Business Management - Unit 3 AOS 3

Operations Management

The coordination and organization of activities involved in producing goods/services a business sells. It aims to optimize resource use and achieve business objectives.

What is operations management?

• Efficiency: Productivity in resource use (doing things right).

• Effectiveness: Achieving objectives (doing the right things).

Distinguish between efficiency and effectiveness.

Machine 3 (90 wallets/kg). Efficiency = Output/Input (e.g., 900/10 = 90).

Which machine is most efficient?

• Machine 1: 20kg leather → 1800 wallets

• Machine 2: 12kg → 1100 wallets

• Machine 3: 10kg → 900 wallets

1. Inputs: Resources used (e.g., labor, materials).

2. Processes: Actions transforming inputs (e.g., assembling).

3. Outputs: Final goods/services (e.g., smartphones).

Define the three key elements of an operations system.

• Manufacturing: Tangible, storable goods (e.g., Yakult bottles).

• Service: Intangible, non-storable outputs (e.g., Qantas flights).

How do manufacturing and service businesses differ in outputs?

1. Automated production lines (e.g., Toyota’s vehicle assembly).

2. Computer-aided design (CAD) (e.g., digital product prototyping).

Name two technological strategies to improve operations.

A materials strategy where inputs arrive only as needed, minimizing inventory waste (e.g., Toyota’s production system).

What is Just in Time (JIT)?

• Quality Control: Reactive inspections during production.

• Quality Assurance: Proactive certification by external bodies (e.g., ISO 9001).

Compare quality control and quality assurance.

1. Reduce (e.g., avoiding overproduction).

2. Reuse (e.g., repurposing materials).

3. Recycle (e.g., turning waste into new products).

What are the "3Rs" of waste minimization?

Reducing waste while improving customer value. Strategies:

1. JIT (just in time) - materials delivered only when required

2. Pull - only producing goods when required

3. Takt - continuous pace to meet customer demand

4. Kaizen - continuous improvement where all employees work together to make incremental improvements in the production process

Define lean management and its four strategies.

Sourcing sustainable/ethical materials (e.g., local suppliers to reduce carbon footprint).

How can CSR be applied to inputs?

Transferring tasks to overseas external businesses (e.g., Peloton outsourcing production to Taiwan).

What is global outsourcing?

• Advantage: Lower labor costs.

• Disadvantage: Risk of damaged goods during transport.

Give an advantage and disadvantage of overseas manufacture.

By involving all employees in continuous improvement, customer focus, and empowerment (e.g., Toyota’s quality circles).

How does Total Quality Management (TQM) improve quality?

To predict customer demand and optimize material orders, reducing waste (e.g., avoiding excess inventory).

Why might a business use forecasting?

By improving efficiency and effectiveness, operations can reduce costs, improve quality, and increase productivity—supporting goals like profit, market share, and customer satisfaction.

How can operations management help achieve business objectives?

he amount of output produced relative to the amount of input used (e.g., units per labour hour).

Define productivity.

Resources used in production, including labour, raw materials, capital, time, and information.

What are inputs in an operations system?

The actions that transform inputs into outputs, such as assembling, mixing, designing, or packaging.

What are processes in an operations system?

The final goods or services delivered to customers.

What are outputs in an operations system?

• Tangible outputs

• Low customer contact

• Production and consumption occur separately

List three characteristics of manufacturing businesses.

• Intangible outputs

• High customer contact

• Production and consumption occur simultaneously

List three characteristics of service businesses.

Technology that automates machinery and tools based on CAD designs, increasing speed and precision in production.

What is CAM (Computer-Aided Manufacturing)?

It simulates human intelligence to perform complex tasks, reducing time, errors, and labour while improving customer service and decision-making.

How does AI improve operations?

An approach to improve efficiency by eliminating waste (TIMWOOD: Transport, Inventory, Motion, Waiting, Overproduction, Overprocessing, Defects).

What is lean management?

Operating in a way that is ethical and sustainable—e.g., sourcing fair trade inputs, reducing waste, using ethical labour, and ensuring safe, non-harmful outputs.

What is CSR in operations?

• Input: Use of sustainable materials

• Process: Waste reduction via lean management

• Output: Biodegradable packaging or non-toxic products

Name one CSR strategy for each stage of the operations system.

Acquiring inputs or production from overseas to reduce costs, access skilled labour, or improve quality.

What is global sourcing?

Loss of control over quality or ethical concerns (e.g., poor labour conditions in supplier countries).

What is one risk of global outsourcing?

They increase customer convenience, reduce labour, speed up transactions, and expand market reach (e.g., online bookings or e-commerce platforms).

How can online services improve operations?

• JIT: Inputs arrive as needed; reduces waste and storage costs but is risky if delays occur.

• Forecasting: Predicts demand; helps plan ahead but may be inaccurate.

Compare Just in Time (JIT) and Forecasting.

800 ÷ 20 = 40 units per labour hour

A business makes 800 units using 20 labour hours. What is productivity?

Efficiency – less time/resource used.

A company reduces production time from 10 hours to 6. Efficiency or effectiveness?

Effectiveness – helps achieve business objectives (e.g., sales, customer satisfaction).

Sales rose after a business improved product quality. Efficiency or effectiveness?

• High customer contact

• Intangible output (flights)

• Labour intensive

• Output cannot be stored

How does Qantas demonstrate characteristics of a service business?

Toyota uses CAD to simulate and optimise car parts before production, improving quality and customer satisfaction.

Example of CAD improving effectiveness.

Yakult uses highly automated systems to minimise waste and produce consistent products efficiently.

Example of lean management in action.

A business’s commitment to go above legal obligations to operate ethically, environmentally, and socially responsibly throughout the operations system.

What is CSR in operations management?

Sourcing ethically produced or sustainable materials (e.g., using local suppliers to reduce carbon emissions).

CSR example in inputs stage?

Biodegradable packaging, avoiding harmful ingredients, ensuring safe and truthful product labelling.

CSR example in outputs stage?

Builds customer trust, brand reputation, and long-term sales, helping to meet objectives like profit and market share.

How can CSR improve effectiveness?

Producing only what is demanded by customers—avoids overproduction.

What does "Pull" refer to in lean management?

A continuous production process where one unit moves at a time through each stage—reduces delays and inventory.

What is "One-piece flow"?

The rate at which products must be made to meet customer demand.

Define "Takt" in lean management.

Delegating parts of the business (often production or services) to external international providers to reduce costs or access expertise.

What is global outsourcing?

Producing goods in a foreign country to take advantage of lower costs.

What is overseas manufacture?

Procuring raw materials or components from international suppliers.

What is global sourcing of inputs?

• ✅ Advantage: Access to cheaper or higher-quality materials

• ❌ Disadvantage: Risk of delivery delays or ethical issues

Advantage and disadvantage of global sourcing?

Loss of control over quality, ethical concerns (e.g., sweatshops), or language/time zone barriers.

Risk of global outsourcing?