5. Operation Management

Location decision

Choosing the best place for business operations

Quantitative factors for location

Measurable factors affecting location choice

Qualitative factors for location

Non-measurable factors affecting location choice

Land availability

Amount of land accessible for business use

Land suitability

Whether land fits the business's operational needs

Land cost

Price of purchasing or renting land

Labour availability

Supply of workers in an area

Labour quality

Skills and productivity level of workers

Labour cost

Wages and employment expenses in a location

Market proximity

Distance to customers and target markets

Materials proximity

Distance to suppliers and raw materials

Government incentives

Financial or legal support offered by governments

Government limitations

Laws or restrictions affecting businesses

E-commerce feasibility

Suitability of location for online business operations

Management preferences

Personal preferences of business leaders influencing location

Local knowledge

Understanding of local culture, market and business environment

Infrastructure

Availability of transport, utilities and communication systems

Political stability

Reliability and security of a country's political environment

Government regulations

Laws and policies businesses must follow

Ethical considerations

Moral concerns influencing location choices

Clustering

Businesses locating near similar companies or industries

Outsourcing

Hiring external businesses to complete certain tasks

Advantages of outsourcing

Lower costs, less management responsibility, efficiency

Disadvantages of outsourcing

Quality control issues, communication problems, reliance on external firms

Offshoring

Moving business operations to another country

Advantages of offshoring

Lower costs and access to cheaper labour

Disadvantages of offshoring

Cultural differences, communication problems, ethical concerns

Insourcing

Bringing outsourced activities back into the business

Reasons for insourcing

Poor outsourced quality or outsourcing no longer cost-effective

Nearshoring

Relocating operations to nearby countries

Relocation

Moving business operations to a different location

Industrial park

Area designed specifically for industrial businesses

Agglomeration

Benefits gained when businesses locate near each other

Footloose industry

Industry that can operate in many locations without depending on resources

Retail location factors

Foot traffic, accessibility, parking, competition and visibility

Manufacturing location factors

Raw materials, transport, labour and utilities

Service industry location factors

Customer access, skilled labour and communication infrastructure

Global supply chain

Worldwide network of suppliers and distributors

Transport links

Roads, ports, airports and railways supporting business operations

Utility availability

Access to electricity, water and internet services

Environmental regulations

Rules protecting the environment that businesses must follow

Sustainable location choice

Choosing locations that minimise environmental impact

Operations management

The process of creating goods and services and managing the production process. Businesses add value during production to generate profit.

Factors of production

The resources used in production: land, labour, capital and entrepreneurship.

Productivity

A firm's efficiency in converting inputs into outputs; measures how well resources are used.

Labour-intensive production

Production that relies more heavily on human workers than machinery or automation.

Management Information System (MIS)

A computerised system that collects, analyses and processes data to support business decision-making and achieve organisational objectives.

Data analytics

The process of examining and scrutinising raw data to identify trends and patterns that support business decisions.

Data overload

When there is so much data available that managers struggle to process it and determine what actions to take.

Descriptive data analytics

Analysis that examines what happened.

Diagnostic data analytics

Analysis that examines why something happened.

Predictive data analytics

Analysis that examines what is likely to happen in the future.

Prescriptive data analytics

Analysis that examines what should be done next.

Database

A computerised system used by businesses to store, organise, search, process and retrieve data and information.

Advantages of databases

Data can be organised and searched easily, allowing businesses to manage large amounts of information efficiently.

Disadvantages of databases

Databases can be vulnerable to cybercrime and large amounts of data can become difficult to manage.

Data

Raw facts or statistics from which useful information can be generated.

Data breach

The theft, unauthorised access or disclosure of important or personal data.

Cybercrime

Illegal activity carried out using electronic systems to attack computers, software, networks or data.

Cybersecurity

Policies, processes and technologies used to protect an organisation's computer systems, networks and data from attacks.

Benefits of cybersecurity

Protects data, maintains customer trust and helps businesses comply with data protection laws.

Limitations of cybersecurity

Can be expensive and complex, and employees may develop a false sense of security.

Critical infrastructure

Crucial computer systems, structures and networks required for the effective functioning of an organisation.

Examples of critical infrastructure

Emergency services, financial services and supply chains.

Artificial Neural Networks (ANNs)

Advanced computing systems designed to simulate how the human brain processes and analyses information.

Cloud computing

A virtual online computing environment that allows users to store, manage and access data and applications remotely.

Artificial Intelligence (AI)

Computer systems capable of performing tasks that normally require human intelligence, such as problem-solving and decision-making.

Big Data

Extremely large and complex sets of data requiring advanced computing systems to store, process and analyse.

Chatbot

Software that simulates human conversation and provides automated customer support.

Data centre

A physical facility containing computer systems, servers, networks and infrastructure used to store and manage data.

Internet of Things (IoT)

A network of interconnected internet-enabled devices that collect and exchange data using sensors and technology.

Virtual Reality (VR)

An artificial computer-generated environment that users can experience and interact with through immersive simulations.

Advantages of VR in business

Provides safe environments for employee training, reduces workplace accidents and waste, and can be used for many training purposes.

Disadvantages of VR in business

Some users experience motion sickness and VR training software and equipment can be expensive.

IoT business example

The National Environmental Department can use IoT devices to monitor air quality and pollution levels.

Artificial Intelligence (AI) definition

The development of computer systems able to perform tasks normally requiring human intelligence, including visual perception, speech recognition and decision-making.

Algorithm

A set of rules or procedures that an AI system follows to process information or solve a problem.

Machine learning

The use of algorithms and computer systems that allows machines to learn from data and adapt without being explicitly programmed for every task.

Voice recognition

AI-powered technology that interprets and responds to verbal commands.

Benefits of Big Data

Helps businesses make more informed decisions, understand customers better and improve operational efficiency.

Personal data protection

Laws and regulations designed to safeguard individuals' personal information from misuse or unauthorised access.

Scientific decision-making

Decision-making based on data, analysis and logical reasoning rather than intuition or gut feeling.

5 Vs of Big Data

The five characteristics of Big Data: Volume, Variety, Velocity, Veracity and Value.

Volume

The large amount of data generated from numerous sources such as phones, computers and online platforms.

Variety

The diversity of data types and sources, allowing businesses to gain multiple perspectives.

Velocity

The speed at which data is generated, collected, processed and stored.

Veracity

The accuracy and reliability of data, including the ability to identify inaccurate or unreliable data.

Value

The extent to which data is useful for supporting problem-solving and decision-making.

Customer loyalty

The extent to which customers consistently repurchase products from the same business.

Customer loyalty programme

A marketing strategy designed to retain customers by offering rewards or benefits for repeat purchases.

Examples of customer loyalty programmes

Points systems, discounts, exclusive offers and rewards for repeat purchases.

Advantages of customer loyalty programmes

Can improve customer retention, increase customer spending and generate referrals through positive word-of-mouth.

Disadvantages of customer loyalty programmes

Can be expensive because businesses provide rewards, and programmes take time to develop and manage.

Brand switching

When customers stop purchasing from one brand and switch to a competitor.

Customer acquisition

The process of gaining new customers through marketing and other business strategies.

Customer base

The total number of customers a business has.

Customer engagement

The level of interaction and involvement between customers and a brand.

Customer retention

The extent to which existing customers continue purchasing from the same business in the future.

Digital Taylorism

The use of management information systems and digital technology to monitor employee behaviour and performance.

Examples of Digital Taylorism

Monitoring how long employees spend on websites, what they search for or how they use company computers.