Operations Management Notes

Operations: An Introduction

Learning Intentions

• Gain an overview of what operations is and what it involves.
• Learn about the different factors that come together under the heading of Operations.
• Begin exploring the different production methods available to businesses.

What is Operations?

• "Operations" is the process of turning raw materials into finished articles, which are products ready to be offered for sale to consumers.
• Quality and cost and the balance between both lie at the heart of operations.

The Production Process

• The production process consists of three main stages:
  • Inputs: Raw materials purchased and labor employed.
  • Processes: The production process transforms inputs.
  • Outputs: Finished product ready for purchase.
• The mix of labor and machinery used depends on the type of product the organization produces.
• Example with Baxters soup. Inputs, processes and outputs for various types of tinned soup.

The Role of the Operations Department

• Inventory control (INPUT): Purchasing raw materials as and when required, storage of inventory.
• Choosing suppliers (INPUT): Considering which supplier to choose.
• Methods of production (PROCESS): Organizing efficient methods of production.
• Quality Issues (PROCESS): Ensuring products are of an acceptable standard.
• Ethical Production (PROCESS): Recycling and choosing more efficient ways of producing.
• Storage (OUTPUT): Storage of the final complete product in warehouses or distribution centers ready to be delivered.
• Distribution (OUTPUT): Methods of distributing the final product to the customer.

Topics in Operations

• Suppliers
• Technology
• Inventory management
• Production methods
• Ethical & environmental considerations
• Quality

Methods of Production - Part 1

• Different production methods are available to businesses.

Capital-Intensive Production

• Common in mass-produced products where large volumes of the same (standardized) product are manufactured.
• Products flow through a production line where parts are added at each stage.
• "Capital-intensive" because there is a high degree of automation, requiring expensive machinery and robotics.

Labour-Intensive Production

• Processes involve less automation and more manual input from skilled and unskilled workers.
• Less capital required for machinery but labour costs likely to be higher.
• Automation: Capital/machinery has replaced the need for humans.
• Mechanisation: Machinery used in the production process but human input still required (to operate machines, for example).

Capital & Labour Intensive Production

• Comparison of advantages and disadvantages.
• Examples of production processes that are either labour or capital intensive.

Labour Intensive

Benefits

• Employees cost less to employ than cost of equipment and machinery
  Costs
• Unhappy workers may not be productive and may even stop work (strike)

Capital Intensive

Benefits

• Large volumes of product can be made very quickly.
  Costs

• Machinery expensive to maintain and keep running.

• Many industries will be a blend of both, at different stages of production.

Methods of Production

• Selecting the right production method can make the difference between success & failure.
• Different methods of production will be used at different stages in the overall manufacturing process.
• Factors that will need consideration:
  • The actual product being made.
  • What quantity of the product needs to be made (and when for)?
  • What resources are available?
    • Finance
    • People & skills
    • Technology
  • Standard of quality required

Other Production Methods

• As well as deciding the right blend of humans and technology for a particular product, they need to decide how a product will move through the production process.
• Cost & quality will be key factors in finding the optimal method.
• Three main methods:
  • Job
  • Batch
  • Flow

Job Production

• One single product is made from start to finish before another is made.
• One worker (or a team of workers) will make the product from start to finish. Often hand-made.
• Will often require highly skilled workers who are expert in the craft of making that product.
• Because each product is made individually, it can be varied, adapted and customized to customers exact requirements.
• Usually quite labour intensive.

Batch Production

• One group (batch) of identical products is made at one time.
• Often used when manufacturing products that comes in different sizes or varieties.
  • Shoes & clothing
  • Many mass produced food items
• All products in that batch will move on to next production stage at the same time.
• Next batch (which may be a different variety of product) will start only when the first batch has moved on.
• Equipment clean-down and change- over important.

Flow (Line) Production

• Product is assembled gradually as it progresses along a production line.
• The finished product will emerge from the last stage in the process.
• Workers and robots will work on a very specific part of the process over and over.
• Method pioneered by Henry Ford (Division of Labour).
• Often very capital-intensive.

Production Methods - Part 3

• Selecting a Method of Production.
• Factors that will need consideration:
  • What is being made?
  • What quantity is required
  • Standard of quality required
  • What resources are available?
    • Finance
    • People & skills
    • Technology

Technology in Production

Computer Aided Design (CAD)

• Software programs that allow the user to create drawings, plans and blueprints using computers.
• Product designers produce drawings and plans in 2D and 3D to allow customers to see what the finished product will look like.

Computer Aided Manufacturing (CAM)

• Manufacturing systems that are automated.
• The machinery and robots used in the production process are controlled by a computer.
• The computer gives instructions that can be changed at short notice if necessary or to facilitate small changes in the design.
• The use of CAM allows precision in the manufacturing process and it also reduces the number of employees required thus keeping costs low.
• For example, during the process of making clothes, cutting machines can be computer controlled.

Automation

• Production is completely automatic and conducted by machinery/robotics.
• This allows for a consistent approach within production and a standardised product to be created meaning no quality differences.
• Although an expensive method of production for an organisation, it can be more efficient method as human error is removed so no mistakes are made.
• Production can run 24/7 with no need for breaks unlike human workers who require time off.

Databases and Forecasting Technology

• Databases can consist of thousands of records that can then be easily searched and sorted to enable the user to locate particular items.
• Databases when combined with bar-code readers or QR codes can help track inventory as it moves through production process.
• Historical sale data can also be used to forecast likely future product demand.
• For example, by analysing previous sales data, a food manufacturer will know to increase its production of burgers and other BBQ food when the weather forecast shows hot weather is expected.

Amazon Case Study

• Amazon is not a manufacturing company but a service provider retailing goods.
• It still has Operations at its heart, with inputs, processes & outputs.

Amazon Use of Technology

• Amazon use technology throughout their operations in several different ways.
  • Firstly, they use computer technology with artificial intelligence to analyse customer buying trends and predict what customers want to buy so that it can be ordered in to the warehouse.
  • Secondly, Amazon use robots in their distribution centres to automate the process of picking and selecting items in the warehouse to send to customers.
  • Lastly, Amazon uses QR codes and GPS in order to control and manage their robots so that they know where each robot is and they do not crash in to each other.

Disadvantages of Capital-Intensive Production

• Firstly, the machinery and equipment required in capital intensive production can be very expensive, requiring a lot of investment.
• Secondly machinery and equipment can break down, when it does it is costly to maintain and fix and can also slow down or stop production.
• Lastly capital intensive production is not good for producing customised, crafted or one-off products.