AOS 3 business management

operation management

refers to coordinating and organizing the activities involved in producing goods/services that a business sells to consumers

Efficiency

How productively a business uses its resources when producing a good/service.

effectiveness

The extent to which a business achieves its stated objectives

how well the business meet’s its objectiveness

Goods

a tangible product made for customer

Service

An intangible performed by business to meet consumer needs/wants

Good operations management influence on objectives

using resources efficiently and organising activities in a way that helps the business achieve its objectives effectively."

How does good operations management influence objective: To make a profit

Successful operations management ensures resources are efficiently used and relevant activities are organised to improve the effectiveness of the objective." This could mean organisation to use tech/machinery reduces labour costs making the goods more profitable

3 elements of operations system

inputs
Processes
Outputs

inputs

are resources the business use to produce goods and services

process

the actions preformed by the business to turn inputs into outputs

outputs

the final product produced as a result of a business operations system that are then provided to consumers.

characteristics of manufacturing and production services PC COST

P- production services

C- consistency

C- customer contact

O- occurance of production and consumption

S- storability

T- tangibility

Characteritics of manufacturing businesses

- Production process: usually highly automated therefore capital intensive
- Consistency: produces standardised goods
- Customer contact: low degree of customer contact in the production of goods because production is separated from consumption of product
- Occurrence of production and consumption: Production and consumption of the product happen at separate times
- Storability: Output from manufacturing can be stored as inventory
- Tangibility: Goods are tangible items

Characteritics of service businesses

-Production process: usually production process of service is labour intensive
-Consistency: produces customised goods, tailored to fulfil individual needs
- Customer contact: High degree of customer contact as it occurs simultaneously to with consumption of service
- Occurrence of production and consumption: Production and consumption happen simultaneously
- Storability: Can not be stored as inventory
- Tangibility: Services produced by businesses are intangible

Similarities between service and manufacturing

- Both services and manufacturing goods may want to be efficient through minimizing waste and producing services/goods in a time efficient manner

- Both services and manufacturing goods may want to be more effective in making a profit through providing high quality outputs at a low production cost

4 factors of materials strategies

- Forecasting (predicting)
- Master production schedule
- Materials requirement planning
- Just in time (JIT)

Forecasting

a material planning tool, that predicts customer demands for upcoming periods from past data and market trends

Example of forecasting

using past sales data to make prediction on future sales

Advantages of forecasting

• It can help to prevent over ordering taking up valuable storage space.

• prevent excessive ordering of materials that may go to waste, reduces impacts on production

forecasting efficiency

Improves efficiency as it decreases the likelihood of ordering and storing excess materials

mproves efficiency by reducing resource wastage by helping a business predict future demand (to order the right amount of materials)

forecasting effectiveness

Improves effectiveness by helping the business better meet customer demand (by accurately predicting the right products are available at the right time.) which can contribute to increase customer satisfaction, sales and market share

forecasting pos

• helps reduce wastage as businesses is ordering the right amount for customer demands (benefits impact on environment, improve reputation)

• reduce cost of storage to store materials as well as the cost to buy supplies

• buying the right quantity of materials can help a business ability to meet customer demand

forcasting negatives

• reliant on forecasting an make the business unable to meet unexpected increase in customer demand

• historial and past data and market trends may not reflect on future demands

• hiring a forecasting specialist increase training and wage cost

master production schedule

refer to a plan that outlines what the business intends to produce, specifically the quantity for a set period

master production schedule pos

• improves the business reputation, as it prevents the business from productive excessive amount of produces and reduce waste (impact on environment)

master production negatives

• time consuming to map out the production details of the business

• implementing this plan can be expensive

• master production schedule isn’t flexible, and those businesses that constantly change their operation may find it harder to use

master production schedule efficiency

improves efficiency as it prevents production of excessive amount of products which can reduce wastage

master production schedule effectivness

produce the right quality of resources can help the ability of the business to meet customer demand which contributes to incrrase customer satisfaction and increase sales an market share

materials requirement planning

is the process that lists out the materials and the amount needed to meet production goals in the master production schedule

materials required planning efficiency

having exact materials needed and reduces the amount of excess stock expiring and taking up storage which helps optimise resources and reduce waste

materials required planning effectiveness

having enough materials to meet customer demands, which helps increase customer satisfaction and sales

materials required planning postives

• reducing excess waste materials from being purchased through MRP only determining exact amounts and resources required

• ensuring there are always enough materials/resources, which limits production delays

Disadvantages of Materials requirement planning

can be time consuming to update material plan

Just in time

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

just in time efficiency

reducing waste and storage costs as materials are only ordered when needed reducing risk of overproduction. 

just in time effectiveness

reduction in stock can reduce expenses associated with waste which can meet the objective of increase profit

Global sourcing of inputs

involves a business acquiring raw materials and resources from overseas suppliers

reasons for global sourcing of inputs

• it is only available in another country or it is better quality

• minimise expense as oversea suppliers offer their materials cheaper than domestic suppliers (due to lower operating cost, it’s their natural recouce, or lower wages)

global sourcing of inputs negatives

• if suppliers mistreat employees, it will damage the business reputation

• resources may be damaged during transportation/shipping

• hard to monitor activities of suppliers due to the time differences

• government’s tariffs and quotas might limit number of suppliers a business can import

• delivery can be time consuming (demands on where supplier is sending from)

global manufacturing

refers to the business producing goods outside the country where headquaters are located

global manufacure positives

• can product goods for better quality for a lower price as cost of labour, natural and capital resources are cheaper

• cheaper labour cost can reduce the cost on the product which will increase customer satisfaction and increase sales

• setting up manufacturing plant overseas may be cheaper than operating a local factory

global manufacturing negatives

• manufacturing goods may be damaged during transport

• delivering goods may be time consuming compared to manufacturing goods in a domestic location

• employees may loose their jobs, if business manufacturing process moves overseas

Global outsourcing

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

global outsourcing advantages

• A business is able to decrease labour costs, as global outsourcing reduces the need for local employees.

• The business is not directly responsible for the manufacturing, employees and their entitlements

global outsourcing negatives

• Reduced control over the other external businesses activities and their actions meaning it may negatively impact the quality of the goods or a businesses reputation 

• Time consuming as the delivery time is longer than purchasing manufactured goods domestically.

Corporate social responsibility:

refers to going above and beyond legal requirements, including consideration of environmental and societal impacts of decisions. 

CSR for INPUTS

refers to considering how sourcing materials can improve environmental sustainability.

csr inputs considerations

• consider sourcing materials locally rather than externally/from other countries (global sourcing of inputs) to reduce transport emissions and carbon footprint

• source from suppliers that uses environmental friendly methods when extracting natural materials

csr for processes

refers to the business preforming operation processes efficiently and effectively to reduce impact on the environment and overall waste

csr for processes considerations

• reduce and recycle unused materials during production process, to reduce waste

• use performance stage such as just in time, to reduce unnecessary waste on materials

• train employees on how to reduce waste when doing tasks

csr through outputs

refers to delivering the final product without harming the environment or society/wilder community and must create minimum waste and environmental damage

csr through output considerations

• clear labelling on the appropiate way of disposing a product

• delivering products to retailers in bulk to reduce carbon emissions from transportation

• eliminating as much plastic as possible in the packaging from the product

adress CSR considerations in an operations system, managers can:

• improve the environmental sustainability of inputs.

• minimise the amount of waste generated in operations processes.

• minimise the amount of waste generated from the production of outputs.

reduce/reuse and recycle on effectiveness

reduce waste can reduce operation costs, which the business can offer lower prices for customers, this can increase satisfaction increasing the amount of sales, therefore revenue

reduce/reuse and recycle on efficiency

by minimising waste on production, business can produce goods and services at a quicker rate which improves efficiency

quality control efficiency

it improves efficiency as it helps waste and rework by identifying errors early in production.

quality control effectiveness

by using quality control, customers are able to receive the highest quality product, which increase satisfaction, loyalty

quality control negatives

• those that are discarded, are then thrown out, which results in money wastage

• time consuming to identify and adress errors

quality control steps

• establish/identify the standard of quality

• produces and goods are actively checked/inspected

• compare these goods to the standard

• those are unsatisfactory/dont meet standards, are removed and discarded

• figure out the cause of errors to prevent it from happening again

quality assurance efficiency

it improves efficiency as it reduces the amount of faulty products as it is a proactive strategy that aims to prevent defects

negatives of quality assurance

• can be expensive to have a independent body assess the operating systems

• documents required to check, can be time consuming

total quality management considerations

customer focus- meet customer needs and wants through goods and services

continuous improvement- business is actively checking and improving business processes to achieve high standard

employee participation- employees help create solutions to improve quality by sharing ideas which enhances their commitment and motivation

total quality management effectivess

Improves effectiveness by focusing on meeting consumer needs allowing products/services to better satisfy them which can result in more repeat consumers.

total quality management efficiency

reduces the amount of faulty products as it is a proactive strategy that aims to prevent defects