BusMan Unit 3 AOS 3 Notes

Operations management is the area of management that is concerned with the activities used to produce goods and services.

Operations management is responsible for transforming inputs into outputs.
Two key areas that the operations area of management responsibility must focus on are effectiveness and efficiency.
Effectiveness refers to the degree to which a business has accomplished its stated objectives.
Efficiency refers to how well a business uses resources in achieving these objectives.

The elements of an operations system are inputs (natural resources and materials, physical resources, human resources, financial resources, information and time), the transformation process and outputs (the finished good or service).

The characteristics of operations management differ according to whether the business is a manufacturer of goods or a provider of a service. Manufacturers produce tangible products, whereas service businesses produce services, which are intangible.
Most modern businesses produce a combination of both manufactured goods and services.

Technological developments

Technology can improve operations. Businesses need to acquire up-to-date technology in order to compete effectively.
Technology is used in the manufacturing sector to speed up processes and enable better utilisation of raw materials. This improves productivity and makes the operations process more cost effective.
An automated production line is comprised of machinery and equipment arranged in a sequence with components added to the product as it proceeds through each step. The product usually moves along the line on a conveyor belt and computers control the process.
The use of robotics allows for a degree of precision and accuracy, as well as speed, in production that would generally be unmatched by human labour.
Computer-aided design (CAD) is a computerised design tool that allows a business to create products and modify them.
Computer-aided manufacturing (CAM) is software that directs and controls the process of producing a product.
Online services can be developed for operations purposes. A website can make it easier for customers to purchase products or to find information online.

Materials management is the strategy involved with managing the use, storage and delivery of materials, to ensure the right amount of inputs is available when required in the operations system.
Materials planning is completed using forecasting, a master production schedule (MPS) and materials requirements planning (MRP).

Forecasting is a tool that relies on data from the past and present and analysis of trends to attempt to determine future events. A master production schedule (MPS) is a plan that details what the business will produce, in what quantities, how and when. Materials requirements planning (MRP) refers to producing an itemised list of all materials involved in production to meet specified orders.
Inventory control ensures that costs are minimised and that the operations system has access to the right amounts of inputs when required. A common approach used by many businesses in Australia is the Just in Time (JIT) system of inventory control. JIT ensures that the right amount of materials and parts arrive just as they are needed for production.

Quality management is the strategy that a business uses to make sure that its product meets customer expectations. Three quality approaches are quality control, quality assurance and Total Quality Management.
Quality control involves the use of inspections at various points in the production process to check for problems and defects. It is a reactive strategy that measures performance in relation to set standards or benchmarks. If the established standards are met, it is then likely that the business will meet customer expectations and will compete effectively with competitors.
Quality assurance involves the use of a system where a business achieves set standards in production. It is considered to be a proactive strategy. A widely used international standard is the ISO 9000 series of quality certifications.
Total Quality Management (TQM) is an ongoing, business-wide commitment to excellence that is applied to every aspect of the business’s operation. Total Quality Management can improve product quality, making the business more competitive. A number of approaches may be used, such as employee empowerment, continuous improvement and improved customer focus.

Waste minimisation is a process involving the reduction of the amount of unwanted or unusable resources produced by a business in an attempt to improve the efficiency and effectiveness of operations.
One strategy for minimising waste is reduce, reuse and recycle. This approach improves the efficiency and effectiveness of operations by eliminating waste at all stages of the operations system.

The efficiency and effectiveness of operations can be improved by adopting the principles of lean management.
Pull, one-piece flow, takt and zero defects are lean management principles.

Operations managers must be aware of corporate social responsibility when pursuing business objectives. Businesses that do so will benefit from improved performance.
An operations manager needs to consider the use of environmentally sustainable inputs and the amount of waste that is generated by the business’s operations.

Global sourcing of inputs refers to the practice of businesses seeking the most cost-efficient materials and other inputs, including from countries overseas.
Overseas manufacture refers to the production of goods in a country that is different to the location of the business’s headquarters.
Global outsourcing is the contracting of a specific business operation to an external person or business, in an overseas country.