HSC Business Studies Notes - Operations Management

https://educationstandards.nsw.edu.au/wps/wcm/connect/2f9a5382-5446-4dc6-ba39-f90f53469200/business-studies-st6-syl.pdf?MO D=AJPERES&CVID - business syllabus OPERATIONS Operations refers to the business processes that involve transfor...

https://educationstandards.nsw.edu.au/wps/wcm/connect/2f9a5382-5446-4dc6-ba39-f90f53469200/business-studies-st6-syl.pdf?MO D=AJPERES&CVID - business syllabus OPERATIONS Operations refers to the business processes that involve transformation or production. ROLE OF OPERATIONS MANAGEMENT TERM / HEADING DEFINITION EXAMPLES Strategic role of operations management To get a long term competitive advantage Function Production of goods and services the production of goods and services production controls and associated quality controls on processes. Included ing These are input management and capacity (volume of output) decisions. inventory controls supply chain management (SCM) logistics and distribution management decision making in terms of operational processes. Lean Production eliminate waste at every stage of production. Analysing each stage of the production process, detecting where inefficiencies are and correcting them. Cost Leadership Have the lowest costs or be most price competitive in the market. The Kmart have cheap products business still has to be profitable. which gives them a competitive position in terms Low cost through operations may be achieved by: of their price using less expensive inputs maximising efficiency by minimising waste and save time  producing more outputs from less inputs using technology producing faster having lower quality outputs increasing size of operations to reduce the average cost of making each item Good / Service Aims to obtain an advantage over its competitors by having outputs that Tutoring give specialised Differentiation are different to its competitors, unique or leading edge technology service to people and it is not necessarily about the Product Differentiation: means distinguishing products (goods or price services) in some way from those of competitors. Product Differentiation Goods Varying the product features: Generally goods will come in one basic variety and then in other varieties of increasing complexity or options Varying product quality: Increasing the quality (which will be reflected in the higher price) Varying any augmented features: This refers to add-ons or additional benefits associated with particular goods Service Varying the amount of time spent on a service: Time is a factor that differentiates between service-providers Varying the level of expertise: to provide a more specialised service Varying the qualifications and experience of the service provider: can significantly affect the quality of service provided Varying the quality of materials/technology used in service delivery: ICT can significantly affect the quality of service provided and is a notable source of differentiation in the services sector.  Goods and/or services in different industries Standardised goods are those that are mass produced, usually on an assembly line, are uniform in quality and meet a predetermined level of quality. Customised goods are those that are varied according to the needs of customers. For both types of goods Use technology Must make predictions about consumer demand Deal with customers and suppliers Make decisions about capacity, location and physical layout of the business Perishable goods Non-perishable goods Operational processes will need to integrate the Operations processes will need to integrate the following factors: following factors: high standards of quality, safety and manage all aspects of quality in the cleanliness in operating processes process, from sourcing through to very short lead times and distribution production and distribution that is as quick and effective implement effective inventory appropriate and robust packaging and management strategies and be highly cold storage processes both through responsive to market demand in order production and distribution. not to over produce. Interdependence with other key business functions How it would work on How it would work on How it would work on How it would work on a new product launch a new product launch a new product launch a new product launch with: with: with: with:  FUNCTIONAL AREA MARKETING HUMAN RESOURCES OPERATIONS FINANCE Will liaise with Will ask for new staff Will set production marketing on the to be hired. Or, if new targets based on expected sales of the technology will be used break-even new product, to and staff must be information and ensure that enough made redundant, will provide supplier can be produced for ask human resources payment information. the launch. to ensure that relevant OPERATIONS employment laws are Operations create the Operations produces a complied with. profits which are then product based on the taken back to finance market research of a Maintaining good staff business to work for the business – competitive advantage INFLUENCES TERM / HEADING DEFINITION EXAMPLES Free Trade When two or more countries agree to allow free trade amongst each other. Agreements (FTAs) Free trade is where no barriers exist to selling a product overseas. Promotes competition Lower prices Gives consumers more choice A loss of industries that cannot compete against low cost labour economies Economies of scale refers to cost advantages that can be created because of an increase in scale of business operations The Global Consumer Global consumers seek global brands and tend to seek standardised products. Driven by technology Affects operations function which need to be structured around production facilities Has allowed business to share their product to a global market Globalisation refers to the removal of barriers of trade between nations around the world that are moving ‘closer together’ and the world is increasingly becoming a single market place. This is done by: increasing integration between national economies high degree of transfer of: Capital, Labour, intellectual capital, Ideas, financial resources, Technology. Some driving forces include: Removal of protectionist trade barriers Increasing number of free trade agreements and trading closer Improvement in technology and transport Increasing acceptance of e-commerce Advantages Disadvantages A larger source of market Increased competition (between opportunities (consumers) businesses) in the global market A source and choice of materials Changes in the global/regional and labour economies can negatively impact businesses opportunity for outsourcing Changes to currencies and trade (reduce production costs) agreements can negatively impact businesses  Can achieve economies of scale IMPLICATIONS (impact of globalisation on operational strategies) ➔ Access to a large market for overseas resources which may be cheaper and/or better quality. Influences decision about production input ➔ Global sourcing: purchasing inputs from overseas ➔ Outsourcing: when an entire function is performed by an external party. Allows australian business to access cheaper overseas labour Task design may need to be ➔ Integration of overseas suppliers adds complexity and needs a altered and new technology global web strategy for Supply Chain Management may be required ➔ Increasing volume impacts all aspects of the transformation process. ◆ Results in Scheduling and Sequencing changes ➔ Products may need to be customised according to the different countries → determined by marketing * Manufacturing plants for production of goods means that the business can achieve massive economies of scale advantages * large-scale business want to standardise services as much as possible Quality a specific reference to how well designed, made and functional goods are, and the degree of competence with which services are organised and delivered. Technology the design, construction and/or application of innovative devices, methods Front house service and machinery upon operations processes disappeared after covid. It used to take 2 mins for one Can be integrated with: person to order. Now once Administration: Organisation, Planning, Decision making, control of the screens were installed operational processes with the self checkout thing Processing: manufacturing, logistics and distribution, quality they have 12 people in 2 management, inventory management, supply chain management, mins sourcing  Advantages Disadvantages Efficient - increases production High initial output costs capabilities of the business (speed, quality, flexibility) Profitable - reduces production Need for staff training and costs such as labour development Innovative - products offer more Potential to reorganise plant layout to the consumer in terms of (impact on other operational convenience, comfort and strategies) standard of living Stock control/inventory Needs updating management - live information on consumer purchases, level of stock and the amount of stock needed to be ordered Competitive advantage - release Can increase complexity of of new products using new operations technology IMPLICATIONS (impacts of technology on operational strategies) ➔ Need to consider how new technologies can be applied to the transformation process to achieve their performance objectives ➔ Technology increases business’s efficiency → lowers costs, increases output/volume, achieves cost leadership ◆ Increases precision and quality ➔ Inputs can be substituted by technology ◆ Thus lowers labour costs → achieves cost leadership Automation means that ◆ As technology becomes cheaper and more reliable machines are replacing ➔ New technology is expensive and impact scheduling and people → lowering labour sequencing and could require re-training staff costs and achieving cost leadership  ➔ Technology could have its initial problems ◆ Puts pressure on operational and financial objectives Quality expectations Businesses produce goods and supply services that will satisfy the desires of its customers. Durability Reliability Fit for purpose *Personal satisfaction with the experience of the product will indicate whether the quality has met with expectations. *Some businesses focus on price rather than quality *Perception in the marketplace that the price of the product = quality of the product Advantages - if business meets Disadvantages - if business quality expectations doesn’t meet quality expectations Customers are satisfied with the Suffer long-term damage to output business’s goodwill and reputation Can be competitive advantage Loss of sales Lead to return customers/repeat Increased costs to improve quality sales IMPLICATIONS (impacts of quality expectations on operational strategies) ➔ Some industries have higher expectations than others Medical equipment ➔ If quality expectations are high in that industry businesses should prioritise quality ➔ This impacts their operations processes and strategies ➔ operations must follow particular standards or prescribed minimum levels of excellence ➔ Quality management strategies - need to be in place to ensure  quality expectations Cost-based When businesses focus on reducing costs in their operations to a competition minimum while maintaining profit margins. To achieve efficiency in the operations of the business through a low-cost business model Focus on reducing both fixed and variable costs → interdependence with finance Advantages Disadvantages Low costs of production Can reduce quality Lower product prices Cause price wars Higher profit Cost leadership achieved IMPLICATIONS (impacts of cost based competition on operational strategies) Clothing and grocery ➔ High cost based competition = business prioritises cost industries have the highest ➔ Should focus on supply chain management, technology and cost-based competition outsourcing ➔ Methods to reduce costs: ◆ Find cheaper inputs / use resources more efficiently ◆ Cutting back on range of outputs ◆ take advantage of bulk purchases ◆ Outsource the use of labour - cause labour is cheaper overseas ◆ Outsource supply of inputs ◆ Minimise cost of packaging Government policies Through government policies the government is able to influence the management of operations by influencing inputs and outputs of production. Government policies that impact businesses: Taxation rates Required materials handling practices Work health & safety (WH&S) standards training and rules Public health policies Environmental policies Employment relations Trade and industry policies IMPLICATIONS (impacts of government policies on operational strategies) Impact on inputs ➔ Government aims to boost efficiency across the economy ➔ Labour market policies ◆ If the government makes labour cheaper business are less likely to replace labour with machines ➔ Government policies might give producers of inputs research and Government may support development grants to allow them to make inputs cheaper and inputs that bring long term more effective benefits like high speed ◆ Mainly done for environmental reasons internet Impact on outputs ➔ Government policies encourage the production of certain outputs Government provided for a range of economic and social reasons subsidiaries to car industry ◆ Can be achieved through subsidiary policy for business to make cars *thus operations managers are to prioritise certain outputs Tax changes The decision to cut ➔ Changes in income tax affects consumer demand company tax to 25% over ➔ Less money to spend if people spend most of their money on tex ten years was announced in ➔ Rise in company tax can reduce production levels 2016. Aimed to spur ➔ Taxes can be targeted at certain inputs and outputs economic growth and  ◆ Eg. taxes increased on alcoholic drinks causes fall in increase business production levels production ◆ E.g. taxes on carbon emissions forces business to look for greener alternatives on producing their products Small business tax break tax deductions for business who have more labour than machines Trade policies ➔ Done through trade agreements ➔ Since the 1980s the aus government has promoted increase free trade: ◆ More imports ◆ More foreign competition ◆ Lower prices ➔ Impact on aus businesses ◆ Increased competition ◆ Need to cut costs - labour losses Redundancies Relocation production overseas ◆ Decline of aus manufacturing against low cost imports in clothing, footwear, electronics and whitegoods Other points Fluorocarbons in white ➔ Policies can be used to ban production of something goods ➔ Policies can encourage the use of inputs by offering rebates to Use of Renewable energy businesses ➔ Incentives and subsidiaries used to encourage production of certain outputs for economic or social reasons ➔ Monetary policies (interest rates) and fiscal policies (government spending and taxation) impact economic conditions Compliance The range of laws business comply with Compliance costs expenses associated with meeting the requirements of legal regulations Legal regulation The various laws and regulations that the business must follow on a range Work health and safety  of issues such as safety, quality and environmental impact (WHS) act 2012 Fair work act 2009 and Impact on inputs anti-discrimination act 1977 Laws or taxes restrict the inputs that can be used Environment protection and ○ E.g. harmful chemicals, tax on carbon emissions biodiversity conservation act 1999 Impact on outputs Harmful goods will have regulations to how many a business is allowed to produce Taxes can also be used to reduce the amount to be produced Taxes on alcoholic drinks Business are not allowed to produce illegal things such as drugs or asbestos Products must meet the safety standards Individuals and firms can take out patents on certain innovations or inventions IMPLICATIONS (impacts of legal regulations on operational strategies) Businesses must comply with these laws. If a business breaks the law, it may face: ➔ Criminal punishments ➔ Being sued ➔ Bad publicity, damage to the reputation → impact on sales and profits Environmental means that business operations should be shaped around practices that sustainability consume resources today without compromising access to those resources for future generations Operations need to integrate long-term sustainable view of resource management into business planning and practise Business try to reduce waste, recycle water, glass, paper and metals and reduce their carbon footprint Corporate social responsibility (CSR) Broader responsibility that a business has to the community in which it operates. This responsibility covers ethical, environmental, social and moral issues.  Legal compliance: requires that a business follows the letter of the law - the prescribed standards of behaviour vs Ethical responsibility Labour Law Such as minimum wages, award wages, working hours, breaks, pay for compliance various forms of leave, other on-costs associated with labour, workers compensation and health and safety laws. Environmental and such as regulations stopping dumping, pollution (air, land and water), public health requiring certain standards of operating and disposing of waste. compliance Business licensing such as those requiring particular levels of training or certification and rules those placing conditions on operations (such as restricted working hours, zoning restrictions, and content and disclosure restrictions). Taxation includes any levies and duties as well as taxes imposed on profits. Superannuation can be considered a form of taxation that is invested for retirement purposes. Taxation can be applied in such a way as to encourage particular practices or penalise particular activities. Trade practices and address issues of market power, misleading and unfair conduct, price fair market dealings collusion, monopoly behaviour, market concentration (competition) and product safety. Migration and rules aim to ensure minimum standards are applied to labour brought in from around the use of other nations. offshore skilled labour Intellectual property addresses issues related to moral rights such as copyright, patents, trademarks, designs and other original ideas and artistic works. Financial and aim to standardise methods and rules around financial records and accounting regulations reports, as well as ensuring that company directors follow particular rules and corporations law as fiduciaries. A fiduciary is a person in a position of financial trust with respect to others’ money. Human rights rules restricting discrimination on the grounds of disability, culture, sexual preference, gender, age or any other distinguishing feature. How could a business reduce compliance costs? Outsource to reduce labour law compliance Register business in a country with a lower tax rate Invest in technology to make operational process more effective, like reducing or reusing waste Have effective quality management strategies in place to monitor operational processes Ethical responsibility sees if the business is meeting all of their legal obligations and taking it further by following the intention and ‘spirit’ of the law. Legal compliance vs Ethical responsibility Legal requirements require that a business follows the letter of the law Ethical responsibility sees business meeting all of their legal obligations and taking it further by following the intention and ‘spirit’ of the law A business that goes further and spends more money are demonstrating that it values something more than just earning maximum profits. Environmental Meeting the needs of the present generations without compromising the Sustainability ability of the future generations to meet their needs. Main aim: reduce negative effects to the environment of production Social responsibility Social responsibility refers to doing what is seen to be socially acceptable for example environmental at the time. This emphasis may change depending on social norms sustainability and the reduction of plastic are important social expectations at the moment OPERATIONS PROCESSES TERM / HEADING DEFINITION EXAMPLES Inputs The resources used in the transformation (production) process Transformed resources Materials Apple - intermediate goods: Are those inputs that are Basic elements used in the production process consist of two types: raw display/touchscreen, changed or converted in the materials and intermediate goods which are manufactured and used in camera, processor, battery operations process further manufacturing or processing for another product. For service-based businesses items such as, stationary, computers and R&D furniture become the inputs Apple spends approximately $8 billion in research and Information - the knowledge gained from research, investigation and development annually instruction, which results in an increase in understanding External information Accessing Suppliers ○ Market reports Source different materials at ○ Statistics from industry observers different prices ○ Official government statistics from Australian Bureau of Apple has been able to Statistics (ABS) access 85% of its suppliers ○ Media reports through asia Internal information Outsource production to ○ Financial report foxconn ○ Quality report ○ Key performance indicators (KPI) such as lead times, Different production inventory turnover rates and production data methods/ technology Development of the FoxBot Key performance indicators (KPIs): are specific criteria used to measure the efficiency and effectiveness of the business’s performance. Customers - their choices shape the inputs. Their tastes are incorporated into the product process. Business can implement a customer relationship management (CRM) program to improve customer service, increase competitiveness and identify changes in consumer tastes. Customer relationship management (CRM): refers to the systemes that business use to maintain customer contact Transforming Human Resources Apple have three staffing resources Well qualification, hardwork and discipline increases productivity departments: Inputs that carry out the and efficiency to business operations which determines the Design transformation process success of a business Production The employees combine other resources, such as machinery, raw -Foxconn employ 1.2 materials and technology to produce goods and services. million involved in well-designed human resource management policies and practices production can improve the performance of the operations process. -These workers are paid $11 to produce an iPhone -The typical age of -Foxconn employees is between 18-21 -They put the phone together Selling Facilities 85% of Apple components refer to the plant (factory or office) and machinery used in the operations are sourced from Asia, processes. allowing for centralised production Major operations decisions include the design layout of the facilities, the number of facilities to be used, their location and their capacity. Foxconn employ 1.2 million In particular, the business needs to decide: people, Production: China, whether the required facilities should be located in one or two Design: CA, USA large sites or divided among numerous smaller sites what impact zoning and other restrictions will have upon the With the use of labour and facilities size and location facilities, it take 141 steps the most efficient plant design and process layout — the to produce an iPhone arrangement of machinery, equipment and people within the facility 6 over a 24hr period. 1/3 of that time is employees testing the products software on each individual phone Use of Foxbots is decreasing the reliance on labour and increasing  automated production Transformation Processes is the conversion of inputs (resources) into outputs (goods and services). Differs between manufacturing and service businesses Manufacturer - transforms inputs into tangible products ○ use machinery, robots and computers to transform Service - transforms inputs into intangible products ○ rely heavily on interaction with the customer and their processes tend to be more labour-intensive; staff heavy *Transformation processes are also directly involved with value adding value adding: the creation of extra or added value as inputs are transformed into outputs Influence of volume number of products or services that operations needs to produce. Apple/Foxconn are able to produce almost 600,000 Volume flexibility: how quickly the transformation process can adjust to iPhone 6s per day. This is increases or decreases in demand. Managers need to respond quickly to supported by a 1.2 million effectively manage lead times. employee workforce, 200,000 dedicated solely Influences on volume: to the production of the The demand for the product iPhone Whether the items are perishable (limited shelf life) - It takes 24 hours to The number of staff produce one iPhone Size of the production facility - Using machinery China has a large pool of Positives Negatives low cost labour Economies of scale allow goods to Businesses can over produce, Geographically, it also have be produced more cheaply which may lead to wastage and the space for large facilities increased inventory costs During peak seasons Greater volumes ensure that If backorders not met quickly, it however, Foxconn cannot increases in demand can be can lead to lost sales due to satisfy demand easily met unsatisfied customers  More effective quality control can For perishable goods, over be applied to production ordering stock and not selling processes, reducing defects when can also lead to wastage goods are sold Influence of variety the number of different models and variations in services that operations needs to create. Mix flexibility: is the mix of products made, or services delivered through the information process. Positives Negatives attract a Increases production costs greater market of Increased staff training consumers, therefore Increased/changed facilities that are required increasing its profitability Business needs necessary machines to adapt to changes in production. Cannot discount on supplies as business is not purchasing stock in larger volume. Influence of variation in the variation in demand over time operations needs to be flexible to Apple generally experiences a demand increase or decrease output. peak of sales when a new Changes in consumer demand impacts businesses relationship product is released. with its suppliers Need to find sufficient suppliers and consider the possibility of In 2014, the final 3 months being overstocked → might have to discount saw 70 million iPhones ○ Could lose profits sold. This was fuelled by the iPhone 6 and 6+  Need to be flexible with labour and employ labour during periods release. of high time and use of less labour during down-turns These businesses will try to forecast demand so that The same period the prior, adjustments can be anticipated Apple had sold 51 million phones. Positives Negatives Foxconn needs to develop Effectively meet the needs of Can cause increased expenses new systems to match customers consumer demand during peak periods. Meet speed, dependability and Loss of profit if demand is not met flexibility objectives Sales of iPhones tend to fall off between 12-18 Can be competitive advantage More difficult to manage finances months after the release 🡪 due to fluctuations speculation for the new iPhone Increase in demand Decrease in demand require increased inputs from staff may need to have their hours suppliers reduced increased human resources production may need to slow to avoid inventory build up increased energy use and suppliers put on pressure due to contractual agreements increased use of machinery and technology Influence of visibility the degree to which customers can see the operations in action. Apple informally observes Customer contact or ‘feedback’ can directly affect transformation customer behaviour in their processes. This is because customers and their preferences shape stores, looking at: what businesses make. - Gender ○ Direct contact: customer feedback given through - Age  ○ surveys, interviews, warranty claims, letters, wikis and - Popularity of certain blogs and verbal contact. products ○ Indirect feedback/contact: through a review of sales data that gives an indication of customer preferences and AppleCare/Genius Bar market share data, through an observation of peoples’ ensures that the decision-making processes and through consumer reviews relationship exists beyond the sales – after sales service Positives Negatives Can understand needs and Increase in online shopping can wants of consumers more reduce customer contact effectively Create products or services that Dependant on level of relevance to suit needs and wants of consumers (social media consumers influence) Access a wider consumer base May need to develop a process to collect customer information Assist to establish a loyal customer base, increase brand loyalty Sequencing and Scheduling and sequencing tools are used to identify all steps in the scheduling operations process and organise them into the most efficient order to complete. Sequencing: refers to the order in which There are two tools used: activities in the 1. Gantt charts operations process 2. Critical path analysis (CPA) occur. GANTT CHARTS Scheduling: refers to Outlines: the length of time the activities that need to be performed activities take within the order in which they should be performed the operations process. how long each activity is expected to take how long the whole project should take Used for any process with several steps and number of different activities. advantages disadvantages Manager is obliged to plan the Not as good for complicated steps needed to complete a task projects and to specify the time required for each task Easy to understand and quick for managers to read They make it easy to monitor and compare actual progress against planned activities CRITICAL PATH ANALYSIS is a scheduling method or technique that shows what tasks need to be done, how long they take and what order is necessary to complete those tasks. The Critical Path Analysis (CPA) is a scheduling method or technique that shows: 1. What tasks need to be done 2. How long they take and; 3. What order is necessary to complete those tasks How to read: The path that takes the longest time is the minimum time required to fully complete the job ○ This is because some tasks can be performed simultaneously advantages disadvantages Shows connections between tasks Can be confusing, not as easy to read for managers Helps to prioritise tasks that are happening simultaneously Helps managers to see future Won't work without accurate, problems in the production up-to-date data process Technology involves the use of machinery and systems that enable businesses to In 2014, Apple dedicated undertake the transformation process more effectively and efficiently $10.5 million updating its technology with Foxconn THE MANUFACTURING SECTOR - Foxbots – an used to speed up (shorten) processes and enable fuller automated machine utilisation of raw materials. This makes the operations processes that produces Apple more cost effective products. Costs ○ Key manufacturing technologies are robotics, approximately computer-aided design (CAD) and computer-aided $25,000 USD manufacturing (CAM) - Laser Cut/Milling Machines – state of Computer-aided design (CAD) the art cutting Graphic design tool to generate 3D diagram machines that cut Used by designer and end user - to visualise what will be produced the frame and CAD programs are linked to printers and copies can be sent to packaging of all client Apple products - Electricity on their screens – reduces positives negatives the reflection and easy to customise a series of Can be expensive to set up glare of Apple options that meets the client’s products needs - Cameras – tested by machinery design the sequence of steps Requires specialised staff or - The strength that would need to be taken to training of existing staff of the screen create the desired product in the - Clarity of shortest possible lead time using their image the least amount of material enables the costing of the project May require maintenance or to be quantified updates Computer-aided manufacturing (CAM)  software used to allow the manufacturing process to become computer controlled CAD is linked to CAM to allows instant manufacturing of designs Can calculate how much of each input resource would be required ROBOTICS highly specialised forms of technology, capable of complex task Can do multiple tasks High quality consistently Minimise waste positives negatives allows for precision and very high-cost items that are accuracy unaffordable for most small and medium-scale manufacturers work without complaint or demands for wage rises in conditions that would be repetitive, boring and often dangerous for employee THE SERVICE SECTOR Technology has helped the whole market open up to allow for small to medium businesses to trade their services globally. Allows people to do more work in less time, which means a greater range of tasks can be completed office workers can work at a great distance from the office positives negatives Increases the production cost of technology is high, so capacity of a business businesses purchase technology or lease it  Minimises human error Leasing is more common because it is cheaper (lease repayments Long term reduces costs of are tax deductible), which allows production (less labour) money saved to be spent elsewhere Information is shared instantly Additional costs include set-up and cabling Stakeholders can view a design the loss of workers who of the product before it becomes may be displaced due to real the acquisition of technology Provides flexibility in the design cost of training or process retraining Size Continual upgrading of Colour skills and time lost in Dimensions adapting to new work techniques Business can change the look of the product before production Task design The process of organising how a particular part of the production process Apple should be completed - 141 steps involved in involves classifying job activities in ways that make it easy for an the production of an employee to successfully perform and complete the task. iPhone - 24 hours to produce In task design, it is necessary to group skills and competencies an iPhone because this helps when obtaining staff Outlines a series of individual steps necessary to complete the task Foxconn are moving towards robotics to produce Impact on the business Apple products Task analysis allows a business to examine how well its employees - Almost all production are performing is assembly line Simplifies how a product is made - 600,000 iPhone are productivity of an employee can be measured produced each day  Sometimes, a business already has available staff however, the staff may not have the requisite skills, managers may wish to conduct a skills audit Skills audit: is a formal process used to determine the present level of skills and any skill shortfalls that need to be made up either through recruitment or through training. Process layout Refers to the design and physical layout of the plant (office/factory) The McDonalds The layout can majorly impact the efficiency of the operation documentary shows them function drawing on a tennis court to There are multiple different ways to organise the physical layout of plan out the product layout a plant. to maximise efficiency. ○ Process production ○ Product production Apple - foxconn ○ Fixed position production - Assembly line production PROCESS PRODUCTION - Geographically the arrangement of machines and equipment that are grouped together by efficient because the function (or process) they perform. 600 out of 750 This is typical for hospitals where there are areas dedicated to suppliers are Asian particular types of medical care → maternity wards, intensive care based units - Promotes It is used for high-variety, low-volume production efficiency - Foxconn have 1.2 PRODUCT PRODUCTION million employees (mass production) is characterised by the manufacturing of a high volume - 200,000 workers on of constant quality goods. iPhones An assembly line is the most common layout for this type of production because it aims to achieve the best possible combination of personnel and machine use Work stations are arranged to match the order of the operations Emphasis in on the sequencing of the flow from one work cell to another Product layout: is where the equipment arrangement relates to the sequence of tasks performed in manufacturing a product.  FIXED POSITION PRODUCTION where a product remains in one location due to its weight or bulk. For large-scale, bulky activities like construction of bridges, ships, aircraft or buildings More efficient if material were brought to site Impact on the business An operations manager needs to consider the best layout to ensure: enough space for the projected volume of production effective use of production equipment appropriate technology adequate location of stock links between processes or stages of production; that is, an efficient flow of the goods or service through the system a work environment for employees that is of sufficient quality for the task conformity with legal regulations concerning site and building constraints conformity with occupational health and safety (OH&S) standards relevant to the industry Monitoring the measuring of all aspects of operations, from supply chain management and the use of inputs, through to transformation processes and outputs against the planned performance. collecting information about the performance of the operations process. These can include: quality speed dependability flexibility customisation lead times/wait times/idle times inventory turnover rates/stock-out rates defect rates, repair rates and warranty claims capacity and volume rates/capacity utilisation rates  IT and maintenance costs direct and indirect cost analysis Control occurs when corrective action is taken if required If there is a discrepancy between performance and goals, changes and improvements can be made operations manager may make changes to the transformation process such as redesigning the facilities layout or adjusting the level of technology in order to correct the problem Improvement refers to systematic reduction of inefficiencies and wastage, poor work processes and the elimination of any bottlenecks. Basically changes made to improve the performance objectives Improvement is usually made in these areas: Time: through the minimisation of bottlenecks to reduce lead times Process flows: and smoothness of transitions between transforming processes Quality: through the pursuit of quality goals, measurement of product standards and quality assessed using returns and warranty claims made Cost: through an assessment of per unit costs of production, a review of expenses Efficiency: through the reduction of waste and the creation of greater output per unit input Impact of monitoring, controlling and improvement on the business Effective managers will be aware (monitoring) and exercise supervision producing action (control), and will take the steps required to replan to pursue the goals of the business (improvement) Processes of monitoring, controlling and improvement are closely linked to quality management such as control, assurance and improvement. Improvement may require lateral or creative thinking to make systematic changes Outputs refer to the end result of the business efforts — the good or service that is provided or delivered to the customer  Good → tangible Service → based on knowledge / expertise Factors useful in assessing outputs: 1. The quality of customer service on delivery 2. The guarantees or warranties provided by the business 3. The after sales service delivered by the business Customer service refers to how well a business meets and exceeds the expectations of customers in all aspects of its operations. Customers do not purchase/pay for customer service 🡪 it comes with the product Businesses should provide quality customer service in order to build relationship and form customer loyalty Satisfied customers act as ambassador for the business 🡪 through word of mouth the name of your business spreads warranties a promise made by a business that they will correct any defects in the goods that they produce or in the services that they deliver. It is a legal obligation of the business to either repair the items or refund its cost to the customer It is an extension of the service offered ○ After the transaction the warranty ensures the relationship still exist If the product doesn’t comply with the implied conditions then the customer is entitled to have the product fixed ○ It a small, inexpensive product customer can refund or exchange it A breach of warranty does not entitle the customer to cancel the contract, but they are entitled to sue for damages for non-compliance with warranty conditions OPERATIONS STRATEGIES TERM / HEADING DEFINITION EXAMPLES  Performance Objectives are goals that relate to particular aspects of the transformation processes To improve: efficiency productivity profitability If a business achieves good performance in…. It can develop a competitive edge in… Quality Superior quality products Speed Fast processing of order and delivery Dependability Reliable delivery and service Flexibility New products, range of products Customisation Volume and delivery flexibility Cost Lower prices Quality Having the highest quality goods and services determined by consumer expectations can be preventative of future repairs and recalls Quality of Design: determines the inputs and how the transformation process will be arranged. Design is based on preferences in design and price. Quality of conformance: measure of how consistently products achieve compliance with the desired specifications. Quality of Service: focuses on the reliability and responsiveness of the service. Speed The time taken for production & operations process to respond to changes of the market to achieve this there needs to be reductions in procedural and technical bottlenecks and smooth internal connection Dependability How consistent the reliable a business’ products are Measured by warranty claims or complaints Flexibility How quickly operations processes can adjust to changes in the market Processing time is intrinsic. Whether you are able to alter types or volume of production Technology introduced to allow greater capacity and efficiency Customisation Creation of individualised products to meet niche needs of the customer Consumer orientation → over time business push operations process towards Customisation Mass Customisation has become more prevalent Cost of Customisation is much greater than standardised products → economies of scale Cost Minimisation of expenses → operations process are conducted as cheaply as possible Business want to be more efficient to remain competitive ○ Reduce waste, inventory, new tech New product or Design and Development The design, development, launch and sale of new products enables a business to grow and to attain a competitive advantage made due to: Apple has established a The preference and desires of consumers → identified by market reputation as a company research that produces extraordinary Innovations in technology → gives new products with greater products that grab the functionality attention, and loyalty, of customers Positives Negatives Broadens or expands target impact on supply chain → extend market the range of supplies, the timing or Introduction of @AppleSupport on twitter  the volume of supplies the service has been Diversified product range to attract Quality → the customers will swamped with a wide range more customers demand particular of technical support quality, attributes and features questions, ranging from (increase costs) iPhone battery faults and screen repairs to Take advantage of technological Capacity → increases range of MacOS parental controls innovations which increases resources used or require an efficiency or provide competitive investment in new technology Apple Support website also advantage (increase costs) offers similar services meets changing tastes or Increases costs preferences of the market which increases demand for products Apple's genius bar Assist to enter into the renewal may not meet customer phase of a products expectations lifecycle Increases the profitabilities of the business All clients or customers using a service need to feel that their particular needs are being met. the service, level of skill, time and expertise must be considered Explicit service: the tangible aspect of the service being provided such as the application of time, expertise, skill and effort. Implicit service: is based on a feeling and is therefore intangible. The implicit aspects of a service are the psychological wellbeing — the feeling of being looked after — that comes with the provision of the service Effects of new service design & development increased customisation & qualities of service  ○ requires new technologies ○ increased skills, qualification, knowledge or experience customers receive range of services → make them feel valued → builds relationships → increases sales and profitability Supply Chain Management involves integrating and managing the flow of supplies throughout the inputs, transformation processes (throughout and value adding) and outputs in order to best meet the needs of customers Sourcing also called ‘procurement’ or ‘purchasing’ refers to the purchasing of inputs for the transformation processes. logistics The transportation and distribution of goods and services. includes: Use of storage, warehousing and distribution centres Materials handling and packaging Storage: finding a secure place to hold stock until it is required (e.g multiple storage locations near the locations of where stock is sold) Can be long term or short term Warehousing: the use of warehouses for the storage, protection and, later, distribution of stock. Expensive Useful for durable items that may need to be transported with little notice Warehousing can actually save costs if it’s used well Distribution centres are strategically located so as to minimise the time it takes to supply stock to retail outlets. Not intended for long term storage requires managers to balance the cost of such centres with the time saved in logistics. Lead time: is the time it takes for an order to be fulfilled from the moment it is made Costs associated with logistics  The premises Insurance and security for the stock Stacking and moving the stock Carrying excess stock or redundant stock if not sold Shrinkage costs and losses from theft or reasons not accounted for stock subject to damage (e.g. water damage) if not correctly stored e-commerce involves the buying and selling of goods and services via the Dell, who takes orders for internet laptops and other computing avoids the need to sell through retail stores (and the need for equipment online, customers to visit retail stores to buy a laptop) and therefore cuts manufacturers the product down the length of the supply chain. according to the stock levels must be managed well and information exchanged specifications ordered, and frequently so that accurate stock levels can be presented to then delivers it via couriers prospective customers to the customer. Global Sourcing refers to businesses purchasing supplies or services without being constrained by location. advantages disadvantages Expertise Issues with relocation of aspects of operations Reducing costs Increased cost of logistics, storage and distribution Obtain finer quality resources different regulatory conditions e.g. labour between nations Access to new technologies Increasing complexity of overall operations Outsourcing  a service is performed by an external provider that specialises in a particular business function at a lower cost greater effectiveness than the same task done within the business Also known as the contracting of non-core activities Business process that are outsourced include: Manufacturing, design merchandising Human resources Data management Admin work IT Finance and accounting Public relations Legal support Technology advantages disadvantages Efficiency Large short term financial costs Save on labour costs Repair costs Faster production Needs updating Quality consistency May not work as needed Less room for human error Competitors can access same tech Competitive advantage Cost of training staff to use new tech Leading edge is the technology that is the most advanced or innovative at any point in iphone time Helps business create products more quickly and to higher standards, with less waste Operations are easier Established is technology that has been developed and widely used and is simply  accepted without question Establish basic standards Established technologies include ○ Barcoding and point of sales (POS) data for inventory management ○ Robotics for manufacturing ○ CAD and CAM and Computer-integrated manufacturing (CIM) for transformations processes ○ Informations processing technologies and information technologies (IT) for admin, logistics, input modelling, demand analysis and distribution Inventory Management or stock refers to the amount of raw materials, work-in-progress and finished goods that a business has on hand at any particular point in time Advantages of holding Consumer demand met Business may sell their stock If a particular product runs out and alternative can be offered unpopular items through Reduces lead time mystery box Stocks create immediate revenue Stocks can be distributed to distribution centres which then rapidly transports the product to places with demand Older stock can be sold at lower prices encourage cash flow Stocks are assets and reflect well on the balance sheet Making products in bulk reduces costs Disadvantages of Storage charges holding stock Spoilage, insurance, theft and handling expenses Cost of obsolescence LIFO (last in first out) The stock that arrives most recent is the stock that the business seeks to ✔️ sell first. Business seeks to sell products with a higher profit margin first (no discounts) ❌ Excess of older stock which customers ignore → heavy discounting  ❌ Need for additional storage for older stock FIFO (first in first out) The stock that the business orders first, is the stock that business sells first ✔️ ✔️ Minimises wastage when it comes to perishables Ensures that current ‘trend’ stock is sold before new season stock The business can skew their values in their financial statement in their favour ❌ ❌ Business may discount their products Old stock may be forgotten and consumer preference change ✔️ Minimises storage issues JIT (just in time) Stock arrives just as it is required ✔️ Lower warehousing costs ✔️ Minimise wastage of perishables ✔️ Maintains freshness ❌ Delays in logistics ❌ May underestimate volume of goods required Quality management refers to those processes that a business undertakes to ensure consistency, reliability, safety and fitness of purpose of product. Quality control inspection, measurement and intervention Apple had quality issues Reduces problems and defects in the product with their Apple Maps. Range of tests to assess the quality of the product against the They realised after feedback businesses standards and had to recall the AC Trained labour that inspect the quality wall plug adaptor after Products pass as either ‘okay’ or ‘defective’ concerns that the product could break and had a risk of electrical shock advantages Prevent faulty products  Ensures components are within standards Promotes consistency Recognise quality issues Quality assurance involves the use of a system to ensure that set international standards are achieved in production Process of measuring the quality of a product against external standards Different acceptable standards across different industries Aspects that are important in this approach: ○ Fitness for purpose ○ Desire for “right the 1st time” International Organisation for Standardisation (ISO certification) Shows to the consumer that the product has achieved international quality standards Confidence in the product Universal standards develop in response to globalisation Comply with domestic and international competitiveness ○ E.g. ISO 9000 Quality improvement total quality management and continuous improvement Toyota has issued a product recall concerning Continuous improvement some 550,000 Toyota and Ongoing commitment to improve a business’ goods or services Lexus vehicles—420,000 of Helps increase market share and maintain competitive advantage potential problems connected to their steering. Total quality management (TQM) Customers define quality Build the product right in the first place and avoid the expense of inspection and waste of rejected products Helps increase market share and maintain competitive advantage  Methods: KAIZEN (Japanese concept) A strategy where employees at all levels work together to achieve regular improvements to the manufacturing process. - Combination of the collective talents within a company Quality Circles Empowers employees to take ownership of improvement strategies. Employees have an understanding of the culture of the business Can recognise people’s strengths Overcoming Resistance to Change Change can come from within the business through new innovation or technology Financial costs Costs that are associated with change include: cost of purchasing new equipment → cost of redundancies → costs of retraining employees → costs associated with structural reorganisation of the business Purchasing new To remain competitive businesses upgrade equipment regularly equipment Improves processing flexibility shorter lead times Higher overall quality Reduced wastage Businesses need to assess costs of purchasing equipment vs leasing and it's depreciation Redundancy payments Redundancy: a loss of work arising from job skills that are no longer required or relevant to the workplace Reduces the workforce. Business need to pay redundant employers compensation On average payments can be up to one week of payment for each year of service. But also depends on: ○ Length of time of employment  ○ Level of pay ○ Amount of unused leave Retraining New systems and technologies would need employees to be retrained Advantages Disadvantages Management can keep staff they The expense of large businesses know and trust in providing in house or outsourcing the training to accredited trainers will be considerable Trained staff improve productivity Employees may not want to be and efficiency within the business retrained - used to old methods which impact productivity Reorganising plant Factory renovations , refurbishing, expansion of existing premises can occur due to changes to employment, technologies, systems can substantially reduce costs closure of plant → decline in profits renovations may become outdated 📉 Additional costs with the renovation loss of productivity Inertia people/management are resistant to change management may fail to recognise the need to change Fail to adapt to changes in trends Financial effects of that resistance from people not adapting Global Factors Global factors present opportunities when assessing the operations strategies. Global sourcing Economies of scale Scanning and learning  Research and development (R&D) Global sourcing Sourcing supplies from overseas Supply chain management → buying or sourcing from the best suppliers to meet the sourcing requirements Global sourcing enables the business to find suppliers with lower prices, higher quality and advanced tech = increase competitiveness advantages disadvantages Cost advantages Possible delays Access to new technologies Exchange rate risks Advantages of expertise and Increase cost of logistics, storage labour specialisation and distribution Access to other resources Managing different regulatory conditions between nations Ability to operate over extended Increase complexity of operations hours (financial and contractual) Economies of scale Refers to the cost advantages that can be gained by producing on a larger Bulk buying - supermarkets scale (lower average costs) (costco) Cost per unit decreases - Transporting items in Same with branding → duplicate ads and logos and photos bulk is lower than Increases competitiveness individually - Lower prices  advantages disadvantages Cheaper materials costs due to Business can be too large bulk buy Specialisation of work due to Competitors make it difficult to repetition of work achieve economies of scale Profitability can rise and product Cost more of increase scale of life cycles are extended operations Scanning and learning Management of the business examining global trends (from other Woolworths use tesco’s businesses) to incorporate into their products idea of everything in the cart Copy and pasting and billing everything Aligned with TQM approach - Tesco is in the US Examples can be and do not compete ○ New consumer trend with woolworths ○ Labour costs and to relocate production ○ New suppliers to lower costs of production and maintain quality ○ Competitors overseas ○ Behaviour of similar business overseas (do not compete)  advantages disadvantages Increases potential for competitive New ideas or leading edge tech is advantage