U3 AOS3 - Business

Productivity

The ratio of outputs produced compared to the inputs required.

Factors that contribute to productivity include

Technology, equipment, training, and worker motivation.

Business competitiveness

The ability for one business to outperform its rivals, known as having competitive advantage.

Factors that contribute to competitiveness include

Quality and availability.

Operations definition

Involves all activities and actions involved with converting inputs into outputs. If this is managed well, businesses have a greatly improved ability to achieve objectives.

Key elements of operations system

Inputs, processes, and outputs.

Inputs definition

All the resources used in the process of producing goods and services.

Processes definition

The conversion or transformation of inputs into outputs.

Outputs definition

The end result of the operations system, being the final finished good or service.

Manufacturing business definition

Businesses that undertake activities to create tangible goods.

Services business definition

Businesses that undertake activities to produce intangible services.

Manufacturing business features

Tangible, meaning materialistic and can be seen and touched. The production of the good and its consumption are separate. Can be stored as inventory. Minimal level of customer contact. Can be standardised and mass produced.

Service business features

Intangible, meaning non-materialistic and cannot be seen or touched. Very difficult to store. The production of the service and its consumption often occur simultaneously. Higher levels of customer contact. Mainly labour intensive. Often customised.

Similarities of manufacturing and services businesses

Involve inputs, processes and outputs. Sell their end good or service to customers. Aim to produce high quality outputs. Deal with suppliers.

5 types of technology

Automated production line, AI, computer aided design, computer aided manufacturing, and online services.

Automated production line

A combination of computerised workstations through which inputs move through without the need for manual input. It is a process where raw materials enter and finished products exit with little to no human intervention, where tasks are performed automatically and arranged in a sequence. Generally used in manufacturing businesses where mass production of a standardised product is possible.

AI

An automatically operated machine that replaces human effort, allowing operations to be homogenous and time effective.

Computer aided design

Designers and engineers create products and modify specifications on a computer, allowing for testing before the product is made. It develops a three-dimensional design from a set of given data and provides accurate predictions of the final product.

Computer aided manufacturing

Computers control the production, allowing manufacturing processes to become computer directed by designing and processing. Sizes, shapes, textures and other features can be easily changed.

Online services

Online services refer to businesses using digital platforms to perform some of their core tasks. For example, using websites to replace the in-person purchase process by allowing online purchases to be made.

Advantages of CAD + CAM

Once the design has been created, it can be viewed from multiple angles, assisting both the designer and the end user to visualise what will be produced. Costs and materials required are calculated by CAD. Editing can occur, allowing the product to be refined to enhance quality.

Disadvantages of CAD + CAM

Specialist trained staff need to be employed. Products may differ in appearance on the computer compared to actuality.

Automated production line advantages

Capable of doing several different tasks. Allows a degree of precision and accuracy generally unmatched by human labour. Robots work without complaint or demands for wage rises in conditions that would be monotonous and often dangerous. Potential for 24/7 production.

Disadvantages of automated production lines

Some margin for error and defects in products. Robots may break down. Maintenance and repair for robots can be expensive.

Advantages of website development

Reduces costs through eliminating the need for brick and mortar retail outlets. Allows businesses to sell to global markets easily. Allows employees to work flexibly. Reduces costs of staff.

Disadvantages of website development

The site is subject to crashing and hacking, resulting in low customer satisfaction. Some consumers prefer retail outlets. Initially expensive. Requires technical training. Can lead to large-scale redundancy.

Materials management definition

Managing the use, storage and delivery of resources to ensure the right amount of inputs are available when required in the operations system.

4 types of materials management

Forecasting, master production scheduling, materials requirement planning, and just in time.

Forecasting

Predicting the future level of output required based on qualitative data, such as tracking social trends and preferences based on survey data, and quantitative data, such as previous period sales and industry average sales.

Master production scheduling

Details what is to be produced, in what quantities and when, with specific delivery dates or contracts for delivery in the future. Breaks down whole production into stages.

Materials requirement planning

Involves developing an itemised list of all the materials needed in production to meet the specified orders.

Just in time

Having the right amount of materials arrive just as they are needed for production, reducing storage costs and the risk of waste.

How does forecasting improve efficiency + effectiveness

Efficiency: improves productivity because production does not need to wait, reducing overstocking which reduces wastage. Effectiveness: can ensure they have enough materials on hand to meet production needs, ensuring consumer demand is met and therefore making it more likely to increase profit.

How does master production scheduling improve efficiency + effectiveness

Efficiency: helps the business plan the exact amount of materials needed so correct materials can be ordered, preventing overproduction and reducing wastage. Effectiveness: enables the business to have a clear picture of what needs to be produced to meet customer orders, therefore making it more likely to increase profit.

How does materials requirement planning improve efficiency + effectiveness

Efficiency: prevents overstocking and reduces wastage. Effectiveness: ensures production has a continuous flow without waiting for materials and ensures enough materials are on hand to meet demand.

How does just in time improve efficiency + effectiveness

Efficiency: reduces storage costs and reduces wastage. Effectiveness: aims to have a continuous flow, uses extra space to maximise production, and money can be saved and used in other areas of the business.

Advantages + disadvantages of forecasting

Advantages: avoids shortages of stock. Avoids overproduction. Allows business to be efficient. Disadvantages: difficult to predict future events. Time consuming and costly. Wastage may occur. It is just a prediction and cannot be relied on 100%.

Advantages + disadvantages of master production scheduling

Advantages: allows organised delivery of inputs. Assists decision making to ensure adequate resources and labour are available to fulfil contracts. Helps avoid shortages and inefficient allocation of resources. Disadvantages: inaccurate assessment will lead to materials wastage or insufficient inputs. Delays to supply delivery times may cause schedules to be interrupted. Cost of implementation as business may need to buy software or other resources.

Advantages + disadvantages of materials requirements planning

Advantages: exact number of inputs should be available when required. Better response to customer orders. Ensures productivity levels in production can be maintained due to adequate stock levels. Disadvantages: if suppliers do not meet their specified lead time, inputs will not arrive on time. Dependent on data accuracy

Advantages + disadvantages of just in time

Advantages: reduction in inventory cost. Faster response to quality issues. Less storage space required. Less wastage. Disadvantages: little to no margin for delays. Dependent on strong supply chain relationships. More frequent deliveries can be costly. Delays may occur.

Quality definition

The degree of excellence of a good or service and its fitness for intended purpose. Better quality can create competitive advantage and a better reputation.

3 types of management of quality

Quality control, quality assurance, and total quality management.

Quality control definition

Involves the use of random inspections at various points in the production process to check for defects and the use of corrective action if necessary. Specifications or benchmarks are set, and actual performance is compared to the established criteria. Competitiveness increases as the costs associated with waste and faults are reduced. In a service organisation, inspection of employee performance is a means of quality control.

Quality assurance definition

A proactive strategy that aims to build quality into work processes, avoiding errors before they occur. It is a system established to ensure predetermined quality standards are achieved and involves an external certification body that audits processes to ensure they are at the highest standard. Involves an independent third party.

Total quality management definition

A management philosophy based on an ongoing, organisation-wide commitment to excellence applied to every aspect of an organisation's operations. It emphasises employee empowerment, continual improvement and a customer focus, and relies heavily on statistical analysis. Quality becomes a responsibility of every employee, and the aim is to create a defect-free environment. It involves evidence-based decision making to improve quality and regular communication and updates from managers about relevant issues.

Examples of total quality management

Employee empowerment: quality circles are a strategy that can be used, involving groups of workers who meet to discuss issues relating to quality. Continuous improvement: a process involving constant evaluation of and enhancement of the processes in an operations system in the pursuit of perfection. Quality is viewed as a journey rather than a destination. Using benchmarking to assess improvement. Customer focus: all employees are serving consumers, either external or internal, with ongoing awareness that the customer is the final user.

Advantages of quality control

Advantages: benchmarks for excellence can be set. Reduced wastage. Correct action can be taken before it is too late. Disadvantages: time-consuming in both service and manufacturing organisations. As most inspections are random, defects may be overlooked by chance.

Advantages and disadvantages of quality assurance

Advantages: internationally recognised. Adds to market value of the product. Disadvantages: application process to receive a quality assurance certificate is lengthy and expensive. Adhering to quality assurance rules and regulations can potentially decrease productivity as random inspections of the organisation can occur.

Advantages and disadvantages of total quality management

Advantages: the whole organisation is aware of the importance of quality. Can add to the organisational culture. Aims for zero defects. Disadvantages: places significant pressure on employees. It is not realistic that defects will never occur.

Waste definition

Any resource which is discarded after use or is worthless, defective or of no use.

Strategies for waste minimisation

Reduce, reuse, recycle, and lean management.

Lean management definition + efficiency and effectiveness

Focuses on finding and eliminating waste and improving quality so that a business may be as lean, without excess, as possible. It is an approach to a business that constantly reviews all processes with the aim to maximise customer value while reducing wastage created. Based on the principle that productivity improves through identifying and eliminating areas of waste or activities that do not add value to the product as it is being produced. A business implementing a lean production method would begin by analysing every stage of their production process to identify inefficiencies. This process will ultimately involve removing resources that do not add value for the end consumer. Efficiency: removing wastage by using fewer resources. Effectiveness: producing products that customers value, becoming more competitive.

Reduce definition + efficiency and effectiveness

Use a lesser number of inputs to create the final output. Efficiency: by reducing the amount of inputs used to create the same number of outputs, businesses are maximising output over input and therefore making the most efficient use of inputs. Effectiveness: by reducing the amount of inputs purchased to create the same number of outputs, businesses are saving money in the production process and therefore increasing their profit levels by reducing their expenses.

Recycle definition + efficiency and effectiveness

To convert waste made in the production process into reusable materials. Efficiency: by recycling, a business may be able to transform what was once waste into inputs that may be reused in the production process. Therefore, the business will be maximising output over input and making the most efficient use of their inputs. Effectiveness: by recycling waste, a business may be able to increase their sales as customers nowadays are increasingly aware of the environment and the role that businesses play in its stability. Therefore, if a business recycles its waste, it can market itself as an environmentally conscious business and this should drive higher sales and hence profit levels.

Reuse definition + efficiency and effectiveness

Use inputs more than once to reduce the number of inputs needed to produce outputs. Efficiency: by reusing inputs to create more outputs, businesses are maximising output over input and therefore making the most efficient use of inputs. Effectiveness: by reusing inputs, businesses are reducing the amount that needs to be purchased in the production process. This means the business will reduce their expenses and thus increase their profits.

Principles of lean management

Pull, one piece flow, takt, and zero defects.

Pull definition

Rather than producing as much as possible, customer demand pulls goods and services through the manufacturing process. This minimises overproduction, inventory and working capital.

One piece flow definition

Focusing on one single element of the production process at a time. This minimises process interruptions, lead and waiting time whilst increasing quality and flexibility.

Takt definition

How fast you need to manufacture a product to meet customer demand. Takt allows us to balance work content, achieve a continuous flow and respond flexibly to changes in the marketplace.

Zero defects definition

A lean company does not pass on defects made in previous steps in the production process. Mistakes must be fixed before moving through the process. This means that lean businesses always strive for zero defects in their goods and services.

Advantages and disadvantages of waste minimisation

Advantages: reduced costs. Increased customer satisfaction. Reduced resource consumption. Increased efficiency. Disadvantages: can be expensive to implement. Only works if employees are committed to the process and could alienate those who are not committed. Requires reliable and flexible suppliers.

Advantages and disadvantages of lean management

Advantages: cost saving by removing unnecessary inventory costs and wasted costs. Improves quality by focusing on paying attention to detail. Decreases number of defects and rework. Process will be optimised to avoid mistakes, which saves time as workers do not need to remake goods and saves money needed to pay for labour. Disadvantages: changes in the process can lead to frustration and resistance from employees. Initial investment of time to develop processes. By removing equipment and materials, it may lead to falling behind if equipment fails.

Global considerations in operations

Global sourcing of inputs, overseas manufacturing, and global outsourcing.

Global sourcing of inputs

A strategy where businesses source their inputs from countries outside their place of origin. Inputs include raw materials, capital, labour, time and money.

Overseas manufacturing definition

Where a business will move the production of its product to a country other than the country in which it is headquartered to utilise cheap labour available overseas.

Global outsourcing definition

Only for services. Where a non-core part of a business is contracted to another business. This often occurs with tasks that are not key components of the business's activities, such as waste management or security. Businesses generally do this to access cheaper labour and reduced costs.

Advantages and disadvantages of global sourcing of inputs

Advantages: access to materials not available in the country, allowing businesses to produce goods and services to meet customer needs. Can specialise in production rather than sourcing, allowing businesses to focus on high-quality production. Cheaper materials and inputs may be available, increasing the ability to make a profit. Disadvantages: can lengthen delivery and supply time, which may help production but impact the ability to supply. Risk of damage in shipping increases due to greater distance, which may increase wastage and costs to treat wastage. Costs associated with transportation.

Advantages and disadvantages of overseas manufacturing

Advantages: works well with large volumes of simple assembly manufacturing where delivery times are not too important, allowing for mass production. Access to new export markets, providing easy access for delivery to other countries. Can use overseas expertise to produce goods and create high-quality outputs. Disadvantages: fewer jobs in domestic manufacturing, which can cause large-scale redundancy and impact corporate culture and brand image. Can lengthen delivery and supply time, which may frustrate customers. Risk of damage in shipping increases, increasing wastage and associated costs.

Advantages and disadvantages of global outsourcing

Advantages: outsource tasks with lesser importance, allowing the business to focus on core business activities to achieve objectives. Great for IT-based services, providing access to completing tasks around the clock. Disadvantages: reliance on internet connection, otherwise tasks and functions cannot be completed. Do not have full control of how services will be provided, which may produce inferior quality and frustrate customers.

definition of CSR

when a business goes above and beyond legal requirements to benefit the environment, stakeholders or society