Operations Management.(production of goods and services)

• Operations Management

  Production of Goods and Services

  Production Process

  
• Production


  Making a product or service to satisfy consumer wants and needs
• Factors of production or 'inputs'

  • Land
  • Labour
  • Capital
  • Enterprise
• A business combines these inputs to produce a more valuable output (this is added value)
• Labour-Intensive Production


  A larger workforce is used than machinery to make goods. Usually done in countries with low wages so that it is more efficient (ex: SHEIN)
• Capital-Intensive Production


  Businesses use machinery rather than workers. Usually done in developed countries where the wages are high
• Operations Department


  Transforms inputs into outputs for consumers
• Operations Manager


  • Ensures raw materials are available and made into finished goods
• Roles in manufacturing businesses

  • Factory Manager - responsible for quality and quantity of products
  • Purchasing Manager - responsible for providing the required materials and equipment
  • Research and Development Manager - responsible for design and training of employees for new products
• In the retail business, the factory manager will be replaced by the managers for the shop
• In service businesses, e.g. Restaurants, the operation department will include managers for each shop
• Productivity


  A way of measuring a business's efficiency
• As employees become productive, per-employee output rises, and costs of production fall
• Ways to increase productivity

  • Improve factory layout to reduce time waste and raise efficiency
  • Introduce automation
  • Improve labour skills by training
  • Improve quality control
  • Improve employee motivation
  • Improve inventory control
• Benefits of increasing efficiency

  • More output compared to inputs
  • Lower costs per unit (and therefore lower average cost)
• If the business has a limited workforce, raising their wages will increase motivation and, therefore, also increase productivity
• Forms of inventory


  • Raw materials
  • Work in progress goods
  • Finished goods
• Why do businesses hold inventory?

  • To ensure enough inventory is available to satisfy sudden changes in demand
  • Production and opportunity costs will also be high if inventory levels are low
• Maximum inventory level


  The business buys in inventory to fill its holding capacity
• Buffer Inventory Level


  Inventory held to deal with uncertainty in customer demand and deliveries of supplies
• Lean Production


  Various techniques to cut down waste and raise efficiency
• Types of Waste


  • Transportation
  • Overproduction
  • Overprocessing
  • Waiting
  • Motion
  • Unnecessary inventory
  • Defects
• Transportation


  • Goods being moved unnecessarily → fuel price, chance goods may get damaged
• Overproduction


  • Leads to high storage costs and possible damage to goods while in storage
• Overprocessing


  • Sophisticated machines being used to do simple tasks
• Waiting


  • Goods not moving or being processed, waste occurs due to inefficiency
• Motion


  • Any action made by an employee that does not relate to the production of goods, wastes time
• Defects


  • Goods have faults/defects that require them to be inspected/fixed, wastes time
• Advantages of lean production

  • Less storage costs
  • Quicker production
  • Better use of equipment
  • Less money tied up in inventory
  • Speed up production by cutting out processes
  • Improved health and safety lead to less time off work due to injuries
  • No need to repair defects or provide replacement services for a dissatisfied customer
• All these save/reduce costs that lead to lower customer prices and increased business competitiveness and profit
• Types of Lean Production

  • Kaizen
  • Just-in-time inventory (JIT)
  • Cell production
• Kaizen


  Continuous improvement in Japanese
• Kaizen


  • Primary focus is to eliminate waste
  • Ideas are thought of by holding frequent meetings with workers to discuss problems and possible solutions
• Just in Time


  A production method that reduces or virtually eliminates the need to hold inventories of raw materials or unsold inventories of the finished product
• To operate in JIT, businesses need to have reliable suppliers and an efficient ordering system. If suppliers are late, it can disrupt the system
• Cell Production


  The production process is divided into separate units, each making an identifiable part of the good
• Production


  Making a product or service to satisfy consumer wants and needs
• Factors of production (inputs)

  • Land
  • Labour
  • Capital
  • Enterprise
• A business combines these inputs to produce a more valuable output (this is added value)
• Labour-Intensive Production


  A larger workforce is used than machinery to make goods. Usually done in countries with low wages so that it is more efficient