topic 5

• 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
• DuPont: 'Video on their ethical position on diversity and inclusion in the workplace'
• 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 (USP)
  • 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 (i.e. produced on a small scale)
• 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
• 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
• 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
• Characteristics of labour-intensive production

  • Ability to offer personalized services
  • Essential in some industries like healthcare and education
  • Highly suited for firms that make highly customized products or operate in the tertiary sector or farming in developing countries
• Capital-intensive production


  Has a relatively high proportion of capital costs compared with labour costs
• Characteristics of capital-intensive production


  • High levels of output are possible
  • Products tend to be highly homogeneous, so there is no unique selling point (USP) from customization
  • Ideal for firms that have goods that can be batch or mass produced, operate in large markets that demand large volumes, 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