Business: operations

Identifying competitive advantage

Strategies used by a business to gain an edge over its competitors

Strategic role of operations management

Holistic and overarching contribution of the transformation process to the achievement of operational objectives = involving pursuit of engineering a competitive advantage to maximise profitability

Cost leadership

Aiming to have the lowest costs or to be the most price competitive in their market ie. Offering value for money

How to achieve cost leadership

1. Achieving economies of scale = ↓ per unit cost of production

2. Implementing technology =↑ output or ↓input

3. Control of production costs

4. R&D = innovation and development of new production techniques, new materials, and reductions in waste

Product differentiation

Developing and promoting difference between a business's products to those of the competitors = ↑ price and build brand loyalty

How to differentiate products

Product features = distinguish them from others in the market, innovative design , quality, service, brand image, convenience, augmented features

Operation performance objectives

Goals that relate to particular aspects of the transformation function and be allocated to particular key performance indicators in the following areas

QFCCoDeS

Quality

Quality of conformance ( now well the good or service meets a prescribed standard with certain specifications ), design ( how well a good is made or a service is delivered ), service ( reliability, meeting needs, timelines of delivery)

QCoDeS

Speed

The time it takes for the operation processes to respond to changes in market demand / consumer demand, time taken to complete transformation process, reducing wait times, short lead times = ↑ sales opportunities

Dependability

How consistent and reliable a business products are, how reliably operations processes can meet customer expectations

Flexibility

Adaptability of operation processes to changes in the market and how quick it can adjust, can be achieved by increasing the capacity / flexibility of the production process, or increasing number of service providers, skill level, technology

Customisation

Individualised products to meet consumer / specific market need

Cost

Minimisation of expenses so that operation processes are conducted as cheaply as possible, minimisation of cogs, and expenses within the operations process to achieve cost leadership, idea to lower production costs and expenses as much as possible without trading off quality

Inputs

Transformed resources = inputs that are changed or converted in the operations process

Transforming resources = inputs that carry out the transformation process

Transformation process

The business processes that involve adding value through transformation of inputs into outputs, ‘ production ‘ of goods or services

Outputs

Good or service, good = tangible product, service = intangible product

Operations strategies

Quality management, supply chain management, inventory management

Qualify management

Concept that focuses on managing the total business to deliver quality to consumers, business wide commitment to excellence that is applied to every aspect of the business's operation: quality control, quality assurance, quality improvement

Quality control

Use of inspections at various points in production process to check for problems / defects before they happen in the process

Quality assurance

Use of a system to ensure all set standards are achieved in production, preventing defects before they happen in the process

Quality improvement

Ongoing commitment to improving good and / or service = continuous improvement as business's will improve quality of its products over time: sourcing higher quality inputs, technology upgrades, staff training, combines the collective talents, learning and experience within a company and by engaging stakeholders to create a platform for improvement

Supply chain management

Integrating and managing flow of supplies throughout the inputs, transformation process, and outputs to best meet customer needs, overall aim = make sure customers needs are met, represents an effort by suppliers to develop and implement supply chains that are as efficient and economical as possible, sourcing, logistics, distribution

Sourcing

The purchase of inputs for the transformation process, choice of supplier influenced by consumer demand, quality of inputs required, flexibility and timelines of supply, cost of supplier,

Global sourcing

Businesses purchasing supplies or services without being constrained by location

Logistics

Transport, storage, warehousing, materials handling and packaging

Transport

Logistics concerned with the physical movement of inventory

Storage

Finding a secure place to hold stock until it is required

Warehousing

Use of warehouses for the storage, protection and later, distribution of stock

Materials handling and packaging

Enables safe movement and storage of certain goods - specifically hazardous / fragile material

Distribution

Ways of getting the goods or services to a customer

Distribution centre

Specialised warehouse used for receiving, storing, and wholesale distribution of goods

Inventory management

Process of ordering, storing, using, and selling a company's raw materials, components, and finished products

Inventory/stock

Amount of raw materials, work in progress, and finished goods that a business has on hand at any particular point in time

Just in time

An inventory management approach which ensures that the exact amount of material inputs will arrive only as they are needed in the operations process

Advantages of holding stock

• Reducing lead times between order and delivery

• Making products in bulk may reduce costs as there are economies of scale in purchasing inputs

• Gives the opportunity for business to generate immediate revenue

Disadvantages of holding stock

• Costs associated holding stock, including storage charges, spoilage, insurance theft and handling expenses

• The cost of obsolescence, which can occur if stock remains unsold