Business - operations management (sac3)

Operations management

all the activities in which managers engage to produce goods or services

Inputs

resources used in the process of production

Business competitiveness

the ability of a business to sell products in a market

Key elements of an operations system

inputs

processes

outputs

6 categories of inputs

natural resources and materials: includes raw materials, components and parts consumed or converted by the transformation process.

physical resources: includes the plant, machinery, equipment and property necessary to conduct operations.

human resources: refers to people involved in the operations function

financial resources: refers to the funds/money required to commence and continue operations.

information from a variety of sources: contributes to the transformation process. Businesses do not always account for the value of this resource because it cannot be easily quantified as an asset.

time: and its efficient use are critical to all businesses. Coordinating resources within appropriate time frames limits costs and wastage. Operational planning may involve achieving production tasks ranging in duration from one year to merely hours

Transformation processes

the conversion of inputs (resources) into outputs (goods or services)

Outputs

the end result of a business's efforts — the service or product that is delivered or provided to the consumer

Tangibles

goods that can be touched

Intangibles

services that cannot be touched

Technological developments

automated production lines

computer‐aided manufacturing techniques

computer‐aided design

robotics

online services

artificial intelligence

Automated production line

comprises machinery and equipment arranged in a sequence with components added to a good as it proceeds through each step, with the process controlled by computers

Advantages of automated production lines

minimises waste

can improve standardisation

allows a business to produce at faster rates — this will result in higher output and increased productivity

reduced need for human labour allows a business to produce at reduced cost and increased productivity

Disasdvantages of automated production lines

robotics are high-cost forms of technology that can be unaffordable for many small and mediumscale manufacturers.

robotics can be costly to maintain or replace.

training is required so that employees are familiar with using robotics — this will cost the business both financially and in time.

the use of this strategy can lead to the loss of jobs as fewer employees are likely to be required.

robotics can break down, halting production.

Robotics

highly specialised form of technology capable of complex tasks

Computer-aided design (CAD)

a computerised design tool that allows a business to create product possibilities from a series of input parameters

Advantages of CAD

product designs can be produced at a faster rate, without the need for erasing and redrawing.

the designer can produce a two- or threedimensional computerised version of a product.

changes can be made to this before a prototype is made. material choices and associated costs can be explored at this stage.

allows a business to view a design from multiple angles, assisting both the designer and the end user to visualise what will be produced.

Disadvantages of CAD

computer software can crash, resulting in the possible loss of work.

costs of software can be expensive.

the costs and time involved in training staff can deter many businesses from the use of CAD.

the use of this strategy may lead to the loss of jobs as fewer employees are likely to be required.

Computer-aided manufacturing (CAM)

the use of software to direct and control manufacturing processes

Advantages of CAM

allows a business to produce at faster rates at reduced cost

allows a business to produce with greater consistency (each component or finished product will be exactly the same) and greater accuracy (free of errors)

CAM allows a business's manufacturing process to become computer-directed by controlling the process — this will lead to greater efficiency as machines controlled by computers will not need to take breaks

Disadvantages of CAM

computer software can crash, resulting in production stopping.

CAM-enabled machinery is generally designed for a specific task, and is typically not versatile.

CAM systems and machinery are very expensive, requiring a business to make a huge upfront investment.

the costs and time involved in training staff can also deter many businesses from the use of CAM.

the use of these strategies can lead to the loss of jobs as fewer employees are likely to be required.

Procurement

the process of researching and selecting suppliers, establishing payment terms, negotiating contracts, and the actual purchasing of resources that are vital to the operations of the business

Advantages of procurement

can be used to deliver consistent messages to customers and suppliers, and can also be used to gain customer feedback

a website means that a business is accessible for sales 24 hours a day, 7 days a week.

reduces the costs of labour and of leasing or purchasing physical spacea

Disadvantages of procurement

designing, registering and publishing a website may initially be expensive and time-consuming.

websites and applications can suffer outages or 'go down'. This can be very frustrating for customers and a business may lose sales or have its reputation affected.

operating websites and applications can require highly skilled staff, who may be expensive to employ or train.

Materials management involves

recieving materials

storing materials safely

identifying ongoing materials requirements

- by ensuring timely purchase of materials

- by forecasting

reducing holdings on surplus stocks

controlling the release of materials into the production process

Materials management

the strategy that manages the use, storage and delivery of materials to ensure the right amount of inputs is available when required in the operations system

Inventory

goods and materials held as stock by a business

Materials handling

the physical handling of goods in warehouses and at distribution points

Forecasting

a materials planning tool that relies on data from the past and present and analysis of trends to attempt to determine future events

Strengths of forecasting

prevents overproduction by maintaining optimal material levels, avoiding excess inventory costs, and reducing risks like theft, damage, or spoilage.

avoids underproduction by ensuring sufficient inventory for operations, preventing customer loss and market share decline.

Limitations of forecasting

relies on historical trends but cannot predict unforeseen events, making future outcomes uncertain.

involves inherent inaccuracy as forecasting is only an educated estimate rather than a precise prediction.

Production plan

an outline of the activities undertaken to combine resources (inputs) to create goods or services (outputs)

Master production schedule

a plan that details what is to be produced and when

Materials requirement planning

involves developing an itemised list of all materials involved in production to meet the specified orders

Strengths of MPS and MRP

balances production levels to prevent costly excess inventory or disruptive shortages, ensuring smooth operations.

uses a master production schedule (MPS) to forecast business needs and plan required materials in advance.

adapts to demand changes by allowing adjustments in production through MPS and MRP systems.

supports flexibility by enabling scheduled adjustments when introducing new products.

enhances efficiency with MRP by accurately estimating material needs and delivery timelines, helping control costs.

Limitations of MPS and MRP

dependent on data accuracy: errors in input information can lead to flaws in materials planning.

high implementation costs: requires investment in software, resources, and employee training.

potential rigidity: over-reliance on schedules may reduce adaptability to sudden changes or disruptions.

inflexibility once initiated: committed orders and set work schedules make last-minute adjustments difficult.

Inventory control

ensures that costs are minimised and that the operations system has access to the right amounts of inputs when required

Just in time

a materials management strategy that ensures that the right amount of material inputs will arrive only as they are needed in the operations process

Strengths of Just in time

lowers storage costs by minimizing inventory, improving operational efficiency

reduces capital tied up in inventory through just-in-time material acquisition

minimizes waste risks by decreasing exposure to stock damage, loss, or obsolescence

maintains production continuity by ensuring materials arrive precisely when needed

Limitations of Just in time

requires dependable suppliers: late deliveries disrupt production due to minimal buffer stock.

demands precise timing: materials must arrive exactly when needed to avoid halting operations.

may raise shipping costs: frequent small deliveries can increase transportation expenses.

needs systemic restructuring: JIT implementation often requires costly and time-consuming operational changes.

Quality

the degree of excellence of goods or services and their fitness for a stated purpose

Quality control

the use of inspections at various points in the production process to check for problems and defects

Quality assurance

the use of a system so that a business achieves set standards in production

Total quality management

an ongoing, business-wide commitment to excellence that is applied to every aspect of the business's operation

Quality circles

groups of workers who meet to solve problems relating to quality

Continuous improvement

an ongoing commitment to achieving perfection

Waste mimimization

a process involving the reduction of the amount of unwanted or unusable resources produced by a business in an attempt to improve the efficiency and effectiveness of operations

Waste minimization strategies

reducing waste at the source

redesigning products and packaging

procurement of materials made from recycled materials

reusing scrap material

improving quality control

exchanging waste with other businesses

recycling waste materials.

reduce - reuse- recycle

Lean management

an approach that improves the efficiency and effectiveness of operations by eliminating waste and improving quality

Four principles application of lean management

pull

one piece flow

tact

zero defects

Strengths of lean management

reduced energy and resource consumption

reduced delays

increased worker productivity

reduced uncertainty

increased customer satisfaction

Limitations of lean manegement

requires committed and experienced employees

employees may resent the change to lean or may prefer not to provide any input

the constant focus on improvement and elimination of waste can result in workplace stress

requires good relationships with suppliers

can involve high implementation costs

Environmental sustainability

a business making decisions that will allow it, and the rest of society, to continue to interact with the environment

Global sourcing

the practice of seeking the most cost-efficient materials and other inputs, including from countries overseas

Strengths of global sourcing

reduces costs

the opportunity to learn how to do business in a potential market

accessing skills or resources that are unavailable domestically

developing alternative suppliers/ sources of inputs

increasing capacity of total supply

Limitations of global sourcing

hidden costs associated with different cultures and time zones

exposure to potential high risk, both financial and political long lead times (for manufactured goods)

the risk of ports shutting down and interrupting supply difficult to monitor the quality of inputs

Overseas manufacture

the production of a good in a country that is different to the location of the business's headquarters

Global outsourcing

the contracting of a specific business operation to an external person or business in another country

Strengths of global outsourcing

improved quality because of access to expert knowledge and high-quality service

the business is able to focus on its core activities

costs can be reduced (for example, instead of employing a full-time driver, a business can use contracted drivers as required)

production may be quicker as the outsourced provider should be able to focus on the task they specialise in.

Limitaations of global outsourcing

management may have less control over the production process.

it may be difficult to maintain quality.

loss of local jobs and career prospects (sometimes resulting in low morale in the local workforce)

there may be security and confidentiality issues.

there may be communication issues that lead to customer service problems.