Operation Flashcards
Drip pricing
means that a business advertises one price but in the process of a customer purchasing the service numerous additional charges and costs are added. The effect is that the nal price can be much higher than the price advertised. Drip pricing is an issue in respect of airline ticketing and travel products sold online.
Supply chain
refers to the range of suppliers a business has and the nature of its relationship with those suppliers.
Global web
refers to the network of suppliers a business has chosen on the basis of lowest overall cost, lowest risk and maximum certainty in quality and timing of supplies.
locatiion of different parts of the production process in different geo areas and diff countries
Carbon pricing
is the term used for putting a price on carbon.
Compliance costs
are the expenses associated with meeting the requirements of legal regulations, i.e. abiding by all laws.
Fiduciary
is a person in a position of financial trust with respect to others’ money.
Carbon footprint
refers to the amount of carbon produced and entering the environment from operations processes.
Capital-labour substitution
means that the machinery and technology displace people by doing the work they do
Materials
are the basic elements used in the production process and consist of two types: raw materials and intermediate goods.
Raw materials
are the essential substances in their unprocessed state
Intermediate goods
are goods manufactured and used in further manufacturing or processing
Key performance indicators (KPIs)
are specific criteria used to measure the efficiency and effectiveness of the business’s performance.
Customer relationship management (CRM)
refers to the systems that businesses use to maintain customer contact.
Critical path analysis (CPA)
is a scheduling method or technique that shows what tasks need to be done, how long they take and what order is necessary to complete those tasks.
- much more precise in terms of timing
- better for short term projects
- both show things that can be done at the same time
Gantt chart
is a type of bar chart that shows both the scheduled and completed work over a period of time. It is often used in planning and tracking a project.
- less complicated
- set out more clearly
- better for long term projects
- shows the ‘when’ (date/month etc.)
- both show things that can be done at the same time
Telecommute
is to ‘commute’, or travel to work, electronically. This means that home or another location becomes the worksite and work is delivered via email or the internet
Computer-aided design (CAD)
is a computerised design tool that allows businesses to create product possibilities from a series of input parameters
Computer-aided manufacturing (CAM)
is software that controls manufacturing processes
Skills audit
is a formal process used to determine the present level of skilling and any skill shortfalls that need to be made up either through recruitment or through training.
Process layout
- Arranging machinery according to what they do, product moves from department to department
- Allows for more flexibility & customization of the product –> more customisation
- **manufacturing flow according to function
Process production
deals with high- variety, low-volume production
Product production
(mass production) is characterised by the manufacturing of a high volume of constant quality goods.
Product layout
is where the equipment arrangement relates to the sequence of tasks performed in manufacturing a product
arranging into stations that product can go through *assembly goods
low variation, economies of scale
Project production
deals with layout requirements for large-scale, bulky activities such as the construction of bridges, ships, aircraft or buildings
Fixed position layout
is an operational arrangement in which employees and equipment come to the product
Workstations
are the desk areas required by of ce workers, usually tted with access to a computer monitor, keyboard, telephone, mouse and mouse pad, storage, and close access to a printer, scanner and facsimile
Bottleneck
an aspect of the transformation process that slows down the overall processing speed or creates an impediment leading to a backlog of incompletely processed products.
Warranty
is a promise made by a business that they will correct any defects in the goods that they produce or in the services that they deliver
Mass customisation
a process that allows a standard, mass-produced item to be personally modi ed to speci c customer requirements
Product utility
defined as the usefulness and value that a product has from the consumer’s point of view
Explicit service
also called the tangible aspect of the service being provided, such as the application of time, expertise, skill and effort
Implicit service
based on a feeling and is therefore intangible. The implicit aspects of a service are the psychological wellbeing — the feeling of being looked after — that comes with the provision of the service
E-commerce
involves the buying and selling of goods and services via the internet
E-procurement
or the use of on-line systems to manage supply, allows suppliers direct access to the business’s level of supplies
B2B
refers to direct access from one business (the supplier) to another (the buyer), allowing the supplier to assess the needs of the buyer and meet them in a timely manner
B2C
the selling of goods and services to consumers over the internet, with payment usually by credit card
Logistics
a term broadly referring to distribution but includes transportation (including transportation modes),
the use of storage, warehousing and distribution centres, materials handling and packaging
Warehousing
defined as the use of warehouses for the storage, protection and, later, distribution of stock
Leading edge technology
the technology that is the most advanced or innovative at any point in time.
Established technology
technology that has been developed and widely used and is simply accepted without question
LIFO
method of pricing inventory assumes that the last goods purchased are also the first goods sold and therefore the cost of each unit sold is the last cost recorded
FIFO
method of pricing inventory assumes that the rst goods purchased are also the first goods sold and therefore the cost of each unit sold is the first cost recorded
Six Sigma
a quality management approach that seeks to identify and remove the causes of problems in the operations processes, achieving virtually defect-free production
Inertia
describes a psychological resistance to change
Change agent
somebody who initiates change or facilitates the change process
Kaizen
Japanese for ‘improvement’. It emphasises continuous improvement in all areas of a business, from the way the CEO manages to the way assembly line workers perform their jobs
Operations
the activities of a business that acquire and combine inputs, changing them into finished goods and services
strategic roles
long term goals (ex. next 10 years)
productivity, efficiency, effectiveness
cost leadership
lowest cost of operations competitive advantage (same or greater quality/value at lower prices)
*Drip pricing
small profit margin but high volume sales
strategy:
economies of scale (high standardization)
using technology (up to date)
controlling production costs
**hard to maintain
Product differentiation
Quality Delivery Custom-design New technology Augmented features (add-ons or additional benefits, typically in electronics/motor vehicles e.g. spoiler, GPS)
**A differentiated product can command a higher premium price in the market as customers are attracted to the product and build up brand loyalty = better long term
Sectors of the economy
o Primary (extracting): Provision of raw materials e.g. mining, fishing
o Secondary: Use inputs to change the shape of product e.g. dishwashers
o Tertiary: Provision of a service e.g. transportation, logistics
o Quaternary: Provision of intellectual activities e.g. teachers, government
Quinary Services
G & S in different industries
goods Tangible Capital intensive Measurable Difficult to modify
services non-tangible Labour intensive People-focused Hard to measure Easy to modify
Both:
• Use technology
• Deal with customers and suppliers
Specialisation
where the business is separated into different functions, each of which is highly skilled at its specific task or role
Interdependence
where the different parts of a business must rely on each other to perform their task or role.
Finance + Operations interdependence
• The finance manager will create budgets and make funds available to purchase inputs, equipment, repairs
- Budgets & makes funds available for inputs, equipment, repairs/ maintenance.
- Minimizes production costs to maximize profit margins
Financial managers monitor use of inputs and outputs by the operations functions of busienss through working capital management (where there are controls on current assets and liabilities)
Lean production
aims to eliminate waste at every stage of production. It involves analyzing each stage of the production process, detecting where inefficiencies occur and correcting them
Perishable goods vs non-perishable goods
short life span, consumed quickly, relatively inexpensive, bought on a regular basis
more durable- Household and business goods
Standardized goods vs customized goods
mass produced
vary according to the needs of customers (capital intensive)
Intermediate goods
goods completed, having gone through one set of operational processes, and then becoming inputs into further processing. E.g. screws
Globalisation influence
ACCESS -reaching new markets/their ifluence on operations, franchising, importing
Globalization
The integration and interdependence of different countries and their economies
*Different currencies
hedging- reduce financial risk ( from appreication or depreciation)
Derivatives- Special contracts between global businesses
Technology influence
reduce reliance on human labor, improve efficiency, improve logistics
CAD : Computer aided design allows architects/engineers to design more efficiently on computers. ***More effective visual representation, alterations can be made easily
CAM : Computer aided manufacture uses electronic data to manufacture/produce products *less errors (efficiency) + save time in exchanging data
Quality expectations influence
customer expectations or quality of service
Products
Quality of design (concept, innovation, materials)
Fitness for purpose (how well it does what its made to do)
Durability / reliability ( how long the product lasts given a reasonable amount of use / without maintenance or repairs)
Services --> customer loyalty Professionalism (cleanliness, courtesy) Reliability (efficiency, competence) Customization (how well needs are met through application of expertise and experience)
Cost based competition influence
cost advantages over competitors (determined thru breakeven point)
Strat: Outsourcing
o Using cheaper inputs
o Lowering quality (quality and price match)
Base cost of a product involves fixed and variable costs
Ways to cut costs include purchasing bulk inputs or updating technology
Fixed costs
do not change regardless of the level of business activity e.g. rent, salaries, utilities, and insurance
Variable costs
vary in direct relationship to the level of business activity (level of production) e.g. employee ‘on-costs’, commissions, and casual employees
Government policies influence
monetary benefit such as a financial grant or tax concessions
tax (company, carbon pricing)
budget/fiscal policy
tariff/ quota
Legal regulation influence
WHS act = safe operations
environment protection 1999 = minimize environment impact
compeition and consumer act 2010 = consumer protection
fair trading 1987
Compliance costs
the expenses associated with meeting requirements of legal regulations
Environmental sustainability influence
Conserving non-renwable resources: Practices that allow resources to be used today without compromising future access
switchign to renewable resoucres
***Significantly impacted by climate change awareness and the need to integrate long-term sustainable view of resource management.
ex. reduce and minimize waste; recycle water, glass, paper metals & reduce theircarbon footprint.
Corporate Social Responsibility (CSR)
Triple bottom line
open and accountable business actions based on respect for people, community, society and the broader environment. It involves businesses doing more than just complying with the laws and regulations
Triple bottom line
3 ps
profit
people - social justice
planet - environment sustainability
Transformed resources
materials: basic elements used in the production process, consisting of raw materials and intermediate goods
informations: knowledge gained from research, investigation and instruction, which result in increased understanding
internal: key Performance Indicators (KPI’s)
external (ABS, media reports) or internal (financial reports, production data)
customers: their choices shape inputs
* changed into finished products
Transforming resources
HR: effectiveness of HR determines how successful transformation
Facilities: refers to plant (factory/office) and machinery used in operations process
*stay in business
transformation process influences
Volume
- Amount of good or service to be product
- Volume flexibility = how fast transformation process can adjust to increases or decreases in demand.
- Responsiveness to required changes in volume is essential to effectively managing lead times (time taken for order to be fulfilled)
Variety
- Number of different models/variations a product or service offers
- Greater the variation made, the more the operations processes need to allow for variation
• low variety will allow business to produce high-volume of a standardized product for cost)
Variation in demand
- How much of the product is needed increased demand requires more inputs from supplier, increased HR, machinery & energy consumption
Visibility (customer contact)
- Degree to which customers can witness the operations process
• Low visibility = manufacturing
• High visibility = service-based
Lead times
the time it takes for an order to be fulfilled from the moment it is ordered
Job, batch, flow
Job- suits those products and service that require customer requests. It is a highly flexible system but with low output. E.g. designer homes and cars. Costs per unit are high.
Batch- products are made in batches or groups. E.g. bakery. Suits businesses that have variations.
Flow- involves a continuous flow of inputs and outputs. It is often associated with assembly lines. Products have little variation. E.g. Fuel refineries. Costs per unit are low.
Sequencing
the planning of activity that decided on the order in which the work is to be performed
Scheduling
is a term used to indicate a detailed timetable of what work needs to be done
Technology
- Many products designed and assembled using CAD and CAM
- Technology allows businesses to relocate dangerous or repetitive tasks away from employees
- This has enabled more efficient production, although technology is expensive it is usually more cost effective long term.
Office technology
computer, printer, electronic transfer of funds, modem etc.
Manufacturing technology
robotics (used in engineering and specialized areas of research as well as assembly lines), CAD, CAM
Task design
- Breaking down a large task into smaller, manageable activities
- Employees therefore able to perform and complete the task successfully.
- Involves job analysis & can be done after conduction of a skills audit.
Monitoring
systmeatic collection and analysis of infor as task progresses
- Arranged around need to measure KPI’s such as lead times, defect rates, inventory turnover
Control
comparing the actual vs planned standards
- Assessing KPIs (key performance indicators) against predetermined targets and taking corrective action if required
Improvement
- Refers to the reduction of any inefficiencies and wastage, poor work processes and the elimination of any bottlenecks
total quality management
total quality management
making sure everyone knows quality expectation and fix if below standard
Customer service
• Customer service is a service provided to customers before, during and after a purchase. Customer service is an intangible output that requires extensive contact with customers.
• Good customer service will increase consumer satisfaction.
• Customer service features include over phone/internet, in person, or written communication.
handling customer returns, answering questions and following up customer enquiries
Businesses that provide superior customer service can
Charge an average of 10% more for the same goods and services
Grow twice as fast as their competitors
Increase their market share and profits
Warranties
• A warranty is a quality assurance that a business stands by of the products they make and provide to the market.
• Under Australian law, all goods must: have a level of quality, be suitable for the job, match the promotion and be free from defects.
Businesses must comply with the Fair Trading Act 1987 (NSW), Competition and Consumer Act 2010 (Cth).
warrantied can be expressed or implied sutiable purpose free of defects and faults match the product description have a level of quality comparable to price and product description
Performance objectives
(i) Quality
- Often determined by consumer expectations which are inform production standards.
- Objectives include: quality of design, quality of conformance, quality of service.
(ii) Speed
- Time taken for production and other operations processes to respond to market demand. It aims to satisfy customer demands as soon as possible.
- Speed goals include: reduced wait times, shorter lead times, faster processing times.
(iii) Dependability
- How long products are useful before they fail measured by warranty claims
- Consistency of service standards and reliability measured by number of complaints
(iv) Flexibility
- Refers to how quickly operations processes can adjust to changes in the market.
- Flexibility best achieved by increasing the capacity of production or for services, increasing the number of service providers.
(v) Customization
- Refers to creation of individualized products to meet specific customer needs.
- Production of many goods now based on mass customization (process allowing standard, mass-produced items to be customized e.g. cars)
(vi) Cost
- Minimization of expenses so operations processes ae conducted as cheap as possible.
- Can lower costs by acquiring new technologies, use inputs better and minimize wastage, reducing supplier/inventory/distribution costs
New product or service design and development
identifying market opportunity –> maintain competitive edge **lengthy process and expensive
*new product is commerically viable
- Two different approaches that determine product design and development:
• Consumer preference
• Changes and innovations in technology
- Important factors in new product design and development include: • Supply chain management • Capacity management • Cost • Quality
*explicit or implicit service
Supply chain management
**efficient and cost effective
high quality, cheap, reliable/ dependable
(i) Logistics
**reduce inventory, increase speed (less lead time) –> revemue (profits)
study, cost efficient, flows if material thro suppluy chain
(right time, place, price)
- Focuses on moving inputs, resources and outputs through supply chain as fast as possible.
Involves:
• Distribution and modes of transportation
• Storage, warehousing & distribution centers
• Materials handling & packaging
(ii) E- Commerce
- Enables businesses to source through online links to suppliers through business-to-business processes and also enables customers direct access to products through business-to-consumer processes
Pro: availability of info, speed (time saving) and cheaper access to global markets
Con: privacy and security issues, more likely to purchase unsatisfaction
(iii) Global sourcing
- Business seeks to find most cost-efficient location for manufacturing a product
Expansion of supply chains over national boundaries
cheaper, quicker than sourcing domestically
rationalisation
decrease suppliers
trend
supply chain *not buying inputs
vertically inetgrate - acquisition of same supplier as compeititor -> increase compeitiveness
Outsourcing adv and disadv
adv:
can focus on core business activites (Not servicing, maintence, logistics)
less capital than vertical intelgration
doesnt need to mainainta employes by paying wages/ superannuatuion/ sick leabe
speed- if more efficient ( already have compeitibe advanatges)
flexiblity - can always switch supplier
less input from managmenr
disadv
more expensive
possible loss of jobs (reduandcy payments)
if supplier is unrealiable ( if business becaomes insolvent or ceases trading)
security and confidentiality issues
Technology strat
leading edge - competitive adv
- Technology that is most advanced or innovative at any point in time (so riskier)
- Helps businesses create products quicker & to higher standard, with less waste and more efficiency. (
(i) Established
- Technology that has already been developed and is used without question. ‘proven’
e. g. IT for administration, robotics for complex manufacturing, barcoding & point-of-sale (POS) data for inventory management
Inventory management
**how much stock? prevent dead stock, stock-out and minimise losses in theft/damage
LIFO last in first out
- Stock purchased most recently is sold first (used for goods with no use-by-date e.g. canned goods, machinery parts)
**bulky and non perishable
reduce profit
FIFO first in first out
- Oldest stock sold first (ideal for perishables)
- perishableJIT just in time
- Holding as minimal stock as possible and only bring in stock from suppliers as required
• increases liquidity of working capital as less cash tied up in inventory
• reduced costs of storing and securing stock
**elimate inventories, reduce cost but risky
adv and disadv of holding stock
Advantages
• Ensures customers served quickly & dependability of delivery
• Bulk purchases = cheaper
• Older stock can be sold at reduced price encourages cash flow
• Ensures sufficient back up stock
Disadvantages
• Capital intensive = dead cash
• Holding costs (storage, insurance)
• Risk of stockpiled goods passing use by date
quality management
Quality management refers to processes a business undertakes to ensure consistency, reliability, safety and fit for purpose of a product.
(i) Control
- Reduces problems and defects through inspection at various points during production
- Pre-determined quality targets are set for all products to meet
- May require that labor be trained to apply these standards throughout working process
(ii) Assurance
- Involves use of a system to ensure set standards are achieved in production.
- Measurements are taken and assessed against standards.
- Aspects important to QA include:
• Fit for purpose
• Achieving right the first time (so re-working isn’t required)
(iii) Improvement
- Focuses on two aspects:
• Continuous improvement businesses ongoing commitment to improving its goods/services
Total quality management (TQM) managing the total business to deliver quality to customers; requires benchmarking, employee empowerment, a focus on the customer and continuous improvement.
Distribution centre
not intended for long-term storage. Strategically located so as to minimize time to take supply stock to retail outlet. Requires managers to balance the cost of such centers with the time saved in logistics
Overcoming resistance to change
Financial costs
¬ Main financial costs associated with change include purchasing new equipment, redundancy payments, retraining & reorganizing plant layout:
(i) Purchasing new equipment
- Purchase of equipment expensive however cost can be recovered through use (adds value in transformation processes) and depreciation.
- Can achieve
• Improved processing speeds & shorter lead times
• More consistency in production
• Higher overall quality of products
• Reduced waste and losses from equipment failure
(ii) Redundancy payments
- Money given to employees when they are forced out of work due to their job skills no longer being relevant. Payment depends on:
• Duration working for the company
• Level of pay they were on
• Amount of unused leave
(iii) Retraining
- May occur when job roles change requiring employees to acquire different work skills.
- Purchase of technology may also involve training or retraining on new software.
(iv) Reorganizing plant layout
- Requires extensive reorganisation of the layout within the facility; high costs can occur when reorganizing. (reorganising staff roles, introducint new tech)
Psychological resistance to change - inertia
- Internal stakeholders such as owners, managers and employees can become too comfortable in a stable environment major reason for resisting change
Strategies to overcome resistance include retraining programs, work teams & a flatter management structure.
Global factors
(i) Global sourcing
* * low cost inputs
- Sourcing goods and services from across national boundaries
- Often to access cheap skilled labour, cheap materials, tax breaks and low trade tariffs.
- Global web = strategy where business sources inputs, labour and finance from the cheapest countries and distributing them to any nation that demands them.
(ii) Economies of scale
- Refers to cost advantages that can be gained by producing on a larger scale. It becomes a global factor when businesses sell to global markets
(iii) Scanning and learning
- Scanning the global environment and learning the best practices
- May come from management journals, conferences, industry and business associations
(iv) Research and development
**innovate new products or imporve existing = long term survival –> extend biz life cycle to renewal (^ profit)
BUT time consuming and costly
- Helps businesses create leading edge technology & innovative products and processes
- Global businesses often have extensive R&D facilities in many countries
Investment in R&D is investing in competitive advantage
**copyrights/ patents last 20 years
ISO
(international organization for
standardization) 9000 series of quality certifications. These are voluntary but
many businesses comply with their requirements to enhance their domestic and
international competitiveness
