourcing labour

Global sourcing strengths and weaknesses

Strengths: lower cost, wider range of resources, potentially better quality, wider choice

weaknesses: global shocks (war, pandemics), tarrifs (tax on inputs), cultural differences, time differences

Overseas manufacture

Production of a good in a country that is different to the location of businesses headquaters

Overseas manufacture strengths and weaknesses

Strengths: takes advantage of cheaper labour therefore lower cost of item overseas, can buy in bulk

weaknesses: cultural differences, time differences, shipping delays, hidden costs

Global outsourcing (tech support, sales & marketing, etc.)

Contracting of a specific business’s operations to an external person or business in another country

Global outsourcing strengths and weaknesses

Strengths: cheaper products, gaining info that may not be avaliable here

weaknesses: cultural differences, language barriers