Operations and project management (The nature of operations (Resources…
Operations and project management
The nature of operations
The use of resources(inputs: land, capital, labour) to provide outputs in the form of goods and services.
Operation management concerns
Efficiency of production/Quality/Flexibility and Innovation
: the difference between the cost of purchasing raw materials and the price the finished goods are sold for
: The design of the product, The efficiency with which the resources are combined and managed, Being able to convince customers to pay more than the cost of input
: All businesses need somewhere to operate from
: The quality of labour input will have a significant impact on the operational success of a business.
: Tools, machinery, computers and other equipment that businesses use to produce the goods and services they sell.
: Well trained and knowledgeable employees, databases, information systems and good links with supplier and customers
: Producing output at the highest ratio of output to input.
: Meeting the objectives of the enterprise by using input productively to meet customers' needs.
: A relative measure and is concerned with how efficiently inputs are converted into outputs
: involving a high level of labour input compared with capital equipment
Very skilled workers that work on specialised products, like furniture made by hand. Job production.
: involving a high quantity of capital equipment compared with labour input
Mass-produced goods. Scale of economies, unit-cost reduction. Flow production. Fixed costs are high. Maintenance costs are high.
Link with marketing
Match output closely to demand levels. Keep inventory on a minimum. Reduce wastage of production. Produce the right product mix.
Availability of resources
: A business might locate where there is an efficient amount of raw material.
Nature of production method
: Labour or capital intensive?
: Use of technology and robot automated production
Technology: CAD and CAM
CAD: Computer aided design. The use of computer programs to create 2 or 3D graphical representations of physical objects. Advantages: Increased productivity, improved quality, faster time to market, great accuracy. Limitations: Complexity of programs, need to train employees, expensive.
CAM: Computer aided manufacturing. The use of computer software to control machine tools and related machinery in the manufacturing of components. Advantages: Precise manufacturing, faster production, more flexible. Limitations: Very expensive, hardware failure.
The need for flexibility and innovation
: the ability of a business to vary both the level of production and the range of products following changes in customer demand.
Flexibility can be achieved by increasing capacity, hold high stocks, have flexible labour force.
: The use of a new or much improved production method or service delivery.
Robots in manufacturing, faster machines, computer tracking inventories, using the internet to track deliveries.
: producing a one-off item specially designed for the customer. Specialised products can be produced, motivating for workers. Expensive, long time to complete, need for highly skilled workers.
: Producing a limited number of identical products, each item passes through one stage before going on to the next stage. Division of labour, economies of scale, can be designed in a special way. Demotivating for workers.
: Producing items in a continually moving process. Low labour costs, JIT stock control, quality is consistent. High initial set up cost, work is boring and demotivating.
: The use of flexible computer-aided production systems to produce items to meet individual customers' requirements at mass-production cost levels. Low unit costs with greater product choice
Changing production methods
Job to batch
: Cost of equipment needed, additional working capital needed, staff demotivation.
Job/batch to flow
: Cost of capital equipment needed, staff training to be flexible and skilled.
Factors influencing location decisions(quantitative)
: Site and other capital costs such as building costs, labour costs, transport costs, sales revenue potential, government grants, profit estimates, investment appraisal.
Factors influencing location decisions(qualitative)
: Safety, room for other expansions, managers preferences, ethical considerations, environmental concerns, infrastructure.
Scale of operation
The maximum output that can be achieved, this can only be increased in the long term by employing more of all inputs.
Factors influencing the scale of a business
: owners' objectives, capital available, size of the market, number of competitors, scope for economies of scale.
Economies of scale
: reductions in a firms unit costs of production that result from and increase in the scale of operations. Purchasing economies, technical economies, financial economies, marketing economies, managerial economies.
Diseconomies of scale
: Factors that cause average costs of production to rise when the scale of operation is increased. Communication problems, alienation of the workforce, poor coordination.
: Materials and goods required to allow for the production and supply of products to the customer.
Purpose of inventory: Raw materials, work in progress, finished goods.
Costs of holding stock: Opportunity cost, storage cost, risk of wastage and obsolescence.
Cost of not holding enough inventories: Lost sales, production may have to stop, urgent orders can be expensive, small order quantities.
: the minimum inventory level that should be held.
: the number of units ordered each time.
: the normal time taken between ordering new stocks and their delivery.
JIT: Just in time inventory control
This inventory control method aims to avoid holding inventories by requiring supplies to arrive just when they are needed in production. Good relations with suppliers, staff must be flexible and multi skilled, machinery must be flexible.