4.1 THE NATURE OF OPERATIONS

• Operations management


  Concerned with the use of resources to produce goods & services of the required quality, in the required quantity, at the time needed, in the most cost-effective way
• Production management


  More concerned with "physical output"
• The production process


  1. Inputs: Resources, Land, Capital, Labour

  2. Production Process (capital or labour intensive)

  3. Outputs: Finished goods, Services, Components for other firms
• The degree of value added to the input depends on?


  • The design of the product - whether customer are prepared to pay higher price for product that offered a better quality than cheaper substitutes
  • The efficiency with which the input resources are combined and managed
  • The impact of promotional strategies to convince consumers to pay more believing the products are really better
• Resources


  Land, Labour (both manual and skilled), Capital (money invested, tools, machinery, computers, equipment), Intellectual capital (human, structural, relational)
• Efficiency


  Measured by productivity
• Effectiveness


  Achieving customer needs profitably instead of just being efficient in operations
• Efficiency is getting the most output for the least inputs, while effectiveness is attaining organizational goals
• Sustainability of operations


  • Reducing energy use and carbon emissions
  • Reducing the use of plastic and other non-biodegradable materials
  • Using recycled materials
  • Manufacturing products that are recyclable
• Labour intensive


  Involving a high level of labour input compared with capital equipment
• Advantages of labour intensive


  • Interesting and varied work
  • Low machine costs
  • One-off designs meet customer requirements
• Disadvantages of labour intensive


  • Low output levels
  • Skilled, high-paid workers required
  • Product quality depends greatly on the skill and experience of each worker
• Capital intensive


  Involving a high quantity of capital equipment compared with labour input
• Advantages of capital intensive


  • Economies of scale
  • Consistent quality
  • Low unit costs of production
  • Ability to supply the mass market
• Disadvantages of capital intensive

  • High fixed costs
  • Cost of financing the equipment
  • High maintenance costs and the need for skilled workers
  • Quick pace of technological change can make equipment obsolete
• Job production


  The making of one single & complex order
• Advantages of job production

  • A small team will be working on a single unit
  • The workers will have a sense of purpose, accomplishment and satisfaction
• Disadvantages of job production


  • Difficult to give a good estimate for the job
  • Unit cost tend to be very high
• Batch production


  Involves the production of products in separate groups that go through the whole production process together
• Benefits of batch production

  • Able to reuse the same machines
  • Enjoy economies of scale in purchasing
  • Costing is easier because has past records
• Drawbacks of batch production

  • Poor coordination can lead to goods in process being held waiting
  • Lot of paperwork
  • Buffer stocks (cost)
• Flow production


  Continuous production with emphasis on the movement of production in a flowing process
• Problems with flow production

  • Difficult to coordinate each stage due to different speeds
  • If demand falters, overstocking may occur
  • Preventive maintenance is crucial to avoid breakdowns
• Mass production


  Emphasizes the huge amount of quantities produced using line/flow production
• Mass customisation


  Combines latest technology with multi-skilled labour to use production lines to make a range of varied products
• Factors to consider when choosing production method
• Problems when changing production methods include increased costs, staff de-motivation, and the need for accurate demand forecasting
• Types of operation methods or types of production?

  • job production
  • batch production
  • flow production
  • mass customisation