operations

• Strategic Role of Operations


  Maximising profits by maximising efficiency and minimising costs
• Cost Leadership


   involves aiming to have the lowest costs or to be the most price-competitive in the market

  consider

  • input costs
  • labour costs
  • processing costs
  • inventory costs
  • quality management costs
• Good/service differentiation


  • Tangibility
  • Customisation
  • Time between production + consumption
  • Determination of value
• Product Differentiation


  distinguishing products (g/s) in some way from its competitors

  • Goods
  • Varying product features
  • Varying product quality
  • Varying augmented features
  • Services
  • Time spent on service
  • Qualifications / Experience
  • Quality of materials/ technology
• goods and/or services in different industries

  Operations decisions will vary for goods depending on whether they are:

  Standardised goods: mass produced, uniform in quality, predetermined level of quality, OR

  Customised goods: vary according to the needs of consumers

  • perishable goods - Very short lead times and distribution that is quick and effective
  • non-perishable goods - Very durable, last a long time
  • intermediate goods = Processed more than once to produce other goods
• goods and/or services in different industries


  Services can be standardised or customised

  → e.g. visiting a GP (standardised) vs seeing a specialist (customised)

  Self service: encouraging the customers to take initiative to help themselves

  → e.g. ikea furniture, self serve checkouts

  • Positives → saves costs on labour, therefore business can reduce cost of product
  • Negatives → longer process, technology issues, customers may not be comfortable
• Interdependence


  • marketing - Marketing designs and markets the products to meet customers’ needs while operations acquires the source and inputs of the product
  • finance - Finance manages the costs and expenses of the business and summarises transactions that the operations team makes to produce a product
  • HR - HR deals with the people that the business employs and the issues arising from their unemployment. Operations needs its HR to produce their products
• Influences - Globalisation


  refers to the removal of barriers of trade between nations

  • Can be seen as an opportunity (e.g. expanding customer base) or threat (e.g. increased competition)

  Supply chain: refers to the range of suppliers a business has and the nature of its relationship with those suppliers

  • Global web - global network of suppliers of the lowest cost, lowest risk and maximum certainty
  • Reverse engineering - taking the product of a competitor that has already been released into the market at lower cost
  • innovations - Occurs when the business creates novel (new) products
• Influences - Technology


  Technology: the design, construction and/or application of innovative devices, methods and machinery upon operations processes

  → e.g. planning technologies, office technologies, manufacturing technologies 

  • Can be applied to, and integrated with, the range of processes that characteristics the operations function in business 
  • Can be a threat → advances in technology that business does not capitalise on
  • Can be opportunity → innovate to enhance their operations process
• Influences - Quality Expectations


  the totality of features and characteristics of goods and services that satisfy the stated or implied needs of consumers 

  • Quality informs all operations processes. The expectations that people have of businesses determine the way that products are designed, created and delivered to customers.
  • Goods
  • Quality of design
  • Fitness for purpose
  • Durability
  • Services
  • Professionalism
  • Reliability of service provider
  • Level of customisation
• Influences - Cost Based Competition


  derived from determining the break even point and then applying strategies to create cost advantages over competitors 

  • Recognises that prices cannot keep increasing, therefore reducing costs is the way to maximise profits
  • businesses that reduce costs
  • bulk buy inputs
  • achieve economies of scale
  • eliminate waste
  • produce standardised products for larger markets
  • produce high volume output
  • use automated production systems
• Influences - Government Policies


  Policies affecting business operations: 

  • monetary and fiscal policy; taxation rates; materials handling practices and waste disposal; Work Health and Safety (WH&S) standards; environmental policies such as carbon pricing, employment relations;and research and development grants

  Operations managers need to be fully aware of the contemporary government policies and what they comprise in every country they operate in.
• Influences - Legal Regulation


  includes a range of laws with which a business must comply with 

  • Influences how practices and process in operations are conducted particularly around labour, technology, finance, machinery and energy
  • Includes
  • Labour laws
  • Environmental/health
  • Licensing laws
  • Taxation
  • Trade practices
  • Migration and rules
  • Intellectual property
  • Financial and corporations law
  • Human rights
• Influences - Environmental Sustainability


  means that the business should be shaped around practices that consume resources today without compromising access to those resources for future generations

  • Can be seen in the move by businesses to reduce and minimise waste, recycle water, glass, paper and metals and reduce their carbon footprint

  Two main aspects:

  • The sustainable use of renewable resources
  • A reduction in the use of non-renewable resources
• Influences - Corporate Social Responsibility


  extends a business’s objectives from profit to ‘service to society and the community’

  • Businesses with a positive CSR image have high reputations with shareholders
  • CSR does reduce profit and may be unpopular with shareholders
  • Operations and production management are influenced by CSR because they create the business’s environmental footprint through production, transformation and outputs
• Influences - CSR


  Legal Compliance

  • Prescribed standards of behaviour that follows the letter of the law 
  • Compliance costs

  Ethical Responsibility

  • Taking it further by following the intention and the ‘spirit’ of the law
  • More expensive
  • Demonstrating that it values something more than just earning maximum profit
• Influences - CSR


  Environmental Sustainability

  • Operate and utilise resources in a way to sustain for the future 
  • Requires businesses to evaluate the full environmental effects of their operations

  Social Responsibility

  • Enhancing outcomes for all people involved in the business - customers, employees, shareholders, suppliers
  • Recognising business activities have an impact on society
• Transformed Resources


  inputs that are changed or converted in the operations process

  1. Materials - basic elements used in the production process, includes raw materials and intermediate goods
  2. Information - the knowledge gained from research, investigation and instruction. can be external (statistics) or internal (reports)
  3. Customers - become transformed resources when their choices, preferences and interests shapes inputs
• Transforming Resources


  inputs that carry out the transformation process; enable the change and value adding

  1. Human Resources - employees coordinate and combine inputs to produce a good/service
  2. Facilities - the plant (factory or office) and machinery used in the operations process
• the influence of volume, variety, variation in demand and visibility


  Variety

  • The mix of products made or services delivered.

  Variation in demand

  • Refers to the changes in demand for a g/s for businesses.
  • High variation → demand goes up and down (seasonal)
  • Low variation → more constant and little change (consistent)

  Visibility (customer contact)

  • How much say customers have in the production of their products.
  • high visibility - restaurant
  • low visibility - online uni course

  Volume

  • how much of a product is made
• Sequencing and Scheduling


  Sequencing: refers to the order in which activities in the operations process occur

  Scheduling: refers to the length of time activities take within the operations process
• Gantt Charts


  • Outlines the activities, the order and the time of each activity
  • Used for any process that has several steps and involves different activities

  Advantages

  • Force managers to plan and specify the time required
  • make it easier to monitor actual progress against planned activities
• Critical Path Analysis


  a sequencing method or technique that shows what tasks need to be done, how long they take and what order is necessary to complete those tasks

  • The critical path is the LONGEST PATH taken to complete the whole project
• Processes - Technology


  • Enable business to undertake the transformation process effectively and efficiently 
  • Used in the manufacturing sector to speed up the operations process and in the service sector to increase trade and communication
  • Office technology
  • computer, keyboard, telephones, printers, scanners
  • more efficient work
  • greater range of tasks
  • employees can work from home
  • Manufacturing technology
  • Robotics - consistency
  • Computer authorised design (CAD)
  • Computer authorised manufacturing (CAM)
• Task Design


  Task design: involves classifying job activities in ways that make it easy for an employee to successfully perform and complete the task 

  • overlaps the employment relations functions of job analysis, job description and person specification
  • Task Design → Job Description → Person specification → Recruitment → Selection
• Process Layout


  Plant layout: the arrangement of equipment, machinery and staff within a facility

  • Impacts the efficiency of operations
  • Must consider physical space, technology, location of stock, legislation and other stages of production
• Process Layout


  The arrangement of machines which are grouped together by the function (or process they perform)

  • High-variety, low volume production, moves from one department to another 

  → e.g. hospital → all machinery and services related to pregnancy are in the Maternity Ward

  
• Product Layout


  Where the equipment arrangement relates to the sequence of tasks being performed in manufacturing a product

  • Deals with work stations which are arranged to match a series of operations, work flows from station to station

  → e.g. the assembly of motor vehicles

  
• Other Layouts

  • Fixed position layout - Where a product remains in one location due to its weight or bulk → e.g. ice cream machines at Messina (related to product layout)
  • Office layout - Organised around discrete workstations and provide spaces to take breaks from the work environment
• monitoring, control and improvement


  1. Monitoring - The process of measuring actual performance against planned performance
  2. Controlling - Occurs when KPIs are assessed against predetermined targets and corrective action is taken if required, includes prevention, feed forward and feedback
  3. Improvement - Refers to the systematic reduction of inefficiencies and wastage, poor work processes and the elimination of any aspect of the transformation process that slows down the overall processing speed
• Outputs - Customer Service


  Customers may express dissatisfaction if a product is: defective, not meeting quality standards, wait times/lead times are too long or makes a warranty claim → operations processes would need a review

  • Includes
  • Handling customer returns promptly
  • Answering questions and providing information
  • Frequent and meaningful communication
  • Anticipating customer needs
  • Following up customer enquiries and complaints
  • Customer service is
  • an aspect of relationship marketing
  • can enable a business to charge higher prices and lessen the need to reduce costs
• Outputs - Warranties


  Warranty: an assurance that a business stands by the quality claims of the products they make and provide to the market

  • Australian law must ensure consumer guarantees → e.g. acceptable quality, safe, lasting, look acceptable, function properly 
  • Retailers and manufacturers must comply with the warranty and may need to provide a replacement product if a consumer is not satisfied
  • Consumers are more likely to buy from a business if there is a quality guarantee and the security that they can get their money back if the goods are not up to standard
• Performance Objectives


  goals that relate to particular aspects of the transformation processes which are set to make businesses more efficient, productive and profitable.

  includes:

  • Quality
  • Speed
  • Dependability
  • Flexibility
  • Customisation
  • Cost
• Quality


  Determined by consumer expectations, which are used to inform the production standards applied by the business. 

  1. Quality of design 
  2. Quality of conformance
  3. Quality of service
• Speed


  Refers to the time it takes for the production and operations process to respond to changes in market demand 

  • Goals for speed: reduced wait times, shorter lead times, faster processing times

  To achieve: reduction in procedural and technical bottlenecks and smooth internal communication, ability to change supply chain to quickly respond
• Dependability


  Refers to how consistent and reliable a business’s products are, how long the products are useful before they fail

  Measured by: warranty claims, consistency of standards, number of complaints received, how durable a product is
• Flexibility


  Refers to how quickly the operations process can adjust to changes in the market

  • The faster the processing time, the greater the likelihood that processes can be adjusted quickly to take on greater capacity of production
  • Achieved by updating products, increasing capacity, tech
• Customisation


  Refers to the creation of individualised products to meet specific needs of the customers

  • Much cheaper to standardise, however more likely to be successful if you add an element of customisation

  Mass customisation: standard mass produced item is personally modified to meet customer requirements

  → e.g. standard car customised through paint colour
• Cost


  Refers to the minimisation of expenses such that operations processes are conducted as cheaply as possible
• New Product or Service Design and Development 


  Goods

  • Two approaches:
  • Preferences and desires of customers via market research
  • Arises from changes in technology that enable new products
  • Factors to consider: quality, SCM, value, capacity management, utility, cost

  Services

  • customised so the customer is the starting point in design or standardised
  • Must consider:
  • Explicit service: tangible aspect such as time, expertise, skill
  • Implicit service: physiological aspect e.g feeling of being looked after

  Services using goods

  • Sometimes in the delivery of services, goods may be required