Business Management Unit 3 AOS 3 SAC revision

Operations management (definition)

Involves coordinating and organizing the activities involved in producing the goods and services that a business sells to its customers.

Inputs (definition & examples)

The resources used by a business to produce goods and services.

Examples:

• Labour resources (employees)

• Raw materials, such as ingredients and natural resources.

• Capital resources, such as equipment and machinery.

• Time

• Utilities (water, electricity)

• Information

Inputs at Yakult

• Ingredients - powdered milk, water, sugar/stevia, flavouring and the gut friendly bacteria.

• Labour - staff on factory floor, marketing staff, quality control staff, cleaning staff.

• Capital - machinery from Japan

• Polystyrene in bottles

Processes (definitions and examples)

Actions performed by a business to transform inputs and outputs.

Examples:

• Mixing

• Designing

• Baking

• Computing

• Cutting

• Washing

• Assembling

Processes at Yakult

• Mixing ingredients for Yakult or Yakult Light.

• Sterilizing milk mixture – heating milk mixture to kill harmful bacteria.

• Culturing & fermenting.

• Homogenization.

• Blending

• Pouring the mixture into the bottles

• Packaging in packs of 5 or 10.

• Storing the completed bottles below 4oC.

Outputs (definition and feature)

The final goods or services produced as a result of a business’s operations system, that are delivered or provided to customers.

The operations manager should ensure that a business’s outputs meet customer expectations relating to price, quality and availability.

Outputs at Yakult

• Final Yakult or Yakult Light Product

• Sold individually or in packs of 5 or 10

Manufacturing business (definition)

A business that uses resources and raw materials to produce a finished physical good.

Characteristics of a manufacturing business

• Highly automated processes that are capital intensive.

• Production and consumption of the product occur at separate times.

• Tangible outputs are produced that can be stored as inventory.

• Outputs are standardized through mass production.

Service business

A business that provides intangible products usually with the use of specialized experience.

Characteristics of a service business

• Production processes are labour intensive

• Production and consumption of the service occur simultaneously.

• Intangible outputs that cannot be stored as inventory.

• Services are usually not standardized and are instead tailored to individual customer wants and needs.

Similarities between service and manufacturing businesses

• Both aim to optimize their operations to produce high-quality outputs at a low price to consumers.

• Both can utilize various forms of technology in their operations system.

Automated production lines (definition & 1 feature)

Involve machinery and equipment that are arranged in a sequence, and the product is delivered as it proceeds through each step.

APLs advantages (1 efficiency, 1 effectiveness, 1 general)

• Can perform tasks at speeds much faster than humans, without needing breaks, reducing the amount of time taken to produce outputs and improving productivity.

• Can perform tasks with a high degree of accuracy free of human error, which can decrease the number of faulty or defective products being sold to customers, which can improve effectiveness by enhancing overall quality and thus increasing customer satisfaction, sales and profits.

• Can replace tasks that would otherwise be performed by employees, especially those that are dangerous, which can decrease workplace injuries.

APLs disadvantages (1 efficiency, 1 effectiveness, 1 general)

• Sudden breakdowns can halt production altogether and compromise productivity.

• It is very costly to install, maintain, repair and update, which can increase overall business expenses and decrease profits.

• A business may develop a poor reputation with customers if it is known for making employees redundant to implement APLs, which can decrease its sales.

Robotics (definition)

Programmable machines capable of performing specialized tasks.

Robotics advantages (1 efficiency, 1 effectiveness, 1 general)

• Can perform specific tasks quickly and with a high degree of accuracy, which reduces the amount of time and resources wasted in production.

• By performing tasks with minimal errors, this can reduce the amount of faulty or defective products being sold to customers, which can improve effectiveness by meeting objectives such as improving customer satisfaction, sales and profits.

• Implementing robotics to complete tasks that would have been previously been completed by employees can reduce wage costs.

Robotics disadvantages

• A business may develop a poor reputation if it implements robotic technology that makes employees redundant.

• It is very costly to install, maintain, repair and update, which can increase overall business expenses and decrease profits.

• Sudden breakdowns can halt production altogether and compromise productivity.

Computer aided design (definition)

A digital design software that aids the creation, modification and optimization of a design and the design process.

Computer aided design advantages (efficiency, effectiveness, general)

• Can speed up the product design process as designs can be created and modified faster.

• Customers have the ability to modify a design to suit their needs. This customization can attract more customers to the business.

• It can allow for greater accuracy in the design process and therefore higher quality designs, which can result in consistent levels of quality.

Computer aided design disadvantages

• A business may develop a poor reputation if it implements robotic technology that makes employees redundant.

• It is very costly to install, maintain, repair and update, which can increase overall business expenses and decrease profits.

• Employees may need to be trained in how to use the CAD software, which can increase business expenses.

Computer aided manufacturing techniques (definition)

Involve the use of software that controls and directs production processes by coordinating machinery and equipment through a computer.

Artificial intelligence definition

Computerized systems that are programmed to simulate human intelligence and mimic human behaviour.

Advantages of artificial intelligence

• Can reduce the time and labour used to complete complex tasks that would usually require human intelligence, such as managing customer service through chatbots, as it does not require breaks and can work 24/7. This can allow for time and labour resources to be used more optimally, improving efficiency.

• Can perform complex tasks, such as providing timely and high quality customer service, which can improve customer satisfaction, and allow for increases in sales and market share.

Disadvantages of artificial intelligence

• A business may develop a poor reputation if it implements AI technology that makes employees redundant.

• It is very costly to install, maintain, repair and update, which can increase overall business expenses and decrease profits.

• Employees may need to be trained in how to use the AI software, which can increase business expenses.

Online services

Services that are provided via the internet

Advantages of online services

• Can remove the need for employees to manually perform certain tasks, such as bookings for tables or appointments, which can enable labour resources to be used more efficiently, as well as time since these operations can be performed at a faster rate.

• Can improve convenience for customers, increasing levels of customer satisfaction, sales and market share.

Disadvantages of online services

• The process of developing a website or online system can be time consuming and expensive for a business, and they may need to hire an expert to help them set it up.

• Sudden breakdowns can halt production altogether and compromise productivity.

Technological considerations at Yakult

• APLs

• Robotics

• CAM

Automated production lines at Yakult

• Conveyor belts were used to label, fill and package the Yakult, and move the product from one stage of production to the next

Pros and cons of APLs at Yakult

• APL made it really easy to conduct quality control checks.

• If APL breaks down it can halt Yakult’s production entirely, and put pressure on the company to meet both Australia’s and New Zealand’s demand for the product.

• The use of automated production and robotics has also increased the risk of employees damaging their hearing.

• Maintenance is also expensive for any type of machinery or tech.

CAM at Yakult

• To control the automated production lines that the Yakult bottles are on and detect irregularities in certain bottles, e.g., not filled enough or not enough probiotic.  

Robotics at Yakult

• A robotic automated arm was used to lift heavy pellets from storage fridge room onto trucks.

Pros and cons of robotics at Yakult

• Robotic arm limited heavy lifting for employees.

• Robotic arm is quicker for managing deliveries and reduces risk of injuries.

• The use of automated production and robotics has also increased the risk of employees damaging their hearing.

• Maintenance is also expensive for any type of machinery or tech.

• Training for staff to be moved to new areas of the business after their jobs are replaced by robotics can be expensive.

Materials management definition

Involves managing the use of, storage and delivery of materials to ensure the right amount of inputs are available when required.

Forecasting definition

A materials planning tool that predicts customer demand for an upcoming period using past data and market trends.

Master production schedule

A plan that outlines what a business intends to produce in specific quantities with a set period of time.

Materials requirement planning

A process that itemizes the types and quantities of materials required to meet production targets set out in the master production schedule.

Considers current materials on hand.

Just In Time

An inventory control approach that delivers the correct type and quantity of materials as soon as they are needed for production.

Forecasting at Yakult

Used to predict how many sales were recorded in the same month over several years, indicating how much Yakult/Yakult Light is needed for Australia and New Zealand.

Just In Time at Yakult

The skim milk powder and sugar are ordered and delivered at the time they are needed for injection into the production process. The bottles are made on site.

Quality control definition

Involves inspecting a product at various stages of production to ensure it meets designated standards, and discarding those that are unsatisfactory.

Quality control at Yakult

• Individual bottles are routinely inspected along the production line to check for incorrect printing, undesirable markings and lid sealing.

• The actual liquid in the bottle is tested by sampling the amount of gut friendly bacteria in the fermentation process, and also if they flavour and texture are consistent between all bottles in the batch. They also make sure that there is no hair or dust in the bottles.

Quality assurance definition

Involves a business achieving a certified standard of quality in its production after an independent body assesses its operations system.

Quality assurance at Yakult

• ISO 9001 - used to ensure employee and factory hygiene comply with national standards.

• HACCP – stands for Hazards Analysis and Critical Control Points, and it is a food safety system that identifies, evaluates and controls potential hazards in food production. They complete chemical and physical risk assessments at Yakult.

• Routine audits and company procedures are documented to maintain these certifications.

Total quality management definition

A holistic approach whereby all employees are committed to continuously improving the business’s operations system to enhance quality for customers.

Effective quality management at Yakult has meant that Yakult has never had….

A PRODUCT RECAL

Similarities between quality control and quality assurance

• Both strategies reduce the number of faulty products reaching customers.

• Both require a good or service to meet set standards.

Differences between quality control and quality assurance

• Quality control is reactive as it identifies and eliminates errors after they occur, whereas quality assurance is proactive as it aims to prevent errors from occurring altogether.

• QC is an internal process and it is employees of the business who check the quality of outputs at various stages of production, whereas QA involves assessment from an external body.

Similarities between quality control and TQM

• Both strategies can be implemented to see notable improvements in the quality of the final output.

• Both strategies are internally controlled and involve employees assessing quality.

Differences between quality control and TQM

• Quality control focuses on meeting predetermined standards of quality, whereas TQM focuses on continuously improving and developing those standards.

• QC is reactive as it identifies and eliminates errors after they occur, whereas TQM is proactive, as it aims to prevent errors from occuring entirely.

Similarities between quality assurance and TQM

• Both strategies are proactive as they prevent errors from occurring in the first place.

• Both strategies improve the process of producing a good or service.

Differences between quality assurance and TQM

• QA focuses on meeting set standards of quality to gain external certification, whereas TQM focuses on internally developing and improving standards within the business.

Waste minimisation definition

The process of reducing the amount of unused material, time or labour within a business.

Reduce definition and examples

A waste minimization strategy that aims to decrease the amount of resources, labour or time discarded during production.

EXAMPLES:

• Adjust the amount of goods produced each month based on predicted customer demand.

• Organize the number of employees required for each day based on how much work needs to be completed.

• Review and select optimal transport routes for the distribution of products.

Reduce strategies at Yakult

Yakult removed the straws that once came with each individual drink. This strategy was implemented prior to the 2023 legislation which placed laws around the food industry’s use of single use plastics.

99% of Yakult’s raw ingredients end up in the bottle, leaving no by products.

Reuse definition and examples

A waste minimization strategy that aims to make use of items that would have otherwise been discarded.

EXAMPLES:

• Reusing storage items.

• Reusing functional parts of defective products.

• Collecting packaging from customers.

Reuse at Yakult

• They have their own water treatment facility which ensures the PH of the water is not too acidic when it goes into the external environment. This facility also checks that the bacteria won’t continue to ferment.

• Bottles can be collected for recycling and crushed. They are then mixed with other resin to create repurposed products, such as chairs and tables at the Yakult factory.

Recycle definition and examples of products that can be recycled

A waste minimization strategy that aims to transform items which would have otherwise been discarded.

EXAMPLES:

• Glass

• Paper

• Metals

• Batteries

• Plastics

• Natural waste.

Recycling at Yakult

• Paper products, such as skim milk powder bags, are recycled.

• The bottles are made from food-grade, code 6 recyclable plastics.

• Bottles can be collected for recycling and crushed. They are then mixed with other resin to create repurposed products, such as chairs and tables at the Yakult factory.

Lean management definition

A process of systematically reducing waste in all areas of a business’s operations system whilst also simultaneously improving customer value and focusing on continuous improvement.

Pull definition & one feature

Refers to when the production of a good or service only starts when the customer places an order.

By applying pull, a business will only produce its goods and services to meet customer demand, to ensure that no resources are wasted on unwanted products that will eventually be discarded.

One-piece flow definition and one feature

Involves the operations process focusing on only one good or service at a time.

A business can quickly deliver products to customers as one product moves through each stage of the entire production process without delay.

Takt definition and one feature

The operations process seeks to create a rhythm whereby all steps of production of the good or service are synchronized to create “continuous flow.”

To achieve a continuous flow, the output of one production stage is transferred to the next step in a timely manner.

Zero defects definition and one feature

Refers to when the operations system strives for perfection by continuously improving until it achieves an output that is free of errors.

When a business finds a defect in its operations system, production is halted, the error is identified and fixed, so it does not occur in the future.

One piece flow at Yakult

Regular Yakult four days a week is produced.

Yakult Light has an entire production day, once a week, on a Friday.

Takt at Yakult

Used to set the speed and pace of production. In periods of forecasted growth the speed is increased, slow periods indicated from past data influences a slower speed of automated production lines in creating both types of Yakult.

CSR considerations for inputs

• Sourcing inputs locally, rather than from overseas suppliers, to reduce transport emissions and minimize the business’s carbon footprint.

• Sourcing inputs from suppliers that use environmentally sustainable methods when extracting and harvesting natural resources.

• Implementing operations strategies such as forecasting and Just In Time to reduce the risk of overordering inputs that may be later discarded due to expiry or damage.

CSR considerations for processes

• Using technology that performs tasks in a precise and consistent manner to reduce the number of defective proudcts discarded in production.

• Developing methods to capture and recycle unused or excess materials, allowing them to be reused in the operations system.

• Training employees on how to minimize waste when executing production tasks, or how to complete quality control.

CSR considerations for outputs

• Creating products that can be recycled at the end of their lifecycle.

• Offering customers incentives for returning the product at the end of its life cycle so that it can be properly recycled or reused.

• Eliminating as much plastic as possible in the final product and its packaging.

Examples of CSR at Yakult

• They have their own water treatment facility which ensures the PH of the water is not too acidic when it goes into the external environment. This facility also checks that the bacteria won’t continue to ferment. They are not legally required to do this.

• Hearing checks are regularly scheduled for employees working on the factory floor.

• Retraining employees to work in new areas if technology replaces their current roles, e.g., robotic storage arm.

• Source milk from local Australian farmers.

• 99% of ingredients sourced in Australia.

• Supply educational tours free of charge.

• Donate Yakults nearing expiry to local nursing homes and hospitals.

• They only allow staff with confinement training to clean the inside barrels to avoid possible hazards.

Global sourcing of inputs definition

Involves a business acquiring raw materials and resources from overseas suppliers.

Global sourcing of inputs at Yakult

• All machinery was sourced from Japan, using the technology from the original creators.

• Bacteria is also sourced from Japan, as it’s the only source trained on creating this gut friendly, heavily researched ingredient.

Overseas manufacture definition

Involves a business producing goods outside of the country where its headquarters is located.

Overseas manufacturing at Yakult

If supply is disrupted for reasons such as lack of inputs, labour or capital resources (machinery), Yakult can be manufactured in a variety of partnered countries and then shipped to stores in Australia and New Zealand.

Global outsourcing definition

Involves transferring specific business activities to an external business in an overseas country.

Global outsourcing at Yakult

Planes are outsourced to move products regionally or further locations such as New Zealand.

Similarities between global sourcing of inputs and overseas manufacture

• Both have the potential to improve quality and reduce production costs.

• Both involve products (whether they are fully created outputs, or raw materials) travelling between countries.

Differences between global sourcing of inputs and overseas manufacture

• Global sourcing of inputs involves the “inputs” element of the operations system being received from overseas, whereas overseas manufacture involves the “process” element of the operations element of the operations system occurring overseas.

Similarities between between global sourcing of inputs and global outsourcing

• Both allocate certain business tasks to external businesses in other country.

• Both can involve accessing cheaper labour and reduce operational expenses.

Differences between between global sourcing of inputs and global outsourcing

• In global sourcing of inputs, inputs are obtained overseas but manufacturing still occurs within the business’s country of operations, whereas in global outsourcing involves all elements of the production process occuring overseas.

Similarities between between overseas manufacture and global outsourcing

• Both involve the execution of business activities in a location away from the business’s main headquarters.

Differences between between overseas manufacture and global outsourcing

• In overseas manufacturing, businesses still retain full control of its operations since the labour resources are employed by the business, whereas in global outsourcing, businesses have little control over the transferred activities since they are transferring to an external business who have no employees of the original business.