Operational management chains

• Operational objectives

  Key goals:

  • Quality
  • Cost efficiency
  • Speed of response & flexibility
  • Dependability
  • Environmental targets

  Influences:

  • Corporate objectives, resources, market conditions, competitors, technology
• . Operations and Efficiency

  Productivity = Output / Inputs

  Efficiency = Achieving maximum output with minimum input

  Capacity: Maximum output a business can produce

  Capacity Utilisation = (Actual Output / Maximum Output) × 100

  • High utilisation = cost-effective, but less flexibility
  • Low utilisation = flexible, but higher unit costs
• . Lean Production

  Aim: Minimise waste and maximise value

  Techniques:

  • Just-in-Time (JIT): Reduces inventory holding
  • Kaizen: Continuous improvement
  • Cell production, Time-based management
• Quality Management

  Quality Control: Checking output after production

  Quality Assurance: Built into the process to prevent defects

  Total Quality Management (TQM): Company-wide commitment to quality

  Benchmarking, Quality circles, and ISO standards
• . Inventory Management

  Key terms:

  • Lead time: Time between ordering and receiving stock
  • Buffer stock: Safety stock held to prevent stockouts
  • Re-order level: When to reorder

  Use of Inventory control charts

  Just-in-Time aims for zero inventory
• 6. Supply Chain Management

  • Managing relationships and flow of goods from raw materials to final product
  • Importance of:
  • Supplier reliability, lead times, flexibility, cost
  • Outsourcing vs. In-house production
• 7. Mass Customisation

  Producing tailored products at near mass-production efficiency

  Requires flexible technology and skilled workforce
• Technology in Operations

  Automation, robotics, CAD (Computer-Aided Design), CAM (Computer-Aided Manufacturing)

  Benefits: Speed, consistency, cost reduction

  Drawbacks: High investment, training needs, possible job losses
• 9. Operational Data and Decision Making

  Key operational data:

  • Labour productivity
  • Unit costs
  • Capacity and utilisation rates
  • Quality metrics (e.g. defect rates, customer satisfaction)
• Lean Production (e.g. Just-in-Time)

  int: Implementing lean production can improve efficiency.

  Cause: This reduces waste and limits excess inventory.

  Effect: Lower storage and handling costs.

  Result: Improves cost efficiency and competitiveness.
• Improving capacity utilisation

  Point: Increasing capacity utilisation lowers unit costs.

  Cause: Fixed costs are spread across more units.

  Effect: Average cost per unit decreases.

  Result: Boosts profit margins and allows competitive pricing.
• 3. Using Technology (e.g. automation, CAD/CAM)

  Point: Introducing technology increases productivity.

  Cause: Machines work faster and with greater precision.

  Effect: Output rises and quality improves.

  Result: Meets customer demand more efficiently, boosting competitiveness.
• Quality Assurance over Quality Control

  Point: Quality assurance ensures defects are prevented, not just detected.

  Cause: Quality is built into each stage of the process.

  Effect: Fewer faulty products reach customers.

  Result: Increases customer satisfaction and reduces costs from rework or returns.
• Outsourcing

  Point: Outsourcing non-core functions can improve operational focus.

  Cause: Specialist firms may perform tasks more efficiently.

  Effect: Allows the business to allocate resources to key activities.

  Result: Potential cost savings and improved performance.
• 6. Holding Buffer Stock

  Point: Holding buffer stock helps meet unexpected demand.

  Cause: Stock is available even if deliveries are delayed.

  Effect: Prevents lost sales and keeps production flowing.

  Result: Improves dependability and customer satisfaction.
• 7. Flexible Workforce

  Point: A flexible workforce improves operational responsiveness.

  Cause: Staff can adapt to different roles or work varied hours.

  Effect: The business can meet changing demand quickly.

  Result: Reduces downtime and increases efficiency.
• How can align operations. Strategy with overall objective s

  For example if aiming for cost leadership should implement lean production

  Ensuring correct allocation of resources to meet objectives like investing in automation for cost control or skilled worker align operations with strategic goal
• Evaluate role of innovation in opertaonal management impact on competitiveness a

  Process innovation- new methods or processes e.g lean production reduce waste, cut costs

  Product innocation - developing new and improved products can differentiate company create usp

  Adapting to advanced tech like ai enhances decision making and customer satisfaction
• Factors business consider when deterring optimal levels of capacity

  Demand forecasting - estimate future demand

  Lead time - time needed to increase capacity e.g hiring employees

  Cost- balance costs of expanding business e.g outsourcing
• How can poor capacity management affect overall performance of a business

  If iverestimated- increased costs such as labour and equipment remain

  Insufficient caoacity during peak demand periods can result in missed opportunities
• Challenges when implementing lean production

  Initial investment- tech, training and process design

  Any delays with supply chain cause fault in production
• Importance of supply chain management on operational efficiency

  Customer satisfaction

  Risk management- disruptions or market fluctuations

  Optimising routes reduce environmental footprint
• How tech influenced modern supply chain

  Forecast demand

  Tracking- improve visibility and reduce risk of error

  Challenges - high inital cost

  Reliance in digital tech exposes business to cyber security threats
• Poor inventory management in operational performance

  Excess inventory - investors tied up capital that could be used else where

  Products not sold in time may expire resulting in financial loss
• Advantages and disadvantages of outsourcing

  Cost saving- reduce costs hiring external providers who can perform fast more effectively

  Expertise

  Scale opertins up or or down without significant investment

  Dis- miscommunication

  Dependent on third party make a business vulnerable

  job losses
• benefits and risks of offspring to low cost countries

  Cost reduction

  Access to new markets

  Increased profit margins

  Risks:

  Quality control issues ensuring consistent quality is difficult

  Supply chain disruptions

  loss of jobs
• Role of information technology in improving opertainal efficency

  Streamlined process

  Real time data

  Communication

  Data analysis for forecasting trends
• Importance of planning in operational management

  Minimise risks

  Preserved reputation

  Compliance

  Employee safety
• Why might a business want to improve its capacity utilization?

  To reduce unit costs
• How does increasing the proportion of maximum capacity used affect fixed costs?

  It spreads fixed costs over more units
• What is the result of spreading fixed costs over more units?

  Lower average costs per unit
• What can improved capacity utilization lead to?

  Increased profitability
• What are the benefits of improving capacity utilization?

  • Reduces unit costs
  • Increases profitability
  • Spreads fixed costs over more units
• What is the relationship between capacity utilization and unit costs?

  Higher utilization generally lowers unit costs
• If a firm increases its capacity utilization, what is likely to happen to its average costs?

  Average costs will likely decrease
• What impact does improved capacity utilization have on profit stability?

  It can enhance profit stability
• How does increasing capacity utilization affect a firm's financial performance?

  • Reduces unit costs
  • Increases profitability
  • Enhances profit stability