Operations Flashcards
What is the strategic role of operations?
Cost leadership through:
- lean production (lower wastes=lower costs)
- economies of scale (lower costs per unit input)
goods/service differentiation
- unique features and characteristics that distinguish from competitors
- innovation, quality, customisation, convenience, lead times
How is operations interdependent with marketing?
MR determines level of demand–> supply, machinery, inputs
MR determines consumer preferences and market trends–> new product design–> new inputs and process etc
How is operations interdependent with finance
Finance (plan, organise, monitor and control financial resources)
- lowering wastes in production–> lower expenses and higher profit
- set budgets –> determine funds available to make purchases for equipment, inputs, storage space etc
- financial goal liquidity (having cash assets) dependent on inventory management- excess stock reduces cash flow)
- change to production–> increase costs in short term
How is operations interdependent with HR
HR (hiring, training and maintenance of employees)
- changes to operations processes (new tech)–> training of HR
- staff must have skills and qualif to perform roles
- management has to have leadership skills and positive BC
Case study of interdependence of operations with KBF
Apple
- MR indicated popularity of phablets in Asia–> design and development of larger iPhone
- 2018 Tariff wars with China–> apple started manufacturing models in India and Brazil
- 2014: in preparation for production of iPhone 6 and iPhone 6+, Foxconn employed additional; 100 000 factory staff to meet production targets
Cadbury
-2019 increase prices for Cocoa (supplies)–> re-budgeting to maintain profitability–> nre product design/qty (smaller family blocks 200g–>180g)–> reduce retail prices
What are the influences on operations
globalisation, tech, quality expectations, cost based competition, government policies, legal regulations, environmental sustainability, CSR
How does globalisation impact operations
def: removal of trade barriers b/w nations. It is characterised by the integration b/w national economies, and a high degree of transfer of capital.
➕expand consumer base, access to cheap labour, weak currencies, access to greater range of production facilities, tech, can make production closer to consumer–> lower logistics costs
➖global competition. other business can apply cost leadership to undercut the market
legal regulations of other countries, reputation and GDP
supply chain management: cost effective, reliable, time effective global web
Globalisation Case study
Apple exploits the CA of other nations
- sources from all over the world–> access to experts at affordable prices–> quality and profit
- product design- USA
- tech inputs- Japan (constant innovation)
- manufacturing- China (cheap labour
saves $600 mill in labour costs and $4.2 bill in everything compared to if they did it in the US
➖tariff war–> had to change suppliers to India and Brazil
How does tech influence operations
def: the design, construction and application of innovative devices, methods and machinery
➕improve admin (office tech, computers, graphic software)–> more effective planning, organising and controlling
- automation- consistency, precision, reduces defects, speed and productivity, reduce wastes, reduce HR cots
- leading edge tech (CAD and CAM)–> advanced software, reduces waste, up to date MR, online base, feedback and brand awareness
➖application is expensive, training costs, maintenance costs, machine downtime, risky, redundancy
Case Study Tech
Amazon
- used automation to replace employees in warehouse–> decreased costs in the long term–> maximise affordability
- packages are processed and delivered at a much faster rate–> less lead times
- 200000 robots worldwide Each robot packer can handle up to 700 orders per hour
- costly (I mill per machine) in 2021 which took 2 years to recover
- replacement of 1300 jobs
- possibility of malfunctions or power outages–> impact will be great bc of heavy reliance on tech–> inefficiencies
- 40% market share
How does quality expectations influence operations?
def: the standards consumers look for in terms of features and characteristics of goods and services to satisfy stated and implied needs. determined by durability, functionality, consistency etc
impact: businesses must invest in
- robotics, new production methods, procedures for QM, ethical sourcing and packaging, MR, HR–> satisfaction, repeat sales, market share
- incurs labour costs, processing costs, input costs–> increase expenses–> increase prices–> deter customers
Case study quality expectations
McD
- in 2011, coffee did not meet standard demand by Australian consumers (feedback indicating dissatisfaction with consistency and blend). response: coffee is now barista made (skills, qualifications). effect: sells 144000 to 250000 cups per day
- In 2019, changes to hamburgers
- fewer patties on grill–> better heat distribution
- reducing size of lettuce tray–> fresh lettuce
-20.9% increase in revenue in 2021
How does cost based competition influence operations
def: lowering costs–> lowering prices–> attract consumers away from competition
- determine break even cost, then reduce fixed and variable expenses
strategies:
- cheap supplies, outsourcing, economies of scale, technology, inventory management, etc
Case study cost based competition
- sources cheap supplies from Germany, Thailand and China.
- stocks on limited brand products
- spends less on marketing
- efficient production processes
- leading edge tech (reduce HR costs)
➕–> lowers costs while maintaining quality–> affordability–> rise in market share up to Coles and Woolies in 2030.
➖response from competition (Coles). - outsourcing production of tinned food, marketing “down down”, intro self service tech
How do government policies impact operations
def: b the goals, decisions, and actions adopted by a government for political, social, and economic management. temporary + quicker to implement
- incur costs (e.g tariffs- tax on imports and exports of foreign countries to safeguard domestic industry, taxes, carbon tax)
- affect how business carries out operations, eg during COVID, masks mandated and public health regulations
- environmental policies, education, healthcare
case study gov policies
In 2019, Trump imposed tariffs on Chinese imports to reduce U.S trade deficit and promote domestic manufacturing–> China US trade war
Apple heavily relies on Chinese manufacturer Foxconn, and had to relocate operations in India and Brazil
How does environmental sustainability influence operations
def: practises that do not compromise access to resources for future generations.
➕reducing energy consumption, waste reduction, and recycling can help businesses save money on operating costs
➕Compliance with regulations: Environmental regulations such as emissions standards, waste disposal regulations, and product packaging requirements can influence the way
➕Consumers are increasingly concerned about enviro sustainability–> improve their reputation and brand image among environmentally conscious customers.
➕SCM: sustainably sourced inputs (e.g. free range eggs)
How do legal regulations influence business regulations
Legal regulations are rules, guidelines, or requirements established by government or other authorities that are designed to ensure that individuals and organizations comply with specific laws, policies, and standards.
- restrict how operations affect stakeholders (workers, the public, enviro)
- non compliance–> legal punishment and penalties
- compliance–> costs (eg training of employees, insurance for workers)
✖️workplace safety (WHS 2011)–> safe worksite, safe machinery and materials, info, training and supervision
✖️environ protection (enviro protection and biod cons act 1999)–> ensure hazardous wastes, feul and chemicals do not enter into enviro. oil spills
✖️CCA 2010, Fair trading Act (1987)–> product safety, info standards (labelling), energy rating, functionality
Case study legal regulations #2
WHS:
Physically and mentally safe work environment → safety
precautions, warning signs, training
Case Study: KFC teen burn
- failed to comply with safety standards
- teenager fell in boiling oil vat and suffered severe burns
- fined more than $100,000, diminished reputation
Case study legal regulations
Apple went to court with Samsung and other parties for infringement of intellectual property: patents, trademarks, user interface and style–> court ordered apple to pay $234 mill for patent infringement (2016)
- breach of labour laws in China. 10 of 127 facilities hired workers under 16–> Apple had to research new facilities –> expensive and time consuming–> increased lead times for production
- suicide of Foxconn factory workers–> bad publicity due to unethical working conditions–> deters consumers
Case study environmental sustainability
Nike partnership in 2019 with ocean conservancy to launch Arctic shipping corporate pledge: commitment against shipping through Arctic Ocean (increased cargo traffic–> risk to marine environment)
➕positive publicity
➖high costs and inconveniences, transport routes +higher costs for fuels–> lead times increase
Impact of CSR
CSR: open and accountable business actions based on respect for people, the community and the broader environment (beyond legal responsibilities
1. people: fair treatment of labour and community, protecting consumers, charity programs. Bulla: wellbeing programs for staff (health, support, fitness, nutrition meals per week)
2. Planet: enviro sustainable practises, e.g. Cadbury: biodegradable plastics from corn-starch, sourcing only fair trade certified cocoa beans
3.Profit
- positive rep–> retain customers and staff, differentiation
Distinguish between legal compliance and ethical responsibility
Legal compliance refers to the act of following laws, regulations, and other legal requirements that govern business operations. These requirements are often set forth by government agencies. minimum required to avoid penalties. However, ethical responsibility is going above the law and treating stakeholders respectfully even when not required to
What is social responsibility
A business’ management of the social, environmental, political and human consequences of its actions- standard of living etc.
- economic development must be established sustainably
ILO:
- promotes rights at work
- greater opportunity for men and women to obtain work and pay
- fostering acceptance and tolerance–> BC
CSR Case study
McD
- charity: supports foodbank (hunger relief charity). regular donations of surplus food (235600 meals in 2018) to avoid in landfill
- healthier choices in menu
- sustainable supply chain: 100% of coffee supply in US comes from verified Sustainable source (Fairtrade, UTZ- international bodies)–> prevents overharvesting. 100% of palm oil supply certified by RSPO (roundtable for sustainable palm oil- organic farming no pesticides, free livestock, regenerative agriculture)
- animal health and welfare: in 2020, announced all chicken served is certified by RSPCA. since 2017, using cage free eggs
✨upholding ethical obligations, commitment to social responsibility✨
Operations processes (syllabus)
inputs
– transformed resources (materials, information, customers)
– transforming resources (human resources, facilities)
transformation processes
– the influence of volume, variety, variation in demand and visibility (customer contact)
– sequencing and scheduling – Gantt charts, critical path analysis
– technology, task design and process layout
– monitoring, control and improvement
outputs
– customer service
– warranties
What are the different types of inputs in operations?
Transformed:
- materials: basic elements used, both raw and intermediate, e.g. steel, cotton
- Info: knowledge gained from research, investigation and instruction
external: media reports, market reports, stats
internal: financial reports, KPI’s, inventory management, turnover rates, lead times, sales
- customers: customer relationship programs, communication, through emails, social media etc, acting on feedback
Transforming: (enable change + value adding to occur)
- HR- skills and qualif, training and development, management
- Facilities- plant (factory or office, machinery, buildings, warehouses, conveyer belts
Influence of Volume
- Influenced by customer demand
- volume flexibility–> essential for managing lead times
🔶 high volume: standardised products, repetitive labour skills, low costs per unit.
🔶low volume- customised goods, specialised labour skills
➕Overproduction: not all products sold–> costs not being made up. inventory costs + risks, obsoleteness–> reduced profit margin, increased costs for inputs
➕Underproduction: machinery/tech not being used become liability bc expenses not being made up, increased lead times–>lose sales
Influence of Variety
- the mix of products/services delivered
🔶more variety–> more operations processes needed (diff inputs, machinery and packaging)–> increased lead times and costs, eg customisation - more market share can be satisfied–> larger customer base
Influence of variation
cyclical increase or decrease in demand- can be predicted based on season or points of interest, eg during Christmas, Mother’s day, winter
- increase in demand: hire more staff, increase inputs
Issues with fluctuating demand:
- suppliers cannot supply quickly enough–> lead times
- machinery cannot adjust or cater for increased capacity
- downsizing when theres low demand to avoid motion waste–> time consuming and costly (redundancy payments) and then having to hire staff again
