Operations Flashcards
1
Q
Operations
A
Business processes that involve transformation or, more generally, production
2
Q
Cost leadership
A
Aiming to have the lowest costs/be the most price-competitive in the market whilst still being profitable.
Can be achieved through:
- Economies of scale
- Supply chain management
- Using technology to increase productivity and speed
- Minimising waste
3
Q
Goods/service differentiation
A
Distinguishing products in some way from competitors Goods: - Varying actual product features - Varying product quality - Varying any augmented feature Services: - Varying time spent - Varying expertise level - Varying provider's qualifications and experience - Varying material/equipment quality
4
Q
Standardised goods
A
Mass produced on an assembly line, uniform pre-determined quality level
- Produced with production focus
5
Q
Customised goods
A
Varied according to customer demands
- Produced with a market focus
6
Q
Perishable good processes
A
- High quality, safety and cleanliness standards
- Short, quick and effective lead and distribution times
- Appropriate, robust packaging and cold storage processes
7
Q
Non-perishable good processes
A
- Quality is managed throughout the entire process
- Implement effective inventory management strategies
- Be highly responsive to market demand in order to not overproduce
8
Q
Intermediate goods
A
Goods that become inputs in other processes
9
Q
Standardised services
A
All customers receive the same streamlined process
- Increases cost leadership but decrease personalisation
10
Q
Customised services
A
All customers receive treatment based off their desires
- Tailored to individual circumstances
11
Q
Interdependence
A
Finance
- Operations cut production costs to free up funds
- Finance provide necessary funds for improved production
Marketing
- Operations set limits
- Marketing set goals
HR
- Operations should avoid HR issues (like excessive overtime)
- HR should hire the right staff for maximum efficiency and effectiveness
12
Q
Globalisation
A
Removal of trade barriers between nations, causing increased integration between national economies and a high degree of capital, labour, ideas, finance and technology
- SCM has been greatly impacted as businesses now have global supply chains
13
Q
Technology (influence)
A
Design, construction and/or application of innovative devices, methods and machinery upon operations processes. Can assist both administration and transformation. Benefits of: - Speed - Quality - Consumer satisfaction - Lower cost per unit
14
Q
Quality expectations
A
Standard of quality that products should be produced at
- For goods, quality of design, make and functionality
- For services, degree of competence
- Force businesses to follow excellence standards when packaging
15
Q
Cost-based competition
A
From deriving the BE point, businesses look to create cost advantages over their competitors
- Done by looking at where fixed and variable costs can be reduced to increase efficiency and profits
16
Q
Government policies
A
Subject to change depending on who is ruling, new laws and taxes can influence operations
- Impacted by trade agreements, like ChAFTA, and government investment/specialisation incentives
17
Q
Legal regulation
A
Certain laws can influence operations, including: - WHS Laws - Environmental protection laws - Consumer laws Breaches can result in fines
18
Q
Environmental sustainablity
A
Responsibility to act within the environment’s best interests in order to keep a high standard of health and wellbeing along with increased social profile and ability to continue these in the future
19
Q
Corporate Social Responsibility
A
Open and accountable business actions based on respect for people, community/society and broader environment. Means businesses must:
- Act fairly and in good faith
- Observe the law
- Protect the environment
- Contribute to charity
20
Q
Legal compliance vs ethical responsibility
A
Legal compliance means to merely comply with the law and not breach any legislation or the business could get punished as breaches lead to financial penalties and reputational harm.
Ethical responsibility means to act within the best interests of society and the environment and, whilst no punishment would be received for not doing it if the business is legally compliant, acting ethically responsible can boost the business’s reputation and lead to growth as a result
21
Q
Inputs
A
Resources used in the transformation process
22
Q
Labour
A
Mental and physical human effort put into the operations process
23
Q
Energy
A
The fuel that powers input transport to the business, the machinery and equipment used in transformation and the distribution of goods to consumers
24
Q
Raw materials
A
Basic components of manufactured goods, including intermediate goods.
- Also called “direct materials”
25
Machinery and technology
Machinery used to process raw materials as well as to design and make products.
- When integrated with technology, it can improve efficiency and reduce waste
- Capital-labour substitution is when people are replaced by machinery
26
Transformed resources
Inputs changed or converted in the operations process. Including:
- Materials
- Information
- Customers
27
Transforming resources
Inputs that carry out the process. Includes:
- Human resources
- Facilities
28
Transformation
Conversion of inputs into outputs.
| - Influenced by the 4 Vs
29
Volume
How much needs to be made
- Higher volume usually leads to more standardisation
- Lower volume usually leads to more customisation
30
Variety
The mix or range of outputs produced
| - More variety leads to more complex transformation
31
Variation
How processes respond to demand changes, such as seasonal variations
32
Visibility
How much of the process the customer sees/experiences
- Services tend to have higher visibility
- Manufactured goods have lower visibility
33
Sequencing and scheduling
Order in which activities occur and the length of time activities take to be completed
34
Gantt chart
Type of bar chart that shows the scheduled and completed work over a time period
- Forces a manager to plan steps needed to complete a task, specifying time required
- Makes it easy to monitor actual progress against the plan
35
Critical path analysis
Shows what tasks need to be done, how long each takes and the necessary order of completion.
- The critical path is the shortest path to complete all necessary tasks
- Some tasks can be completed simultaneously
- Enables a manager to see what needs to be done and allows the timing of tasks to be considered
- Gives direction and organisation as a business can see the order tasks need to be done in
36
Competitive advantage
Factors that give a business the edge over its competitors. Can arise from areas such as:
- Quality
- Dependability/consistency
- Flexibility/convenience
- Customer service
- Variety
- Innovation
- Reduced costs
37
Technology (process)
Allows for increased efficiency and reduced costs
- For goods it can shorten processes and reduce waste throughout production
- For services it is used in office and communications technology, which has allowed for globalisation
38
Robotics
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Use of programmable machinery capable of doing several tasks
+ High quality outputs
+ High consistency levels
+ Improved efficiency
+ Minimised waste
– Short-term job loss
– Lack of customisation
– High short-term costs
```
39
CAD/CAM
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Computer Aided Design/Manufacturing
Computer drawing and adjusting of 3D designs
+ Shorter time
+ Automatic calculations
+ Higher consistency
– Lower quality individual products
– High start-up/equipment costs
```
40
Office technology
Use of technology to allow for virtual employment outside the physical office
+ Accessible from anywhere
+ Less commute
+ Less floor space
+ Perform multiple jobs simultaneously
– Can lead to burnout as employees always feel on
41
Task design
Classifying job activities in ways that make it easy for an employee to successfully perform and complete a task. Involves determining:
- Number of staff needed
- Skills required
- Training/retaining required
42
Skills audit
Used to determine if existing employees have necessary sills to carry out the task or if the business needs it train/retrain/acquire new staff
43
Process layout
Arrangement of machinery so that machines and equipment are grouped together by the function they perform
44
Process production
Different sequences for different products
- Best suited to high variety, low volume production
- Services (like hospitals)
45
Product production
Uses product layout, where the arrangement relates to the sequence of tasks
- Best suited to high volume, low variety tasks
- Assembly line manufacturing (like cars)
46
Project production
Uses fixed position layout, where the manufactured object is located
- Best used for large scale activities (like construction)
47
Hot desking
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No set desks for employees
+ Encourages collaboration
+ Less floor space required
– Time wasted choosing and unpacking
– Employees don't like the insecurity of not having a set desk
```
48
Monitoring
Measuring actual performance against planned performance through KPIs
49
Key Performance Indicator
Quantifiable performance measure for a specific objective. Typical ones include:
- Lead times
- Process flow rates
- Direct/indirect cost analysis
- Defect rates
- Repair rates
- Warranty claims
- Capacity and volume rates
- IT and maintenance costs
- Inventory turnover rates
50
Control
Corrective action taken if a discrepancy is detected in monitoring
51
Improvement
Systematic reduction of inefficiencies and wastage, poor work processes and the elimination of bottlenecks
52
Output
End result of the business efforts
53
Product
The good made or service provided to the consumer
54
Customer service
How customers are treated and supported when purchasing the product
- Aims to meet an exceed a customer's experience in all operational aspects
- Attempts to entice new customers back and increase repeat customers
- Customer dissatisfaction can force a partial or full operations review
55
Warranty
Promise made that defects in a business's products will be corrected within a time period
- Less warranty claims means better product quality
56
Performance objectives
Goals that relate to particular aspects of transformation, allowing the business to become more:
- Efficient
- Productive
- Profitable
57
Quality (performance objective)
- Quality of design - Producers can design goods to consumer standards when they understand their
preferences
- Quality of conformance - Ability of the manufacturer to meet expectations consistently
- Quality of a service - Requires reliability, timeliness and responsiveness
58
Speed
Time it takes for production to respond to market demand changes
- Requires changes in input levels and processing times
- Goals include reduced wait times, shorter lead times and faster processing times
- Bottleneck reduction and smooth internal communications are required
59
Dependability
How consistent and reliable a product is
- Highly durable products are dependable
- If consistent and predictable, perishable products can be dependable
- Can be measured in complaints received for services and warranty claims for goods
60
Flexibility
How quickly operations adjust to market changes
- Can be caused by capacity pressure
- Faster processing times lead to greater flexibility
- For goods, achieved by new tech, increased variety and altered design
- For services, achieved by increased number of providers, skill level and improved tech
61
Customisation
Creation of individualise products to meet the specific needs of customers
- Many modern products opt for mass customisation - mass-produced item to be modified to suit individual
requirements
- Costs more than mass-production so only easily adaptable products usually customise (unless
customisation is the business model)
62
Cost
Minimisation of expenses to conduct operations as cheaply as possible
- Often determine price
- Can be achieved through more efficient tech, minimised wastage, better input use, lower supplier, holding
and movement costs and efficient distribution methods
63
Product design
The design, development, launch and sale of new products enabling a business to grow and attain a competitive advantage. Important considerations include:
- Quality
- SCM
- Capacity
- Cost
64
Consumer approach
Market research identifies customer preference and determines which products are designed and deliviered
65
Technological innovation
New products are sold with advanced tech due to greater functionality
66
Service design
Starts with consumer needs
- Can be customised (hairdresser) or standardised (fast food cashier)
Considerations include:
- What the explicit service will be
- What the implicit service will be
- Goods required with service delivery
- Cost determination after factoring in expenses
67
Reasons for new products
- Product mix is declining or maturing
- Possess resources to drive innovation and gain competitive advantage
- Under pressure from low-cost rivals - respond with hard to imitate innovations
- High-risk appetite to be first mover in category
68
Supply chain management
Integration and management of the flow of supplies throughout the inputs, transformation process and outputs in order to best meet the needs of customers. Uses include:
- High variety and volume of material inputs (high COGS)
- Trouble obtaining inputs
- Complex supply chain (high admin costs)
- High transportation costs
69
Sourcing
Purchasing of inputs for transformation, also called procurement or purchasing. Factors influencing choice include:
- Flexibility
- Timeliness of supply
- Input quality
- Consumer demand
- Supplier cost
70
Global sourcing (SCM)
Sourcing without location constraints from international firms
- Can be more cost effective
71
Making vs buying inputs
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Making:
- Lower costs when economies of scale achieved
- More control
- Protect tech advantages
- Respond to changes faster
- Protect corporate secrets
Buying
- Lower costs by selecting cheapest supplier
- Specialists can produce better inputs
- Only requires small quantities
- Can cancel orders
- No factory costs
```
72
Supplier rationalisation
Assessing the number and diversity supplies to reduce to the least amount necessary
- Less contracting and input duplication
- Improved timeliness
- Reduced waste
- Lower costs through bulk buying
73
Vertical integration
Purchasing suppliers through mergers or acquisitions
- Guarantees supply for transformation
- Must be cost and time assessed
74
Cost minimisation
Use of offshore markets, increasing access to low-cost inputs
- Also applicable to lean production
75
E-commerce
Buying and selling via the internet
76
E-procurement
Allows suppliers direct access to a business's supply level, allowing them to supply without formal request
- Enabled by business-to-business (B2B) which allows the supplier to assess the buyer's needs and meet them effectively
- Business-to-consumer (B2C) allows businesses to sell directly to consumers
- Specialist sites exist as third parties so accurate stock levels can be presented
77
Logistics
Generally refers to distribution, including:
- Transportation
- Use of storage, warehousing and distribution centres
- Materials handling and packaging
78
Distribution
Concerned with physical inventory movement and ways of getting products to customers
- Product type and transportation cost affect transportation mode choice
79
Storage centres
Involves finding a secure place to hold stock until required
- Necessary when numerous sale outlets exist and demand is variable
- Can have particular protective characteristics
80
Warehousing
Use of a facility for stock storage, protection and distribution. Associated costs include:
- Premises
- Stock insurance and security
- Stock stacking and moving
Can save costs if used well and useful for durable items that may need short notice transportation
81
Distribution centres
- Intended for short term usage
- Strategically located near retail outlets to reduce lead times
- Can be co-located with transportation hubs
82
Materials handling and packaging
Requires application of particular standards and methods as products can be dangerous or delicate
83
Cross-docking
Direct transfer of products from inbound trucks to outbound trucks without storage in between
- Saves on storage costs
84
Outsourcing
Contracting out of a business's functions to a third party. Can be on-shore or off-shore. Types include:
- Business process outsourcing (BPO)
- Operations
- HR
- IT
- Admin work
- Finance and accounting outsourcing (FAO)
- Knowledge process outsourcing (KPO)
- Legal process outsourcing (LPO)
85
Reasons for outsourcing
- Inefficient internal functions
| - Seek to drive down costs and can afford the backlash to do so
86
Considerations and options when outsourcing
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Considerations
- Whether its cheaper
- Favoured geographical location
- Choice of outsourcee
- Contract terms
Options
- Shared services centre
- Fee-for-service arrangement
- Joint ventures
- "Build-operate-transfer" use - outsourcee builds and operates the project for a period of time before
transferring ownership to the outsourcer
```
87
Advantages of outsourcing
- Saving in capital outlay (factory space and machinery)
- Saving in labour
- Increased dependability (multiple suppliers ensures security)
- Cost savings
- Higher level skills access
- Increased flexibility
- Management savings
88
Disadvantages of outsourcing
- Dependency (SCM failures can cause major issues)
- Control loss
- Data security loss (potential leakage)
- False economy (costs warrant constant review)
- Redundancy costs
- Industrial problems
- Image damage
89
Technology (strategy)
The equipment and knowledge that is available to help businesses perform certain functions or make products. Considerations include:
- Speed of change taking place in area of tech
- Tech competitors use
- Implementation costs
- Ease of integration into existing operations
- Finances available for a tech change
- Time taken to introduce new tech
- Whether staff need to be retrained or made redundant
90
Leading edge technology
Technology which is the most advanced of its kind, said to be at the "cutting edge"
- A business can potentially gain a competitive advantage by using it should the tech live up to the promise
since they're at the forefront of innovation
- Risky as tech is unproven, meaning no guarantee it will be beneficial
91
Established technology
Technology which has been developed and widely used across the board without question
- A business should use these as they are functionally sound and uphold basic productivity and speed
standards
- A business could be left behind if they do not use it
92
Uses of technology as a strategy
- When competitors heavily invest in technological innovations
- When internal tech is dated, inefficient and costly
- When a firm seems to obtain a long-term competitive advantage through advanced productive capacity
- Businesses must integrate both technology types to gain efficiencies, productivity and improved operations
capacity
93
Inventory
Amount of raw materials, work-in-progress and finished goods a business has on hand at any particular point in time
94
Stock
Yet to be sold products either in partial or full transformation
95
Holding stock (+ and –)
+ Meeting unexpected demand increases
+ Stock being ready to use or sell
+ Bulk buying cost savings
+ Reduced lead time between order and delivery
+ Stock is ordered to move regularly, reducing the pressure on a business to have higher cash amounts
available, creating cash flow advantages
+ Inputs and components are able to be used as spare parts if needed
– Working capital is tied up in stock
– Expenses include warehousing, storage, insurance, storage, theft and security
– Risk of becoming obsolete or spoiled
– Invested capital, labour and energy cannot be used elsewhere as it is being used to hold the stock
96
Just-in-time
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Inventory management approach which ensures that the exact amount of material inputs will arrive only as they are needed in the operations process
- Can be used in conjunction with FIFO and LIFO
+ Reduced costs of storage and security
+ Increased working capital liquidity
+ Reduced chances of obsolescence
+ Reduced chances of spoilage
+ Less warehouse space necessary
+ Increased flexibility
– May experience a stock-out
– SCM issues disrupt entire schedule
```
97
LIFO (management)
Inventory management system where the most recent stock purchased is the first used, whether into production or sold
- Useful for goods with no use-by date (like machinery parts)
+ Most recently produced products are sold to customers
– Higher obsolescence and spoilage chances
98
FIFO (management)
Inventory management system where the oldest stock purchased is the first used
- More appropriate for perishable items (like food and drink)
+ Lower spoilage and obsolescence chances
– Customers may not want the older product
99
Inventory valuation
Inventory must be valued for the balance sheet (current assets) and income statement (COGS)
100
FIFO (valuation)
First goods purchased are first goods sold, meaning costs of each unit sold is first cost of production
- May understate costs and overstate gross profit, increasing taxes
101
LIFO (valuation)
Assumes that last goods purchased are first goods sold, meaning costs of each unit sold is last cost of production
- May overstate costs and understate gross profit, lowering taxes
- Illegal under Australian Accounting Standards and forbidden by the ATO
102
WAC
Uses average production cost to calculate inventory value
103
Quality management
Processes that a business undertakes to ensure consistency, reliability, safety and fitness of purpose of product
104
Quality control
Use of inspections and various points in the production process to check for problems or defects. Done through:
- Feedforward controls
- Concurrent controls
- Feedback controls
- Goods businesses tend to undergo attribute inspection, where a good's attributes are individually tested
- Services businesses tend to undergo employee performance inspections
105
Quality assurance
Use of a system to ensure that set standards are achieved in production
- Achieved through taking measurements and assessing them against pre-determined quality standards,
aiming for products to be fit for purpose and right first time
- ISO set standards which businesses can voluntarily comply with to enhance competitiveness
106
Quality improvement
Continuous improvement and TQM
107
Continuous improvement
Ongoing commitment to improving a business's products
- Staff encouraged to show initiative
- Leads to efficiency and effectiveness growths
- Likely to obtain competitive advantage as a result
108
Total quality management
Ongoing, business-wide commitment to excellence that is applied to every aspect of a business's operations
- Much more holistic - every staff member is responsible for quality
- Requires benchmarking, employee empowerment, customer focus and continuous improvement
109
World's best practice
Highest standards and practices achieved anywhere in the world
110
Quality legislation
- Competition and Consumer Act 2010 (Cwlth) - Products must be of acceptable quality for sale
- Fair Trading Act 1987 (NSW) - Similar function
111
Resistance to change
Reasons include:
- Purchasing new equipment
- Redundancy payments
- Retraining
- Reorganising plant layout
- Inertia
112
Driving forces
Forces that help promote change and encourage progress
113
Restraining forces
Forces that make change harder and counteract the driving forces
114
Purchasing new equipment
- Capital cost which can be quite high
- Must be compared to leasing, which is less upfront but can be more long-term
- Can lead to improved processing flexibility and speeds, shorter lead times, more consistency, higher overall
quality, reduced wastage and equipment failure losses
115
Redundancy payments
Caused by loss of work arising from job positions no longer necessary.
- Payouts depend on length of employment, pay level, unused leave amount and outstanding wages
- Can accumulate to a high cost
- Typically capital-labour substitution
116
Retraining
Arises from change that causes an internal hierarchy reorganisation or tech acquisition
- Job roles may change requiring employees to acquire new skills
- Tech acquisition causes staff to be trained or retrained
- Can be done on or off the job
117
Reorganising plant layout
Major changes, like system re-engineering, can require extensive reorganisation. High costs arise, such as from:
- Transportation, placement and powering of new plant
- Downtime when transferring and testing new tech
- Productivity loss as staff orientate themselves with new tech, processes and arrangements
118
Inertia
Psychological resistance to change. presenting uncertainty and fear
- Employees may feel threatened due to potential job/career opportunity loss and overwhelming new
equipment
- Can also cause financial effects
119
Force-field analysis
Suggests there is a state of imbalance between the driving and restraining forces in a business environment and that these forces must be identified to develop strategies to overcome change resistance
120
Unfreeze/change/refreeze model
Multi-step process allowing for large-scale change with minimal disruption
1. Unfreeze - Assure staff that changes will be beneficial and worthwhile
2. Change - Implement all planned changes
3. Refreeze - Ensure that the changes have settled in and that there is stability for a few years after
121
Change agents
Individual/group who inspire and influence a culture of change. Generally are:
- Positive
- Encouraging
- Relatable
- Understanding
- Collaborative
- Good at communicating
122
Management consultants
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Specialists with wide industry experience and knowledge across business who assess issues and develop strategies to overcome them
- Aware of industry's best practice
- Institute of Management Consultants
Areas of expertise include:
- Industrial relations
- Marketing and product promotion
- Recruitments and retrenchments
- Business establishment
- Technical requirements
```
123
Global sourcing (global factors)
```
Strategy of acquiring inputs from overseas
+ Lower costs
+ Improve quality
+ Greater production variety
– Fluctuations in prices
– Quality issues
– Increased lead times
```
124
Economies of scale
Reduction of production costs per-unit as fixed costs are spread over more units
- May also occur due to increased purchasing power leading to bulk buying discounts
- Increased specialisation can lead to cost benefits
- Global marketing can also increase production levels and greaten economies of scale
125
Research and development
Systemic work undertaken to improve or create new products and production processes or to extend product life cycles
- Global co-ordination can maximise specialist skills of workforces in different nations and bring together different perspectives
126
Scanning and learning
Systematic process of acquiring information about changes and trends in external conditions and using them to make operations decisions
- Scanning - acquisition of info
- Learning - implementation
- Reactive globally but can be proactive domestically if applied efficiently
