Operational Management

Question 1

Operations Management

Answer 1

• Operations management is the management of resources and functions within a business to achieve efficient output of finished goods or service in a way that adds value to customers and create a profit margin for the business.

Question 2

Competitiveness

Answer 2

• determines the costs of production, quality of finished goods and materials used in producing goods and services, it has a direct impact on the revenue, costs and profit made by the organisation.
• Changes in any element will ultimately determine how cheap or expensive that the product or service will be produced at, and then affect the price of the product- thus effecting the overall business competitiveness.
• Competitiveness in a service organisation is more vital as there is nothing to produce just the service and a consumer can go somewhere else to get the service. It is vital that your service is better than competitors.

Question 3

The relationship between operations and business objectives

Answer 3

• The core objective of most businesses is to maximise profit. This aim therefore requires businesses to efficiently use resources to produce goods and services at the lowest costs. Operations is responsible for achieving this objective. They do this by focusing on management of quality, customer service, productivity, technological development, management of materials, waste reduction and speed of delivery.

Question 4

Characteristic of goods

Answer 4

• A manufacture will transform inputs into final product
• Goods are a tangible, physical products that can be handled and stored before they are sold to consumer.
• Production and consumption occur separately. There is little customer involvement in the production process.
• Goods can be held in storage before they are sold
• Goods tend to be the same e.g a jar of vegemite
• Goods are manufactured created or assemble.

Question 5

Characteristic of services

Answer 5

• A service business will transform inputs into information to consumer
• Intangible means you cannot touch or feel a service
• Production and service occurs at the same time.
• Difficult to store. E.g people cannot be stored in a warehouse
• Usually, services are highly unique to the customer e.g haircut
• High degree of customer contact as the customer has to be present to get service e.g airline travel
• Occurs at the service provider e.g dental appointment happens at the dentist.

Question 6

Similarities of goods and services

Answer 6

• Both use technology, both aim to satisfy customer, both set goals and objectives, both deal with suppliers, both aim to produce a high-quality product at the lowest costs.

Question 7

Key Elements of the operations system

Answer 7

Inputs- The resources used to create goods and services.
Transformations (Processors)- Are the activities used to transform inputs into outputs
Outputs- The final goods and services produced by the business in a tangible or intangible form

Question 8

5 types of inputs

Answer 8

• 1. Raw materials- The supplies that go into making of the product. Can be natural or processed. E.g Ice cream seller may need milk, cream as an input. Unprocessed resources taken from environment. Component parts purchased from a manufacture. Only one that isn’t a service input
• 2. Capital: Facilities and equipment- Includes machinery, vehicles, and facility being used by the business.
• 3. Entrepreneurial/ Human Resources- The managers, employees and owners who work.
• 4. Information and knowledge- knowledge and skill required to enact the operations system. Can be customer service, research and market
• 5. Time- A non-renewable resource. The business must make sure it uses time effectively. Time is also frequently used as a measure of efficiency.

Question 9

Transformation Processors

Answer 9

• An operational manager will focus on the continual improvement of the production process to ensure the processors are efficient and effective.

Question 10

Output

Answer 10

• The quality of the output is a direct reflection on the inputs and processors
• Business needs to make sure output is responsive to consumer needs

Question 11

Technological Development

Answer 11

• Technology- Is the practical application of science to the development of products or services to achieve business objectives.

Question 12

Technological Development Automated Production Line

Answer 12

• Comprises of machinery and equipment arranged in a sequence with components added to goods at each step with the process controlled by computer.
• Comprises of a series of workstations
• Each station performs a specific operation, and the product is processed step by step.

Question 13

Technological Development Automated Production Adv and Disadv

Answer 13

Advantage- Improved productivity through lower labour costs, production is faster and more stable without humans, automation is safer as dangerous tasks can be performed by technology, repetitive jobs can be replaced

Disadvantages- huge initial costs of purchase and development, ongoing maintenance required, need highly skilled group of IT maintenance workers, social costs reduction of employment

Question 14

Technological Development Computer aided design (CAD) +Adv and disadv

Answer 14

• A computerised design tool that allows a business to create product possibilities from a series of input. E.g an architect uses computer software to design house.
• Software that generates 3D diagrams from a set of inputs. When designed can be viewed from multiple angles which helps visualise what is being produced. Used to design cars and planes
• Advantage- Can make changes without redrawing, provides 3D instead of 2D making it easier to visualise, allow for accurate predictions and development costs
• Disadvantage- expensive to start up, software can crash, cost and time involved training staff to use CAD

Question 15

Technological Development Computer Aided Manufacturing (CAM) +Adv and Disadv

Answer 15

• CAM is the use of software to design and control manufacturing process.
• Involves the control of machinery tools and equipment through computer
• Machines are fed programmed instructions from a computer allowing greater precision less error in production process
• Advantage- Its more precise which results in less wastage and improved productivity, allows products to be more consistent which improves customer experience
• Disadvantages- Initial start-up cost high when purchasing CAM, can take a long time to develop software to the way a business wishes, can lead to loss of job as less employees required to do task

Question 16

Technological Development Website Development + Adv and Disadv

Answer 16

• A website is a page or collection of pages on the wide web under a domain name. Needed for a business to compete in 21st century. Helps consumers get information and able to contact business to purchase goods and services.
• Must be accessible and appealing.
• Website can add credibility and can be an advantage if done correctly
• Online business requires fewer staff and retail space not required reducing space
• Customer feedback can be easily contained which leads to improvements
• Marketing costs can be reduced as it can be easily linked to social media
• Benefits- 24/7 access and availability, easy to access new markets, reduced running costs, increased competitiveness
• Weaknesses- designing, registering, and publishing can be expensive, technical issues reducing access, cost re-training staff, increased chance of customer data breach, can lead to redundancies

Question 17

• Efficiency and effectiveness

Answer 17

efficiency- the ability to accomplish something with the least amount of wasted time, money, and effort or competency in performance

Effectiveness- the degree to which something is successful in producing a desired result thus achieve business objective

Question 18

Material Management

Answer 18

• Dealing specifically with inputs or raw materials

Question 19

Material Management Forecasting (can be a service)

Answer 19

• A material planning tool that relies on data from past and present to attempt to identify future events
• The initial stage of managing materials
• Operations manager will use forecasting to develop a production plan and reduce uncertainty in the future by looking at previous sales data, market trends, economic statistics, external factors
• Organisation needs to forecast quantity and timing of demand for goods or services and then match supply with demand. Allow organisation to decide to provide right materials in right quantities at the right time and right price.

Question 20

Material Management Master Production Schedule (MPS)

Answer 20

• Is a manual of what a business intends to produce, in what quantities, over a set time frame considering the forecast customer demand and production costs
• Shows exactly what will be produced in what time frame.
• technology can help plan and will be correctly assessed.
• Breaks down the whole production process into stages to determine what’s required

Question 21

Material Management Materials Requirement Plan (MRP)

Answer 21

• Used in conjunction with MPS to determine what needs to be ordered and when
• Aims to minimise storage costs, wastage, idle machines and order the materials in sufficient time to be delivered. Allows manager to consider bulk buying over storage costs, seasonal variations, price variations.
• Assists productivity by ensuring sufficient inputs, minimising inventory costs, planning operational activities
• Considers supplier lead in time, exact number of materials, possible price change, contracts with suppliers, system in place of inventory control

Question 22

Material Management Just in Time (JIT) (can be used as a service)

Answer 22

• Inventory system that aims to avoid holding stock. Supplies arrive just as needed for production, and finished products are immediately sold reducing the storage costs of finished goods as well
• Involves having positive relationship with supplier, who is reliably delivers inputs when MRP says. Helps saves money for not storing for long periods of time
• JIT in service organisations can happen, but only receive stock just as it is ready to sell to meet demands of customer immediately.

Question 23

Quality Management

Answer 23

• Quality management is the process that will help minimise waste and defect rates in production, ensuring you obtain consistently high standards of products and service at every stage of the process to achieve set quality.

Question 24

Quality Management Quality Control+ adv and disadv

Answer 24

• Quality control is the process that checks the quality of predetermined raw materials or component parts. Reactive process
• Done through a series of physical checks at different stages to ensure no defects and meets standard. Ensures errors are eliminated, products are not recalled at expense of the good not being high quality and ruining reputation effecting future sales.
• Can be done for service business by getting feedback on customer services and implement ways to do better.
• Reduces the likelihood of returned goods (efficiency)
• Customers feel that they can count on consistent quality thus giving repeat business (effectiveness)

Quality Control Process
• 1. Establish quality benchmarks
• 2. Carry out inspections of product performance
• 3. Compare results of inspections against the standards set. Reject those who don’t meet standard.
• 4. Correct Processors to prevent defects occurring

Quality Control Advantages and Disadvantages
•Advantage- Prevents poor quality of goods or services to reach consumer
• Disadvantage- Wasteful as it was a waste of raw materials and time to make good that is not sold, doesn’t isolate the cause of problem, some inferior goods may slip through if not performed at each process.

Question 25

Quality Management Quality Assurance + adv and disadv

Answer 25

• A system established to ensure the predetermined quality is achieved from an external body. System aims to reduce errors before they occur. Assures quality to public. Proactive process as it removes errors before they exist
• Organisation engages an external body called certification body which audits production system against national or international standards.
• For services there is standard to receive citification.
• Allows business to display a logo if achieves standard.
• Decreases waste by preventing errors or defects (efficiency)
• Provides competitive advantage (effectiveness)

Quality Assurance Process
• 1. Organisation employs consultant to advise on standards to obtain certification.
• 2. Adjustments are made to achieve certification
• 3. Certification is granted by standard authority
• 4. The right is granted and allowed to use logo in organisation for marketing

Quality Assurance Advantages and Disadvantages
• Advantages- great for marketing, gives competitive advantage in domestic and global markets, reduces wastage as it stops errors occurring before produced
• Disadvantage’s- can be expensive, can take additional time preparing documents and processors for inspection.

Question 26

Quality Management Total Quality Management (TQM)

Answer 26

• Is a holistic approach. All members of organisation participate in the ongoing improvement of quality in everything they do. Proactive process
• All employees are placed in a quality circle. In the ‘quality circle’ they meet regularly to discuss quality and production issues. Any proposed changes are put forward to management as part of its culture.
• Aims to improve performance in every level of the business
• Decreases waste by preventing errors from occurring (efficiency)
• Improves employee morale and therefore leads to increase productivity (effectiveness)

Continuous Process Improvement
• Employee should see work as small steps in the overall process. It is a continuous process not isolated themselves.
• Continuous process improvement never stops. Just because you have the competitive edge doesn’t mean you stop you keep going so you are not caught.
Customer focus
• Two types of customers internal and external. Each work team needs to find out what the customer wants and give it to them.
Defect Prevention
• TQM is proactive it aims to prevent defects before they occur.
• Therefore, everyone in the organisation is involved to ensure quality across every aspect.
Universal Responsibility
• Every work group in the organisation has the responsibility to seek ways to improve quality. From CEO to every worker, not just the quality team.

TQM in service
• Service quality perception depends on:
• Intangible differences in the service. Eg customer service could be different one day compared to another.
• Intangible expectation of consumers. How do you know what level of service is a consumer expecting?

Question 27

TQM adv and disadv

Answer 27

• Advantages- zero defects, greatly reduces waste, higher customer satisfaction
• Disadvantage’s- requires a whole business cultural shift which can be expensive and time consuming.

Question 28

Sim and difference between QC and QA

Answer 28

Sim- Both aim to improve quality across business

Both aim to prevent faulty products reaching the customer

Dif- QC is reactive as faults identify during or after production whereas QA is proactive looking to identify faults before they occur

QC takes place against internal standards set whereas QA is assessed from external body

Question 29

Sim and difference between QC and TQM

Answer 29

Sim- Both aim to improve quality standards across business

Both aim to prevent faulty products going to consumers

Diff- QC is reactive and TQM is proactive

Question 30

Sim and difference between QA and TQM

Answer 30

sim- Both aim to improve quality standard across business

Both are proactive

Diff- TQM uses ‘quality circle’ an internal way to identify and improve quality whereas QA is assessed against standards from an external organisation

Question 31

Waste Minimisation

Answer 31

• Waste minimisation is a process involving the reduction of misused or discarded resources produced by a business to improve efficiency and effectiveness.
• Minimising waste reduces cost of production, improves productivity, and reduces environmental impact which improve reputation.
• Waste is a by-product of any operations system. Waste can occur because of packaging, leftover and poor-quality outputs that needs to be destroyed. Can also be labour.
• Money is wasted if materials are discarded.
• Excess or overproducing goods may spoil, go off or become damaged while stored.
• Waste that is returned to the environment may cause fines to business.
• CSR- consumers demand business to operate in an ethical manner and reduce waste going to landfill.

Question 32

Waste prevention (4r’s) Good and service

Answer 32

• Reduce- The use of resources
• Reuse- being able to use waste where possible
• Recycle- try to recycle the waste into other products
• Recovery- sometimes it is possible to recover materials or energy from waste which cannot be reduced, reuse, recycle.

Question 33

Lean Management

Answer 33

• Lean Management- An approach that improves the efficiency and effectiveness of operations by eliminating waste and maximising customer value.
• ‘lean’ means no excess
• Lean management attempts to deliver the most value from customers while using fewer inputs.

Question 34

7 types of waste (TIMWOOD)

Answer 34

Transport- Reducing unnecessary movement between machines and products between processors
• Inventory- minimising storage required
• Motion- Reducing unnecessary movement of workers and product within process
• Waiting time- Eliminate any idle time waiting between stages and processors
• Overprocessing- Not adding more value to the product than what consumers want
• Overproduction- Not making more than required or earlier than required
• Defects- reducing errors that require time to fix.

Question 35

4 Principles of Lean Management (POTZ)

• Pull Focussed

Answer 35

This is where the amount that is produced is determined by customer demand. Waste is reduced as inventory is less likely to be damaged or spoil and the business is less likely to overproduce. Eg Dominos only making pizza when ordered or medical clinic only ordering the number of flu vaccines required to meet the demand in a month.

Question 36

• One Piece Flow Principles of Lean Management

Answer 36

Focus on one piece or customer at a time. Each product moves through the production system in an order. Eliminating idle time of machines and labour. Eg finish making the beans first then make pasta or Medicare issuing a number required to the assistance needed which allows them to go to the right service counter.

Question 37

• Takt Principles of Lean Management

Answer 37

The rate of production needed to meet customer demands. Takt is the time spent at each product. Business can adjust this to ensure production is continuous and able to change to reduce waiting times. Eg At Maccas it takes 2 minutes to make a burger so they might employee more staff during peak hours or a barber is able to cut hair in 45 minutes, so he spaces appointments 45 minutes apart to reduce consumer waiting time.

Question 38

• Zero defects Principles of Lean Management

Answer 38

strives to continuously improve and aim for no defects. Defective products cause waste and may be passed onto consumers. Aiming for zero defects reduces efficiency and competitiveness. Eg Domino’s Pizza checker to ensure all tops are on and evenly spread.

Question 39

How does lean improve efficiency and effectiveness?

Answer 39

Reducing waste will reduce cost of production which leads to an increase in profit thus making it effective.
• Reducing the amount of defects can lead to an increase of customer satisfaction resulting increased sales and market share thus improving effectiveness
• Efficiency can be achieved through lean as waste declines and fewer resources required.

Question 40

Strengths and weaknesses Lean management

Answer 40

• Strengths- reduced resource consumption, reduced delays, increased customer satisfaction.
• disadvantages- requires committed and experienced employees, high implementation costs, constant focus on improvement can result in workplace stress.

Question 41

Ways CSR can be used in operations system-Inputs

Answer 41

Sustainable resource selection
• Done by an Organisation creating purchase policy, that states that they only select suppliers who use a sustainable process, not testing on animals. This could also be checking if employees are treated well or child labour.
Sustainable inputs
• Done by purchasing green energy options, purchasing technology that creates green options, and choosing local suppliers to reduce carbon footprint

Question 42

Ways CSR can be used in operations system-Processors

Answer 42

• Reuse of resources, recycle resources
• Ensuring employees have access to training and development
• Ethical treatment of employees

Question 43

Ways CSR can be used in operations system-Outputs

Answer 43

• Output is not harmful. Make sure output is safe either poor quality or unethical, does not cause social harm or cause consumer or environment distress
• Honest marketing
• Packaging has limited effects on environment making it recyclable or biodegradable

Question 44

Benefits v Drawbacks of CSR in Operations

Answer 44

• Benefits- improves reputation, increases the number of potential customers, increasing sales, and improving effectiveness, improves efficiency and reduced costs in long term, reduces impact on the environment
• Drawbacks- expensive to implement, sourcing sustainable can be costly, time consuming to manage, can conflict with profit objectives, can be seen as a marketing gimmick

Question 45

Global Considerations

Answer 45

• The increased interdependence of countries and the movement across nations of trade, investment, technology, and labour due to improvements in transport, communication, and the removal of trade barriers.

Question 46

Global Sourcing of Inputs + adv and disadv

Answer 46

• Involves selection and use of inputs from other countries
• For an organisation to be competitive they may need to look outside Australia for inputs. Businesses do this to exploit cost savings or efficiencies that can be gained from global delivery.
• Includes: low-cost skilled labour, low-cost raw materials, access to materials
• CSR implication of loss of Australian jobs
• Adv- Cheaper materials can be accessed, access to skills or resources not available locally, provides business opportunity in new markets, can be used as alternative suppliers
• Disadvt- Can lead to loss of jobs, more difficult to monitor CSR, increased lead in times

Question 47

Overseas Manufacturing (offshoring) +adv and disadv

Answer 47

• Overseas manufacture is when the good is produced in a country that is in a different country to the business’s headquarters. businesses consider this because of reduced cost of production and reduced delivery costs by manufacturing in the country you’re selling to.
• There will be initial cost and obtaining approval from foreign government can be timely and costly
• CSR implication of sweatshop labour. This is a workplace with poor and socially unacceptable working conditions. Ensure there it is not dangerous, or underpaid, overworked, and child labour.
• Adv- Access to cheaper labour rates, access to larger pool of employees, business not directly responsible for factory operations, access to new export markets
• Disadv- lost in domestic manufacturing, can lengthen delivery times, language barriers in dealing with manufacturing suppliers, risk of damaged shipping, concern for sweatshops labour

Question 48

Global Outsourcing

Answer 48

• When businesses process or function is contracted out to another business overseas. Another business could perform its non-core roles like IT/Software, customer service, data entry, call centre, accounting.
• This can be done due to ability to communicate via internet has facilitated the growth of global outsourcing.
• Adv- Outside experts can provide a specialist service and allow the business to focus on their core function, production maybe quicker because they specialise in it, costs can be reduced.
• Disadv- CSR issue of language barrier may prove to be problematic and take time to resolve, can lead to loss of local jobs, difficult to maintain and control over quality, can take time to locate reputable outsourcing organisation.

Question 49

Supply chain Management

Answer 49

• The co-ordination of a range of suppliers from which the business purchases materials and other resources.
• A typical supply chain starts with the sourcing of natural resources, followed by manufacturing activities such as component construction and assembly, storage, and transport / distribution.
• Managers role is making sure deliveries are efficient, stock use rate, consistent of quality, competitive pricing, and if there are other ways the businesses needs can be met more efficiently
• When conducting a supply chain the products needs to get to the next part of the supply chain or to the final consumer at the end of the process. This is what we call logistics.
• Often organisations will outsource their logistics to other organisations who specialise in this, so that you can get best and most competitive logistics processes.
• Adv- Access to cheap materials, cheap labour rates, ensures business has required materials on hand to meet demand.
• Disadvt- Can lead to delays and damaged goods during transport, exposed to exchange rates, exposed to unethical behaviour of overseas suppliers, specific parts to supply chain can be hard to manage.

Question 50

Forecasting Adv + Disadv

Answer 50

adv- Can anticipate external changes and adjust to save costs and wastage
Can help prevent over ordering or materials

disadv- Unexpected events can still catch you out
Requires a lot of time analyze trends

Question 51

Master Production Schedule Adv + Disadv

Answer 51

adv- Very accurate ordering quantities and timings
Easy for new staff to learn routine
Reduces wastage

Disadv- Initially time consuming and expensive to track and record
Not flexible
Hard to account every situation

Question 52

Materials Requirement Planning Adv + Disadv

Answer 52

Adv- Reduces wastage
Reduces storage needed
Reduced idled machines

Disadv- Initially expensive to set up a dedicated system which can accurately track materials through the site

Question 53

Just In Time Adv + Disadv

Answer 53

Adv- No raw material wastage
Bare minimum cash in raw materials
No storage space required
No idle machines

Disadv- Huge reliant on suppliers to deliver on time all the time. Failure to do this causes shut down of production line.