Unit 5.1 - Introduction to Operations Management

Question 1

5.1 Introduction to Operations Management

Define Operations Management and detail the four main methods of production

Define the terms:
1. Productivity
2. Labour-intensive
3. Capital Intensive

Answer 1

Operations Management, otherwise referred as production, refers to the output of a good or provision of a service that people want to purchase, using the resources that are available. Businesses earn a profit from the production process by adding value in the production process.

Added Value: the purpose of operations management, namely, to ensure through the production process that the price that customers pay for a product is greater than the costs of producing it.

Productivity: a measure of a firm’s efficiency level in terms of how well things are done within the organisation. It calculates the rate at which inputs (factors of production) are transformed into outputs (good and services), adding value in the production process.

An organisation can have production that is either:

1. Labour Intensive: an organisation that relies more on labour to produce its output, rather than machinery and capital equipment.
2. Capital Intensive: an organization that relies on more machinery and equipment to produce its output, rather than labour.

EXTRA INFORMATION:
A key idea to think about with regards to Operations management is this key concept of “sustainability”.

Sustainability:
The ability of an organization or an economy to continue its business activities indefinitely. This means that its operations today do not jeopardise the opportunities for future generations.

There are three different types of sustainability however that businesses need to consider that make up “The Triple Bottom Line”:

1. SOCIAL SUSTAINABILITY (People):
   The extent to which an organisation or economy can meet the needs of the current generation without jeopardising the needs of future generations. Social sustainability enables people of the current and future generations to enjoy a decent quality of life.

For example, population growth around the world results in greater levels of consumption and depletion of the earth’s natural resources.

Social barriers exist which prevent or limit social sustainability. Examples include absolute poverty, unemployment and social imbalances.

2. ENVIRONMENTAL/ECOLOGICAL SUSTAINABILITY (Planet), and
   The sustainable use of the planet’s natural resources so that the current level of consumption does not jeopardise the resources available for future generations. Without ecological sustainability, business activity will eventually deplete the planet’s natural resources. Examples of unsustainable business activities include overfishing and deforestation.

Operations management has a significant role in ecological sustainability. For example:

1. Lean production and quality management help to minimise the resources used to make goods and provide services
2. Cradle-to-cradle (C2C) design and manufacturing is used to reduce waste.
3. Operations methods that involve the use of green technologies, such as the use of renewable energy sources (solar, wind, and geothermal power).
4. ECONOMIC SUSTAINABILITY (Profit):
   The use of resources, both natural and manufactured, efficiently and responsibly. It is about encouraging businesses to focus their strategies on long-term rather than short-term profitability targets, and the long-term consequences of economic activities. This also has a direct impact on people’s jobs and careers in the future.

For instance, a lack of economic sustainable business behaviour causes over-production and over-consumption in the short run.