Business unit 3 AOS 3 - operations management

Operations management

Involves overseeing the process required in the production of goods and servcies

Operations managers

Plan, lead, organises and controls the production process, and is responsible for coordinating the transformation into goods and services

Primary sector industries

Extract or harvest products or raw materials from the natural environment

• mining

• fishing

• agriculture

= commodities

Secondary/Manufacturing sector industries

Take raw materials and create new products through the production process

• construction

• engineering

• food industry

= Goods

Tertiary/services sectors

Produce intangible products known as services

• retail

• tourism

• banking

• media

• health

Quaternary sector

Provides information and knowledge

• education

• financial service

• information technology

• R&D

= services

Inputs

Resources that are used in the process of production.

Including raw materials, capital equipment, labour, information, time and money.

Processes

Used to convert inputs into outputs, such as design and manufacturing.

Processes will differ between manufacturing and service organisations

Outputs

The final products of transformed inputs that are delivered to the customer

Productivity

Measures the amount of output compared to the amount of input that goes into production. It is a measure of efficiency, and can be improved by reducing the amount of inputs that are required to make the same, or larger amounts of outputs.

Business competitiveness

The ability of an organisation to sell products in a market, and requires a business to outperform others in the market.

Quality management

The degree of excellence of goods or services and their fitness for the purpose for which they are designed.

Quality products should be easy to use, reliable, durable and delivered on time.

Materials management

The strategy that manages the use, storage, and delivery of materials to ensure that the right amounts of inputs are available when required in the operations system.

CSR (corporate social responsibility)

The obligation that a business has over and above its legal responsibilities to the well-being of employees, shareholders, and the environment through ethical practices.

• Environmental sustainability of inputs

• Amount of waste generated from processes

• Production of outputs should not cause an issue for society (Packaging impact on the environment)

Operations management and business competitiveness

If operations management is managed effectively, the business is more likely to possess a larger market share and become more competitive in its areas of expertise, leading to higher levels of profits and success.

Manufacturing

• Transform inputs into tangible products (can be touched)

• Made by manufacturing organisations and need to be stored

• Product and consumption do not need to be linked in the manufacturing business (customer doesn’t need to be present in its creation)

Service

• Transform outputs into intangible services

• Do not need to be stored anywhere

• Product and consumption are linked; the person receiving the service needs to be present while it is happening.

Technological developments

One of the best ways to improve productivity levels is to increase efficiency through the implementation of technology.

Can help the operations manager in allowing

• Higher quantity produced

• Quality enhancement

• Fewer errors

• Less waste

S/W of Technological developments

+Once everything has been set up, there can be reduced costs for the company

+Potential for new staff to learn new skills to operate machinery'

-COST: Initially very expensive to set up

-Training

-Repairs

-If technology breaks or wont work, it can disrupt the entire organisation, affecting the entire production process.

-REDUNDANCIES: Potential for downsizing and large numbers of staff losing their jobs as robots replace the need to employ them.

Automated production lines - tech

Comprised of machinery and equipment arranged in a sequence. Human interaction with goods is minimal, and each stage of production is as simplified as possible.

+Reducing the chance of human error, therefore producing better quality goods.

+Goods can be made faster

-Upfront costs of the machines which can be quite financially taxing

Robotics - tech

Machines that have been created to perform tasks that are usually done by people, doing dangerous and/or repetitive jobs, but allowing for precision and accuracy.

-Can replace jobs that would have otherwise been done by humans (Redundancies)

+allows for workers saftey

CAD Computer-aided design - tech

A software tool that facilitates the creation and development and creation of designs and creates a database for manufacturing

CAM Computer-aided manufacturing - tech

Software applications that control the manufacturing process and can assist with minimising faults and improving quality and precision.

Ai - tech

A constantly evolving technological development that can replace human labour with machinery capable of intelligence and problem-solving skills. Minimises human errors, and is far more capable of completing tasks precisely without breaks and increases the efficiency of the business organisation.

Online services

A broad term that refers to any services offered online through a website format by a company, where anyone from around the world can purchase their goods and read the provided information.

• expands market

• increases customer knowledge - increases trust

• higher levels of sales and profits

includes booking systems, training courses, feedback forms and online shopping

Materials management

Involves the planning and coordination of all materials that are required for an operations system. The job of a materials manager is to provide the right materials in the right quantities and levels of quality at the right time, at the right price, from the right source.

must ensure that a constant supply of inputs is available for production, storage is minimised, and stock is controlled effectively to reduce overstocking of inventory, while guaranteeing supply ensures steady, continuous production.

Forecasting - materials management

Analyses past data to make informed future predictions, in order to attempt to determine future levels of demand using objective quantitative data.

Factors should be considered:

• supplier lead-in time (prior warning of orders)

• Future price changes (season, world market, changes in aus dollar value)

• not foolproof - difficult to accurately predict future demand

• Anticipates seasonal changes and adjusts orders to save costs

• prevents over-ordering and reduces storage requirements

• requires time to anticipate and analyse potential impacts from supply chain

• can be difficult to select the right forecast method and parameters.

MRS -Materials requirement schedule - Materials management

A statement of what a business intends to produce, in what quantities, and when they are to be produced, allowing the operations manager to analyse production capacity requirements ahead of time and to allocate additional resources if required.

Basic inputs to MPS

• current inventory

• forecast sales

• current orders - quantities and timelines

• quantity to produce and meet orders and forecasts.

• determines order quantities and timing, avoiding waste

• provides clear processes for staff to follow'

• many variables associated, making set-up complex and time consuming

MRP- Materials requirement planning - materials management

A computerised inventory management system, largely demand-oriented, is used to schedule and place material orders, improving efficiency and profitability.

• reduces waste, storage, and labour costs

• expemsive to set up and highly dependant on data

JIT - just in time - materials management

An inventory management system that aims to avoid holding any stock, with supplies arriving just as needed for production and finished products being immediately dispatched

• reduces the amount of money tied up in stock storage

• reduce storage waste and costs - increasing competitiveness

• precise planning

• dependant on supply chain to commit and respond as required

• employee participation needed to identify wasteful practices

Quality management

The degree of excellence of goods or services and their fitness for the purpose for which they are designed. Quality products should be easy to use, reliable, durable and delivered on time.

Quality control - quality management

A reactive (detect and eliminate after they occur) process of checking the quality standards of work done, materials and component parts for problems and defects.

• cheaper

• prevents defective goods being sold

• does not disrupt production

• potential waste of resources

• more employees needed & not all feel responsible of quality

Quality assurance QAS - quality management

A proactive process that may involve an external certification body that aims to build quality into work processes, therefore avoiding errors before their occurrence.

• training of staff

• specific processes to adapt in regard to customer satisfaction, improvement and production processes

• documentation processes

• controls

• corrective action

• auditing of processes

• high initial costs

• time-consuming training staff to meet QA standards

• Enhances motivation

• competitive advantage

• errors prevented, reducing costs

Total quality management TQM - quality management

A proactive and holistic approach where each member is committed to maintaining high standards in every aspect of an organisation’s operations.

• focus on the customer - increase sales, market share, loyalty

• involve all employees - increased retention, empowerment and motivation

• accurate evaluation

• continuous improvement - improved knowledge and skills to increase performance.

• quality improvement

• improved customer satisfaction, productivity, and job satisfaction

• consistently aiming for improvement in processes, products and systems

• requires a whole organisation commitment

• if failed to be fully implemented, partial efforts will fail

Types of waste - TIMWOODS

Transportation

Inventory

Motion

Waiting

Overprocessing

Overproduction

DEfects

Skills

Waste minimisation

Choices that a company makes or practices that they can implement, which reduce the amount of waste they produce in an attempt to improve efficiency and effectiveness of their operations. Will then also help to eliminate harmful waste that can promote a more sustainable society as a whole.

Reduce, reuse, recycle

Lean management

An approach to running a company that supports the idea of consistently attempting to improve the business by removing all activities that do not add value to the product as it is being produced, increasing productivity levels.

4 PRINCIPALS:

• pull -avoid - overproduction

• one-piece flow- efficiency

• takt - meet customer needs

• zero defects - fix problems early

Pull - 4/ lean management

Not producing items until the customer has ordered the product , preventing a build up of unwanted stock being produced.

One-piece flow - 4/ lean management

Aims to complete production of one unit at a time in a continuous flow

(opposite of batch production)

Zero defects - 4/ lean management

Process of identifying production errors or defects at the stage in which they occur, preventing them from being passed on to the next stage of production

Takt- 4/ lean management

(takt = timing in German)

refers to the maximum time required to complete production to meet customer demand.

One-piece flow relies on the takt being carefully calculated to prevent bottleneck congestion, leading to idle time - machines ready to be used but sit empty bc of a bottleneck upstream delay

Global considerations

Decisions that are affected and made by a much larger global market.

Global sourcing on inputs

Purchasing and importing inputs for a good from overseas, as opposed to using products that have been manufactured in Australia

+low cost skilled labour and raw materials

+free trade deals between Australia and other countries

-economically and socially (for aus) it makes sense to limit overseas sourcing.

-need to ensure that practices overseas are ethical

important to weigh up the benefits against the costs, as recalls of products and the damage done to the brand’s reputation can result in lost market share

Overseas manufacture

Labour costs in Australia are higher than those in developing countries, so businesses find it more cost-effective to manufacture overseas

+cheaper - reduce labour and overhead costs

-wont provide Australian jobs

-harder to monitor the quality of manufacturing

Global outsourcing

The contracting of a specific business operation (such as IT support or payroll) to an external person or business located in another country.

Businesses use it to reduce costs, improve efficiency, and gain access to specialised expertise.

TBFIC - Achieve business objectives by:

profit- Icecream formula

Increase market share- Confined itself to SW VIC, leveraging brand recognition and local spending

Improving efficiency- making a product with 0 defects. Efficiency increases as they move to a new factory + new tech

• automated production of pumping product into buckets.

• use of bigger and continuous ice cream churns for greater consistency and fast churning rate

• 4 smaller blast-freezers into 2 larger ones

Improving effectiveness - commitment to outstanding quality of product, dense/high quality = more profit

Fulfilling market need- Uses farm fresh and local ingredients - point of difference

Fulfilling social need- Supports local farmers - milk

TBFIC - cost of introduing new tech

Capital investment needs to be justified with increased revenues and profitability

f the cost of technology does not result in more ice cream being produced, or creates delays, then the cost of implementing technology may not be warranted.

TBFIC - KEY ELEMENTS OF OPERATION SYSTEM: inputs, processes and outputs

INputs = ingredients = milk, cream, sugar, labour, equipment, capital, factory

Processes= actions = Churning/flavouring/packaging ice cream, cleaning factory

OUTputs= Timboon Fine Ice Cream

TBFIC- CHARACTERISTICS OF OPERATION MANAGEMENT (MANU&SERVICE)

• built a new factory, redesigning the manufacturing process to be more effective and efficient

• manufacturing process now has fewer steps 9 to 6 (efficient)

• Can now produce greater amounts of ice cream (effective)

TBFIC - TECH

• online services = website- where to buy, book vans, flavours, info

• social media

• website allows wholesalers/supermarkets to get in touch

TBFIC - MPS (master production schedule)

The bulk of their production occurs from September to April, the time when there is the greatest demand for ice cream.

Production then slows down and sometimes even is stopped for a couple of weeks in the winter months of July/August

MPS at TBFIC take into account:

• past sales data to determine production schedule

• new factory capacity (new consideration)- more storage

• staffing - rostering core and non-core staff

• peaks and troughs of milk production

• peaks and troughs of customer demand

TBFIC - materials requirement plan MRPS

MRP plan derived from the MPS

Determines how regularly the ingredients for the ice cream are delivered and coordinates them so that they can be put into production quickly

• just-in-time

• milk 1-2 per week, cream weekly, skim milk powder monthly

TBFIC - quality control

products and services need to be consistent, fit for purpose, and durable.

QUALITY CONTROL

- uses an app to monitor freezer temp and notifies staff

-The red line painted sets a barrier for street clothes and footwear to prevent contamination

-Positive pressure manufacturing means air cannot move from one room to another, stoping insects from transferring room-to-room

-human taste testing

TBFIC - quality assurance

Where a business receives accreditation from a third-party regulator that certifies that the product complies with health and quality standards.

• DFSV (Dairy food safety vic) -

  Requires TBFIC to have its food safety plan tested monthly for both products and water.

• HACCP (hazard analysis critical control points) - critical to the provision of safe food to the community

These systems give customers confidence that the food they buy and consume is safe

TBFIC - TQM - total quality management

TBFIC empowers staff to follow a TQM - continuous improvement culture

• submit a suggestion about how to improve a procedure, process, policy

• staff meet regularly to do this as a collaborative group

• flavour development

TBFIC - strategies improve efficiency and effectiveness of operations through WASTE MANAGEMENT

REUSE:

• plastic tub

• mobile vans

REDUCE:

• Uses solar power, reducing reliance on grid electricity - money on bills

RECYCLE:

• cardboard packaging that indreigents arrive in is returned to suppliers to be recycled.

TBFIC - 4 lean management to improve the effectiveness and efficiency of operations management

Lean management means production is done without waste of resources

PULL:

• manufacturers seasonally = Pull system - produced September-April

ONE-PIECE FLOW:

• manufacturing one product fully before repeating the process

• Once one flavour is complete, another will be produced

ZERO DEFECTS:

• ensure standards, processes and procedures are so rigorous, staff are consistently aware of their importance in their role in the business so mistakes don’t occur, and if they do, are picked up

• zero defects philosophy

TBFIC - CSR

Philosophy of giving back to the community

• little waste from production

• linking with another business and the council to rebuild a footbridge linking the businesses and rejuvenate parklands

• Uses local and regional suppliers for ingredients

• partnered with local first nations people to produce a special line of ‘bushfood’ flavours to sell at Tower Hill

TBFIC - Global sourcing of inputs

No great scope for global sourcing, except in 2024 when a paper cup supplier could provide cups for a quarter of the price of the Australian supplier. But decided they would stick wth australian resources.