U3 AOS 3 Business Revision Set

Operations Management

coordinating and organising the activities involved in producing the goods or services that a business sells to it’s customers

List of Business objectives

• to make a profit

• to meet shareholder expectations

• to increase market share

• to increase efficiency

• to increase effectiveness

• to fulfil a market need

• to fulfil a social need

Efficiency

how productively a business uses its resources when producing a good or service, which will be maximised by an operations manager

Effectiveness

the extent to which a business achieves its stated objectives, which can be optimised by operations managers using suitable strategies

Business competitiveness

the ability of a business to sell products in a market

Inputs

resources used in the process of production. the categories include

• natural resources and materials

• physical resources

• human resources

• financial resources

• information

• time

Processes/transformation process

the process which transforms inputs into a tangible or intangible output, depending on the business.

Outputs

the final goods or services produced as a result of business operations

Manufacturing businesses

Businesses that create tangible outputs

Service businesses

Businesses that create intangibly outputs

Types of technological developments

• automated production lines

• robotics

• computer-aided design

• computer-aided manufacturing

• AI

• online services

Automated Production Lines (APL)

Machinery and equipment that are arranged in a sequence, the product is developed as it proceeds through each step. It is more efficient as it’s faster than humans, and perform more effectively.

Advantages of APL

• high quality products

• faster processes

• less employees

• improve employee morale

• no need for breaks

• cheaper long term

Disadvantages of APL

• poor reputation through redundancy

• high short term costs

• causes employee redundancies

• breakdowns compromise productivity

• expensive to repair

• employees may need more training

Robotics

programmable machines that can perform specified tasks, high levels of precision and accuracy and often reduce the need for human labour, replacing dangerous, repetitive or complex tasks. Speed and accuracy increase efficiency, and minimising errors increases effectiveness.

Advantages of Robotics

• high quality, improving reputation

• less errors, reduces wastage

• faster operations

• removing dangerous tasks from employees

• no need for breaks

• less employees needed

• increased precision

Disadvantages of Robotics

• Poor reputation through redundancy

• high initial costs

• may need added training

• redundancies may occur

• high maintenance costs

Computer-aided design (CAD)

Digital design software that aids the creation, modification and optimisation of a design and the design process. This reduces time and labour for efficiency, and develops multiple prototypes for best quality, thus increasing effectiveness

Advantages of CAD

• greater accuracy, quality and reputation

• employees can create more sophisticated designs

• customers can easily aid in design

• faster

Disadvantages of CAD

• Redundancy

• high set up costs

• training expenses

• poor reputation from redundancies

• high maintenance costs

Computer-aided manufacturing (CAM)

the use of software that controls and directs the production process by coordinating machinery and equipment through a computer facilitating production. Reduces time to increase efficiency, and accuracy improves effectiveness

Advantages of CAM

• high accuracy, quality and reputation

• speeds up processes

• improve employee morale

• redundancy reduces costs

Disadvantages of CAM

• Redundancy

• tech faults compromise productivity

• high maintenance costs

• poor reputation from redundancy

• high set up costs

• training costs

Artificial Intelligence (AI)

using computerised systems to simulate human intelligence and behaviour. Reduces time and labour for efficiency, and increases quality for effectiveness

Advantages of AI

• 24/7 operation

• improves job satisfaction

• redundancy

• complex tasks done with precision

• faster than humans

• quality

Disadvantages of AI

• redundancy

• high set up costs

• poor reputation from redundancy

• high maintenance costs

Online services

digitally accessible business platforms. removes need for labour resources for efficiency, creates convenience for effectiveness

Advantages of online services

• improve business reputation

• competitive boost

• increased exposure

• increase speed

• increase customer base

• increased job satisfaction by decreasing workload

Disadvantages of online services

• tech faults disrupt operations

• time consuming to create

• continuous costs

• decrease customer base

• cost to establish

• training expenses

Materials management strategies

• forecasting

• master production schedule (MPS)

• materials requirement planning (MRP)

• Just in time (JIT)

Forecasting

use of past data and trends to predict future demand so decisions can be made on materials requirements

Forecasting improving efficiency

• ensures materials are on hand for a continuous flow, reducing wait times

• minimising wastage - reduces materials in storage

Forecasting improving effectiveness

• helps operations meet customer demand

• enhances ability to respond to changes in the market

Disadvantages of Forecasting

• potential for inaccuracies

• time-consuming to monitor trends

Master production schedule (MPS)

a plan that describes what is to be produced, in what quantities, where and when.

MPS improving efficiency

• streamlines production process with plan and schedule

• reduces wait times between stages of production

• reduces overproduction

MPS improving effectiveness

• meeting customer demand by aligning production with market demand

• allows the business to plan resources, reducing costs and improving profits

Materials Requirement Plan (MRP)

an itemized list of all materials involved in production to meet the orders. Consists of what needs to be produced and quantities, as well as whats already on hand and wait times.

MRP improving efficiency

• ensuring materials are on hand for continuous flow

• minimise wastage

MRP improving effectiveness

• reducing delays, helping to meet customer demand

• can lead to reduced costs

Disadvantages of MRP

• requires accurate data to be effective

• costs in implementing can be significant

Just in time (JIT)

where the right amount of materials arrive just as they are needed for production

JIT improving efficiency

• reduces storage costs

• minimises wastage

JIT improving effectiveness

• allows the business to be more responsive to market conditions

• improves product quality

• less money in idle stock

Disadvantages of JIT

• highly dependent on suppliers

• increased risk of stock outs

• increased carbon emmisions

• vulnerable to supply chain disruptions

• increased delivery costs

Quality

the degree of excellence of a product or service, particularly as compared to something similar

Quality control

reduces problems and defects in the product by using inspections at various points in the production process, and comparing results to set benchmarks

Efficiency in quality control

• prevents errors from recurring

• reduces wastage

• allows for continuous flow

Effectiveness in quality control

prevents errors from reaching customers, satisfying objective to satisfy customer needs

Advantages of quality control

• prevents defects before sale

• increases reputation

• does not interrupt production

• internally controlled

• cheaper

Disadvantages of quality control

• Potential waste of resources

• doesn’t examine the full production process

• more employees needed

• more time spent

quality assurance

the use of a system that will assure customers that the product of a business is fit for it’s purpose. This involves achieving externally set standards throughout the production process to receive external certification

Efficiency in quality assurance

• prevents errors and waste

• less production haults to fix errors

Effectiveness in quality assurance

customers are more likely to purchase a good or service with a certified standard of quality, thus meeting objectives

Advantages of quality assurance

• reduces waste, increases sustainability

• reduces errors, smoother workflow

• certification boosts competitiveness

Disadvantages of quality assurance

• high initial costs

• time consuming documentation

• time consuming training to meet standards

Total quality management (TQM)

ongoing, business-wide commitment to excellence that is applied to every aspect of the business’ operation.

Essential principles of TQM

• continuous improvement

• customer focus

• employee empowerment

efficiency in TQM

continuously improving systems to increase quality and reduce waste

effectiveness in TQM

determining customer needs, meeting them throughout full production process and thus increasing sales through higher quality products

Advantages of TQM

• adapts to suit business

• competitive advantage

• employees feel valued

• improves business reputation

• minimise environmental impact

Disadvantages of TQM

• May be initially resistant

• time consuming to implement

• whole organisation commitment

• can be costly

Waste minimisation

a process which involves reducing the amount of unwanted or unusable resources created by the business’ production process in an attempt to improve the effectiveness and efficiency of operations

Waste minimisation strategies

3Rs - reduce, reuse, recycle

Reduce (waste minimisation)

achieved by creating less waste. This also reduces business costs whilst increasing effectiveness, and can be implemented through JIT, robotics and/or quality management

Reuse (waste minimisation)

taking old or unwanted items you might otherwise throw away and finding a new use from it, thus saving money spent in waste disposal and potentially providing an extra income stream

Recycle (waste minimisation)

changing discarded materials into new products in order to avoid using more virgin resources, reducing business costs whilst improving community

Lean management

a never-ending management effort to eliminate waste in the forms of overproduction, waiting, transportation, inappropriate processes, excess inventory, defects and unused employees

Principles of lean management

• TAKT

• One-piece flow

• Pull

• Zero defects

Pull

a lean management principle which involves only producing when a customer demands it, preventing overproduction

Efficiency in pull

• reduces overproduction

• minimises time, labour and materials wastage

Effectiveness in pull

gaining products of the right quality which ensures customer needs and expectations are met

One-piece flow

a method of lean management involving a single product moving through all stages of production one at a time.

Efficiency in one-piece flow

reduces errors by focusing on one unit at a time

effectiveness in one-piece flow

only maintains processes that add to customer satisfaction, thus meeting objectives

TAKT

a method of lean management which involves adjusting the rate of production needed to meet customer demand

Efficiency in TAKT

optimises flow of materials and reduces cardboard waste

Effectiveness in TAKT

optimises production to improve customer satisfaction

Zero defects

a method of lean management involving the prevention of any defects occuring by identifying errors as soon as they occur and quickly resolving them

Efficiency in zero defects

minimises waste and quality issues at its root

Effectiveness in zero defects

delivers products of increasing quality to customers with no errors

Advantages of lean management

• reduces energy and consumption

• increases productivity

• increases customer satisfaction

• reduces delays and uncertainty

• improved reputation

• employee satisfaction

• less production costs

• improved quality

• quicker production

Disadvantages of lean management

• requires committed and experienced employees

• workplace stress

• high implementation costs

• employees may resist change

• requires good supplier relationships for certain strategies

• time consuming training

Corporate Social Responsibility (CSR)

the ongoing commitment by a company (beyond laws and regulations) to operate in an economically, socially and environmentally sustainable manner, whilst considering the various interests of stakeholders.

triple bottom line (CSR)

consideration of social and environmental costs are considered alongside and even before profits

CSR for operations managers

• managing inputs appropriately

• managing staff appropriately

• managing supplies appropriately

• managing the customer relationship appropriately

• consider environmental sustainability of inputs

• the amount of waste generated from processes and production of outputs

CSR of inputs

• source inputs from conscious suppliers

• supporting local suppliers to reduce transport

• environmentally sustainable inputs that may be energy efficient or recyclable

CSR in processes

• minimise waste during production

• recycle and reuse inputs throughout production

• caring for long term welfare of workers

• training and investing in employee skills

• keeping production local

• using appropriate quality management.

CSR in outputs

• quality

• packaging

• honesty

Global strategies

• global sourcing of inputs

• overseas manufacturing

• global outsourcing

Global sourcing of inputs

where the business uses international suppliers, often for costs, quality, speed and reliability. Lots of considerations must be made though

Overseas manufacturing

where a business produces goods in a foreign country.

Global outsourcing

involves contracting out business processes or services to third-party providers in foreign countries.