Bus Man - Operations management Unit 3 AOS 3

Operations management

The management of resources to achieve efficient outputs of goods and services.

Efficiency

How well a business has used it's resources to achieve its stated objectives.

Effectiveness

The degree to which a business achieves its stated objectives.

Responsibilities of operations management (FFIIIRM)

-Managing the quality of products

-Ensure they have enough materials/products to meet production targets/customer demand

-Minimising waste in production process

Operation and business objectives

-Increased profits

-Meet shareholder expectations

-Increased market share

-Fulfil social need

-Fulfil market need

-Increased efficiency

-Increased effectiveness

-Reduced levels of waste

Manufacturing business

A manufacturing business produces a tangible, physical good, either as a finished product of a component part, used as an input in another manufacturing system.

Service business

Provide an intangible product. Services are performed rather than produced and usually involve provision of labour or expertise in return for payment.

Manufacturing business differences

Tangible: can be seen and touched.

Production and consumption occur separately.

- E.g. manufactures soft drinks, then distributes to retailer, customer purchases and drinks

Can be stored as inventory.

Can be standardised and mass produced, ensuring consistent quality.

- E.g. food items, cars, clothing.

Minimum customer contact.

- E.g. manufacturer will deal with wholesaler/distributer. Not generally with final customer.

Service business differences

Intangible: Can't be touched.

Production and consumption often occurs simultaneously.

- E.g. patient goes to see a doctor who performs the service (medical treatment etc.)

Difficult to store, however record of service is maintained.

- E.g. medical history, legal advice on file.

Often specifically customised to meet individual client/customer requirements.

- E.g. tax advice

High degree of customers contact established.

Similarities between manufacturing and service business

- Deal with customers and suppliers.

- Aim to produce high quality products or services at the lowest cost.

- Aim to reduce costs of production.

- Aim to reduce waste

Inputs

Inputs are the resources that will be converted into outputs.

Inputs include

- Materials

- Technology

- Facilities, machinery, equipment

- Knowledge and skills

Process

Processes are the activities that help transform inputs into outputs.

- Storing, sorting, blending, packing

Outputs

Outputs are final goods or services that is produced and ready for customers.

Technology

Practical application of science to achieve commercial or industrial objective.

Automated productive lines

Equipment and machines are arranged in a sequence and controlled by computer systems to perform tasks automatically.

Advantages of automated productive lines

- Improved productivity through reduced production time (efficiency)

-Faster production allowing the business to meet customer demand (effectiveness)

Disadvantages of automated productive lines

- Huge initial cost in purchasing systems

- Reduce available employment opportunities (negative CSR impact)

Robotics

Integrates computer science and engineering in the design, construction and use of machines to perform manual tasks.

Advantages of robotics

- Speed of robot reduces production or service time improving efficiency.

- Robots are more accurate than humans reducing wastage. improving efficiency.

Disadvantages of robotics

- Initial cost in purchasing robots

- Downtime for maintenance and repairs if the robot breaks down (reducing efficiency)

Computer-aided design (CAD)

Software that creates products possibilities from a series of parameters

Advantages of computer-aided design

- Customers are able to make suggestions and alterations to their product (improving effectiveness through increased satisfaction)

- Enables product to be tested before going into production -> reducing wastage by making less mistakes (improving efficiency)

Disadvantages of computer-aided design

- Costly to introduce

- Requires technical training to use

Computer-aided manufacturing (CAM)

Software used to allow the production process to be directed and controlled by computers.

Advantages of computer-aided manufacturing

- Greater accuracy and consistency improving the quality of the end product (effectiveness)

- Reduces need for manual resetting of machinery. Saves time and labour costs (efficiency)

Disadvantages of computer-aided manufacturing

- Costly to introduce

-If computer breaks down, it can lead to expensive break downtime that halts production (impacting efficiency)

Artificial intelligence

Deals with the development of computer programs that imitate human intellect.

Advantages of artificial intelligence

- Can analyse information and make decisions for businesses quickly, increasing efficiency

- Can allow services to be provided to customers 24/7

Disadvantages of artificial intelligence

- Difficult to ensure accuracy -- prone to errors, leading to poor decisions

- Requires ongoing testing and validation which is time consuming

Online services

Providing information and support over the internet

Advantages of online services

- Can be used to gather customer feedback which can be used to help improve quality (effectiveness)

- Booking appointments online requires less human energy (efficiency)

Disadvantaged of online services

- Web designers are expensive

- Time consuming to develop website

Materials management

Involves the planning and coordinating of all inputs that are required for an operation system.

Forecasting

Planning strategy where past data and trends are used to predict future demand so informed decisions can be made around materials.

Forecasting effectiveness

- The business can ensure they have enough materials on hand to meet production needs, ensuring customer demand is met, increasing sales revenue and profit.

Forecasting efficiency

- Improve productivity because production does not need to wait.

- Reduces overstocking which reduces wastage.

Advantages of forecasting

- Ensures stock and materials are on hand to meet demand.

- Factors in lead-time for suppliers to deliver, which reduces chances of supply shortage.

Disadvantages of forecasting

- Prediction and cannot be relied 100% on.

- Global events can impact supply or demand (weather, politics etc.)

Master Production Schedule (MPS)

Outlines what is going to be produced, in what quantities and when it is going to be produced.

Effectiveness of Master Production Schedule

- Enables the business to have a clear picture on what needs to be produced to meet customers orders, increasing revenue and profits

Efficiency of Master Production Schedule

- Helps the business plan the exact amount of materials needed so the correct materials can be ordered-preventing over production reducing waste.

Advantages of Master Production Schedule

- Reduces stress as production plans are made clear

- Creates clear guidelines and expectations for staff

Disadvantages of Master Production Schedule

- Delays to supply delivery times may cause the schedule to be interrupted.

- Changes to customer demand could lead to changes in MPS.

Materials Requirement Planning (MRP)

An itemised list of materials that are required to meet specific orders.

Effectiveness of Materials Requirement Planning

- Ensures production has a continuous flow without waiting for materials.

- Enough materials on hand to meet demand, increasing sales revenue and profit.

Efficiency of Materials Requirement Planning

- Prevents overstocking, reducing wastage

Advantages of Materials Requirement Planning

- Ensures stock and materials are available for specific orders.

- Ensures productivity levels in production can be maintained due to adequate stock levels.

Disadvantages of Materials Requirement Planning

- Delays to supply delivery times may cause the schedule to be interrupted.

- Glitches in computer system could lead to orders not being received.

Just-in-time (JIT)

Is a strategy that ensures the right amount of materials arrive just as they are needed for production.

Effectiveness of Just-in-time

- Aims to have continuous flow of production, reducing downtime and minimising expenses.

- Businesses can use extra space to maximise production

- Money saved, can be used in other area's of the business

Efficiency of Just-in-time

- Reduces storage cost

- Reduces waste

Advantages of Just-in-time

- Less wastage as only what is required is ordered.

- Money is saved (not tied up in inventory) can be used in other areas of the business.

Disadvantages of Just-in-time

- Delays may occur

- Industrial actions at suppliers (e.g. strike) impact production.

Quality management

The management of the production process that ensures the outputs produced are consistently reliable and durable.

Quality strategies aim

- Minimise waste production process

- Minimise defects

- Achieve set quality standards to ensure customer expectation is met

Quality control

A procedure that aims to ensure that a good or service adheres to a set of quality criteria by performing checks at regular intervals.

Quality process

1. Establish quality standards

2. Carry out inspections of products (sampling)

3. Compare results of inspection with standards

4. Correct processes to prevent defects from occurring

Advantages of quality control

- Benchmarks for excellence can be set.

- Higher levels of customer satisfaction as errors are identified.

Disadvantages of quality control

- Time consuming to physically inspect sampled products.

- Defects may be overlooked as inspections are random.

Quality assurance

A system where the business meets a set of predetermined quality standards often set by an independent body.

Quality assurance process

1. Consultant advises business on standards required to obtain certification.

2. Business makes adjustment to processes in line with certification standard.

3. Certification granted by authority.

4. Business now has right to use standard logo in marketing.

Advantages of quality assurance

- Internationally recognised standards (IOS) acts as marketing tool to reassure customers products are of high standard.

- Proactively integrates quality into processes (less likely defects, less wastage).

Disadvantages of quality assurance

- Application process to receive quality assurance certificate is lengthy and expensive.

- Adhering to quality assurance rules and regulations can decrease productivity, as random audits of business can occur.

Total quality management (TQM)

A holistic approach to quality where all members of an organisation focus on continuous process improvement customer focus, defects prevention and universal responsibility.

Core TQM concepts

1. Continuous improvement

2. Customer focus

3. Defect prevention

4. Universal responsibility

Quality circle (universal responsibility)

Group a of workers who meet regularly to discuss quality and production issues. Proposed changes to production methods and are then put forward to management.

Advantages of total quality management

- Business is aware of the importance of quality. Quality is therefore ingrained in corporate culture.

- Proactively integrates quality into process (less defects, less wastage).

Disadvantages of total quality management

- places pressure on employees, leading to high levels of stress.

- Time consuming to run quality circles, decreasing productivity levels.

Effectiveness of quality strategies

Overall improve quality being produced.

Leads to increased sales, reduced customer complaints and increased market share.

Efficiency of quality strategies

Errors are reduced or at very least identified early.

Ensuring less wastage from faulty products being thrown out or needing to be put back into production for reworking

Waste minimisation

The process of reducing the amount of discarded resources created by the business operations system.

Types of waste (TIMWOODS)

- Transport

- Inventory

- Motion

- Waste

-Over-processing

-Overproduction

- Defects

- Skills

Waste minimisation strategies (RRRR)

- Reduce

- Reuse

- Recycle

- Recover

Lean Management

Aims to deliver customer value by systematically reducing waste and focusing on continuous improvement.

Lean management principles (POTZ)

- Pull

- One-piece flow

- Takt

- Zero defects

Pull

Production of goods or services is only started when the customer places an order.

- Inventory is kept minimum, waste reduced and customer satisfaction assured as orders are received less damaged

One-piece flow

An uninterrupted flow of process from the beginning until end of production process.

- products move through each step of a process one at a time, removing unnecessary activities and waste

Takt

The operational process that seeks to create that seeks to create a rhythm whereby all the steps in production of the good or service are synchronised to create 'continuous flow'.

Zero defects

Focus on quality, identifying potential defects asap to ensure that any issues are resolved quickly and efficiently.

- Resulting in high quality

Advantages of lean management

- Responsive to customer needs, developing strong customer relations.

- Reduce waste production and improves productivity as unnecessary resources are removed.

Disadvantages of lean management

- Time consuming to actively review all procedures to make changes to reduce waste.

- Focuses on short-term gains and waste reduction, may be at the expense of long-term sustainable solutions.

Corporate Social Responsibility (CSR)

The commitment by a business to go above and beyond legal obligation to ensure they are acting in an ethical manner in relation to social, economic and environmental considerations.

CSR & environmentally sustainable Inputs

- Purchase sustainable inputs (recyclable materials)\

- Purchase energy-efficient technology

- Purchase and use green energy options

- Choose local suppliers

CSR & Process

- Reuse of resources

- Recycling of resources

-Utilise green technology

CSR & Outputs

- Ensure product is durable and reliable (beyond legal requirement)

- Create sustainable packaging

- Final output id biodegradable

Technology (CSR)

- Implement green technology

- Implement technology to reduce wastage and increase accuracy

Materials (CSR)

- Implement just-in-time to avoid wastage

- Source sustainable inputs

Quality (CSR)

- Implement quality strategies, ensures product lasts beyond warranty period

Waste minimisation

- Implement lean manufacturing to reduce wastage and landfill

- Implement prevention techniques to minimise landfill

Supply chain management

Involves meeting consumer demand for goods and services while making the most efficient use of production process and the distribution of the finished product to the customer.

Global sourcing

A business uses suppliers from overseas countries

Advantages of global sourcing

- Countries have different types of quality of resources to naturally produce specific products.

Disadvantages of global sourcing

- Increased shipping and time costs

- Risk of damage during shipping (increases with distance)

Overseas Management

Production of a good occurs in an overseas location, This may be done by the business or outsourced.

Advantages of overseas management

- Labour costs is cheaper in developing countries

- Potential to be closer to other markets

Disadvantages of overseas management

- Increased shipping costs and time

- Inefficiencies associated with time zones, cultural differences and language barriers

Global outsourcing

Where the business hands over part of its operations to an overseas business.

E.g.) non-core business activities such as IT

Advantages of global outsourcing

- Outsourced to people who are specialised in their field (have specific equipment and technical expertise)

- Access to cheaper labour rates

Disadvantages of global outsourcing

- Inefficiencies associated with time zone, cultural differences and language barriers

- Loss of Australian jobs (may be seen as unethical)