AOS 3 Summary notes

OPERATION MANAGEMENT

  • Definition: Involves coordinating and organizing the activities involved in producing the goods and services that a business sells to its customers.

  • Efficiency: Refers to how productively a business utilizes its resources when producing goods and services.

  • Effectiveness: The extent to which a business achieves its stated objectives.

KEY ELEMENTS OF OPERATIONS SYSTEMS

Inputs

  • Definition: The resources used by a business to produce goods and services.

  • Examples:   - Labour resources   - Raw materials   - Capital resources   - Time   - Utilities   - Information

Processes

  • Definition: Actions performed by a business to transform inputs into outputs.

Outputs

  • Definition: Final goods and services produced as a result of a business’s operating systems, delivered or provided to customers.

  • Quality Influence: Quality is influenced by the inputs used and the processes performed within its operation systems.

Manufacturing Business Example

  • Input: Yeast, water, eggs, machinery, mixers, ovens.

  • Processes: Transforming inputs into baked products.

  • Output: Bread, burger.

Service Business Example

  • Input: Computer, machinery, cables, data, knowledge, utilities.

  • Processes: Technicians combine their knowledge with appropriate technology and cabling.

  • Output: Internet access for specific customers.

Form for Answering Questions

  • An input is… (then provide example).

  • Processes are… (then provide example).

  • An output is… (then provide example).

CHARACTERISTICS OF MANUFACTURING AND SERVICE BUSINESS

Manufacturing Business

  • Resource Use: Utilizes resources and raw materials to produce finished tangible goods.

  • Production Process: Highly automated processes that are capital intensive.

  • Occurrence of Production & Consumption: Production and consumption occur at separate times.

  • Customer Contact: Low degree of customer contact during production as it is separated from consumption.

  • Tangibility: Outputs produced are tangible.

  • Storability: Outputs can be stored as inventory.

  • Consistency: Produces standardized goods through mass production.

Service Business

  • Resource Use: Provides intangible products, usually with specialized expertise.

  • Production Process: Labour intensive.

  • Occurrence of Production & Consumption: Production and consumption occur simultaneously.

  • Customer Contact: High degree of customer contact during production as it occurs simultaneously with consumption.

  • Tangibility: Outputs produced are intangible.

  • Storability: Outputs cannot be stored as inventory.

  • Consistency: Usually not standardized and tailored to fulfill individual customer needs.

Similarities

  • Both aim to optimize operations to produce high-quality outputs at low production costs.

  • Both must deal with suppliers during the operation management process.

  • Both utilize forms of technology in their operation systems.

  • Both strive to optimize efficiency and effectiveness in operations.

TECHNOLOGICAL STRATEGIES

Automated Production Lines

  • Definition: Involves machinery and equipment arranged in a sequence, with the product developed as it proceeds through each step.

  • Efficiency Improvement: Operate at speeds faster than humans, thus reducing the time taken to produce outputs.

  • Effectiveness Impact: Tasks performed with high accuracy decrease the number of errors; ensures high quality products consistently.   - Advantages: Precise, accurate, reduces waste, increases productivity.   - Drawbacks: Breakdown can decrease productivity and be expensive; may lead to employee redundancy affecting reputation.

Robotics

  • Definition: Programmable machines capable of performing specific tasks efficiently.

  • Efficiency Improvement: Quick, accurate completion of tasks reduces time and resource wastage, optimizing productivity.

  • Effectiveness Impact: Minimizes errors during production enhancing overall quality and customer satisfaction.   - Advantages: Tasks completed quickly; higher quality production reduces waste.   - Drawbacks: Costly setup, repairs, and potential redundancy of employees.

Computer-Aided Design (CAD)

  • Definition: Software aiding the creation, modification, and optimization of designs.

  • Efficiency Improvement: Reduces time and labor needed for product design.

  • Effectiveness Impact:Allows selection of optimal options for high-quality designs.   - Advantages: Greater accuracy, sophisticated designs attract customers, fast innovation.   - Drawbacks: Potential employee redundancy; costly to set up and maintain.

Computer-Aided Manufacturing (CAM)

  • Definition: Software controlling and directing production processes by coordinating machinery.

  • Efficiency Improvement: Ensures tasks are completed to a high degree of accuracy, increasing productivity.

  • Effectiveness Impact: High-quality products produced consistently improves customer satisfaction and market share.   - Advantages: Speeds up production, accurate execution reduces waste.   - Drawbacks: May lead to employee redundancies; high setup costs.

Artificial Intelligence (AI)

  • Definition: Computerized systems that simulate human intelligence and behavior.

  • Efficiency Improvement: Reduces time and labor for complex tasks, allowing better resource utilization.

  • Effectiveness Impact: Can provide 24/7 customer service, improving customer satisfaction and sales.   - Advantages: Complex functions handled quickly; reduces tedious tasks.   - Drawbacks: Setup and recalibration costs; potential employee redundancy.

Online Services

  • Definition: Services provided via the internet (e.g., booking platforms, online marketplaces).

  • Efficiency Improvement: Reduces need for human involvement in certain tasks, optimizing labor utilization.

  • Effectiveness Impact: Increases customer convenience which may improve satisfaction and sales.   - Advantages: Broader exposure to customers; accuracy in order processing.   - Drawbacks: Technical difficulties can disrupt operations; costly setup and training.

MATERIALS STRATEGIES

  • Involves organizing and monitoring the delivery, storage, and use of materials needed for production.

Forecasting

  • Definition: A materials planning tool that predicts customer demand based on past data and market trends.

  • Efficiency Improvement: Minimizes production halts by ensuring sufficient materials are on hand.

  • Effectiveness Impact: Improves business capacity to meet customer demand; enhances reputation through informed decisions.   - Drawbacks: Risk of incorrect assumptions; may face production halts from lack of materials.

Master Production Schedule

  • Definition: A plan outlining what a business intends to produce in specific quantities within a set time.

  • Efficiency Improvement: Minimizes errors, optimizing resources and reducing interruptions.

  • Effectiveness Impact: Increases the likelihood of producing the right quantities to meet demand.   - Drawbacks: Inflexible in dynamic operational environments; implementing can be costly.

Materials Requirement Planning

  • Definition: Itemizes the types and quantities of materials necessary to meet production targets.

  • Efficiency Improvement: Reduces halts in production ensuring smooth operations; optimizes resource utilization.

  • Effectiveness Impact: Helps achieve sufficient materials for customer demand, enhancing reputation.   - Drawbacks: Time-consuming updates; maintaining the plan incurs additional costs.

Just in Time (JIT)

  • Definition: An inventory control approach delivering materials as needed for production.

  • Efficiency Improvement: Frees up workplace areas for increased production, reducing waste.

  • Effectiveness Impact: Savings from reduced storage can be redirected to meet sales objectives.   - Drawbacks: Risk of failing to meet customer demands from insufficient stock; reliance on supplier reliability.

QUALITY STRATEGIES

  • Quality Definition: A good or service’s ability to satisfy a customer’s needs.

Quality Control

  • Definition: Involves inspecting products at various stages of production to ensure quality standards are met.

  • Reactive Strategy: Responds to issues after they occur.

  • Steps:   1. Standards of quality established.   2. Regular inspections conducted.   3. Products compared against standards.   4. Unsatisfactory goods discarded.   5. Errors addressed to prevent recurrence.

  • Efficiency Improvement: Fixing errors optimizes resource use and prevents production halts.

  • Effectiveness Impact: Maintains high product quality, enhancing reputation and sales.

Quality Assurance

  • Definition: Achieving a certified standard of quality assessed by an independent body.

  • Proactive Strategy: Actions taken to prevent problems before they occur.

  • Efficiency Improvement: Reduces faulty products; promotes optimal resource use.

  • Effectiveness Impact: Increases customer confidence in products, supports sales growth.   - Drawbacks: Training is often necessary; organizing external assessments can be costly.

Total Quality Management (TQM)

  • Definition: A holistic approach where all employees engage in improving business operations to boost quality.

  • Key Features:   1. Customer Focus: Identify and meet customer needs.   2. Continuous Improvement: Constant evaluation and identification of improvement methods.   3. Employee Empowerment: Encourage teamwork and participation in solutions.

  • Efficiency Improvement: Optimal resources use via continuous quality enhancement.

  • Effectiveness Impact: Increased sales through improved customer satisfaction and reduced waste.   - Drawbacks: Implementation can be costly; potential employee confusion on roles.

WASTE MINIMISATION

  • Definition: The process of reducing the amount of unused material, time, or labor.

Waste Minimization Strategies

  • Reduce: Adjust quantities produced based on predicted demand to prevent excess inventory and waste.

  • Reuse: Utilizes items that would otherwise be discarded, promoting optimal resource use and reducing costs.   - Examples: Reusing packaging; collecting materials for future use.

  • Recycle: Transform items that would otherwise be discarded to lessen material costs and disposal expenses.

Efficiency and Effectiveness Impact of Waste Minimization

  • Minimizing wasted time maximizes speed of production improving profits.

  • Reduces discarded materials: enhances resource optimization, lowers costs, and meets profit objectives.

LEAN MANAGEMENT

  • Definition: Systematically reducing waste in business operations while improving customer value.

  • Strategies:   - Pull: Customer-driven production to avoid excess products – minimizes wasted resources.   - One-Piece Flow: Individual products processed sequentially to enhance speed of delivery.   - Takt Time: Synchronizing operations to meet customer demand effectively.   - Zero Defects: Continuous pursuit of error prevention and high-quality standards.

CSR IN OPERATIONS

  • Definition: Ethical conduct beyond legal obligations, considering social, economic, and environmental impacts.

  • CSR Considerations for Inputs:   - Sourcing sustainably, optimizing energy use, and minimizing environmental impacts.

  • CSR Considerations for Processes:   - Technology use reducing waste; training employees on efficient practices.

  • CSR Considerations for Outputs:   - Producing environmentally friendly and recyclable products; reducing packaging waste.

GLOBAL CONSIDERATIONS

Global Sourcing of Inputs

  • Definition: Acquiring raw materials and resources from overseas suppliers.

  • Cost Considerations: Factors affecting cost and reputation include pricing, delivery costs, and ethical treatment of employees.

Overseas Manufacturing

  • Definition: Producing goods outside the home country for cost efficiency.

Global Outsourcing

  • Definition: Transferring specific activities to external overseas businesses to enhance operational efficiency.

  • Challenges: Communication barriers; CSR practices of outsourced entities reflecting on the primary business.