operations - W/O QANTAS

• These notes relate to HSC Topic 1 - Operations

Role of Operations Management

• It involves managing efficiency, quality, and production to maximize profit
• Operations are processes used in transformation and production
• Strategic decisions refer to long-term, broad aims affecting all business areas

Cost Leadership

• The goal is to have the lowest cost or be the most price-competitive
• Achieved through economies of scale (lowering costs per unit as the business expands) and expense minimization

Economies of Scale

• Businesses can lower the costs per unit as they expand
• This creates a cost advantage
• Bulk buying can reduce costs
• Increasing the efficiency of machinery can reduce costs

Expense Minimisation

• Minimizing cost in some areas of the business
• Input costs: facilities, land, energy and leases on machinery
• Labour costs cover employees, redundancy and overtime
• Processing costs cover prototyping, machinery and maintenance
• Inventory costs cover insurance, back orders and storage
• Quality management costs cover preventing loss, training, remediation, warranty claims and sales returns

Goods/Services Differentiation

• The aim is to distinguish products from competitors
• Focusing on quality and customized production leads to customer loyalty and higher prices, achieving profit maximization

Differentiation of Goods

• Product features can be offered in a basic form or with sophisticated options
• Product quality involves offering a low-quality, affordable model and increasing quality with a higher price
• Augmented features are additional benefits associated with particular goods

Differentiation of Services

• Quality of materials/technology used in the delivery of the service includes computer-based technologies, medical technologies and ICTs
• Time spent on a service, for example, next-day delivery
• The Level of Expertise of staff can provide more specialized services
• Self-servicing options offers greater flexibility
• 'No Fuss' options are a no questions asked return option for unwanted purchases

Cross Branding

• Definition: Differentiation through strategic alliances adds value by offering consumers added benefits

Goods and/or Services in Different Industries

• Standardised goods
• Customised goods
• Non-perishable goods

Goods vs. Services

• Goods are tangible, standardised, capital intensive, can be stored and are perishable
• Services are intangible, customised, labour intensive, outputs can't be stored, and are non-perishable

Standardised vs. Customised Goods

• Standardised goods are homogenous, mass-produced with a production focus
• Customised goods are varied, depending on the customer's needs with a market focus

Perishable Goods

• Operations process needs to integrate suitable packaging, high standards of quality and hygiene, short lead times, and efficient distribution

Non-Perishable Goods

• The operations process needs to manage quality and implement effective inventory management strategies

Intermediate Goods

• Definition: Goods manufactured and used in further manufacturing or processing
• Middle goods are used in the middle of the entire production process

Interdependence with Other Key Business Functions

• Operations depends on Marketing for research/design and marketing campaigns
• Marketing depends on Operations to produce quantities that meet quality claims
• Operations depends on Finance to allocate funds for inputs
• Finance depends on Operations to produce a sales volume that maximises total revenue
• Operations depends on Human Resources to attract skilled employees and provide training
• Human Resources depends on Operations to communicate HR needs

Influences

• Globalisation
• Technology
• Quality Expectations
• Cost-Based Competition
• Government Policies
• Legal Regulations
• Environmental Sustainability

Globalisation

• Definition: The removal of barriers to trade between nations, characterised by integration and interdependence
• Exposes businesses to global competitors applying cost leadership
• Increases the ability to source inputs at cheaper prices globally
• Increases access to foreign technology to increase efficiency, quality, and speed of production
• Allows offshore outsourcing to foreign countries where costs are lower
• Supports economies of scale through increased production
• Influences new product design and development towards global markets

Technology

• Definition: The design, construction, and/or application of innovative methods and machinery in operations processes
• Can help a business offer a superior level of service and reduce costs
• Technology used in Administration helps with organisation, planning, decision-making, and control
• Examples are planning technologies, office technologies and software

Quality Expectations

• Definition: How well-designed and functional goods are and the competence of organised services
• Customers determine how products are designed, created, and delivered
• Requires managers to implement quality management strategies and assess employee skills
• Managers must consider the quality of inputs and offer after sales support

Quality Expectations with Goods

• Quality of design reflects consumer needs, materials used and innovation
• Fitness for purpose is how well the product does what it should
• Durability is how reliable and long lasting the product is

Quality Expectations with Services

• Professionalism of the service provider is determined by cleanliness and staff interactions
• Reliability is how efficient the service is performed
• Level of customisation reflects how customer needs are fulfilled

Cost-Based Competition

• Definition: Determining the breakeven point and applying strategies to create cost advantages, achieving cost-leadership
• Limited opportunities for price increases
• Operations management focuses on reducing fixed costs (leases, insurance) and variable costs (labour, energy)

Government Policies

• Definition: Announced intentions by the government as to future laws
• Policies may change over time due to societal expectations
• Policies include employment regulations, taxation and work health and safety

Legal Regulations

• Definition: Laws that have been passed by the government
• Businesses are expected to comply with societal standards and risk financial penalties if they don't
• Compliance costs are expenses associated with meeting regulations
• Laws impacting operations include Work Health and Safety (WHS) 2011, Workers Compensation Act 1987, Environmental Protection and Biodiversity Conservation Act 1999 and Food Act 2003 (NSW)

Environmental Sustainability

• Definition: Shaping business operations around practices that use resources today without compromising future access
• Businesses aim to reduce their carbon footprint and minimise waste
• Operations management increases renewable resources and reduces non-renewable ones
• The Precautionary Principle means businesses act to minimise environmental impact whenever impact are uncertain

Corporate Social Responsibility

• Definition: Open and accountable business actions based on respect for people, community/society, and the environment
• Places value on financial returns, social and environmental responsibility

Legal Compliance vs. Ethical Responsibility

• Legal compliance involves following the law to avoid penalties
• Ethical responsibility exceeds legal requirements by following the 'spirit' of the law

Environmental Sustainability and Social Responsibility

• Environmental sustainability uses production methods that conserve resources
• Economic growth cannot occur at the expense of environmental damage
• Social responsibility changes production to meet expectations and align stakeholders

Operations Processes INPUTS

• Businesses must consider transformed resources and transforming resources

Transformed Resources

• Materials: Basic components that may be raw or intemediate materials
• Information: Knowledge gained from research, investigation, and instructions
• Customers: Provide customer feedback and influence production (impacted by customer relationships management)

Transforming Resources

• Human Resources: Employees with expertise and well-designed resource management policies
• Facilities: The factory, equipment and machinery used

Transformation Processes

• the influence of the 4 V's → Volume, Variety, Variation in Demand and Visibility
• Sequencing (order) and scheduling (timing) through the use of Gantt charts and critical path analysis (CPA)
• Technology manufacturing and office technologies, task design (for labour) and plant (office/factory) layout Monitoring of processes, control and improvement of all operations processes

Volume

• Indicates how much of a product is made
• Volume Flexibility indicates how easily a business can adapt to changes in demand.
• A high volume of production decreases average production costs through economies of scale

Variety

• Variety is the range of products a business produces
• Operations process needs more to allow for this variation
• A large variety increases average production costs and and makes operating processes more complex

Variation in Demand

• Variation indicates operational flexibility
• Flexibility requires more inputs from suppliers, labour, energy use and machinery

Visibility

• Visibility relates to how much customer contact there is, where customer contact and feedback impacts transformation processes
• Visibility can be direct, such as through surveys and warranty claims, or indirect, such as reviewing data

Sequencing and Scheduling

• Sequencing refers to the order of activities while scheduling indicates the length of time activities take
• These can be displayed by the use of Gantt Charts and Critical Path Analysis

Gantt Charts

• Definition: Bar chart that shows scheduled and completed work over time, including the order and length of time required for activities

Critical Path Analysis

• Definition: Method that indicates tasks that need to be done, how long they take, and what order they need to be done in.
• Critical path is the shortest length of time it takes to complete all tasks

Technology, Task Design, and Process Layout

• Technology allows businesses to undertake the transformation process more efficiently and effectively
• Task design allows and employee to more successfully perform the task
• Process/plant layout is how workspace is organised and alternate layout options include process layout, product layout, fixed layout and office layout

Monitoring, Control, Improvement

• Monitoring is measuring performance with KPIs
• Control is when KPIs are assessed and action is taken and can include adjustments scheduling, technology, task design or process layout
• Improvement is the systematic reduction of inefficiencies and bottlenecks, as well as poor work processes

Outputs

• Outputs are results of a business's efforts and is responsive to consumer demand
• Customer service is how well a business meets consumer expectations
• Warranties are a promise to correct any defect in their goods/services

Operations Strategies

• An evaluation based on goals (performance objectives) with an emphasis on - Quality, Speed, Dependability, Flexibility, Customisation, Cost

Quality (as an Operations Strategy)

• This is often determined by consumer expectations and influences production standard
• it's objectives are achieved by:
• considering the Quality of Design -> business's understanding of consumer preferences
• Quality of Conformance -> how well the product meets the standard of the prescribed design
• Quality of Service -> involves the level of reliability and meeting clients' needs

Speed

• Speed relates to the time it takes for the production and the operations process to respond to change in market demand
• To achieve these goals, operations needs a reduction in bottlenecks

Dependability

• This Operations Strategy is all about how consistent and reliable a business's products are
• measured by
• Dependability in goods -> number amount of warranty claims
• Dependability in services -> number of complaints received and consistency of service standards

Flexibility

• Is how quickly operations processes can adjust to changes in the market.
• Achieved by:
• GOODS -> increasing the capacity of production and by using plant and machinery more efficiently.
• SERVICES ->increasing number of service providers or improving the level of technology used.

Customisation

• the creation of individualised products to meet specific needs of customers.
• Services are generally customised except for standardisation in the fast food industry.
• Many goods and services are based on the principle of mass customisation.

Cost

• Cost operations are a strategy to minimise the expense so that operations processes are conducted as cheaply as possible through outsourcing, supply chain management, waste management and bulk buying to achieve economies of scale

New Product or Service Design and Development

• It is the creation and development of new products
• Provides an opportunity for a business to attain competitive advantage In the process consider:
• consumer preferences
• Changes and innovation in technology to enable new and appealing products

Considerations to Product Design and Development

• business strategies of product utility, supply chain managment, quality, capacity management and costs

Service Design and Development

DEFINITION

• Using customer as starting point in design process

KEY CONSIDERATIONS

• Tangible aspects of the service + the application of time, expertise, skill, effort

Supply Chain Management

• Logistics, E-commerce are important here + consider the benefits to the busines in relation to GLOBAL SOURCING of goods and components

• Involves integrating and managing the flow of supplies, to meet the needs of customers

SUPPLY CHAIN MANAGEMENT - Logistics, IN INPUTS

SOURCING (PROCUREMENT)

• The purchasing of inputs for the transformation process
• VERTICAL INTEGRATION -> where all inputs are made within the business with no external contribution
• GLOBAL SOURCING, this provides a range of business advantages or potential business risks DEFINITION - Purchasing supplies without being constrained by location

Benefits Using SOURCING (PROCUREMENT)

• GLOBAL SOURCING can provide opportunities to achieve, ADVANTAGES like Lower cost, greater levels of Expertise and Access to new technology
• Conversely, they can DISADVANTAGES, with increased Increased cost of logistics, managing Storage and distribution and dealing differeing regulatory conditions between nations

SUPPLY CHAIN MANAGEMENT E-COMMERCE CONSIDERATIONS

• E-COMMERCE deals with buying and selling goods and services via the internet
• IMPACTS OF E-COMMERCE in the context of;
• BUSINESS SOURCING using E-PROCUREMENT -> which allows suppliers direct access to a business's level of supplies
• This can be done through B2B (business-to-business arrangement).

SUPPLY CHAIN MANAGEMENT, focus on -CUSTOMER ORDERS

• Businesses may choose to sell directly to consumers ( B2C ) which is business-to-consumer transactions (selling goods and services over internet)

OUTPUTS in operations

• LOGISTICS -> broad term referring to distribution

OUTPUTS, Key factors for - DISTRIBUTION CHANNELS

• Method of delivering goods and services to customer With key steps; TRANSPORTATION and DISTRIBUTION

• Logistics also considers STORAGE and WAREHOUSING with efficient MATIERALS HANDLING PACKAGING

Outsourcing Advantages and Disadvantages

• Outsourcing is contracting business functions to providers with specialist skills. Operations that are outsourced typically cover areas from manufactoring, sourcing, logistics or design

• A key benefit is often to provide Cost Reduction

• Potential Negatives might be considered in reference to Cost vs Benefit and language barriers

Advantages of Outsourcing

• Simplication of Business and improved overall Efficiency
• Reductions to staff costs and improve production values

Disadvantages of Outsourcing

• A potential for a loss of operational control
• a security liability due to the shared information that happens with sensitive assets may be transferred over to a third party vendor.

Technology

• Leading edge technologies, help provide a business a competitive advantage in the marketplace

Technology Considerations

• May improve inputs, transformation processes, outputs Helpful to achieve the strategic role - product differentiation and cost leadership DEFINITION - Technology that is the most advanced at a point in time.

Inventory Management benefits and costs assessment

• Businesses will try to assess their processes in relation to, LIFO (LAST-IN-FIRST-OUT), FIFO (FIRST-IN-FIRST-OUT), JIT(JUST-IN-TIME)

Benefits to inventory mnanagement

• By providing greates incentive's to promote goods and services to new markets will assist your businesses to reflect good financal outcomes

Inventory Valuation Considerations

• In Australia, in accordance with the accounting standards (AASB 102), a business must use the FIFO method.

Inventory Management - JIT (JUST-IN-TIME)

• Is ensures that the exact amount of material inputs will arrive only as they are needed in a production process, or system

"THE GOAL is to align incoming products with production schedules and sales forecasts instead of having a surplus of inventory on-hand."

Qualitiy Management assessment- key considerations

• Qualitiy outcomes can be seen by assessing the processes that a business undertake to ensure consistency, reliability, safety,

" IMPORTANT - to be able to contribute to your PROFIT MAXIMISATION outcomes"

Important Quality management consideration

• Quality Improvement can be a achieved using TQM AND CI systems, or outcomes

Overcoming Resistance to Change using financial considerations assessments

• Key processes, such as, Purchasing New Equipment, with greater Redundancy Payments, when business are Retraining, their staff by Reorganising Plant Layout can provide greater INTERTIA to business processes, or business changes

Assessing financial implications of change

• MARKET ADVANTAGES with capital investment offers Shorter lead times and faster processing

Inertia- psychological, or human resistance provides a need to consider;

"CHANGE AGENTS -> internal staff or external professionals that help create culture of change"

Kurt Lewin's unfreeze/change/refreeze model

1. unfreeze is, determine what needs to change, then ensure there is strong support from upper management
2. change communicates often empowering action and Involve people in the process
3. Anchor the changes into the culture and celebrate success!

Key factors in global operations

• Economies of Scale assist with SCANNING AND LEARNING,

DEFINITION - Businesses purchasing supplies or services without being constrained by location

Global benefits assessment

Increased cost of logistics with a range of benefits can achieve great levels of access to global markets to Access to new technologies and resources