Processes

Question 1

Materials

Answer 1

- Refer to the basic elements in the production process.

• Raw materials - Essential substances in their unprocessed state and usually come from mines, forests, oceans or recycled waste.

1. Availability of high quality material can assist in improving product quality → quality objective

HOWEVER

1. High quality materials may result in higher costs → impacting on the ability of the business to achieve cost leadership.

• Intermediate goods – Finished product by one business which is used as an input into another business (Cloth made from cotton)

1. Quality materials may lead to less wastage in the transformation process → assists in achieving cost objective

HOWEVER,

1. Materials could be difficult to source → Increases lead times → Adversely impact speed and efficiency objectives.

Question 2

Information

Answer 2

- Refers to the knowledge gained from research, investigation and instruction, which results in an increase in understanding.

• Internal information such as sales reports.
• External information such as market reports, media reports.
• Good - Information on how to produce a good efficiently.
• Service - Information is provided by consumers as an input.

Internal information

1. Creates improvements in the operations process

HOWEVER

1. A lack of information could result in poor decision making - Decrease productivity - SPEED

External information

1. Accurate information assists in producing the correct volume and variety of products in the most cost-efficient way​

HOWEVER

1. Incorrect information could result in unnessassary expenses - negatively impacting cost leadership - COST

Question 3

Customers

Answer 3

- Individuals who purchase goods/services from a business to satisfy their needs and wants

Customers choices shape inputs.

1. Assists with meeting customers wants and needs - Customer satisfaction - Increased sales

HOWEVER

1. Failure to respond to customer feedback will result in low levels of customer satisfaction, Negative brand reputation, Negative WOM

Customer preferences shape marketing decisions.

1. Customer loyalty - Repeat sales – Due to meeting their unique needs

HOWEVER

1. If the operations managment is not willing to adhere to customer expectations, will result in decreased sales - negative reputation.

Question 4

Tranformed resources… CASE STUDY

Materials

information

Customers

Answer 4

Materials

• An iPhone is a complex piece of machinery. Each phone contains a number of metals, including titanium, iron and gold.
• It takes many different materials to create an iPhone.
• However, some of the main materials used in an iPhone are:

1. Iron - “Extracting iron from its ore can have huge impacts on our society, we can use iron to make many bigger and better things for example an iPhone.” - Apple
2. goldcopper - 74% of gold is mined from Nevada alone. Gold is used in consumer electronics because it is highly reluctant to corrosion and an excellent conductor of electricity

Information

• Apple Music and iTunes – service
• Info gathered on each consumer Through Apple ID – Purchasing behaviour, preferences, tastes.
• Info used to suggest songs, artists, albums, playlists
• Enhances service experience – customisation

Customers

• In response to feedback from earlier models, developed in-cell display for iPhone 5, which eliminated glass layer between touchpad and LCD
• Allows thinner phone/longer battery life

Question 5

Transforming Resources

Answer 5

- Transforming resources are those inputs that carry out the transformation process

• Enable the change and value adding
  to occur.

Question 6

Transforming resources - Human Resources

Answer 6

- Refers to Individuals within the operations function who provide labour in exchange for income.

• Apply their knowledge, skills and experience in order to convert materials to produce a good/service

1. Highly qualified, motivated and well trained – Productivity, efficiency – Higher volume good – SPEED.
2. Higher quality outputs – Cust Sat – Pos Wom - QUALITY

HOWEVER

1. Training and motivational techniques can be costly - Decreased Productivity - COST
2. Poorly trained or inexperienced employees can decrease productivity, speed and quality

Question 7

Transforming Resources - Facilities

Answer 7

- Refers to the plant, factory or office, and machinery used in the operations processes.

Decisions that businesses need to consider regarding facilities;

• Machinery and equipment in facilities will physically change the shape/features of materials.

1. Effective plant layout can improve efficiency, and productivity - SPEED
2. Technology used within facilities - Efficiency/Productivity - Higher volume.

HOWEVER

1. Ineffective plant layout can decrease efficiency - SPEED
2. Re-structure of plant layout can decrease productivity

Question 8

Transforming (HF) - CASESTUDY

Answer 8

1. Human resources

• Outsourcing partner is Foxconn – 123m workers
• Each factory employs approx. 200 000 workers
• HR heavily Assists meeting high global demand for products
• Availability of skilled labour such as engineers are higher in Asia compared to US.
• Economies of scale/cost leadership achieved in large-scale.

1. Facilties

• Outsourcing partners assemble iPhone/iPad in number of factories, mostly in China.
• Foxconn has approx. 123m workers – Each factory employs approx. 200 000 workers
• Apple spent in 2016 $105B on purchasing robotics whcih assisted in keeping up with demand and shortening long term costs for apple.
• Allows Economies of scale/cost leadership by reducing cost of labour. however short-term costs increased
• Foxconn able to provide more efficient/higher quality transforming facilities, thus increasing quality of iPhones/iPads

Question 9

Volume

Answer 9

• *- Refers to the number of goods or services produced by the
  operation. **

Implications

• Need to consider inventory management, logistics, storage, wastage, machinery

LOW VOLUME

1. Operations managment can have an efficient, organised inventory.

HOWEVER

1. Higher cost per unit → COST
2. Underproduction can lead to lost sales → Impacting profitability

HIGHER VOLUME

1. Bulk buying discounts → Economies of scale → Lower cost per unit → COSTS
2. Encourage businesses to utilise technology to assist with meeting volume demanded.

HOWEVER

1. Overproduction → Wastage & Increased Inventory costs → COST
2. Innefficent in inventory mangement
3. High initial outlay with technology

Question 10

Variety

Answer 10

- Refers to the number of different models and variations offered in the products or services.

• Standardised goods/services are lower variety
• Whereas customised goods are higher variety.

Less variety:

1. Greater levels of speed and efficiency in production process
2. Assist with producing a larger volume of products

HOWEVER

1. Limits ability to achieve customisation objective

High variety:

1. May assist in achieving customisation objective and appeal to wider target market → Cust satisfaction → FLEXIBILITY

HOWEVER

1. More complex production methods and higher production costs
2. Number of inputs that must be purchased and stored → COST

Question 11

Variation

Answer 11

- Refers to the ability of a business to adjust it’s production levels in response to changes in demand.

• Seasonal changes
• Annual calendar events
• Daily peak periods

High variation in demand

1. If a business responds well, Significant increase in sales revenue (profitability)

HOWEVER

1. Suppliers might not be able to meet the increase in demand quick enough, resulting in lost sales for the business

Low variation in demand

1. Ability to negotiate with suppliers to reduce supplies – Lowered production costs – COST

HOWEVER

1. An operations may see an inventory build-up – increased wastage – negativley impacting COSTS.

Question 12

Visibility (Customer Contact)

Answer 12

- Refers to the degree to which customers can see the operations in action.

• Service-based have a high level of visibility and customer contact.
• Manufacturing-based business has low level visibility & Customer contact.

Direct Customer contact (Interviews, warranty claims)

1. The more visible the customer contact, the higher the expenses - operational costs - COST

HOWEVER

1. Operations will need to have well-trained, highly skilled staff, handling individual needs and wants of customers - Acqusition & Training costs - COSTS

Indirect Customer contact (Sales data anaylitics)

1. Operational managment can establish decsions based on analylitics to achive the wants and needs from customers - Customer satisfaction - Positive WOM

HOWEVER

1. Employees may reduce the work ethic due to a low visibility, negativey impacting efficiency - SPEED.

Question 13

Volume

Variety

Variation in demand

Visibility

Answer 13

VOLUME
242 million iPhones, 58 million iPads and 26 million Mac and MacBook units were sold in 2021

Suppliers like Hanson metal factory have the ability to adjust for changing volumes by simply adjusting staff number and reconfiguring tasks (shifting labour, space and equipment) - This in turn speeds up lead times

VARIETY
Apple has a narrow product range of approximately 30 products, best seen through 52% of its revenue coming from the iPhone.

Limited variety of products – narrow range (compared to Samsung) but
slowly expanding Part of marketing strategy (cost in operations) – limit variety and customisation.

Suppliers in Asia/South America who specialise in production of particular parts/products.
Supply chain of 330+ suppliers in mainland China produces high volumes of electronics but still provide customers with variety of choice

VARIATION IN DEMAND
• Experiences increased sales of iPhone in lead up to Christmas
• Releases new products annually in Sep → highest demand during product launch
• Sales are highest in the 2 months following product launches, based on
historical data Christmas (Dec.) → iPhone revenue $71.62b in Q1 2022 (Oct-Dec 2021) compared with $38.86b in Q4 2021 (Jul-Sep 2021)

VISIBILITY
• Makes customer contact through authorised resellers, consultants, retail stores, online tech and query support.
• Helpline (Apple Support) for customers in need of assistance.
• Email/text when you purchase from store to promote further products.
• However, even though extensive customer contact is provided by Apple,
manufacturer (Foxconn) doesn’t allow contact unless with special permission.
• Raised concerns for brand image.

Question 14

Sequencing - Critical path analysis

Answer 14

- Involves showing what tasks need to be done, how long they take and what order us necessary to complete those tasks

• Constructed to determine the shortest time it takes to complete all activities in a project

1. Provides clarity to what tasks can be done at the same time or simultaneously → Effiency → SPEED.
2. May assist in minimising bottlenecks in the transformation process → increased productivity

HOWEVER

1. If any task on the critical path is delayed, adverse cost → customer satisfaction implications

Question 15

Scheduling - Gantt Charts

Answer 15

- A horizontal bar chart that shows both scheduled and completed activities over a period of time.

Often used in planning and tracking a project

1. Graphically illustrates the status of the project → Providing clarity and effective planning → increased productivity
2. Can be used to schedule the work activities of one employee or a team of employees → Effiency → Productivity

HOWEVER

1. Does not necessarily show the interdependence between business activities → Potientyal bottleneck → Decreased productivity therefore SPEED.
2. Does not show the most efficient way to complete a project → Productivity → SPEED.

Question 16

Technology

Answer 16

- The application of science and knowledge that enables people to do new things or perform established tasks in new and better ways

• A business may use established technology such as robotics & automated vehicles to undertake the transformation process

Established Technologies (CAD, Robotics)

1. CAD Increases the accuracy and precision of production methods – Increasing qaulity – reduced wastage – COST & QUALITY.
2. Robotics leads to a reduction of labour costs due to Capital Labor substitution – long term cost efficiencies – COST.

HOWEVER

1. CAD requries High initial outlay → Negatively impacting S.T costs – COSTS
2. Redundancy costs associated with employees who are replaced
   by Robotics → Impact staff morale and productivity

Administrative technology (Computers and software)

1. Computers may Improve efficiency & productivity in the
   transformation process – improved lead times – SPEED
2. Software Reduces defects – Warranty claims – Improved COSTs.

HOWEVER

1. Time and cost of training or retraining employees – decreased productivity – SPEED & COSTS.
2. Installation and set-up of new technology – Decreased efficiency – decreased lead times – SPEED.

Question 17

Technology CASESTUDY

Answer 17

• Foxconn ‘lights out’ factory in shenzhen is highly-automated with robots (Foxbots). deployed across the production line, reducing its reliance on\ human workers → Upfront initial costs, however → Long term cost efficient.
  Foxconn reduced the staff in a single department by 60,000
  due to the introduction of ‘FoxBots’ evidencing the potentially negative implication of technology on a business’ workforce
• However, at apple Robotics and engineering replace repetitive tasks previously done by employees, and through training, enable our employees to focus on higher value-added elements in the manufacturing process, such as R&D and Quality control
• 10.5 Billion on new tech such as, laser sutters, robotics and testing equipment at foxconn
• Apple uses, liam and daisy to recycle products → reducing wastage → COST

Question 18

Task design

Answer 18

• Refers to the determination of the tasks that need to be performed, how they will be performed, and labour needed to perform the required tasks.
• Determining the labour required, skills needed, adjust training, or recruit for specialist staff.

Task design process

1. Employees successfully perform and complete the task in an efficient and productive manner - SPEED
2. Appropriatley skilled labour can increase the quality of output - QUALITY.

HOWEVER

1. Time, and cost to create a task design and Find an appropirate candidate – SPEED/COSTS.

Skills audit (Determining current skills of staff and any shortfalls)

1. Appropriatley skilled labour is matched to perfrom tasks requiring a certain skill set - QUALITY.

HOWEVER

1. Time, and cost to create a task design and Find an appropirate candidate – SPEED/COSTS.
2. Skills audit may result in redundancies/staff turnovers - COSTS

Question 19

Task design - CASE STUDY

Answer 19

Apple used a skills audit which helped to complete the
production of the iPad Pro in the most efficient and effective
timeframe.
• Recruitment of staff at Foxconn was based on specific duties
selected for employees
• Foxconn identified that they required an additional 200 engineers

• Unskilled workers were still required within specific functions of the assembly
• Unskilled workers were highly supervised
• It takes 5 days and 300 hands to assemble an iPad

Question 20

Process Layout

Answer 20

- Refers to the physical arranagment of equipment, processes and people within the operations of the business

Process Layout

Machinery is grouped together based on the function they perform such as a surgery at a hospital

• Generally used for high-variety, low-volume production
• Work teams can be created

1. Improved layout can increase teamwork and thus efficiency and
   productivity

HOWEVER

1. Can be time consuming to organise different layouts

Product Layout

Machinery is arranged based on the sequence of tasks performed such as a car maunfacturer

• Assembly line production
• For uniform quality, high-volume production (mass production)

1. Decrease cost due to less staff required due to collaborative workplace layout → Increase in profitability

HOWEVER

1. Can disrupt/change routine or methods that have been used/ employed for a long period of time

Fixed-Position Layout

Products remain in one location and employees, machinery & materials are brought to the product such as manufacturing a plane

• For large, heavy, bulky or immobile products
  1. Can promote positive workplace culture/morale through collaboration and human interaction

HOWEVER

1. Initial costs with undergoing structural reorganisation

Office Layout

Desks and workstations are arranged based on similar functions to create efficiencies.

• Desk areas required by office workers, usually fitted with access to a computer monitor and a telephone. Encourages communication and collective thinking and problem solving
  1. Employees working colaborativley is beneficial towrads effective working – Productivity – SPEED

HOWEVER

1. High initail outlay for the purchase of the computers and monitors.

Question 21

Process layout CASESTUDY

Answer 21

• Apple manufacturing of iPhones and iPad at Foxconn require the factories to mass produce using assembly lines (product layout) where machinery and equipment is arranged according to the sequence in which the iPhone is assembled.
• The use of human labour (Foxconn currently employs 1.23 million workers) and robotics are used throughout the assembly line to assemble the iPhone and iPad
• iPhone sales in 2021 = 241 million units

Question 22

Monitoring, Control and Improving

Answer 22

- Refers to the process of measuring actual performance against planned performance.

• Statistical data analysis
• Customer feedback

Monitoring Efficiency/Time KPI;

1. Allows the business to focus it’s attention on actions that will have
   the most effective impact on overall performance - commitment to
   continuous improvement
2. Encourages good performance in processing through awareness of
   what to look for and goal setting

HOWEVER

1. Can encourage a reactionary approach rather than a proactive approach → When the issue arrises → Time innefficient → Speed.
2. Costly to employ supervisors to monitor →SPEED

Monitoring Cost indicators

1. Allows a business to pinpoint inefficiencies using KPI’s as a benchmark

HOWEVER

1. Can be time consuming to monitor cost indicators – productivity – SPEED.

Question 23

Monitoring CASE STUDY

Answer 23

Apple measures KPI’s relative to their production process and global supply chain

• Identified workplace hazards as an issue through implementing the ‘Overall Equipment Effectiveness’ - used to determine problems related to Electrostatic Discharge (ESD) in the production of iPhones and iPads
• Required Apple to measure how safe and effective the machinery workers at Foxconn are handling when assembling the iPhone and iPad
• Assisted with reducing work-related injuries through implementing ESD protection

Apple has used KPI’s of direct cost analysis to measure transport costs between the US and Asia.
• Identified that 70-90% of finished product weight was related to packaging, plastic and bare boards.
• Led to changes in the production process (inputs - materials)
• Able to use lighter and higher quality packaging and plastic materials
• Reduce weight of airfreight and cost of transport
• Assisted with cost leadership and profitability

Question 24

Monitoring, Controlling and Improvement

Answer 24

- Refers to assessing KPI’s against predetermined targets and taking corrective action to ensure the performance objectives are being achieved.

Involves measuring against KPIs and making improvements
Examples of improvements:

• Redesign of facility layout
• Utilising CPA/Gantt Charts to address efficiency & Speed issues

Redesign of facility layout

1. Allows the business to improve its operational processes structure – Productivity – Improved lead times – SPEED
2. Corrective action ensures the business is on track to achieve its performance & financial objectives – Positivley addressing SPEED AND COSTS.

HOWEVER

1. A Redesign of operations will decrease S.T productivity – Decreasing Leadtimes – Negativley impacting SPEED

Conduct CPA /Gantt Charts to address speed problems

1. Corrective action ensures the business is on track to achieve its performance & financial objectives – Positivley addressing SPEED AND COSTS.

HOWEVER

1. Costly and time-consuming (e.g. ‘down-time’) to engage in corrective action

Question 25

Controlling CASESTUDY

Answer 25

Apple measures their inventory turnover rate and production volume in order to take corrective action.

• In 2021, inventory turnover rate was 6 days and it was identified there were unnecessary transportation costs with distributing the iPhone globally - Weight of packing made up 70-90% of finished product weight.
• Apple took corrective action by increasing production volume in
• 2021 by manufacturing 540,000 iPhones each day at Foxconn.
• Efforts were made to decrease inventory turnover rates by 30%, which Apple almost achieved within a year (4.4 days) by increasing the frequency of distributing order.
• In addition, capitalising on economies of scale and dual supplier engagement assisted Apple with reducing the costs per unit (iPhone) which influenced their net profit of $95 billion

Question 26

Monitoring, Controlling and Improvement

Answer 26

- Refers to systematic processes, strategies and culture used to improve product quality, efficiency and achieve key performance objectives.

1. Increase efficiencies such as reduction of waste.
2. Increase speed such as eliminate bottlenecks

Total quality management (Quality circles)

1. Reduce/eliminate operational problems such as Inefficiencies → Reduce operational costs → Improve Profitability

HOWEVER

1. ​Having to undergo quality circles is time consuming and requires additonal expenses – Decreasing productivity & expenses – SPEED & COSTS.

Continuous improvement (six sigma)

1. Can motivate employees to always strive to better their craft and involvment to achieving operational objectives.

HOWEVER

1. Investment in continuous improvement strategies → COST & TIME, therefore impacting other objectives.

Question 27

Improvment CASESTUDY

Answer 27

Spent $22 billion on R&D in 2021, a 15% increase from the previous year

• Improved products such as the camera, Touch ID and facial recognition in the iPhone XR/XS/XS Max
• Improved production process with the introduction of Robotics (‘FoxBots’) throughout the production process ($11.5 billion spent in 2021 - averaging $25,000 each) → assist with precision, efficiency, quality and long term cost advantages
• Contributed to Apple’s net profit of $95 billion in 2021.

Question 28

Customer Servce

Answer 28

- Refers to how well a business meets the needs and exceeds the expectations of customers in all aspects of its operations.

• Customer service can occur before, during the operations process and post-sales
• Answering questions and providing after sales advice
• Frequent and meaningful communication with customers
• Anticipating customer needs

Use skilled and knowledgeable staff

1. Exceeding customers’ expectations → Customer relaitonships → WOM → Sales.
2. Provide opportunities for a business to address concerns. providing additional assistance to their customers → increased customer satisfaction → brand loyalty → repeat sales → profitability → Sustainable competitive advantage

HOWEVER

1. Training employees can be costly and time-consuming → Production costs → COST
2. Difficult teaching employees who lack interpersonal a skills → Inneffeciency
3. If poor customer service → Negative brand image → Loss of sales → Negativley impacting profitability

Why
Recent market research has shown that businesses that provide
superior customer service can:

• Charge an average of 10% more for the same goods and services
• Grow twice as fast as their competitors
• Increase their market share and profits

Question 29

customer service CASESTUDY

Answer 29

• Apple is widely regarded as having a significantly effective customer service process
• The transition from third-party sellers to running its own stores gave Apple more control over its customer service. It controlled all aspects of the customer experience from the layout of the store to how employees interacted with customers.

• Customer service evident in:

• All Apple retail stores - staffed are trained in both customer service and Apple technology → improves effectiveness of their customer service

• Large investment in training of their sales teams on customer management and communication skills - a significant portion of Apple’s Genius Training Student Workbook (guidebook for new Apple Geniuses) looks at people skills and applied psychology.

• Genius Bar focuses on repairs and resolving customer service issues
• Rigorous recruitment process (5 interviews over 6 weeks)
• Deemed effective by technology magazine BGR who stated “Apple has turned customer service into a science.”

Question 30

Customer warranties

Answer 30

- A warranty is a promise made by a business that they will correct
any defects in the goods that they produce or in the service that
they deliver.

Under Australian Consumer Law (ACL), all businesses must
ensure that the products they sell:

• Have a level of quality that is comparable to the price and product
  description
• Are suitable for the purpose or job they will be used for
• Match the product description in any advertising or promotion
• Are free from defects or defaults
• Warranty claims are an indicator of quality management and
  can highlight issues in the production process

1. Warranties build trust/confidence in the product quality → increase sales

HOWEVER

1. Poor product quality → increase in repairs, replacements and refunds → increase operational costs → decrease profitability → damage business brand and reputation
2. Lower defect rates may require greater quality control or higher quality inputs → high manufacturing costs BUT lower warranty Claims.

Question 31

Warranties CASE STUDY

Answer 31

Apple was fined $9 million in 2018 for breaches of competition law
over false and misleading representations to customers with faulty iPhone and iPads

• Complaints about “error 53 message that disabled some iPhones and iPads after operating system updates in 2015”
• Customers were told that they were not eligible for refunds if a third party had repaired the product.
• The Federal Court stated that even if a third party had repaired the product, consumer guarantees and rights under Australian law still applied.

IMPLICATIONS

• Apple had to change its warranty policies depending on its jurisdiction as legal requirements have forced them to extend their one year product warranty.