5 - Operations Management

What is Operations Management?

The provision of goods and services in the right quantities and quality, in a cost-effective and timely manner.

What are the Five Ms in operations management?

Manpower, Machines, Materials, Methods, and Money.

What is the importance of production methods?

They affect the quality and individuality of the product and determine pricing strategies.

What are the Human Resource Management implications of production methods?

Changes in workforce size, training and development needs, and recruitment challenges for skilled workers.

What are some financial implications of operations management?

Investment in machinery, need for investment appraisal, contingency funds for emergencies, and labor costs.

What does the primary sector involve?

Businesses involved in the extraction, harvesting, and conversion of natural resources.

What is the role of the secondary sector?

Businesses that are engaged in the manufacturing or construction of products.

What does the tertiary sector specialize in?

Provision of services to the general population.

What is the focus of the quaternary sector?

Intellectual and knowledge-based activities that generate and share information.

What is a key ethical consideration in business operations?

Diversity and inclusion policies ensuring that everyone feels valued by the firm.

What needs to be developed for operational crises in HR management?

Contingency plans.

What does investment appraisal assess?

Different investment options and the financial viability of significant fixed costs.

What is Job Production?

Creating an individual product tailored to specific customer needs from start to finish.

What are the advantages of Job Production?

High quality of production, motivated workers, uniqueness of products, flexibility in design.

What are the disadvantages of Job Production?

Labor intensive, time-consuming, long working capital cycle, and few economies of scale.

What is Batch Production?

Producing a limited number of identical products with work completed on each batch before switching to another.

What are the examples of Batch Production?

Bakeries making bread, footwear manufacturers producing shoes, and electrical appliances for different markets.

What are the advantages of Batch Production?

Cost-effectiveness, flexibility, efficient quality control and waste reduction.

What are the disadvantages of Batch Production?

Inflexibility in changing batches, high storage costs, repetitive jobs leading to boredom, and high production costs.

What is Mass Production?

The manufacturing of large amounts of standardized products often involving automated assembly processes.

What is Flow Production?

Continuous production process focusing on manufacturing standardized products in large quantities, relying on automation.

What are the advantages of Mass/Flow Production?

Large-scale output, economies of scale, standardized quality, low labor costs, and specialization of workers.

What are the disadvantages of Mass/Flow Production?

Low motivation due to repetitive work, major delays from equipment breakdowns, inflexibility in production changes, and high capital costs.

What is Mass Customization?

Producing large quantities while tailoring products to meet customer preferences.

What factors influence the choice of production methods?

Relative cost of labor and capital, size of the market, and corporate objectives.

What is Labour-intensive Production?

Using a greater proportion of labor than any other factor input to produce goods or services.

What is Capital-intensive Production?

Industries with high capital costs relative to labor costs, allowing for high output but lacking unique selling propositions.

What does Force-Field Analysis help with in operations management?

Analyzing driving and restraining forces affecting operational decisions, like implementing mass customization.

What ethical consideration arises from capital-intensive strategies?

The ethical implications of making people redundant while pursuing efficiency and scalability.

What is the societal backlash against production methods since the Industrial Revolution?

Increasing awareness and concern over mass consumerism and production impacting ethical sustainability.

What are the main features of lean production?

Less waste and greater efficiency.

What does Kaizen mean in the context of lean production?

Kaizen is a Japanese philosophy of making small and continuous improvements to increase efficiency and productivity.

What does JIT stand for and what is its purpose?

Just-in-Time; a stock management method that delivers stocks as needed, holding only minimum levels of stock.

What is the focus of Total Quality Management (TQM)?

The dedication of everyone in the organization to achieve quality standards, with quality seen from the consumer's perspective.

What is benchmarking?

The comparison of products, operations, processes, and financial data of a firm with others in the same industry, especially market leaders.

What are the benefits of implementing Quality Assurance?

It improves staff morale through participation, generates new ideas for improvement, and reduces wastage from reworking faulty products.

List two methods of managing quality discussed in the lecture.

Quality circles and benchmarking.

What is the impact of Total Quality Management on an organization?

Improved employee motivation, reduced waste, improved corporate image, and competitive advantage.

What is meant by 'muda' in lean production?

Muda refers to waste in the production process that does not add value.

What are the features of cradle to cradle (C2C) design?

A sustainable model of production based on natural processes that benefit the environment.

What factors generally influence the location of a business?

Factors influencing location include quantitative factors (like availability and cost of land and labor) and qualitative factors (such as management preferences and local knowledge).

What are quantitative factors affecting location decisions?

Quantitative factors include availability, suitability and cost of land; cost and availability of labor; proximity to markets and raw materials; government incentives; and feasibility of e-commerce.

Why do businesses consider proximity to the market when selecting a location?

Businesses choose locations near markets for convenience, especially in retail and service industries, and to reduce high transportation costs for bulk-increasing industries.

What is the significance of government incentives in location decisions?

Governments may attract businesses to certain areas by offering financial incentives, particularly in enterprise zones, while unfavorable regulations can drive firms to relocate.

What are qualitative factors affecting location decisions?

Qualitative factors include management preferences, local knowledge, infrastructure, political stability, government restrictions, ethical issues, and clustering for comparison shopping.

How does political stability affect location decisions?

Political stability is crucial, as instability can disrupt business operations, regardless of other favorable location factors.

What is outsourcing?

Outsourcing is the practice of transferring business functions to an external firm within the same country.

What does reshoring mean in the context of production location?

Reshoring refers to bringing back previously offshored business functions to the home country.

What are the advantages of outsourcing?

Advantages of outsourcing include improved quality output, reduced costs, focus on core activities, and increased workforce flexibility.

What are some disadvantages of outsourcing?

Disadvantages include potential sub-standard quality, difficulties in quality management, increased supervision time, potential redundancies, and negative ethical perceptions.

What is STEEPLE analysis?

STEEPLE analysis examines external factors affecting business decisions, including Social, Technological, Economic, Environmental, Political, Legal, and Ethical factors in location decisions.

What are some reasons for insourcing?

Firms may insource if the quality of outsourced work is sub-standard or if cost-saving benefits of subcontractors no longer exist.

What is clustering in business location?

Clustering refers to firms locating near other businesses that cater to similar or complementary markets to enhance customer access and sales.

What are some qualitative factors involving local infrastructure in location decisions?

Infrastructure includes essential facilities needed for operations, which can influence employee commuting and overall business efficiency.

Why might a company choose to reshore its operations?

Reasons for reshoring include better quality supervision, government support to bring jobs back, and rising transportation costs making local production more logical.

What is the Break-even Point (BEP)?

The level of sales at which total revenue equals total costs, resulting in neither profit nor loss.

How do you calculate Contribution per unit?

Selling price - Variable cost.

What is the formula for total revenue (TR)?

TR = Price x Quantity.

What does Margin of Safety measure?

The amount by which demand exceeds the break-even quantity.

What is the formula for calculating the break-even quantity using variable costs?

Break-even quantity = Fixed Costs / Unit Contribution.

Why is break-even analysis important for businesses?

It helps determine the level of sales needed to cover costs and informs pricing and production decisions.

What financial information does Bea need to know to determine her target profit?

How much profit she might make, how many units to produce, and how much to charge for the selling price.

What are potential limitations of break-even analysis?

Assumptions about linear cost and revenue functions, static nature in a dynamic business environment, data quality issues, and ignoring qualitative factors.

How can changes in price or cost affect the break-even quantity?

An increase in costs or a decrease in price raises the break-even quantity, while a decrease in costs or an increase in price lowers it.

What are the three methods of determining the break-even point?

Unit contribution method, Total revenue = Total cost method, and Drawing a break-even chart.

What is the difference between Just-In-Time (JIT) and Just-In-Case (JIC) stock control methods?

JIT focuses on minimizing stock levels and receiving goods as needed, while JIC maintains larger inventories to safeguard against supply and demand fluctuations.

What does SCM stand for and what does it refer to?

Supply Chain Management; it refers to managing the sequence of activities from production to delivery of goods to customers.

What are two advantages of Just-In-Time (JIT) stock control?

Reduces costs of holding stock and improves cash flow.

What is the main purpose of stock control charts?

To graphically illustrate a system of stock control, showing maximum stock level, reorder level, buffer stock, reorder quantity, and lead time.

What does the capacity utilization rate measure?

The output level of a firm as a percentage of its potential output, indicating productive efficiency.

What are the drawbacks of high capacity utilization?

It can lead to minimal maintenance time, increased stress on the workforce, and limit suitability for growth.

What is the defect rate in production?

The proportion of substandard output relative to overall production, indicating waste and inefficiency.

How does the cost to make (CTM) differ from the cost to buy (CTB)?

CTM includes fixed and variable costs associated with manufacturing, while CTB is the price paid to an external supplier.

What are some influences on the amount of stock held by a firm?

Factors include product type, forecast level of demand, lead time, and cost of holding stock.

What is the critical path in project management?

The sequence of stages determining the minimum time needed for an operation, such as baking bread in a bakery.

What is a crisis?

A crisis is a situation of instability that results in major problems for a business, often unexpected and requiring quick decisions.

What distinguishes crisis management from contingency planning?

Crisis management is reactive, responding to immediate crises, while contingency planning is proactive, preparing for potential future crises.

What are four key factors that affect effective crisis management?

Transparency, Communication, Speed, and Control.

Why is transparency important during a crisis?

Transparency (being open and honest) prevents further damage to the firm's reputation.

How does communication affect crisis management?

Effective communication with stakeholders is critical for managing a crisis, ensuring timely contact with emergency services and others.

Why is speed crucial in a crisis situation?

A rapid response is critical to reducing the impact of a crisis and managing it effectively.

What leadership qualities are important during a crisis?

Leaders must control the situation, communicate effectively, make quick decisions, and work well under extreme pressure.

What are some benefits of contingency planning?

It can minimize financial damage, save valuable time during a crisis, reduce risk, and reassure employee safety.

What are some drawbacks of contingency planning?

Opportunity costs, potential inaccuracy of plans, and the necessity of regular risk assessment reviews.

What was a major consequence of the United Airlines incident in April 2017?

UA's market value fell by $1 million due to damage to its reputation.

What is Research and Development (R&D)?

An ongoing effort to develop or improve products and services, typically involving teams of skilled scientists and engineers.

What is the purpose of R&D?

To provide continual advancement and launch new products to satisfy customer needs in a profitable way.

What are sunrise industries?

Industries that have enormous growth potential, often benefiting greatly from research and development.

What is an example of a drawback of R&D in sunset industries?

R&D expenditure in sunset industries is unlikely to be profitable.

What types of customer needs can R&D address?

Known needs (market-oriented) and unknown needs (product-oriented).

What are the main types of Intellectual Property Rights (IPRs)?

Patents, copyrights, and registered trademarks.

What is incremental innovation?

Minor improvements to products or work processes that are more affordable, less risky, and less disruptive.

What is radical innovation?

Major and disruptive innovations that involve high risks and can provide a competitive advantage.

What is a benefit of protecting intellectual property rights (IPR) in differentiation strategy?

It allows firms to charge premium pricing for their unique products.

What are the ethical implications of R&D?

R&D can have ethical implications, especially related to automation and job elimination.

What is data analytics?

The process of transforming raw data into usable information for businesses.

What defines a database?

A computerized system that makes it easy to store, search, and select data.

What was the 2022 cyberattack experienced by Optus?

A cyberattack that led to the theft of personal data of about 10 million customers.

What does cybersecurity protect against?

Protection of computer systems and networks from unwarranted information disclosure, theft or damage.

What is cybercrime?

Any illegal activity carried out using computers or the internet.