10.1 Operations - Role of operations management Flashcards
Definition of operations management
Is the transformation of inputs to outputs to meet requirements of customers while making efficient use of resources
1.1 Role of operations management
What operation management includes
It involves the certain of goods and the provision of services by:
- Planning activities
- Purchasing inputs
- Managing inventory
- Selecting and implementing manufacturing processes
- Developing strategies to gain a sustainable competitive advantage
1.1 Role of operations management
Advantages of effective operation management
Adds value to the business by:
- Increasing productivity
- Reducing costs
- Improving quality
1.1 Role of operations management
Impacts of effective operation management
Aims to achieve a competitive advantage through lower cost and/or different goods.
1.1 Role of operations management
Long term planning - strategic goals
- Improving productivity
- Efficiency
- The quality of outputs
1.1 Role of operations management
Advantages of using technology
It is an advantage by producing a more constant quality item at a cheaper price.
1.1 Role of operations management
Strategic operation decisions include
- Operations of inputs and equipment
- What combination of human and technological resources to use
- Where to locate
- Level of quality
1.1 Role of operations management
All strategic decisions focus on achieving a competitive advantage…
- Cost leadership: focuses on high volume of output as cheap as possible and suits mass production.
- Differentiation: Focuses on costly operations due to designs, innovations, and features that make the goof ot service difficult.
1.1 Strategic role of operation management.
The role
focuses on being the most priced- competitive in thr market
1.1 Strategic role of operation management.
managers focus on product differentiation…
- Varying product features
- Varying product quality
- Varying augmented features (add ons)
1.1 Strategic role of operation management - Cost leadership.
What is it?
establishing a competitive advantage by having the lowest cost of operations in the industry by:
- fewer features
- lower quality
- Using low cos packaging
1.1 Strategic role of operation management - Cost leadership.
How is low cost is achieved through strategies?
- Building efficient production facilities
- Time and money efficiency to keep cost of sales low
- Tight control over overhead costs
- Economies of sale
- Accessing cheap raw materials from suppliers
- Outsourcing non core business functions
1.1 Strategic role of operation management - Cost leadership.
Maccas example of cost leadership
- Basic food at low cost
- Keep production cost low by division of labour
1.1 Strategic role of operation management - Cost leadership.
IKEA example of cost leadership
- Producing cheap but stylish furniture
- Source their products in low wage countries
- Offer very basic customer service
What are economic scales?
- Cost advantage that’s created because of an increase in scale of business operations.
- The cost of savings come from being able to purchase lower cost per unit of input and efficiencies created from the improved use of technology.
Economic scales cont.
- Efficient production
- Spread risks
- Reduction in promotion cost
- Cheaper capital
- Reduction in logistic costs
- Buy in bulk
1.1 Strategic role of operation management - good/service differentiation
Product differentiation strategy
- Product unique characteristic strategy, enables a company to charge premium and achieve above average returns thereby achieving competitive advantage.
- A products achieves a greater market share with the quality, service and technology differences from its competitors.
1.1 Strategic role of operation management - good/service differentiation
Product differentiation: GOODS
- Varying actual product features
- Varying the product quality
- Varying any argumented features
1.1 Strategic role of operation management - good/service differentiation
Product differentiation: SERVICES
- Varying the time spent
- Varying the expertise brought to a service
- Varying the level of qualifications and experience on the service provider
- Varying the qualities of materials/ technology used in the service delivery
1.1 Goods and/or services in different industries
Description
Operations need to consider what industry they’re in and what they are producing in order to effectively manage the operations process.
1.1 Goods and/or services in different industries
Perishable and non perishable goods
How long a good last will determine how quickly the distribution will be.
Non perishable goods are usually more durable and are found in many industries
1.1 Goods and/or services in different industries
Intermediate goods
One that may go through more than one operational process or further processing.
1.1 Goods and/or services in different industries
Intermediate goods examples
Zara - they buy or manufacture their own fabric to make the final customer a shirt (good).
Coca cola - Use sugar to produce their final product.
1.1 Goods and/or services in different industries
Standardised goods
- Mass produced
- Standardization is achieved by accepted guidelines in regards to how a product or service is created.
- The GOAL of standardisation is consistency or uniformity in quality.
- Enables lower cost.
