Business (operations - unfinished)

10.1 Operations

Operations

process which resources (inputs) transform into goods or services (outputs) 

STRATEGIC ROLE OF OPERATIONS MANAGEMENT — Cost Leadership

A business strategy that aims to have lower production costs in producing a good/delivering a service, enabling competition

STRATEGIC ROLE OF OPERATIONS MANAGEMENT — Types of costs in operations

Input, labour, processing, inventory, quality management

STRATEGIC ROLE OF OPERATIONS MANAGEMENT — Goods & service differentiation

If businesses don’t pursue a cost strategy, goods and services could be differentiated instead to achieve competitive advantage 

STRATEGIC ROLE OF OPERATIONS MANAGEMENT — Differentiated of Goods Methods

• Varying product qualities — e.g Warranties 

• Varying product features — e.g Cars

• Varing argumented features (add ons) — e.g IKEA’s place app/Garnier virutal hair colour try on

STRATEGIC ROLE OF OPERATIONS MANAGEMENT — Differentiation of Services Methods 

• Amount of time spent

• Qualifications, experience, expertise

• Quality of materials, technology and delivery 

G&S IN DIFF INDUSTRIES — Standardised goods

mass produced, usually on an assembly line

products that are produced to a uniform set of criteria. Usually are identical or have similar quality regardless of where or how they are sold.

G&S IN DIFF INDUSTRIES — Customised goods

 varied according to the needs of the customer 

Products that are modified or created to a customer's specific needs

Assembly line

A manufacturing process where products are assembled through a series of sequential workstations, with each station performing specific tasks as items move along a predetermined path.

e.g electronic devices, clothing, cars 

G&S IN DIFF INDUSTRIES — Perishable Goods 

have limited shelf life, predominantly food

G&S IN DIFF INDUSTRIES — Non-perishable goods

Household and business goods

G&S IN DIFF INDUSTRIES — Intermediate goods

Finished goods that go on to become a part of another production process

Intermediate goods are products used as inputs in the production of other goods and services

e.g wheat becomes flour, flour is then used to make bread

7 Influences on operations management

1. Globalisation

2. Technology

3. Quality

4. Cost-based competition 

5. Government Policy

6. Legal Regulations

7. Environmental Sustainability 

INFLEUNCES — Globalisation Effect on operations:

Opportunities 

• Introduces business to new markets — more potential customers and sales

• Outsource — source materials and labour from low-cost regions  

Threats 

• Increases competition for new markets and local/domestic businesses 

INFLUENCES — Technology Effect on operations:

• Cost saving — Processes run more efficiently/safely, reduced need for staff

• Increases competitive advantage — Elements of supply chain more efficient, goods/serive differentiation

• Improved product quality — reduced human error

INFLUENCES — Quality Effect on operations:

• Ensures goods and services meet a set standard/criteria 

• Operations managers adopt quality management processes: Quality control, quality assurance, TQM

INFLUENCES — Cost-based competition — ways of reducing business costs 

• Lower supply costs — source lower quality input, outsource, bulk-buy inputs

• Production — achieve economies of scale, standardise products, auto-production

• Output — achieve economies of scale 

INFLUENCES — Government Policy Effect on operations:

• Creates rules and regulations businesses must follow

e.g tax rates fall → more production with less tax → higher revenue

new standards → business responds with innovative solutions → more efficient production → higher product quality

INFLEUCNES — Legal Regulation Effect on operations:

• Creates rules and regulations businesses must follow

INFLUENCES — Environmental Sustainability Effect on operations:

Protects natural resources for future generations → enhances brand reputation with customers, attracts investors, drives innovation, reduces costs through efficiency

Corporate social responsibility (CSR)

Business actions based on respect for people, community, society and the broader environment. Places value on social responsibility and environmental sustainability, not just pofits

CSR — Legal compliance

Costs involved with complying with government laws

CSR — Ethical compliance

Businesses who uphold moral values even when not legally required.

→ Builds trust, protects reputation and reduces legal and financial risks 

CSR — Difference between legal and ethical compliances

Legal compliances are written laws enforced by the government of which the business is obligated to comply to as they have legal consequences for violations whereas, ethical complainces are unwritten, principles of right and wrong behaviour based off personal conscience, societal norms, and morals, though it may damage business reputation if these are breached.

CSR — Define environmental sustainability

a business's commitment to operating in a way that minimises negative environmental impact

CSR — Define social responsibility

involves a company's ethical duty to positively impact society

Inputs

Any resources used in the production process

INPUTS — Transformed resources

Inputs that are changed, converted or transformed by the production process (or they transform the production process itself)

INPUTS — Transforming resources

Inputs that carry out the production process

INPUTS — Types of transformed resources

1. Materials

2. Information

3. Customers 

INPUTS — Types of transforming resources

1. Human resources

2. Facilities

NPUTS — Transfromed resources: Materials 

Raw materials — substances in unprocessed/raw state

Intermediate goods — goods that have been maufactured and used for further production processes (e.g wheat → flour → bread)

INPUTS — Transfromed resources: Information

Transforms the final product

external information — market reports, industry statistics

internal information — financial reports, quality reports, production data

INPUTS — Transfromed resources: Customers 

Customers preferences and choices shape inputs

(Their wants influence the production process) 

INPUTS — Transfroming resources: Human resources 

Human resources (people) coordinate and combine resources to produce good&services

INPUTS — Transforming resources: Facilities

Facillities is the plant (office or factory) and machinery used in the production process

Major decisions include: layout, number of facilities, location, capacity 

The physical locations and infrastructure where a business’s operations take place + machinery involved, serving as a "transforming resource" by converting inputs (like raw materials) into outputs (like finished goods or services).

TRANSFORMATION PROCESSES — Transformation

The conversion of inputs (resources) into outputs (G&S) 

e.g: Getting the haircut, assembling the computer

TRANSFORMATION PROCESSES — Value adding

Transformation leads to value adding

= Process which inputs have their value increased by processing, refining or transforming 

TRANSFORMATION PROCESSES — The 4 Vs

1. Volume

2. Variety

3. Variation

4. Visibility 

TRANSFORMATION PROCESSES — The 4 Vs: Volume

Quantity to be produced

TRANSFORMATION PROCESSES — The 4 Vs: Variety

Range and choice of products

TRANSFORMATION PROCESSES — The 4 Vs: Variation

Spikes in demand or consistent

e.g A factory may make more bikinis, surfboards in Summer and skiing equipment in Winter

TRANSFORMATION PROCESSES — The 4 Vs: Visiblity 

To what extent does the customer ‘see’ or interact with the process 

TRANSFORMATION PROCESSES — Sequencing & Scheduling

The order in which activities in the operations process occurs

TRANSFORMATION PROCESSES — Sequencing & Scheduling

The amount of time activities in operations processes take

TRANSFORMATION PROCESSES — Sequencing & Scheduling: Gnatt charts

A type of bar chart that shows the sequence and schedule of the work involved in a task over time

TRANSFORMATION PROCESSES — Sequencing & Scheduling: Critical path anaylsis

shows what tasks need to be complete, how long they’ll take and what order is neccessary for completion

If asked to define the Critical path what do you look for? (tip for the HSC)

The critical path is the shortest length of time it takes to complete all tasks

If asked to calculate the Critical path what do you look for? (tip for the HSC)

The critical path is the longest route that can be taken through the network diagram

TRANSFORMATION PROCESSES — technology

Technology is the applied science that enables people to do new things or perform established tasks through better methods — including machinery and systems that enable efficiency

TRANSFORMATION PROCESSES — Technology: Office technology

Office or administrative technology include a range of computer and communications devices

TRANSFORMATION PROCESSES — Technology: Manufacturing technology

Technology used in the production of goods:

robots, computer-aided design, computer-aided manufacturing 

TRANSFORMATION PROCESSES — Task Design

• Classifying job activities so that employees can successfully perform and complete the task

• Breaking down the work into a series of jobs 

TRANSFORMATION PROCESSES — Process Layout (1)

1. Process Layout: Machines & equipment are grouped together by the function (process) they perform

TRANSFORMATION PROCESSES — Product Layout (2)

2. Product layout: Machines & equipment are grouped together according to the sequence of tasks performed in manufacturing a product

TRANSFORMATION PROCESSES — Fixed Position Layout (3)

3. Fixed Position layout: Employees + equipment come to the product

TANSFORMATION PROCESSES — Monitoring

The process of measuring ACTUAL performance against PLANNED performance

TANSFORMATION PROCESSES — Control 

Occurs when KPIs are assessed against predetermined targets and corrective action needs to be taken

What does KPI stand for? (TRANSFORMATIVE PROCESSES UNIT)

KPI = Key Performance Indicators

TRANSFORMATION PROCESSES — Improvement

The systemic reduction of inefficiencies and wastage, poor work processes and the elimination of any bottlenecks (a point in a process where capacity is limited, causing a slowdown in the overall workflow)

OUTPUTS — 3 Types of outputs:

1. Goods & Services

2. Customer service

3. Warranties 

OUTPUTS — Customer service

How well the business meets/exceeds the expectations of its consumers

OUTPUTS— Warranties

An agreement to fix defects in products.(an assessment of warranty claims can help a business to adjust transformation processes so that they become more effective)

PERFORMANCE OBJECTIVES — Aim of operations strategies

to manage the resources of the business to achieve and maintain a competitive advantage

PERFORMANCE OBJECTIVES — List all 6 Performance objectives:

a) Quality

b) Speed

c) Dependability

d) Flexibility

e) Customisation

f) Cost 

PERFORMANCE OBJECTIVES — Quality

Refers to the products having good or advanced features, performing reliably, being durable and easy to service:

• Design — How well a good/service is made or delivered

• Comformance — How well the good/serivce meets design specifications

• Service — Reliable and timely service delivery 

PERFORMANCE OBJECTIVES — Speed 

The objective of reducing the time it takes to make a product

As a KPI, speed aims to satisfy customer demands asap.

• Reduced wait times

• Shorter lead times

PERFORMANCE OBJECTIVES — Flexibility 

How quickly operations processes can adapt/adjust to changes in the market 

• New products

• Change in demand

• Changes in product range 

PERFORMANCE OBJECTIVES — Customisation

Refers to the creation of individualised products to meet the specific needs of customers 

PERFORMANCE OBJECTIVES — Cost

Minimisation of expenses such that operations processes are conducted as cheaply as possible

NEW PRODUCT/SERVICE DESIGN — High level summary

Operations must work with marketing to develop new products

• Operations can contribute to market research

• Prototyping

• Test for quality

NEW PRODUCT/SERVICE DESIGN — How does IKEA test for quality?

• Weight and Load tests

• Fabric durability tests

• Temp and humidity tests