operations process

Question 1

Inputs

Answer 1

are the components used in the transformation process (eg. labour, energy, materials, machinery and technology)

Question 2

Transformed resources

Answer 2

Inputs that are changed during the transformation process (eg. paint splashed across canvas)

Question 3

MIC

Answer 3

material, information, customers

Question 4

Materials

Answer 4

are raw materials or intermediate goods

Raw materials are unprocessed (eg. wood)

Intermediate goods are semi-finished and will be manufactured further (eg. flour used to make bread)

Question 5

Information

Answer 5

defines how each input is used and where it’s sourced from. It can be from either internal or external sources.

example: a clothing manufacturer could look through a list of suppliers (information) to find the best fabric

a barber needs to know customer preferences (information) before cutting their hair

Internal sources: financial statements, employee knowledge, market research, sales reports

External sources: Australian Bureau of Statistics, scientific studies

Question 6

Customers

Answer 6

Customer choice define a business’ goods and services through customer orientation

Customers are transformed through use of goods or service delivered.

Example: an exercise machine can help lose weight (goods) and a haircut can change the look of hair (services)

Question 7

Transforming resources

Answer 7

Inputs that perform the transformation process. They are either human resources or facilities.

Question 8

Human resources

Answer 8

Employees that design, create and deliver products. They are:

• The most valuable asset of the business
• Responsible for combining other resources to create goods and services
• Should be motivated and skilled -> makes transformation efficient and effective (fewer accidents and absences, less waste, faster completion times, higher volume production)

Question 9

Facilities

Answer 9

Plants and machinery used to carry out the transformation process.

A plant can be a factory or an office
A machinery can be technology (eg. robots) or equipment (eg. forklift)

When it comes to facilities, businesses need to decide on:

• Location
• Size
• Layout

When it comes to machinery, businesses need to decide on:

• Type
• Amount
• Extent to which it will be used

Question 10

4 V’s

Answer 10

The 4 V’s are factors that shape operations processes. These are driven by customer demand in the market.

They are volume, variety, variation in demand and visibility

A business with high volume, but low variety, variation in demand and visibility will keep production costs low.

A business with low volume, but high variety, variation in demand and visibility will keep production costs high.

Question 11

Volume

Answer 11

refers to the amount of output that will be produced. The main driver of volume is consumer demand.

However, it can also be affected by inputs such as supply of raw materials and labour, size of manufacturing plants and amount of technology or information available

Example:
A 5 star restaurant uses high quality inputs and smaller customer base
A fast food company uses cheaper inputs and large customer base

Question 12

Effects on production: volume flexibility

Answer 12

Operations need to have volume flexibility, i.e. how quickly the production process can adapt to changes in demand

• Slow response to falling demand -> overproduction -> high inventory costs and wastage
• Slow response to rising demand -> underproduction -> lost sales and profits
• If this is balanced right, businesses can shorten lead times (time taken from customer order to product delivery)

Question 13

Variety

Answer 13

refers to the range of products that a business offers.

Example: a small clothing boutique will have high variety and a clothing factory will have low variety

Question 14

Effects on production: variety

Answer 14

The more variety, the more that operations has to adapt. With larger variety comes more inputs (wider range of materials) and larger range of transformation processes (more facilities)

If a clothing company wants to sell shoes, they need to:
• Source new materials e.g. leather and glue
• Expand their plant to allow for more product volume
• Bring in machinery designed for shoe making

Question 15

Variation in demand

Answer 15

refers to how much market demand will change and how operations can respond to these changes

Example:

High variation: an air conditioning manufacturing will have high demand in summer

Low variation: a café will have consistent demand throughout the year

Question 16

Effects on production: variation in demand

Answer 16

To manage variation, businesses need to be able to anticipate changes in demand and be flexible

Rising demand requires: 
Supplier (more inputs)
Labour (more employees)
Energy (more energy)
Machinery (efficient machinery)

Falling demand requires:
Reduced staff hours
Slower production

It can be hard to respond if:
Suppliers -> cannot supply on time
Labour -> inflexible, unskilled or unavailable
Energy -> not enough available
Machinery -> cannot adjust to increase in capacity

Example:
there is high demand for toys during Christmas, so high production is required during Christmas

there is low demand for sweaters during summer, so low production is required during summer

Question 17

Visibility

Answer 17

refers to the level of customer contact businesses have and the extent to which this influences their operations process.

Example:
A hairdresser will have high visibility because customers decide on output

Production of office supplies will have low visibility because of not much input; standardised

Question 18

Effects on production: visibility

Answer 18

Marketing: Consumer needs and wants (customer feedback) shape the products that businesses create

Operations: The business decides how much customer input there should be.

Therefore, operations and marketing managers should work together to shape which goods and services the business offers

Customers affect all 4 V’s of production!

Question 19

4 V’s: Effects on production costs

Answer 19

High volume lowers cost because it achieves economies of scale (as production increases, cost per unit of production falls)

Low variety reduces cost because business requires smaller range of inputs and transformation processes

Low variation in demand reduces cost because of reduced need for flexible production

Low visibility reduces cost because less time and resources is spent on gathering customer input. Also, rent costs can be reduced because the business doesn’t need a central location easily accessible by customers.

Question 20

Sequencing

Answer 20

The order of activities in the operations process

For example: If Valentine’s day was coming up, the chocolate manufacturer will first order materials, secondly prepare and package, last deliver and selling the chocolates

Question 21

Scheduling

Answer 21

refers to the time taken to complete activities in the operations process.

For example: the chocolate manufacturer may have to wait for two month for their materials to arrive, one month for preparing and packaging and one week for delivery to retailers

Question 22

Sequencing and scheduling

Answer 22

refers to planning tools for coordinating the operations process and boosting efficiency

Aims of sequencing and scheduling include:

Provide a sense of direction and organisation to make sure everything runs smoothly

Allow adjustments to be made when there are hold-ups, so that completion time is not affected

Question 23

Gantt chart

Answer 23

Gantt charts outline each step in the operations process, the order in which they will be done, and the time need for each step

Best used when the operations process includes a number of steps that need to be completed to produce an output, i.e. simple tasks and complicated projects

Advantages:
Simple to use
Provides operations managers with a quick overview of their schedule
Encourages managers to plan ahead
Makes it easier to monitor actual progress against plans

Disadvantages:
Not suitable for complex projects

Question 24

Critical path analysis

Answer 24

Critical Path Analysis (CPA) outlines the activities that need to be done, how long each activity takes, and the best order in which to complete them

Critical Path: minimum length of time needed to complete all activities in a project

Tip: in exams, ALWAYS choose the longest path

Advantages - CPA shows:
How each activity is interrelated
Which activities can be done at the same time
Which activities are the most important in terms of overall time (activities within CPA can be prioritised so that the most important activities are completed first)

Disadvantages:
Not suitable for complex projects
If time estimates are incorrect, there will be major delays

Question 25

Technology

Answer 25

Business technology uses machinery and systems to:

Perform the transformation process more efficiently and effectively
Increase labour productivitiy

Technology can be categorised into manufacturing (robotics, CAD/CAM) and service-based/office (telephones, printers, internet)

Manufacturing technologies are used in manufacturing. There are three main types:
Robotics: specialised machines programmed to carry out complex processes. Robots are not prone to human errors, leading to higher quality, better efficiency and less waste

CAD: stands for Computer Aided Design. Computerised design tool that uses inputs to generate product ideas

CAM: standards for Computer Aided Manufacturing. Software that controls the production process

Service based/office technologies can be found in any office such as printers and computer software. These allow:

Allow employees to complete more tasks in less time
Allow some people to telecommute (work from home)

Advantages:
Provides access to higher quality inputs
Makes transformation more efficient, which reduces costs
Reduces waste -> full utilisation of materials

Disadvantages:
Need to be leased if expensive
Requires retraining (learning to use new technologies) and redundancy (when employees are replaced by technology) costs: brings financial costs, time consuming, reduces employee morale

Question 26

Task design

Answer 26

Involves classifying job activities in ways that make it easier for employees to successfully complete their tasks

Breaks a larger task down into a series of jobs in order to match the right employee to a specific job

Requires conducting a skills audit: to assess if there are any skills that require recruiting or training employees. Has interdependence with HR.

Question 27

Workplace layout

Answer 27

Designing a workplace to boost productivity and ensure processes run smoothly

Options that businesses can choose from are process, product, fixed position and office. It depends on the type of product, machinery required and volume to be produced

Process layout: Machines and equipment are arranged according to to the function (process) they perform. It is used when a product is highly varied and being produced in low volume. Eg. hospital.

Fixed position: employees and equipment are brought to the task or products. Used when the product cannot be moved around due to the size, shape, weight etc. E.g. airport

Office layout: employees are provided with equipment at different workstations. Allows employees to work efficiently.

Product layout: machines and equipment according to the sequence of operations / the order in which a product is made. Used when a product is standardised and being produced in very high volumes. E.g. car manufacturer.

Question 28

Monitoring, control and improvement

Answer 28

Monitoring, control and improvement are used for achieving the strategic goals of operations. This includes improving:

Product quality 
Lead time
Process flow
Time taken to complete tasks
Amount of waste created 

Outcome and strategic goals

Reduced production costs leads to cost leadership
Improved products leads to product differentiation

Question 29

Monitoring

Answer 29

The process of collecting data to measure performance

Operations managers should measure how the business is going and see if they are achieving their goals

This involves monitoring all parts (KPIs) of the operations process from inputs, transformation and outputs

Key performance indicators (KPIs): are used to measure the efficiency and effectiveness of the business’s performance. These include warranty claims, lead times, production volume and number of defects

Question 30

Control

Answer 30

Comparing KPIs against plans or targets, and identifying areas that need corrective action

Target: what the business aimed to achieve
Actual: what the business actually achieved
If there is a gap between target and actual, operations managers need to make changes to improve their processes

Operations managers should:
Set challenging but achievable performance targets that focus on optimising productivity
Control the transformation process and supervise their employees

This allows managers to provide constructive performance reviews and indicate specific issues to employees. Shows them where and how they can improve.

Question 31

Improvement

Answer 31

Making changes to the transformation process to reduce inefficiencies (i.e. waste, ineffective processes and bottlenecks)

Operations managers need to focus on Kaizen (seeking continuous improvement) and improve on:

quality: establish quality standards and adopt quality management processes
process flows: improve transitions between steps
costs: identify unnecessary fixed and variable costs
speed: eliminate bottlenecks and reduce lead + wait times
efficiency: reduce waste and create more output from every input

Question 32

Outputs

Answer 32

The output is the end result of the transformation process, i.e. the finished product (goods or services).

Output has to be responsive to consumer demand

The desired output is what shapes the rest of the production process. There is no point producing something that no one will buy!

Question 33

Customer service

Answer 33

meeting and exceeding customer expectations in all areas of business operations. Businesses need to use the input of customer to meet customers’ needs and wants

Purpose of customer service is to:

Ensure customers feel valued
Creates long-term relationships
Helps the business to maintain a good reputation in situations where the customer is dissatisfied (e.g. product is defective, delivery is too slow or poor quality)

Aims of customer service is to:

Respond to complaints with a solution in a timely and courteous manner
Review and reshapes their processes and output

The advantages of customer services are:

Higher growth
Increased market share
Profits

Question 34

Warranties

Answer 34

A promise made by a business to fix any defects in the goods or services they offer. Businesses have a legal obligation to protect consumers with warranties

Purpose of warranties include:
A tool for monitoring effectiveness of operations processes

Monitoring the reasons behind each warranty claim can indicate issues in the operations process

Aims of warranties include:
Warranties cost time, money and resources, so operations should implement effective quality management processes and aim to reduce the number of warranty claims to zero