1. role of operations management Flashcards
operations
refers to the business processes that involve transformation or, more generally, ‘production’
- involves process of transforming raw materials into finished goods and services
value adding
refers to the creation of extra or added value as inputs are transformed into outputs
Operations in manufacturing
processes of turning inputs such as raw materials into outputs of finsihed or partially finished goods.
Operations in services
convertising inputs such as labour and equipment to deliver the final service.
what does the strategic role of operations management involve
- allocating resources so that all aspects of the business meet the customers needs
- considering the importance of cost leadership and differentiating goods and services.
what is cost leadership
involves aiming to have the lowest costs or to be the most price-competitve in the market.
- Overall business should be profitable whilst trading with lowest cost.
- Focus on adjusting costs/expenses to maximise profit
what is the goal of cost leadership and when should you use it
GOAL - Have lower prices than competitors (reduce costs)
WHEN -
- When price is best way to compete
- Standard product - apples, oranges
- When no one else is competing on price yet (eg airlines)
how to have successful cost leadership
- use cheaper resource
- shorter production times
- organise production to reduce delays
- economies of scale
what are economies of scale
refers to cost advantages that be created from an increase in the scale of business operations
- the more you produce the cheaper each unit is.
Cost savings come from:
- Form being able to purchase at lowest cost per unit (buy in bulk)
- From efficiency through technology and machienery
types of business costs
1.processing costs
2. input costs
2. labour costs
4. inventory costs
5. quality management costs
how does walmart exemplify cost leadership
Made decisions to supply chain and sourcing to achieve lowest costs:
1. buy in bulk
2. constantly moving inventory (pay to keep in warehouse)
3. grow e commerce
what is the balance between cost and quality
- Direct relationship between cost and quality
- low input cost = lowe quality
- Operations manager decide desired level of quality and hence the costs.
- decide what balance to create between costs and the desired quality.
what is product differentiation
distinguishing products (goods or services) in some way from those of compeititors.
goal of product differentiation and when to use it
goal - Have better features than competitors
when - When quality is the best way to compete
- If there are lots of low cost products
- Luxury products
If you have a compeietive advantage (like access to highest quality materials
strategies on how to differentiate products
Make products stand out by:
- more time and money on product design
- Focus on reputation of brand
- Make customer service priority -
- quality control process
what is standardisation
**producing goods or services that are homogenous. **
- Mass producing in high volume
- No variety
- Low cost per unit
- Directly related to cost savings through economies of scale
- Ensure consistency of quality/uniformity
how to differentiate goods
1. vary product features- have more options (making a bit different, e,g cereal)
2. vary product quality - affordable low quality model and expensive high quality model.
3. vary augmented features - additional features cost more (add ons in car
how to differentiate services
1. vary amount of time spent on service - provide service quickly
2. vary level of expertise brought - more speciliased (expensive) service if person high expertise
3. develop self service options - give customers flexibility
4. vary quality of technology used in delivery - compute technology affect quality of service
what is cross branding
- For both goods and services
- Differentiation from cross branding or strategic alliances
Adds value to products by offering consumers added benefits from cross branding arrangemen
cross branding example
EXAMPLE - Woolworths - Caltex alliance, Coles - Shell alliance
- Products are differentiated
- Differentiation not from product but rather from an external factor that the business has brought into the mix
what is interdependence?
**the mutual dependence that the key business function have on one another.
**
* Occurs when each key business function us committed to the same business goals as the other key areas
* Work in a coordinated and collaborative way to achieve these goals.
what is marketing and how is it interdependent with operations?
marketing: Promotes products to attract and retain customers.
marketing dependent on operations:
* produce quality products to satisfy consumer demands = generate sales
* abide by government regulations
* determine product capabilities and characteristics
operations dependent on marketing:
* increase sales of products to generate profit
what is finance and how is it interdependent with operations?
finance: Manages funds, budgeting, and financial planning.
finance dependent on operations:
* practice within budget to maximise profit margins
* report on damages/malfunctions - reduce poor quality goods and save costs
operations dependent on finance:
* determine budget for manufacturing expansion, technology, equipment
* ensure business has enough capital to produce products
* prevent business from debt
what is human resources and how is it interdependent with operations?
human resources: Recruits, trains, and manages employee relations.
human resources dependent on operations:
* indicate what labour is need to product goods/services
* collab with finance to ensure correct wages paid
operations dependent on human resources:
* recruit employees with adequate skills, qualifications and experience
* provide correct training
