Chapter 1: Role of Operations management

Question 1

Role of operations

What does operations refer to?

Answer 1

The activities of a business that involve transformation of inputs into outputs of goods and services.

(A term that applies to both the manufacturing goods and the provision on services.)

Question 2

Role of operations

What does operations refer to in manufacturing?

Answer 2

The processes involved in turning inputs such as raw materials, labour, energy and other resources into outputs of finished or intermediate goods.

E.g. Toyota turning steel, glass and other parts into cars (finished goods)
BlueScope turning iron ore and other materials into steel (intermediate goods)

Question 3

Role of operations

What is an example of operations in manufacturing?

Answer 3

• Toyota turning steel, glass and other parts into cars (finished goods)
• BlueScope turning iron ore and other materials into steel (intermediate goods)

Question 4

Role of operations

In services, what does operations refer to?

Answer 4

The process involved in combining inputs such as knowledge, skills, expertise, equipment and effort into carrying out the service.

Question 5

Role of operations

What is an example of operations in services?

Answer 5

An accountant using a computer program to complete a client’s tax return.

Question 6

Role of operations

What is the concept of value adding?

Answer 6

The creation of extra or added value as inputs are transformed into outputs.
The greater the degree of transformation, the higher the value added.

E.g. The value of a finished car is greater than the sum of its parts – the steel, glass, plastic, engine, etc.

E.g. whole raw chicken, raw drumsticks/breast, packaged Kievs/raw prepared stir fry, full prepared chicken meal.

Question 7

Operations and the customer focus

What are factors that customers may seek out in products and firms?

Answer 7

Customers seek firms that
1. Waste minimal resources in their production
2. Ensure fair labour practices by compensating workers equitabl
3. Operate at low cost to maximise affordability
4. Integrate environmental awareness and ecologically sustainable practices
5. Reflect changes in the needs of consumers over time

Question 8

Operations and the customer focus

What is ethical sourcing?

Answer 8

Involves a business choosing suppliers that engage in ethical conduct such as the payment of fair wages and use of environmentally fair practices.

Question 9

Strategic role of operations management

What does a strategic component refer to?

Answer 9

The long-term broad aims of the business

Question 10

Strategic role of operations management

What is the strategic role of management in each functional area?

(generally)

Answer 10

To ensure that they are contributing to the strategic direction of the business and the achievement of the business’s strategic goals as identified in the business plan.

(eg. profit maximisation, growth, increased market share)

Question 11

Strategic role of operations management

What does the strategic role of operations management thus refer to?

Answer 11

How operations affects the other key business functions and how operations contributes to the achievement of the business’s short and long-term goals.

Question 12

Strategic role of operations management

What are two important strategic role of operations?

Answer 12

1. Cost leadership
-* through which businesses can develop a competitive advantage through cost savings which can be passed onto customers in the form of lower prices.*
2. Good/service differentiation
- which can allow businesses to increase sales revenue by providing more attractive products

Question 13

Strategic role of operations management

What does cost leadership involve?

Answer 13

The lowest operating costs in an indsutry, enabling a business to be the most price-competitive in the market.

Question 14

Strategic role of operations management

How does a business achieve cost leadership?

Answer 14

operations managers must find ways to improve efficiency by using the least amount of inputs possible to produce a given level of output.

Question 15

Strategic role of operations management

What is a way that businesses attempt to achieve cost leadership?

Answer 15

creating economies of scale

Question 16

What is meant by creating economies of scale?

Answer 16

Creating cost savings or advantages that come with producing on a larger scale, as fixed costs are spread out over more units of output and inputs can be purchased in bulk at discounts.

Question 17

Strategic role of operations management

What is another key strategic aspect of operations management?

Answer 17

Product differentiation

Question 18

Strategic role of operations management: Product differentiation

What does product standardisation mean?

Answer 18

Involves the making of products that are homogenous or identical

Question 19

Strategic role of operations management

What does product differentiation involve?

Answer 19

Distinguishing a good or service in some way from its competitors.

Question 20

Strategic role of operations management: Product differentiation

What are some sources of product differentiation?

Answer 20

• varying the actual product features
  goods in other varieties with added options
  e.g cereal - basic variety; may have dried fruit, nuts added
• varying product quality
  affordable, lower quality models and more expensive higher quality model, often sold under a different brand name
• varying any augmented features
  add-ons such as car manufacturers making vehicles that can be fitted with optional extras such as roof racks etc.

Question 21

Strategic role of operations management: Product differentiation

What are some sources of differentiation in services?

Answer 21

• varying the amount of time spent on a service
• varying the level of expertise – service providers with higher levels of expertise can offer a more specialised service
• varying the qualifications and experience of the service provider – more qualified and experienced providers can offer higher quality service
• varying the materials/technology used in service delivery – eg. many service providers in the healthcare industry can offer the latest in medical technologies

Question 22

How can differentiation be created?

Answer 22

By cross branding or strategic alliances

Question 23

Strategic role of operations management: Product differentiation

What is meant by cross branding or strategic alliances?

Answer 23

Adding value to products (goods and services) by offering customers added benefits from a cross-branding arrangement.

Products are differentiated, but the differentiation is not from the product itself but rather from an external factor that the business has brought into the mix.

Examples: Woolworthes-Caltex alliance, Coles-Shell alliance.

Question 24

Cost leadership vs Product differentiation

Contrast the path to profitability for cost leaders with that of business renowned for quality.

Question 25

Goods/services in different industries

What are standardised goods?

Answer 25

Goods that are mass produced, usually on an assembly line. They are
* uniform in characteristics,
* meet a predetermined level of quality,
* and are produced with a production focus.

Question 26

Goods/services in different industries

What are customised goods?

Answer 26

Goods that are tailored/varied according to the needs and wants of customers.
They are produced with a market focus rather than with a production focus.

Question 27

Goods/services in different industries

What is an example of a standardised good?

Question 28

Goods/services in different industries

What is an example of a customised good?