role of operations

Question 1

what are operations?

Answer 1

the transformation process of inputs to outputs with value adding

Question 2

explain the relo between transformation and value adding

Answer 2

By transforming inputs into outputs that better suit the needs of customers, customers will pay a higher cost for the outputs than the cost of the inputs. Hence, through the transformation process, value is added.

Question 3

what are business inputs?

Answer 3

• tangible: □ raw materials
  □ Land
  □ human resources
  □ capital in the form of facilities and technology
• intangible: □ Ideas
  □ Information

Question 4

what are business outputs?

Answer 4

the products (goods and services) made from the processes of transformation (operations)

Question 5

lean production?

Answer 5

• aims to eliminate waste at every stage of production

- involves analysing each stage of the production process, detecting where inefficiencies are and correcting them

Question 6

whats the purpose of minimising waste?

Answer 6

Waste is non-value adding and is costly -> so if waste is minimised the production process is more efficient

Question 7

what are sources of waste that add cost and do not add value

Answer 7

□ Underused labour
□ Over productions
□ Errors and defects requiring remediation or creating lost product
□ under utilisation of machinery
□ Poor machinery
□ slow lead times and waiting times within processes
□ carrying of excess inventory

Question 8

to maximise affordability for consumers

Answer 8

• Minimise production costs to lower prices
• to operate at low cost it depends on
  □ from where the product is sourced
  □ how it is transported to the business
• Access to low-cost suppliers can ensure that the business makes the final price to consumers as low as possible

Question 9

strategic role of operations management

• define profit centres and cost centres

Answer 9

• Profit centres: aspects of the business that directly derive income.
  
  • Cost centres: aspects that do not directly derive income but do incur cost eg. operations function

Question 10

cost leadership

Answer 10

Cost leadership involves aiming to have the lowest costs or to be the most price-competitive in the market

• Although trading with low cost, must translate into higher sales in order to achieve profit
• > so must minimise cost

Question 11

sources of operational costs?

Answer 11

inputs: facilities, land, resources, leases on machinery and interest on investment, energy
labour: redundancy, recruitment and training, full time and past time employees, overtime
processing: machinery maintenance, electricity, product design, prototyping
inventory: logistics and distribution, storage, inventory, shrinkage, insurance, damaged and stolen goods
quality management: machining errors and downtime, sampling and inspection of goods and processes

Question 12

what is economies of scale?

Answer 12

maximise level of production for the lowest cost (benefits gained from increasing the scale of business operations and cost savings from purchasing lower cost per unit of input)

Question 13

product differentiation?

Answer 13

distinguishing products (goods or services) in some way from its competitors

Question 14

product standardisation?

Answer 14

involves the making of products that are homogeneous or identical
involves mass producing items in high volume, with no variety and at a low cost per unit

Question 15

how can GOODS be differentiated?

Answer 15

□ Colour variation (basic level)
□ Varying product features
□ Varying product quality
□ Varying any augmented features (‘add ons’)

Question 16

how can SERVICES be differentiated

Answer 16

□ Varying the amount of time spent on a service
□ Varying the level of expertise brought to a service
□ Varying the qualifications and experience of the service provider
□ varying the quality of materials/technology used in service delivery

Question 17

what is cross branding?

Answer 17

□ This approach adds value to products (goods and services) by offering consumers added benefits from a cross-branding arrangement
□ Examples
® Woolworths–Caltex alliance
® Coles–Shell alliance
□ products are differentiated from an external factor that the business has brought into the mix

Question 18

GOODS+ SERVICES IN DIF INDUSTRIES- operations management is dif for dif products

can be

STANDARDISED (define)
or
CUSTOMISED (define)

Answer 18

Standardised goods: mass produced, usually on an assembly line; uniform in quality and meet a predetermined level of quality

Customised goods: varied according to the needs of customers; produced with a market focus rather than a production focus

Question 19

what are PERISHABLE GOODS and how should operations manage them

Answer 19

Perishable: short lifespan; eg food, groceries, meat, flowers, pharmaceutical products

	○ Operations must integrate
		§ high standards of quality, safety and cleanliness in all operating processes
		§ very short lead times and quick effective distribution
		§ appropriate packaging and cold storage processes both through production and distribution

Question 20

what are NON PERISHABLE GOODS and how should operations manage them

Answer 20

○ Non-perishable: long lifespan and durable eg. household business goods, clothes, shoes, technology, furntiure

Operations must
§ manage quality, from sourcing through to production and distribution
§ implement effective inventory management strategies and be highly responsive to market demand in order not to over produce.

Question 21

intermediate goods?

Answer 21

○ Intermediate: semi finished goods that have been processed but may become inputs for further processing for other goods

Question 22

examples of standardised and customised services???

Answer 22

SERVICES IN DIFFERENT INDUSTRIES

○ Standardised services -> Eg. fast food chains like maccas

○ Customised services -> cater specifically to the customer’s particular circumstances
Eg. Accounting services, medical services, lawyers

Question 23

what is self service and the benefits

Answer 23

Self service: encourages the customers to take the initiative to help themselves

advantage:
- businesses can concentrate on customisation when a person cannot help themselves
- puts consumers in control of their shopping experiences-> more personalised (in control of how long it takes to purchase/if they prefer not to engage in conversation with employees
- operations can be more streamlined

disadvantage:
- self-service online is that drip pricing (lots of additional prices that make final price really high)

Question 24

explain relationship between cost leadership and standardisation of products

Answer 24

Standardisation of services minimises costs of production as it is mass produced without variation which increases efficiency and can allow for economies of scale, thereby resulting in cost leadership

Question 25

INTERDEPENDENCE OF KEY BUSINESS FUNCTIONS- mutual dependence that they have on each other

how do operations and marketing overlap?

Answer 25

Marketing is concerned about the design of products, and their subsequent sale, to meet the needs of consumers.
□ operations function involves the acquisition or sourcing of products/ inputs for production or sale.
-> product design (a marketing requirement) directly affects the operations function as they have to source the materials

Question 26

how do operations and finance overlap?

Answer 26

key marketing objective is profitability: requires that a business maximise sales (revenue) and minimise costs (expenses)

If (operations) costs of production can be minimised then profit margins can be increased
(finance).

if operations processes focus on quality then the resulting products can be sold (marketing) at higher prices and generate higher revenues (finance)

Decision to invest in facilities and buy technology
- high financial costs can lead to faster processing speeds/more efficiency with less waste (operations/lean production)

Question 27

how do operations and HR overlap?

Answer 27

New technologies are enabling faster processing speeds and are changing the way that work is done ->
Impacts HR-> As nature of work changes, so does the needed skills/qualities for employees

Outsourcing (using specialised third party business for things eg.recruitment firms) changes nature of operations ->
communication between HR can be more complicated and that there is an increasing reliance on technology.

operations decision to outsource and to acquire technology directly shapes the nature of the workplace and the skills and qualities required of the human resource