Chapter 1: role of operations management Flashcards
(30 cards)
define operations
refers to a business’s activities that involve transforming inputs into outputs of goods and services (ie. the production process)
- In manufacturing: turning inputs such as raw materials, labour, energy and other resources into outputs of finished or intermediate goods
- In services: combining inputs such as knowledge, skill, expertise, equipment and effort in carrying out the service
define value adding
refers to the conversion of inputs into outputs, operations involve the creation of value
what do customers also seek from products and firms other than high-quality goods
- waste minimal resources in their production eg. overproduction
- reflect fair value for any labour used eg. ethical suppliers
- operate at low cost to maximise affordability eg. capture market share
- integrate environmental awareness and ecologically sustainable practices eg. reduce greenhouse gases
- reflect changes in the needs of consumers over time eg. innovative goods
define lean production
an approach designed to eliminate waste and improve efficiency, ultimately resulting in greater profits for businesses and lower prices for consumers
what are the two most important strategic roles of operations
- 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
- good/service differentiation: which can allow businesses to increase sales revenue by providing more attractive products
define cost leadership
having the lowest operating costs in an industry, enabling a business to be the most price-competitive in the market
To achieve this, operations managers must find ways to improve efficiency by using the least amount of inputs
do all businesses aim to achieve cost leadership?
not all businesses - as keeping costs down and maximising quality depends on the aims of a business (to be cheap or differentiated)
define product differentiation
distinguishing a good or service in some way from its competitors
- successful differentiation strats enable buses to charge higher but still attract ppl
what are some sources in differentiation in goods
- varying the actual product features (eg. sugar and sugarfree)
- varying product quality (eg. Qantas and Jetstar)
- varying any augmented features (eg. add-ons)
what are some sources of differentiation in services
- varying the amount of time spent on a service
- varying the level of expertise (eg. specialised)
- varying the qualifications and experience of the service provider
- varying the materials/technology used in service delivery
Note: most businesses will regard themselves as a provider of either goods or services and some provide a combo of the 2
define standardised and customised goods
- Standardised goods: mass-produced, usually on an assembly line
- Customised goods: vary according to customers’ needs (market focus rather than production focus)
- Note: Standardised goods are usually cheaper due to economies of scale and faster processing
define perishable and non-perishable goods
- Perishable goods: short lifespan and are consumed quickly (mostly foods), relatively inexpensive and bought regularly
- Non-perishable goods: inherently more durable, so they are expected to last much longer
what must operational processes incorporate for perishable goods
- high standards of quality, safety and cleanliness
- very short lead times: time b/w the initiation and execution of a process
- distribution is quick and effective
- appropriate and robust packaging and cold storage
what must operational processes do for non-perishable goods
- manage all aspects of quality throughout the process
- implement effective inventory management starts
- be highly responsive to changes in demand so as not to overproduce
define intermediate goods
goods that have gone through one set of transformational processes but can be inputs in other operational processes
what are the three types of services a bus can offer
standardised, customised or self-service
what are the adv of self-service
- greater convenience
- quicker operations processes
- cost savings for the bus
- lowers staffing requirements
- close physical stores
define interdependence
refers to the mutual dependence that the key business functions have on one another
how do small and large buses differ in their interdependence with other key bus functions
- small buses choose to perform onyl the functions in which they are most competent and outsource the other functions
- large buses separate the key bus functions into diff departments with their own management teams
how does operations rely on finance
- operations relies on finance to provide the funds necessary to undertake production
- raising funds to expand output or produce a new product
- finance will also measure the effectiveness of ops by monitoring use of inputs
how does finance depend on operations
finance relies on ops to:
- perform its role effectively in order to achieve key bus objs
- minimise production costs (increasing the margin by which sales revenue exceed input costs)
- expand the volume of output (generating higher rev cos selling more)
- focus on quality (generating higher rev by selling more for higher price)
how does operations rely on marketing
- identifying need of the target market
- informs on what and how much to produce (product designs and the scale of the business operations)
how does marketing rely on ops
relies on ops to successfully perform the 4 Ps:
- product: output must match design specifications and meet customer expectations associated with image of the brand
- price: basing pricing decisions on market factors, ability of ops to minimise production costs
- promotion: easier when product is high quality
- place - making products easily available when and where they are demanded depends on the timely completion of ops processes
How does operations rely on the HR function
ops relies on HR to:
- recruit employees, train, develop, motivate and retain valuable staff thru provision of monetary and non-monetary benefits
- without HR, ops processes will be compromised by bottlenecks due to understaffing or lack of skill
