Business Unit 5

Operations Management

Operations management

Operations management

Involves the management of the production/transformation process to ensure that the best product or service is created

Business Inputs

Labor, Capital, Enterprise, Land

Business Outputs

Tangible (physical)

Intangible (abstract)

Triple bottom line

When a business considers all Economic, Social, and Environmental responsibilities when managing their operations

Production methods

Job/customised , mass , batch (cell)

Job/customised production

The production of unique items that are tailor made​ to the needs of individual customers

Features of job/customized production

Skilled labour and slow method

Benefits of job/customized

• Built exactly for the needs of customers = higher selling price

• More motivated workers

Limitations of job/customized

• Small scale​ of output = high average costs

• Cash flow problems

Mass production

Highly automated assembly of products

Features of mass production

• Capital intensive because of more machinery

• Massive economies of scale

Benefits of mass production

• Capital intensive = high productivity, low average cost, low selling price

• Less skilled workers = lower wages

• Automated process = less probability of error

Limitations of mass production

• Massive set up costs

• Labour is unmotivated

• Least flexible production method

Batch production

Producing items in identical groups

Features of batch production

• Producing large quantities

• A range of products to be produced

Benefits of batch production

• Variety of products = can meet different target markets

• Production is flexible

• One machine, more products = less investment and set costs

• Capital intensive

Limitations of batch production

• Storage costs can be high

• Low motivation

• High productivity costs

• Unsuitable for tailored products

Cell production

Employees work in teams and take joint responisbility

Benefits of cell production

• Teamwork

• Low labour turnover

• High motivation

• Multi-skilled labour

Limitations of cell production

• Investments in staff training

• Factories to be redesigned

• Lower productivity than mass

Efficiency

How well the products are produced

Higher quality, speed, results, and lower costs

Waste

How bad the products are produced

TIM WOOD (Time, Inventory, Motion, Waiting, Over-processing, Over-production, Defects)

More efficiency equals...

Less waste

Lean production

Umbrella term for techniques that aim at reducing waste. Aim is to produce high quality products with minimal resources

Kaizen

Regular, scheduled meetings, where staff are invited to say their opininons

Just-in-time

JIT production aims to minimise costs by reducing or eliminating stock held by a firm. It works by placing smaller regular orders that are delivered just in time

Kanban

Regulates the supply of components through a card system

Andon

Notification system that alerts workers to potential problems in the manufacturing process

Cradle to cradle manufacturing

C2C is a model of designing and creating to minimise the negative effects on environment and stakeholders - focus on sustainability

Technical cycle (C2C)

Raw materials - production - product - use - return - diassembly - REPEAT

Quality control

Occurs at the end. Products are checked to assess if they meet an agreed criteria based on physical dimensions, etc and work withing tolerances (usually ±1% from desired result)

Quality assurance

Quality assurance systems attempt to overcome problems by involving all staff in the quality process

Quality improvement

If they adapt a quality improvement policy, they'll see improvement as a continuous process in which it is always possible to improve product quality

Total quality management

Every employee is responsible for manufacturing the overall quality

Quality circles

A group of employees that meets regularly to discuss potential improvements to product quality

Benchmarking

Comparing your company to others and learn from them

Factors that affect location

Labor costs, land costs, external economies of scale, transportation and infrastructure, government assistance, international factors, company history

Outsourcing

Paying an outside company to carry out a task that may have traditionally been seen as an internal business function

Subcontractor

An external company/individual that carries out the task that was outsourced

Insourcing

Ending contracts with subcontractors to carry out tasks that were outsourced before internally

Offshoring

Relocation of a business to another country

Supply chain management

Managing the flow of supplies through the sourcing of inputs, transformation processes, and delivery of outputs

Just-in-case

Just in case stock control involves holding relatively large levels of buffer stocks so that a business can continue to operate when faced with an unforeseen event

Stock control charts

Graphs to monitor and analyze stock levels. They record when stock is delivered and sold

Cost to buy

CTB = price x quantity

Cost to make

CTM = fixed costs + (variable costs x quantity)