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Yr12 Business Studies > Operations Management Strategies > Flashcards

Operations Management Strategies Flashcards

1
Q

What are the 9 operations strategies

A
  • Performance objectives
  • Outsourcing
  • Global factors
  • Overcoming resistance to change
  • Supply chain management
  • Quality management
  • Inventory management
  • New product/service design and development
  • Technology
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2
Q

What are performance objectives

A
  • Performance objectives are goals that relate to particular aspects of the transformation processes.
  • These objectives or targets are set so the business becomes more efficient and profitable as they strive to meet them.
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3
Q

What are the 6 main performance objectives

A
  • Quality
  • Speed
  • Dependability
  • Flexibility
  • Customisation
  • Cost
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4
Q

What are the 3 types of quality

A
  • Quality of design
  • Quality of conformance
  • Quality of a service
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5
Q

What is quality of design

A
  • Extends to how well a product is made or a service is delivered.
  • Well designed and produced goods attract a high price.
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6
Q

How does quality of design relate to inputs and price

A
  • Design begins prior to the creation of a product and determines the inputs and the transformation process.
  • High quality inputs add cost and this will be reflected in a higher price that some consumers may (or may not) want to pay e.g. Apple, Mercedes
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7
Q

What is quality of conformance

A
  • This is the focus on how well the product meets the standard of a prescribed design
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8
Q

Example of difference between quality of design and quality of conformance

A
  • A Mercedes Benz vehicle combines very high-quality design with high standards of conformance.
  • A cheap plastic toy is of very low‐quality design but this meets the low-quality design specifications.
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9
Q

What does quality of service relate to

A
  • How reliable the service is
  • How well the service meets the specific needs of the client
  • How timely or responsive the service delivery is
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10
Q

What is speed as a performance objective

A
  • Speed refers to the time it takes for the operations processes to respond to changes in market demand.
  • As a performance objective, speed aims to satisfy customer demands as quickly as possible
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11
Q

What are some main goals for speed

A
  • Reduced wait times (e.g. In a travel agent or McDonalds for example)
  • Shorter lead times (i.e. Time it takes from order placement to it being received)
  • Faster processing times
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12
Q

What is dependability as a performance objective

A
  • Refers to how consistent and reliable a business’s products are.
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13
Q

How may businesses measure dependability of a good or service

A
  • For goods, one measure of dependability is measured by warranty claims (fewer claims=more dependable/reliable products)
  • For services, one measure of dependability is the number of complaints received (fewer complaints = more dependable service)
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14
Q

What is flexibility as a performance objective,

A
  • Flexibility refers to how quickly a business’s operations can adjust to changes in the market such as customer wants
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15
Q

What are the main types of flexibility

A
  • Product flexibility
  • Mix flexibility
  • Volume flexibility
  • Delivery flexibility
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16
Q

What is product flexibility

A
  • Business can change the products that it offers its markets
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17
Q

What is mix flexibility

A
  • Business is able to change the mix of products it offers
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18
Q

What is volume flexibility

A
  • Business is able to change the volume of products it produces (relates to market demand)
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19
Q

What is delivery flexibility

A
  • Business is able to change the delivery time of its products (relates to lead time)
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20
Q

How might businesses improve their flexibility

A
  • Increasing the capacity of production
  • Using equipment better
  • Buying new technology
  • Changing the product design
  • For services, Increasing the providers skill‐level and technology used when providing the service
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21
Q

What is customisation as a performance objective

A
  • Customisation refers to the creation of individualised products to meet the specific needs of the customers , extension of product and mix flexibility
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22
Q

What is mass customisation

A
  • The principle of ‘mass customisation’ is a process that allows a standard, mass-produced item
  • e.g. car or computer, to be personally modified to specific customer requirements
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23
Q

What is cost as a performance objective

A
  • Cost as a performance objective refers to the minimisation of expenses to ensure operations processes are conducted as cheaply as possible
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24
Q

How does the four V’s infuence costs

A
  • Low cost businesses, tend to have high volume and low variety, variation in demand and visibility
  • High cost businesses, tend to have low volumes and high variety, variation in demand and visibility
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25
Q

How does each seperate performance objective allow buisnesses to achieve cost performance objective

A
  • Achieving quality means business will reduce costs as it will not require a large budget to fix mistakes and resources will be used efficiently
  • Achieving speed will save the business time and therefore money
  • Being dependable also contributes to saving time and money through reduced errors in production (lean production)
  • Flexibility indirectly contributes to reducing costs by improving speed of responses
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26
Q

What does acheivement of a range of performance objectives ultimately lead to

A
  • Businesses achieving a competitive advantage
  • Role (Cost leadership and Product differentiation)
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27
Q

How does Apple relate to performance objectives

A
  • Apple seeks to differentiate itself through quality
  • 2013 Apple CEO Tim Cook “we’re not about selling the most we’re about selling the best”
  • Apple must respond to changes in market demand quickly to remain competitive
  • Apple must maintain its high degree of quality à 2017 iPhone X release was delayed due to issues with OLED display
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28
Q

What is New Product Development (NPD)

A
  • NPD is the term used to describe the complete process of bringing a new product or service to market
  • This contributes to a business’s ability to grow and attain a competitive advantage
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29
Q

What are the two approaches to NPD

A
  • Consumer approach
  • Technological approach
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30
Q

What is the consumer approach to NPD

A
  • Cosumer approach is whereby market research determines what consumers desire
  • which in turn determines what products are designed and developed
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31
Q

What is the technological approach to NPD

A
  • technolgical approach to NPD is whereby innovations in technology enable new appealing products to be made which use advanced technologies giving products greater functionality
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32
Q

What are the main steps in product design and development

A
  1. Market research/product concept
  2. Product design and prototype development
  3. Prototype testing and assesment
  4. Product refinement and production process refined
  5. Production and product launch
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33
Q

What are iImportant considerations when designing and developing a product

A
  • Quality of the product (must meet customer expectations)
  • Supply chain management (new products may increase the number of suppliers, the timing of supplies needed and/or the volume of supplies)
  • Capacity management (is more machinery and labour required?)
  • Cost factors (what will be the cost of inputs, time and energy used in production of this new product)
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34
Q

In designing and developing services what must a business consider

A
  • What the ‘explicit service’ will be, the tangible aspect of the service and,
  • What the ‘implicit service’ will be, the psychological, wellbeing factor (influence on customer choice)
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35
Q

How does NPD relate to Apple

A
  • Innovation is important in smart-phone market
  • As such Apple spends large amounts on R&D
  • 2014 spent US $6 billion to US $13 billion in 2018
  • Despite R&D, due to increasing competition in Chinese market Apple’s market share has declined in recent years
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36
Q

What is a supply chain

A
  • A supply chain is the sequence of activities and organisation involved in producing a good or service:
  • Inputs to transformation process to outputs
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37
Q

What is Supply Chain Management (SCM)

A
  • SCM is the efficient control of inputs as they move in a process from:
  • Supplier to manufacturer to wholesaler to retailer to consumer
  • In order to best meet the needs of customer’s
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38
Q

What are the three goals of SCM

A
  • Reduce inventory
  • Increase the speed of transactions
  • Increase revenue by satisfying customer demands more efficiently
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39
Q

What 3 levels are SCM decisions made on

A
  • Strategic
  • Tactical
  • Operational
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40
Q

What does sourcing refer to

A
  • ‘Sourcing’ is also called ‘procurement’ or ‘purchasing’ and refers to the purchasing of inputs for the transformation process
  • Sources or ‘Inputs’ are drawn from a range of suppliers
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41
Q

What are the factors influencing a business’s choice of suppliers

A
  • Consumer demand
  • Quality of inputs required
  • Flexibility and timeliness of supply
  • Cost of supplier
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42
Q

What are the 4 trends in sourcing or purchasing

A
  • Supplier rationalisation
  • Backwards vertical integration
  • Cost minimisation
  • Flexible or responsive supply chain processes
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43
Q

What does supplier rationalisation involve

A
  • Involves assessing number and diversity of suppliers
  • Business strategy behind this is to reduce the number of suppliers
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44
Q

What is a lean organisation

A
  • A ‘lean’ organisation is one that minimises costs and improve processes
  • i.e. They will not carry inventories (JIT approach) and aim to ‘make to order’ so they don’t incur unnecessary storage costs.
  • This requires a responsive supply chain
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45
Q

What does global sourcing refer to

A
  • Global sourcing refers to businesses purchasing supplies or services without being constrained by location.
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46
Q

What has prompted global sourcing

A

Globalisation

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47
Q

What is global sourcing in relation to SCM

A
  • In the supply chain management activity, global sourcing means buying or sourcing from wherever the suppliers are that best meet the sourcing requirements.
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48
Q

What are potential benefits of global sourcing

A
  • Lower cost
  • Better expertise
  • Access to new technology
  • Access to higher quality inputs
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49
Q

What are potential challenges of global sourcing

A
  • May need to relocate aspects of operations
  • Increased cost of logistics
  • Storage and distribution
  • Managing different regulatory conditions between nations
  • Increased complexity of overall operations
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50
Q

How has global sourcing been affected by COVID 19

A
  • Border closures
  • Reduced trade between nations
  • Reduced demand from other countries
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51
Q

What is logistics

A
  • Logistics is a term broadly referring to distribution but also includes:
  • Transportation (including modes of transport)
  • Use of storage, warehousing and distribution centres
  • Materials handling and packaging
52
Q

What are the three aspects of logistics

A
  • Distribution
  • Transportation
  • Storage, warehousing and distribution centres
  • Materials, handling and packaging
53
Q

What is distribution

A
  • Refers to ways of getting the goods to the customer
  • The different forms of physical distribution that a business may use (channel choice) include
  • Producer to wholesaler to retailer to consumer
54
Q

What is transportation in regards to logistics

A
  • Transportation is the aspect of logistics concerned with the physical movement of inventories
  • The type of product and cost of transport will determine the mode of transport selected
55
Q

What is storage

A
  • Storage involves finding a secure place to hold stock until it is required
  • Storage for inventory is necessary when there are numerous outlets through which stock is sold and when demand is variable and needs a responsive supply chain
  • Storage may be short or long-term
56
Q

What is warehousing

A
  • Warehousing is the use of a facility for the storage, protection and later, distribution of stock
57
Q

What are the costs associated with warehousing

A
  • Costs associated with warehousing are: the premises, insurance, security, moving stock, damage if not stored correctly
58
Q

What are distribution centres

A
  • Facilities that are strategically located to minimise time to supply stock to retail outlets and are often highly technologically advanced facilities
59
Q

What is an example of distribtution centres being used

A
  • Amazon utilises physical distribution centres through its fulfillment centres placed in strategic locations that utlilises robotics to get goods delivered as quickly as possible
  • Wadonga City Council developed freight distribution centre located off hume highway and close to major airports, ports and rail ways LOGIC
  • Wooloworths has built distribution centre within the centre
60
Q

Why is handling and packaging an important aspect of logistics

A
  • Important aspect of logistics as there are particular standards and methods of operating which need to be applied for certain goods
61
Q

What does e-commerce involve

A
  • E-commerce involves the buying and selling of goods and services via the internet
62
Q

What has e-commerce led to

A
  • Increased access to important business information
  • Increased interconnected amongsts businesses domestically and globally
63
Q

What is e-procurement

A
  • E-procurement is the use of on-line systems to manage supply, allowing suppliers direct access to the business’s level of supplies so that when stock falls to a pre- determined point, the supplier will supply without a formal request from the buyer. (B2B Business to Business)
64
Q

What are advantages of e-commerce

A
  • Greater availability of information
  • Speed
  • Time saving
  • Easier and cheaper access to global markets
  • Easier data management
  • Flexibility and ability to create broad networks
65
Q

How does SCM relate to Apple

A
  • Inputs for iPhone are sourced from a global web of suppliers, who deliver them to Apple production facilities such as Foxconn in China
  • Apple has 785 suppliers in 31 countries
  • Apple uses multiple suppliers for the same component to gain competitive advantage through encouraging competition between suppliers and hence lowering costs of components
  • Apple faced difficulties in supply chain in 2017 when iPhone X was delayed indefinitely due to issues with OLED display à manufacturing issues were worsened as Apple relied on one supplier for manufacturing of iPhone.
  • Finding different components for different iPhone models requires continuous planning, monitoring and control measures
  • Changes in demand in different models can lead to increases of inventory in certain models and shortages in others, iPhone X exceeded demand expectations whereas 8 and under performed
  • Apple has implemented inventory tracking technologies to reduce company’s number of warehouses and thus reduce costs
66
Q

What does outsourcing

A
  • Outsourcing involves the use of external providers to perform business activities. Also called ‘BUSINESS PROCESS OUTSOURCING’
67
Q

What are the different forms of business process outsourcing

A
  • Operations (e.g. manufacturing, design, distribution) e.g. Apple and Foxconn
  • Human resources (e.g. employee renumeration, training, counselling)
  • Administrative work (e.g. data entry, back office work)
  • Information Technology (e.g. network outsourcing via remotely hosted software applications)
  • Finance and accounting (preparation of financial accounts, taxation etc)
  • Knowledge process outsourcing (e.g. outsourcing marketing, public relations)
  • Legal process outsourcing (e.g. Legal advice, drafting contracts, patents and trademarks etc)
68
Q

What’s captive/in-house outsourcing

A

This is when a business uses a wholly owned subsidiary to carry out a business process/function

69
Q

What is non-captive outsourcing

A
  • This is when a company uses a third party to outsource to.
  • Can be on-shore or off-shore.
70
Q

What are the main advantages of out-sourcing

A
  • Simplification by reducing the number of activities performed within the business.
  • Capacity to focus on core business/competencies and therefore improve performance
  • Cost savings and efficiencies
  • Increased process capabilities due to access to improved technology
  • Human resource function of the business does not need to spend time and money meeting employees
71
Q

How does outsourcing result in cost savings and efficiencies

A
  • Access to cheaper labour
  • Regulatory differences
  • Skilled labour elsewhere (e.g. educated workers in India and The Philippines – Telstra has call centres in The Philippines as do the four major Australian banks)
72
Q

What are disadvantages of out-sourcing

A
  • Business is now dependent on other businesses to supply components or raw materials
  • Loss of control of standards and information security, e.g. Too much lead in paint used in toys manufactured for Mattel
  • Payback periods: can take 2 or 3 years to make up the initial cost of organising outsourcing
  • Loss of control of standards and information security
  • Loss of jobs
  • Loss of corporate knowledge by reliance on outsourcing provider
73
Q

How does outsourcing relate to Apple

A
  • Outsourcing for Apple has resulted in lower costs through benefiting from cheaper labour and other companies such as Foxconn’s pre-established economies of scale
  • However, outsourcing has led to loss of quality control and they have become dependent on supplier, iPhone X delays due to issues with OLED display at manufacturing plant
  • Due to outsourcing globally has also been affected by US-China trade war along with border restriction due to COVID 19
74
Q

Why is technology an important operations strategy

A
  • Use of technology can lead to competitive advantage
75
Q

What is leading edge technology

A
  • ‘Leading edge’ technology is technology that is the most advanced or innovative at any point in time
76
Q

How can leading edge technology help businesses

A
  • Use of leading-edge technology can help businesses to create products more quickly and to a higher standard, with less waste.
  • Lead to cost-leadership
77
Q

What is established technology

A
  • Established technology is the technology that has been developed and widely used and accepted without question
78
Q

What are examples of established tecnology

A
  • Robotics for complex manufacturing (although there are new ‘leading edge’ robots too)
  • Computer-aided design (CAD) and computer-aided manufacturing (CAM)
  • Bar coding and point-of-sale data for inventory management
79
Q

How does technology relate to Apple

A
  • Foxconn factory uses leading edge robotics
  • 2016 factory in China reduced workers of 110,000 to 50,000 through use of robotics
  • Hence reduced costs in long-term
  • However, robotics lacks flexibility of human labour that is needed for smart-phone market
  • Also, technology such as robotics involves a large capital outlay
80
Q

What does Inventory refer to

A
  • Inventory refers to the total stock of goods and materials held by a business at any point in time
81
Q

What are advantages of holding stock

A
  • Unexpected increases in consumer demand can be met when there is stock available, (influence of variation in demand)
  • It reduces lead times between order and delivery if there are some stocks of finished goods (improves speed)
  • Some businesses maintain high levels of inventory in raw materials (inputs) to take advantage of discounts that apply to bulk purchases of inputs, (cost leadership)
  • Stocks are valued as an asset and are of value to the business, reflecting well on the balance sheet, (interdependence with finance)
82
Q

What are the disadvantages of holding stock

A
  • Many businesses view holding stock as a waste, Business trend is to hold as little stock as possible and to adopt a ‘make-to-order’ approach
  • The cost of holding stock can be as high as 30% of the value of the stock and include rent on warehouse, spoilage, insurance, theft and handling expenses (labour, transport etc)
  • The cost of obsolescence, stock is no longer able to be sold, e.g. perishable items or demand for product has decreased
  • High inventory levels place more layers of management (need inventory managers) between the customer and the product à higher costs reduced profits
83
Q

What are the two inventory valuation methods

84
Q

What is Just-in-Time (JIT)

A
  • JIT is an inventory management approach (not an inventory valuation method)
  • It ensures that the exact amount of material inputs will arrive only as they are needed in the operation process.
85
Q

What does JIT aim to do

A
  • Aims at overcoming the problem of end-of-period stock valuation, eliminating waste and making efficient use of time (aspect of lean production method)
86
Q

What does JIT require

A
  • Very flexible operations function with flexible processing
  • Very high ability to respond quickly to changes in demand as well as reliable supplier deliveries
87
Q

What are benefits of JIT

A
  • Benefits is that business does not need to operate storage facilities or manage inventories due to the fact no stock or inputs will need to be stored
88
Q

What is disadvantage of JIT

A
  • Disadvantage is that if supplies are delayed the whole operation process may be delayed
89
Q

What is Quality Management

A
  • Quality Management refers to those processes that a business undertakes to ensure consistency, reliability, safety and fitness for purpose of the good or service
90
Q

What does Quality Management include

A
  • Quality control
  • Quality assurance
  • Quality improvement
91
Q

What is Quality Control

A
  • QC is a review process whereby everything that is involved in production process is reviewed and then adapted
92
Q

What are the three steps in QC

A
  • First step, set defined quality standards/parameters
  • Second step, design a range of tests to assess the quality of processes against the standards
  • Third step, carry out inspections and intervene where there are any shortfalls (i.e. take corrective action). à This might include an attribute inspection of goods or in a service business, an inspection of employee performance e.g. phone call recording, mystery shoppers
93
Q

What is Quality Assurance

A
  • QA involves the monitoring and evaluation of various processes of a project, service or facility to ensure that minimum levels of quality are being achieved in the production process
94
Q

What is main difference between QC and QA

A
  • QA is similar to QC but QA is process oriented while QC is output oriented
95
Q

How are set quality standards established internationally

A
  • International quality assurance standards have been exmaple such as the ISO 9000 certification
  • Purpose is to ensure businesses and consumers know that a component overseas is same quality as component manufactured internationally
96
Q

What is Quality Improvement/continuous improvement

A
  • Continuous improvement is the belief that over time, processes will be made more efficient and effective, may be in the form of a monumental breakthrough due to innovation or may be gradual over time.
97
Q

What is the aim of QI

A
  • QI is a process which aims to reduce the rate at which mistakes occur in the production process.
  • Leads to less defects and reduces waste, hence increases profits
98
Q

How is QI achieved

A
  • Through analysing what has happened in the operations processes and what actions will be taken to improve performance
  • The basis of successful improvements in quality is the inclusion of staff into improvement processes
99
Q

How does Quality Management relate to Apple

A
  • 2013 5 million iPhones had to be returned to Foxconn factory due to defects at a cost of $1.6 billion à attributed to lack of training in Foxconn factory
100
Q

What are the types of change that a business may face

A
  • External environment (economic conditions, legislative changes, social changes, technological breakthroughs)
  • Internal environment (new technology introduced, staff changes)
101
Q

What is the idea of overcoming resistance to change

A
  • Businesses must respond to changes in internal and external environment in order to maintain competitive advantage.
  • Many businesses struggle to do this due factors that make change difficult including financial and psychological
102
Q

What are two sources of resistance to change

A
  • Financial
  • Psychological/emotional
103
Q

What are main types of financial costs associated with resistance to change

A
  • Cost of purchasing equipment
  • Redundancy payouts
  • Retraining
104
Q

How do redundancy payouts relate to resistance to change

A
  • Introducing changes such as improved efficiency or new technology often creates surplus of workers
  • meaning workers are made redundant
  • Businesses may choose to defer changes to avoid large capital outlay associated with redundancy payouts
105
Q

How does retraining relate to resistance to change

A
  • Changes such as new systems and procedures along with flatter management structures create a need for staff retraining
  • Cost of retraining may be high, workers may be reluctant to retrain
106
Q

How does Reorganising plant layout relate to resistance to change

A
  • Many internal and external influences create a need for reorganising plant layout
  • Resistance is driven by cost, inconvenience, unavailability of appropriate space and the loss in production time
107
Q

How does inertia relate to resistance to change

A
  • Inertia is a term that describes a psychological resistance to change, caused by the fear of uncertainty or of the unknown
  • Particularly affects managers and employees if they fear their job prospects or career opportunities may be threatened or if they are intimidated by new technology
108
Q

What are change management steps for operations managers

A
  • Identify the source(s) of change and assess whether there is a need to accommodate change through adjustments to business processes
  • Setting SMART goals that aim to reduce resistance to change
  • Creating a culture of change, using ‘change agents’ (internal staff or external professionals), if staff are included in the process of change and goal setting, they will be more supportive.
  • Apply change models
109
Q

What are two main strategies to reduce resistance to change

A
  • Creating a culture of change, involves use of change agents and effective teams
  • Positive leadership, Managers who acts as a leader and has high expectations of employee’s abilities to initiate and implement and change, leaders have open mind
110
Q

What are the Global Factors

A
  • Global sourcing
  • Economies of scale
  • Research and development
  • Scanning and learning
111
Q

What is global sourcing as a operations strategy

A
  • Global sourcing as an operations strategy involves not only sourcing supplies globally but also any business operations that gives the business cost advantages
112
Q

What’s the main form of global sourcing

A

Global web strategy

113
Q

What does global web refer to

A
  • global web refers to location of different parts of production process in different geographical areas
114
Q

What is purpose of global web strategy

A
  • Reason for use of global web is to reduce production costs
115
Q

What are the main benefits of global sourcing

A
  • Cost advantages
  • Access to new technologies
  • Advantages of expertise and labour specialisation
  • Access to other resources and the ability to operate over extended hours
116
Q

What are the main challenges of global sourcing

A
  • Possible increased cost of logistics
  • Managing different regulatory conditions between nations
  • Contractual concerns
  • Loss of control of quality
117
Q

What are Economies of Sale (EOS)

A
  • EOS are cost advantages that can be gained by increasing the size, or scale, of production
  • As scale of production increases cost per unit falls as large fixed costs of production are spread over more output
118
Q

What does buying in bulk (purchasing economies) and better technologies lead to

A
  • Reduced costs
119
Q

How does EOS become a global factor

A
  • Economies of scale, becomes a global factor when businesses sell to global markets which necessitates making higher product volumes
120
Q

What other ways can EOS arise apart from operations

A
  • Marketing through global branding
  • HR through global training
121
Q

What is scanning and learning

A
  • Scanning the global environment and learning from the best practice of businesses around the world
122
Q

How does information gained from scanning and learnng assist operations managers

A
  • Information gained from scanning and learning will assist managers in responding to challenges in the business environment, tactical and strategic planning
123
Q

What are the three ways of scanning the business environment

A
  • Ad-hoc scanning
  • Scheduled scanning
  • Continuous scanning
124
Q

How does R&D help businesses

A
  • Research and development help businesses develop leading edge technologies and to create innovative products and solutions
  • R&D can lead to businesses gaining a competitive advantage
125
Q

How do businesses that compete in global markets have additional advantages with R&D

A
  • The ability to establish R&D facilities in countries which have a reputation for outstanding educational facilities or SME’s
  • The cost of R&D is spread over a larger output.
126
Q

How does Global Factors relate to Apple

A
  • Apple achieves cost-savings from sourcing components from over 31 countries
  • Majority are from China to reduce cost of transporting
  • More affected by trade wars such as US-China and COVID 19
  • Achieve economies of scale through use of skilled labour and greater production at facilities such as Foxconn
  • Apple attracts employees from around the globe and learns from expertise
  • Apple spends large amounts of R&D to compete on global market

Yr12 Business Studies (17 decks)

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