Strategies Flashcards
Performance objectives - quality, speed, dependability, flexibility, customisation, cost
- Quality
- Determined by consumer expectations
Three areas:
- Quality of design: how well product is made
- Quality of conformance: how well product meets standard of design
- Quality of service: reliability, consistency, worth money
- Quality causes product differentiation - Speed
- Time it takes w/ production + time taken for (b) to respond to changes in demand
- Linked to efficiency - if fast has reduced wastage (time) → comp. adv.
- Goals of speed = reduced lead times, faster processing times
- To achieve → bottlenecks (e.g. tech failure) need to be removed - Dependability
- How consistent + reliable a product is: how long does it last - measured by warranty claims
- Service: consistency w/ a standard measured by complaints
- Want dependability for a good rep → linked to customer service (output)
- includes: frequent stock
on hand, open reg hrs = customers know can buy products when needed
- not dependable = lose sales + customer loyalty
Performance objectives - flexibility, customisation, cost
- Flexibility
- How quickly processes can adapt to change
- Faster the processing time the greater the flexibility; link to speed → can respond to changes quickly
- Gives comp. adv. → reduced wait times = society wants speed → proactive not reactive
- Increased flexibility occurs
through: broader product range, having a range of services, skill level of employees, range of tech, services that complement each other - Customisation
- Individualisation of products, consumers needs being met
- services usually customised → are some standard e.g. fast-food
- Op processes are moving away from standard products → varying size, colour, function → mass customisation - Cost
- Minimisation of expenses = (b) can be a cost leader
- If cost too high = limited price flexibility
- (b) may start w/ products set at high price but over time as (b) grows + can make a profit will reduce prices
New Product or Service Design and Development
- Design - planning new product - conducting SWOT, screening ideas w/ customers, basic costing
- Development - testing / implementing ideas - prototype, target market reaction, trial run
Product: - Consumer Approach - preferences + desires of consumers as identified by market research determine which products are designed + developed
- Changes + innovations in tech - these enable new, appealing products to be made → use advanced techs giving products greater functionality e.g. Apple use this approach
- When designing + developing a product - (b) must consider quality, SCM, (extend range of suppliers, timing, volume), costs (determined from no. of inputs, time + energy used in processing)
- Product utility = usefulness + value a product has from consumer’s point of view
Service Design + Development - Services intangible → as produced are consumed → customer feedback important
- When designing service must consider: explicit service (tangible aspect e.g. expertise, time), intended implicit service (intangible e.g. feeling), goods required
Supply Chain Management (SCM) - sourcing
involves integrating = managing flow of supplies throughout op processes → in order to best meet customer needs + max profits
Sourcing
- purchasing of inputs for transformation processes - sources or inputs drawn from a range of suppliers
- Factors influencing choice of supplier: consumer demand, quality of input required, responsiveness + timely supplier is w/ changes in demand (flexiblity), cost of supplies compared to others
Global sourcing
- purchasing of inputs w/o constraint by location
ADVANTAGES: expertise advs, variety of sources, access to new tech, decrease costs (cheap labour)
DISADVANTAGES: increased costs of logistics (distribution, transport), possible relocation of ops aspects, managing laws b/w nations, ethical issues
Supply Chain Management (SCM) - e-commerce + in general why important
- Buying + selling of g/s via internet
- Many (b)’s have SC managed through electronic ordering
- E-procurement = use of online systems to manage supply
- Electronic ordering = way e-commerce can assist (b)’s = by ordering electronically
instead of manually = can reduce lead times + receive stock faster
WHY IMPORTANT: - can affect profits + sales
- If not managed SM correctly = may run out of stock + customers will go elsewhere = reducing sales
- need to try to minimise cost of supplies = using cheaper suppliers + trying to reduce no. of suppliers to deal with = increase profits
Supply Chain Management (SCM) - logistics
- Refers to distribution (methods of getting g/s to consumer)
Transport - Influenced by nature of product (perishable, non-perishable etc), length of travel e.g. truck for large items, aeroplane for distances etc
Storage - Finding a secure location to hold stock until required
- Warehousing = use of a facility for storage, protection + distribution of stock
- Cost of warehousing: is high (insurance, movt of products, theft, damage)
Benefits: stock on hand to meet customer orders - can save costs - i.e. EOS, decrease lead times
Materials Handling and Packaging - important aspect of movement + storage (influenced by product) - e.g. delicate glassware
Response: - improved logistics: could improve efficiency + allow (b) to better compete
w/ foreign (b)’s
Outsourcing - Advs
- use of external providers to perform (b) activities
- Simplification - reducing no. of activities performed by (b)
- Efficiency + cost savings - access to cheaper labour, regulatory conditions + skilled labour in offshore locations
- Access to skills + resources lacking within (b) - reduced spending on T&D
- Capacity to focus on core KBF’s
- Specialisation - possible more up to date tech
- cost-effective strategy to improve long-term
sustainability = focus on the quality of service to customers, grow market share + improve profitability - improves flexibility in regards to operating in different time zones for some (b)
technology - leading edge, established
- Can create a comp adv
- Some (b)’s innovate + create new techs - product differentiation
Leading Edge Tech: - Tech that is the most advanced or innovative at any point in time
- Quick product development, increased efficiency, high standards, less waste, decreased costs (long-term) e.g. Shelfie
Established Tech: - Tech that has been developed + widely used = simply accepted w/o question
E.g. barcodes, robotics, CAD, CAM, computers
example response: - could adopt more leading-edge payment methods e.g. smartphones + smart
watches or established techs e.g. EFTPOS - By purchasing this new equip, customers might be more inclined to shop at (b) which may increase sales +
enhance speed of service.
Inventory Management - adv + disadv of holding stock
ADV:
- ensures adequate supply for sale - meets consumer demand
- If a particular product line runs out, alt can be offered
- reduces lead time b/w order + delivery
- Older stock can be sold at reduced prices which encourages cash flow
- Producing products in bulk reduces costs due to EOS in purchasing inputs
DISADV:
- Cost: incl storage charges, spoilage, insurance, theft, handling - expensive
- Slow-moving stock is money tied up + not generating income
- Invested capital, labour + energy cannot be used elsewhere as it has been used to create stock
- Cost of obsolescence (outdated) which can occur if stock remains unsold
- Difficult to continually + accurately monitor + track
Inventory Management - LIFO
LIFO - Last-In-First-Out
- Method of pricing inventory = assumes last goods purchased are also the first goods sold + therefore the price reflects the cost of the product e.g. tech - playstation, iphone
ADV: gross profit = more recent + closely reflect economic value. prices used to calculate cost of sales
DISADV: may overstate cost + understate gross profit, need to reduce price of older items
Inventory Management - FIFO
FIFO- First-In-First-Out
- Method of pricing inventory = assumes first goods purchased are also first goods sold + therefore the cost of each unit sold is not reflected in the cost of the product
- Used for perishable items
ADV: certain all stock is used = no wastage
DISADV: costs can be understated + profits overstated
Inventory Management - JIT
JIT- Just-In-Time - inventory management approach = ensures exact amount of material inputs arrive only as needed in op process or ordering of stock only when needed - Allows to display a wider range of products as need to store less + can order in response to customer demand - only enough products to meet demand - Saves money = no expensive holding + insurance costs, shrinkage costs + losses due to obsolescence is minimised - Requires very flexible ops, high ability to respond to changes in market demand quickly e.g. McDonald’s - ADV: does not need to hold large amounts of stock which could be damaged or perish costing (b) money - DISADV: (b) may find it difficult to respond to a sudden increase in demand for a product = may not have enough supply to meet the order, could be delays
Quality management - quality control
Refers to those processes that a (b) undertakes to ensure consistency, reliability, safety + fitness of purpose of product
Quality Control
- Involves use of inspections at various points in production process to check for problems + defects
- could introduce checklists where quality of g/s could be checked at different points during process e.g for repair service: standard of welding, painting, checking oil + tyres etc
- Reactive approach - needs to be balanced against a more proactive approach that ensures continuous improvement
- To ensure outputs meet required standards (b)’s
- ADV: will meet customer expectations of quality for all g/s
Quality management - assurance
- Involves use of a system to ensure that set standards are achieved in production = qual meets certain standard
- Done through making a series of measurements + assessing them against predetermined qual standards
- Proactive approach rather than a reactive
- Ensures product is fit for a purpose + product achieves acceptable quality first time produced
- must ensure national standards are met
- e.g. repair (b): could ensure its repairs meet Aus quality assurance standards for the repair of large trucks
- help differentiate from competitors, potentially increasing its market share
Quality management - quality improvement = including continuous improvement + total quality management
- Focuses on continuous improvement + TQM
Continuous Improvement - ongoing commitment to improving a (b)’s g/s
- May be through monumental breakthrough of innovation or gradual change
- Basis of successful improvements in quality is inclusion of staff into improvement process
- All staff encouraged to demonstrate initiative + suggest improvement areas
TQM: concept = focuses on managing total (b) to deliver quality to customers - ongoing (b)-wide commitment to excellence = applied to every aspect of the (b)’s operation
- If product produced right initially = avoid expense of inspection + waste of rejected products
- Through benchmarking → firm can identify critical processes that may need improvement → firm will study best op processes used by its immediate competitors to improve own methods
