Business Operations and Human Resources

Business Operations

## Supply Chains

  • Supply chains are the processes required to make a finished product or service available to the customer.

  • The chain begins with the provider of raw materials (supplier) and ends with the firm that sells the finished product.

  • Members of a supply chain typically include suppliers, manufacturers, distributors, and retailers.

  • The reliability of suppliers is critical. Late or shoddy goods can have knock-on effects further down the chain.

  • A distributor buys products from a manufacturer and sells them to other businesses or consumers.

  • A retailer sells products directly to consumers.

  • Factors to consider when choosing suppliers:

    • Price: The total cost of getting the product. Firms must decide how much they are willing to pay, balancing cost with quality.
    • Quality: Consistent quality is essential. Poor quality reflects badly on the company selling the product.
    • Reliability: Suppliers need to deliver high-quality products on time or give ample warning if they cannot.

  • Business Example: A seat supplier for Thai Airways was late or failed to deliver, causing Thai Airways to lose the use of five airplanes for 18 months while they found a new supplier.

    Procurement and Logistics

  • Procurement means finding and buying things a firm needs from suppliers outside of the firm (e.g., materials for a clothes manufacturer).

  • Logistics means getting goods or services from one part of the supply chain to another (e.g., transporting materials to a factory).

  • Effective procurement and logistics improve business efficiency, ensuring supplies are available when needed, reducing waste, and cutting overall costs.

  • Companies that manage their supply chains effectively can:

    • Build good relationships with suppliers for efficient and cost-effective processes.
    • Find the best price and value from various suppliers.
    • Reduce waste and unnecessary costs by only buying needed supplies and optimizing delivery.
    • Operate more efficiently and have faster production times.

    Production Methods

  • Job Production:

    • Manufacturing individual, unique products to customer specifications.
    • Requires retooling the factory for each new product.
    • High labor-to-capital ratio and skilled labor.
    • Workers are likely to be better paid and more motivated.
    • Expensive, time-consuming, and high quality.
    • Examples include shipbuilding, bridge building, handmade crafts, and made-to-measure clothes.

  • Flow Production:

    • Manufacturing many identical products as efficiently as possible along an assembly line.
    • Continuous production, often 24 hours a day.
    • Highly capital-intensive, using robots and machinery.
    • Used for mass-market products; sometimes called mass production.

    Lean Production and Stock Management

  • Lean Production: A strategy to make production more efficient and minimize waste. Workers are encouraged to improve productivity.

  • Just-in-Time (JIT):

    • A form of lean production aiming to keep stock levels to a minimum, ideally zero.
    • Raw materials come in, are made into products, and go straight out for delivery.
    • Reduces the cost of keeping stock but requires coordination between the firm and its suppliers.
    • Firms take frequent deliveries of stock and buy small quantities, losing out on purchasing economies of scale.

  • Just-in-Case (JIC):

    • Operating a production and distribution system with buffer stocks at every stage.
    • Ensures enough stock to satisfy demand, even if there is a supply shortage.

    Quality

  • Products should be of good quality, meeting customer expectations and industry standards.

  • For services, the service needs to be of good quality.

  • Good customer service is essential.

  • Benefits of Good Quality:

    • Higher prices
    • Increased sales
    • Better reputation and image

  • Consequences of Poor Quality:

    • Reduced sales
    • Extra costs to fix mistakes
    • Product recalls
    • Negative impact on reputation and image

  • Business Example: Whirlpool recalled millions of tumble dryers due to safety concerns, offering replacements or refunds, which was very costly.

    Measuring Quality

  • Firms need to clarify what good quality means to them and find ways to measure it.

  • Methods to measure quality:

    • Specifying physical properties of a product (size, color, ingredients, etc.).
    • Monitoring product returns and customer complaints.
    • Conducting customer surveys.

  • Quality Control:

    • Checking products as they are being made helps identify quality problems.
    • Products are checked at different stages of the production process.
    • Random samples are taken to check the quality of work in progress.

  • Total Quality Management (TQM):

    • Aims to make quality the responsibility of every employee.
    • Focus on getting things right the first time to reduce waste.
    • Emphasizes the quality of after-sales service.
    • Takes a long time to introduce and requires training.

  • Rapid growth can make it harder to maintain quality standards.

    Customer Service

  • Firms need to provide the right service to keep customers happy.

  • Sales process steps:

    • Finding potential new customers
    • Approaching potential customers
    • Assessing customer needs
    • Presenting the product and persuading the customer
    • Closing the sale
    • Following up

  • Firms should provide great customer service throughout the sales process.

  • Staff should know the firm’s products inside out.

  • Ensure that any experience customers have is as positive as possible.

  • Some products might need to be serviced throughout their lifespan.

    Technology and Customer Service

  • Technology has allowed firms to develop their customer service.

  • Companies may buy and sell their goods online via e-commerce.

  • Many firms include 24-hour ordering on their websites.

  • Many sites provide answers to frequently asked questions (FAQs).

  • Some firms let customers set up online accounts so they can access services on the web.

  • Businesses can use social media to communicate with customers.

  • It's really important that businesses respond quickly and politely to any questions or complaints.

  • Comments on social media may be seen by thousands of other people within minutes, so it's really important that businesses respond quickly and politely to any questions or complaints.

  • Poor customer service can lead to dissatisfied customers, spread by word of mouth, and cause damage to the firm’s reputation and falling revenue.

    Conclusion on Operations

  • Businesses have to work really hard at keeping everything running smoothly so that customers are kept happy.

  • Operations are the processes that make a business tick—if these processes break down, the whole business can suffer.
    # Human Resources
    ## Organisational Structure

  • An internal organisational structure is important for a firm to keep track of how employees are organised.

  • This makes it easy for everyone in the business to know who is responsible for what.

  • Hierarchical Structure:

    • Structured in layers with four basic levels:
      • Directors (responsible for strategy)
      • Managers (organise the carrying out of the directors' strategy)
      • Supervisors (ranked below managers)
      • Operatives (given specific tasks)
    • The chain connecting directors to operatives is called the chain of command.
    • Responsibility is delegated to people in the level below.
    • Span of control is the number of workers who report to one manager.

  • Tall Organisational Structures:

    • Long chain of command with more layers of management.
    • Narrow span of control.

  • Flat Organisational Structures:

    • Each manager has a wide span of control.
    • Communication can be much faster

  • Communication within a business can be affected by the organisational structure.

    Centralised and Decentralised Organisations

  • Firms need to decide how much power to give to people at each layer.

  • Centralised Organisations:

    • All major decisions are made by one person or a few senior managers at the top of the hierarchy.
    • Can slow down decision-making and communication.

  • Decentralised Organisations:

    • The authority to make most decisions is shared out.
    • Employees can use expert knowledge to make decisions.
    • Inconsistencies may develop between departments or regions.

  • Firms often start with a centralised structure but decentralise as they get too big.

    Functional Areas of a Business

  • Examples of functional areas are sales, marketing, customer service, operations, finance, and personnel.

  • The main advantage is that specialists can concentrate on their particular job.

  • The main disadvantage is that the different departments may not work well together.

  • Businesses can also be organised into different sectors or divisions.

  • The divisions may be regional or national, spreading management between regions.

    Types of Employment Contracts

  • A legal agreement between an employee and an employer, including:

    • The job title
    • The starting date of the employment
    • The hours of work, the starting pay, and the regular date of payment
    • Where the employee will be working
    • The holiday the employee's entitled to
    • Details of sickness pay and any company pension
    • Information about disciplinary procedures
    • The length of notice the employee has to give if they want to leave

  • Full-time:

    • Usually means around 35-40 hours a week.

  • Part-time:

    • 'Less than a full working week'—usually between 10 and 30 hours per week.

  • Job-sharing:

    • The employees share the work and pay of one full-time job with another person.

  • Zero-hour Contracts:

    • Employers do not guarantee employees any hours of work, and the employees do not have to accept any work that is offered to them.

    Recruitment

  • Involves job analysis, advertisement, and selection.

  • Job analysis is where a firm thinks in depth about every little detail of the job in question.

  • The business then advertises the job.

  • Job description:

    • Includes the formal title of the job, the main purpose of the job, the main duties plus any occasional duties

  • Person specification:

    • lists the qualifications, experience, skills, and attitudes needed for the job.

  • Recruiting Internally

    • A process for filling job opening by looking at current employees.

  • Recruiting Externally

    • A process for filling job openings by looking at people outside of the business

    Selection Process

  • The selection process then helps compare these candidates and decide which one is best for the job.

  • Businesses usually ask candidates to send a written application for a job.

  • Many businesses also ask candidates to fill in an application form.

  • The best applicants are invited for an interview with at least one manager.

  • Tests

    • Skills assessment measure candidates abilities related ti job's performance
    • Aptitude tests determine ability of learning new skills or information
    • Personality Test asses characteristics related to traits and behaviors
    • Group Tests find out whether the candidate can work as part of a team

    Training

  • Induction training:

    • Introduces the new employee to their workplace, their colleagues, and the firm's procedures.
    • On-the-job training:
      • The employee learns to dotheir job better by being shown how to do it, and then practising.

  • Off-the-job training:

    • Appropriate when the employee needs to know general information about the business or procedures.

    Motivation

  • Financial Methods:

    • Wages are commonly paid weekly or monthly—usually to manual workers.

    • A salary is a fixed amount paid every month—this doesn't change even if the number of hours worked does change.

    • Commission

    • It is paid to sales staff for every item they sell.

    • Profit sharing schemes

    • For example, where a percentage of the company's profits is divided up between employees.

  • Non-financial methods:

    • Training, Management Styles and Benefits