Topic 1.1 role of operations management

Question 1

1.1 What are operations and what does it involve?

Answer 1

Involves various processes that transform and add value to business inputs in the creation of outputs
—> informed by businesses drive to maximize profits, needs of consumers

1. Inputs:
   - good: ideas/info, raw materials, hr, capital
   - service: skill, education, time, technology, qualifications
2. Transformation: (converting inputs to outputs)
3. Outputs:
   - finished, intermediate good/ results of service

Question 2

1.1What do customers desire firms to engage in: (in operations)

Answer 2

1. Minimizing waste
   Eliminate waste at every stage of production. Analysing each stage, detecting inefficiencies, correcting them
   —> lean production utilized minimal resources, reducing waste
2. Reflect fair value of labor used
   Compensate, treat workers well (fair price, decent working condition, ethical sourcing, local sustainability)
3. Ethical sourcing
   Sourcing from suppliers engaging in ethical conduct (wages, environment)
4. Operate at low cost- maximize affordability
   Global sourcing, scam essential to effect operations management
5. Adjust to shifting needs
   Consumers seek innovative goods- businesses will create
   Improvements in tech: capability, function of products improves
   Eg, apple, Toyota-
6. Integrate environmental awareness
   ——
   Focus on these due to:
   - rising customer expectation
   - Changing nature of communication (consumers can report on business practices more widely)
   - stakeholders can’t hold businesses accountable for impacts on society/environment

Question 3

1.2 what is the strategic role of operations management

Answer 3

Strategic: long term, broad aims affecting all key business areas

Strategic role of operations management:
Managers contributing to strategic plan, implementing:
- cost leadership (lowest costs/price competitive)
- product differentiation/standardization
—> to sustain a competitive advantage, achieve profit maximization (overarching goal)

Profit centres: revenue/ income
Cost centres: costs/expenses

Operations management is a key function, overlaps w other functions which have strategic components

Question 4

1.2 (1)cost leadership: balance between cost and quality, eos

Answer 4

(lowest costs/price competitive)
Direct relationship between cost & quality.
—> standard of materials, labor rises, prices increases
—> operations managers need to decide balance between costs and desired quality

Economies of scale:
Cost advantages created as output increases (cost savings from lower cost per unit input and efficiencies in technology)

Question 5

1.2 (2) Good/service differentiation - difference between good/service

Answer 5

Tangibility:
Goods: tangible
Services: intangible

Customization:
Goods: usually standardized
Services: generally customized

Ownership:
Goods: can be owned, transferred
Services: can’t

Time between production & consumption:
Goods: can be considerable
Services: simultaneous

Determination of value:
Goods: value ascertained through profit margin
Services: subjective, depends on market (value increases w expertise, time spent)

Question 6

1.2 good/service differentiation- product standardization & differentiation

Answer 6

Product differentiation: 
Goods:
- varying product features 
- varying product quality 
- varying augmented features (add ons) 

Services:

• varying amount on time spent
• varying expertise level
• varying qualifications & experience of provider
• varying quality of materials/tech

*cross branding(approach): for goods & services- differentiation created through strategic alliances (adds value to product- offering added benefits)

Question 7

1.3 goods in different industries (perishable, non perishable, intermediate )

Answer 7

Character of goods shapes nature of operations process

Perishable:

• high standards of quality
• short lead times, distribution (effective)
• appropriate, robust packaging, cold storage processes

Non perishable: (quality, inventory management)

• manage all quality aspects
• implement effective inventory management strategy, highly responsive to market demand (don’t over produce)

Intermediate:
goods processed more than once (have cones through 1 set of operational processes, become inputs in further processing)

Question 8

1.3 services in different industries (cost leadership/standardized, self service)

Answer 8

Cost leadership &; standardization: (goods & services)
- costs can be minimized in standardization (mass produced w/out variation, eos)
—> eg. Standardization in service meal industry, call centres

Self service:
Encouraging customers to take intiative to help themselves (issue: drop pricing- business advertises a price, customer purchasing has add on charges, higher eg. Airline tickets)

Question 9

1.4 interdependence

Answer 9

• mutual dependence that key functions have w one another

—> most businesses: closely related tasks grouped together (operations & r&d, sales &marketing)

—> operations: processes involving transformation
—> marketing: meeting needs & wants through providing at price market is prepared to pay
—> finance : reports (eg. Income statement) determines profit (useful to managers)
—> hr: deal w employees, issues