Business Chapter 11 Flashcards
Operations Management
The operation function
Is that function of the business aimed at executing the transformation process
What are the operations function and management concerned with?
They are concerned with creating products and providing services in order to realize the objectives of the business
Advantages of an efficient and effective operation
1)It can reduce costs of making the products or offering the services, contributing towards the profitability of production.
2)Increases revenue, increasing sales through superior-quality products and service excellence directly contributes towards the profitability of a business.
3)Reduce the amount of investment(capital) needed to manufacture the type and quantity of products or to offer the service required. By increasing the effective capacity of the operation by better use of facilities.
4)Provide the impetus for new innovation by using its solid base of operational skills and knowledge to develop new products and services.
Operations function
Aimed at the utilization of resources to manufacture products/render services
Operations managers
Personnel who are directly responsible for managing the operations function
Operations management
Involves operations managers’ activities, decisions and responsibilities that tie in with the execution of the operations function. Includes operations(Planning, Organizing, Scheduling, Control)
What should the operations-management function take cognizance of?
Of the customers’/clients’ needs and continually formulate its management strategies and objectives in such a way that the competitive position and customer/client base remain not only intact but where necessary are also strengthened and expanded
6 main elements of customer/client needs
Higher quality
Lower costs
Shorter lead time
Greater adaptability
Lower variability with regard to specifications
Higher level of service
General operations management performance objectives
1.Do things right the first time(No mistakes, higher quality ,lower costs)
2.Do things cost effectively(Provide the business with cost advantage)
3.Do things quickly(the lead time should be shorter)
4.Make changes quickly(Adapt/change activities if unforeseen circumstances make it necessary to do so)
5.Do things right every time(Error-free products and services that satisfy set specifications should regularly and continuously be provided to customers/clients)
6.Do things better(A business will endeavor to provide a better total product/service package compared to that of its competitors, gives service advantage)
Why is innovation leadership needed
To integrate a holistic perspective of the dimensions needed to forge innovation. So it is needed to integrate these forces within the digital ,legal, and biological worlds
Four primary dimensions of the model
The triple helix ecosystem
Epochal society
Upscaling agility
Triple management theory
The triple helix ecosystem
Describes the important principle or partnerships, networking and engagement between academics, gov and industry
Epochal society
More informed, demanding customer intelligence and new models for service quality
Upscaling agility
To be organic and in flux
Triple management theory
Hidden intellectual properties(IPs) needed to be smart for a ‘triple edge’
Products vs services
Products: Physical, Long-lasting, Held as stock, Very little customer contact, Long response time ,Manufactured before use
Services: Intangible, perishable, simultaneous use(provision and consumption), Heavy involvement with customer, short response time
Different operations have different characteristics
1.The volume of output may differ (no. of items produced by the operation over a given period of time)
2.The variety of output may differ(range of different items produced by the operation over a given period of time)
3.The variation of output may differ
4.The visibility of output may differ
Variation vs Visibility
Variation-Particular demand pattern for the output of the operation, which may be constant/may be irregular, non-routine, unpredictable
Visibility-How much of the operation’s activities the customers/client experience themselves or are exposed to
The classification of process types(manufacturers)
- Project processes
- Jobbing processes
- Batch processes
- Mass processes
- Continuous processes
Project processes
Projects represent operational processes that are highly
individual and unique, but that are normally tackled on a large scale. Examples are construction projects
Jobbing processes
Jobbing normally represents operational processes conducted on a small scale with a low volume of output. Examples are the process whereby a goldsmith manufactures jewelry (each piece
of jewelry is usually unique and takes the unique design preferences of the client into consideration)
Batch processes
In batch production (lot production), a limited range
of products is manufactured by the business and production occurs in batches (or lots)
Mass processes
Mass processes. Mass production is a well-known term for the production of products in high volumes, but with relatively little variety. While there may be some variants of the product itself (for example, the color, engine size )
Continuous processes
Continuous production is a step beyond mass production
because the volumes are even greater, but there is very little variety in the type of product. Examples are a wheat mill (Sasko).
The classification of process types for service providers
1.Professional services.
2.Service shops.
3.Mass services
Professional services
Professional services represent operational processes provided on a high client-contact basis, where the client is usually present within the service process for a considerable period of time(services of dentists, doctors, attorneys, auditors and management consultants)
Services shop
Service shops represent operational processes where the
characteristics of service provision fall between those of professional services and those of mass services. Examples of service shops are banks, hotels and retail stores
Mass services
Mass services. Mass services represent operational processes where many client transactions take place with limited client contact and in which the nature of the services provided is largely standardized (variety is therefore low).Examples of mass services include post and telecommunication services, air- and rail-transport services, and television-broadcast services
Operations design entails two interdependent aspects:
1.The design of products and services (also referred to as product design)
2.The design of operations product or service processes to manufacture or provide these products or services (also referred to as process design).
Design for a product
The design of a product entails far more than merely
determining its physical appearance in terms of shape, color and finish. It also includes the design of the operational processes for manufacturing the different components
Design for a service
Design of a service the processes (or systems) should be designed to execute the particular service as specified.
The primary aim of operations design
Is to provide products and/or services and processes that satisfy the needs of customers/clients in the best possible way
Design
Design, as an operations activity, helps to achieve the operations-management objectives with regard to quality, cost, lead time, adaptability, variability and service.
The design should also be such that errors in the manufacturing process are kept to a minimum so that manufacturing costs can be kept at a reasonable level
The competitive advantage of good design
The design of a product or service begins and ends with the customer/client. Initially, products and services are designed with a view to satisfying the needs of the customer/client in the best possible way
The components of products and services
All products and services consist of three interdependent components: a concept, a
package and a process.
A concept
The concept (or idea) is the set of expected benefits that the
customer/client purchases when purchasing a product or service in response to his or her needs
A package
Thus, regardless of whether it is a product or service that has
been designed, the package comprises a combination or ‘bundle’ of products and services. It is this package that the customer/client in fact purchases.
Two further aspects should be kept in mind in the composition of a service package:
1.Services cannot be inventoried. .
2.Services usually involve direct interaction between the customer/client and the process. They can involve high contact or low contact
A process
A process is necessary to create the package of products and services. The design of the products or services takes place in conjunction with the design of the processes required to manufacture or provide them
The steps in designing a product/service
- Concept generation
- The screening process
- Preliminary design
- Evaluation and improvement
- Prototype and final design
Concept generation
The first step in designing a product or service starts when
different ideas for new product concepts or service concepts are generated. New ideas for products or services can come from within the business itself or from outside the business
The screening process
Not all concepts that are generated will necessarily
develop into new products and services. Concepts are evaluated by means of a screening process based on certain design criteria, such as feasibility (how difficult is it and what investment is needed?), acceptability (how worthwhile is it and which
return is possible?) and vulnerability (what could go wrong and what risks are there?)Overall, the purpose is to determine whether the new concept will make a significant contribution to the product or service range of the business
Preliminary design
The preliminary design is the first attempt to specify the
composition of the components of the product or service to be included in the package and to identify the processes that will be necessary to produce or provide the product or service package
Evaluation and improvement
The aim of this step is to evaluate the preliminary design with a view to improving it, and making the process of manufacture and provision less expensive and easier
Prototype and final design
The development of a prototype of the product, or a simulation of the service, in order to test it in the market. If the prototype, which is based on the improved preliminary design, is favorably received in the market, the final design and specifications of the product or service can be compiled
The design of supply networks
No operations process exists in isolation; it is always part of a greater, integrated supply network. Besides the specific operations process itself, the supply network also includes the suppliers of materials or services, as well as intermediaries
and final customers/clients.
The layout and flow of manufacturing and service-provision facilities
The layout of the operations facility determines the physical arrangement of the resources (such as machines, equipment and personnel) used in a particular transformation process
Combination of the process and product layout but predominantly product layout
The layout of a manufacturing or service-provision facility entails three steps:
Selecting the process type, selecting the basic layout type and making a detailed design of the layout
The four basic layout types are as follows
The fixed-position layout
The product layout
The process layout
The cellular layout
The fixed-position layout
In this layout, the product cannot be shifted on
account of its size, shape or location. The resources for transformation (equipment, machinery and people) are taken to the receiver of the processing, which is static, for example, a construction site or a shipyard
The product layout
In this layout, the different processes
(operations) required to manufacture a product or provide a service are arranged in consecutive order
The process layout
In this layout, similar processes
(operations) are grouped together into sections. For example, if a business manufactures not only basic office chairs, but also tables and desks, these can be grouped together for the tasks (sawing, planning, turning and attaching).
The cellular layout
In this layout, specific processes are placed in a cell, which is then arranged according to either a process or a product layout. A good example here is a department store selling men’s, ladies’ and children’s clothing
Reconciling the supply of products or services with the demand for them by means of planning and control activities occurs in terms of three dimensions
1.Volume (the quantity of products or services)
2.Timing (when the products or services have to be manufactured or provided)
3.Quality (whether products or services consistently conform to
customers’/clients’ expectations).
To reconcile the volume and timing dimensions with each other, three different but integrated activities are performed:
1.The loading of tasks refers to the volume or quantity of work allocated to a particular work center
2.The sequencing of tasks refers to the sequence in which the tasks are performed
3.The scheduling of tasks refers to the use of a detailed roster that indicates when a specific task should start and when it should be completed
Capacity
Capacity is defined as ‘the maximum level of value-added
activity over a period of time that the process can achieve under normal operating circumstances
Quantitative data on the expected demand and the required capacity to satisfy this expected demand must be obtained by applying the three steps described below.
- The total demand and required capacity must be determined
- Alternative capacity plans must be identified
Three options are available:
a. A level-capacity plan in which the capacity levels are kept constant and demand fluctuations are ignored.
b. A chase-demand plan in which capacity levels are adjusted according to fluctuations in demand.
c. A demand-management plan in which demand is adjusted to tie in with available capacity - The most suitable approach to capacity planning and control must be chosen
Techniques and methods used during capacity planning and control
The moving-average demand-forecasting technique is based on the availability of actual demand data over preceding periods. This technique can be used to forecast the demand for the following period and is especially suitable for applying to the
demand for products where the demand pattern is stable over the short term.
Cumulative representations of demand and capacity is a method that can be used to evaluate the effect of different capacity plans graphically
Quality
Quality is defined as ‘consistent conformance to customers’/clients’ expectations
Inventory and supply chain planning and control
Regarded as activities executed by a separate functional management area called purchasing management. Inventory is defined as all stored resources required for the smooth functioning of the operations process. The OP manager should liase closely with the purchasing manager in order to manage inventory levels optimally
The nature of quality planning and control
The aim of quality planning and control is to ensure that the products or services that are manufactured or provided conform to or satisfy design specifications.
Quality characteristics that are often used include:
*functionality (performance ability);
*appearance (aesthetic attractiveness);
*reliability (continuous performance capability);
*durability (total life expectancy);
*serviceability (reparability); and
*contact (convenience of interaction).
The steps in quality planning and control
Step 1: Defining the quality characteristics of the product or service
Step 2: Measuring the quality characteristics of the product or service.
Step 3: Setting standards for each quality characteristic of the product or service.
Step 4: Controlling quality against the set standards
Step 5: Identifying and rectifying the causes of poor quality
Step 6: Continuously improving quality
Three questions in particular are of importance to the operations manager here:
1.Where in the operations process should one check to see if the standards have been satisfied? There are three possible positions: at the beginning of the process (preventive control), during the process (in-time control) or after the process
(reactive control).
2.Should each individual product or service provided be checked to determine whether the standards have been met?
3.How should the inspection be conducted? In practice, most businesses use sampling to ascertain whether their products or services measure up to standards. Two methods used here are statistical process control (SPC), whereby the inspection of a quality characteristic takes place during the process of
manufacturing or service rendering, and acceptance sampling (AS), whereby inspection occurs after the process of manufacture or service rendering.
Operations improvement
The improvement of the operational process of a business is seen as a activity of the operations
Four kinds of performance standards are generally used
1.Historical performance standards (by which present performance is compared with the particular business’s own performance in previous years).
2.Target performance standards (by which present performance is compared with predetermined standards, which indicate an acceptable or reasonable level of performance).
3.Competitors’ performance standards (by which present performance is compared with that of one or more similar competitors – where businesses evaluate their own operations function by comparing their product or service package with that of their competitors).
4.Absolute performance standards (by which current performance is compared with the theoretical maximum achievable performance standards)
Two divergent approaches to
improvement can be followed:
1.Breakthrough improvement or continuous improvement.
In breakthrough improvement, dramatic and large-scale changes occur in the functioning of an operations process, but not very regularly
2.In continuous improvement, also known as Kaizen improvement, more regular, but smaller, incremental changes take place in the functioning of the operations process. The aim is to improve the process on a continuous basis
Types of failure
- Design failures (these occur when the design of the process is found to be wrong or inadequate )
- Facility failures (these happen when one or more components of the facility itself, such as machines or equipment, breaks and causes parts of or the whole facility, to grind to a halt);
- Staff failures (these happen when mistakes are made or set procedures are not followed – for example, when workers are not properly trained)
- Supplier failures (these happen when suppliers do not provide products or services according to the agreement – for example, when supermarkets place advertisements for special offers and the suppliers do not deliver the order on time)
- Customer/client failures (these occur when customers/clients use a product or service incorrectly or do not use it for the purpose for which it was designed
TQM defined as
As a management philosophy that primarily aims to satisfy the needs and expectations of customers/clients by means of
high-quality products or services, and that endeavors to shift the responsibility for quality from the operations-management function to the entire business
The implementation of total quality management
*Integration of TQM in the overall business strategy (systems)
*Top management and employees’ support and involvement (commitment)
*Teamwork in the improvement initiatives (teams)
*Feedback on quality successes that have, in fact, been achieved (communication)
*Creation of quality awareness (culture)
*Training of employees in quality techniques and methods (techniques/methods)
TQM is further primarily aimed at
*meeting the needs and expectations of customers/clients;
*identifying and accounting for all costs of quality (both prevention and failure costs);
*doing things right the first time (proactive rather than reactive action);
