Operations Management (2)

Production and technology:

ICT: The use of electronic technology to gather, store, process & communicate information.

Robot: A computer-controlled machine able to perform a physical task.

·      Advantages:  

            - Manufacturing robots are known for speed, accuracy & efficiency.

            - Are exact & through, achieve high quality, without breaks.

            - Used for repetitive, hazardous & boring task.

            - More accurate than workers, thus increase efficiency & reduce waste.

Computerized stock-control programs: The use of computers to keep records of all stocks & reorders necessary stock automatically.

·      Advantages:

            - Automatic stock control, triggering orders when the reorder stock level        is reached.

            -Bar coding systems, which speed up processing, recording of stock &             customer checkouts.

            -Less labor required & fewer errors made, both improve efficiency.

Communication technology – advantages of access to Internet & email:

            - Intranet system gives rapid & cheap internal communication within             organization.

            - Can improve accuracy & speed of passing information between         operations management department & other departments.

            - Allows supplies to be bough quickly from cheapest online supplier on          the Internet.

Design technology

Computer-aided design (CAD): Using computer-based tools to design products, such as buildings, cars & clothes.

- Advantages:

·      CAD enables designers to lay their work out on screen, print it out as a 3-D image & edit it.

·      New products can be designed & developed more quickly.

·      On screen simulated designs mean there is no need for physical prototypes, which reduces costs.

·      Design data is passed directly to computer controlled machines for production, reducing risk of errors  & wastage & improving firm’s environmental image

·      Large numbers of different designs of a standard product can be made which improves the firm’s ability to focus on different target markets.

Benefits of new technology	Drawbacks of new technology
Lower unit costs of production as technology replaces labor-intensive methods.	Cost of purchase can be expensive & beyond resources of new small firms. However, almost every business can now afford at least one computer as their prices have fallen.
Better communications.	Training of staff is an extra cost, which small firms might find difficult to support.
Quicker & more flexible operations.	Workers can be reluctant to change & accept new ways, as they fear they will lose their jobs.
Better customer service, such as making stocks available as & when needed.

Production and quality:

Quality product: A good/service that meets customers’ expectations & thus is ‘fit for purpose’.

Customer expectations:  The minimum quality standards for a product/service that is acceptable to consumers.

Quality assurance: A system of agreeing & meeting quality standards at each stage of production.

·      A quality product does not necessarily have to be the best possible product available.

·      Customer expectations will be very different for products sold at different prices.

·      Setting standards to high for a product consumer do not expect to last for many years can make the product very expensive & uncompetitive.

·      A cheap good can be considered good quality if it performs as expected.

·      Quality is relative as it depends on the product’s price & the expectations of consumers.

-Advantages of producing a quality good/service include:

·      More satisfied customers

·      A better reputation

·      Lower cost as wastage is reduced

Quality assurance is a method of improving quality standards – works by setting quality standards at each stage for worker.

-Large advantage over traditional method of checking quality for final product –

·      It achieves high-quality products the first time round, not just inspecting for poor quality.

·      Workers should get it right first time, reducing the chances of faulty products.

·      Consumers should be more satisfied & will complain less.

·      Workers are involved in reaching good-quality standards, which is motivating.

·      Components, materials & services bought into the business are checked at the point of arrival.

Operations Management (1)

“Controlling the resources of the business to make a product or provide a service efficiently and to a satisfactory level of quality.”

Why OP is important to a new business?

New businesses have operational needs. The owner will require:

·      Premises (location)

·      Machines, computers or other equipment

·      Stocks of supplies (e.g: raw materials for factory or stationery for insurance company).

Operational constraints on a new business:

·      Budget (limited)

·      Expertise (may not be able to afford skilled workers for all activities)

·      Access to ICT & other technology (limited by cost & the level of production of a new business might not justify the cost of the latest technology).

Production methods:

Production means using resources of land, labor & capital to produce goods & services.

Job production:

Job production: Making one-off specialized products for each customer.

(E.g: architects, tailors, & wedding-cake bakers)

Main features	Advantages	Disadvantages
Each product/service is aimed to satisfy the particular needs of one customer.	One-off products/services allow customers’ special requirements to be meet.	Production cost can be high. It is often a slow process as the business must plan & design each individually.
It is a flexible production process – no two needs to be the same.	High prices can often be charged as customers may be prepared to pay extra for specially designed products.	Labor costs can be high, as skilled workers are usually needed.
	Easier & cheaper to set up compared to other methods, thus used for small businesses.

Batch production:

Batch production: Groups of identical items that pass through different stages of the production process at the same time.

(E.g: paint manufacture, school uniforms, soft drinks & takeaway food).

- Might be suitable for some new & small business such as a takeaway restaurant, in which large quantities of dishes could be made in advance & reheated)

Main features	Advantages	Disadvantages
Groups of identical products can be made at the same time.	Cost of each unit produced is likely to be lower than job production as it is more efficient to make a lot of similar items.	Less scope for customizing products – consumers must be prepared to buy similar goods.
Different designs & styles can made in different batches	Different consumer tastes can by supplied by producing different products in different batches.	Can take longer to switch from making a batch of one product to a batch of a different product.
To be profitable there must be demand for the same style, design or flavor of product.		Stocks of finished goods from each batch may take some time to sell.

Operational efficiency:

Operational efficiency: Producing goods/ services to an acceptable standard with as few resources as possible to keep costs per unit low.

Unit costs: The average cost of making each unit.

Specialization: Work is divided into separate tasks/ jobs that allow workers to become skilled at one of them.

Advantages of being operationally efficient:

·      Lower prices to make force competitors business to make a loss if it reduced prices too. This could eventually drive competitors business out of business altogether.

·      Expand business to employ other workers who work as efficient as possible & achieve a high- quality product/service to be as competitive as possible.

How can one firm be more operationally efficient than another?

·      More efficient machinery (by using the latest technology, although this can be expensive).

·      More highly motivated (workers work quickly & well).

·      Minimum wastage (virtually everything produced can be sold, means making sure everything that is produced is ‘right first time’).

·      More effective management (faster production methods, such as encouraging worker specialization - good managers are at the heart of an efficient business).