Unit 3 AOS 3 Operations Management

Business Management Notes

Efficiency

how well a business uses it resource like raw materials, time and labour

Effectiveness

the extent to which a business achieves its objectives like profit and sales

Operations Management

coordinating and controlling resources and activities to produce (good/service) as effectively and efficiently as possible

Operations Systems

An operations system is the process used to transform inputs into outputs

Inputs

Resources used to produce the business’ goods or service such as raw materials, eqiupment and labour

Process

Any actions taken to transform inputs into outputs

Outputs

The finished (good/service) that is sold to the consumer

Manufacturing Business

Output is Tangible

Low Level of Customer Contact

Low Level of customisation (homogenous)

Production is capital intensive

Production and consumption occur seperately

Service Businesses

Output is Intangible

High level of customer contact

High level of customisation

Production is labour intensive

Production and Consumption occur simultaenously

Automated Production Line + How it improves efficiency/effectiveness

Machinery and equipment arranged in a sequence, controlled by computer with components added as it proceeds through each step

Efficiency - More precise, Time efficient

Effectiveness - No need of human labour, Decreases cost

Robotics + How it improves efficiency/effectiveness

Programmable machines that are capable of performing specified tasks with high level of precision and accuracy

Efficiency - Time (Produce faster)

Effectiveness - Profit (Minimises Waste)

Computer Aided Design (CAD) + How it improves efficiency/effectiveness

the use of computer and software to prepare 3D product designs, which then can be reviewed, examined, evaluated and changed without the need for a physical prototype being built

Efficiency - Raw Materials (Decrease waste and time)

Effectiveness - Profit (decrease of materials and waste)

Computer Aided Manufacturing (CAM) + How it improves efficiency/effectiveness

refers to the use of computer software in the control of the production process

Efficiency - Produce at a faster rate (Machines don’t need breaks)
Effectiveness - Reduces costs of productions (Less Errors), Greater Accuracy and Consistency

Artificial Intelligence (AI) + How it improves efficiency/effectiveness

using computerised systems to stimulate human intellegence and mimic human behaviour

Efficiency - Ability to make quick informed decisions, Forecasting and Reducing Waste

Effectiveness - High Accuracy and precision in anticipating ad responding to customer needs

Online Services + How it improves efficiency/effectiveness

the provision of services that are provided via the internet, such as allowing consumers to review products, a portal for communication for suppliers and cloud services that allow businesses to connect with clients, prepare and share work, and provide services from anywhere in the world

Efficiency - Delivers consistent messages, can be used to gain customer feedback

Effectiveness - Reduces cost of labour and leasing or purchasing physical space

Forecasting + How it improves efficiency/effectiveness

a materials planning tool that uses factors such as historical data and seasonal fluctuations to predict demand for a business’ products and therefore determine their resource needs

Master Production Schedule (MPS) + How it improves efficiency/effectiveness

a plan that shows the quantity and type of each product line the business will produce and when. (Focuses on Outputs)

Efficiency - Time, through planning quantities needed of each finished product, this increases time efficiency in focusing on producing what is needed

Effectiveness - Sales, through planning quantities needed of each finished product, allows the business to produce the right amount and meet customer demand

Materials Requirement Plan (MRP) + How it improves efficiency/effectiveness

a document that sets out the exact resources needed to fulfil the scheduling set out in the Master Production Schedule. (Focuses on Inputs)

Efficiency - Raw Materials, by basing resource requirements on the MPS the business won’t over order materials

Effectiveness - Profit, by basing resource requirements on the MPS, the business won’t under order materials avoiding time delays and idle labour

Just in Time (JIT) + How it improves efficiency/effectiveness

Ensures materials arrive just as they are required in the production process

Efficiency - Raw Materials, by minimising large stockpiles of inventory, wastage of materials decrease as it won’t perish or deteriotate

Effectiveness - Profit, by minimising large stockpiles of inventory and wastage of materials

Quality Control (QC) + How it improves efficiency/effectiveness

a process where a sample of products are inspected and evaluated during the production to ensure they meet acceptable internal standards

Efficiency - Raw Materials, by identifying errors early during production through sampling, no further raw materials or labour will be wasted on a faulty product

Effectiveness - Sales, due to errors being indentified and resolved during production, it is less likely consumers will receive faulty products increasing there satisfaction

Quality Assurance (QA) + How it improves efficiency/effectiveness

a proactive strategy where an external business certifies that a business’ systems and processes meet accepted quality standards

Efficiency - Raw Materials, as it is a proactive approach to prevent errors reducing waste of raw materials

Effectiveness - Market Share, provides unbiased verification to customers that the products are of high quality, they are likely to gain a competitive advantage increasing sales and market share

Total Quality Management (TQM) + How it improves efficiency/effectiveness

a holistic and preventative approach to achieving and maintaining quality through continuous improvement, employe involvement and a customer focus

Efficiency - Raw Materials, due to employee empowerment and continuous improvement principles, then more ideas to improve the quality in production and minimise errors

Effectiveness - Sales, due to the customer focus and continuous improvement of quality principles customer satisfaction and sale will likely increase

Waste Minimisation

a process involving the reduction of the amount of unwanted or unusable resources

Reduce

to decrease the amount of products, raw materials, labour or time discarded during production

Reuse

utilise resources again that would have otherwise been discarded

Recycle

to transform items which would otherwise have been discarded into another product

How Waste Minimisation can improve Efficiency/Effectiveness

Efficiency - Helps reduce waste, increasing efficiency of all resources such as time, labour and raw materials therefore reducing long-term costs and increasing profit

Effectiveness - Shows their Corporate Social Responsibility values, which therefore may increase customer satisfaction and sales

LEAN Management + Benefits

a systematic process for the elimination of waste to improve efficiency and effectiveness

Benefits

• Reduction of waste therefore reduction of costs

• CSR, as reducing waste going into landfill appeals to customers

• Maximises profitability

Pull + How it improves efficiency/effectiveness

production of the good or service only starting when a customer places the order

Efficiency - Raw Materials, as production of the good/service only starts when the order is placed, reduces waste or producing products that may not sell

Effectiveness - Profit, only producing what is needed, there is less waste of stock that has deteriorated while unsold

One-Piece Flow + How it improves efficiency/effectiveness

Involves the operations process focusing on one good or service at a time

Efficiency - Labour, By reducing repetition/removing steps that do not add value to production can improve their use of labour and time

Effectiveness - Profit, By reducing the amount of resources such as labour and time needed to produce the same quantities of products decreasing costs

Takt + How it improves efficiency/effectiveness

Rate of production needed to meet customer demand, to establish a synchronised workflow that is flexible as customer demand rises and falls

Efficiency - By reusing materials instead if disposing of them, the business can reduce the amount of raw materials needed to produce the same quantities

Effectiveness - By reusing resources, this decreases costs of purchasing inputs increasing profit and effectiveness

Zero Defects + How it improves efficiency/effectiveness

Striving for perfection by continuously improving the operations process to achieve no faults

Efficiency - Raw Materials, by transforming items “which would otherwise have been discarded” the business can reduce waste and costs

Effectiveness - Profit, by transforming items “which would otherwise have been discarded” the business can reduce waste and costs

Corporate Social Responsibility

going beyond the law to make a positive impact on society and/or reduce their negative impact on the environment

CSR Inputs

Local Suppliers

• More local jobs benefiting community

• Decrease carbon emissions from transport helping the environment

CSR Processes

Reuse

• Less waste of raw materials means less landfill benefiting the enviroment

CSR Outputs

Reducing

• Using packaging that is biodegradable, recyclable etc means less landfill benefiting the environment

Global Sourcing of Inputs + Advantages/Disadvantages

when a business acquires raw materials or resources from overseas

Advantages

• Lower Costs of production if they have access to cheaper resources locally

• Access to higher quality resources overseas leading to increase customer satisfaction

• Access to resources that may not be available domestically

Disadvantages

• Can lengthen delivery times and more chance for inputs to be damaged in transit

• Unexpected delays in receiving inputs

• Delivery costs may be higher

Overseas Manufacture + Advantages/Disadvantages

when the transformation stage of the operations systems is conducted in an overseas manufacturer

Advantages

• Lower cost of production if they have access to cheaper labour resources

• Access to a greater pool of employees and skill sets that many not be a available domestically

• New export markets as the business may be able to beat tariffs

Disadvantages

• Lost manufacturing jobs domestically could tarnish the business reputation

• Delivery costs

• Language barriers

Global Outsourcing + Advantages/Disadvantages

a business organisation contracts an overseas business to perform some of its roles or functions

Advantages

• Lowers costs of production if they can pay another business to complete a task that can do so more cheaply due to cheaper labour reducing costs

• Less responsibility for the business as they pay another business to complete the task and do not have to manage it as its usually outside their specialisation

Disadvantages

• Reduced Control

• Unexpected delays

• Language barrier