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UNIT 5 OPERATIONS MANAGEMENT - Coggle Diagram
UNIT 5 OPERATIONS MANAGEMENT
5.1
The role of operations management
It impacts on other functional areas of a business e.g:
Marketing function - physical goods or intangible services are produced based on market research to meet needs and wants of customers.
Finance function - costs of different production methods e.g. mass are needed for economies of scale although it requires high set up costs.
HRM - Production workers need to be hired and trained to work productively.
Operations management
focuses on the management process of creating goods and services using the available resources of the organisation.
Operations management combines inputs to produce outputs
Operations management involves planning, organising, coordinating and controlling all inputs needed to produce goods and services for a business. (must ensure there is value added)
Have an important role in ensuring sustainability by creating a balance between ecological, social and economic needs of people today and the future.
Triple Bottom Line
= Aspects of sustainability that a business needs to consider.
Sustainability
= Business or economy to continue their activities without threatening for future gen.
Ecological sustainability
= Sustainable use of planets natural resources so current level of consumption does not threaten resources available for future gen.
A lack of ecological sustainability means that production will use up natural resources for the future.
Requires efficient and sensible use of the planet's natural resources so that they do not become exhausted.
Social sustainability
= Focuses on what a business or economy can meet the needs of the current population without threatening needs for future gen.
Enables society to optimize the quality of life for current and future gen.
Elkington argued male business leaders need to accept women as equals if there is to be social sustainability and development. Embracing social justice can bring about many business opportunities for example recruitment, staff, retention etc.
Economic sustainability
= Focuses on using ONLY resources.
Requires businesses to be more responsible in their use of resources. e.g. using materials that are environmentally friendly and in a maintainable way.
Can help firms survive, thrive and contribute to the economic wellbeing of others via the creation of jobs and wealth.
5.2
Production methods
Job/customised production
= Making SPECIAL one of a kind orders
ADVANTAGES
output likely to be outstanding quality.
high mark-up price can be charged because of the products exclusivity and high quality.
Most flexible method of production as orders are made specifically to customers.
DISADVANTAGES
High production costs
Time consuming
High labour costs due to need for highly skilled and experienced workers.
Production
= output of a good or service.
Batch production
= Involves producing a set of identical products being completed before moving to the next.
ADVANTAGES
Some flexibility to meet a variety of demands therefore providing some choice to customers.
Useful for small businesses that cannot afford to operate continuous production lines.
DISADVANTAGES
Greater need for stocks especially raw materials
Less flexibility as customers have to select from a range of standardized output
Mass/process production
= different operations carried out in sequence with large volume of standardized products.
ADVANTAGES
Easy and cheap to hire labour
Automation means low level of manpower required in the production process which lowers labour costs.
Cost per unit of production are lower due to economies of scale
DISADVANTAGES
Requires an efficient system of stock control as stockpiling of manufactured goods can be expensive.
Workers can quickly become demotivated
Lower profit margins are earned due to the low prices.
Cell manufacturing
= Involves teamwork on a section in the production process.
Used by businesses that focus on mass production techniques.
Each cell has complete responsibility for quality assurance.
ADVANTAGES
Should lead to less wastage and lower rejection rate.
Enables workers to operate in a team which will boost motivation and productivity.
Team working can create new ideas and products.
DISADVANTAGES
High set up costs e.g. machinery, equipment etc.
5.3
Lean production and quality management
Methods of lean production
(Continuous improvement) kaizen
Workers have something to contribute in order to improve the way the business operates.
Involves making small progress to improve productivity and efficiency
ADVANTAGES
Increases efficiency
Motivation
All employees are involved
DISADVANTAGES
Can be time consuming
Employees not willing to participate
Short-term costs for training
Just in time (JIT)
= The method aims to avoid holding stocks by requiring supplies to arrive just as they are needed.
ADVANTAGES
Greater flexibility to changes in consumer demand
Costs of storage and handling are reduced
Less possibility of stock becoming so outdated.
DISADVANTAGES
Delivery costs may increase
Less opportunities for economies of scale
Business reputation depends on external suppliers
Kanban
= Japanese manufacturing system in which the supply of components is regulated through the use of an instruction card sent along the production line.
ADVANTAGES
Simplifies planning production
Flexibility
Reduces costs
It helps prevent unproduction which results in productive inefficiency or overproduction which creates waste.
DISADVANTAGES
Requires planning in advance
May require training
System may be vunerable to breakdowns
Andon = manufacturing term referring to a system to notify management, maintenance and other workers of a quality or process problem.
ADVANTAGES
Immediate attention to the problem
Simple system and consistent
Increases employee accountability
DISADVANTAGES
Expensive tool
Employees should be trained
Risk of ignoring signal
Cradle 2 Cradle
= Manufacturing principle that seeks to create production techniques that are not just efficient but are essentially waste-free and truly sustainable.
ADVANTAGES
Environmentally friendly e.g. Tesla
Sustainable
Certified companies have strong environmental brand image
DISADVANTAGES
Rely on the supply chain
Difficulties in modification
Cost for certification
Features of lean production
Less waste
= Strive to cut out all sources of waste and achieve efficiency gains.
Methods of less waste minimization include TQM, cradle 2 cradle and JIT
Greater efficiency
= Using resources more effectively to generate output. This can be gained by staff training and development, staff motivation and improved capital.
Features of quality control and assurance
Quality product
- a good or service that meets customer’s expectations.
Quality standards
– the expectations of the customers expressed in terms of minimum acceptable product standard.
Quality control
– based on inspection of the product or a sample of products are the production has been completed. (Check the products at the end of the production line)
Traditional approach
Inspecting and detecting at the end of production
Reactive rather than proactive
Quality assurance
– system of agreeing and meeting quality standards at each stage of production to ensure customer satisfaction. (Checking the products at every stage of the production lines to make sure it is good quality)
During the process, it is everyones responsibility to check
Reduces the products that are not working)
Aim is zero defects (perfection fist time round)
Lean production
= Method focusing on eliminating waste, while ensuring quality.
Quality circles
- groups of employees who meet regularly to assess quality issues to improve quality standards.
Members of quality circles are typically volunteers
It is common for members of quality circle to go to different departments in the organisation to get a range of views and suggestions.
Kaizen usually involves the implementation of quality circles
Benchmarking
- comparing products, processes and performances to its competitors.
ADVANTAGES
increases competitiveness
Identifies better ideas for improvement and innovation
Fast and cheap way to solve problems through comparison
DISADVANTAGES
Copying ideas and practices of other firms
Costs of comparison may not be recovered from improvements
Increased costs to make changes and improvements
Total Quality Management (TQM)
- workers having responsibility maintaining quality standards throughout the production process.
They aim to achieve zero defects by preventing mistakes
Focus on getting things right first time
Quality circles can also be a feature of TQM
ADVANTAGES
Quality is higher hile costs should be reduced
Motivational impact on employees who feel more involved in decision making.
Cost effective as they eliminate the need of inspections
DISADVANTAGES
Expensive
Staff training
Only works if employee is committed to the approach
Objective of lean production and TQM is to improve the quality of a firm's goods and services.
Quality is important for a business as it satisfies needs and wants of customers, raises customer confidence regarding a business and its products, improving motivation from employees and gain competitive advantage over its rivals.
Poor quality output will result in higher costs for the business due to customers seeking compensation for substandard products
Examples of poor quality include:
Product breaking down unexpectedly
Product delivered late
Lack of instructions
National and international quality standards
are a form of benchmark. A good or service must meet a set of predetermined criteria of quality in order to be awarded certification of quality standards recognised within the country or throughout the world.
ADVANTAGES
Quality awards can provide the firm with major marketing advantages
Can help differentiate the business from it rivals, thus minimising potential competition.
DISADVANTAGES
Operational costs of meeting national and international quality standards can be very high
inspection costs must be paid to outside agencies such as the ISO.
5.4
Location
Nearness to markets: How close you are to your target market customers. Is a qualitative factor Most retailers need to locate near customer because it helps a business gain a competitive advantage and makes it convenient for customers.
Local infrastructure: Is qualitative and refers to organisational structures and systems in the society to function. Includes transportation.
Cost and availability of labor: Is a quantitative and firms may choose to locate in a rural area to gain a cheaper or better skilled labour.
Reasons for a specific location of production:
Cost and availability of land: Is a quantitative factor. Rents are high in the CBD and other popular locations than in rural remote areas. This means higher prices are charged for business located in these popular locations to keep profit margins.
Government incentives: Government will give you a grant so you can move to the location. This can cut down the production costs which therefore make businesses want to relocate in these areas.
Clustering: All locating to the same location to the best of the customer's needs. E.g. children's clothing stores may choose to locate near toy stores.
Bulk-increasing industries:Business moving close to the customer as the products are heavier.
Strategic reasons: If you want to compete with your competitors, you would want to be near them.
Bulk-reducing industries: Close to the raw materials and where the supplies are
Footloose businesses
- Do not have to relocate in a particular area
Industrial inertia
- Exist when a business chooses to remain in the same location although there are no cost advantages in doing so.
Ways or re-organising production (nationally and internationally)
Outsourcing
: Subcontractors relates to outsourcing and is the use of a third-party subcontractor for carrying out non-core activities on an organisation to improve efficiency.
Subcontractors perform the non-core activities without compromising quality.
ADVANTAGES:
Business isn't responsible for some tasks
The people they reach out to gain specialisation
Outsourcing helps the business reduce costs (can negotiate to reduce this)
DISADVANTAGES
Quality of work being produced can rise
Although you get reduced costs for hiring them you still have costs to monitor
Conflict between businesses and third party subcontractors.
Insourcing
- When the business uses the resources in their own business to complete a task.
Internal stakeholders with relevant skills and experience are used rather than outsourcing the function to an external third party provider costing more money.
ADVANTAGES
Cheaper than outsourcing
Business had better control of the operation
In the country they are in, it creates more jobs.
DISADVANTAGES
Employees may not have enough knowledge to perform tasks.
Multinational companies overseas cannot rely on insourcing as they do not know anyone from the country to rely on people.
Reshoring (move the business into the local country)
Is expensive
Offshoring - Involves relocating part or all of an organisation’s functions and processes overseas. (remember multinational companies and economies of scale)