role of operations management

Question 1

Operations

Answer 1

the business processes that involve transformation (production)

Question 2

Strategicrole of operations

Answer 2

Operations assists the business in achieving its overall goal of profit maximisation.

This is achieved through cost leadership and product differentiation

Question 3

Operations process

Answer 3

is about transforming inputs into outputs. The goal is to add value so that the output is worth than all of the inputs combined

Question 4

Cost leadership

Answer 4

to have the lowest costs or be the most price competitive in the market

Operations is a cost centre meaning it doesn’t directly create income, but it does generates costs for the business

Question 5

How is cost leadership achieved

Answer 5

Strategy: keep costs as low as possible

Business could:

Invest in technology, research and development
Lower production costs
Use economies of scale (cost advantages created when a business increase the scale of its operations)

Advantages:

Businesses can make a larger profit
Business can drop their prices creating a competitive advantage

Question 6

Product differentiation

Answer 6

Distinguishing products from competitors based on factors other than price

Differentiation usually leads to enhanced or additional features. So it’s creating unique products to achieve brand loyalty.

Question 7

Product differentiation: Goods

Answer 7

Goods can be differentiated by their:

Features
Quality
Augmented features (add-ons and additional benefits rather than standard features)

Question 8

Product differentiation: Services

Answer 8

Services can be differentiated by:

Time taken to deliver the service
Experience and qualifications
Quality of materials and technology

Question 9

Product differentiation: cross-branding

Answer 9

Two businesses form an alliance so they can offer extra benefits to consumers

Question 10

Interdependence

Answer 10

The mutual dependence that the key business functions have on each other.

They rely on each other to perform efficiently and effectively.

They have to work together to achieve common goals, such as profit maximisation.

Question 11

Operations and marketing

Answer 11

Marketing is the design of products and their sale. Operations is the production of goods and services. Operations and marketing must communicate to make sure products are of correct standards to satisfy customer needs.

Question 12

Operations and finance

Answer 12

Finance provides the funds that determine what strategies operations can undertake and what inputs are able to be used.

Cost: one of the key goals of operations management is to achieve cost leadership (minimising the cost of production leads to increased profit margins)

Quality: Instead of aiming for low costs, businesses can strive for quality (higher quality products can be sold for higher prices which results in higher revenues/profits)

Investment: Finance investing in new areas such as facilities and technologies can lead to faster processing speeds and less waste in operations (investment increase efficiency which results in more profits)

Question 13

Operations and human resources

Answer 13

the relationship between operations and human resources is constantly changing.

New technologies: are changing the way work is done. Therefore, the skills and qualities businesses are looking for in employee are also changing.

Outsourcing: also changing the nature of operations. Communication within HR is more complicated now and has stronger reliance on technology. Outsourcing also means that many employees aren’t needed anymore, so the HR function must let them go

Question 14

Standardised goods

Answer 14

are produced in high volumes, usually on assembly lines. This means they’re designed and manufactured to meet the same quality standards.

Question 15

Customised goods

Answer 15

are customised, or tailored, to meet the needs of individual consumers.

Question 16

Perishable goods

Answer 16

goods are those that deteriorate, like milk and seafood. These need to be as fresh as possible when they’re delivered to customers. So, these goods require special processes, including:

Strict quality, safety and hygiene standards to make sure products like food don’t become contaminated and unsafe to eat.
Short lead times and efficient distribution.
Appropriate and protective packaging, as well as cold storage throughout the production and distribution processes

Question 17

Non-perishable goods

Answer 17

like cars and furniture are more durable products, so they last longer and, importantly, don’t spoil. This leads to a need for different processes, including:

Quality management in sourcing, to production, to distribution. This includes sourcing high-quality materials, using quality management processes, and making sure the distribution is done in the most efficient way possible.

Inventory control. Inventory levels should strike a balance between not stocking enough and stocking too much so the business stays responsive to market demand.

Question 18

Customised services

Answer 18

involve a higher level of interaction with the customer, such as legal or medical services.

Question 19

Standardised services

Answer 19

Service providers can achieve cost leadership by standardising how the service is performed.

Question 20

Intermediate goods

Answer 20

Goods that enter the production process more than once

Question 21

Standardised services

Answer 21

in service delivery can lead to cost leadership. When processes are simplified, they can be completed with greater efficiency, although this isn’t always a viable option for service providers

Question 22

Standardisation

Answer 22

refers to the making of products that are homogeneous or identical

Question 23

Self-service

Answer 23

allows customers to complete a large aspect of the service provision themselves.