Operations Strategy Flashcards
what are the main strategic operations decisions
TO MEL
- tech - AI and IT
- outsourcing
- methods of production (e.g. lean, capital intensive)
- expanding or downsizing
- location - offshoring, reshoring and relocating
key eval point when considering an expansion of capacity
IS THERE GOING TO BE ENOUGH DEMAND IN THE LONG TERM?
is the rise in demand temporary or likely to be sustained? If the latter, then business will not recover the huge capital costs and is likely to make a loss
pros of CAD
- lower development costs - fewer physical prototypes
- faster, more efficient design - can reduce time to market, first mover competitive edge can increase market share
- software suggests optimal design/measures- higher product quality -
cons of CAD
- costs of software
- requires highly skilled employees or huge training costs
pros of CAM
- more precise and consistent quality than human labour- customersatisfaction for meeting expectations thus increases repeat custom and loyalty+trust
- more reliable than labour - no motivation issues, absenteeism, strikes
- higher productivity - more work per unit time
- with CAD, more flexible product design allows for mass customisation
cons of CAM
- costs
- hardware breakdown will halt production
- program errors still possible
1 - tech is rapidly becoming cheaper with advancements
3 - QA needed, cannot take quality for granted just because it is automated
CAD VS CAM
CAD - computer software to design 2D/3D models of physical objects
CAM - using computer software to automate equipment in the manufacturing process
operational flexibility
ability to vary both the level of production and the type of goods being produced in response to changing customer demand and needs, including supply chain flexibility like delivery times
ways to improve operational flexibility
- Increase capacity
- Outsource some production (faster compared to capacity changes)
- Just in Case
- multiskilled labour force
- flexible machinery allowing mass customisation
- Process innovation - e.g. internet tracking of exact location of parcels being delivered to improve the speed of delivery
enterprise resource planning
use of a single computer application to plan the purchase and use of resources more efficiently, coordinating all business functions to complete customer orders
ERP and marketing
- NPD prototypes and testing
- producing products for which sales have increased rapidly
- logistics to get products to required distribution channels
finance and ERP
- budgets
- payroll for operations staff
- funding new equipment
- invoicing customers
- sales forecasts to inform production
HR and ERP
- workforce planning depending on sales forecasts
operations and ERP
- record orders
- automatically purchase inputs when needed
- manage inventories - e.g. automatic re-order
pros of ERP
- produce according to demand - sustainability
- support JIT- order inputs exactly when order is placed - cost benefits of JIT
- accurate costing and pricing as direct costs allocated accurately - pricing; cost management (e.g. find cheaper substitutes)
- improved delivery times/predictions - customer service
- quicker response to changing demand - easily re-allocate resources like labourso competitive edge that increases sales and market share
- improve coordination between deparments - fewer mistakes and waste
cons of ERP
- cost of program and training
- may cause resentment as it forces employees to change the way they work- resistance to change
- time to implement ERP system fully to link to supply chains of customers and suppliers - risk of software going redundant by then
1- costs of software falling with tech advancements
lean production
minimising waste in production while maintaining high quality
main sources of waste
- Waiting times (for inputs, processes, etc)
- Excessive inventory and overproduction
- - Defects
- Overprocessing - overcomplicating the design of goods
- Unnecessary movement of employees
- Underutilised talent - Excessive transportation
approaches to lean production
Kathy Saw Queen Chris Take Wallet
Kaizen
Simultaneous engineering
Quality circles
Cell production
just in (T)ime
Waste management
Kaizen
culture of continuous improvement where all employees are encouraged to make gradual and incremental process improvements that will result in big efficiency gains
inclusiveness is key as workers in day-to-day production likely to better understand areas of improvement than managers without hands-on experience
conditions for Kaizen
- inclusive management culture that involves employees
- teamworking to generate better ideas
- must all be committed to the idea and motivated well
- Theory Y - empower workers to implement decisions, which enriches jobs (Herzberg) and motivates them to continue innovating
MUST link to job enrichment and Herzberg in analysis
pros of kaizen
- job enrichment (Herzberg) - everyone’s work is important, they all have responsibility for generating improvements
- encourages innovation - better efficiency gains
limitations of Kaizen
- some efficiency improvements cannot be incremental, must be radical like AI production system
- will be resisted by Theory X/autocratic managers who may not sufficiently empower employees
- costs of training including lost output in the ST
- diminishing returns - most significant improvements tend to occur early on, less so afterwards
quality circles
small worker groups discuss quality issues and find solutions to them
pros of quality circles
- job enrichment (Herzberg) - more committed if they are more involved in work
- more teamwork - more innovative solutions to improve quality and efficiency to gain competitive adv
- workers are directly involved in production and have more hand on experience and specialist skills than senior managers- more effective solutions to save costs
cons of quality circles
- can waste time if not sure of purpose or how to hold meeting properly - lower productivity
- may not be given authority to implement changes and if they are dismissed this will demotivate
quality circles eval
- training necessary to efficiently utilise circle time
- management culture must be inclusive, open to employee ideas, and empower with enough authority to implement - this will ensure success in LT as employees are encouraged to continue improving
simultaneous engineering
stages of product development from design to engineering are done simultaneously, to reduce the time to market of the good
what is the significance of ‘time to market’?
- taking too long may mean rivals launch first and dominate sales for that product
- taking too long increases risk of obsolescence of product due to changes in demand/tech
- sell products when demand is high, capitalising on profitable opportunities
will increase risk of never recovering R&D costs + making loss, and of being less competitive and losing market share
must reduce time to market as products become more complex and take longer to design
cell production
split production into self-contained units that are each responsible for a complete unit of work
performance is measured againt targets for output, quality and lead times
pros of cell production
- Closeness of cell members will improve communication - better coordination and less wasted time
- everything needed for production is within the cell so less time wasted moving around - higher productivity and lower unit costs
- Job rotation within the cell allows for multi-skilling, making operations more flexible
- Job rotation, increased teamwork and a sense of ownership of the unit of work improves motivation - commitment to meeting performance targets
pros of JIT
- lower warehouse holding costs - increased profits to retain and reinvest in xyz
- better cash flow - reduced opportunity cost as you have the cash to be flexible and invest in profitable opportunities like stocking a popular good
- less risk of obsolescence, damage and waste - may have to discard/sell at lower price
- **more emphasis on ‘zero defects’ **as there is no excess stock to rely on in case of mistakes- better quality
cons of JIT
- excessive reliance on suppliers to meet deadlines - if delayed will halt production, lowering productivity and increasing unit costs
- risk of running out of inventory - being unable to meet demand leads to satisfaction/reputation issues - lower sales
- lower purchasing EOS - less bulk-buying discount - higher unit costs
- little room for error - no ‘back-up’ inventory - delays?
JIT eval
- excellent supplier relationships
- flexible machinery and labour,supported by ERP system to switch to producing different items at short notice –> BUT COST FOR SMALL BIZ?
- how predictable future demand is
- motivation and commitment must be high to ensure quality is the priority
- not appropriate for all businesses - tertiary businesses like hotels and restaurants need buffer stock to ensure good customer service
where does TQM fit in with lean production?
it is a culture that supports and must be integrated with each of the main systems
e.g. zero defects for JIT, Kaizen and cell production
waste management
reducing the waste of physical resources from inventory and production
- JIT to reduce damage and waste of stocks
- TQM/zero-defects
- using recycled products
summarise the benefits of using lean methods
- reduced time to market
- WORKER INVOLVEMENT SO MORE EFFECTIVE SOLUTIONS
- increased efficiency and lower unit costs, so higher profitability/lower prices
- improved sustainability - less waste
-** better quality** - higher employee motivation through job enrichment
- better flexibility and response to changing demand
limitations of lean production methods
CRIC
- may not be able to afford capital costs of new tech and training so must focus on improving existing systems
- culture - need to be motivated have good relationship or will not trust and show resistance to change
- may lead to redundancies to reduce costs –> reputation? motivation?
- less lean approach better for tertiary businesses that require good customer service (higher inventories and more choice)
- may not be needed for job production firms - stay competitive with niche products and less price sensitivity
CRIC - COST, REDUNDANCIES, INDUSTRY (JOB, TERTIARY), CULTURE
CPA
planning technique that identifies all tasks in a project, puts them in the correct sequence and highlights the critical path of activities
critical path
sequences of activities that must be completed on time for the whole project to be completed by the deadline. is made of activities without any float time
LFT
activity cannot finish later than this time without delaying another activity
total float
amount of time an activity can be delayed without delaying the whole project
TF for activity X = LFT(X) - duration(X) - EST(X)
free float
amount of time an activity can be delayed without delaying the start of the FOLLOWING activity
FF for activity X = EST (NEXT activity by arrow) - duration(X) - EST(X)
pros of CPA
- can support NPD/activity with simultaneous engineering to reduce duration with SE opportunities - time to market/time to complete can give competitive advantage
- (if there will be production disruption) can determine non-production time and prepare by building up inventories, allowing sales to proceed and avoid unmet sales
IN GENERAL:
- supports JIT - ordering resources only when needed using EST, which improves cash flow and hence reduces strain on liquidity as cash available for other purposes BUT is only estimate so many be wrong
- having target could increase employee motivation - more productive so more likely to finish in time, leading to customer satisfaction for meeting deadline
- knowing critical path helps manager understand how to deal with delays on critical path by speeding up a later critical activity with resources from a non-critical one, keeping project on track
- knowing LFT helps manager track progress and intervene if delays occur
cons of CPA
- risk of creating focus on speed due to LFT deadline so shortcut taken - lower quality, harm reputation
- durations are only estimates - may take longer, which will (1) increase costs and (2) damage relationship with customers
- cost of hiring specialist project managers to conduct
CPA eval
- no matter how well CPA done, is only a planning tool and depends on how skilled mgmt is at allocation + reallocating resources
- other factors that influence success no matter how well planning is done - external factors, e.g. supplier delays
- employees need to be motivated and committed to meeting deadlines+ have culture of zero defects to avoid shortcuts
- will be more committed if deadlines discussed first so that they don’t feel burdened with unrealistic targets
- less accurate duration estimates if no similar project done before
- time and cost of planning using computer justified by efficiency gains
importance of AI applications
efficiency, customer service, working experience
- improve customer service by using customer service bots that work 24/7
- improve productivity and efficiency by handling monotonous work and freeing up time for employees to perform higher-level creative work
- improve working experience for employees by making the collection and analysis of data easier - greater job satisfaction
importance of operational flexibility
- more adaptable to consumer needs - if you can meet quicker than rivals you gain a competitive edge (AN) which can increase sales and market share before them (DAN)
- increase efficiency as resources are re-allocated quickly to avoid waste - minimises your unit costs and hence (price/profit)
importance of process innovation
- develop more efficient process that minimise time and resources used - reducing unit costs, increasing profit margin/lower prices
- develop higher quality products - improve reputation and customer satisfaction, increase customer loyalty and reduces PED
- becoming more flexible (possibly through mass customisation) - meet changing needs more quickly so gain a competitve edge that increases sales and market share
role of employees in lean production and flexibility
- flexible employment contracts
- multi-skilling and training
- willingness to participate in groups to innovate ways to reduce waste e.g. Kaizen and quality circles
how can capacity utilisation be improved through flexibility and lean production?
- producing a range of goods to market to diff consumer groups
- adapting existing designs with variations to suit niche market
