nature of operations

Transformational process

Turns inputs (like factors of production) into profitable outputs in the form of goods and services

How does operations contribute to adding value?

It manages efficiency of production

Quality of goods and services ; meet customer expectations

Flexibility and innovation

Factors for adding value

Design of product ; quality features

Efficiency of operations ; reducing waste

Branding ; creating a high class brand image so customers pay more for the product

Productivity

Ratio of outputs to inputs during production ; determines the competitiveness of business

Level of production

Number of outputs produced in a given period of time

Labour productivity formula

Total output/ total workers

Efficiency

Highest ratio of output to input

Effectiveness

Using inputs productively without wasting resources and meeting customer needs and business objectives

Sustainability of operations

Business operations that can be maintained in the long term. Eg. CSR

How to sustain operations

Reduce energy use, use of plastic and non biodegradable materials.

Benefits of increasing sustainability

Positive publicity

Reduced energy costs

More demand from green customers

Reducing waste reduces cop

Costs of increasing sustainability

Hugh capital investment

Development is time consuming and expensive

Plastic is often more effective and practical

Capital intensive

High quality of capital equipment used

Labour intensive

Involves high level of labour input

Benefits of labour intensive production

Varied work which Improves employee motivation and skill

Low machine costs

Easier customisation and product can be charged according to request

Limitations of labour intensive production

Low output levels

High workforce costs

High skilled labours must be employee to ensure consistency in quality

Benefits of capital intensive production

Consistent quakity

Lower cop

Supply mass market

Limitations of capital intensive

High fixed costs per unit

Maintainable of machines

Technological advancements

Operation methods

Job production, batch production, flow production, mas producyion

Job production

Prominent in niche market

Production of single one off products (only 1 product made at a time)

Labour intensive

Enables specialised products

Varied and interesting work

Is expensive and requires highly skilled labours

Eg. Aston martin engines handmade

Batch production

Group of identical products that pass thru each production stage together

Every unit goes thru one stage before the whole batch moves on to the next

Enables economies of scale and division of labour

Design and composition can be altered

High levels of wip inventory

Work may be boring

High unit costs

Eg. bread

Flow production

Individual products move from stage to stage without waiting for any other products

Employed when product are produced in large quantities of standardised items

Often used in mass market

Equal output levels

All stages are carefully planned

Labour costs are low

Easier inventory control

Consistent quality

High set up costs and cannot be justified if demand i low

Demotivating and repetitive work

eg. Cococola

Mass customisation

Allows customers to customise their products by changing just a few key components

Low unit costs

More product choice

Competitive pricing

Expensive product redesign and flexible capital equipment needed

Differentiated marketing can be used

Advanced technology

Choosing the ryt operation method

Capital available

Size of market

Customer demand