management of operations

operations process

-input:buying raw materials & hiring labour
-process:using resources to produce products for sale including machinery and a skilled workforce
-output:goods and services are packaged & sent to suppliers

operations department deals with

-purchasing raw materials
-managing stock
-producing goods
-quality control
-storage + distribution

purchasing mix

-quality of product
-quantity of product
-time process should take
-dependability
-price of raw materials
-location of suppliers

labour intensive

using humans rather than machinery to produce goods

capital intensive

-machines do the work instead of humans
-processes are automated (computer controlled)

labour intensive advantage

-humans can use their skills/abilities & their initiative

labour intensive disadvantage

-humans are expensive + can be absent which costs money

capital intensive advantages

-can work 24/7
-machines do boring repetitive jobs with a high degree of accuracy

capital intensive disadvantages

-can be expensive to maintain and install
-when machines break down, production stops

methods of production

-flow production
-batch production
-job production

job production

-company produces a single product or small number of products to specific requirements
-unique
-may be a one off job to suit a customers particular requirements
-frequently found in smaller businesses
-labour costs in skills & time tend to be high
-wedding dress

job production advantages

-firms can produce one-off orders to exactly meet the customer needs
-high prices can be charged so high profits can be earned
-workers are more motivated as there is likely to be a variety of work + skills required

job production disadvantages

-expensive to hire highly skilled staff
-wide variety of expensive tools, equipment and machines may be required
-one-off orders may take several months to complete from the order being placed to delivery to the customers

batch production

-batches of similar products are made
-different ingredients used for different products
-if batches are small then unit costs can be high
-chocolate and soup

batch production advantages

-all products in the batch are identical and so should be no quality differences (all customers should receive exact same quality)
-reduced need for highly suited & costly staff as work is broken down into simple stages & fairly competitive
-machinery & robots can be used to do a lot of the production which may reduce costs in the long run

batch production disadvantages

-staff may be less motivated as they repeat the same task batch after batch
-business may have to purchase very expensive machinery which can also be costly to maintain
-workers & machines may be sitting idle between batches of production if there is any fall in demand from customers

flow production

-stock continually flows from one operation to the next
-each stage adds to the production
-continuous output of identical products
-economies of sale
-use of machinery (automation)
-car

flow production advantages

-capital intensive
-lower costs per unit (less mistakes & more efficient)
-economies of sale (the more you make, the cheaper it becomes to make one)

flow production disadvantages

-inflexible (cannot change anything once you start)
-boring (very repetitive for staff, can lead to mistakes)
-if one part breaks, the whole production stops

factors to consider when deciding which method of production to use

-the actual product being made
-quantity of product being made
-the way stock is managed
-resources available

why is quality important

-if finished products do not meet the expectations of consumers then they will stop using a business
-the business could also face court action and legal fines if they have broken any laws

benchmarking

-copying the best techniques and applying them throughout the production process
-may come from a competitor

methods of ensuring quality

-high quality stock
-high quality resources
-benchmarking

using high quality stock

-want to use suitably high quality stock for production because if not, finished goods will not be of a high enough standard
-"rubbish in=rubbish out"

using high quality resources

-make sure the factors of production they use will be of a high enough standard to produce the finished product to a suitable standard
-can be achieved by; providing adequate training for staff, repairing + maintaining capital equipment & replacing it when necessary, recruiting good quality staff with right skills and experience

quality assurance

-checking quality of product at various stages in the production process
-waste can be cut down if problems are found earlier in the production process rather than when the good is finished

quality control

-manufacturer passes a sample of raw materials and finished product through a quality control check
-any unacceptable products are then discarded as waste or sent back for reworking
-ensures substandard products are not sold to customers
"seconds" TKmaxx

quality circles

-small group of workers meeting regularly to discuss improvements
-others benefit from the knowledge of their coworkers
-e.g marketing meeting with operations

benefits of providing quality product

-company's rep + image improve
-higher price can be charged meaning increased profits
-customers will be satisfied and likely to return/buy again
-customers are likely to recommend the company to others, which can mean an increase in new customers
-competitive edge can be gained if the product is of a better quality than that of competitors

cost of raw materials meaning + importance

-how much ingredients cost to buy
-used to set selling price
-the more a business pays for supplies, the higher its production costs will be therefore, should aim to find cheap supplier as keeping production costs down will result in higher profits

quality of raw materials meaning + importance

-how good are raw materials
-don't start with quality=cannot end with quality
-having high quality finished product means that a business will be able to charge a higher price for it

lead time meaning + importance

-how long after placing an order it can be with you
-products can go out of date/problems delay production

storage space available

-amount of factory space to hold maximum value
-goods will be damaged or more likely to be stolen if they're not stored securely

understocking

business holds too little inventory to operate efficiently

understocking consequences

-business cannot fulfil orders on time
-production may stop due to lack of available materials
-never be possible to meet unexpected large orders
-business will be viewed as unreliable and its reputation will be damaged

overstocking

business is holding more inventory than required

overstocking consequences

-money tied up in inventory could be invested elsewhere in a business
-inventory can spoil meaning the business will have to write it off as a loss like milk eg
-having too much inventory results in higher storage costs in terms of both overheads and security