IB BUSINESS

• Operations management


  The provision of goods and services in the right quantities and at the right quality in a cost-effective and timely manner
• Role of production


  To turn factors of production (inputs) into outputs by adding value
• The Five Ms


  A useful tool in devising marketing and production plans by viewing factors of production as inputs in the production process
• Production methods


  Affect the quality and individuality of the product
• Exclusive products


  Can be marketed at high prices due to uniqueness and quality
• Mass produced products


  Are more standardized
• HRM implications of production methods

  • Size of workforce
  • Training and development needs
  • Recruitment and selection
  • Contingency plans for operational crises
• Finance implications of production methods

  • Capital intensity and lean production require heavy investment
  • Investment appraisal is required
  • Contingency funds needed for unforeseen emergencies
  • Labour intensive production has greater proportion of costs towards worker remuneration
• Sectors of the economy

  • Primary
  • Secondary
  • Tertiary
  • Quaternary
• Primary sector


  Businesses involved in the extraction, harvesting and conversion of natural resources
• Secondary sector


  Businesses involved in the manufacturing or construction of products
• Tertiary sector


  Businesses that specialize in providing services to the general population
• Quaternary sector


  Businesses involved in intellectual, knowledge-based activities that generate and share information
• Diversity and inclusion are increasingly at the forefront of business approaches to CSR
• Diversity and inclusion policies are designed to ensure that everyone, regardless of who they are or what they do, feel equally valued by the firm
• Many firms have publicly declared their position on diversity and inclusion, which can be found on their company websites
• Operations methods


  • Job production
  • Batch production
  • Mass/flow production
  • Mass customization
• Job production


  Creating an individual product from start to finish, tailor made to meet specific needs of a customer
• Advantages of job production

  • Quality of production
  • Highly motivated workers
  • Uniqueness of the product acts as a unique selling point
  • Flexibility in the design and specifications of the product are possible
• Disadvantages of job production

  • Labour intensive and therefore expensive
  • Time consuming due to the varying and specific design requirements
  • Long working capital cycle between producing and selling product
  • Few economies of scale can be enjoyed since each product is unique
• Batch production


  Producing a limited number of identical products, with work on each batch fully completed before production switches to a new batch
• Batch production


  • Bakeries baking bread, pastries or cakes
  • Footwear manufacturers making shoes in different sizes
  • Electrical appliances made with 110 volts for the US and Japanese markets and 220 volts for other markets
• Advantages of batch production

  • Economies of scale from machinery producing larger quantities
  • Specialization leads to increased productivity
  • Higher sales from a wider product portfolio, which gives customers greater choice
  • Products can still be tailored at relatively low cost
• Disadvantages of batch production

  • Inflexibility from difficulty in changing one batch to another once production has begun
  • Storage costs are high since there is a lot of work in progress
  • Jobs are repetitive and may lead to boredom
  • High production costs from using equipment and machinery
• Mass production


  The manufacturing of large amounts of a standardized product, often involving the assembly of individual components, and is capital intensive with many tasks relying on automation
• Flow production


  A continuous production process of manufacturing products that are standardized in large quantities, relying entirely on automated systems with very few workers required
• Mass production vs flow production

  Mass production is highly automated but will have more workers than flow production
• Flow production


  • Jaffa Cakes
• Advantages of mass/flow production

  • Large scale output
  • Economies of scale through capital intensive methods
  • Standardized quality
  • Worker specialization leading to low defect rates
  • Low labour costs due to use of unskilled workers
• Disadvantages of mass/flow production

  • Low levels of motivation due to boring repetitive work
  • Breakdowns will cause major delays
  • Little flexibility for change once production begins
  • Capital intensive and therefore very high set up, running and replacement costs
  • Large storage system is required for the large amounts of stock
• Mass customization


  Producing large quantities of goods via batch or mass/flow production, but products can be tailored to a customer's exact preferences
• Production methods can either be labour or capital-intensive
• Labour-intensive production


  Uses a greater proportion of labour than any other factor input, and is highly suited for firms that make highly customized products, are in the tertiary sector, or operate farming in economically developing countries
• Capital-intensive production


  Has a relatively high proportion of capital costs compared with labour costs, allowing high levels of output but with homogeneous products, and is ideal for firms that have goods that can be batch or mass produced, operate in large markets, and/or have ambitious growth objectives
• Lean production is the process of streamlining operations and processes to reduce all forms of waste (or 'muda') and to achieve greater efficiency
• Muda


  The Japanese term for waste
• Lean production should lead to improved quality and reduced costs
• Examples of muda


  • Over-processing
  • Time
  • Human effort
  • Energy
  • Resources and materials
• Continuous improvement (kaizen)


  A Japanese philosophy of making small and continuous improvements to increase efficiency and productivity, with small groups of employees identifying changes and improvements
• Just-in-time (JIT)

  A Japanese stock management method based upon having stocks delivered as and when they are needed, with only the absolute minimum levels of stock held and finished goods dispatched as soon as they have been produced