Business Unit 5 Flashcards
What is operations management?
Art of managing production to get the best end product
Economic sustainability
The need to use available resource and raw materials to their best advantage, ultimately ensuring the profitability and financial perfomrance
Social sustainability
the need to take human factors into account both internally (eg workers) and externally (eg local community) when making business decisions
Ecological sustainability
the need to take environment factors into account when making business decisions
Triple bottom line
the need to take economic, social and ecological factors into account when making business decisions
Operations methods
job production
budget production
mass / flow standardized production
mass customization production
Job production
production of a special “one - off” product made to a specific order
eg. wedding cake
Job production (advantages vs disadvantages)
advantages: mark-up is likely to be high, clients get exactly what they want, likely to motivate skilled workers, can be flexible
disadvantages: expensive (skilled workers and non-standardized materials), time consuming, might fail because of lack of client’s knowledge, labour intensive and reliant on skilled workers
Batch production
manufacturing method in which products are produced in groups or batches rather than in a continuous stream. Each batch goes through one stage of the production process before moving on to the next stage. This method is used when similar items are produced together, but there are breaks between production runs to change or reset equipment for different batches.
Batch production (advantages vs disadvantages)
advantages: economies of scale, wider choice than mass so captures more market share, useful for trialling products, help with unexpected orders
disadvantages: loss of production time, need to hold large stocks to manage unexpected orders, sizes of batches are dependent on the capacity of the machinery which can limit flexibility and efficiency
Mass production
Production of a high volume of identical, standardized products
Mass production (advantages vs disadvantages)
advantages:
- once set needs little maintainance
- larger orders achieving economies of scale
- labour costs may be low
- can respond to an increase of orders quickly
disadvanatges:
- High set-up costs.
- Costly breakdowns, as the entire assembly line may need to stop.
- Dependence on steady demand from a large market segment.
- Inflexibility, particularly evident if there’s a sudden drop in demand, potentially leaving the factory with large stocks of unwanted products.
- The potential demotivation of workers due to the repetitive nature of their activities
Mass individual customization
combines mass production with the personalization of custom made products for marketing purposes.
eg, furniture with many option to be chosen by customers
Comparison of production methods
- Set up time
- Cost per unit
- Capital
- Labour
- Production
- Stock
- Set up time
Job production: Long (new set-up for each job)
Batch production: Fast (modification of existing)
Mass production: Long (synchronize process - Cost per unit
Job production: high
Batch production: medium
Mass production: low - Capital (machinery)
Job production: flexible, depends
Batch production: mixture, based on general purpose machines
Mass production: large numbers of general purpose machines for specific function - Labour
Job production: highly skilled
Batch production: semi skilled
Mass production: unskilled - Production time
Job production: long
Batch production: once set, can be swift
Mass production: swift - Stock
Job production: low quantities of raw materials, high amount of work in progress
Batch production: high quantities of raw materials, medium amount of work in progress
Mass production: high quantities of raw materials and finished stock, low amount of work in progess
Changing the production method
Would have implication for all business functions
1. Human resources: reemployment and retained
2. Marketing: image may be altered, changes in prices, distribution channels affected
3. Finance: any change needs financing, long or short term
Appropiate type of production method
Factors affecting:
1. The target market
2. The state of existing technology
3. The availability of resources
4. Government regulations
Lean production
Business approach that focuses on less waste and greater efficiency.
Developed in Japanese manufacturing industries, notably by the Toyota Motor Corporation
Goal is to streamline production, improve quality, and increase overall customer value.
includes waste of time, transportation, products, space, stock, energy and talents
Methods of lean production
Continuos improvement
Just in time
Just in case
Continuos improvement (Kaizen)
Kaizen is a Japanese business philosophy that emphasizes continuous, incremental improvement in all aspects of an organization, involving every employee.
small, incremental changes that cumulatively lead to significant improvements in efficiency, quality, and overall performance.
Just in time
a modern method of stock control, which involves avoiding holding stock by being able to get supplies only when necessary and to produce just when ordered
Just in case
the traditional methods of stock control, which involve holding reserves of both raw materials and finished products in case demand arises
Cradle-to-cradle design and manufacturing
a recent approach to design and manufacturing based on principles of sustainable development, especially recycling
Quality
Suggests a product is reliable, safe, durable, innovative, and has value for the money paid
Quality revolution
Business not at the top end of the range can benefit from producing good quality products, eg. Honda
Quality control
- Quality is controlled by one person carrying out inspection after production
- Max percentage is set of failure, wasteful production
- Rarely to stop production, quality stops with the job
- Role culture, autocratic leadership, top down communication
Quality assurance
- Quality assured through he organization, whole business is focused
- Zero rejections are expected, lean production
- Company expects to halt production to fix errors, quality errors includes suppliers and after sales servicing
- Total quality culture, democratic consultative leadership, 360 degree communication
Methods of managing quality assurance
For quality assurance to work effectively, whole business has to embrace a total quality cultural shift.
Methods:
- Quality circle
- Benchmarking
- Total quality management
Quality circle
a formal group of employees who meet regularly to discuss and suggest ways of improving quality in their organization
Benchmarking
a tool for businesses to compare themselves to their competitiors in order to identify how they can improve their own operations and practices
Total quality management
an approach to quality enhancement that permeates the whole organization
Total quality management features and purposes
- Quality chain: As the quality of a business depends on suppliers and after sales services, all stages of the production process must be taken into account
- Statistical process control: all stages are monitores and info is given to all parties
- Mobilized workforce: all employees are expected to embrace TQM
- Market oriented production: focusing on customers wants, business can make sure that it is innovating and reinventing products. Can lead to improved sales and brand loyalty
Total quality management disadvantages vs advantages
Advantages:
1. creates closer working relationships
2. motivates workforce
3. reduces costs
4. improves design and production of quality products
5. enhance reputation
Disadvantages
1. costly
2. staff need training
3. take time to change corporate culture
4. creates stress
5. difficult to maintain long term
National and international quality standards
it is an excellent way to assure the consumer the quality
- enable exports
- give a competitive edge
- enhance image and reputation of a business
- save on the costs of withdrawing products
- act as an insurance
- lead to higher profit margins
Location of production
is one of the most important decisions a business has to make, where it will be based, or as business grows, where it should relocate to
Factors to take into account for deciding location of production
- Cost
- Competition
- Type of land
- Markets
- Familiarity of area
- Labour pool
- Infrastructure
- Suppliers
- Government
- laws and taxes - National, regional and international ambition
Business tool to decide location of a compnay?
Decision tree: forecast outcomes of alternative scenarios
The impact of globalization on location
Best analysed in terms of push and pull factors
- influence whether a business decides to operate domestically or expand its operations internationally, driven by both internal pressures and external opportunities.
Pull factors of globalization in location
- Access to New Market
- Economic Policies
- Technological Advances and Improved communication
- Dismantling of trade barriers
Push factors of globalization in location
Reduce Costs: allow businesses to move closer to raw materials or to utilize cheaper labor
Increase Market Share: new countries, new markets and increase their market share.
Use Extension Strategies: extend the lifecycle of their products, expand overseas to introduce their products into new markets.
Use Defensive Strategies: avoid competitors from doing so first.
Ways of reorganizing production, both nationally and internationally
- Outsourcing (subcontracting)
- Offshoring
- Insourcing
- Reshoring
Outsourcing
practice of using another business (as a third party) to preform some peripheral activities
Offshoring
the practice of subcontracting overseas, eg, outsourcing outside the home country
Insourcing
the practice of preforminf peripheral activities internally, wihtin the company (the opposite of outsourcing)
Reshoring
the practice of bringing back business functions (jobs and operations) to the home country (the opposite of offshoring)