Studied by 27 people
operations management
the process of transforming resources (inputs) into outputs to achieve business objectives
capital intensive
production process that uses relatively more physical capital than human labour
labor intensive
production process that uses more human labour relative to physical capital
job production
production of unique items that are tailor-made products for individual customers
batch production
producing items in groups of identical products
mass/flow customization
production of large quantities of goods that can be adjusted to customer specifications
types of mass costumization
collaborative, adaptive, cosmetic and transparent
collaborative customisation
where there is a close interaction between the business and customer to adapt a mass-produced product according to the customer’s specifications
adaptive customisation
customers can choose from pre-set customisations provided by the business
cosmetic customisation
where the face of the product, often the packaging, is changed to suit the needs of the customer
transparent customisation
personalised items are recommended to the customer based on their online shopping cart; analysing online customer data is important to make recommendations
advantages of mass customization
customer satisfaction and loyalty, lower costs, and higher prices and profits
disadvantages of mass customization
handling returns, higher customization costs, and time invested
lean production
set of strategies to reduce waste in the production process
quality management
set of strategies to ensure products meet or exceed customers’ expectations
waste
any part of the production process that does not add value to the final consumer
kaizen
continuous improvement - a quality management approach where employees are encouraged always to seek and implement production improvements
efficiency
how well a business transforms physical, human and financial inputs into outputs.
waste categories TIM WOOD
transportation, inventory, motion, waiting, over-processing, over-production, defects
transportation
moving components between workstations or from suppliers
inventory
accumulating excessive stocks, incurring storage costs
motion
risking staff injury during product assembly
waiting
delays in the production process
over-processing
adding unnecessary features to products
over-production
generating surplus finished goods
defects
products failing to meet quality standards
benefits of kaizen
diversity of ideas, better ideas, employee motivation
limitations of kaizen
lower productivity, high labor costs
just in time production (JIT)
aim of minimizing costs by reducing or eliminating stock through smaller, regular orders delivered just in time. requires excellent relationships and regular communication with suppliers.
benefits of JIT
improved cash flow, reduced costs, increased production capacity
limitations of JIT
reduced economies of scale, high risk of production halts, and reduced resilience to changes
biological cycle for products for consumption
production, product, use, biological degradation, biological nutrients, plants
technical cycle for products for service
production, product, use, return, disassembly, technical nutrients
cradle-to-cradle design and manufacturing
process focused on sustainability and minimizing waste and negative environmental effects through durable products, recyclable materials, and pollution-reducing production methods.
quality
characteristics of a product or service that meet customer needs and expectations
quality control
inspection of a product to find defects and remove them before they are delivered to retailers or customers
quality assurance
strategies to prevent defects and improve products
quality management strategies
quality circles, benchmarking, total quality management (TQM)
quality circles
group of employees convened regularly to discuss and propose improvements to product quality within an organization. members come from diverse departments, offering varied perspectives on quality-related issues.
benefits of quality circles
employee motivation, improved quality, and cost effective due to the elimination of quality inspectors
limitations of quality circles
reduced productivity as this requires time, training costs for appropiate participation, and not universally applicable.
benchmarking
strategic process wherein a business compares its performance against industry leaders to identify areas for improvement and learn from best practices
benefits of benchmarking
improved quality, understanding of competitors and consumers, and customer satisfaction
limitations of benchmarking
lack of transferability, lack of information, and selecting the right benchmark
total quality management (TQM)
process that emphasizes collective responsibility among employees for maintaining overall product quality, rooted in principles of empowerment and internal customer focus
empowerment
the authority to initiate changes or improvements within their roles, fostering a culture of continuous improvement
internal customer focus
employees are encouraged to consider the needs of their colleagues who rely on the quality of their output, promoting teamwork and communication
benefits of TQM
motivated employees, improved quality and reduced costs through the elimination of quality inspectors and waste reduction
limitations of TQM
potential reduced productivity due to time allocated to quality management, training costs associated with implementing this method, and the requirement of a conducive organizational culture for effective implementation
certification process
businesses undergo inspection and evaluation by quality standards organizations
project elements
deliverable, has a time period and resources
gantt chart
a business management tool illustrating project plans, representing tasks over time
critical path analysis
a project planning tool revealing the shortest time needed for project completion, known as critical path
float time
the amount of time that a task or activity can overrun its time estimate, but not delay the whole project
free float time
the amount of time that an activity can overrun its time estimate, but not delay the next activity
location
the geographic position of a business; where it is positioned or sited
tariffs
a tax on imports
subsidy
a payment by a government to individuals or businesses
methods of reorganising production
outsourcing/subcontracting, insourcing, offshoring, reshoring
outsourcing
subcontracting
when a business takes an internal function and has it performed externally by another person or business
benefits of outsourcing
passing the costs to the subcontractor and the company can simply end its contract with the subcontractor without having to worry about factory overheads or staff redundancy costs
downsides of outsourcing
the use of subcontractors results in a loss of control, as the company doesn’t own the factories, it makes it more dificult to know and regulate what goes on inside them.
insourcing
when a business decides to have its own personell perform tasks or operations previously performed by an external organisation
offshoring
relocating some business functions overseas to lower costs and increase productivity
advantages of offshoring
companies can cut costs and increase productivity
disadvantages of offshoring
communication and transportation will be made more difficult, and this practice has been criticised for unethical practices such as exploitation of labour in low-income countries, and environmental damage may also be more likely when companies do this.
reshoring
when a business moves an operation that is performed in another country back to the company’s home country
advantages of reshoring
more effectiveness in the management of supply chains, more control over the production and operations and reduces risks involved with offshoring
disadvantages of reshoring
higher costs of production, supply chains would need to be redeveloped and workers abroad would lose their jobs.
supply chain
steps involved in creating finished goods
stock control chart
a chart that records when stocks are delivered, when they’re sold and when and how much stock is reordered
maximum stock level
the total amount of inventory a company wishes to hold, using current storage facilities
buffer stock level
stock that is held just in case there’s an unexpected order or late delivery. a backup so customers’ needs can still be met if something unforeseen occurs
lead time
the time it takes a supplier to fulfill an order
reorder level
point when new stock is ordered from a supplier. it takes into account the lead time and buffer stock level
reorder quantity
the amount of stock that is ordered from a supplier
productivity rate
the ratio of output per unit of input over a period of time
labour productivity
the output per worker over a defined period of time
capital productivity
a measure of how efficiently a business uses its capital
unit cost
the cost of producing a single unit of output
defect rate
a measure of the products that fail to meet specified quality guidelines
operating leverage
the measure of a company’s fixed costs relative to total costs
capacity utilization
a measure of the extent to which a business is using its productive capacity
cost to make
the total cost of production if manufacturing is kept in house
cost to buy
the cost of production if a business decides to subcontract production to a supplier
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