TOPIC 5 - operations

• Operations management


  Planning, organizing, coordinating, and controlling all activities in transforming inputs and outputs
• Role of production


  Turn factors of production (inputs) into outputs by adding value
• Operation managers


  • Ensure the transformation process occurs in the way the business wants and that the operational targets are met
• Effective operations management


  The business is doing the right thing - meeting its operational targets, consistently producing its products in the right quantities and with the right specifications, producing and cost-effectively delivering its products
• Operations


  Producing physical goods and providing services which are intangible
• Forms of transformation of inputs into outputs


  • Changing the characteristics of materials, information, and customers
  • Changing the location of materials and information
  • Changing the ownership of materials
• Designing transformation process


  1. What level of output will be provided?

  2. What quality of service will be provided?

  3. How will the business provide the service?

  4. What aspects of the process will the business undertake for itself and what elements will be outsourced to or bought in from other providers?
• Factors of production


  • Land: Location decisions, cost and ease of access to supplies
  • Labour: Number and skills of people employed
  • Capital: Capital goods such as equipment and machinery
  • Enterprise: Ability of employees to come up with new ideas, find solutions to problems and be creative
• Capital-intensive process


  Operation process that has a high proportion of capital compared to labour
• Labour-intensive process


  Operation process that has a high proportion of labour compared to capital
• Output


  The total amount produced in a given time period
• Inventory


  The stocks held in a business, such as materials, and semi-finished goods
• Types of operation processes

  • Job: One-off, unique, tailor-made items
  • Batch: Items move as a group from one stage to another
  • Mass/flow: Items move continuously from one stage to another
  • Mass customisation: Large-scale production with flexibility to produce different models
• Job production


  Produces one-off, unique, tailor-made items
• Batch production


  Items move together from one stage of an operations process to another
• Mass or flow production


  Large scale production using production-line technology
• Mass customisation


  Large-scale mass production but with the flexibility to adapt to different customer needs
• Lean production


  An approach to operations that aims to reduce wastage and make a business more efficient
• The 'five Ss' of lean production

  • Sieketsu: Standardize the approach in every area
  • Seiso: Employees keep their work area clean
  • Seiton: Employees organize their tools, materials, and documents
  • Seiri: Employees have key equipment only and remove unnecessary tools
  • Shitsuke: Employees follow the set ways to complete a task
• Lean production aims for

  • Zero delays
  • Zero inventories
  • Zero mistakes
  • Zero waiting
  • Zero accidents
• Principles of lean production

  • Waste minimisation
  • 'Right first time' approach
  • Businesses aim for zero defects
  • Flexibility
  • Continuous improvement
  • Supply chain management
• Advantages of lean production

  • Eliminates waste
  • Worker satisfaction
  • Just in time
  • Competitive advantage
• Disadvantages of lean production

  • New inefficiencies
  • Low margin for error
  • Worker frustration
• Continuous improvement (Kaizen)


  The process of making continuous small, incremental improvements to various production processes in order to achieve greater efficiency
• Advantages of continuous improvement (Kaizen)

  • Employees are more receptive to small and incremental changes
  • Positive impact on staff motivation and labour productivity, as workers feel respected and valued by the employer
• Disadvantages of continuous improvement (Kaizen)

  • Time consuming and expensive
  • All staff members are required to believe in the approach, and put in the necessary effort and commitment to eliminate waste and to make efficiency gains
• Just in time (JIT)


  Aims to eliminate buffer stock requirements by ensuring raw materials and components are received just before they are needed
• Advantages of Just in Time

  • Buffer stocks are not required, so this reduces the cost of stock management and waste
  • Avoids opportunity cost
  • Improve the firm's cash (liquidity) position
• Disadvantages of Just in Time

  • JIT stock control does not enable firms to enjoy bulk buying economies of scale as raw materials are only ordered
  • Risk of running out of stock if demand is higher than expected
• Cradle-to-cradle design and manufacturing

  A sustainable, waste-free production model in which all materials inputs can be recycled or reused, or are consumable or compostable
• Advantages of cradle-to-cradle design and manufacturing

  • Not expensive (saves money) because of recycling and reusing products
  • The product can be manufactured at the same level of speed and quality
• Disadvantages of cradle-to-cradle design and manufacturing

  • Lack of flexibility
• Quality


  A product is fit for purpose i.e. the good or service meets or exceeds the needs of its customers
• Quality Control (QC)


  The most traditional form of quality management in which a supervisor or inspector checks and examines output for possible defects, usually at the end of the production process
• Advantages of Quality Control

  • Improve customer satisfaction
  • Quality controllers are experts
  • Cheaper than quality assurance
  • Can give a firm a competitive advantage
• Disadvantages of Quality Control

  • QC is a reactive rather than proactive method of quality management, so does not prevent mistakes
  • If products are only checked at the end of the production process, this can result in a rather large volume of substandard products
• Quality Assurance (QA)


  A lean approach to quality management as it involves all employees in the quality process, focusing on empowering all staff to check their own work throughout the production process
• Advantages of Quality Assurance

  • Improve level of motivation in the workplace
  • Employee participation can help to generate new ideas regarding the quality process
  • Reduces costs of wastage
• Disadvantages of Quality Assurance


  • Expensive compared to quality control as all workers need to be trained or upskilled
  • Might not be feasible or suitable for all organisations
  • The philosophy only works if each staff member is committed to quality assurance
• Methods of managing quality

  • Quality circles
  • Benchmarking
  • Total Quality Management (TQM)