10.1 OPERATIONS

Operations definition

A key business function that transforms and adds value to inputs to cretae outputs of g/s

Operations involves…

transformed and transforming

Operations management definition

concerned with planning, scheduling ans controlling of business inputs that are transformed into finished goods and services

• Concerned with managing customer satisfaction

customer satisfaction definition

Meeting and exceeding customer expectations and needs

Lean production definition

Minimizing waste making more efficient production by lowering costs, reducing errors and defects, and minimizing unused labour

Strategic role definition + objectives

the long term decisions regarding the operations of the business to enable the business to maximise profits.

• OBJECTIVES

• Productivity = involves increasing the number of output items with the same inputs 

• Efficiency = Increased efficiency means there are more items to sell - resulting in increased revenue and profits 

• Quality of outputs

Cost leadership definition

Cost leadership involves aiming to have the lowest costs or to be the most price-competitive in the market

Cost leadership categories

1. Economies of scale - savings linked to the size of the business 

• Bulk buying resources = reduces the cost per item

• The bigger the business the stronger their purchasing power which allows for increased efficiency from improved technology 

• Turnover = number of sales ∴ the better tech ↑ turnover 

2. Standardisation - the more uniform the g/s, production costs per unit is lower due to ↑ speed - no variation to the equipment labour or designed

3. Technology - the adoption of advanced technology directly impacts production costs through ↓ labour costs and more efficient operations processes 

4. Waste minimisation - this results in ↓ production costs 

• Waste includes excess production, under utilisation of labour equipment, faulty of defective production of excess inventory 

Differentiation of product/service

This approach to competition is based on adding features to differentiate the product/service from the competition

1. Higher quality or better performance 

2. Added value/more customer service 

3. Convenience 

4. Trusted/respected image and social conscience 

5. Faster delivery

6. Custom-designed products 

7. More features and applications 

8. Incorporation of new technology 

Common categories used in inputs

1. Labour

2. Energy

3. Raw materials

4. Machinery and technology (capital)

Transformed resources definition

Inputs that are changed or converted in the operations process to a finished good or service

Transformed resources categories

Raw materials = substances in an unprocessed state (resources from the land, ocean, mines)

• Goods manufactured and ready for further use (silicon chip)

Information = gained from research and development → increasing understanding 

• Becomes transformed when used to operate equipment or indicate what supplies/suppliers are available 

Customers = their desires and preferences are the starting point for production

• Customers can be transformed with their appearance changed e.g. Doctor, Hairdresser

Transforming resources definition

resources that remain in the business and carry out the transformation process to add value to inputs.

transforming resources categories

Human resources = coordinate and combining other resources to produce g/s 

• Business success directly relates to efficiency, qualifications and experience of staff ie. how well resources are changed

Facilities = plant, machinery, land, buildings and technology used to transform these resources

Transformation processes

• Transformation is the conversion of INPUTS (resources) into OUTPUTS (goods and services)

• Transformation differs between manufacturing business (tangible good) and services (intangible) which is more customer orientated and labour intensive 

• Adding value process at each stage of production

4 v’s

1. Volume flexibility - refers to how quickly adjustments for increased or decreased demand can take place

• Lead time = time taken to fulfil an order

2. Variety - mix flexibility or range of products 

• The number of different models

3. Variation in demand - may occur over time e.g. time of the day, season, time of the year

• Continuous demand → steady production

• Seasonal demand → flexible production - need to anticipate demand e.g.  new school items (Jan)

1. Visibility - Customer contact → efficient well trained staff

 Sequencing and scheduling

BOTH PLANNING TOOLS USED TO ENSURE WHAT NEEDS TO BE COMPLETED

Sequencing = the order in which activities occur 

Scheduling = the length of time activities take to complete 

• The two main scheduling tools are GANTT charts & Critical Path Analysis (CPA)

GANTT chart

• Shows start and finish times for each task 

• Enables the planning and tracking of a project

Advantages	Disadvantages
Quick and easy to read and follow All steps of the project must be included Estimated time for task is given (start and finish) Actual progress can be compared to predicted estimates (weather/economic conditions/delayed deliveries/unexpected legal req)	Time involved in estimating each task and its completion  Only a guide involving the tasks and completion dates - not a guarantee Estimation leads to certain expectations which if not delivered on time could impact reputation  Employees morale could impact worker satisfaction  (customer satisfaction ↓)

Critical path anylasis

Shows the tasks needed to be done 

• Time taken to complete each tasks

• Specific order (moving forward) 

• Shortest possible time required to complete all ordered tasks\

• 
  

Technology/task design and process layout

1. Established technology : Office technology - mobile/landline, fax, computer, scanner, photocopier, manufacturing technology (CAD, CAM, Robotics)

• Which are programmed for use in the factories using AI with algorithms 

• Used for a long time and very successful 

2. Task design :Classifying jobs/activities to easily allow employees to complete tasks effectively 

• E.g. what needs to be done. who needs to do the job 

3. Plant (factory/office) layout : arranging the workplace to streamline the process → max efficiency 

• E.g. McD - food prep area, dress area, cook area, restaurant area, play area

• Effective use of the space and equipment 

• Efficient flow between processes → Similar processes located together 

• Safe workplace (WHS → Human resources)

4. Process layout: machines and equipment grouped together by function 

• E.g. hospitals - special machines (particular care) ICU - humidicribs

Monitoring, controlling and improvement

Each part of operations must be monitored and controlled to ensure that planned activities are happening with a focus on continuous improvement 

• Monitoring  = involves detecting what is happening with all aspects of operations measuring actual performance against planned performance 

• Controlling = involves assessing operations against a planned performance (performance targets) and making corrective action if required 

• Improvements = the systematic reduction of inefficiencies of wastage, poor work processes and the elimination of bottlenecks (apply kaizen - continuous improvement (quality) 

Monitor	Control	Improvement
Measure actual performance	KPI’s assesses against targets  Corrective action if required	Reduces inefficiencies wastage, poor work processes eliminate bottlenecks

Continuous improvement → Commitment to perfection - kaizen → zero defects (ZDP)

Outputs

the end result of business efforts

Subcategories for outputs

3.1 Customer service

Definition = how well a business meets or exceeds expectations of customers in all aspects of its operations 

• Customers = lifeblood of any business 

• Businesses will not survive without customers hence customer service is a prime concern

→ can be before, during and after 

Must develop a Customer Relationship Marketing → in order to have REPEAT PURCHASES

3.2 Warrantes

Definition = a promise from a business that they will correct and defect in g/s produced 

• Effectiveness of operations process can be measured by the number of warranty claims

• Reduced warranty claims → improvements in transformation processes → increased efficiency 

CCA- Australian Competition Consumer Act 2010

Influences definiton

Influence = an external feature over which the business has no control over. Must develop strategies to manage or address this

7 influences

1. Globalization

2. Technology

3. Quality

4. Cost based competition

5. Government policies

6. Legal regulations

7. Environmental sustainability

Corporate social responsibility

the relationship between business and society, where people are considered a stakeholder in business decisions as these affect their quality of life.