Operations Management

Job Production

Creating an individual product from start to finish and meets the customers specific needs

Batch Production

Producing a limited number of identical products

Mass production

Manufacturing of large amounts of a standardized product

Flow production

Focuses on the continuous production process of manufacturing products that are standardized in large quantities. 

Mass Customization

Occurs for businesses that produce large batch of products, but can be tailored to a customers preference

Labour-intensive production

Uses a greater proportion of labour than any other factor inpu

Capital-intensive production

The use of a high proportion of machinery, technology, and physical assets.

Lean production

The process of streamlining operations and processes reduces all forms of waste

Principles of lean production

Waste minimization, ‘Right first time’ approach, Flexibility, Contusion Improvement, Supply chain management

Continuous Improvement (Kaizen)

A japanese philosophy of making small and continuous improvements to increase productivity and efficiency

Just in time stock control

Japanese stock management method based upon having stocks delivered when they are needed.

Cradle to Cradle

A sustainable model of production based on natural processes, thus benefiting the environment.

Quality

Means that a product fulfills its purpose and meets the expectations of the consumer

Quality Management

This is the function concerned with controlling business activities to ensure that products are fit for their purpose.

Quality Control

Traditional approach involving inspecting, testing and sampling the quality of completed work.

Quality Assurance

The process of assuring customers that everything is ‘right first time’

Quality Circle

These are small groups of people who meet regularly to examine issues related to the quality of output and make recommendations for improvements.

Benchmarking

The comparison of products, operations, processes and financial data of a firm with others in the same industry.

Total Quality Management

Process that requires the dedication of everyone in the organization to commit to achieving quality standards.

Quality Standards

Documented requirements, specifications, and guidelines ensuring products consistently meet fitness-for-purpose, performance, and customer expectations

Location of Business

Refers to the geographical position of a business

Availability, suitability, and cost of land

Important factors when choosing a location

Availability, suitability and cost of labour

Affect the levels of wages to paid to workers.

Proximity to the market (customers)

Location chose by a firm depends on the product it sells

Proximity and access to raw materials

The location chosen by a firms that depend on the raw materials needed

Feasibility of e-commerce

a comprehensive study of market demand, competition, technology, operations, and financials

Local Knowledge

Some business will choose to locate in areas familiar to them as it is less risky

Management Preferences

Management may have preferences for location decisions for various reasons.

Infrastructure

Term used to describe the essential structures and facilities needed to operate in another country.

Political Stability

Is disruptive to any business even if location factors suggest otherwise.

Government restrictions and regulations.

Need to consider government policies and regulations that constrain business activity.

Ethical Issues

Decisions regarding the international location or relocation of a business often include ethical issues

Comparison Shopping (clustering)

Means that firms locate near other businesses that cater for complementary(related) or similar markets.

Reorganizing product

Often takes place by firms to take advantage of the best that locations nationally and internationally have to offer

Outsourcing

The practice of transferring business functions to an external firm within the same country

Insourcing

The use of a firm’s own people and resources to accomplish a certain function.

Offshoring

The practice of transferring business functions to an external firm located overseas

Reshoring

The practice of bringing back resources and functions to the original place.

Unit contribution

Price - variable cost

Contribution to fixed costs (i.e. the break even quantity)

Fixed cost/Unit contribution

Total Revenue (TR)

Price x Quantity

Total Cost (TC)

Fixed cost + (Variable cost x Quantity)

Break-even point (BEP)

Total Revenue = Total Cost

Profit or Loss

Total revenue - Total cost

Margin of Safety

Level of Demand - Break-even Quantity

Target Profit Quantity

(Fixed Cost + Target Profit) / (Price - Variable Cost)

Contribution

Refers to the sum of money that remains after all direct and variable costs have been taken away from sales revenue

Unit Contribution

The proportion of the selling price for each unit output that will go towards paying off total fixed costs

Total Contribution

Quantity of output needed to go towards paying off total fixed costs

Total contribution formula

Total contribution = Fixed costs/unit contribution

Unit contribution (formula)

Unit contribution = selling price per unit - variable cost per unit

Break-even analysis

Helps determine whether the level of sales that must be generated for the firm to earn a profit

Margin of Safety (definition)

This measures the amount by which demand of product exceeds the break-even quantity

Causes for changes in break-even

Changes due to demand, level of risk, new innovations

Supply chain management (SCM)

Refers to the sequence of activities from the production of a good or service to it being delivered to the end customer.

Just-in-time stock control

Japanese stock management method based upon having stocks delivered as and when they are needed.

Just-in-case stock control

A traditional stock control method which recognizes the need to maintain large amounts of stock in case there are supply or demand fluctuations

Optimal levels of stock

Companies decide between

Fast-moving consumer goods

Need to have higher available consumer stocks due to high stock turnover

Consumer durables or perishables

Consumer durables are infrequently purchased, hence less stock should be held

Peak season demand

At seaside destinations result in a greater sales of sunscreen, ice-creams, bbq, and cold drinks

Low season demand

At seaside destinations result in the same products to decline in sales

Short-lead times

Suppliers that can guarantee short-lead times allow a business to have a minimal buffer stock

Long-lead times

Lead to larger volumes of stock which need to be reordered

Factors influencing amount of stock held - cost of stock holding

High opportunities cost of stockpiling, and low opportunities cost of stockpiling

Capacity utilization

Measures a firm’s output level as a percentage of its potential output

Capacity utilization rate

Actual output / productive capacity x 100

Defect rate

Occurs when the quality of a particular product is unacceptable

Defect Rate Formula

Defective output / Total Output x 100

Productivity

Refers to how resources are used in the production process to generate outputs.

Productivity rate

total output / total output

Labour productivity

Total output / number of workers

Capital productivity

Total output / number of capital hours

Benefits of higher productivity rates

Economies of scale, Higher profits and wages, efficiency improved, evolution

Operating leverage

(Price - variable cost per unit) x Quantity / [(price - variable cost per unit) x quantity] x 100

Crisis management

Refers to the response of an organization's response to a crisis situation

Contingency Planning

Involves developing a plan before an unwanted or unlikely event occurs

Research and Development (R&D)

Research refers to the process of investigating the unknown, such as products or processes.

Development involves using research findings to create products that might be commercialized.

Intellectual property protection

Are the legal and exclusive ownership claim to certain creations, inventions or pieces of work

Innovation

The process of commercially pioneering new ideas and creations in the production process

Incremental Innovation

Refers to the minor improvements to products or work processes

Radical innovation

Refers to major and disruptive innovations that tend to involve high risks

Data Analytics

The process of transforming raw data into usable information for businesses

Database

A computerized system that makes it easy to store, search, and select data and information

Cybersecurity

Refers to the protection of computer systems and networks

Cybercrime

Refers to any illegal activity carried out using computers or the internet by deliberately and maliciously targeting computers.

Critical infrastructures

Refers to the essential and interrelated physical structures and facilities needed for the effective function of a business

Artificial Neural Networks

It is a form of machine learning that uses learning algorithms that can independently adapt as they receive new input.

Data centres

A physical facility or space of networked computers and component resources that support businesses in housing their critical applications and data.

Cloud Computing

It is a virtual resource or online space that enables business to store.

Virtual Reality

It is an artificial three-dimensional environment created by software.

The internet of things

Refers to a broad system of physical objects embedded with electronics, software and sensors that connect to the internet

Artificial Intelligence

It is an aspect of computer science that focuses on the ability of smart machines to perform tasks that typically require human intelligence.

Big data

The process of collecting and analyzing large amounts of data to identify trends and patterns.

Benefits of Big Data

Marketing, tracking and monitoring, dynamic pricing, tailored customer experience.

Customer Loyalty Programmes

Refers to any customer - retention strategy that incentivizes customers to continue buying the same product.

Data mining

The process of extracting raw data from large amounts of different data sets and summarizing this into useful information in a coherent structure.

Management information systems (MIS)

Refers to the study of advanced computer technologies and their impact on organizations.