Studied by 12 people
Operations management
Concerned with the use of inputs (land, labour and capital) to provide outputs in the form of goods and services
Added value
the difference between the cost of purchasing raw materials and the price the finished goods are sold for
Environmental/ecological sustainability
a capacity of ecosystems to maintain their essential functions and processes, and retain their biodiversity in full measure over the long term
Social sustainability
the ability of a community to develop processes and structures which not only meet the needs of its current members but also support the ability of future generations to maintain a healthy community
Economic sustainability
within a business context, economic sustainability involves using the assets of the company efficiently to allow it to continue functioning in profitability over time
Production process
Method of turning factor inputs into outputs by adding value in a cost-effective way
Job/customised production
producing a one-off item specially designed for each customer
Batch production
producing a limited number of identical products-each item in the batch passes through one state of production before passing on to the next stage
Mass production
producing large quantities of a standardized product
Flow production
producing items in a continually moving production line-also known as line production
Process production
producing standardized goods, typically in bulk quantities, by using a continuous input of materials and other resources
Mass customization
the use of flexible computer-aided production systems to produce items to meet individual customers’ requirements at mass production cost levels
Cell manufacturing/production
a lean method of producing similar product using cells, or groups of team members, to facilitate operation by elimination of setup time between operations
Capital intensive
Manufacturing or provision of a product relies heavily on machinery and equipment
Labour intensive
Manufacturing or provision of a product relies heavily on labour
Productivity
Measures the level of labour and/or capital efficiency of a business by comparing its level of inputs with the level of output
Specialization
Division of a large task or project into smaller tasks, allowing individuals to concentrate on an area of expertise. Essential part of mass and flow production.
Lean production
producing goods and services efficiently with the minimum of waste resources while maintaining high quality
7 types of waste
Excessive transportation of components and products
Excessive stock-holding
Too much movement by working people
Waiting time - delays in production process
Overproduction - producing ahead of demand
Over-processing - making goods that are too complex as they could have been designed more simply
Defects - products that do not come up to quality standards and have to be rejected or corrected
Quality product
a good or service that meets customers’ expectations and is therefore ‘fit for purpose’
Quality standards
the expectations of customers expressed in terms of the minimum acceptable production or service standards.
Quality control
this is based on inspection of the product or a sample of products
Quality assurance
a system of agreeing and meeting quality standards at each stage of production to ensure consumer satisfaction
Kaizen
Japanese term meaning ‘continuous improvement’
Just-in-time (JIT)
this stock-control method aims to avoid holding stocks by requiring supplies to arrive just as they are needed in production and completed products are produced to order
Kanban
Japanese manufacturing system in which the supply of components is regulated through the use of an instruction card sent along the production line
Andon
A manufacturing term refferring to a system to notify management, maintenance, and other workers of a quality or process problem
Cradle to cradle (C2C)
A manufacturing principle that seeks to create production techniques that are not just efficient but are essentially waste-free and truly sustainable
Quality-control techniques
Prevention
Inspection
Correction and improvement
Benchmarking
Involves management identifying the best firms in the industry and then comparing the performance standards - including quality - of these businesses with those of their own business
Quality circles
Groups of employees who meet regularly to discuss ways of resolving problems and improving production and quality in their department/organisation
Total quality management (TQM)
An apporach to quality that aims to involve all employees in the quality-improvement process
Internal customers
People within the organisation who depend upon the quality of work being done by others
Zero defects
the aim of achieving perfect products every time
ISO 9000
an internationally recosnised certificate that acknowledges the existence of a quality procedure that meets certain conditions
Optimal location
a business location that gives the best combination of quantitative and qualitative factors
Quantitative factors (choosing location)
these are measurable in financial terms and will have a direct impact on either the costs of a site or the revenues from it and its profitability
Site and other capital costs
Labour costs
Transport costs
Salaries
Market potential
Government grants
Qualitative factors (choosing location)
non-measurable factors that may influence business decisions
Outsourcing
using another business (a ‘third party’) to undertake a part of the production process rather than doing it within the business using the firm’s own employees
Business-process outsourcing (BPO)
a form of outsourcing that uses a third party to take responsibility for complete business functions, such as HR and finance
Insourcing
the reverse of outsourcing as it is undertaking a business function or process within the business rather than contracting it to another business
subcontracting
the practice of assigning to another business (the subcontractor) part of a contract – for example, a specialist activity that makes up part of a construction contract
Offshoring
the relocation of a business process done in one country to the same or another company in another country
Inshoring
ending offshoring contracts with overseas suppliers and returning functions or processes to business operations in the home country
Multinational
a business with operations or production bases in more than one country
Supply chain
every business that comes into contact with a particular product
Stock (inventory)
materials and goods required to allow for the production and supply of products to the customer
Raw materials and components
Work in progress
Finished goods
JIT – just-in-time stock control
this stock-control method aims to avoid holding stocks by requiring supplies to arrive just as they are needed in production and completed products are produced to order
JIC – just-in-case stock control
the stock management strategy that businesses use when they hold a high level of stocks because there is a risk of ‘stock-out’
Stock holding costs and cost of not holding stocks
Stock holding costs:
Opportunity cost
Storage costs
Risk of wastage and obsolescence
Cost of not holding stocks:
Lost sales
Idle production resources
Special orders could be expensive
Small order quantities
Economic order quantity (EOQ)
the optimum or least-cost quantity of stock to re-order taking into account delivery costs and stock-holding costs
Stock control charts
Charts that record stock levels, stock deliveries, buffer stocks and maximum stock levels over time
Buffer stocks
the minimum stocks that should be held to ensure that production could still take place should a delay in delivery occur or production rates increase
Maximum stock level
limited by space or financial costs
Calculation: EOQ of each component + buffer stock level for the item
Reorder quantity
the number of units ordered each time
Lead time
the normal time taken between ordering new stocks and their delivery
Re-order stock level
the level of stocks that will trigger a new order to be sent to the supplier
capacity utilisation
the proportion of maximum output capacity currently being achieved
full capacity
when a business produces at maximum output
excess capacity
exists when the current levels of demand are less than the full capacity output of a business – also known as spare capacity
capacity shortage
a shortfall that occurs between the required operating capacity and the actual amount of operating capacity the system can provide.
productivity
the ratio of outputs to inputs during production, e.g. output per worker per time period
Labour productivity (number of units per worker) = Total output in a given time period/Number of employees
Capital productivity = Total output/Capital employees
level of production
the number of units produced during a time period
Make - or - buy decisions
Decision if a business should make a product themselves or buy them in
Figures they should consider
Expected volume (V)
Fixed or overhead costs directly associated with making the product (FC)
Unit direct costs of making the product (UDC)
Unit cost from an external supplier - including transport costs (UCS)
Formula:
Cost to buy (CTB) = V x UCS
Cost to make (CTM) = FC + (UDC x V)
If CTM exceeds CTB → it is more financially advantageous to buy-in or outsource
If CTB exceeds CTM → it is more financially advantageous to make ourselves
Innovation
the practical application of new inventions into marketable products
Invention
the formulation or discovery of new ideas for products or processes
Research and development (R&D)
the scientific research and technical development of new products and processes
Intellectual property
refers to creations of the mind such as inventions, literary and artistic works and symbols, names, images and designs used in business
Intellectual property rights:
legal property rights over the possession and use of intellectual property
Copyright
legal right to protect and be the sole beneficiary from artistic and literary works
Trademark
a distinctive name, symbol, motto or design that identifies a business or its products - can be legally registered and cannot be copied
Types of innovation → 4Ps Innovation Model
Product innovation: new marketable products and improving products
Process innovation: new methods of manufacturing or providing a service
Positioning innovation: ‘relocation’ of customer’s perception about a certain product
Paradigm innovation: a distinctive change in what a business does or in the nature of goods and services available
Adaptive creativity and innovative creativity
Adaptive creativity: thinking that applies existing solutions, techniques or products to new scenarios or changed conditions → do things better
Innovative creativity: thinking that results in new solutions → do thing differently
Patents
legal right to be the sole producer and seller of an invention for a certain period of time
contingency planning
preparing the immediate steps to be taken by an organisation in the event of a crisis or emergency
crisis management
steps taken by an organisation to limit the damage from a significant, damaging event by handling, containing and resolving it
quantifiable risks
financially measurable threats that can jeopardize the survival of an organization
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