Chapter 3

Operations

Operations

• Refers to the actual work done transforming inputs into finished outputs

Operations Management

• Essential for businesses to remain competitive

• The management of resources and functions within a business to achieve efficient output of finished goods or services in a way that adds value to customers and creates a profit margin for the business

• Coordinating and organizing activities for producing goods/services

Effectiveness

• The extent to which a business achieves its stated objectives

• An increase positively impacts business performance and achievement of objectives

Efficiency

• How productively a business uses it resources to produce a good or service in order to achieve objectives

• An increase positively impacts business performance and achievement of objectives

Productivity

• The number of goods or services that are produced compared to the number of resources used in the production process

Inputs

• The resources used by a business to produce goods and services.

• Some resources are owned by the business, while others are from suppliers.

Includes:

• Labour resources

  • employees & people involved in the processes

• Materials

  • raw materials, components and parts consumed or converted by the processes

• Capital Equipment

  • the machinery, equipment and property necessary

• Time

  • its efficient use & coordinating resources within an appropriate time frame limits costs and wastage

• Information

Processes

• The actions performed by a business to transform inputs into outputs

• Will differ depending on what the business is producing

• Can mean physical changes or the conversion of resources into services

INCLUDES:

• Mixing

• Designing

• Baking

• Computing

• Assembling

• Constructing

• Interaction for customers (service businesses)

Outputs

• Final goods or services result from a business's operations system, delivered to customers.

• Outputs must meet customer expectations for quality, cost, and availability.

• Output quality is influenced by input and process quality.

Manufacturing Business

• Use raw materials and resources to produce a finished tangible good.

Service Business

• provide intangible products, usually with the use of specialised expertise.

Computer-Aided Design (CAD)

• A digital design tool that enables businesses to generate and modify technical illustrations of a product.

• Helps designers make 3D designs faster for businesses like car makers and fashion brands.

Computer-Aided Manufacturing (CAM)

• A software used to control and direct the production process by controlling machinery and equipment through a computer.

• Provides instructions to machines and tools during production, allowing them to operate automatically.

Artificial Intelligence (AI)

• Involves using computerised systems to simulate human

  intelligence and mimic human behaviour.

• Enables machines to function autonomously by analyzing data, recognizing patterns, and problem-solving independently.

Automated Production Lines (APL)

• Consist of machinery arranged sequentially to develop products through various steps.

• Each station performs specific operations, replacing human tasks, especially those that are repetitive, mundane, or hazardous.

• May still require human monitoring, maintenance, and part supply, robotics are often integrated into the process to handle dangerous, repetitive, or complex tasks.

Online Services

• Services that are provided through the Internet and include booking platforms, online marketplaces, food ordering, price comparison, and cloud storage.

• Businesses benefit from increased customer reach, continuous operation, and improved communication with customers for feedback and inquiries.

Forecasting

• Is a materials planning tool that predicts customer demand for an upcoming period using past data and market trends.

Master Production Schedule (MPS)

• A plan that outlines what a business intends to produce, in its specific quantities, within a set period of time.

• Aligns production with customer demand

• Specifies production details like location, timing, and quantity

• Assists managers in determining materials, machinery, and labor needed to meet targets

Materials Requirement Planning (MRP)

• Lists the materials needed to meet production targets set out in the MPS

• Creates detailed plan of exact materials required

• Helps managers determine what materials to order in appropriate quantities

Just In Time (JIT)

• An inventory control approach that delivers the correct type and quantity of materials as soon as they are needed for production.

• Minimizes stock on hand to reduce storage costs

• Prevents stock from being damaged or expiring

Quality Control

• Inspections at various stages of the production process to ensure products meet designated standards and unsatisfactory products are discarded.

Quality Assurance

• Involves achieving a certified standard of quality in production.

• It's achieved through assessment by an independent body against national or global standards.

• This strategy is proactive, aiming to improve work processes and prevent errors.

Total Quality Management (TQM)

• Involves continuous improvement for customer satisfaction.

  Features

  • Customer focus:

    • Identifying and fulfilling customer needs.

  • Continuous improvement:

    • Evaluating processes for higher standards.

  • Employee empowerment:

    • Fostering teamwork and participation.

Waste Minimisation

• The process of reducing the amount of unused material, time or labour within a business.

• involves actively reducing the amount of defective, unused, returned or discarded materials by a business

• Time waste:

• Labor waste:

• Material waste:

• Product waste:

Types of Waste

Time waste

• Occurs during resource or product transportation and delays between production stages.

Labor waste

• Happens when employees lack work during production or highly skilled workers are assigned unnecessary tasks.

Material waste

• Occurs when current inventory isn't used for production.

Product waste

• Arises from defects, overproduction, or surplus unsold items.

Lean Management

• The process of systematically reducing waste in all areas of production while improving customer value.

• Involves identifying and eliminating waste across operations.

• Implemented through principles like pull, one-piece-flow, takt, and zero defects.

• Aims to streamline processes and improve efficiency.

Pull

• Products are only made when in demand

• Customers determining the number of products a business should produce for sale

One-Piece-Flow

• A single product moving through all stages of production one at a time.

Takt

• Synchronising production steps to meet customer demand.

• No delays in between

Zero Defects

• Preventing defects from occurring in the production process.

CSR Considerations For Inputs

• It is the process of identifying how the business can improve the environmental sustainability of its natural resources.

• Managers have to consider sacrificing cheapest production costs for eco-friendly inputs

• Source from local suppliers to cut transport emissions

• Choose suppliers with sustainable methods for natural resources

• Implement forecasting and just-in-time to prevent overordering

• Invest in energy-efficient machinery for production

• Install reusable and clean energy sources

CSR Considerations For Inputs (Strategies)

CSR Considerations For Processes

• Implementing CSR in the operations processes can make a business more efficient and effective by reducing waste and improving its reputation.

• Employ precise and consistent technology to minimize errors

• Capture and recycle excess input materials for reuse in production

• Utilize just-in-time and lean management to cut unnecessary material waste

• Eliminate harmful chemicals from waste

• Safely dispose of untreated harmful waste

CSR Considerations For Processes (strategies)

CSR Considerations For Outputs

• Businesses must ensure that goods and services produced does not cause harm to the wider community AND any output produced creates minimal waste and environmental damage.

CSR Considerations For Outputs (strategies)

• Develop environmentally friendly alternative products

• Create products with recyclable elements

• Minimize plastic usage in packaging and product creation

• Deliver products in bulk to retailers to cut carbon emissions

• Provide incentives for customers to return products for proper recycling

Supply Chain Management

• The coordination of the flow of goods and services from raw materials to delivering final products to customers

• Ensures timely delivery of materials/products to right locations in required quantities

• Continuous flow between suppliers, manufacturers, wholesalers, retailers, and customers

• Competitiveness relies on cost-effectiveness and efficiency in supply chain management

Global Sourcing Of Inputs

• Acquiring raw materials or resources from overseas suppliers

• Businesses often implement global sourcing for inputs unavailable domestically or for cost savings

• Overseas sourcing may offer cheaper raw materials due to lower operating costs like wages

Global Sourcing Of Inputs (Factors to consider)

• The price of raw materials and resources differing from each country.

• Delivery costs varying due to the different distances between countries.

• The environmental impact of different methods used by suppliers to extract raw materials

Overseas Manufacture

• Is producing goods or services in a location outside of a business’s

• Used to produce goods in high quantities at lower cost

• Businesses establish own manufacturing plant in foreign country for control over operations and quality assurance

Global Outsourcing

• Transferring specific business activities to an external business in an overseas country.

• Provides access to a broader range of specialized businesses

  Examples:

  • Technology support outsourced to IT firms

  • Finance activities outsourced to accounting firms

  • Operations system outsourced to manufacturing factories for cost savings and quality assurance