Operations

• Operations


  Business processes that involve the conversion of inputs, both transformed and transforming, into final goods and services known as outputs through the transformation process
• Strategic


  Affecting all key business operations whereby operations managers contribute to the strategic (long-term) direction and plans of the business
• Value adding process


  • Creation of extra or added value as the inputs are transformed into outputs
• Strategic roles of operations managers


  • Cost leadership
  • Product differentiation
• Cost leadership


  Businesses aiming to have the lowest possible costs, or be the most price-competitive in the market
• How to reduce costs


  1. Exploit economies of scale

  2. Produce standardised goods

  3. Engage in supplier rationalisation

  4. Outsource materials and labour
• The main costs for Qantas are: staff (28%), aircraft operation and maintenance (23%), fuel (21%), depreciation (21%), marketing (4%)
• Qantas has been able to gain cost leadership recently by reducing its costs by over $7 billion in the last 14 years
• How Qantas reduced costs


  1. Exploited economies of scale: joined the Oneworld Alliance to reduce unnecessary flight paths

  2. Standardised flights: reduced flight routes to unpopular destinations

  3. Implemented leading edge technology: online booking has reduced labour costs

  4. Minimised waste: diverted its waste to a trigeneration waste treatment facility in 2010 where 99.8% of waste is now recycled
• Product differentiation


  Businesses distinguishing their products from its competitors through augmenting the product's features, varying product quality or including additional benefits
• How Qantas has engaged in product differentiation


  • Destinations (76+ worldwide)
  • City flights and express services in peak - flights every 30 minutes between SYD and MEL
  • Jetstar flight service for price-conscious consumers or 'budget buyers'
  • Comfort - sky beds, menus by renowned chefs, lounges, self-serve kiosks
• It is very difficult for businesses to attempt to achieve product differentiation and cost leadership simultaneously as the former involves high costs and the latter focuses on reducing costs
• Standardised goods


  Mass produced, usually on an assembly line where they are uniform in quality and meet a predetermined level of quality. There is a high focus on production.
• Customised goods


  Goods that are tailored to the needs and wants of the customer. There is a high focus on producing consumer-centric goods.
• When goods are perishable, there needs to be a high level of operational processes integrated, specifically with the evolution of fast-moving consumer groups (FMCG). This includes high standards of quality and safety, short lead times and appropriate packaging and storage processes.
• When goods are non-perishable, they become more durable than perishable goods due to their long-lasting nature. Operations managers still need to effectively manage quality management processes such as quality control and inventory management systems such as just-in-time.
• Standardised services


  Service providers can achieve cost leadership by standardising how the service is performed
• Customised services


  Services can be customised to fulfil the needs of customers, commonly seen in the form of pre and after sales service when shopping at luxury and high-end stores
• Interdependence


  The mutual dependence the key business functions have on one another, meaning each function relies on another to perform to their full productive capacity
• Key business functions


  • Finance
  • Marketing
  • Human resources
  • Operations
• How operations relies on finance


  Finance ensures there are adequate funds to carry out transformation processes, and summarises financial transactions to reflect the true value of the business. Operations produces the products that generate sales and provide funds for the other functions. If costs in production are minimised, the cost of each good sold is reduced, which increases sales and maximises profitability. By focusing on quality, operations managers are able to provide high quality and durable products, thus resulting in products that can be sold at high prices via price skimming to increase revenue.
• How operations relies on marketing


  Marketing identifies and meets the needs and wants of customers through market research. Marketers adopt the marketing concept, allowing them to successfully fulfil customers inherent desires while simultaneously achieving the business social, environmental, and economic goals. This allows the business to effectively direct and manifest all of its policies, plans, and operations integrally into the business in a bid to achieve customer satisfaction.
• How operations relies on human resources


  Human resources effectively deals with employees and their employment issues to generate business success. Human resources management deals with employment resourcing, engaging in activities of acquisition, development, maintenance, and separation. Effective human resources is vital to the success of the business as employees are the most valuable asset to the business. However, the constantly changing business environment poses a challenge for human resources management due to the complexity of communications and increased reliance on technology. Thus, the operations function decision to outsource and acquire leading-edge technology directly influences the nature of the workplace and the skills required to effectively carry out the human resources function.
• The interdependence of the key business functions at Qantas include: human resources recruiting and training staff, marketing connecting customers with requirements, and finance monitoring and reporting financial transactions.
• Globalisation


  The removal of trade barriers between nations, characterised by an increasing integration between national economies, as well as a high degree of transfer of capital, labour, financial resources, technology, and ideas.
• Impact of globalisation on operations


  Allows businesses to modify and implement new transformation processes to suit the changing global market, acts as a source of market opportunities, but also poses challenges as cost leaders can undercut the market.
• How businesses integrate operations processes to meet global needs


  1. Integrating product designs that meet the needs of global customers

  2. Choosing the location for manufacturing facilities

  3. Deciding on quality management logistics

  4. Assessing quality management logistics
• The effects of globalisation for Qantas include: outsourcing non-core functions to reduce costs, accessing new markets with 70% of operations geared to the global market, and struggling to compete with subsidised foreign airlines.
• Supply chain


  The range of suppliers a business has, and the nature of its relationship with those suppliers.
• Global web


  The network of suppliers a business has chosen on the basis of lowest overall cost, lowest risk, maximum certainty of quality, and timing of suppliers.
• The development of globalisation has had a significant impact on supply chain management and the evolution of the global web. Businesses need to ensure they engage with a predictable and reliable supply chain that is responsive to changes in demand.
• Technology


  The design, construction, and/or application of innovative devices, methods, and machinery upon operations processes.
• The evolution of technology has enabled people to communicate more easily, and improve the smoothness of operations processes. It has enabled businesses to introduce new and innovative production methods which increase speed, reduce costs, and increase quality.
• Businesses must conduct a cost-benefit analysis to assess the opportunity cost of implementing new technologies.
• Technology at Qantas


  • Labour: self-serve kiosks which automates the check-in process
  • New planes: introduction of the A380 and the Dreamliner has increased the flying capacity and more efficient while providing a higher quality experience to customers
  • Data and digital transformation: has enabled Qantas to target and personalise communications to ensure a smooth booking process
• The improvements in technology meant Qantas has spent millions on training annually to ensure their staff are properly equipped with the correct skills.
• Quality


  How well-designed, well-made, and functional goods are, and the degree of competence with which services are organised and delivered.
• Quality expectations for goods


  • Durability
  • Quality of design
  • Fitness for purpose
• Quality expectations for services


  • Level of customisation
  • Reliability of the service provider
  • Professionalism of the service provider
• The constant pressure on operations at Qantas is to ensure customer expectations are fully met, and if possible, exceeded. This includes flights arriving and departing on time (reliability) and comfort-based features such as online check in, self-serve kiosks, and in-flight entertainment.