U3 AOS3: Operations management Flashcards
Operations management
All the activities in which managers engage to produce goods or services
Business competitiveness
The ability of a business to sell products in a market
- Business = competitive when able to produce goods/equal to/better than competitors
Effectiveness
The degree to which a business has achieved its stated objectives
Efficiency
How well a business uses resources in achieving these objectives
Inputs
Resources used in the process of production
Categories of inputs
- Natural resources/materials
- Physical resources (machinery, equipment, property)
- Human resources (labour)
- Financial resources
- Information from a variety of sources
- Time
Difference between the inputs of a manufacturing business vs service business
Manufacturing = capital and natural resources
Service = information and human resources
Transformation process
The conversion of inputs (resources) into outputs (goods or services)
Differences between the processes of a manufacturing business vs service business
Manufacturing = tangible product
Services = intangible product
Outputs
The end result of a business’s efforts - the service or product that is delivered or provided to the consumer
Tangibles
Goods that can be touched
Intangibles
Services that cannot be touched
Characteristics of operations management within manufacturing businesses
- Produce tangible goods
- Store goods for later use
- Production process and consumption not linked
- Little customer involvement in production
Characteristics of operations management within service businesses
- Produce intangible services
- Cannot be stored
- Customer is involved in production (has to be present)
- Process and consumption typically occur simultaneously
What are the 6 strategies related to technological developments?
- Automated production lines
- Robotics
- Computer-aided design (CAD)
- Computer-aided manufacturing (CAM) techniques
- Artificial intelligence (AI)
- Online services
Automated production lines
- Comprises machinery and equipment
- Arranged in sequence
- Components added each step
- Process controlled by computers
How do automated production lines improve efficiency?
- Fewer human resources
- Perform tasks quicker than humans
- Reducing waste due to improved accuracy
How do automated production lines improve effectiveness?
- Improved safety
- Increased quality
Advantages of automated production lines
- Improved speed of production
- Reduced need for labour
- Precision and accuracy of production
Disadvantages of automated production lines
- High cost to purchase
- Costly to maintain/replace
- Employee training required
Robotics
Highly specialised form of technology capable of complex tasks
- Often used to perform repetitive tasks and can be used in both manufacturing and service industries
How do robotics improve efficiency?
- Fewer human resources
- Perform tasks quicker than humans
- Reducing waste due to improved accuracy
How do robotics improve effectiveness?
- Improved safety
- Increased quality
Computer-aided design (CAD)
A computerised design tool that allows a business to create product possibilities from a series of input parameters
How does CAD improve efficiency?
- Fewer resources
- Material planning
- Ability to view the product, opportunity for feedback
How does CAD improve effectiveness?
- Making adjustments prior to production (meet consumer needs)
- 3D viewing of product = more realistic perspective
Advantages of CAD
- Product designs produced faster
- Design can be viewed from several angles
- 2D or 3D model of product can be produced
- Changes can be made before prototype is produced
Disadvantages of CAD
- Software crashing
- Expensive
- Time to train staff
- Loss of jobs
Computer-aided manufacturing (CAM) techniques
The use of software to direct and control manufacturing processes
How does CAM improve efficiency?
- Speeds up production
- Fewer human resources
- Fewer errors
How does CAM improve effectiveness?
- Product quality
- Customisations
Advantages of CAM
- Speed of production
- Consistency
- Can run 24/7
Disadvantages of CAM
- Cost of implementation
- Training
- Machines only perform one type of task
Artificial intelligence (AI)
Using computerised systems to stimulate human intelligence and mimic human behaviour
Business applications of AI
- Web searching
- Self-driving cars
- ChatGPT
How does AI improve effectiveness?
- Improve decision making
- Quality
- Speed and customer service
How does AI improve efficiency?
- Speeds up analysis of large amounts of data
- Monitor materials (appropriate stock on hand)
- Identify errors early
Advantages of AI
- Precision in responding to customer needs
- Production forecasting and reduce waste in production process
- More creativity for staff
Disadvantages of AI
- Cost of implementation
- Can make incorrect assumptions as it relies on human data
- Job losses
Online services
Web pages, apps and platforms that allow businesses to provide their service to customers through the internet.
How do online services improve efficiency?
- Reduced operation costs
- Communicate with customers with fewer resources
How do online services improve effectiveness?
- Increased accessibility = improved customer satisfaction
- Materials and production planning
Advantages of online services
- Customers can access service 24/7
- Reduce costs (decreasing need for brick and mortar store)
- Saving on employee costs
Disadvantages of online services
- May have to increase distribution channels if offering products abroad
- Large investment to keep services updated and running
- Invest in data privacy
Materials management
Manage the use, storage and delivery of materials to ensure the right amount of inputs is available when required.
What does materials management involve?
- Receiving materials
- Storing materials safely
- Identifying ongoing materials requirements
- Reducing holdings of surplus stock
- Controlling release of materials
Inventory
Goods and materials held as stock by a business
- Stock taking up storage space for long periods reduces opportunities for the business to invest money elsewhere
Materials handling
The physical handling of goods in warehouses and at distribution points
What is the process for managing materials?
Forecasting > MPS > MRP > JIT
Forecasting
Use data from the past and present and analysis of trends to attempt to determine future events.
- Quantitative data (numerical)
- Qualitative data (subjective, opinions)
Advantages of forecasting
- estimate types of outputs likely to be sold and what times
- Maximise sales, not run out of goods =increasing effectiveness
- Less likely to end with excess stock that is unusable, thus increasing efficiency
Disadvantages of forecasting
- Data may be inaccurate
- Historical data is not subject to recent changes
Production plan
An outline of the activities undertaken to combine resources (inputs) to create goods or services (outputs)
Master production schedule (MPS)
A plan that details what is to be produced and when.
- Helps determine if business has capacity to meet production and plan for upgrades, recruitment, expansions or interruptions (public holidays)
Materials requirement planning (MRP)
Involves developing an itemised list of all materials involved in production to meet the specified orders.
What are the considerations of MRP
- Exact number of inputs required
- Amount of stock already on hand
- Lead times (how long deliveries from suppliers take)
- Storing inventory (space to store inputs)
How does MPS/MRP increase efficiency?
- No excess inventory or spoilt/damaged inventory
- Ensures lower production costs by avoiding less busy periods
- Rostering staff where extra-time is required
How does MPS/MRP increase effectiveness?
- Ensures sales are maximised (production wont be interrupted by lack of materials, capital or labour)
- Staff rostering can be determined in advance
Disadvantages of MPS/MRP
- Info used may be inaccurate > schedule/plan = errors
- May be costly to implement (expensive software)
- If MPS done too far in advance, may be unable to adjust to changes
Just in time (JIT)
Materials management strategy that ensures that the right amount of material inputs will arrive only as they are needed in the operations process
- Needs reliable supplier
Advantages of JIT
- Reduces costs (less storage space required, less money spent on inventory)
- Reduces wastage and defects (less spoilage of inventory)
Disadvantages of JIT
- Late supplies may hold up production
- Transportation costs higher due to more frequent deliveries being made
Quality
The degree of excellence of goods or services and their fitness for a stated purpose
Attributes of quality
- Free of defects
- Reliable (lasts and doesn’t break easily)
- Easy to use
- Well designed
- Useful features
- Delivered on time
How to maintain quality from a business perspective
- Minimise waste defects
- Strictly conform to standards
- Reduce variance in final output
Quality control (QC)
The use of inspections at various points in the production process to check for problems and defects
How can quality control be implemented
- Business sets benchmarks for quality
- Physical checks completed (sometimes randomly) to determine whether outputs meet standards
- Outputs that don’t meet standards = rejected, while those that pass are sold
Attributes of quality control
- Most simple form of quality strategy, cheapest to implement
- Focuses on the output, rather than the production process itself
Advantages of quality control
- Prevents poor quality goods/services to reach customer
- Inexpensive
- Easy for new staff to learn production routines
Disadvantages of quality control
- Wasteful (rejected products not sold)
- Doesn’t always isolate the cause of the problem
- Inferior goods may bypass
Quality assurance (QA)
The use of a system so that a business achieves set standards in production
How can quality assurance be implemented
- Business records all production processes (inspections, maintenance, hygiene, checking outputs) using forms and checklists
- Usually accredited by 3rd party
- Independent audits ensure business meets all requirements and follows all processes
Attributes of quality assurance
- QA more sophisticated than QC
- QA = proactive, focuses on whole production process
- Involves a specific quality manager to oversee the quality management system
Advantages of quality assurance
- Gives comp adv in domestic and global markets
- Reduces wastage (stops errors before good/service is even produced)
Disadvantages of quality assurance
- Gaining certification is exxy
- Preparing docs and processes prior to inspection is time consuming
Total quality management (TQM)
An ongoing, business-wide commitment to excellence that is applied to every aspect of the business’s operation
Aim of TQM
To create a defect-free production process, and maintain a customer focus on operations.
Aspects/approaches of TQM
- QA/QC
- Employee empowerment
- Continuous improvement
- Customer focus
Employee empowerment
Quality circles are groups of workers who meet to solve problems relating to quality.
- Typically use data, analysis and problem solving to develop situations
Continuous improvement
An ongoing commitment to achieving perfection
- Emphasises continuous improvement in all facets of a business
Customer focus
Business needs to ask ‘What does the customer require’
- Customer ultimately decides level of quality
- Focus of customer = delivering products that meets/exceeds their expectations
Advantages of TQM
- 0 defects
- Reduced wastage via proactiveness
- Employee empowerment
- Increased customer satisfaction
- Improved business rep
Disadvantages of TQM
- Requires whole business cultural shift
- Time consuming
- Exxy to implement
Waste minimisation
A process involving the reduction of the amount of unwanted or unusable resources provided by a business in an attempt to improve the efficiency and effectiveness of operations
What are the waste minimisation strategies (3 R’s)?
Reduce, reuse, recycle
Reduce
Minimise amount of waste generated by operations system
- Buy minimum inputs necessary for production
- Buy resources with minimum packaging
Thus less waste generated, less cleaning and disposal
How can a business reduce?
- May use movement light sensors in their shops/offices so lights only turn on when people need them, > effort to reduce energy consumption.
- A business may choose to lower the amount of labour if there is more labour than customer demand
Reuse
Taking old products and using them again in production process.
- Capturing offcuts, emissions or leakages and returning them back to start of production process
- Using waste from one process as input to another
How can a business reuse?
A glass drink bottle business may choose to have customers return used glass bottles so they can clean and re-bottle drinks
Recycle
Processing waste products into new generic inputs to avoid using more raw materials
How can a business recycle?
- Pulping materials made from natural fibres (wood, clothing, paper, cardboard)
- Crushing and melting materials made from metals and plastic
Benefits of waste minimisation
- Reducing and reusing inputs cuts costs
- Waste removal costs money, thus reducing waste to landfill reduces costs
- Some wastes (eg, scrap metal) can be sold to generate revenue (valuable inputs for other industries)
Lean management
An approach that improves the efficiency and effectiveness of operations by eliminating waste and improving quality
Lean = no excess
What are the 4 lean management principles?
- Pull
- One piece flow
- Takt
- Zero defects
Pull
The rate of production is determined by customer demand.
Customer ‘pulls’ the final product through the production line, rather than businesses ‘pushing’ inputs though at an insufficient rate
How does pull increase efficiency?
- Eliminates unsellable stock
- Reduces cost of inventory as it is made according to customer demand
How does pull increase effectiveness?
Ensures goods don’t spoil or become defective because they were produced too long before required
One piece flow
- Goods move through the production line one at a time in a continuous flow
- Each step adding value occurring immediately after the previous step is completed.
How does one piece flow increase efficiency?
- Eliminates stops, starts, bottlenecks and waiting times
- Machinery and employees are never idle waiting for next task
How does one piece flow increase effectiveness?
Avoids a pile-up of in-process goods, (less likely to create defects and breakages).
Takt
Rate of production to meet customer demand.
Important for business and their scheduling
- must know the minimum level of resources necessary to produce at customer demand rate
Example of takt
If a product is sold every 5 minutes, then a product must be finally produced every 5 minutes
How does takt increase efficiency?
- Business creates consistent workflow
- Avoids catch-up periods and overwhelming periods
How does takt increase effectiveness?
Ensures finished outputs are ready when needed, sales are maximised
Zero defects
Business strives for perfection, no defects passed from one stage of production to the next.
Achieved by identifying exact step in the production process where errors occur, then rectifying these issues.
How does zero defects increase efficiency?
Avoids the need to undo steps in production process to fix earlier problems/defects at the end of production process before they can be sold
How does zero defects increase effectiveness?
Ensures finished outputs meet customer expectations and don’t require warranty claims.
Advantages of lean management
- Increased efficiency, effectiveness, and quality
- Lower costs of production
- Improves customer satisfaction
- Reduced wastage
- Improves business reputation
Disadvantages of lean management
- Requires committed and experienced employees
- Constant focus = workplace stress
- Requires good relationships with suppliers
What are some managerial concerns in relation to CSR?
- inputs, suppliers, staff, customer relationships
- environmental sustainability on inputs
- amount of waste generated from process and production of outputs
Advantages of CSR considerations
- Increased brand recognition and sales
- Increased attraction and retention of quality staff
- Decreased costs in long run
Disadvantages of CSR considerations
- Increased costs (sourcing)
- Decrease in suppliers
- Potentially quality sacrificing
- Time involved in training
How can a business manage inputs responsibly
- Socially responsible sources (environmentally sustainable, workplaces free of exploitation)
- Local suppliers to reduce emissions
- Involve recycling and remanufacturing of materials/waste
How can a business manage its processes responsibly
- Facilities and technology should contribute to health and welfare of staff
- Conduct production locally (show concern for local communities)
How can a business manage outputs responsibly
- Create products intended for its purpose
- Use of environmentally friendly package (minimise material, energy, waste)
- Safe and reliable product with no defects
Global sourcing
The practice of seeking the most cost-efficient materials and other inputs, including from countries overseas
Advantages of global sourcing
- Reduced cost
- Higher quality materials
- Develops alternative suppliers/sources of inputs
Disadvantages of global sourcing
- Long lead time
- Higher risks of interruptions
- Language barriers
Overseas manufacture
The production of a good in a country that is different to the location of the business’s HQ
Advantages of overseas manufacture
- Cheaper
- Closer to suppliers
- Access to new export market
Disadvantages of overseas manufacture
- Longer delivery times
- High risk of interruption
- Risk of damage during shipping
- Language barriers
Global outsourcing
The contradicting of a specific business operation to an external person or business in another country
- Allows business to focus on other aspects
- Production may be done by independent companies
Advantages of global outsourcing
- Cheaper
- Higher quality
- Business can focus on core activities
Disadvantages of global outsourcing
- Hard to protect confidential info
- Risks to interruptions
- Hard to measure quality and CSR
- Language barriers
