Operations - Y12, Term 1, 2025

Operations management

The process of transforming inputs into outputs and managing production of goods and services.

Strategic role of operations

To achieve long-term competitive advantage through cost leadership or product differentiation.

Cost leadership

Minimising costs so a business can undercut competitors or keep profit margins high.

Product differentiation

Making products unique to stand out from competitors.

Interdependence of business functions

Operations, marketing, finance and HR rely on each other to achieve business goals.

Goods vs services

Goods are tangible and storable; services are intangible and often customised.

Globalisation influence

Increases competition, encourages global sourcing and economies of scale.

Technological influence

Improves efficiency, speed, quality and lowers labour costs (e.g., CAD, CAM, robotics).

Quality expectations

Customers expect products to meet specific standards for their price.

Cost-based competition

Competing mainly on price by lowering costs in operations.

Government policies

Trade, environmental, training or WHS policies that affect operations decisions.

Legal regulations

Laws businesses must follow—WHS, consumer law, environmental protection.

Environmental sustainability

Using resources responsibly to protect the environment for future generations.

Corporate social responsibility

Acting ethically and sustainably beyond legal requirements.

Legal compliance vs ethical responsibility

Legal = required by law; ethical = morally right but not compulsory.

Transformed resources

Inputs that are changed in the process (materials, information, customers).

Transforming resources

Inputs that carry out the transformation (human resources and facilities).

Volume

The amount of output produced; high volume reduces unit costs.

Variety

The range of products; higher variety requires flexible processes.

Variation in demand

Changes in consumer demand; affects capacity and staffing.

Visibility (customer contact)

Extent of customer involvement in the transformation process.

Gantt chart

A bar chart used to plan and track project tasks over time.

Critical path analysis

Identifies the quickest time to complete a project and tasks that determine total time.

CAD

Digital creation of product designs.

CAM

Automated production using machines.

Task design

Breaking work into specific tasks so employees can perform jobs efficiently.

Process layout

Equipment arranged by function; flexible but slower for mass production.

Product layout

Assembly-line layout for mass production of consistent goods.

Fixed-position layout

Project remains in one place during production (ships, bridges).

Office layout

Arrangement of workspaces to maximise efficiency.

Monitoring

Measuring actual performance against planned performance using KPIs.

Control

Comparing performance to targets and taking corrective action.

Improvement

Continuous reduction of waste, bottlenecks and inefficiencies.

Customer service

How well a business meets customer expectations.

Warranties

Guarantees that products will function as promised.

Quality performance objective

Making products consistent, reliable and meeting standards.

Speed performance objective

Quick production and fast service/delivery times.

Dependability performance objective

Reliable quality and timely delivery.

Flexibility performance objective

Ability to change volume or mix of products.

Customisation performance objective

Adjusting products to meet individual needs.

Cost performance objective

Minimising production expenses to increase competitiveness.

New product design and development

Designing and launching goods/services driven by consumer needs or technology.

Explicit services

Tangible aspects of service delivery (time, skill, expertise).

Implicit services

Intangible feelings or emotional benefits (comfort, confidence).

Supply chain management

Managing the flow of inputs → production → distribution to customers.

Sourcing

Purchasing inputs required for production.

Global sourcing

Buying inputs from overseas to lower cost or access better quality.

E-commerce in SCM

Using online systems to source, track and manage supply chain processes.

Logistics

Transporting, storing and distributing inputs and outputs.

Outsourcing

Hiring external providers to perform tasks previously done internally.

Advantages of outsourcing

Lowers costs, increases efficiency, provides specialist skills.

Disadvantages of outsourcing

Loss of control, quality risks, communication issues.

Leading edge technology

New, advanced technology that provides competitive advantage.

Established technology

Proven, reliable, widely used technology.

Advantages of holding stock

Faster delivery, avoids stockouts, bulk buying savings.

Disadvantages of holding stock

High storage costs, risk of obsolescence or wastage.

LIFO

Last-in-first-out inventory method; newest stock sold first.

FIFO

Oldest stock sold first.

JIT

Just-in-time inventory; stock delivered only when needed to reduce waste.

Quality control

Checking for defects after production (reactive).

Quality assurance

Setting standards to prevent defects before production (proactive).

Quality improvement

Continuous improvement of quality over time.

Financial costs of change

Expenses such as equipment, redundancy, retraining.

Purchasing new equipment

A cost of overcoming resistance to change; improves efficiency.

Redundancy payments

Payments required when staff are no longer needed after change.

Retraining

Cost of upskilling employees to adapt to new processes.

Reorganising plant layout

Changing facility layout to improve workflow or fit new technology.

Inertia

Resistance to change due to fear or comfort with old processes.

Intermediate goods

Outputs used as inputs by another business (e.g., flour → bakery).

Economies of scale

Lowering costs by producing large volumes.

Bottleneck

A constraint that slows down the entire production process.

Key KPIs in operations

Lead times, defect rates, inventory turnover, idle time.

Inputs

Resources such as materials, HR, information and facilities.

Outputs

Final goods/services produced through the transformation process.