Operations

• Operations


  The process of transforming inputs into finished goods
• Product


  The goods or service an organisation supplies to customers
• Types of production systems

  • Capital intensive
  • Labour intensive
  • Automation
• Operating system


  The method of organising resources to achieve the desired outcome
• Operating system stages


  1. Input

  2. Process

  3. Output
• Departments that interact with Operations

  • Marketing
  • Finance
  • Human Resources
• Purchasing mix (choosing a supplier)

  • Price charged
  • Quality of raw materials
  • Lead time
  • Amounts of stock
  • Location of supplier
  • Reliability of supplier
• Economic (Maximum) Inventory Level


  Stock level that permits activities to continue without interruption but incurs the minimum cost
• Minimum Inventory Level


  Stock level that ensures there will always be stocks available for production, allowing for ordering and delivery times
• Re-order Level


  Level at which new stock should be ordered, usually based on amount used per day plus lead time
• Re-order Quantity


  Amount of stock required to return stock levels to economic stock level on the same day that new stocks arrive
• Problems with overstocking


  • Storage costs
  • Cash tied up
  • Inventory deterioration/obsolescence
• Problems with understocking


  • Unable to cope with unexpected orders
  • Production may have to stop
  • More frequent ordering
• Inventory storage


  • Dry
  • Well lit
  • Well ventilated
  • Locked
  • Clearly labelled
  • Oldest to front
• Just-in-time production


  Method of inventory control where inventory arrives just before needed in production
• Factors influencing choice of business location

  • Availability of raw materials
  • Distance to market
  • Availability of labour
  • Availability of land
  • Infrastructure
  • Incentives
• Methods of production


  • Job production
  • Batch production
  • Flow production
• Factors to consider when choosing a method of production

  • Product being produced
  • Size of market
  • Size of business
  • Finance available
  • Technology available

  
• then unit costs can be high as production has to halted and changed frequently
• Flow production


  Continuous process with production flowing from one operation to the next. Each stage adds to the production. This type of production often uses a production line for mass production of goods to the same specification.
• Flow production


  • Cars
  • Paper
• Flow production


  • Continuous output of products, all of which are much the same. The large scale production means that the organisation can benefit from economies of scale – e.g. they can buy in bulk and obtain discounts so that cost of production per unit falls as output increases.
• Factors to consider when choosing a method of production

  • The product being produced
  • The size of the market
  • The size of the business
  • The finance available
  • The technology available

  
• You could not use batch or flow production to build hospitals, however houses can be built in batches
• Setting up a factory for flow production is very expensive and would only be viable for products that there is a very large demand for ie a mass market
• New businesses are usually small to medium sized organisations so would not have a big enough market for flow production or the finance available to make the large investment in equipment and technology required to set up a flow production operation
• Labour intensive production


  The amount of machinery/equipment and labour used in making a product will determine whether or not it is labour or capital intensive

  
• Capital intensive production


  The amount of machinery/equipment and labour used in making a product will determine whether or not it is labour or capital intensive
• Methods of transportation


  • Road
  • Rail
  • Air
  • Sea
  • Pipeline
• Road transport


  • Many organisations rely on road transport, using either vans or lorries that can be specially adapted to suit the needs of the types of goods to be transported eg refrigerated transport. Larger organisations may buy their own fleet of vans and lorries whilst some many decide to use haulage companies who specialise in transportation of goods.
• Rail transport


  • Rail can be useful for transporting large, bulky goods (coal etc) and can be quite cost effective. The problem may be that some parts of the country are not well served by a rail service and you may also have to use alternative transport once you have reached the rail station closest to your customer. The rail service in the UK is also relatively old and requires maintenance which may mean that the service is disrupted eg over holiday weekends etc. Rail can be used to transport some goods to mainland Europe via Eurostar, giving companies an alternative to air or sea freight.
• Air transport


  • Air freight is often the quickest way to get supplies from a distant location, or to deliver to customers in another country. If you require quick delivery, eg for tropical fruits, flowers etc then air freight may be the only way to transport the goods. It is also generally the most expensive method of transport through so will have a direct impact on profits or the price you can charge the customer. There is also a well-documented environmental impact of air freight.
• Sea transport


  • Sea freight can be the most economical way to transport goods from other countries and since the UK is an island there are a number of ports that goods can come in to. Onward transportation from the port with usually be required though and sea freight can take a long time, eg 4 weeks to come from far east.
• Pipeline transport


  • Pipelines can be used to transport resources such as oil and gas under sea beds and across countries.
• Today's highly competitive markets mean that quality products are extremely important to a firm
• Quality


  Ensuring that actual products and services meet customer requirements. All businesses have to set standards of quality for each product or service they make and make sure that they meet these standards.
• Factors affecting quality


  • Good Quality Materials
  • Well Trained Staff
  • Maintaining Equipment
• Quality control


  Monitoring the standard of production to make sure products meet customer specifications. This usually happens once the product is finished. Can lead to high levels of wastage.
• Quality assurance


  This method is based on prevention of errors. It aims to create a situation in the production process where 'right first time, every time' becomes a real possibility. To achieve this quality is checked at every stage of the manufacturing process.
• Ethical and environmental operations considerations

  • Minimising waste and packaging
  • Recycling
  • Preventing pollution
  • Caring for the local or global community through emphasis on sourcing raw materials from suppliers who produce sustainably and are paid a fair price for their produce
  • Reducing 'food miles' (carbon footprint) through sourcing locally produced raw materials