Operations management

• Business production and operation management involves managing resources effectively to produce goods and services
• Business aim: Spend less on input than they make from output to make a profit
• Production is the total of goods and services made over a period of time
• Productivity is the amount of goods and services produced per unit of input over a period of time
• Cost advantage is reaped by companies that become efficient
• Economies of Scale: increasing productivity through training, nature of product, product type, target setting, better equipment, size of market, size of business, low demand, automation, improving production methods, motivation, performance-based pay, recruitment & selection
• Factors to consider when deciding which method of production to use:

  • Availability
  • Achieved when production is increased and costs are lowered
• Job production is when a firm produces items to meet specific requirements
• Batch production involves producing in lots and batches
• Lean production focuses on the continuous improvement of quality and efficiency
• Kaizen is a concept of continuous improvement, aiming to increase efficiency and reduce wastage
• Inventory management involves holding stock of raw materials, unfinished goods, and unsold goods
• Workers can gather in small groups to discuss problems and solutions for maximizing production efficiency
• Break-even analysis:

  • Formula: Break even level of output = Total Fixed Cost / (Price per unit - Variable Cost per unit)
  • Break even level of output is where total cost equals total revenue
• Advantages of break-even charts:

  • Allows managers to see the level of production & sales needed to break even
  • Enables managers to read off expected sales, losses, and profits
  • Helps visualize the impact of business decisions
  • Shows safety margins
• Business term: Member

  • Managerial economies: benefits large firms get in terms of cost savings due to their size and scale
  • Financial economies: large firms can access cheaper bank loans because banks see them as lower risk
  • Technical economies: large firms can benefit from efficiencies in production processes
  • Purchasing economies: large firms can negotiate cheaper prices for materials
  • ISO 9000 benefits: firms can base their activities on requirements accepted internationally
  • Total Quality Management (TQM): a management approach involving all employees in improving quality
• In business, quality production can be achieved through ways like:

  • Measuring quality through customer complaints, failure/reject rates, product returns, customer loyalty, customer satisfaction, efficiency, speed, statistical process control, and zero defects
  • Quality circles involve relevant workers meeting to discuss maintenance/improvement issues
• Quality can be measured in business through factors like customer complaints, failure/reject rates, levels of product returns, customer loyalty, customer satisfaction, efficiency, speed, statistical process control, and zero defects
• Quality circles in business involve relevant workers meeting to discuss issues related to maintenance/improvement
• Customer loyalty, customer satisfaction, efficiency, speed, and statistical process control are all ways quality is measured in business
• In business, cleanliness and interaction with staff are important aspects of quality
• Quality production in business is about satisfying customer needs and expectations
• Reasons why quality is a concern:

  • Satisfying customer needs and expectations
  • Quality control and quality assurance contribute to reputation
  • Aspects of quality include good design, functionality, consistency, and durability
• Benefits of quality control and assurance:

  • Gives a competitive edge
  • Encourages return purchases
  • Provides customers with information, builds confidence with the brand
  • Reduces costs incurred to solve post-sales issues
  • Improves efficiency and customer confidence
• Benefits of quality reputation:

  • Motivates employees
  • Allows pricing of goods at a higher level
  • Builds customer loyalty
• In achieving quality production, every member of the workforce is responsible for the quality of products/services
• Identifying faults and reducing defects before reaching the final stage of production and consumer hands is crucial for maintaining quality
• Emphasis on prevention over inspection in quality production leads to fewer complaints, higher customer loyalty, and the ability to command higher prices
• Employees are responsible for checking their work and are held accountable for it, leading to less returns and replacements, reduced financial compensation, and costs