5.1 & 5.2 Flashcards
Operations
Takes raw materials purchased from suppliers (input), uses these raw materials in production (process) and turns the raw materials into finished goods (output).
The Role of Operation
- Purchasing of raw materials to meet production requirements
- Managing stock
- Ensuring the quality of output is consistent and standardised
- Warehousing and distribution of finished products
- Ensuring appropriate methods of production are used
Operations and Sustainability
While the quality of the finished product is highly important, the operations manager also has wider responsibilities:
Economic Factors
Social Factors
Ecological Factors
(Known as the three pillars of sustainable development or triple bottom line)
Economic Factors
- Budgets must be respected and wastage kept to a minimum. Further savings should be identified through efficiency
- Usually measured in monetary terms with focus on economies of scale and average cost per unit
- Focus on increasing profitability year on year to ensure the business remains liquid
- This is known as economic sustainability
Social Factors
- Businesses need to understand their responsibility towards their workers as internal stakeholders as well as to external stakeholders such as the local community
- Employees should be treated fairly, working conditions acceptable
- The quality of life for local residents should nit be affected by decisions made by a business
- Known as social sustainability
Ecological Factors
- Business must acknowledge and take responsibility for the negative impact their decisions have on the natural environment, especially different forms of pollution.
- Known as ecological sustainability
The Triple Bottom Line
Demonstrates the fact that business decisions should not only consider financial aspects, but also the well-being of local communities and the natural environment. It is ideal as in reality, economic aspects largely drive most commercial organisations.
Production Process
Labour Intensive Production
Capital Intensive Production
Labour Intensive Production
- Products are made using human labour
- Small quantities of products are produced
- Used by smaller businesses where products are manufactured to suit specific requirements
- E.g. wedding cake
Capital Intensive Production
- Products are made using machinery and equipment
- Products are standardised and large quantities or identical products are made
- E.g. soft drinks
Labour Intensive Production Advantages
- Products can be made to suit individual customer requirements (satisfaction)
- The initial cost is cheaper as expensive machinery is not required
- Employees can use their skills and initiative resulting in job satisfaction
Labour Intensive Production Disadvantages
- Wages are higher as employees are highly skilled
- Human errors result in an increase in waste and costs
- The business cannot take advantage of economies of scale
Capital Intensive Production Advantages
- Large volumes of identical products are made
- Quality of output is standardised and consistent
- Can take advantage of economies of scale
- Machinery can operate 24/7
Capital Intensive Production Disadvantages
- Individual customer requirements cannot be met
- Production stops if machinery breaks down
- Machinery is expensive to purchase and maintain
- Worker motivation may be low if employees have been de-skilled
Methods of Production
Process in which raw materials are converted into goods and services. Business must decide on the most suitable method of production, the objective is to minimise the cost per unit.
Job Production
Batch Production
Flow Production
Cellular Production