U3 AOS 3 BM - Operations Management

Operations Management

operations system

• used to transform inputs into outputs

• inputs → process → outputs

operations management

• all activities managers use to produce goods or services

relationship between operations and objectives

• core objective = maximise profit

• by optimising efficiency and effectiveness in operations

how to maximise profit?

• Use resources efficiently to produce goods/services

Operations Management  is responsible for helping achieve this this objective

• Does this as effective and efficient operations lead to satisfied customers and sales therefore maximising profit, increasing market share and providing a return for investors

operations and business objectives

• introduce technology

  → Increases Productivity and efficiency (Do things quicker and cheaper)

  → Increased Profit as you make things cheaper and quicker

• quality control
  → Reduces wastes/defects, better quality 

  → Increased productivity & Effectiveness

• etc, such as Just in Time and Lean Management

categories of inputs

• natural resources and materials

• capital resources

• human resources

• financial resources

• information from a variety of sources

• time

Inputs

• The resources used in the process of production 

process/transformation

• inputs undergo a process/transformation to become an output

• the conversion of inputs into outputs

outputs

• final good or service that is delivered or provided to the consumer

• manufacturing business → transforms inputs into tangible products, (goods that consumers can touch and see), and can be stored on shelves and sold later on.

• service business → transforms inputs into intangible items, (services that cannot be touched or stored),

efficiency

• a measure of how well a business uses its resources to produce goods or services.

effectiveness

• the ability for a business to achieve its goals.

tech developments

• Technology increases efficiency and speed in both service and manufacturing.

• Businesses can produce more with fewer employees, lowering costs.

• Improved quality and reduced costs lead to higher profits.

Automated Production Lines

• a series of machines and workstations positioned in a sequence to perform tasks automatically.

• little to no employee involvement.

how automated production lines can improve efficiency

• speed: makes things faster, machines don’t need breaks

• reduction in human error: reduces chances that mistakes are made, less waste.\

• consistent operation: work for longer, and doesn’t drop in quality.

• resource optimisation: automated production lines used resources and materials more efficiently, reducing waste.

how automated production lines can improve effectiveness

• improved quality: machines are more precise and consistent which can lead to better quality

• customisation: easier to program machines to produce different versions allowing better response to market trend

• reduced labour costs: reduced wages, less costs

• meet market demand: can speed up production when demand is needed, (e.g, covid-19 and hand sanitiser)

advantages of automated production line

• Speed

  • Can increase speed of machines to meet increased demand

• Accuracy/consistency

  • Machines are more accurate and consistent than humans

• Save money

  • Reduced Wages cost and less wastage 

• Increased production time

  • Make more goods as machines can work longer hours with no break

disadvantages of automated production line

• Initial Cost

  • High set up cost

• Time in set-up

  • Complex to first set up and make sure everything is programmed correct

• Ongoing maintenance costs

  • Can be expensive if machine breaks, if machine breaks down – cant make anything

• Job loss

  • Less workers, may lead to bad image

Robotics

• Programmable machines that automate tasks.

• Used for repetitive or dangerous jobs.

• Allow workers to focus on more complex tasks.

how robotics can improve efficiency

• Increased Productivity 

  • Operate without breaks, increases amount of outputs made, with less human resources

• Precision & Consistency

  • Reduces error rate as, less waste of inputs/resources

• Speed

  • Can work faster than humans – make more

• Resource optimisation

  • Use resources and materials more efficiently, reducing waste

how robotics can improve effectiveness

• Improved quality

  • More precise and consistent which can lead to better quality 

• Customisation

  • easier to program machines to produce different versions allowing better response to market trend

• Reduced costs

  • reduces wages, resources used, less costs

• Improved Safety

  • Complete jobs that are dangerous

advantages of robotics

• Speed

  • Can work longer hours/faster

• Accuracy/consistency

  • Machines are more accurate and consistent than humans

• Save money

  • Reduced Wages cost and less wastage 

• Safety

  • Humans not performing tasks where they can be injured

disadvantages of robotics

• Initial Cost

  • High set up cost

• Time in set-up

  • Complex to first set up and make sure everything is programmed correct

• Ongoing maintenance costs

  • Can be expensive if machine breaks, if machine breaks down – cant make anything

• Job loss

  • Less workers, may lead to bad image

Computer-aided Design (CAD) and Computer-aided Manufacturing (CAM)

• CAD: Software for digital product design, modification, and testing.

• CAM: Uses software and machinery for product manufacturing.

• Modern manufacturers combine CAD/CAM for cost savings and precision.

how CAD and CAM can improve efficiency

• Streamlined Process

  • Easy to change CAD plans quickly as its all computer generated 

• Improved materials management 

  • Using CAD & CAM better estimates materials needed to create something – less waste 

• Speed

  • Working together can quickly design and make things

• Resource optimisation

  • Use resources and materials more efficiently, reducing waste

How CAD and CAM can improve effectiveness

• Better creativity 

  • CAD allows more creativity in design – innovation 

• Analysis & testing 

  • CAD & CAM allows to test things digitally before making 

• Market responsiveness/demand

  • Using CAM & CAD allows you to quickly design and make something and increase capability

Advantages of CAD and CAM

• Speed

  • Design & Make products quicker

• Accuracy/consistency

  • Are more accurate and consistent than humans

• Save money

  • Less wastage 

• Flexibility

  • Easier to change parts of your design

Disadvantages of CAD and CAM

• Initial Cost

  • High set up cost

• Time/training in set-up

  • Complex to first set up and training needed

• Ongoing maintenance costs

  • Can be expensive if machine breaks, if machine breaks down – can't make anything

Artificial Intelligence (A.I)

• Computer systems mimicking human intelligence.

• Manages supply chains by forecasting demand and automating orders.

• Improves quality through defect detection and real-time alerts.

• Enhances maintenance with predictive analysis.

• Optimizes production via data-driven scheduling.

How AI can improve efficiency

• Reduce Waste

  • Analyses lots of data to find the best way to do something

• Predictive maintenance

  • predicts when machines will need maintenance before they break down

• Increased productivity

  • Through automation

How A.I can improve effectiveness

• Quality 

  • AI can detect flaws in products, makes sure there is high quality 

• Reduced costs

  • Replaces human labor in some aspects

Advantages of A.I

• Speed

  • Analyse data faster

• Accuracy/consistency

  • Reduce human error

• Performs repetitive jobs

  • Allows workers to focus on more complex tasks

Disadvantages of A.I

• Initial Cost

  • High set up cost

• Errors

  • Can be wrong and hard to identify 

• Job losses

  • Can replace human workers

Online Services

• Aspects that allow businesses to connect with customers over the internet

  • Most businesses will use a combination of the below (a website and a mobile app for example a business may have both)

Efficiency and Effectiveness of Websites and Mobile Apps.

• Selling through website/app (click & collect)

• check stock online 

• saves time for customers 

• Schedules orders for pickups – more productive in store

Efficiency and Effectiveness of Software as a Service (SaaS)

• Method of software delivery – MYOB accounting services, Canva 

• Customers pay a subscription to use your service 

• Increases speed of operations

• Have as many customers as possible

Efficiency and Effectiveness of Online Education

• Providing a course online through zoom ect

• Reduces costs as can deliver course anywhere, don’t need to go to one spot

Efficiency and Effectiveness of Social Media

• Twitter, Facebook, TikTok, Instagram – easier for a business to reach its customers 

• improve service, message through social media if you have an issue

Advantages of Online Services

• Speed

  • Service is delivered faster

• Increased ability to meet customer demand

  • More customers can access

• Convenience 

  • Easier for customers to get products

• Reduced costs

  • Reduction in labour needs

Disadvantages of Online Services

• Risk of fraud

  • Cyber security needs to be invested in

• Cost

  • Can be expensive to set up

• Machine failure

  • Computer/internet may be down

Materials Management Summary

• Planning, organizing, and controlling a business’s supplies, resources (inputs), and finished goods.

• Aims to ensure the right materials are available in the right amount at the right time.

• Accurate materials management ensures resources are ready for use throughout the operations system.

• Applies to both manufacturing and service businesses.

Forecasting

• Predicting future product demand using data, trends, and seasonality.

  • Balances supply and demand to minimise material risks.

  • Can be short-term or long-term.

Advantages of Forecasting

• Ensures have right amount of materials at the right time to meet customer demand

• Prevents over-ordering and reduces storage requirements

Disadvantages of Forecasting

• Only a prediction – can be wrong, may be an unforeseen change in the market, spike or drop in demand reduce efficiency 

Master Production Schedule

• A plan detailing what to produce, how many, when, and where.

• Indicates when materials and employees are needed for production.

Advantages of Master Production Schedule

• Avoids waste & shortages by determining ordering quantities 

• Clear plan of where and when staff will be needed

Disadvantages of Master Production Schedule

• Complex and time consuming. 

• Relies on predictions – use forecasting to make this schedule, so may not meet demand

Materials Requirement planning

• M.R.P creates a detailed list of all materials needed for production to fulfil specific orders.

  • It relies on the Master Production Schedule (MPS) to determine the materials required.

  • It ensures a business maintains sufficient stock levels and continuous production.

Just-in-time (J.I.T)

• - A strategy ensuring materials arrive only when needed.

  • Minimises inventory; materials arrive just in time for production

Advantages of Just-in-time

• Reduces cost of storage 

• Smother production flow – materials are used as they come in, can't go ‘off’, or be damaged

Disadvantages of Just-in-time

• Not flexible - Hard to meet if there is a spike in demand 

• Supplier delays can impact your customers 

• Increased transport costs – more often deliveries

Quality Management

• Businesses use quality management to make sure that their products meet customer expectations. Quality strategies are used to improve the efficiency and effectiveness of operation

Quality

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

Quality Control

• Involves inspections during production to find issues.

  • Aims to identify and fix problems early.

Advantages of Quality Control

• Ensures products are a high quality before the customer gets it 

• Identifies errors quickly to fix them

• Reduce waste as errors are found and fixed 

• Improves customer satisfaction

Disadvantages of Quality Control

• Slows production down – constant checks of quality

• Can be expensive as pay employees to complete the QC check

• Reactive – looking for errors as opposed to trying to fix them before they occur

Quality Assurance

• Quality Assurance ensures a business meets industry standards for its products/services, verified by an independent body, resulting in certification.

• Most common standard - ISO 9001 Certification

Advantages of Quality Assurance

• Improved quality of end product being produced

• A proactive approach – trying to fix an issue before it happens

• Customers see certification of good quality

Disadvantages of Quality Assurance

• Costly to obtain certification 

• Take time to train employees in the new standards

Difference between Quality Control and Quality Assurance

QC – set up by the business where they set their own standard for the end good or service

Whereas

QA – Predetermined standards set by an independent body, not always based on the end product but on the operations system the business used  

Total Quality Management

An ongoing commitment to excellence applied business-wide, embedding quality into the culture and continuously improving it.

Total Quality Management Strategies

Employee empowerment:

• employees given responsibility to improve the quality of the business. Quality circles are an example of this – employees meet together to discuss ways they can improve the process

Continuous improvement:

• regularly evaluate the operations process to look what can be improved upon

Customer focus:

• entire focus of TQM is on the end customer, are we meeting the needs/expectations of the customer

Advantages of Total Quality Management

• Improved moral – employees are empowered to help improve operations

• Quality is constantly improving, allows for a competitive advantage

• Proactive

Disadvantages of Total Quality Management

• Quality circles may be time consuming

• Can be hard to get all employees to commit to quality 

• Employees may be less focused on their actual work

Waste Minimisaton

• Waste minimisation is a process that involves reducing the amount of unwanted or unusable resources created by the business’s production process in an attempt to improve the efficiency and effectiveness of operations.

Types of Waste - TIMWOODS

Transportation
Inventory
Motion
Waiting
Over processing
Overproduction
Defects
Skills

Why use waste minimisation

• Minimising waste reduces production costs and improves productivity.

• Demonstrates environmental concern, improving business reputation.

Reduce

• Done by creating less waste, which reduces costs and improves efficiency

• Using less resources when possible

• Essentially if there is less waste there is less to reuse and recycle

Reuse

• Taking old or unwanted items, you might otherwise throw away and finding a new use for it

• Uses fewer resources 🡪 improves efficiency

Recycle

• Recycling converts discarded materials into new products, reducing the need for virgin resources.

• Using recycled materials can lower production costs and enhance the business's environmental image.

Difference between Reuse and Recycle

• Reuse – Same item is used again with small amounts of processes (or none at all)

  • Whereas

Recycle – the product/item is broken down into its raw materials and then are used to produce new items

Lean Management Summary

• Aims to eliminate waste and inefficiencies.

• Maximizes customer value with fewer inputs.

• Focuses on improving efficiency, effectiveness, and quality by eliminating waste.

Pull

• Customer demand dictates production rate.

• Real-time sales data informs production.

• Minimizes inventory and waste, increases customer satisfaction.

One Piece Flow

• Eliminates waiting/idle time by focusing on processing one piece at a time.

• Prevents interruptions by ensuring only one item is at each stage of production.

• Improves efficiency, reduces costs and waste, and enhances quality.

Takt (Summary)

• Takt time: average time between starting production on one unit and the next to meet demand.

  • Balances production with customer demand to reduce waste and storage needs.

  • Example: A takt time of 10 minutes means a product is completed every 10 minutes, matching customer purchase rate.

Zero Defects

• Striving for perfection with focus on eliminating defects.

• Defects need to be identified closely to where they occur to minimise waste.

• Improving efficiency and avoiding quality issues to try increase profitability.

Strengths of Lean Management

• Reduced energy and resource consumption

• Reduced Delays

• Increased worker productivity

• Reduced uncertainty

• Increased customer satisfaction

Weaknesses of Lean Management

• Requires committed and experienced employees

• Employees may resent the change to lean or may prefer to not provide any input.

• The constant focus on improvement and elimination of waste can result in workplace stress.

• Requires good relationships with suppliers

• Can involve high implementation costs

Differences between Pull, One-Piece flow, and Takt.

• Pull is about producing the right amount to meet customer demand – prevents the business from over producing goods or services 

  • Whereas

• One-piece flow is about a business having continuous flow in production with minimal starts, stops or bottlenecks 

• Takt – the speed in which a good or service needs to be produced in order to meet customer demand

Corporate Social Responsibility (CSR)

• CSR = commitment to exceed legal duties for employee, customer, community, and environmental welfare.

• Economically (relates to ability to generate profit)

• Socially (relates to impact on employees, customers and the community)

• Environmentally (relates to its impact in the natural environment)

CSR Considerations for Inputs

• Procurement – ensuring suppliers incorporates CSR practices 

• Using local suppliers to support local jobs and economy 

• Using renewable energy to power facilities

• Simplifying supply chains to reduce carbon emissions

CSR Considerations for Processes

• Efficient use of resources

• Ethical disposal of waste

• Easte minimisation strategies 

• Job rotation to help motivate employees – rather than doing the same task every day

• Keeping processes local to support local jobs

CSR Considerations for Outputs

• Packaging decisions – minimise packaging and environmental impact

• Creating high quality goods

• Considering product after its life span – can it be recycled 

• Ethical dealings with customers – returns and repairs

Global Considerations

• Manufacturing is declining in Australia due to globalisation.

• Manufacturing costs are high compared to less developed countries.

• Australian manufacturers often consider using overseas businesses.

Global Sourcing

• Seeking cost-efficient materials/inputs globally.

• Exploiting efficiencies like low-cost labor, raw materials, and favourable economic factors.

Advantages of Global Sourcing

• Reduce costs

• The opportunity to learn how to do business in a potential market

• Accessing skills or resources that are unavailable domestically

• Developing alternative suppliers/sources of inputs

• Increased capacity of total supply.

Disadvantages of Global Sourcing

• Hidden costs associated with different cultures and time zones

• Exposure to potential high risk, both financial and political

• Long lead times (for manufactured goods)

• The risks of ports shutting down and interrupting supply

• Difficult to monitor the quality of inputs

Overseas Manufacturing (Offshoring)

• Making or Offering some of your service you provide overseas. It can be the whole service/product or a part of it.

Advantages of Overseas Manufacturing

• Access to expert knowledge and high-quality service

• Focus on core activities

• Reduced costs

• Quicker production due to specialization

Weaknesses of Overseas Manufacturing (Summary)

• Reduced control over production

• Quality control issues

• Job losses and morale problems

• Security and confidentiality risks

• Communication challenges