Role of Operations Management Flashcards
What does strategic mean in relations to business operations
Affecting all key business operations’
How is maximised profits achieved
Focusing on revenue maximisation and cost minimisation
What is the main business goal
Maximise profits
What are the two aspects of operations management
- Cost leadership
- Good/service differentiation
What are the different costs in business
- Input costs
- Labour costs
- Processing
- costs of getting products to markets
- Costs associated with inventory management
- Quality management costs
What are input costs
- Facilities
- Land
- Energy
What are labour costs
Full-time and part-time employees
What are processing costs
Machinery, Electricity and scheduling
What’s an example of costs associated with inventory management
- Logistics and distribution, damaged goods
What’s an example of quality management costs
What is cost-leaderhsip
Cost leadership is aiming to have the lowest costs and to be the most price-competitive in the market
What are strategies to reduce costs
- Economies of scale
- Control production costs
- Control other costs
- Technology
- Standardisation
What’s an example of ‘other’ costs
R&D/marketing
What are examples of production costs
- Labour
- Raw material
- Overheads (plant, equipment, power
What is economies of scale
Economies of scale are cost advantages reaped by companies when production becomes efficient
How is economies of scale achieved
Increasing production and lowering costs thus spreading costs over a larger number of goods
What does economies of scale result in
Lower per unit costs
What does standardisation involve
The making of products that are homogeneous or identical.
What other strategy to reduce costs does standarisation directly relate to
Economies of scale
What does product differentiation mean
Distinguishing products in some way from those of competitors
What might product differentiation for goods include
- Varying the actual product features
- Varying product quality
- Varying augmented features
What might product differentiation for services include
- 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 the service delivery
What 2 features of goods will influence operations decisions
- Standardised or customised
- Perishable or non-perishable
What are intermediate goods
Goods which are processed more than once
What are 2 features of standardised goods
- Mass produced
- Uniform and meet a predetermined level of quality
What are features of customised goods
- Varied according to the needs of customers
- Produced with a market focus rather than a production focus.
What’s an example of a service which has been customised
Fast food industry
How does operations relate to marketing
- Marketing Identifies customers’ wants; create a marketing mix and assist operations through the design of new products, change existing products and after-sales service requirements
How do operations and finance relate
- Finance department must plan, organise, monitor and control financial resources
- set financial controls for each part of operations; monitor progress
- Pay staff and accounts
How does operations relate to HR
- Manages human effort at every stage of production, core and non-core activities
- Identify staffing needs, training, organise staff during operations to meet objectives
Case study for good/service differentiation
- Apple differentiates product through its IOS operating system and unique features, 2014 Apple introduced Apple pay
- However, 2012 Apple lost position as highest selling smart phone to Samsung due to a lack of innovation and increased competition
- Apple also differentiates its product through quality, iPhones are marketed as a premium product
Case study for cost leadership
- Apple lowers production costs by forming partnerships with manufacturers such as Foxconn in China where labour and materials are much cheaper
- Helps Apple achieve economies of scale
- Introduced lower costs products such as iPhone 5c and iPhone SE
Case study on goods/services in different industries
- Apple’s iPhones are mass produced on a production line and are hence standardised and non-perishable
Case study on standardised services
- McDonald’s has standardised the service of fast-food through offering set menus and staff have specific role and use specific lines
- Also implemented mass customisation through programs such as ‘create your taste’
Case study for interpendnece of key business functions
- Market research indicated the popularity of phablets in Asia led to the design and development of larger iPhones
- When US President Trump began threatening to impose tariffs on Chinese imports, Apple’s profitability was threatened due to its dependence on Chinese outsourcing partners for operations à thus affecting Apple’s finance
- HRM is in charge of hiring employees and thus affects operations
- à2014 Foxconn hired additional 100,000 staff for production of iPhone 6 and 6s
Outline the role of operations syllabus
- Stratgic role of operations (cost leadership, product differentiation)
- Goods and/or services in different industries
- Interdependence with ither key business functions
