5.1 The role of operations management Flashcards
What is meant by operations management?
Concerned with the use of resources called inputs - land, labour and capital - to provide outputs in the form of goods and services.
What is the relationship between operations management and the other functions of a business (finance, human resources and marketing)?
Finance - expanding capacity requires funding
HRM (Human resource management) - so that appropriate numbers of suitably qualified workers are employed.
Marketing - Need to make sure that the right quantity of the good is made available so that they may successfully sell it
How does operations management apply to all production sectors of the economy?
Primary sector: extracting raw materials, harvesting, rearing
E.g. mining, agriculture, fishing
Secondary sector: turning natural resources into processed or finished goods
E.g. steel production, car manufacturing
Tertiary sector: the provision of services
E.g. finance, insurance, travel and tourism, transportation
Quaternary sector: the provision of intellectual, knowledge-based activities that generate and and share information
E.g. ICT, R&D, consultancy services
What is the production (or transformation) process?
the method of turning factor inputs into outputs by adding value in a cost-effective way.
How does the production process ‘add value’ to output of goods and services?
The factors of production are commonly known to marketing and production managers as the Five Ms - materials, manpower, money, machines and management. The 5Ms can be a useful tool in devising both marketing and production plans. They are combined in a cost-effective way to ensure that there is value-added during the production stage of the transformation process
What are the inputs?
Capital
Land
Resources
Labour
Outputs
Finished goods
Services
Components for other firms
Factors affecting the degree of value added
The design of the product or the nature of the service
The efficiency with which the input resources are combined and managed
Being able to convince consumers to pay more for the good or service than the cost of the inputs
What are the ‘triple bottom line? What type of company tries to achieve them
Ecological sustainability
Social sustainability
Economic sustainability
Job/customised production
Creating a product from start to finish that is tailor made to meet customer requirements – usually one-off or unique items (e.g. violin, painting)
Only one person or group’s job to complete entire product
Small firms are likely to use job production
Advantages of Job/customised production
High quality and uniqueness
High motivation of workers
More flexibility
Disadvantages of Job/customised production
Labor intensive and expensive
Time consuming due to customer requirements
Long working-capital cycle (due to slow production)
Minimal economies of scale
Batch production
Producing limited number of identical products (batch) at a time (e.g. chocolates, CPUs, breeding)
Usually used when level of demand is not clear and the business produces a range of products
Batch production advantages
Technical and purchasing economies of scale
Specialisation – better quality and productivity
Variety – reduce risks of producing single product
Batch production disadvantages
Inflexibility – can’t stop once started
Storage costs
Boredom – reduced motivation
Flow/line/mass production
Continuous production process of standardized products
Flow/line/mass are usually interchangeable
Generally capital intensive
Flow production
Sequence of steps to create product (e.g. newspapers/magazine)
Line production
Product is assembled in various stages along an assembly line (e.g. car)
Mass production
Manufacturing large amounts of standardised products (e.g. Chips)
Advantages of Flow/line/mass production
High production scale at low cost due to economies of scale
Initial high costs is spread over high volume of units
Standardized quality (assuming low defect rate)
Low cost for workers
Disadvantages of Flow/line/mass production
Low motivation
Breakdowns cause major delays
Inflexible – no reworking or customization
High initial set-up, running, and replacement costs
Requires effective storage
Cell production
Modern adaptation of assembly line
Parts of production are delegated to teams or cells for completion
Any member of team can contribute to the task
Cells work independently but rely on each other to achieve targets
Advantages of Cell production
Certain degree of autonomy in decision making
Improved standards of quality
Greater sense of responsibility and accountability in team
Higher levels of motivation (team working, empowerment, etc.)
Specialisation
Disadvantages of cell production
Output may be lower
Higher chances for intra- and intergroup tension and conflict
Capital intensive to initiate and sustain
How to choose the production method
Size of the market
The amount of capital available
Availability of other resources
Market demand exists for profits adapted to specific customer requirements
Factors influencing location decisions
Site and other capital costs such as building or shop fitting costs
Labour costs
Transport costs
Market potential
