Business management U3 AOS3

What is operation management

Operations management is the management of resources to efficiently produce goods and/or services.

Many processes take place before a business actually puts the product/service in the market.

The operations manager has a direct influence on the quality, cost, and availability of goods/services. Therefore directly impacting business objectives.

What does operation management involve

Efficient use of time

Efficient use of resources

Quaily control methods

Waste minimisation

Waste management

Key elements of operations management

INPUTS -> PROCESSES -> OUTPUTS

Difference between manufacturing and service business: Inputs

MANUFACTURING

More capital/resource intensive production

SERVICE

More labour intensive production

Difference between manufacturing and service business: Processing

MANUFACTURING

Very little to no customer involvement

SERVICES

Heavily reliant on customer involvement

Difference between manufacturing and service business: Outputs

MANUFACTURING

Turns inputs into tangible outputs

SERVICES

Turns inputs into intangible outputs

Difference between manufacturing and service business: Storage/consumption

MANUFACTURING

Can be stored

Consumption is separate from production

SERVICE

Cannot be stored

Consumption is simultaneous with production

Difference between manufacturing and service business: Standardisation

MANUFACTURING

Can be mass produced

Can be standardised

SERVICE

Cannot be mass-produced

Can be more customised

Efficiency

The best use of resources to produce an output.

Minimal use of inputs to produce outputs in satisfactory time and quality.

Effectiveness

Businesses' ability to achieve business objectives.

Technology in operations

Businesses looking to improve operations are likely to use technology.

Technology has the ability to increase efficiency and effectiveness.

Automated production lines

Where machines and equipment are arranged in a sequence and controlled by computer systems to perform tasks automatically.

Employees are involved in monitoring, maintenance, or supplying materials to the production line.

Robotics

Same application of automated production lines.

Used to replace human tasks that are repetitive.

Computer aided design (CAD)

Use of software for product design and testing product specifications.

Able to view the end product without having to build it.

Enables product testing and calculating production costs before production.

Computer aided manufracturing (CAM)

Use of software to control manufracturing through use of robotics and automation.

AI

Use of software that can learn and adapt.

Online services

USING INTERNET TO IMPROVE OPERATIONS

Seeing orders for product in real time to ensure no over or under prduction of products.

USING INTERNET FOR OPERATIONS

Shein exclusivly sells products online.

Adv of technology

- More reliable and consistent than humans. E.g., no days off

- No wages needed

- Achieves things humans cant

Disadv of technology

- If it goes wrong, there is the potential for the whole operations system to fail.

- Expensive to set up.

Materials

Non labour resources.

Materials management

Materials management is how materials are stored and received to ensure the right amount of materials are present when required.

Forecasting

When a business uses past trends and data in an attempt to predict future events.

It assists them in indetermining the appropriate amount of materials needed to meet market demand.

Can be done through:

Looking at past data

Looking at past trends

Assessing business campaigns

Mass production schedule (MPS)

An outline of planning what is being produced, in what quantities, and when it will be produced.

Used by businesses to plan the amount of inputs needed to meet production objectives.

Materials requirement planning (MRP)

MRP is an itemised list of materials required for MPS.

Operations managers should consider:

- Stock on hand

- How long it takes for supplier to deliver

- Quantity of needed inputs

Just in time (JIT)

JIT is a strategy that ensures the right amount of inputs are present right when they are needed in an operations process.

Ensures the exact right amount of materials needed, removing the need for large amounts of stock.

Reduces costs and storage needs.

If inputs aren't delivered on time, it can slow or halt production.

3.3.6

DO IT

Waste

inputs that are discarded or add no value to outputs

TIMWOOD

Used to talk about various wastages in operations.

Transport: Unnecessary transport

Inventory: Mass storage, wasted inputs

Motion: Movement of workers, products and production

Waiting: Wasted time between processes

Overproduction: Excessive outputs

Overprocessing: Processes adding little/no value to customer

Defects: errors in production

Waste minimisation

Refers to any efforts made to reduce the number of discarded resources that occur during the operations process.

Increases business efficiency as they are using fewer inputs to produce more outputs with minimal waste.

Common strategies:

REDUCE

REUSE

RECYCLE

Reduce

Decreasing amount of resources, including time, money, effort, etc., used in production.

E.g.MPS, MRP or JIT to ensure no oversupply of outputs

Reuse

Making use of inputs that would have otherwise been discarded.

Using reusable products instead of disposable products wherever possible.

Repairing/recollecting discarded inputs so they can be used.

Recycle

Finding a completely new purpose for waste/discarded inputs that still benefit the business.

Ex-microwavable meal production can use discarded vegetables and fruits as compost and sell it to local farms for money.

Lean management

Lean management is a holistic approach that reviews all processes with the aim to maximise customer satisfaction while minimising waste.

Lean management: Pull

Sometimes businesses overproduce outputs, leading to huge waste.

Pull refers to only producing required outputs to meet market demands, preventing overproduction of outputs.

Increases efficiency.

Lean management: One-piece flow

Refers to an operations system with steady flow in production without any constant starts or stops.

Improves efficiency by reducing waiting.

Lean management: takt

When processes are too slow, it wastes time, but if it's too quick, it increases the chance for defects.

Takt time is the ideal time between the completion of one output and another.

Different processes have different takt times. This ensures that no time is wasted whilst also minimising defects.

Lean management: Zero defects

If a business sells outputs with defects, it fails to meet customer needs, failing the business and reducing effectiveness.

Fixing each defect takes time, money, and effort.

Ideally, there should be no defects at all.

Zero defects is a philosophy in which production is perfect, striving that each output that is produced is free of any defect, achieving optimal quality and reducing costs related to fixing defects.

Using automation is one way to reduce human error and ensure reduced defects.

Corporate social responsibility

When a business goes above and beyond minimal acceptable standards in a socially, economically, and environmentally sustainable way while balancing the interests of diverse stakeholders.

CSR and inputs: electricity

Electricity is still generated from fossil fuels in Australia, negatively impacting the environment.

Hydropower in large regions also raises concerns for displaced animals and ruined ecosystems.

HOW TO DEMONSTRATE CSR

Use sources of electricity which are green

Use statergies to reduce demand for exesive use of energy.

CSR and inputs: Water

Overuse of water for agriculture is leading to the drying of rivers and loss of biodiversity.

Privatisation and water trading companies favour large corporations over communities and small farmers.

CSR and inputs: Plastic

Made out of fossil fuels, leading to greenhouse gas emissions.

Plastic can be toxic which is extremely unsafe for workers if unregulated

Plastic is contributing to massive piles of plastic in landfills and oceans.

CSR and inputs: Oil (crude)

Contributes to emissions and climate change

causes air and water pollution

risk of spilling can cause long environmental damage

CSR and inputs: Oil (palm)

Usually illegally deforested to get palm oil.

Loss of wildlife, especially orangutans.

Displacements of indigenous people.

Use child labour.

CSR and inputs: Sugar

Usually children harvest sugar cane, especially in Asia, Africa, and Latin America.

Poor wages, lack of safety and equipment, and unsafe work environment.

CSR and inputs: Cotton

Exploits labour, including child and forced labour, in many countries.

Overuse of water ruins ecosystems.

Overuse of pesticides leads to harmful toxins in the air.

CSR and inputs: Wood

Deforestation leads to loss of biodiversity.

Causes communities to be kicked out without compensation

CSR and inputs: Metal

Done in areas using child labour.

Extremely unsafe working conditions.

Leads to contaminated water and deforestation.

CSR in inputs

- Ensure suppliers are ethically responsible.

- Maximise efficiency to reduce the need for inputs.

- Purchase from local suppliers; it'll boost immunity

CSR in processes

- Waste minimisation: reducing impact on environment

- Recycling resources: reuse materials in the operations system

- OH&S: going above and beyond legal requirements to ensure health and safety of employees

- Training: investing in employees and ensuring all employees have access to training

- Staying local: keeping processes in Australia to support local employment

CSR in outputs

- High quality outputs last longer

- Biodegradable packaging

Global consideration in operations

Globalisation may advantage businesses as they have increased access to:

- Larger quantity of inputs

- Higher quality of input

- Less costly inputs

- Global talent

Supply chain management

Management of the flow of the supplies to the supplier, through the operations process to the end customer.

When sourcing global outputs, businesses should consider:

- Cost of transport

- Availability/reliability of inputs

- Cost of inputs

- Quality of inputs

Cost of transport

trying to minimise the distance that inputs and/or exports need to be transported can reduce costs, reduce pollution, increase efficiency, get to manufacturing sites quicker

Reliability/availability of inputs

If domestic suppliers are more prone to having insufficient quantities or prone to disruption, businesses should consider overseas suppliers.

Cost of inputs

Additional taxes and import costs may make domestic inputs more expensive. Due to cheap labour costs overseas, businesses can access adequate quality inputs for cheap.

Quality of inputs

Particular countries or regions are well known to produce high-quality goods or products.

Ex., coffee from Colombia.

Overseas manufacture

Overseas manufacturing refers to when a business makes its goods/products in a country separate from its headquarters.

It allows businesses to take advantage of cheap labour costs.

It also allows businesses to make products closer to overseas markets, especially useful if products are perishable or expensive to export.

Global outsourcing

Global outsourcing relates to when a part of the operations system is given to another person or business in another country.

Businesses casually give non-core activities, which

- Improve productivity as business focus on core activities

- Reduces costs

- Makes use of global talent

Quality

Degree of excellence a product and its ability to satisfy customer needs

Quality management

Quality managment is the management of production processes that ensures outputs are consistently satisfactory to client/customer needs and still fulfilling business objectives.

Poor quality outputs can lead to:

Unhappy customers

Increased wastage

Quality management strategies

Quality control

Quality assurance

Total quality management

Quality control (QC)

QC is the procedure that aims to ensure that manufactured goods or performed services adhere to set quality criteria by performing checks and tests at regular intervals.

To do this, businesses must

- Identify their quality standards

- Plan how and how many times the checks will be performed

- Collect data

- Fix any defects that have occured

QC is a reactive approach; it fixes the mistake after it has occurred.

Quality assurance (QA)

QA is a system where businesses meet a set of predetermined quality standards often set by an independent body.

Increases customer confidence.

It takes a proactive approach to follow QA; the root of problems or defects must be addressed.

Total quality management (TQM)

TQM is a holistic attitude towards quality centered around the principle that every member of staff must be commited to maintaining high standards of work in each aspect of operations

Four key areas of TQM

1. Continuous improvement

2. Defect prevention

3. Customer focus

3. Universal responsibility

Continuous improvement

a commitment to constantly make quality better by taking incremental steps that never stop.

Defect prevention

A proactive approach that aims to address the root cause of any defects or problems so they do not occur in the first place.

Customer focus

People view their world as a step-by-step process instead of being isolated.

Increasing value is to determine customer wants and needs and ensure the operations process provides it.

Universal responsibility

Each employee is held responsible for the continuing improvement of a business.

TQM quality circles

A quality circle is when a group of employees comes together and proposes solutions to quality-related problems.

Usually these employees come from diverse areas fo the business and are challenged with a quality problem that related to an area of the business the employee isn't necessarily involved in.

Employees are given the power to give proposals and allocate resources to fix quality-related problems they think they are capable of solving.